2019 Investment Climate Statements: Belarus
The Government of Belarus (GOB) officially welcomes foreign investment, which is seen as a source of new production technologies, jobs, and hard currency. Belarusian authorities stress the country’s geographic location, its inclusion in the Eurasian Economic Union (which also includes Russia, Kazakhstan, Armenia, and Kyrgyzstan), extensive transport infrastructure, and a highly-skilled workforce as structural advantages for investment. Belarus also highlights the preferential tax benefits and special investor incentives it provides for its six export-oriented and regionally-located free economic zones, the IT sector-centric High Tech Park (HTP), and the joint Belarus-China Great Stone Industrial Park.
Various laws and decrees provide the legal and regulatory framework governing investment activities in Belarus that allows for investment agreements and the following forms of investment activities in Belarus:
- Greenfield: establishing a legal entity (joint ventures and foreign enterprises);
- Brownfield: property or property rights acquisition, i.e., a share in charter capital, real estate, securities, intellectual property rights, concessions, public-private partnerships, equipment, or other permanent assets.
Belarus places a priority on investments in pharmaceuticals; biotechnology; nanotechnologies and nanomaterials; metallurgy; mechanical engineering industry; production of machines, electrical equipment, home appliances and electronics; transport and related infrastructure; agriculture and food industry; information and communication technologies; creation and development of logistics systems; and tourism.
Despite its official openness to foreign investment, Belarus has not undertaken large-scale privatization of the large majority of its state-owned enterprises (SOEs) or state-owned properties. Investments in sectors dominated by SOEs have been known to come under threat from regulatory bodies. Investors, whether Belarusian or foreign, purportedly benefit from equal legal treatment and have the same right to conduct business operations or establish new business in Belarus. However, according to numerous sources in the local business community and independent media, the enforcement of existing laws and unwritten practices can discriminate against the private sector, including foreign investors, regardless of their country of origin. Serious concerns remain about the independence of the judicial system and its ability to objectively adjudicate cases rather than favor the powerful central government.
When considering investing in Belarus, it is also important to note that pursuant to a June 2006 Executive Order, the United States maintains targeted sanctions against nine Belarusian SOEs and 16 individuals in relation to concerns about undermining Belarus’ democratic processes. Since October 2015, however, the U.S. Department of Treasury, in consultation and coordination with the Department of State, has provided temporary sanctions relief for the nine SOEs in consecutive six-month intervals, and in October 2018, expanded the length of temporary sanctions relief to 12 months. The current 12-month period of temporary sanctions relief ends on October 25, 2019. For additional information click here: https://www.treasury.gov/resource-center/sanctions/Programs/pages/belarus.aspx.
Despite GOB organizations that promote foreign direct investment (FDI), both the central and local governments’ policies often reflect an old-fashioned, Soviet-style distrust of private enterprise – whether local or foreign. Technically the legal regime for foreign investments should be no less advantageous than the domestic one, yet FDI in many key sectors is limited, particularly in the petrochemical, agricultural, and alcohol production industries. FDI is prohibited in defense and security as well as production and distribution of narcotics, dangerous and toxic substances. FDI can also be restricted, as is the case in the following areas:
- Investments in businesses that have a dominant position in the commodity markets of Belarus may not be allowed unless such investments are approved by the Ministry of Trade and Antimonopoly Regulation.
- Investments in activities and operations prohibited by law in the interests of national security (including environmental protection, historical, and cultural values), public order, morality protection, public health, and rights and freedoms of individuals.
|TI Corruption Perceptions Index||20178||70 of 180||https://www.transparency.org/cpi2018|
|World Bank’s Doing Business Report “Ease of Doing Business”||20198||37 of 190||www.doingbusiness.org/data/exploreeconomies/belarus/|
|Global Innovation Index||20187||86 of 127126||https://www.globalinnovationindex.org/gii-2018-report#|
|U.S. FDI in partner country ($M USD, stock positions)||2017||N/A||https://apps.bea.gov/international/factsheet/factsheet.cfm?Area=336|
|World Bank GNI per capita capita||2017||$5,2980||https://data.worldbank.org/country/belarus?view=chart|
1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
The GOB states attracting FDI is one of the priorities of the country’s foreign policy, and net inflows of FDI have been included in the list of government performance targets since December 2015. The GOB also does not have any specific requirements for foreigners wishing to establish a business in Belarus. Investors, whether Belarusian or foreign, reportedly benefit from equal legal treatment and have the same right to conduct business operations in Belarus by incorporating separate legal entities. However, the existing laws and practices often discriminate against the private sector, including foreign investors, regardless of the country of their origin.
Limits on Foreign Control and Right to Private Ownership and Establishment
The GOB asserts foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity. The GOB also states there are no general limits (statutory, de facto, or otherwise) on foreign ownership or control. In reality, however, the GOB establishes such limits on a case-by-case basis. The limits on foreign equity participation in Belarus are above the average for the 20 countries covered by the World Bank Group’s Investing Across Borders indicators for Eastern Europe and the Central Asia region. Belarus, in particular, limits foreign equity ownership in service industries. Sectors such as fixed-line telecommunications services, electricity transmission and distribution, and railway freight transportation are closed to foreign equity ownership. In addition, a comparatively large number of sectors are dominated by government monopolies, including, but not limited to, those mentioned above. Those monopolies, together with the perceived difficulty of obtaining required operating licenses, make it difficult for foreign companies to invest in Belarus. Another example is that under local law, foreign ownership cannot exceed 30 percent in charter funds of Belarusian insurance companies. Finally, the government may restrict investments in the interests of national security (including environmental protection, historical and cultural values), public order, morality protection, and public health, as well as rights and freedoms of people.
Although the GOB claims that it does not screen, review, or approve FDI, the above practices suggest the opposite. Belarus retains elements of a Soviet-style command economy, with the President and his administration prescreening and approving all significant (multi-million dollar) foreign investment.
Belarus’ Ministry of Antimonopoly Regulation and Trade is responsible for reviewing transactions for competition-related concerns (whether domestic or international).
Other Investment Policy Reviews
The UN Conference on Trade and Development reviewed Belarus’ investment policy in 2009 and made recommendations regarding the improvement of its investment climate. http://unctad.org/en/Docs/diaepcb200910_en.pdf
Individuals and legal persons can apply for business registration via the web portal of the Single State Register (http://egr.gov.by/egrn/index.jsp?language=en) – a resource that includes all relevant information on establishing a business.
Belarus has a regime allowing for a simplified taxation system for small and medium-sized and foreign-owned businesses.
Belarus defines enterprises as follows:
- Micro enterprises – fewer than 15 employees;
- Small enterprises – from 16 to 100 employees;
- Medium-sized enterprises – from 101 to 250 employees.
Belarus’ investment promotion agency is the National Agency of Investments and Privatization (NAIP). NAIP is tasked with representing the interests of Belarus as it seeks to attract FDI into the country. The Agency states it is a one-stop shop with services available to all investors, including: organizing fact-finding missions to Belarus, assisting with visa formalities; providing information on investment opportunities, special regimes and benefits, state programs, and procedures necessary for making investment decisions; selecting investment projects; and providing solutions and post-project support, i.e., aftercare.
To maintain an ongoing dialogue with investors, Belarus also has the Foreign Investment Advisory Council (FIAC). Its activities include, but are not limited to: developing proposals to improve investment legislation; participating in examining corresponding regulatory and legal acts; and approaching government agencies for the purpose of adopting, repealing or modifying the regulatory and legal acts that restrict the rights of investors. The FIAC is chaired by the Prime Minister of Belarus and includes the heads of government agencies and other state organizations subordinate to the GOB, as well as heads of international organizations and foreign companies and corporations.
The government does not promote or incentivize outward investment, nor does it restrict domestic investors from investing abroad. According to government statistics, Belarusian businesses’ outward investments in 2018 totaled USD 5.67 billion.
2. Bilateral Investment Agreements and Taxation Treaties
BITs or FTAs
The GOB maintains foreign entities have the same investment opportunities as Belarusian ones.
Belarus has signed 66 bilateral investment agreements (BITs) with the following states: Armenia, Austria, Azerbaijan, Bahrain, Bangladesh, Belgium, Bosnia and Herzegovina, Bulgaria, Cambodia, China, Croatia, Cuba, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Great Britain, India (terminated 24 March, 2017), Iran, Iraq, Israel, Italy, Jordan , Democratic People’s Republic of Korea, Republic of Korea, Kuwait, Kyrgyzstan, Laos, Latvia, Lebanon, Libya, Lithuania, Luxembourg, Macedonia, Mexico, Moldova, Mongolia, Netherlands, Oman, Pakistan, Poland, Qatar, Romania, Saudi Arabia, Serbia, Singapore, Slovakia, Slovenia, Sudan, Sweden, Switzerland, Syria, Tajikistan, Turkey, Turkmenistan, Ukraine, United Arab Emirates, United States, Venezuela,Vietnam, and Yemen.
Such agreements routinely provide for: national or most-favored treatment; minimum standards; and no expropriation for reasons other than for the public benefit on a nondiscriminatory basis, according to the appropriate legal procedure, and on conditions of fair compensation.
Currently Belarus is negotiating or renegotiating BITs with several countries, including the Czech Republic, Hungary, India, Slovenia, and Sri Lanka.
Belarus is party to two regional investment agreements within the framework of the Commonwealth of Independent States (CIS): the Agreement on Cooperation in the Field of Investment Activities of December 24, 1993, and the Convention on Protection of the Rights of the Investor of March 28, 1997. Belarus is also a party to the Agreement on Promotion and Reciprocal Protection of Investments in the Member States of the Eurasian Economic Community of December 12, 2008 (other parties are Kazakhstan, Kyrgyzstan, Russia and Tajikistan). Foreign investments among the members of the Eurasian Economic Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia) are governed by Annex 16 to the Treaty on the Eurasian Economic Union signed on May 29, 2014.
According to the GOB, Belarus is also a party to the following agreements:
Free Trade Agreement between the Eurasian Economic Union and its Member States, and the Socialist Republic of Vietnam; Treaty on Eurasian Economic Union; Agreement on Trade in Services and Investment in the Member States of the Common Economic Space of Belarus-Kazakhstan-Russia; Agreement on Promotion and Reciprocal Protection of Investments in the Member States of the Eurasian Economic Community; Convention on Protection of Investor Rights; Partnership and Cooperation Agreement Establishing a Partnership between the European Communities and Their Member States, of the One Part, and Belarus, of the Other Part; and The Energy Charter Treaty.
Belarus is a party to the Agreement between the Government of Republic of Belarus and the Government of the United States of America on Promotion of Capital Investment (24 June 1992). Belarus and the United States also signed the Agreement between the Republic of Belarus and the United States of America on Stimulation and Protection of Investments (Minsk, 15 January, 1994). That agreement did not enter into force, however.
Belarus has been a member of the Multilateral Investment Guarantee Agency (MIGA) of the World Bank since December 1992. In July 2011, Belarus ratified amendments to the Convention on Establishing MIGA and concluded agreements on the legal protection of guaranteed foreign investment and the use of local currency. According to Belarus’ Economy Ministry, these agreements finalized procedures for Belarus to become a full member of MIGA.
Bilateral Taxation Treaties
Belarus is the successor of the USSR in the Convention between the Union of Soviet Socialist Republics and the United States of America on Matters of Taxation (Washington, June 20, 1973). In addition, Belarus has 65 such agreements with other countries.
3. Legal Regime
Transparency of the Regulatory System
The government states that its policies are transparent and the implementation of laws is consistent with international norms to foster competition and establish clear rules of the game. However, independent economic experts note that private sector businesses are often discriminated against in relation to public sector businesses. In particular, SOEs often receive government subsidies, benefits and exemptions, including cheaper loans and debt forgiveness. Such beneficial treatment is generally unavailable to private sector companies.
According to Belarusian legislation, drafts of laws and regulations pertaining to investment and doing business are subject to public discussion. Draft legislation is published on government agencies’ websites.
International Financial Reporting Standards (IFRS) have been a part of Belarus’ legislative framework since 2016. Public-interest entities, which include banks, insurance companies, and public corporations with subsidiary companies are required to publish their financial statements, which comply with IFRS. Such statements are subject to statutory audit.
IFRS in Belarus can be accessed through the Ministry of Finance at the following links:
Belarus has no informal regulatory processes managed by nongovernmental organizations or private sector associations.
International Regulatory Considerations
Belarus is not a WTO member but announced in April 2016 it will step up efforts to join the organization by June 2020. The Working Party on Belarus’ Accession to the WTO group meets regularly in Geneva and as of January 2019, still needs to hold talks on trade in services with the European Union, the United States, Canada, and Ukraine. After the completion of bilateral market access talks with WTO member states, Belarus will still have to integrate these agreements into national regulations.
Belarus is a member of the Eurasia Economic Union (EAEU), a political and economic union driven by Russian leadership and modeled after the European Union. The EAEU’s goal is to ensure the free movement of goods, capital, services, and people across the territories of its five members – Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. The EAEU envisages common economic policies on customs, foreign trade and investment, technical regulation, competition and antitrust regulation. The Eurasian Economic Commission is the EAEU executive body. The EAEU has completed free trade agreements with Vietnam, China, and Iran and is in negotiations with Serbia, Singapore, India, Israel, and Egypt.
Legal System and Judicial Independence
The Belarusian legal system is a civil law system with a legal separation of branches and institutions and with the main source of law being legal act, not precedent. For example, Article 44 of Belarus’ Constitution guarantees the inviolability of property. Article 11 of the Civil Code safeguards property rights. Presidential edicts and decrees, however, typically carry more force than legal acts adopted by the legislature, which risks weakening investor protections and incentives previously passed into law. There is sometimes a public comment process during drafting of legislation or presidential decrees, but the process is often not transparent or sufficiently inclusive of investors’ concerns. Belarus has a written and consistently applied commercial law, which is broadly codified but contains inconsistencies and is not always considered to be business friendly.
Each of Belarus’ six regions and the capital city of Minsk have economic courts to address commercial and economic issues. In addition, the Supreme Court has a judicial panel on economic issues. In 2000, Belarus established a judicial panel on intellectual property rights (IPR) protection. Under the Labor Code, any claims of unfair labor practices are heard by regular civil courts or commissions on labor issues. However, the judiciary’s lack of independence from the executive branch impedes its role as a reliable and impartial mechanism for resolving disputes, whether labor, economic, commercial, or otherwise. According to Freedom House’s 2018 Nations in Transit report, executive authorities can directly influence a judge’s decision-making if their political or economic interests are involved, and such influence usually takes the form of direct instructions from officials.
Laws and Regulations on Foreign Direct Investment
Foreign investment in Belarus is governed by the 2013 laws “On Investments” and “On Concessions,” the 2009 Presidential Decree No. 10 “On the Creation of Additional Conditions for Investment Activity in Belarus,” and other legislation as well as international and investment agreements signed and ratified by Belarus.
The GOB regularly updates the following websites with the latest in laws, rules, procedures and reporting requirements for foreign investors:
Competition and Anti-Trust Laws
The June 3, 2016, presidential edict number 188 authorized the Ministry of Antimonopoly Regulation and Trade to counteract monopolistic activities and promote competition in Belarus’ markets.
Expropriation and Compensation
According to Article 12 of the Investment Code, neither party may expropriate or nationalize investments both directly and indirectly by means of measures similar to expropriation or nationalization, for other purposes than for the public benefit and on a nondiscriminatory basis; according to the appropriate legal procedure; and on conditions of compensation payment. Belarus has signed 66 bilateral agreements on the mutual protection and encouragement of investments.
In 2018, there was one nationally-reported case of nationalization, however the Belarusian government compensated the Ukrainian owner market value for shares of the Motor Sich aircraft repair factory in Orsha. In the past five years, there have been no instances of confiscation of business property as a penalty for violations of law.
Post has not received any expropriation claims from U.S. companies, and is not aware of any particularly high-risk sectors prone to expropriation actions.
There were no known investment disputes with American investors in 2018.
ICSID Convention and New York Convention
Belarus is a party to both the International Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The GOB states that local courts recognize and enforce foreign arbitral awards in compliance with the above conventions, national laws, and regulations. The enforcement of arbitral awards in Belarus is governed by Chapter 28 of the Code of Commercial Procedure.
Most of the BITs concluded by Belarus include a provision on international investment arbitration as a mechanism for settling investor-state disputes and recognize the binding force of the awards issued in investment arbitrations. Under Belarusian law, if an international treaty signed by Belarus establishes rules other than those established by local law, the rules of the international treaty shall prevail.
Investor-State Dispute Settlement
Local economic court proceedings normally do not exceed two months. The term of such proceedings with the participation of foreign persons is normally no longer than seven months, unless established otherwise by an international agreement signed by Belarus.
International Commercial Arbitration and Foreign Courts
Judgments of foreign courts are accepted and enforced if there is a relevant international agreement signed by Belarus. Courts recognize and enforce foreign arbitral awards. International arbitration is accepted as a means for settling investment disputes between private parties. In principle, the GOB accepts binding international arbitration of investment disputes between foreign investors and the state, although the Embassy is not aware of any cases where this has been put to the test. As of 2018, there were three known cases against Belarus pending at the ICSID: two from Russian investors in joint ventures in transport and infrastructure sectors, and one from a Dutch holding company in the banking sector. The Belarusian Chamber of Commerce and Industry has an International Arbitration Court. The 2013 “Law on Mediation,” as well as codes of civil and economic procedures, established various alternative ways of addressing investment disputes.
Belarus’ 2012 bankruptcy law, related presidential edicts, and government resolutions are not always consistently applied. Additional legal acts, such as the Civil Code and Code of Economic Procedures, also include certain regulations on bankruptcy-related issues. Under the bankruptcy law, foreign creditors have the same rights as Belarusian creditors. Belarusian law criminalizes false and intentional insolvency as well as concealing insolvency. According to the World Bank’s 2019 Doing Business Report, Belarus was ranked 72 in Resolving Insolvency, down from 68 in 2018 and 69 in 2017 (rankings available at http://www.doingbusiness.org/data/exploreeconomies/belarus)
4. Industrial Policies
According to the GOB’s Strategy for Attracting FDI, the priority sectors that need FDI include pharmaceuticals; biotechnology; nanotechnologies and nanomaterials; metallurgy; mechanical engineering industry; production of machines, electrical equipment, home appliances and electronics; transport and related infrastructure; agriculture and food industry; information and communication technologies; creation and development of logistics systems; and tourism. NAIP maintains a database of investment proposals at http://www.investinbelarus.by/en/invest/base/. The GOB offers various incentives and programs for FDI depending on the sector and industry. The below incentives outline the specific incentives that are usually accompanied by preferential tax rates.
Investment Agreement with the Republic of Belarus
The list of major incentives and benefits under an investment agreement includes but is not limited to:
- Allocation of a land plot without auctioning the right to lease it
- Removal of vegetation without compensation during construction
- Full VAT deduction for the purchase of goods, services (works) or property rights
- Exemption from import tariffs and VAT on the imports of production equipment
- Exemption from fees for the right to conclude a land lease
- Exemption from duties for employing foreign nationals
- Exemption from compensation for losses sustained by the agriculture and/or forestry industries due to the use of a land plot under the investment agreement
- Exemption from land tax on land plots in government or private ownership, and from rent on land plots in government ownership, for a period starting from the first day of the month in which the investment agreement came into effect until December 31 of the year following the year in which the last of the facilities scheduled under the investment agreement started operations.
Investment agreements concluded under the decision of the Belarusian Council of Ministers and with the permission of the President of Belarus may offer additional incentives and benefits not expressly provided for in legislation. Such incentives are provided on a case-by-case basis.
Free Economic Zones
Each of Belarus’ six regions has its own free economic zone (FEZ): Minsk, Brest, Gomel-Raton, Mogilev, Grodno Invest, and Vitebsk. The tax and regulatory pattern applicable to businesses in these zones is simpler and lower than elsewhere in Belarus. To become a FEZ resident, an investor needs to make a minimal investment of EUR 1 million, or at least EUR 500,000 provided the entire sum is invested during a three-year period, as well as engage in the production of import-substituting products or goods for export.
In October 2005, the President of Belarus signed the edict that established uniform rules for all FEZs. The list of main tax benefits for FEZ residents was revised in December 2016 to include certain exemptions from the corporate profit tax (CPT), real estate tax, land tax, and rent on government-owned land plots located within the boundaries of the FEZ, among others.
As of 2017, FEZ residents benefit from a simplified procedure of export-import operations. Resident enterprises are exempt from customs duties and taxes on facilities, construction materials, other equipment used in implementation of their investment projects. They are also exempt from customs duties and taxes on raw materials and materials used in the process of manufacture of the products sold outside the territory of the Eurasian Economic Union.
Otherwise, FEZ residents pay VAT, excise duties, ecological tax, natural resource extraction tax, state duty, patent duties, offshore duty, stamp duty, customs duties and fees, local taxes and duties, and contributions to the Social Security Fund according to the general guidelines.
For more details please visit:
- FEZ Minsk: http://www.fezminsk.by/en/
- FEZ Gomel-Raton: http://www.gomelraton.com/en/
- FEZ Vitebsk: http://www.fez-vitebsk.com/en/
- FEZ GrondoInvest: https://grodnoinvest.by/en/
- FEZ Brest: http://fezbrest.com/en/
- FEZ Mogilev: http://www.fezmogilev.by/
Great Stone Industrial Park
The Great Stone Industrial Park is a special economic zone of approximately 112.5 square kilometers located adjacent to the Minsk National Airport and Belarusian highway M1, which connects Moscow to Berlin. Great Stone resident companies also have access to Lithuania’s Klaipeda seaport on the Baltic Sea. According to a master plan approved in 2013, Great Stone will eventually include production facilities, dormitories and residential areas for workers, offices and shopping malls, and financial and research centers.
Great Stone is primarily a Belarus-China joint venture but any company – regardless of its country of origin – can apply to join the industrial park. Interested companies must submit either a business project worth at least USD 500,000, to be invested within three years from the moment of the business’ registration; or submit a business project worth at least USD 5 million without any time limit for investment; or submit a business project worth at least USD 500,000 tied to research and development.
As of 2017, Great Stone residents receive, among other preferences, certain exemptions on income tax, real estate and land taxes, and dividend income; the right to import goods, including raw materials, under a preferential customs regime; full VAT repayment on goods used for the design, building, and equipment of facilities in Great Stone; exemptions from environmental compensatory payments; and a preferential entry/exit program allowing Great Stone residents and their employees to stay in Belarus without a visa for up to 180 days. Great Stone residents are also exempt from any new taxes or fees should the government make future changes to the tax code.
For more information on Great Stone, please visit: https://industrialpark.by/en/home.html
High Technology Park (HTP)
Created in 2005 to foster development of the IT and software development industry, the High Technology Park (Hi-Tech Park) is a “virtual” legal regime that extends over the entire territory of Belarus. A physical campus of the HTP is found in the eastern part of Minsk and a satellite campus is located in Hrodna. The legislation behind the HTP was updated in 2017 with the signing of Presidential Decree No. 8 “On the Development of the Digital Economy.” The decree extended the HTP preferences from 2022 until 2049 and expanded the list of business activities in which HTP residents may engage, including but not limited to: software development; data processing; cryptocurrency and token-related activity; data center services; development and deployment of Internet-of-Things technologies; ICT education; and cybersports.
HTP provides residents beneficial tax preferences, including but not limited to: exemptions from VAT and CPT on sale of goods or services; exemptions from customs duty and VAT on certain kinds of equipment imported into Belarus for use in investment projects; immovable property tax and land tax benefits with regard to buildings and land within the boundaries of the HTP campuses; and caps on personal income tax at nine percent for employees and five percent for foreign entities.
Foreign nationals who are hired on contract by an HTP resident company, or who are founders of a HTP resident company, or who are employed by such founders, are eligible for visa-free entry into Belarus for a stay of up to 180 days a year. Foreigners employed by HTP residents are not required to have working permit in Belarus and are entitled to apply for a temporary residence permit for the duration of their contract.
Government agencies are not allowed to inspect the operations of HTP residents without prior consent of the HTP Administration.
For more information on HTP, please visit: http://www.park.by/
Investment activities in small and medium-sized towns
Small and medium-sized cities/town and rural areas in Belarus are defined by a 2012 presidential decree as settlements with populations under 60,000. Individual entrepreneurs and legal entitites who work in rural areas, defined as settlements of less than 2,000, receive additional tax benefits and exemptions.
Since July 1, 2012, companies and individual entrepreneurs operating in all rural areas and towns enjoy the following benefits in the first seven years after registration: exemption from profit tax on the sale of goods, work, and services of a company’s own production; exemption from other taxes and duties, except for VAT, excise tax, offshore duty, land tax, ecological tax, natural resources tax, customs duties and fees, state duties, patent duties, and stamp duty; exemption from mandatory sale of foreign currency received from sale of goods, work, and services of a company’s own production, and from leasing property; no restrictions on insuring risks with foreign insurers; exemption from import tariffs on certain goods brought into Belarus that contribute to the charter fund of a newly established business. The special legal regime does not apply to banks, insurance companies, investment funds, professional participants in the securities market, businesses operating under other preferential legal regimes (e.g. FEZ or HTP), and certain other businesses.
Performance and Data Localization Requirements
The host government does not mandate local employment. Foreign investors have the right to invite foreign citizens and stateless persons, including those without permanent residence permits, to work in Belarus provided their labor contracts comply with Belarusian law. The GOB often imposes various conditions on permission to invest, and pursues localization policies when it deems it appropriate. Other performance requirements are often applied uniformly to both domestic and foreign investors.
According to official Belarusian sources, licenses are not required for data storage. Law enforcement regulations governing electronic communications do not include any requirements specifically for foreign internet service providers. Beginning in 2016, internet service providers are required, by law, to maintain all electronic communications for a one-year period.
5. Protection of Property Rights
Property rights are enforced by the Civil Code. Mortgages and liens are available, and the property registry system is reliable. Investors and/or duly established commercial organizations with the participation of a foreign investor (investors) have the right to rent plots of land for up to 99 years. According to the Belarusian Land Code, foreign legal persons and individuals are denied land ownership. According to the 2019 World Bank Doing Business Report, Belarus ranked fifth in the world on ease of property registration (http://www.doingbusiness.org/en/data/exploreeconomies/belarus).
Intellectual Property Rights
In 2015, Belarus was taken off the USTR’s Special 301 Report Watch List. As of 2019, Belarus has made progress on improving legislation to protect IPR and prosecute violators. However, challenges for effective enforcement include a lack of sufficiently qualified officers and limited focus to those areas that have the most impact on the economy. The United States expects Belarus to continue improving its IPR regime as part of its WTO accession negotiations and will continue to assist Belarus with technical consultations to that end.
According to information provided by Belarus’ National Center of Intellectual Property, the government amended Article 4.5 of the Administrative Code in 2018 to allow greater prosecution of intellectual and industrial property rights violations. Notably, in 2018 Belarusian law enforcement prosecuted five legal persons for distribution of counterfeit products under Article 9.21 of Belarus’ Adminstrative Code, based on a request filed by a U.S. company operating in Belarus.
As of February 2019, Belarus’ National Customs Register of IP objects, run by the State Customs Committee, included 70 trademarks whose rights holders were U.S. registered companies. U.S. registered trademarks account for 23 percent of IP objects secured by the Register.
In 2018, the National Center of Intellectual Property continued discussions with U.S. Broadcast Music, Inc. on an agreement that could help secure the recording rights of U.S. property rights holders and enable the collection of royalties in Belarus.
In 2018, Belarusians paid a total of USD 50 million for using IPR.
Belarus does not appear in the USTR’s Out-of-Cycle Review of Notorious Markets report, nor does it appear in the Special 301 report.
The World Intellectual Property Organization (WIPO) provides 186 Country Profiles, including Belarus. These profiles are available at: http://www.wipo.int/directory/en
For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.
Resources for Rights Holders
tel.+375 (17) 210-1283
6. Financial Sector
Capital Markets and Portfolio Investment
The Belarusian government welcomes portfolio investment and has taken steps to safeguard such investment and ensure a free flow of financial instruments. The Belarusian Currency and Stock Exchange is open to foreign investors, but it is still largely undeveloped because the government only allows companies to trade stocks if they meet certain but often burdensome criteria. Private companies must be profitable and have net assets of at least EUR 1 million. In addition, any income from resulting operations is taxed at 24 percent. Finally, the state owns more than 70 percent of all stocks in the country, and the government appears hesitant and unwilling to trade in them freely. Bonds are the predominant financial instrument on Belarus’ corporate securities market.
In 2001, Belarus joined Article VIII of the IMF’s Articles of Agreement, undertaking to refrain from restrictions on payments and transfers under current international transactions. Loans are allocated on market terms and foreign investors are able to get them. However, the discount rate of 10 percent (as of March 2019) makes credit too expensive for many private businesses, which, unlike many SOEs, do not receive subsidized or reduced-interest loans.
Since 2016, businesses to buy and sell foreign exchange at the Belarusian Currency and Stock Exchange through their banks. Belarus used to require businesses to sell 10-20 percent of foreign currency revenues through the Belarusian Currency and Stock Exchange, however in late 2018 the National Bank abolished the mandatory sale rule.
Money and Banking System
Belarus has a central banking system. The country’s main bank, the National Bank of the Republic of Belarus, represents the interest of the state and is the main regulator of the country’s banking system. The President of Belarus appoints the Chairperson and Members of the Board of the National Bank, designates auditing organizations to examine its activities, and approves its annual report.
As of March 2019, the banking system of Belarus included 24 commercial banks and three non-banking credit and finance organizations. According to the National Bank, the share of troubled loans in the banking sector was 12.9 percent in 2018. The country’s five largest commercial banks, all of which have some government share, account for 77 percent of the total assets of the country’s banking sector, totaling the equivalent of some USD 26 billion. To the best of the Embassy’s knowledge, rules on hostile take-overs are clear, and applied on a non-discriminatory basis.
Foreign Exchange and Remittances
Foreign Exchange Policies
According to the GOB, Belarus’ foreign exchange regulations do not include any restrictions or limitations regarding converting, transferring, or repatriating funds associated with investment. Foreign exchange transactions related to FDI, portfolio investments, real estate purchasing, and opening bank accounts are carried out without any restrictions. Foreign exchange is freely traded in the domestic foreign exchange market. Foreign investors can purchase foreign exchange from their Belarusian accounts in Belarusian banks for repaying investments and transferring it outside Belarus without any restrictions.
Since 2015, the Belarusian Currency and Stock Exchange has traded the U.S. dollar, the euro, and the Russian ruble in a continuous double auction regime. Local banks submit their bids for buying and selling foreign currency into the trading system during the entire period of the trading session. During the trades the bids are honored if and when the specified exchange rates are met. The average weighted exchange rate of the U.S. dollar, the euro, and the Russian ruble set during the trading session is used by the National Bank as the official exchange rate of the Belarusian ruble versus the above-mentioned currencies from the day on which the trades are made. The cross rates versus other foreign currencies are calculated based on the data provided by other countries’ central banks or information from Reuters and Bloomberg. The stated quotation becomes effective on the next calendar day and is valid till the new official exchange rate of the Belarusian ruble versus these foreign currencies comes into force. The IMF has listed Belarus’ exchange rate regime in the floating exchange rate category.
There have not been reports of problems exchanging currency and/or remitting revenues earned abroad.
Sovereign Wealth Funds
Belarus has the State Budget Fund of National Development, which is used for implementing major economic and social projects in the country.
7. State-Owned Enterprises
Although SOEs are outnumbered by private businesses, SOEs dominate the economy in terms of assets. According to independent economic experts, the share of Belarus’ GDP derived from SOEs is at least 75 percent. Belarus does not consider joint stock companies, even those with 100 percent government ownership of the stocks, to be state-owned and generally refers to them as part of the non-state sector, rendering official government statistics regarding the role of SOEs in the economy as misleading.
According to independent economic media reports, SOEs receive preferential access to government contracts, subsidized credits, and debt forgiveness. While SOEs are generally subject to the same tax burden and tax rebate policies as their private sector competitors, private enterprises do not have the same preferential access to land and raw materials. Since Belarus is not a WTO member, it is not a party to the Government Procurement Agreement (GPA).
Belarus’ privatization program is in practice extremely limited. There was no privatization of state-controlled companies in 2018, one SOE was bought by private investors in 2017, and there were zero companies or shares privatizatized in 2016. In early 2019, Belarus’ State Property Committee approved a list of 23 joint stock companies for full or partially privatization in 2019. The GOB is allowing sale of the government share in these companies on the condition that the purchasing investors preserve existing jobs and production lines. For a list of open-joint stock companies whose shares which are available for privatization, as well as a description of the asset and conditions for privatization, visit: http://www.gki.gov.by/ru/auction-auinf-auishares/.
Investors interested in assets on the published privatization list are encouraged to forward a brief letter of interest to the State Property Committee. A special commission reviews offers and makes a recommendation to the President on the process of privatization – via tender, auction, or direct sale. Investors may also send a letter of interest regarding assets that are not on the State Property Committee list and the government will examine such offers.
Additionally, the State Property Committee occasionally organizes and holds privatization auctions. Many of the auctions organized by the State Property Committee have low demand as the government conditions privatizations with strict requirements, including preserving or creating jobs, continuing in the same line of work or production, or launching a successful business project within a limited period of time, etc.
In 2016, Belarusian joint stocks were allowed trans-border placement of their stocks via issuing depositary receipts. However, to the Embassy’s knowledge, this instrument of attracting investments has not been put to test in Belarus.
8. Responsible Business Conduct
Post continues to develop resources and information on the current state and development of responsible business conduct.
Belarus has effective and non-discriminatory anti-corruption legislation, which includes certain provisions of the Criminal Code and Administrative Code as well as the Law on Public Service and the Law on Combating Corruption. The latter is the country’s main anti-corruption document and was adopted in 2015. Government organizations directly engaged in anti-corruption efforts are prosecutors’ offices, internal affairs, state security and state control agencies. However, as noted a pervious section, the country’s judicial system is not independent from the executive branch and is not transparent.
Belarusian anti-corruption law covers family members of government officials and political figures. The country’s regulations require addressing any potential conflict of interests of parties seeking to win a government procurement contract. The list of such regulations include the July 13, 2012, law “On public procurement of goods (works, services),” the December 31, 2013, presidential decree “On conducting procurement procedures,” and the March 15, 2012, Council of Ministers resolution on the procurement of goods (works, services). Some of the same concerns with the independence of the judiciary also apply in the context of corruption. The lack of an independent judiciary means investors have little recourse to deal with corruption concerns.
Bribery is considered a form of corruption and is punishable with a maximum punishment of 10 years in jail and confiscation of property. Belarus is a party to a number of international anti-corruption conventions and agreements. The Republic of Belarus has consistently ratified and complied with requirements of main international anti-corruption acts, such as the Convention of the Council of Europe 173 On criminal liability for corruption (S 173) (concluded in Strasbourg on 27 January, 1999); the United Nations Convention Against Transnational Organized Crime, signed by Belarus in Palermo on 24 December, 2000, and the United Nations Convention Against Corruption (concluded in New York on 31 October, 2003); and the Civil Law Convention on Corruption (concluded in Strasbourg on 4 November, 1999) (ratified in 2005). Belarus also signed a number of the intergovernmental agreements to address this problem. In 2004, Belarus signed and ratified the United Nations Convention against Corruption. Belarus is considering joining the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.
In 2019 the Council of Europe’s (COE) Group of States against Corruption (GRECO) publicly declared Belarus non-compliant with GRECO’s anti-corruption standards. This was GRECO’s first ever declaration of non-compliance. According to the COE, Belarus failed to address 20 out of 24 recommendations made in 2012; had not authorized the publication of the 2012 report or related compliance reports; and was non-responsive since 2017 to requests from GRECO to organize a high-level mission to Belarus. The majority of GRECO’s recommendations related to fundamental anti-corruption requirements, such as strengthening the independence of the judiciary and of the prosecution office, as well as increasing the operational autonomy of the law enforcement and limiting immunity protection of certain categories of persons. However, the COE contends that limited reporting indicates that corruption is particularly alarming higher up in the government hierarchy and in procurement for state-run enterprises.
According to Transparency International’s 2018 Corruption Perception Index, Belarus fell from 68th to 70th of 180 countries in the rankings, tied with Jamaica and the Solomon Islands. In Belarus’ region, Poland ranked 36th, Lithuania 38th, Latvia 41st, Ukraine 120th, and Russia 138th.
10. Political and Security Environment
In the Embassy’s estimation, the potential for widespread, politically-inspired violence that would adversely affect foreign property interests is low.
11. Labor Policies and Practices
Belarus has a highly skilled and well-educated work force, due to its advanced system of higher and specialized education. Wages are lower than in Western Europe, the United States, and even Russia.
Belarus has been a member of the International Labor Organisation (ILO) since 1954 and is a party to almost 50 ILO conventions. In 2004, the ILO made several recommendations regarding workers’ rights to organize and freedom of association. Belarus has not adequately responded to those recommendations by the 2004 ILO Commission of Inquiry.
The Constitution, the Labor Code, and presidential decrees are the main documents regulating the Labor Market in Belarus. Prior to the 1999 Presidential Decree No. 29, the vast majority of the labor contracts in the country were open-ended work agreements. Decree No.29 established a new option to employ workers on 1-5 year-long term contracts and to transfer current employees to these new type contracts. In 2018, almost 90 percent of employees in Belarus were working on term contracts.
The term contract system generally favors the employer. The employer can choose not to renew a contract upon its expiration without giving the employee an explanation. Technically, the employer can also refuse an employee’s proposed resignation before the contract term is up, which would then require the employee to argue their case in court. The employer, on the other hand, can terminate the contract at will. There are several protected employee groups that are exempt from early termination: pregnant women, women with children of up to 3 years old, and single parents with children under 14 years old. Additionally, the employer is obligated to renew contracts with women on maternity leave and with those employees who have reached pre-pension age at the end of their prior contract (53 years for women and 58 for men.)
Severance pay in the case of reduction in force is 13 weeks of salary, and eight weeks’ notice is required for dismissal. Normal work hours in Belarus are eight hours per day and 40 hours per week. Belarusian law is stringent in limiting overtime hours. A non-standard work hour regime is allowed with the condition that the employee is provided with up to seven days of additional annual leave. In general, employees must be granted at least 24 calendar days of paid leave a year.
There are special provisions on employing foreign citizens who have no permanent residence permit. Such citizens have to secure a work permit, which can be usually granted only if an unemployed Belarusian citizen cannot perform the required work. To date, the Embassy has not heard of discriminatory or excessively onerous visa, residence or work permit requirements inhibiting foreign investors, nor of restrictions placed on the numbers or duration of employment of foreign managers brought in to supervise foreign investment projects. In practice, however, few firms employ significant numbers of foreigners, apart from Russian citizens, who benefit from Russia’s and Belarus’ common employment regulations streamlined under the Eurasian Economic Union arrangement of Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan.
In July 2000, President Clinton signed a proclamation withdrawing benefits under the Generalized System of Preferences (GSP) for Belarus. This decision was based on a 1997 American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) petition to the United States Trade Representative (USTR). The petition alleged that Belarus was not acting in accordance with the Trade Act of 1974, as amended, regarding internationally recognized worker rights. These include the freedom to form independent trade unions and the right to organize and bargain collectively. The rights of independent trade unions are often subject to government attack, as documented in the Department of State’s Report on Human Rights Practices for 2018: https://www.state.gov/reports/2018-country-reports-on-human-rights-practices/belarus/
The official unemployment rate in Belarus has been steady in recent years at or just below one percent. Independent analysts claim the unofficial unemployment rate is closer to five percent when taking into account job seekers and unregistered unemployed.
12. OPIC and Other Investment Insurance Programs
Under Section 5 (Sense of Congress Relating to Sanctions Against Belarus), paragraph C (Prohibition on Loans and Investment) of the Belarus Democracy Act signed by the president on October 20, 2004, no loan, credit guarantee, insurance, financing, or other similar financial assistance should be extended by any agency of the United States government (including the Export-Import Bank and the Overseas Private Investment Corporation) to the Government of Belarus, except with respect to the provision of humanitarian goods and agricultural or medical products.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
According to official statistics, Belarus received USD 1.6 billion in FDI (on a net basis) in 2018, up from USD 1.24 billion in FDI in 2017 and USD 1.3 billion in 2016. Russia (41.7 percent), Cyprus (13.5 percent), China (9.3 percent), Germany (5.5 percent), UAE (3.6 percent), Poland (3.4 percent), Ireland (2.8 percent), Latvia (2.5 percent), the United Kingdom (2.4 percent) and the United States (2.1 percent) are considered the top ten foreign investors in Belarus.
Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy
|National Statistical Committee of the Republic of Belarus (Belstat)||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|Host Country Gross Domestic Product (GDP) ($M USD)||2018||$59,600||2018||$59,700||www.worldbank.org/en/country|
|Foreign Direct Investment||Belarus’ National Bank||USG or International Statistical Source||USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other
|U.S. FDI in partner country ($M USD, stock positions)||2018||$54.5||2018||N/A||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Host country’s FDI in the United States ($M USD, stock positions)||2017||$39||2018||N/A||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Total inbound stock of FDI as % host GDP||2018||14.3%||2018||34.8%||UNCTAD data available at https://unctad.org/en/Pages/DIAE/World%20Investment%20Report/Country-Fact-Sheets.aspx|
For detailed statistics on foreign direct investments in and outside Belarus for 2010-2018 see the website of Belarus’ National Bank (http://www.nbrb.by/engl/statistics/ForeignDirectInvestments/) and Economy Ministry (https://www.economy.gov.by/ru/pezultat-ru/).
Table 3: Sources and Destination of FDI
|Direct Investment From/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||$19,795||100%||Total Outward||$872||100%|
|Russian Federation||$10,971||55.4%||Russian Federation||$647||74.2%|
|Netherlands||$497||2.5%||Venezuela, Rep. Bol||$34||3.8%|
|“0” reflects amounts rounded to +/- USD 500,000.|
Table 4: Sources of Portfolio Investment
|Portfolio Investment Assets|
|Top Five Partners (Millions, US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||$1,851||100%||All Countries||$1||100%||All Countries||$1,850||100%|
|United States||$424||22.9%||United States||$424||22.9%|
|Russian Federation||$353||19.1%||Russian Federation||$353||19.1%|
For the latest available statistics on foreign portfolio investments in Belarus see the website of Belrus’ National Bank: http://www.nbrb.by/engl/statistics/PortfolioInvestment
14. Contact for More Information
46, Starovilenskaya St., Minsk, 220002, Belarus
tel. +375 (17) 210-1283