The conditions for investment activity in Belarus are constantly being adjusted and improved. Chairman of the Board of Deutsche Bank in Russia Joerg Bongartz commented on the attractiveness of Belarus as an investment object at present and in post-crisis perspective.
- It is not too late for Belarus to start reforming the economy, isn’t it?
- At the beginning of liberalization it should be considered as the economy is ready for this process, what are the causes and what external factors will play a role. One thing is new laws, the other is what external and internal investors will react to the proposed changes. And the third is the general economic climate. You could certainly argue whether it was necessary to start all this five years ago or to wait until the crisis passes. But I think the moment has been chosen correctly, because there are favorable factors for Belarus even now. But the process should be carrying out firmly. Moreover, regarding the pace of implementation, I observe the government and the relevant participants of the process to be determined.
- What is essential for business development in Belarus?
- It should be always kept in mind that economies compete with each other. And if Belarus wants to attract foreign investment, it is necessary to compare offers from other countries. All the factors must be competitive. In Belarus there are favorable conditions for foreign investors, who deal with production and export, such as free land, tax and customs preferences, relatively cheap natural and human resources, low competition in all sectors of the economy.
It is important for investors to have a platform to protect their interests in case of risks, not rhetorically, but as a real practice. If there is a risk, it is important that the relevant laws and regulations put Belarus on a par with developed economies.
- Do investors take into account the previous negative examples?
- Each investor should decide how such cases can appear and what the reasons are for it.
Such situations also took place in other countries, when foreign or minority investors did not receive any expected rights. Fortunately, there are few of such examples.
I think that government intervention is a key point, especially when an investor needs to fulfill the requirements put forward by the government. For example, if the government insists on preservation of jobs. If an investor can not react flexibly, especially in a crisis situation, when reduction of personnel is just inevitable, it raises his risks. So an appropriate balance of interests must be found. I'm not talking about full liberalization without any state control, but the balance is necessary.
- Is it interesting for investors to invest in the modernization of production facilities during the crisis, when the markets are unstable and it is difficult to predict the output?
- It is necessary to consider the overall picture of investments. Positive aspects of Belarus for the investor are the opportunity to become the first in the market, low competition between industries, geographic location. Negative reasons are the necessity to attract resources for investment from abroad. It is difficult not only for the Belarusian market, but also for the Russian, German and British companies to provide credit resources, even from the capital markets.
However, it is possible, including Belarus, to receive assistance from international financial institutions such as the European Bank for Reconstruction and Development. Providing cheap and available resources is relevant not only for Belarus, but also for the whole region.
I also want to note the recent government measures to improve the business climate, such as providing information on the structure of credit portfolio of investment object, simplification of the registration. For Belarus it is a grate advantage.
The top five investing countries are Russia (59.6%), Cyprus (14.2%), United Kingdom (9.9%), Lithuania (2)%, Germany (1.2%).
- What business sectors are most attractive for investment in Belarus?
- Due to an advantageous geographical location Belarus is attractive for infrastructure investments. It is necessary to analyze which areas have been so attracting for the investors for the last two or three years. First of all it is the telecommunication industry. For small and medium business food production is considered to be attractive. Some investments were put in retail.
After the crisis banking sector will provide several opportunities. It can be privatization through public stock offering of banks’ shares or attracting a strategic investor. It is obvious that the Belarusian government understands it.
The second promising sector is machinery and equipment. It is particularly promising from the side of export potential to Russia.
I believe that after the normalization of the situation a 30 percent increase can be expected.
Investors are also highly interested in retail. Commercial prospects exist in a construction business as well. However especially this sphere of business has been affected badly. Construction companies should have time to improve the situation in their own markets before investing.
Most of the investment goes into such sectors as transport, trade and manufacturing.
- How is adequate the assessment of enterprises during the crisis in terms of the further sale?
- An assessment is usually based on the expectation of return. Now we need to calculate several models, which are based on already available information, such as the assessment of the balance of the company in recent years, market analysis, forecast economic growth in Belarus and on the markets. It is important that all these projects will be accompanied by professional consultants that can carry out such an assessment.
- However, the experts from around the world can not predict the end of the crisis. Is it possible in such a situation to predict confidently the growth on market channels of the acquired object?
- Indeed, the forecasts are very different, and many factors of influence are being regarded. We understand that the willingness of the sale to strategic investors (I am not speaking about sales on the stock exchange and capital markets) is quite low due to the fact that the owner is not sure of the adequacy assessment. There should be more information on the development and forecasts, which are now difficult to provide.
But, I think, it will be obvious in several months how the situation develops in some sectors, countries, etc. It takes time to be more confident in the predictions.
- Assuming that the liberalization of the economy after the crisis in Belarus is not over, what model of development should be chosen for our country?
- I do not believe in the choice of models for such processes. I do not think you need someone to copy. It is better for you to see things in a realistic light, where the Belarusian economy is and where it wants to go. An important role here the development of the internal market will be played. As the ground for foreign investment Belarus is attractive for Russia and the European Union. Accordingly, the Belarusian economy should become closer and more understandable for the investors of these regions. Tighter integration of the Belarusian economy with the economies of Russia and the EU is the most important thing in choosing the way of further development.
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