IT industry to lead Belarusian export growth in 2016
In 2015, exports of IT services by HTP residents exceeded USD 700 million. The IT industry’s success is due to tax benefits, high quality of Belarusian specialists and limited abilities of the authorities to interfere with the industry. In 2016, amid expected export failures in other economic sectors, the Belarusian IT will lead export growth.
The High-Tech Park management reported an increase in export of services by HTP residents by 21% compared with 2014, up to USD 705.6 million. Export occupies more than 90% of total HTP production. HTP companies-residents employ more than 24000 people with more than 3,000 jobs created in 2015 alone.
Overall, in 2015, Belarus’ export of telecommunication and computer services for the first time exceeded USD 1 billion and listed second in the total exports of services, following transport services. Branch holds the first place in terms of gross salary in Belarus. The average salary in the HTP in late January 2016 exceeded USD 1,700.
The industry’s success in Belarus is due to highly skilled workers, raised at domestic universities. In addition, the HTP enjoys tax benefits, including tax on profits and income tax, which is 9% for HTP employees. As well, a significant flexibility in the workflow prevents the Belarusian authorities from interfering too much with the industry. HTP companies can easily change their place of residence within a couple of days should any threat occur, and leave Belarus without foreign currency inflow. Tax Ministry’s attempt to increase tax payments for HTP residents was unsuccessful so as the HTP companies were able to defend their privileges, even against the backdrop of state budget deficit.
In 2016, Belarusian exports will continue to shrink. Exports of potash fertilizers may reduce by one third in value terms, prices on dairy products may reduce by 20%-30% in dollar terms, while investment demand for engineering products is unlikely to increase. Russian market, which is the key market for exports of Belarusian goods, is unlikely to resume growth in 2016 due to persistently low oil prices.
The IT industry is focused on markets outside the CIS, software is delivered to more than 60 countries in the world, which saves the industry from foreign exchange risks. High wages attract additional manpower to the industry, which allows to increase production volumes. In recent years, the industry’s exports grew by at least 10% per year, and its potential has not yet been exhausted. Exports of the IT industry in 2016 may increase by USD 100-150 million, making the most significant increase among all goods and services.
With the overall decline in exports of goods and services, the IT sphere earned more than USD 1 billion in 2015. Diversification of exports, minimal government interference and highly skilled workers create favourable environment for at least 10% increase in exports of IT services in 2016 relative to 2015.
Yet Minsk has not decided on the "patriots' case" and is attempting to break new grounds in relations with the West. Meanwhile, Brussels is ready to lower cooperation levels with the Belarusian authorities in anticipation of new political prisoners to appear after the trial against former White Legion activists, irrelevant of the charges, either preparation for riots, or creation of illegal armed groups, or any other. Minsk is unlikely to cross the red line in bilateral relations with the West and new political prisoners are unlikely to appear in Belarus.
The harsh clampdown on protests and arrests this spring in Belarus are unlikely to lead to new moves by the European Union, however, the EU would closely monitor ‘some investigations’, including the ‘patriot’s case’ aka the ‘White Legion’ case.
According to human rights defenders, 17 people remain in custody, of which 16 are former members of the White Legion and one supporter of Statkevich-led the Belarusian National Committee, Sergei Kuntsevich. The law enforcement has been releasing former activists of the White Legion and members of the Patriot Club, most likely in order to mitigate criticism from Western capitals. Amid Minsk Dialogue expert conference with the participation of Belarusian and EU officials, the authorities released from custody head of the Bobruisk "Patriot" Club Nikolai Mikhalkov. In addition, the Belarusian leadership expects to ease some tension by demonstrating greater openness to a dialogue with civil society on human rights issues. For instance, for the first time the Belarusian authorities and human rights defenders held consultations on Belarus’ fifth periodic report to the UN Human Rights Committee.
The Belarusian leadership has attempted to mitigate the West’s attitude towards the criminal prosecution against former activists of the "White Legion" by adding charges of creating an ‘illegal armed formation’ to ‘preparing for mass riots’ charges.
Apparently, Minsk also gains from speculations about possible disagreements among the executives - supporters of stronger ties with Russia, and "pro-Western" reformists lead by Foreign Minister Makei. That said, the Presidential Administration and President Lukashenka have full control over the foreign policy agenda and the law enforcement.
Overall, Minsk is determined to develop relations with Western capitals. The Belarusian authorities are likely to take controversial actions, i.e. to demonstrate the desire for liberalization in some areas and occasionally tighten repressions against the opponents, however without creating new political prisoners.