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.
Over the past year, military-political relations between Minsk and Kyiv have become complicated. Due to their high inertia and peculiarities, this downward trend would be extremely difficult to overcome.
The root cause of the crisis is the absence of a common political agenda in the Belarusian-Ukrainian relations. Minsk is looking for a market for Belarusian exports in Ukraine and offers its services as a negotiation platform for the settlement of the Russo-Ukrainian war, thereby hoping to avoid political issues in the dialogue with Kiev. Meanwhile, Ukraine is hoping for political support from Minsk in the confrontation with Moscow. In addition, Ukraine’s integration with NATO presupposes her common position with the Alliance in relation to Belarus. The NATO leadership regards the Belarusian Armed Forces as an integral part of the Russian military machine in the western strategic front (the Baltic states and Poland). In addition, the ongoing military reform in Ukraine envisages a reduction in the number of generals and the domestic political struggle makes some Ukrainian top military leaders targets in politically motivated attacks.
Hence, the criticism of Belarus coming from Ukrainian military leadership is dictated primarily by internal and external political considerations, as well as by the need to protect the interests of generals, and only then by facts.
For instance, initially, the Ukrainian military leadership made statements about 100,000 Russian servicemen allegedly taking part in the Russo-Belarusian military drill West-2017. Then the exercises were labelled quazi-open and military observers from Ukraine refused to provide their assessment, which caused a negative reaction in Minsk. Further, without citing specific facts, it was stated that Russia was building up its military presence in Belarus.
Apparently, the Belarusian and Ukrainian Defence Ministries have entangled in a confrontational spiral (on the level of rhetoric). Moreover, only a small part of the overly hidden process has been disclosed. That said, third states are very likely to take advantage of the situation (or have already done so). This is not only about Russia.
The Belarusian Defence Ministry officials are restrained in assessing their Ukrainian counterparts. However, such a restraint is not enough. Current military-political relations between Belarus and Ukraine are unlikely to stabilise without the intervention of both presidents.