Outflow of foreign investment from Belarus

April 22, 2016 18:14

Last week Oman refused to implement an investment project worth USD 150 million in Minsk. Belarusian authorities are looking for new investors to implement a number of investment projects.

Omman’s State Reserve Fund refused to implement an investment project. The investor believes the project is unprofitable due to significant changes in the economic conditions resulting from the devaluation of the Belarusian ruble in 2011.

In March 2010 the Fund, in face of “Eagle Properties four”, Ltd, received a land plot in the centre of Minsk (2.6 hectares) in private ownership for USD 10 million (no auction was held) for the construction of a residential complex, business center and a five star hotel. The overall investment was estimated at USD 150 million and the project should have been finished by 2016. 

Quoting similar reasons an investment agreement with a Cypriot company IteraVnukovo Ltd (part of the group \"Itera\") was terminated. The contract envisaged construction of an aircraft maintenance and repair and business aviation centre at the Minsk National Airport.

Among other reasons that hinder the implementation of investment projects in Belarus are corruption and inefficiency of government agencies.

Nevertheless, the government continues looking for investors. For example, the Swiss Stadler Rail AG and JSC “Belkommunmash Holding Management Company” will build a plant to produce urban electric passenger transport in Dzerzhinsk district, Minsk region. For this, a JSC “Electric vehicles” has already been registered as a FEZ “Minsk”. Project implementation is envisaged between 2012 and 2016. 

Lithuanian Norfa will build a vegetable processing plant in Belarus. Retailer Norfa Norfos mažmena has already acquired land plot in Belarus (in Vilejka). Currently design works are carried out, project cost is around Euro 5 million.

For reference. According to the National Statistics Committee, the net inflow of foreign direct investment in January-May 2012 decreased compared with the same period in 2011 by 18.5% to USD 605.7 million with the forecast for 2012 USD 1.2 billion.

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The Architecture and Construction Ministry has acknowledged that the decree No 585 on assistance to large and young families in building and buying housing was prematurely rescinded.

The authorities are often forced to revise their decisions on curtailing social assistance to different social groups during their implementation, without preliminary impact assessment and feedback from the population, so as they lead to the growth in social tension. Due to the centralised decision making, languishing state resources and the lack of public debate as a balancing instrument in issues related to social protection, the state administration is losing control of the population.

Perhaps, the compensatory mechanisms of the state apparatus lack the time to adjust to dwindling state resources for supporting the existing social model, even in a reduced form. The authorities have completely or partially paralysed operations of independent public institutions and representative bodies, through which they could monitor public moods and receive feedback from the population, such as local councils, the parliament, political parties and NGOs. Last year, under the pressure of the authorities, the last independent institute for measuring public sentiment, IISEPS, suspended operations.

President Lukashenka’s self-removal from the decision-making on current socio-economic issues, also could have affected the state apparatus’ operations. The president has always been very sensitive about adopting unpopular decisions which could lower his popular support, hence demanded a careful preliminary assessment of such decisions. However, recently, especially after the introduction of the tax on social dependants, the president has mainly focused on the foreign policy agenda.

Hence, a lacuna has formed in the state decision-making after the president reduced participation in the current socio-economic policy formation, which leads to an increase in manifestations of dysfunction in the public administration.