Belarus - Raiffeisen Bank International AG

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1. The Economic and Political Situation in Belarus National Economy in Crisis 4 In contrast to developments in other CEE countries, the Belarus economy still remains largely in the hands of the state. About 75% of GDP was generated by state-owned companies, and state banks comprise 70% of the banking sector. Belarus experienced a strong phase of growth with an average rate of 7.5% p.a. in the five years leading up to the financial crisis. Both internal factors, such as high investments and climbing private consumer demand, and external factors such as strong demand for Belarus’s export goods, contributed significantly to this dynamic. Exports include petrochemical products for the European market (above all products from two oil refineries) and industrial facilities, trucks, tractors, consumer goods and food, which are sold in the post-Soviet area (especially in Russia). With foreign trade revenues (the sum of exports and imports) of over 100% of GDP, the country is a very open national economy. Politically, Belarus is associated with neighbouring Russia via membership in multiple organisations. In addition to the Commonwealth of Independent States (CIS), Belarus belongs to a union state with Russia that was founded in the 1990s (and does not function well), and the Eurasian Economic Area (EurAsEC), which is a customs union between Russia and Kazakhstan formed in 2010. The customs union currently has numerous deficiencies that should be addressed by a shared economic space as of 2012. In addition, Belarus profited, even before the introduction of the customs union, by preferential access to the Russian market and very favourable conditions for the delivery of oil and gas. Despite this reliance on Russia, President Alexander Lukashenko, who has been in office since 1994, has wanted to limit direct foreign political and economic influence on Belarus. The president’s authoritarian style of leadership, as well as the high percentage of state-owned companies, means that hardly any important economic decisions are taken without Lukashenko’s blessing. The Belarus economic model was based on cheap Russian energy in recent years, which increased the competitiveness of domestic industry and allowed the subsidisation of otherwise unprofitable sectors (such as agriculture). From 2007 forwards, however, Russia has slowly increased prices to bring them to world market levels. Belarus offset decreasing energy subsidies on one hand by striving to increase energy efficiency, and on the other by taking on more loans from abroad. The state’s strong control of the economy turned out to be a good thing during the financial and economic crisis of 2008/2009. Despite a massive collapse in exports, domestic investors were forced to avoid terminations, thereby stabilising private domestic demand. A currency devaluation and support from the International Monetary Fund (IMF) totalling over $ 3.6 billion successfully prevented a deep recession like those in the Ukraine or Russia.
The continuation of expansive policy measures, such as strong growth in wages and credit, became a burden to Belarus in the final analysis. They led to an expansion of pre-existing foreign trade imbalances. The country therefore slipped into a major liquidity and currency crisis in early 2011. The securities market almost completely dried up, and the value of the Belarus ruble fell against the U.S. dollar on the black market. A steep devaluation of the official exchange rate by an additional 40% followed in May. Efforts began in autumn of 2011 to revive the securities market. A further increase in devaluationary pressure, high inflation rates, upheavals in the banking sector and lower growth forecasts will continue to affect the economy in 2012. The long-term challenge is to increase the energy efficiency and productivity of the Belarus economy to be able to continue financing the social-state portion of the Belarus economic model. An opening in terms of structural reforms oriented towards a market economy, as well as a partial privatisation of industry, seem indispensable. 5
Page 1 and 2: Financial Market Report Belarus In
Page 3: The Belarusian Financial Market Imp
Page 7 and 8: The general view is that representa
Page 9 and 10: Forming a limited liability company
Page 11 and 12: 3. Taxation and Legislation VAT The
Page 13 and 14: Profit tax in a number of areas of
Page 15 and 16: Special tax regimes Unified tax on
Page 17 and 18: 4. Privatization Roughly 75 per cen
Page 19 and 20: The arbitration clause of the Inter
Page 21 and 22: Who can apply? All natural persons
Page 23 and 24: 7. Risk Mitigation and Finance Guar
Page 25 and 26: Investment of €100 Austrian Compa
Page 27 and 28: 8. Payment and Account Services at
Page 29 and 30: 9.3. Clearing Mechanisms Settlement
Page 31 and 32: 10. Your International Business Spe
Page 33 and 34: Notes 33
Page 35 and 36: Notes 35

Belarus - Raiffeisen Bank International AG

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