Belarus 2020: Turning the Vicious Circle Into an Upward Spiral

emerging europe belarus outlook ebrd

Read the Outlook on Belarus special report


Pavel A Laschenko

About Pavel A Laschenko

Pavel A Laschenko is EY Country Managing Partner for Belarus, Assurance with 22 year working experience in auditing and banking in Belarus, Baltic States and CIS countries. He opened the EY office in 2000. He is a certified Belarusian auditor and a fellow of the Association of Chartered Certified Accountants of Great Britain (FCCA). He is also a member of the Foreign Investment Advisory Council under the Council of Ministers of Belarus (FIAC). Since 2004, he has been advising the Belarusian National Bank.

The latest presidential elections were held on 11 October 2015, when the incumbent President Alexander Lukashenko registered a first-round landslide victory with 83.5 per cent of the vote. His fifth term will end in the autumn of 2020. 

In the twenty-some years since his election as the first president of Belarus, no major changes have been made that would give the economy a market orientation. The private sector still accounts for less than 30 per cent of the economy, while it has long passed the 60 per cent mark in all other countries bordering Belarus (Russia, Ukraine, Poland, Lithuania and Latvia).

There are no plans for large-scale privatisation projects, making it highly unlikely that this figure will improve much in the near future. Talks on accession to the WTO have dragged on since 1993 without visible result. The main reason in both cases is the lack of political will and the president’s reluctance to lose any levers of control over the economy by handing the private sector more of a significant role. As a result, the economy continues to be dominated by a massive and unprofitable state sector with low labour productivity.

In the first three quarters of 2015, the top twenty five loss-making enterprises posted combined losses of nearly $380 million. Until recently, Russia was the main source of demand for the output of Belarus state companies but, with the neighbouring countries going through an economic crisis and demand for Belarus’s products falling, the 50 per cent drop in sales to Russia seems like a catastrophe that was waiting to happen. The latter contributed to the overall negative GDP growth of 3.9 per cent in 2015, compared to positive growth in previous years (2014: 1.7 per cent GDP positive growth).

Competition can no longer be based solely on price, as this niche has been taken by more productive and profitable Chinese manufacturers. Following the recent modernisation in a number of industries, state enterprises can’t repay their loans without help and are suffering an acute shortage of working capital and the country’s major employers, with hundreds of thousands of employees, are unable to pay salaries. In the second half of 2015 and early 2016, the state was thus forced to provide targeted financial support to eighteen enterprises by creatively restructuring almost $2.3 billion in debt.

A key feature of this scheme is that, if the titans of Belarus’s machine building, glass, cement and wood-processing industries continue to experience financial distress, it will be up to the state to pay off their creditors using budget revenues – the taxpayers’ money.

Debt restructuring is obviously no more than a stopgap; postponing the problem for two or three years but ultimately resolving nothing. Enterprises aren’t interested in solving their financial problems independently. IPOs and Eurobond issues have been under discussion for the last decade but most state enterprises still don’t prepare IFRS (International Financial Reporting Standards) financial statements.

At formal meetings, high-level officials with personal responsibility for the state of affairs in industry and for company investment projects report, without blinking an eye, that restructuring has resulted in rising profitability and an improved financial and economic situation, thus passing these problems on to the next generation of officials. And so the vicious cycle has continued for the last twenty years…

In early 2015, judging from a meeting of the “club of creditors of 106 state enterprises,” under the direction of the National Bank’s new and progressively-minded leadership, it seemed that the authorities had realised that they couldn’t go on subsidising inefficient and unprofitable enterprises and were threatening to take these industrial giants off the dole. Promises to this effect were made to the Eurasian Fund for Stabilisation and Development and the International Monetary Fund, but the hoped-for assistance never materialised. The EFSD postponed a decision on $2 billion in aid until 2016, and talks with the IMF on $3 billion in technical aid are still under way in the first quarter of 2016.

However, moderate growth in the private sector is still possible. Following the adoption of the PPP Law in late 2015 and the announcement of seven PPP pilot projects worth over $1.1 billion, there is reason to hope that public-private partnerships will be introduced in 2016.

There have even been success stories: the PPP Law still hadn’t been passed in February 2012 when the Austrian Kapsch began operating in the area of transport infrastructure (upwards of $270 million in investments over the last three years).

There are also hopes for the expansion of greenfield projects. Swiss Stadler entered the market in January 2012 (€76 million in planned investment) with plans to expand throughout the Customs Union. The China-Belarus Industrial Park “Great Stone,” which opened in 2014, enjoys unprecedented customs and tax benefits, but the Chinese don’t seem to be in any hurry. There are still only eight residents with combined investments of $90 million. The total investment of $550 million is planned by 2020, but the current economic downturn in China doesn’t inspire much optimism about the Great Stone’s rapid development.

Hi-Tech Park in Minsk
Hi-Park in Minsk

One successful park – the Hi-Tech Park – has indeed been gathering momentum and currently employs over 22,000 “eggheads.” Over the last decade, annual growth in the park’s revenue has been around 30 per cent, passing the $600 million mark in 2015. The park’s core residents – IHS, EPAM Systems and Bell Integrator – consistently rank high in ratings of global software developers. Game Stream, a development centre of the world famous, is also a resident.

The world is clearly heading into a post-industrial and innovation-based future if it follows the current spiral of development. It is also clear that Belarus’s current economic woes are the result of state subsidies and directive planning that ignore the laws of the market and the forces of supply and demand.

Today’s top priority is to transform the entire management and corporate governance structure of state enterprises, which otherwise face economic collapse with severe social repercussions for the state. And such transformation is fastest and most effective when it involves a change in ownership all the more so, as the authorities have realised. And that happens when issues of product quality and cost, effective management, labour productivity and diversification of sales come to the fore.

The main thrust of the needed reforms is to end the economy’s domination by a massive and inefficient state sector, meaning that the state must deliberately give up some of its powers to free the economy from interference. Rapid and transparent privatisation would mean an infusion of investments and is an absolutely essential step on the path of innovation-based development.

Carriages manufactured by Stadler in Minsk
Carriages manufactured by Stadler in Minsk

Strange as it may seem, it would be hard to imagine a more favourable time for economic transformation. There are already new faces in the new/old government; professionals who could potentially form a team to direct reforms and take the ownership.

Following the presidential elections, the country is now, more than ever, politically and economically manageable. The authorities have already provided required social care and stable average cost of living to the “Soviet Union generation” after the USSR collapse in 1991, to ensure a smooth and clear transition to the new Belarus generation, with the overall aim to support and gradually develop a national entrepreneurial spirit.

There’s no need to wait for a social consensus, as success depends on the political will of the country’s leader and on the speed and scale of reform. The process must be set in motion in 2016 so that by autumn 2020, society will be able to see some of the desired economic benefits.


The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.


Central And Eastern Europe At the World Property Market

Serbia’s New PM Is Cut From a Familiar Cloth

Serbian flag emerging europe

Hungary and Israel: the Collision of Past and Present

Budapest synagoge

21st century Manufacturing Arrives at Great Stone

Great stone

International Women’s Day — Let’s Take Action And Then Celebrate

Belarusian Economy on a Diet to Change its Financial Outlook

Putin Urges Belarus to End Oil Transit Through Lithuania

Athens Greece - May 27 2016: Russian President Vladimir Putin delivers

Despite Public Anxieties, Migration is Playing a Key Role in ECA Growth

Bratislava city aerial panoramic view. Bratislava is the capital of Slovakia.

Emphasising the Incongruence Between the V4 Countries

Macron emerging europe

Belarus is the most creative EEU country

How Will Trump’s Visit Affect Polish Politics?

Donald trump

Are There Differences Between How Tax Regulations in Poland and IAS Treat Intangible Assets?

The Capital Markets Union: a New Beginning in the European Financial Sector?

Resignation in Ukraine: War, Revolution, Crisis — Some Things Never Change

Polish Tax Laws — Fighting a Winning Battle Against Tax Evaders

PandaDoc — Rolling Sales Procedures Together So Everyone Succeeds

Feel the Vibe of the City of Minsk

Trinity suburb in Minsk (Nemiga) Belarus on 20 May 2017

One Belt One Road: a Big Task for Europe

The Right to Water: Who Can Change Today’s Situation?

The Global Outsourcing Industry — the Rise of the Phoenix

Poland’s Confusing GDP Growth

Belarusian Economic Recovery May Downgrade Intended Reforms for Competitiveness

CEE-Benefits and Disadvantages of Joining the Eurozone

forint zloty euro

Poland’s Unicorn, Slovakia’s Flying Car and the Future of Europe

Defending EU Values in Poland and Hungary

Eu hungary poland

Emerging Europe Live: Life in Belarus As Seen by Foreigners

The Eurasian Economic Union Fails to Bring Belarus Closer to Big Brother

People Power Reminds the Government of the Rule of Law

The Netherlands’ Objection to the Ukraine-EU Association Agreement could be Costly to Europe

A New Division Between Eastern And Western Europe?

Europe at Odds over OPAL and Nord Stream 2

Belarusian Journalists Still Face Huge Problems

Will the New Five-day Visa-free Regime Encourage More Visitors to Belarus?

United or Divided? Europe in the Face of the Challenges of Tomorrow

Belarus: MOST Builds a Bridge to the Future

Swimpassing Dniester Without Prejudice To Democracy

Parliament of the republic of moldova in chisinau, national flag, stefan cel mare street, spring time with blue sky

The EU’s Benign Neglect Of Eastern Europe

History as Destiny? Institutional Erosion in Ukraine and Poland

IMF Believes State-Owned Enterprises Must Be Reformed

Image of the banknotes of new Belarusian banknotes five rubles put into circulation July 1 2016

Belarus US Business Relations Thrive as Conditions Improve

The Long Tail of Global Expansion

After 25 Years of Restructuring, the Romanian Power Sector Is at a Crossroad

The Competitive Edge in Central and Eastern Europe

SOFIA BULGARIA - MAY 5: View of the Ivan Vazov National Theatre in Sofia on May 5 2016. Sofia is the largest city and capital of Bulgaria.

Smart, reliable and promising

Young Well-Paid IT Specialists Are Making Belarus Known Internationally

EBRD Emerging Europe Outlook on Belarus 2016

Belarusian Tech Companies Lead a Global Technological Advance in Outsourcing and Product Development

China: A Giant That Is Hard to Crack

The Country Shows Promise but Needs Some Reforms

Could the West At Least Help Ukraine To Insure FDI Against Political Risks?

January Kicks Off an Exciting Year for Emerging Europe

Germany Is Not Letting Belarus’ Small Downturns Put it off Looking for Investment Opportunities

Brexit Makes Waves Across the European Union and Beyond

PiS Uses Media Control to Bring Poland to Heel

Jaroslaw kaczynski pis emerging europe

Belarus and the EBRD:
Working to Expand the Country’s Strengths and Success

Belarus Has To Make an Extra Effort To Change Investors’ Perceptions

New investors interested in Belarus’ Great Stone Industrial Park

We, the Post-Communist Generation, Have the Skills to Rid of the Past And Create Our Own Future

Is there any prospect of ‘Polexit’?

poland european union polexit

Brexit: Let’s Learn the Lesson and Hope a Better Europe Will Arise

Veni, Vidi, Vici, Or My Personal Experience of Doing Business in Belarus

Albania’s Election Apathy

tirana albania

World Bank’s Doing Business Report 2016 Resume For Emerging Europe

How Will Poland Approach the Brexit Negotiations?

Poland: Is it Ready, and is it Time to Adopt the Euro?

FocusEconomics: Belarusian Economy to Grow in Q4 2016 and Onwards

Global Expansion in the Digital Age

A New Modern Mall Hopes to Draw Belarusians Back to the Home Market

RRY Capital

Innovation Brings Great Opportunities to the Belarusian Economy

Poland’s Capital Saturation Lower Than the Czech Republic’s

deloitte fdi poland

Falling into Old Ways in 2017? Ukraine’s Struggle for Functioning Economic Institutions

Poland’s Drift Away From Democracy

Business Mentors Helping to Solve Business Development Problems First

Portrait of confident business people interacting in the office

Czech Republic Renaming Has Real Economic Costs

Belarus and Singapore Share the Same Factors for Economic Success

Why Hungary’s New NGO Law Is Harmful for Business

Budapest, Hungary. Aerial view of the old city Budapest, Hungary with river and Parliament Building with cloudy blue sky

EU-CEE Is Still Growing at a Healthy Rate

Prague emerging europe

Let’s Stop Wasting Time Redefining our Place in Europe

Europe Needs To Be More Proactive In Embracing Armenia

Serbia, Belarus and Ukraine Ranked Lowly by Wharton Business School

Kyiv Ukraine - April 172017: The postal square in Kiev on Podol the Dnipro river. view of the square from the river panorama

Good Match But Unlikely Marriage

Is the Level of Foreign Ownership a Problem in Emerging Europe?

Flags of European countries flying from their capital cities. Viewed from the South.

Breaking trade barriers with CIS has never been easier

Business Opportunities in Belarus Encourage Outside Interest

Belarus’s Election Tests the EU’s Global Strategy

Measuring Growth of Societies with GDP Alone Shows an Incomplete Picture

Rolling Sales Procedures Together so Everyone Succeeds


High-Tech Park in Minsk is growing rapidly

Azerbaijan: The Rich Get Richer and the Poor Get Nothing


Belarus: Navigating the geopolitical storm

Adam Smith’s Warning for Poland

Using Words to Paint a Picture – Belarus’ Nobel Prize Winning Novelist

Minsk International Airport Widens its International Reach


Moldova Falls Victim to Politicising

moldova emerging europe

Will Poland Leave the European Union?


The Belarusian Financial Sector: An Industry in the Process of Restructuring

Prepare for a New Europe

Belarus: Changing Old Ideas And Mixing With the New in Belarus’ Export Market

Can Armenia Keep a Foot in Both Camps?

European union armenia russia emerging europe

The Sharing Economy Could Bring New Business Models to CEE

Cautious Upturn in Emerging Europe Haunted by the Spectre of Uncertainty

Donald Trump

The Reality Is More Interesting Than the Misconceptions

Long-time Neighbours Need to Share Awareness, Plus Trade & Investment

Macedonia’s Controversial Coalition Government

SKOPJE MACEDONIA emerging europe

Belarus: On the Way to a Market Economy?

Central and Eastern European Consumers Are Joining the Global Trends for Change

HTP: Belarus’ Engineers Are Leading a Cool Revolution

The UK and Belarus: A Partnership to Introduce the Real Belarus to Europe

Belarus Is Making the First Steps onto the International Finance Floor

Winds of Change for Belarus’ Reinsurance Industry?

European Volatility Makes Economic Development Slower for Ukraine

Political Tensions Rise As Croatia Allegedly Breaks the Dublin III Refugee Regulation

croatia migrants

Ukraine’s Reputation for Cheap Labour May Not Ring True in the Long-term

The Belarusian Banking Sector Moving Towards Modernisation Despite Some Challenges

Will European Business and Institutions Bolster the New Trends That Have Appeared in Belarus?

The Deep Roots of Currency Crises in the Former Soviet Union

CEE — Do We Need a Launch Pad For Our On-Site Tech Intelligence in the Silicon Valley

LGBT in CEE — A New Acceptance Is Being Born From Migration

The Belarusian Economy: The Challenges of Stalled Reforms

Belarus’ Economy Is Slowly Recovering From Past Declines

The Morawiecki Plan Promises a Brighter Future for Poland

Partnership is the Key to CEE-Indian Business

OECD: Belarus Has to Find Its Own Belarusian Model to Emerge

Why Is Belarus Tech Booming?

Not All Quiet on the Eastern Front

Belarus is Bringing Opportunities for European Companies

Great Stone

The Shopping Experience Is Set To Go Global in Belarus from 2017 Onwards

The Next Four Months Crucial For the Belarus-EU Relations

Foreigners choose Minsk and Gomel as Belarus’ most attractive FDI destinations

From Denmark to Belarus — A Personal Experience of Business

2018 Elections — Vital Decisions for Hungary’s Future

Victor Orban energing europe

Impact of Brexit on EU-CEE Not Overstated

theresa may brexit

Under Promise, Over Deliver: Prospects for the EU’s Eastern Partnership in 2018

Eastern partnership

Where’s My Cheese? – The GREAT British Food Tour 2014

Cheese Shop

Encouraging SME’s Development Will Help Build Belarusian Economy

Emerging Europe Live: CEE — The Outsourcing Destination

Hungary’s Nationalist Assault on Free Enquiry

victor orban ceu

Bringing Belarus’ Cultural Past to Life for Belarusians and the World

A Bosnian Referendum Shows Russia’s Influence in the Balkans—As Well As Its Limits

Outsourcing in Germany: Stop Talking at and Start Talking to

The Belarusian real estate market is on the up

Bulgaria Needs a Reform-Oriented Government to Take Full Advantage of its EU Membership

bulgaria emerging europe

“e-Belarus”: Embracing the Internet and its Possibilities

Belarus Has Set an Example for Others to Follow

UK Shores: the New Frontier, a View on a Series of Fortunate Events

Belarus Is One of the Top Outsourcing Destinations of 2016

Only a United Opposition Can Defeat Poland’s Ruling Law and Justice Party

Classical building of Polish parliament. Warsaw in Poland.

Belarus Is Where the New Silk Road Heads For Europe

Romania Surviving the Waves of Recent Political Tsunamis in Europe

Poland Needs to Cling to the Eurozone

zloty euro emerging europe

While the EU Makes Plans for CEE China Makes Investments

Nuclear Security Summit In Washington, 2016

After Its Significant Rise the Georgian Economy May Now Fall

Panorama of Tbilisi, Georgia in sunset rays. Vivid, saturated, splittoned image.

How strong is V4?

Viktor Orban

Foreign Investors: Belarus Offers Opportunities But Further Improvements Are Needed

The Great Stone Industrial Park — Making Doing Business Easy in Minsk

A Positive and Modern View of Entrepreneurship

Finalising the DCFTA is Expected to Bring Multiple Benefits to Ukraine

Will a Two-speed European Union Side-line the Visegrad Four?

When Neutrality Isn’t an Option

President of the Russian Federation Vladimir Putin

The GREAT London Food Scene

Bakery in London

Invest in Belarus: looking beyond politics to the future

EY: Belarus’ IT Scene Is Thriving

High tech park minsk

Business Moving Forward with Cautious Optimism — Can Investors Win the Confidence Game?

Falling Student Numbers and Declining R&D Result From Lack of Funds

Lukashenka seeks to avoid commitment to Russia’s geostrategic goals

The Voice of European Business Must Be Heard Loud and Clear by Brexit Negotiators

The essence of the Customs Union is protectionism

Are Labour Shortages Driving Economic Growth?

Stuck in Neutral: Georgia’s Constitutional Reforms

Tbilisi Parliament Georgia

Emerging Europe and the EBRD host the Outlook on Belarus conference in London

The EU’s Choice: Fundamental Reform Or Disintegration

Fiscal Policy Predictability in CEE — It’s Time for Change

More EU Help for Belarus SMEs

GRODNO BELARUS - DECEMBER 13 2013: Seamstress in textile factory sewing with a industrial sewing machine .

Belarus: The Importance Of Diversification

Belarus-Turkey Investment Forum to increase investment and trade between the two countries

Czech Own Currency Insures Against Euro Losses

Euro Czech republic emerging europe

Big Fish, Small Fish, Where to Fish? On the Eve of the Fourth Industrial Revolution

Ex-Transition Economies’ FDI Recovery

dollar euro fdi

Examining How a Strong Swiss Franc Could Single-Handedly Topple Poland’s Economy

Is the CEE Region About to Steal the Outsourcing Crown From India?

Amazing view on the Taj Mahal in sunset light with reflection in water. The Taj Mahal is an ivory-white marble mausoleum on the south bank of the Yamuna river. Agra Uttar Pradesh India.

Slovenia’s Presidential Election: Pahor Expected to Romp Home

Slovenia flag against blue sky waving in wind

Belarus Is Ready to Begin With Venture Capital Investments

Breaking With Imitations of the Past

Nagorno-Karabakh Conflict Moves from Frozen to Kinetic


A Strategic Asset for Regional Growth and Development in the EU

Pier bridge crane and cargo handling cargo trains transported away.

The EU’s Benign Neglect of Eastern Europe

Brexit Is a Great Opportunity to Attract Foreign Investors to Belarus

‘No’ To a Monetary Union With Russia

EU Visa-Liberalisation Strengthens Georgia’s Pro-Western Path

georgia emerging europe eu

Poland Challenges the European Identity

Poland emerging europe

Changing Perspectives and Showing That True Romania is a Vibrant Innovative Country

The CEE Region Is Making Advances in Prioritising Waste-to-Energy Projects

The Proof of a Country’s Readiness to Attract Foreign Investors Lies in the Development of the Insurance Market

Belarus Introduces New Business-Friendly Auditing Procedures

MINSK, BELARUS - AUGUST 15, 2016: Aerial view of the southwestern part of the Minsk with Palace of Sport and old and new other buildings. Minsk is the capital and largest city of Belarus.

Regional Relations in the Western Balkans: Moving Beyond Folklore

Bosnia and Herzegovina flag with Serbia flag, 3D rendering

Germany and Belarus: Thinking Globally Acting Locally

E-lifestyle and Cyber Security: Some Views From Estonia

Cyber Security Protection Firewall Interface Concept

Old Fashioned Skulduggery Overshadows the Elections in Moldova

Belarus Serves up Some Recipes for Success

Business in Belarus Recipe Book

Office Space Vacancy is Currently Low but Building Standards Cause Concern

Minsk Belarus - March 23 2017 modern architecture business center Pokrovsky on Pobediteley Avenue editorial

The EU Is Encouraging Belarus to Join the World Trade Organisation

Italy and Belarus: A Relationship Based on Complementarities and History

Leave a Reply

Your email address will not be published. Required fields are marked *