1. Openness To, and Restrictions Upon, Foreign Investment
Policies Towards Foreign Direct Investment
Attracting FDI is one of the government’s foreign policy priorities; net inflows of FDI have been included in the list of government performance targets since December 2015. The GOB has no specific requirements for foreigners wishing to establish a business in Belarus. Investors, whether Belarusian or foreign, reportedly benefit from equal legal treatment and have the same right to conduct business operations in Belarus by incorporating separate legal entities. However, selective application of existing laws and practices often discriminate against the private sector, including foreign investors, regardless of the country of their origin.
Limits on Foreign Control and Right to Private Ownership and Establishment
While the GOB asserts foreign and domestic private entities have the right to establish and own business enterprises and engage in all forms of remunerative activity, in reality, the GOB imposes limits on a case-by-case basis. The limits on foreign equity participation in Belarus are above the average for the 20 countries covered by the World Bank Group’s Investing Across Borders indicators for Eastern Europe and the Central Asia region. Belarus, in particular, limits foreign equity ownership in service industries. Sectors such as fixed-line telecommunications services, electricity transmission and distribution, and railway freight transportation are closed to foreign equity ownership. In addition, a comparatively large number of sectors are dominated by government monopolies, including, but not limited to, those mentioned above. Those monopolies make it difficult for foreign companies to invest in Belarus. Finally, the government may restrict investments in the interests of national security (including environmental protection, historical and cultural values), public order, morality protection, and public health, as well as rights and freedoms of people.
While Belarus has no formal investment screening mechanism for national security purposes, it retains elements of a Soviet-style command economy and does screen investments through an informal and hierarchical process that escalates through the bureaucracy depending on the size of the investment or the size of incentives an investor seeks from the Belarusian government. The President and his administration prescreen and approve all significant (multi-million dollar) foreign investment.
Additionally, Belarus’ Ministry of Antimonopoly Regulation and Trade is responsible for reviewing transactions for competition-related concerns (whether domestic or international).
Other Investment Policy Reviews
Belarus has a regime allowing for a simplified taxation system for small and medium-sized and foreign-owned businesses.
Belarus defines enterprises as follows:
Micro enterprises – fewer than 15 employees;
Small enterprises – from 16 to 100 employees;
Medium-sized enterprises – from 101 to 250 employees.
Belarus’ investment promotion agency is the National Agency of Investments and Privatization (NAIP). NAIP is tasked with representing the interests of Belarus as it seeks to attract FDI into the country. The Agency states it is a one-stop shop with services available to all investors, including: organizing fact-finding missions to Belarus, assisting with visa formalities; providing information on investment opportunities, special regimes and benefits, state programs, and procedures necessary for making investment decisions; selecting investment projects; and providing solutions and post-project support, i.e., aftercare.
To maintain an ongoing dialogue with investors, Belarus has established the Foreign Investment Advisory Council (FIAC) chaired by the Prime Minister. FAIC activities include, but are not limited to: developing proposals to improve investment legislation; participating in examining corresponding regulatory and legal acts; and approaching government agencies for the purpose of adopting, repealing or modifying the regulatory and legal acts that restrict the rights of investors. The FIAC includes the heads of government agencies and other state organizations subordinate to the GOB, as well as heads of international organizations and foreign companies and corporations.
The government does not promote or incentivize outward investment, nor does it restrict domestic investors from investing abroad. According to government statistics, Belarusian businesses’ outward investments in 2019 totaled USD 5.8 billion.
7. State-Owned Enterprises
Although SOEs are outnumbered by private businesses, SOEs dominate the economy in terms of assets. According to independent economic experts, the share of Belarus’ GDP derived from SOEs is at least 75 percent. Belarus does not consider joint stock companies, even those with 100 percent government ownership of the stocks, to be state-owned and generally refers to them as part of the non-state sector, rendering official government statistics regarding the role of SOEs in the economy as misleading.
According to independent economic media reports, SOEs receive preferential access to government contracts, subsidized credits, and debt forgiveness. While SOEs are generally subject to the same tax burden and tax rebate policies as their private sector competitors, private enterprises do not have the same preferential access to land and raw materials. Since Belarus is not a WTO member, it is not a party to the Government Procurement Agreement (GPA).
Belarusian officials welcome “strategic investors,” including foreign investors, and claim that any state-owned or state-controlled enterprise can be privatized. However, Belarus’ privatization program is in practice extremely limited. Notably, in April 2020, the government sold its controlling share in Belarus’ fifteenth-largest bank, Paritetbank. Otherwise, there was no privatization of state-controlled companies in either 2018 or 2019, one SOE was bought by private investors in 2017, and no companies or shares were privatized in 2016. In early 2019, Belarus’ State Property Committee approved a list of 23 joint stock companies for full or partial privatization in 2019. Also in 2019, the World Bank concluded a pilot SOE privatization project that identified and helped prepare 12 Belarusian SOEs for privatization. However, the GOB allowed sale of the government share in these companies on the condition that the purchasing investors preserve existing jobs and production lines. The State Property Committee reported that the government sold its minority share (under 25 percent) in two enterprises in 2019.
Investors interested in assets on the published privatization list are encouraged to forward a brief letter of interest to the State Property Committee. A special commission reviews offers and makes a recommendation to the President on the process of privatization – via tender, auction, or direct sale. Investors may also send a letter of interest regarding assets that are not on the State Property Committee list and the government will examine such offers.
Additionally, the State Property Committee occasionally organizes and holds privatization auctions. Many of the auctions organized by the State Property Committee have low demand as the government conditions privatizations with strict requirements, including preserving or creating jobs, continuing in the same line of work or production, or launching a successful business project within a limited period of time, etc.
In 2016, Belarusian joint stocks were allowed trans-border placement via issuing depositary receipts. However, to the Embassy’s knowledge, this instrument of attracting investments has not been put to the test in Belarus.
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
According to official statistics, Belarus received USD 1.1 billion in FDI (on a net basis) in January-September 2019, USD 1.6 billion in 2018, USD 1.24 billion in FDI in 2017, and USD 1.3 billion in 2016. Russia (24.1 percent), Cyprus (20.6 percent), UAE (5.1 percent), Germany (4.9 percent), Switzerland (4.9 percent), UK (4.2 percent), China (4.1 percent), Netherlands (3.9 percent), USA (3.3 percent), and Poland (3.0 percent) are considered the top ten foreign investors in Belarus.
* Source for Host Country Data:
|Direct Investment from/in Counterpart Economy Data|
|From Top Five Sources/To Top Five Destinations (US Dollars, Millions)|
|Inward Direct Investment||Outward Direct Investment|
|Total Inward||13,060||100%||Total Outward||1,443||100%|
|Russian Federation||4,042||30.9%||Russian Federation||1,191||82.5%|
|“0” reflects amounts rounded to +/- USD 500,000.|
|Portfolio Investment Assets|
|Top Five Partners (Millions, current US Dollars)|
|Total||Equity Securities||Total Debt Securities|
|All Countries||2,038||100%||All Countries||2||100%||All Countries||2036||100%|
|United States||503||24.6%||Russian Federation||1||50%||United States||503||24.6%|
|Russian Federation||151||7.4%||Russian Federation||151||7.4%|