On an official level, the Government of Belarus (GOB) claims to welcome foreign investment, which has been seen as a source of new production technologies, jobs, and hard currency. Belarusian authorities note the country’s geographic location, its inclusion in the Eurasian Economic Union (which also includes Armenia, Kazakhstan, Kyrgyzstan, and Russia), extensive transport infrastructure, and a highly skilled workforce as competitive advantages for investment. Belarus also highlights the preferential tax benefits and special investor incentives provided in six export-oriented regional free economic zones, the Hi-Tech Park (HTP), and the joint Belarus-China Great Stone Industrial Park.
Despite the authorities’ stated focus on increasing FDI, in practice, government policies reflect a deeply rooted, Soviet-style distrust of private enterprise, favor Belarusian state-owned enterprises (SOEs), and restrict FDI in strategic sectors. SOEs continue to dominate many sectors of the economy and investors in those sectors reportedly faced selective regulatory enforcement and other forms of discrimination. Corruption and the lack of judicial independence remain significant deterrents to attracting foreign capital. Analysts report Lukashenka and his inner circle also control private businesses that receive preferential treatment from the government. In 2019, the Council of Europe’s (COE) Group of States against Corruption (GRECO) declared Belarus non-compliant with GRECO’s anti-corruption standards.
In 2020, Belarus experienced massive civil action following the fraudulent August 9 presidential election as demonstrators protested widespread and visibly-evident vote rigging by Alyaskandr Lukashenka as well as the government’s widespread use of brute force against and detentions of peaceful protesters. In the election’s aftermath, private businesses have come under increasing pressure from Belarusian authorities and Lukashenka bragged publicly that he had ordered the closure of 200 businesses for their perceived political activities. Private companies observed the government selectively enforced regulatory and criminal laws for political purposes and the arbitrary detention of employees and internet outages affected their operations. In an open letter published shortly after the election, IT executives said that the authorities’ violent response to peaceful protestors was damaging Belarus’s business climate and would prompt IT companies to consider leaving Belarus.
The country saw a net FDI outflow in the second and third quarters of 2020, which analysts attributed to the political instability as well as the economic effects of the COVID-19 pandemic. Fitch Ratings downgraded its outlook for Belarus to negative in November 2020, noting “the political crisis retains potential for intensification and creates risks of renewed social unrest, strikes, additional diplomatic tensions with western countries and potentially harsher sanctions beyond those in place, which are aimed at several government officials including the president.” The World Bank forecasts Belarus’s economy to remain in a recession through 2021, citing the headwinds from increased political tensions.
In 2020, Foreign direct investment (FDI) on a net basis increased 6.6 percent year on year in Belarus totalling $1.4 billion. Almost 80 percent of net FDI was invested in manufacturing, trade, transport, information and communication, and finance and insurance. Investments from Russia and Cyprus accounted for 50.2 percent of all FDI in the Belarusian economy. Despite the GOB’s focus on attracting more investment from China, Chinese FDI totalled only $24 million in 2020, 25 percent lower than in 2019.
In early 2020, Belarus’ State Property Committee approved a list of 13 joint stock companies for full or partial privatization, but no progress was reported on these efforts and Lukashenka has repeatedly stated his opposition to privatization. In early 2021, the State Property Committee announced Belarus had no plan to privatize SOEs and instead would focus on “evolutionary” management improvements to maximize returns and company value.
When considering investing in Belarus, it is important to note that pursuant to a June 2006 Executive Order, the United States maintains targeted sanctions against nine Belarusian SOEs and 16 individuals over concerns about undermining Belarus’ democratic processes. In 2015, the U.S. Department of the Treasury, in consultation with the Department of State, issued a General License (GL) authorizing U.S. persons to engage in certain transactions with the nine sanctioned Belarusian state-owned enterprises. However, the human rights situation in Belarus sharply deteriorated after the fraudulent August 2020, presidential elections, with widespread government abuses and the detention of more than 340 political prisoners. Consequently, on April 19, 2021, the Treasury Department revoked the GL and implemented a 45-day wind down of transactions, which ended on June 3. For more information, please visit: .
In addition to the targeted sanctions under the June 2006 Executive Order, the U.S. government imposed new sanctions on Belarusian individuals and legal persons over their participation in the fraudulent August 9, 2020 presidential election and subsequent violent crackdown on peaceful pro-democracy protests. In December 2020, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated one individual and four entities for the same reasons and in February 2021 the U.S. Department of State imposed visa restrictions on 109 individuals. The European Union, Canada and the United Kingdom also imposed new sanctions following the fraudulent August 9, 2020 election. For more information, please see: and .
13. Foreign Direct Investment and Foreign Portfolio Investment Statistics
According to official statistics, Belarus received $1.4 billion in FDI (on a net basis) in 2020, while government forecasted for 2020 at least $1.7 billion. Belarus received $1.3 billion in FDI in 2019, $1.6 billion in 2018, USD 1.2 billion in FDI in 2017, and $1.3 billion in 2016. The list of top-10 countries, which invested in Belarus in 2020 includes Russia (21.7 percent), Cyprus (17.7 percent), Netherlands (8.4 percent), Germany (5.4 percent), USA (3.0 percent), Lithuania (2.6 percent), Switzerland (2.2 percent), UK (1.9 percent), Czech Republic (1.7 percent), China (1.7 percent), are considered the top ten foreign investors in Belarus.
|Host Country Statistical source*||USG or international statistical source||USG or International Source of Data: BEA; IMF; Eurostat; UNCTAD, Other|
|Host Country Gross Domestic Product (GDP) ($M USD)||2020||$60.2||2019||$63.08||www.worldbank.org/en/country|
|Foreign Direct Investment||Host Country Statistical source*||USG or international statistical source||USG or international Source of data: BEA; IMF; Eurostat; UNCTAD, Other|
|U.S. FDI in partner country ($M USD, stock positions)||2020||$42.2||2020||N/A||BEA data available at https://apps.bea.gov/international/factsheet/|
|Host country’s FDI in the United States ($M USD, stock positions)||2017||$39||2019||$4||BEA data available at https://www.bea.gov/international/direct-investment-and-multinational-enterprises-comprehensive-data|
|Total inbound stock of FDI as % host GDP||2020 (not on net basis)||10%||2018||34.8%||UNCTAD data available athttps://stats.unctad.org/handbook/EconomicTrends/Fdi.html|
* Source for Host Country Data: The National Bank of Belarus ( http://www.nbrb.by ); Ministry of Economy ( https://www.economy.gov.by/ ); National Statistical Committee ( https://www.belstat.gov.by/en/ ).
|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||14,417||100%||Total Outward||1,440||100%|
|Russian Federation||4,537||31.4%||Russian Federation||1,152||80%|
|“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||151||100%||All Countries||5||100%||All Countries||147||100%|
|International Organizations||74||49%||China||3||57%||International Organizations||74||50%|
|United States||57||38%||Russian Federation||1||27%||United States||57||39%|