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

The UN Conference on Trade and Development reviewed Belarus’ investment policy in 2009 and made recommendations regarding the improvement of its investment climate. http://unctad.org/en/Docs/diaepcb200910_en.pdf 

Business Facilitation

Individuals and legal persons can apply for business registration via the web portal of the Single State Register (http://egr.gov.by/egrn/index.jsp?language=en ) – a resource that includes all relevant information on establishing a business.

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).  https://investinbelarus.by/en/naip-and-what-we-do/  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.

Outward Investment

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.

Transparency of the Regulatory System

According to Belarusian legislation, drafts of laws and regulations pertaining to investment and doing business are subject to public discussion.  Draft legislation is published on government agencies’ websites.  The government states that its policies are transparent and the implementation of laws is consistent with international norms to foster competition and establish clear rules of the road.  However, independent economic experts note that private sector businesses are often discriminated against in relation to public sector businesses.  In particular, SOEs often receive government subsidies, benefits and exemptions, including cheaper loans and debt forgiveness, that is generally unavailable to private sector companies.

International Financial Reporting Standards (IFRS) have been a part of Belarus’ legislative framework since 2016.  Public-interest entities, which include banks, insurance companies, and public corporations with subsidiary companies, are required to publish their financial statements, which comply with IFRS.  Such statements are subject to statutory audit.

IFRS in Belarus can be accessed through the Ministry of Finance at the following link:  http://www.minfin.gov.by/ru/accounting/inter_standards/docs/ 

Belarus’ Ministry of Finance posts regular updates and information on budgetary policy, public finances, and debt obligations on its websites:   http://www.minfin.gov.by/en/budgetary_policy/ 
http://www.minfin.gov.by/en/public_debt/ 

International Regulatory Considerations

Belarus is not a WTO member but since 2016 has stepped up efforts to join. Together with the WTO Secretariat, the government drafted an indicative roadmap for the completion of Belarus’s WTO accession, now envisioned for late 2020 or early 2021.

Belarus is a member of the Eurasian Economic Union (EAEU); EAEU regulations and decisions supersede the national regulatory system.

Legal System and Judicial Independence

The Belarusian legal system is a civil law system with a legal separation of branches and institutions and with the main source of law being legal act, not precedent.  For example, Article 44 of Belarus’ Constitution guarantees the inviolability of property.  Article 11 of the Civil Code safeguards property rights.  Presidential edicts and decrees, however, typically carry more force than legal acts adopted by the legislature, which risks weakening investor protections and incentives previously passed into law.  There is sometimes a public comment process during drafting of legislation or presidential decrees, but the process is often not transparent or sufficiently inclusive of investors’ concerns.  Belarus has a written and consistently applied commercial law, which is broadly codified but contains inconsistencies and is not always considered to be business friendly.

Each of Belarus’ six regions and the capital city of Minsk have economic courts to address commercial and economic issues.  In addition, the Supreme Court has a judicial panel on economic issues.  In 2000, Belarus established a judicial panel to enforce intellectual property rights.  Under the Labor Code, any claims of unfair labor practices are heard by regular civil courts or commissions on labor issues.  However, the judiciary’s lack of independence from the executive branch impedes its role as a reliable and impartial mechanism for resolving disputes, whether labor, economic, commercial, or otherwise.  According to Freedom House’s 2018 Nations in Transit report, executive authorities can directly influence a judge’s decision-making if their political or economic interests are involved, and such influence usually takes the form of direct instructions from officials.

Laws and Regulations on Foreign Direct Investment

Foreign investment in Belarus is governed by the 2013 laws “On Investments” and “On Concessions,” the 2009 Presidential Decree No. 10 “On the Creation of Additional Conditions for Investment Activity in Belarus,” and other legislation as well as international and investment agreements signed and ratified by Belarus.

The GOB regularly updates the following websites with the latest in laws, rules, procedures and reporting requirements for foreign investors:
http://www.investinbelarus.by/en/ 
http://www.economy.gov.by/ 
http://president.gov.by/en/official_documents_en/ 

Competition and Anti-Trust Laws

The June 3, 2016, presidential edict number 188 authorized the Ministry of Antimonopoly Regulation and Trade to counteract monopolistic activities and promote competition in Belarus’ markets.

Expropriation and Compensation

According to Article 12 of the Investment Code, neither party may expropriate or nationalize investments both directly and indirectly by means of measures similar to expropriation or nationalization, for other purposes than for the public benefit and on a nondiscriminatory basis; according to the appropriate legal procedure; and on conditions of compensation payment.  Belarus has signed 67 bilateral agreements on the mutual protection and encouragement of investments which include obligations regarding expropriation.

In 2018, there was one nationally-reported case of nationalization, however the Belarusian government compensated the Ukrainian owner market value for shares of the Motor Sich aircraft repair factory in Orsha. In the past five years, there have been no instances of confiscation of business property as a penalty for violations of law.

Dispute Settlement

There were no known investment disputes between Belarusian government authorities and American investors in 2019.

ICSID Convention and New York Convention

Belarus is a party to both the International Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, meaning that local courts recognize and enforce foreign arbitral awards in compliance with the above conventions, national laws, and regulations. The enforcement of arbitral awards in Belarus is governed by Chapter 28 of the Code of Commercial Procedure.

Most of the BITs concluded by Belarus include a provision on international investment arbitration as a mechanism for settling investor-State disputes and recognize the binding force of the awards issued by tribunals. Under Belarusian law, if an international treaty signed by Belarus establishes rules other than those established by local law, the rules of the international treaty prevail.

Investor-State Dispute Settlement

Local economic court proceedings normally do not exceed two months.  The term of such proceedings with the participation of foreign persons is normally no longer than seven months, unless established otherwise by an international agreement signed by Belarus.

International Commercial Arbitration and Foreign Courts

Judgments of foreign courts are accepted and enforced if there is a relevant international agreement signed by Belarus. Courts recognize and enforce foreign arbitral awards. The Belarusian Chamber of Commerce and Industry has an International Arbitration Court. The 2013 “Law on Mediation,” as well as codes of civil and economic procedures, established various alternative ways of addressing investment disputes.

Bankruptcy Regulations

Belarus’ 2012 bankruptcy law, related presidential edicts, and government resolutions are not always consistently applied. Additional legal acts, such as the Civil Code and Code of Economic Procedures, also include certain regulations on bankruptcy-related issues. Under the bankruptcy law, foreign creditors have the same rights as Belarusian creditors. Belarusian law criminalizes false and intentional insolvency as well as concealing insolvency. According to the World Bank’s 2020 Doing Business Index, Belarus was ranked 74 in Resolving Insolvency (rankings available at http://www.doingbusiness.org/data/exploreeconomies/belarus ).

Real Property

Property rights are enforced by the Civil Code.  Mortgages and liens are available, and the property registry system is reliable.  Investors and/or duly established commercial organizations with the participation of a foreign investor (investors) have the right to rent plots of land for up to 99 years.  According to the Belarusian Land Code, foreign legal persons and individuals are denied land ownership.  According to the 2020 World Bank Doing Business Report, Belarus ranked 14 in the world on ease of property registration (http://www.doingbusiness.org/en/data/exploreeconomies/belarus ).

Intellectual Property Rights

Belarus has made progress on improving legislation to protect intellectual property rights (IPR) and prosecuting violators. However, challenges for effective enforcement include a lack of sufficiently qualified officers . The United States expects Belarus to continue improving its IPR regime as part of its WTO accession negotiations and will continue to assist Belarus with technical consultations to that end. According to information provided by Belarus’ National Center of Intellectual Property, the government amended Article 4.5 of the Administrative Code in 2018 to allow greater prosecution of industrial property and IPR violations. Notably, in 2018 Belarusian law enforcement prosecuted five legal persons for distribution of counterfeit products under Article 9.21 of Belarus’ Administrative Code, based on a request filed by a U.S. company operating in Belarus.

Belarus was removed from USTR’s Special 301 Report in 2016 and is not included in the Notorious Markets List.

Belarus is a member of the World Intellectual Property Organization (WIPO) and party to the Berne Convention, the Paris Convention, the Patent Cooperation Treaty (PCT), the WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty, among others.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Resources for Rights Holders

U.S. Embassy Minsk
Economic Section
tel.+375 (17) 210-1283
e-mail: usembassyminsk@state.gov

Capital Markets and Portfolio Investment

The Belarusian government welcomes portfolio investment and has taken steps to safeguard such investment and ensure a free flow of financial instruments. The Belarusian Currency and Stock Exchange is open to foreign investors, but it is still largely undeveloped because the government only allows companies to trade stocks if they meet certain but often burdensome criteria. Private companies must be profitable and have net assets of at least EUR 1 million. In addition, any income from resulting operations is taxed at 24 percent. Finally, the state owns more than 70 percent of all stocks in the country, and the government appears hesitant and unwilling to trade in them freely. Bonds are the predominant financial instrument on Belarus’ corporate securities market.

In 2001, Belarus joined Article VIII of the IMF’s Articles of Agreement, undertaking to refrain from restrictions on payments and transfers under current international transactions. Loans are allocated on market terms and foreign investors are able to get them. However, the discount rate of 8.75 percent (as of February 2020) makes credit too expensive for many private businesses, which, unlike many SOEs, do not receive subsidized or reduced-interest loans.

Since 2016, businesses buy and sell foreign exchange at the Belarusian Currency and Stock Exchange through their banks. Belarus used to require businesses to sell 10-20 percent of foreign currency revenues through the Belarusian Currency and Stock Exchange, however in late 2018 the National Bank abolished the mandatory sale rule.

Money and Banking System

Belarus has a central banking system. The country’s main bank, the National Bank of the Republic of Belarus, represents the interest of the state and is the main regulator of the country’s banking system. The President of Belarus appoints the Chair and Members of the Board of the National Bank, designates auditing organizations to examine its activities, and approves its annual report.

As of January 2020, the banking system of Belarus included 24 commercial banks and three non-banking credit and finance organizations. According to the National Bank, the share of non-performing loans in the banking sector was 4.2 percent in 2019. The country’s five largest commercial banks, all of which have some government share, accounted for 67 percent of the approximately USD 36 billion in total assets across the country’s banking sector. There are five representative offices of foreign banks in Belarus, with China’s Development Bank opening most recently in 2018. To the best of the Embassy’s knowledge, rules on hostile take-overs are clear, and applied on a non-discriminatory basis.

Foreign Exchange and Remittances

Foreign Exchange

According to the GOB, Belarus’ foreign exchange regulations do not include any restrictions or limitations regarding converting, transferring, or repatriating funds associated with investment. Foreign exchange transactions related to FDI, portfolio investments, real estate purchasing, and opening bank accounts are carried out without any restrictions. Foreign exchange is freely traded in the domestic foreign exchange market. Foreign investors can purchase foreign exchange from their Belarusian accounts in Belarusian banks for repaying investments and transferring it outside Belarus without any restrictions.

Since 2015, the Belarusian Currency and Stock Exchange has traded the U.S. dollar, the euro, and the Russian ruble in a continuous double auction regime. Local banks submit their bids for buying and selling foreign currency into the trading system during the entire period of the trading session. During the trades the bids are honored if and when the specified exchange rates are met. The average weighted exchange rate of the U.S. dollar, the euro, and the Russian ruble set during the trading session is used by the National Bank as the official exchange rate of the Belarusian ruble versus the above-mentioned currencies from the day on which the trades are made. The cross rates versus other foreign currencies are calculated based on the data provided by other countries’ central banks or information from Reuters and Bloomberg. The stated quotation becomes effective on the next calendar day and is valid till the new official exchange rate of the Belarusian ruble versus these foreign currencies comes into force. The IMF has listed Belarus’ exchange rate regime in the floating exchange rate category.

Remittance Policies

There have not been reports of problems exchanging currency and/or remitting revenues earned abroad.

Sovereign Wealth Funds

Belarus has the State Budget Fund of National Development, which is used for implementing major economic and social projects in the country.

Post continues to develop resources and information on the current state and development of responsible business conduct in Belarus.

According to official sources, most corruption cases involve soliciting and accepting bribes, fraud, and abuse of power, although anecdotal evidence indicates such corruption usually does not occur as part of day-to-day interaction between citizens and minor state officials. In Belarus, bribery is considered a form of corruption and is punishable with a maximum punishment of 10 years in jail and confiscation of property. The most corrupt sectors are considered to be state administration and procurement, the industrial sector, the construction industry, health care, and education. In the first half of 2020, Belarusian courts convicted 463 individuals “on corruption-related charges.” However, the absence of independent judicial and law enforcement systems, the lack of separation of powers, and a harried independent press largely barred from interaction with a nontransparent state bureaucracy make it virtually impossible to gauge the true scale of corruption.

Belarus has anti-corruption legislation consisting of certain provisions of the Criminal Code and Administrative Code as well as the Law on Public Service and the Law on Combating Corruption. The latter is the country’s main anti-corruption document and was adopted in 2015. Belarusian anti-corruption law covers family members of government officials and political figures. The country’s regulations require addressing any potential conflict of interests of parties seeking to win a government procurement contract. The list of such regulations include the July 13, 2012, law “On public procurement of goods (works, services),” the December 31, 2013, presidential decree “On conducting procurement procedures,” and the March 15, 2012, Council of Ministers resolution on the procurement of goods (works, services). Government organizations directly engaged in anti-corruption efforts are prosecutors’ offices, internal affairs, state security and state control agencies.

Belarus is a party to a number of international anti-corruption conventions and agreements. The Republic of Belarus has consistently ratified and complied with requirements of main international anti-corruption acts, such as the Convention of the Council of Europe 173 On criminal liability for corruption (S 173) (concluded in Strasbourg on 27 January, 1999); the United Nations Convention Against Transnational Organized Crime, signed by Belarus in Palermo on 24 December, 2000, and the United Nations Convention Against Corruption (concluded in New York on 31 October, 2003); and the Civil Law Convention on Corruption (concluded in Strasbourg on 4 November, 1999) (ratified in 2005). Belarus also signed a number of the intergovernmental agreements to address this problem. Belarus is currently considering joining the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

In 2019, the Council of Europe’s (COE) Group of States against Corruption (GRECO) publicly declared Belarus non-compliant with GRECO’s anti-corruption standards.  This was GRECO’s first ever declaration of non-compliance. According to the COE, Belarus failed to address 20 out of 24 recommendations made in 2012; had not authorized the publication of the 2012 report or related compliance reports; and was non-responsive since 2017 to requests from GRECO to organize a high-level mission to Belarus. The majority of GRECO’s recommendations related to fundamental anti-corruption requirements, such as strengthening the independence of the judiciary and of the prosecution office, as well as increasing the operational autonomy of the law enforcement and limiting immunity protection of certain categories of persons. However, the COE contends that limited reporting indicates that corruption is particularly alarming higher up in the government hierarchy and in procurement for state-run enterprises.

According to Transparency International’s 2019 Corruption Perception Index, Belarus climbed from 70 to 66 out of 180 countries in the rankings.  In Belarus’ region, Poland ranked 36, Lithuania 38, Latvia 41, Ukraine 120, and Russia 138.

Resources to Report Corruption

General Prosecutor’s Office
Internatsionalnaya Street 22
Minsk, Belarus
+375 17 337-43-57
info@prokuratura.gov.by

Ms. Oksana Drebezova
Belarus National Contact
Transparency International
Levkova Street 15-113
Minsk, Belarus
+375 29 619 71 25
drebezovaoksana@gmail.com

In the Embassy’s estimation, the potential is low for widespread, politically-inspired violence that would adversely affect foreign property interests.

Belarus has a highly skilled and well-educated work force, due to its advanced system of higher and specialized education. Wages are lower than in Western Europe, the United States, and even Russia.

Belarus has been a member of the International Labor Organization (ILO) since 1954 and is a party to almost 50 ILO conventions. In 2004, the ILO made several recommendations regarding workers’ rights to organize and freedom of association. However, Belarus has not adequately responded to the 2004 ILO Commission of Inquiry.

The Constitution, the Labor Code, and presidential decrees are the main documents regulating the Labor Market in Belarus. Prior to the 1999 Presidential Decree No. 29, the vast majority of the labor contracts in the country were open-ended work agreements. Decree No. 29 established a new option to employ workers on 1-5 year-long term contracts and to transfer current employees to these new type contracts. In 2019, more than 90 percent of employees in Belarus were working on term contracts.

The term contract system generally favors the employer. The employer can choose not to renew a contract upon its expiration without giving the employee a cause for dismissal. Technically, the employer can also refuse an employee’s proposed resignation before the contract term is up, which would then require the employee to argue their case in court. The employer, on the other hand, can terminate the contract at will. There are several protected employee groups that are exempt from early termination: pregnant women, women with children of up to 3 years old, and single parents with children under 14 years old. Additionally, the employer is obligated to renew contracts with women on maternity leave and with those employees who have reached pre-pension age at the end of their prior contract (53 years for women and 58 for men).

Severance pay in the case of reduction in force is 13 weeks of salary, and eight weeks’ notice is required for dismissal. However, severance pay only applies to workers on open-ended work agreements, less than 10 percent of all labor contracts in 2019. The law establishes a standard workweek of 40 hours and provides for at least one 24-hour rest period per week. Under the law, Belarusians receive mandatory overtime and nine days of holiday pay and overtime is limited to 10 hours a week, with a maximum of 180 hours of overtime each year. A non-standard work hour regime is allowed with the condition that the employee is provided with up to seven days of additional annual leave. In general, employees must be granted at least 24 calendar days of paid leave a year.

There are special provisions on employing foreign citizens who have no permanent residence permit. Such citizens have to secure a work permit, which can be usually granted only if an unemployed Belarusian citizen cannot perform the required work. To date, the Embassy has not heard of discriminatory or excessively onerous visa, residence or work permit requirements inhibiting foreign investors, nor of restrictions placed on the numbers or duration of employment of foreign managers brought in to supervise foreign investment projects. In practice, however, few firms, excluding Belarus’ IT sector, employ significant numbers of foreigners. Those that do tend to hire Russian citizens, who benefit from Russia’s and Belarus’ common employment regulations streamlined thanks to their membership in the EAEU.

In July 2000 the United States withdrew benefits under the Generalized System of Preferences (GSP) for Belarus. This decision was based on a 1997 American Federation of Labor-Congress of Industrial Organizations (AFL-CIO) petition to the United States Trade Representative (USTR). The petition alleged that Belarus was not acting in accordance with the Trade Act of 1974, as amended, regarding internationally recognized worker rights. These include the freedom to form independent trade unions and the right to organize and bargain collectively. The rights of independent trade unions are often subject to government attack, as documented in the Department of State’s Report on Human Rights Practices for 2019: https://www.state.gov/reports/2019-country-reports-on-human-rights-practices/belarus/

The official unemployment rate in Belarus has been steady in recent years at or just below one percent. According to ILO methodology, unemployment in Belarus in 2019 was approximately five percent.

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:

For detailed statistics on foreign direct investments in and outside Belarus for 2010-2019 see the website of Belarus’ National Bank (http://www.nbrb.by/engl/statistics/ForeignDirectInvestments/ ) and Economy Ministry (https://www.economy.gov.by/ru/pezultat-ru/ ).