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FM AMEMBASSY MINSK
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RUCNCIS/CIS COLLECTIVE

UNCLAS SECTION 01 OF 08 MINSK 000023 
 
SIPDIS 
 
SIPDIS 
 
E.O.12356: N/A 
TAGS: ECON KTDB OPIC USTR BO
 
SUBJECT: 2008 Investment Climate Statement for Belarus 
 
REF: STATE 158802 
 
¶1.  Per reftel, the follow is the 2008 Investment Climate Statement 
for Belarus: 
 
Openness to Foreign Investment 
------------------------------ 
 
The government of Belarus officially welcomes foreign investment, 
which is seen as a source of new production technologies, jobs and 
hard currency. The factors that attract foreign businessmen to 
Belarus include good geographical position, a well-developed 
infrastructure, highly qualified and relatively inexpensive labor 
force.  At the same time, the country's business climate did not 
improve substantially and a generally cautious attitude of the 
authorities toward FDI prevailed. President Aleksandr Lukashenko 
noted on several occasions that he does not want FDI, which would 
create extra competition to Belarus' main exports: tractors, trucks, 
etc. but welcomed such investment in areas of production Belarus 
lacks.  In July 2007 Lukashenko threatened retaliation against U.S. 
companies in Belarus in the event the U.S. government enacted new 
sanctions against his regime. 
 
In the first half of 2007, Belarus attracted $2.3 billion in foreign 
investment, 22% of which came in the form of foreign direct 
investment.  Most foreign direct investment during this period came 
from Switzerland (39%), Russia (16%) and Cyprus (14%).  Russia's 
Gazprom was allowed to purchase an initial 12.5% stake of the 
Belarusian state-owned gas pipeline monopoly, Beltransgaz, and will 
own 50% of the company by 2011.  Additionally, the government 
allowed a minority stakeholder of one of the major cell phone 
service providers, Velcom, to purchase a majority stake.  In both 
instances, however, analysts criticized the privatization for 
lacking transparency. 
 
The Investment Code of the Republic of Belarus, passed on June 22, 
2003, is the major Belarusian law affecting all forms of investment 
activities. The list of such activities includes acquisition of 
assets, stocks, intellectual property rights, concessions and 
creation of "greenfield" businesses. 
 
The judicial system generally upholds the sanctity of contracts. 
However, courts may give in to pressure from authorities. 
 
There is no particular discrimination against foreign investors in 
Belarus at the initial or any later stages. The tax regime for 
businesses with and without foreign investments is now identical. 
However, the government discriminates against foreign firms in its 
tender policies.  Also, the government discriminates in favor of 
state-owned businesses. 
 
Generally, both central and local governments' policies reflect a 
distrust and discrimination against private enterprise and profit 
and therefore are not always conducive to a favorable business 
climate. It should be noted, however, that such discrimination 
equally applies to private businesses with and without foreign 
investment. The government of Belarus openly states that it wants to 
maintain tight control over all economic activity in Belarus. 
 
In 2006, there were certain improvements in foreign ownership and 
control issues.  The notorious "Golden Share" rule (which dictates 
that the government may renationalize firms in which it formerly 
owned at least one share) and limits on foreign shares in the 
charter fund were removed for the banking sector in 2006, allowing 
substantial new foreign investment. Nevertheless, "Golden Share" is 
still applied from time to time in other industries, if the 
government has or ever had at least one share in a company. 
 
As was noted above, foreign investments are no longer 
unconditionally welcome in Belarus. The government claims it works 
to create equal conditions for domestic and foreign investors in 
Belarus. In practice, however, foreign investments undergo 
additional screening and are allowed only on a case-by-case basis. 
Major screening criteria used by local governments include the 
introduction of modern technology, the number of jobs created, scope 
of financial investment, potential competition with existing 
domestic producers, etc. Also, while under the law there are no 
unconditional requirements on local content, workforce, exports, 
etc., the government highly recommends them to foreign investors. 
Sometime, political criteria come into play, e.g. in 2006 a 
Belarusian-Iranian JV started assembling Iranian "Samand" cars 
(outdated equivalent of the French Peugeot). 
 
Most sectors of Belarus' economy are open for investment. Industries 
generally closed for investment for all countries except Russia 
include defense, state security and related industries. 
 
The Embassy is not aware of any instances in which a foreign 
investor was formally denied national treatment or MFN treatment. 
 
MINSK 00000023  002 OF 008 
 
 
However, as noted above, Lukashenko has made public statements 
against foreign investment in some sectors.  It should also be noted 
that the most profitable business areas in Belarus (e.g. refining 
crude oil, trade in tobacco and alcohol, lotteries, etc.) have been 
gradually taken over by businesses connected to the Presidential 
Administration. So, in this context, other private businesses, 
domestic and foreign alike, are discriminated against equally. 
 
The Embassy has not received any complaints of discrimination 
against foreign investors in connection with privatization, although 
there were very few instances of such participation. Under the law, 
foreign investors enjoy the same privatization rights as their 
Belarusian counterparts.  In reality, however, the government tries 
to keep tight control over all the country's major industries, 
especially those that are highly profitable. It took Russia's 
Gazprom many years of painful talks with the Belarusian government 
to finally receive permission to buy 50% of Belarus' gas 
transportation company Beltransgaz. The deal was signed in January 
2007, and came in the wake of a long and dramatic energy stand-off 
between the governments of both countries and was in a sense 
political. 
 
Conversion and Transfer Policies 
-------------------------------- 
 
There have been no reported problems with converting and 
transferring funds to or from Belarus.  According to the National 
Bank of Belarus, conversion/remittance system in the country is more 
organized and streamlined than in many other countries of the former 
USSR. The Embassy is not aware of any plans to change remittance 
policies, although some independent economic analysts predict 
possible difficulties with acquiring freely convertible currencies 
as Belarus' balance of payments worsens. 
 
Expropriation and Compensation 
------------------------------ 
 
Expropriation of private property happens in Belarus from time to 
time. Expropriation usually takes the form of a reversal of 
privatization. The government has also sought to secure a majority 
share in many joint stock companies, sometimes under flimsy 
pretexts, though officially claiming it seeks to secure the 
interests of workers, e.g. long loss-making, wage payment arrears, 
etc. Such acts are not related to any particular industry and are 
not targeted exclusively at international firms; foreign and 
domestic assets alike are subject to expropriation, sometimes to the 
benefit of businesses under the control of the Presidential 
Administration. Successful "independent" businessmen are often 
forced out of business through commonly employed bureaucratic 
methods, such as licensing, Golden Share, etc. 
 
In the recent past there have been instances of 
confiscation/nationalization of business property as a penalty for 
some violations of law, although the Embassy received no such 
reports in 2007. Under the Investment Code, fair compensation for 
the nationalized/expropriated property should be offered. However, 
the government, when nationalizing/expropriating property, refers to 
breaches of business law and, consequently, offers no compensation. 
 
 
Private businesses in Belarus, foreign and domestic alike, often 
prefer to start a project from scratch and thus avoid potential 
risks connected with privatization. 
 
Dispute Settlement 
------------------ 
 
The judiciary is not independent from the executive and therefore 
cannot always provide a reliable and impartial mechanism for 
resolving disputes. 
 
The tax authorities have the power to seize money from bank accounts 
based on their unilateral determination that taxes are due. 
 
The Embassy is not aware of any large investment disputes over the 
last few years involving U.S. or other foreign investors or 
contractors. 
 
The country has a commercial law, though it contains inconsistencies 
and is largely not business friendly. 
 
Belarus' bankruptcy law was passed in 1991 and significantly amended 
in 2001 and 2003.  Nevertheless, independent observers note that 
though many state enterprises operate at a significant loss, 
bankruptcy proceedings are seldom contemplated. 
 
Belarus is a member of the International Center for the Settlement 
of Investment Disputes (ICSID) (also known as the Washington 
Convention).  It is also a member of the New York Convention of 1958 
 
MINSK 00000023  003 OF 008 
 
 
on the recognition and enforcement of foreign arbitral awards.  In 
principle, the government of Belarus accepts binding international 
arbitration of investment disputes between foreign investors and the 
state, although the Embassy is not aware of any cases where this has 
been put to the test. 
 
Performance Requirements and Incentives 
--------------------------------------- 
 
It is highly unlikely that Belarus will become a WTO member in the 
foreseeable future. 
 
In private projects, there is no limitation on foreign content. In 
public projects the share of foreign investment normally cannot 
exceed 49%. As an exception, in early 2007, it was announced that 
Gazprom would be allowed to buy 50% of shares in Beltransgaz, 
Belarus' gas transportation monopoly, by 2010. 
 
According to the Belarus Investment code, foreign investment is 
prohibited in areas affecting the defense and security of the 
country, unless the president decides otherwise. It is also 
prohibited in the manufacturing and sale of narcotic and toxic 
substances, according to a list established by the Ministry of 
Health. 
 
Belarus seldom applies performance requirements or incentives to 
domestic or foreign investors. Largely command-style and prohibitive 
regulations and instructions prevail. Often, they have no direct 
connection to what companies do for business. For example, it has 
become common that businesses in Belarus are approached by the 
authorities with all kinds of informal and sometimes exotic 
"requests", e.g. donate money for the construction of the National 
Library, pave the sidewalk or paint the fence on the neighboring 
street, etc. If companies refuse, authorities normally exert 
significant pressure, often through special taxes, and fire and 
police inspections. Most companies concede to the requests just to 
be left alone. Nevertheless, large international businesses seldom 
give in to pressure - they appeal directly to the central 
government, or Embassies of their respective countries, and/or 
protest in the independent media that remain; often with positive 
results.  Good personal contacts in the government are essential for 
many local businesses when addressing more than normal businesses 
concerns. 
 
Sometimes in large-scale projects with foreign investment there is a 
requirement that nationals own shares, or that the share of foreign 
equity be reduced over time, or that technology be transferred on 
certain terms. However, Belarus has had few such projects so far and 
it did not become a common practice. 
 
The Embassy is not aware of any "offset" requirements imposed by the 
government. 
 
Foreign investments are screened by central or local governments and 
are allowed only on a case by case basis. Major criteria used by 
local government for screening include the number of created jobs, 
scope of financial investment, potential competition with existing 
domestic producer, etc. Also, the authorities usually require that 
investors purchase from local sources and export a certain 
percentage of output, though that often depends on the project, its 
volume and industry. 
 
In 2005 and 2006, enterprises with foreign investment lost 
substantial customs, tax and other privileges. The Belarusian 
parliament changed the Investment Code to make conditions for 
foreign and domestic investors equal. Sometimes, the Belarusian 
government provides additional benefits ad hoc, particularly to 
major high profile investors. 
 
To the Embassy's knowledge, U.S. and other foreign firms are able to 
participate in governmen financed and/or subsidized research and 
developent programs, e.g. Belarus High Tech Park 
(http:/www.park.by/en). There are occasional reports tha 
preference is sometimes given to businesses with a considerable 
state share. 
 
To date, there have been no discriminatory or excessively onerous 
visa, residence or work permit requirements inhibiting foreign 
investors, nor have there been restrictions placed on the numbers or 
duration of employment of foreign managers brought in to supervise 
foreign investment projects.  In practice, however, few firms employ 
significant numbers of foreigners, apart from Russian citizens, who 
benefit from special visa treatment. 
 
The government has an announced policy of import substitution and 
actively encourages people, as well as state-owned and private 
businesses to buy locally made goods and services.  The government 
tries to control prices on goods and services, as well as salaries 
of workers and managers. Businesses have to provide information on 
 
MINSK 00000023  004 OF 008 
 
 
their prices to the local authorities and they, in turn, provide 
instructions on the time and amount of salary increases. The 
government also has onerous non-tariff trade barriers, e.g. 
excessive number of licenses/clearances that businesses must secure, 
etc. 
 
Right to Private Ownership and Establishment 
-------------------------------------------- 
 
The Belarusian Constitution proclaims the equality of private and 
public enterprises. In theory, both foreign and domestic enterprises 
may establish and engage in most forms of remunerative activity.  In 
practice, however, private businesses are often disadvantaged 
compared to their public counterparts. For example, tax exemptions 
and benefits are provided usually to fully state-owned businesses or 
joint stock companies in which the government holds a majority 
share. 
 
Disputes and problems that arise over foreign investors' activities 
in Belarus are not different from those experienced by local 
businesses. 
 
Speaking to Russian journalists in November 2005, the Belarusian 
president stated the following: "The private entrepreneur cares 
little about the state and people. He cares more about his income. 
Government should not ignore this, especially in cases when private 
property results from privatization. I welcome property created at 
the expense of an entrepreneur's own labor, rather than through the 
purchase of business from a state for $1 million. Then, billions of 
dollars are earned over ten years and the business is sold back to 
the state for $10-15 billion. I am against such tricks with property 
and against such private property." 
 
In accordance with Belarusian law, the following items are in 
exclusive state ownership: 
* munitions; 
* defense infrastructure assets including civil defense assets; 
* facilities producing, storing and selling narcotic and 
psychotropic substances, as well as organizations growing, 
processing and selling plants containing narcotic substances 
(including hemp); 
* facilities producing, storing and selling caustic and poisonous 
substances which can pollute the environment or endanger human 
beings, except facilities providing agrochemical services in 
agriculture; 
* disposal of household, industrial, radioactive and chemical 
waste; 
* extraction and processing of precious metal ores, precious stones, 
potassium ores, radioactive and rare earth elements; 
* patenting, standardization, metrology, certification, geodesy and 
cartography; 
* pre-school education, out-of-school educational services, 
institutions, orphanages, boarding schools for orphans and disabled 
children; 
* water-supply and sewage, city street lighting; 
* backbone and international power grids; 
* heat supply; 
* natural gas supply: gas-distributing points, underground depots of 
liquefied gas; 
* oil and oil-product pipelines; 
* grain storages; 
* public roads, bridges, overpasses, tunnels; 
* railroad transportation; 
* air traffic control, national and military airports; 
* underground and urban electric transport; 
* forestry enterprises; 
* water distribution and melioration; 
* production and storage of national bank notes and coins not yet 
issued; 
* production and storage of state securities; 
* historical and cultural heritage (state archives, state libraries, 
state art galleries); 
* interregional and regional stations and laboratories, posts and 
other organizations of the Republican Hydrometeorology Center, as 
well as laboratories and organizations of Ministry of Natural 
Resources and Environmental Protection; 
* scientific organizations of the National Academy of Sciences and 
the Academy of Agrarian Sciences of Belarus; 
* customs infrastructure; 
* enterprises and objects of correctional labor institutions; 
* cemeteries and crematoria; 
* state sanitary control; 
* cryptographic equipment; 
* research-production organizations of the Belarusian State 
Research-Production Concern of Machinery and Instruments, Belarusian 
State Research-Production Concern of Powder Metallurgy. 
Protection of Property Rights 
----------------------------- 
 
 
MINSK 00000023  005 OF 008 
 
 
The concept of mortgage exists and is governed by the Civil Code. 
However, a draft law on mortgage is still being prepared. 
 
Belarusian law gives land ownership rights to individuals only. 
Businesses cannot own land, unless they secure land ownership 
permission from the president. Sales of state-owned buildings are 
allowed, though sales above a certain value are subject to clearance 
by the president. The procedure, like most in Belarus, is highly 
bureaucratic and imposes considerable time costs. 
- Intellectual property: 
 
Belarus is a member of the Paris Convention for the protection of 
industrial property, the Geneva Universal Convention, the Bern 
Convention for the protection of literary and artistic works, the 
WIPO copyright treaty and the WIPO performances and phonograms 
treaty.  In addition, Belarus joined the Geneva Phonogram 
Convention.  Nevertheless, there still is no retroactive protection 
for works or sound recordings under Belarus' intellectual property 
law, which came into effect in August 1998.  Belarus has amended its 
Criminal Code to adopt penalties for intellectual property rights 
violations. Nevertheless, pirated copies of video, audio, and 
printed materials as well as computer software can still be 
purchased in Belarus. 
 
Belarus has taken steps to implement and enforce the WTO TRIPS 
agreement. The Civil Code and laws pertaining to intellectual 
property rights include provisions that facilitate implementation of 
the TRIPS agreement. 
 
Transparency of Regulatory System 
--------------------------------- 
 
The government of Belarus announced efforts to reduce bureaucracy 
and red tape. Nevertheless, bureaucratic procedures, including those 
for licenses and permits are neither sufficiently streamlined nor 
transparent and unnecessary red tape remains a problem. The rules of 
the game often remain inconsistent and change frequently. 
 
The government claims the country's legal, regulatory, and 
accounting systems are transparent and consistent with international 
norms. However, businesses often call them burdensome, inconsistent 
and unfriendly. Regulatory policies are not fully transparent. 
Observers of the economic scene say that it is not so much existing 
laws that make foreign investors uncertain and cautious, but the 
lack of respect for law. Lack of consistency in numerous laws, 
presidential decrees and edicts is a big concern. This state of 
affairs is exacerbated by inefficient bureaucratic procedures.  The 
Embassy has received complaints alleging that officials often give 
inconsistent or contradictory advice, fail to answer questions 
clearly, and fail to take responsibility for their actions. The 
amount of time that the government in Belarus requires to issue 
licenses/permits to businesses is one of the longest in the former 
USSR. 
 
At the same time, tax laws do not normally impede investment.  They 
have become more stable and predictable, and there were no instances 
of their retroactive application. 
 
The Embassy has received no reports that labor, health, environment 
or safety laws have impeded investment. 
 
Draft laws are seldom discussed publicly before being adopted. 
Independent observers note that the system of bookkeeping in Belarus 
is not completely consistent with international standards. 
 
Belarus is a signatory of the 1958 Convention on the Recognition and 
Enforcement of Foreign Arbitral Awards - the "New York" Convention. 
Under the Convention, Belarus recognizes and enforces awards made in 
other States, subject to specific limited exceptions. 
 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
Economic policies of the Belarusian government are not always 
conducive to free movement of financial resources, since government 
control is often too tight. 
 
Private businesses have access to a variety of credit instruments, 
though interests are high. The time and cost of preparing all 
necessary paperwork often makes it difficult for small- and 
medium-sized businesses to try to secure many of the existing credit 
instruments. 
 
There is a legal system for portfolio investment, though the level 
of such investment is low (0.1% of the total foreign investment in 
2006) primarily because Belarus does not have a developed or 
efficient stock market. In the first half of 2007, portfolio 
investment totaled just $1.4 million. 
 
 
MINSK 00000023  006 OF 008 
 
 
Mutual shareholding is not common. 
 
Belarus' banking system is stable. According to official sources the 
non-payment of loans is low.  Belarusian banks offer interest rates 
of up to 15% on deposits of individuals and issue loans to 
enterprises with interest rates from 14 to 16%. The legal, 
regulatory, and accounting systems used by banks are fairly 
consistent with international norms. 
 
Statistics on the total assets of the country's banking system are 
fairly reliable. As of November 1, 2007, they were $18.7 billion, up 
39% since the beginning of the year. Individual deposits make up 
more than 50% of all assets.  Belarus' four largest banks -- 
Belarusbank, Belagroprombank, Belpromstroibank and Belinvestbank 
(each with a majority of its shares owned by the governments) -- 
hold approximately three-quarters of these assets. 
 
Starting in 2008 Belarusian banks will follow international 
accounting standards in addition to preserving Belarusian standards 
of book-keeping. 
 
Political Violence 
------------------ 
 
In the Embassy's estimation, the potential for widespread political 
violence that would adversely affect foreign property interests is 
low. 
 
Corruption 
---------- 
 
Belarus has laws, regulations and penalties to combat corruption. 
While the Embassy has received credible reports of corruption, 
particularly at the local level, U.S. firms have not identified 
corruption as a particularly significant obstacle to foreign direct 
investment.  Belarusian business representatives, particularly those 
involved in import and export transactions, however, complain often 
of pervasive corruption. 
 
A number of investigations in 2007 pointed to high-level corruption. 
 In June the Director General of Belneftekhim, the holding company 
controlling Belarus's petrochemical industry, was arrested. Also in 
June, the deputy head of a department within the Presidential 
Administration was charged with accepting a $35,000 bribe. A former 
senior customs official was sentenced to 13 1/2 years in prison in 
July for heading a ring of 14 corrupt officials. 
 
Belarus signed and ratified the Civil Law Convention on Corruption 
on December 26, 2005; the UN Anticorruption Convention on November 
25, 2004; the Criminal Law Convention on Corruption on May 26, 2003; 
and the UN Convention against Transnational Organized Crime on May 
3, 2003. Belarus is not a signatory to the OECD Convention on 
Combating Bribery of Foreign Public Officials in International 
Business Transactions. 
 
The list of major Belarusian agencies responsible for fighting 
corruption includes the Ministry of the Interior, the State Security 
Committee (KGB), the State Control Committee and the Security 
Council. In July 2006, the president signed into law a bill on 
fighting corruption, complementing Belarus' existing anti-corruption 
legislation. The new law defines professions vulnerable to 
corruption, designates the Prosecutor General's Office as the 
coordinator of anti-corruption efforts and establishes limitations 
on government of Belarus officials' family members. 
 
Giving or accepting a bribe is a criminal act, and penalties can be 
quite severe: up to 15 years of imprisonment.  However, senior 
officials convicted of large-scale corruption can be released 
without penalty. 
 
According to independent polls, corruption is most pervasive among 
local government officials, directors of large state enterprises, 
police and especially traffic police officers, doctors and 
teachers. 
 
To the Embassy's knowledge, there are no local or international NGOs 
that help fight corruption in Belarus.  The government is generally 
hostile to NGO that are not explicitly pro-government. 
 
To the Embassy's knowledge, there have been no reports that any 
foreign investors have been implicated in bribery schemes. 
 
Bilateral Investment Agreements 
------------------------------- 
 
In January 1994, the United States and Belarus signed a bilateral 
investment treaty, which has been ratified by both sides but not 
implemented.  Implementation is unlikely in the near future. In 
addition, due to continuing repression of labor rights in Belarus, 
 
MINSK 00000023  007 OF 008 
 
 
the United States removed Belarus from the Generalized System of 
Preferences (GSP) in 2000. The EU followed suit in 2007. 
 
As of January 1, 2007, Belarus also has bilateral investment 
treaties with Poland, Vietnam, Finland, China, Germany, Switzerland, 
France, Great Britain, Sweden, the Netherlands, Romania, Iran, 
Italy, Turkey, Ukraine, Bulgaria, Serbia, the Czech Republic, 
Pakistan, Egypt, South Korea, Latvia, Syria, Cyprus, Tajikistan, 
Lithuania, the UAE, Israel, Singapore, Cuba, Libya, Qatar, Austria, 
Armenia, Mongolia, Lebanon, Macedonia, Croatia, Kuwait, the Belgium 
and Luxembourg economic union, Bahrain, Jordan, Yemen, Denmark, 
Oman, India, and Bosnia and Herzegovina.  Belarus has multilateral 
investment treaties with Azerbaijan, Armenia, Georgia, Kazakhstan, 
Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan 
and Ukraine. 
 
The USG has discontinued negotiations on the development of a 
bilateral taxation treaty. Belarus has fifty such agreements with 
other countries. 
 
Belarus is a member of the Multilateral Investment Guarantee Agency 
of the World Bank since December 1992. 
 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
In 1997, OPIC paid an expropriation claim filed by an American 
investor in a joint defense-conversion venture in Belarus, after the 
government nationalized the company without compensation.  Shortly 
thereafter, OPIC suspended underwriting insurance in Belarus, until 
the government provides reimbursement for this claim. 
 
Labor 
----- 
 
Belarus has a highly skilled and well-educated work force, due to 
its good system of higher and specialized education.  Wages are much 
lower than in Western Europe, the United States and even Russia. 
The government is actively raising all salaries by fiat, in public 
and private enterprises, unconnected to increases in productivity. 
The government plans to double the average wage by 2010 to $500 a 
month. 
 
Belarus' Labor Code is the major law regulating all labor issues. 
Joint ventures and foreign businesses throughout Belarus are bound 
by the existing Labor Code. The Embassy has received no reports that 
the requirements of the Labor Code, per se, hinder foreign 
investment.  State-owned industries are often overstaffed and not 
attractive to private investors unless the private investor can make 
personnel cutbacks.  The government of Belarus, however, is 
reluctant to allow private investors to make these cutbacks. 
 
In July 2000, President Clinton signed a proclamation withdrawing 
benefits under the Generalized System of Preferences (GSP) from 
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), which requested that the 
United States remove Belarus from GSP.  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 EU suspended GSP benefits 
for Belarus in 2007 after the International Labor Organization found 
Minsk made insufficient progress in protect the labor rights.  The 
rights of independent trade unions are often subject to government 
attack, as documented in the Department of State's 2006 Human Rights 
Report. 
 
Foreign-Trade Zones/Free Ports 
------------------------------ 
 
In November 1998, Lukashenko signed a law on free economic zones 
(FEZ) in Belarus.  The first such zone was established, before the 
adoption of the law, in the city of Brest. At present, each of 
Belarus' six regions has its own FEZ. 
 
The tax and regulatory scheme applicable to businesses in these 
zones is, in principle, much simpler and more rational than 
elsewhere in Belarus.  Significant tax benefits for businesses 
registered and operating inside the zones include, among others, 
import tariff and VAT exemptions and income tax reductions of 50% or 
more.  In October 2005 the president signed an edict that 
established uniform rules for all FEZs. In order to avoid unfair 
competition of FEZ businesses with ones outside the zones, the edict 
made all benefits contingent upon either exporting products 
manufactured or producing products not in competition with those 
produced by existing domestic firms. The restrictions reflect the 
intent to use the FEZs to improve the balance of trade. 
 
 
MINSK 00000023  008 OF 008 
 
 
Foreign Direct Investment Statistics 
------------------------------------ 
 
Official Belarusian government statistics are fairly reliable. The 
figures below were drawn from statistics provided by the government 
of Belarus. 
 
Foreign investment in 2006, the last year for which complete data 
are available, was more than $4 billion, of which direct investment 
was $859 million (18.5%). FDI represented only 2.6 % of the total 
investment in Belarus' economy.  In 2007 the government plans to 
increase this share to 15-20%. 
 
While it is suspected that many "foreign" investors actually 
represent domestic interests, according to official statistics, 80% 
of FDI came as loans from foreign investors, 10% came as 
contributions to charter funds and the remaining 10% came as other 
types of FDI. Most FDI came from Switzerland (66.4%), Russia (6.1%), 
Cyprus (3.8%), the United States (3.2 %), and Great Britain (3.1%). 
 
The total volume of foreign investment in Belarus in 2006 ($4 
billion) was 11% of the GDP ($37 billion). 
 
In 2006, Belarus' FDI abroad was $5.5 million, of which $2.6 million 
was in the CIS (primarily Russia - $1.9 million) and $2.9 million 
was invested outside the CIS (primarily in the United Arab Emirates 
- $2.4 million and the European Union  - $468 thousand) 
 
As of January 1, 2007 Belarus had more than 3,500 organizations with 
FDI. 
 
The list of major FDI in Belarus includes: 
 
Coca-Cola Beverages Byelorussia (Coca-Cola's bottler); 
McDonald's Restaurants (five restaurants in the capital city of 
Minsk); 
Double Star International Ltd (candy production). 
MAZ-MAN (Germany) truck production; 
Mobile TeleSystems (Russia) provision of mobile phone services; 
Milavitsa (Italy, Estonia) lingerie production; 
Henkel Bautechnik (Austria) chemical production; 
Inko-Food (Poland) meat processing; 
Vicos Nahrungsmittel GmbH (Germany) production of confectionery; 
Maersk Medical A/S (Denmark) production of syringes; 
SB Telecom (Cyprus) provision of mobile phone services; 
Karl Zeiss (Germany) production of optics; 
Fresenius Beteiligunggeselschaft GmbH (Germany) production of 
medical equipment; 
Raiffeisenbank (Austria) banking services; 
Fenox Automotive GmbH (Germany) production of replacement parts for 
automobiles. 
 
In late 2006, Belarus and Russia signed a $2.5 billion deal on 
Gazprom's purchase of 50% of Belarus' Beltransgaz (natural gas 
transportation company). So far, this has been the largest 
investment project in Belarus' history. Nevertheless, the payment is 
scheduled in equal installments in the course of the next four 
years. 
 
Web Resources 
------------- 
 
http://www.mfa.gov.by/eng/index.php?d=economi c 
http://www.belarusembassy.org/economic/invest ments 
http://www.nbrb.by/engl/ (National Bank of Belarus) 
http://www.pravo.by/win/other_legacts.asp . 
http://w3.economy.gov.by/ministry/bip.nsf/all eng.html (Belarus' 
major investment projects) 
http://belarus.bel.biz 
 
 
Moore