Chinese Enclave in the Heart of Belarus?

Chinese builders in Minsk (tut.by)

650 thousand Chinese will be building an industrial park near Minsk and they have already obtained working visas. 

Yaraslau Ramanchuk – an ex-candidate for Belarusian presidency – has received this information from his own sources of information. Gazeta.ru, major Russian online media, also mentioned a similar figure which it obtained from government sources. 

If the information is true, Belarus will soon have one Chinese for every 14 Belarusian and an a sizable Chinese town 50 kilometres from Minsk. Belarusian state officials deny this. However, recent Belarusian history has taught the Belarusian public to be sceptical of the government’s assurances. Moreover, the whole story about the Chinese-Belarusian Industrial Park rests under a veil of mystery.

Chinese-Belarusian Industrial Park

Already in October 2011 the Belarusian Ministry of Economy and China CAMC Engineering Co., Ltd. agreed on the creation of the Chinese-Belarusian Industrial Park in Belarus.  Governments of both countries, China Exim Bank, and Belarusian Horizont Holding Management Company negotiated the project. Finally, on 5 June 2012 Lukashenka signed an Edict on the Chinese-Belarusian Industrial Park.

Under the Edict, the Park is going to occupy 8,048 hectares of the Smaliavichy region (Minsk district) and host high-tech and export-oriented companies. Electronics, biomedicine, fine chemistry and engineering will be among the Park’s priorities.

The estimated cost of the Park’s construction is about $30bn. Apparently, a great portion of this money Belarus is expected to come from China. Recently, Vice Prime Minister Anatoly Tozik has claimed China is already on the point of allocating $3bn for the Park’s development.

The large financial assets’ coming from China to Belarus are not as rare as might be expected. By now, loans from the Chinese have enabled different state ministries to implement a couple of investment projects. China investments have flown into Belarusian power generation and clean energy. By 2014 in the centre of Minsk a new Chinese hotel complex “Beijing” is going to arise thanks to a Chinese investor.  

But as a rule, money from the Celestial Empire arrives in the form of tied loans. Under such loan arrangements, Belarus does not only use the money for the purchase of Chinese equipment, but also as remuneration for Chinese workers. From a financial point of view, the situation with the Chinese-Belarus Industrial Park represents a new stage in relations between two countries. 

Belarus’ Alluring Proposals

According to the presidential edict, the Chinese-Belarusian Industrial Park will become the most favourable place to do business in Belarus. More importantly, the Chinese-Belarusian Industrial Park has borrowed and enforced the effective incentive of High-Technology Park: taxation privileges.  

Probably the most tempting perspective are the exemptions from profit, land and real estate taxes granted to all the Park’s residents for its first 10 years. In addition, the income tax of the Park’s employees is going to be a quarter less than for other Belarusians.

Under the Edict the Industrial Park Development Company can acquire the Park’s lands with a 50% discount and even dispose of it. At the same time 60% of the Industrial Park Development Company’s charter belongs to China's CAMC Engineering Co., Ltd. 

Russia Protests

Goods produced by Chinese companies in Belarus will benefit from the same special treatment in Russia and Kazakhstan as usual Belarusian goods. For example, a major Chinese automaker Geely has already become the Park’s resident.

Production of competitive automobiles in Belarus seems to disappoint its larger neighbour. Already, in June 2012 the Russian Ambassador to Belarus Alexander Surikov said that Belarus’ intent to start production of Chinese automobiles can become “a matter of serious discussions”. “We do not want to destroy our Russian automobile industry. And that is the whole issue”, - said Surikov.

Russia’s claims against automobiles’ construction have no legal foundation. Alexander Surikov admits: “Of course, we cannot forbid Belarus from assembling someone else's automobiles, but we note that some questions will arise […]”.

Unfortunately, Belarus still depends on Russia’s favourable disposition, primarily expressed in the form of subsidised energy resources. That makes Belarusian authorities look for compromises. According to some Belarusian media, the state is now making concessions to Russia within the negotiations on merger of Belarusian MAZ and Russian KAMAZ, two post-Soviet giant automobile plants. While the merger’s question has been on the allies’ agenda since 2010, this November they deadlocked again.

Still, in case of Chinese motor industry’s success in Belarus, such concessions may not suffice.

Even more, Russia can succeed in attacking the Park’s privileges from a legal point of view. The tax privileges Belarus provides to the Park’s residents may qualify as state subsidies. At the same time some international commitments of Belarus, such as the Common Economic Space’s Agreement on Unified Rules on Providing Industrial Subsidies, limit the possibilities of such state subsidies’ use. Consulting the Common Economic Space’s Commission on the permissibility of such measures in advance seems to be the only reasonable step Belarus can take now.

Inhospitable Belarusians?

The new project has lead to inner turmoil as well. The first wave of dissatisfaction came already in January 2011. Inhabitants and summer residents of the future Park’s territory protested against the construction.

At first, the reason was the fear of demolition of people’s houses.

The fear grew into a mass movement. The citizens protested not only against the need to leave the settlements, but against the whole building of the Chinese–Belarusian Park. In their opinion, it will also threaten the region's ecology. One of Belarusian opposition political groups, "Tell the Truth" campaign, managed to attract the public’s attention to the problem.

Belarusian officials, including Vice Prime Minister Anatoly Tozik and the Head of Minsk District Executive Committee Boris Batura, had to make numerous assurances.  However, the campaign failed to implement its more ambitious goal: to hold a local referendum on whether the Park should appear. Probably, the possible result of the referendum was too obvious and undesirable for the state.

The people’s strong dissatisfaction spread even far beyond the Smaliavichy region after Yaraslau Ramanchuk announced that 650,000 of Chinese are going to immigrate to Belarus for working in the Park. Russian Internet resource Gazeta.ru mentioned 600,000 Chinese. However hospitable Belarusians may be, such a change in the country’s ethnical situation seems quite shocking. The total population of Belarus is less than 9.5 million people. 

The state authorities have denied the news. According to Tozik, 600,000 people is the approximate total number of employees of the Park (including Belarusians). Time will show whether the giant Industrial Park with hundreds of thousands Chinese workers will become a fact or a myth. In the past, Belarus has negotiated many large-scale investment projects, most of which failed to materialise. 

Darya Firsava is a Minsk-based lawyer working on her PhD and leading a number of educational projects in Belarus.

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