Belarus – an Outsourcing Haven?
High-tech outsourcing is one of the most dominant trends in today’s economy, but few would associate it with Belarus, better known for its heavy machinery exports than IT experts. This appears to finally be changing. RnR Market Research projects Belarus’ IT outsourcing market to grow at an annual rate of 17.8% by 2018.
Its proximity to the EU, the availability of skilled labour and technical infrastructure, and the limited domestic demand for IT specialists all make Belarus an attractive outsourcing partner. There are already about 800 IT companies and about 30,000 IT professionals in a country of 9.4 million people and a largely state-driven economy.
Pessimists might say that these advantages are just on paper. Belarus’ authoritarian image and small market size make it difficult to compete with EU member states like Poland, which dominate the Eastern European outsourcing market. The West’s growing list of sanctions against Russia, however, may give Belarus’ nascent outsourcing market an extra boost.
Innovation and Technology Growth Driven by the State
The government started to prioritise innovation and technology in the mid-2000s. To improve the country’s business climate, Minsk simplified the process of setting up a business and establishing a preferential taxation regime. Belarus ranked 63rd in the World Bank’s Ease of Doing Business Index last year, ahead of Russia, China, and Italy (Poland ranked 46th).
Valery Tsepkalo, a former ambassador to the United States, spearheaded the state-driven innovation approach. Today, Tsepkalo is an official aide to Lukashenka. He also directs Belarus’ first High-Tech Park, established in 2005 to support the software industry.
The Park, hosting some 140 companies, has an extremely young workforce, with 70 percent of employees aged 28 and under.
Seven Belarusian companies are featured in the recent Software 500 list, a global ranking of software leaders. Attributing this success entirely to the government, however, distorts the facts.
Unlike manufacturing companies, which remained in the hands of the state after 1991, the Belarusian IT sector was built up from scratch by young programmers and academics that were struggling to make ends meet in the post-Soviet economy. These small firms managed to stay off the state's radar. Over time, some of them matured into successful companies that now compete in the global marketplace.
During Soviet times, Belarus was a major technical hub. Minsk's factory for manufacturing computers, created in 1958, produced 70% of all of the general-purpose computers manufactured in the Soviet Union.
Due to educational continuity and a comparatively low level of brain drain, Belarus’ primary asset today lies with its young scientists. In spite of significant problems facing the Belarusian educational system, Belarus produces over 16,000 technical graduates every year.
Belarusians regularly win medals at international science olympiads. This August, 19-year-old Gennady Korotkevich won first place at the Google Code Jam, which annually attracts more than 20,000 participants. Students from the Belarusian State University of Informatics and Radioelectronics (BSUIR) won medals at the IT-Universe-2014 and the International Olympiad in Informatics in Taiwan.
The 2012 list of the top 200 Belarusian businessmen, published by Ezhednevnik, included 16 high-tech entrepreneurs. Most of them founded independent software development and distribution companies in the 1990s and early 2000s. All of them have a scientific or technical background, and six graduated from the Belarusian State University of Informatics and Radioelectronics (BSUIR).
The largest, EPAM Systems, was founded by Arkadiy Dobkin, a graduate of the Belarusian National Technical University (BNTU). In 1991, at the age of 30, Dobkin emigrated to the United States. He then organised a network of Minsk-based programmers for doing work that originated in the US. In 1993, together with his classmate Leonid Lozner, he founded EPAM (Effective Programming for America).
Today, EPAM is listed on the New York Stock Exchange, has branches in North America, Europe, and Central Asia, and employs some 9,300 programmers. It was ranked #6 on Forbes’ 2013 list of the 25 Fastest-Growing Tech Companies.
Another Belarusian outsourcing entrepreneur, Sergey Kostevich, began his career building computer hardware.
In 1991, a few months before the Soviet Union's imminent disintegration, Kostevich and his colleagues released the first Soviet-made hard drive. Kostevich soon abandoned academic work and started importing and selling computers and computer parts. In 1992, his newly founded company, Asbis, signed a distribution contract with Seagate, a U.S. hard drive manufacturer. Today, ASBIS has more than 1,700 employees and 33,000 active customers in over 90 countries around the globe.
Of course, not all of Belarus’s IT sector is a story of private sector dynamism and entrepreneurial drive. The 2012 list of the top 200 Belarusian businessmen also includes eight “oligarchs” whose wealth was earned through other means and subsequently invested in various IT assets.
Topping the list is Uladzimir Peftiev, who made his fortune selling Belarusian weapons and only later acquired control of Internet provider “Delovaya set” (Business network).
Roadblocks to Outsourcing
Belarus has the potential to become a rather successful high-tech centre in Europe. Currently, though, the top IT companies in the region still prefer to invest in Bulgaria, Poland, Czech Republic, Estonia and Lithuania. These countries are democratic EU member states with attractive market economies. The primus inter pares is Poland – Krakow, for example, ranked 10th in Tholons’ 2013 list of top 100 outsourcing destinations. Minsk did not even make the list.
In Belarus’ small economy, high-tech industries remain marginalised. The country invests a mere 0.7% of its GDP into research and development; a level that is lower than average among post-Soviet nations. Neighbouring Russia spends more than twice as much (relative to its GDP). The share of high-tech products among Belarusian exports is also well below that of its neighbours, and indeed, it has barely budged since the onset of the post-Soviet period.
Perennial sanctions by the West against Belarus – including a travel ban and asset freeze affecting ministers and businessmen with direct ties to Lukashenka – have also stifled high-tech outsourcing.
That trend may be reversing, however, as the West steps up its sanctions against neighbouring Russia. According to data from customer records of Hiperos LLC, a vendor of third-party management software, over 1,600 of Russian firms provide services to U.S. companies.
U.S. companies involved in these transactions now have to check whether sanctioned individuals own their Russian partner companies in order to avoid the legal repercussions.
The most risk-averse firms, of course, may simply decide to leave the post-Soviet space altogether. Still, Belarus’ burgeoning outsourcing industry could yet benefit from the political instability plaguing Eastern Europe. Outsourcing to Belarusian companies may yet prove an alternative that is safer than Russia and more cost-effective than the EU states.
An IT outsourcing boom could yield broad-based benefits for Belarusian society. IT companies could gradually help erode the dominance of the state sector in emerging high-tech industries. Workers in these industries are less likely to fear losing their jobs based on their political opinions. A new class of young and wealthy techies — with income nearly three times the national average — would have the opportunity to travel abroad and build important social ties with the West.
European Intercultural Festival, Superkot, European College of Liberal Arts – Belarus Civil Society Digest
European Intercultural Festival to be held on September 4-14 in Belarus. CES launches the European College of Liberal Arts.
4th Belarus Reality Check is to be held in Riga. CSO networks announce calls for small projects – National Youth Council RADA and Assembly of Pro-Democratic NGOs.
Belarusians are asked to invent and define a contemporary graphic symbol of unity of the Belarusians.
Festivals and Other Events
European Intercultural Festival 2014. On September 4-14, the European Intercultural Festival will take place in Minsk, Mahiliou, Hrodna and Brest. The main goal of friendly and creative team of CSOs in cooperation with diplomatic missions, media and other partners is to create for ten days the European atmosphere, as well as to provide sites for information and skills exchange in the field of culture and education.
The agenda is available here. The organizers are Office for a Democratic Belarus, Office for European Expertise and Communication, Fond of Ideas.
Eco-Cultural Festival in Minsk. The Minsk Gallery Ў, Ecodom NGO, Agro-Eco-Culture non-profit institution and Green Alliance invite to the annual Eco-Cultural Festival, which traditionally takes place in the Gallery Ў, on August 30. The program includes the closure of the exhibition Mutual Relationship, presentations, workshops, concerts, wine and organic products from the Belarusian farmers.
The 4th International Congress of Belarusian Studies presents a list of 15 thematic sections. The annual Congress will take place on 3-5 October 3-5, 2014, in Kaunas, Lithuania and aims to promote a deeper understanding of Belarus in academic and civil communities of the country, region and world. The organising committee has also announced a short list of the 2014 Congress Award for the best publication; the award ceremony will take place at the Congress.
4th Belarus Reality Check is to be organized on September 11, in Riga, Latvia. Western and Belarusian experts will discuss the latest developments in the Belarus' relations with U.S., EU and Russia as well as the upcoming presidential elections in Belarus. The Ministry of Foreign Affairs of Latvia is joining EESC and Pact to the organization of the event.
Initiatives for People with Disabilities
Office for the Rights of Persons with Disabilities is launching a new project on Improvement of the quality of work to protect the rights and legitimate interests of employees with disabilities. This project is implemented in cooperation with the independent trade union REP with the assistance of the branch of the Rosa Luxemburg Foundation in Russia. Lawyers and representatives of trade union organizations will be trained to work on the field of protection the rights of employees with disabilities.
Eco-path for people with disabilities. A unique path of natural experiences for people with disabilities will appear soon in Grodno region. The path will be created by local initiative ‘Creating a barrier-free environmental education paths and places of recreation for families with children with disabilities’ within the USAID/UNDP project ‘Local entrepreneurship and economic development’. The initiative belongs to Sergei Vavilov who won one of 30 mini-grants. The Grodno authorities and CSOs also support the project.
Study visit on freedom of associations. The Assembly of Pro-Democratic NGOs and Legal Transformation Center Lawtrend invite to participate in a visit to Vilnius and Budapest to study the modern standards of freedom of associations and legal conditions of non-profit organizations. The program is open to representatives of all sectors – private, public, and commercial. The visit will take place in October; application deadline is September 12.
Center of European Studies is launching a new education project in Minsk – European College of Liberal Arts in Belarus (ECLAB). The main goal of ECLAB is to provide the Belarusian youth with an alternative program of humanitarian education that will contribute to Belarus integration into the common European space. At the very beginning ECLAB will function as a project of non-formal education. However, their next goal is to accredit college programs with the help of partner universities in the countries of the European Union.
Campaigns and Civil Initiatives
Charity shop KaliLaska will reopen if collects $5,000 donations. KaliLaska/You are Welcome is the first charity offline shop in Belarus. It opened in April 2013 and worked for 13 months. During this time the shop collected second hand clothes, shoes, books and transferred them to the vulnerable groups – in total, 12 tons of things and help for 13 charity organizations. To reopen – pay rent, repair and equipment – shop announces collecting donations.
Shelter Superkot spent all the money on the treatment of animals and now to be closed. The first non-state Minsk shelter for animals Superkot states his distress due to lack of money. Superkot was opened in Minsk about 5 years ago and existed solely on donations. Each year the shelter "parked" to 1 thousand cats.
Assembly of Pro-Democratic NGOs announces a competition of Small Deeds 2014. The project call is open for CSOs, which are members of the Assembly of NGOs, and have ideas that can strengthen civil society in Belarus. Priority is given to activities aimed at identifying active and value-motivated people for their involvement in the civil activity, conducting local and national public awareness campaigns, etc. The project budget shouldn't exceed $1,500. Applications are accepted up to September 30.
Let's Make It Better 2014 campaign initiated by the Assembly of Pro-Democratic NGOs continues to extend its influence across Belarus via local CSOs. Utulny krai/Comfortable region initiative assisted residents of Groznovo village to appeal to local authorities; Baranovichi branch of TBM organized the Festival dedicated to the city historical founder; Zvyaz/Union youth CSO conducted the first amateur tournament backgammon in Orsha; Mova ci Kava/Language or Coffee initiative launches a campaign To teach others to speak Belarusian, etc. The campaign’s press releases are available here.
Symbol of national unity to be identified. The Assembly of Pro-Democratic NGOs with information support Art Siadzibaand Radio Svaboda offers Belarusians to invent and define a contemporary graphic symbol of unity of the Belarusians in the manifestation of their independent position. The suggestions from artists, designers, and all the interested are accepted until August 31.
Ibikeminsk invites to put the finishing point of the project. On August 30, Ibikeminsk brand that promotes the image of Minsk as a bike-friendly city, invites to participate in the cycling cruise in the spirit of the Soviet Union. The trip will go on from the main entrance to the Minsk Gorky Park to Pobedy Park. Those who are without a bicycle, can also be a participant of a bright show, taking part in the dance and master classes in Lindy Hop.
Belarus Digest prepared this overview on the basis of materials provided by Pact. This digest attempts to give a richer picture of the recent political and civil society events in Belarus. It often goes beyond the hot stories already available in English-language media.