Going green: towards a zero-waste economy in Belarus
On 12 October 2016 Belarus announced its intention to adopt a national action plan for a green economy. This September the country also ratified the Paris Climate Change Agreement. What’s more, the European Union has invested over €10m in a project aiming to fascilitate Belarus’ transition to a green economy.
What a “green economy” entails could be anything from simply recycling to increased use of renewable energy sources, all areas in which Belarus needs improvement. According to some calculations, the average Belarusian produces 1–1.5 kg of garbage per day. This adds up to roughly 300kg of garbage a year. In Belarus, only about 12% of this amount will be recycled. The rest goes to landfills.
Business as usual
Belarus is a country lacking its own significant energy and fuel resources. It therefore relies heavily on imported crude oil, natural gas, and peat. However, almost all existing energy resources within the country are renewable: water, wind, solar energy, and biomass. Therefore, it would be logical for Belarus to invest primarily in the development of renewable energy sources.
And yet according to Naviny.by, in 2015 only 5% of energy in Belarus came from renewable sources. The government plans to increase this number to 6% by 2020. The is nevertheless a negligible margin compared to the neighbouring EU’s plans to spike at 20% by 2020.
A look at the structure of renewable sources of energy also reveals that wood fuels account for the major part of such sources. Almost 93% of renewable energy comes from wood, wood chip and wood waste. This in itself presents a problem and can hardly prove to be sustainable in the long run.
Belarus has also begun the costly and controversial construction of a nuclear power plant (NPP) on the border with Lithuania. According to some experts, Astraviec NPP will not only produce a surplus of energy in Belarus, it will also stall the development of alternative energy resources. Some argue that it will increase the country’s dependence on Russia as well, as the main contractor is a Russian company also likely to stay on to take care of the NPP’s nuclear waste disposal.
Recycling in Belarus
Major improvements in the recycling sphere can also make Belarus a more eco-friendly and sustainable country. The present rate of recycling peaks at 12% at the Speckommuntrans Waste Sorting Facility in Homyel, according to its Deputy Director Aliaksandr Nikonov. In contrast, about 80% of waste in Germany will be recycled and the USA can boast a reported 93% recovery rate for cardboard packaging for recycling, according to WBUR. The difference in attitudes towards recycling is staggering.
The state still has a monopoly on the recycling sector in Belarus. People continue to expect the government to pay them to return their their waste products, such as paper, plastic, and glass. However, because the rates are so low, most citizens do not take advantage of these opportunities. According to Denis Grebenchuk, Chief Engineer at Gomelhimtorg, a scrap metal facility, Roma people and the homeless, who view recycling as a business opportunity, provide the bulk of the resources.
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Thus, ecology remains a marginal issue in mainstream Belarus. In Germany, for instance, a major shift occurred in 1985, when the federal government announced its priorities to recycle and reduce waste. However, the government failed to act, and the amount of rubbish continued to grow, until private small enterprises stepped up.
Today Germany leads the EU in recycling and zero-waste efforts, thanks to combined private and state efforts. Massive public information campaigns encouraged citizens to commit to separate waste management and recycling.
In Belarus change is slow. Private initiatives have sprung up across the country, while the state lags behind in ecological matters. The mentality that the state should take over and solve ecological issues has slowly changed in major cities thanks to new generations of Belarusians. One can find separate containers for glass, paper, and plastic. The younger generation seems to be more willing to take responsibility for its own carbon footprint.
How to achieve a greener economy
One initiative, called “Green Map” http://greenmap.by/, aims to educate people about utilisation of toxic waste, such as used batteries, bulbs, and other products. It also provides information on how to sort garbage. Such initiatives step up where the state has failed – they encourage Belarusians to take ownership of their future by managing their own waste today.
Air quality in Belarus causes concerns, as the number of car owners has increased. According to BelStat there are 412 cars per 1,000 residents in Minsk. This is the highest ratio in any former USSR country. In comparison, Moscow stands at 380 cars per person.
This ratio, an all-time high, also leads to very tangible problems in terms of air pollution, noise, traffic jams, and parking issues. Despite the well-developed and affordable public transportation system in Minsk, 2015 has seen a 5% decrease in the number of passengers, according to the Ministry of Transport.
Another way to go green is the paradigm of the “sharing economy” or the peer economy. This is when owners rent something out that they are not using. To some extent, this mentality has already caught on in Belarus, and it will only become more widespread. Both Airbnb.com and uber driving service have a strong presence in the country.
Since 2014 there have been regular initiatives such as free-markets, charity shops and book crossings, where people exchange, donate, or lend their old things. These events attract thousands of motivated Belarusians who care about the environment. According to scientists at the individual level any person can make a difference by giving up driving, plastic bags, or bottled water, and reducing the amount of meat they eat.
Foreign direct investments in Belarus: many words but few actions
The autumn of 2016 has seen many plans to boost investment in Belarus.
On 17 September Minsk hosted the first Belarus-Oman business forum, while on 29-30 September the Belarusian capital hosted the Belarusian Forum: “Broadening Horizons. Investment. Finance. Development”. Moreover, autumn has become a traditional season for hosting the German-Belarusian “Minsk Forum.”
Such an increase in pro-investment activities gives the impression that the government is considering possible shifts in policy in this sphere. However, the statistical data, as well as the views and opinions of numerous businessmen, make the real picture seem much more complicated.
Reasons to invest
In spite of Belarus’s generally negative image, the country boasts distinct advantages for potential investors. Moreover, according to the UN Conference on Trade and Development, Belarus has managed to raise much more foreign direct investment than fellow CIS countries such as Armenia, Kyrgyzstan, Moldova, Tajikistan and Uzbekistan.
Both potential investors and Belarusian officials ascribe Belarus’s success in raising FDI to the country’s strategic location (between the EU and Russia), and its participation in Eurasian integration, which affords it direct access to the market of the five Eurasian Economic Union (EAEU) countries.
The National Agency for Investments and Privatisation considers this a key factor. The UNECE reports that the government carries out permanent systemic work to promote the growth of commodity exchange between the EU and Asian countries; this includes active support for the new Silk Road initiative.
The Belarusian authorities also emphasise the competitive taxation conditions in six free economic areas (0-10 per cent), the Belarus High Technology Park (0 per cent) and the Great Stone Industrial Park (0 per cent), as well as other advantages. However, these concern only separate areas of activity and have not become a real impetus for large-scale investment.
Belarus also possesses developed transportation and logistics infrastructure: a large share of cargo flows between Russia and the EU transit through Belarus. Since 2011, the number of transit trips of trucks belonging to foreign carriers has increased by more than 21 per cent.
Belarusian authorities consider the national labour force to be highly qualified, while most investors (excluding the IT sector) disagree.
Differing views on taxation and labour force qualification between officials and businesspeople represent only a fraction of the authorities’ misunderstanding of the needs and demands of potential investors. Investors will often rely on stock picking services for advice. Motley Fool is one such service. You can see how the Motley Fool picks stocks and determine whether or not it is a good fit for you.
Both of the Belarusian government’s most recent five-year development programmes (for 2011-2015 and 2016-2020) admit that Belarus has failed to raise enough foreign direct investment, although it recognises their vital importance for the country’s further development. The first programme stipulated a $7,000-7,500m raise in FDI by 2015, while the latter avoided concrete figures.
Unfortunately, the official statistics, as is often the case in Belarus when it comes to sensitive issues, remain rather tricky for a researcher. Thus, according to the Ministry of Economy and the National Statistical Committee, in 2011-2015 Belarus raised between $10,909.8m to $52,100.1m in FDI. However, because the sources of said FDI, as well as how it entered the economy, remains unclear, these figures should be taken with a grain of salt.
The National Bank, which is obliged to utilise internationally recognised methodology, claims another figure: $3,080.6m in 2011-2015. This figure seems to be more relevant and indicative of the dramatic situation of FDI in Belarus.
Remarkably, during a conference held by the Research Institute of the Ministry of Economy on 21 October 2016, a representative of the Ministry also tried to avoid any actual figures.
According to official statistics, the major part of FDI in Belarus comes from Russia (46.4 per cent) and Cyprus (16.1 per cent). However, many suggest that this money originally comes from Russia and Belarus, given Cyprus’s well-known role in reinvestment.
One of the main obstacles mentioned by all participants was lack of property protection. Potential investors are wary of administrative pressure on owners, as well as possible nationalisation. The cases of the confectionery factories ‘Spartak’ and ‘Kamunarka’, which were nationalised in October 2012, provided justification for these fears.
The absence of a stock market represents a second important hurdle for foreign investors. It is very difficult to ‘come in’ to a company or evaluate its assets. Belarusian authorities tried to launch the IPO “Minsk Sparkling Wines Factory” in 2013, but this attempt enjoyed little success. Almost all experts claim that the full-fledged IPO will reveal a significant overestimation of Belarusian enterprises, as well as limited attractiveness to serious investors.
Unstable legislature and the general absence of rule of law feeds investors’ fear both for the security of their investments and the predictability of possible incomes. The generally unstable situation in the region only aggravates these anxieties.
The large share of property in the economy owned by the state (70-75 per cent) results in uncertain divisions between the government’s role as an owner and as a regulator. For example, the Ministry of Industry administrates many plants as a (co-)owner while simultaneously regulating legislature in this sphere. While nobody in Belarus supports complete privatisation, such conflicts of interest will result in privileged terms for state enterprises and unfair competition between the private and public sectors.
Foreign investors who already work in Belarus complain about the low qualification of Belarusian officials and the labour force in general. For example, in 2010-2012 Omani businessmen tried to buy a lot of land in the city of Minsk. According to them, even though they paid $3m in advance, they ended up receiving nothing, despite their previous agreement. Meanwhile, the Belarusian side claims that a manager simply absconded with the money. Such cases only confirm investors’ discontent with local personnel and with how the public administration system functions.
Much need to be done
Despite numerous advantages, serious obstacles continue to prevent Belarus from attracting serious foreign investors. Cases with Arab countries, as well as with China, prove that patronage networks and contacts between the leaders of authoritarian regimes are not much of a guarantee for raising FDI. Personal negotiations do not always result in significant investments. The authorities should therefore also work to improve their understanding of the needs and claims of potential investors.
Unfortunately, most obstacles are of a clearly political nature, as they help preserve the government’s control over society and the economy. In the face of a serious economic crisis, the Belarusian authorities should make a choice between different alternatives: either to preserve the political status-quo or to start reforms which would make the country more attractive for serious investors.