UK Ambassador Bruce Bucknell on Belarusian Identity, Business Climate, Education and Visas

Belarus Digest interviewed Bruce Bucknell, British Ambassador to Belarus who has been serving in Minsk since July 2012. He also runs a blog about his work in Belarus.

Bruce Bucknell shared his views on Belarusian identity, importance of modern education, business climate in Belarus and UK’s new visa rules.

Understanding Belarusian identity

BD: You said that before you came to Belarus you were not sure what Belarus is. Do you know now what being Belarusian is in practice?

We are talking about identity. I think I have a better idea, but I’m not sure my assessment has changed very much.

Belarus is a country between Asia and Europe. Whether Russia is Asian or Eurasian, I don’t know. Russians themselves are not quite sure, I think, what their identity is. But for Belarusians, the recent events in Crimea, and Eastern Ukraine, may have given them a renewed sense of being different from Russia.

They have their own flag, history, language and culture. They are close to Russians, but they are also close to Ukrainians. They are Slavs with a Slavic language. But national identity is a very complicated question. Look at Britain which has multi-identities. People in Britain sometimes have English, sometimes British, sometimes Scottish and mixed identity. Belarusians might also have more than one identity.

Business climate

BD: Do you see many Western companies coming to Belarus?

Not many British companies, although there is a lot of interest in the IT sector. We have around 125 million pounds worth of exports to Belarus in 2012 and 2013.

There are lots of German companies selling to Belarus. But that probably reflects how Belarus is still largely a country based on industrial production.

The economic model is dominated by the state enterprises. And that is a bit of a problem, because the state controls so much. Our businesses are mostly private, and they go where they think they can market their goods and services.

What Belarus desperately needs is actually some more space in economy, so new companies can grow.

BD: Why do think is the main stereotype that may deter some western companies?

I think some companies are deterred because this is a small domestic market. If you are just selling into Belarus, it probably doesn’t make much sense. A lot of British companies are represented through Moscow, or Kyiv, or even Warsaw and Vilnius. But actually when they get to Belarus they say: things work, there is order. Compared to other countries in the neighbourhood, there is relatively little petty corruption.

There is relatively little petty corruption .. but a heavy bureaucratic burden

On the other hand, there is a heavy bureaucratic burden. Rules are complicated, and the public authorities sometimes interfere unnecessarily. Private companies should be allowed to get on with their business as long as they comply with the law.

There are successful and dynamic businesses in some sectors, particularly in the IT sector. World of Tanks is doing very well, and EPAM which writes software for Western companies and so on. A number of good private companies in Belarus export not just to Russia, but also to the West. They are doing well, because they sell good quality products. Belarus needs more of those sorts of company.

The Customs Union and Eurasian Economic Union may be a major factor in the next few years, if it leads to a more open trading system between Belarus, Russia and Kazakhstan. It opens up the possibilities for the companies located in Belarus to be able to sell into Russian market, beyond, Kazakhstan and so on. But that depends on Russia opening its market. The most recent indications suggest that Russia is turning away from an open market.

BD: Do you think it is important for Western businesses to come to Belarus?

It depends what you mean by coming to Belarus. If you are talking about trade, this is not the most attractive market, because there are still regulations for foreign business, as well as high tariffs.

As for place for investment to supply to the Russian and Customs Union market, yes, it is interesting. Costs are lower than in Russia. The labour force is well qualified.

the Customs Union and the Eurasian Economic Union is great in theory, until we have a better idea of how the Eurasian Economic Union works in practice

But the issue is that while the Customs Union and the Eurasian Economic Union is great in theory, until we have a better idea of how the Eurasian Economic Union works in practice, and it has established a track record of free movement of goods, services, people and capital, then I think there are still some question marks about the advantages of the Union.

BD: And what would you say to the argument that those who are investing in Belarus are helping the regime?

I hear that, but the regime’s philosophy and its social contract, is based on the state control of the economy.

There are some advantages in that social contract. People have free education, health care and so on. But that model does not look sustainable in a long-term. It survives on cheap Russian energy supplies, and continuing Russian loans.

The model needs fundamental reform. There are a very few incentives to take risk in Belarus. There is a lot of bureaucracy, and even some Russians I meet say that it is a very rigid system. There is much more space for private sector in Russia than there is in Belarus.

If Belarus is to develop longer term, and become more independent of Russia, then it needs to develop a more dynamic economy and allow more private companies that can compete in international markets.

Education

BD: You mentioned in the past that that education was one of the most important areas of your work. Why?

Yes, it is important. I am lucky because I am an ambassador of Shakespeare. I am welcome at universities around the country to stand in front of lots of students and speak English. I am happy to go, as it is a chance to talk to people here. Overall, I spoke to over 2000 people in 2013, mostly in English, but occasionally in Russian.

Education is important because Belarus depends on the skilled labour force for its future prosperity. I think the area where Belarus needs more education is in specialist business skills.

To give a couple of examples. There is a local organization representing London School of Public Relations. Public relations is not necessarily needed for all businesses, but in terms of thinking strategically, thinking about what your company is producing, in building brands and consumer loyalty, it is an important specialism.

Marketing – there are several organisations providing marketing courses in Belarus. We support the Open University, which does business education in Russian through distance learning. I spoke to some people studying there and they are very knowledgeable about techniques and skills, importance of marketing, and if there is a demand for goods.

So marketing, public relations, and other skills are available, but they are not taught and valued widely enough in Belarus. There is a great need to understand how markets work and how to compete in international markets.

Visas

BD: Is there anything you can do to improve the situation with British visas for Belarusians? People submit their applications and remain without passports for many weeks and even months, which is very frustrating.

The standard service is 15 working days from the date of giving biometrics, and handing over passport and papers.

We have moved from an in-house service via a visa section – where the whole process was conducted in the embassy in Minsk – to an outsourced application process. This is where the applications are made at a “visa application centre” in Minsk, but the papers and passports are then sent by courier to Moscow, where the decisions are taken, before they are returned to applicants in Belarus.

There were delays in June when we closed our visa section and opened the visa application centre. But our Home Office colleagues have addressed the problems with the contractors, and the service is again within the standard service levels, so that everyone who applies for an ordinary visit visa gets their passports back within 15 working days.

There will be further improvements as we move from the temporary visa application centre – which is based in the President Hotel – to a permanent centre. There will be a tracking system available, so people can check where their application is online and so on. We hope to have the permanent centre open before the end of the year.

Interviewed by Yarik Kryvoi.




What do Belarus Businesses Think? – Online Broadcast

Belarus Digest will broadcast live open panel discussion in series “What Do Belarusians Think?” organised by the Eastern Europe Studies Centre (EESC, Lithuania) and the Belarus Research Council (BRC).

The broadcast will start on 31 January at 2 pm (Vilnius time).‚Äč 

The fourth discussion “What do Belarus Businesses Think?” will analyse the results of the latest research on the competitiveness of the regions in Belarus, carried out by the Research Center of the Institute for Privatization and Management (IPM RC).

 

Alexander Chubrik, director of the IPM RC will present research on “Competitiveness of Regions in Belarus: General Review”, which analyses the integrated indicators of competitiveness in the regions of Belarus. The research was based on the latest official statistical data and polls of entrepreneurs.

After the presentation, representatives of various Belarusian business associations and independent experts will discuss what Belarusian businessmen think about the business climate in their country, as well as the country's infrastructure, institutions and policies.

Vadim Sehovich from the Belarusian news portal “Ezhednevnik” will compare and contrast the results from the ratings of the most successful Belarusian businesses. Sergei Nikoliuk from the Institute of Independent Socio-Economic and Political Studies will discuss the public's attitude towards the business climate in Belarus. The discussion will be moderated by journalist Maria Sadovskaya-Komlach.

Alexander Chubrik earned his Master’s degree in Economics from the Department of Economics at the Belarusian State University (BSU) in 2000 and attended post-graduate studies at the BSU in 2000-2003. He has also worked as a vice president of CASE Belarus (2007-2012). Currently, he is a director of the Research Centre of the Institute for Privatization and Management (since 2011), a CASE fellow, and a lecturer at the European Humanities University (EHU). His expertise includes macroeconomics and private sector development in Belarus.

Siarhei Nikaliuk has been an expert of the Independent Institute of Socio-Economic and Political Studies (IISEPS) since 2006. Mr. Nikaliuk graduated from the Department of Chemistry at the Belarusian State University in 1974. He has worked as a journalist after registering the first independent newspaper in Belarus. His interests include the social, political and cultural particularities of the Belarusian society as a society that has not completed its process of modernization.

Vadim Sehovich is the deputy editor-in-chief of the Belarusian news portal “Ezhednevnik” and the lead author of the list of the “200 most successful and influential businessmen in Belarus.”

Maria Sadovskaya-Komlach is a Belarusian journalist with 15 years of professional experience. She graduated from the Columbia University School of Journalism (New York) in 2011. Maria writes about international affairs and, in particular, EU policies and Belarus-EU relations. She cooperates with Belarusian print, broadcasting and online media.




The World of Tanks

In 2012 the most recognisable Belarusian brand abroad was World of Tanks according to Belarusian contest The brand of the year.

Produced by Belarus-based Wargaming it allows hundreds of thousands of players play the computer game at the same time. “World of Tanks” broke the previous record in November 2011 when 250,000 players played on the game’s Russian server simultaneously.

In January the Belarusian company bought Day 1 Studios – an American game developer from Chicago for $20 million. That is the second major deal of Wargaming in recent months. Previous purchase Big World Company cost $45 million which was the largest M&A-transaction involving private Belarusian companies in 2012.

Wargaming History

Viktar Kisly, a physics graduate of the Belarusian State University, founded Wargaming in 1998. Originally the company focused on developing websites. The first PC game turned-based strategy “DBA online” appeared in 2000. This game as well as the second turn-based strategy “Massive Assault” were unsuccessful. As a result both  projects had to close. 

The next game Real-time strategy Order of War released in 2009. Despite the fact that the game was critically acclaiming, the company has only managed to sell 100 000 copies of the game which barely allowed to recoup development. To stay afloat the company had to work for banner exchange network AdRevolver.

At that date a great success was gaining by a multiplayer online role-playing game “World of Warcraft”. To develop their own massively multiplayer online game (also known as MMO) Wargaming conducted a market survey. First,  they were considering to make a game with elves, dwarves and orcs. But finally Victar Kisly team rejected this idea and made a decision in favour of tanks.

Tanks as a Part of Soviet Folklore

The game “World of Tanks” is extremely user-friendly, the system of control is very simple and anyone can learn how to play the game in a short time.

Released in August 2010 the “World of Tanks” had 45,000,000 registered players worldwide. In contrast to the “World of Warcraft” the game from Belarus is free to play and the creators' earnings come from micropayments for additional options. On average, each player only pays $3-5 per month.

The game gained most popularity in the countries of ex-USSR and Eastern Europe where the monuments of tanks appeared in almost every city. Soviet propaganda always emphasised that tanks produced in USSR are the best in the world.

Tanks occupied an honourable place in the Soviet mythology of the Great Patriotic War. According to the Soviet historiography the Great Patriotic War is a part of the Second World War which started from the Soviet-Nazi War.

Even songs praise the tanks. One of the most popular TV series in USSR was Polish film about Second World War “Four tankmen and the dog” where Soviet tank T-34 even had a first name. For inhabitants of the former USSR tanks is a part of folklore.

To win markets in Asia, Western Europe and USA where the tank discourse is not as popular Wargaming lunched two new projects – the “World of Warplanes” and the “World of Warships”. Ultimately games of tanks, planes and ships will compose a single MMO universe with single economy.

Wargaming tries to secure its share of the market. In 2012 Viktar Kisly bought for $45 million Big World Company from Australia which is a producer and a supplier of game engines – an essential link of “World of Tanks”. That was the largest M&A-transaction involving private Belarusian companies in 2012.

In January 2013, Viktar Kisly made another important acquisition – he bought Day 1 Studios – an American game developer for $20 million. This purchase will allow Wargaming to expand the presence of “World of Tanks” on new platforms such as game console or mobile phone.

The Belarusian Context

In Minsk the average salary for the newcomer on the labour market is around $400 per month. In these circumstances for young people to work for Wargaming is a great luck. Wargaming proposes a decent wages and a chance for making career in a growing international company based. 

Offices of Wargaming are locating in Paris, Kiev and Saint Petersburg. Over 400 employees are currently working at the Minsk office. For that reason to make a corporate party the company rents “Sport Palace” – Ice hockey arena in the centre of the city, where Lukashenka regularly practises his Ice hockey skills with his sons, and a second biggest arena for concerts in Minsk.

Wargaming is a phenomenon for Belarus where all the big businesses are directly or indirectly linked to the bureaucracy – current or former officials, security officers and oligarchs controlled by Lukashenka. Making the most recognisable brand from Belarus in the world Wargaming is distancing itself from Belarusian government. It is impossible to imagine Viktar Kisly on Belarusian congress next to the director of tractor factory and militia generals.

Today “World of Tanks” for Belarus is the same as Skype for Estonia. It creates a more positive image for the country known more for Lukashenka and Chernobyl. Wargaming makes Belarusians proud for their country and demonstrates by its own example that doing big business in Belarus is possible not only for for those linked to the ruling regime.




How to Make Belarusian Privatisation More Sensible

Belarus will need to pay over $3 billion this year to serve its mounting external debt. This payment is more than twice than in 2012.

In the absence of significant foreign investments and additional Russian subsidies, Belarusian authorities may have to privatise more state enterprises.

Although a number of foreign companies have been operating in Belarus for decades, the process for privatisation is far from transparent and often unpredictable, a recent study from the Belarus Public Policy Fund suggests. 

Although the efficiency gap between Belarusian state enterprises and foreign private companies is increasing, Belarusian authorities are not in a hurry to sell off state property. They lack a clear vision of the goals that should be achieved as the result of privatisation and often impose conditions which make privatisation unattractive for foreign investors. 

The integration of Belarus with Russia and Kazakhstan within the Customs Union has been a mixed blessing for Belarus.  On the one hand, potential foreign investors have access to a bigger market, which extends from the Polish border in the West to Korea in the East. But at the same time it has intensified competition within the Customs Union.

Now the key challenge for Belarus is to compete with often more favourable business environments in Russia and Kazakhstan. The better the investment climate, the better the chances that a large foreign investor would come and, consequently, the higher the asking price for privatised state property. Belarus is missing what its eastern neighbours have: a more liberal economic climate, private ownership of land, lower taxes, and other virtues of a more market-oriented company. 

However, the not-so-favourable investment climate is not Belarus' biggest problem. 

Main Barriers to Effective Privatisation 

When it comes to selling state enterprises, a whole plethora of Belarusian state institutions comes into play. It is difficult to clearly understand differences between them and their responsibilities. 

More importantly, Belrusian authorities and foreign investors have very different approaches to valuation of state property. Belarus insists that the balance sheet value of the enterprise should be the most important factor. Foreign investors are more interested in anticipated revenues of the enterprise. The problem is that when all liabilities and losses of privatised companies are taken into account, they become not nearly as attractive for potential buyers. 

The new owners would have to deal not only with the old debts of the enterprise but also with various strings attached to the privatisation contract. They may need to guarantee that no massive layoffs would follow, that the volume of production would remain the same or that the investor would continue to inject money into the enterprise. 

Even the very process of understanding what old and new liabilities come with the enterprise is not an easy task. The Belarusian state fails to publish coherent lists of enterprises offered for privatisation and the uniform conditions for sale of state enterprises simply do not exist.

This is yet further evidence that privatisation is Belarus lacks a coherent strategy and goals. Instead, privatisation is often done on an ad hoc basis, where each deals depends on how well the foreign investor can navigate its way in the corridors of Belarusian state institutions.  

How to Make Privatisation More Effective 

The most obvious step which Belarusian authorities need to take is to concentrate various privatisation procedures in a single state agency. It is no secret that the Presidential Administration takes the most important economic decisions in the country, including the privatisation of sizable chunks of state property.

Making the already existent National Investment and Privatisation Agency accountable directly to the Presidential Administration would help ease negotiations between the state and potential investors.

Agreeing on the right price tag for privatised assets remains the most difficult hurdle for foreign investors. If the parties reach a stalemate in negotiations, the use of independent experts to evaluate the property should be accepted by both parties.

The unwillingness of the parties to defer, despite their disagreements, to independent experts would probably mean that one of the parties is not genuinely interested in the deal. Otherwise, they should unconditionally accept such a valuation. If the state is unsatisfied with the result of the valuation, it would be counterproductive to refuse the sale altogether or organise another broad auction in order to invite new bids. 

Instead of the requirement to preserve jobs at state enterprises, which are often overstaffed and inefficient, the state should insist on the mandatory retraining of personnel. A more flexible approach would also make sense in requiring the enterprise to preserve its core activities or guarantee a certain number of investments. 

Finally, the process of privatisation should be more transparent not only to the parties involved, but also to the general public. This includes publishing the lists of enterprises offered for privatisation and developing a uniform set of rules for privatisation.

Although the practise of offering special favourable conditions to certain investors should remain, the process needs to become much more open and predictable. That would benefit not only the foreign investor, but also the state and the Belarusian people at large. 

This review was prepared on the basis of Policy Brief Privatization in the Republic of Belarus: Framework Improvements and Chief Priorities of Andrej Skryba. The study was conducted by Belarus Public Policy Fund as a part of a program jointly carried out by Pontis Foundation (Slovakia) and Belarusian Institute for Strategic Studies.