The Belarusian hi-tech revolution: the government drafts an ambitious decree

Last month, Belarusian IT businessman Victor Prokopenya published a post on Facebook informing the public about a new decree on High Tech Park. This led to fervent discussion in the Belarusian media, with a number of articles devoted to the topic.

After meeting with HTP head Usievalad Jancheuski and Prokopenya, Belarusian president Alexander Lukashenka repeatedly mentioned that fundamental measures would be taken to develop the IT industry. ‘We have set an ambitious goal – to turn Belarus into an IT-country,’ said Lukashenka at the plenary session of the 4th Belarus-Russia Forum.

The new IT decree, drafted by a group of representatives from HTP, state bodies, specialists from leading IT companies, and legal and financial experts, aims to address the problems of the Belarusian IT sector. From cryptocurrencies and investment funds to English law and immigration policies, the decree is groundbreaking in the number and types of reforms it sets out.

 

Optimists believe that this sensational decree could turn totalitarian Belarus into an ‘IT Hong-Kong for the Slavic world’. Others remain critical of the fact that the government has neither published the decree nor opened it up for public discussion, suggesting that certain points may be controversial. Thus, whether the decree will benefit the whole country’s economy or merely widen the already existing gap between privileged IT companies and other sectors remains unclear.

New benefits for the IT business

Most importantly, the decree prolongs already existing tax benefits for IT businesses, which will help sustain the growth of Belarus’s most successful industry. The document also makes numerous large and small amendments which remove limitations on the sector’s further growth.

With the new decree, HTP will open its doors to large IT product companies, export-oriented ITES (IT enabled services), and companies working in other hi-tech spheres (such as medicine, biotechnologies, and electronics). Not only will this create thousands of well-paid jobs for Belarusians, it will also broaden the type of activities High Tech Park engages in.

Moreover, the decree welcomes investment funds, including venture capital, which is crucial for the sphere’s growth. In March, the head of Flint Capital announced the readiness of international investment funds to come to Belarus once the necessary legislative conditions are created. Thus, if the government implements the legislative changes – such as cancellation of subsidiary liability for HTP residents in case of bankruptcy – more investment funds and venture organisations will enter HTP.

What’s more, the decree simplifies the business process, allowing IT companies to implement various business models, such as earnings on advertising, marketing activities, games with internal currencies, etc. For example, it would be possible for Google or Facebook, which make money off advertisement, to become HTP residents. At the same time, investment funds and lifted restrictions regarding earnings will encourage Belarusian companies and startups to remain in the country, as they will be able to find finances and opportunities for development in Belarus.

English law, currency control, and documentation changes

The decree stipulates the application of English law, which would stimulate shareholder agreements, investment partnerships, and non-competition agreements with employees. This measure would boost investment activity and also structure transactions for Belarusian IT business sale.

Furthermore, in order to reduce the risks associated with the unstable Belarusian economic situation, the decree would abolish control of the movement of capital. It would also eliminate a significant amount of paperwork that companies engaging in foreign trade have to deal with. Experts consider these steps crucial for making Belarus appealing to large foreign enterprises, as they do away with some of the most frustrating bureaucratic procedures with which enterprises must contend.

The decree will uproot old Soviet-style legislation, involving complex document circulation, which prevents Belarus from adopting business practices preferred in much of the rest of the developed world. Key IT players lack the incentive to enter the Belarusian market as long as these time-consuming practices continue to exist. Thus, simplification of legislation is a wise move if Belarus wants to attract big names in the tech sphere.

Cryptocurrency and unmanned vehicles

On 17 July, the National Bank of Belarus announced the introduction of blockchain technologies for solving a wide range of problems in the banking sector and outside it. This decision is rooted in the HTP decree, which legitimises cryptocurrencies and tokens based on blockchain technology.

The proposed legal regulations would allow HTP residents to provide crypto-exchange services, use cryptocurrencies in everyday life, and attract ICO financing. Potentially, this could also lead to the creation of crypto-centres for generating crypto-code. Given the increasing legal status of cryptocurrencies around the world, their legitimisation could allow Belarus to directly benefit from this trend .

The decree also creates the legal basis for the development of unmanned vehicle technologies in Belarus. In May, Uber’s regional head and the CEO of Gett announced the opening of R&D centres in Minsk. Their motives for doing business in Belarus relate to existing information about upcoming reforms for HTP. Additionally, the decree makes provisions for a legal act which would even allow the circulation of 3rd-class unmanned vehicles on Belarusian roads. Hence, Belarus could become one of the first countries in the world to launch driverless cars.

One country – two systems?

The decree sets the ambitious goal of turning Belarus into a world centre for IT development and innovation. However, its critics insist that the decree would enforce a ‘one country, two systems’ formula, by which HTP would function according to capitalist laws while the rest of the country remains socialist. This would exclude non-IT spheres from the same privileges and reforms, creating an unfair and unbalanced economy.

Furthermore, some criticise the fact that Belarusian society has no access to information on the development of the decree. Thus, the public cannot influence the decision-making process. Key IT figures participating in the drafting of the decree are struggling to attain privileges for themselves, let alone campaigning to amend the Civil Code for everyone. Thus, critics claim that the decree will foster the IT industry exclusively and question whether it will benefit the rest of the country.

However, IT specialists respond that although the decree primarily targets HTP, it will also allow the expansion of IT activities to education, science, finance, and other fields. Moreover, it will create more well-paid jobs, thus increasing the size of the wealthy class of Belarusian programmers and preventing brain drain.

More well-paid workers will consequently increase Belarus’s tax revenue. Additionally, the decree will foster improvement in IT education as HTP residents will be able to carry out educational activities, contributing to IT education at schools and universities.

Nevertheless, the question remains of how an authoritarian state with no experience in regulating investment funds or venture organisations will ensure everything functions at an optimal level. Despite doubts, experts are expressing hope that once the decree is fully implemented, it might eventually de-bureaucratise the Belarusian economy and bring positive changes to the conservative state apparatus.

 




Plans to transform the old economy into a new IT-economy – digest of the Belarusian economy

According to Belstat, Belarus’s official statistical agency, in the first half of the year the Belarusian economy sped up, improving four months in a row.

Meanwhile, on 17 July 2017, the authorities announced plans to transform Belarus’s IT-sector into a full-fledged economic driver, aiming to create new jobs and increase tax revenues.

Finally, on 25 July 2017, the government announced a new modernization strategy for the manufacturing industry – the plan involves building a new tractor factory.

Economic growth: rising from the ashes

In the first half of the year, GDP growth was 1 per cent. By year-end however, GDP growth should reach 1.7 per cent according to the official forecast (see Figure 1). Industrial production has increased by 6.1 per cent and exports of goods by 23 per cent (in January-May).

As a result of these positive half-year economic figures, the government has started to think about new drivers of economic growth. However, according to the First Deputy Minister of Finance, Maxim Ermolovich, artificial stimulation of the economy (through the budget or monetary policy of the National Bank) should not be considered an economic policy tool.

The IT-economy: thinking about a prosperous future

On 17 July 2017, the authorities announced plans to transform Belarus’s IT-sector into a full-fledged economic driver. At present, approximately 30,000 IT-specialists work in the country, providing about $1bn of foreign exchange earnings annually. The average IT-specialist, with a salary of $1,500, delivers twice as much tax revenue as the average non-IT worker.

Although these plans are still only on paper, the authorities have already hammered out the main ideas of their new revolutionary presidential decree for the IT-sector.

The most significant changes have to do with the following issues: first, the decree opens up the Belarusian IT-market for new companies from high-tech industries (electronics, machine engineering, medicine, and biotechnology) and foreign organisations (for example, Google, Facebook, Microsoft, Apple) which monetise IT-products through advertising and paid subscriptions.

Second, the decree creates the necessary legal basis for opening a centre for scientific and technological development of driverless cars in Belarus. What’s more, the decree would allow said cars to navigate on Belarusian roads.

Third, the decree aims to develop educational activities in the IT-field, such as teaching modern IT-subjects in English in universities and schools.

Fourth, the decree opens up the Belarusian market for international investment funds and venture capital organisations. In particular, it would liberalise economic legislation in the event of bankruptcy of an IT-project – this measure would limit investor obligations in terms of their invested money, but not their entire property.

Fifth, the decree intends to create favourable conditions not only for Belarusian IT-specialists, but also to poach talent from Ukrainian and Russian IT companies. For example, the decree simplifies the procedure for obtaining a residence permit for qualified foreign IT-specialists and introduces long-term visas for them.

Finally, the decree would introduce cryptocurrency into civil circulation (the consumer market).

Thus, the government plans to create new jobs and increase tax revenue. According to experts, state tax revenue from IT may increase by two or three times if the number of IT-specialists in the country triples.

Manufacturing: promoting a new tractor factory

On 25 July 2017, President Lukashenka decided the fate of the Belarusian tractor industry at a meeting: the government would organise the production of new technologically advanced types of heavy tractor. However, in recent years, this manufacturing sector has shown substantial decline.

Over the past five years, the production volume of tractors in Belarus has decreased by half, from 71,000 to 34,400 units (see Figure 2). The amount of people employed by MTZ (the Belarusian tractor producer) has shrunk by a quarter. Likewise, exports have also decreased significantly – from $1bn in 2012 to only $425m in 2016.

The decline in exports of Belarusian tractors (90% go to foreign markets) was mainly caused because the primary market (Russia) has in recent years experienced recession (due to reduced oil revenues). Therefore, subsidies for the purchase of agricultural machinery (including Belarusian) has also decreased.

In 2017, the export of Belarusian tractors finally began to grow. According to Belstat, in January-May tractor sales increased by 12.2 per cent in comparison with the same period last year, mainly due to improvements in the Russian market.

Thus, Russian subsidies for agriculture have reached $1bn, providing buyers a discount (from 15% to 20%) for agricultural machinery, including purchase of tractors assembled in Belarus.

According to the Director of the IPM Research Center, Alexander Chubrik, the Belarusian authorities plan to take advantage of the recovery of the Russian market to accelerate economic growth. One of their primary strategies will be establishing production of new tractor models.

According to Deputy Prime Minister Vladimir Semashka, this project could cost around $300m-350m, financed by Chinese credit resources. However, the use of Chinese loans may not please Russian partners, who may rethink the subsidies for new tractor models.

Thus, Deputy Chairman of the Belarusian Scientific and Industrial Association Georgy Grits has proposed joint production with Russia (which already has factories for such tractors). This would provide favourable conditions for the sales of the new Belarusian tractors on the Russian market.

All things considered, the positive external economic conditions have helped the authorities get back on a path of economic growth. However, the economy still lacks new drivers for economic growth which could more than double GDP growth. The new tractor factory remains a project for the Old Economy while the new IT-economy still seems a distant prospect.

Aleh Mazol, Belarusian Economic Research and Outreach Center (BEROC)

This article is a part of a joint project between Belarus Digest and Belarusian Economic Research and Outreach Center (BEROC)




Problems and prospects for the Belarusian IT industry

On 7 June 2017, the Microsoft Corporation held a Government Industry Day at Belarus’s Hi-Tech Park with the participation of both Belarusian ministers and Microsoft experts. The seminar addressed issues surrounding the digital transformation of the economy and aimed to present technologies that could work for the finance, transport, health, education, and other economic sectors to the Belarusian authorities.

IT has become the fastest-growing sector in the Belarusian economy, increasing by over 20% annually. However, the nature of the industry in Belarus, which focuses on outsourcing, primarily targets foreign customers. This is partially due to the reluctance of the Belarusian state to embrace tech achievements at home.

Given the limited growth potential of outsourcing, Belarusian IT needs to shift from software services to production, as well as increase local consumption. These processes require economic liberalisation – including venture legislation and favourable investment conditions – larger number of specialists, and modernised national tech management.

The prevalence of the outsourcing model

On 12 June 2017, the number of Hi-Tech Park residents reached 181. Last year, HTP revenue nearly reached $1b – a huge leap from $22m in 2007. The World Bank’s Doing Business 2017 index ranked Belarus 37th due to its good outsourcing conditions.

However, outsourcing may soon reach its apex, given Belarus’s limited human resources and the world’s spending on outsourcing. The outsourcing-dependent IT sector sells ‘brains’, thus letting most income go abroad; it may also become less economically attractive after HTP tax exemptions terminate in 2020.

On the other hand, the presence of global outsourcing companies fosters the development of Belarusian IT infrastructure, thus increasing the productivity and stability of the IT sector and reducing risks and costs. It also sustains a labour market with a number of wealthy and skilled professionals who receive wages significantly higher than the average.

What’s more, many outsourcing companies are now moving beyond software services. For instance, EPAM Systems, owned by Belarusian businessman Arkadź Dobkin, has expanded its focus to product development in such areas as medicine, media, and banking.

Rising software production

At the moment, out of a total of over a 1,000 IT companies operating in Belarus, only 10-15 per cent create their own products. Nevertheless, product software remains the most promising direction, as ready-made projects earn more than services. In particular, Belarus will benefit from companies that create machine learning and artificial intelligence products – fields which will dominate the tech industry in the near future.

Software producers, however, are encountering problems finding specialists in such spheres as marketing and product management. Dominated by outsourcing, Belarus has so far failed to create the necessary job market for software producers. Last week, Wargaming, a game developer with Belarusian roots, began a liquidation process at its London ‘mother’ company. Belarus’s richest product developer, famous for the game World of Tanks, now faces serious business stagnation.

Nonetheless, Wargaming recently opened a mobile division in an attempt to reorient its functioning. Other Belarusian startups also remain active and receive foreign investment. This year, the mobility company Gett acquired the Belarusian-Israeli startup Juno, while the public company Globant acquired PointSource. Other promising startups include DroneX, which develops custom-made Unmanned Aerial Vehicles, Blinger – an app that allows communication via multiple platforms, the trip-planner Eightdays.me, and an emotion recognition app called NeoSound. These projects have already been noticed internationally and have high chances of becoming successful.

Problems in state policy and legislation

In a recent interview, Ivan Michnievič, a co-founder of Wargaming who left the company in 2014, described the state policy towards business as ‘short-sighted’. Belarus barely invests in IT and has complex legislation for the IT business. State investments in R&D have been declining since 2011, never exceeding 1 per cent of GDP. This consequently reduces Belarus’s ability to retain regional leadership in the current technology race.

During the conference IT Spring 2017, various speakers discussed investment problems in Belarus. Not only do specifics of legislation prohibit venture funds, they also fail to protect the investor. Belarusian law neither secures investor’s property rights nor protects him or her from employees transitioning to competitors.

What’s more, occasional arrests and administrative punishments of shareholders and managers for violations of economic and bureaucratic procedures frighten off potential investors. The government, which is incapable of scraping together national funds to support IT, should at least allow venture funds and amend legislation to attract more investment.

As for advertising, Belarusian legislation stipulates complex bureaucratic procedures. For example, paying for advertising services of foreign sites (such as Facebook, GooglePlay, or Apple) involves a 35% tax on non-resident services comes, making advertising from Belarus highly unprofitable.

Lastly, the reason why Belarus lacks many major corporations is the country’s image. In order to attract companies like Microsoft or Facebook, Belarus should cultivate a positive image in foreign media; this requires political will rather than large amounts of money.

Domestic IT consumption and social division

Lack of domestic consumption remains a challenge for the Belarusian IT industry. State companies which have their own tech specialists remain unwilling to move on to a new type of technology management. Beside being insufficiently informed about the opportunities offered by the IT industry, officials have no real interest in the tech-supported success of state-owned businesses.

Arkadź Dobkin expressed his readiness to work in Belarus provided that the customer has a sincere interest in the result and ‘wants to be your real partner, and not a boss on a high chair’. If Belarusian manufacturing and agricultural giants make better use of Belarusian IT services, this will eventually benefit both sides, improving the country’s economy overall.

Moreover, Belarus should address IT education, as the current level of IT training does not meet requirements. To increase its supply of professionals, Belarus could attract specialists from neighbouring countries by offering special visas or residence permits, reducing payroll tax, or providing other benefits.

On the other hand, the state must maintain a balance in the way it treats the IT sector. At the moment, IT specialists receive significantly larger salaries with many tax benefits; these are unavailable to the rest of the working population. Excessive attention to IT could contribute to the creation of a distinct labour elite, which brings inequality and division to society. The authorities should pay more attention to other spheres, such as education or health, regardless of the profit they bring.

Thus, provided the state implements legislative changes, the ICT sector will grow faster, bringing more companies, revenue, and technological advancement to Belarus. However, in order for ICT not to become overly exclusive and divisive, the sector should work out a way to directly benefit the Belarusian economy and society.

This article is a part of a series of publications on IT sector in Belarus supported by VP Capital.




The avant-guarde of Belarusian hi-tech industry

Agreements concluded in May of this year between the Belarusian High Tech Park and Uber, along with the opening of an R&D centre for the Israeli company Gett, demonstrate the growing success of the Belarusian IT industry.

Dave Waiser, Gett’s CEO, compared Belarus to Israel in terms of its small domestic market for retail business, but big opportunities for IT export for worldwide use.

Over the past decade, Belarusian IT services have grown by almost 50, with export reaching $900m – a number which is growing at a rate of 20 per cent and currently constitutes 12 per cent of Belarusian export.

Out of the 1,000 IT companies in Belarus, only 24 belong to the state. The largest IT companies, which operate in Belarus’s most promising industry and do most of their business abroad, put continuous effort into ensuring the industry continues to grow.

While the authorities support the increasing contribution of the IT sector to Belarus’s declining economy, it is Belarusian IT companies themselves which play the largest role in boosting IT education, expanding the sector’s size and regional reach, and cautiously influencing changes in legislation.

High Tech Park – Belarus’s hub for IT

It’s been 12 years since High Tech Park opened in Minsk, after the president signed the decree ‘On High Tech Park’ in 2005. Before the park’s opening, Belarus’s IT export constituted $15.2 million.

In 2009, HTP had already reached $121.5m worth of export. In 2016 it reached $820.6 million, expanding its activities into the fields of nanoelectronics, mechatronics, data transmission, and other areas.

Currently, the park hosts 173 companies from 67 countries, producing 91% of its software for export and attracting $169m of foreign direct investment. Thanks to HTP, the export of Belarus’s IT services became the second most important contributing factor to the country’s current positive trade balance for foreign services.

A few days ago, HTP opened an educational centre in a regional department in the city of Hrodna. The department implements and supports regional ICT projects, cooperates with local universities, and promotes employment in the IT sector. HTP has also opened IT academies in several locations in order to teach programming to school children. In this way, the park can enhance IT education while motivating students to specialise in ICT, consequently increasing the number of potential IT specialists for the growing sector countrywide.

The number of foreign companies entering HTP is increasing thanks to tax benefits and a pool of inexpensive and highly qualified specialists; this creates a perfect environment for outsourcing.

Four Companies with Belarusian roots (EPAM Systems, IBA Group, Intetics, and Itransition) are ranked among the world’s largest outsourcing companies in 2016 Global Outsourcing 100. Another ranking, SoftwareMag, includes EPAM, IBA and eight more HTP residents among the top 500 IT service providers.

Top outsourcing companies

EPAM Systems is the largest Belarusian IT company, registered in the US with 25 branches around the world. Arkadz Dobkin, a Belarusian immigrant to the US, founded EPAM in 1993. Today, EPAM employs 22,000 people, including 8,000 in Belarus, where the company has branches in all regional centres. With revenue of over $1 billion and IPO at the New York Stock Exchange, EPAM is the fastest-growing IT company in Belarus and among the fastest in North America. Over the past six months alone, the Belarusian branch of EPAM increased its staff by more than a third.

EPAM invests millions of dollars into real estate for Belarusian programmers, finances university training programmes, and runs start-up initiatives. Moreover, the company is listed among the winners of the ‘Best Exporters of 2016’ for its leading position in Belarus’s IT services export.

However, EPAM’s overall revenue structure shows that North America takes the largest share (59.2 per cent), while CIS receives 14 times less (4.2 per cent), and this gap is widening. Hence, most of EPAM’s revenue falls outside Belarus, the country with the most employees.

IBA Group, the third largest IT exporter and second biggest supplier to Belarusian market, is another major Belarusian outsourcing company. IBA owes its creation to the US company IBM, which established a joint venture with the Minsk Research Institute of Computers in the early 1990s. Today IBA is headquartered in Prague, while the Minsk-based office remains the key to the company. IBA has developed several projects for the Belarusian market, including an e-tax system for the Ministry of Taxes and Duties, a ticket system for public transportation, and budgeting systems for banks.

In August 2016, the media claimed that Belarusian police had detained IBA’s top managers. While IBA CEO Siarhiej Liaŭciejeŭ denied this information, he confirmed certain claims by national law enforcement agencies. Nonetheless, IBA, EPAM, and other top IT companies, such as Itransition, ISsoft Solutions, and iTechArt, remain among the top Belarusian IT service providers to this day.

Conquering the world with tanks and augmented reality

While the Belarusian IT industry largely focuses on services, product development continues to be the most profitable sector. Wargaming, founded in Minsk in 1998, is a primary example. Last week, the world’s fifth most popular PC gaming company held its 2017 Grand Finals in Moscow, gathering 12 teams to compete for a $300,000 prize. Officially registered in Cyprus, Wargaming garners international recognition for its game World of Tanks, played by 110 million users. The game turned the company into an international corporation.

Wargaming’s CEO Viktar Kisly became the first gaming industry billionaire from the CIS included in the Bloomberg index, which valued Wargaming’s business at $1.5 billion. However, since World of Tanks, no other game has had similar success. Stagnation of the business could have influenced the decision of co-founder Ivan Michnievič to leave Wargaming in 2014. While the Minsk-based Game Stream Studio continues developing new projects, recent games such as World of Warplanes and World of Warships have failed to take off.

Other fresher examples of Belarus’s IT development is the company Banuba Development, registered in Hong-Kong with a development centre in Minsk. Backed by $5m of funding from the Gutseriev family’s Larnabel Ventures and Viktor Prokopenya’s VP Capital, the team of 45 Belarusian programmers are currently developing augmented-reality-enabled mobile apps. Already boasting 11 US patents, Banuba expects to present its first application this year.

Emerging trends

During Lukashenka’s visit to several IT companies, the president made clear that the state has given a green light to the development of the IT industry. Lukashenka praised the achievements of Belarusian IT companies, promising to expand state support for new projects.

The fact that Belarus already has EPAM and InterActiveCorp (IAC), which owns the HTP-registered mobile apps developer Apalon, shows that the right steps are being taken towards involving large corporations in Belarus’s IT sector. Nevertheless, further revenue growth requires a new legal system to support the IT product model and attract more public IT companies with traded shares on stock exchanges.

While Belarusian and Russia-oriented exports continue to shrink, the West-oriented IT industry is growing by leaps and bounds. The government supports Belarus’s high-tech achievements by asking for its 5 per cent share in GDP, while IT businessmen carefully push for reforms in economic legislation. As long as the interests of IT business and the government in making Belarusian economy more innovative coincide, HTP residents can expect production and revenue growth, as well as more IT corporations coming.

This article is a part of a series of publications on IT sector in Belarus supported by VP Capital.




Is the IT sector Belarus’s most successful industry?

On 24 May, Usievalad Jančeŭski, the Head of Belarus’s High Technologies Park (HTP), and Pierre-Dimitri Gore-Coty, Head of the EMEA region at Uber, agreed to an R&D centre for Uber in HTP for driverless vehicles.

Uber’s decision to cooperate with HTP does not come as a surprise, given Belarus’s reputation on the East European IT market. Belarus hosts more than 1,000 IT companies with over 30,000 employees. Boasting many well-educated and relatively inexpensive specialists, the country provides excellent hi-tech outsourcing services for foreign enterprises.

The majority of IT clients come from North America and Europe, while a number of famous IT firms, such as EPAM Systems and IBA Group, have roots in Belarus. The IT industry was successful thanks to limited government interference and a large pool of highly-skilled professionals.

Despite the favourable business climate, however, the unstable tax system, loosely defined property rights, the government’s capricious behaviour, and Western sanctions are barriers to the Belarusian IT business.

The history of tech innovation in Belarus

During Soviet times, Belarus was an epicentre of technological research and development: Belarusian engineers designed 60 per cent of the USSR’s computers. Once the Soviet Union fell apart, Belarus’s legacy of software expertise and scientific research became the foundation for today’s independent IT entrepreneurial activity. Young programmers kept their small companies away from state control; in some cases they eventually entered the global market.

In 2005, after Lukashenka signed a presidential decree entitled ‘On the High Tech Park’, Belarus got its own version of Silicon Valley. The establishment of the High Tech Park has done much to foster the development of information and communication technologies (ICT) in Belarus, producing computer services for export. With simplified regulations regarding hi-tech business and taxation, Belarus became one of Europe’s main outsourcing destinations, competing with other East European countries.

Given the overall economic decline, the authorities see the IT industry as a potential solution to the Belarusian economy’s woes, leading them to promote Belarus’s self-branding as an ‘IT country’. Meanwhile, foreign clients choose Belarus because it’s IT services are high-quality and cost-efficient. Although Belarusian developers charge more than South-East Asian ones, they still demand less in wages than West Europeans and Americans; they are thus among the cheapest IT specialists in Eastern Europe. Foreign enterprises make Belarus’s IT market grow, currently contributing 1.5 per cent to the GDP; this number is expected to rise to 4-5 per cent by 2020.

During Lukashenka’s visit to HTP in March 2017, the president asserted that the state would continue to assist the IT sphere in legal and other aspects. Besides state investments, the ICT sector is growing mainly thanks to limited governmental control and relaxed taxation. The 2005 presidential decree exempted High Tech Park companies from corporate and profit tax payments, and HTP residents from custom duties. Additionally, HTP residents receive special rent and insurance rates, pay a fixed 9 per cent income tax instead of the usual 13 per cent, and receive the benefits of the Social Security Fund despite earning above average salaries (BYN 777 or $420 in April 2017).

Nevertheless, the IT industry remains vulnerable to the whims of the authorities. For instance, in March 2017, Lukashenka dismissed Valiery Capkala, HTP’s former head, with no explanation. One version suggests that Capkala did not aim at deploying the IT sector fully in favour of the Belarusian economy. If such incidents occur more often, they may negatively affect the IT investment climate, creating uncertainty among potential investors.

Young and well-educated IT talents

IT-sector growth became possible thanks to the huge IT talent pool. Despite the many issues in the Belarusian education system, it maintains a focus on mathematics, hard sciences, and logical thinking. Around 16,000 STEM students graduate from 54 universities every year, 4,000 of which are IT specialists. Because the IT sector guarantees a well-paid job, admissions for IT degrees are highly competitive. For example, the admissions rate for the Information Systems and Technologies degree at Belarusian State University of Informatics and Radio-electronics (BSUIR) reached 7.3 people per place in 2016; 373 out of 400 applicants had a passing score.

Therefore, most Belarusian IT students have deep knowledge of their subject and participate in numerous national Olympiads and international competitions. For example, Belarusian sport programmer Hienadź Karatkievič won the Google Code Jam competition three times in a row in 2014-2016, breaking the world record. What’s more, Belarusian students won several prizes in the IEEEXtreme competition, International Mathematics Competition, and Informatics Olympiad. Such results demonstrate the high level of technical and scientific knowledge that allows Belarusian programmers to compete with their rivals from Western countries.

It comes as no surprise that many IT firms maintain close contacts with Belarusian universities, providing special trainings for students, taking on interns, and hiring recent graduates. These graduates constitute 11 per cent of IT employees, while one third have a 7-year working experience. Thus, with an average age of 28.6, young people dominate the Belarusian IT industry and enjoy a standard of living several times higher than the national average.

Local product development, geography and mentality

Localised product development also contributes to Belarus’s self-branding as an IT country. Recently, the mobility company Gett acquired the Belarusian start-up Juno, while document management startup PandaDoc scored $15 million of investment. Other examples of famous Belarusian IT projects include MSQRD, one of the top 2016 iPhone apps, popular messaging service Viber, the video game World of Tanks, and the mapping service Maps.me.

In some cases, Belarusian emigrants contribute to IT growth by bringing leading software enterprises back to their home country. This was the case for Arkadź Dobkin, who opened multiple franchises of his company EPAM Systems and began collaborations with local universities to train and recruit students. EPAM, together with IBA Group and Wargaming, are perennially at the top of the list of Belarusian IT companies.

Finally, the geographic location of Belarus makes it attractive to IT companies, which prefer physical proximity to outsourced personnel. What’s more, Belarusians are more familiar with the Western mind-set, and have no trouble adapting to company etiquette. Belarusian IT specialists have earned a reputation for being hard-working, tech-savvy, mobile, and eager to be relocated if necessary.

Whether the Belarusian IT industry will keep growing depends primarily on the demand for Belarusian software services and custom development from international clients. Unless the government puts more pressure on the IT sector, Belarus will probably see more foreign tech enterprises coming.

Nevertheless, these companies still opt for registration abroad to avoid economic vulnerability and political risks. This demonstrates a lack of confidence in Belarus’s business environment, which may lose its attractiveness once HTP’s privileges come to an end in 2020.

This article is a part of a series of publications on IT sector in Belarus supported by VP Capital.




What does Belarus want from China?

On 16 May 2017, Alexander Lukashenka concluded a three day visit to the People’s Republic of China, where he met with Chinese leader Xi Jinping and took part in the One belt, One Road International Forum.

Earlier, from 24 to 26 April, head of the Belarusian Security Council Stanislaŭ Zaś visited China to discuss several issues with important Chinese defence officials. This is yet more evidence of the Belarusian authorities’ strong interest in building a strategic partnership with China.

Belarusian authorities constantly allude to the strategic nature of relations between Belarus and China. On 4 May 2017, President Lukashenka even gave a special press-conference to the Chinese media, in which he once again highlighted the close ties between the two countries.

However, whether Beijing is of the same opinion is dubious, especially given the political situation in Belarus and Minsk's relations with the European Union. After all, the Chinese are famous for their pragmatic approach to foreign policy.

A response to Russian 'food blackmail'

Nevertheless, China is actively cooperating with the the government in Minsk. Thus, the latest visit of a Belarusian delegation to Beijing, headed by Lukashenka, resulted in several significant agreements in the sphere of economics.

On 15 May 2017, the Belarusian Minister of Agriculture and Food Leanid Zajac and the Minister of the State Administration of China on Quality Control, Inspection, and Quarantine Zhi Shupin signed an agreement allowing Belarusian beef on the Chinese market. The day before, representatives of Belarusian agricultural companies signed contacts on the supply of Belarusian dairy products to China, amounting to $13m. At the same time, the Ministry of Agriculture and Food of Belarus signed a protocol of intentions with the Chinese corporation DRex on direct investment in the Belarusian agricultural sector worth $1bn.

Such cooperation is welcome in Belarus, where exports to Russia have been declining. It also functions as a sign to the Kremlin: Belarus is capable of finding a market for its food industry products should Russia continue pushing Belarusian products out. Presently, Moscow continues to use restrictions on Belarusian food products on the Russian market in order to put political pressure on Minsk.

New industrial perspectives

On 14 May 2017, Belarusian Deputy Finance Minister Jury Seliviorstaŭ announced a series of agreements with the Chinese on the implementation of three engineering projects worth more than $340m: the construction and development of the Amkadormash, Saleo-Homiel and Saleo-Kobryn enterprises. Two days later, Minister of Economy Uladzimir Zinoŭski met with the top management of China Railway Construction Corporation, which declared its intentions to participate in the building of high-speed railway in Belarus.

Finally, on 16 May 2017, Xi Jinping announced the possibility of providing a $1bn loan to Belarus for the modernisation of oil refineries.

Highly sensitive investments

Meanwhile, another four Chinese enterprises have become residents of the Belarusian-Chinese industrial park Great Stone on 15 May 2017. However, it would be premature to call this event a success or a guarantee of large-scale Chinese investment. According to an investigation conducted by the independent TV channel Belsat, only two companies are operating in the industrial park at the moment, despite the fact that the Belarusian government had announced much larger plans and perspectives.

Initially, both sides planned for the park to become a Chinese industrial cluster situated in a strategic location – right at the border of the European Union. The project kicked off in 2010, when relations between Minsk and Brussels were much warmer, and some politicians and media sources even discussed the possibility of Belarus’s joining the EU in the foreseeable future. However, following the events of 19 December 2010 and the ensuing mass repression, the pace of development of the project woundd own significantly. It gained speed once again only after the detente in Belarusian-EU relations in 2014.

Beijing sees Great Stone as a jumping-off point for an invasion of Chinese products in Europe. This is why the success of the project depends largely on Minsk's relationship with Brussels, as well as on the political stability of the country. Should the current atmosphere of low trust between Europe and the Belarusian regime continue, Great Stone will survive only on paper and in the dreams of Belarusian officials.

As Belarusian officials like to underline, 'Belarus plays the role of the door to the market of the Eurasian Economic Union'. But China has no need to enter this market from the back door – it is close enough to Russia itself and has no trouble selling Chinese products there.

Chinese experience for Belarusian security

During his visit to China on 24-26 April 2017, Stanislaŭ Zaś met with Secretary of the Political and Legal Commission of the Central Committee of the Communist Party of China Meng Jianzhu, the Minister of Public Security Go Shengkun, the Minister of State Security Chen Wenqing, and the Minister of National Defense Chiang Wanquan. The sides discussed fighting international terrorism, extremism, illegal migration, and cross-border organised crime. They gave much attention to the further development of military-industrial cooperation and issues of information security.

The latter is especially notable given the recent protests in Belarus and the regime’s failure to control the country's information space. The Belarusian authorities may be interested in studying the Chinese experience of moderating information and cyber-security measures, as well as in getting information about Chinese state-backed hacking groups.

Meanwhile, the Belarusian missile programme, which uses Chinese technologies, is a good example of already existing cooperation. The MLRS Polonaise is the direct result of this partnership. The Belarusian authorities have repeatedly stated their desire to create their own operational-tactical missile system with the help of Beijing. Belarus launched this project after Russia refused to provide Minsk with its Iskander missile systems.

Belarusian defence officials also mentioned cooperation in the UAV development, which could mean that the Belarusian military would finally obtain their own combat UAV.

These facts show that relations between Belarus and China could develop further and be profitable for both sides. At the same time, the Belarusian authorities should understand that Beijing will not give Minsk preferential treatment in exchange for promises of loyalty and statements about 'brotherhood'. Whether Belarus can manage to attract Chinese investment depends largely on the image of Belarus on the international arena and its relations with the European Union.




Social parasite tax postponed, round table on Kurapaty, Uralkali – Belarus state press digest

The government will postpone the ‘social parasite’ decree but not rescind it. The Minister of the Interior claims that the opposition is waging an information war against his ministry. A round table with Belarus Segodnia discusses whether Kurapaty should become a National Mourning Memorial.

The Belarusian government reveals a Russian official's vested interest in banning Belarusian imports. The Belarusian president hosts his Georgian counterpart Giorgi Margvelashvili in Minsk.

Minsk may restore cooperation with the Russian company Uralkali. This and more in the new edition of Belarus state press digest.

Domestic politics

The government will postpone the ‘social parasite’ decree, but not rescind it. Zaria reports on Alexander Lukashenka’s decision regarding the notorious decree on taxing ‘social parasites’. He has officially postponed it until 2018 and ordered that the list of freeloaders be double-checked. Those who have already paid the fee will not have to pay it next year even if they are still unemployed, and they will be remunerated if they have found a job by then. Lukashenka ordered all unemployed people to find a job by 1 May.

'We need to determine where these people can work, set up brigades, groups that will plant forests, build fences, paint, clean up the streets, dig, carry things, and so on. And we will employ all people', the head of state said. Lukashenka also demanded that the authorities create a space for a civilised dialogue between the authorities and society, including large-scale events. 'People should have places where they can express their opinions, as in developed countries in the West. But all attempts to create disorder or violence should be stopped immediately,' he underlined.

Opposition stages information war against the Interior Ministry. In a long interview to Belarus Segodnia, Interior Minister Ihar Šunievič argued that no post-Soviet country has successfully reformed its police by merely copying Western uniform and smiles. Likewise, Belarus will not make a radical break with its policing system but rather pursue incremental reform. He also denied a widespread rumour regarding the amount of police in Belarus: there are a mere 405 police officers per 100,000 inhabitants, and not the alleged 1,500.

The minister argued that the political opposition is waging an information war against the police force to weaken it and change the political system of Belarus. He also noted that crime remains inside the police ranks and the ministry combats it successfully. Šunievič also commented on the controversial NKVD uniform that he wears during military parades. He made the uniform in order to honour to security servicemen that worked during the difficult war and post-war times.

Round table with Belarus Segodnia: Kurapaty should become a National Mourning Memorial. Belarus Segodnia held a round table on the future of Kurapaty – the site of mass executions during the Stalin regime in the 1920s-1950s. Prominent figures including chief editor Paviel Jakubovič, First Deputy KGB Chairman Ihar Siarhejenka, and Commissioner for Religious Affairs and Nationalities Leanid Huliaka. A number of historians also took part in the discussion. The participants argued that local authorities' disregard for the place and the lack of commemoration activities has led to a vacuum which was filled by political forces trying to privatise Kurapaty.

The resolution of the round table recommended the founding of a National Mourning Memorial in Kurapaty supported by all Belarusians regardless of their religion or political affiliation. The nation needs to confront anything which divides Belarusians, causes confrontation, or weakens the country in Belarus's public and spiritual life.

Foreign policy

The Belarusian government reveals Russian official's vested interest in banning Belarusian imports. Narodnaja Hazieta quotes Russian Transparency International, which revealed that Sergei Dankvert, head of the Russian agricultural control agency, owns a network of companies in Kaluga Region affiliated with a large agricultural enterprises which Dankvert was a manager of in 1995-2000. He thus has vested interest in the sphere which he regulates as a government official.

His incumbency brought restrictions on exports of numerous Belarusian agricultural companies to the Russian market, resulting in huge losses during 2016-2017. The newspaper also quotes Belarusian expert Aliaksandr Špakoŭski, who argues that Belarusian companies are excluded from the Russian market because they do not offer kickbacks to Russian officials. Earlier, Alexander Lukashenka publicly accused Dankvert of personal interest in banning Belarusian food imports.

Belarus increases cooperation with Georgia. The Belarusian president hosted his Georgian counterpart Giorgi Margvelashvili in Minsk on 1-2 March. Earlier, the sides had aimed to reach $200m in bilateral trade; they are currently half-way there. Georgia stands to benefit from Belarusian experience in agricultural technologies, since 50% of its population works in agriculture but makes up only 9% of the GDP.

Belarus also assists Georgia in modernisation of elevators in houses, building a sports arena and biathlon infrastructure, as well as supply of communal service machines and other areas. Lukashenka noted during the meeting that the two countries are not developing relations in order to oppose some third party, but rather to act according to their own national interests.

Economy

Minsk may restore cooperation with Uralkali. Lukashenka met with the leaders of the Belarusian potash industry to discuss the possibility of restoring cooperation with the Russian company Uralkali. After a conflict and eventual breakup in 2013, the current owners of Uralkali continuously signal to Minsk that they are eager to restore relations. Belarus appears to be thinking it over.

According to Lukashenka, the interests of Belarus should be met by 200 per cent if a joint venture is to take place again. The company should work on the territory of Belarus and the sides should honestly agree on all issues. ‘If the deal harms Belarusian interests, we are out', he said

Belarusian project Kino-mo among the 'top 10 best gadgets of the world' according to USA Today. Belarusian IT startup entrepreneurs Arciom Stavienka and Kiryl Čykiejuk triumphed at the annual CES 2017 exhibition in Las Vegas with their hologram technology Kino mo. The gadget produces 2D and 3D images in the air and is becoming increasingly popular in the advertising industry.

In 2016, the projects was also included in the New Europe 100 rating of Financial Times – a list of the brightest people and organisations from Central and Eastern Europe who are changing the region’s social, political, or business environments. The project has already established links with several prominent billionaires, including Richard Branson and Mark Cube.

The state press digest is based on review of state-controlled publications in Belarus. Freedom of the press in Belarus remains restricted and state media convey primarily the point of view of the Belarusian authorities. This review attempts to give the English-speaking audience a better understanding of how Belarusian state media shape public opinion in the country.




Belarusians in the Forbes rating, no autonomy for the Belarus Orthodox Church – Belarus state press digest

Minsk views a normalisation of relations with the EU as being in its national interest. The Russian World cannot be a political factor in Belarus, according to the Metropolitan of the Belarusian Orthodox Church.

The economic recession has reached its lowest point, and in 2018 the Belarusian economy will once a gain experience growth. Russian economic policies towards Belarus are creating obstacles for Eurasian integration. Several Belarusian IT entrepreneurs appeared in the '30 under 30' Forbes rating.

The city of Hrodna sees a rise in the tourism sector as a result of the new visa-free regime. The government reduces the cost of visas to Belarus.

All this and more in the new edition of the Belarus state press digest.

Politics and foreign policy

Minsk seeks to build bridges between regional actors. Narodnaja Hazieta publishes an interview with Andrej Rusakovič, chairman of the Centre for Foreign Policy and Security Studies, on the dynamics of Belarus-EU relations in 2016.

Consistent normalisation of relations with the EU is in the national interest of Belarus, as this enhances economic development and strengthens Belarus's global position. The fact that Belarus currently holds the Presidency in the Central European Initiative and the 2017 OSCE Parliamentary Session is to be held in Minsk means that the EU has recognised Belarus's achievements in shaping a stable and lasting security system in the region.

Belarus's geopolitical position makes it dependent on EU-Russia relations. Therefore, Minsk seeks to build bridges between various European associations and institutions in spite of the historical, economic and cultural differences between the countries of the region.

The Russian World cannot be a political factor in Belarus. Belarus Segodnia discusses the recent comments of Metropolitan Pavel of the Belarusian Orthodox Church and the arrest of several pro-Russian journalists. The Metropolitan spoke of the 'Russian World' not as a political factor, but as a cultural and spiritual space. The newspaper adds that today some adherents to this idea propagate the armed defence of all those who identify as Russian but live outside Russia.

people with Russian roots work everywhere in Belarus, from road workers to the head of the Council of Ministers. 

The author argues that this idea has no potential in Belarus, since people with Russian roots work everywhere in the country, ranging from road workers to the head of the Council of Ministers. The newspaper stresses that incitement of ethnic hatred is a crime, and the arrest of pro-Russian journalists should not be considered a restriction of free speech, as some media debates suggest.

Economy

Economic recession hits bottom, 2018 will see growth. Respublika discusses the prospects for the Belarusian economy in 2017. In a recently published macroeconomics review, Sberbank of Russia noted that the economic recession in Belarus is grinding to a halt; this has been the case for three consecutive months now. According to a World Bank report, 2017 will still be uneasy for Belarus, but the worst of the recession has already passed and 2018 will see visible growth.

The government points to the 11% inflation rate as its main success in 2016, and hopes to drive it below 10% in 2017. It foresees a 1.7% GDP growth for 2017. Major growth factors will include global oil prices and the state of economy of Russia, Belarus's dominant trade partner. A forecast of the Russian economy predicts zero growth, so Belarus can hardly expect anything better, the newspaper concludes.

Russian economic policies towards Belarus create obstacles to Eurasian integration. Negotiations on supplies of Russian gas to Belarus lasted for almost a year, writes Narodnaja Hazieta. Back in spring, falling oil prices and a significant devaluation of the Russian ruble made Minsk claim $73 dollars per thousand cubic metres as a fair price for Russian gas.

However, Russia continued to demand $132 and went on to cut oil supplies to Belarus to be extra persuasive, which immediately affected Belarusian budget revenues. Such behaviour contradicts the basic principles of the Eurasian Union, which promise equal prices and conditions for all members.

A food safety conflict came as another serious blow to bilateral relations. At the moment, the Russian food control agency Rosselkhoznadzor has placed limits on exports from 20 Belarusian agricultural enterprises to the Russian market. The author concludes that a union does not make sense if it fails to meet the interests of all parties.

Belarusian IT entrepreneurs appear in the Forbes '30 under 30' rating. Jaŭhien Nieŭhień and Siarhiej Hančar made it into the Forbes '30 under 30' ranking, which lists 600 of the brightest young entrepreneurs, breakout talents, and agents of change in 20 different sectors. The two Belarusian were included in the Consumer Technologies category, reports Belarus Segodnia.

According to the magazine, 'When Facebook wanted to catch up with Snapchat, it turned to two entrepreneurs from Belarus. Nieŭhień and Hančar built MSQRD, an app which adds crazy filters to selfies. After the app caught on in the U.S., Facebook bought MSQRD for an undisclosed amount in March 2016. Since then, both co-founders have been working for Facebook in London'.

Tourism and visas

The city of Hrodna sees a rise in the tourism sector thanks to the new visa-free regime. The visa-free regime in Hrodna Region has been in effect for two months now. Around 2,200 tourists have already taken advantage of the opportunity to visit Belarus over this period. In the end of 2016, the Hrodna City Executive Committee met to discuss what has already been done and how to attract more foreigners, writes Hrodzienskaja Praŭda.

The recently created website www.grodnovisafree.by informs potential travellers about border crossing procedures and the tourist attractions in the region. The authorities have already installed signs on the boundaries of the visa-free zone and modified the working hours of museums, currency exchanges, and other tourist spots. They also drafted a schedule of events for 2017, which includes more than three hundred festivals, celebrations and other brand activities.

Meanwhile, tourist companies and attractions are hurrying to translate their facilities into foreign languages and introduce wifi networks.

The government reduces the cost of visas to Belarus. On 1 January 2017 Belarus introduced new consular fees for issuing visas, writes Belarus Segodnia. Now, individual visas will cost €60, regardless of the number of entries, while a group visa will cost only €10 per person.

Previously, foreign visitors had to pay €150 for D-type visa, €120 for a multiple C visa, and €60 for a one-time visa. Citizens of Poland and Lithuania could acquire visas for half the price: €25 and €60 respectively. According to new regulations they will also enjoy lower rates than other countries, while citizens of Japan and Serbia will be completely exempt from consular fees.

The state press digest is based on review of state-controlled publications in Belarus. Freedom of the press in Belarus remains restricted and state media convey primarily the point of view of the Belarusian authorities. This review attempts to give the English-speaking audience a better understanding of how Belarusian state media shape public opinion in the country.




Protectionism in EEU, New Ministry, Organised Crime – State Press Digest

In the first half of June, official newspapers in Belarus focused mostly on economic affairs.

Belarus-Russian cooperation within the Eurasian Economic Union continues to suffer from protectionism and exemptions in trade and prices, particularly in hydrocarbons.

Belarus will establish the Ministry of Antitrust Regulation and Trade to manage the growing liberalisation of the national economy. Belarus presents its armoured vehicle at the international arms exhibition.

Belarusian schoolchildren will be offered extracurricular programming courses, introduced to enhance national potential in the IT sector. Organised crime groups become more active as the region experiences instability. This and more in the new edition of State Press Digest.

Belarus-Russia

Eurasian Economic Union suffers from protectionism. Minsk hosted the Third Forum of Belarusian and Russian Regions under the auspices of Aliaksandr Lukashenka and Vladimir Putin. As Belarus Segodnya noted, despite the social and humanitarian theme of the forum the presidents talked mostly about economic matters.

Lukashenka emphasised that the countries need to develop a single industrial policy and remove all barriers in bilateral trade; at the moment the EEU states often employ protectionism as anti-crisis strategy. In response Putin only answered that “Russia is interested in increasing food imports from Belarus”.

Russia is reluctant to cut gas price for Belarus. The newspaper Respublika criticises the Russian gas monopoly Gazprom for its persistent reluctance to reduce current gas prices. A previous attempt by Belarus to negotiate the issue with Gazprom at a recent EEU summit failed. Despite the common EEU market, trade within the union involves a number of exemptions.

Trade in hydrocarbons remains most sensitive for Belarus, which remains heavily dependent on Russian energy resources. The newspaper claims that in this way Gazprom is trying to raise funds for its major project – a gas pipe to China, as Europe increasingly diversifies its supplies to avoid dependence on Russia.

Economy

Belarus will establish a Ministry of Antitrust Regulation and Trade. The main reason for this change is liberalisation of economy, according to Minister of Trade Uladzimir Kaltovič, quoted in Zviazda. He specifically mentions the removal of price regulation implemented this January. As free competition on the market increases, the risk of emerging trusts grows.

The current governmental body in this area, as well as its policies, lags behind Belarus's partners in the Eurasian Economic Union. The Ministry will be restructured according to new functions, and local trade inspections will be united with antitrust agencies. Moreover, the Ministry plans to update and specify the antitrust law.

Switzerland will invest in Belarusian agriculture. Head of Hrodna region Uladzimir Kraŭcoŭ and Head of Embassy Subdivision of the Swiss Confederation in Minsk Pascal Aebischer met to discuss cooperation between the region and Switzerland, Hrodzienskaja Praŭda reports.

Swiss investors will allocate $4m to a farm with 12,000 pigs in Ščučyn district and $7m to a dairy farm in Smarhoń district. Pascal Ebischer has been visiting Belarusian regions this year to study their business potential. In an overview of bilateral cooperation, the diplomat mentioned that at the moment around 30 Swiss companies operate in Belarus, and trade turnover reached $3m in 2015. 20 Swiss citizens live in Belarus and a few hundred Belarusians study in Switzerland.

Security

Belarus presents its own light-armoured vehicle V-1. Two Belarusian enterprises took part it the international exhibition of arms Eurosatory-2016 with 1,500 defenсe companies from 57 countries participating, writes Belarus SegodniaFor the first time, the Minsk Wheel Tractor Plant publicly presented a model of light-armoured vehicle V-1 (Volat).

It is designed for transportation of troops as well as fighting in urban and rural areas and mountainous and impassable territories. The manufacturers took into account the experience of recent local conflicts and anti-terrorist operations, where mines and improvised explosive devices posed particular danger. Therefore, V-1 is heavily mine-protected and has a V-shaped bottom which allows it to dissipate the energy of explosions.

Social

Schoolchildren in Belarus will be offered extracurricular programming courses. In the new school year Belarusian schools will introduce Scratch – an object-oriented visual programming language, designed by Massachusetts Institute of Technology to teach children programming and algorithmic thinking. Schoolchildren will have the opportunity to study physics, mathematics, geography, biology, and even literature with the help of Scratch, writes Znamia Yunosti.

To date, Belarusians are learning the basics of programming later than their European peers, but now the situation is changing. The project will be jointly implemented by the Ministry of Education and High Technologies Park. Six IT companies have already tested it on their employees' children and achieved good results, the newspaper reports.

Helpline for children stopped work due to financial reasons. The national helpline for children and teenagers has not been operating for a few months now, Belarus Segodnia reports. In 2011 the international NGO ‘Understanding’ purchased equipment and established a helpline in the National Centre for Mental Health. The line received around 3,660 calls since its installation and succeeded in preventing 8 suicide attempts and dozens of violent acts annually.

The line stopped because of lack of funds to pay full-time staff, as the doctors of the Centre had to reply to calls during their working hours. The project needs $30,000 a year and ‘Understanding’ leader Andrej Machańko hopes that soon it will resume its work with the help of private charity donations.

Organised criminal groups become more active in environment of regional instability. Chief of the Department of Combating Organised Crime and Corruption of the Interior Ministry, Mikalaj Karpiankoŭ, revealed to Specnaz certain trends of organised crime development in the post-Soviet space and Belarus.

Organised criminal groups unite to become transnational, while professional thieves engage in business and some businessmen become closer to criminals. Some wealthy bosses use money and connexions to try to secure protection within the government. What's more, in recent years Russian gangs have become more active in attempts to increase influence on Belarusian criminal affairs. So far Belarus has been famous as a country with a highly repressive approach towards the so-called thieves in law – the higher strata of criminal bosses in the former USSR space.

The State Press Digest is based on review of state-controlled publications in Belarus. Freedom of the press in Belarus remains restricted and state media convey primarily the point of view of the Belarusian authorities. This review attempts to give the English-speaking audience a better understanding of how Belarusian state media shape public opinion in the country.




Lukashenka in Italy, WTO, NASA, Bielavieža Forest – State Press Digest

This May state newspapers highlighted President Alexander Lukashenka's first journey to the EU in seven years. They also reported on the launch of works on the logistics centre in the Belarusian-Chinese industrial park, and an EBRD programme for water supply reform in Belarusian cities.

Belarusian IT geeks made headlines again, this time for reaching the final of the NASA innovative ideas contest, and green activists launch the second season of free bike rental in Minsk. Read about this and more in the latest edition of our State Press Digest.

Politics

Lukashenka chose Italy and the Vatican as his first EU destinations after a seven year break. Belarus Segodnya highlights Lukshenka's visit to Italy and his meeting with the Pope and Italian president Sergio Mattarella. This was the first visit by the Belarusian leader to the EU in seven years. Lukashenka explained that through this visit he aimed to thank Italy for its role in normalisation of relations with the west.

“Italy and the Vatican supported us in the toughest times and I have thanked them for that”, he said. As for the Pope, Lukashenka once again invited him to visit Belarus, and according to Lukashenka the Pope agreed to do so in the future. Lukashenka wants him to meet Orthodox Church leaders in Belarus and engage them in Belarus’ peacemaking efforts in Eastern Ukraine.

Economy

The first cargo train from China delivered materials for development of the Belarus-Chinese industrial park. The first train shipment of 41 containers with metal construction materials has travelled from China to Minsk, Belarus Segodnia reports. Currently the first residents of the park – China Merchants Company – are building a logistical centre. The centre will require 9,000 tonnes of metal, of which 5,500 will be purchased in Belarus and 3,500 shipped from China. The Chinese representative of the company explained that the railroad shipping took 16 days, while a sea route would have taken at least 45. “This is our first experiment of cross-border railroad shipping. This route is one of the logistic corridors of the New Silk Way”, he said.

European Bank for Reconstruction and Development (EBRD) will finance modernisation of water supply systems. The bank will finance water purification projects in Slonim, Viciebsk and Baranavičy, Respublika reports. This is a part of a water reform project, in which Nordic investment bank, Northern Dimension Environmental Partnership and SIDA are also participating with a joint budget of €​65m.

The reforms aim to make Belarusian water systems self-repaying and abolish subsidies for water supply to the population which make the system ineffective. By 2017 Belarusians are expected to pay the full price of the water service. The reforms include making communal service independent companies with their own decision making powers and business plans independent from local authorities. EBRD plans to expand the list of cities where such projects will be financed.

Belarus accelerates WTO accession efforts. Sielskaja Hazieta highlights developments on Belarus' path to WTO membership. Recently, the Belarusian delegation took part in the meeting of the WTO Council in Switzerland to discuss foreign trade regulation. Belarus is already forced to work according to the rules and regulations of the WTO, since a number of its Eurasian Economic Union partners are already WTO members. At the same time, however, the country does not receive the benefits that the fully-fledged members of the organisation enjoy.

Companies and industries subsidised by the state remain one of the key problems of Belarus' entry into the WTO, as it prohibits state aid to specific enterprises. Besides, Belarus has identified 1,500 production items that are at particular risk from WTO accession. However, the potential advantages will outweigh these risks, the newspaper believes.

Society

Belarusian programmers' start-up ranked in the top-5 best innovative ideas for the American National Aeronautics and Space Administration (NASA). The international competition brought together 1,300 start-ups from 160 cities worldwide, writes Znamia Yunosti. In Minsk, the hackaton Space Apps Challenge was held in the business incubator of the Hi-Tech Park.

The Belarusian IT-project Wake Up NEO came in the top 25 in the People's Choice category and later reached the final. A quartet of programmers and the head of the Minsk planetarium within 48 hours developed a unique service that helps to calculate and estimate the orbit of an asteroid and determine the danger it poses to the Earth. The winners of the competition will have the opportunity to personally observe the launch of the NASA spacecraft from Cape Canaveral.

Green activists organise free bike rentals in Minsk. Respublika reported on the Dobry Rovar (Good Bicycle) project that is entering its second season in Minsk with support from green activists. Volunteers gathered old bikes and bike parts from all over the city and soon created a fleet of 50 bikes. This was the first such project in a former Soviet country and in the first season 3,000 people used the service. Twelve spots with bikes are located at the junction of the city's main streets. To take a bike, one must register via an online system and retrieve a bike from a nearby rental spot.

Environment

Animal Planet documentary on Belarus' primeval forest hailed. Holas Radzimy tells the story of the film The Primeval Forest of Belovezhskaya Pushcha, made by the TV channel Animal Planet in 2015. Over a month the film crew wandered the primeval forest with the assistance of biologists from the national park. According to biologist Mikalaj Čarkas, this was the best film in the history of Bielavieža forest filming, as it managed to show the full diversity of its flora and fauna.

The film also recounts the vast conservation works which employees of the National Park are busy with daily. In 2015, a presidential edict granted visa-free three-day entry to foreign citizens if they provide documents confirming the order of tourist services in the Bielavieža National Park.

The State Press Digest is based on review of state-controlled publications in Belarus. Freedom of the press in Belarus remains restricted and state media convey primarily the point of view of the Belarusian authorities. This review attempts to give the English-speaking audience a better understanding of how Belarusian state media shape public opinion in the country.




Viber, World of Tanks, EPAM – Belarusian IT Companies Conquer the World

The Belarusian game World of Tanks has become one of the most profitable in the world, earning $372m in 2013. The game, with 60 million users, is only one instance that shows how Belarusian IT business is achieving considerable successes and becoming global.

Viber, the smartphone messaging and calling client, has become one of the most popular applications in the AppStore and Google Play, and EPAM Systems creates software for the largest companies in the world. These are just some of the world's leading companies with their roots in Belarus. 

Belarusian highly qualified specialists with a robust technical education and favourable business conditions in the industry have made ​​these achievements possible. Success in this field should be an important lesson for the Belarusian authorities. 

Belarusian Skype`s Killer

Smartphone application Viber can become perhaps the biggest Belarusian brand on the global market. More than 200 million people use the program, with some hundred thousand people every day becoming new users of the service.

Though the founders registered a company in Cyprus, the application developers work in Israel and two Belarusian cities: Minsk and Brest, a city in the west of the country. Minsk office employs about 60 people.

Currently Viber's is mostly popular in the countries of the former USSR, Asia, Europe and the Middle East. The company has a global aspiration and often appears in the news from those regions. 

This year, the company made its services in ​​the Philippines free of charge to help victims of the typhoon to connect with one another. Also this year, Saudi authorities have demanded that they decrypt the services traffic, as they are unable to monitor it. Viber Media refused. As a result, Saudi Arabia has blocked the programme from being used within its borders.

It is noteworthy that the company`s paid services in Belarus remain much more expensive than in other countries. For example, a one minute call to the U.S. phone costs 2 cents, while for a one minute call with a Belarusian number people should pay 39 cents. However, this price does not depend on the creators of the Viber, but on the telephone operators. Beltelekam, the state monopoly in this Belarusian market segment, sets such a high price.

IT-Leader in Eastern Europe?

Viber`s case is not an exception. Some other companies with Belarusian roots have become global players.

According to the Global Outsourcing 100 ® List EPAM Systems, an American company with Belarusian roots, became a leading provider of software in Central and Eastern European region. The market capitalisation of the company at the New York Stock Exchange even reached a billion dollars at one point. Microsoft, Barclays Capital, London Stock Exchange, Aeroflot, Gazprom, The Coca-Cola Company were among the clients of the company.

Pennsylvania hosts EPAM`s headquarters. Arkadz Dobkin, Belarusian National Technical University grad, moved to the U.S. from Belarus in 1991 and was washing dishes at the time, founding EPAM Systems in 1993. Now more than 9,000 people work for the company, half of them in Belarus. Apart from Belarus and the United States, EPAM Systems has offices in 10 countries.

It seems that every computer game addict knows the game World of Tanks, a tank simulator set in the time of World War II. This game appears to be the biggest game made by Belarusian developers with over 60 million people registered in it.

Wargaming Public Co Ltd.'s official company registration is in Cyprus. In addition to offices on the island and in Belarus, the company has offices in nine countries and pursues quite an aggressive development strategy. 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. 

The company constantly launches new online games and swallows up Western game studios. During the last two years  Wargaming bought two American and one Australian firms. Moreover, Wargaming diversified its own portfolio and on 31 October acquired a controlling stake in Hellenic Bank, a large bank of Cyprus at a cost of € 50 million. 

How Belarus Achieved IT Success

The poor reputation of Lukashenka`s regime casts a shadow over the whole country, including Belarusian innovators. However, Belarus has enough talented businessmen who can play the game on the global market. Success in the IT sphere has primarily to do with two factors.

Although the Belarusian education system is clearly deteriorating, Belarusian programmers remain able to compete with their counterparts from the Silicon Valley.

At the Belarusian State University the scores of programmers’ alma mater – the Faculty of Applied Mathematics – were considerably higher than in any other natural science faculty: 321-345 (depending on speciality) out of 400 possible points. Passing scores for most other natural science majors remained well below 300. 

Marvin Liao, a former commercial director for Yahoo!, said in November 2013 that "Belarus in technical talent is excellent. Perhaps one of the best in the world.”​

The authorities seems reluctant to be a hindrance​ to this sector. Many joke that they behave this way because they do not understand this branch of business. Moreover, the Belarusian High Tech Park offers its residents a preferential tax regime and favourable legislation. The companies registered in the technology park pay a fixed income tax of 9% and receive exemptions from corporate and capital gains taxes, VAT and custom duties.​ Few Belarusian business people have similar conditions.

However, Viber Media, EPAM Systems or Wargaming prefer to have their registration abroad. Not only do economic conditions influence their decisions, but political risks as well. On the one hand, businessmen are afraid of possible problems that the authorities could create. On the other hand, IT companies want to avoid economic sanctions by the U.S. and the European Union.

IT's success proves that Belarusian business is alive. Highly qualified personnel and favourable conditions from the state authorities can secure the constant growth of the industry and its global success. This is a good lesson for the Belarusian authorities.




Teddy Bear Publicity and Burgeoning IT Business – Western Press Digest

Thanks to teddy bears, Belarus has the honour of making it into the infamous British tabloid press this month. The UK’s ubiquitous Daily Mail provides sensationalist coverage of the teddy bear episode and fall-out, and includes a thorough description of the Belarusian police state and detailed portrait of Europe’s last dictator. 

The article describes Belarus as “a sort of of Cold War theme park”, revealing Lukashenka’s plans for his younger son’s takeover and rubber-stamp parliament. Celebrating the teddy bear stunt, the article concludes: “If you cannot beat Europe's last dictator at the ballot box, you can at least dent his ego”.

Closer to the action, NBC provide extensive coverage of the motivations and reflections of Studio Total, the Swedish PR agency who carried out the teddy bear drop. Chief Executive Per Cromwell tells NBC that the point of the action was to highlight “the absurdity of life under Lukashenko”.

The Swedes report having received google-translated threats and instructions from the Belarusian KGB to report to Minsk to assist in investigating the incident. While Cromwell acknowledges that the stunt cannot achieve long-term change, he lauds it as a means of creating momentum for the opposition.

The Washington Post concurs, and considers the teddy bear drop to have been a “resounding success”. The Post celebrates the stunt for exposing Lukashenka’s fallibility, as his arrest of a journalism student and expulsion of Swedish diplomats exposes him as unstable and disproportionate, and can only provoke mocking. The Post notes that “the smallest gesture has become a lesson in the insecurity of the powerful”.

Time-up for “tacit condemnation” approach

Writing in the New Statesman, Jack Barton of the Free Belarus Now campaign suggests that the British government will soon be forced to take a stronger stance on Belarus. Barton suggests that the combination of the publicity gained from the teddy bear stunt, the subsequent diplomatic fractures, and the likely falsification of the forthcoming elections are going to make it impossible for the UK to retain its current approach. For a long time it has been one of only “tacit condemnation” of the regime and leaving it to the EU to deal with.

Jack Barton llaments the fact that the only response from the UK government to the teddy bear incident was a tweet from the Foreign Minister congratulating Sweden for furthering the human rights cause in Belarus. While Barton admits that this may be “wishful thinking” on the part of a human rights activist, he nonetheless suggest that it seems “inevitable that we could soon see our government take some small but genuine stand in support of democracy and human rights, whether they want to or not”.

Bad news for the EU, good news for Lithuania?

Euractiv website discusses the implications of Lukashenka’s dismissal of his Foreign Minister Sergei Martynov on 20 August, who has been replaced by Vladimir Makey. The piece considers the timing of this move particularly significant. Makey is known for prioritising national security over any engagement with the West.

His appointment may signify a consolidation of the hardening of relations between Minsk and Brussels which has followed the teddy bear drop and expulsion of Swedish diplomats. However, one possible winner from Makey’s new role is Lithuania, the article argues. Makey is known to have good relations with Lithuanian President Dalia Grybauskaitė, whom he visited in January.

Plight of Political Prisoners Exposed

The New York Times provides a platform for Andrej Dynko (editor of Nasha Niva) in a special piece on Belarus’s political prisoners and arduous prison system. He describes in detail the tortuous conditions which political prisoners must endure and which the regime enforces as an exercise of control.

Dynko warns that the release of political prisoners is not a sign of change. As long as Moscow continues to offer financial subsidisation of the regime, such gestures are irrelevant. Dynko suggests that, much like the dissolution of the Soviet Union was needed for its republics to gain freedom, any change in modern Belarus will demand the dissolution of the “Putin model”.

Elsewhere, Julian Assange’s prospective extradition to Ecuador has exposed the plight of Belarusian Aliaksandr Barankov in numerous Western media outlets. Barankov was granted asylum by Ecuador three years ago after he allegedly exposed a petroleum-smuggling corruption scandal among the presidential administration.

Radio Free Europe reports that there are now indications that Lukashenka is pressing for his extradition to Minsk, with Barankov awaiting certain torture or death on return to Belarus. The Guardian, Washington Post and even Daily Mail have all reported the Associated Press coverage of the case.

And Beyond Politics…

Bloomberg Business Weekly have run a lengthy piece on exciting new Belarus-based app Viber, “one of the hottest apps in the world”, and Belarus’s emerging attractiveness as a place to do business. “Despite Belarus’s reputation as a phantom country self-exiled in the heart of Europe”, it notes, thanks to the free-economic zone established in Belarus in 2008 it has been able to establish itself as a “high-tech hothouse.”

The article speaks enthusiastically about Belarus’s burgeoning IT sector, and highlights in particular the “hungry, skilled, affordable” programmers and engineers that the country offers. The Belarus Hi-Tech Park in Minsk means the industry looks likely to grow further. Whilst alluding to the possible dangers of doing business in an unpredictable and not very private-sector friendly environment, the article strongly suggests that the benefits outweigh the risks.

EOC




Programmers in Belarus: the Cream of Society

The 2012 university admissions campaign in Belarus has just finished and reflects a very interesting trend. However good Belarusian higher education is for engineers, physicists, and mathematicians, that does not seem to matter to young people anymore. They want to become programmers. That means representatives of almost the only profession that guarantees them independence and a decent living standard immediately after and even before graduation.  

A decade ago the cliche IT specialist image in Belarus included uncut hair, a worn-out sweater and other attributes of a modest bachelor's life. Now they form a distinct Belarusian – primarily Minsk –  cohort with a label of successfulness and independence unparalleled in other sectors of the struggling Belarusian economy. To a large extent this happened due to the reasonable regulatory approach to the IT industry in Belarus. 

Wealthy Boys and Girls

According to the Belarusian National Statistics Committee. the average programmer’s salary approaches $1,300 per month. It is about three times higher than the average salary across the country, which currently is less than $450. Employment websites are full of vacancies for IT specialists. Competitions for the title of the Best IT Company to Work For become more popular to attract the brightest. Public respect is taken for granted. All these advantages target primarily a group of young people in their 20s who have recently graduated from Belarusian universities. 

Saying that programmers are just lucky would be unjust. Their efforts and talent deserve real respect. This year once again, in the Belarusian State University passing scores to the programmers’ alma mater – Faculty of Applied Mathematics – were considerably higher than to any other natural science faculty: 321-345 (depending on speciality) out of 400 possible points. Passing scores for most other natural science specialities remained well below 300.

But even the admittedly talented students find curriculum of the Faculty of Applied Mathematics difficult. At the same time, they have to do plenty of extra-curriculum studies, because the university provides only basic knowledge of programming languages.

However, the graduates get paid for every drop of their efforts because the Belarusian IT industry is ready to remunerate their skills and continues to grow. 

High Technologies Park

The favourable environment for IT business in Belarus started to develop in 2005 with the adoption of the presidential decree “On the High Technologies Park”. The decree established the High Technologies Park for 15 years to support the national software industry. Since that time the High Technologies Park represents a specific part of the territory of the city of Minsk and its residents have a number of benefits in the spheres of taxation, immigration and foreign currency transactions.

Tax benefits are probably the most impressive. For instance, the High Technologies Park’s residents are not subject to profits tax, VAT on turnover from sale of goods and rendering services in the territory of Belarus, or customs duties and VAT with respect to goods imported into Belarus. Preferential personal income tax rate (9 per cent instead of statutory 12 per cent) applies to profits of individuals earned working at the High Technologies Park. Withholding tax rate on income from dividends, interests, royalties if the source of payment of such income are significantly lower than the normal rate.

Thanks to the favourable legal environment, the High Technologies Park has expanded quickly and currently hosts 109 residents. Half of them are foreign companies and joint ventures. Branches of world leaders in software production of Belarusian origin such as EPAM Systems, Sam Solutions and IBA Group are also among the High Technologies Park’s residents. The list of consumers of the High Technologies Park’s software includes Mitsubishi, British Petroleum, London Stock Exchange, World Bank, Coca-Cola and many others.

Stop the Brain Drain

There is nothing unusual about big demand for Belarusian programmers. Respect for post-soviet schools of math and physics that laid the foundation for programmers’ qualification has always been high. But until recent years that resulted in a huge outflow of bright graduating students to foreign countries.

Despite their interest in Belarusian programmers, major international companies were unwilling to enter the market even for outsource out of prudence. The High Technologies Park’s tax incentives became the second and decisive reason for starting an IT business in Belarus. Success of the first foreign IT companies attracted others, and finally Belarusian programmers became able to find good jobs in their home country.

Belarusian programmers still earn much less than their USA colleagues – about $88,000 a year in the USA compared to approximately $15,000 in Belarus. However, this can allow for quite a well-off life thanks to Belarus's relatively low cost of living. For example, monthly rent for a good two-bedroom flat is about $370. Since the difference in real income is not that striking, programmers take into account their wish to be with families and friends and often choose to stay in Belarus rather than go overseas.

End of the Fairy Tale?

While programmers prosper in Belarus now, many predict the end to their era and explain such apprehensions by the forthcoming oversaturation of the Belarusian labour market with skilled specialists. However right was the concept of diminishing marginal utility as such, it is too early to apply it to IT in Belarus. The export share in the total production volume of the High Technologies Park is 80 per cent. That means that it is only the world’s labour market saturation which they should be afraid of, which is very unlikely.

In the meantime, what seems to be a real threat to the current peace and quiet is that in 2020 the privileges of the High Technologies Park will terminate. Will doing business in Belarus still be so attractive to IT companies? It is not only programmers who worry about this. The best of them will always have the chance to get a job abroad. But the IT sphere feeds a number of related professions and administrative staff, provide the country with foreign currency and accelerates consumption in the country. This is a challenge Belarus is going in eight years, and it is already time to think about it.