Talks with Neighbours and the EU, Ties with Iraq – Belarus Foreign Policy Digest
The gathering on the Ukrainian crisis meditated by Belarus and held on 26 August in Minsk became one of the most important recent global events.
The Belarusian government tried to make maximum use of this opportunity to promote its own national interests in its relations with the EU and its other neighbours.
Lukashenka Talks with Neighbours, EU Officials
The key foreign policy event for Belarus in August was the Minsk meeting of the Eurasian "troika", the Ukrainian president Petro Poroshenko and three top EU commissioners. Belarus Digest covered the background and political ramifications of this meeting for Belarus in a separate story.
It is telling that although Alexander Lukashenka and Vladimir Putin held no bilateral meeting on the sidelines of the Minsk summit, the Belarusian president held bilateral meetings with all other parties in attendance.
His meeting with Catherine Ashton was more an issue of protocol than anything else, without any joint statement or even a mention of the bilateral discussion. Still, any dialogue at such a high level seemed impossible only a few weeks ago.
Time will tell whether this meeting helped the parties to start building the trust they need to design and implement a package of reciprocal steps to normalise their relations. However, Lukashenka's appreciation of the EU's role in the peace process in Ukraine, expressed during a phone call with his Serbian counterpart on 1 September and made public by his press service, looks like a positive sign.
Lukashenka and Poroshenko discussed several bilateral issues besides the Ukrainian crisis, including strengthening of mutual trade and economic relations, especially in the energy arena, and the official demarcation of Belarus-Ukraine border. However, Lukashenka's press service chose to keep quiet about these bilateral discussions. They focused solely on the crisis in Ukraine and potential implications of the country's association agreement with the EU for its neighbours.
Kazakhstani President Nursultan Nazarbayev chose to stay in Minsk overnight after the Minsk meeting to continue his discussions with Alexander Lukashenka. The two leaders may have found common ground with regard to their status in the Eurasian Union. However, unlike Nazarbayev, Lukashenka now prefers to refrain from any public statements criticising the EaEU.
Warsaw and Minsk Discuss Ukraine
Belarusian Foreign Minister Vladimir Makei paid a working visit to Poland on 28-29 August. In Warsaw, he met with his Polish counterpart Radosław Sikorski and Janusz Piechociński, Polish Deputy Prime Minister and Minister of Economy.
The talks focused on the situation in and around Ukraine. Vladimir Makei shared his assessment of the Minsk meeting. Radosław Sikorski said that the fact that Russia and Ukraine were Belarus and Poland's immediate neighbours was "the cause of their great concern about what was happening between these two countries."
Poland certainly values Belarus as an important source of insider information about Russia's intentions towards Ukraine. The Polish government also appreciates the measured position the Belarusian authorities have taken in the Ukraine crisis from its very inception.
Polish PM Donald Tusk already called Lukashenka in April to discuss this issue. This move surprised many of those who are aware of Lukashenka's pariah status in the West. National security considerations seem to have overweighed the reluctance of dealing with Lukashenka's regime. Sikorski's invitation to Makei to visit Warsaw is a continuation of this policy line.
No Breakthrough in Polish-Belarusian Relations – Yet
The foreign ministers also discussed bilateral relations. Radosław Sikorski expressed Poland's satisfaction with the progress achieved during the bilateral talks. Indeed, the two countries have recently established contacts on the level of deputy ministers on a monthly basis. The dialogue has focused predominately on trade, visa issues, trans-border and cultural cooperation.
At the press briefing after their meeting on 28 August, Sikorski mentioned some conversations on consular matters, the forthcoming signing of an agreement in the field of education as well as increased historical dialogue among positive examples of cooperation. The Polish minister spoke in favour of upgrading the existing legal framework of bilateral relations as "some agreements dated back to Soviet times". He also rejoiced in Makei's meeting with the minister of economy, seeing it as another positive step forward.
Vladimir Makei refrained from highlighting any specific areas of bilateral cooperation during his press briefing. He announced that the parties had agreed on "holding a separate meeting on bilateral relations in the future". However, according to Makei, "this meeting requires thorough preparations".
Translated from diplomatic language, this means that such a meeting is unlikely to happen any time soon. Any breakthrough in bilateral relations will come only after Belarus takes serious steps to calm the West's concerns about political freedoms and the human rights situation in the country.
Belarus Successfully Restores Its Relationship with Iraq
Foreign Minister Vladimir Makei made an official visit to Iraq on 23 and 24 August. This was the highest-level Belarusian delegation to visit this country in the post-Saddam era.
The overthrow of Saddam Hussein's regime by the US and allied military forces in 2003 dealt a crushing blow to relations between Belarus and Iraq. Lukashenka's regime was then one of the staunchest supporters of Hussein in the world. It used this status mostly to promote its economic interests. Some allegations were also made about military cooperation between the two regimes.
The new Iraqi authorities had little appreciation for this old friendship and relations between the two nations practically froze. Belarus closed down its diplomatic mission in Baghdad, and Iraq reopened its embassy in Minsk only three years ago.
However, this difficult period seems to be over. Vladimir Makei met with several of the most important top-ranking Iraqi officials during his trip to Baghdad. This list of officials included the president, the current and future prime ministers, parliament's speaker, and foreign and oil ministers. Iraq's President Muhammad Fuad Masum interpreted Makei's visit as a sign of support to the Iraqi authorities in their ongoing fight against extremism.
During its visit, Belarus' top diplomat predictably emphasised its trade and investment interests. Belarus seeks to enter Iraq's lucrative oil market with its equipment. Two countries signed an agreement on mutual protection for investments. They also confirmed plans to organise another meeting of the bilateral commission on trade and economic cooperation and a visit of Iraqi businessmen to Belarus.
Minsk now seems to be ready to stage a comeback in Iraq. Yet much depends on whether Belarusian business will be able to deal with Iraq's omnipresent corruption.
Belarus – an Outsourcing Haven?
High-tech outsourcing is one of the most dominant trends in today’s economy, but few would associate it with Belarus, better known for its heavy machinery exports than IT experts. This appears to finally be changing. RnR Market Research projects Belarus’ IT outsourcing market to grow at an annual rate of 17.8% by 2018.
Its proximity to the EU, the availability of skilled labour and technical infrastructure, and the limited domestic demand for IT specialists all make Belarus an attractive outsourcing partner. There are already about 800 IT companies and about 30,000 IT professionals in a country of 9.4 million people and a largely state-driven economy.
Pessimists might say that these advantages are just on paper. Belarus’ authoritarian image and small market size make it difficult to compete with EU member states like Poland, which dominate the Eastern European outsourcing market. The West’s growing list of sanctions against Russia, however, may give Belarus’ nascent outsourcing market an extra boost.
Innovation and Technology Growth Driven by the State
The government started to prioritise innovation and technology in the mid-2000s. To improve the country’s business climate, Minsk simplified the process of setting up a business and establishing a preferential taxation regime. Belarus ranked 63rd in the World Bank’s Ease of Doing Business Index last year, ahead of Russia, China, and Italy (Poland ranked 46th).
Valery Tsepkalo, a former ambassador to the United States, spearheaded the state-driven innovation approach. Today, Tsepkalo is an official aide to Lukashenka. He also directs Belarus’ first High-Tech Park, established in 2005 to support the software industry.
The Park, hosting some 140 companies, has an extremely young workforce, with 70 percent of employees aged 28 and under.
Seven Belarusian companies are featured in the recent Software 500 list, a global ranking of software leaders. Attributing this success entirely to the government, however, distorts the facts.
Unlike manufacturing companies, which remained in the hands of the state after 1991, the Belarusian IT sector was built up from scratch by young programmers and academics that were struggling to make ends meet in the post-Soviet economy. These small firms managed to stay off the state's radar. Over time, some of them matured into successful companies that now compete in the global marketplace.
During Soviet times, Belarus was a major technical hub. Minsk's factory for manufacturing computers, created in 1958, produced 70% of all of the general-purpose computers manufactured in the Soviet Union.
Due to educational continuity and a comparatively low level of brain drain, Belarus’ primary asset today lies with its young scientists. In spite of significant problems facing the Belarusian educational system, Belarus produces over 16,000 technical graduates every year.
Belarusians regularly win medals at international science olympiads. This August, 19-year-old Gennady Korotkevich won first place at the Google Code Jam, which annually attracts more than 20,000 participants. Students from the Belarusian State University of Informatics and Radioelectronics (BSUIR) won medals at the IT-Universe-2014 and the International Olympiad in Informatics in Taiwan.
The 2012 list of the top 200 Belarusian businessmen, published by Ezhednevnik, included 16 high-tech entrepreneurs. Most of them founded independent software development and distribution companies in the 1990s and early 2000s. All of them have a scientific or technical background, and six graduated from the Belarusian State University of Informatics and Radioelectronics (BSUIR).
The largest, EPAM Systems, was founded by Arkadiy Dobkin, a graduate of the Belarusian National Technical University (BNTU). In 1991, at the age of 30, Dobkin emigrated to the United States. He then organised a network of Minsk-based programmers for doing work that originated in the US. In 1993, together with his classmate Leonid Lozner, he founded EPAM (Effective Programming for America).
Today, EPAM is listed on the New York Stock Exchange, has branches in North America, Europe, and Central Asia, and employs some 9,300 programmers. It was ranked #6 on Forbes’ 2013 list of the 25 Fastest-Growing Tech Companies.
Another Belarusian outsourcing entrepreneur, Sergey Kostevich, began his career building computer hardware.
In 1991, a few months before the Soviet Union's imminent disintegration, Kostevich and his colleagues released the first Soviet-made hard drive. Kostevich soon abandoned academic work and started importing and selling computers and computer parts. In 1992, his newly founded company, Asbis, signed a distribution contract with Seagate, a U.S. hard drive manufacturer. Today, ASBIS has more than 1,700 employees and 33,000 active customers in over 90 countries around the globe.
Of course, not all of Belarus’s IT sector is a story of private sector dynamism and entrepreneurial drive. The 2012 list of the top 200 Belarusian businessmen also includes eight “oligarchs” whose wealth was earned through other means and subsequently invested in various IT assets.
Topping the list is Uladzimir Peftiev, who made his fortune selling Belarusian weapons and only later acquired control of Internet provider “Delovaya set” (Business network).
Roadblocks to Outsourcing
Belarus has the potential to become a rather successful high-tech centre in Europe. Currently, though, the top IT companies in the region still prefer to invest in Bulgaria, Poland, Czech Republic, Estonia and Lithuania. These countries are democratic EU member states with attractive market economies. The primus inter pares is Poland – Krakow, for example, ranked 10th in Tholons’ 2013 list of top 100 outsourcing destinations. Minsk did not even make the list.
In Belarus’ small economy, high-tech industries remain marginalised. The country invests a mere 0.7% of its GDP into research and development; a level that is lower than average among post-Soviet nations. Neighbouring Russia spends more than twice as much (relative to its GDP). The share of high-tech products among Belarusian exports is also well below that of its neighbours, and indeed, it has barely budged since the onset of the post-Soviet period.
Perennial sanctions by the West against Belarus – including a travel ban and asset freeze affecting ministers and businessmen with direct ties to Lukashenka – have also stifled high-tech outsourcing.
That trend may be reversing, however, as the West steps up its sanctions against neighbouring Russia. According to data from customer records of Hiperos LLC, a vendor of third-party management software, over 1,600 of Russian firms provide services to U.S. companies.
U.S. companies involved in these transactions now have to check whether sanctioned individuals own their Russian partner companies in order to avoid the legal repercussions.
The most risk-averse firms, of course, may simply decide to leave the post-Soviet space altogether. Still, Belarus’ burgeoning outsourcing industry could yet benefit from the political instability plaguing Eastern Europe. Outsourcing to Belarusian companies may yet prove an alternative that is safer than Russia and more cost-effective than the EU states.
An IT outsourcing boom could yield broad-based benefits for Belarusian society. IT companies could gradually help erode the dominance of the state sector in emerging high-tech industries. Workers in these industries are less likely to fear losing their jobs based on their political opinions. A new class of young and wealthy techies — with income nearly three times the national average — would have the opportunity to travel abroad and build important social ties with the West.