UK Ambassador Bruce Bucknell on Belarusian Identity, Business Climate, Education and Visas
Belarus Digest interviewed Bruce Bucknell, British Ambassador to Belarus who has been serving in Minsk since July 2012. He also runs a blog about his work in Belarus.
Bruce Bucknell shared his views on Belarusian identity, importance of modern education, business climate in Belarus and UK’s new visa rules.
Understanding Belarusian identity
BD: You said that before you came to Belarus you were not sure what Belarus is. Do you know now what being Belarusian is in practice?
We are talking about identity. I think I have a better idea, but I’m not sure my assessment has changed very much.
Belarus is a country between Asia and Europe. Whether Russia is Asian or Eurasian, I don’t know. Russians themselves are not quite sure, I think, what their identity is. But for Belarusians, the recent events in Crimea, and Eastern Ukraine, may have given them a renewed sense of being different from Russia.
They have their own flag, history, language and culture. They are close to Russians, but they are also close to Ukrainians. They are Slavs with a Slavic language. But national identity is a very complicated question. Look at Britain which has multi-identities. People in Britain sometimes have English, sometimes British, sometimes Scottish and mixed identity. Belarusians might also have more than one identity.
BD: Do you see many Western companies coming to Belarus?
Not many British companies, although there is a lot of interest in the IT sector. We have around 125 million pounds worth of exports to Belarus in 2012 and 2013.
There are lots of German companies selling to Belarus. But that probably reflects how Belarus is still largely a country based on industrial production.
The economic model is dominated by the state enterprises. And that is a bit of a problem, because the state controls so much. Our businesses are mostly private, and they go where they think they can market their goods and services.
What Belarus desperately needs is actually some more space in economy, so new companies can grow.
BD: Why do think is the main stereotype that may deter some western companies?
I think some companies are deterred because this is a small domestic market. If you are just selling into Belarus, it probably doesn’t make much sense. A lot of British companies are represented through Moscow, or Kyiv, or even Warsaw and Vilnius. But actually when they get to Belarus they say: things work, there is order. Compared to other countries in the neighbourhood, there is relatively little petty corruption.
There is relatively little petty corruption .. but a heavy bureaucratic burden Read more
On the other hand, there is a heavy bureaucratic burden. Rules are complicated, and the public authorities sometimes interfere unnecessarily. Private companies should be allowed to get on with their business as long as they comply with the law.
There are successful and dynamic businesses in some sectors, particularly in the IT sector. World of Tanks is doing very well, and EPAM which writes software for Western companies and so on. A number of good private companies in Belarus export not just to Russia, but also to the West. They are doing well, because they sell good quality products. Belarus needs more of those sorts of company.
The Customs Union and Eurasian Economic Union may be a major factor in the next few years, if it leads to a more open trading system between Belarus, Russia and Kazakhstan. It opens up the possibilities for the companies located in Belarus to be able to sell into Russian market, beyond, Kazakhstan and so on. But that depends on Russia opening its market. The most recent indications suggest that Russia is turning away from an open market.
BD: Do you think it is important for Western businesses to come to Belarus?
It depends what you mean by coming to Belarus. If you are talking about trade, this is not the most attractive market, because there are still regulations for foreign business, as well as high tariffs.
As for place for investment to supply to the Russian and Customs Union market, yes, it is interesting. Costs are lower than in Russia. The labour force is well qualified.
the Customs Union and the Eurasian Economic Union is great in theory, until we have a better idea of how the Eurasian Economic Union works in practice Read more
But the issue is that while the Customs Union and the Eurasian Economic Union is great in theory, until we have a better idea of how the Eurasian Economic Union works in practice, and it has established a track record of free movement of goods, services, people and capital, then I think there are still some question marks about the advantages of the Union.
BD: And what would you say to the argument that those who are investing in Belarus are helping the regime?
I hear that, but the regime’s philosophy and its social contract, is based on the state control of the economy.
There are some advantages in that social contract. People have free education, health care and so on. But that model does not look sustainable in a long-term. It survives on cheap Russian energy supplies, and continuing Russian loans.
The model needs fundamental reform. There are a very few incentives to take risk in Belarus. There is a lot of bureaucracy, and even some Russians I meet say that it is a very rigid system. There is much more space for private sector in Russia than there is in Belarus.
If Belarus is to develop longer term, and become more independent of Russia, then it needs to develop a more dynamic economy and allow more private companies that can compete in international markets.
BD: You mentioned in the past that that education was one of the most important areas of your work. Why?
Yes, it is important. I am lucky because I am an ambassador of Shakespeare. I am welcome at universities around the country to stand in front of lots of students and speak English. I am happy to go, as it is a chance to talk to people here. Overall, I spoke to over 2000 people in 2013, mostly in English, but occasionally in Russian.
Education is important because Belarus depends on the skilled labour force for its future prosperity. I think the area where Belarus needs more education is in specialist business skills.
To give a couple of examples. There is a local organization representing London School of Public Relations. Public relations is not necessarily needed for all businesses, but in terms of thinking strategically, thinking about what your company is producing, in building brands and consumer loyalty, it is an important specialism.
Marketing – there are several organisations providing marketing courses in Belarus. We support the Open University, which does business education in Russian through distance learning. I spoke to some people studying there and they are very knowledgeable about techniques and skills, importance of marketing, and if there is a demand for goods.
So marketing, public relations, and other skills are available, but they are not taught and valued widely enough in Belarus. There is a great need to understand how markets work and how to compete in international markets.
BD: Is there anything you can do to improve the situation with British visas for Belarusians? People submit their applications and remain without passports for many weeks and even months, which is very frustrating.
The standard service is 15 working days from the date of giving biometrics, and handing over passport and papers.
We have moved from an in-house service via a visa section – where the whole process was conducted in the embassy in Minsk – to an outsourced application process. This is where the applications are made at a “visa application centre” in Minsk, but the papers and passports are then sent by courier to Moscow, where the decisions are taken, before they are returned to applicants in Belarus.
There were delays in June when we closed our visa section and opened the visa application centre. But our Home Office colleagues have addressed the problems with the contractors, and the service is again within the standard service levels, so that everyone who applies for an ordinary visit visa gets their passports back within 15 working days.
There will be further improvements as we move from the temporary visa application centre – which is based in the President Hotel – to a permanent centre. There will be a tracking system available, so people can check where their application is online and so on. We hope to have the permanent centre open before the end of the year.
Interviewed by Yarik Kryvoi.
The Unwanted Economic Union in Exchange for Money – Digest of the Belarusian Economy
The main economic events for October in Belarus revolve around Russia: the ratification of the Eurasian Economic Union, the continued fighting over the re-export of banned European foodstuffs to Russia, and, finally, an argument over Russia’s oil tax manoeuvre.
Russia’s actions, both political and economic, further complicate the situation with the Belarusian economy, which is exhibiting subpar growth for the third year in a row. Ironically, its troubled economy is forcing the Belarusian government to seek even more assistance from Russia.
Eurasian Economic Union and the Oil Tax Manoeuvre
The complicated economic relationship with Russia was front and centre in news coverage during October.
As the Belarusian Parliament was contemplating the ratification of the Eurasian Economic Union (EEU) trade pact, Russia threatened the economic stability in Belarus with its oil tax manoeuvre. Under the terms of their bilateral agreement, Belarus has to pay an oil export tariff into the Russian state budget for an oil refinery product produced using Russian oil and that is destined for export.
Before signing the EEU agreement in May, Belarus negotiated a $1.5bn discount on its oil tariff payments for 2015. But afterwards Russia de facto annulled this preferential deal with its oil tax manoeuvre, a move which partially replaces the oil export tariff with an oil extraction tax. Instead of saving $1.5bn in 2015, Belarus would have to pay basically the same amount back to Russia, effectively eliminating much of the income it hoped to bring in.
Belarus has zero interest in Eurasian integration unless Russia is going to pay for it Read more
The disappointment surrounding the Russian ban on EU foodstuffs, which turned out to be not as profitable for Belarus as it had hoped (in particular, TIR business has suffered and the potential for re-exporting goods was significantly lower than expected), this tax manoeuvre has Belarusian society and the government questioning its choice of integration projects.
Just days before ratifying the trade pact, Russia made a promise to compensate Belarus for the oil tax manoeuvre, though how much it plans to offer has not been specified. Despite these issues, this conflict made one thing clear (and Lukashenka later spelled it out during a press-conference for the Russian regional media) – Belarus has zero interest in Eurasian integration unless Russia is going to pay for it.
Growth Still Slow as the Russian Economy Stagnates
In January-September 2014 the Belarusian GDP has grown only 1.5 per cent. The expected gains from the Russian EU food import ban did not materialise in August or September – the food processing industry is still stagnating, witnessing a 1.9 per cent decline in output.
But the other branches of the economy are experiencing decline as a result of the shaky economic situation in Russia. The production of goods traditionally exported to Russia – for example, machinery, transport vehicles or consumer goods like TV sets or refrigerators – has declined substantially.
Exports of these investment goods (machinery etc.) have also dropped due to the high level of economic uncertainty and a lack of financing in Russia, which is itself a result of declining levels of investment. An additional factor affecting the overall economic environment is the devaluation of the Russian rouble, which makes Belarusian goods relatively more expensive in Russia.
The exchange rate factor drives down consumer good exports as well. Moreover, it puts additional pressure on the Belarusian rouble, and the National Bank is already considering whether or not to increase the tempo at which the national currency is devaluated.
Trade, and, in particular, retail remains the main driver of growth in the economy. Retail is developing dynamically due to both the partial liberalisation of the sector and to a high level of income growth. However, as real incomes slow down, retail is slowing down as well. Over 2014 the real income growth declined from 9.4 per cent to 2.7. Retail is reacting with its own slowdown, declining from 13.6 to 9 per cent over 2014 (see Figure 1), and the expectations for the next year are similarly discouraging.
The worsening economic situation in Belarus, ironically, forces it to look for more financial support from Russia. Belarus still needs financing to repay its loans in 2014 and 2015.
Russia is currently facing financing constraints itself, given the sanctions its largest banks are dealing with. Nevertheless, it promises to help, but with strings attached, of course.
On 21 of September 2014 Russian Prime Minister Dmitriy Medvedev during a visit to Minsk emphasised that Russian corporations are hoping to privatise several Belarusian state enterprises. The enterprises in question are, among others, the truck manufacturer MAZ, the electronics company Integral, military equipment procuders MKTZ and Peleng, and the nitrogen fertiliser manufacturer Grodno Azot.
While experts and international organisations, including the IMF and WB, have long advocated for the privatisation of these enterprises, the sale to Russian state corporations would only bring about modest increases in efficiency at best.
A Surge in Bitumen Exports
Bitumen sales schemes are starting to replace the old solvent sales schemes of 2012. Bitumen is a semi-solid that is extracted from heavy crude oil during the refining process and is more commonly known for being used in asphalt. In 2014 Belarus will still be required to make oil export tariff payments for exporting oil refinery products made from Russian oil. It turns out, however, that certain kinds of bitumen are not on the list of refinery goods.
exports of bitumen are disguising exports of other refined oil goods in an attempt to avoid paying export tariffs Read more
In the first quarter of 2014 the exports of bitumen from Belarus increased by 182%. Moreover, according to official statistics the production of bitumen is two times lower than its export figures. From this, one may deduce that the exports of bitumen are disguising exports of other refined oil goods in an attempt to avoid paying export tariffs.
The scale of the operation so far has fallen short of the solvents smorgasbord of 2012. The Russian side has already expressed its concerns and initiated the creation of the working group to investigate the issue. Thanks to the oil tax manoeuvre, the bitumen scheme will become irrelevant in 2015, and Belarusian refineries will have to find other ways to survive.
This article is a part of a joint project between Belarus Digest and the Belarusian Economic Research and Outreach Centre (BEROC)