Free economic zones showcase Belarus's skills and stability
Besides perks such as tax breaks, Belarus’s six free economic zones offer investors convenient logistics and, for companies from neighbouring Ukraine and Russia, a geopolitical safe place to do business. Wendy Atkins reports.
Many investors in Belarus choose to set up business in a free economic zone (FEZ) to take advantage of the tax savings and business support these areas offer.
According to the Belarus Ministry of Economy, six FEZs have been established in the country: FEZ Brest (in 1996), FEZ Vitebsk (1999), FEZ Gomel-Raton (1998), FEZ Grodnoinvest (2002), FEZ Minsk (1998) and FEZ Mogilev (2002). It estimates that more than 280 resident companies operate in the zones, employing over 61,000 people.FEZ resident companies enjoy a special legal regime for the first few years of registration, including tax-free profits on all goods and services; no land tax; no real estate tax; and no customs duties and taxes on imported equipment and goods to be used in the FEZ. Manufactured goods can be freely exported.
An array of goods
FEZ Minsk comprises sites in the Minsk region and provides opportunities for investment in sectors including machinery manufacture and metal working; automotive; woodwork; building materials production; electronics; polygraphy; and packing.
“We now have 115 enterprises, including 65 companies from 21 countries with foreign investments,” says Dmitry Rudchenko, head of administration at FEZ Minsk. “Exports from FEZ Minsk total more than $10bn. Our residents use advanced technologies and modern equipment, making them competitive in global markets. In fact, products manufactured by our companies are successfully exported to 89 countries globally.”
Alexander Kornev is deputy head of FEZ Gomel-Raton administration, located in south-east Belarus. “We sit on 4000 hectares of land and have 70 companies from more than 16 countries here. Being close to the Ukraine and Russian borders, we are attractive to businesses focused on these markets,” he says. “Residents in our FEZ are export-orientated and they are engaged in production. In particular, we have producers of chemicals, metalwork, glass, furniture, machinery and wiring. We also have companies that produce products from precious metals and diamonds.
Mr Kornev says that the FEZ, located as it is so close to a geopolitical hotspot, acts as a buffer zone for some of the problems in the region. “Ukrainian equipment can come here, and Russian companies can locate here and make sales with no limitation. Companies that come to our FEZ win: they can be safe and develop their business irrespective of any political issue,” he says.
Maksim Touz, first deputy head of the administration of FEZ Mogilev, says that the zone contains18 land plots with a total area of 3340 hectares. The plots are located in Mogilev itself – the administrative centre of Mogilev Region in eastern Belarus – as well as in towns around the region.
“According to the statistics for 2018, the residents of FEZ Mogilev have made a significant contribution to regional economic performance,” says Mr Touz. “They account for 62.8% of attracted FDI, 48.7% of exports and 35.8% of industrial output of the region. In large measure this has been possible because of the decision that was made in 2010 to make about $30m-worth of budget investments in one of FEZ Mogilev land plot’s infrastructure development. This has already helped us attract $900m of foreign investment in project finance since then.
“Due to our advantageous geographical location, the convenience of our logistics, extensive infrastructure and the availability of forests, we have a lot of companies that have located here and are successfully carrying out their activity in the wood processing sector.”
Mr Touz highlights how success breeds success. “We find that if we have a large investor, it will attract other companies that are able to make related products. For example, one company that is located here supplies companies that make products for IKEA with cardboard packaging. Using this as an effective mechanism for attracting investors, we have started to host conferences in the FEZ as well.”
Original text on fDi Intelligence