1. WhyBelarus?Reasonstoinvest1.1. BelarusinWorldRankings:strongpotential,goodperformance2. PromisingsectorsforFDI2.1. Pharmaceuticalindustry2.2. RenewableEnergy2.3. AutomotiveIndustry2.4. Foodindustry 3. One-stopshopforinvestors.NationalAgencyforInvestmentandPrivatization 3.1. Services3.2. Pilotprivatizationproject.Implementingbestinternationalpractices

4. EconomyofBelarus.Overview.Macroeconomicindicators.4.1. NominalGDP4.2. GDPpercapita4.3. Consumerpriceindex4.4. Exchangeratepolicy4.5. Internationaltrade4.6. Creditratesforlegalpersons4.7. Grossexternaldebt

8111415192125292930

3435363738394041

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5. InternationalcooperationandforeigncapitalinBelarus5.1. FDIonnetbasis5.2. Belarus–Russiarelations5.3. Belarus–EuropeanUnionrelations.Longwayfromneighborhoodtopartnership5.4. Belarus-China:towardsnewlevelofcooperation5.5. Internationaleconomicorganizations5.6. PrivatizationinBelarus–perspectivesandobstacles5.7. OverviewofM&ATransactioninBelarus5.8. TheperspectivesofBelarusiancompanies’IPOs

424344475255575961

6. Legalenvironmentforforeigninvestments6.1. Internationaltreaties6.2. Nationallegislation6.3. ProtectionandGuarantees6.4. MethodsforSettlementofDisputes6.5. Incentivesandpreferences6.5.1. High-TechPark(HTP)6.5.2. IndustrialPark6.5.3. Freeeconomiczones(FEZ)6.5.4. Smallandmedium-sizedtowns6.5.5. Investmentagreement6.6. Basicrepublicantaxes6.7. Businessentities6.7.1. Formsofbusinessentities6.7.2. Establishingacompany

626263636363636465656566676768

6.8. Representativeoffice6.9. Privatization.Legalframework6.10. TheM&A.Legalframework6.11. Financialregulations6.11.1. Currencytransactionsandtheirfulfillment6.11.2. Banksaccount6.12. Employmentrelations6.13. IntellectualProperty

6869707374757575

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Welcoming Message from PrimeMinisteroftheRepublicofBelarusH.E.Mr.MikhailMyasnikovich

Dearfriendsandforeignguests!

The Republic of Belarus is a developing European countrywithanopeneconomy.Belarushasalottooffertointerna-tionalbusinesses. ItgivesmegreatpleasuretopresenttheInvestmentGuidetoBelaruspreparedbytheNationalAgencyof InvestmentandPrivatization.Wesincerelyhopethat thisguidebookwillhelpallinvestorsplanningtostartupanen-terprise in our country to obtain an objective evaluation oftheeconomicsituationandtofamiliarizethemselveswiththeinvestmentpotentialoftheRepublicofBelarus.

TheBelarusianGovernment prioritizes buildingup the eco-nomic,legalandinstitutionalframeworkofdoingbusinessinourcountry.Overthelastfiveyears,foreigndirectinvestmentflowsintoBelarushaveincreasedfivefold.

Specialtaxregimesattractivetoforeigninvestorshavebeenformed and are successfully functioning. Guarantees of in-vestmentsecurityandprotectionareprovided.NewformsofGovernment to business partnership are being actively de-veloped.

Belarusoccupiesanadvantageousgeographicalpositionbe-inglocatedatthecrossroadsofmajorinternationaltransportcorridors. We are constantly improving our logistics infra-structure.SettingupyourbusinessinBelarusandestablish-ingjointventures,foreigninvestorscanobtainfreeaccesstothemarketof theEurasianEconomicUnionofBelarus,Ka-zakhstanandRussia.Themarketencompasses180millionconsumers and significant human, resource, research andtechnologicalcapabilities.

All those factors,alongsidesustainablegovernment institu-tions create unique opportunities for successful investmentactivityinBelarus.

Letme,onbehalfoftheGovernmentoftheRepublicofBe-larus,assureyouthatwearecommittedtoalong-termandmutuallybeneficialpartnershipwithourforeignpartners.

WelcometoBelarus!

Prime Ministerof the Republic of Belarus Mikhail Myasnikovich

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DearReader,

Belarus is becoming a promising investment platform fordoing,buildingandexpanding internationalbusiness today.ReputableinternationalstudiesconsistentlyconfirmBelarus’statusasoneofthemostfavorableforeigndirectinvestmentdestinationsintheEasternEurope.It’snothardtoseewhy.

Throughtheyearsofeconomicreformsand improvements,Belarusianauthoritieshavecreatedapro-businessenviron-ment that stimulates entrepreneurship and foreign invest-ment.Those Internationalbusinessplayers thatarealreadydoingbusiness inBelarushighlightcountry’seconomicandpoliticalstability,aswellastheavailabilityofhighlyeducatedpersonnel.Belarushasafriendlylegalbusinessenvironmentwichoffersguaranteesofstableregultoryframeworksrelatedtoconductingbusinessandachievingbusinessgoalssuchastaxincentives.

We believe that the country’s business and industry infra-structureandactivegovernmentpolicyofattracting foreigndirect investmentsprovides thecomplete“smart”businessanswer for international investors looking for starting busi-nessinBelarus.

That iswhy it givesme particular pleasure to present youtheneweditionoftheInvestmentGuidetoBelarus.OurnewInvestmentGuideprovidesaneasyorientationpointforyourfuturebusinessactivitiesinBelarus.

Thishandbookguidesyoustep-by-stepthroughthebusinessformation process in Belarus. This guide sets out detailedreasoning and the benefits of investing in Belarus, whilstproviding information on the legal points to be taken intoconsiderationduringthe investmentprocess inBelarus.Wehopethatyoufindtheinformationprovidedinthisguidetobeusefulandinteresting.

TheNationalAgencyofInvestmentandPrivatizationhascon-siderable experience in helping international companies toset up businesses in Belarus. Our comprehensive range ofadvisory,businessinformation,andprojectsupportserviceshelpstoleadthewayforeasierinternationalinvestment.

TheBelarusianmarkethasneverbeencloser.AndsettingupbusinessinBelarushasneverbeeneasier.

WelcometoBelarus!

Natalia NikandrovaDirector of the National Agencyof Investment and Privatization

NataliaNikandrova

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INVESTMENTOPPORTUNITIES

CHAPTER 1.Why Belarus? reasons to invest

BELARUSISTHEBESTPLACEFORyOURINvESTMENTWHILEITOFFERS:

StrategicallyadvantageouslocationPlacingabusiness in the territoryofBelarusenablescom-panies to efficiently serve the most high-capacity andquick-growingtargetmarkets:EUcountries(500millioncon-sumers),Russia,Ukraine,Kazakhstan,andotherCIScoun-tries(280millionconsumers).

DirectaccesstothemarketofthethreeCEScountries(Belar-us,Russia,Kazakhstan)TodaycompaniesinvestinginBelarusautomaticallyenterthe180-millionmarketofthethreeCEScountries.

CompetitiveinvestmentandtaxationconditionsInBelarusthereareanumberofpreferentialregimeswhichforeigncompaniescanbenefitfromintheirtaxationandop-timizationplanning.Theyincludespecialbeneficialbusinessconditionsinthecaseoforganizingbusinesswithinsixfreeeconomicareas (0% profit tax for 5 years; 10%vAT),High-TechPark(0%profittaxfor15years;0%vAT),andIndustrialpark”Greatstone“(0%profittaxfor10years).

Foreign companies can also derive additional profit by themaximumdecreaseofinvestmentexpensesandtaxationburdenwhileplacingtheirbusinessesintheterritoryofsmallandmediumtownsofBelarus(0%profittaxfor7years,0%vATfor5years).Belarus strives to create open and favorable conditions forbusinessinitsterritory.Todaythecountryistheleaderinleg-islationimprovementwhichisconfirmedbytheWorldBank’sDoingBusiness2014research.Belarusoccupiedthe63thplaceoutof189countries,leavingRussiaandUkrainefarbehind. Concerning such indices as “property registration”(3thplace)and“startingabusiness”(15thplace),Belarusis

oneofthemostattractivecountriesnotonlyoftheregionbutalsooftheworldingeneral.

DevelopedtransportationandlogisticsinfrastructureDuetoitsgeo-economiclocation,BelarusisatransportationandlogisticshubofEurasia.

The transportation infrastructure of Belarus is representedby a broad network of motorways, railways, airlines. Thethoroughfares crossing the country are themost importantcomponent of the European transportation system. Thus,Belarus is crossedby2cross-European transportationcor-ridors, according to the international classification No. II(West-East – Berlin-Warsaw-Minsk-Moscow) and No. IX(North-South – Russian-Finnish border-vyborg-St. Peters-burg-vitebsk-Gomel-Ukraine-Moldova-Bulgaria-Greece)withbranchIXB–Gomel-Minsk-vilnius-Klaipeda-Kaliningrad.

Annuallyover100milliontonesofEuropeancargocrossBelar-us’sterritory,90%ofwhichcargoisbetweenRussiaandtheEU.

UniqueprivatizationopportunitiesBelarusprovidesforeigncompanieswithuniqueopportunitiesofspeedydevelopmentoftheirbusinessbytakingpartintheprivatizationprocessinthecountry.

Today around 70% of industrial production falls within thegovernmentalsectorinthecountry.UnlikeRussia,otherCISand Eastern Europe countries, Belarus has preserved thelargest national companies in state ownership, which hasenabledtoensuretheirfull-scalesupportand,asaresult,toincreasetheirmanufacturingpotentialandinternationalcom-petitivenesssignificantly.

Today theNational Agency of Investment and Privatization,jointlywith theWorldBank, introducesmodernapproachesandinstrumentscorrespondingtotheadvancedinternationalpractice.Theyareaimedatestablishingmoreopenprivatiza-tionconditionsunderstandabletoforeigncountriesinBelarus.

HighlyqualifiedworkforceBelarus is the country of one of themost educated, highlyqualified,andindustriouspeoples.Over90%ofthepopula-tionhavehigher,secondaryorbasiceducation.Awell-devel-opedsystemofprofessionaltrainingaswellasahighleveloftheindustryandservicesdevelopmentenabletheBelarusianworkforceworksuccessfullyincompaniesofanyindustries,beitsewing,agriculture,biotechnologiesorsoftwaredevel-opment.

DecentlivingstandardsIntheratingofcountriesbylivingstandardspublishedintheUNHumanDevelopmentReport2012,Belarusoccupiedthewell-deserved50thplace (among187)andbecamethere-nownedleaderamongalltheCIScountries.Theliving,dwell-ingcosts,thecostsofeducationandvariousculturaleventsare lower than in themajority ofWestern and Eastern Eu-ropeancountries.Besidesadevelopedsocial infrastructure,Belarushaspreservedauniqueeco-environmentsuitableforfullanddiverselifeofpeople.In2012theresearchersofyaleandColumbiaUniversitiesawardedBelaruswiththebestenvironmentratingamongalltheCIScountries.

FavorableinvestmentpolicyThegovernmentofBelarusistakinganumberofmeasuresaimedatimprovingtheinvestmentclimate.Favorableinvest-ment policy along with natural advantages of Belarus andexistingeconomicopportunitiesresultedinsteadygrowthofFDI.Anothersignificantindicatorisanincreasingquantityoforganizationswithforeigninvestments.

OntheotherhandtheroleofenterpriseswithforeigncapitalinBelarusianeconomyisconstantlygrowing.Thatalsostim-ulatestheGovernmenttotakeproactivemeasuresinthefieldofinvestmentpolicy.

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CommercialorganizationswithforeigninvestmentscontributemoreatenthofGDP.InvestorscanbenefitmorefromotherincentivesandprivilegesprovidedundertheinvestmentagreementwithBelaruswhencarryingoutinvestmentprojectsimportantforthegovernment.

1.1. Belarus in World rankings: strong potential, good performance

Economic role

+15,2

+8,6

+6,7

+2,3

+1,9

30,615,4

25,316,7

17,510,8

24,221,9

9,27,3

2013 2010

personal

sales of goods revenue

investments in fixed capital

retail turnover

export of goods

370

931

13081615

investments, bn $

13,6

21,2

28,632,3

investment agreements

Investment agreements with Belarus 4,4 times increasein investments amount

2,4 times growth in numberof agreements

01.01.2010 01.01.2014

Number

Commercial organizations with foreign investments

5176

7172+1996

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Whencomparedto2010,BelarusimproveditspositionintheHumanDevelopmentIndex,LegatumProsperityIndex,PressFreedomIndex,GlobalPeaceIndexandPerceptionofCorrup-tionIndexin2014.Thisisevidencethatqualityofliferemainsoneoftheprimarytasksthattheauthoritiesworkon,astheyseeeconomicstabilityasameanstolegitimizetheirrule.

BelarushashadarathergoodshowingintheUNDPHumanDevelopment Index, the Legatum Prosperity Index and theEaseofDoingBusinessIndex.Compared to other countries in the region, Belarus usuallyfinds itself rankedaboveUkraineorRussia,but lower thanPoland,LithuaniaandLatvia.

Human development index

Country Human development index ranking

Norway

Poland

Lithuania

Belarus

Russia

Turkey

Georgia

Ukraine

1

35

35

53

57

69

79

83

South Korea

Poland

Russia

Belarus

Kazakhstan

Turkey

Ukraine

Georgia

1

31

40

41

48

65

68

73

Source: United Nations Source: Legatum Institute

Legatum prosperity index

Singapure

Lithuania

Kazakhstan

Belarus

Russia

Ukraine

Macedonia

Turkey

1

43

47

58

61

64

79

87

Source: International Telecommunication Union

Easy of doing business indexICT development index

Source: World Bank

Country

ICT development index rankingCountry

Legatum prosperity index ranking

Singapure

Czech Republic

Belarus

Luxembourg

Russia

Croatia

Kazakhstan

Ukraine

Country DB index ranking

1

44

57

59

62

65

77

96

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2. promising sectors for fdi

Toimprovetheinvestmentclimate,inJanuary2012thegov-ernmentlaunchedanewprogram“thestrategyofAttractingForeigndirectInvestmentuntil2015”.Thefocusofthepro-gramis,interalia,onreducingthestateshareintheBelar-usianeconomy,privatizingstate-ownedassetsandcreatingfavorable conditions to foster development of private busi-nessesinprospectiveeconomicsectors.

Investmentopportunities

2.1. pharmaceutical industry

AccesstothelargeanddynamicmarketPharmaceuticalproductsmanufacturing inBelarusprovidesduty-freeaccess to the largeanddynamicmarket of threeCES(CommonEconomicSpace)memberstates(Russia,Be-larus,andKazakhstan).

Consumptionpercapita,$,2013

Rapid growth, open for foreign investors, up-to-date standards o f corporate governance and reporting

Low l evel o f development o f cable a nd Internet services, room for development o f up-to-date infrastructure

Under s aturated domestic m arket, domineered b y private sector, u p side potential in medium- sized towns with high level of household incomes

Rich local resource base, low logistics costs

Advantageous transit location, underdevel-oped logistics infrastructure

Availability o f scientific infrastructure, highly-educated l abor force, t ax c onces-sions and customs privileges applied to companies operative i n special economic areas

Outdated technologies requiring r eplace-ment, government support t o domestic market, broad access to the Russian market

Solid industrial base, access to the Russian energy resources

ces

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Unique preferential treatment within the industrial zone of«BelBioGrad»Within «BelBioGrad» there will be provided unique tax andinfrastructural conditions for the set-up of amodern inter-nationally integrated pharmaceutical, nano- and biotechno-logicalcluster.

DevelopedHRpotentialPharmaceutical industryoftheRepublicofBelarusemploysmorethan5,9thsd.professionalsofdifferentlevelsofprepa-rationandawiderangeofskills.Eachyear,theyarejoinedinlargemeasurebyadditional500graduates,whichcreateastablebasisforapersonnelinflowintonewmanufactoriesandsegmentsoftheindustry.*-50%taxrate

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1840sitesforpotentialwindfarmslocationwithmultiplegridconnectionpoints440-460MWoftotalwindpowergeneratingcapacityistobeinstalleduntill2015inaccordancewiththeNationalProgramforDevelopmentofLocalandRESources1600MWpossiblewindenergycapacity4.9-5.3m/sisaveragebackgroundwindspeedattheheightof10m3.9MWtotalinstalledcapacityinBelarus

102,1MWisthetotalcapacityof33hydropowerplants,whicharetobebuiltuntill2015inaccordancewiththeNationalProgram850MWpossiblehydroenergycapacitythelargesthydropowerpotentialisconcentratedinGrodno,vitebskandMogilevregionsintheriverbasinsofNeman,WesternDvinaandDnepr33,4MWtotalinstalledcapacityof49existinghydropowerplants

largeeconomicpotentialfortheuseofbiogasandbiomass,availabilityofthenecessaryrawmaterials(municipalsolidwaste,agriculturalwaste,wastewatertreatmentfacilities,etc.)37,9MWisthetotalcapacityof38biogasplants,whicharetobebuiltuntill2015inaccordancewiththeNationalProgram850MWpossiblebioenergycapacity14,7MWtotalinstalledcapacityofbiogasplants>600MWtotalinstalledcapacityofbiomassplants

potentialeffectivenessoftheuseofsolarpanelsontheterritoryofBelarusduetothefavorableconditionsofinsolationismorethan10%higherthaninPolandandtheNetherlandsandmorethan17%higherthaninGermany,Belgium,Denmark,Ireland,UnitedKingdomthehighestfeed-in-tariffofferedtoproducersofelectricityfromrenewablesinBelarusseveralinvestmentprojectsonbuildingsolarpowerplantswithtotalcapacityof120MWareintheim-plementationstage

GovernmentalsupportofinvestmentprojectsinthesphereofpharmaceuticsIthasbeenpassedthecomprehensivestateprogramforthedevelopment of pharmaceutical industry in the Republic ofBelarus.Accordingtothisprogramtheshareof locallypro-ducedmedicinesconsumedinthecountryshouldaccountfor50%by2015(in2012thisindicatormade30.6%inmonetaryterms).

ThehighlevelofintegrationoftheRepublicofBelarusintotheinternationalsystemofpreproductiontestingandmedicinesqualitycontrolBelarus is ranked fourth by the WHO Pharmacovigilanceamong101memberstates.

2.2. reneWaBle energy. high natural and resource potential

TheRepublicofBelarushasatitsdisposalasignificantpotentialfordevelopmentofrenewableenergysources.

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electricity from natural movement of water

electricity from wind, wood, biogas,

geothermal and other renewables

solar energy

1.1(USD 0,15 per 1 kWh as of June 17, 2014)

1.3(USD 0,18 per 1 kWh as of June 17, 2014)

2.7(USD 0,37 per 1 kWh as of June 17, 2014)

0.85(USD 0,12 per 1

kWh as of June 17, 2014)

Type of energy source

Feed-in-tariff for the first 10 years

from the date of commissioning

of electricity generation

Feed-in-tariff for the next

10 years of operation

Highfeed-in-tariffsThetariffsforelectricityproducedfromRESaresetbasedonelectricenergytariffsforindustrialandequivalentconsumerswiththeconnectedcapacityofupto750kvAthatareindexedtotheUSDexchangerate,usingmultiplyingfactorsdifferen-tiateddependingonthetypeofarenewableenergysource:

SubstantialgovernmentalsupportSystematicworkondevelopmentofrenewableenergysectorisorganizedandsupportedbyalllevelsstateauthoritiesandisexpressedin:

a)providinglegalguarantees–guaranteedconnectiontothestateelectricitygrid;–guaranteedpurchasebythestateenergyutilityofallpro-posedenergyproducedfromRES;–guaranteedpayment of all energyproduced fromRESatpreferentialtariffs.

DevelopedelectricitygridandrichlandresourcesTheRepublicofBelarushasawell-developedpowersupplysystemwith total installed capacity of 8,367MWand totallengthofstateelectricitygridofmorethan240thousandki-lometers,andtheexistinginfrastructureisbeingdevelopedatasignificantpace(6billionUSDaretobeinvestedinthede-velopmentoftheBelarusianenergysystemfor2011-2015).

Theautomotiveindustryisthe3dbiggestsectorofthecoun-try’sindustrialactivity,withfocusonproductionofownde-signed superheavy, heavy and middle trucks mainly pluspost-Soviet developed buses, trolleybuses and trams. Themain assemblers in the country include MAZ, MAZ-MAN,BELAZandNeman.

Theavailabilityoffreelandresourcesallowstopromptlyse-lectanappropriatelandplotaccordingtotherequestedchar-acteristics (size,plannedREcapacity tobe fed inetc.).Thedensityofthecountry’selectricitygridcoverageisconsideredashigh,whatsignificantlysimplifiestheprocedureofdeter-miningasuitablegridconnectionpoint.

2.3. automotive industry

The industry iswidelyrecognizedfor the long-standingtra-ditionanditscompetenceinmachinebuildingandmanufac-turing.Mostcompaniesinthesectororiginatedasfactoriesmanufacturingequipmentforthetransportationofminerals,as manufacturers of tractors or as parts and componentssuppliers.

2011-2015;–NationalProgramforDevelopmentofLocalandRESourcesfor2011-2015.

b)stimulatingpublicpolicy–StateProgramforConstructionofBiogasPlantsfor2010-2015;–StateProgramforConstructionofHydropowerPlantsfor

Production of rock handlers, unitsProduction of freight vehicles, units

30 000

25 000

20 000

15 000

10 000

5 000

0

1 800

1 600

1 400

1 200

1 000

800

600

400

200

0

13 502

21 84124 572

18 016

2010 2011 2012 2013 2010 2011 2012 2013

978

1444

1671

1248

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Motorization degree ratio in Belarus is one of the largestamong former Soviet states and accounts to 282 passen-gercarsperevery1000ofthepopulation.Asof01.01.2014the number of registered passengers cars accounted to

3231556.

Tractorsandheavycommercialvehicles(trucks)areamongthemainindustrialproductsmanufactured,consumedwithinthecountryandexported.

20 most popular foreign marques (by number of registered cars), units

365 155Volkswagen

Opel

Audi

Ford

Renault

Mercedes-Benz

Citroen

BMW

Mazda

Toyota

Nissan

Fiat

Mitsubishi

Hyundai

Volvo

Honda

SEAT

Kia

Skoda

204 673

181 800

176 626

139 824

85 324

102 025

77 610

74 727

63 846

57 936

56 709

50 605

36 354

29 407

26 880

24 897

24 127

21 494

18 261

Production of buses, thsd units

Domestic market capacity for the main production items, thsd units

agricultural machinery

agricultural application

tractors

freight vehicles

27,8

54,5

10,9

60

50

40

30

20

10

0

21,9

1,4

14,1

0,4 0,3

25

20

15

10

5

0freight

vehiclesbicycles agricultural

application tractors

grain combines

forage harvesters

Production f buses, units

Production of agricultural application tractors, units

2010 2011 2012 2013

2 0892 162

2 2772 342

2 400

2 300

2 200

2 100

2 000

1 900

2010 2011 2012 2013

50 949

66 80371 030

62 59180 000

60 000

40 000

20 000

0

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Having succeeded in automobilemanufacturing in Belarus,GermanMANcooperateswithMAZoncontinuingbasisnow.GeelyandGeneralMotorsfollowedthemandlaunchedpro-ductionoftheircarsbymeansofcooperatingwithBelarusianenterprisestoo.

2.4. food industry

ThefunctioningoftheCustomsUnion(CU)andtheCommonEconomic Space (CES) of Belarus,Kazakhstan and RussiaopenstoforeigninvestorsinBelarusentirelynewprospects.Belarus is the largest supplier of food products to the CIScountriesandhasa favorablegeographicalposition togainstatusasaleaderintheregion.

Theindustryhasconsistentlybeenacentralaspectinlegis-lationandininnovativepolicies.Themostrelevanttargetsofthepoliciestomeetintheyears2011-2015arethefollowing:–restructuringandcreationofanintegratedindustry(consid-eringnationalandforeigninvestment);–radicalrenewaloftheproductionequipmentusedandtheintroductionofinnovativetechnologies;– rapid renewal of fixed assets, production of high-quality,marketableproducts,includingmeetingtherequirementsofEurovandEurovI;–grantingtaxandcustomsprivilegestoautomotiveentitiesrelatedtotheMinistryofIndustryandexemptingthemfrompayingimportcustomsdutiesandvalue-addedtaxonimportsofprocessedequipmentandcomponentsfortheproductionofautomotiveproducts;–unitsofmodernmachineryandequipment,whicharetobeboughtonlyfromdomesticenterprises;–upgradingofpublicbusesandtrucks.

GrowthpotentialThegrowthpotentialofthefoodindustryinthecomingyearswillremainatahighlevelasthecapacityofthissegmentisnotfullydisclosedandthereforerepresentsgoodopportuni-tiesfordomesticandforeigninvestors.Production of passenger cars, units

364

2010 2011 2012 2013

397 406

27363000

2500

2000

1500

1000

500

0

RawmaterialsFoodindustryplaysaleadingroleinthestructureof industrialproductioninBelarus.Alongwithmetallurgicproductionandfuelcomplex,foodindustryisaleaderintheproductionofindustrial

goods.Belarushashighpotentialfordevelopmentoffoodindus-tryinBelarusduetoavailabilityofrawmaterialsandtoabun-danceofproductsproducedbyagriculture.Belarushasaconsid-erableproduction,laborandlandresourcesinthecountryside.

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The agriculture sector plays a significant role in theBelar-usian economy. The country is rich in good soils, qualifiedlaborandhasafairagriculturalpotential.Belarusianagri-pro-ductionprovidesmorethan90%ofthefoodsupplyanden-suresnationalfoodsecurity.

Occupyingonly0.15%oftheworld’sterritoryandwithapop-ulationof9.49million,theRepublicofBelarusaccountsfor6.24%offlaxfiber,2.8%ofpotatoes,0.9%ofmilk,0.8%ofsugarbeet,0.3%ofmeat incarcassweightand0.25%ofgrainproducedworldwide.

TheRepublicofBelarusistheleaderamongtheCIScountriesin theproductionofdairyandmeatproducts,aswellas ingrowingpotatoes.

hectare29,7

Bela

rus

hectare28,9

Kyrg

yzst

an

hectare28,1

Mol

dova

hectare26,9

Azer

baija

n

hectare21,9

Russ

ia

hectare12,1

Kaza

khst

an

Grain crop capacity

7,9%

GDP

8,1%

employees in the economy

30%

fixed assets

Land Fund Structure

65,8%arable

agriculturallands

unusedlands

other42% 43%

15%

Belarus competitiveness

0,14%0,17%

0,4%

0,19%

0,9%0,8%

0,3%0,25%

Population Agriculturalland

Milk produced

Sugar beet

produced

Meat produced

Grain produced

Export of agricultural

production

GDP

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TheUNFoodandAgricultureOrganization(FAO)considerstheRepublicofBelarusanimportantproducerofmajoragricul-turalproduce.AccordingtotheFAOBelarusenteredthelistof the top 20 leading exporting countries by all key exportitems,andthelistoftop10world’sleadingexportersoffoodby6majorexports.

ThereviewpublishedonNovember1,2013byFAOreportsthat following the resultsof2013Belarus is rankedamongtheleadersintheporkandbeefmeatmarket.Inthiscontext,FAOpredictsincreaseinBelarusianmeatproductsexportstotheforeignmarkets.

Accordingtotheabovementionedreview,Belarusispredict-edtotakethe3rdplaceintheworldastheproducerofbutter(75thousandtons),onlybehindNewZealand(451thousandtons)andtheEU(125thousandtons),andthe6thplaceastheproducerofcheese(140thousandtons).

3. one-stop shop for investors. national agency for investment and privatization

NationalAgencyforInvestmentandPrivatizationaimstoas-sistforeigninvestorstofindanichefordoingbusinessinBe-larus.TheAgencyactsasa“onestopshop”forforeigndirectinvestorsatnocost.

3.1. services

Informationservices–Handlinginvestorenquiries–Providinginformationondoingbusinessconditionsandin-vestmentclimateinBelarus–PriorityFDIsectoranalysis–Investmentproposals

Organizingfact-findingtripstoBelarus–visitarrangements(visafacilitation,accommodation,logistics)– Meetings schedule development (negotiations with localauthorities,privateinstitutions,potentialpartners)–Accompanyingandassistingatmeetings–Follow-up

Condenced milk

Butter

Whole milk evp

Cranberry

Cattle meat

Cheese

Skimmed milk

Refined sugar

Cow milk, whole, fresh

Pork sausage

2

3

4

5

6

6

9

10

11

13

13.0

4.0

5.7

4.8

7.3

2.6

3.2

2.5

2.1

3.0

Belarus' ranking amongthe top 20 exporters by physical volume ofeports

Belarus' share in the top 20 exporters' exports by volume,percent

AftercareIntheframeworkof«aftercare»theAgencyprovidessupportto facilitate the re-investment and enterprise development,including:–assistanceintheselectionofsuitableland,realestateandinvestmentprojects–searchforbusinesspartners

Siteselectionsupport–Greenfieldandbrownfieldopportunitiessearch–Sitevisits–Facilitationinliaisingwithlocalauthorities

ProjectManagement–Developingaroadmapofaprojectimplementation–Supplier,serviceproviderandJvpartnersearchandcontact–Liaisingwithstatebodiesandindustryregulators–Assistanceinsolvingadministrativeissues

–providinginformationaboutobtaininginvestmentincentives–ensuringnegotiationswithlocalandstateauthorities–assistanceinsolvingproblemsintheimplementationoftheinvestmentproject–transfer investors’proposalsonimprovingtheinvestmentclimatetotheBelarusianGovernmentandetc.

Minsk Tel Aviv2,5 h

1 flight daily

MinskTbilisi3 h

1 flight daily

3130

3.2. pilot privatization project. implementing Best international practices

OneofthemaingoalsoftheAgencyistolaunchandmanageacase-by-caseprivatizationprocessintheRepublicofBelar-usinaccordancewithinternationalbestpractices.

Under a Grant Agreement signed between the Ministry ofEconomy of the Republic of Belarus and the InternationalBankforReconstructionandDevelopment(internationaltech-nicalassistanceprojectNo.2/11/000466dd.28April2011)theMinistry of FinanceofAustria establishedaTrust Fundintheamountof3.6millionUSdollarsfordurationofuptofiveyearstosupporttheBelarusPilotPrivatizationProjectim-plementedbytheAgency.TheprojectisexecutedunderthesupervisionoftheWorldBank.

Аcase-by-caseprivatizationprocessisaimedat:- attracting the best strategic investors of either domesticor foreign origin able to ensure further development of thecompany;-generatingrevenuestothestatebudgetasaresultofsuc-cessfulsales;- minimizing the potential negative social impact of thesetransactions.

ThePilotPrivatizationProjectincludesthefollowingstages:

Stage1.Selectionofcompanies

Eight small and medium sized State Owned Enterprises(SOEs) representing different industrial sectors have beenidentifiedfor thefirstPilotPrivatizationandassignedtotheAgencytoprivatize.

Stage2.InvolvementofFinancialAdvisors

AcorecomponentoftheprojectincludestheinvolvementofFinancialAdvisors(internationallyreputableinvestmentbanksoradvisoryfirms)toassistAgencytoexecutetheprivatizationtransactions,includingallpreparatorywork,structuringthe

sale, implementing the actual sale and performing appro-priate post-sale activities for the privatization of the StateOwnedEnterprises(SOEs).

The Agency is working with such Consultants as “Ernst &young”,“KPMG”,“Mattigmanagementpartners”,numerouslocallawyersfirms.

OJSC «Medplast»

OJSC «Belgazstroy»

Production of medical instruments, plastic products

Construction, installation and adjustment of objects of gas supply and other engineering networks and constructions

262

850

212 000

56 953

OJSC «Konfa»

OJSC «Minsk Margarine Plant»

Production of confectionery: biscuits, cakes, waffles

Manufacture of margarine and mayonnaise, processing, storage and sale of agricultural products

364

429

69 662

157 729

Production of building blocks, ready mixed concrete, other articles of concrete, plaster and cement

Construction a nd i nstallation, starting-up a nd a djustment, repair work on sanitary-engineering, gas and ventilating systems

Maintenance and construction of roads, airfields and sports constructions

Building services

80962

162057

161864

151726

Main activityCompany

OJSC «Baranovichi Reinforced Concrete Products Pant»

OJSC «Belsantekhmontazh-2»

OJSC «Avtomagistral»

577

1 676

544

632

StaffValue of net assets, BYR mln

Main activityCompany StaffValue of net assets, BYR mln

Main activityCompany StaffValue of net assets, BYR mln

MinskVienna2 h

2 flights daily

Minsk Vilnius0,5 h

2 flights daily

3332

Stage4.Interestanalysis

TheFinancialadvisorjointlywiththeAgencyundertakesthefinalstage.Duringafourthstagetheteamworkscloselywiththeshort-listedpotentialinvestorsthrough:Drawingupand circulation of an informationmemoran-dum;Informingpotentialstrategicinvestors;Inspectionofstrategiccompatibilityoftheinvestorswhichhaveexpressedtheirinterest;Accessofpotentialinvestorstothecompanies’DataRoomrequiredtocarryouttheprocedureofcompleteinspection;Analysisandevaluationoftheinvestmentofferspotentialinvestors,holdingnegotiations.

Stage5.Makingaprivatizationdeal

OnthefinalstagetheAgencysignsacontractwiththestra-tegicinvestorwhowentsuccessfullythroughthetenderpro-cess.AfterthecontractissignedtheGovernmentreceivesapaymentfortheprivatizedenterprise.

Stage3.PreparationofSOEs

Phase 1. Preparation the company for the sale:

Pre-bid due diligences;Recommendations o n actions t o be t aken t o improve the attractiveness of the SOE;Valuation of t he SOE based o n international standards and Belarusian accepted methodology;Assessment of market interest;Preparation of the financial reports in compliance with IFRS;Developing of the Privatization Strategy for each SOE.

Phase 2. Launching the tender process:

Advertise t he transaction i n local a nd i nterna-tional media;Distribution of Teasers;Submission of the Expressions of Interest (EOIs) by the potential buyers;Short listing of the Potential Investors: the FA will assess and provide the Agency with the financial viability and strategic f it o f investors w ho submitted EOIs;Due D iligence p rocess: t he due d iligence process requires t hat t he s hortlisted p otential buyers will be given a high degree of access to the SOE’s Data Room.

Phase 3. Negotiation and Closing. Once the due d iligence p rocess i s over, t he buyers will submit their bids and the most attractive bid will be selected.

on November 2014The Stages completed

POOL 1

POOL 2

POOL 3

MinskWarsaw1 h

3 flights daily

Minsk AshgabatAbu-Dhabi5,5 h

1 flight daily

3534

4. economy of Belarus. overvieW

In2013,theBelarusianeconomywasdevelopinginthecon-textofdeceleratinggrowthratesofboththeglobaleconomyas a whole and the economies of the countries which aremajortradepartnersoftheRepublicofBelarus.ShrinkingofthemainexportmarketsforBelarusiangoodsanddecreasingexternaldemandfordomesticproductsledtotheslowdownineconomicgrowthratesofthecountry.

Differentapproachesoftheassessmentofthepotentialout-putgrowthrateprovideestimatesbetween1.5and4%.

Givenacyclicalphaseofrecessionin2013,theactualoutputgrowthratehasbecomelowerthanthepotentialone.Thecy-clicalrecession,inturn,stemmedfromanumberofchannels.First,thereweredomesticonesconsequenttotheinheritanceofthecurrencycrisisin2011.Sincethen,inflationanddeval-uationexpectationshavebeenprettyhighandvolatile,whichdetermined high and volatile interest rates on the financialmarket. This caused a depression of capital investments,giventhelackofaccessibleandaffordablefinancialsourcesfor them.Second, the government intended to secure highgrowthofrealwages.Ontheonehand,ithelpedtoexpandconsumerdemand.Butontheotherhand,duetoincreasingcostsonsalariesandwages,Belarusianproducers facedaloss incompetitiveness,whichresulted inshrinking foreigndemand.Third,insomemarkets,foreigndemandcontractedgivenotherexogenousshocks.Forinstance,the‘potashwar’betweenBelaruskaliandUralkaliledtoasharpcontractioninexportsofBelarusianpotashfertilizers.

The economic growth was maintained, primarily, due tothe resumption of investment activities and continued highgrowthratesofconsumerdemandowingtothemaintenanceofhouseholds’realincomesatafairlyhighlevel.Atthesametime, the budgetary policywas stillmoderately strictwhilebalancingbetweentheneedtomaintainmacroeconomic

well-balanceandtacklethestate’ssocialandeconomictasksofprimaryimportance.

However, in 2014 a long-term trend of declining potentialgrowthrateseemstohavebeenstopped,andthepotentialgrowth is likely to stabilize around current values. Further-more, new initiatives by the government (enhancing morecompetitivenessbetweenstate-ownedandprivatefirms,lessdirectedlending,etc.)maysomehowstrengthengrowthpo-tential.Second,someenginesofcyclicalrecessionarelikelytohavebeenmitigated.For instance, therearecertain im-provementsinrespecttoforeigndemand:someforeignmar-ketsofcapitalgoodsdemonstratethesignsofrecoveryin

demand (due tokeepinghouseholds’ real incomeata ratherhighlevel)andresumptionofinvestmentactivity.

comparison to previous year (tractors, trucks); the suppliesofpotashfertilizersareexpandinginphysicalvolumes,giventhemarketshutdowninthepreviousyear.

Moreover, inthefirstquarterof2014Belarussucceededtorestrictimportsofnon-energyintermediarygoodsconsider-ably,whichfurtherimprovesforeigndemandonanetbasis.Inthedomesticeconomy,althoughtheenvironmentinfinan-cialmarketsisstillvulnerable,theauthoritiesaresomehowsuccessfulinreducinginterestratesandenhancingmorefi-nancialsourcesforcapitalinvestments.Thesetrendsin2014seemtosecureamodestgrowthofGDPaccompaniedwithslightimprovementsinnetexports.

In2013, realgrowthratesofGDPtotaled100.9%(101.7%in2012). The economic growth was assured, primarily, at theexpenseofthemaintenanceofhighgrowthratesofconsumer

MacroeconomicIndicators.4.1. nominal gdp

The history of nominal GDP, mln USD

SOURCE: National Committee of the Republic of Belarus, National Bank of the Republic of Belarus

2009 2010 2011 2012 2013

49 193,255 086,5

58 799,0

63 470,9

71 411,9

MinskAmsterdam3 h

6 flights a week

AshgabatMinsk4 h

2 flights daily

3736

4.2. gdp per capita

Throughout the period 2009-2013, to a less extend in theyear2013,thenegativetrendinthedemographicsituationinBelarusprevails.ThisincreasesGDPpercapitawiththeotherconditionsbeingequal.

4.3. consumer price index

Inflation in2011wasmainlyacceleratedbythe large-scaledevaluationof theBelarusian ruble,which led toanalmostthree times depreciation of the national currency since the

beginningoftheyear.Takingintoaccountthedirectimportsandtheproportionofimportedrawmaterialsandfuelsusedinproductionofthegoodsgoingintotheconsumermarket,the devaluation could lead to a 90% increase in consumerprices.

The history of GDP per capita, mln USD

SOURCE: National Committee of the Republic of Belarus, National Bank of the Republic of Belarus, proper calculations

8000

7000

6000

5000

4000

3000

2000

1000

0

2009 2010 2011 2012 2013

5170,65798,6

6201,86705,9

7545,6

Consumer price index

SOURCE: National Statistical Committee of the Republic of Belarus

108 106,6 112,1 113,3 110,1109,9

208,7

121,8 116,5

220

200

180

160

140

120

1002005 2006 2007 2008 2009 2010 20122011 2013

MinskAstana4,5 h

3 flights daily

BakuMinsk3,5 h

2 flights a week

3938

4.4. exchange rate policy

From2011ongoing, following the recommendations of theIMF,thepolicyoffloatingexchangerateissuccessfullycon-ductedinthecountry,andtheofficialexchangerateisdeter-minedonthebasisofcurrencymarketrates.ExchangerateinBelarusisformedbasedonthedemandforandsupplyofforeignexchange.TheNationalBankcarriesourlimitedfor-eignexchangeinterventionswithaviewtorestrainingsharpfluctuationsofexchangerate.

4.5. international trade

Thevalue indicatorsofexportand import toaconsiderabledegreeareinfluencedbythedepreciationoccurredin2009and2011.Asanadditionalfactor,theuseofschemeswiththesuppliesofsolventsandlubricantsboostedexportvolumesin2012.Thedecrease indynamicsof totalexportvolumes in2013 is caused by the reduction in the physical volume ofexportsof intermediategoods,bothenergyandnon-energyones;theshareofconsumerandinvestmentgoodsincreasedthough.

Stablepositiveexportsurplusofservicesisdriventoalargeextentby transport, telecommunications,computer,and in-formationservices.

Dynamics of foreign trade of good and services, mln USD

import

export

surplus

SOURCE: National Statistical Committee of the Republic of Belarus

50 000

45 000

40 000

35 000

30 000

25 000

20 000

15 000

10 000

5 000

0

-5 000

-10 000

-15 000

2005

-729

16708

22351

28693

39381

28569

34884

45759 46404

42999

37232

4606041419

25284

21304

32571

24275

1973415979

-2617 -4418-6810

-7265-9600

-4340

-344

-5767

2006 2007 2008 2009 2010 2011 2012 2013

MinskBarcelona3,5 h

2 flights a week

BatumiMinsk3 h

4 flights a week

4140

4.6. credit rates for legal persons

Duetosomeamountofcreditingofspecialstateprograms,bothinnationalandforeigncurrency,theratedoesnotreflectthesituationinthemarketfully,andthusshouldbesubjecttoallowances.

4.7. gross external deBt

The increase in thegrossexternaldebtwascausedby theneed inexternalborrowings,which in turnoccurreddue tothenegativesituationwiththecurrenttransactions.In2013

externalloansintheamountof1795,6milliondollarswereborrowedandthegrossexternaldebtwasrepaidby1690,4milliondollars.Notwithstandingthestablegrowthofthegrossexternaldebtamount,itsratiotoGDPremainsatalowlevel.

The history of gross external debt, mln USD

Gross external debt / GDP, %

SOURCE: National Bank of the Republic of Belarus

01.01.2010 01.01.2011 01.01.2012 01.01.2013 01.01.2014

22 060,3

28 402,734 023,1 33 766,0

39 108,545 000

40 000

35 000

30 000

25 000

20 000

15 000

10 000

5 000

0

SOURCE: National Committee of the Republic of Belarus, National Bank of the Republic of Belarus,proper calculations

01.01.2010 01.01.2011 01.01.2012 01.01.2013 01.01.2014

44,84%

51,56%57,86% 53,20%

54,76%70%

60%

50%

40%

30%

20%

10%

0%

Dynamics of interest rate on newly provided credits for legal persons, % per annum

Dynamics of interest rate on newly provided credits for legal persons, % per annum

19,5

13,29,6 9,5 8,9 8,2

14,4

28,2

39,1

35,9

45

40

30

25

20

15

10

5

0

For a term up to 1 yearin foreign currency

in national currency

11,49,1

18,1

24,922,1

8,79,48,77,87,4

30

25

20

15

10

5

0

SOURCE: National Statistical Committee of the Republic of BelarusFor a term up to 1 year

in foreign currency

in national currency

MinskBelgrade3,5 h

3 flights a week

BerlinMinsk2 h

5 flights a week

4342

5. international cooperation and foreign capi-tal in Belarus

ThestructureoftheindustryhaveidentifiedahighdegreeofopennessoftheeconomyoftheRepublicofBelarus,itsfocusonforeignmarkets.Morethan50percentofgoodsproducedinthecountryaredeliveredforexport.Inthewakeoftheworldfinancialdownturn,theforeigntradeof Belarus changed structurally. Today the country adoptedatradepolicytoincreasetheshareofhigh-techproductsinexportsanddiversifysuppliestoforeignmarkets.TheRepublicofBelarustraditionallyimplementsamulti-vec-torforeigntradepolicy,supportstradecontactswithforeigncountries,activelyparticipatesininternationalintegrationpro-cesses.

TodayBelarushastraderelationswithmorethan180coun-triesaroundtheworld.RussianFederationisthemajortradepartneroftheRepublicofBelarus,itaccountsfor40percentofexportandmorethanahalfofvolumeofanimport.TheEuropeanUnionisthesecondlargesttradepartneroftheRepublicofBelarus,itaccountsmorethan28percentofex-portandonefifthofimport.ThemainpartnerintheEUaretheNetherlands,Latvia,Germany,Poland,Lithuania, Italy,GreatBritain,Belgium,CzechRepublic,France.Belarushasbeendevelopingcooperationwithpartnersintheintegrationassociationsandorganizationsofthepost-Sovietcountries:CIS,EurAsECandCSTO.

Aneedtomitigatetheaftermathoftheglobaleconomiccrisisand launch structural financial reforms promptedmore co-operationwiththekeyeconomicandfinancialorganizationssuchastheInternationalMonetaryFund,WorldBank,Euro-peanBankforReconstructionandDevelopment,UNEconomicCommissionforEuropeandUNConferenceonTradeandDe-velopment(UNCTAD).

5.1. fdi on net Basis

On17April2013StandardandPoor’supgradeditsoutlookonBelarussovereignratingfromstabletopositive.Accordingtotheagency,strengtheningeconomicstabilitywasbroughton by tightened monetary and fiscal policies. The benefi-cial changemeansmore than a pleasant evaluation of thecountry’sperformance,butalsoasignaltoforeigninvestors,whichBelarusneedsnowmorethanever.ThefactssuggestthatBelarus’politicsplaysa lesssignificantrolefor foreigninvestments’inflowthanonecouldimagine.Evenmore,sta-tisticsshowsincreaseofinvestmentsintoBelarus.

GrowthofthegrossvolumeofforeigninvestmentsregisteredinrecentyearsinBelarus,andmoresymbolic,theincreaseof foreign direct investment in them. Thus, for example in2006, this figurewas18.5%,and in2012theshareofFDIwasabout74.1%.

ThegrowthofFDIonnetbasisin2011isrelatedtothesellingof 50% of shares of the OJSC “Beltransgaz” for USD 2,5billion.In2012FDIonnetbasiswasUSD1,4billion.In2013,foreign investors invested USD 15 billion of gross foreigninvestments in the real sector of the economy of Belarus,including$2,1billionforeigndirectinvestmentonnetbasis.

Foreign direct investments on net basis (without due account for the indebtedness to direct investor for goods, works, and services), mln USD

SOURCE: National Statistical Committee of the republic of Belarus

2011 2012 2013

3973,6

1376,52136,2

4500

4000

3500

3000

2500

2000

1500

1000

500

0

2013 TOP-10 of donor-countries of FDI on net basis to the Republic of Belarus

SOURCE: National Statistical Committee of the Republic of Belarus

Russia 35,6%

36%20%

16%

2%2%2% 3% 4%

5%

5%

6%

Cyprus 20,2%Switzerland 5,6%USA 4,9%Austria 4,8%United Kingdom 3,8%Germany 2,7%Netherlands 2,3%Liechtenstein 2,0%Latvia 2,0%Other donor countries account for 15,9%

2013 TOP-10 of donor-countries of FDI on net basis to the Republic of Belarus

SOURCE: National Statistical Committee of the Republic of Belarus

3%3%

2% 4%

Industry 32,5%Finance 18,3%Real estate 15,3%Transport and communications 11,1%Trade 10,5%Restaurants and hotels 3,2%Construction 2,8%Agriculture 2,1%Other sectors 3,9%

33%

18%15%

11%

11%

MinskBudapest2 h

2 flights a week

Minsk Frankfurt 2 h

3 flights a week

4544

5.2. Belarus–russia relations

RussiaisthelargestandmostimportantpartnerforBelarusbothinthepoliticalandeconomicfields.

RussiaisakeytradepartnerandamajorexportmarketforBelarusian goods. Over the previous ten years, the Belar-us-Russia trade turnover increased more than four times,reaching$39.5billionofmutualtradein2013.

BelarusrankedsecondintradewithRussiaamongthecoun-triesoftheCommonwealthofIndependentStates(CIS),tak-ingupthesixthplaceamongallmajorRussianforeigntradecounterparts.

In2013Russiaaccountedfor49.6percentoftheaggregateforeigntradeand45percentoftheBelarusianexports.Theexportsincreasedby3percentandreached$16,8bn.

BelarusandRussiaachievedthehighestresultsinsuchsen-sibleareaofcooperationasenergy.FulfillingconscientiouslyitsinternationalobligationsinthesphereofenergytransittoEuropeancountriesBelarusmakesanimportantcontributiontoregionalenergysecurity.

AlongwithcooperationintheframeworkoftheUnionStateofBelarusandRussiathecountriessupportthestrengtheningofmultilateralrelationsandactivelyparticipateinotherintegra-tionprojectsonthepost-Sovietspace.

BelarusisalreadyinvolvedintheRussianprojectsofeconom-icintegration,suchastheCustomsUnionandtheCommonEconomicSpace,andtheRussianinfluenceisenhancedbythefactthatsincemid-2010,thecountryremainsthemostimportantcreditorofBelarus.

RUSSIANINvESTMENTSINBELARUS

RussiaisthemaininvestorintheBelarusianeconomy.

In2013Russiancompanieshaveinvested$5,140millionintheBelarusianeconomy.OntheshareofRussianFederationthereis36,5%ofthetotalinfluxofforeigninvestments.

ThedeepeningofcooperationbetweenBelarusandRussiaisanobjectiveprocessbasedon thewill of the twocountries.Russiahasalwaysbeenoneofthemainstrategictradepart-nersforBelaruswithhighinfluenceondomesticbusinessde-velopment.ThatiswhyRussianinvestmentsinBelarusplayasignificantrole.

InBelarus,therearesevenbankscontrolledbyRussianfinan-cial institutions,with theircapitalamounting toone-fourthoftheaggregatecapitalof theentireBelarusianbankingsectorthereare2,500businessesinvolvingRussiancapitalinBelarus.

PrimaryinvestmentcounterpartiesareRussiancompaniesin-terested in themodernization of Belarusian enterprises, andembeddingthemintheRussianproductionchain.

In2007and2011BelarussoldtoRussiaoneofitsmajoras-sets-theBeltransgazcompany,whichcontrolledthetransitofgasfromRussiatoEurope inBelarus.ThedealensuredthatBelaruswouldreceivediscountedgaspricesformanyyears.

In2014RussiaandBelarusagreedontheacquisitionofthreeBelarusianmilitaryandhigh-techlarge-scaleindustrialcom-plexes.

CUSTOMSUNIONANDCOMMONECONOMICSPACEOFBELARUS,KAZAKHSTANANDRUSSIA

Theconversionfromapartnertoavassalbecamemostno-ticeableduring thecreationof theCustomsUnionbetweenBelarus,RussiaandKazakhstan,andtheCommonEconomicSpaceconsistingofthesamecountries.Thefirstorganizationoriginatedin2010,thesecond–in2012.

Thesestructureslaythegroundworkforthefunctioningofacommonmarket.

InJuly2010theCustomsCodeoftheCustomsUnioncameintoforce.TheCustomsUnioneliminatedtariffandnon-tariffbarriersinmutualtrade,unifiedandgreatlysimplifiedforeigntradeprocedures,liftedcontrolsatinternalborders.Allthesehasensuredthe freemovementofgoodsbetweenBelarus,KazakhstanandRussia.

StartingfromJanuary1,2012SECopenedthewayforthecre-ationofessentialconditions in the fieldof freemovementofgoods,services,capitalandequalconditionsforbusinesses.

IntheframeworkoftheCESotherthanthefreedomofmove-mentofgoodsthefreedomofmovementofservices,capitalandlaborisalsoensured.

In the CES coordinatedmacro-economic policies based oncommonprinciplesand rulesof competitionand regulationofnaturalmonopoliesareprovided.Thestateshaveagreedoncommonapproachestothesupportofindustryandagri-culture,aswellastheimplementationofpublicprocurement.

CES contracts recorded to ensure non-discrimination andequalaccessofpartiestoservicesofnaturalmonopoliesintheelectricity,gastransport,railtransport,includingtheba-sicsofpricingandtariffpolicy.

MinskGeneva3 h

3 flights a week

Minsk Hannover 2 h

2 flights a week

FDI net flows from Russia, thsd USD

2011 2012 2013

644069,6

2697350,2

173897,7

591898,1

2013

3000

2500

2000

1500

1000

500

0

4746

TodaycompaniesinvestinginBelarusautomaticallyenterthe180-millionmarketofthethreeCEScountries.

TheCESis

AcommoncustomsterritoryofBelarus,Russia,Kazakhstanwithasinglecustomstariff;Equalbusinessconditions(includingthecostsoftheprinci-palenergyresources);Singlerulesoftechnicalregulation,singlesanitary,veteri-nary,andphytosanitarynorms;Freemovementofgoods,services,capital,workforce.Exemptionofprocessequipment,rawmaterialsimportedtoimplementinvestmentprojectsfromimportcustomsduties.

On theeveof accession to theCES,PresidentsofBelarus,RussiaandKazakhstansignedtheDeclarationoftheEurasianeconomicintegration.Thefinalgoalofintegrationisthetran-sitiontotheEurasianEconomicUnion.TheUnionisplannedtobeformedby2015.

JoiningtheCommonEconomicpromisesbothplusesandmi-nusesforBelarus.

RUSSIA’SACCESSIONTOTHEWTO:IMPACTONBELARUS

The Russian Federation became amember of theWTO onAugust,22,2012.andthereforebindeditselftoreducetariffsthatautomaticallymeanacutinimporttariffsinBelarus,duetocountry’sparticipation in theCustomsUnionwithRussiaandKazakhstan.As a result, different industries inBelarushavebeenaffected,inparticular,thosethatproduceimportcompetingproducts.AtthedateofRussia’sWTOaccessiontheonly industry thatmaybesubstantiallyaffectedboth inBelarusandinRussiaistheproductionofmotorvehiclesforthe transport ofgoods.TheRussia’saccession to theWTOhas an impact onpharmaceutical products, televisions, re-frigerators,articlesfortheconveyanceorpackingofgoods,and truck tractors and trucks.Of theseproducts, the lattertwohavebeenaffectedmost.

BelarusianexportsofmeatandmilkproductshavealsobeenaffectedbyRussia’sWTOaccession.

However, by 2015-2017 Belarusian companies would beready for Russia’s fullmembership in theWTO. As for theharmonization of procedures to subsidize certain sectorsof theeconomywith theWTOnormstheprocesswouldbecompletedby2015.ThisisagreedintheprogramtoformaCommoneconomicspace.

BelarusfiledanapplicationtojointheWorldTradeOrganiza-tionbackin1993.CurrentlyBelarusintensifiestheprocessofaccessiontotheWTO.Belarusholdsitsnegotiationsonjoin-ingtheWordTradeOrganizationinfourmajorareas:bring-ing its national legislation in linewith theWTOmultilateraltreaties,accesstogoodsmarket,accesstoservicesmarket,statesupportofagriculture.ParticipationintheWorldTradeOrganizationisaprocessthatisofgreatinteresttoBelarus.

5.3. Belarus–european union relations. long Way from neighBorhood to partnership

Belarusisgeographically,historicallyandculturallyaninte-gralpartofEurope,situatedatthecrossroadsofmajortrans-portation and trade routes that link various regions of theEuropeancontinent.

FollowingtherecognitionofBelarusasanindependentstateinDecember1991bytheEuropeanCommunity,EC/EU-Be-larusrelationsinitiallyexperiencedasteadyprogress.

Since Belarus gained its independence it has establisheddiplomatic relationswithpracticallyall Europeanstates.28Belarusiandiplomaticmissionsandconsulatescurrentlyop-erate in the following21 countries of Europe: Austria, Bul-garia,Belgium,theCzechRepublic,Estonia,Finland,France,Germany,Hungary, Italy,Latvia,Lithuania, theNetherlands,Poland,Romania,Serbia,Slovakia,Switzerland,TurkeyandtheUnitedKingdom.

ThesignatureofthePartnershipandCooperationAgreement(PCA)in1995signaledacommitmenttopolitical,economicandtradecooperation.SomeassistancewasprovidedtoBe-laruswithintheframeworkoftheTACISprogrammeandalsothroughvariousaidprogramsandloans.

ImprovingtraderelationswiththeEuropeanUnionisapriorityforBelarusanditsbusinesses.Since2007thisprocesshasbeengreatlyaidedbythecreationoftheBelarus-EUBusinessCooperationCouncilwhichwassetupwithexpresspurposeofdismantlingtradebarriersandregulatoryobstacles.

CooperationbetweenBelarusandtheEUistakingplaceonbilateral and multilateral levels. Some promising relation-ships havebeenestablished already such as theEuropean

Among the benefits of Belarus’ accession to the Single Economic Space are favorable terms of deliveries of energy resources. At the same time Belarus now enjoys now an increased investment flow, a larger market and access to cheaper raw materials. In his opinion, tougher competition encourages manufacturers to use modern effective technolo-gies to make and promote products, encourages them to improve quality of products.

The tough competition entails considerable negative consequences for Belarusian manufacturers, particularly those that make consumer goods. First of all, they risk losing markets, with their financial status worsened. Unified business operation terms in the Single Economic Space restrict use of subsidies, invariably worsening economic and financial indicators of several industrial and agricultural enterprises.

Minsk Istanbul 2,5 h

4 flights a week

MinskHelsinki1,5 h

3 flights a week

4948

Commission’sEastInvestprogram.Eastinvestwas launchedin2011withthegoalofsupportingsmallandmediumsizedenterprisesinEasternEurope.BelarusEUBusinessCouncilisapartoftheconsortiuminvolvedwiththisprojectalongwiththeMinistryofEconomyandIndustryofBelarus.

EUassistanceinBelarus-priorityareas:

EnergyEnvironmentEducationSupporttocivilsocietyandindependentmediaRegionaldevelopment

Afewexamplesofongoingbilateralprogrammes:

Energypolicy:policyadviceonelectricitysectorreforms,energyefficiencynormsandstandardsandpromotionofrenewableenergyEnvironment:support to the implementationofBelarus’senvironmentalpolicies,pilotprojects in the fieldof solidwastemanagement,activities topromotegrassroots ini-tiativesinvolvingNGOs,schools,universities,businesses,localandregionalauthoritiesNuclear Safety: transfer ofWestern European regulatorymethodology and practices to the relevant authorities inBelarusFoodSafety:supporttoqualityinfrastructureinfoodsafetyandraiseawarenessonfoodsafetyrequirementsEducation:providingscholarshipsforyoungBelarusianstostudyatEuropeanUniversities

EasternPartnership:

ThealreadyexistingbilateralcooperationwithBelaruscon-tributestotheobjectivesoftheEasternPartnership.BelarusparticipatesinthemultilateraldimensionoftheEasternPart-nershipwith regionalprojectsmainly in theareasof: crossbordercooperation,environment,andeducation.Examples:

Eastern Partnership Territorial Cooperation Support pro-grammeEasternPartnershipIntegratedBorderManagementFlag-shipSurveillanceCapacityprojectEasternPartnershipIntegratedBorderManagementFlag-shipCustomsproject

Belarus-EUeconomiccooperation

MutualinterestswiththeEuropeanUnionmemberstatesarebased first of all on economic cooperation. Because evenagainst thebackgroundofdifficultpolitical relations theEUhas remainedoneof themain tradepartners,an importantsourceofcreditresourcesandinvestment.

The European Union is the second largest trade partner oftheRepublicofBelarus,itaccountsmorethan28percentofexportandonefifthofimport.

Inthepeakyearof2008theturnoverintradebetweenBelarusandtheEUamountedto23.0billion$,outofwhich14.4billion$wereexportsand8.5billion$–imports.ThebalanceoftradewasinfavourofBelarusandamountedto5.8billion$.

TradebetweenBelarusandtheEUsuffereda30%declinein2009-2010asaconsequenceoftheworldeconomiccrisis.

In2010Belarus–EUturnoveraccountedfor$15.1billion$.Be-larusianexportstotheEUshrankto7.6billion$,downnearly50percentcomparedto2008.ThebalanceoftraderemainedinfavourofBelarus,butdeclinedto57.0million$.However,theresultsoftradebetweenBelarusandtheEUin2011 confidently exceeded the pre-crisis peak indicators of2008.Theturnovergrewto24.2billion$,up61.1%comparedto 2010. Belarusian exports increased to 15.7 billion $, up106.9%comparedtoequivalentlastyear’sresults.ThetradebalanceinfavourofBelarusreached7.2billion$.

ThepositivedynamicsoftradewiththeEUcontinuedin2012,settingnewbenchmarksinalltradeindicators:turnoveradded11.0%and reached26.9billion$, andexports increased to17.6billion$,up12.0%comparedto2011.ThetradebalanceinfavourofBelarusstandsat8.3billion$.In2013Belarus-EUtradeexperiencedaslowdown:comparedto2012,turnoverdecreasedby21,8%andamountsto21bil-lionUS$,exportisdown40,2%at10,49billionUS$,importincreasedby12,9%andamountsto10,51billionUS$.

MinskKiev1 h

2 flights daily

Minsk London3 h

4 flights a week

Belarus-Eu trade in goods, 2003-2013, US$, billion

3,94

10,74

15,85

15,15

24,38

26,81

20,97

20

10

-10

0

2000 2005 2009 2010 2011 2012 2013

Turnover Export Import Balance

2,09

7,13

9,30

7,60

15,70

17,51

10,46

1,85

3,61

0,23 3,52

2,76 0,05 7,01

8,22 -0,05

6,557,55 8,69

9,29

10,51

9,29

8,22

5150

EuropeancompanieskeepexpandingtheirpresenceinBelar-usandupgradingtheirexternaldistributionandexport-pro-motion networks. A number of European commercial andinvestment projects are underwayGreatBritain, Germany, Italy, Lithuania, Poland, the Netherlands, France, the Czech Republic and Estonia.

ComprehensivecooperationwiththeEuropeanUnioncontrib-utescruciallytothecountry’sincreasinglydiversifiedforeigntrade, investmentactivity,modernizationandgrowingcom-petitivenessofitseconomy.

EnsuringcomplianceofBelarusianproductswithEuropeanqual-itystandardsisavitalelementofthenationalexportpromotionpolicyinEurope.Thenationalstandardssystemincreasinglyhar-monizedwiththeEUnormsandregulationsisakeyforbetteraccessofBelarusiangoodstotheEuropeanmarket.

One of priorities in Belarus’ cooperationwith the EuropeanUnion is attracting European investments, first of all in re-search-intensive and high-tech sectors, agriculture, energyefficiency,alternativeenergyandtransitareas.

TheEUisthelargestsourceofFDIinBelarus.StatisticaldatashowanincreaseinEuropeaninvestmentsinBelarusagainstabackdropofdeterioratingBelarus-EUpoliticalrelations.TheFDInetinflowfrommanyEuropeancountrieswasconsiderablein2011-2013despitetheeconomicsanctionsimposedbytheEU.

MinskManchester3 h

1 flight a week

Minsk Milan3 h

4 flights a week

DE

NL

PL

IT

LT

UK

LV

CZ

FR

BE

4788

3786

2371

2010

1543

3035 443 1589 1107 466 401 147 496 496 3661753 3343 782 903 1077 1028 529 96 92 1984788 3786 2371 2010 1543 1429 676 592 588 564

1429

676

592

588

6000

5000

4000

3000

2000

10000

564

TurnoverExportIm

port

US $, millon

The TOP-10 trade partners of Belarus within the EuropeanUnion in 2013 were Germany, the Netherlands, Poland, Italy, Lithuania, the United Kingdom, Latvia, the Czech Republic, France and Belgium

FDI net inflows from the European Union countriesm thsd USD

800 000

700 000

600 000

500 000

400 000

300 000

200 000

100 000

0

614552,5

462472,7

726 052,4

2011 2012 2013

5352

Altogether,Europeancountriesinvestedmorethan8bndol-larsinBelarusin2014.UnitedKingdom,Cyprus,Austria,theNetherlandsandItalyaretopinvestorsinBelarusianeconomy.

LeadingEuropeanmultinationalcorporationssetuptheiraffil-iatesorjointventuresinBelarus,includingMANN(automobileproduction),SBTelecom,AlcatelSEL (mobileGSMsystemsand switching systems), Frezenius (production of medicalinstruments), AXAGroup, Generali Group (insurance and fi-nancialservices),Uniliver,DanoneHeinekenHoldingCarlsbergHenkelGroup(beveragesanddairyproducts),etc.

BelarusisgeographicallyandmentallyclosetotheinvestorsfromWesternEurope.Conductingbusinessisrelativelyeasyfor European companies because the cultural environment,business practices, and customer expectations are similar.Belarus’businessetiquetteisalsosimilartothatofEurope.

InvestmentForumsorganizedbytheBelarusianGovernmentonaregularbasisinrecentyearsareanimportantwayofad-vertisingbusinessopportunitiesinBelarustoEuropeancom-munityandattractingforeigninvestmentstoourcountry.ThefirstForumtookplaceinLondonin2008,thesecondone–on17November2010inFrankfurt-am-MainduringtheEurope-anFinancialWeek.Inaddition,anumberofregionalbusinessforatookplacein2011incooperationwithItaly,Latvia,Lith-uania,Poland,theNetherlandsandSlovenia.

5.4. Belarus-china: toWards neW level of cooperation

TherelationshipwithChinahasbeenregardedasoneofthekeyforeignpolicyprioritiesofBelarus.Thetradeandeconom-iccooperationbetweenBelarusandChinahasbeenvibrantinrecentyears.ChinaranksfifthamongBelarusianpartnersanditsmaintradingpartnerinAsia. In2013ChinatookthetenthplaceintermsofexportsandthethirdplaceintermsofimportstoBelarus.

Since2006,tradeturnoverbetweenBelarusandChinahastri-pled.During2013 thevolumeof tradeofBelarusandChina(includingHongKong,MacaoandTaiwan)increasedby17%to

3,3billiondollarsascomparedto2012,BelarusianexportstoChinareached400milliondollars(up6%comparedto2012).Belarus’majorexportswerepotashfertilizersandcaprolactam.

MinskMoscow1,5 h

7 flights daily

Minsk Nice 3 h

3 flights a week

Belarus-China trade in goods, 2003-2015, mln USD

Export

Import

Turnover

2005 2006 2007 2008 2009 2010 2011 2012 2013

3500

3000

2500

2000

1500

1000

500

0

5554

There is a huge potential in developing all-round relations,including the investment sector.Chinapossesseswideop-portunitiesinBelarusandisreadytoinvestinpromisingproj-ects.Bothstrongstatecompaniesandprivatebusinessshowinterestinthiscooperation.

Chinese investment in Belarus has been growing steadilysince1992.In2013Belarushasattracted$31,3millionfor-eigndirectinvestmentfromChina.

Belarusisinvolvedintheimplementationof20majorprojectswiththesupportofChinaThetotalinvestmentforprojectsareatvariousstageofimplementation,estimatedat$16billion.

Recentlythetwocountrieshaveadoptedaroadmapforthenextfiveyears(2014-2018)tomovetowardsanewlevelofeconomic relations: from trade and credit cooperation to-wards investment cooperation. Over 150 projectsmay be-comepartoftheprogramdesignedtoguidethedevelopmentof Belarus-China strategic partnership till 2020. A numberofChinesecompanies thathave longbeenoperating in themarketofBelarushavealreadysubmittedsimilarinitiatives.China National Machinery Industry Corporation Sinomach,CITICConstructionannouncedtheirreadinesstoinvestintheBelarusianeconomy.

IndustrialPark“GreatStone”–aplacetonurturedreams

Industrialpark“Greatstone”isaterritorialentityofapproxi-mately91,5sq.kmwithaspeciallegalstatusfortheprovisionofcomfortableconditions fordoingbusiness. It isaspecialeconomiczoneinBelarus,establishedwithintheframeworkoftheChina-Belarusintergovernmentalcooperationandtherelevantsignedintergovernmentalagreements.

Industrial park in Belarus is a major cooperative projectfor deepening economic and trade cooperation and estab-lishing a strategic partnership between China and Belarus.

TheChina-BelarusIndustrialParkisthelargestandthemosthighlydevelopedoverseas industrialparkproject thatChinahasundertaken.Since thecooperationagreementwasoffi-ciallysignedbyandbetweenChinaandBelarus,theprojecthasattractedgreatattentionfrombothgovernmentsandisagoodexampleofcooperationbetweenthetwocountries.

IndustrialparkissituatedinSmolevichydistrict,Minskregion,inthedistanceof25kmfromMinsk,thecapitalofthecoun-try. Advantageous geographic position is stipulated by theclosevicinitytoMinskNationalAirportandinternationalhigh-wayM1whichextendstoMoscowonthenorth(thedistanceof700km),andtoBerlinonthesouth(thedistanceof1000km)aswellasithasaccesstoKlaipedaseaportintheBalticSea(thedistanceof500km).

Accordingtothemasterplan,approvedbytheGovernmentoftheRepublicofBelarus inJune2013,productionand livingareas,officesandshoppingmalls,financialandresearchcen-tersaretobelocatedattheterritoryofthePark.Anycompanyregardlessofcountryofcapitalorigincanactasaresidentoftheindustrialpark.

Realizingintensecompetitionforaninvestorintheworldmarket,thestatehascreatedafavorableinvestmentclimateforindustrialparkresidents,asguaranteedbythenationallaw,specialinter-nationalagreementsandobligations;hasprovidedunprecedent-edbenefitsandpreferences,hasformedaseparateandindepen-dentstateadministrationbodywhichcarriesoutadministrativeend-to-endservicingontheprincipleof“one-stopshop”.

AccordingtothespecialDecreeofthePresidentoftheRepub-licofBelarusasofJune5,2012whichwasupdatedin2014to take intoaccount the legal regimepractices in thePark,residentsaregrantedtaxpreferences.

TheactivitiesoftheIndustrialparkwillfocusonthedevelop-mentofmechanicalengineering,finechemical,biomedical,

manufacturingofhouseholdappliancesandelectronics.ThemainmarketsformanufacturedgoodsintheparkwillbeCIScountriesandEurope.

Inaddition,theindustrialparkwillofferreadyengineeringandtransport infrastructure provided by themanagement com-pany,goodgeographicallocation,optimizingtimeandtrans-portationcosts,disciplinedandqualifiedstaffofBelarusianlabormarket.

5.5. international economic organizations

Integration of Belarus into the world economy directly de-pendsontheinteractionwithvariousinternationalorganiza-tions,particularlywiththeInternationalMonetaryFund(IMF),theWorldBankGroupandtheEuropeanBankforReconstruc-tionandDevelopment(EBRD).

InrecentyearstheBelarusianstatemanagedtoreceivetherevisionofitstraditionalapproachesandsignificantextensionoftiesbytheBrettonWoodsinstitutions.

TheimplementationoftheIMFstandbyprogramfortheRe-publicofBelaruswithatotalamountofaboutUSD3,5billionhas finished.The InternationalBank forReconstructionandDevelopment provided a loan for development worth USD200million.Newjointprojects,includingprojectsonincreas-ing theenergyefficiency, thedevelopmentof infrastructureobjects in thesocialsphere, increasingthequalityofwatersupplyandsolidwastemanagement,thedevelopmentoftheroadinfrastructure,therehabilitationofareasaffectedbytheChernobyldisasterandanumberofotheraspectsareinthedevelopmentstage.

CooperationwithtwootherinstitutionswhichentertheWorldBankGroup–theInternationalFinanceCorporation(IFC)andtheMultilateral Investment Guarantee Agency (MIGA)— isdeveloping.

Minsk Prague 2 h

1 flight daily

MinskParis3 h

6 flights a week

5756

The total volumeof investmentsof the IFC in theeconomyof the country, including projects in banking, manufactur-ing, agro-industrial spheres, aswell as in the service sec-tor,amountedtoUSD316million.Anumberofprogramsofcounseling assistance of IFC to the Republic of Belarus onthedevelopmentoftheprivatesector,whichisaimedattheimprovement of business regulation and the promotion ofattracting foreign investments, aswell as the improvementofthefoodproductssecuritysystem,arebeingsuccessfullyimplemented.

In2011,frameworkagreementsontheuseoflocalcurrencyandlegalprotectionofguaranteedforeigninvestmentshavebeen signed with MIGA, thus, creating the most favorableconditionsforattractingforeigninvestmentstotheRepublicofBelarusbyinsuringforeigninvestmentsontheterritoryofourcountryfromnon-commercialrisks.

OverthemembershipperiodinEBRDBelarusreceivedloansforthedevelopmentoftelecommunications,themoderniza-tionoftheOrshaTPP,thereconstructionofthe

M1/E3OroadinthesegmentBrest-Minsk-Russianborder,thedevelopmentofsmallandmediumbusiness loanschemes,mortgagelending,exportguarantees.

CooperationwitheconomicorganizationsoftheUNsystem–the UN Economic Commission for Europe (UNECE), the UNConferenceonTradeandDevelopment (UNCTAD), theUnit-edNationsIndustrialDevelopmentOrganization(UNIDO)andothers–isdevelopingactively.

ConsiderableeffortsoftheUNECEareaimedattheunificationandstandardizationof theEuropean legislation in thesphereof transport, trade, energy, ecology and a number of otherspheres.OvertheperiodofmembershipintheUNECE(Belarushasbeenamembersincethecreationof theorganization in1947),thecountryaccededtodozensofinternationaltreaties,conventions,protocolsonawiderangeofeconomicrelations.

CooperationwithUNCTADisdevelopingratherdynamically.Itisfocusedonsolvingtheclassicaleconomicproblems:thedevel-opmentoftradeandattractionofinvestments,theimprovementofcompetitiveenvironmentandreformingofthetaxlegislation.

LegislativebasisandcomprehensivelegalregulationofpublicpropertyprivatizationissuesisformedwiththeparticipationoftheexpertsoftheWorldBankandInternationalMonetaryFund. Since 2011 a new Law on Privatization has been ineffectintherepublicwhichestablishednewprinciplesofpri-vatizationsuchaspriorityofrefundablewaysofprivatization,observanceoflawatallstages,andpublicity.

Belarusauthoritieshavenotconsideredprivatizationasapri-oritypartofthecountry’seconomyforalongtimebutinthe2011thenewlawswereenactedandlaunchedinordertoboostforeigninvestmentstotheBelarusianeconomy.Belarushasadoptedtheplanfor2011–2013forprivatizationofstate-ownedproperty.Theplanconsistedofover240state-ownedand state-controlled enterprises in various industries. Thecompaniesweremostlymiddle size, andbelonged to suchdiverseindustriesasproductionoffurniture,industrialequip-ment, and construction materials, transportation services,clothingandfootwear,foodanddrinketc.

The principles of privatization has been revised in 2012.Therewasdecisiontorefusefromthelistofenterprisessub-jecttoprivatizationandtoannouncethatanyofstate-ownedenterprisescanbeprivatized.

Additionally, in 2014 State Property Committee announcessale of sharesof87enterprises . Theauthority is going tosell the shares of 23 enterprises via auctions. Tenderswillbeheldtosellsharesof62joint-stockcompanies.Twomoreenterprisesaregoingtobesoldasonegroupofassets.

AuctionswillbeheldtosellthestateshareinthecharterfundofGlassFactoryyelizovo,vitebsk Instrument-MakingPlant,BrestRadioTechnicalPlant,thevitebsk-basedfactoryEvistor

andanumberofotherenterprisesrunbytheMinistryofIn-dustry, theDepartmentofEnergy, theMinistryofTransportandCommunications, theMinistry of Agriculture and Food,TheMinistryofCommunicationandInformationTechnology.

5.6. privatization in Belarus – perspectives and oBstacles

Theprocessofprivatizationof thestateproperty inBelarushasstartedinmid-1990s.In2011,businessentitieswithlessthan50percentofstateshareaccountedfor47percentofthecountry’sGDP.Todayprivateofforeignownershiphave75percentofretail,cateringandpersonalservicecompanies,about50percentofbuilding,communications, forestryandagriculture,andover30percentofthecountry’sindustry.

Work is in progress to hold tenders to sell shares ofOJSCGomel Building Structures Combine, BATE - the ManagingCompanyoftheHoldingCompanyAutocomponents,Manag-ing Company of the Holding Company Horizont, BelarusianSea Steamship Company, Air Company Transaviaexport,MozyrOilRefinery,Giprosvjazandothers.Belarusoptedfortargetedattractionstrategicinvestorstothestate-own-enterprisesratherthananacceleratedselloutofstate-ownedassetsofbigenterprises.Thoughseveralrecentmajorbillion-dollarprivatizationdealswereamongthelarg-estmergerandacquisitiondealsinEurope(forexample,sell-ingstatesharesin“Beltransgaz”andinJointventure“MobileDigitalCommunications”).

Thegovernmentplansistoraiseupto$4.5billionbysellingitsstakesincompaniestoinvestorsin2014.Thegovernmentwantsto invite investors insmallcompanieswhere itholdsless than25percent andbigger companieswhere it holdslessthan50percentaswellasinstrugglingcompanies.

Minsk Rome 2,5 h

2 flights daily

MinskRiga1 h

2 flights daily

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5.7. overvieW of m&a transaction in Belarus

Recently,M&Aactivity in theRepublicofBelarushasbeenincreasing. Despite the fact that in comparison with othermember-statesoftheCommonwealthofIndependentStates(CIS),thescopeofM&AtransactionintheRepublicofBelarusismuchlower,growthofM&AmarketinBelaruswasmorethan10timesascomparedwith2009.

Telecommunication,bankingand finance, retailandwhole-salesectorsarethemostattractivesectorsforinvestors.

M&AinBelarus(history)

2007-2008(highactivity):Themostattractiveindustries:FinancialSectorBreweryPrivatization

2009(lowactivity)Themostattractiveindustries:FinancialSector(thebulkofbuyoutbySberbankofBPS-bank)

2010 (renewal of interest inBelarus,new investors, small-scaletransactions):Themostattractiveindustries:PharmaceuticalsBankingSectorTourism

2011(fadingofinvestors’interest)Themostattractiveindustries:Privatization(Beltransgaz)

M&A–Belarus2013

2013canbeconsideredoneofthemostsuccessfulforBelaru-sianM&Amarketoverthelast5years.Accordingtotheexperts,thetotalscopeofM&AtransactionsinBelarushasincreasedby2,8timesin2013incomparisonwith2011andhasreached435

millionU.S.dollars.ThetotalvolumeofM&Atransactionsin2013amountedto82anditis3timesmorethanin2012.

The activity of local business has become a key driver formarketgrowth.92%of totalmarketwasmadewith the in-volvementofBelarusianequity.

ItisnoteworthythatM&Atransactionsaremostlyconductedintelecommunicationsandbankingsectors.Themostsignif-icantM&Atransactions in2013-2014onBelarusianmarketarethefollowing:

In2013,vTBGroupboughta25.95%stakeinvTBBank(Belar-us).In2014vTBGroupraiseditsstakeintheauthorizedcapitalofvTBBankBelarusupto100%,havingacquired2.63%ofsharesownedbyminorityshareholderstothetuneof$37million.Nowtheauthorizedcapitalof theBelarusiansubsidiary totals$45.6million.Themovewillhelp thebankstrengthen itsposition inthelocalmarketbothinretailandcorporateinvestmentsectors.The residentofGermanyH.M.Tankhaboughtout94%of theshares of CJSC Onerbank from Iranian owners in February2013.ThetotalamountofthetransactionswasEUR5.1million.

InMarch thegroupPPFbecametheownerofForeignJointCJSCPPFInsurance.100%ofcompany’ssharesweresoldatEUR2.4million.Thesellerwasanotherforeigninvestor–GeneraliPPFHolding(GPH).

Swiss company EUROSETHOLDINGSA bought out 99.995%ofthesharesofCJSCEurobank.TheamountofthetransactionwasEUR5millioninMay2013.

Polish companyFAMacquired55%of the sharesofCJSCBelmorflotatUSD55thousandinMay2013.

In2013,M&Aactivityhasgotmanytimeshigherascomparedtoanyperiodsince2009.Moreover,itwastheaccessionofBelarustoCommonEconomicSpacethatseveralmajorproj-ectswithgoodchancestobeimplementedwereannounced.

MinskSaint Petersburg1,5 h

2 flights daily

Minsk Stockholm2 h

4 flights daily

The volume of M&A transactions in Belarus

Sectoral analysis of M&A transactions in Belarus, by volume

IT and telecomsHeavy industryFood industryBanking sectorWholesale and retail tradingReal estatePharmacologyConsumer goods

The volume of transactions, mln. USD

The number of transactionsm units

500

450

400

350

300

250

200

150

100

50

0

90

80

70

60

50

40

30

20

10

02007 2008 2009 2010 2011 2012 2013

151

13

258

299

66

155

383

435

20

10

21

48

82

27

6160

Despite the fact thatM&Aprocesshas intensified, transna-tionalcorporationsdonottendtotakeactivedevelopmentoftheBelarusianmarket.M&AactivityinBelarusstillencoun-tersasmallamountofforeigninvestors.

It is hoped that the repeal of themoratorium on the turn-over of shares of companies established in the process ofpreferentialprivatizationand improvementof theconditionsof privatization shall have a positive impact on the invest-ment attractiveness of the country and appearance of newstrategic investors in Belarus. The development of the Be-larusianprivatesector isalsoexpected toattract largeandmedium-sizedforeigninvestorsandinvestmentfundsintheBelarusianmarket.

5.8. the perspectives of Belarusian companies’ ipos

TheissueofBelarusianenterprises’IPOonforeignstockex-changesacquiresmoreandmoreurgencynowadays,as intheunstablemacroeconomicenvironmentandsoaringrivalrywithforeignmanufacturesefficientandcompetitivebusinessunitsaccountcruciallytomaintaintheeconomyandactasamaindrivingforceofitsevolvement.

TheBelarusianenterprisesarecontemplatingtheideaofbe-comingglobalplayersontheinternationalstockmarket.

AsuccessfulexampleofBelarusianIPOsubsists–on8Febru-ary2012“EpamSystems”becamethefirstBelarusiancompa-nylistedonNySE,withastartingsharepriceof$12.Nowthesharesaretradedatabout$35asharewhichisequaltomorethan1,6billionUSdollarsmarketcapitalization.

TheopportunityofBelarusiancompanies’IPOsisconsideredregarding foreign stock exchanges, for the domestic one

(BelarusianCurrencyandStockExchange–BCSE)isinchoate-andisnotapttoensureprofoundcapitalization.TheexperienceoftwomajorBelarusiancompaniesthatwentpublicon(BSCE)indicatesthedomesticstockmarketbeingstronglysurpassedbyforeignones:inSummer2011sharesof“BorisovkiyZavodMedicinskihPreparatov”(BorisovMedicationPlant)werealmostnottraded(whereastheIPOwasorientedonforeigninvestors),inMay–June2012“MinskiyZavodIgristyhvin”(MinskPlantofSparklingWine)wasabletosell68.63%ofoverallsharevolume(attractingabout3millionUSdollars),whilst on foreign stockmarketsdemandsignificantlysurpassessupply.

IPO matters have gained high importance recently. Manydocuments now stipulate the components to improve thecountry’s financial market, the legislation and corporatemanagement.

Entry of several Belarusian enterprises into internationalstockmarkets isplanned for2014-2015.The listofenter-priseswasannouncedattheendof2012.ThelistincludesBELAZ,Gomselmash,MTW,BMZ,Horizont,andBATE.

2007–2011

2010

2010

2010

2011

2011

2011

2012

2012

2012

2012

2012

2012

2012–2013

Gazprom

Telecom Austria

Frank Muller International

Carlsberg

EBRD

Hydromashservice

Triple

Atlant Telecom

Interservice

RTL Holdings

HC

Alfa-Bank

Eurotorg

Servolux

100 %

30 %

52 %

17 %

35 %

57 %

49 %

100 %

53 %

100 %

100 %

100 %

92 %

100 %

Russia

Austria

Switzerland

Denmark

DFI

Russia

Belarus

Belarus

Belarus

Belarus

Belarus

Russia

Belarus

Belarus

5 000

459

12

11,7

6

9,5

5

Not disclosed

76

Not disclosed

5

31

4,7

85

M&A transactions, 2010-2013 (randomly)

Beltransgas

Velcom

Minsk Watch Plant

Alivaria

Atlant Telekom

Bobruisk Machine / Building Plant

Prostore

Solo

Amkodor

Wester

Yubileiny-92

Belrosbank

International Reserve Bank

Smolevichi Broiler / Poultry Factory

MinskTbilisi3 h

1 flight daily

Minsk Tel Aviv2,5 h

1 flight daily

6362

CHAPTER legal environment for foreign investments

6. legal regulation of investment activities

ThelegislationoftheRepublicofBelarustakesintoaccountthecurrentneedsoftheimplementationofinvestmentprojectsandprovidesthenecessarygovernmentsupportandincentivestoinvestors.Todaythecountryisoneoftheleadersinlegislationimprovementwhich is confirmedby theWorldBank’sDoingBusiness2014research.Asaresult,intheconditionsforbusi-nessBelarusoccupiedthe63thplaceoutof189countries.

Belarushas createdaneffective legal framework for the in-vestment business underpinned by international treaties andthenationallegislation.

6.1. international treaties

TheRepublicofBelarusisapartytotheInvestorRightsCon-vention(28March1997), InvestmentCooperationAgreement(24December1993),NewyorkConventionontheRecognitionandEnforcementofForeignArbitralAwards(1958). In1992BelarusjoinedtheConventionontheSettlementofInvestmentDisputes between States and Nationals of Other States (18March1965)andtheConventionEstablishingtheMultilateralInvestmentGuaranteeAgency(11October1985,Seoul).

Guaranteestoforeigninvestorsarealsoprovidedintheframe-work of bilateral agreements between Belarus and othercountries.Currently,thereare62agreementsonavoidanceofdouble taxationand58 treatiesonpromotionandprotectionofinvestments,includingAustria,GreatBritain,Germany,Italy,China,Latvia,Lithuania,Poland,Turkey,CzechRepublic,Swe-den,Switzerland,Finland,SouthKorea,etc.

6.2. national legislation

Toimprovetheinvestmentclimate,inJanuary2014,theLaw“OnInvestment”enteredintoforce.Itsnormsprovideaddition-alassurancesofdisposalofprofitsmadefrominvestmentandprotectionagainstinterferenceinaninvestor’sprivateaffairs.

ThefeatureoftheLaw“OnInvestment”isthenorm,accord-ingtowhichtheinvestorisnotlimitedwithrespecttowaysofinvestingandtypesoffundingsources.Therearenorestric-tionsintermsofinvestmentsandorganizational-legalformsofcreatinginvestororganizations.

6.3. protection and guarantees

TheStategivesaninvestorthefollowingguarantees:the right to private property and other proprietary andnon-proprietaryrights;theequalityofrightsandtheequalnondiscriminatorypro-tectionoftherightsandlegitimateinterestsofaninvestor;thestabilityoftherightstoperforminvestmentactivitiesandterminatethem;therighttoanindependentchoiceofactionandtheper-formance of actions related to the ownership, use anddisposaloftheobjectsandresultsofinvestmentactivity,including independentdisposalof the revenuesand freetransferofprofitsabroad;compensationofthemarketvalueoftheinvestedpropertyandrecoveryofotherlosssufferedbyaninvestorasare-sultofnationalizationorrequisitionallowedinexceptionalcasesonly;recoveryofthelossanddamageinflictedupontoanin-vestorasaresultoftheactionsofgovernmentofficials.

Insuranceofnon-commercialinvestmentrisksisavailableviaMultilateralInvestmentGuaranteeAgency.ThetreatyonlegalprotectionofguaranteedforeigninvestmentbetweentheGov-ernmentoftheRepublicofBelarusandMultilateralInvestmentGuaranteeAgencyhasbeenratifiedonMay04,2012.

6.4. methods for settlement of disputes

ToensureexecutionofinternationaltreatiesamediationandconciliationprocedurehasbeenformalizedbytheResolutionoftheCouncilofMinistersoftheRepublicofBelarusNo.146passedonFebruary14,2012.Aninvestormaysubmitawrit-tenproposalonadisputesettlementandwithinthreemonthstheproposalshouldbeconsideredandmeasurestosettlethedisputeshouldbetaken.Thedisputesnotresolvedinanout-of-courtprocedurethroughnegotiationsmayberesolved:in the arbitration court established to resolve each spe-cific dispute in accordancewith the ArbitrationRules oftheUnitedNationsCommissionontheLawofInternationalTrade(UNCITRAL);in the International Centre for Settlement of InvestmentDisputes(ICSID)incasethisforeigninvestoristhecitizenorthelegalentityofthestate–thepartytotheConven-tiononthesettlementofinvestmentdisputesbetweenthestatesandnaturalpersonsorlegalentitiesofotherstatesdd.March18,1965.

IncasetheinternationaltreatyoftheRepublicofBelarusand(or) theagreementconcludedbetweenthe investorandtheRepublicofBelarusestablishes,theprovisionsofthesedoc-umentsshallapply.

6.5. incentives and preferences

InBelarusthereareanumberofpreferentialregimeswhichcould be of use for foreign companies, including from thepointofviewoftheirtaxationplanningandoptimization.

6.5.1. high-tech park (htp)

High-Tech is the name of a special tax and legal regime,which aims to create favorable conditions for developmentsoftware,informationandcommunicationtechnologiesintheRepublicofBelarusandtoenhancenationalcompetitiveness.

MinskVienna2 h

2 flights daily

Minsk Vilnius0,5 h

2 flights daily

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UnlikemanyparksinEuropeorAsia,BelarusHTPisavirtualhi-techpark.ItmeansthatthelegalconditionsofBelarusHi-TechParkarevalidwithinthewholeterritoryofBelarus.Thisprincipleenables the resident companies to use educational, scientific,professionalandinfrastructuralpotentialofthewholecountry.

TheresidentcompaniesofBelarusHi-TechParkareexemptedfrom:profittaxandvATongoods(works,services)producedintheterritoryoftheRepublicofBelarus;customsdutiesandvATontechnicalequipmentimportedforrealizationofinvestmentprojects;obligationofcompalsorysalesofforeigncurrency;landtaxonlandplotswithintheHTPthroughouttheperi-odofconstructionbutnotexceedingthreeyears;realestatetax(exceptforleasedrealestate).

Furthermore, a reduced tax rate of personal income (only9%) isapplied toemployees in theHTP.Moreover, IncomereceivedbyaforeignentityfromaHighTechnologyParkres-identissubjecttowithholdingtaxataratenotexceeding5%.

6.5.2. industrial park

TheIndustrialparkisaterritorialentitywiththeareaofap-proximately80sq.kmwithaspeciallegalstatusforthepro-visionofcomfortableconditionsforbusiness.Anycompanyregardlessofcountryofcapitalorigincanactasaresidentoftheindustrialpark.

TheindustrialparkinBelarusofferstoinvestors:Preferential taxation: exemption fromall corporate taxesfor10yearsfromthedateofregistrationasaParkresidentandreductionoftheeffectivetaxrateby50%forthenext10yearsofactivityinthePark;Exemption from tax ondividend incomeaccrued for thefoundersfor5yearsfromtheyearofgrossincomeoriginofaParkresident;

ExemptionfromcustomsdutiesandvATongoodsimport-edtoBelarusforinvestmentprojectsimplementation;InfullvATdeductionpaidatacquisitionofgoods(works,services, property rights) used for design, building andequippingofbuildingsandfacilitiesinthePark;Regime of a free customs zone that gives the right toimport goods (raw stock,materials)without payment ofcustoms duties (customs, vAT, excise duties) subject tofurtherprocessingandexportoutsidethecountriesoftheCustomsUnion;Benefits for employees of companies operating in theindustrial park: rate of personal income tax is fixed andcomprisesonly9%;Exemptionfromcompulsoryinsurancecontributionsfromtheirwagesfund;Special procedure in respect of attracted foreign labourpower.

WhennewtaxesandfeesareestablishedontheterritoryoftheRepublic,obligationtopaysuchtaxesandfeesforParkresidentsdoesnotarise.

6.5.3. free economic zones (fez)

TheRepublicofBelarushascreatedsixfreeeconomiczones,providing residentswith significant benefits for the organi-zationofitsownproduction.AstheirresidentsonMarch1,2014registered494organization.

BusinesseswantingtoregisterinaFEZmustmakeaminimuminvestmentof$1million,butreceivethefollowingbenefits:Tax freeprofitsonallgoodsandservices for fiveyears,thena50%discount;50%discountonvATonimportsubstitutiongoodsmanu-facturedwithinanFEZ;NotaxesonrealestateownedorleasedintheFEZ;ExemptfrompaymentstoNationalAgricultureSupportFund;Notaxonpurchasingvehicles;

Nocustomsdutyonrawmaterialsandequipmentimport-edfromoutsideBelarus;Guaranteethatlegislationgoverningfirmswillnotchangeforsevenyears.

6.5.4. small and medium-sized toWns

Intotal184urbansettlementsinBelarusarecategorizedassmall and medium-sized towns. Commercial organizationswhichareregisteredsinceJuly1,2012andlocatedinme-diumandsmalltowns,ruralareasandcarryingoutactivitiesontheproductionofgoods(works,services)ontheirterritoryareexemptedwithinsevencalendaryearssincethedateofstateregistrationfrom:profit taxonsaleofgoods(works,services)ofownpro-duction;statefeepaymentsforgrantingaspecialpermit,itscor-rectionand(or)extension;paymentofothertaxesandduties(excludingvalueaddedtax,exciseduties,stampandoffshoreduties,statefees,patentfees,customsdutiesandcharges, landtax,envi-ronmentaltaxandanumberofothertaxes);mandatorysaleofforeigncurrencyreceivedfromthesaleofgoods(works,services)ofownproduction,includingtheleaseofproperty,receivedfromtransactionswithnon-res-identlegalentitiesandnon-residentnaturalpersons.

6.5.5. investment agreement

Investmentactivitycanbecarriedoutbysigningan invest-mentagreementwiththeRepublicofBelarus.Currently1615investmentagreementsareregisteredinBelarus.

Conclusion of investment agreement gives an investor theopportunity to receiveadditional legalguaranteesandpref-erentialconditionsfortherealizationofaninvestmentprojectincluding:

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constructionoftheobjectsprovidedbytheinvestmentproj-ect,inparallelwiththedevelopment,expertexaminationandapprovalofthesubsequentstagesoftheconstruction;simplificationofobtainingland,whichincludesleasingofalandplotwithoutholdingofanauction;exemptionfrompaymentofimportdutiesandvATonimpor-tationofequipmentandsparepartsfortherealizationoftheinvestmentproject;exemptionfromthecompensationforlossesofagriculturaland forestryproduction,causedbytheseizureof the landplot;exemption from thepaymentof thestateduty for the is-suanceofpermitstoattracttheforeignlabourforceintotheRepublicofBelarus;exemptionfromthetargetsfeestothelocalbudgets.

MoreoverBelarusianlegislationprovidesadditionalindividualbenefitsandpreferences,takingintoaccountthespecificsoftheproject.

6.6. Basic repuBlican taxes

LegalentitiesregisteredontheterritoryofBelarus,atthegeneraltaxationsystempaythefollowingmaintaxesandduties:PersonalincometaxIncometaxonindividualsisleviedat12%rateontotalincomederivedfromsourcesbothinandoutsidetheRepublicofBe-larus(forBelarusianresidents)andontotal incomederivedfromsourcesintheRepublicofBelarus(fornon-residents).

ProfittaxTheprofittaxispaidat18%ratebycompaniesoftheRe-publicofBelarus, foreign legalentitiescarryingoutactivityintheRepublicofBelarusthroughpermanentestablishment,partnershipsandeconomicgroups.A9%rateappliestoprofitfromthesaleofshares.

valueaddedtax20%-generaltaxrate;10%-saleofagriculturalgoodsproducedinBelarus;im-portand/orsaleoffoodproductsandgoodsforchildren;

importand/orsaleoffoodproductsandgoodsforchildren;0%-exportedgoods.

RealestatetaxThetaxisleviedonbuildingsandconstructions:1%forcompanies;0,1% for individuals, individualentrepreneursandcoop-erativesocieties;2%forcompanieshavingunfinishedover-normprojects.

LandtaxTheobjectsofthetaxarelandparcelswhichareowned,tem-porarily/permanentlyusedbycompaniesandowned,lifetimeusedwiththerightofinheritanceortemporarilyoccupiedbyindividuals.Taxratedependsonthecadastralvaluationofalandparcel.Taxbaseisequivalenttothecadastralvalueofalandparcelunlessotherwiseprovidedbytaxlegislation.EcologicaltaxThetaxratedependsonthetypeofpollution

Socialsecurityandinsurancecontributions:1%ofgrosssalary-foremployee34-35%ofgrosssalary–foremployers

IncomereceivedfromsourcesintheRepublicofBelarusbyforeigncompanieswhichdonotcarryoutactivityintheRe-publicofBelarusthroughpermanentestablishmentistaxedatthefollowingrates:6%-internationaltransportation;10%-interestincomeformdebt-claims;12%-dividendsandothersimilarrights;15%-royaltyandotherincome(limitinglistincludingallkindsoftransactionswithimmovableproperty);5% on dividends, interests, royalty and licenses if thesourceofincomeisaHi-TechParkresident.

SimplifiedTaxationSystemTogetherwithgeneraltaxationsystemtherearespecificre-gimesoftaxation,whichprovidereducedtaxrates.Depend-ing on set requirements on gross revenues and number ofpersonnel, themain tax rates under the simplified taxationsystemare3%and5%.

6.7. Business entities

6.7.1. forms of Business entities

There are 7172 enterpriseswith foreign capital, registeredinBelarusonJanuary2014.MostbusinessesinBelarusarelegalentities,organizedinformsofprivateunitaryenterprise,limited-liability company, closed joint-stock company, andopenjoint-stockcompany.

Number of participants

From 2 to unlimited

From 2 to 50

From 2 to 50

Only 1 owner of assets

Form of company(natural and

legal persons)

Minimal capital

requiremets

400 basic units (approximately

5 985 USD)

100 basic units (approximately

1 496 USD)

There are no minimum

requirements

There are no minimum

requirements

FormofcompanyOpenjoint-stockCompany(OJSC)OJSC is a company with stock of shares ofequalnominalvalue.Sharescouldbesoldfree-ly to any person without the consent of othershareholders. Shareholders are liable for theobbligationsoftheOJSCwithinthevalueoftheirshares.Thesecompaniesareallowedtoofferanunlimitedamountofshares.

Closedjoint-stockCompany(CJSC)CJSCisthemostcommontypeofJointStockCompany inBelarus.Thesharescouldbesoldwiththeconsentoftherestshareholdersorun-deritsarticlessharesmaybesoldtoalimitedrangeofpersons.

Limitedliabilitycompany(LLC)LLCisthemostflexibletypeofcompanystruc-ture. It is a profit organization, the authorizedcapital ofwhich is divided into shares. Partic-ipantsLLCwillbear the riskof losswithin thevalueoftheircontributions.

Privateunitarycompany(PUC)PUCisapopularchoiceamongforeigntradingcompanies.Itisacommercialorganizationwithonefounder (privateora legalperson),who istheownerofthepropertyofPUС.

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6.7.2. estaBlishing a company

ThecompaniesareregisteredinBelarusonthedayofappli-cationonthe“one-stopshop”basis.

TheprocedureofbusinesscreationintheRepublicofBelarusincludesthefollowingsteps:Step1:Сhoosetheorganizational-legalformofbusinessentity;Step2:Check theavailability and register thenameof thecompany;Step3:Findanofficeanddeterminetheplaceofbusiness;Step4.Formthemanagementbody;Step5:Preparecompanybylaws;Step6:Submitthedocumentsforstateregistration.AdditionalstepforCJSC/PJSC;Step7.Openthebankaccount;Step8.Conclude theAgreement tocustodyandconsultingservices.Registratethesharesinthestateauthority.

6.8. representative office

Therepresentativeofficesofanyorganizationmaybeopenedon the territory of the Republic of Belarus with a view toprotectand represent their interests,andcarryingout theiractivitiesonbehalfandinthenameoftheorganizationrep-resentedby suchoffice. The representativeoffice isnot alegalentitybutitisobligedtoregisterasataxpayerattaxingauthoritiesorotherbodies,andopenbankaccounts.Inordertoperformlicensableactivitiesoneistobegrantedlicence.

Therepresentativeofficeisdeemedtobecreatedontheter-ritoryof theRepublicofBelarus from thedateof obtainingpermissiontoitsopening.PermissionstoopenrepresentativeofficesshallbeissuedbytheMinistryofForeignAffairsforatermof3yearwithavailabilityofextensionforthesameterm.

Thestatefeeforissuingtheauthorisationonthesettinguporprolongationofactivitiesofarepresentationofficeshallbepaid

beforethereceiptoftheauthorisation.AccordingtoBelaruslegislation,therearethefollowingfees:foropeningandprolongationofthetermofactivityoftherepresentativeofficesof foreignorganizations in the ter-ritoryoftheRepublicofBelarus–65basicunits(approx973USdollars)foreveryyearofprolongation;foropeningandprolongationofthetermofactivityoftherepresentativeofficesofnoncommercialforeignorganiza-tions,alsotherepresentativeofficesofforeignorganiza-tions that carry out exclusively charitable activity in theterritoryoftheRepublicofBelarus–20basicunits(approx299USdollars)foreveryyearofprolongation.

Representationofficesarenotentitled tocarryonbusinessinBelarus.

6.9. privatization. legal frameWork

Privatizationisunderstoodtobethesaleoftargetsofprivat-izationtoacquiringentitiesonthetermsandaccordingtotheproceduresstipulatedbytheLawonPrivatization.

TheexistinglawoftheRepublicofBelarusenshrinesequalrightsforforeignandnationalinvestorsinparticipatinginpri-vatizationofthestate-ownedproperty.

Anindividualapproachisappliedtoprivatization,anyofferbyastrategicinvestorrelatedtoprivatizationofanyBelarusianenterprisemaybeconsidered.Theinformationonstateas-setsisopenandreadilyaccessible.

The investors are welcome to select privatization targetsthemselvesandsendbrieflettersofinteresttotheStateProp-ertyCommittee,theCouncilofMinisters,orabranchministry.

The decisions on privatization of state-owned property aremadebythePresidentoftheRepublicofBelarus,thoseonpri-vatizationofcommunalproperty-bylocalregulatorybodies.

PrivatizationObjects:Enterprises as asset complexes of state-owned unitaryenterprises;Equitystocks(sharesinauthorizedcapitals)ofeconomicoperators.

Waysofprivatization,denationalization:Sellingprivatizationobjectsatauctions;Selling privatization objects on the basis of competitivebidding(withinvestmentand/orsocialconditions);Selling equity stock of an economic operator possessedbytheGovernmentresultingfromfiduciarymanagementthereof;Contributingpropertyinauthorizedcapitalsofeconomicop-erators,includingonthestageofincorporatingajointstockcompanywhenrestructuringastate-ownedenterprise;AlienatingrealestatefacilitiespossessedbytheGovern-ment, including on a non-repayable basis when imple-mentinganinvestmentproject.

AsellerofthestocksistheStatePropertyCommitteeoftheRepublicofBelarus.Atenderoranauctionisopentoalllegalentitiesandindividuals,includingforeignones,withtheex-ceptionoftheBelarusianlegalpersons,whoseshareofstateownershipintheauthorizedcapitalis50percentormore.

Amajorwayofprivatizationaretenders(auctions,competitivebiddings).Theexistinglawprovidesanopportunitytoacquirestate-ownedpropertybyasingleparticipantofanauctionortender in casewhenanauctionor tender isdeemed tobefailedbyvirtueofthefactthatanapplicationforparticipationthereinhasbeenfiledbyasingleparticipantoronlyonepar-ticipanthasbeenparticipatedtherein.Insuchcaseasubjectofanauctionortendershallbesoldtosuchparticipantataninitialpriceincreasedby5%(provideditisacceptableforsuchparticipant).

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6.10. the m&a. legal frameWork

It shouldbenoted that therearenospecial legislativeactsregulatingM&AtransactionsinBelarus.M&Aisinsteadreg-ulatedby:generalprovisionsoftheCivilCode,theLowonInvestments,theLawonEconomicCompanies,andtheLaborCode;securities regulations (the Law on Securities and StockExchange, Presidential Edict on Certain Issues of EquityMarketRegulations,andresolutionsoftheMinistryofFi-nance);special regulations applicable to certain sectors, suchas banking and insurance (theBankingCode, Presiden-tialEdictonInsuranceActivities,decisionsoftheNation-alBankoftheRepublicofBelarusandresolutionsoftheMinistryofFinance);privatizationregulations(theLawonPrivatizationofState-ownedPropertyandReorganizationofStateUnitaryEnter-prisesinOpenJoint-stockCompanies,PresidentialEdictonDenationalizationandPrivatizationofState-ownedPropertyintheRepublicofBelarus,decisionsoftheCouncilofMinis-tersoftheRepublicofBelarus,andsubordinatelegislation);specialregulationsapplicabletomergersandacquisitionscontrol (theLawonCounteraction toMonopolisticActivityandCompetitionDevelopmentandsubordinatelegislation).

Typesoftransactions

ThestructureofM&Atransactionsdependsonthelegalformof the targetandbidder.Differentpathswillbe followed inrespect of open joint-stock companies (public companies),closed joint-stock companies (private companies), unitaryenterprisesorstate-ownedcompanies.M&Atransactionscanbeaccomplishedintheformof:reorganization;acquisitionofshares;acquisitionofassets.

Reorganization

UnderthelegislationoftheRepublicofBelarus,reorganiza-tionmaybeeffectedthroughmerger,accession,separationorspin-off. It isworthmentioningthatasopposedtowest-erntakeoverregulations,incaseofreorganizationofalegalentity throughamergerat leastone legalentity involved inthemergerceasestoexistundertheBelarusianlegislation.Mergersmaytakethefollowingforms:mergerthroughconsolidationwheretwoormorelegalen-titiesmergeandformanewentity,whichbecomesasuc-cessortoallrightsandobligationsoftheprecedingentitieswhichceasetoexist;mergerthroughaccessionwherethesurvivingentitytakesoveratargetentitywhichisincorporatedintothesurvivingentityandceasestoexist, therightsandobligationsaretakenoverbythesurvivingentity.

Incaseofseparation,alegalentityissplitintotwoormorenewlegalentitieswhichbecomesuccessorstotherightsandobligationsoftheoriginalentitywhichceasestoexist.Incaseofspin-off,oneormore legalentitiesaresplitoff from theoriginallegalentity,andcertainrightsandobligationsoftheoriginallegalentity,whichcontinuestoexist,aretransferredtolegalentitiessosplit.

Acquisitionofshares

Acquisition of shares is the most commonly-used form ofM&A in Belarus and requires certain procedures to be fol-loweddependingonthelegalformofatargetcompany.Theacquisitionofsharesinopenjoint-stockcompanies,asarule,iseffectedonlythroughthestockexchange,withcertainexceptions. The acquisition of shares in closed joint-stockcompaniesmaybeeffectedover the counter by anoff-ex-changemechanism,however,subjecttoobligatory’registra-tionwiththetrader(stockbroker).Thetransferoftitletothesharesinallcasesmustberegisteredwithadepositary.

Acquisitionsofparticipatoryinterestsinlimitedliabilitycom-paniesandadditionalliabilitycompaniesareusuallyconclud-edinwritingwithoutanyspecialregistration.Notarizationofsuchtransactionsmightberequiredincertaincases.

ItshouldbenotedthatthereisaspecialtypeoflegalentityinBelarus-aunitaryenterprisewhichisownedbythesoleshareholder.Thepurchaseofaunitaryenterpriseisusuallyaccomplished byway of acquisition of such enterprise as asingle properly complex,which can be rather complicated.Specific requirements of such types of transactions makethemunattractiveandsometimes,inordertoavoidthecom-plicatedprocess,acquisitionsofunitaryenterprisesarecar-riedout in twostages-aunitaryenterprise is transformed(reorganized) into any other legal form, for instance, into alimitedliabilitycompany,atthefirststage,andthesharesofthelegalentityareacquiredatthesecondstage.

Acquisitionofassets

Acquisitionofassetshasanumberoffeatures.Thepurchas-ercaneitherpurchasecertainassetsownedby thevendorwithout acquiring a legal entity or can purchase thewholebusinessbymeansofacquisitionofa targetcompanyasasinglepropertycomplex.Suchproperlycomplexincludesalltypesofthetarget’sassetsandliabilitiesintendedforitsactivity,suchaslandplots,build-ings, installations,equipment, tools, rawmaterials,products,legal claims, debts, and intellectual properly (the companyname,trademarks,andsoon),andotherexclusiverights.

The properly complex is qualified as a special type of realestateandforthatreasontheassetsacquisitiontransactionisrequiredtoberegisteredwiththeStateRegistryofImmovableProperty.Therightsandobligationsassociatedwiththeprop-ertycomplexwillbepassedovertothepurchaserasofthemomentofregistrationof theassetsacquisitiontransactionandthetransferoftitletothepurchaser.

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The acquisition of legal entities as a single property com-plex isamorecomplicated transaction than theacquisitionthrough shares, because it entails additional preparatoryprocedures,suchasinventorying,evaluationofthepropertycomplex,notifyingofcreditors,andtaxconsequences.Therearealsootherrequirementsmakingtransactionsofthistypeunattractivetomarketplayers.

Employment

Employment relations within the framework of MSA trans-actionsare regulatedby theLaborCodeof theRepublicofBelarus.TheCodeimplementsthemainprinciplesofemploy-ees’ protection during M&A proceedings. According to theprovisionsoftheLaborCode,theacquisitionofsharesisnotlikelytoaffectemploymentrelations.

Incaseofchangeofownershipor reorganizationofa legalentity, the employment relationship cannot be terminatedwithout theconsentof theemployees.Wheres theemploy-ee fails to give such consent, the employment relationshipwill be terminated subject to severance pay in the amountofnotlessthantwo-weeks’averagesalary.TheLaborCodefurtherstipulatesthat,incaseofchangeofownershipofale-galentity,theemploymentrelationshipwiththeCEO,deputyCEOandChiefFinancialOfficercanbeterminatedbythenewownerwithouttheirconsentbutsubjecttoaseverancepayintheamountofnotlessthanthree-months’averagesalary.

Taxation

Taxation aspects in relation toM&A transactions are regu-latedbytheTaxCodeoftheRepublicofBelarus.IfanM&Atransaction is a cross-border deal, a double taxation treatywillbeapplied,ifrelevant.TheRepublicofBelarushasdoubletaxationtreatieswith65countries.

Theratesofwithholdingtax,profit taxof legalentities-res-identsandincometaxofnaturalpersons-residentsareset

at12%.Thecostsofacquisitionofsharesandsharecapitalcontributionsare tax-deductible. If the seller of shares is anon-resident,theprovisionsoftherespectivedoubletaxationtreatywillbeapplied.

Thesaleofproperty,asasinglepropertycomplex,leadstotheobligationofthesellertopaynotonlyincometaxattherateof24%forresidentsand15%fornon-residents,butalsovATattherateof20%.

It is worthmentioning that certain double taxation treatiesstipulatethatatransactionwithsharesofalegalentitywhoseassetsmainlyconsistsofimmovablepropertymightentailthesame taxconsequencesas in transactionswith immovablepropertyofsuchlegalentity.

Privatization

Oneof themostdistinctive featuresofM&Atransactions inBelarus is a considerably high level of acquisition of state-ownedcompaniesandproperty.Cooperationwithinvestorsintheprocessofprivatizationcanberealizedthrough:incorporationofanopenjoint-stockcompanybytransfor-mation (reorganization)ofastate-ownedenterprisewiththeparticipationofaninvestor;sale of a state-owned enterprise as a property complexandsaleofholdingsofsharesbyconductinganauctionoracompetition;directsaleofsharestoinvestors.

Thelistofstate-ownedpropertiesincludedintheprivatizationplanandthelistofopenjoint-stockcompaniesincorporatedintheprocessofthestatepropertyprivatizationaresubjecttoperiodicalapproval.

Thechoiceofaninvestorasafounderofanopenjoint-stockcompanyismadeonacompetitionbasis.Ifthereisonlyonepotentialinvestor,thedecisionismadebydirectnegotiations.

Payment of contributions (whethermonetary or non-mone-tary)tothesharecapitalofanopenjoint-stockcompanyinfullbeforethemeetingoffounderstakesplaceisoneoftheconditionsprecedenttochoosinganinvestor.

The shareswith the value equal to the amount paidwill betransferredtotheinvestor’sownershipupontheregistrationofthesharesandthestatutesoftheopenjointstockcompany.

Accordingtotheconditionsofsale,theownerofaprivatizedenterpriseisobligedtopayoffthedebtstothestateortoanyothercreditorintheappropriatemanner,topreservejobs,en-sureproductionandcommercialoperationsoftheenterpriseandfulfilothertermsandconditionsofthesaleagreement.

Loss-making state companies canbe sold to a legal entityby competition in the process of privatization. The sale ofloss-makingstatecompaniesisrequiredtobeconductedincompliancewiththefollowingconditions:realizationoftheinvestmentprojectandsocialprogramstosupportemployees;assuming of outstanding obligations of the loss-makingstatecompany;preservationofoldandcreationofnewjobsaccordingtotheinvestmentproject.

The initialsalepriceofa loss-makingstateenterprisecon-sistsofthepriceoftheenterpriseasapropertycomplexandofthepricetobepaidfortherighttoconcludeanagreementontheleaseofalandplot.Theinitialsalepriceofaloss-mak-ingstateenterpriseisestimatedtoconstitute20%ofitsval-ue.Iftheassessedvalueisequaltozeroorisnegative,theinitialsalepriceofsuchenterprisewillbeonebasicunit.

6.11. financial regulations

LegalnormscontainedintheinternationaltreatiesoftheRe-publicofBelarusareapartofthecurrencylegislationinforce

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intheterritoryoftheRepublicofBelarus.Iftheinternationaltreatyestablishesotherrulesthanthoseprovidedbythena-tionallegislation,therulesofthetreatyareapplied.

6.11.1. currency transactions and their fulfillment

Currency transactions carried out between residents andnon-residentsaredividedintocurrentcurrencytransactionsandcurrencytransactionsconnectedwithcapitalflow.

Current currency transactions shall be carried out betweentheresidentsandnon-residentswithoutanyrestrictionsandpermissionsoftheNationalBankoftheRepublicofBelarus,withtheexceptionofthecurrencyoperationsundergiftcon-tracts(includingdonations).

ThefollowingTransfersofforeigncurrencyshallbedeemedcurrentcurrencytransactionsfor:carrying out settlements on transactions stipulating exportand/orimportofgoods(withtheexceptionofmonetaryfunds,securities and immovable property), protected information,exclusiverightstointellectualactivityresults,works,services;makingsettlementsforleasing(financialleasing);transferandreceiptofdividendsandotherincomeoninvest-ments;transactionsofnon-commercialcharacter.

Currency operations connected with capital flow are those,whicharenotconsideredascurrentcurrencyoperations.TheresidentsasarulerequireapermissionoftheNationalBankoftheRepublicofBelarus.Toimplementthesetransactionsbynon-residentspermitsoftheNationalBankarenotrequired.

Settlementsbetweennon-residentsinBelarusianrublesandforeigncurrencyheldundertheaccountsopenedinthebanksandnon-bankcreditandfinancialorganizationsoftheRepub-licofBelarusarecarriedoutwithoutlimitations.

6.11.2. Banks account

Residentsandnon-residentshavetherighttoopeninbanksand non-bank credit and financial organizations of the Re-publicofBelarusaccountsinBelarusianrublesandanyfor-eign currency, official rate of Belarusian ruble to which isestablishedbytheNationalBank,inorderdeterminedbytheNational Bank. Belarusian companymay open accounts inforeigncurrencyandinBelarusianrublesinbanksandothercreditorganizationsbeyondtheRepublicofBelaruswhileob-servingtheorderandtermsestablishedbytheNational Bank.

BelarusiancompanyrequiresapermissionfromtheNationalBanktoobtaincredits and/or loansfromanon-resident, ifthereisatleastoneofthefollowingconditions:interestratefortheloaninUSDorEURexceeds14percentperannum;whileperformingoperations inother foreigncurrenciestherateofrefinancingoftherespectivecentralbankincreasesby5percentagepoints;defaultinterestrateforusingloanexceed0.01percentforeverydayofdelay(3.65percentperannum);thecontractstipulates,alongwiththeinterestrateofusingloan,aduty toperformotherpayments (except forpay-mentsforusingaloaninthecaseofthedefaultinrepay-mentofaloan,andthepaymentsforpayingthepenalty(fine,interestpenalty);fulfillmentofobligationson therepaymentof the loan iscarriedoutnotfromthecredit-holder’saccount;theloanistransferreddirectlytotheaccountofathirdpar-ty,withoutinitialtransferintotheresident’sbankaccount;thecreditorisregisteredinanoff-shorezones).

6.12. employment relations

Investors and commercial organizations established in theprescribedmannerwiththeparticipationoftheinvestorshallbeentitledtoattracttotheRepublicofBelarusforeigncitizensandstatelesspersons,includingthosenothavingapermitfor

permanentresidenceintheRepublicofBelarus,fortheworkactivity in the Republic of Belarus under labor contracts inaccordancewiththelawoftheRepublicofBelarus.

ThissphereofrelationsisprimarilyregulatedbytheLabourCodeof theRepublicofBelarus.Moreover, therearemanyotheractsoflegislationthatsettlemorespecificissuesofthissphere.AccordingtotheLabourCode,anemploymentcon-tractshouldbeconcludedinthewrittenform.Theobligatoryconditionsthatmustbeincludedintheprovisionsofthecon-tractarealsostipulatedbytheLabourCode.Thehigheststateauthoritythatisresponsibleforthepublicpolicyoflabourandemploymentof thepopulation istheMinistryofLabourandSocialProtectionoftheRepublicofBelarus.

6.13. intellectual property

ProtectionofintellectualpropertyrightsofinvestorsinBelar-usisdefinedbyanumberofnationallawsandinternationaltreaties.Thecountryisaparticipantofmultipleconventionsbothoncopyright,andproprietaryrights,interalia:ParisConvention for theProtectionof Industrialproperty(1883);ConventionEstablishingtheWorldIntellectualPropertyOr-ganization(WIPO)(1967);MadridAgreementConcerningtheInternationalRegistra-tionofMarks(1891);PatentCooperationTreaty(PCT)(1970);EurasianPatentConvention(1994);Universal(Geneva)CopyrightConvention(1952)etc.

BeingamemberoftheWorldIntellectualPropertyOrganiza-tion (WIPO) since1970,Belarusparticipates inmany inter-nationalIPagreementsadministeredbytheWIPO,i.e.PatentCooperation Treaty (December 25, 1991), Paris ConventionfortheProtectionofIndustrialProperty(December25,1991),MadridAgreementConcerningtheInternationalRegistrationofMarks(December25,1991)andSingaporeTreatyontheLawofTrademarks(May13,2014).

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BelarusisalsoapartytoseveralregionalIPagreements,e.g.Eurasian Patent Convention (August 12, 1995), AgreementonCooperationintheAreaofLegalProtectionofIntellectualProperty(August24,2011)withintheframeworkoftheCIS,AgreementonUnifiedPrinciplesofRegulationintheSpheresof Intellectual Property Rights Protection (January 1, 2012)within theframeworkof theEurasianEconomicCommunity(Belarus,RussiaandKazakhstan).

Belarusian legislation corresponds to the best internationalstandardsandallowsdomesticandforeignentitiestoprovidereliableprotectionandeffectiveuseof intellectualproperty,to receive additional revenue, competitive advantages andensuresstableandsecurethepresenceofgoods(services)onthedomesticandforeignmarkets.

Trademarks are protected in Belarus if they are registeredthroughinternationalornationalprocedure.TradenamesofforeigncompaniesareprotectedinBelaruswithoutformali-tiesifthetradenameoftheforeigncompanyisregisteredinamemberstateof theParisConventionor isgenerallyac-knowledgedtherein.Rightstoinventions,utilitymodels,industrialdesignsandselec-tionachievementsareprotectedifpatentsaregrantedforthem.

duetotheircreationthemselves.Thereisnoneedtoregisterthemor acquire any other documents enabling their protec-tion.Theyareprotectedbythelawsincethemomentoftheircreation.Inordertoget legalprotectionofother intellectualpropertyobjectsoneneedsaprotectiondocument:

forinventions,usefulmodels,productionpieces,selectedachievements–apatent;fortopographiesofintegralcircuits,trademarksandser-vicemarks,geographicalindicationsofproductorigin–acertificate;forbrandnamesoflegalentity–registrationoflegalenti-ty,foundationdocumentsofwhichcontainabrandname).

Protectionofrightsofintellectualpropertyobjectsisafunc-tionoftheNationalCentreofIntellectualProperty.

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2 flights a week

1)resultsofintellectualactivity:worksofscience,literatureandart;performances,phonogramsandbroadcastings;inventions,usefulmodels,productionpieces;selectedachievements;topographiesofintegralcircuits;undisclosedinformation,includingmanufacturingsecrets(know-how).

2)individualizationmeansofcivilturnoverofproducts,worksorservicesparticipants:brandnames;trademarksandservicemarks;geographicalindications.

3)otherresultsofintellectualactivityandindividualizationmeansCopyrightandadjacentrightobjectsaresubjecttoprotection

GDP

6

5

4

3

2

1

PatentTrademark

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012

Industrial Disign

IP Filings and Economic Growth ( Set first availabie year to 1)

SOURCE: WIPO statistics database; last updated: 03/2014

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

912

1,000

997

936

907

1,210

1,233

1,298

1,349

2,534

2,605

3,229

2,893

2,368

2,813

66

66

73

77

54

96

223

178

167

154

227

277

202

245

281

53.14

54.94

58.13

60.88

63.95

68.45

76.29

83.49

91.84

99.78

110.01

110.19

118.67

125.25

127.18

Year Patent Trademark Industrial Design GDP (Constant 2005 US$)

1,174

1,150

1,344

1,885

1,782

2,307

2,957

2,944

3,231

4,838

4,621

4,820

5,449

5,232

7,035

7978

DearSirorMadam!

LetmegreetyouonbehalfofBelgosstrakh,GeneralPartneroftheForum.

AstheheadoftheleadinginsurancecompanyoftheRepublicofBelarus,operatingsince1921,Iinviteyoutopartnermutu-allybeneficialcooperation.Belgosstrakhoffersacomprehen-sive rangeof insuranceproductsandservices fromclassiconestouniqueinsuranceproducts.

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Among the clients of our company are following entities:EBRD, IFC,UNDP,Coca-Cola,Carlsberg,Heineken,Danone,NokiaSiemensNetworks,HenkelBautechnik,etc.

LetmeexpressmyconfidencethatBelgosstrakhwillbecomeyourreliableassistantonthewaytosuccess in investmentactivityintheRepublicofBelarus.

Sincerelyyours,

S.yakubitskyDirectorGeneralofBelgosstrakh