Rachel Morarjee in Minsk -

Walking past a row of child-size yellow trucks in the Belaz factory museum, interpreter Natalia Petrashkevich points to a display of wall photos crowned by a Lenin flag. "This one is Valentina Tereshkova, the first Russian woman in space. Many important dignitaries have visited our Belaz factory," she says.

From the Soviet cosmonauts on the walls to the Lenin medals under glass in its museum, a visit to the Belaz factory is a step back in time to a place where communism meant cradle-to-grave welfare for workers. The state-owned company, which produces lorries, bulldozers and underground mining vehicles, also builds subsidised apartments for its workers. It runs a football team, has sports facilities and owns farmland, pigs and a dairy herd. Its cafeteria sells meals made from potatoes grown in Belaz fields. But all this will have to change if it is ever to become an attractive investment prospect for foreign business.

Belaz, which has a 30% share of the global market for heavy-duty dump trucks, is now seeking outside money as part of a wider drive to open up the Belarusian economy to foreign investment and reduce the country's dependence on Russian oil. Earlier this year, Belaz completed its financial restructuring and is now a joint stock company hoping to attract $25m of investment.

Although it has orders until the middle of 2011 and strong demand for its products, the factory's enormous welfare burden is likely to put off foreign investors. During the recent recession when the global mining industry slumped, Belaz did not lay off a single worker. "The welfare of our workers is paramount, so we are looking for the right foreign investor," First Deputy General Director Volchok Vladimir tells bne. "We have many families here where three generations of men have come to work for Belaz."

Changes

In many ways, the problems that Belaz faces in attracting foreign investment mirror the wider challenge of the Belarusian economy: how to maintain political stability and employment rates while attracting investors to modernise the ailing state sector?

Many Belarusian companies kept all their workers on during the recession, building up debts and inventories as the global economy slid downhill in 2008-09. Unemployment in the country is a meagre 0.9%, but what looks like a buoyant economy is not manifest in the street - there are few shops and the roads are almost empty of cars.

There will be presidential elections held on December 19, which will inevitably deliver a thumping victory for the incumbent, Alexander Lukashenko. But the big change for the country next year will be Russia's decision to begin charging Belarus world prices for its oil, breaking Belarus' long-held economic model of importing cut-price Russian oil, refining it and exporting it to Europe for a large profit.

July saw Belarus float its maiden $600m sovereign Eurobond to be redeemed in 2015, with a coupon rate of 8.75%. Only a month later, the country added a further tranche of $400m, and managed to pull the yield in to 8.251%. More recently, the state said it may issue another $1bn before the end of this year and also plans to tap the Russian market for some $500m. But although the government has been successful in borrowing on the international debt markets, the country badly needs to attract foreign investment and is now trying to attract business.

Economics Minister Nikolai Snopkov says the government has a two- to three-year privatisation plan and has begun laying the groundwork for a sell-off of state-assets. The government will trim the size of its departments and boost their efficiency, but hoped to avoid huge job losses. But with almost everyone in Belarus employed by the state, it's hard to see how greater efficiency would be possible without higher unemployment. "The role of the government is not just to deal with the economy, but to create an environment that maximises the potential of the people," Snopkov says.

When asked about how to reduce his dependence on Russian oil, he says he hopes that Belarus would become like Switzerland: "open, independent and free." But if Switzerland knows exactly how to market itself to foreigners from ski chalets to private banking, Belarus has a long way to go in understanding how foreign investors and tourists think.

Big game

With a third of the country covered by unspoilt natural forest, Belarus is trying to raise its profile as a destination for nature holidays on locally run farms and for hunters seeking unusual game - the country is the only place in Europe where bison still roam wild.

At the Ministry of Sport and Tourism, Deputy Minister of Sport and Tourism Nikolai Vakovitc boasts that while in the western wellness sector tourism focuses on spas and resorts where you don't have to be ill, Belarus has 102 sanatoriums where doctors can treat your ailments - conjuring up images of Victorian hospitals.

Rather than talking about farmhouses and nature holidays, he instead talks about how the country now has 1,200 "agro-tourism" complexes, leaving listeners confused about whether huge swathes of forest have been hacked down to build these complexes. In reality, many agro-tourism complexes are in fact privately owned farmhouses and with a bit of marketing could be popular with foreign guests. Just over an hour from the capital Minsk, is a charming woodland home called Mashin Hutor, selected by officials as an example of the kind of holidays Belarus can offer.

The wood panelled house has a banya with skylights that look up to the heavens so that visitors can take in the scenery after they have been for a sauna and is situated in a region surrounded by mushroom and wild boar-filled forests. They also have a library, and guests can relax with their books. "This one is good," says farmhouse owner Andrei picking up a biography of Lenin. "It's good for a snooze."