Belarus looks to “New Silk Road”

By bne IntelliNews July 18, 2014

Sergei Kuznetsov in Minsk -


Four years after the idea of a China-Belarus industrial park was first raised by the Belarusian authorities, construction is underway and the park’s first resident, the Chinese telecommunications group Huawei, has signed up. However, there are a lot of challenges left to surmount, including rivalry from similar projects in Russia and Belarus unfavourable reputation.

In late June, the park was named Great Stone by a special decree signed by the Belarusian president, Alexander Lukashenko. According to government officials, this ambitious $5bn project should attract more than 200 hi-tech companies and employ over 120,000 people. “However, it’s hard to predict how these plans will [pan out]. The first stage of the park will show how much interest there is in the project,” Kirill Koroteev, the China-Belarus industrial park’s deputy director general, tells bne.

The first stage of the park covers over 850 hectares. This space will be used, according to the marketing info, for “industrial, logistics and public facility purposes.” A 350-hectare strip bordering on Minsk’s international airport has been allocated as the starting zone for high-priority construction. “Currently, we are trying to raise funding for the starting zone,” Koroteev says, adding that the park is negotiating long-term loans with Export-Import Bank of China and China Development Bank. Loans of about $200m are being sought for the starting zone, while the entire first stage requires $500m-600m.

Some 60% of the park is controlled by two Chinese corporations - China CAMC Engineering and Harbin Investment Group. Koroteev believes that this fact, in addition to good political relations between the two governments, should allow the project to secure funding on favourable terms.

The territory of the China-Belarus industrial park is located 25 kilometres away from Minsk, near the M1 international highway that connects Russia, Belarus, Poland and Germany. “Most of the facilities are in the design stage… However, recently we began construction of the first premises in the starting zone. Infrastructure to the boundaries of the park are also being laid out,” Koroteev says.

“The China-Belarus industrial park will become one of the vital hubs on the New Silk Road Economic Belt,” the park’s marketing bumf reads. This statement is a reference to the new concept announced by Chinese President Xi Jinping during his visit to Central Asia last year. The president ambitiously proposed to strengthen relations between China, Central Asia and Europe, with an emphasis on economic ties.

Rivalry with Russia

As well as Huawei, Koroteev also reveals that another major Chinese telecom company, ZTE, could become a resident. “ZTE is defining its budget, and determining the line of products that they can be produced at the park,” he says.

But Koroteev believes that  other companies will wait until active construction of the facilities and infrastructure has begun before committing to the project.

The park faces other big challenges. “There is very strong competition from Russia, which has a serious state programme for the development of industrial parks,” Koroteev says.

The Belarusian authorities have repeatedly stated that one of the advantages of the industrial park is free access to the markets of Belarus, Russia and Kazakhstan through the Customs Union. However, Oleg Andreyev, managing director of investment banking at Minsk-based EnterInvest, tells bne that 145m of the total 170m population of the Customs Union live in Russia, and “there is no significant reason to open operations in Belarus or Kazakhstan.”

Moreover, there is always a risk that relations between members of the Customs Union will deteriorate. “And if something goes wrong in our relationship tomorrow, imports [to Russia] from Belarus could be restricted or quotas imposed,” Andreyev says.

The industrial park is open to companies from any country, not only from China and Belarus. However, it will be a tall order attracting western investors, due to EU and US sanctions imposed against Belarus’ government and companies in response to human rights violations and breaches of democratic standards during previous elections. “It’s not an easy task for us to fight for investors, also because of the specific relationship between Belarus and the EU. Many businesses will look at this point [and be deterred],” Koroteev admits.

And then there are the issues of the inability of Belarusian banks to provide “adequate financing” for companies looking to set up in the park, as well as a possible deficit of skilled labour to employ there. “Belarus already suffers from such a deficit,” Andreyev says.


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