The industrial park of Great Stone is the new great hope for the government of Belarus. The East European country wants to position itself as a platform for high-tech export-oriented and innovative manufacturing, as well as a key logistics and transport hub on the fastest growing trade corridor in the world, running overland from Asia to Europe.

It takes about half an hour to drive to the site where the Great Stone buildings are going up outside the Belarusian capital of Minsk. The land is flat and the weather grey as winter closes in. The forests along the roadside look a little beaten up after a millennial storm blew through here a few weeks ago, felling trees with winds that were strong enough to blow out some windows in office buildings in the capital.

 

But the construction site is a hive of activity, littered with the bright yellow diggers and giant trucks that you’d find on any large-scale construction project in Europe. Kirill Koroteev, first deputy general director of Great Stone, points out the buildings that are already rising above the tree line. All the basic infrastructure is in place; new roads that still smell of fresh asphalt run through the plot, an electrical substation is up and supplying power, and the road connections back to Minsk and on to the rest of Europe have been upgraded. From amongst the buildings, the administrative centre is half completed, most of the first of a series of large warehouses for the Chinese logistic tenant are almost ready and other several large buildings are well underway. “We broke ground in April and we are now well ahead of schedule,” Koroteev proclaims proudly.

The industrial park is the сore of a deal between the Belarusian government and China, which is in the process of building a new Silk Road from Asia to Europe, what it calls the One Belt, One Road project. Some $200mn has already been invested on the first phase of Great Stone, including $80mn on the basic infrastructure that is already completed, according to Koroteev.

When completed the whole park will cover 91.5 square kilometres, with the first phase accounting for 8.5 square km. Work on the next phase will start next spring, which will include recreational facilities on the banks of the river that runs down the side of the development plot. The concept is still under discussion, but one of the options is to create a sort of ‘northern Disneyland’, says Koroteev. “And work on the first phase of residential will also be started in early 2017 that will house some 10,000 people, but ultimately there should be accommodation for 180,000 when the park is finally completed.”

Chinese construction workers rub shoulders with their Belarusian colleagues and the general contractor is China CAMC Engineering Co. (CAMCE), a large state-owned company that was appointed as part of the financing deal.

 

Chinese anchors

China forms the backbone of the whole project and also the majority of the anchor tenants. Belarus has already built the highly successful High Technologies Park, making the small republic a big player in software engineering, and several Special Economic Zones (SEZ). However, Great Stone is on another scale entirely.

Currently, there are 20 companies that have signed up to work in the park, of which eight have already declared the minimum $5mn to gain the “resident” status that entitles them to tax breaks and other benefits the SEZ is offering. Of those eight companies, seven are Chinese working in pharmaceuticals, biotech, machine building, automotive and telecommunications. China Merchant Group, a logistic company, will operate the warehouses that are nearly ready.

The other non-resident companies come from Romania, Moldova, Austria and Russia among others, and are also involved in the pharmaceutical and chemical sectors. The sole Belarusian resident company, Belarus Nano Pectin Corporation, produces the chemical pectin from apples, which is used to reduce high cholesterol and prevent diabetes.

These tenants will form the anchor group at Great Stone, but to flourish it will have to attract more investors who want to take advantage of Belarus’ highly skilled, well educated, hard working but low-cost workforce, as well as the country’ strategic position on the path between east and west. Most of the rail traffic running from Western Europe to Asia already runs through Belarus.

 

Investment hopes

The interest in what was once called “the last dictatorship in Europe” by former Secretary of State Condoleezza Rice is growing as external relations improve. The problems that Russia has had in its relations with the West over the last two years have played to Belarus’ advantage. Last year the EU removed all its sanctions from the country and only a few US sanctions remain on individuals as the climate warms. 

Belarus’ reputation gained another important fillip when the first members of the opposition were elected to parliament in two decades in September’s parliamentary elections.

Belarus has also reached out to President-elect Donald Trump, saying it was ready to continue working together with the US to “in future normalise” relations between the countries, foreign ministry spokesperson Maria Vanshina said on November 9.

All this talk of change is not just cheap rhetoric. Last decade’s ‘Great Recession’ has also spurred the government to launch deep reforms that could mark the beginning of a “new paradigm”, say analysts at Berlin Economics – if they are implemented as advertised.

As a result of all this, foreign direct investment (FDI) has been growing and the republic now has an explicit policy of diversifying its investor base, instead of just concentrating on its traditional friend Russia. Belarus attracted $1.35bn of FDI in 2015, slightly down from the $1.83bn attracted in 2014, and President Alexander Lukashenko called for $1.5bn to be invested this year. “The Belarusian economy needs at least $1.5bn in FDI in 2016 to regain growth,” Lukashenko said in his national address on April 21, BelTA reported. “This will help us replace the internal resources we lack with the foreign sources.” He went on to say that China had offered a credit line worth $8bn and is now a major source of investment for the country.

 

In an effort to bolster sectors like agriculture and automotive, Russia in particular has taken to imposing administrative barriers to trade that should have been freer as part of the newly established Eurasian Economic Union (EEU). The upshot is that Belarus has become a lot more interested in developing trade with new partners and is actively courting not only China and Western Europe, but also countries in the Middle East and elsewhere.

That said, Russia is and will remain a key trade and strategic partner for Belarus. President Lukashenko met with his counterpart Russian President Vladimir Putin on November 22 and the two pledged continuing support and cooperation. “Belarus remains Russia's most important trade and economic partner, while Belarus is among Russia’s top five trade and economic partners,” Putin told Lukashenko in the Kremlin. “I must admit there was a slight drop last year and an 8% decline in the first half of this year, considering the obvious circumstances. However, we assume that these are temporary phenomena… Using the institutions we established with your active support, we can not only restore our ties, but also move forward.”

Great Stone will play a key role in these plans as China develops a transport corridor that stretches across the entire Eurasian land mass and opens up for Belarus direct access to very distant markets.

And it is going to happen. While much of the news coverage over the last two years has centred on the conflict between Russia and the West, the really seismic geopolitical change going on at the moment is China’s steady progress in creating its One Belt, One Road project – the land-based Silk Road Economic Belt and the oceanic Maritime Silk Road.

It has been buying up assets and investing in transport and logistics companies across Russia and Central Asia, investing in factories and especially raw material resources in the region, and steadily working towards linking the Western and Eastern Hemispheres. Minsk is hoping to be a major node on this route and the Great Stone industrial park is in the perfect place to play this role.