Belarus’ IT sector has become increasingly worried after Belarus strongman Alexander Lukashenko’s comments on its future.
Two weeks ago, Belarus’ Hi-Tech Park (HTP) said that they were not expecting any restrictive changes to the existing regulatory model for cryptocurrencies in Belarus. In fact, Belarus’ Ministry of Finance announced last week that it will further liberalise the investment climate for cryptocurrencies.
This all boded well for the Hi-Tech Park. But recent comments by Lukashenko, and the Belarusian security forces’ actions against members of the Park, are cause for worry. In a recent speech, Lukashenko referenced the high-technology sector workers in Belarus, and especially those who work in the HTP.
In a recent speech, Lukashenko said that these workers had been a common sight at the protests in 2020. According to him, this was because foreign IT companies outsource their work to companies in the HTP, and that these foreign companies had given the workers of the HTP direct orders to join the protests. Among the foreign companies active in the park, Lukashenko emphasised companies from the United States, especially Google and Microsoft.
While Lukashenko acknowledged that the HTP supported the Belarusian economy, he also said he was weighing the pros and cons of having the park. Belarusian state media reported him as saying "I need time to understand the processes that are taking place in the Hi-Tech Park. We will not act rashly or violate the law." One thing which Lukashenko said he had been considering was to put Belarusian IT specialists in the HTP “on an equal footing” with specialists who work in state enterprises or for the National Academy of Sciences.
At the same time, state-affiliated opinion makers have been arguing for depriving the Hi-Tech Park of some of its benefits. Besides this, political persecution of several business profiles and the searches of several companies’ offices made many leave the HTP and relocate to neighbouring countries. Ukraine’s upcoming launch of the “Diya-City” could, in combination with all the Belarusians fleeing to Ukraine, become a serious competitor to the HTP.
According to the IT news publication dev.by, a record number of IT companies were “liquidated” (closed) in Belarus during 2021. According to the publication, the amount of newly registered IT companies in Belarus had been declining since four years ago. Last year, while 427 IT companies were registered in 2021, a total of 261 companies had been “liquidated”. Two weeks ago, one of the world’s largest mobile game developers, Say Games, left the HTP.
In 2020, some companies initially left due to the political turmoil in the country. However, when the regime intensified repressions last year they started to search the offices of several prominent companies, detaining and sometimes arresting and charging leading business profiles and workers. Many companies relocated to neighbouring Poland, Lithuania and Ukraine, not only because they don’t want their offices raided, but also because they are chasing the IT sector’s workforce, who are continuing to leave Belarus for neighbouring countries.
Between January-November 2021, the trade balance of Belarus foreign trade in services turned out a surplus of $4.1bn. This can be compared to the trade balance of foreign trade in goods which saw a deficit of $0.12bn for the same period. During 2021, The Information and Communications sector contributed with 0.7 percentage points to the 2.3% growth in Belarusian GDP. The other 1.6 percentage points mainly consisted of export revenues received due to last years’ unusually high commodity prices, especially in fertilisers as well as wood and metal products.
An expanding IT sector which makes good use of the country’s highly educated population, attracts foreign investments and which repeatedly increases its year-on-year exports provides for highly positive structural development of the country’s otherwise quite debt-ridden and stale commodity-based economy. In the long run, if this sector keeps growing, it will most likely completely take over the Belarusian economy's growth.
Moreover, according to the Belarusian telegram channel Nashy Groshy, the companies in the HTP replenished the state budget by BYN736mn ($287mn) last year, this is BYN54mn more than the country’s agricultural sector, whose importance in the country’s foreign trade is often lifted by state Belarusian media. The Information and Communications sector in total paid BYN2.3bn to the state budget in 2021. This surpasses the amount provided by the construction sector by BYN500mn; this sector is another flagship sector for the country’s state media.
To summarise, the IT sector is still growing in Belarus, even if the increase in IT companies is slowing down. The cause of the slowdown in the sector’s growth can more or less solely be attributed to the regime’s repressions. That the regime is actually considering closing the HTP should feel doubtful; especially Lukashenko’s cryptic statement on the HTP makes one wonder if the regime is not just trying to scare the private sector. On the other hand, the regime has many times before made small and large rash decisions based on political reasons which have had serious consequences for the economy.
The HTP (and the private sector as a whole) has seen some of its benefits removed during 2021. What we can almost certainly be sure of is that stripping these benefits might continue, since the government will be trying to increase its budget revenues to support its stricter budget regime and the expected deficit for the state budget in 2022.