It appears that Belarus is no longer able to develop without foreign financial injections. The country’s western-inspired reforms pursuing economic assistance of the West have been fruitless so far, while the situation in Russia will hardly let it resume the erstwhile subsidies to Belarus any time soon. Therefore, it is not surprising that Minsk has focused on its new strategic partner China that is expected to help it settle all its acute problems by investing billions of dollars in Belarus. In 2008-2010, when Belarusian officials were busy dwelling on promising cooperation with China, it was grounded at least ideologically, as the relations with Russia worsened then. Now, it is absolutely unclear what the Belarusian authorities are hoping for and why they have decided that Beijing will burden itself with the stalling economy of Belarus.
Belarus officially considers China as its major and most promising partner; even Alexander Lukashenko has repeatedly said this. The president has been meeting with representatives of the Celestial Empire starting from leaders of Chinese companies up to the members of the Communist Party. Almost everywhere, the Belarusian leader acts in accordance with the same scenario: words about long years of strong friendship, then - gratitude for the current and future assistance, and finally – hope for further cooperation and investments. In other words, the president of Belarus as before started personally searching financing without relying on his team. Yet, in the case of Beijing, Minsk’s too ambitious plans to raise Chinese investments look quite doubtful because of a range of reasons.
It should be recalled that during his annual State of the Nation Address this April, Alexander Lukashenko said, “this year, it is necessary to raise at least $1.5bln of direct foreign investments on a net basis to restore the economic growth.” On June 22, at the 5th All-Belarusian National Assembly in Minsk, Lukashenko even said that one of the government’s prior tasks is “to implement more than 80 major investments projects for more than $27bln and use at least $14bln from foreign sources” within five years. Such ambitious plans are based just on the unrealistic dreams of Belarusian officials, which perfectly demonstrate the current economic state of the country, in particular, the situation with foreign investments. Suffice it to say that in recent years, none of the government-set plans to raise investments has been implemented. The situation today is even worse. According to data of the National Statistics Committee, for the first half of 2016, foreign investors invested $47bln in the real sector of Belarusian economy, except the banking sector, which is by $1bln (or 17.5%) less than for the same period of 2015. By official statistics, most of the foreign investments are traditionally the debts to investors for goods and services. As economy suffers decline, Belarusian exporters try to prevent a growth of receivables and cut the delay in payments, while foreign partners respond the same way. This makes the situation even worse, though the Belarusian authorities officially say “we are getting out of the trajectory of decline as markets are awakening.” It is hard to say where officials get such information from, but they do believe that everything will be fine and China will help them overcome the current situation. Yet, it defies any logic.
During the recent years, Beijing has invested in the Belarusian economy very little funds, and it does not look like it is going to invest more. Deputy Head of the President’s Administration Nikolay Snopkov confirmed that fact addressing the second meeting of the Belarusian-Chinese Intergovernmental Committee for Cooperation in Minsk on August 18. In his words, “Belarus (for several times during the recent years – the euthor's note) relies on a transition from credit cooperation with China to direct investing.” Now, Minsk hopes to raise “at least $100mln of direct investments from China” for every region and the capital city by 2020. At the same time, officials do not say what has suddenly changed in the Beijing’s attitude to Belarus and why Chinese leadership should suddenly start actively investing in the economy of Belarus.
Populism and demagogy of the Belarusian authorities is reflected in official statistics. Last year, Russia was traditionally the key foreign investor in Belarus – 43.2% of total investments. UK and Netherlands accounted for 20.6% and 10.8% of total investments in Belarus, respectively. In the first half of 2016, the situation has almost not changed – Russia - 50.2% of total investments, UK – 20.5% and Cyprus – 7.5%. China was not among the key investors in Belarus neither last year nor in the first half of the current year. In 2015, Chinese investments accounted for some 3% of total foreign investments in Belarus (for instance, Austrian investments accounted for 3.1% of total). In the current year, China’s share in total foreign investments in Belarus was a bit more than 1%. Despite this, Minsk insists on the strategic role of China in restoration of the economy of Belarus.
On the one hand, the actions of the Belarusian authorities are clear, as formally the Belarusian-Chinese cooperation is promising. However, there are absolutely no signs that Chinese business activity has intensified in Belarus. Even the largest and most advertized joint project of the recent years - the Great Stone, a Belarusian-Chinese industrial park – is implemented not the way Minsk dreamed off. If it carries on like this, in the future the park will turn into a huge offshore storehouse of Chinese goods bringing nearly no benefit to Belarus. Minsk does not want to remain just a transport corridor for the products made in China and does it utmost trying to attract new Chinese investors on the most favorable terms for them.
On the other hand, it is absolutely clear that Beijing has nothing to offer to Belarus now. That is why it is naïve to pin hopes with more investments. Loud slogans and joint projects on paper coupled with the recently announced plans of the Belarusian Finance Ministry and Citic Construction Co. Ltd to create a joint investment fund with a start-up budget of $50mln speak of a deep crisis of the local economy and senior executives. Meantime, the leadership of Belarus needs to take practical steps to create favorable conditions for operation of foreign investors instead of dreaming of projects and building castles in the air. Having failed to carry out the privatization properly and refusing from close cooperation with Russian businesses, the authorities of Belarus still cherish illusions that their industry, agriculture, and science are interesting to anyone in the world. In fact, these are just dreams that will hardly come true with the help China.
Pavel Yurintsev
