The latest legislation concerning the IT sphere highlights Belarusian authorities’ will to use the growing sector as a way to generate foreign investment and develop the national economy.
In recent years, the Belarusian government has taken steps to improve the country’s regional standing, boost the local economy and foster foreign investments. A key driver for this development has been the strengthening the local IT sector as it generates much-needed revenues for segments of the country’s young and highly-skilled population and creates incentives for global companies to invest in Belarus.
New legislation puts Belarus at the forefront of digital currency law
On 22 December President Alexander Lukashenko signed into law a new decree that offers incentives for foreign investors in the Belarusian IT sector. The bill signals the Belarusian government’s intent to partially liberalise the HTP, invest in digital technologies and use the momentum generated by the IT sector to drive economic growth.
The law is remarkable for its innovative stance on digital currencies. It is the first legislation in the world to regulate digital tokens, cryptocurrencies, including bitcoin, while giving a legal basis to initial coin offerings (ICOs), activities of cryptocurrency exchanges, and smart contracts. This provides Belarus with a new legal structure whose benefits are aimed at further developing growth around the momentum gathered by the Hi-Tech Park (HTP) in Minsk.
Among the incentives for investors in the HTP, all activities linked to cryptocurrencies will be exempt from taxes. In addition, all HTP resident-companies will have the right to employ IT-specialists through a specific visa-free policy in which professionals linked to the HTP can enter Belarus for up to 180 days a year without any limitation or work permit. The new law also expands the domain of activities in which HTP companies can operate. These now include artificial intelligence, cyber training, blockchain products, biotech as well as aviation and space technologies.
The IT sector: a driving force in Belarus
The IT sector is increasingly becoming a driving force of economic growth in Belarus. Belarus-based companies, such as Viber, World of Tanks and Wargaming, have been spearheading this revolution by developing key offerings that have gained global attention.
Beyond those ‘big names’, the sector is driving social change in the country. IT related jobs have been pushing wages upwards and leading to greater financial independence for Belarusian young professionals. The positive impact of these changes was highlighted by repeated statements issued by President Lukashenko, in which the Belarusian head of state calls upon all sectors of the national economy to link up with the IT revolution.
A wider strategy of gradual opening?
Boosting the IT sector and developing local economies are part of a wider initiative to improve Belarus’ investment appeal. The relative liberalisation of sectors linked to the IT sphere has been conducted in parallel to local authorities’ efforts to increase foreign travel and investments in the country.
This translated, for instance, into the introduction of a 5-day visa-free policy implemented in January 2017. The reform’s goal was to boost revenues linked to tourist expenditures in Belarus. Given the latest data, a year after the reform tourism revenues in Minsk already increased by 35 percent. During the same period, tourism-related revenues in Grodno increased by 40 percent.
As a result of this positive impact, the visa-free policy will be extended to a 10-day period for Grodno and Brest. In addition, Minister of Foreign Affairs Vladimir Makei stated that the government may be looking into ways of broadening the current 5-day visa-free policy to a period of 30 days.
The government is likely to build on this success by lobbying for Belarus to host international events, such as the 2019 European Games and the 2021 IIHF World Championship.
A strategy of gradual freeing up of travel and investment regulations dovetails with Belarus’ broader regional ambitions to position itself as a bridge between Moscow and Brussels, while maintaining its role as a key partner of Russia.
Risk outlook
Under centralised regimes like Lukashenko’s, there is an understandable wariness of arbitrary changes to regulation that would negatively affect foreign investors. However, in the case of the IT sector, there are strong reasons to believe that unpredictable government interference is unlikely. Changes included in the new law will run until 2049, providing a level of stability for those investing within the HTP.
Moreover, the recent legislation, alongside the development of the HTP in Minsk, points to a gradual shift in strategy: from being an IT outsourcing centre for international companies, to being an IT hub in the region. This is likely to translate in further measures taken by the government to liberalise the IT sector and enact additional fiscal and operational incentives whose goal is to facilitate the implantation of foreign companies in Belarus. In the coming years, it is also likely that authorities will capitalise on the current momentum by sponsoring higher education programs aimed at improving the local skills in business and IT-related fields.
Importantly the contained nature of the economic transformation means that it is controlled by local authorities and it does not generate a short-term challenge to the current power structure. Indeed, it provides much-needed growth and development to buttress the regime’s legitimacy. All of this means that Belarus’ IT revolution is not a political revolution.
