The recession in the Belarusian economy that started in 2015 continues, says Ekaterina Zabello, Partner at Vlasova Mikhel & Partners in Belarus, who notes that she doesn’t expect it to recover significantly until 2017 or 2018 at the soonest.
The factors, she says, are well known: 1. The country’s close economic ties to Russia, its primary trading partner, which is itself in the midst of a serious economic crisis; 2. An economy dominated by state-run industries and companies; and 3. Decreasing exports. None of those shows any signs of abating anytime soon.
Zabello says the government has made various attempts to address these problems without much success, including the preparation of various action papers and plans and the efforts were aimed at the technological modernization of certain industrial sectors to increase the competitiveness of Belarusian products and thereby the amount of exports. “But the products are still not so popular on external markets, and the consumption of the Russian market, which is essential for the Belarusian exporters, has decreased,” Zabello reports, “and the situation won’t be getting much better any time soon.” She believes the amount of exports may even decrease in coming years.
Turning to another subject, Zabello points out that the Belarusian State controls “about 70% of the economy, making that part of the economy not so efficient” She says there have been a number of attempts at privatization over the years, but nothing successful of significance, except for certain transactions. “Investors have been waiting for mass privatization more than 20 years,” she says.
Ultimately, Zabello says, that according to the expectations of the World Bank there may be minor GDP growth next year (almost certainly less than 1%), “but real growth will take some time.”
At the same time, according to Zabello, “law firms are not generally in crisis,” and she concedes that some practices and firms remain active and show good results. Her own practice — Zabello specializes in Real Estate and Construction — falls into this category, she reports, noting that the recession makes it a good time for tenants and lessors, and a good time for big chain retailers to come into the country. "Property is cheap,” she says, “and there are no real local competitors, who are all in crisis.” As a result, “big players can come in and wait,” suggesting that a number of major chains have done just that in the past 12 months, including Leroy Merlin, Jysk, and Zara. As prices are at historical lows, “sellers are in crisis,” so it’s not a good time for developers, but it’s a good time for retailers — “not in terms of their general activity, but it’s a good time for investment” — and tenants.
In general the legal market is fairly stable, she says, “notwithstanding the fact that the market is in crisis,” and she points out that, as is common in such situations, firms with strong litigation/arbitration and bankruptcy practices are doing quite well.
There’s no real legislation of significance on the horizon, according to Zabello, and the only recent change of significance was the Amendment to Decree No. 10, regulating foreign investment issues, which entered into force this past spring. She notes that “the biggest aim of the government is to attract FDI,” and some of the changes enacted in that Amendment were quite good,” … but others were “not so good, and some actually made things worse.” She agreed with the suggestion that this sounds like a “mixed bag” at best.
In “The Buzz” we interview experts on the legal industry living and working in Central and Eastern Europe to find out what’s happening in the region and what legislative/professional/cultural trends and developments they’re following closely.