Belarus — squeezed as it is uncomfortably between Ukraine and Russia both geographically and economically — continues to suffer from the ongoing crises in and conflict between the two, according to Sorainen Belarus Managing Partner Kiryl Apanasevich, as well as the indirect but continuing affects of foreign sanctions, imposed on Russia as its closest trade partner and largest investor.
Apanasevich points out that Russia has traditionally provided about 50% of Belarus's foreign trade and foreign investment, with Ukraine usually also among the top in trade at least. As a result, and in light of the circumstances in which all three countries find themselves, he sighs, the Belarusian economy and market overall standing, again, “shows negative trends so far this year.”
The first quarter of 2016, in particular, Apanasevich reports, was “pretty dreary.” There were very few transactions in corporate/M&A, or banking/finance, and Real Estate, he says, “was totally down.” The GDP was declining, he said, and resulted in declared approximately 4% drop in 2015. Q2, he conceded, was a bit better, with international financial institutions starting to show some activity. He also pointed to several completed transactions mainly in IT industry, including Facebook's acquisition of Belarusian app developer Masquerade Technologies (which his office advised on) as a significant deal, as “already a sign of a maybe a slightly growing market.”
“Nevertheless,” he said, still referring to Q2 “GDP was down by another 2.5% over last year — which itself was already down from the year before. Real Estate remains dead, with no transactions of any significance, and Banking/Finance work has changed, with less work coming from trade finance and almost no project finance work, and instead more requests coming related to securitization and financial restructurings — which, he noted, “means that many corporate borrowers do not feel healthy.”
Q3, so far, “has been the most positive in terms of the micro-economy.” Apanasevich explained that inflation is going down and the State implemented a local currency denomination on July 1, and recent forecasts refer to an expected 1% growth for the next year. IT remains the most active sector, and international institutions seem to be showing more interest in Belarusian companies as a result of difficulties of various kinds they’re encountering in neighboring countries.” There’s also, Apanasevich reported, “a new wave of privatization-related issues,” including in the banking industry, and he refers to the Belinvestbank (the country’s fourth largest) contemplated privatization with the participation of the EBRD, and recent announcements that the Belarusbank — currently 100% owned by the Belarusian state — will potentially be looking for a foreign investor to take a minority share (perhaps 20%-25% in the next few years). Apanasevich referred to various infrastructure projects anticipated as well, which “should generate work for lawyers and also have an impact on the economy of the country in general.”
Finally, Apanasevich is able to smile at the shifting alliances and associations that have dominated news in the neighboring Baltic legal markets for the past 18 months, reporting that lawyers at firms in the Belarusian market, which is much calmer and more stable, are enjoying “taking popcorn and watching the show.”
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.
