WORLD CRISISAND

BUSINESS IN BELARUS

Mikhail Kovalev

Consumption and Savings Problems

high consumption level

hypothec boom

low savings level (mainly USA)

Barrier 1: restriction of capital in hypothec

Barrier 2: risk retail banking and rate of savings

Monetary ProblemWorld GDP2008= $60 689 bln – nominal

= $69 000 bln - by PPP

World Trade2008≈$14 000 bln

FDI ≈ $1 000 bln

New approach to the equation of quantity of money:

P∙GDP=MVCountry M3/GDP

Japan 134

UK 112

US 65

China

Ukraine 30

Russia 27

Belarus 15

USD Problem

USD: - world currency

USD: - national currency

Senyorage

Debt – $11 000 bln

China, Russia – new world currency (example: SDR)

Dynamics of Payment Balance in the USA

-455-417

2517

2337

2204

1997

1769

1514

1399

1370

14501070

-430

-485

-551

-670

-787

-838

-815

-681-673

-788

-811

-755

-640

-522

-460

-385

1836

1628

1446

1283

1157

1017

975

1084

2008

2007

2006

2005

2004

2003

2002

2001

2000

$ mlnDeficit of trade balance Deficit of current account Import Export

Creditors Ranking of the USA Government Treasury, $ bln

1. China 739,6

2. Japan 634,8

3. Oil Exorters 186,3

4. Offshore 176,6

5. Brasil 133,5

6. UK 124,2

7. Russia 119,6

8. Luxemburg 87,2

9. Taiwan 73,3

10 Hong Kong 71,7

11 Switzerland 62,1

12 Germany 56,4

Total: 3073

Source: finance.yahoo.com

Derivatives Growth (bln of contracts)

1512

108,58

6

0

2

4

6

8

10

12

14

16

2002 2003 2004 2005 2006 2007

Liberal Rules and ICT-opportunities turned the capital into the speculative one’s and create

disbalance of real and financial sector of economics

Source: WFE/IOMA 2007 Derivatives Market Survey

Source: Bank of International Settlements, www.bis.org

Source: Bank of International Settlements

Demographic disbalance

3/5 bln.

2,5/4 bln.

1/1 bln.

4 Silver billions

The rest of the world

BRIC (Brazil + Russia + India + China) + other asian countries

USA + EU 27 + Japan + Canada + Australia + et alias.

Population size 6,5 / 10 bln.

Golden Billion

14,3

2 + 2,3 + 3,3 + 7,9

+ 2 = 17,5

14,3 + 15,3 + 4,3 + 1,3 + 0,8 + 1,2 = 37,2

GDP by PPP in 2008. $69 000 bln

GDP by Purchasing-Power-Parity of world leading countries in 2008,

$ bln. (Belarus – $118,9 billion)

EU2715,3

USA14,3

Japan4,4

others19,5

Brazil2

Russia2,3

India3,3

China7,9

Consensus PrognosisGDP Growth

1Q09 09 10 11

USA -5.7 -3.0 1.4 2.4

Eurozone -2.5 -3.7 0.4 1.2

EU27 -2.4

Japan -4 -6.3 1.0 1.3

China 6.1 7.0 7.9 9.0

Economic Development Indicators of particular countries in 2008

CountryPopulation

(mln) Area

(km2)

GDP by PPP

(billion of intern. $)

Export of goods and services (billion of

$)

GDP by PPP

(thousand of $ per capita)

World 6 750 149 000 000 68 996 14 838 10.2

EU 27 500 4 324 782 15 247 2037 30.5

USA 306 9 826 630 14 264 1427 46.9

China 1 328 9 600 000 7 916 1067 6.1

Japan 127 377 873 4 354 773 34.1

India 1 148 3 287 240 3 288 194 2.8

Russia 142 17 075 400 2 260 334,6 15.9

Ukraine 46 603 628 337 49 7.3

Belarus 9.6 207 600 119 22 12.3

BUSINESS IN BELARUS

Business in Belarus Human and Labour Resources

0,935

0,87 0,862

0,804 0,8020,788

0,7

0,75

0,8

0,85

0,9

0,95

Germany (23) Poland (37) Lithuani (43) Belarus (64) Russia (67) Ukraine (76)

Population – 9,6 mln (UN: 2050 – 7,7 mln)Urban population – 73,4%

Workforce – 4,5 mlnLiteracy – 99,6%

Human Development Rank 2008

Business in BelarusUnemployment rate

4,0

0,81

1,0

1,2

1,5

1,93,1

2,7

2,32,12,1

2,3

2,8

2,9

2,1

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Q1

%

Source: IMF

Business in Belarus GDP Growth

8,310

1,2

8,1

9,9

9,4

11,4

7,05,05,0

5,8

3,4

11,4

2,802468

1012

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009Q1

%

Business in BelarusEnergy Shock

7,38,4

12,1

0,78

7,3

10,4

13,7

2,71,61,3 3,72,2

5,42,62,1

0,5

2,2 2,3 34,5

5,5

0,5

2,1

10,90,9

0,70,50,50,70

2

4

6

8

10

12

14

16

1996 2000 2001 2002 2003 2004 2005 2006 2007 2008

$ b

ln

export (oil products) import (oil products) gas import

22,2

27,6

37,3

30,4

41,8

2,2 2,85,3

6,7 7,8 7,1 6,4 7,6 8,59,3

11,6

15,7

18,2

23,8

17,9

17,2

12,29,898,1

6,78,18,7

7,35,83,22,6

-3

2

7

12

17

22

27

32

37

42

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Export Import

$ bln.

Business in BelarusThe secret of success: export

Problem: high import

Business in BelarusThe secret of success: export

1334 1277 1098 1171 13382071 2147

27273623

50786371

7664

9234

14428

516421348241232 8127317530

2000

4000

6000

8000

10000

12000

14000

16000

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

export in EU27 including Germany

Business in BelarusThe secret of success: growth of

agricultural production

6,6

-4,9

8,94,16,0

1,7

12,6

6,6

0,71,8

9,3

-8,3

-0,72,4

-4,7-10

-5

0

5

10

15

1995

1996

1997

1998

1999

2000

2001

2002 20

320

0420

0520

0620

0720

08

2009

, IV

%

Business in BelarusThe secret of success: export of

agricultural production

503605 638

832

11441329

1484

1816

2235

0

500

1000

1500

2000

2500

2000 2001 2002 2003 2004 2005 2006 2007 2008

$ m

ln

Business in BelarusThe secret of success: knowledge

ex. Export of IT-service in 1994 - 2008

49,5

160

94

26,417,517,412,36,75,33,95,92,11,10,2

0

50

100

150

200

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

FDI dynamics in Belarus in 2001-2008, mln. $

2279,8

1769

35130316396 453

170 28,9%

16%36,2%

374,7%

-20% -62,4%-4,6%

404%

0

500

1000

1500

2000

2500

2001 2002 2003 2004 2005 2006 2007 2008

-100%

0%

100%

200%

300%

400%

500%FDI, min. S Growth rates, %

Largest M&A 2007-2008GazProm is in the process of acquiring a control share holding of BelTransGaz ($2, 5 billion)Russian banks strengthened their position in Belarus through acquisitions of controlling stakes in 4 medium-sized Belarusian banks (VTB, Alfa Bank, VneshEconomBank, RosBank)Mobilkom Austria Group acquired 70% of a mobile service provider «MDC»(Velcom) for EUR 730 millionTurk Cell acquired formerly state- owned mobile phone operator BEST for USD 600 millionHome Credit Group (Czech Republic) acquired the controlling stake in «Lorobank»Getin Holding S.A. (Poland) acquired 75.04% stake in a Belarusian «Sombelbank» Baltic Beverages Holding (Carlsberg) acquired JSC «Alivariya» (3d largest beer-producer in Belarus)Heineken NV bought Syabar brewery, (2d-largest beer brand in Belarus) Heineken NV invested 6.4 Euro mln. In 51% stake in Rechitsa BreweryOlvi plc (Finland) acquired a majority holding in a Belarusian brewery Lidskoe Pivo for 16 mln.$

Business in BelarusExport of goods in 2008 - 2009

2419

,6

2651

,2 2939

,5

2852

3083

,1

3307

,732

38,9

3069

,5

3019

,726

62,1

1921

,7

1737

,112

99,6

1334

,5

1469

,3

0

500

1000

1500

2000

2500

3000

3500

january

febru

ary

mar

chapril

may

june

july

august

septem

ber

october

novem

ber

decem

ber

january

(2009

)

febru

ary

mar

ch

$ m

ln

Business in BelarusExport – Import of goods in 2008-2009гг.

2419

,626

51,2

2939

,5

2852

3083

,133

07,7

3238

,930

69,5

3019

,726

62,1

1921

,7

1737

,112

99,6

1334

,514

69,3

2623

,728

83,3

3257

,234

74,9

3461

,638

24,940

69,4

3650

,1

3540

,5

3317

,4

2542

,328

37,6

1761

,9 1977

,2

2230

,6

0

500

1000

1500

2000

2500

3000

3500

4000

4500

janua

ry

febru

ary

mar

chap

rilm

ayju

ne july

augu

st

sept

ember

octo

ber

novem

ber

decem

ber

janua

ry (2

009)

febru

ary

mar

ch

$ m

ln

Export Import

Business in BelarusGross External Debt

2,83,8 3,7

4,8

7,9

9,5

4,24,9 5,1

6,8

12,5

14,8

1

3

5

7

9

11

13

15

17

2003 2004 2005 2006 2007 2008

$ bln

Business in Belarus

64

45

15,6

1,5 3,6

16

35

47

12,3

36

0

10

20

30

40

50

60

70

Germany USA Poland Belarus Russia

$ t

ho

us

an

d

GDP by PPP per capita Gross External Debt per capita

Exports and Imports split by sector, 2008

export import

6,8

18,9

17,7

18,7

37,9

7,9

11,7

18,6

24,3

36,4Mineral products

Machinery, equipment andvehicles

Other

Chemical products, rubber,fibers, and filements

Food and agricultural rawmaterials

Business in Belarus

Dynamics of reserves in foreign currency

(2008 – 2009)

3

3,4

2,42,8

2,63,33,63,6

4,14,14,13,93,9

12345$ bln

Business in BelarusEase of Doing Business - Global rank

1

68 7085

103

120

145159

0

20

40

60

80

100

120

140

160

180

Singa

pore

Kyrgys

Kazak

hsta

n

Belar

us

Mol

dova

Russia

Ukrai

ne

Tajiki

stan

Business in BelarusRank of World Bank

2007 2008 2009Ease of Doing business 129 85

Starting a Business 148 121 97

Dealing with Construction Permits 84 93 65

Employing Workers 31 48 49

Registering Property 96 35 14

Getting Credit 171 126 109

Protecting Investors 142 101 104

Paying Taxes 175 181 181

Trading Across Borders 113 142 134

Enforcing Contracts 36 15 14

Closing a Business 91 72 71

Business in Belarus

Source: Doing Business, World Bank

Business in Belarus