Belarus: Silicon Valley Of Eastern Europe

The former Soviet Union republic may be known for manufacturing tractors, but the region has its eye on becoming Eastern Europe’s Silicon Valley. This week, our Tech Center Roundup heads to Belarus to see how the nation has become one of the largest and most established places in Europe for information technology outsourcing.

Before we jump into the post, here are a few quick facts about Belarus and its tech scene:

• Belarus has an estimated population of 9.5 million people.
• The nation is known for its well-educated population and low labor costs.
• Exports from Belarus’s main IT hub totaled $705.6 million in 2015.
• Many global corporations are consumers of software development in Belarus, including Mitsubishi, British Petroleum, Reuters, British Telecom, London Stock Exchange, World Bank and Coca-Cola.
• Companies in Belarus are exempt from all corporate taxes, including value-added tax and profit, real estate and land taxes.
• The volume of Belarus’ exports of computer services ($60 per capita) exceeds that of the U.S. and India.
• In Martin Prosperity Institute’s annual Global Creativity Index 2015, Belarus ranked thirty-seventh.
• According to the World Bank, it is easier to start a new business in Belarus than in the U.S.

In recent years, the nation of Belarus has become known for its growing technology sector and has a well-established reputation for excelling in information technology and software development specifically.

According to a newly released report by the World Bank, the Economic Update for Belarus, to accelerate sustainable growth in the economy, there needs to be a focus on improving competitiveness and productivity of enterprises.

“A faster pace of structural transformation in Belarus — in combination with the global and regional recovery — would improve enterprise performance, strengthen the financial sector and increase household income in the medium term,” Young Chul Kim, World Bank country manager for Belarus, explained. “The ongoing challenges need to be overcome through strong policies in the enterprise sector. Improving the incentives system, factor utilization rates, streamlining and upgrading of product lines, and ultimately transparency and governance of state-owned enterprises will allow enterprises to move toward better profits and higher returns on investment. Activation of mechanisms of an orderly exit of inefficient companies has to be accompanied by commensurate safety net measures to protect living standards as well as support workers to acquire new skills.”

Over the last eight years, the latest Doing Business 2017 report confirmed, Belarus has ranked among the top 10 countries for starting a new business and offering business-friendly reforms.

Both micro- and small-sized companies have benefitted from ongoing enhancements to the domestic investment climate, which have helped to foster positive business growth.

“Creating a favorable environment for foreign direct investment (FDI) is an important task, as foreign investors can help Belarusian companies — both private and state-owned — to penetrate new markets, acquire new technologies and business processes and manufacture new products,” Karlis Smits, a senior economist for World Bank, noted. “The government has already made steps towards building a stable macroeconomic environment required to foster investment. The next steps require legislative and institutional changes to make the country’s economy a more attractive investment destination, building on its favorable geographic location, strong scientific and engineering capacities and strong labor skills.”

Belarus’ Global Ambitions

Many consider the country’s Hi-Tech Park, a 123.5-acre special business environment located in eastern Minsk, as one of the main drivers in creating a vibrant tech ecosystem.

According to the Wall Street Journal, industry insiders believe that the IT haven has helped to foster innovation throughout the country, despite the government’s reputation for keeping a tight grip over its state-dominated economy.

The Hi-Tech Park was launched back in 2005, which was considered a turning point for the country’s IT industry. The government-led initiative has been so influential on the tech sector that other similar ventures are already planned for other innovative sectors.

More than 164 companies call Hi-Tech Park home, and more than 25,000 employees are residents of the space. Since the start of the park, 41 percent of the companies there have been funded by Belarusian investors, while 35 percent were established by foreign investors and 24 percent are joint ventures, the WSJ reported.

“We’ve liked working in Belarus more [than in other countries] because work culture and work ethic and education and quality of people [are] on a very high level,” said Igor Magazinik, founder of messaging app Viber and Juno, a new ride-sharing app and challenger to Uber.