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BELARUS AND DEVELOPING COUNTRIES: LOOKING FOR NEW FORMS OF ECONOMIC COOPERATION
Andrei Yeliseyeu
Summary
In 2013, Belarus apparently intensified political relations with Turkey, South and Southeast Asia and some countries of Latin America. Having realized that it was impossible to boost commodity turnover using traditional cooperation patterns, Belarus shifted the focus on qualitatively new forms of trade and economic cooperation with third world countries1. This process, however, takes time, so that the results of many announced joint ventures remain very modest. Besides, the talks on free trade zones of the EurAsEC Customs Union and a number of developing countries have not led anywhere so far.
Trends:
• Considerable intensification of political, economic and trade cooperation with several partners in South and Southeast Asia, Latin America and Turkey;
• Continuous stagnation in economic and political relations with Iran, Syria, Egypt, Libya, and Iraq;
• Strategic (political) partnership with China, although benefits of trade and investment cooperation with it are quite unobvious;
• Minsk’s orientation on innovative forms of trade and economic cooperation;
• Expanded diplomatic presence of Belarus on the African continent.
Political and diplomatic relations with developing countries
The year 2013 saw plenty of political and diplomatic contacts between Belarus and developing countries. Below is a brief description with respect to the geographical setting. *
For conceptual convenience, the author considers the EU and associated states, the United States and Canada in North America, Australia and New Zealand in Oceania, Japan, South Korea, Singapore, Taiwan, and Israel in Asia, and the Southern African Customs Union “developed” countries and regions. The countries of former Yugoslavia, CIS republics and Georgia are not related to the category of “developing countries” here.
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Latin America: Belarus cultivated close relations with Bolivia and Ecuador, and continued all-round cooperation with Venezuela. Newly elected President of Venezuela Nicolas Maduro visited Belarus in early July. Minsk welcomed Bolivian leader Evo Morales in September and Ecuadorian President Rafael Correa Delgado in late October. In 2012, a delegation of Belarusian ranking officials went on tour to Latin America visiting Cuba, Venezuela and Ecuador.
Before the visit to Minsk, Bolivian President Evo Morales met with Alexander Lukashenko, who went to Caracas in March 2013 to pay last respects to passed Hugo Chavez2. Lukashenko declared his intention to establish “the same relations with Bolivia” as he maintained with Venezuela. Meanwhile, Belarusian-VEnezuelan relations definitely needed a new impetus: in 2013, Belarusian exports to Venezuela shrank three-fold to USD 83 million against USD 254 million in 2012. Trying to revive fading cooperation, Minsk and Caracas worked out a new road map.
A decline in the price of potash fertilizers in late 2013 led to a considerable drop in Belarusian exports to Brazil (from USD 802 million in 2012 to USD 519 million in 2013). An official delegation of Belarus formed of representatives of industrial enterprises visited Brazil in November hoping to diversify Belarusian exports to this country in every possible way (in 2012, potash fertilizers constituted 99%)3. The sides considered a project on assembly of Belarusian tractors and signed an agreement on abolition of short-term visas. Belarus thus closed a consulate general in Rio de Janeiro in autumn 2013 to optimize the structure of government agencies4.
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During the visit, Alexander Lukashenko also held a meeting with the leaders of Ecuador, Cuba and Haiti.
Detailed analysis of the composition of Belarusian exports to developing countries, see Yeliseyeu A. Belarus and developing countries: Faulty singlecommodity export orientation // Belarusian Yearbook2012. Minsk, 2013. P. 222—128. Graphical description of the composition of trade between Belarus and developing countries, see Yeliseyeu A. Belarus and developing countries: trade specifics (special study by BISS) // [Electronic resource] Mode of access: http://belinstitute.eu/ru/node/1659.
Resolution by the Council of Ministers of the Republic of Belarus No.803 on the closing of the consulate general of the Republic of Belarus in Rio de Janeiro (Federative Republic of Brazil) of September 11, 2013, see http:// pravo.by/main.aspx?guid=3871&p0=C21300803&pl=l.
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belarusian yearbook 2013
Southeast Asia: Belarus put much effort into development of relations with several countries in the region, especially Indonesia, Vietnam and Laos. In late June and early July, President of Laos Choummaly Sayasone visited Belarus. Belarusian ministerial delegations went to Vietnam, Cambodia, Laos, Mongolia, Myanmar, and Sri Lanka where they signed dozens of agreements. The Belarusian Foreign Ministry explains this activity referring to pragmatic interests, specifically the outlined “shift of the global center of trade and investment to rapidly developing countries in Asia.”5
The visit of a delegation headed by Alexander Lukashenko to Indonesia and Singapore in March was one of the most important events in relations between Belarus and countries of the region. Alongside potash fertilizers, Belarus supplies Indonesia with engineering and defense products. When accepting an Indonesian delegation in May 2013, Lukashenko said that Belarus hoped to “create a trade base in Indonesia to approach markets in Southeast Asia.” Although Singapore is recognized as a developed country, it is contextually important that it hosts a number of regional offices of Belarus’ leading enterprises, such as the Belarusian Potash Company, Belshina tire manufacturer and the Belarusian Automobile Plant (BelAZ), targeted at developing countries of South and Southeast Asia6.
South Asia: A delegation of Bangladesh headed by Prime Minister Sheikh Hasina visited Belarus in July. Sri Lankan President Mahinda Rajapaksa arrived in August. Belarus, Sri Lanka, India and Bangladesh exchanged interdepartmental visits. At the same time, no progress in construction of five joint plants in Bangladesh and India was reported in 2012. Moreover, a visit of the president of India to Belarus announced at the end of the year did not take place. India repeatedly expressed interest in acquiring Belaruskali stocks. The parties probably need more time now to analyze the situation in the potash market after the
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Review of foreign policy of the Republic of Belarus and activities of the Ministry of Foreign Affairs in 2013, see http://lithuania.mfa.gov. by/docs/ review_mfa_2013.pdf.
Minsk also expressed interest in attracting investments from Singapore and the possibility to float Belarusian bonds in the financial market of Singapore.
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Belaruskali-Uralkali potash cartel break-up. As a result of a fall in potash prices at the end of the year under review, Belarus’ exports to India sharply declined from USD 266 million in 2012 to 170 million in 2013.
Middle East: Minsk and Tehran made no headway in political and economic relations despite a series of interdepartmental meetings held throughout the year and communication between the foreign ministers of Belarus and Iran during United N ations events in New York. The project on assembly of Samand cars in Belarus started in 2007 but soon stalled and did not gain momentum in 2013. The launch of the first phase of the transport and logistics complex Prilesye built by Iranian Cason was probably the only success in bilateral economic cooperation.
Belarus’ relations with several Arab states of the Persian Gulf (especially Qatar and the UAE), and also with Turkey were developing quite actively over the past few years against the background of underwhelming political and economic relations with Iran. The foreign ministers of Belarus and Turkey exchanged visits in 2013. In March, they entered into an agreement on visa-free regulations and readmission. The intention to negotiate a free trade zone between Syria and the Customs Union7 voiced in 2012 could not but agitate Ankara. Throughout the year, Belarus and Turkey discussed regional developments, including the situation in Syria and Iraq, more than once.
Africa: There was no breakthrough in political, diplomatic and economic relations with the African region, although Belarus expanded its diplomatic presence on the continent. An embassy in Ethiopia opened in 2013. The Belarusian ambassador to Egypt presented his credentials to the president of the Sudan, and ambassadors to Nigeria and the Republic of South Africa to the leaders of Ghana and Mozambique. A Belarusian delegation visited Gabon and Equatorial Guinea. Belarus continued cooperating with Nigeria, which is regarded as a foothold in West Africa.
See: Why Syria wants a free trade zone with the Customs Union // Our Opinion [Electronic resource] Mode of access: http://nmnby.eu/news/ analytics/5078.html.
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Belarusian yearbook 2013
China: Political relations with China were formally taken to a higher level of comprehensive strategic partnership. Benefits of trade and investment cooperation with China are quite unobvious, though. The China-Belarus Industrial Park was not given a qualitative impetus. The deficit of Belarus’ trade with China in 2013 increased even more8.
Looking for innovative forms of economic cooperation
The Belarusian leadership realizes the futility of boosting exports to developing countries based on old schemes due to the lack of real opportunities to expand it by adding new commodity items. Therefore, in 2013, Minsk stated the intention to prioritize new, more flexible types of trade and economic cooperation, like those below.
Joint ventures: During a meeting with an Indian delegation in May, Alexander Lukashenko said that the parties “should have switched from simple commodity exchanges to cooperation ties and joint ventures here and there, in India.” The media reported that Belarus negotiated trilateral projects with Venezuela and Bolivia totaling USD 2 to 3 billion and joint participation of Belarus and Vietnam in a tender on construction of potash fertilizer production facilities in Laos. During an official visit to Mongolia in September, Prime Minister of Belarus Mikhail Myasnikovich spoke about the plan to “launch new enterprises with Mongolian colleagues and generate added value.”
Export crediting and leasing: The use of these trading tools was discussed during meetings with the leaders of Indonesia and Sri Lanka. As concerns Sri Lanka, Belarus has expressed interest in setting up joint ventures and opening head offices of Belarusian companies to trade with the countries of South and Southeast Asia given the favorable tax system in the country. In 2013, Belarus gave Bangladesh USD 50 million worth export
More information about the specifics of Belarusian-Chinese relations is available here: Yeliseyeu, Belarus and developing countries: Faulty singlecommodity export orientation, op. cit.
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commodity loans to supply road-building machinery and municipal vehicles.
Stronger technological cooperation: In 2013, Belarus and Laos signed a memorandum of cooperation to establish a joint mineral prospecting laboratory in Laos, which possesses considerable potash reserves, but needs help to step up production processes. Belarus also agreed to cooperate with Ecuador in prospecting and extraction of oil, construction of power lines, and joint production of engineering goods and agricultural machinery.
Belarus has been developing industrial and technological cooperation with Vietnam and Turkey. In 2013, the Belarusian-Turkish working group on industrial and technological cooperation held its first meeting to consider the creation of a joint industrial area.
Fruitless
negotiations on free trade zones
The objective to commence negotiations on free trade zones between the EurAsEC Customs Union and a number of developing countries (Vietnam, Syria, Mongolia, and Egypt) was set back in 2012. As many as four rounds of talks had been held with Vietnam by the end of 2013, but the date of agreement has not been announced yet.
At a session of the Supreme Eurasian Economic Council in October, Russian President Vladimir Putin said that India’s interest to negotiations with the Customs Union should have been “taken very seriously.”9 Given that exports of industrial goods from the Customs Union to South and Southeast Asia is relatively insignificant, and that a reduction in customs duties on light industry products in the region will hit manufacturers, it is very unlikely that a swift progress in launching a free trade zone will be achieved. The talks on free trade zones with Mongolia,
Turkey wants to join the Customs Union, India asks for a free trade zone with the CU // Yezhednevnik. 2013. October 24. [Electronic resource] Mode of access: http://www.ej.by/news/economy/2013/10/24/turtsiya_i_ indiya_hotyat_vstupit_v_tamozhennyy_soyuz.html.
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belarusian yearbook 2013
Egypt and Syria did not give much hope for a breakthrough in 2013 either10.
Conclusion
In 2013, Belarus markedly intensified political and diplomatic contacts with Turkey, a number of countries of Latin America (Bolivia, Ecuador and Venezuela) and South and Southeast Asia (Indonesia, Vietnam, Laos, India and Bangladesh). At the same time, political and economic cooperation with Iran, Syria and North African countries remains stagnant due to the complicated political and economic situation there.
Introduction of innovative forms of trade and economic cooperation is an adequate step taken by the Belarusian leadership, but tangible results of this strategy are unlikely to be obtained soon. Belarus did not commission any promising assembly plants or joint ventures in Venezuela after a series of successful projects implemented in the past few years.
The Belaruskali-Uralkali breakup caused world prices for potash fertilizers to drop and intensified competition between potash producers in the third world markets. The potash price drop together with an inability (or reluctance with a view to follow the price-before-volumes strategy) of Belaruskali to scale up sales in the 4th quarter of 2013 have resulted in a decline in the value of the Belarusian potash export to many developing countries.
10 The progress in this area has also stalled as concerns the Customs Union and developed countries. Despite numerous rounds of negotiations between the CU and New Zealand, the agreement date has not been set yet. European Free Trade Association members (Norway, Switzerland, Iceland, and Liechtenstein) suspended negotiations on a free trade zone with the Customs Union in March 2014 due to the events in Crimea.
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