BRICKS & MORTAR: Construction output in Belarus up 25% in Jan-May

PMR Research

Despite the ongoing global downturn that has severely reduced construction activity in Russia, Ukraine, Kazakhstan and most other world markets, the construction industry in Belarus is still experiencing impressive growth.

According to the report "Construction sector in Belarus 2009 - Development forecasts for 2009-2011," recently published by research and consulting company PMR, in the first five months of 2009, the value of construction and assembly work in Belarus increased by 25.3% to BYR6.9 trillion ($2.4bn). At the same time, Kazakhstan reported an 8% decline in construction output, Russia a 20% fall and Ukraine a slump of more than 55%. The reason for this is that the development of the construction industry in these three countries was fuelled by massive foreign investment, mostly in the form of credit. When the stream of funds dried up in the wake of the global liquidity crisis, there was a significant reduction in construction activity, and numerous projects were stalled or their completion postponed. In Belarus, on the contrary, most investment projects are government-sourced and their financing has been secured. The property market wasn't as developed and open as that in other CIS countries, so there was no price bubble, market overheating or overdevelopment.

Steps toward the liberalisation of the Belarusian economy and the construction market were taken as late as 2008 and early 2009, and an influx of investment is, therefore, anticipated only now. A few months ago the law pertaining to the construction process and tendering was simplified, and a new Land Code has been in force since January 1. Further steps are to follow: in 2009, Belarus intends to implement 52 measures aimed at the liberalisation of the economy. The plan includes efforts to improve tax and customs legislation, matters pertaining to property and land, price and antimonopoly regulations, and administrative and technical procedures. It also includes measures to simplify certification procedures and those involving the design, construction and commissioning of structures, in addition to measures to improve investment activity, develop the country's financial market, regulate monetary and banking operations, stimulate the labour market and encourage the development of self-employment.

Furthermore, investment in Belarus has already been made easier for companies by the fact that large foreign banks have entered the country, and significant improvement has been seen in the business support framework, including areas involving lawyers, auditors and consultants. "All of these steps, along with the opportunities offered by the market, are attracting the attention of an increasing number of foreign companies, which have begun to export building materials and equipment to Belarus, acquire local construction companies and even set up their own construction and development businesses in the country," says Robert Obetkon, a senior construction analyst at PMR and the author of the report. Companies who have entered, or stated an intention to enter, the Belarusian construction market include: Germany's Henkel Bautechnik, the American Hudson Capital and Caterpillar, Britain's David Samuel Properties and Zomex Investment, Poland's Pol-Aqua, Mostostal Export and Polnord, Iran's Kayson and Mobina Group, Belgium's Euro Immo Star, Electrawinds and AOI, and numerous companies from Russia, Turkey, Finland, Sweden, Switzerland and the Czech Republic.

Belarus is still far from being an easy country in which to do business, and to succeed one has to learn how to operate in its individual business environment. However, it is a good investment destination for companies who are not afraid of increased risk and particularly for those who have experience of operating on difficult markets such as other CIS countries. "Interestingly, according to the latest Doing Business 2009 World Bank rating, Belarus has become more hospitable than Russia or Ukraine in terms of doing business," says Obetkon.

The Belarusian government is actively promoting the development of the construction industry in a move to support economic growth, maintain employment levels and help improve the living conditions of the population. Residential construction is being fostered in pursuit of these aims, and, as a result, the total floor space of housing completed between January and May 2009 increased by 17.1%. At the same time, Russia and Kazakhstan reported only meagre increases in housing construction, and a 33% fall was observed in Ukraine.



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