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Belarus Will Hold a Key Position on the 'New Silk Road'

A new special economic and manufacturing zone will be constructed 25 km from Minsk

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More than two years have passed since the leadership of the People’s Republic of China announced its decision to revive the Silk Road and establish trade routes connecting the countries of the Pacific Rim to the Middle East and Europe. The Republic of Belarus is expected to be one of the significant hubs of the new Silk Road.

Belarus and China have long amicable relations, and Belarus has to work hard to maintain them. Increased cooperation with the People’s Republic of China is among the top priorities of Belarusian foreign policy since it considers China one of its five top-priority economic partners. Trade turnover between the two countries is gradually expanding, though not as fast as Belarus would want. Besides, the volume of export from China significantly outweighs that supplied by Belarus. Nevertheless, the countries are currently working toward the complete lifting of all trade barriers. It is no surprise then that the Chinese “New Silk Road” project was fervently embraced by Minsk. A respective Memorandum on Cooperation was signed by the Ministry of Economy of the Republic of Belarus and the Ministry of Commerce of the People’s Republic of China at the end of 2014.

Belarus, being a long-standing partner of the People’s Republic of China, also boasts an advantageous geographic location, representing a point where Russian and European trade routes as well as the trade routes from the Baltic Sea and the Black Sea intersect. China, on the other hand, is looking with interest at these routes and has plans to participate in their development. The key project associated with the Belarusian section of the Silk Road is the Chinese-Belarusian industrial park “Great Stone.” Though this project was conceived before the “New Silk Road” project came into being, it has quite harmoniously fit into it and become its integral part.

The “Great Stone” is a special economic zone, which, according to the plan, will be established 25 km from the Belarusian capital, in the vicinity of existing railroad tracks, the Moscow-Berlin highway, Minsk international airport and only 500 km from the Klaipeda Baltic Sea port. Chinese companies plan to build large production facilities and R&D centers focusing on machine building, electronics and health care there. The zone will also have shopping centers and residential areas. Ultimately, this will be a new town that will play a role of one of the key junction points of the “New Silk Road,” interconnecting (thanks to its favorable location) Europe and Asia with railroads, highways, waterways and airways.

The significance of this zone for the entire project cannot be overestimated. It will be both a transport and logistics hub and an industrial area manufacturing goods for export. Since the “Great Stone” is an open project and any country can participate in it, there will also be companies from other countries operating there in addition to Chinese. China already has experience establishing similar facilities: the Belarusian technological cluster will be akin to the China-Singapore Suzhou Industrial Park. As of today, the “Great Stone” is the largest industrial park that China is building abroad. As President of Belarus, Alexander Lukashenko, noted, implementation of the project is expected to bring both countries billions in revenues.

For the first time, the concept of this unique facility was made public in March 2010 during the visit of Xi Jinping (who at that time was not yet the President of the People’s Republic of China) to Belarus. In October of the same year during the official visit of Alexander Lukachenko to China, the Ministry of Economy of the Republic of Belarus signed an agreement with Chinese SAMS Corporation on the development of the China-Belarus industrial park. In September 2011, the project was reviewed by the governments of Republic of Belarus and the People’s Republic of China and a respective agreement was signed. It was ratified at the beginning of 2012. A presidential decree assigning special status to the industrial zone was issued in Belarus in June 2012.

According to the decree, foreign companies wishing to establish their enterprises in the zone would be eligible for customs privileges, tax breaks and other incentives. The decree, for example, envisages exemption from corporate tax for the participating companies for the first 10 years after their registration and a 50% reduction for the next 10 years. Also, the residents of the park will not have to pay customs duties on goods imported to implement their projects. There are also other privileges making the participation in the project extremely attractive. Companies from China, Romania and Latvia have already announced their intention to participate in the project. In June 2014, the first brick-laying ceremony of the future industrial park took place and the development of the infrastructure began. The construction of the first business facility — a logistics park — commenced in December 2015.

Alexander Lukashenko says that successful implementation of the project will drive the Belarusian economy to a new level. Quality of the goods manufactured at the “Great Stone” is expected to be high enough to be sold in the European and American markets. According to the ambitious estimate of the Belarusian President, operation of the Industrial Park would facilitate a twofold expansion of the country’s exports. The prospects of affiliation with the Silk Road economic zone also seem very advantageous.

However, there is an alternative opinion about the prospects of the “Great Stone” project as well as of the Chinese-Belarusian relations as a whole. The project’s opponents express doubts that the enterprises of the Industrial Park will be able to bring the billions in revenues that the government of Belarus claims. They voice concerns over the role of Belarus in the project, worried that it all will boil down to the mere provision of a parcel of land for the construction of the Industrial Park since the Park will be built by Chinese workforce in compliance with Chinese technologies and funded with Chinese money. Many experts believe that, considering these circumstances, China will be collecting the lion’s share of the revenues associated with the project, while the Belarusian share will be very modest.

In addition, the nature of Belarusian-Chinese cooperation alarms them since Belarus’ debt increases year by year. The sum of Chinese loans issued to Belarus significantly exceeds the volume of trade turnover between the two countries, threatening to transform the partnership into a dependency. Furthermore, the volume of Chinese investments in the Belarusian economy is not that large. Minsk believes that Belarus will play the first fiddle in China’s integration into the European market, all due to its geographic location. But Ukraine and Poland are also competing for the role of an intermediary between China and Europe, while China does not seem to favor either of them. An increasing imbalance in the trade turnover also raises concerns: while the volume of Belarusian exports to the People’s Republic of China is decreasing, Chinese exports are rapidly expanding.

Though, even if the pessimistic outlook will prove to be true, Belarus would hardly be able to withdraw from cooperation with China. The oil price drop has put a strain on the Belarusian economy, and left the country in real need of external assistance. Though sanctions that were imposed by the EU and US were recently eased, they are still effective, which significantly restricts the number of potential investors in Belarusian economy. The issue of financial aid to Belarus by its main partner Russia has not been resolved yet either. Thus, Belarus has no choice, but to cooperate with China on its terms even if the cooperation does not prove to be beneficial in the long run.

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