China chows Belarus intentions with Great Stone investment

As Belarus seeks to diversify its sources of investment and reduce reliance on Russia, turning an eye towards China was a near inevitability – and it is now getting some attention in return.

While economic ties with Russia remain strong, the relationship between Russia’s small quasi-satellite state Belarus and heavyweight neighbour and competitor China are growing.

Forging a relationship

Central to this fledgling relationship is Great Stone Industrial Park, otherwise known as the China-Belarus Industrial Park, which is located 25 kilometres from the Belarus capital, Minsk, near to its international airport and the Berlin-Moscow transnational highway. Covering an area of 91.5 square kilometres, the special economic zone is set to include production and living areas, offices and shopping malls, financial services, and research centres, with 8 square kilometres being developed in the first phase.

The project, first announced in 2010, is being developed within the framework of the China-Belarus Intergovernmental Co-operation according to intergovernmental agreements. The China-Belarus joint-stock closed company, Industrial Park Development Company (which acts as the developer) was founded in 2012, and an intergovernmental council helps to oversee it.

In May 2015 the presidents of Belarus and China both visited the construction site – an indication of the top-level political support behind it. “[Great Stone] is being patronised at the highest level; it’s a priority for both governments,” says Alexander Yaroshenko, the park’s head of administration. This has developers of some rival parks or special economic zones grumbling about favouritism, however.

High-tech focus

Great Stone’s main focus will be on hi-tech production, and corporate tenants are being sought in such sectors as electronics and telecoms, bio-pharma, chemicals and machinery, as well as logistics services, e-commerce and big data. So far about 20 tenants have signed up – among them Chinese telecoms equipment company Huawei, which announced in August 2017 it will build an R&D centre in Great Stone. The stated long-term target is to attract more than 200 hi-tech companies employing some 120,000 people.

While the early stages are focused on securing investment from companies, plans for the site call for the creation of a 'comprehensive development zone' designed for both living and working. Eventually it is intended to be a whole new city, with housing, hotels, recreation areas and schools accommodating 150,000 to 200,000 people.

In an effort to help hit the ambitious investment targets, in May 2017 Belarusian president Alexander Lukashenko issued a decree to expand the incentives for park tenants, including a 10-year exemption from profit tax and an exception from land tax until 2062. The investment threshold was also reduced from $5m to $500,000, in a bid to entice SMEs.

It is hoped that the park will help boost Belarusian exports, especially of hi-tech products, with Mr Lukashenko claiming it could generate an additional $50bn annually in export revenue. Whether that figure turns out to be realistic remains to be seen, but the park can at least potentially present a way for Belarus to increase its ties with China while also leveraging its status within the Eurasian Economic Union customs union, which also includes Russia and Kazakhstan.