Free Economic Zones

Over 1996-2004, six free economic zones were organised in the Republic of Belarus. These zones have liberal business conditions, including in particular preferential taxation, customs and registration conditions. Free economic zones “Brest”, “Minsk”, “Gomel – Raton” and “Vitebsk” have 5 to 8 years of experience; zones “Mogilev” and “Grodnoinvest”, set in 2002, are at the stage of development. They were set by Decrees of the President of the Republic of Belarus for a period of 30 to 50 years, for the purpose of increasing the flow of foreign investments, introduction of new technologies, and development of export and import-substituting production facilities and creation of new jobs in the country.

During their operation period, FEZs have proved their expediency for social and economic development of the regions and the country in general. Involvement of foreign investments helps put into operation empty and inefficiently used production capacities, create new jobs, introduce new technologies, increase production output and export of products from such zones, and increase tax revenues and collections to the budget and extra-budgetary funds.

The tax rates on profits and added value for residents of FEZ are two times lower than in the country as a whole. Profits received by residents of FEZ through sale of their own products are exempted from taxation for 5 years from the time the profits are declared.

In 2004, the output of enterprises that are residents of FEZ was 149 percent compared to 2003 , the sale revenues (sale of products, work and services) was 162 percent, export of goods 159 percent, revenues from taxes, duties and other fees paid to the budget and extra-budgetary funds 161 percent.

In 2004, the number of new jobs created in free economic zones of the country was 6048. The total number of employees in FEZ was 20,700, i.e. up by 24.6 percent against 2003.

Export of goods from FEZ in 2004 was worth 485.5 million US dollars; export per employee in FEZ was 6 times higher compared to the national figure. Predicts included into the State programme of import substitution manufactured in all free economic zones made about 40 percent of the total amount of own products sold (15 percent in 2003).

In 2004, about US$ 90 million were involved as foreign investments to FEZ, which was 1.6 times higher than in 2003. The growth rates of investments into fixed capital in FEZ were 191.5 percent.

Over the last three years, new principles of legal regulation of FEZ activities have been applied, aimed at the development of export-oriented, import-substituting and high-tech production facilities in FEZ, and the reduction of product supplies to the domestic market. Registration of enterprises as residents of FEZ is made according to the regulatory basis, which stipulates, in particular, limited supply of products manufactured by the FEZ residents to the domestic market to 10 percent. Failure to observe such restrictions in 2004 resulted in 39 enterprises having been deprived of the status of the resultant of FEZ (23 enterprises in 2003). In 2005, administration of FEZ will continue the work to supervise the observance by residents of FEZ of their contractual commitments.

The draft regulatory act has been prepared that determines the common for all procedure of use of special (preferential customs and taxation) legal conditions for the residents of FEZ. It is planned to define procedures for closer cooperation of administration of free economic zones with local governing and self-governing authorities. The administrations of free economic zones receive the status of the legal entity, organised as an institution, and operate according to the legislation of the Republic of Belarus. This will allow the use of economic advantages of the FEZ for implementation of regional development strategies and operative solution of problems faced by residents of FEZ.