Belarus emerges as Europe's leading high tech hub

Belarus emerges as Europe's leading high tech hub
Belarus today earns as much money from exporting software as Russia does from selling arms.
By Vladimir Kozlov in Moscow February 18, 2020

Best known as “Europe’s last dictatorship”, Belarus has a secret. Over the last decade it has grown a blossoming high tech industry that earned the small northern republic nearly $15bn last year – as much as Russia earns from arms exports.

In a country that is better known for producing tractors, giant mining trucks and the legendary “Minsk fridge” that is in service across the former Soviet Union, the high tech park on the edge of the capital has been a startling success.

The combination of a hard science bias in the education system, a few highly effective entrepreneurs, a geographical location that is convenient for customers in the US, Europe and Asia, as well as solid government support for promoting the sector has turned Belarus into a software factory that caters to the biggest international names around the globe. And with plans for a second high tech park in the capital and more in the regions, there is no sign of the industry growth slowing any time soon.

“In monetary terms the export of high-tech products is estimated at nearly $15bn [in 2019], and the increase in the information and communications sector alone made up about $0.5bn,” Aleksandr Shumilin, chairman of Belarus' State Science and Technology Committee, told a press conference in Minsk in late January, adding that demand for Belarusian high-tech products is still growing.

“Our tech solutions arouse great interest abroad," he said. "Foreign companies are ready to buy them."

In 2019, high-tech and science products accounted for 35.6% of Belarus' total exports, up 2.5% from the previous year, Belarusian news agency Belta reported. Meanwhile, over the last five years, the value of Belarus' software exports increased an astonishing 20-fold.

Technoparks as a growth driver

Belarus' IT industry received its first serious boost in 2005 when High Tech Park (HTP) was created in Minsk. The idea was the brainchild of EPAM Systems, a local started up that set the ball rolling in 1993, exporting its innovative software engineering services to companies in the region – both in the west and to the East European countries.

The company was founded by Arkadiy Dobkin, who was based in Princeton in the US, and Leo Lozner, who was in Minsk. In 1998 the company won its first really big deal, working for SAP AG that provided the cash to expand before listing on the NYSE in 2012, the first ever company with Belarusian roots to IPO. In 2017 EPAM grossed over $1bn in revenues for the first time. As bne IntelliNews reported in a profile, Dobkin is arguably the most successful businessman to ever emerge from Belarus.

"We are just at the beginning of the transformation and it will never stop, as it is developing so fast," Dobkin told bne IntelliNews from his headquarters in Newtown, Pennsylvania in May 2016. "As one transformation wave finishes, then that will push change. As increasingly there are smart machines everywhere, I anticipate if anything this process will accelerate."

EPAM has been the engine behind Belarus’ tech sector success, but the industry has reached critical mass as other companies start to tap into the resources in the country. The government set up the technopark in order to train a new generation of engineers and over half of EPAM’s work force remains in Minsk today. With the ballooning export revenues the government has provided the tech sector with substantial tax privileges for technopark residents and is now keen to develop the business further.

In 2018, another regulation was enacted, extending more privileges to Belarus' IT sector and helping to solidify the country's status as Eastern Europe's major tech hub. The regulation expanded the list of areas that entitle companies to technopark residency, simplified the process of IT professionals' relocation to Belarus and legalised the use of cryptocurrencies.

Currently, 91.9% of HTP's software output is exported, mainly to other European countries (49.1%) and North America (44%), with only a tiny 4.1% destined for Russia and CIS states.

The idea of focusing the country's IT industry around technoparks, some of which are linked to universities, has proven very successful. Currently, in addition to the flagship HTP, another 16 technoparks and nine technology transfer centres are in operation in Belarus. Recently, the government announced the creation of another five – in Baranovichi, Borisov, Bobruisk, Orsha and Molodechno, Belta reported.

But HTP remains the most important of all the parks in the country. In 2019, the number of its residents increased by 72 to reach 752, while in the January to September period, total revenue was BYN3.5bn ($1.6bn), a 168% increase, year on year.

Among consumers of software developed by HTP's residents are a range of global giants, including automakers Peugeot and Mitsubishi, telecom operators British Telecom and T-Mobile, as well as British Petroleum, Russian atomic energy corporation Rosatom, the World Bank, London Stock Exchange, Deutsche Bank, Coca Cola, Procter & Gamble, Colgate-Palmolive and Samsung.

In addition to EPAM, the list of Belarus' top IT companies includes: Systems, Playtika, Gismart, Apalon, BPMobile, Verv, Wargaming, iTechArt, Itransition and Intetics.

EPAM Systems remains the largest player in the Belarusian tech business. Currently, the company focuses on on-demand software development and has offices in dozens of countries across the world, employing over 30,000 people globally. In 2018, the latest data available, EPAM Systems posted an operating profit of $349mn on a revenue of $1.8bn.

Success in gaming

When it comes to IT products originated in Belarus, among the best known is the computer game World of Tanks, developed by Wargaming. In 2011, World of Tanks, a multi-player game featuring 1930s to 1960s armoured combat vehicles, made the Guinness Record Book as it was able to boast the highest number of players on the same server, 90,000. Founded by a group of computer game enthusiasts led by current CEO Victory Kisly back in 1998, the company has so far released over two dozen games for various platforms.

It currently has several offices across the globe, from Seattle to Helsinki, employing over 4,500 people. The company doesn't disclose its financial data, but, a few years ago, Bloomberg estimated the value of Wargaming at $1.5bn and Kisly's net worth at $1bn, making him Belarus' first billionaire.

Software development base

Due to relatively low labour costs, Belarus has been a software development base for a number of foreign companies, including Israel-based Viber, the producer of an instant messaging client of the same name, later acquired by Japanese e-commerce giant Rakuten.

Another testimony to Belarus' proficiency in IT is the fact that over the past decade, several Belarusian tech companies have been acquired by larger global corporations.

The best known example is Viaden Media, a major producer of iPhone and iPad apps, founded by entrepreneur Viktor Prokopenya, which was acquired by Teddy Sagi, the co-founder of Playtech, in 2012.

Dobkin told bne IntelliNews that EPAM's market is getting crowded and the company is facing growing competition, but he also expects to stay out in front thanks to EPAM's superior engineering skills and focus on innovation.

The big consultants, such as Deloitte and Accenture, are starting to get into the same business, but EPAM has opened up an enormous lead after more than two decades in the business. 

"We do complex solutions better that include user design skills that are tailored to the customers' specific needs," says Dobkin. "There is a very high demand for quality development and we need to keep up with the cutting edge technology work, as we then reapply the same solutions to other customers' businesses."

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This article is part of bne IntelliNews' coverage of technology, blockchain, fintech, cryptocurrencies and the new economy. Sign up for the free monthly newsletter bneTech, or read more tech stories on the website.

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