By today, the procedure of expert analysis of any investment project has been established by the Investment Code of the Republic of Belarus and by the Regulations of elaboration and implementation of any forecasts concerning development of commercial companies managed by, or included in, the Republican public authorities, other governmental institutions subordinated to the Government of the Republic of Belarus, regional executive committees and the Minsk City Executive Committee, business-plans of such institutions, expert examination thereof, agreement and approval (hereinafter the “Regulations”) as approved by Ordinance of the Council of Ministers No. 873 dated August 8, 2005.

According to the Regulations, the following shall be carried out in respect of any investment projects:

expert examination by the Republican public authorities, other governmental institutions subordinated to the Government of the Republic of Belarus, regional executive committees and the Minsk City Executive Committee to which the investor (investment project initiator) is subordinated (if such subordination exists), or within which competence the issues related to the planned output of production (work, services) fall;

the state integrated expert examination of business plans by the Ministry of Economy – for the investment projects which amount exceeds USD 1 million at the official rate of the National Bank as of the date of their making, and for which the governmental support is provided in the form of:

• tax concessions for any new and high-tech productions;
• use of funds from any centralized investment resources, in particular, refund of a certain part of interest on any credits allocated from the Republican budget by competition;
• participation of the government in formation of any commercial companies with foreign investments, through foundation thereof;
• assistance in utilization of any loans secured by the government of the Republic of Belarus.

Any investment projects for which implementation the banking credits are used, shall be considered by the crediting bank.

The main criteria of investment project appraisal during the state expert examination thereof in compliance with Article 21 in the Investment Code of the Republic of Belarus are as follows:

• urgency of the investment project and its compliance with the strategy of the branch development;
• financial state of the investor-organization;
• technical, technological, financial feasibility and reasonability of the investment project implementation under planned environment of investment activity;
• justification for any investment expenditures under such investment project, and participation of the government in such project;
• scientific and technological standard of any used and/or created technologies;
• competitive power of any products (goods, services) and market availability; efficient marketing strategy of the investor-organization;
• comparative factors of efficiency and stability of the investment project.

Investment efficiency is evaluated on the basis of integral efficiency factors specified in the Rules of Investment Project Business Plan Development, approved by Ordinance of the Ministry of economy of the Republic of Belarus No. 158 dated August 31, 2005.

When considering such investment projects, the following factors shall be evaluated:

Simple and dynamic pay-back period

Pay-back period serves for evaluation of the hazard of risk during the project implementation, and investment liquidity. Simple pay-back period is a period after which expiration the net amount of proceeds (income) exceeds the amount of investments (expenses); it corresponds to the period when the accumulative value of net cashflow changes from negative to positive. Any dynamic pay-back period is calculated on the basis of accumulative discounted net cashflow. In contrast to simple pay-back period, dynamic pay-back period takes account of the cost of capital and shows the real pay-back period.

Net present value (NPV)

Net present value characterizes integrated results of the project implementation and is determined as a value derived from discounting (under the fixed rate of discount separate for each year) the difference between the annual outflows and inflows of real money accumulated during the time-frame of the project calculation. Net present value shows the absolute value of net income discounted to the startup of the project implementation; it shall be positive, otherwise such investment project shall be deemed inefficient.

Internal rate of return (IRR)

Internal rate of return is an integral factor calculated by determination of the rate of discount under which the cost of future proceeds is equal to the cost of investments. Under the rate of return on investments preset by the investor, the investments shall be deemed justified if IRR is equal to, or exceeds, such preset factor. This factor also characterizes the project’s margin of safety expressed as a difference between the internal rate of return and the rate of discount (percentage wise).

Profitability index (PI)

Profitability index characterizes a relative effectiveness of the project. It shows the cost of net income derived for the settlement period per cost unit of investments.

A decision on rendering governmental support to the project concerned shall be made on the basis of analysis of the main criteria of investment project appraisal, the above-mentioned integral factor of investment efficiency, and also taking account of forecasted indices of financial and economic activities of the company.