Import Substitution in Focus
Minsk Oblast plans to increase production of import-substitution products by 20% in 2012
Minsk Oblast plans to increase production of import
substitution products by 20% in 2012
Foundation for Growth
In 2011, Minsk Oblast made certain progress in foreign trade, with the foreign trade balance surpassing the level of the most successful year 2008. The force behind the regional economic growth is the manufacturing industry. Manufacturers
Production of high quality competitive goods, and reduction of the import share in the domestic production remain priorities of the economic development of Belarus. Balanced foreign trade activities and trade surplus will become a solid foundation for the economic well-being of the state and all the Belarusians. It goes without saying that it is impossible to fully exclude imports but it is necessary to focus on import substitution in order to avoid last year’s mistakes. There are two options: we can launch the production of new goods either on our own or with the help of investors. Minsk Oblast intends to fully support import-substitution projects and these two options are reflected in the regional import-substitution program 2012.
boosted production and exports. Some companies formerly specializing in imports shifted their focus to exports, hence increasing the number of exporters by 300 over the year. Investment activities were on the rise as well. Minsk Oblast is leading other Belarusian regions in capital investments. Last year, 80 import-substitution companies were set up in the region.
Several big investment projects were completed. Molodechnobased Amkodor Unicab launched the production of forklift loaders. By the way, nobody else in Belarus makes them. The company plans to become a leader among former Soviet countries in this sector making 2,500 loaders per year. Metallartstroi, a foreign private company, set up a metal profiles production in Logoisk District. A new food company Prodovolstvennaya Manufactura was set up in Minsk District. Exports account for 90% of its overall production (breadsticks, bagels, etc.).
Another unique production facility was opened in Zhodino. It produces honed shaped tubes. This is a truly import-substitution project as these tubes, used in production of hydrolytic cylinders were bought abroad before. Now Belavtozapchast produces them both for its own use and for other companies. According to the Economy Committee of the Minsk Oblast Executive Committee, the demand for such tubes is very high in Belarus and customers of this import-substitution facility include MTZ, Lidagroprommash, Bobruiskagromash, Orshaagroprommash, Gomselmash, etc.
It is noteworthy that Minsk District has been consistently taking measures to promote importsubstitution production. Thus, as many as 127 projects were implemented in the region over 2006-2010. In 2011 alone the number of projects
grew to 27 with the total investments amounting to $200 million. About 60% of the projects were carried out by small and medium-sized companies.
We are trying to attract investors and carry out innovative importsubstitution projects rather than replicate imports for the domestic market. In order for us to be able to improve our foreign trade balance, these products should sell well abroad, Deputy Chairman of the Minsk Oblast Executive Committee Alexander Yermak says.
More Pros Than Cons
Nonetheless, import-substitution efforts have had some drawbacks in the last few years. In particular, many import-substitution projects required many imported components. This issue was in focus of the national workshop titled “Import substitution as a key factor to ensure balanced economic development of the Republic of Belarus” held in late 2011. As a rule, products made under the import-substitution program had 70% to 90% imported components and therefore had no impact on the reduction of the foreign trade deficit. On the whole, high import intensity of the Belarusian economy is a sad legacy of the Soviet Union as Belarus was the assembling shop of the whole USSR. Therefore now the share of imported components is quite high.
In this connection it is important for the regions to implement only efficient import-substitution projects, to reduce material and energy consumption of production and to use local raw materials to the maximum. Minsk Oblast sees a great potential in developing business initiative as due to their specificity small companies tend to focus on production of import-substitution goods using local resources. The capital region is one of the leading regions in the development of small and medium business in Belarus. As of early 2011, more than 15% of all the small companies and more than 17% of medium companies registered in Belarus were operating in Minsk Oblast. Slovechno-bel is one of the small business success stories. Having started as an importer, the company switched to producing polyethylene pipes for water disposal and canalization systems.
A powerful tool for reducing import dependency is attraction of strategic investors who can offer new technologies as well as new products. For instance, construction of M-standard production facility of technical liquid and household cleaning agents is underway in Minsk Oblast. When completed, the facility will satisfy 60% of the domestic market in car, technical and household cleaning agents. Some of these products will be sold in other CIS countries. Assomedica will soon open a new closed cycle production facility of disposable medical supplies; Vichunai Bel will open a seafood processing plant.
Minsk Oblast can also boast such well-known companies as Henkel Bautechnik, Avgust-bel, Lekpharm and others, which help Belarus save millions of dollars. In addition, they provide jobs, advanced technologies, export opportunities, and lower prices as compared to imported goods. For example, by using local materials Henkel Bautechnik, a Belarusian branch of the Henkel building chemicals concern accounting for 25% of the Belarusian market, managed to reduce the cost of building mixes by 15-20%. Avgust-bel was initially conceived as a producer of importsubstitution pest control products and according to estimates, the company helps to save more than $17 million a year. Besides, development of the pharmaceutical industry benefits medical security of the country.
A significant share of import components in import-substitution goods is not a very good thing. Nonetheless, these products have more advantages than disadvantages: high value added, additional jobs, tax revenues, etc. Earlier, 100% of goods were imported. Now we import only raw materials, so the products are 50% Belarus-made. It may be more expensive to launch production of raw materials than to buy them abroad, Deputy Chairman of the Minsk Oblast Executive Committee Valery Skakun says.
Belarusian Roquefort and Mozzarella
Like in the whole Belarus the import-substitution efforts in Minsk Oblast go in line with the work plan
on substitution of imported goods which envisages import reduction across three groups. The first group includes products that are made in Belarus but they are either produced in insufficient quantities to satisfy the demand or they are not as good as similar imported goods. The second group includes goods which production is being developed under specific government programs or plans. The third group includes products that are not made in Belarus but which production is in the stage of development.
Import reduction efforts include extending the offering range of products, boosting production, gradual reduction of the import share, maximum use of small and medium business potential for production of import-substitution components and materials, setting up new production facilities, boosting current production capacities, manufacture of hi-tech goods.
In 2012, the capital region plans to implement 46 import-substitution projects, 16 of them belong to the first group, 30 belong to the second and one is from the first group. A total of $240 million worth of import-substitution products is planned to be made. This is 20% more than in 2011.
The most interesting novelties include specialty Roquefort-like blue cheese and Mozzarella-like soft cheese. Today Belarus imports up to 150 tonnes of Roquefort a year. By the way, in the West soft cheeses are becoming more popular, while in Belarus their production is not so high.
The development of production of powder paints, thermal underwear and toilet soaps will be continued. Soon the Belarusian market will see new smoked cheeses, dairy products, toffee and gummy sweets, cosmetic and hair products. Production of fruit and vegetable juices, canned vegetables, pickled cucumbers, wooden flooring will be boosted. The assortment range of footwear for men, children and women, deodorants, perfumes and toys will be extended. Zabudova is working on increasing live lime production in order to reduce the import share of raw materials used for building blocks production.
Import substitution should not be the goal by itself. Decisions in this area should be based on economic viability and each case should be considered from the point of view of economic benefits and efficiency, Boris Batura, Chairman of the Minsk Oblast Executive Committee, stated at the workshop of senior governmental officials. In order to balance up the share of imports it is necessary to export 60% of the national production.
Import-substituting goods should be innovative, hi-tech, have a high added value and should be exportoriented. Surely these products will successfully compete at home and abroad. If we keep constantly trying to catch up, we will always lag behind, Boris Batura says.
After the creation of the Customs Unionandsingleeconomicspaceand possible accession to the WTO, it will be impossible to limit the imports by administrative measures. To win the competition Belarus will need to rely on the quality and flexible pricing policy.
Belarus’ participation in integration associations opens up new markets for national producers. Investors’ interest in Belarus is growing too as the country serves as a link between Europe and Asia. Minsk Oblast as the central region of Belarus has to take advantage of this by creating conductive environment to import-substitution productions. Foreign investors have already started submitting their proposals. For instance, Avtokomponenty and a Chinese company want to start producing cars. In 2012 alone this project promises to bring hundreds of billions of Belarusian rubles worth of investments. A BelarusianChinese industrial park is planned to be built in Smolevichi District, which will surely benefit the innovation development of Belarus.
Import substitution is a complex issue and there are many things to be considered. Not all the projects implemented in previous years gave the desirable results. Yet, many import-substitution companies managed to launch the production of competitive goods, find their niche in the market, and lay the foundation for the future development. The Belarusians should support national producers by choosing local goods. Then, the investments will repay and the country will not have to spend billions of dollars on imports.
Amkodor-unikab started a full-scale
production of warehouse electrical equipment. This is a joint project of the Belarusian enterprise and the Dimex firm from
On 17 February 2012, President of Belarus Alexander Lukashenko visited Avgust-bel, where he was told about the production, testing and storage of chemical crop protecting agents
Henkel Bautechnik manufactures over 37 types of building
and finishing materials under the famous trademark