Masters of their Land
Grodno Oblast actively encourages producers to stand up to imports
Grodno Oblast actively encourages producers
to stand up to imports
Measure Thrice, Cut Once…
This year Grodno Oblast has a new import substitution concept. While before only specific projects were focused on import substitution, now any opportunity to cut down on imports is thoroughly analyzed and thought through. Today import substitution should be, first of all, considered as a powerful tool for ensuring a foreign trade surplus, increasing exports and saving foreign currency, says Alexander Rusanov, Deputy Chairman of the Grodno Oblast Executive Committee.
He had to admit that some import substitution projects did not
Seeing is believing, decided the State Control Committee and organized an unusual exhibition showcasing imported goods and their local equivalents successfully competing with them. As expected, the exhibition has clearly demonstrated the obvious: while replacing imported brand-name hi-tech appliances and electronics is indeed difficult and unnecessary, the predominance of imported kettles, cooking pots, linoleum and similar goods on the Belarusian market is hard to explain. Why can they not be made at home? Is it really better to buy them abroad than to produce them locally?
stand up to their name as the share of imported raw materials was as high as 80%. Sometimes mistakes in estimates were to blame. Thus, one import substitution project (construction of a champignon growing factory) did not see the light due to the fact the Polish partner failed to submit the design documentation in time.
Today, the first thing to be considered when a new offer to launch import substitution production is submitted is the share of imported raw materials as well as the possibility to replace imported components with the domestic ones. The export capacity is being considered as well (exports have to account for at least 65% of all the output).
When considering starting assembling goods from foreign components (which can be quite feasible, too) their competitiveness as compared with similar goods on foreign markets is being considered. Before giving the green light to this or that import substitution project it is necessary to make sure that the goods made in Belarus will be competitive and demanded abroad, Alexander Rusanov says.
First Time in Belarus and Elsewhere
This year Grodno Oblast plans to produce over $272 million worth of import substitution goods. Their exports are expected to generate more than $57 million.
According to the regional authorities, the local import substitution program for 2012 is first of all aimed at reducing imports of consumer goods (pork, dry building mixes, canned vegetables, juices, fruit drinks, etc).
A total of 26 major import substitution projects will be carried out in the oblast this year with $58 million worth of total production and $28 million worth of exports. This goal is quite ambitious. Last year Grodno Oblast implemented the same number of projects, however their total exports did not exceed $10 million.
Promising import substitution production facilities will appear virtually everywhere in the region. Thus, Volkovysk District will launch production of vinyl chlo-
ride polymer pipes and hoses for the machine-engineering sector and for household purposes (Armakan). This year the company will produce $1.7 million worth of import substitution products and start exporting. Volkovysk-based Bellakt will be the first company in Belarus to launch production of hypoallergenic dry baby formula, a 100% import substitution project.
The biggest project in terms of size and economic importance is production of disposable injection syringes and needles in Lida District. In 2012, Medaks-m will produce over $7 million worth of import substitution goods ( some of them have never been made in Belarus before) and boost exports to reach $5 million. By the way, the new private company received a subsidy to create new jobs, which is one of the ways the state supports import substitution producers.
Belgreenline, a resident company of the Grodnoinvest free economic zone, will launch a $2.2 million production of wet wipes this year. Their exports are estimated to generate $1.7 million.
Although Grodno Oblast has been home to many kitchen furniture producers for a long time, many kitchen appliances (for instance, kitchen sinks) have been bought abroad. In 2012, ZOV Stone will partially solve the problem by launching production of kitchen sinks worth $3.7 million. The company will export $2.6 million worth of products this year.
Speaking about import substitution in the region, one cannot fail to mention a project to build a woodworking company in Smorgon District implemented by the Austrian-based Kronospan Holdings East Limited. The company will produce laminated chip boards and medium density fiberboards as well as oriented strand boards, a brand new product for Belarus. This year it plans to produce $18 million worth of import substitution goods and export almost all of them. By the way, direct foreign investments are channeled into this project. This year alone the Austrian group will invest $20 million in production.
According to Deputy Chairman of the Grodno Oblast Executive Committee Alexander Rusanov, import substitution projects have been growing more popular among domestic producers as well. Thus, Grodno Tobacco Factory Neman is about to launch the production of new brand of cigarettes, Grodno Glass Factory is launching productionof medicalpackaging,beltapaz intends to replace imported turning chucks with the domestic ones. Import substitution projects are underway at Radiovolna, Belkard and other companies.
Local companies will also produce undersupplied goods, such as canned vegetables, ketchup, juices, modified potato starch, metal cabinets, nets, dry spies, etc. Even small shipments of this import substitution goods help save foreign currency and create new jobs.
Success stories in setting up import substitution productions demonstrate the advantages they bring: high export capacity, permanent inflow of foreign currency funds, economic sustainability.
However not many businessmen decide to implement an import substitution project. It is much easier to follow a well-trodden path than to launch the production of a brand new product and promote it on the market.
What are the incentives that encourage businessmen to set up import substitution productions? Under the initiative of the Economy Committee of the Grodno Oblast Executive Committee a database of promising investment activities, rental opportunities and real estate on sale was set up to attract potential investors. It also informs them that import substitution projects as one of the state priorities are eligible to subsidies and other perks from the Oblast Executive Committee without being put on a waiting list.
These measures are aimed to involve first of all the private sector to import substitution projects. The regional administration also believes it is necessary to offer benefits at the national level, such as special taxation regime for producers of import substitution goods.
Today residents of free economic zones enjoy significant preferences and the Grodnoinvest administration places a great emphasis on attraction of investments for exportoriented production.
So far 19 resident companies of the Grodno free economic zone have been producing import substitution goods. In 2011, they made Br714 billion worth of goods (an increase of 60% from 2010), hence having helped save $52 million.
Nonetheless, the Grodno Oblast Executive Committee believes it is not enough. Moreover, FEZ efforts to boost exports were not very impressive as more than one third of its residents were not exporting abroad in 2011. Therefore the FEZ administration is tasked with intensifying its import substitution efforts.
Grodnoinvest has a host of interesting and successful projects. For instance, Medvatpharm, a resident of the free economic zone, launched production of medical cotton some years ago and has been the only producer of this import substitution product in Belarus ever since. Recently the company has started production of flax cotton and is working to launch production of other medical and sanitary items, including such popular imports as diapers.
By the way, the first lot of Belarusian diapers was made some years ago. However, it was never sold as retailers preferred to use their well-established ties with foreign producers and sell imported products. It took the company a lot of time and efforts to prove the high quality of the Belarusian product. But it was worth it, now Medvatpharm has managed to find its niche on the domestic market by offering consumers high quality goods at affordable prices.
The State Control Committee (SCC) of Grodno Oblast responsible for supervision of the import substitution program outlined the following areas as the most promising for the region. First of all, imports should be replaced by the goods made from local raw materials, such as agricultural products, wooden goods, etc.
At the same time it is important to effectively promote these goods on the market. For instance, an agricultural cooperative named after V.I. Kremko in Grodno District launched production of frozen vegetables and berries under the brand name of Svezhedar. However, inspectors have failed to find any of these goods in local grocery stores. Yet, they found a lot of similar imported goods (50% to 100%).
Second, we can start assembling international brand-name products which can become a good export solution as 90% of these goods will go to the global market. After all, Belarus used to be the assembling shop of the USSR for a reason. The main thing here is to ensure high quality of goods assembling them from a basic set of components with the maximum use of domestic parts.
Another promising area, according to the local State Control Committee, is the development of export services (for instance, engineering and forwarding greatly demanded by foreign companies) and innovation import substitution. There are some promising scientific projects in the region but their value is often underestimated as they do not offer a short-term payoff, yet they can be very fruitful in the long run.
Grodno Tobacco Factory Neman in partnership with Japan Tobacco International has launched a new line to produce super
Zov-lenevromebel has been operating in Belarus for 15 years already. The high quality and a wide assortment of the company’s products were recognized in many countries
With a view to reducing food
imports, the Kremko agricultural
cooperative, Grodno District, has opened a shop
floor to process fruit, vegetables and