A Long Way To Suc­cess

Gom­sel­mash in­creases ex­port via joint ven­tures and assem­bly fa­cil­i­ties abroad

Economy of Belarus - - CONTENTS - Valery SI­DORCHIK

Gom­sel­mash in­creases ex­port via joint ven­tures

and assem­bly fa­cil­i­ties abroad

Most gov­ern­ments pro­vide sup­port to the do­mes­tic agribusi­ness. This per­tains, first of all, to the pro­duc­tion of so­phis­ti­cated and ex­pen­sive ma­chines, like grain har­vesters and for­age har­vesters. It is no se­cret that the pref­er­ence is given to ma­chines pro­duced do­mes­ti­cally. There­fore, the in­dus­try lead­ers set up joint ven­tures or assem­bly fa­cil­i­ties abroad to boost sales.

Gom­sel­mash ramped up the pro­duc­tion of grain har­vesters in 2001. To make the pro­duc­tion prof­itable, the com­pany had to ex­plore new mar­kets out­side Be­larus. The es­tab­lished ex­port schemes, mainly barter trade, did not al­low for large-scale and reg­u­lar sup­plies. There­fore, the ex­port of one of Be­larus’ in­dus­trial gi­ants in 2005 was as lit­tle as $35 mil­lion.

The com­pany stud­ied the ex­port prac­tices of the mar­ket lead­ers – John Deere, Claas, and New Hol­land – and de­cided to set up joint ven­tures in other coun­tries. Over the five years the com­pany’s so­lu­tions and tech­nolo­gies have been in­tro­duced in Rus­sia, Kaza­khstan, China, Ukraine, and Ar­gentina.

The com­pany’s ef­forts have borne fruit. In 2011 the ex­port rose to $285 mil­lion.

Be Neigh­bors with Neigh­bors

We gave the 2005 fig­ures for a rea­son. It was back then when Gom­sel­mash reg­is­tered its first joint ven­ture abroad. It was es­tab­lished in Bryansk Oblast, the Rus­sian re­gion that borders on Gomel Oblast. Gomel Oblast and Bryansk Oblast are not only good neigh­bors. The regions have a com­mon his­tory and in­ter­per­sonal ties.

The joint ven­ture Bryan­sksel­mash was re­mark­ably vi­able and fast-grow­ing. A small dis­tance be­tween the par­ent com­pany and the daugh­ter en­ter­prise, no lan­guage bar­ri­ers, com­mon en­gi­neer­ing tra­di­tions stem­ming from the Soviet times, and, the main thing, mu­tual ben­e­fits al­lowed to ar­range the assem­bly fa­cil­ity of Be­laru­sian

har­vesters in Bryansk within a short pe­riod of time. The be­gin­nings of the joint ven­ture were quite hum­ble. It made only sev­eral dozens of ma­chines per year. How­ever, the pro­duc­tion vol­ume was ris­ing year to year, with mod­els be­com­ing more complicated.

To­day Bryan­sksel­mash is ca­pa­ble of pro­duc­ing vir­tu­ally all types of ma­chines de­signed by Gomel engineers. The joint ven­ture has made a name and be­came the sec­ond largest pro­ducer of grain and for­age har­vesters in Rus­sia af­ter Rost­sel­mash. Over the last two years, the com­pany has been pro­duc­ing hun­dreds of ma­chines. Bryan­skmade Pole­sie har­vesters are now used all over Rus­sia. Ac­cord­ing to the re­cent in­for­ma­tion, they are op­er­ated in over 50 regions of the Rus­sian Fed­er­a­tion.

The sales ex­plo­sion can be at­trib­uted to sev­eral fac­tors: a well-or­ga­nized dealer net­work of Gom­sel­mash in Rus­sia, good main­te­nance ser­vice and an ex­cep­tional re­li­a­bil­ity of Be­laru­sian ma­chines. For ex­am­ple, Pole­sie GS12 com­bine harvester has been rec­og­nized the CIS best ma­chine in the seg­ment. There­fore, it is no sur­prise that the ma­chine dom­i­nates the or­der in­take of the joint ven­ture.

Bryansk was the first sta­tion on the Great Harvester Way east­ward.

New Old Friend

Kaza­khstan be­came the sec­ond most im­por­tant strate­gic part­ner for Gom­sel­mash. The decision made per­fect eco­nomic sense. First, Kaza­khstan is a ma­jor grain pro­ducer. Its an­nual de­mand for new har­vesters is es­ti­mated at 1,000 ma­chines. Sec­ond, the coun­try has set up a num­ber of ma­jor in­dus­trial com­pa­nies that for­feited their mar­ket po­si­tions af­ter the col­lapse of the USSR, but re­tained a great in­fra­struc­ture. Third, be­ing a ma­jor ex­porter of oil, gas and other raw ma­te­ri­als, Kaza­khstan is ca­pa­ble of pro­vid­ing con­sid­er­able sup­port to the na­tional agri­cul­ture.

Gom­sel­mash ex­panded into the Kazakh mar­ket in 2007. By that time the lo­cal mar­ket had been di­vided be­tween large for­eign com­pa­nies. The Be­laru­sian pro­ducer teamed up with Agro­mash­hold­ing to im­ple­ment a promis­ing project. In 2008, Kostanai En­gine Plant owned by Agro­mash­hold­ing as­sem­bled the first batch of grain har­vesters (54 units). Pole­sie GS812 is the pro­to­type of the harvester known in Kaza­khstan as KZS-740 ESSIL. This is a 4th class harvester de­signed for fields with the grain yield of up to 40 cent­ners per hectare. In fact, it is per­fectly suited for Kaza­khstan con­di­tions. The har­vesters have been fit­ted with 7-me­ter-cut­ters. The pi­lot batch of har­vesters did very well dur­ing the first grain har­vest­ing cam­paign. To­day it is one of the most pop­u­lar ma­chines in Kaza­khstan. About 400 har­vesters were sold in 2011.

The part­ners de­serve credit, too. They worked hard to pro­mote bi­lat­eral co­op­er­a­tion. For ex­am­ple, last year they started to as­sem­ble self­pro­pelled for­age harvester KSK-600 and grain har­vesters Pole­sie GS12, which is known in Kaza­khstan as KZR-760 ESSIL.

No one doubts that the assem­bly plant in Kaza­khstan has great prospects. The coun­try has launched a

long-term pro­gram to de­velop the live­stock in­dus­try which needs a sig­nif­i­cant tech­no­log­i­cal up­grade. This year the joint ven­ture is set to as­sem­ble at least 50 units of for­age har­vest­ing equip­ment. I have al­ready men­tioned the pres­tige of Pole­sie GS12 in Kaza­khstan. I just want to add that this is the most pop­u­lar grain harvester in the CIS.

Har­vesters in Kostanai are as­sem­bled in ac­cor­dance with the li­cense con­tract that pro­vides for the use of mostly lo­cally-pro­duced spare parts and mech­a­nisms. This form of in­dus­trial in­te­gra­tion al­lows the Be­laru­sian pro­ducer to have cer­tain pref­er­ences in the form of lower cus­toms du­ties, ex­emp­tion from VAT in sale and leas­ing schemes.

When Gom­sel­mash just ar­rived in Kaza­khstan, it an­nounced it was plan­ning to take over 50% of the lo­cal mar­ket of new com­bine har­vesters. Four years ago it seemed like some­thing al­most fan­tas­ti­cal. How­ever, al­most 500 units were sold last year. The assem­bly fa­cil­ity aims to pro­duce as many ma­chines in 2012.

Of course, well-known man­u­fac­tur­ers from the United States, Ger­many, the Nether­lands and Rus­sia con­tinue to op­er­ate in Kaza­khstan. Some of them do well in sales, oth­ers do not. But all of them had to squeeze up with the ar­rival of the Be­laru­sian pro­ducer in Kaza­khstan. As they say in these cases: noth­ing per­sonal, just busi­ness.

How­ever, com­pa­nies com­pete al­most ev­ery­where, in­clud­ing in China. This is the mar­ket Gom­sel­mash tar­gets next.

East­ward Ex­pan­sion

An agree­ment to set up the Be­laru­sian-chi­nese joint ven­ture “Harbin Dong Jing Gomel Plant of Agri­cul­tural En­gi­neer­ing” in the city of Harbin (Hei­longjiang) was signed in Septem­ber 2009. Its founders were Gom­sel­mash and Dong Jin Group (China).

In De­cem­ber the same year, the en­ter­prise re­ceived the sta­tus of a le­gal en­tity and was put on the reg­is­ter of busi­ness en­ti­ties of China. Con­struc­tion of pro­duc­tion premises was fast. In a short while they com­mis­sioned ten frame cranes, and made a con­veyor to as­sem­ble ma­chines from kits.

Si­mul­ta­ne­ously, train­ing of spe­cial­ists was un­der­way. Or­ders for the man­u­fac­ture of spare parts that were in­cluded in the lo­cal­iza­tion nomen­cla­ture list were placed with en­ter­prises of China. In the spring of 2010, Gom­sel­mash sent the first trains with kits for for­age harvester KSK-600 “Pole­sie FS60”. The out­come of such prompt move is the fol­low­ing: 100 units of equip­ment will be ready by the be­gin­ning of the for­age har­vest­ing sea­son.

It seemed that the next step of the joint ven­ture would be to in­crease the pro­duc­tion ca­pac­ity, im­prove tech­no­log­i­cal process, and es­tab­lish main­te­nance cen­ters for the new har­vesters. But the en­ter­prise de­cided to start pro­duc­ing ear corn har­vesters.

Gom­sel­mash had not pre­vi­ously pro­duced this kind of equip­ment. Spe­cial­ists had only six months to de­sign the first pi­lot model and launch tests. In Be­larus the self­pro­pelled four-rowed ear corn harvester is known as KPS-4 (4YZQ-4) harvester. Tests were com­pleted in Novem­ber. In De­cem­ber the pro­duc­tion pro­gram was ap­proved, and the man­u­fac­tur­ing was launched. In March 2011 Gom­sel­mash shipped kits for new equip­ment to China. In Au­gust the first com­bine har­vesters rolled off the assem­bly line. All in all it took the plant 15 months. By the har­vest­ing cam­paign the joint ven­ture sold over 300 com­bine har­vesters. The sig­nif­i­cance of this fig­ure can be il­lus­trated by the fol­low­ing fact. An­other joint ven­ture to man­u­fac­ture sim­i­lar equip­ment was set up in Harbin in as­so­ci­a­tion with John Deere Com­pany. The Amer­i­can com­pany took five years to reach such sales. Gom­sel­mash has been able to do so in one year.

Such a de­tailed ac­count of progress in the pro­duc­tion of ear corn har­vesters shows how dif­fi­cult it is to work abroad. It is com­pe­ti­tion that sets the pace. They say op­por­tu­nity only knocks once. It is no less im­por­tant to think about prospects, im­prove the tech­no­log­i­cal process, and ex­pand pres­ence on the mar­ket, i.e. to plan and cre­ate fu­ture.

In Au­tumn 2011 up­graded ear corn har­vesters KPS-4-1 were tested in Be­larus and China. The new ma­chine has a num­ber of fun­da­men­tal dif­fer­ences; it is less me­tal in­ten­sive and more re­li­able. This year the com­pany is plan­ning to launch mass pro­duc­tion of this

equip­ment. More­over, Gom­sel­mash is keen to ex­port potato and beet har­vesters to China. Ne­go­ti­a­tions and promo cam­paigns were held in neigh­bor­ing prov­inces. In all like­li­hood, In­ner Mon­go­lia and Bei­jing will pur­chase the equip­ment pro­duced by the joint ven­ture this year. There are plans to sell 500 com­bine har­vesters in 2012.

Of course, not ev­ery­thing is smooth for Gom­sel­mash on the Chi­nese mar­ket. First, this is a great dis­tance from Gomel to China, which in­creases trans­port costs. Sec­ond, there is a lan­guage bar­rier. The Chi­nese cor­po­ra­tion hired many in­ter­preters to work with Be­laru­sian spe­cial­ists. Third, the com­pe­ti­tion on the mar­ket is much big­ger than, for ex­am­ple, in Rus­sia or Kaza­khstan. Fourth, the Be­laru­sian pro­ducer has to spend a lot on train­ing lo­cal per­son­nel, open­ing main­te­nance cen­ters, and mar­ket­ing ser­vices. There­fore, the project will not bring huge prof­its in the short-term per­spec­tive.

Nev­er­the­less, the founders of the joint en­ter­prise be­lieve that in five years the sales of corn har­vesters may reach 5,000 items, the sales of for­age har­vesters can amount to 300 items. That is a ten­fold in­crease. Is that fea­si­ble? If we com­pare these tar­gets with the sales growth num­bers in Kaza­khstan within five years we will get vir­tu­ally the same fig­ures.

East­ward pro­mo­tion of Be­laru­sian tech­nolo­gies did not stop with China. In Au­gust 2011 Gom­sel­mash ex­ported the first batch of for­age equip­ment to South Korea. The com­pany ex­ported seven pull-type for­age har­vesters KDP-3000 Pole­sie FT40. The har­vesters are used to crop full and wax ripe corn, sorgo, sun­flow­ers, and other tall­stalked plants with fur­ther grind­ing and load­ing on trans­port ve­hi­cles.

Korean spe­cial­ists needed to test har­vesters cou­pled with en­ergy in­ten­sive trac­tors. Fields are rather small in Korea. That is why lo­cal spe­cial­ists de­cided to test the fol­low­ing scheme: they mounted a KDP3000 in front of a trac­tor and placed a cart for crushed corn be­hind it.

The Be­laru­sian har­vesters proved ef­fi­cient. There­fore, there are plans to co­op­er­ate fur­ther this year. By the way, Ger­man pull-type har­vesters un­der­went sim­i­lar tests. As a re­sult, the choice was made in fa­vor of Be­laru­sian-made equip­ment.

P.S.

Why has Gom­sel­mash de­cided to ex­pand east­ward while Europe is much closer? It ap­pears that things are not so easy in the world of busi­ness. It is worth say­ing that prac­ti­cally all Gom­sel­mash ma­chines are com­pli­ant with the EU stan­dards. Thus the com­pany can ex­port har­vesters to Western coun­tries. More­over, Be­larus-made com­bine har­vesters re­ceived good re­views from farm­ers af­ter tests.

But there is such a thing as pro­tec­tion of lo­cal pro­duc­ers. Farm­ers in the Euro­pean Union can get sub­si­dies only for the pur­chase of the equip­ment made in Europe. In ad­di­tion, the re­cent fi­nan­cial crises have af­fected the fi­nan­cial ca­pac­i­ties of many coun­tries. As a re­sult, lo­cal agrar­i­ans will not buy Be­laru­sian equip­ment be­cause they will not re­ceive sub­si­dies from the gov­ern­ment although Gom­sel­mash trac­tors are much cheaper than West Euro­pean ana­logues.

Pro­duc­tion of farm ma­chines will get a greater fo­cus in Be­larus, Pres­i­dent of the Repub­lic of Be­larus Alexan­der Lukashenko said as he vis­ited agro­town Alexan­dria where new Gom­sel­mash ma­chines are op­er­ated. Au­gust 2011

KZS-1624 Pole­sie GS16 is the most

pow­er­ful grain harvester in the CIS

Highly ef­fi­cient fod­der har­vesters Pole­sie FS80 in the field

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