New Con­struc­tion Rules

Economy of Belarus - - FRONT PAGE - Yeka­te­rina MARKOVICH

Im­por­tant amend­ments have re­cently been in­tro­duced to Be­larus’ laws reg­u­lat­ing the con­struc­tion sec­tor. The amend­ments for­mal­ized the new rules of the game for the in­dus­try. The terms of shared-eq­uity con­struc­tion dra­mat­i­cally changed; at­tes­ta­tion of spe­cial­ists and or­ga­ni­za­tions was in­sti­tuted; the pun­ish­ment for mala fide de­vel­op­ers was tough­ened. All these amend­ments are de­signed to help re­solve the prob­lems out­lined by the work­ing group that has been set up to deal with is­sues in the con­struc­tion in­dus­try. These amend­ments are also ex­pected to of­fer additional pro­tec­tion to Be­laru­sians who want to live in their own homes. Have the amend­ments born fruit? What are the most promis­ing lines of busi­ness in the con­struc­tion in­dus­try? How will the qual­ity of con­struc­tion ser­vices be im­proved and what will be done to ex­pand the ex­port? These ques­tions were ad­dressed by the Econ­omy of Be­larus Mag­a­zine to Ar­chi­tec­ture and Con­struc­tion Min­is­ter of Be­larus Ana­toly CHERNYI.

Mr Chernyi, the day you were ap­pointed min­is­ter you told jour­nal­ists that Be­larus’ con­struc­tion in­dus­try should em­brace Euro­pean stan­dards. What did you mean?

I meant har­mo­niza­tion of Be­laru­sian tech­ni­cal documents with Euro­pean codes and norms, as well as ef­forts to ad­vance the do­mes­tic con­struc­tion in­dus­try to the Euro­pean level. We are lo­cated be­tween the CIS and the West. There­fore, we should set an ex­am­ple. We need to make sure that all con­struc­tion and de­vel­op­ment projects pro­ceed smoothly and evenly and keep up with the dead­lines. Ev­ery­thing should work like a clock, from project en­gi­neer­ing and prepa­ra­tion of a con­struc­tion site to the timely de­liv­ery of a fa­cil­ity. That was what I meant. And, of course, qual­ity should be at the core of ev­ery­thing we do. Our build­ing ma­te­ri­als and con­struc­tion ser­vices should meet Euro­pean stan­dards.

What was the ra­tio­nale be­hind the nov­el­ties like govern­ment pro­cure­ment and rented homes?

It is not a trib­ute to fash­ion or new trends, but the most op­ti­mal and ac­cept­able so­lu­tions for now.

For ex­am­ple, pub­lic pro­cure­ment al­lows ad­dress­ing is­sues as­so­ci­ated with con­struc­tion de­lays. These de­lays are of­ten due to ir­reg­u­lar fi­nanc­ing. For ex­am­ple, some­one fails to get a bank loan or trans­fer their funds in time – all this is detri­men­tal to the pace of con­struc­tion. The pub­lic ten­der­ing mech­a­nism will help avoid such sit­u­a­tions in prin­ci­ple, be­cause the fu­ture property owner does not take part in the in­vest­ment process on the stage of con­struc­tion. In the case of pub­lic pro­cure­ment, only one pub­lic con­trac­tor is in­volved – a cap­i­tal con­struc­tion man­age­ment com­pany that drafts de­tailed crit­i­cal path sched­ules and di­rectly trans­fers bank loans into the con­struc­tion project. Six months be­fore a house is de­liv­ered, a co­op­er­a­tive of fu­ture property own­ers is formed. The fu­ture res­i­dents take over their ready-to­move-in apart­ments to­gether with loan com­mit­ments.

Be­sides, the Be­laru­sian Pres­i­dent has re­cently de­creed that one square me­ter of hous­ing built un­der govern­ment pro­cure­ment con­tracts should be equal to the aver­age monthly salary in Be­larus with the co­ef­fi­cient of 1.2. Thus, thanks to these mea­sures, a fu­ture property owner will know ex­actly when he will be able to move in to his new apart­ment. He will not be afraid of be­ing charged more than was ini­tially agreed on, be­cause the cost of the project will be set­tled in a con­tract with a de­vel­oper. More than that, it will be eas­ier for a fu­ture property owner to plan his spend­ing, as he will know ex­actly how much he will have to pay for the hous­ing. There­fore, pub­lic pro­cure­ment guar­an­tees sta­bil­ity and gives a sense of se­cu­rity to both property own­ers and de­vel­op­ers.

To help de­vel­op­ers keep costs un­der con­trol, the min­istry and sub­or­di­nate agencies have come up with so­lu­tions re­lated to cost­ef­fi­cient hous­ing con­struc­tion. If de­vel­op­ers go over budget, they will have to re­vise their ex­penses and cheapen the cost of hous­ing. They need to keep in mind that their sav­ings will trans­late into their prof­its. It is a win-win strat­egy.

In ad­di­tion, the mech­a­nism of the govern­ment pro­cure­ment can be in­tro­duced for small hous­ing de­vel­op­ment. Such a pos­si­bil­ity is not ex­cluded at the leg­isla­tive level. To­day, for ex­am­ple, us­ing the mech­a­nism of govern­ment pro­cure­ment, we can build sep­a­rate houses for large fam­i­lies if the cost of 1m2 is equal to the aver­age salary in the coun­try with the co­ef­fi­cient of 1.2. We im­ple­ment a

suf­fi­cient num­ber of small hous­ing de­vel­op­ment projects in prin­ci­ple and will fur­ther de­velop this area.

With re­gard to rental hous­ing, the prac­tice of commercial apart­ment con­struc­tion has been long-es­tab­lished in many coun­tries. We used to fo­cus on hous­ing lend­ing pro­grams be­fore and missed the point that rental hous­ing could be a so­lu­tion to the hous­ing prob­lem. To­day this is a great op­por­tu­nity to save up for a fu­ture home pur­chase or to be more mo­bile if there is a need to travel around the coun­try, for ex­am­ple, for work.

For people’s con­ve­nience we have de­vel­oped projects of rental stu­dio apart­ments, which can be a great op­tion for stu­dents. This is a small one-room apart­ment with a low rent, which will be quite com­fort­able and in­ex­pen­sive for stu­dents. And if a univer­sity grad­u­ate gets as­signed for work to an­other city, he will be able to eas­ily rent a new place in an­other city and save up to buy or build his own home.

When these projects gain ground and the pub­lic commercial hous­ing stock is big enough, the money that will come from rent will be in­vested in new commercial apart­ment con­struc­tion. And this will be­come an on­go­ing process. In the mean­time, we are us­ing budget funds.

If the rent of state-owned commercial apart­ment is lower than that of pri­vate land­lords and the pro­ceeds are spent on fur­ther con­struc­tion, then this begs the ques­tion: how lu­cra­tive is this busi­ness to­day? What is a pay­back pe­riod of rental hous­ing projects?

If it were very prof­itable and lu­cra­tive, the busi­ness would be all over such projects. Of course, these are the projects with a long pay­back pe­riod, but we have to take care of people who need hous­ing and are un­able to pay the rent on the commercial mar­ket.

Pay­back pe­riod is in­flu­enced by such a fac­tor as the use of de­creas­ing co­ef­fi­cients for cer­tain cat­e­gories of cit­i­zens. This is a so­cial not a commercial project, but rental hous­ing should be de­vel­oped be­cause it is promis­ing.

Be­laru­sians pre­fer to have their apart­ments in their own­er­ship. Many ex­pect that in the fu­ture they will be able to buy out rental hous­ing. Should they count on it?

If the buy­ing out is al­lowed, then the rental hous­ing project will make no sense. All will buy out rental apart­ments, and this project will fail. There­fore, the buy­ing out should not be al­lowed. I will per­son­ally in­sist on that.

When a per­son gets an op­por­tu­nity to live in a rental apart­ment he will be au­to­mat­i­cally re­moved from the wait­ing list for hous­ing. Do you think this is fair?

A con­tro­ver­sial is­sue. In my opin­ion, we should not re­move people from the wait­ing list. Let the per­son re­main on this list, so much so that it does not pro­vide any spe­cial ben­e­fits. Af­ter all, the main ad­van­tage of this list is the right to re­ceive a soft loan, and there are not many people in Be­larus who are en­ti­tled to such loans. By De­cree No.13 pref­er­en­tial loans can be ex­tended to a nar­row cir­cle of people: large fam­i­lies, people who have lived more than 10 years in dor­mi­to­ries, mil­i­tary per­son­nel. And by the way, I be­lieve that large fam­i­lies should re­ceive max­i­mum sup­port. They should be en­ti­tled to live in rental hous­ing, and build their own apart­ments or houses on a pref­er­en­tial ba­sis. We need a hu­mane ap­proach here!

Re­cently there has been a lot of talk about rental hous­ing and govern­ment pro­cure­ment and less talk about such an in­ter­est­ing project as the con­struc­tion of satel­lite towns. Why has not this promis­ing idea been ex­plored fur­ther? What is the rea­son?

You see the de­vel­op­ment of satel­lite towns was not as ur­gent as other is­sues. For ex­am­ple in Minsk there are avail­able ar­eas to build 7 mil­lion m2 of hous­ing. The satel­lite town projects have been put on the back burner, so to speak. But work on the project has not been stopped. It re­sulted in De­cree No.214 “On the de­vel­op­ment of satel­lite towns”. We have worked on this doc­u­ment long enough be­cause it was of­ten re­turned for fi­nal­iza­tion. We needed to reach a con­sen­sus, and we suc­ceeded in that.

The de­cree was de­vel­oped si­mul­ta­ne­ously with the im­ple­men­ta­tion of the very project. Hous­ing con­struc­tion was launched in Smole­vichi. The suit­abil­ity of the land for new hous­ing con­struc­tion projects was ex­am­ined. The is­sue was any­thing but sim­ple since the land un­der con­sid­er­a­tion was clas­si­fied as plough­land or wet­land. Be­sides, the satel­lite town project re­quires

the as­so­ci­ated in­fra­struc­ture, and in some places it is un­der­de­vel­oped. The new de­cree for­mal­izes all the above­men­tioned is­sues.

When will the first dwelling in Smole­vichi be com­mis­sioned? Have new ar­eas been al­lo­cated for the fu­ture con­struc­tion projects?

The house in Smole­vichi will be com­mis­sioned this year. As for new ar­eas, once De­cree No.214 comes into ef­fect, con­struc­tion projects will be launched in other satel­lite towns: Dz­erzhinsk, Zaslavl, Lo­goisk, Ru­densk, Fa­nipol, Skidel and Zhabinka. De­sign and es­ti­mate doc­u­men­ta­tion, en­gi­neer­ing in­fra­struc­ture plans will be worked out for each of these ar­eas. I will re­it­er­ate that in­fra­struc­ture is needed in the first place. There is no sense in start­ing hous­ing con­struc­tion in the mid­dle of nowhere with no util­ity sys­tems avail­able. Uti­liz­ing the site with the main lines and nec­es­sary net­works in place is both con­ve­nient and wise. Thus, be­fore talk­ing about big re­sults, one should un­dergo all the pre­ced­ing stages which in­clude de­sign­ing, co­or­di­na­tion, prepa­ra­tion of de­sign and es­ti­mate doc­u­men­ta­tion and in­fra­struc­ture de­vel­op­ment. I think that the work on the de­vel­op­ment of these ter­ri­to­ries will be fully launched next year.

There are plans to con­sid­er­ably cut on hous­ing con­struc­tion in Minsk and to keep the vol­ume of new con­struc­tion un­der 500,000m2 per year start­ing from 2016. In the mean­time, the Be­laru­sian cap­i­tal has the

long­est wait­ing list for hous­ing. Does it mean that new hous­ing will be avail­able in satel­lite towns only?

As I have al­ready said, to­day the area avail­able in Minsk is enough for build­ing 7 mil­lion m2 of hous­ing. The an­nual con­struc­tion plans for the com­ing years will pro­vide for at least 1 mil­lion m2. It will be grad­u­ally re­duced through 2020. Now you can imag­ine how much new dwellings the cap­i­tal will have. The re­duced con­struc­tion vol­umes will hardly be no­ticed.

Then go satel­lite towns. There is no need to be afraid of them. With all nec­es­sary en­gi­neer­ing and trans­port in­fra­struc­ture de­vel­oped, speed rail­way com­mu­ni­ca­tion and high­ways in place, it will be very easy to get to the satel­lite town from the cap­i­tal. By the way, the in­dus­try will be grad­u­ally mov­ing from Minsk to satel­lite towns and people liv­ing there will have their jobs nearby.

The work­ing group on con­struc­tion is­sues that has been set up in pur­suance of the Pres­i­dent’s in­struc­tions fo­cused its ut­most at­ten­tion on un­com­pleted con­struc­tion projects. How is this is­sue ad­dressed?

The is­sue is se­ri­ous. Yet the progress is con­sid­er­able. In early 2014 there were 144 un­fin­ished con­struc­tion projects. 78 of them were com­mis­sioned by 1 May 2014. How­ever, over the pe­riod un­der re­view 18 more houses joined the list.

Ac­cord­ing to the sched­ule, 18 houses are to be de­liv­ered in May and about 63 in June, and these are the houses that arouse spe­cial con­cerns. Heavy work­load falls on the last month of the dead­line set up by the head of state. Al­though the level of their readi­ness is very high, it is not good to leave any work till the very last mo­ment.

Min­istry rep­re­sen­ta­tives and I per­son­ally in­spect the sites on a reg­u­lar ba­sis. All my deputies are in charge of dif­fer­ent parts of Be­larus where they su­per­vise the trou­bled con­struc­tion projects. To­day, un­for­tu­nately, some is­sues in Minsk and Minsk Oblast have

yet to be ad­dressed. The is­sues are solv­able if we con­cen­trate all the ef­forts there and or­ga­nize the work in two and three shifts. The un­com­pleted con­struc­tion projects that are de­vel­oped by the en­ter­prises af­fil­i­ated with the Con­struc­tion and Ar­chi­tec­ture Min­istry are all un­der a tight con­trol. I have no doubts they will be com­pleted on sched­ule.

It will be a dis­as­ter if we fail to ful­fill the Pres­i­dent’s in­struc­tions and do not com­plete the works in progress by 1 July. We have an­a­lyzed ev­ery un­fin­ished build­ing and had the com­mis­sion­ing dates for some of them post­poned. Such projects are few how­ever. Thus, the com­mis­sion­ing of the no­to­ri­ous build­ing No.10 in Pri­tyt­skogo Street (Minsk) has been resched­uled for De­cem­ber 2014. Work on the build­ing be­gan in Septem­ber 2007. The con­struc­tion was pro­tracted due to some scams which re­sulted in dam­ages for hun­dreds of eq­uity hold­ers. The house will be com­pleted this year. The rel­e­vant de­cree was signed by the head of state. Other projects are to be com­pleted and com­mis­sioned in time.

Is it pos­si­ble that as the at­ten­tion to this is­sue abates the is­sue of the un­fin­ished con­struc­tion projects will emerge again?

The main so­lu­tion to this prob­lem is to or­ga­nize large-scale con­struc­tion us­ing the govern­ment pro­cure­ment mech­a­nism as soon as pos­si­ble. It will help avoid trou­bled projects be­cause fi­nanc­ing will be pro­vided on an equal ba­sis, while the coun­try has enough build­ing ma­te­ri­als. There­fore, there are no rea­sons to de­lay the hous­ing de­liv­ery. I am ab­so­lutely con­vinced and can guar­an­tee that the govern­ment pro­cure­ment mech­a­nism in hous­ing con­struc­tion will help erad­i­cate the prob­lem of un­fin­ished con­struc­tion projects.

Apart from that, a num­ber of le­gal documents were passed to stream­line the con­struc­tion in­dus­try. For ex­am­ple, it is now pos­si­ble to have an in­flu­ence with de­vel­op­ers and cer­tify their qual­i­fi­ca­tions level. Cer­tain mea­sures have been taken in the shared-eq­uity con­struc­tion sec­tor. For in­stance, a de­vel­oper has to fi­nance at least 15% of the con­struc­tion project. It will guar­an­tee that the de­vel­oper will com­mis­sion the project and will not cre­ate a fi­nan­cial pyramid to de­ceive shared-eq­uity con­struc­tion par­tic­i­pants.

Of course, the Ar­chi­tec­ture and Con­struc­tion Min­istry will step up con­trol over the in­dus­try. If we get in­for­ma­tion about de­lays in con­struc­tion from the State Com­mit­tee for Stan­dard­iza­tion, we will in­ter­vene with­out tak­ing into con­sid­er­a­tion whether the house is built by a sub­or­di­nate or­ga­ni­za­tion, mu­nic­i­pal com­pany or a pri­vate de­vel­oper. We have lever­age on all of them.

Are all the above­men­tioned mea­sures ef­fi­cient? Have you man­aged to en­sure additional pro­tec­tion of people par­tak­ing in hous­ing con­struc­tion projects?

Of course, at present people par­tak­ing in shared-eq­uity con­struc­tion face lower risks be­cause to­day this process is trans­par­ent. All de­vel­op­ers and in­vestors are well aware of the rules.

I see that the mea­sures have been a suc­cess. Per­haps, in the fu­ture it will be nec­es­sary to amend the documents. We al­ready have in­ter­est­ing ideas. But these documents should not be set in stone. They must evolve like a liv­ing or­gan­ism.

You have once pro­posed to peg fi­nan­cial bonuses to heads of Be­laru­sian con­struc­tion com­pa­nies to the size of Be­larus’ ex­port, progress in re­duc­ing back­logs of in­ven­tory and pro­duc­tiv­ity per em­ployee. How are you go­ing to ma­te­ri­al­ize this idea?

Yes, I have put for­ward such pro­pos­als. Rel­e­vant amend­ments have al­ready been in­tro­duced to the con­tracts of di­rec­tors of sub­or­di­nate or­ga­ni­za­tions and com­pa­nies. This prac­tice has been in­tro­duced at mu­nic­i­pal con­struc­tion com­pa­nies. Pri­vate com­pa­nies ap­ply it too. It is clear that this is a fair mea­sure be­cause it does not bear losses but cre­ates eco­nomic stim­uli. You must work harder if you want to earn more.

In your opin­ion, why do cer­tain com­pa­nies strug­gle with ex­port? They even have to re­vise bonuses to man­age­rial per­son­nel. There are no prob­lems with de­mand; for­eign con­sumers are in­ter­ested in Be­laru­sian build­ing ma­te­ri­als and ser­vices of our spe­cial­ists. What is the prob­lem here?

You know, the ex­port of goods and ser­vices is a trou­ble­some busi­ness. It is es­sen­tial to study the le­gal frame­work and re­quire­ments of the state with which you are go­ing to ne­go­ti­ate, bol­ster con­tacts and ties, in­spect fa­cil­i­ties, get nec­es­sary cer­tifi­cates and so on and so forth. Some people be­lieve that it is not nec­es­sary. They pre­fer to have a con­struc­tion site nearby. There­fore, it is ex­tremely dif­fi­cult for such com­pa­nies to pro­mote ex­port. I can prove my words with facts. In Jan­uary-March 2014, 34 com­pa­nies of the Ar­chi­tec­ture and Con­struc­tion Min­istry had zero ex­port.

But ev­ery­one should un­der­stand that the con­struc­tion vol­umes in the coun­try are de­clin­ing and will con­tinue to de­cline be­cause all nec­es­sary so­cial and sports fa­cil­i­ties have al­ready been erected in Be­larus. Con­struc­tion com­pa­nies and or­ga­ni­za­tions still have work­load tar­gets. There­fore, it is nec­es­sary to sign con­tracts with for­eign com­pa­nies. More­over, our spe­cial­ists are highly qual­i­fied. The mod­ern­iza­tion of com­pa­nies man­u­fac­tur­ing build­ing ma­te­ri­als was a suc­cess. Hav­ing cut­ting-edge equip­ment and tech­nolo­gies, they will eas­ily be able to boost their ex­port, if they want it. It is also worth say­ing that mod­ern­iza­tion and re­con­struc­tion projects were fi­nanced through loans, in­clud­ing in for­eign cur­rency, while ex­port is the main source of for­eign cur­rency.

For­tu­nately, many people re­al­ize that. Thus, in Jan­uary-April this year the ex­port of ser­vices and goods of our sub­or­di­nate com­pa­nies soared 33% and 9% re­spec­tively as com­pared to the same pe­riod of last year. I be­lieve that we will be able to reach an­nual tar­gets. A 15% in­crease in the ex­port of ser­vices in 2014 is likely to be achieved, but things are more com­pli­cated with the ex­port of goods as the global prices for build­ing ma­te­ri­als plum­meted and we were work­ing at a loss and sell­ing at prime cost or even lower. But this was a forced mea­sure as we had to keep our po­si­tions in the mar­ket. Now the con­struc­tion sea­son is in full swing and we are thor­oughly mon­i­tor­ing mar­kets mak­ing note of ev­ery in­crease in prices and im­me­di­ately tak­ing de­ci­sions.

The sit­u­a­tion in Ukraine has also dealt a blow to our ex­ports as we used to ship a great share of the float glass to this coun­try. Yet, the mar­kets are grad­u­ally “wak­ing up” and we know how to win a ten­der so

I am con­fi­dent that we will han­dle it.

Not long ago Be­larus in­tro­duced manda­tory ac­cred­i­ta­tion of con­struc­tion com­pa­nies and their em­ploy­ees. What is be­hind this move? Af­ter all, the li­cens­ing had been abol­ished be­fore to lib­er­al­ize the build­ing ma­te­ri­als mar­ket.

The mat­ter is that there were many prob­lems with not only con­struc­tion but also ar­chi­tec­tural de­sign and var­i­ous ge­o­logic ex­plo­ration works. The process is not ef­fi­cient any­more as there are too many un­fair play­ers. Even when com­pa­nies re­al­ized that they were not ca­pa­ble to deliver on a project they bid any­way.

To­day we use a five-class re­spon­si­bil­ity scale. Only com­pa­nies pass­ing the nec­es­sary ac­cred­i­ta­tion and hav­ing the re­quired tech­ni­cal, sci­en­tific and archival ca­pac­i­ties as well as ac­tive fixed as­sets and ac­cred­ited per­son­nel are al­lowed to build fa­cil­i­ties of the first and sec­ond class. Now if such an or­ga­ni­za­tion com­petes in a ten­der with an­other or­ga­ni­za­tion, we know that they are equal. The choice will be made based on what suits the cus­tomer best and what has a lower price tag. As for em­ploy­ees, even be­fore they had to un­dergo ac­cred­i­ta­tion, we just did not mon­i­tor it so closely.

Now if an em­ployee or a com­pany do not com­ply with their obli­ga­tions or fail to meet the terms of an agree­ment they can lose their qual­i­fi­ca­tion cer­tifi­cate which means that all their ac­tiv­i­ties will be sus­pended as it is for­bid­den to per­form any works with­out a cer­tifi­cate and the tax au­thor­i­ties will be no­ti­fied. Ev­ery­body should re­al­ize that it is not worth the risk of los­ing a cer­tifi­cate. This is quite a use­ful lever­age.

How­ever, when the ac­cred­i­ta­tion res­o­lu­tion of the Coun­cil of Min­is­ters came into ef­fect, there was a prob­lem with re­gional ag ri­cul­tural con­struc­tion com­pa­nies. These are as­so­ci­a­tions which in­clude ju­ridi­cal en­ti­ties with a small num­ber of per­son­nel. To con­struct fa­cil­i­ties of the first and sec­ond class they are al­lowed to count all their work­ers as, one way or an­other, they will all be work­ing on the project.

Prac­ti­cal ap­pli­ca­tion of the res­o­lu­tion may prompt in­tro­duc­tion of other amend­ments.

The res­o­lu­tion also spec­i­fies that­ev­eryqual­i­fi­ca­tion­cer­tifi­cate had to be signed per­son­ally by the Min­is­ter of Ar­chi­tec­ture and Con­struc­tion. Al­though this will pro­vide a rock solid guar­an­tee that the ac­cred­ited com­pany or em­ployee can be trusted, is it re­ally nec­es­sary for you to sign it per­son­ally?

A cer­tifi­cate is a very im­por­tant doc­u­ment; it is one of the main documents of the com­pany. Get­ting a li­cense re­voked is equal to los­ing a mil­i­tary ban­ner; there­fore it was de­cided that ev­ery cer­tifi­cate will be signed by the min­is­ter. Of course, this means that I will have more pa­pers to sign on a daily ba­sis but this is the only way to make ev­ery­one ap­pre­ci­ate the true value of this doc­u­ment. Be­sides, this is an additional pro­tec­tion mea­sure and I hope ev­ery­one will re­al­ize that. As for me, I am ready.

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