What breakthrough ideas could benefit new industrial policy of Belarus?
For many decades, the Belarusian industry has successfully developed as the big state’s «assembly workshop». Today, however, it is clear that this platform has become outdated, both physically and mentally. A new program for the industrial sector development up to 2020 is being drafted under the Economy Ministry auspices. A few figures can confirm the importance of this document. Presently, the industrial sector accounts for about 30 % of national GDP and more than 90 % of exports and employs a quarter of the economically active population. Thus, the new strategy is set to determine the future competitiveness of the entire Belarusian economy.
The first document, the concept of the program, has already been unveiled to the public. It outlines issues such as the current state of industrial production in Belarus, the objectives of its development, implementation tools and mechanisms, funding, and expected results. In particular, the document states that poor labor productivity remains the most critical problem: this parameter for the Belarusian processing industry is four times as low as in Europe. The sector’s inefficient technological structure, a cumbersome governance system (including eight ministries and concerns), poor co-operation between domestic and foreign companies all are said to be major internal growth constraints. The concept focuses on eliminating these and other deficiencies.
The authors of the documents expect that active industrial and innovation policies will halve the labor productivity gap making it only twice as low as in European countries. Thus, by the end of 2020 gross value added per employee might reach $30 thousand a year. The implementation of new industrial policy will require about $ 90 billion, of which 35--37% are own funds of organizations, 33--35 % are foreign sources, and about 30% are bank loans.
The emergence of an industrial policy concept is a big leap forward, experts believe. However, many view this document only as a starting point for further discussions. «Cutting the labor productivity gap to make it be not four, but two times lower than in Europe is a false objective. What competitiveness are we talking about in this case?!» says professor at the Belarusian State University’s Institute for Continuing Education, deputy chairman of the Belarusian Confederation of Industrialists and Entrepreneurs (Employers) Georgy Grits. «The entire economy should be changed, and we need to shift from low added value to high added value».
«Why view labor productivity as a key factor? It is just a minor specific issue», argues an academician at the National Academy of Science of Belarus Piotr Nikitenko. He believes that a cluster approach might become one of the cornerstones in the new industrial policy: «For instance, we are seeing an agro-industrial cluster being put in place. For the first time in many years this area can boast good staff, technology and scientific potential».
Chairman of Minsk Association of Entrepreneurs and Employers Vladimir Karyagin thinks that the concept does not contain any breakthrough ideas that could bring the industrial sector to a new level. «The document urges companies for modernization but stipulates importing parts from Russia and adding just «five kopecks» domestically. There are no breakthroughs, no ambitious goals, and it lacks aspiration to give up unnecessary things and focus on the principal issues», the expert says. He believes that a policy statement must reflect, alongside a cluster approach, such ideas as subcontracting, logistics development, and prudent production among others.
Here is yet another important thing: the concept of Belarus’ industrial development, despite that integration within the Common Economic Area is being boosted, is not consistent with our counterparts’, Russia and Kazakhstan, similar documents. «It was a right decision to create a Common Economic Area, but this document does not analyze processes that Russia and Kazakhstan are facing», Mr Nikitenko says. «For instance, a couple of years ago a research revealed that Russia intended to launch more than 100 enterprises to rival Belarusian companies». We are addressing this problem by investing in foreign businesses and setting up productions to assemble Belarusian-manufactured items – this is an on-going process. However, the concept does not distinctly formulate the strategy. The document has no answer to the question how Belarusian enterprises, who contribute the largest portion of money in the $90-billion pie, will be able to raise funds for implementation of a new industrial policy. Also, the document does not envisage inflows of foreign capital in the economy.
«We are well aware of our industrial sector conditions. How shall we move from problems to efficiency? No propositions have been made to the working group so far», said head of the Industry, Transport and Communications Directorate of the Economy Ministry Yuri Chebotar. The discussion over new industrial policy will be continued on various levels. Policy makers are drafting another concept-based document, an industrial sector development program. Working out a legal framework for implementation of new policy would assumedly be the next step.
Some believe, however, that a broader expert panel must be engaged in this important process. For instance, Mr Grits suggests using international practices and involving international institutions and renowned experts, at least for analysis of the documents worked out and for consultations. «We have a «template» to discuss, but a conceptual approach is needed», Mr Nikitenko believes. A brainstorm would be very helpful in formulating clear and explicit provisions of the program of development up to 2020 that would determine our economy competitiveness for the coming years. These provisions should be both highly ambitious and realistic.
