In August 2009 the Belaruskaya Dumka (Belarusian Thinking) journal published my article titled ‘TNC “Belarus”. It said: “Given that the global economy will be dominated by transnational corporations, Belarus should try to become one of those, a kind of ‘corporation of corporations’, and benefit from rightly foreseeing future trends.”
The 2011-2012 economic transformations prove that assumptions made back in 2009 were worthy. Merging Belarusian large and medium-sized enterprises into holdings would enable them to compete with international large businesses more successfully. It is also clear that consolidation of enterprises will facilitate coordination of their activities by the state and provide for more accurate and efficient funding for modernization. Integration is also helpful for solving personnel issues. Belarus, like any other growing economy, faces perennial shortage of qualified top managers. As companies consolidate, one of the senior executives’ concerns would be enhancing capacities of mid- and lower-level employees or building new efficient teams. Presently, two principal issues need to be solved: it is important to identify the most capable managers who can lead a holding and to grant them authority to address staffing problems faced by subordinate enterprises. A head of a holding should be empowered to make decisions on removal of ineffective managers unable to ensure maximizing exports and improving profitability. Unsuccessful managers can be replaced with less experienced yet good learning people who are able to implement the latest management technology in the context of globalization.
Launching a potentially successful transnational corporation such as Belarusian Foods is worth considering. Former USSR countries are familiar with high-quality Belarusian foodstuffs, and a food holding can use a well-known brand. Further improvement of quality of and raising prices for foods exported by Belarus should be a key objective. Presently, Belarusian foods that are exported abroad are often of better quality than those locally produced yet they are sold at lower prices. As participants of a holding, Belarusian manufacturers will cease competing with each other and take all the efforts to increase their revenues.
Holdings would make the work of ministries easier and more efficient. Instead of making futile attempts to interact with heads of thousands of enterprises on a regular basis they will have to efficiently contact with just few. On-going control and guidance will be substituted with backing holdings’ expanding their footprint in foreign markets. With ministries acting as mediators, several dozens of holdings will form a transnational corporation ‘Belarus’, a flexible mechanism to improve profitability of member enterprises, the living standards and efficiency of public administration.
Another important question is to what extent Belarusian enterprises should be consolidated. The prospects are obvious. The greater aggregate capitalization, resources and a distribution network of a company, the greater is its efficiency in the conditions of economic globalization. It makes sense to set up 20 to 30 large economic entities, mostly state-owned, to operate in the major economic areas of Belarus. The capitalization of those would enable them to enter, sooner or later, the top 2000 world’s largest corporations. Belarusian assets should be internationalized in order to lower the risks associated with doing business in just one country. Proto-TNCs set up in Belarus should extensively cooperate with foreign TNCs using their experience and improving their export strategy.
Also, non-government Belarusian TNCs can be launched on the basis of existing private large corporations. Future Belarusian TNCs should be listed on the world’s leading stock exchanges to facilitate their integration into the global economic system and to provide access to cheaper foreign funds.
In the case of large state-owned enterprises the objectives of consolidation are obvious. What can be done in private business? As I wrote in 2009, “the main task is to develop private businesses that are focused on effective servicing the interests of state-run export-oriented enterprises, exporting their own products and import substitution with domestically manufactured goods.” The lessons of early 2011, when 7,000 firms flooded Belarus’ market with imported products bought for cheap loans extended by state-owned banks without trying to export Belarusian goods and services, prove that the idea was good. Beginning in the spring of 2011, the government made it clear to officials that it was in a position to enhance exports and arrange for import substitution. Presently, banks allocate their funds to exporting companies while import-oriented private businesses cannot count on benevolent attitudes on any level.
The foreign trade balance in the first two months of 2012 proved positive. While in January-February 2011 the negative trade balance totaled 1.35 billion dollars, in the same period of 2012 the balance was positive with exports exceeding imports by 839 million dollars. Continued consolidation of enterprises would maintain this trend over time.
