Economy rejects protectionism

It wasn’t until January–February 2009 that National Statistic Committee data was showing a fall in exports of 42.2 per cent; production volumes had fallen 2.3 percent as a result. Clearly, Belarus is at last facing the consequences of the global crisis
It wasn’t until January–February 2009 that National Statistic Committee data was showing a fall in exports of 42.2 per cent; production volumes had fallen 2.3 percent as a result. Clearly, Belarus is at last facing the consequences of the global crisis.

The export-oriented segment of machine building felt the change most painfully. One of the biggest enterprises, Minsk Motor Works, has seen sales tail off significantly. In January, Russian GAZ Group — its main foreign engine consumer — bought just 473 engines (a quarter of its purchase volume of January 2008). Other major partners in Russia (Pavlovsky Automobile Plant, named after Likhachev) and Ukraine (Poltavsky Turbomechanical Works and Yuzhny Machine Works) have also cut back on acquisitions. Falling demand for Minsk engines can be explained by a sharp slump in finished-product output.

The Directorate of Minsk Motor Works believes the best way to combat the situation is to expand export geography to include India, Vietnam, Venezuela, and Bulgaria. This won’t compensate for losses on the Russian market, of course. Nikolay Lobach, the Director General of Minsk Motor Works, is convinced that tapping into domestic market potential is the answer (a view shared by others in his position). Facing slumping sales in Russia, Belarusian woodworking enterprises are keen to sell greater volumes at home via import-substitution e.g. of veneers. Mr. Lobach explains, “Domestic combine harvesters, tractors and automobiles are equipped with 4 and 6 cylinder engines — some imported. We could raise sales by ensuring Belarusian vehicles are powered by domestic engines.”

The plant is extending its product range to include tractors with heavy-duty 8 cylinder motors, as well as engines for generators, compressors and pumping stations. Mr. Lobach notes that the market for diesel-generators is more active than the automobile market at present, so the plant will take advantage of this opportunity.

Minsk Motor Works believes sales will pick up by the end of the year, though optimism is restrained. Export forecasts are for 80 per cent of 2008 sales, with economic efficiency of industrial products falling from 8.1 to 6 per cent and average salaries of 505 US Dollars, compared
to 613 US Dollars last year.

Exports of Belarusian machines equipped with Minsk-made engines are also falling, which could complicate the situation. At the beginning of the year, sales of trucks to Russia had fallen eightfold. If the trend continues, demand for domestically produced engines could also fall within the Republic, affecting sales at home and abroad.

During his March meeting with Russian President Medvedev (at the Zavidovo residence) President Lukashenko emphasised the need to maintain trade turnover — since employment and personal income rely on steady sales. Belarus has no wish to see a decline in mutual trade or the use of protectionist measures.

The Director General of Minsk Tractor Works, Alexander Pukhovoy, tells us that 560 million US Dollars of MTZ tractors were exported to Russia last year. Meanwhile, 275 million US Dollars of component parts were bought from Russian enterprises. 88 Russian plants are operational in assembling almost half the ‘Belarus’ tractors sold to the Russian Federation; thousands of jobs and salaries rely on this production.

Preferential treatment for Belarusian tractors and trucks, creating unequal conditions for state purchases, could negatively influence the Russian economy. Loans should not be granted to encourage the purchase of domestically produced machinery over imports, since such protectionism could aggravate today’s problems.

Artificial barriers to foreign trade are a major topic of G-20 summits. Yet the defense of free trade remains a ‘declaration of intent’. The Belarusian economy depends on trade and insists on rejecting protectionism. Open foreign markets may be the ‘remedy’ the industrial sector needs, leading to gradual recovery in the world economy.

Vitaly Volianiuk
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