Logistical thinking required for success and real benefits
Logistics centres spring up like mushrooms around the country
According to official statistical data, as of early 2015, 34 logistics centres were operating in the country, with 15 of these established as part of the logistics system development programme. However, only 8 of these are owned by Belarus, most belonging to foreign investors from Russia, Azerbaijan, Ukraine, Lithuania and Iran.
Logistics centre in Baranovichi reaches its designed capacity
Professor Roman Ivut, who heads the Economy and Management in Transport Chair at the BNTU’s Autotractor Faculty recalls, “In the beginning of the state programme we planned to construct 50 centres for various functions but over the course of time their number was reduced to 36. Specialists began to analyse the map of Belarus with the intention of putting warehousing at major railroad intersections and major highway interchanges. When the scale of the task was revealed, the planners began to have second thoughts.”
In 2011, much available land was removed from the plan because it was unsuitable for investors owing to its location, absence of communications, presence of industrial enterprises nearby and unacceptable distance from automobile or railroads. Whilst it may be easy to build logistical depots almost anywhere in the country, they must be sited wisely since such sites are not merely warehouses but centres of distribution requiring a range of business support systems, as well as a local labour force. It’s possible that the planners who had a desire to implement such a large-scale plan were unaware of the nature of logistical enterprises. Investing companies are obviously attracted to the most efficient sites. The most attractive regions for the construction of logistics centres are the Minsk Region (behind the Minsk ring road, close to II and IX trans-European transport corridors) and the Brest Region (on the border with Poland).
Mr. Ivut comments that the first large-scale plan was debated in 2004 yet the issue remained an academic one for several years. At this point there is clarity on the plan, terminology and theories of logistics are well studied. However, even the implementation of the current programme is under question, since two thirds of its points haven’t yet been achieved. In spite of this, it is undeniable that the country has significantly advanced over the last seven years in terms of logistics infrastructure development whilst increasing the exports of such services. New contemporary transport-logistics centres have appeared at junctions and tax administration has improved, while Belarusian universities are producing highly educated specialists in the field.
According to the data of the Transport and Communications Ministry, last year, logistics centres and their operators processed around 11 percent of transit cargoes which passed through the country. There are clearly improvements to be made here, logistics accounts for around 7.5 percent of the country’s GDP while in the EU states this figure reaches 20-25 percent. Moreover, as a proportion of the final cost of produce in Belarus, the share of logistic expenses remains rather high, totalling around 20 percent over the previous year and in some cases reaching as high as 30-35 percent. This figure is much more modest among Europeans: the cost of transportation and warehousing of goods accounts for 9-11 percent of the final price.
According to official assessments, in 2014, financial injections into logistics development exceeded 150m Euros and the growth in logistics area stood at around 150,000 square metres. The Ministry for Transport and Communications states that by the end of this year, the total amount of investments in the construction of logistics centres will near $1bn and around $130m will be invested into the development of transport and logistics infrastructure.
According to the Ministry’s data, the total area of warehouses of ‘A’ and ‘B’ classes in Belarusian logistics centres is over 350,000 square metres while, by the end of 2015, it should increase to more than 700,000 square metres. Nevertheless, state officials insist that the goal isn’t the number of warehouses constructed in the country, but the opportunity to offer qualitative, competitive and affordable services. At present, Belarusian transport and logistics centres are running at 60-70 percent capacity, but this isn’t a problem, since spare capacity makes the businesses competitive with each other.
Several years ago, the President determined to maximise the opportunities from the country’s advantageous geographical position by turning it into a large-scale transport and logistics international centre. He commented, “Belarus shouldn’t merely connect west with east and north with the south via numerous transport connections. It should be a regional hub for the secure and comprehensive servicing of transit cargo. Moreover, Belarus should be a more attractive proposition for our business partners compared to our rivals”. According to the President, the achievement of this goal will give economic benefits and strengthen our geopolitical role.
If we delay, the chance for development may be taken by others and the opportunities for logistical success for Belarus will be overtaken by its competitors.
By Vladimir Khromov