New agro-‘Mercedes’ sought
As in the human body, everything is interconnected within the economy; a problem with one link in the chain may cause failure across the whole system. For Belarus, shifting the abundance of unsold goods stored in warehouses is a serious challenge. We rely on export sales for currency inflow, which funds state social programmes. Enterprises also suffer, lacking circulating assets. Yet, why is trade becoming more difficult?
By Yevgeny Kononovich
Quality in demand
“Our machine engineers used to enjoy a good niche on the Russian market, regardless of price or demand,” notes economist Vladimir Vasilega. “However, as Russians began to develop similar manufacturing, competition grew tougher; our quality alone is not enough to guarantee sales. On one hand, our technologists and heads of enterprises need to solve this problem; on the other, we need to find new niches, conducting market research and updating our ‘inventory’, as well as expanding its geography. Markets do exist; we just need to reach out to them. Our IT companies are generating hundreds of millions of Dollars of revenue annually by producing software — despite being in the toughest field for competition.”
Obviously, there’s no point in offering goods or services for which there is no demand. Much of the challenge is in anticipating future needs. In the field of agricultural engineering, a ‘Mercedes’ is sought, surpassing all others in quality.
Credits must be earned
Vadim Iosuba, a financial analyst with Alpari, in Minsk, believes that poor quality goods are down to poor organisation in the workplace. While enterprises were once focused mostly on gaining maximum output, it’s now more important that there are sales markets for what’s being produced. It’s hard for traditional firms to change their approach; the answer is sometimes to privatise inefficient enterprises, since private owners are more greatly motivated to ensure healthy sales.
Another problem is the huge credit load borne by some enterprises. The Chairman of the Board of the Development Bank, Sergey Rumas, emphasises, “Of course, we need to reduce interest rates but the National Bank cannot do this in isolation. A fall in rates would only work if supported by other economic measures, since credit availability would raise inflation and encourage import growth.”
Mr. Iosub suggests offering crediting to all enterprises under identical conditions, without subsidies from the state. “In this case, high rates would lead to reduced demand for credit, so banks would be compelled to reduce rates. At present, enterprises working under state programmes don’t need to worry about interest rates, since theirs are subsidised by the state.” He adds that the government and banks also need to be tough in refusing to credit inefficient projects, reserving funds for those who can show evidence of cost-effectiveness and whose profits directly depend on quality.
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