By Piotr Akumenko
Import substitution has always been important for Belarus. Imported raw materials and components are used in a third of all manufactures, while one-third of our GDP is generated by products made using imported materials. However, as PM Mikhail Myasnikovich notes, in recent times, import substitution has shifted from being an economic issue to a political issue. It entails other problems — such as the sustainability of the national currency’s exchange rate, the balance of payments and other issues relating to the country’s economic development.
Mr. Myasnikovich is convinced that the country could half its import dependence without losing competitiveness or quality. Science can significantly contribute to the process — as studied at a recent session of the National Academy of Sciences’ Presidium. This calculated that each budget Rouble spent on the development of import substitution production leads to its manufacture worth 18.8 Roubles; the figure reaches 85 Roubles under the ‘Machine Building’ programme. As part of the Belarusian National Academy of Sciences’ import substitution programme of 2006-2010, 202 objects of new import substitution machinery were created; their sales generated almost $170m.
However, challenges remain — such as our need for 2.5m imported shaving accessories annually. Meanwhile, 100m children’s nappies are imported each year. Belarus’ first facility making nappies for children and pads for adults is under construction in the Mogilev free economic zone, aiming to satisfy 30 percent of the market’s needs. Production is to commence in late spring of 2012.
The major problem seems to lie in the modest size of our domestic market. “For many products, economically feasible production volumes are much higher than those required by the Belarusian market,” explains the Chairman of the National Academy of Sciences’ Presidium, Anatoly Rusetsky. Complete import substitution is clearly unfeasible while those goods chosen for the process must have the ability to realise foreign sales. Mr. Rusetsky is convinced that our grain harvesting machinery could be a bright example; this year, Gomselmash Association has produced and sold more harvesters abroad than domestically.
Our strategy for the further development of industry needs to take into account our place in the Customs Union, which gives greater access to the Russian and Kazakh markets. We can set up joint ventures and establish production of components for Russian and Kazakh industrial facilities.
Many options are open to us, making it vital to choose the correct path to reducing imports and raising exports.