From raw materials to high technology

Belarus’ industry export growth potential is estimated at $5.07bn per year

The Eurasian Development Bank (EDB) has presented the results of a new analytical study, Advanced Manufacturing Potential in Eurasia: Sectoral Niches for Growth. The research identifies priority sectors and products for each country, assesses the potential for export growth and import substitution, and proposes a set of measures for industrial development and integration into global value chains. What potential analysts see in Belarus — in our article.

Through joint efforts

For decades, the economies of the Eurasian region have developed primarily through the extraction and export of raw materials. This model ensured an influx of foreign currency but made the countries vulnerable since a significant proportion of high value-added products were imported, and industry remained technologically heterogeneous and focused on minimal resource processing.
Experts at the Eurasian Development Bank are confident that the limitations of the raw materials model can be overcome through industrial diversification and moving up the technological ladder. At higher stages of development, the roles of knowledge-intensive and high-tech goods increase, and their production contributes to sustainable long-term growth. “Developing deep processing industries creates new sectors of the economy, reduces the environmental burden and increases technological sustainability. In the context of global transformations, it is high-tech industry that determines the sustainability and innovative competitiveness of countries,” noted Arman Ahunbaev, Head of the Sectoral Analysis Centre of the Analytical Work Directorate at the Eurasian Development Bank.
In order to realise industrial potential, the EDB’s study proposes an active industrial policy aimed at diversifying the economy and developing high value-added manufacturing. An important principle is to combine efforts to substitute imports with building up export potential. This balanced approach will enable to simultaneously reduce vulnerability to external shocks and occupy niches in high-yield segments of the global market.
From a technological perspective, the long-term priorities of industrialisation are related to the digitalisation and automation of production processes based on the Industry 4.0 concept — the introduction of artificial intelligence, robotisation, the Internet of Things, and digital twins. In parallel, experts recommend stimulating the development of biotechnology, pharmaceuticals and the new materials industry, as well as universally implementing the principles of environmental sustainability and the circular economy. These measures will enhance the technological sophistication of manufactured products and ensure the integration of the Eurasian region into global innovation processes, which is particularly essential for achieving the Sustainable Development Goals.

   













Mogilevtransmash, branch of MAZ automobile plant                           BelGee automotive manufacturer           Aleksandr Kulevsky
Andrei Sazonov               

“The effective implementation of the proposed measures will require a partnership between the state, businesses and the scientific community to align priorities and accelerate technology transfer. It is necessary to improve the industrial policy management system by introducing transparent indicators and KPIs, regularly monitoring results and adjusting support measures as needed.

  At the same time, investment should be made in human capital — educational programmes must be modernised, engineering and management skills developed, and academic mobility of personnel encouraged. Completing the set of tasks is the improvement of the institutional environment and investment climate, designed to facilitate the implementation of new projects,” the Head of the Sectoral Analysis Centre emphasised. 
It is worth noting that all of these initiatives are interrelated and require comprehensive implementation. Their realisation will unlock the region’s existing industrial potential. “An increase in manufacturing exports is estimated at over $70bn annually. The largest relative growth is possible in smaller economies such as Kyrgyzstan, Uzbekistan and Armenia, while an increase of 12–17 percent is expected in Russia, Belarus, Kazakhstan and Tajikistan. Import substitution is seen as a comparable growth reserve. According to the EDB, replacing foreign goods with domestic production generates more than $80bn annually. Overall, countries in the region are capable of replacing between 11 and 23 percent of imports, including through the localisation of equipment and component production. Such measures not only reduce external vulnerability and strengthen the industrial base, but also stimulate technological modernisation of the economy,” the EDB expert believes.
In general, the cumulative economic effect from the realisation of export potential and import substitution programmes — taking into account the growth of related industries — is estimated by the EDB at more than $510bn per year. This growth covers both supplies to external markets and satisfaction of domestic demand, stimulating the development of related industries such as energy, transport, trade, agriculture, chemical and metallurgical production. 

Unlocking potential

Regarding Belarus, analysts at the Eurasian Development Bank estimate the industry export growth potential at $5.07bn per year. Additional growth could amount to 16 percent, with a cumulative economic effect of $19.73bn. The top 10 commodity groups with the greatest export potential include automobiles, machinery and equipment, chemical products, food products, metals, clothing, computers, pharmaceutical products, electrical equipment, rubber and plastic products.

Experts note that Belarus ranks 33rd globally in the Economic Complexity Index (an indicator that reflects the level of sophistication and diversification of a country’s production capabilities based on an analysis of its exports). The manufacturing industry’s share in GDP is 20.3 percent, with medium and high-level processing in manufacturing accounting for 19.8 percent.

  Concerning import substitution, the potential for growth is also estimated at approximately $5bn. The greatest prospects lie in the automotive industry, the chemical industry, and in the production of machinery and equipment, metals, food products, electrical equipment, computers, textiles, rubber and plastic products, as well as finished metal products, excluding machinery.
“Belarus is among the top countries in terms of economic complexity. It is one of the most industrially sophisticated economies in our region, according to the international index. Further development is needed. Indeed, where competitive advantages exist, opportunities for export growth and import substitution can be found,” asserted Arman Ahunbaev, Head of the Sectoral Analysis Centre of the Analytical Work Directorate at the Eurasian Development Bank.

By Vladislav Sychevich