OREANDA-NEWS. December 19, 2011. A wider use of local resources in production is the best option for the Belarusian economy, Prime Minister of Belarus Mikhail Myasnikovich said when speaking at the seminar held for executives of national and local level government agencies to discuss import substitution as a vital factor for ensuring the balanced development of the Belarusian economy.

“Calculations show that the development of production using local resources is the most optimal option for the Belarusian economy, the major reserve for import substitution, higher labor efficiency, a higher degree of processing of local raw materials,” Mikhail Myasnikovich said.

The Premier named three major areas where local resources might be widely used: woodworking, extraction and processing of potash raw materials and production of construction materials. “Economic development and a 35% export growth in this five-year period will come from industries using local resources with minimal import capacity, including agriculture. This was the perspective we used in the socioeconomic development program for the five-year period,” the head of government said.

Mikhail Myasnikovich has suggested introducing tough antimonopoly requirements for major net importers. The Prime Minister suggested studying economic and system-based conditions for promoting import substitution. This pertains to the reduction of tax burden for companies that overfulfill the material and energy conservation targets. The Premier suggested transferring some part of saved resources to such companies. “However, I should say that this opportunity is often abused,” he said.

“The second, an extremely unpopular move is introducing additional restrictions, some quasi-taxes for net importers,” the Prime Minister said. He emphasized that this move should not run contrary to Belarus’ obligations in the Single Economic Space.

“We can introduce tough antimonopoly requirements for major net importers, and make commodity interventions using stabilization funds of oblasts and Minsk. So far the relevant efforts of consumer cooperatives and the Trade Ministry on the grass route level leave much to be desired,” the Premier said.

Twelve holding companies will be set up by the Industry Ministry of Belarus, Prime Minister of Belarus Mikhail Myasnikovich said when speaking at the seminar.

“Companies affiliated with the Industry Ministry will be grouped into 12 technologically integrated holding structures,” the Premier informed. Major holding companies will be set up in other industries, too.

Mikhail Myasnikovich emphasized that the establishment of big integrated structures is the basic economic condition for import substitution of intermediate goods. “It is logic of economy proved right by experience: the greater is concentration of industrial, financial and intellectual capital, the better is domestic cooperation and potential opportunities on external market,” the head of government concluded.

Belarusian companies and industrial sectors should use the potential of the Single Economic Space (SES) to the full extent possible, Belarus Premier Mikhail Myasnikovich said.

“We have a constellation of unique three factors for us. They include the increasing purchasing power of our Customs Union partners, the Belarusian ruble exchange rate that favors the export growth and the common market with a high tariff protection,” the PM said.

However, according to him, we should be aware that these factors will not last forever. “Window of opportunity will close quickly. The most that we have is the current five-year term. We do not have time for a slow start,” Mikhail Myasnikovich said.

He explained that import tariffs for a number of commodity groups were lowered as Belarus joined the Customs Union, which makes these products less competitive. “Therefore, we will have to work to improve competitiveness, lower prices and increase product quality to win the competition with imports,” the Prime Minister believes.

He also noted that Russia's accession to the WTO will reduce the level of tariff protection of the common market for a number of products in the medium term.

Belarus is initiating the introduction of a special protective tariff on tablet computers and notebooks, which are imported into the Customs Union, Prime Minister of Belarus Mikhail Myasnikovich told the seminar held on 15 December for executives of national and local level government agencies to discuss import substitution.

“In the near future we will approach the Russian commission with a proposal to introduce a protective tariff on the import of tablets and notebooks into the Customs Union,” said the Prime Minister.

At present the tariff is zero. “It is not profitable to start manufacturing these products due to cheap imports,” said the Prime Minister. “We will ask for your support, Alexander Grigoryevich [Lukashenko], and will try to convince our Russian and Kazakh colleagues to create economic conditions to localize this promising manufacturing in the Single Economic Space”.

According to the Prime Minister, Belarus should take the leading position in starting the manufacturing of these products. “It is an example of the strategy for anticipating import substitution when enterprises are set up to satisfy future demand,” he said.

Over the last few years Belarus has achieved serious results in substituting certain imports. For instance, in 2010 the import of buses and trolleybuses dropped by 2.4 times in comparison with 2006, the import of cigarettes dropped by 6.2 times, the import of macaroni products dropped by 1.5 times. With the GDP up by 40%, the consumption of fuel and energy resources has increased by only 6%. Yet no systemic growth of import substitution effectiveness has been achieved, stated Mikhail Myasnikovich.

Belarus can technically complete WTO accession procedures in 2012, Prime Minister of Belarus Mikhail Myasnikovich said. “Staying outside the WTO while our partners in the Single Economic Space are its full members basically means that we live to the WTO rules but have no protection from discrimination on part of third parties and no right to appeal to protection and court institutions of the organization,” the Premier said.

“Technically Belarus might be able to complete the accession procedures next year,” Mikhail Myasnikovich added.

Belarus will invite major European companies for the sake of setting up joint ventures in the chemical industry. The statement was made by Prime Minister of Belarus after a visit to Henkel Bautechnik and IP Coswick as part of the seminar held for executives of government agencies to discuss import substitution.

According to Mikhail Myasnikovich, not all Belarusian enterprises work hard to substitute imports. The share of imported components in the product cost of the best of them is still large. “We have a lot to do, especially in our chemical industry,” stressed the Prime Minister. The industry accounts for a considerable share of imports.

To address the problem, Belarusian enterprises should promote cooperation with well-known foreign manufacturers and create joint ventures with them. “We cannot establish modern chemical enterprises on our own, therefore major European concerns like BASF should be invited in order to set up joint ventures for the sake of satisfying interests of Western partners and for the sake of reducing the import dependence of Belarus,” stated the head of government.

Speaking about the seminar held on 15 December, Mikhail Myasnikovich said the event will give a boost to the fulfillment of import-substituting projects. The seminar was supposed to use good examples to train government executives, he said. “Since there are ministers, heads of district and oblast administrations present, I think it will heat them up in a good way in order for them to implement projects locally”.

Henkel Bautechnik is a civil engineering chemistry division of the concern Henkel in Belarus. The enterprise was founded in 2004 to start manufacturing import-substituting products. The use of local raw materials has allowed reducing the cost of products by 15-20% in comparison with imports. Over the last three years the company’s operation has saved about USD 20 million thanks to import substitution. In January-October Henkel Bautechnik turned out Br71 billion worth of products, 59.6% up on the same period of last year.

The parquet factory Coswick is a foreign enterprise with Canadian capital. In January-October 2011 the enterprise turned out Br61.2 billion worth of merchandise, 123.2% up on the same period of last year. In the period the company exported USD 6.4 million worth of commodities. Coswick boasts a branched dealer chain across the globe, selling its products in Canada, the USA, the UK, Germany, Greece, the Baltic states, and Russia.