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Belarus President critical over state of mechanical engineering

Belarusian trucks, passenger cars and buses have to compete with Swedish Volvo and Scania and it's not easy. However, an interesting fact: Volvo group has recently been bought by the Chinese company Geely, whose cars are produced in Belarus. In this chain, Belarus could find benefits for its automobile industry. Firstly, this fact gives some weight to the brand BelGee. And new models of the Belarusian-Chinese cars are being developed together with Volvo. But experts say: each product will find a buyer if you sell aptly and establish production process well. This issue was discussed at a meeting with the President last week. The situation in mechanical engineering was subjected to critical analysis. Yevgeny Pustovoy has the report.

Alexander Lukashenko, President of Belarus:
We don't see any significant positive results and someone has to be held accountable. I am wondering whether the government has really effective measures for the industry's recovery. Do business leaders know ways of solving problems? What prevents us and how are we going to recover?

For these burning questions not to become rhetorical, Alexander Lukashenko held a similar meeting in 2015 and then traveled all over the country visiting machine building enterprises one after one.

Alexander Lukashenko:
I did not prevent you from working this year. If necessary, we support you. In fact, the National Bank and all that is necessary is at your disposal. It accumulated all problematic assets. No other president in the world has to deal with these issues personally.

Over two years, the number of produced equipment has reduced by 50%. To get out of this pit one needs to work faster and with more quality. In the meantime, Belarus has completed only 3% of work to return to the level of 2013.

Alexander Lukashenko:
Wherever I come, they always tell me: 'We need you buses. But Belarus, they say, cannot produce as many buses as necessary.' That's what other countries say. I was stunned. Work 28 hours a day, but make the buses that are needed. You will receive the money, after all!

The entire global engineering is experiencing problems. But hardly any car brand is helped into new markets by the head of state himself. From the Atlantic to the Indian Ocean and even up to 1am meeting with Putin, the Belarus President discussed the possibility of increasing the export of Belarusian tractors, trucks and buses.

Alexander Lukashenko:
So, the problem of filled warehouses has disappeared?

Vitaly Vovk, Minister of Industry of the Republic of Belarus:
No, not completely. Our main task is to have products that can be sold. And parallel tasks were to sell products lingering in warehouses.

Belarusian companies also have accounts receivable worth tens of millions of dollars. Receivables range from Venezuela to China.

Alexander Lukashenko:
MTZ receivables are...? $60 million?

Vitaly Vovk:
MTZ has more than $60m in Venezuela alone.

Alexander Lukashenko:
And in Russia?

Vitaly Vovk:
About $90m.

Alexander Lukashenko:
You decide to just present this money to them?

Vitaly Vovk:
No.

Russia is the usual direction for the majority of Belarusian goods. It is the closest in terms of distance, demand and mentally. But now even Russian machine builders experience problems with sales. The same applies to many western partners.

Vitaly Vovk:
Kazakhs joined the WTO. They took unprecedented conditions for the opening of their own market. Armenia and Kyrgyzstan are moving in the same direction. Russia, in defiance of all norms and canons, began to massively adopt internal regulations for the protection of its own market.

Alexander Lukashenko:
Russia will not buy Belarusian products if they see that they are of the same quality as their KamAZ. No relationship will help here. But we still have to work in Russia. We need to work harder. And why are we always talking about Russia? Don't we have other markets?

The Russian economy has converted many enterprises into plants producing military products. Belarusian producers simply cannot reformat their contracts.

Alexander Lukashenko:
All people in Belarus know what diversification is, what overstocking is, what profit is. What Mr Vovk and Mr Semashko said are lofty, not real projects. I've enough of them. And I know how the government implements them.

When it comes to export of Belarusian machinery, everyone should be involved in its promotion: from the ordinary clerk of a sales department to the diplomat.

Alexander Lukashenko:
Look how many relatives sit there, and their salary is higher than that of our ambassadors. It is necessary to take measures against them.

Vladimir Makei, Minister of Foreign Affairs of the Republic of Belarus:
We will report back on that.

But how to conquer new markets if Belarusian automakers compete against one another. Should they be competitors? Chinese loans are not used, but instead the companies are ready to mindlessly spend money (received at interest) to produce what has already been produced. Another key problem is the quality of products. Modern Belarusian tractors have become of worse quality than those made in earlier years.

Alexander Lukashenko:
This is a mess. If Mr Vovk and Mr Semashko cannot control quality, we need to do it, because this is a brand of the country.

The report of the Minister of Industry included prospects for 2020 and 2030 and promises: transmission, hydraulics, batteries, electric cars and factories. However, the President, fed up with reports on seemingly flawless operation of Belarusian engineering companies, stopped other speakers. They reports, full of fake optimism, have remained in briefcases.

Head of BelAZ asked the President about delaying payments, which could boost exports. This is international experience.

Piotr Parkhomchik, director general of BelAZ Holding Company:
Our competitors use long grace periods: 5 to 7 years. Today, we, the maximum that our law allows - 720 days.

Alexander Lukashenko:
Agreed.

Some urge to reform the machine building industry; in other words, to free the state from the responsibility for 150,000 workers. Behind the broad back of each factory worker are seven other workers in related sectors of economy.

In the early 1990s, the government did not know what to do with large enterprises and the same problems. People took to streets, but the young leader Lukashenko managed to find the way out.

And now, the Belarus President insists: worthless are all the changes if they do not affect the wallets of workers. After all, economic works are for the sake of social benefits.

Alexander Lukashenko:
The reforms is a good thing but people want to eat every day. In 2015, real salaries fell by 11%, over the 9 months, we've added about %0.5, and in industry 1.7%. How will you get $500 in the coming year?

The President concluded: acceptable loans will be given only if a company has real orders. Belarus must have an extensive service and dealer network of its brands abroad. All the flaws must be eliminated by the middle of 2017.

Belarus - an assembly plant of the former USSR - runs 16 automotive holding companies. This is 13% of the GDP and every 9th ruble of export earnings.

No wonder a lot of money is invested in the mechanical engineering industry of Belarus. A budget infusion is sometimes a real lifeline. But mechanical engineering companies must not go with the flow either.

Alexander Lukashenko:
We see military situation in economy. We have relaxed, as if nothing is happening. I've tried to tell you the whole year that war is going on. We need to hope on ourselves only. Not on America or Russia. There are so many problems in the world! I wish we could deal with them. Those who get rid of these problems first will remain alive. Those who will remain behind will not be able to survive.

And yet, despite the skeptical predictions, Belarus can resolve its mechanical engineering problems. The country is mastering the production of new cabins and municipal engineering. The President's dream of a people's car is being embodied near Borisov. However, for now Geely cars are seen only in officials' garages. But, as practice shows, the Belarusian passenger car can compete even with Mercedes and BMW.

Belarus President critical over state of mechanical engineering