Great potential for production and business. Interview with the Chairman of the Vitebsk Regional Executive Committee Nikolai Sherstnev

Vitebsk region is known not only for its lakes and the "Slavianski Bazaar" festival. It is also a major industrial region. Chairman of the Vitebsk Regional Executive Committee Nikolai SHERSTNEV told "Director" magazine about what the region's economy is built on and how it works.

- Nikolai Nikolaevich, how do you assess the economic potential of the region, and which sectors of the economy in the region are the most promising?

- Vitebsk region has reserves in all sectors of the economy. This includes the agro-industrial complex, where it is already possible to double agricultural production volumes today, to load the capacities of processing organizations, and to increase foreign exchange earnings. And industry, where we see the main potential in sectors that work with local raw materials – for processing meat, milk, wood, clay, and peat, the production of which has been modernized in recent years or will be completed in the near future.

Unfortunately, we are not yet making sufficient use of the region's favorable geostrategic position in terms of transit cargo transportation. The most important European transport corridors pass through our territory, so the region can be involved in the cross-border project "New Silk Road". Work is currently underway to establish a multimodal transport and logistics center in the area of the settlement of Bolbasovo, Orsha transport hub, with the aim of combining trade, logistics, and industrial zones on its site.

And, of course, in all sectors of the economy, the potential of small business needs to be more actively utilized. It is this sector that attracts advanced technologies and investments to the economic sectors and uses bold management decisions. For example, "Manuli Hydraulics Manufacturing Bel" and "LINPAK Packaging East" companies successfully cooperate with Western partners; "Polymerkonstruktsiya" and "VIK-Animal Health" enterprises are expanding production; new high-efficiency enterprises "Modern-Expo", which produces high-tech retail equipment, and "NATIVITA", a manufacturer of medical preparations, will reach their design capacities this year.

- Tell us about the modernization of the largest industrial enterprises and sectors of industry.

- Organizations of the region continue to work aimed at creating new production facilities and modernizing existing ones that produce high value-added products.

Thus, to ensure the economically efficient production of the most important types of petroleum products and raw materials in the petrochemical complex, OJSC "Naftan" continues to implement the Development Program for 2011-2015 and for the period up to 2020. As a result, oil refining will increase to 12 million tons per year, and oil refining depth in 2021 will increase to 91%. With the aim of producing promising additives and additive packages, modernization is continuing at SOOO "LLK-Naftan".

The commissioning of the Polotsk and Vitebsk HPPs is planned for the third quarter of 2017. The "Krasnaya Zvezda" Paper Mill branch of OJSC "Svetlogorsk Pulp and Paper Mill" is carrying out technical re-equipment of production aimed at optimizing the paper production process. This year will also see the completion of the second stage of modernization of RUPTP "Orsha Linen Mill", which will allow for the renewal of capacities for processing long flax fiber and flax combing production for processing 5.1 thousand tons of long flax fiber, and increase the production of linen yarn.

The fulfillment of the investment agreement within the framework of Decree of the President of the Republic of Belarus No. 467 of October 14, 2013 "On measures for the development of leather and fur production and footwear production" will allow the "Marko" holding to increase its footwear production capacity to 5 million pairs per year in 2018, as well as create capacities for sheepskin tanning - 300 thousand skins and fur raw materials - 250 thousand pieces per year.

From 2000 to 2016, approximately 63 million rubles of investment were channeled into the modernization of the region's meat and dairy processing enterprises, resulting in the creation of over 800 jobs. Currently, a major investment project is being completed at JSC "Verkhnedvinsk Butter and Cheese Factory" (modernization of the milk processing workshop from 180 to 240 tons per day). At JSC "Gluboksky Condensed Milk Plant," an investment project for the construction and modernization of a workshop for dry whey and dry dairy products will be implemented by the end of the current year.

The implementation of these and other production modernization measures will allow for the renewal of technologies, cost reduction, and overall improvement of the industrial enterprises' performance efficiency.

- How do you assess the investment potential of the region? What projects within the region can you offer to potential investors?

- Amidst the reduction of domestic funding sources due to the tightening of monetary policy and decreased state program lending, external resources serve as an alternative source of development.

With the attraction of net direct foreign investment, the region has established production facilities for water treatment and purification equipment, optical cable, coiling tubing equipment for the repair and maintenance of oil and gas wells, lubricant additives, liquefied gases, veterinary and pharmaceutical preparations, fire-fighting equipment, plastic construction products, cosmetic products for animal care, and others.

Through direct foreign investment and loans from foreign banks, it is planned to construct two power stations – in Beshenkovichi and Verkhnedvinsk districts, approximately 10 new large dairy farms, 3-4 pig breeding complexes, a modern woodworking complex, and a waste processing plant.

Some projects are being implemented in the Vitebsk Free Economic Zone (FEZ), where the development of modern packaging materials, power and optical cables, commercial and refrigeration equipment, measuring instruments, and fiberglass gas cylinders is planned. The preferential regime of the FEZ allows investors to reduce their tax burden by 40%, which enables the launch of innovative export-oriented production with lower costs.

- What is the dynamics of foreign trade in the Vitebsk region? With which countries is the most effective cooperation established, and which sectors are leaders in export volumes?

- The foreign trade statistics of the Vitebsk region are largely determined by the situation related to oil supplies for processing at Naftan OJSC and the subsequent export of the enterprise's products abroad.

Under favorable external market conditions, the region's foreign trade turnover, considering the petrochemical complex's operations, can reach up to $7 billion (including shipments of oil products manufactured by Naftan OJSC through Belarusian Oil Company CJSC). Excluding oil products, the region's foreign trade turnover in 2016 amounted to $2.5 billion, including exports of $1.5 billion.

Enterprises in the region export a wide range of products (about 700 commodity items). By product groups, the main ones are meat and dairy products (22.5% of exports), polymer and chemical products (17.3%), textiles (12%), machinery and equipment (over 8.5%), construction materials (6.2%), and footwear (about 6%).

In 2016, goods were exported to 87 countries. At the same time, export volumes to the Middle East (a 3.7-fold increase), Asia (1.5 times), Africa (1.3 times), and the EAEU (growth rate of 105.1%), including the Russian Federation (105.8%), were significantly increased. Supplies to the EU countries (by 27%) and the Americas (-51.3%) decreased.

In the current year, compared to Q1 2016, an increase in foreign sales of 1.8-1.9 times is noted. Exports to the UK, Denmark, Austria, Italy, and the Netherlands have increased significantly. It should be noted that the share of goods with a low degree of processing in the total export volume is gradually decreasing: if in 2016 it was 42%, then in Q1 2017 it was 35%. As a result, enterprises in the region have additionally earned 65 million dollars.

The average annual volume of goods imports, including oil refining, reaches 3.5 billion dollars. In the import structure, 83.5% are so-called intermediate goods intended for further processing (polymers, protein, textile chemical raw materials, metal), 7.5% are investment exports, and 9% are consumer goods.

For January-March 2017, the region produced import-substituting products worth 98 million dollars, or 104.6% compared to the corresponding period last year. The estimated savings of foreign currency due to the supply of products to the domestic market amounted to 16.5 million dollars. Moreover, in the structure of import substitution measures, products manufactured by small and medium-sized businesses account for 60%!

- Vitebsk region is the northernmost region of the country, which implies certain specifics in the organization of agricultural production. Tell us how the agricultural sector of the region operates?

- The agricultural sector today is represented by 261 agricultural organizations, 4 meat processing, 8 dairy processing, and 5 grain processing enterprises. In the structure of sown areas for agricultural crops, 45% is allocated to grains and legumes, as well as fodder crops, and 1.5% to flax. In the gross regional product of the region, the economic activity "Agriculture, forestry, and fishing" accounts for about 10-12%.

In the current year, agricultural organizations in the region are demonstrating positive production dynamics. The growth rate of gross output in agricultural organizations for January-April reached 106% compared to the same period in 2016. This is the best result among all regions of the republic! Revenue growth rates are outpacing cost increases, thanks to agricultural organizations reducing costs by 5.1% in Q1 2017. As a result, sales profitability has moved from negative last year to positive, and the number of unprofitable organizations has decreased by 29 compared to January-March 2016.

To enhance the efficiency of agricultural production, 4 integrated structures were established by Decree of the President of the Republic of Belarus No. 320 of August 25, 2016, "On the Development of Agricultural Production in the Vitebsk Region." These structures have united agricultural raw material producers, processing, and final product sales into a single legal entity. This promotes the development of food industry enterprises, increasing the utilization of production capacities for food, beverages, and dairy products. As a result, over 4 months of 2017, the growth rate of gross output in agricultural organizations within the integrated structures reached 114.8%. This year, it is planned to consolidate enterprises within the integrated systems.

Decree of the President of the Republic of Belarus No. 253 of July 4, 2016, "On Measures for the Financial Recovery of Agricultural Organizations" is also actively implemented in the region. Currently, the possibility of financing (lending) for the construction of 10 new dairy farms and 4 pig breeding complexes by the Development Bank of the Republic of Belarus, Belarusbank, Bank of China, and a Czech investor is being explored.

- How is the State Program of Support for Small and Medium-Sized Entrepreneurship in the Republic of Belarus for 2016-2020 being implemented in the region? What problematic issues arise in this process?

- Financial support for this sector of the economy is provided in accordance with the State Program "Small and Medium-Sized Entrepreneurship in the Republic of Belarus" for 2016-2020, approved by Resolution of the Council of Ministers of the Republic of Belarus of February 23, 2016 No. 149, and Decree of the President of the Republic of Belarus of May 21, 2009 No. 255 "On Certain Measures of State Support for Small Entrepreneurship".

Funds from the regional budget for entrepreneurship support in 2016 were allocated in three areas: financial support for small business entities, promotion of the development of infrastructure for small and medium-sized entrepreneurship, and information support for small and medium-sized entrepreneurship. Support was provided to small business entities in the form of reimbursement of expenses related to participation in exhibition and fair events.

The main volume of financial assistance to this sector of the economy in the region consists of funds allocated in the form of subsidies for building repairs, acquisition of computer and copying equipment. Such support contributed to an increase in the volume and quality of services provided to small and medium-sized enterprises. Budgetary funds were also directed to information support - by providing and updating legal reference systems and for holding the national competition "Entrepreneur of the Year".

- Tell us about the tourism potential of the Vitebsk region. What is being done to attract Belarusian and foreign tourists?

- Today, the region offers all opportunities for a great time in any season: unique historical and cultural heritage, rich nature, continuously improving services, and convenient logistics. We have over 3,000 monuments of archaeology, architecture, history, and culture. Vitebsk region is the center of the Belarusian Lake District. It hosts the largest lake group in the country - Braslav Lakes. The region ranks first in the republic in terms of the number of rivers and lakes, with the state nature reserve fund including over 300 objects covering 9.5% of the territory. Among them are the Berezinsky Biosphere Reserve, the national parks "Braslav Lakes" and "Narochansky," 86 заказники (sanctuaries), and 238 natural monuments of republican and local significance. Forest resources contribute to the development and growing popularity of hunting tourism. Over 60 hunting grounds lease hunting areas totaling 3.5 million hectares and provide hunters with a full range of services.

Our health resorts are particularly popular among foreign tourists and residents of Belarus. Their advantages include a good price-quality ratio, a modern medical base, and highly qualified specialists.

Significant work has been done in creating tourism infrastructure. Today, we operate 108 sanatorium-resort and health improvement organizations with 5,000 beds (9 sanatoriums, including a children's one, 1 children's rehabilitation and health center, 2 health complexes, and 96 other health organizations). In recent years alone, the tourist complexes "Svechanka" and Green Club, the hotel "Braslav-hotel," the boarding house "Lesnoye-Rudnya," and the elite tourist complex "Krasny Bor" have been commissioned. In 2016, a new sanatorium "Plissa" was built with a state-of-the-art medical base, designed in a European style.

New roadside service facilities (currently 242) appear annually on the region's roads, and campsites and parking lots are being built. There are 107 hotels and similar accommodation facilities with a total capacity of almost 6,000 beds. The region ranks second in the national rating for the number of rural homesteads - 606.

Annually, a great number of interesting, vibrant events are held – festivals and celebrations, which attract an increasing number of foreign guests. The International Arts Festival "Slavianski Bazaar in Vitebsk" has become a global brand and a symbol of the capital of our region.

All the factors listed above contribute to the development of domestic and inbound tourism. Today, 135 tourist organizations offer diverse excursion and tour programs throughout the region, employing 250 professional guides and interpreter-guides. In 2016, the number of domestic organized tourists exceeded 95 thousand people, a 1.6-fold increase compared to 2015. Over 34 thousand foreign tourists from 39 countries visited the region as part of excursions and tours. Their number increased by one third compared to the previous year.

In 2016, the export of tourism services in the region reached $12.1 million, or 106.4% compared to 2015. Moreover, the share of tourism services in the total volume of the region's service exports in 2016 increased by almost one third compared to the previous year, reaching 8.8%.

Nikolai ZAGORSKY, "Director" magazine.