Are Vitebsk region enterprises managing to survive in crisis conditions? Interview with the Chairman of the Committee for Economy

The country's economy as a whole is going through difficult times, largely due to external crises in countries with which we have close economic ties. Nevertheless, measures were taken throughout the year to minimize negative phenomena. Was this achieved in the Vitebsk region? How is the region's economy performing this year? What are the achievements and problem areas? This is discussed in an interview with Sviatoslav Zarovsky, Chairman of the Vitebsk Regional Executive Committee's Economics Committee.

– Sviatoslav Anatolyevich, what is the current economic situation in the region? Have we managed to achieve positive results in rather challenging conditions?

– The crisis phenomena demanded the mobilization of all our forces, constant monitoring of global economic developments, and analysis of the performance of individual sectors and organizations. As a result, the joint efforts of the head of state, the government, the regional executive committee, and enterprise managers have borne fruit: despite the difficulties, the economy of the Vitebsk region shows positive results today, albeit modest ones. For instance, revenue from the sale of products (goods, works, services) by enterprises in the Dvina region increased by 14.4%. A positive sales profitability of 5.3% was ensured. Organizations in the region earned over 1.2 trillion rubles in net profit (at the beginning of the year, there was a net loss of 3.3 trillion rubles). We have increased the production of vegetable oils, dairy products, pasta, television receivers, lubricating oils, plastic packaging, and other goods. Importantly, one-third of the shipped products in the total volume are innovative, which is the highest indicator among other regions of the republic. Our producers' goods are in demand, so it can be said that the economic situation in the Vitebsk region is controlled and manageable. The most important indicator is the stable operation of institutions in the budget sphere.

– Are the forecast indicators set by the republic's government being met?

– Yes, but not all of them. We are meeting the energy saving target. The annual target for exporting goods to new promising markets has been met: for January-August, products worth $6 million were supplied against an annual target of $2 million. The standard for the specific weight of finished goods inventories to the average monthly production volume is no more than 40%; ours is 31.5%. A positive balance of foreign trade in goods and services has been ensured by reducing imports, which decreased by $234 million in value, a result of targeted import substitution efforts. The export of construction services increased by 17.7%, computer services by 9.6%, equipment and vehicle repair services by 1.6 times, educational services by 1.5 times, and sports services by 1.9 times. At the same time, the main indicator of the economy's performance – gross regional product – is still below last year's level. This is due to the difficult situation in the Russian and Ukrainian markets and the decline in export prices. However, it is worth noting that although this indicator has not reached the target, in the current year, over 8 months, the GRP has still grown by 1.6 percentage points compared to January-July.

– Are there enterprises that have managed to adapt to the new conditions and are currently feeling quite confident in the market? Thanks to what reserves?

– I would like to note that 140 organizations that were operating at a loss at the beginning of the year have managed to achieve break-even operations. Today, most industrial enterprises are operating with net profit. Among them are Polotsk-Steкловолокно JSC, Vitebsk Carpets, Vitebsk Oil Extraction Plant, Vitebsk Radio Components Plant "Monolit", LLC Management Company "Belarusian Leather and Footwear Company "Marko", Polotsk Dairy Plant, Postavy Dairy Plant, private enterprises "PO "Energokomplekt", "Belkotlomash", "Rubikon", "Vitstroytekhmash", "Polimerkonstruktsiya", and others. This is the result of timely modernization, improvement of product quality, increase in the share of innovative products, and entry into new sales markets while maintaining existing ones.

– But there are also those who are on the verge of bankruptcy...

– Republican enterprises OJSC "KIM" and Vitebsk Silk Fabric Combine, as well as the joint-stock company with a share of communal property "Kuptsov" (Glubokoe) found themselves in a difficult situation. As you know, by decisions of the economic court of the region, liquidation proceedings have been opened against "KIM" and "Kuptsov". The issue of the further fate of the silk fabric combine is being considered today. We expect that it will receive the right to rehabilitation, that is, recovery. I want to say that the entry of any enterprise into bankruptcy proceedings is always preceded by measures taken for pre-trial recovery. This includes reorganization, state support, including financial support, debt restructuring, and others. And only after the measures taken have not yielded results, a decision on economic insolvency is made.

– The President of the country has repeatedly said that the main task in the current conditions is to preserve labor collectives. This is not easy to do if an enterprise is forced to switch to a shorter working week. Are there such examples today? And how to explain the fact that, according to the Ministry of Finance, the staff of OJSC "Naftan" and "Vityaz" has been reduced?

– It is very important that the teams of such large enterprises as Orsha Linen Mill, Krasny Borets Machine-Tool Plant, Monolit, Vitebskiye Kovry, Znamya Industrializatsii, Vitebchanka, dairy plants, meat processing plants, bakeries of the region, and many others are currently working full-time. Unfortunately, there are also negative examples. Thus, some enterprises of the Ministry of Industry, linked to the supply of components to such giants of the republic as MAZ, Gomselmash, MTZ, do not have orders for full capacity, which forces them to reduce the working week. As for Naftan OJSC, the staff reduction here occurred as a result of the withdrawal of non-core assets (canteens) from the company and their transfer to a newly established legal entity, as well as the transfer of social sphere facilities (two nursery-kindergartens, the Leninetz children's health camp) to the communal property of Novopolotsk, and the decommissioning of production facilities for the production of unprofitable products. A similar situation is at Vityaz: subsidiaries have been created from the plant based on the greenhouse complex, trading houses, transport department, medical unit, and engineering and production complex.

– Are new business entities actively being created in the Vitebsk region?

– For the first half of the current year, 30 industrial enterprises were registered. I would like to note that these are mainly representatives of small and medium-sized businesses. And, despite the difficulties, they are taking their first confident steps. For example, Akoterm Flax in the Orsha district, specializing in the production of thermal and sound insulation materials based on natural fibers used in modern low-rise and wooden house construction. Atelier of Furniture Polotsk has started producing cabinet and upholstered furniture. In addition, the enterprise is mastering the production of oak furniture and staircases for turnkey cottage interior design. And the activity of the new Vitebsk organization Plissa Prom is related to the production of metal building structures.

– Is it possible to attract foreign capital and what investment projects are currently being implemented?

– In January-June 2015, direct foreign investment amounted to 48.5 million dollars, on a net basis – 26.5 million dollars. Large projects in the energy sector and at OJSC "Naftan" are being implemented using credit resources of foreign companies. In total, 170 investment agreements are being implemented in the region. Of course, direct foreign investment aimed at creating new production facilities and introducing modern technologies is of greatest interest to us. For these purposes, the head of state has determined measures of state support for investors, primarily those implementing projects in small towns and rural areas. The regional executive committee has concluded 13 such agreements, including those for the construction of new plants for the production of peat substrates in Sharkovshchyna district with Czech investment, welded metal structures in Farinovo, Polotsk district (Russian capital), and the construction of a plant for the production of sheet metal and tinplate in Miory district (investment from Austria and Germany). Funds from the regional innovation fund are also directed to support projects. This year, they were received by LLC "SiVital" (production of new disease diagnostic systems), UP "Vitstroytekmash" (production of telescopic lifts), Obol Ceramic Plant, where the production of ceramic stone is being organized.

– How is the government's task of diversifying exports being implemented in the Vitebsk region? What new sales markets have appeared, and which, in your opinion, can be considered promising for us?

– The task of exporting goods to new markets has been overfulfilled by more than 3 times due to the establishment of trade relations with Singapore and the United Arab Emirates. We have resumed supplies to countries to which goods were not shipped in 2014: Israel (condensed milk and cream, joinery and carpentry products, fiberglass), India (acrylic tow, synthetic fibers, fiberglass products, capacitors, optical instruments), Ireland and Korea (fiberglass), Cameroon (motor vehicles), Luxembourg (optical instruments), Saudi Arabia (condensed milk and cream, malt extract). In total, products are shipped to more than 70 countries and to almost all regions of Russia.

– So, the Russian market is not losing its position in the geography of export of goods from Vitebsk manufacturers?

– Yes, it traditionally remains the main one: we sell more than 60% of the products manufactured by enterprises in the Dvina region to our neighbors. Even with the fall in the exchange rate of the Russian ruble, prices and sales conditions for most goods in Russia are more favorable for us than in other CIS countries, as we work according to unified technical regulations, certificates, and standards. In addition, considering the number of territorial subjects of the Russian Federation, we have something to strive for; the Siberian and Ural federal districts seem promising. Furthermore, we are orienting the industrial complex towards negotiations not only on product supplies but also on the creation of a joint product. In this regard, the Forum of Regions of Russia and Belarus in Sochi has been productive. Bilateral contacts with the Russian regions closest to us – Pskov, Smolensk, Ivanovo, Kaluga, Tver, Bryansk – have also been intensified.

– The budget revenue and the well-being of the citizens of our region depend on how the economy works. What ways do you see to overcome the existing problems, and which path will the economy of the Vitebsk region take further?

– Of course, the complex economic situation affects the well-being of the population and wage levels. I want to note that there has been an increase in wages – for January-August 2015, compared to the same period in 2014, the average monthly wage in the Vitebsk region increased by 10% and amounted to 5 million 772 thousand rubles. It is closely linked to the growth of labor productivity. The main thing for us is to preserve labor collectives and the material and technical base of enterprises. And for this, there must be strict savings of material and labor resources. It is necessary to increase production efficiency, widely use local raw materials, and create small enterprises for their processing. We cannot do without the further development of the industrial complex and the improvement of the agro-industrial sector. And, of course, we need to continue targeted work on increasing export supplies, diversifying exports, and attracting foreign investment. I believe that we will be able to do all this in a peaceful and calm environment while maintaining and developing the socio-economic course that is being implemented in our state.

Olga Maslovskaya. Photo by Elena Sys. "Vitebskiye vesti".