Leu Margolin: Industry cannot rise from its knees

Although 30 percent of Belarusian enterprises can still be revived through urgent structural reforms.

"The system of the Ministry of Industry includes more than 220 organizations. Each of enterprises (holdings) as an independent organization is entitled to set its own working hours. Notably, some factories start working from January 9 to synchronize with Russian companies, others combined days off, but will work them off on Saturdays”, - commented the situation the press service of the Ministry of Industry to FINANCE.TUT.BY.

Meanwhile, high-ranking officials are talking about the Belarusian industry "rising from its knees" starting the early autumn of 2016.

What is actually happening to the domestic industry? At the request of the "EuroBelarus" Information Service Leu Margolin, economist, assessed the situation in the industry.

 - The industry rising from its knees is out of the question. Industry is not agriculture or construction, which can be stimulated by infusion of money. Industry needs investments. If you do not go forward, you're standing still.

For over 15 years, government has been trying to stimulate industry by cheap credits. Industry did increase the volumes of production and had a big Russian market at the end of the 90s, when the Russian industry was in decline. However now the situation has changed dramatically: Russia has more serious investors – China, Korea and Japan.  Belarus cannot compete with them without new technology and products.

The only way to solve the problem is foreign investment. A foreign investor comes with the money only if they have markets ready, but a bigger production volume is required. Then the investor thinks, what place of production will bring more profit…

- Aliaksandr Bukhvostau, the chairman of the Free Trade Union of Metal Industry Workers called the situation of domestic industry a catastrophy.

- Of course, I agree with him. Industry is stuck in a vicious circle: shrinking markets - reduced production, reduced production - reduced wages at the time of no free flow of labor, reduced wages - best workers leave, best workers leaving - deterioration of the product quality, deteriorating quality - markets shrink even more accordingly. Stopping the cycle is almost impossible without structural systematic reforms.

- Belarusian authorities have no intension to carry out reforms. What is the diagnosis of our industrial complex then?

- Deindustrialisation. It is difficult to assess the complexity of the situation from outside, but Belarus may face the problem when an investor comes, but does not find the necessary skilled labor force to create new productions in the country.

- The situation is so bad? After all, there are MAZ, BelAZ – the Belarusian government has been proud of them for the past 20 years...

- Problems of MAZ and BelAZ are not caused by either external crisis, or crisis in Russia; I believe these enterprises are suffering from deintustrialization process as well.

- How long may the degradation of industry last?

- If the authorities have complied with the requirements of the International Monetary Fund, Eurasian Fund for Stabilization and Development, if we took the crutches away from the industry, it would recover fast enough. Perhaps 30-40 percent of enterprises would be able to land on their feet and continue to work, another 30 percent would be sold and we would just have to close the remaining 40 percent. But, unfortunately, the government is not going to reform.

- 30-40 percent of the enterprises can still be saved?

- It is needed to make audit of the more or less large enterprises, which have more than 500 employees together with the international companies to give a simple answer: whether the company will be able to live and work or it is better to shut it down. But I believe we can still revive about 30 per cent.