Cement industry is in need of diversification following its modernisation
On August 16 president Lukashenko demanded that new factories for manufacturing of reinforced concrete construction and imitation stone founded on the basis of the Belarusian cement plant launch production by November 2014.
Modernisation of cement industry which utilised about USD 1.2 bn, has not met export expectations of the government. Because of falling demand and managerial errors in the course of modernisation the plans to boost export had to be curtailed in terms of the volume of goods by more than three times. In such a situation an attempt is being made to launch production of new export goods.
Belarusian authorities try to partly offset the decline in revenues from traditional export items by way of organising new export production. Two such projects were presented to president Lukashenko on August 16 during his visit to ‘Kritshevtsementoshifer’, a subsidiary of ‘Kritshevtsement’ JSC. We are speaking about the launch of manufacturing of reinforced concrete construction and imitation stone founded on the basis of the Belarusian cement factory (which cost USD 50 mln and USD 38 mln, respectively). The president approved the projects mentioning that they are going to ‘be of great help to export’ under the condition when cement sale ‘has slowed down’.
Yet following the results of recent modernisation of cement industry which cost some USD 1.2 bn (whereas USD 530 mln – the tied loan of the Exim Bank of China), the production volume of cement in Belarus was meant to double. It should have reached 10 mln tons in 2013, of which 5 mln tons were meant for export. Export revenues on this item were planned to reach USD 400 mln in 2013. Yet because of the drop in foreign and domestic demand observed since the second half of 2012 the plans had to be modified. The volume of production will not exceed 6.1 mln tons this year, the volume of export will not exceed 1.5 mln tons.
Nevertheless, problems of the industry are related not only to the deterioration of the market conditions but managerial errors, too, committed while choosing the mode of modernisation. The intention of the government to simultaneously improve the investment statistics and ‘save money’ on technologies failed altogether: Chinese equipment purchased with the Chinese loan showed its poor quality as early as at the stage of assembly and fettling. And this is one of the reasons behind the postponement of the planned yield of 10 mln tons of cement until 2015.
And yet another important goal of modernisation has not been reached – improvement of energy efficiency of the industry by way of decreasing volumes of consumption of the Russian gas (Chinese technologies were intended to replace it by coal). As a confirmation, the head of the Russian holding ‘Eurocement Group’ Mikhail Skorokhod paid a visit to the Belarusian cement factory and ‘Kritshevtsementoshifer’ on August 14. The governor of the Mogilev region Petr Rudnik who accompanied the businessman voiced his proposal to establish partnership in terms of operation of new capacities to decrease the prime cost of production and use alternative types of fuel. The head of the holding promised to help Belarusian colleagues. The conditions of this assistance have not been disclosed.
The Labour and the Tax Ministries are considering the possibility to include persons engaged in some economic activity without forming a legal entity in the social security system. When the decree No 337 comes into effect, the number of private entrepreneurs is likely to reduce due to the possibility of reducing the tax burden when switching to a tax payment as an individual. 95% of self-employed, including PE, pay insurance premiums on the basis of the minimum wage. The number of self-employed citizens is expected to increase, the number of insurance contributions to the pension system from PE will decrease, the number of citizens who will pay a fee to finance government spending will decrease by several tens. Self-employed citizens have the alternative not to pay social security fees and save resources for future pensions, which, given the gradual restriction by the state of pension requirements could be a more long-sighted option.