Loss-making enterprises. Regional Overview

April 22, 2016 18:20

The number of loss-making enterprises is reducing, but the volumes of losses are increasing. This is the main outcome of the Belarusian economy’s anti-crisis measures: inefficient production is attached to profitable enterprises.

In January – August 2012, 555 enterprises and organizations in Belarus were loss-making, or 6.5% of the total number. Compared to the same period last year, their number has decreased insignificantly: in January-August 2011, 621 organizations were loss-making, or 7.3%. Nevertheless, the volume of net loss has increased substantially. In January-August this year, the amount of net loss amounted to BYR 2.4 trillion, or 1.7 times more than in the first eight months of 2011.

The overall decline in the number of unprofitable enterprises is due to production consolidation policy, when the loss-making enterprises are merged or transferred to the balance of the more lucrative industries, which, in turn, affects financial statements of the ‘donor’ enterprises. The most obvious example was the reduced performance at JSC Mogilevkhimvolokno after its merger with unprofitable fiber plant.

All in all, the number of loss-making enterprises has been reducing in all regions, with the exception of Vitebsk and Grodno regions.

The share of unprofitable enterprises,%; National Statistics Committee data

Region

January – Augsust 2012

January – August 2011

Minsk

9.3

9.7

Brest Oblast

8

11.8

Vitebsk Oblast

6.9

6.4

Minsk Olast

5.8

6.3

Gomel Oblast

5.1

5.2

Mogivlev Oblast

4.2

5.6

Grodno Oblast

4

3.5

Three the most unprofitable types of activities include: hotels and restaurants - 11.5%, industry - 10.7%, construction - 8.4%.

Regional restructuring programmes for unprofitable enterprises do not work in practice. They all come down to the cross-subsidization - allocation of non-core assets and, as already mentioned, to transferring loss-making enterprises on balance sheets of profitable ones and in rare cases, to sales to interested investors.

Another scheme is used to exclude a company from the loss-making ones: registration as residents in Free Economic Zones. Tax benefits enable to improve the financial climate at these enterprises without resorting to radical reforms. It is obvious that companies can become fully profitable only if their production is modernized; new technologies are introduced and, as a result, product quality and its competiveness are improved. It is impossible without investments, the volume of which has not increased this year.

The largest loss-making enterprises: Svetlogorsk Pulp and Paper Mill, Mogilevkhimvolokno, Grodnooblautotrans, “Neman” Lida buses, regional construction companies.