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Republic

15 July 2011

Decisions on new holding companies in Belarus needed by 1 September

MINSK, 15 July (BelTA) – The practice of setting up manufacturing corporations with versatile business interests will be continued in Belarus. President of Belarus Alexander Lukashenko made the statement as he heard out a report from Anatoly Savenok, Director General of Belarusian Steel Works (BMZ trademark), on 15 July. The press service of the Belarusian head of state told BelTA, the President now hears out performance reports from heads of major enterprises and associations on a regular basis. “Using today’s example you can see that Belarusian Steel Works is not just a Zhlobin-based enterprise. It is a corporation of four enterprises. It is also a practice of our economy to help revive manufacturing at large enterprises. We revived them, modernized them, and then increased the output and the choice of products made by the parent enterprise using loss-making or forsaken enterprises,” said Alexander Lukashenko. In his words, the head enterprise would turn round the loss-making daughters. Exceedingly large companies have been created this way. The Belarusian head of state believes this practice should be promoted and perfected. The President remarked that in many countries two or three large companies can drive the entire economy. “This is why we need to create multi-business associations and we’ve been doing just that for years, even a decade to enable them to drive our economy forward,” stressed the head of state. The press service quoted Alexander Lukashenko as saying: “Once we backed such large enterprises as BelAZ, MAZ, Amkodor, and BMZ. When they are up and running, modernized, the demand for their products has risen. Back then they lacked manufacturing space. We attached loss-making enterprises to flagships, setting up major companies”. The head of state remarked that he drew attention to social issues, effective operation of the company and development prospects when he appointed Anatoly Savenok Director General of the manufacturing corporation Belarusian Steel Works. The President wondered how these instructions had been fulfilled. In particular, the President was interested in what was done to improve the financial state of the company, how debts for delivered products were collected, how loans were paid out and whether investments were effectively used. The report also covered the provision of the company with raw materials, the increase in the output and quality of products. In particular, the President was interested in what resources and sources should be used to compensate for the growing global prices for scrap metal and other components without reducing the company’s profitability. The President believes that this serious problem should be resolved together with other enterprises and government agencies. Alexander Lukashenko emphasized that it was necessary to discuss the establishment of a more effective sales chain. There are quite many organizational, financial and personnel problems in this area. For instance, the President was interested in what had been done to avoid mediators (and in what kinds of mediators there were), what had been done to deliver BMZ exports to more countries. Anatoly Savenok informed the head of state that in 2010 BMZ turned out over 2.5 million tonnes of metal products. In 2010 the company’s industrial output totaled Br4.4 trillion, 14% up on 2009 in comparable prices. The company penetrated new markets, including Albania, Switzerland, Iran, Mali, Mauritania, Morocco, Cameroon, Vietnam, Thailand, Mexico, Venezuela, Brazil, and Armenia. The export share stood at 78.4% in 2010. The company exported 1.9 million tonnes of metal products worth over $1.16 billion, 31.7% up on 2009. This year the company plans to earn up to $1.7 billion. BMZ’s distribution chain comprises seven joint ventures located in Russia, Austria, Germany, the USA, China and Lithuania. In addition, the company has eleven official dealerships and distributors, primarily major players on the metal products market. According to Anatoly Savenok, the company remains financially stable despite difficulties in 2009-2010. H1 2011 performance figures indicate that the company is past the point of falling and has a good development potential. The company’s effective operation and development in the future may be secured primarily through innovations and the manufacturing of high added value exports. BMZ aims to increase the output of metal products up to 3 million tonnes in 2015. The company plans to accomplish more than ten various investment projects in the future. The project to build a facility to turn out 800,000 tonnes of flat steel per annum is the key one. The need for investments for this project is about ?700 million. The company is now seeking an investor. Various forms of investments are available, including the purchase of some BMZ shares. Alexander Lukashenko said it was necessary to satisfy the domestic demand and to export more products with a high added value. “It is necessary to produce more serious products, prices for which are higher on foreign markets,” said Alexander Lukashenko. He urged to promptly clarify the situation regarding the search for investments and the search for money to implement projects to enhance the processing level. Belarusian Industry Minister Dmitry Katerinich said that Belarusian Steel Works had a huge potential and could be much more effective. He believes it is necessary to sell at least 25% of the output through e-commerce auctions and mercantile exchanges in order to secure a fair price. The Minister believes it is necessary to merge the enterprise Belvtorchermet and some other enterprises, which use scrap metal as raw materials, with BMZ. It will help bring together interests of the main consumer and the supplier of raw materials. Speaking about the establishment of major manufacturing associations and holding companies in Belarus, Dmitry Katerinich pointed out that small enterprises employing 300-600 people cannot set up a profitable distribution chain of their own and these enterprises lack turnover means. This is why it is necessary to set up 14-16 holding companies in Belarus. Relevant presidential decrees will have to be prepared for that. “I think that drawing up 16 decrees is a bad idea. We need one decree that will lay down the legal groundwork for setting up these holding companies,” said Alexander Lukashenko. “You will be granted relevant rights by an overall system decree. Time requires prompt decisions. The matter of holding companies should be handled by 1 September”. Speaking about the provision of the company with raw materials, Alexander Lukashenko said: “We have mountains of scrap metal all over the country. We can achieve normal operation by arranging proper collection”. Sales of finished products were mentioned during the discussion. Practice indicates that BMZ’s existing model is not very effective. With this in mind First Vice Premier of Belarus Vladimir Semashko suggested that BMZ should assimilate distribution practices of Belarusian Potash Company (BPC). The head of state approved of the idea. Once again Alexander Lukashenko stressed that the practice of setting up manufacturing corporations with versatile business interests have to be continued. “We could use large companies: capitalization will increase. If we have to evaluate and sell shares, the price will be completely different. It should be done promptly,” remarked the President. Alexander Lukashenko added it was necessary to use the devaluation effect in full. “We should use it for modernization, for reviving enterprises. This is why we need to make decisions fast and need strict control over their fulfillment both in industry and agriculture,” said the head of state.

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