Aleksandr Lukashenko holds session to discuss the state and development prospects of Bellesbumprom Concern

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Projects to modernize companies affiliated with Bellesbumprom Concern should be completed in 2014. The statement was made by President of Belarus Aleksandr Lukashenko at a meeting to discuss the state and development prospects of the companies affiliated with Bellesbumprom Concern.

“We have always kept focus on the industry. We spare no resources on its modernization, because we believe it can make a significant breakthrough and boost the country’s export potential. Export means foreign currency. Hence, the toughest requirements to the payoff of the capital investments and to the operation of all the companies,” the head of state said.

The President remarked that no other companies get as much attention as the enterprises affiliated with Bellesbumprom Concern, in particular, wood processing enterprises. “Unfortunately, the major reason for this attention was serious failures and setbacks in the companies’ upgrade. The blatant violation of the financial discipline, lack of control and sheer mismanagement prompted us to respond harshly,” the Belarusian leader said.

Aleksandr Lukashenko noted that he constantly reiterates the importance of the forestry, paper-and-pulp industry and wood processing industry, because these branches can take advantage of high-quality domestic raw materials and an extensive production network. “Nobody argues that we need to diversify the production. It is a lengthy process, it is going to be permanent in our country, because we heavily rely on resources, spare parts and other things that we have to import. We underuse the raw materials available in our country. The modernization of the wood processing industry is designed to rectify this misbalance,” the head of state said.

The President said that there are 173 cubic meters of wood per capita in Belarus, up 2.5 times compared to the global average. Nevertheless, up until recently the industry exported mostly round timber and cheap semi-finished products. “We exported timber and spent currency to buy furniture, high-quality paper and other products with a high added value instead of manufacturing all these things at home,” the Belarusian leader remarked.

This situation necessitated a dramatic revision of the established export patterns and a large-scale modernization of wood processing and paper-and-pulp companies. “This can be defined as ‘targeted modernization’ - we handpicked several companies and decided to upgrade them,” Aleksandr Lukashenko said.

The head of state stressed that huge public funds were earmarked, bank loans were raised, and unprecedented support of the government was provided to implement investment projects. “Of course, the state needs to control how the investments are used and how the investments pay off,” the President noted.

Aleksandr Lukashenko reminded that when he appointed Yuri Nazarov Chairman of Bellesbumprom Concern, he set clear-cut tasks to straighten out a mess at all the companies and make sure the modernization projects will be completed in time.

The head of state wanted to know what is being done to accelerate the modernization and to reach the design capacity, how the processing depth of raw materials will increase and whether the effort will result in the manufacture of goods with a high added value. “I would like to draw your attention on that, because I am concerned about your plans to export 60% of the boards made by upgraded facilities. Does it mean that you will again ship semi-finished products abroad? Is it smart? Why cannot you sell finished products with a higher added value, like furniture, instead of semi-finished goods?” the President asked.

The head of state wanted to know about the projected economic effect and other benefits of modernization, like output growth and increase in export, import substitution and improvements in product quality.

“Have you properly analyzed the sales of finished products, the expansion of sales geography and the establishment of new ties? How are you going to balance out the needs of the domestic and foreign markets? How are you going to improve the operation of your sales network and sales outlets and introduce new forms of trade? The objective is not just to sell products, but to sell them more efficiently, without intermediaries, maximizing the inflow of foreign currency into the country,” the Belarusian leader said.

The President also urged the companies to improve their financial performance and to repay loans in time.

At the beginning of the session Aleksandr Lukashenko reminded that the meeting was supposed to be held in Vitebsk at the end of the last year or the beginning of this year. The meeting was to assess the modernization progress and resolve some personnel issues. “As you see, this meeting is held in Minsk,” the Belarusian leader stated. Aleksandr Lukashenko asked all the attending officials responsible for modernization why the meeting was taking place in Minsk.

Vitebsk Oblast Governor Alexander Kosinets said that the plant was built, but it is now facing some issues, like low efficiency of the ventilation system of the molding press. As a result, the formaldehyde content is two times higher than the acceptable level. Therefore, people can work there only in respirators. “We are working with the designers to improve the ventilation system,” the Vitebsk Oblast Governor said.

First Vice Premier of Belarus Vladimir Semashko informed those present at the session that now Vitebskdrev is operating a molding and pressing line and is producing slabs.

Head of the Belarus President Administration Andrei Kobyakov reported that the instructions of the head of state were repeatedly forwarded to Vitebskdrev. The last time the commissioning deadline was set for 1 December 2013 (taking into consideration the completion of installation and start-up works). In his words, the instillation works were mostly finished at the end of November-the beginning of December last year. In line with the contract, the start-up works are to be completed within three months after the equipment is installed. Thus, equipment trials are underway now. “We cannot say that the company has been commissioned and is manufacturing products. It is operating in the semi-automatic mode with the delays mentioned by Alexander Kosinets. The company is not ready; your instruction was not fulfilled,” Andrei Kobyakov said.

Aide to the President - Chief Inspector for Vitebsk Oblast Nikolai Domashkevich reminded that the Vitebsk Oblast authorities promised to commission the upgraded company by 1 August, or 15 August at the latest. However, it was clear back then that such optimistic deadlines would be missed.

Belarusian Prime Minister Mikhail Myasnikovich noted that the government promised to launch production at Vitebskdrev in December. “There are three facilities: slab molding, polishing and laminating. In mid-December the first slab was rolled out. Now technological processes are tuned-in. The only thing that has to be done to make the company work is to automate these three productions,” he said.

When asked why the promises were not delivered, the Premier noted that there were no systemic failures. “This is a new technology and it is now being fine-tuned in an automatic mode. We wanted to finish it in December, however there are all grounds to believe that the work will be completed in February,” Mikhail Myasnikovich remarked.

The head of state addressed Director General of Vitebskdrev Anatoly Yukhnovets asking him about his vision of the problem and the failure to fulfill the instructions of the President. “The company is manufacturing slabs; however, there are many factors, like the severe winter, frost and other obstacles,” the company’s chief said.

“What does the winter have to do with it? You promised me to do it before the winter. Now the winter is to blame! You talk like you do not live in Vitebsk and are not aware what kind of winters we have. Not to mention that the deadlines were revised dozens of times. Why have not you done what you promised?” the President wondered.

“There were miscalculations of the R&D institute and builders, there were not enough people on the construction site, they worked only one shift,” Anatoly Yukhnovets explained.

“Why did they not work two shifts, why were there not enough people, why did you not mobilize Vitebsk Oblast to fulfill the instruction of the President? After all, a decision of the President is a law. Don’t you understand that?” the Belarusian leader emphasized.

“Ask the Prosecutor General to look into the matter and calculate the damage within the framework of a criminal investigation. No need to get my approval for it. If you need to launch police surveillance or detain someone – go ahead and do it,” Aleksandr Lukashenko said addressing Head of the Belarus President Administration Andrei Kobyakov.

Chairman of Bellesbumprom Concern Yuri Nazarov informed the head of state about the operation of the industry in 2013. He noted that only two out of four targets were achieved in the industry, i.e. the foreign trade balance and the correlation of exports and the industrial output. The margin on sales totaled 3.9% as against the annual target of 8%. Eleven companies of the Group operated in the red, while 30 others had profitability of sales under 5%.

As of 1 January 2014, backlogs of inventory totaled almost Br600 billion, or 81.2% of the monthly average industrial output. The average monthly salary neared Br5 million, or over $500, in December 2013. The accounts receivable amounted to Br3.5 trillion, with the accounts payable at almost Br3.2 trillion. Yuri Nazarov assessed the results as unsatisfactory. In his words, one of the reasons is the weakening of the coordinating role of the administrative machinery of the Group both in the current activity and modernization of basic organizations.

According to the Chairman of the Bellesbumprom Concern, another fact that influenced the efficiency of the performance is the modernization being conducted in the operating organizations. In particular, Borusovdrev has had to halt its veneer and match production, an upgrade project at Gomeldrev has led to a 40% reduction in veneer production.

Apart from that, Yuri Nazarov expressed dissatisfaction with the fact that the concern and its organizations have acquired a negative image in the mass media which downplays the efforts of the 40,000-strong personnel of the industry where the majority of workers are diligent and committed people.

“Who created this image? Did you want to meet with me behind closed doors without journalists? We invest over €1 billion in the wood processing industry. Do you really want us to conceal anything?”

The Chairman of the concern said that it is necessary to appoint new heads of Bellesbumprom enterpises. However, it is difficult to find those who will be willing to work there.

In this respect, Aleksandr Lukashenko suggested sending workers of the concern to those companies. “Let them revive the image,” he said.

Speaking about the completion on modernization at the basic organizations, Yuri Nazarov assured that the goal would be reached in 2014 in line with the President’s instructions. He added that the completion of modernization in time was possible only given continuous financing of investment projects. In his words, as of 1 January 2014, the amount of unused loans totaled €164.4 million, or almost 16% of the envisaged volumes.

According to Yuri Nazarov, operating furniture production lines are upgraded as part of the current modernization projects. Thus, an investment project will be completed at Ivatsevichdrev in 2015 to launch the production of furniture parts. However, according to the Chairman, it is still insufficient, and there is a need to elaborate an array of measures for further development of furniture production in the country.

Alongside with the modernization of woodworking companies, a large-scale upgrading project is underway at the pulp-and-paper industry slated for completion before 2015. The volume of investments makes up $1.4 billion. The project is aimed at the production of bleached sulfate, which will allow securing the pulp and paper industry of the country with high-quality fibrous raw material and viscose pulp.

Yuri Nazarov noted that the improvement of the financial situation at the companies of the concern and the securing of guaranteed repayment of loans are only possible through establishing an efficient system of sales. In his words, the product of the Group’s companies is in demand. The main markets for new products will be Russia, Kazakhstan, Uzbekistan, Armenia, Azerbaijan and Turkey.

Yuri Nazarov stressed that it is necessary to improve the current system of sales through excluding domestic competition between the Group’s companies on the operating markets. In his words, 2014 is a key year for basic companies taking into account new production and the development of the order portfolio both for exports and the domestic market.

Yuri Nazarov noted that the implementation of all the projects which are currently underway would help increase the annual production output by 2017. It is expected that the trade surplus will reach $810 million, sales proceeds per average employee will make up $67,700, and wood processing depth will reach almost 81%. Thus, a brand new woodworking industry will be developed in the country, Yuri Nazarov stressed.

Aleksandr Lukashenko ordered the Presidential Administration, the State Control Committee and other stakeholders to draft laws formalizing the final dates for the modernization of the woodworking industry. “I would like to point out that the document should be based on what the woodworking industry officials promised before the meeting. It means that the deadline is the year 2014, except for a couple of companies which have their own modernization schedules. You have set these deadlines yourselves. They will be formalized in the document,” the head of state said.

The President added that, most likely, the legislation will be in the form of a decree. He instructed to formalize, unless it is prescribed by law, the criminal liability for failure to conduct the modernization on schedule and also the personal responsibility of the Prime Minister, Governors and enterprise executives. "I have no other choice!" Aleksandr Lukashenko noted.

The President instructed the Prime Minister and the Chairperson of the Board of the National Bank to help resolve all financial issues that were raised at the meeting. “If you need help and my involvement, please be my guest. Let us deal with these things together. But I would like you to understand that without iron discipline you will not be able to address any issue,” the Belarusian leader said.

The head of state called upon directors of companies to be proactive and take necessary decisions. “Keep in touch with the head of your ministry. If needed, the minister can coordinate any issue directly with me. As for production and sales, technologies and other things, you are the boss here. Work and take responsibility for results,” the head of state stressed.