Aleksandr Lukashenko visits wood processing companies in Mogilev FEZ

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According to President of Belarus Aleksandr Lukashenko, there is no need to further expand the existing free economic zones in Belarus. The head of state made the statement as he visited wood processing enterprises built by Lithuanian investors in the free economic zone Mogilev on 9 July.

Government officials, who were present, including Chairman of the State Control Committee Alexander Yakobson and Economy Minister Nikolai Snopkov, agreed that further expansion and development of such zones is inadvisable. The reasoning is based on the fact that investors can get virtually the same preferences in small towns and populated areas. At the same time, the establishment of new production facilities in small towns and populated areas will create jobs and improve living standards of Belarusians.

“In my opinion, there is no need for them to be larger and we have enough jobs to go around. It is necessary to think about the benefits the state can get by setting up an enterprise and granting preferences,” the President remarked.

The Economy Minister, for his part, noted that he thinks that it is inadvisable to continue developing free economic zones because the territory of existing zones is not totally used up.

“We have to take a serious look into this matter and dot all the i’s,” Aleksandr Lukashenko said. He added that if there is an interest in the arrival of an investor, there are other ways to grant some preferences to a specific enterprise.

Aleksandr Lukashenko was informed about the operation of free economic zones in Belarus, in particular, the free economic zone Mogilev.

According to Nikolai Snopkov, all the zones account for about 10% of the total export while FEZ Mogilev accounts for about half of the Mogilev Oblast export. Chairman of the Mogilev Oblast Executive Committee Piotr Rudnik explained it by saying that the preferences enjoyed by resident companies of free economic zones had been granted to several major GDP-generating enterprises. Aleksandr Lukashenko said that the practice should be gradually phased out. “Let’s do it like this: we will finish this five-year term and that’s it except for foreign-owned companies. State-run enterprises will have time till the end of the five-year term. It is necessary to take a closer look at new executives, who will know that it will be necessary to pull 100% as from 2015,” the head of state said.

According to the President, the availability of jobs is no longer such a problem in Belarus and therefore it may not be necessary to use free economic zones to attract companies and give them certain preferences. “We will not do it anymore. Besides, I have been deterring the process quietly. But I do not think we need free economic zones to attract companies, even foreign capital ones,” Aleksandr Lukashenko said. The Belarusian President added that in Belarus there are many less developed territories in small towns with as attractive terms for investors. Moreover, the policy is compliant with the arrangements made within the framework of the Single Economic Space.

In the free economic zone Mogilev Aleksandr Lukashenko visited the company IOOO VMG Industry. The company manufactures furniture, ply-curve parts and flake boards. He examined the manufacturing premises of the enterprise and visited various workshops. In line with signed contracts the merchandise is sold to IKEA.

Speaking about benefits of the enterprise and benefits from working with a private investor in particular, Aleksandr Lukashenko noted that it creates the necessary competitive environment inside the country and can be seen as an example of good business practices. “I would like you to show how it is done as a private enterprise. It is important for me to see what heights we should approach these days,” the head of state remarked.

Aleksandr Lukashenko did not rule out that a major holding company involving the enterprise may be set up in the future, with massive woodworking capacities utilized. “Certainly, some preferences will be removed, but it still will be some average level of payments to the state budget,” he said.

Director General of ZAO Vakaru Medienos Grupe Viktoras Adomaitis, for his part, said that the enterprise enjoys most favorable terms and constantly feels support of the local authorities. “We do not feel like foreign investors, we feel at home here,” he said.

The same day Aleksandr Lukashenko visited another woodworking enterprise with Lithuanian capital – IOOO Mebelain. The factory focuses on manufacturing veneer cabinet furniture out of IKEA collections. However, the company has plans for an independent access to the market in the future. The two Lithuanian-capital companies are connected by the process flow. The flake boards made by VMG Industry are supposed to be used by Mebelain to make cabinet furniture.

The Ambassador of Lithuania to Belarus Evaldas Ignatavičius spoke highly of the success of these projects. He remarked that the positive example will serve as a good foundation for implementing new projects in Belarus with the participation of Lithuanian business.

“The European Union reproaches us for the overabundance of bureaucracy that makes access to our market impossible. I will have you know that oblast governors and the Minsk city mayor are assigned investment targets. Therefore, this criticism is inadequate. Contrariwise, they are pleased to welcome an investor, a decent one I hope, and we do business with such investors. We do not do business with cheats. Therefore the criticism that a foreigner cannot start a business here is inadequate,” the head of state said addressing the diplomat.

“You are welcome to come and work here. But you see we will soon run out of workforce for the jobs that have been created,” Belarusian head of state remarked.

The head of state deflected criticism of ill-wishers, who say that he intends to keep the state ownership of enterprises because it means power. “Total nonsense. I can reach an agreement with a private owner faster than an agreement with a state-run enterprise that expects state budget funding every day,” the President stressed.

The Ambassador of Lithuania praised good dynamics in the inflow of Lithuanian investments to Belarus. The diplomat stressed that Mogilev-based companies are the biggest ones. But they are not the only examples of successful investment cooperation between the two countries. Lithuania’s presidency in the European Union opens up many new promising areas of cooperation.

Aleksandr Lukashenko invited Evaldas Ignatavičius to get familiar with various industries in Belarus and to look for new cooperation opportunities.

Mogilev Oblast Governor Piotr Rudnik informed the President about the fulfillment of his instruction to reduce backlogs of inventory.

The Chairman of the Mogilev Oblast Executive Committee told the head of state about the region’s efforts to raise investments. In 2011-2012 and H1 2013 the oblast signed over 110 investment agreements to the tune of Br4 trillion. In 2013 Mogilev Oblast raise more than $62 million in FDI, while the annual target is $145 million.

Apart from that, 893 new commercial organizations, including over 500 manufacturing companies, opened in Mogilev Oblast in H1 2013. Therefore, the region created about 11,000 new jobs.