Session of the Council of Ministers to discuss Belarus’ socio-economic progress in 2012 and targets for 2013
The government will be immediately fired if the economy development results of the year 2012 are repeated. President of Belarus Aleksandr Lukashenko made the statement at the session of the Council of Ministers held on 1 March to discuss the social and economic development of the country in 2012 and goals for 2013.
“The situation we saw last year is totally unacceptable this year!” the President stressed. “If last year is repeated, the government will be immediately fired!”
Aleksandr Lukashenko reminded that last year the Council of Ministers decided to hold the session when the information about the operation of the Belarusian economy would be available. The officials wanted to discuss all the existing problems and draw special attention to the challenges which can emerge in the near future.
The head of state emphasized that the year 2013 is a decisive year for the five-year term. “It is important to make things certain and work hard in order not to feel shame when we gather for the All-Belarusian People’s Congress before the entire nation in 2-2.5 years”. “Our work this year will affect the success in reaching targets set forth by the Fourth All-Belarus People’s Congress and included in the social and economic development program of Belarus,” the President said.
He noted that the Council of Ministers in its current membership has been working for three years now. “This is a good time to make conclusions and give objective assessments,” the head of state noted. He also added that he is closely following the work of the government and sees its pluses and minuses.
“I am present at the session of the government not because something is very bad. Some things are insufficiently good, not as good as we would like them to be,” the President said.
Aleksandr Lukashenko warned that the present session should contain more than reports. “We all know the statistics, we know how the government and the regions perform. I am interested in the ways we should act if some things are bad in order to make them better, to make them good,” the head of state said.
The President remarked that in 2012 Belarus managed to secure financial stability and macroeconomic balance.
Aleksandr Lukashenko said that the country was able to slow down the inflation rate, achieve a trade surplus in foreign trade in goods and services, and reach stability on the domestic currency market. The country maintained its gold and forex reserves at the previous level and fulfilled, timely and in full volume, its obligations on foreign and internal debts. The country secured a good growth rate across most important economic sectors, i.e. industry and agriculture. Belarus harvested a record 9 million tonnes of grain while harvests in the CIS countries sharply reduced.
“A few recent years have been quite difficult due to the global economic recession. There is hardly a country which has not been affected by the crisis. Our country was not an exception. Therefore, we should acknowledge the government’s certain contribution to keeping the Belarusian economy from collapsing,” the head of state noted.
According to opinions surveys, over two thirds of the Belarusians view the current economic, social and political situation in the country as positive.
“Indeed, we managed to consolidate the positive trends in the social sector in 2012,” the President said. Real incomes went up by 21%. Nominal average monthly wage in December 2012 amounted to slightly less than Br5 million ($552), including $418 in the public sector. Aleksandr Lukashenko drew attention to the fact that in 2012 pensions were increased four times: in February, May, August, and November. In December 2012 pensions averaged almost Br2 million ($ 220). Ruble and currency deposits with banks went up 1.6 times.
“It would seem that not everything is so bad. However, not everything that was planned by the government and approved by the Decree of the President was fulfilled,” Aleksandr Lukashenko said.
Aleksandr Lukashenko stressed that he was most concerned with the slowdown of the growth in the key sectors of the economy, which was clearly evident in the second half of 2012.
In 2012 Belarus failed to meet 5 out of 12 key targets of the social and economic development forecast. These were the GDP parameters, industrial production, reduction of material consumption in industry, GDP energy intensity and foreign direct investment. Almost all regions have not reached the forecast targets for the growth of the gross regional product. The city of Minsk even failed to reach the level of 2011 (96% as against the growth target of 4.5%).
“I would like to point out the biggest flaws in the work of the government, which should be eliminated as soon as possible. First of all, these are subjective flaws, like inaction and absence of initiatives, inability to anticipate negative trends and a fear to make decisions,” the head of state said.
“You always wait for orders and instructions from the President instead of addressing the problems promptly on your own. I always have to “push” the executive vertical of power. Only after the government and the National Bank receive tough orders, they start acting, although sometimes they act incorrectly or inadequately,” Aleksandr Lukashenko said.
“I have to be honest with you, dear members of the government, if you keep working like this, you will not be here soon,” the President said.
“You are stuck in protracted meetings that produce no results,” the head of state said. He illustrated his point referring to the government’s report on the fulfillment of the instructions in 2012. “It is just a sham. You say that virtually all the instructions were fulfilled; you suggest removing them from the agenda. However, the findings of the control committee attached to the report imply that 40% of the instructions were not met. How shall I understand it?” the President asked the attendees.
The head of state reminded that he drew attention to these issues back in 2011 when he set tasks for the newly appointed members of the government.
“Ill-conceived decisions, red tape, failure to meet deadlines and fulfill instructions of the President speak volumes about the style and methods of the Council of Ministers,” Aleksandr Lukashenko said.
“The major reason for missing the deadlines is inaction and the lack of discipline,” the President said.
“It is totally unacceptable! Tough discipline is a must for everybody. You should keep in mind that these instructions were elaborated by all of us in the course of painstaking work and were formalized by the President,” Aleksandr Lukashenko said.
“If you keep working like you do and the situation in the real production sector remains the same as in late 2012 - early 2013, you run the risk to fail to meet the 2013 targets,” the head of state said.
“Figuratively speaking, all chronic issues remain where they are. You are unable to challenge the situation and promptly address emerging social and economic problems. Of course, you are working on it,” the President said.
“So far, the general assessment is “unsatisfactory”!” the head of state emphasized.
Aleksandr Lukashenko dwelled upon the performance of each and every industry, pointed out existing flaws and ordered to eliminate them.
The head of state remarked that the manufacturing sector in Belarus affects the development of the entire economy in many aspects.
Aleksandr Lukashenko urged the government to take comprehensive and effective measures to develop the production sector and raise the output of innovative goods.
“I am worried that our main economy branch is yet unable to reverse the trend of the output falling every month that emerged in H2 2012,” the head of state said. “Why do we make less exports such as grain harvesters, machines for road work and construction work, steel wire, bearings, metal cord, trolleybuses and other ones?” Aleksandr Lukashenko wondered.
The head of state said that several enterprises had reduced their output and export by 20-30%. “If foreign markets favor our conventional products less, where are your innovative products?” the President asked those present. As an example he referred to the critical situation in Lidagroprommash, which output has been halved, the shortage of turnover assets is dire, with workers retiring and the social tensions on the rise. “Did the government and the governor set out to bankrupt the enterprise? We expect the enterprise to make machines for the country’s flax-growing industry, a priority industry for our development. Where are those machines at all?” the head of state was displeased.
“It is obvious that comprehensive and effective measures are needed to recover poorly performing enterprises,” the President believes. “Starting with basic order and discipline and ending with the implementation of modernization projects”.
Aleksandr Lukashenko remarked that things turn out to be a bit different in practice: “You are accustomed to promising mountains and then asking to shift the deadline”.
According to the President, the retooling and modernization of the woodworking industry is a vivid example. “Modernization projects have not been implemented at eight out of the nine Bellesbumprom enterprises, which are subject to modernization. The construction readiness of new production facilities did not exceed 50% as of the beginning of the year. Meanwhile, the state support poured into the modernizing enterprises in 2010-2012 alone has exceeded Br800 billion,” the head of state said.
“The establishment of the enterprises to make fiberboards and chipboards, which sell well on the home and foreign markets, has been delayed by more than three years. Meanwhile, more and more of the merchandise is imported every year due to the rising domestic demand. If you had commissioned these enterprises on time, we would have already recovered the investments collected by the state from various sources for these enterprises. But we have not done that yet,” Aleksandr Lukashenko remarked. “The backbone enterprises of Bellesbumprom Concern, which are subject to modernization, had nearly $100 million worth of imported equipment in cold storage as of the beginning of the year. The equipment was bought back in 2010-2011. Today the $150 million in foreign currency is just dead weight,” the head of state added. He reminded he had had to personally interfere in order to give a nudge to the implementation of these projects.
Aleksandr Lukashenko quoted an example. “Due to the choice of an unsound supplier of energy equipment the implementation of the project to modernize the Bereza state district power plant has virtually failed. The delivery of a steam turbine and a turbine generator was scheduled for 2010 and has not been fully accomplished yet. Contrary to your promises that the problem will be resolved by the new year,” the head of state said. “Back in 2008-2011 the electrical company Brestenergo transferred nearly €20 million as an advance payment to the supplier”.
The President also drew attention to the situation regarding government purchases in the power engineering industry. “Proper order has not been introduced there yet. Abuse of office, straight embezzlement during tenders is frequent. I have to interfere every year”.
“Do not invest in walls but in equipment! We have an extremely dissatisfying technological structure of investments at that,” the President added.
The head of state focused on the investment activity in general.
The President is dissatisfied with the government’s efforts to raise foreign financing and implement investment projects. “I am displeased with the work of the government and local administration bodies to implement investment projects in our country,” the head of state said.
The President remarked that in 2012 it was planned to implement 76 projects included in the national register. “No one hastened the government as far as the number and terms of projects are concerned. You have made the decision and appointed responsible people. And here is the result. By the beginning of the year 37 projects, a half, have not been implemented,” the head of state said.
Aleksandr Lukashenko pointed out that the Economy Minister is in charge of the investment activity in the government. “But it seems to me that obsession with liberal ideas and market theories as well as constant attempts to rely on foreign experts distract you, Nikolai Gennadyevich, and your colleagues working in a similar way from effectively dealing with investments and other important issues which exist in the country,” the head of state said.
“There are no deep analysis and business proposals. For several years we have been lowering the volume of fixed capital investments. We mostly reduce investments to the active part of fixed assets. In 2012 just 42% of capital investments have been funneled into modernization of the active part of fixed assets (machines, equipment, transport vehicles) as against 46% in 2011. We should raise this figure to at least 50%.
“The volume is lowering against the background of complaints about the deficiency of loan resources. The question arises: why should we give these resources if they are used irrationally?” the President remarked.
“Therefore, I want to reproach all the ministers and governors. Your efforts to attract foreign investments are lame,” Aleksandr Lukashenko stressed.
“All your talks about foreign direct investments produced a $1.4 billion result in 2012. It fell by 65% in comparison with 2011. Virtually all investments were used by the non-production sector – trade and financial industries. Here the ministers and governors should not even exert themselves. These industries can raise investments without your help,” the head of state noted.
“The Economy Ministry was responsible for the coordination of efforts to attract foreign investments. Your role in these processes is unseen,” the President said and added that he did not see the results of work of the investment agency which was set up for these purposes, too.
“You got stuck on privatization. You view foreign direct investment solely as the sale of state property,” the President said.
“My approaches to privatization remain unchanged,” Aleksandr Lukashenko underlined. “We can sell any asset but there will be no come-and-go sale! The principle is known: want to buy – pay a price and take the obligation to invest in production, save jobs, provide people with decent wages and pay taxes to the budget.”
“There will be no bureaucratic privatization. There will be no behind-the-doors sales to large businesses," the President said. "And with that, let’s put an end to talks about privatization," Aleksandr Lukashenko underscored.
The President pointed out the problems regarding making most use of idle state property.
The President noted that the country has a lot of unused premises and facilities, as well as a lot of opportunities to build companies on greenfield sites or premises with available infrastructure. “We still do not use these opportunities in full. My instruction to find uses for idle state property was not fulfilled altogether,” the head of state said.
In 2012, there were 3,837 vacant community facilities; only 1,664 of them (43.5%) started to be used. Besides, there were 1,008 idle premises belonging to the state in all the oblasts and the city of Minsk, and only about 500 of them started to be used again.
“We have agreed that the governors will be personally responsible for the work that was supposed to be concluded in 2012. I did what they asked; I eliminated red tape, agreed to sell these facilities for one base value and allowed the governors and the Prime Minister to do with these facilities what they deem necessary. However, they made little headway. What is the matter?” the President asked.
He noted that if officials are not able to make most use of these facilities, they should give them to those who will be able to do so.
According to Aleksandr Lukashenko, the performance of the Belarusian construction industry is extremely dissatisfying.
“The industry cannot get rid of old problems. State budget money is regularly spent ineffectively, the volume and cost of design, construction and installation services are overstated, figures are falsified, and tariffs are manipulated,” the President remarked.
“All the people say, and I agree with them, that the construction industry is the most corrupted one just like our neighbors’. The public even says that it is a mafia industry,” Aleksandr Lukashenko stressed.
“Belarusian construction companies regularly fail to hit the targeted increases in the export of construction services. Meanwhile, the import of these services exceeds export by 50%. As a result, we have a deficit of $193 million, twice as bad as in 2011,” the head of state said.
The President pointed out some negative facts, in particular, the unjustifiably long implementation of investment projects in the glass industry, shifted deadlines for building technological lines to make cement.
“Some homes are still built poorly, including standard quality ones, for citizens in need of better homes,” remarked Aleksandr Lukashenko. In his words, in 2012 construction supervision watchdogs detected over 30,000 defects and violations of construction norms and rules. Customers and contractors were issued 3,000 orders to fix the problems. Over 1,000 executives were fined. “However, the malpractice has not been eradicated,” the President stated.
“People complain a lot about the rising cost of homes. It has to do a lot with the overdue home construction terms,” Aleksandr Lukashenko remarked and mentioned several examples. For instance, in Vitebsk construction deadlines were shifted by 3-17 months for all the 15 multiple-apartment buildings commissioned in 2012, with over 80% of the total area designed for people in need of better homes. In addition, the cost of one square meter rose by 27-105% in comparison with the initial value. In Gomel the construction of as many as 16 out of the 17 multiple-apartment buildings commissioned in 2012 was 1-32 months overdue. In Mogilev Oblast 41 residential houses or 36% of the total number were overdue.
“The list can go on and on. And it is statistics from the construction sites where thousands of citizens, who are waiting for these homes and are sending letters to complain about the neglectful construction workers to various government agencies audit the process. Let alone the manufacturing facilities where the public supervision is non-existent,” the head of state remarked.
The President underlined that it was a serious fault on the part of Architecture and Construction Minister Anatoly Nichkasov and Vice Premier Anatoly Kalinin, who oversees the industry. “You’ve promised to set things straight in design organizations, to resolve overdue problems: reduce the length of all the stages involved in the construction cycle, step up the responsibility for fulfilling contractual obligations, introduce stricter requirements for acceptance inspections and raise the warranty period. But still there are no tangible results,” the head of state remarked.
“Many promises have been made, but no real deeds are noticeable. Our construction companies should work more and give better quality. Then salaries will match the effort,” Aleksandr Lukashenko said.
“Putting pressure on customers by raising the cost of projects in order to squeeze out additional money for wealthy lives and patching holes caused by poor management will end badly for many construction industry executives,” the head of state warned.
The head of state also spoke about problems on the consumer market. The President drew attention to the fact that the inflation rate gained momentum at the start of the year and this aroused concern in the public, which was quite understandable. Addressing Prime Minister Mikhail Myasnikovich and Chairperson of the Board of the National Bank Nadezhda Yermakova, the President said that this matter is of strategic importance for the state. “If we resolve the issue, we will be able to boost our macroeconomic stability,” the President said.
“Starting from 2011, the Belarusian ruble has devaluated 2.9 times. Consumer prices rose 2.6 times, of them prices for food products increased almost three times, non-food products and services 2.5 times. Does your pricing policy aim to catch up and outpace the devaluation rate?” the President asked.
The head of state is convinced: “If we do not restrain inflation now when we have a fairly stable exchange rate of the national currency, we will incur greater domestic expenses and our products will lose competitiveness, in particular, products meant for export. Therefore, we should take more aggressive steps to curb inflation”.
“I want you to stop these loose pricing practices. There is no need for that. The Government and the National Bank should regulate prices more efficiently,” Aleksandr Lukashenko emphasized.
“The situation is getting absurd sometimes. The State Control Committee told me that some company chiefs have been following some price formation schedule adopted by the government at the beginning of last year. These company chiefs have been raising their prices thinking that this schedule was some kind of price rise guideline,” Aleksandr Lukashenko said. “If we fail to restrain inflation, we will create serious problems for ourselves on the consumer market and make it harder to carry out economic modernization,” the head of state added.
Addressing Anatoly Tozik, the head of state reminded that apart of education matters the Vice Premier should deal with efficient employment. At the same time, the President pointed out that he still wants modernization to be carried out in a socially responsible way. “It is no secret that some enterprises employ personnel, who are surplus to requirements. While re-equipping the enterprises, we should not waste the manpower. Every released worker has to get a job. It is a task for everyone,” the head of state said.
In order to turn the tide in the economy, it is necessary to change attitudes to doing the business and, first of all, accomplish the modernization of enterprises. “It is our strategic line. This is why last year I gave instructions to the government, the National Bank, and local-level authorities to modernize each and every enterprise and the country’s economy as a whole,” the President remarked.
The head of state reminded about his requirement for every company to have a modernization plan. “Let me set priorities once again. Members of the government, heads of local authorities, and directors of enterprises are responsible for this work. And Piotr Petrovich Prokopovich has been sent to the government to keep an eye on the work on behalf of the President. Yes, he does first-hand monitoring, works out a supervision system and is the first one in the government to organize this work. But if you think that we will fail modernization plans and Prokopovich will be made responsible for it, you are mistaken,” Aleksandr Lukashenko said.
“As early as 1 January every executive should be busy working on modernization. We have to accomplish the bulk of the work in 2013,” Aleksandr Lukashenko said.
According to the head of state, the annual earnings per employee as large as at least $60,000 will be the indicator to judge the effectiveness of the modernization. “It is the key requirement for everyone. You cannot find your way around it or juggle with the figure,” the President is convinced. In his words, nearly 60% of the enterprises with a state-owned share have less than $20,000 in earnings per employee so within three years they will have to triple earnings.
“If we do it slowly at the start, we will not be able to catch up. The Council of Ministers and the National Bank should enable the necessary economic conditions for a successful modernization,” the President stressed. Addressing the top government and National Bank officials, the head of state said he wanted them to take more daring and forward-looking decisions, however, he warned them against “drowning the economy in unearned money”.
Aleksandr Lukashenko said he wanted the national export to reach $60 billion in 2013, $8 billion up (over 15%) from 2012. “Raising the export is the key factor to recover the high pace of economic growth and a guarantee of macroeconomic stability in conditions of peak foreign debt payments,” stressed the President. In his words, the entire power vertical – from members of the central government to heads of local government agencies – should make its contribution to raising the export volume.
“I am sick and tired of talking about the need to expand the trade area to sell Belarusian products,” Aleksandr Lukashenko said. “Your actions in this field look like an imitation of hard work”. As an example Aleksandr Lukashenko referred to trade with Latin America countries. “It looks like we have come to terms on everything with Cuba, Venezuela, Ecuador, Bolivia, and other countries. But in the end we get nothing but delayed fulfillment of my instructions. Go there along the beaten path and get things organized. Shipments to 15 new markets have been reported but they constitute only 0.1% of the total export. No big deal in penetrating 15 markets like that! Meanwhile, shipments to 11 countries have been stopped,” the President stated.
According to the President, to ensure normal economic operation of organizations and extended reproduction the banking system should implement a key task to approximate interest rates of ruble and foreign currency loans. “At present interest rates on ruble loans are unmanageable for enterprises. However, it is obvious that banks are far from collapse in this situation. It is time for the banking system to address the needs of the economy,” Aleksandr Lukashenko said.
The President emphasized that the National Bank has to deal with the accessibility of Belarusian ruble loans for the real production sector. “But you have to exercise the toughest control over the issue – loans should be given for concrete ideas and high-efficiency projects,” Aleksandr Lukashenko ordered.
“The banking system of the country should provide the so-called ‘long money’ for modernization projects. By the way, banks should raise money abroad and bring it to the country. You can find the money,” the President is convinced.
Aleksandr Lukashenko emphasized that apart from domestic financing banks should find other sources: “You should not give up on foreign loan resources, but attract them only on the terms which are favourable for the country. As part of loan agreements with China we can raise up to $12 billion. It is high time we stopped beating the air. It is essential to start using the loan and investment cooperation potential in full”. “Export and modernization should be the locomotive which will haul the entire economy,” the head of state added.
The President reminded: “Citing the lack of resources will not count as an excuse. This is what is often done at the local level to cover for the absence of profitable and currency-generating investment projects. Every company should have an upgrade plan with an efficient business plan. Such projects will be supported through funds and cheaper loans,” Aleksandr Lukashenko said.
In his words, the resources of the innovation funds should be used efficiently in the development of new companies. “In 2013 this is over Br3 trillion. They should be spent on the most important economic projects,” the President noted.
The head of state believes that Belarus needs to create the conditions for implementing the initiative of Belarusian entrepreneurs and involving them in the process of modernization of the economy. “The other day we had a meeting with representatives of the Belarusian business. They are ready to engage in this work. Responsibility for creating the environment to attract domestic capital into upgrade projects is vested with the governors, chairmen of local executive bodies,” Aleksandr Lukashenko said.
Prime Minister Mikhail Myasnikovich informed the President about the results of work of the government in 2012 and plans for 2013. Modernization was one of the main topics. Speaking about the efficiency of capital investments, the Prime Minister said that more funds should be injected into the manufacturing sector which is a main generator of value added and gives the lion’s share of export. This problem was taken into account when the government approved modernization plans.
Today the majority of state-owned and private enterprises have their own modernization plans. As a result, the proceeds per one employee are expected to increase 1.4 times on average in the country to $60,000 by 2015. The Prime Minister told the head of state about the projects which will be implemented in the wood processing industry, production of construction materials, light industry and about the expected results.
In 2013 some Br134 trillion has to be funneled into modernization and innovative development of companies. The overall capital investments are expected to exceed Br200 trillion this year. According to Mikhail Myasnikovich, the country needs another Br60 trillion to fulfill the plans. Taking into account the inadmissibility of using emission loans and the deficiency of foreign direct investment, the Prime Minister believes it is necessary to use the country’s internal reserves.
In 2013 Br9 trillion will be injected into investment projects. Another Br2.6 trillion will be provided by innovation funds. The government and oblast administration will draw special attention to such large national projects as the Belarusian-Chinese Industrial Park and the Lelchitsy Industrial Park. Other targeted projects will be financed, too.
The Prime Minister highlighted the good progress made by Belarus in foreign trade. However, Mikhail Myasnikovich said that a special support system of lending to exporters and end-users is needed. The government has developed five types of export support schemes. The Development Bank and the Finance Ministry have already been instructed to boost lending under these schemes already in the first quarter. But major exporters are extremely slow to use these schemes, the Prime Minister said. “The managers, who will allow a decline in output and export, will be held responsible, even fired,” Mikhail Myasnikovich said. The Prime Minister also added that the banking industry will need to gradually reduce deposit rates, making loans available to producers.
Mikhail Myasnikovich also touched upon the agricultural industry, which produced good results in 2012. The domestic market is stable, therefore export of milk and meat products can be increased in 2013, said the Prime Minister. It is necessary to continue working on diversification of exports. With regard to the reconstruction of 1,200 dairy farms, Mikhail Myasnikovich assured that the work will be completed before 1 October 2013. In 2014, the state-of-the-art dairy facilities must account for not less than 60% of the milk output in the country.
The Prime Minister also acknowledged that the measures to curb the growth in consumer prices have been insufficient.
The President noted that the government should come to grips with prices for utility services and find out if these prices are fair. The head of state emphasized that such instructions had already been given many times; however, no tangible results are still available. “We keep insulting people saying that they do not pay. Look into the matter from the beginning to the end and calculate how much each service should cost,” Aleksandr Lukashenko said.
“The Energy Ministry is like a state inside a state. They came forward and told you how much electric energy costs; the utilities ministry told you how much a bucket of water costs. Hence, cross-subsidizing, you put extraordinary pressure on industrial companies and so on. Has anyone calculated the real price?” the President asked.
In order to make these approximate calculations more precise, the government deems it necessary to switch to planned prices in each region where the cost of utility services will be determined taking into consideration local conditions. “You demand raising prices for electric energy and utility services, but you still have not made any calculations,” the head of state said. The President instructed the State Control Committee to look into the matter. The head of state also expressed dissatisfaction with the work of the Energy Ministry: “Sheer mismanagement adds up to the cost of services and goods and we condone it”.
Chairperson of the Board of the National Bank Nadezhda Yermakova delivered a report on financial support for the real economic sector in 2013 aimed at boosting socioeconomic development and facilitating modernization of Belarusian companies. Nadezhda Yermakova noted that in 2012 the government and the National Bank managed to secure stable operation of the national economy. The rise in prices for consumer products has been curbed; gold and foreign currency reserves have been maintained at the amount of two-month import; all foreign and domestic obligations have been met. The exchange rate of the national currency remained stable. Household deposits denominated in foreign currency and Belarusian rubles have been on the rise.
In 2013 all conditions are in place to maintain positive trends. The key objective is to reduce the inflation rate down to 12% in 2013. The refinancing rate will depend on the macroeconomic situation, first of all, foreign trade and the currency market, as well as the actual inflation rate. “Naturally, if positive trends remain in place, the refinancing rate and loan rates will be reduced,” Nadezhda Yermakova said.
The head of the NBRB noted that the needs of individual industries exceed the available and potential resources of banks. “Taking this into consideration, the government and the National Bank need to study the matter and identify the priority order of providing credit resources for government programs. All banks, not only state-run banks, should be involved in financing government programs,” Nadezhda Yermakova said.
The concerted effort of the government and the National Bank will be facilitated by the 2013 financial program that will harmonize the needs for funds with potential sources of financing. Loans will be primarily meant for investment projects. The scale of financial support should not threaten the economic balance, financial and macroeconomic stability.
The National Bank has already adopted a number of measures to reduce the cost of loans. These measures will translate into lower loan rates. However, credit expansion per se should not be the only way to boost economic growth. Credits should be used more efficiently, the NBRB chief underlined. “Poorly elaborated business plans with unclear payoff periods will not be considered,” she said.
Banks have been tasked to contribute to export growth by providing loans for export-oriented projects and by using more widely export loans and international leasing.
Aleksandr Lukashenko emphasized that the National Bank should keep a check on bank loans given to companies for modernization purposes and make sure these loans are really needed. The President believes that companies should not apply for loans to perform routine operations, like paying out salaries. The head of state warned Nadezhda Yermakova of her personal responsibility: “Keep in mind that you will be personally responsible for all the money you allocate”.
Director general of BelAZ Piotr Parkhomchik told the participants of the session about the company’s efforts to diversify sales markets. In particular, Belarusian dump trucks will be shipped to Australia and Mongolia. “The situation on conventional markets is different. We expect a 30-35% decline on the Russian market which is a main export market for BelAZ. Therefore, today all marketing specialists are focused on non-CIS countries. This month they have paid a visit to Indonesia, Mongolia, South Africa. I have been to Australia. We have same action plan which provides for traveling to non-CIS countries in March,” the Director General said.
Chairman of the State Control Committee (SCC) Alexander Yakobson paid attention to the fact that big state-run companies such as Belaruskali, Brestenergo, Grodnoenergo and others allocate considerable funds on voluntary insurance of supplementary pension. “These funds are transferred to the private insurance company “Belarusian People’s Insurance Pension Fund” which put them into bank deposits. Raised revenues are used by the shareholders of this firm (the director and her husband as well as some other commercial structures) for personal advantage. Thus, an average wage of the Director of the Belarusian People’s Insurance Pension Fund made up Br30 million in 2012. The dividends got by the couple last year reached almost Br3 billion,” the SCC Chairman said.
Aleksandr Lukashenko urged to address the issue in the shortest possible time. The President was updated on the situation by Finance Minister Andrei Kharkovets. According to the minister, Belaruskali, in particular, was repeatedly suggested taking up the services of a state insurance company. The issue, however, has not been solved for a number of reasons.
The head of state heard out Belaruskali Director General Valery Kiriyenko who called to current difficulties of various kind. Belneftekhim Chairman Igor Zhilin stated that “he has just become aware of the situation”.
“Br3 billion! Where did this money come from?! Do they produce potash fertilizers there or what?” Aleksandr Lukashenko wondered.
“Take it under control. The money, these dividends, put in the construction of cottages and other things should be returned. I believe you will have done it by the end of Q1. Here is the efficient work of the State Control Committee, the Finance Minister and the Prime Minister in all its glory. It is called a formal bureaucratic approach. This is a shining example of your approach to the matter, Mr Myasnikovich, and yours, Mr Yakobson. If you could not do it, you should have informed me and got the corresponding resolution from me. Money is stolen in front of your eyes, and you go easy on it,” Aleksandr Lukashenko said.
“All the issues should be addressed by the end of March,” the President warned.
“Mr Yakobson, I warn you one last time. You do your work properly to protect the interests of the state or come to me and say that you are afraid and cannot do it,” the head of state added.
“I feel somehow awkward with taking decisions here, doing the job of our courts. But you see this bugger’s muddle here. It cannot go on this way any longer,” Aleksandr Lukashenko concluded.
The President reminded the participants of the meeting on a blanket ban to work through mediators: “We have a great amount of contracts with commercial structures and so-called fly-by-night companies. I thought there were isolated instances, but now I see it is a country-wide issue.”
Vice Premier Anatoly Kalinin also informed about results of the work and future prospects of development of organizations of the Transport and Communications Ministry. The need to reconstruct the national airport Minsk was also mentioned as well as plans for road construction, better transit attractiveness of the country, development of the motorway service, and the modernization of the industry’s enterprises.
Vice Premier Mikhail Rusyi made a report about the state of affairs in the agriculture that he oversees. The President was primarily interested in economic effectiveness indicators. “What is going on at agricultural enterprises? How many collective farms have their own money in bank accounts?” the head of state said.
According to the Vice Premier, about 35-37% of the agricultural enterprises steadily keep their own funds in banks. About 50% of the enterprises use credit resources. “As much as Br57 trillion in credit resources has been issued. It is necessary to return Br26 trillion this year. At present the overdue liabilities are about Br5 billion for the agricultural machines that have been sold via leasing. We are now working to get the loans repaid,” the Vice Premier said.
“Keep in mind and tell your subordinates: while I am the President, we will not write off a cent for anyone. The money has to be repaid,” the head of state stressed.
Once again Aleksandr Lukashenko reminded about his instruction to reconstruct dairy farms last year. The instruction was failed. “If these farms had been commissioned and outfitted, they would have been able to be returning money already. Trillions of rubles that you need now. Time is money,” the President remarked.
The President also warned against corruption in governmental bodies. “We have a state policy and state-run companies. I will never forgive anyone corruptive actions. No mediators for state-run companies starting this day,” Aleksandr Lukashenko underlined.
Addressing MPs, Aleksandr Lukashenko said: “I am ready to work with you, but it entirely depends on you. We have drawn a line here. We agreed that the past two years had been tough for us. We had problems, we turned a blind eye on some issues. And it ends today. Take the pricing policy under immediate control. We should stop aggregating the situation and keep the people in this constant hysteric state,” the head of state said.
The Belarusian leader stressed the necessity for the government to build on their efficient work: “It is inadmissible when the government is turned into a laughingstock. It is not only me getting reports of the kind. It is people who start talking about it.” The President reiterated the needlessness in numerous useless meetings. “Only governmental sessions can be held during working hours. As for any other meetings, they should take place before 8 a.m. or after work,” Aleksandr Lukashenko said.
“The situation we saw last year is totally unacceptable this year!” the President stressed. “If last year is repeated, the government will be immediately fired!”
Aleksandr Lukashenko reminded that last year the Council of Ministers decided to hold the session when the information about the operation of the Belarusian economy would be available. The officials wanted to discuss all the existing problems and draw special attention to the challenges which can emerge in the near future.
The head of state emphasized that the year 2013 is a decisive year for the five-year term. “It is important to make things certain and work hard in order not to feel shame when we gather for the All-Belarusian People’s Congress before the entire nation in 2-2.5 years”. “Our work this year will affect the success in reaching targets set forth by the Fourth All-Belarus People’s Congress and included in the social and economic development program of Belarus,” the President said.
He noted that the Council of Ministers in its current membership has been working for three years now. “This is a good time to make conclusions and give objective assessments,” the head of state noted. He also added that he is closely following the work of the government and sees its pluses and minuses.
“I am present at the session of the government not because something is very bad. Some things are insufficiently good, not as good as we would like them to be,” the President said.
Aleksandr Lukashenko warned that the present session should contain more than reports. “We all know the statistics, we know how the government and the regions perform. I am interested in the ways we should act if some things are bad in order to make them better, to make them good,” the head of state said.
The President remarked that in 2012 Belarus managed to secure financial stability and macroeconomic balance.
Aleksandr Lukashenko said that the country was able to slow down the inflation rate, achieve a trade surplus in foreign trade in goods and services, and reach stability on the domestic currency market. The country maintained its gold and forex reserves at the previous level and fulfilled, timely and in full volume, its obligations on foreign and internal debts. The country secured a good growth rate across most important economic sectors, i.e. industry and agriculture. Belarus harvested a record 9 million tonnes of grain while harvests in the CIS countries sharply reduced.
“A few recent years have been quite difficult due to the global economic recession. There is hardly a country which has not been affected by the crisis. Our country was not an exception. Therefore, we should acknowledge the government’s certain contribution to keeping the Belarusian economy from collapsing,” the head of state noted.
According to opinions surveys, over two thirds of the Belarusians view the current economic, social and political situation in the country as positive.
“Indeed, we managed to consolidate the positive trends in the social sector in 2012,” the President said. Real incomes went up by 21%. Nominal average monthly wage in December 2012 amounted to slightly less than Br5 million ($552), including $418 in the public sector. Aleksandr Lukashenko drew attention to the fact that in 2012 pensions were increased four times: in February, May, August, and November. In December 2012 pensions averaged almost Br2 million ($ 220). Ruble and currency deposits with banks went up 1.6 times.
“It would seem that not everything is so bad. However, not everything that was planned by the government and approved by the Decree of the President was fulfilled,” Aleksandr Lukashenko said.
Aleksandr Lukashenko stressed that he was most concerned with the slowdown of the growth in the key sectors of the economy, which was clearly evident in the second half of 2012.
In 2012 Belarus failed to meet 5 out of 12 key targets of the social and economic development forecast. These were the GDP parameters, industrial production, reduction of material consumption in industry, GDP energy intensity and foreign direct investment. Almost all regions have not reached the forecast targets for the growth of the gross regional product. The city of Minsk even failed to reach the level of 2011 (96% as against the growth target of 4.5%).
“I would like to point out the biggest flaws in the work of the government, which should be eliminated as soon as possible. First of all, these are subjective flaws, like inaction and absence of initiatives, inability to anticipate negative trends and a fear to make decisions,” the head of state said.
“You always wait for orders and instructions from the President instead of addressing the problems promptly on your own. I always have to “push” the executive vertical of power. Only after the government and the National Bank receive tough orders, they start acting, although sometimes they act incorrectly or inadequately,” Aleksandr Lukashenko said.
“I have to be honest with you, dear members of the government, if you keep working like this, you will not be here soon,” the President said.
“You are stuck in protracted meetings that produce no results,” the head of state said. He illustrated his point referring to the government’s report on the fulfillment of the instructions in 2012. “It is just a sham. You say that virtually all the instructions were fulfilled; you suggest removing them from the agenda. However, the findings of the control committee attached to the report imply that 40% of the instructions were not met. How shall I understand it?” the President asked the attendees.
The head of state reminded that he drew attention to these issues back in 2011 when he set tasks for the newly appointed members of the government.
“Ill-conceived decisions, red tape, failure to meet deadlines and fulfill instructions of the President speak volumes about the style and methods of the Council of Ministers,” Aleksandr Lukashenko said.
“The major reason for missing the deadlines is inaction and the lack of discipline,” the President said.
“It is totally unacceptable! Tough discipline is a must for everybody. You should keep in mind that these instructions were elaborated by all of us in the course of painstaking work and were formalized by the President,” Aleksandr Lukashenko said.
“If you keep working like you do and the situation in the real production sector remains the same as in late 2012 - early 2013, you run the risk to fail to meet the 2013 targets,” the head of state said.
“Figuratively speaking, all chronic issues remain where they are. You are unable to challenge the situation and promptly address emerging social and economic problems. Of course, you are working on it,” the President said.
“So far, the general assessment is “unsatisfactory”!” the head of state emphasized.
Aleksandr Lukashenko dwelled upon the performance of each and every industry, pointed out existing flaws and ordered to eliminate them.
The head of state remarked that the manufacturing sector in Belarus affects the development of the entire economy in many aspects.
Aleksandr Lukashenko urged the government to take comprehensive and effective measures to develop the production sector and raise the output of innovative goods.
“I am worried that our main economy branch is yet unable to reverse the trend of the output falling every month that emerged in H2 2012,” the head of state said. “Why do we make less exports such as grain harvesters, machines for road work and construction work, steel wire, bearings, metal cord, trolleybuses and other ones?” Aleksandr Lukashenko wondered.
The head of state said that several enterprises had reduced their output and export by 20-30%. “If foreign markets favor our conventional products less, where are your innovative products?” the President asked those present. As an example he referred to the critical situation in Lidagroprommash, which output has been halved, the shortage of turnover assets is dire, with workers retiring and the social tensions on the rise. “Did the government and the governor set out to bankrupt the enterprise? We expect the enterprise to make machines for the country’s flax-growing industry, a priority industry for our development. Where are those machines at all?” the head of state was displeased.
“It is obvious that comprehensive and effective measures are needed to recover poorly performing enterprises,” the President believes. “Starting with basic order and discipline and ending with the implementation of modernization projects”.
Aleksandr Lukashenko remarked that things turn out to be a bit different in practice: “You are accustomed to promising mountains and then asking to shift the deadline”.
According to the President, the retooling and modernization of the woodworking industry is a vivid example. “Modernization projects have not been implemented at eight out of the nine Bellesbumprom enterprises, which are subject to modernization. The construction readiness of new production facilities did not exceed 50% as of the beginning of the year. Meanwhile, the state support poured into the modernizing enterprises in 2010-2012 alone has exceeded Br800 billion,” the head of state said.
“The establishment of the enterprises to make fiberboards and chipboards, which sell well on the home and foreign markets, has been delayed by more than three years. Meanwhile, more and more of the merchandise is imported every year due to the rising domestic demand. If you had commissioned these enterprises on time, we would have already recovered the investments collected by the state from various sources for these enterprises. But we have not done that yet,” Aleksandr Lukashenko remarked. “The backbone enterprises of Bellesbumprom Concern, which are subject to modernization, had nearly $100 million worth of imported equipment in cold storage as of the beginning of the year. The equipment was bought back in 2010-2011. Today the $150 million in foreign currency is just dead weight,” the head of state added. He reminded he had had to personally interfere in order to give a nudge to the implementation of these projects.
Aleksandr Lukashenko quoted an example. “Due to the choice of an unsound supplier of energy equipment the implementation of the project to modernize the Bereza state district power plant has virtually failed. The delivery of a steam turbine and a turbine generator was scheduled for 2010 and has not been fully accomplished yet. Contrary to your promises that the problem will be resolved by the new year,” the head of state said. “Back in 2008-2011 the electrical company Brestenergo transferred nearly €20 million as an advance payment to the supplier”.
The President also drew attention to the situation regarding government purchases in the power engineering industry. “Proper order has not been introduced there yet. Abuse of office, straight embezzlement during tenders is frequent. I have to interfere every year”.
“Do not invest in walls but in equipment! We have an extremely dissatisfying technological structure of investments at that,” the President added.
The head of state focused on the investment activity in general.
The President is dissatisfied with the government’s efforts to raise foreign financing and implement investment projects. “I am displeased with the work of the government and local administration bodies to implement investment projects in our country,” the head of state said.
The President remarked that in 2012 it was planned to implement 76 projects included in the national register. “No one hastened the government as far as the number and terms of projects are concerned. You have made the decision and appointed responsible people. And here is the result. By the beginning of the year 37 projects, a half, have not been implemented,” the head of state said.
Aleksandr Lukashenko pointed out that the Economy Minister is in charge of the investment activity in the government. “But it seems to me that obsession with liberal ideas and market theories as well as constant attempts to rely on foreign experts distract you, Nikolai Gennadyevich, and your colleagues working in a similar way from effectively dealing with investments and other important issues which exist in the country,” the head of state said.
“There are no deep analysis and business proposals. For several years we have been lowering the volume of fixed capital investments. We mostly reduce investments to the active part of fixed assets. In 2012 just 42% of capital investments have been funneled into modernization of the active part of fixed assets (machines, equipment, transport vehicles) as against 46% in 2011. We should raise this figure to at least 50%.
“The volume is lowering against the background of complaints about the deficiency of loan resources. The question arises: why should we give these resources if they are used irrationally?” the President remarked.
“Therefore, I want to reproach all the ministers and governors. Your efforts to attract foreign investments are lame,” Aleksandr Lukashenko stressed.
“All your talks about foreign direct investments produced a $1.4 billion result in 2012. It fell by 65% in comparison with 2011. Virtually all investments were used by the non-production sector – trade and financial industries. Here the ministers and governors should not even exert themselves. These industries can raise investments without your help,” the head of state noted.
“The Economy Ministry was responsible for the coordination of efforts to attract foreign investments. Your role in these processes is unseen,” the President said and added that he did not see the results of work of the investment agency which was set up for these purposes, too.
“You got stuck on privatization. You view foreign direct investment solely as the sale of state property,” the President said.
“My approaches to privatization remain unchanged,” Aleksandr Lukashenko underlined. “We can sell any asset but there will be no come-and-go sale! The principle is known: want to buy – pay a price and take the obligation to invest in production, save jobs, provide people with decent wages and pay taxes to the budget.”
“There will be no bureaucratic privatization. There will be no behind-the-doors sales to large businesses," the President said. "And with that, let’s put an end to talks about privatization," Aleksandr Lukashenko underscored.
The President pointed out the problems regarding making most use of idle state property.
The President noted that the country has a lot of unused premises and facilities, as well as a lot of opportunities to build companies on greenfield sites or premises with available infrastructure. “We still do not use these opportunities in full. My instruction to find uses for idle state property was not fulfilled altogether,” the head of state said.
In 2012, there were 3,837 vacant community facilities; only 1,664 of them (43.5%) started to be used. Besides, there were 1,008 idle premises belonging to the state in all the oblasts and the city of Minsk, and only about 500 of them started to be used again.
“We have agreed that the governors will be personally responsible for the work that was supposed to be concluded in 2012. I did what they asked; I eliminated red tape, agreed to sell these facilities for one base value and allowed the governors and the Prime Minister to do with these facilities what they deem necessary. However, they made little headway. What is the matter?” the President asked.
He noted that if officials are not able to make most use of these facilities, they should give them to those who will be able to do so.
According to Aleksandr Lukashenko, the performance of the Belarusian construction industry is extremely dissatisfying.
“The industry cannot get rid of old problems. State budget money is regularly spent ineffectively, the volume and cost of design, construction and installation services are overstated, figures are falsified, and tariffs are manipulated,” the President remarked.
“All the people say, and I agree with them, that the construction industry is the most corrupted one just like our neighbors’. The public even says that it is a mafia industry,” Aleksandr Lukashenko stressed.
“Belarusian construction companies regularly fail to hit the targeted increases in the export of construction services. Meanwhile, the import of these services exceeds export by 50%. As a result, we have a deficit of $193 million, twice as bad as in 2011,” the head of state said.
The President pointed out some negative facts, in particular, the unjustifiably long implementation of investment projects in the glass industry, shifted deadlines for building technological lines to make cement.
“Some homes are still built poorly, including standard quality ones, for citizens in need of better homes,” remarked Aleksandr Lukashenko. In his words, in 2012 construction supervision watchdogs detected over 30,000 defects and violations of construction norms and rules. Customers and contractors were issued 3,000 orders to fix the problems. Over 1,000 executives were fined. “However, the malpractice has not been eradicated,” the President stated.
“People complain a lot about the rising cost of homes. It has to do a lot with the overdue home construction terms,” Aleksandr Lukashenko remarked and mentioned several examples. For instance, in Vitebsk construction deadlines were shifted by 3-17 months for all the 15 multiple-apartment buildings commissioned in 2012, with over 80% of the total area designed for people in need of better homes. In addition, the cost of one square meter rose by 27-105% in comparison with the initial value. In Gomel the construction of as many as 16 out of the 17 multiple-apartment buildings commissioned in 2012 was 1-32 months overdue. In Mogilev Oblast 41 residential houses or 36% of the total number were overdue.
“The list can go on and on. And it is statistics from the construction sites where thousands of citizens, who are waiting for these homes and are sending letters to complain about the neglectful construction workers to various government agencies audit the process. Let alone the manufacturing facilities where the public supervision is non-existent,” the head of state remarked.
The President underlined that it was a serious fault on the part of Architecture and Construction Minister Anatoly Nichkasov and Vice Premier Anatoly Kalinin, who oversees the industry. “You’ve promised to set things straight in design organizations, to resolve overdue problems: reduce the length of all the stages involved in the construction cycle, step up the responsibility for fulfilling contractual obligations, introduce stricter requirements for acceptance inspections and raise the warranty period. But still there are no tangible results,” the head of state remarked.
“Many promises have been made, but no real deeds are noticeable. Our construction companies should work more and give better quality. Then salaries will match the effort,” Aleksandr Lukashenko said.
“Putting pressure on customers by raising the cost of projects in order to squeeze out additional money for wealthy lives and patching holes caused by poor management will end badly for many construction industry executives,” the head of state warned.
The head of state also spoke about problems on the consumer market. The President drew attention to the fact that the inflation rate gained momentum at the start of the year and this aroused concern in the public, which was quite understandable. Addressing Prime Minister Mikhail Myasnikovich and Chairperson of the Board of the National Bank Nadezhda Yermakova, the President said that this matter is of strategic importance for the state. “If we resolve the issue, we will be able to boost our macroeconomic stability,” the President said.
“Starting from 2011, the Belarusian ruble has devaluated 2.9 times. Consumer prices rose 2.6 times, of them prices for food products increased almost three times, non-food products and services 2.5 times. Does your pricing policy aim to catch up and outpace the devaluation rate?” the President asked.
The head of state is convinced: “If we do not restrain inflation now when we have a fairly stable exchange rate of the national currency, we will incur greater domestic expenses and our products will lose competitiveness, in particular, products meant for export. Therefore, we should take more aggressive steps to curb inflation”.
“I want you to stop these loose pricing practices. There is no need for that. The Government and the National Bank should regulate prices more efficiently,” Aleksandr Lukashenko emphasized.
“The situation is getting absurd sometimes. The State Control Committee told me that some company chiefs have been following some price formation schedule adopted by the government at the beginning of last year. These company chiefs have been raising their prices thinking that this schedule was some kind of price rise guideline,” Aleksandr Lukashenko said. “If we fail to restrain inflation, we will create serious problems for ourselves on the consumer market and make it harder to carry out economic modernization,” the head of state added.
Addressing Anatoly Tozik, the head of state reminded that apart of education matters the Vice Premier should deal with efficient employment. At the same time, the President pointed out that he still wants modernization to be carried out in a socially responsible way. “It is no secret that some enterprises employ personnel, who are surplus to requirements. While re-equipping the enterprises, we should not waste the manpower. Every released worker has to get a job. It is a task for everyone,” the head of state said.
In order to turn the tide in the economy, it is necessary to change attitudes to doing the business and, first of all, accomplish the modernization of enterprises. “It is our strategic line. This is why last year I gave instructions to the government, the National Bank, and local-level authorities to modernize each and every enterprise and the country’s economy as a whole,” the President remarked.
The head of state reminded about his requirement for every company to have a modernization plan. “Let me set priorities once again. Members of the government, heads of local authorities, and directors of enterprises are responsible for this work. And Piotr Petrovich Prokopovich has been sent to the government to keep an eye on the work on behalf of the President. Yes, he does first-hand monitoring, works out a supervision system and is the first one in the government to organize this work. But if you think that we will fail modernization plans and Prokopovich will be made responsible for it, you are mistaken,” Aleksandr Lukashenko said.
“As early as 1 January every executive should be busy working on modernization. We have to accomplish the bulk of the work in 2013,” Aleksandr Lukashenko said.
According to the head of state, the annual earnings per employee as large as at least $60,000 will be the indicator to judge the effectiveness of the modernization. “It is the key requirement for everyone. You cannot find your way around it or juggle with the figure,” the President is convinced. In his words, nearly 60% of the enterprises with a state-owned share have less than $20,000 in earnings per employee so within three years they will have to triple earnings.
“If we do it slowly at the start, we will not be able to catch up. The Council of Ministers and the National Bank should enable the necessary economic conditions for a successful modernization,” the President stressed. Addressing the top government and National Bank officials, the head of state said he wanted them to take more daring and forward-looking decisions, however, he warned them against “drowning the economy in unearned money”.
Aleksandr Lukashenko said he wanted the national export to reach $60 billion in 2013, $8 billion up (over 15%) from 2012. “Raising the export is the key factor to recover the high pace of economic growth and a guarantee of macroeconomic stability in conditions of peak foreign debt payments,” stressed the President. In his words, the entire power vertical – from members of the central government to heads of local government agencies – should make its contribution to raising the export volume.
“I am sick and tired of talking about the need to expand the trade area to sell Belarusian products,” Aleksandr Lukashenko said. “Your actions in this field look like an imitation of hard work”. As an example Aleksandr Lukashenko referred to trade with Latin America countries. “It looks like we have come to terms on everything with Cuba, Venezuela, Ecuador, Bolivia, and other countries. But in the end we get nothing but delayed fulfillment of my instructions. Go there along the beaten path and get things organized. Shipments to 15 new markets have been reported but they constitute only 0.1% of the total export. No big deal in penetrating 15 markets like that! Meanwhile, shipments to 11 countries have been stopped,” the President stated.
According to the President, to ensure normal economic operation of organizations and extended reproduction the banking system should implement a key task to approximate interest rates of ruble and foreign currency loans. “At present interest rates on ruble loans are unmanageable for enterprises. However, it is obvious that banks are far from collapse in this situation. It is time for the banking system to address the needs of the economy,” Aleksandr Lukashenko said.
The President emphasized that the National Bank has to deal with the accessibility of Belarusian ruble loans for the real production sector. “But you have to exercise the toughest control over the issue – loans should be given for concrete ideas and high-efficiency projects,” Aleksandr Lukashenko ordered.
“The banking system of the country should provide the so-called ‘long money’ for modernization projects. By the way, banks should raise money abroad and bring it to the country. You can find the money,” the President is convinced.
Aleksandr Lukashenko emphasized that apart from domestic financing banks should find other sources: “You should not give up on foreign loan resources, but attract them only on the terms which are favourable for the country. As part of loan agreements with China we can raise up to $12 billion. It is high time we stopped beating the air. It is essential to start using the loan and investment cooperation potential in full”. “Export and modernization should be the locomotive which will haul the entire economy,” the head of state added.
The President reminded: “Citing the lack of resources will not count as an excuse. This is what is often done at the local level to cover for the absence of profitable and currency-generating investment projects. Every company should have an upgrade plan with an efficient business plan. Such projects will be supported through funds and cheaper loans,” Aleksandr Lukashenko said.
In his words, the resources of the innovation funds should be used efficiently in the development of new companies. “In 2013 this is over Br3 trillion. They should be spent on the most important economic projects,” the President noted.
The head of state believes that Belarus needs to create the conditions for implementing the initiative of Belarusian entrepreneurs and involving them in the process of modernization of the economy. “The other day we had a meeting with representatives of the Belarusian business. They are ready to engage in this work. Responsibility for creating the environment to attract domestic capital into upgrade projects is vested with the governors, chairmen of local executive bodies,” Aleksandr Lukashenko said.
Prime Minister Mikhail Myasnikovich informed the President about the results of work of the government in 2012 and plans for 2013. Modernization was one of the main topics. Speaking about the efficiency of capital investments, the Prime Minister said that more funds should be injected into the manufacturing sector which is a main generator of value added and gives the lion’s share of export. This problem was taken into account when the government approved modernization plans.
Today the majority of state-owned and private enterprises have their own modernization plans. As a result, the proceeds per one employee are expected to increase 1.4 times on average in the country to $60,000 by 2015. The Prime Minister told the head of state about the projects which will be implemented in the wood processing industry, production of construction materials, light industry and about the expected results.
In 2013 some Br134 trillion has to be funneled into modernization and innovative development of companies. The overall capital investments are expected to exceed Br200 trillion this year. According to Mikhail Myasnikovich, the country needs another Br60 trillion to fulfill the plans. Taking into account the inadmissibility of using emission loans and the deficiency of foreign direct investment, the Prime Minister believes it is necessary to use the country’s internal reserves.
In 2013 Br9 trillion will be injected into investment projects. Another Br2.6 trillion will be provided by innovation funds. The government and oblast administration will draw special attention to such large national projects as the Belarusian-Chinese Industrial Park and the Lelchitsy Industrial Park. Other targeted projects will be financed, too.
The Prime Minister highlighted the good progress made by Belarus in foreign trade. However, Mikhail Myasnikovich said that a special support system of lending to exporters and end-users is needed. The government has developed five types of export support schemes. The Development Bank and the Finance Ministry have already been instructed to boost lending under these schemes already in the first quarter. But major exporters are extremely slow to use these schemes, the Prime Minister said. “The managers, who will allow a decline in output and export, will be held responsible, even fired,” Mikhail Myasnikovich said. The Prime Minister also added that the banking industry will need to gradually reduce deposit rates, making loans available to producers.
Mikhail Myasnikovich also touched upon the agricultural industry, which produced good results in 2012. The domestic market is stable, therefore export of milk and meat products can be increased in 2013, said the Prime Minister. It is necessary to continue working on diversification of exports. With regard to the reconstruction of 1,200 dairy farms, Mikhail Myasnikovich assured that the work will be completed before 1 October 2013. In 2014, the state-of-the-art dairy facilities must account for not less than 60% of the milk output in the country.
The Prime Minister also acknowledged that the measures to curb the growth in consumer prices have been insufficient.
The President noted that the government should come to grips with prices for utility services and find out if these prices are fair. The head of state emphasized that such instructions had already been given many times; however, no tangible results are still available. “We keep insulting people saying that they do not pay. Look into the matter from the beginning to the end and calculate how much each service should cost,” Aleksandr Lukashenko said.
“The Energy Ministry is like a state inside a state. They came forward and told you how much electric energy costs; the utilities ministry told you how much a bucket of water costs. Hence, cross-subsidizing, you put extraordinary pressure on industrial companies and so on. Has anyone calculated the real price?” the President asked.
In order to make these approximate calculations more precise, the government deems it necessary to switch to planned prices in each region where the cost of utility services will be determined taking into consideration local conditions. “You demand raising prices for electric energy and utility services, but you still have not made any calculations,” the head of state said. The President instructed the State Control Committee to look into the matter. The head of state also expressed dissatisfaction with the work of the Energy Ministry: “Sheer mismanagement adds up to the cost of services and goods and we condone it”.
Chairperson of the Board of the National Bank Nadezhda Yermakova delivered a report on financial support for the real economic sector in 2013 aimed at boosting socioeconomic development and facilitating modernization of Belarusian companies. Nadezhda Yermakova noted that in 2012 the government and the National Bank managed to secure stable operation of the national economy. The rise in prices for consumer products has been curbed; gold and foreign currency reserves have been maintained at the amount of two-month import; all foreign and domestic obligations have been met. The exchange rate of the national currency remained stable. Household deposits denominated in foreign currency and Belarusian rubles have been on the rise.
In 2013 all conditions are in place to maintain positive trends. The key objective is to reduce the inflation rate down to 12% in 2013. The refinancing rate will depend on the macroeconomic situation, first of all, foreign trade and the currency market, as well as the actual inflation rate. “Naturally, if positive trends remain in place, the refinancing rate and loan rates will be reduced,” Nadezhda Yermakova said.
The head of the NBRB noted that the needs of individual industries exceed the available and potential resources of banks. “Taking this into consideration, the government and the National Bank need to study the matter and identify the priority order of providing credit resources for government programs. All banks, not only state-run banks, should be involved in financing government programs,” Nadezhda Yermakova said.
The concerted effort of the government and the National Bank will be facilitated by the 2013 financial program that will harmonize the needs for funds with potential sources of financing. Loans will be primarily meant for investment projects. The scale of financial support should not threaten the economic balance, financial and macroeconomic stability.
The National Bank has already adopted a number of measures to reduce the cost of loans. These measures will translate into lower loan rates. However, credit expansion per se should not be the only way to boost economic growth. Credits should be used more efficiently, the NBRB chief underlined. “Poorly elaborated business plans with unclear payoff periods will not be considered,” she said.
Banks have been tasked to contribute to export growth by providing loans for export-oriented projects and by using more widely export loans and international leasing.
Aleksandr Lukashenko emphasized that the National Bank should keep a check on bank loans given to companies for modernization purposes and make sure these loans are really needed. The President believes that companies should not apply for loans to perform routine operations, like paying out salaries. The head of state warned Nadezhda Yermakova of her personal responsibility: “Keep in mind that you will be personally responsible for all the money you allocate”.
Director general of BelAZ Piotr Parkhomchik told the participants of the session about the company’s efforts to diversify sales markets. In particular, Belarusian dump trucks will be shipped to Australia and Mongolia. “The situation on conventional markets is different. We expect a 30-35% decline on the Russian market which is a main export market for BelAZ. Therefore, today all marketing specialists are focused on non-CIS countries. This month they have paid a visit to Indonesia, Mongolia, South Africa. I have been to Australia. We have same action plan which provides for traveling to non-CIS countries in March,” the Director General said.
Chairman of the State Control Committee (SCC) Alexander Yakobson paid attention to the fact that big state-run companies such as Belaruskali, Brestenergo, Grodnoenergo and others allocate considerable funds on voluntary insurance of supplementary pension. “These funds are transferred to the private insurance company “Belarusian People’s Insurance Pension Fund” which put them into bank deposits. Raised revenues are used by the shareholders of this firm (the director and her husband as well as some other commercial structures) for personal advantage. Thus, an average wage of the Director of the Belarusian People’s Insurance Pension Fund made up Br30 million in 2012. The dividends got by the couple last year reached almost Br3 billion,” the SCC Chairman said.
Aleksandr Lukashenko urged to address the issue in the shortest possible time. The President was updated on the situation by Finance Minister Andrei Kharkovets. According to the minister, Belaruskali, in particular, was repeatedly suggested taking up the services of a state insurance company. The issue, however, has not been solved for a number of reasons.
The head of state heard out Belaruskali Director General Valery Kiriyenko who called to current difficulties of various kind. Belneftekhim Chairman Igor Zhilin stated that “he has just become aware of the situation”.
“Br3 billion! Where did this money come from?! Do they produce potash fertilizers there or what?” Aleksandr Lukashenko wondered.
“Take it under control. The money, these dividends, put in the construction of cottages and other things should be returned. I believe you will have done it by the end of Q1. Here is the efficient work of the State Control Committee, the Finance Minister and the Prime Minister in all its glory. It is called a formal bureaucratic approach. This is a shining example of your approach to the matter, Mr Myasnikovich, and yours, Mr Yakobson. If you could not do it, you should have informed me and got the corresponding resolution from me. Money is stolen in front of your eyes, and you go easy on it,” Aleksandr Lukashenko said.
“All the issues should be addressed by the end of March,” the President warned.
“Mr Yakobson, I warn you one last time. You do your work properly to protect the interests of the state or come to me and say that you are afraid and cannot do it,” the head of state added.
“I feel somehow awkward with taking decisions here, doing the job of our courts. But you see this bugger’s muddle here. It cannot go on this way any longer,” Aleksandr Lukashenko concluded.
The President reminded the participants of the meeting on a blanket ban to work through mediators: “We have a great amount of contracts with commercial structures and so-called fly-by-night companies. I thought there were isolated instances, but now I see it is a country-wide issue.”
Vice Premier Anatoly Kalinin also informed about results of the work and future prospects of development of organizations of the Transport and Communications Ministry. The need to reconstruct the national airport Minsk was also mentioned as well as plans for road construction, better transit attractiveness of the country, development of the motorway service, and the modernization of the industry’s enterprises.
Vice Premier Mikhail Rusyi made a report about the state of affairs in the agriculture that he oversees. The President was primarily interested in economic effectiveness indicators. “What is going on at agricultural enterprises? How many collective farms have their own money in bank accounts?” the head of state said.
According to the Vice Premier, about 35-37% of the agricultural enterprises steadily keep their own funds in banks. About 50% of the enterprises use credit resources. “As much as Br57 trillion in credit resources has been issued. It is necessary to return Br26 trillion this year. At present the overdue liabilities are about Br5 billion for the agricultural machines that have been sold via leasing. We are now working to get the loans repaid,” the Vice Premier said.
“Keep in mind and tell your subordinates: while I am the President, we will not write off a cent for anyone. The money has to be repaid,” the head of state stressed.
Once again Aleksandr Lukashenko reminded about his instruction to reconstruct dairy farms last year. The instruction was failed. “If these farms had been commissioned and outfitted, they would have been able to be returning money already. Trillions of rubles that you need now. Time is money,” the President remarked.
The President also warned against corruption in governmental bodies. “We have a state policy and state-run companies. I will never forgive anyone corruptive actions. No mediators for state-run companies starting this day,” Aleksandr Lukashenko underlined.
Addressing MPs, Aleksandr Lukashenko said: “I am ready to work with you, but it entirely depends on you. We have drawn a line here. We agreed that the past two years had been tough for us. We had problems, we turned a blind eye on some issues. And it ends today. Take the pricing policy under immediate control. We should stop aggregating the situation and keep the people in this constant hysteric state,” the head of state said.
The Belarusian leader stressed the necessity for the government to build on their efficient work: “It is inadmissible when the government is turned into a laughingstock. It is not only me getting reports of the kind. It is people who start talking about it.” The President reiterated the needlessness in numerous useless meetings. “Only governmental sessions can be held during working hours. As for any other meetings, they should take place before 8 a.m. or after work,” Aleksandr Lukashenko said.