A competent approach in the new realities
The question of import substitution is not new for Belarus. Various activities in this area have been implemented in the country for more than 20 years. But if earlier we were focused on purely socio-economic goals — creating new jobs, attracting investment, improving the foreign trade balance, increasing exports, now, given sanctions and external restrictions, the sovereignty of the country is at stake.
It is quite obvious that even in partnership with Russia and the EAEU member states, Belarus will not be able to produce the entire range of products and goods necessary for our state. Therefore, an important task today is to concentrate resources on developing strategically important products for the country. First of all, those of them being most exposed to sanctions risks. Including in terms of supplies from friendly countries that cooperate with us, but experience the effect of secondary sanctions, which undoubtedly affects our interaction. Second, import substitution projects need to be evaluated in terms of their import intensity along the entire chain of intermediate links — raw materials, materials and components. This is also necessary to clearly understand the economic effect and assess potential risks from external factors — not only restrictive, but also other force majeure, including epidemiological ones. The experience of the pandemic has shown how quickly production and logistics chains can be disrupted.
It should be understood that there is a significant difference between import substitution measures in the natural and progressive mode of qualitative endogenous (internal) economic development and in the conditions of sanctions pressure. In this situation, we have to solve several tasks at the same time. First, tactical, to safeguard the smooth operation of enterprises and saturation of the consumer market. According to this vector, enormous work has been implemented and is continuing to replace the goods of Western companies with suppliers from friendly states. Second, there is the task of import substitution itself: developing production of goods critical for national security and the country's economy. It is clear that it is impossible to immediately establish the manufacture of the entire nomenclature, and these goals are achievable only in the medium term.
Third, it is obvious that development requires not only replication of those products whose delivery is difficult to our market for one reason or another, but also looking to the future. Today it is important to develop products that will be in demand and competitive in 5-10 years.
For an effective import substitution policy, it is necessary to eliminate or reduce the internal restrictions that have developed in our, the Union and the Eurasian economies due to certain circumstances. One of the most significant barriers faced by the Belarusian manufacturer is the lack of information. Often, collecting the necessary data about companies that produce, for example, electronic components, involves incredible efforts, including using informal channels: near-¬industry sites, forums, groups in social networks ... A more or less clear picture is being collected literally bit by bit.
It is still objectively easier to interact with manufacturers of imported components. The practice of forming cataloging sites and global distributors that promote the interests of a large number of electronics manufacturers has long been introduced abroad. In the public domain, you can find the parameters of the components in the form of a separate document, the so-called datasheet. Large brands have manuals — multi-page documents containing all characteristics of a product. It is advisable to apply such experience more widely to domestic manufacturers of electronic components. Of course, balance between trade secrets and product promotion should be kept.
The second serious limitation is the long response to the order. In addition, in order to insure the failure of goods delivery, it is necessary to keep them in stock, which requires additional working capital, entails non-production financial costs and affects both the cost of production and the financial and economic result of the company producing the final products.
Another complexity to be overcome one way or another is to increase the output of import—substituting products, to a level that would ensure the economic efficiency of production. This can be achieved both through developing exports and optimizing domestic demand. For example, certain components and assemblies for a particular product should be unified within, for example, the machine-building industry. And this unification should be initially incorporated into the design documentation. After all, small-scale production of high-tech products makes it quite expensive, and the market often has to compete with products from friendly countries, including Southeast Asia. And their prices are much more attractive for Belarusian consumers.
It seems that dynamic and effective import substitution should start with developing an appropriate infrastructure. First of all, informational, so that data about our manufacturers are available to potential Belarusian and Russian consumers. Promoting import-substituting products at a higher quality level will contribute to solving another key problem – ensuring the volume of serial production at a level that will enable an acceptable return on capital costs and competitive cost.
Vitaly Demirov, BISR analyst.