Dean of the Faculty of MEO BGEU: There are no our graduates on the labor exchange
Dean of the Faculty of MEO BGEU: There are no our graduates on the labor exchange
Where is it – the place of the Belarusian economy in the global economy? Is Belarusian goods able to squeeze foreign competitors’ products on the world market? What can we do, what are we doing wrong, do we have the potential for growth or is everything really bad? How to survive in global competition? How to find your place in the world market?
The dean of the faculty of international economic relations of the Belarusian State Economic University spoke about the choice of a strategy for our country to enter foreign markets and search for niches in the domestic market Galina Shmarlovskaya.
Belarus found its place in the global economic system? Among which countries and in what does our country specialize in?
Belarus belongs to the category of countries with small open economies. Given the resource base that it has, we cannot produce as many products that could affect the situation in world markets and, accordingly, the formation of world prices. To have everything we need, we are forced to import a number of goods, and this requires a currency. This means that it is necessary to develop national production in volumes exceeding domestic needs, and focused on exporting national products abroad. Due to this peculiarity, Belarus as a country with a small open economy is oriented towards international specialization. Indicators characterizing the openness of our economy, such as export and import quotas, with some fluctuations are equal to sixty percent. These are pretty high rates. However, the problem of openness of the Belarusian economy still exists.
International specialization suggests that we are both a subject and an object of the international division of labor. Our specialization is determined primarily by a significant number of manufacturing industries. Given global trends, this is very good for Belarus, since we not only produce raw materials, but also have a processing complex.
The predominant industries in our republic are engineering, oil refining, chemical and woodworking. Moreover, the share of engineering and metalworking in Belarus is more than 25 percent. This indicator meets international standards.
The Republic pursues a multi-vector policy. We cooperate with the countries of the European Union, the USA, Latin America, as well as with the countries of the Asia-Pacific region. During the current 2010, new interesting projects with China and Vietnam were identified.
Of course, we are cooperating with Russia. But over the past ten years, the share of trade with Russia has been declining, and with countries far abroad, it has been increasing. If you look at the rating of trading partners, then the EU countries follow Russia.
Can the creation of the Customs Union change this situation in the opposite direction?
The creation of the Customs Union will make our exports cheaper within the region due to a decrease in customs duties due to the introduction of the Unified Customs Tariff. This will facilitate trade between Belarus, Russia and Kazakhstan and will be beneficial for all members of the union. But this does not mean the cessation of cooperation with other countries.
I would like to clarify what Belarus could specialize in and do we still have an unrealized reserve?
An innovative development path has been chosen, which involves increasing emphasis on the development of new high-tech and high-tech industries. In turn, this implies the presence of highly qualified personnel that we have. And here we are also in line with global trends. At large Belarusian enterprises, the processes of transferring individual production links outside our country have long begun to create various assembly, as well as joint production. For example: tractor plant, MAZ, BelAZ. This suggests that opportunities are being created for the release of labor and financial resources and their switching to the production of more science-intensive products.
The basis of the Belarusian economy is industrial giants. What strategies are used or can be used to integrate them into world economic relations? Are they ready for this, and does this integration come from any threat to the Belarusian giants?
The problem of entering and finding your place in the world market and in the global economy remains. We must become equal partners. Our large enterprises use a lot of technology to enter the international market. And this is not only the export of finished products. The practice of developed countries has shown that the use of only export of finished products is not always effective, especially in conditions of high import duties. The economic crisis has intensified protectionist tendencies.
National enterprises, in addition to exporting finished products, have switched to the export of capital, through which assembly plants are being created in various regions of the world. This is one of our strategies – the transition from international production cooperation from exporting goods to exporting capital and organizing production activities on the basis of international production cooperation. The development of production activities in a particular country, firstly, allows us to strengthen the situation in the developed markets. Secondly, our enterprises have the opportunity to enter the markets of neighboring countries. That is, two problems are solved at once.
Fragmentation of production is also actively used when, for example, machine kits are exported. In this case, specialization is developing not only in the production of finished products, but also in the production of components and components. They are delivered to countries where there are specific consumers of these products. An example of this is the Minsk Tractor Plant, which supplies finished products and components to China, Venezuela and other countries.
In general, there is a distribution network with which opportunities for exporting products are expanded.
What about threats to large enterprises in Belarus? Yes, the more the country opens its borders, the greater the likelihood of a threat to national security. There must be a reasonable compromise when opening borders for the influx of imported goods. Thus, the Customs Union carries a certain danger due to the increase in the number of delivered goods from Russia. For example, in the context of integration, KamAZ becomes a big competitor for MAZ. Problems for the sale of national products are being strengthened, but integration creates both prerequisites and opportunities for cooperation. It is legitimate to determine on which components each of these enterprises specializes.
Threats from integration processes exist, but you can always find a certain compromise.
Are there any examples of the correct choice and successful implementation of the exit and work strategy in foreign markets?
As I said, this is the functioning of the distribution network. For example, according to 2009 data, the foreign distribution network of the Ministry of Industry operated in 63 countries, including more than 1,200 dealer structures, 92 subjects of a distribution network with Belarusian investments, 54 assembly plants in 15 countries. As of April 2010, the distribution network was already represented by 94 enterprises, and over the current year it is planned to create another 28 assembly plants – in Russia, the CIS countries and 10 countries of far abroad.
Can small and medium-sized companies be links in the production chains of large international companies?
World experience confirms the legitimacy of this. When it comes to large-scale business, taking into account world practice, we must continue the idea of further enlargement of enterprises, subject to cooperation with small and medium-sized businesses.
During the twentieth century, there was a period when large companies in developed countries, proving their advantage, pursued a policy of strangling small businesses. In the 80s, the renaissance of small business began in developed countries, a period of cooperation. It has become economically more profitable for large enterprises to finance small businesses in order for them to engage in research and development. It is during this period that venture capital appears.
We can also occupy this niche. We have technology parks and fairly highly qualified specialists who can engage in research activities. Moreover, transnational corporations show a rather great interest in transit countries. At the beginning of the restructuring, they used transit countries mainly as a sales network for the sale of their products. Now the situation has changed, and they are being considered from the point of view of the possibilities of using locally produced standardized products, including those produced at Belarusian enterprises, and the development of R&D.
It is possible to occupy a niche for national small and medium-sized firms, to become a link in the chain of large companies.
Abroad, the participation of small and medium-sized forms of business in the production process of large enterprises for the manufacture of spare parts and parts is practiced. Is it possible to introduce such practices in our economy? After all, we have a socially oriented economy. Would you then have to close some lines at these large enterprises?
Small business is faster and reacts to changing needs and tastes of consumers. It is not about all sectors. For example, in light industry, with the help of small and medium-sized businesses, you can close many issues of this plan.
Why in this case we do not do this?
For several years it is impossible to solve all the problems at once. Of course, one can take the thesis of closing large enterprises and dividing them into smaller ones. Do not forget about the mass of social problems. In this case, I am for the option of evolutionary transition and business transformation. Take at least as an example of the creation by Belarusian large enterprises of their network structures, in which part of the production is transferred outside the republic. This is the creation of opportunities for the release of resources and the start of production of completely new high-tech products using small and medium-sized businesses.
At one time, I was surprised that up to 80% of newly developed samples do not reach mass production. In this case, small and medium-sized businesses can provide very tangible assistance to large ones. Through the development of scientific developments and the creation of experimental industries, proven products can go into mass production or simply will not need to be put on stream. It is through elements of cooperation, cooperation and receiving orders from large enterprises by small and medium-sized companies. It is clear that they will not produce tractors, but the use of new technologies for the release of certain elements will be quite possible.
The principle of the international division of labor does not contradict the orientation adopted in Belarus on the production of import-substituting products? What import substitution of Belarus is needed?
Belarus has defined a model of export-oriented and import-substituting production. Many new industrial countries went through such a model. But first you need to decide on the concept. Most think that import substitution is used so that we do not buy goods abroad, but produce products ourselves if possible. This is not a proper understanding of the idea of import substitution. Firstly, one of its aspects is the rationalization of imports, that is, if we can produce high-quality products using the latest technologies for this, then we must do it. Secondly, import-substituting production is also the production of export products. Why did the idea of import substitution come up? Today, there is a network organization of production in the global economy. In order to focus on the development of high-tech high-tech production, developed countries needed to free up resources and production capacities. The technological process was divided into parts, and developed countries began to transfer mainly material-intensive and labor-intensive industries to developing – mainly countries in the Asia-Pacific region. Technology was transferred to newly created enterprises, staff trained. Specialization was determined for the production of components and spare parts. But over time, import-substituting products became export-oriented.
It is necessary to develop import-substituting production, which is characterized by the latest technologies and which in the future should become export. And if we consider the same new industrial countries, then there are quite high export rates of not finished products, but of those components and spare parts that they produce – it reaches 70-80%. It was one of those niches that allowed them to climb a higher step. If initially the orientation of developed countries in developing countries was to use cheaper labor, then as the qualifications improved, due to staff training, higher-level technological processes were already transferred there.
The development of import-substituting production is a normal process that does not contradict world practice. But what danger is possible? No need to strive to produce everything. No state can afford such a luxury due to limited resources. It is necessary to determine alternative costs that allow us to compare – how much does the development of import-substituting production cost us compared to if we buy similar finished products. There should always be a calculation.
Does Belarus have a global practice of mergers and acquisitions? Including – cross-border. And the subject or object of these acquisitions can be Belarusian enterprises? Would this pose another threat to the national economy?
The merger and takeover strategy is one of the latest. Although from the beginning of the twentieth century, centralization or enlargement of production on the basis of small and medium was based precisely on mergers and acquisitions. The beginning of the 21st century was marked by a surge of mergers and acquisitions. Moreover, these processes affected the largest transnational corporations. In order to withstand competition, despite their power, they went on mergers and acquisitions.
We also need to use such a strategy. But today we are the subject of mergers and acquisitions. This mainly concerns the banking business. To withstand competition, we must become subjects of mergers and acquisitions. Only this will allow us to create horizontally and vertically integrated organizational structures in the form of clusters. The export-oriented cluster nature is the petrochemical, engineering, forestry and food industries. In the future, taking into account what is the rate on the agricultural sector today, it is also possible in these sectors. Suppose we are dependent on the influx of raw materials, we do not receive any raw materials, and we have problems. By merging and absorbing, you can go to the acquisition of enterprises that are suppliers of raw materials for us and / or connect companies that are our consumers to our largest export-oriented enterprises. This is the way to create clusters, including by attracting enterprises abroad.
It will also strengthen the position of our enterprises, which are becoming international, not only because they export products or import, but also by the nature of their activities.
So how do you represent the Belarusian State Economic University? I would like to talk a little about him. The university specializes in the training of specialists, including for foreign economic activity. How do you assess the level of today’s Belarusian managers and managers? What has changed in the training of such specialists in recent years?
At the faculty, which I represent, there is training in the new educational standard in the specialty “World Economy”. Within its framework, we train economists in foreign economic activity, and for about seven years we have been training in the specialization “International Investments”. Given the problems of attracting investments, it is clear that we really need such specialists. Students are focused on the latest level of theoretical training. They are ready for production activities at enterprises in the relevant departments, in ministries, concerns and so on.
However, starting from the fourth year, private business “buys” our guys. And sometimes it becomes a shame that when the distribution process is ongoing, private enterprises, knowing how difficult it is in the market, show increased demand and try to “activate” our guys. Moreover, in addition to excellent knowledge of foreign economic activity, when graduating from university, students are fluent in two foreign languages. When passing the final exams, they also receive a certificate of a referent.
In addition to the world economy, the faculty is preparing for the specialty “Business Administration” also with the study of two foreign languages. Also in the specialty “Economics”, which allows students to receive a diploma representing the right to employment not only as an economist, but also as a teacher.
How is the number of applicants wishing to enter the faculty of economics changing? Is the popularity of the profession growing?
Popularity is growing. As for our faculty, the highest passing score last year was with us. It is very nice. So only the best come. Among those in need of work on the labor exchange, there are no graduates of our university. I think this is also an indicator of the level of student training.
We wish that henceforth the graduates of your university do not join the ranks of the labor exchange, that they are in demand on the labor market of our country and that they raise our economy as well.