‘Do you think everything will come back if they lift sanctions now? The currency rate did its job’
Despite a course on import substitution that was set immediately after the imposition of anti-Russia sanctions, now Tatarstan is not able to drive out its western colleagues in the production of agricultural machinery yet. This topic, a difficult economic state of the country, localisation issues and ways of revival of the market of agricultural machinery were discussed at a meeting of the corresponding committee of the Tatarstan Parliament on 20 June. A correspondent of Realnoe Vremya heard the deputies out.
'We did not manage to show our all possibilities and the potential of Alabuga SEZ'
As the Minister of Economy of Tatarstan Artyom Zdunov told at the meeting, the course of the fulfilment of the strategy of the social economic development till 2030 in import substitution and our own production of agricultural vehicles is an issue of paramount importance. It should be noted representatives of three ministries at once were present at the meeting in the State Council (Ministry of Economy, Ministry of Industry and Trade, Ministry of Agriculture). And the very discussion dragged and lasted for almost 2 hours.
According to the chairman of the committee Tahir Khadeyev, nowadays Tatarstan has a problem of vehicle supply: we cannot cover the whole technological cycle like in both horticulture and animal husbandry; we face a groundless rise in price for agricultural machinery. The Republic of Tatarstan is also dependent on foreign suppliers.
'Unfortunately, we did not manage to show our all possibilities and the potential of Alabuga SEZ. A Priority Development Area was created with a very active participation of our President, so how do you use it? Do we have a single strategic development and machinery? How can we help our people? Will our products be competitive enough?' Khadeyev asked questions.
The Minister of Agriculture and Food of Tatarstan Marat Akhmetov also mentioned a number of deterrent factors. According to him, large machine-building and industrial enterprises of the republic are not interested. In addition, he noted the seasonality, a small volume of demand and absence of money for their development, elaboration of design documentation, test and certification.
Reduction in fleet of vehicles and a billion rubles per year for foreign agricultural machines
Marat Akhmetov presented data in order to clearly define the course of import substitution in agricultural machine-building of Tatarstan.
The Agricultural and Industrial Complex of Tatarstan has about 800 imported tractors (or 5%), and 30% of agricultural machines are made abroad or assembled in the Russian Federation. Purchase costs of spare parts are 3,5bn rubles every year, the foreign ones account for 1bn rubles,' Akhmetov said. 'Prices grew because of the increase in the currency rate – the work on the production of spare parts in regional enterprises is being carried out. The republic has managed to master the production and remanufactured of over 2,000 parts for foreign vehicles since the start of the course on import substitution. Average prices for them are 1,5-2 times lower than the original ones, while remanufactured parts are 5-6 times cheaper.
The speaker also noted that despite all taken measures, the fleet of the main types of the machinery in the agricultural organisation is reducing. If earlier the republic purchased about 1,000 tractors, 300 combine harvesters, 100 forage harvesters, now these indicators have reduced 2-3 times. So, in 2015, agricultural organisations bought 297 tractors, 161 combine harvesters and 48 forage harvesters.
'In addition, we underpay agricultural workers' salaries'
According to Akhmetov, only state support can help to reach a real import substitution. Production must be oriented to supplies for not only regional and Russian markets but also export. The Minister also linked the development of machine-building with purchasing power of producers of agricultural goods – demand is needed.
'Not only the serious devaluation of the ruble but also the absence of low-interest loans significantly affected it (Editor's Note: purchasing power). Many people cannot purchase new devices. Fertilisers, chemicals, fuel, electricity are very expensive. In addition, we underpay agricultural workers' salaries,' Akhmetov told. 'We should support our producers making orders, giving subsidies for purchase of our tractors first.'
Minister of Economy of Tatarstan Artyom Zdunov agreed with Marat Akhmetov's position that demand plays a major role in the market.
'If there is no demand, nothing will happen. Investors who come to our republic come for our market, regardless of the sector they work in. We should understand it,' Zdunov said.
Artyom Zdunov: 'We are able to support one or another producer; financial support connected with our banks – they many good loan programmes'
The speaker also enumerated tools that could be really used now in order to revive the market and support the local producer.
'Tax concessions; we are able to support one or another producer; financial support connected with our banks – they have many good loan programmes. In Russia, there are 12 authorised banks – we reduced the threshold of the banks that receive soft loans. Ak Bars can easily use this programme,' the speaker stated. 'There is a leasing grant, we've had a Micro-Financial Support Foundation. And our key task now is to maintain the infrastructure: creation of SEZ, agricultural associations, factory-based towns.'
Support of three ministries and next kick of the West
It should be noted an idea of the creation of a special department of agricultural machine-building was noted at the meeting. This idea was supported by the three ministries. This thought expressed by Marat Akhmetov who answered a question asked by the chairman of the Committee on Economy, Investments and Entrepreneurship of the State Council of Tatarstan Rafis Burganov.
'We have been living with sanctions for a long time. At the beginning we thought they would frighten us and that's it. Now we see the problem is not just economic – it became political. And it maybe always be a bargaining power. We don't know how long these sanctions will last. We don't know what resources for import substitution were given. At the same time the fleet of vehicles will be scarce every year, and at the same time we will always have to cultivate this land. We need to try to make a forecast together with our ministries. Every agricultural unit is trying to solve its problem. Every district, every enterprise that produces this machinery is aspiring to find its customer. But how is it possible to try to unit it and look at its price, and what is needed for this goal?' Burganov told.
The speaker also noted it will be uneasy to produce spare parts for some foreign vehicle nowadays.
'Western suppliers start to sue for production of spare parts for their vehicles made by other enterprises. It already happened in industry. What can we hide? Today we all have the Internet. They have spies who detect it. It will possibly be another attempt to step onto the ring and kick us from this side. We could need some plan or another way of development,' Rafis Burganov offered.
Answering the second question, Akhmetov stated China has been doing it for its whole life.
'We pin our hopes on what will never happen'
Despite the support of the three ministries given to the offer on the creation of a separate department, a sceptic participant of the meeting was present there too. He had no scruples about expressing his own opinion.
'Import substitution is a result of the sanctions. But I have another opinion. Do you think everything will come back if they lift them? The currency rate did its job better than some sanctions. Nothing will return: everything will be expensive even if they lift tehse sanctions,' deputy chairman of the Committee of the State Council of Tatarstan Marat Galeyev started. 'In my point of view, we should talk about a localisation of legal work with all producers, not import substitution when there is a confrontation. Agricultural machine-building is such a big amount of nomenclature, it will be impossible to deal with it. Machine-building without a big market is never profitable. I would not complain about the Ministry of Agriculture of Russia: the logic of the creation of new organisations is a road to a state plan, a road to nowhere. We pin our hopes on what will never happen.'
Yury Kamaltynov (right): 'We know for sure we won't produce combines nor powerful tractors like in the West today. Is not it better not to put effort into it?'
Deputy chairman of the State Council of Tatarstan Yury Kamaltynov also questioned the problem of import substitution.
'Is this problem really critical for us? Should we spend money to expand the production to elaborate something if we know the combine is Dutch and it is much better that the machine we are using today and we almost get an end product?' the speaker told. We should clearly understand we don't need to buy some goods from the West. We can make them here, they will be cheaper and more effective. We know for sure we won't produce combines nor powerful tractors like in the West today. Is not it better not to put effort into it? I offer to create a department, working group that will explain what goods made in the West we can refuse from.