Ministry Of Economy Figured Out Where To Attribute Its Failures

“Free economic zones” losses in the first quarter have allegedly occurred due to the creation of the “new export-oriented” enterprises.

Losses at a certain stage of development are a specific feature of the free economic zones, associated with the creation of new export-oriented industries. In such a manner the Ministry of Economy of Belarus commented on the statistical data referring to the FEZ work in the first quarter of 2016, BelaPAN reports.

The number of unprofitable FEZ residents has increased up to 187 organizations, and their share of the total number of active residents was 45.6%. “However, these figures correspond to the current situation with the loss-making enterprises in the republic as a whole, they do not reflect only the FEZ’s efficiency,” –the statement says.

Unfavorable international business conditions, the recession in the Russian economy, the stagnation in the world market of oil products and potash, difficulties in gaining positions in the Ukrainian market have also contributed to FEZ’s negative operating results, experts of the ministry say.

According to them, right now significant financial burden of interest payments on loans, borrowings for equipment, negative exchange differences, arising from the translation of assets and liabilities, denominated in foreign currencies (for the I quarter 2016 for this reason of more than 40% of unprofitable FEZ had losses); the initial stage of implementation of the investment project and the associated costs for the design, construction, installation, repair, acquisition, installation and commissioning of equipment, production output of test batches, its certification have an impact on index proportion of unprofitable enterprises in EPZs.

As noted in the Ministry of Economy, in order to remedy the situation, measures to overcome the loss are being taken by FEZ residents. Among them – the reduction of costs, increase in product sales, the search for new markets, the replacement (in the case of economic feasibility) of imported raw materials by Belarusian ones, activation of claims work and the strengthening of control over the implementation of foreign trade contracts, the introduction of changes in foreign trade contracts, involving the supply of goods for export after receiving prepayment, optimization of working capital structure in order to reduce credit load.

On April 1, 2016, 429 resident companies operated in the Belarusian free economic zones, employing more than 124 thousand people. This is 4.3% of the employed in the economy as a whole. At the same time over the past three years FEZ residents manufactured more than 11% of the country’s industrial production, their share of exports reached 15%. The share of export sales in the total revenue amounted to more than 65%. In the first quarter of 2016 the volume of profit from FEZ residents’ sales of goods (products, works, services) increased by 47% compared to the same period of 2015 and amounted to 2 trillion rubles.