A. Lukashenko: Foreign investors in the dairy industry must participate in the development of raw material zones and ensure deep processing
04/02/20110 views
On February 3, Minsk / BELTA /. The processing of agricultural products is of strategic importance not only for Belarus but for any country in modern conditions. This was stated by the President of the Republic of Belarus Alexander Lukashenko on February 3 at a meeting on the development of the Belarusian dairy industry, BELTA was informed by the press service of the Belarusian leader.
"Two billion people in the world are starving. All the riots that are happening today in the world, including in the North African countries, began because there was not enough food, and what was available was unaffordable for 75% of the population of these states," the President said.
Alexander Lukashenko recalled that at the dawn of his presidential activities, he "repelled all attempts to privatize such industries that ensure the food security of our state." "It was clearly and unequivocally stated: we must cope with this ourselves," the President said. This applied to milk and meat processing, modernization of sugar production enterprises, beer production and other goods – everything related to food products.
Speaking about the dairy industry, the President noted that, "figuratively speaking, milk for Belarus is not just a commodity, but a significant factor in the economy and politics, which has a serious impact on both ensuring food security and increasing exports." Huge efforts and funds have been invested in Belarus for the dynamic development of the dairy industry, and good results have been achieved. Over 5 years, milk production has increased by almost 35%. "Having secured the domestic market, more than 50% of the milk processed has been sent for export. Last year, almost 4 million tons of dairy products were exported. And the demand for them in world markets is very high. The geography of exports is expanding. Today, we have queues: give us dairy products. They don't even ask for prices anymore," the Belarusian leader said.
Alexander Lukashenko drew attention to the fact that the tasks for the new five-year period are even more ambitious. By 2015, it is necessary to reach a milk production level of 10 million tons per year and double the export of dairy products. The country will have to build almost 900 new and modernize about 1.4 thousand dairy farms, increase the number of dairy cows, expand the feed base, and continue the development of the processing industry.
The milk processing industry of Belarus is export-oriented: out of 5008 thousand tons of milk processed in 2010 (100.5% compared to 2009), almost 54% of the produced dairy products were exported. Revenue from the sale of milk and dairy products for export increased by almost 1.5 times and amounted to almost $1.5 billion.
In 2010, the economic condition of dairy industry organizations improved. Net profit amounted to Br425.7 billion, and the profitability of sold products was 9.2%. This result is explained not only by the favorable market conditions but also by the intensive technical re-equipment and modernization of milk processing enterprises. In 2005-2010, over Br1.9 trillion was allocated for these purposes, against the planned Br513 billion. Thanks to the technical and technological re-equipment of enterprises, the output of marketable products from 1 ton of milk in 2010 increased by 6.9% compared to 2009 and amounted to Br1285 thousand.
Significant attention has also been paid to the structural reorganization of enterprises. The milk processing industry of the republic today consists of 45 enterprises (in 2005, there were 59). Their further development will be carried out within the framework of the Republican Program for the Development of the Dairy Industry for 2010-2015, which provides for increasing milk production in agricultural organizations to 10 million tons by 2015, and its processing volume to 9 million tons (4 million tons more than in 2010). At the same time, the export of dairy products will increase to 59% of their production volume (in terms of milk, it will be about 5.5 million tons) and will increase in volume terms by more than 2 times (to $3 billion).
It is planned to allocate Br31.5 trillion for these purposes, including almost Br1.6 trillion for the implementation of measures for the construction, reconstruction, and modernization of milk processing organizations.
Alexander Lukashenko emphasized that Belarus should derive maximum benefit from the export of high-quality dairy products. Significant investments will be required to solve these problems. In particular, cooperation with such large transnational companies as the French-Russian "Danone-Unimilk" (with its capabilities for selling finished products in the Russian and EU markets), which is already operating in the Belarusian market, is promising. In 2009, two joint ventures for the production of whole milk products were established in the republic: JV "Unimilk Pruzhany" and JV "Unimilk Shklov".Nevertheless, the Head of State noted, Belarus may cease cooperation with this company in case of its failure to fulfill its obligations.
Joint ventures began their operations in 2010. However, to date, the investor's work has essentially been limited to bottling milk.
"If you do not fulfill my instructions in the first quarter, you will no longer operate in the Belarusian market," Alexander Lukashenko emphasized, addressing the management of this company. Requirements regarding the maximum depth of milk processing and investment in the development of raw material zones were clearly formulated during the Head of State's visit to "Unimilk Shklov" in June last year. And the company's management pledged to fulfill them strictly.
The Head of State noted that cooperation with this company is not coincidentally being considered at the meeting. According to the President, the dairy industry is a lucrative sector for investors, and these issues are increasingly moving into the political sphere.
Alexander Lukashenko expressed concern that cooperation with "Unimilk" is limited to the processing and export of drinking milk, i.e., essentially the export of raw materials. "We allowed it into our dairy market, to our raw material resources on the most favorable terms. But I categorically warned against the inadmissibility of exporting low value-added products from the country. Moreover, the company itself promised to create modern milk processing enterprises and develop its raw material base. However, the implementation of these promises is not yet visible," the President emphasized.
"This infuriates me to the core. You have forgotten that you are working not in Russia, but in Belarus. And issues of corruption, issues of division, pressure, all sorts of arrangements – all this is unacceptable," said Alexander Lukashenko. "I know everything, even what you are thinking: how you divided dividends, how much your representatives in Belarus received, etc., even where you directed this money," he added.
"I warned you that no one will take a penny from you, no one will demand any bribes from you, but you must work honestly. I have set the direction of your work," the Head of State noted. "You decided: let the President speak, and we will do our own thing here. You are mistaken!" Alexander Lukashenko warned."Because after the elections, everyone probably realized that we are now going to carve up the country into pieces and give it away. What we don't need – we'll give to "Danone", Germany, Russia, Poland. So – this will not happen," the Belarusian leader emphasized. "And this applies not only to the dairy industry."
The Minister of Agriculture and Food, Mikhail Rusy, reported to the Head of State on the work to develop Belarus's dairy industry, noting that "a very serious struggle is underway for every liter of milk." "You are fighting within the country and shipping milk without added value somewhere incomprehensible. Is that how it turns out? Why haven't you established order yet?" Alexander Lukashenko reacted harshly. "The position is defined, you must execute it."
The President emphasized that Belarus can successfully market its dairy products on foreign markets independently. "Create your own transnational company, create distribution networks and market them. Russia is currently facing a food shortage. They will buy this milk for a long time and always. What are the problems?" he noted. "If Russia doesn't want it – increase supplies to Venezuela. We have increased milk supplies fivefold. They are asking to increase them twofold again. There is huge profitability there."
As noted by the Chairman of the Committee of State Control of Belarus, Alexander Yacobson, the company "Unimilk" does not fulfill one of the main requirements, which is the need for maximum deep processing of milk and obtaining products with high added value. At the same time, the Russian investor, entering the Belarusian market, undertook such obligations.
In addition, the company "Unimilk", as an investor, was supposed to participate in the activities of organizations engaged in milk production, construction, and technical re-equipment of dairy farms through direct investments and credit resources. Investor participation was also envisaged in the creation and development of organizations engaged in milk processing, in terms of construction, reconstruction, and technical re-equipment. All these and other obligations were to be enshrined in relevant investment agreements, which so far look more like protocols of intent. They are, in essence, devoid of specifics.In developing its two enterprises in Belarus, the "Unimilk" company has invested $2.1 million and Br102.3 billion, of which Br75.2 billion was allocated for equipment procurement and construction. Currently, the joint ventures are solely engaged in bottling milk into cartons and selling it, predominantly to the Russian market. Their production capacities are utilized through the redistribution of raw materials among processors.
For instance, in 2010, half of the milk processed by "Unimilk Pruzhany" came from the raw material zone of the Pruzhany Dairy Plant, while the other half was sourced from 8 dairy plants in the Brest region. Concurrently, the 12% markup on the purchase price was not paid to the farmers but to the dairy plants. "I hope that the governors will settle with the farmers for the period during which the company operated," demanded Alexander Lukashenko.
The head of the State Control Committee of Belarus also mentioned several documents concerning the prospects for further cooperation with "Unimilk," which are either inconsistent with each other or of a questionable nature.
For example, an agreement between the "Machulishchy" agro-combine and "Unimilk" stipulates the collection of milk from farms of the National Bank across the country and its delivery to "Unimilk." However, what is the point, for instance, of transporting milk to Shklov from the Rogachev district, if there is a local milk processing enterprise there that also produces high value-added products?
Another document is a supplementary agreement between the Mogilev Regional Executive Committee and "Unimilk," signed at the end of December last year. According to this agreement, the investor's role in developing the raw material zone is limited to supplying 3,000 heifers to agricultural organizations in the Shklov district in exchange for future milk supplies. This means that the agricultural organizations in the district will receive a commodity loan, not actual investments.
As of today, the Russian company has presented a project to the State Control Committee titled "Feasibility Study for the Development of Dairy Cattle Breeding in the Republic of Belarus with the Participation of OJSC 'Company Unimilk'," which envisages the construction of 300 new dairy farms and 88 heifer-rearing complexes, with a planned implementation period of 2011-2019. However, after reviewing this document, it became evident that state funds have already been allocated for the development of 143 farms (almost 50%)."The road should be two-way. Business should be built in such a way that not only the investor has certain guarantees, but also the Belarusian state is confident in investments both in deep milk processing and in the development of raw material zones for processing enterprises," said Alexander Yakobson.
In this situation, the investor, without having managed to fulfill the obligations already undertaken, is actively raising the issue of acquiring additional assets in the form of OJSC "Pruzhansky Dairy Plant" and OJSC "Shklovsky Butter Factory". It is noteworthy that these enterprises operate with higher profitability and their economic indicators are much better than those of "Unimilk Shklov" and "Unimilk Pruzhany".
"The sale of milk processing enterprises should be beneficial to the state, the work collective, and take into account the strategic interests of the country. At the same time, it is business that should be sold, not factories," noted the Chairman of the State Control Committee, explaining that the state invests significant funds in milk production and the development of the raw material base (and this should also be taken into account in the business valuation).
The Governor of Brest Region, Konstantin Sumar, reporting to the President on the current situation, noted that the situation in the country's dairy industry was completely different some time ago, and many enterprises were unprofitable. "You, as strategists, should have foreseen what would happen in the dairy industry and in food products. I constantly warned you: 1.5-2 billion hungry people in the world. Do you think the program for the revival of the village was adopted on a whim?! I warned you that if we invest in agriculture today, in 5 years (in the next five-year plan) we will receive $7 billion from the export of these products," the head of state retorted.
He also reacted sharply to the report of the Chairman of the Board of the National Bank, Pyotr Prokopovich, on the large-scale plans for the development of "Unimilk" company's activities in Belarus: "Thank you, we know the fairy tale. It's about something else: while you are doing this, there is profit today. And all this is done for the sake of profit, not for what you are telling me. We ourselves can invest this money, someone else will invest, and so on. But we went with your proposal for this decision. How is the profit from "Unimilk" operating in Belarus divided today? That's what interests me most. Everything else (as Alexander Serafimovich Yakobson rightly said) are protocols of intent.""I need money distributed fairly. This is the kind of services Danone-Unimilk has provided in Belarus – let them receive this much profit. Everything else (means of production, work collectives) is Belarusian. Give this much to Belarus, and there will be no questions, Alexander Lukashenko said. – Let Danone invest 1 billion, take milk from these investments, process it as it should, and we will have no claims against them, but for now, you only have a pile of papers."
"You need to work, not bow to a brand, but create your own brand. Today in Russia, there is a "Belarusian" brand. Nothing else is needed: write that it is from Belarus – Russians will buy it with hands and feet, the President emphasized. – And no one is allowed to offend people, and the state even less so. Unimilk, and even more so Danone, are not poor companies. So if you are going to Belarus (and I told them this in Shklov), then throw yourselves forward, and you will find yourselves afterwards. And they have drowned along with the government, along with you (governors and chairmen of district executive committees) in paperwork. And they promise me that it will be tomorrow. Okay, I'll wait another quarter, half a year, but here – throw yourselves forward. Give more so that the peasants, the collectives feel that some brand from the West has come, but they have given money."
"Both today and tomorrow, you need to work on such human agreements if you want to continue working here. And this is, if you like, a litmus test for Danone-Unimilk. If they want to work, they will leave more here today than they take into their own pockets, if they want to work for the future, the Belarusian leader noted. – Moreover, we are not talking about large sums of money. I am not saying that it should ultimately be a loss for them, by no means. Therefore, sit down and count the money.""Fulfill all your obligations to the peasants and work collectives of these enterprises, even verbal ones. Settle accounts with the state, so that the state has an interest in working with you, keep the profit for yourselves, so that you don't operate at a loss, and continue to work only in this way, even if you don't have contracts with the state and agreements – like decent businessmen work – demanded the head of state from the investor company. – We have a completely different situation in the country than in Russia, the West, and so on. We do not want wild capitalism in our country. We want those who work to also receive something. And today, it is the peasant who milks and feeds the cows, and Belarusians also process the milk. They are not rich. Therefore, if you want to work here, bear the social burden."
Alexander Lukashenko also stated that the chairman of the Pruzhany District Executive Committee "most likely needs to be replaced." "He works a lot, perhaps he has overexerted himself, overheated. Another person needs to be sent there. I am not insisting on this, but this issue must be considered within 10 days by the Presidential Administration and the State Control Committee from the perspective of personnel work in the country. No complaints and regrets. Also sort out the situation in Shklov. As for the governors, I will sort it out myself," said the Belarusian leader.
Addressing the representatives of the company "Unimilk," the head of state said: "Remember, the interests of the Belarusian people come first, without prejudice to investors. We cannot allow a single company, even one with a world name, to start working in this way. Because others will follow you. And we would like to establish normal cooperation with you, normal business. If this does not work out and you do not want it, well, Godspeed. But let's cooperate in a businesslike, genuine manner."
"This is not the kind of business we should be chasing. They should come to us and ask: take us into this business. So why should we give any benefits? Secondly, they are not coming into an empty space, but into a business that exists normally in Belarus, and the prospects here are good," noted Alexander Lukashenko.
Regarding the possibility of selling additional enterprises to the investor, the head of state emphasized: "there should be no sale," at least until the company fulfills its obligations."And God forbid I am informed that my order will not be executed. The main thing here is money. Not blocks of shares, not future promises, but money, today's money. Milk costs a lot today, and for us even more so, – said the President. – There should be no deviation from the development model of Belarus that we have defined. No wild capitalism. Social guarantees for the Belarusian people first and foremost."
In conclusion, Alexander Lukashenko instructed Alexander Jakobson and Deputy Head of the Presidential Administration Andrei Kobyakov to take the situation under control. "Everything under control, everything must be resolved. Report to me within the first quarter. Either they work as stated here, or they leave. We will survive the loss of this brand. If they want to work, let them work, we will support them, they will be our people. But not the way they are working now," the President concluded. -0-
BELTA