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Главная arrow Articles in English arrow Home electronics companies ask government for support  

Home electronics companies ask government for support

23.10.2006
(3 голосов)

Nurtured by the government in greenhouse-like conditions for more than 10 years, Horizont and Vitsyaz face a tough competition from TV makers in the neighboring countries. The new Value-Added Tax (VAT) payment mechanism introduced last year disrupted the companies' traditional distribution arrangements in trade with Russia. Vitsyaz was placed 42nd among the country's top taxpayers in 2004 accounting for 0.2 percent of the total budget revenues. It went down to 50th spot in 2006 with 0.12 percent. Horizont plunged from the 41st spot (0.22 percent) to 122nd (0.03 percent).

The companies manufactured a total of 675,900 TVs from January to July 2006. This is a 14.9-percent decline compared to the same period last year. Domestic sales plummeted by 13.3 percent to 214,300 units and exports dropped from 390,700 units worth $46.3 million to 203,800 units worth $18.99 million.
Belarusian leader Alyaksandr Lukashenka expressed concern about the trend during his meeting with Belarusian diplomats in Minsk on August 1. "We give you money, allow you to hold a monopoly, always offer support by placing barriers to imports as long as it is possible, but you are lazy to work properly. And I worry, may be we have spoiled you?"
The company management is definitely taking a relaxed approach to business because of the government's support. The government has granted Horizont and Vitsyaz tax and customs duty exemptions, and payment delays since 1996. Horizont saw its output soar by nearly 700 percent between 1997 and 2003. Vitsyaz increased output by more than 300 percent. The companies launched new products such a DVD players and TV-DVD combinations. But what was the point in earning $20 in taxes from each TV if subsidies and administrative support, converted into cash, equaled the tax revenues?
Meanwhile, the competition on the TV market tightened in the last few years. In the second half of 2002 the EU imposed an anti-dumping duty of 12 to 46 percent on all audio and video appliances imported from Asian countries. Chinese and Turkish electronics companies redirected their goods to Russia, selling appliances 30 to 50 percent cheaper than Belarusian companies. That was three years ago, when the Belarus' electronics giants asked the government for new loans.
At present, 90 percent of electronics goods retailed in Russia are made or assembled in that country. The share of domestically assembled TVs jumped from 40-45 percent in 2004 to 70 percent in 2005. In addition, Russian electronics companies aggressively compete with Horizont and Vitsyaz in Belarus.
The image tube is the most expensive component of a TV set. Although Belarusian companies do not produce tubes, the government collects a duty that depends on a tube size and makes up about 10 percent of its price. The duty makes TVs uncompetitive in Russia. Tubes are a history. Poland has launched construction of two plants for manufacturing LCD and plasma displays.
The Chinese are even more aggressive. In that country, electronics companies do not pay customs duties, VAT and income tax, while social security tax makes up just eight percent of the wage fund. In addition, the Chinese government covers 20 percent of export product manufacturing costs, companies have an opportunity to take interest-free loans and pay just 10 percent of the electricity costs.
Horizont and Vitsyaz are likely to be granted the exemption they seek, but it would be only a limited breathing space rather than a pragmatic strategy. The possible exemption may draw criticism from Russia and member states of the World Trade Organization (WTO). What is considered a tax break or government support now should be a general rule applicable to all manufacturers in the future. The government must revoke import duties on goods that are not manufactured in Belarus. This would ease worries about international anti-dumping probes and measures.