September 16 – September 22, 2013

Industrial lobby managed to revoke privileges for truck imports

The situation has not changed
Industrial lobby managed to revoke privileges for truck imports

As of December 1st, 2013 customs facilities and VAT exemptions will not be applied for a number of goods imported by enterprises in rural areas.

Decree No 6, ‘Encouraging entrepreneurship in rural areas’ has resulted in greater imports of foreign-made trucks. Low prices on cars and a lack of customs duties have resulted in a larger freight car fleet in the country and increased competition on the domestic freight market. This has made major domestic carriers and manufacturers of commercial vehicles unhappy. Instead of improving the quality of service and trucks, the authorities in their usual style have decided to implement restrictive measures to address the problem and have banned imports of equipment whose equivalent are produced in Belarus.

On May 7th, 2012 Decree No 6, ‘Encouraging entrepreneurship in rural areas’, was adopted. The decree envisaged significant benefits for organizations registered in rural areas. One of the most attractive benefits was the exemption from paying import duties and VAT on goods imported to Belarus on special conditions for their further use. Cargo transport was the most important item on the list of goods to which these benefits applied.

Business was quick to react to the benefits the decree had offered. In H1 2013 trucks import increased by 2.7 times compared with H1 2012 – up to USD 208.3 million; special purpose vehicles import – by 4.3 times up to USD 44.7 million; and vehicles for 10 or more passengers – by 2.7 times up to USD 17.6 million. As a rule, the imported equipment was second-hand and at better prices than MAZ had to offer. An expanded truck fleet has resulted in lower prices on domestic freight traffic, making larger carriers unhappy, since they had no such privileges. Against the background of significant stocks at MAZ warehouses and problems on the foreign exchange market, the cargo industry managed to lobby the decision to abolish the said benefits, inter alia, for trucks imports.

The authorities did not analyze the reasons behind the poor competitiveness of MAZ trucks and other equipment manufactured in Belarus on the domestic and international markets (except Russia), but decided to address the issue by restricting the competition. MAZ sales on the European market did not exceed 10 cars in H1 2013 with total exports exceeding 4,000 pieces. The main reason is the lack of service stations in EU countries. International freight carriers are forced to purchase imported machinery, because if MAZ trucks breakdown in the EU, a truck ride will be disrupted entailing penalties and reputational costs. Trucks made in Sweden, Germany and other EU countries offer a wide network of service stations, allowing for quick fixes of technical problems and thus guaranteeing the timely delivery of goods.

It is likely that large freight carriers will push some competitors off the market and will increase service prices, while MAZ will try to sell some of their accumulated stocks. Also, enterprises, that for a while benefited from the abovementioned preferences, will undergo checks by the controlling bodies (in the case of violations, fines will be handed out or vehicles will be confiscated).

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Once a week, in coordination with a group of prominent Belarusian analysts, we provide analytical commentaries on the most topical and relevant issues, including the behind-the-scenes processes occurring in Belarus. These commentaries are available in Belarusian, Russian, and English.

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