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“Tick the box” import replacement: whose screw is loose?

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“Tick the box” import replacement: whose screw is loose?

Unpopular goods have got onto the RF Ministry of Industry and Trade list of import replacements. Have those who composed the list studied the market?

Independence shadow

As a reminder, last year the RF Ministry of Industry and Trade, answering the call of the Russian authorities to expand import replacements, prepared their “List of priority and critical products, services and software as regards import replacement and national security”.

The appearance of some of the products and services considered priorities for import replacement by the ministry seems contrary to common sense. For example, pillar cranes with a capacity of 12—16 tons are not in great demand on the market, whereas the in-demand machines of a 6—10 ton capacity have not been paid attention to. Do we need such import replacements?

The main aim of import replacement is to replace foreign goods with domestically manufactured products. Ideally, it should provide for additional job creation, new companies and businesses, the creation of favourable conditions for domestic producers, an increase of their presence on the internal market, etc.

Besides this, this policy is to provide for the security and independence of the country from western producers.

Well, let’s try to analyze how the inclusion of 12-16 ton cranes meets the above-mentioned challenges.

“Tick the box” import replacement: whose screw is loose? 

Overstocked with cranes

We have already written that the domestic market for construction equipment is not especially efficient. Only three plants in Russia produce pillar cranes and their output is a little over 200 machines.  To remind you, in the USSR, more than 4,000 units of such construction equipment were produced.  At the same time, the Russian market is flooded with German, Chinese, Turkish, French, Italian, Spanish and Portuguese machinery.

 

— So many cranes have been sent to Russia that they are only half-loaded today, Petr Kapralov, Director General Of “Setistroy” LLC, Emeritus Builder of Russia, says. — The other half is unused because of the decreased volume of work during the crisis. The imported equipment is more convenient: the boom on foreign cranes is longer, and they are assembled faster. Besides, the Russian machinery is very heavy.

The quality of the domestic products also leaves much to be desired. Will the program of import replacement provide for an increase in quality? The Executive Director of the National Association of Construction Materials and Structures Producers, Nickolai Sobolev, thinks that the measures on import replacement introduced by the regulatory authorities, in this case by the Ministry of Industry and Trade, must aim for one main result: the increase of accessibility to the most modern equipment and technologies for Russian producers and the enhancement of the export potential of the industry. But the aims have not been achieved yet.  

— Now, owing to the Russian counter-sanctions, domestic cheese is selling more, but its quality has not increased, the leader of the National Association says. — Instead, the import of palm-oil, used for the production of substitutes of very doubtful quality, has increased sharply.

So, if measures on import replacement are limited to the introduction of barriers for foreign equipment to selectively support low-efficiency Russian enterprises, the will suffer the inevitable decrease in competitiveness, range reduction and production quality decrease. 

The fact that the cranes listed are not the most in-demand types of cranes is raising eyebrows among specialists. Hence, actual measures taken by the regulatory authority in this sphere of the construction equipment market are not providing for the security of the Russian economy, as the mass segment - cranes with a capacity of 6—10 tons - did not make the list.

— Speaking of import replacement, something important should be replaced, but cranes with the 12—16 ton capacity represents only about 3—5% of all orders, said Aslan Karisov, commercial director of the “Bashcranesnab” GC.  — I think the list was made only so that somebody could file a report…

“Tick the box” import replacement: whose screw is loose? 

Who needs 3% of the market?

Meanwhile, not all the experts are so critical. Mikhail Stepanov, PhD, Deputy Director of the Engineering and Ecological Construction and Mechanization Institute of the Moscow State University of Civil Engineering (MGSU), thinks heavy-duty crane production may be invigorated in Russia. 

— These cranes were formerly produced in Russia, in Moscow [the Karacharov plant and “BAKRA”], he says. — Modern producers have every opportunity to launch new production.

According to the scientist, the difference between the 12-ton cranes now produced in Russia and the 16-ton machines is not very big. Old models, in combination with modern materials, may be used.  

— Taking a 12-ton crane as a basis, we exchange the steel for high-hardness steel (alloy steel), and we retain the mass characteristics, Professor Stepanov explains. — Our students develop this in their theses. We increase the crane’s capacity by changing the materials. Neither weight nor rigidity nor any other performances change.

Producers also think they can manufacture high quality, inexpensive equipment.

— Three plants can produce such cranes in Russia at present: the Rzhev plant in the Tver region, the Niazepetrovsk plant in the Chelyabinsk region, and the Odintsovo plant in the Moscow region, Alexander Cherenkov, the head of the QC department of the Rzhev crane-building company, told our correspondent.

 — The only thing is that the 16-ton crane’s deployment will take some time. But if there is a demand on the market, there won’t be any problems: we have the people, the engineering documentation and the technologies.

If there is a demand on the market… But is there? Taking into consideration that there is only a 3% demand for these types of cranes, it is very doubtful…

In fact, when will the machines bought abroad, and standing idle, wear out? And how will the state support its producers?

It’s one thing to write a list, and quite another to provide the opportunity to receive beneficiary credits for a new production organization, to get scientific support going, and to train qualified specialists capable of creating a high quality product.  Does the program of import replacement cover these issues? There are more questions than answers…  

 

Its not the right beginning

By the way, the problems of import replacement were discussed at a meeting dedicated to innovation developments on the construction materials industry, which took place in Vladimir on June 14th.

Speaking at the forum, at which the heads of the RF Ministry of Industry and Trade and the Ministry of Construction, Housing and Utilities, and representatives from the domestic construction industry spoke, the Prime Minister Dmitry Medvedev stressed that while in the sphere of construction materials production the import replacement plan is working rather well – the import share is only 5% – the situation with machine building is quite the opposite. More than 80% of machines, equipment and vehicles are imported, so the economic dependence, including in the construction industry, on foreign companies remains.

The dependence is growing if extra part procurement expenses, engineering etc. are taken into account, assumed the Head of the Cabinet. 

So, how can we speak about industrial security? In this situation, the efforts of the Ministry of Industry and Trade to solve the problem of import replacement in the sphere of construction equipment at the cost of widening the segment of the pillar crane market looks very strange... if not to say unprofessional.

Semion MORON

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