Support of the Industrial sector: Valery Gavrilovich Draganov

Valery Gavrilovich Draganov
First Deputy Chairman of the State Duma Industry Committee

- The measures taken by the Government concern not only the selective support of domestic automakers but they, to a certain extent, aim at making the market more active. Among the innovations it is necessary to mention government purchases for agricultural sector, internal affairs bodies, medical institutions, etc. A very important measure is stimulation of consumer loans and loans for legal entities.

In the present situation it is very important to avoid suspension of production because one of the most significant conditions of the automotive industry is the continuity of production strings. Even a short-term stoppage of one plant producing a certain type of vehicle components can lead to deplorable results. The lagged delivery of kitting-ups to the production line of a car assembly plant can lead to its full stoppage which will entail non-fulfillment of work flow charts including schedule of delivery and use of sets of part types of other manufacturers that will bring about losses.

Not only economic aspect is of utmost importance but also the social one. That is why in the present situation we must apply all possible measures which directly or indirectly aim at supporting and stimulating the industry.

It is also very important to take into consideration the present situation and to carry out the appropriate corrective activities on timely basis. For example, one of the last innovations is connected with the revision of the terms of subsidized loans. The new rules are governed by the Government Decree No 548 dd. June, 7 2009. Particularly, in low-demand environment for cars purchased on the subsidized loans the increase of the cost of vehicles from 350 000 RUR up to 600 000 RUR is quite timely. The double reduction (down to 15%) of the amount of initial payment is also very significant change. Besides, the innovation according to which the subsidization of loans covers not only purchase of new cars but also purchase of LCVs is significant too.

In 2010 2 billion RUR are going to be allocated from the federal budget for subsidization of the loans disbursed during 2009 to individuals for purchase of vehicles. In 2011 this amount will make a total 1.5 billion RUR and in 2012 – 500 million RUR.

To my way of thinking, we should continue demand stimulation in the future. Particularly we should consider the possibility of development of the purchasing power support programme of military personnel and employees of government-financed organizations. The question of the support of producers of vehicle components seems to be very acute. Besides, we must level the practice of lending out tight money.

It is important to use the potential that we already have. Moreover, Russian automotive industry has the full cycle of development and production which remained unchanged since Soviet times. That is why we must find strategic approach to the use of such opportunity.

The automotive industry of India is a good example because there was announced the possibility of making a car costing $2500. It aroused great interest of the vehicle components suppliers who queued up with their offers because they pretty well understood the promotability of such project.

If we talk about prospective measures which can be taken for the support of the domestic industry, in this case the government faces two problems. The first one is related to the further work of enterprises and human resources. The second one is social.

When the manufacturing programmes are deliberately trimmed the question arises whether dismiss labour or not. But for every city or town there are its critical figures concerning the dismissal of labour. For example dismissal of 6500 employees of OJSC “GAZ” is critical for Nizhny Novgorod, especially taking into consideration the fact that nowadays it is very difficult to place in a job so many people. In Zavolzhye situated in Nizhny Novgorod region, 1000 employees of OJSC “Zavolzhskiy Motor Plant” will loose their jobs. This is a critical figure for the relatively small town. The whole town depends on the solution of this problem. For the other region dismissal of even 200 employees will be critical. The ex-employees of the automotive industry can either leave native towns or under more convenient circumstances, find a job in another organization, but in this case it will be very difficult to bring them back to former places of employment. Especially it concerns skilled and highly qualified employees who have always been valued highly. Thus the personnel potential of the automotive industry will be lost.

I am pleased to note that the first-rate companies of automotive industry support the policy announced by the Chairman of the State Duma Boris Vyacheslavovich Gryzlov and by many other party-mates in “United Russia”. This policy concerns the rejection from bonuses, wage and salary benefits for top-managers, etc. I think that in order to remedy the social strain the Government will carry out the same policy in the future. Now we appeal to the CEOs of not only first-rate Russian automakers but also to the foreign ones which are established in the Russian Federation and work in the mode of industrial assembly. We ask them not to dismiss labour but use the short week as an alternative.

However, we understand that these measures cannot fully change the situation which occurs in the automotive industry but they can only smooth over the negative consequences. The main question is still related to the macroeconomic situation in our country which took a turn for the worse because of the global financial crisis.