Several Comments to the Article We Will Fight Our Way Free from The State Help Written by Konstantin Babkin

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Severe competition and game rules established on the Russian agricultural machinery market draw attention of its participants more than ever, because it influences on the investments climate in this economics sphere and, the most important, on domestic agricultural business development.

Now in the support plan of the Russian agricultural machinery construction the program No.1432 is being valid. In the year 2015 due to the program statements the agrarians get 15% compensation of purchased agricultural machinery cost, which is manufactured at a agricultural machinery enterprise with Russian share not less than 50% . Those are such enterprises as ZAO Peterburgskiy tracornyi zavod, OAO Millerovoselmash, OOO Kombaynovyi zavod Rostselmash, ZAO Eurotechnica, OAO Remmash, OAO Kuzembetevskiy RMZ, OOO Agro, OOO Pegas-Agro, ZAO Rubzovskiy zavod zapasnyh chastey, OAO Taospectr, OAO CAREKS, OOO BDM-Agro, ZAO Kolnag, OOO Kanmash AGRO, OOO PK Agromaster, OOO Navigator Novoe mashinostroenie, OOO Klever, OOO Promzapchast, OOO New Ton, OAO Kormmash, OOO Selmash, OOO Voronezhselmash, OOO Volzhskiy kombaynovyi zavod, OOO Zavod Bezheckselmash. At a first view the Russian agrarian wins buying agricultural machinery of manufacturers mentioned above, but, at the same time, he has no right for the compensation of highly technological agricultural machinery of European brands cost, which is necessary for straight development and for introduction of advanced technologies into the domestic agricultural business.

It should be noticed that European companies, which manufacture trailer equipment, it means not self-moving equipment, are able to adapt to new market conditions. The manufacture depth increase is done during much shorten terms, especially, if no one creates difficulties during the development process, it means that already during the formation period they are in equal conditions with other market participants. The manufactures localization and deeping in the RF allow not just to reduce charges, but also to have a possibility of immediate delivery to the customer. For example, the ZAO Eurotechnica is a company with German investments and this company for today has the localization percent in accordance with the program 1432 requirements. The another instance is a company John Deere, which produces highly productive seeding apparatus in Orenburg.

At the same time it is impossible to expect a rapid present increase of manufacture localization in Russia from the manufacturers of much more difficult and highly technological agricultural machinery, tractors and combines, and it limits choice of the domestic agricultural producers. It is necessary to agree with the fact that neither in Russia, nor in any other country of the TU or the CIS for today there is no manufacturers of engines, transmissions, drive assembled apparatus, which could respond to the European brands requirements. By the opposite side, today we may see a tendency of spare parts and accessories of the European manufacturers share increase in tractors, combines and in other agricultural machinery. And there is nothing of improper. It is a normal and healthy process, thanks to which much better results are achieved in effectiveness, productivity and reliability of the agricultural machinery manufactured in Russia.

That is why I am publishing here the full article, written by Konstantin Babkin, We Will Fight Our Way Free from The State Help, which was published on 16/06/15 on the authors page in the social network, and also comments for major article head notes. I would like to invite everybody, who wishes to discuss this topic, in social networks groups of

Konstantin Babkin Some days ago on the Forum of food safety in Rostov-na-Donu the Minister of Agriculture Aleksander Nik. Tkachev announced that starting from the second half year a new fund for tractors and combines selling will be valid, and that in a short-term prospect a second Russian factory on harvester combines manufacture will appear. if this program will be targeted firstly for following of the interests of Russian agricultural business representatives, who have right to choose by themselves agricultural machinery, which will bring them a maximum profit, will provide straight development of domestic agricultural enterprise and increase of its competitiveness on the world markets, than such program will be approved by the strong majority of Russian agricultural machinery market participants.

Konstantin Babkin the background is clear, a new wave of fight is started, from which outcome the result of fight for formation in Russia of correct and smart economic policy will depend significantly. First of all, the German company Claas expanded an assembly area in Krasnodar. It is a good reason for lobbying pressure, and also it is necessary to take into account that it is necessary to get profit from the investments. the process of manufacturing arias enlarge, as a rule, is accompanied with workplaces increase. Especially it is important for young specialists, who get a possibility to support not just themselves, but also to grow in the professional way and to become highly-paid specialists. The matter of making profit from investments is not a new it is just an economics law.

Konstantin Babkin Secondly, the Government Executive of Krasnodar Alexander Tkachev became the Minister of Agriculture. It is known that he is in a sort of contact with the company Claas. the partnership between the Government Executive and the huge invest man, tax-payer and employer of Krasnodar krai was and remains an obliging component in an effective work of both sides.

Konstantin Babkin Really, in less than one month from the designation, Alexander Nik. had not met agricultural manufacturers, gone into the matter, it was announced that he was planning to change the funding system of agricultural machinery selling.

Now in the branch support plan the Programm No. 1432 is in force.

Due to this program farmers receive 15% of purchased machinery cost (in the nearest time they will get 25%, and Siberians 30%). For machinery to be a subject of funding, the manufacturer must to produce them exactly in Russia. If he manufactures harvester combines he should manufacture in Russia a cabin, axles and a threshing mechanism. If he manufactures tractors he must to mount inside of the tractor Russian engine, transfer gearbox, or a cabin. usual interviews with Russian agrarians, who use tractors and combines of European brands in the production process, would give a convictive answer about purposiveness of the European engines substitution to the engines, which today are manufactured in Russia.

Konstantin Babkin it is also necessary to implement the basic process stages metal shaping, welding, paint coating. as what is possible to produce in Russia, it should be done in Russia.

Konstantin Babkin This fund brings at once several effects:

-Farmers support in a way of making easier to purchase machinery;

-Levels out competition terms between Russian and foreign machinery manufacturers, who use many types of support in their own countries;

-Force the machinery manufacturers to place manufactures in Russia.

Last two points are not interested for European corporations. in the case, support of Russian agricultural machinery manufacturer is performed at the expense of limits in choice of domestic agricultural manufacturer choice limits, it means that it brakes development of domestic agricultural business. It is true that the agricultural machinery construction is for agriculture, not in the opposite way.

Konstantin Babkin That is why most of them act according the plan: to create in Russia as simle manufacture as possible in order to minimize delivery costs, to announce it as a highly technological factory, which would become a worldwide star of agricultural construction soon, to get into the Russian programs of the state funds, to develop the market and to receive a profit. to receive a profit it is a normal interest of any manufacturer and here is nothing of improper. And location and deepening of the manufacture it is a stagewise process. He is determined not just by a purposiveness, by a possibility to reduce charges, to support more quick delivery, but also by the availability of qualitative constituent parts manufacturers on the market. If those are not available, it would be necessary to delivery them from abroad. And support program those are not a plank, which is being lifted up every minute in order not to allow an athlete to get it over, taking into account his skills and acquirements. Except of seldom cases the European companies do not receive these funds. And they are investors and suppliers of the leading agricultural technologies for Russian agriculture.

Konstantin Babkin Everything listed above was obtained earlier. There were opened more than ten of such factories. Everything it worked earlier, but not now, because for getting the support according to the program 1432 it is necessary to produce the machines in Russia not just nominally, but really. Possibly, for the machinery real manufacturing in Russia it is not enough to have just one program 1432. Firstly, there are necessary: enough market capacity, clear game rules and favourable conditions for long-term investments, and, at this, nobody canceled the development of own technologies.

Konstantin Babkin To manufacture really in Russia nobody wishes. And foreign manufacturers are not guilt. Did you read my article about comparison of manufacturing conditions in Canada and in Russia? There is no an economic reason. without any comments.

Konstantin Babkin And here are two options.

The first option to explain the situation, to show a potential, to offer solutions, to motivate the government of Russia to change terms for the machinery manufacture and agricultural business in Russia become on favourable terms and profitable. And just after that manufacturers could comfortably do their business in Russian Federation. While solving of these important matters it is not good to limit a domestic manufacturer in his choice, and it means not to brake the development of agriculture. Machinery construction for agriculture, but not in the opposite way.

Konstantin Babkin An another option to say: please, look, it is not profitable. That is why manufacture in Russia is not necessary. The fund 1432 should be substituted or a new fund should be introduced, at which the importers and the assemblers could use all the rules. The Rosagromash, the Rostselmash and the party Dela chose the first option. The Rostselmash for 8 years has its own manufacture of tractors and other agricultural machinery in Canada. And also it has the distribution network and the production capacities in Russia. The Rostselmash never offered the customers to purchase its tractors through the Rosagrolising or through the program 1432. Instead of it we really prepare tractors manufacture moving to Russia and patiently explain what is necessary to change in the economic policy to guarantee moving of these and other manufactures to Russia to become economically reasonable. Possibly we are losing our current profit, but we make a contribution to appearance of honest clear rules, we approach the potential realization in Russia. Foreign lobbyists, some agricultural holdings, some civil servants choose the second option. In the Ministry of Agriculture there were already found 3 billion for the start of a new fund, which is directed to importers support. I consider that our option is better and correct, and that is why it should win. We have to give Konstantin Babkin that he is going to move the tractors factory from Canada to Russia, but it is better to discuss it at the fact of real movement.

Konstantin Babkin Conclusions and advices.

To the Government. Not to encourage those import goods, which we are able to produce in our country by ourselves. Not to change the program 1432 and not to start new funds regarding agricultural machinery. If there is a wish to liven up the manufacture, it is possible, for example, to re-read the article about comparison of tractors manufacture in Canada and in Russia, and to start corrections and improvements. To reduce taxes, to change policy of the CB, to organize the market protection and the export supporting systems, to simplify the bookkeeping, to return the stub fund, etc. Please, check, Russia has a huge potential, but some problems should be solved. You are able to go down in history as a government, which made the economical miracle.

To the management of the company Claas. Dear Katrina, Jan-Hendrik, Mr Garbers, dear colleagues!

You manage by the strong and authoritative company, which production volume several times bigger than the production volume of the company Rostselmash. Your company even has a definitive charm. You know more than me about many markets. But we are speaking about Russia, and let me give you an advice. I believe that you have a long-term and a forward-thinking approach to the Russian market. You understand that in order to be present on reliable basis here, you need to manufacture really in Russia. You had invested seriously and had expanded assembled manufacture in Krasnodar. Do not stop! But it is not enough just to assembly machines in Russia. Mount into your machinery more spare parts and assemblies produced in Russia! Also engines, gear boxes, ties, systems and hydraulics. as far as it is known, a Russian manufacturer of Rostselmashs combines completes parts of its machines by engines of brand Cemmins, and also uses catalytic agents, filters of foreign manufactures and cooperates closely with a lot of foreign manufacturers, such as: GKN, Bondioli&Pavesi spider shafts and power take-off shafts ZF, Carrano transmissions and axes, Bosch Rexroth hydraulics, MWS, Busatis cutting elements, Geringhoff, Fantini harvester threshers, IWIS driving parts, chains for separating unit driving. The RSM is not a discoverer, it is a world experience, when an enterprise, instead of spending decades for creation of a competitive product, purchases it from the branch leaders and concentrates on discoveries, where the enterprise is traditionally strong.

Konstantin Babkin There are entirely respectable manufacturers in Russia. If they do not respect to your wishes, - teach, share experience. You know how to do it! If you worry to desecrate the light name of your company by usage of domestic spare parts, create a new brand. In China you already have combines, which you sell there, and those are not called Claas. To sell successfully in China, in Northern America, in Brasil, it is necessary to have there a real, deep manufacture. Russia also goes to it. That is why if somebody offers to change conditions and to simplify import, he swims against the stream. the incorrect comparison with the Chinese agricultural market, which has value about EUR 18 billion on the previous year result that is approximately 18% of the world market volume. Capacity of the Russian agricultural machinery market, on last year results, is about 3% of the total volume of the world agricultural machinery market. At all perspective of the Russian market, its capacity could not be compared with markets of China, the EU, the USA, Northern and South America, which share is about 70% of the world agricultural machinery market volume. Every market is unique and development solutions of different countries must not be similar. If today this development is limited just by the program 1432, there is no point to expect for succeed in a long-term prospect.

Konstantin Babkin You know, the Rostselmash is opened for cooperation, is ready to delivery all necessary parts. And also it offers to defend the interests of Russian agrarians together. Our sales depend from their success. For instance, it is possible to raise a question about entrance simplify of Russian agricultural products to the European market. those manufacturers of component parts and apparatus, who are able to manufacture products of corresponded quality and are targeted to innovations, always could establish partnership relations on long-term basis with any of the world agricultural machinery manufacture leaders.

Referring to the agricultural products market, it is strongly another market, and no one of the world agricultural machinery leaders would be able to influence in any way on the matter of the Russian agricultural products entrance to the European market to become simpler, because it is not its participant.

At all disagreements with the articles author according the market situation estimation, it should be recognized that Konstantin Babkin, along with other members of headed by him association Rosagromash, is the major and hot defender of Russian agricultural construction interests, who openly protects his own interests and interests of his groups of persons. The President of the Rosagromash association has fine communications and skillfully involves all possible resources for the target achievement.

In its turn, the western manufacturers of agricultural machinery have and protect their own interests. It is not in conflict with all economical laws. Exactly they have a rich experience of work in all world regions, huge material resources, and also they are the main holders and suppliers of advanced technologies, which are necessary for Russian agriculture and agricultural construction.

Tough competition between these giants is an obligated condition for the qualitative development of the agricultural machinery market, for the establishment on it game civilize rules and for the successful integration of the Russian agricultural construction into the world technological area. Both parties work for the Russian market benefit and have to agree between themselves, placing into a central interest of its customer the Russian producer of agricultural products.


Vitalii Mietolkin

Desk editor of the web-portal about agricultural machinery market RUNO-AGRO.COM


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