Table 1.1: Share <u>of SOEs in output, export and inputs of production in 2004-10, percent of total</u>

||**_2004_**|**_2005_**|**_2006_**|**_2007_**|**_2008_**|**_2009_**|**_2010_**|
|---|---|---|---|---|---|---|---|
|**1. Output**|59.1%|59.6%|57.5%|56.7%|56.0%|55.2%|55.5%|
|**2. Value Added**|57.0%|57.8%|57.3%|55.9%|54.9%|53.9%|54.5%|
|**3. Merchandise Exports**|n.a.|n.a.|52.0%|55.1%|54.2%|41.5%|45.8%|
|**4. Employment**|68.9%|68.8%|68.4%|67.7%|66.0%|66.3%|65.6%|
|**5. Fixed Capital Investment**|61.5%|61.3%|60.1%|59.5%|59.5%|66.1%|66.2%|

Source: Belstat, Authors estimates

# The machine building sector

**The machine building sector**<sup>**5**</sup> **accounts for about a quarter of industrial production and comprises the most visible SOEs producing heavy trucks and tractors.** It includes Belarus’s best known large industrial enterprises—MAZ, MTW and Belaz (Box 1).  From 2000 to 2008, the machine-building sector grew at a rate of 12 percent per annum.

# Box 1: History of Machine Building in Belarus: case study of MAZ/Minsk Motor Plant

**The origins of the Belarus auto-motive industry can be traced back to the post-war economic reconstruction and recovery efforts.** In the first post-war years two automotive enterprises were established in the city of Minsk: Minsk Automobile plant (MAZ) and Minsk Tractor Works (MTW).

**Over the next decades MAZ became one of the largest producers of heavy trucks, busses and trolley busses in Eastern Europe with nearly 15,000 employees.** Although MAZ specializes on two product lines - heavy trucks and busses- the range of products offered is broad: 250 different truck and 50 different busses and trolley busses.  Its key markets remain the former Soviet Union states.

**MTW became one of the world’s largest manufacturers of agricultural equipment with nearly 20,000 employees.** Over the last 50 years it produced over 3 million tractors and exported them to more than 100 countries around the world; currently it produces 62 models of different vehicles with more than 100 assembly options for all climates and operating conditions.

**A second wave of industrialization started in late 1950s. In 1958, Belarusian Autoworks (BELAZ), a producer of mining dump trucks, was established.** The development of big mineral deposits in the Soviet Union demanded large and powerful mining dump trucks. BELAZ developed more than 600 versions of mining dump trucks of payload capacity from 27 to 320 tons, and sold more than 130 thousand units of mining dump trucks in more than 60 countries of the world.

**Similarly, Minsk Motor Plant (MMP), a producer of diesel engines, was established in 1963 as a spinoff of Minsk Tractor Works (MTW).** After five decades it is the leading manufacturer of diesel engines not only in Belarus but in countries of the former Soviet Union; currently the Minsk Motor Plant manufactures over 250 engine specifications.

**From its inception the Belarusian machine building sector specialized in the production of unsophisticated low-price products to a captive market, Russia and other the former Soviet Union Republics.** This market specialization persisted as of 2010.  For example, MAZ, a Belarusian heavy truck and bus producer, is positioned in a relatively unsophisticated low cost truck market niche, where it competes with KAMAZ, a leading truck producer in Russia, and Shanxi, a Chinese truck producer, (Figure 1.2a).  MAZ and other Belarusian transport equipment producers occasionally venture into the production of higher quality products; but these production lines  require the use of advanced strategic components (such as engines) produced by other suppliers, which considerably increases the final

> 5 Machine building sector includes automotive industry, production of agriculture equipment, electronic equipment, white  consumer goods.

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