Stagnation metal

13.04.2012 — Analysis

The government of the Sverdlovsk Region is raising alarm: The world market prices for metals remain high, while the economic growth rate in the metallurgical region is below the national level. The main reason for the lag is rooted in low labor efficiency, which is extremely difficult to improve at outdated factories. Officials suggest that business should assume obligations for allocating part of the profits for upgrading of its production operations. However, as manufacturers told the RusBusinessNews columnist, no company through its own efforts will be able to increase efficiency: The whole technological system should be changed. Otherwise, without adequate support, intellectual investment can result in increased product costs.

The Sverdlovsk Regional Ministry of Economy published the data showing the growth rates in 2011. The region, according to the minister Yevgeni Sofrygin, lagged behind its neighbors, including the agrarian Kurgan Region. The previous forecasts of experts did not prove true: In accordance with the five-year Program for Social and Economic Development, the Sverdlovsk regional economy was to demonstrate a 12% annual growth rate, which was only 5%. The most disturbing fact is that the world market prices for metals - the main export product of the region - remain stable, while the production output is going down.

In January-February 2012 the trend remained unchanged: The economic growth rates were lower than the overall growth rate in Russia. Ye. Sofrygin thinks that the regional economic structure should be changed. It can be done only through improvement of labor efficiency, large-scale modernization and creating of new sectors of industry.

None of these processes has started so far: according to the data from the minister of industry and science of the Sverdlovsk Region, Alexander Petrov, only 12% companies take part in innovative activities, allocating 1.5-2% of the total expenses for research and development. Deterioration of equipment, states Anatoly Solovyov, the acting director of the Ural Department of the Federal Service of Environmental, Technological and Nuclear Supervision (Rostekhnadzor), is 80-90%, and only continuous repairs keep it from going down to 100%. The worst situation is with overhead cranes that are worn out by 95%. Some companies still have boilers manufactured in the 1930s; energy efficiency in such cases is out of the question.

Experts point out that instead of modernization, company owners prefer to increase work intensity and cut expenses on personnel. According to Dmitry Antonov, the director of the Labor and Employment Department for the Sverdlovsk Region, the number of employees working in harmful conditions increased by 4% in 2011. At some large enterprises 90% of the work space does not comply with the hygiene standards, thus debunking the prestige of many "shop floor" professions. Young people are not interested in manufacturing; that is why about 14% of the industrial jobs are performed by retired people. One cannot expect high labor efficiency from them.

A. Solovyov is sure that there is no alternative to modernization, as survival of enterprises depends on investment. In this connection, the management of Rostekhnadzor offered manufacturers to assume obligations for investment of part of their profits in new equipment. The supervisory agency believed that this initiative will help to reduce accidents at enterprises and will dramatically improve their performance. Anatoly Solovyov has no information whether anyone has entered into any agreements with Rostekhnadzor. This is hardly surprising: Manufacturers took a dim view of the initiative. Metallurgists suspect violation of the legislation; machine-builders think that the initiative needs a lot of preliminary work.

Sergey Tsarapkin, the general director of Uralkhimmash, OJSC, thinks that modernization can hardly be initiated through administrative measures - first of all, it should be analyzed where and when it can produce an effect. No changes in production result in a fast technological leap. He sees it as a crucial point: Infusion of money cannot make an enterprise more efficient within one day; however, it can increase the product cost. Therefore, it should be analyzed very thoroughly where to invest and what is the purpose of the investment.

Minister Alexander Petrov thinks that production efficiency will increase substantially, if the government starts stimulating research and development in the areas that are important to the Sverdlovsk Region. There will be no commonplace distribution of money; the ministry promises to participate financially in certification of enterprises, preparation of business plans, reduction of energy consumption of production. He believes that all these measures will be able to change the technological situation at factories of the region.

S. Tsarapkin notes that improvement of labor efficiency depends not only on technologies, but also on production engineering, the education system existing in the country. Russia has lost much in these fields within the last twenty years and has not been able to do a lot of things due to the economic recession extended over many years. It takes time for people to learn how to handle new technologies.

The top-manager is sure that the process of their deployment should go hand in hand with large-scale retraining of specialists. Russia has very few engineers who are competent in new materials and the latest methods of mechanical tooling; therefore, people should be trained through an absolutely different system. The problem cannot be solved within a single enterprise - the whole system of personnel training should be changed, including institutions of higher education.

It is obvious that this problem cannot be solved either through participation of the Fund for Stimulation of Research and Development or with the help of the comprehensive program for industrial development of the Sverdlovsk Region for 2012-2015, though officials are doing their best to put them into effect.

Vladimir Terletsky