Economy of Russia

 

 

It is symbolic that if the rate of economic growth achieved for the first months remains, soon the volume of Russian GDP will at last reach figures of the last precrisis year of 1990. Meantime level of individual consumption has exceeded an initial level a long time ago though with high degree of social stratification. But to materialise hopes of most people for better life it is necessary to move to a new model of economics as fast as possible. Grigory Yasin, Leonid Grigorjev and Marsel Salihov, the leading Russian economists, have presented their own solution of the problem in the recently issued complex report “Russia’s Innovation Way: Mission Impossible?”.

 

The medium rate of the Russian GDP growth was 6.7% in 1999-2006 years which is more than the world average rate for the same period though Russian results are generally average among states with transitional economy particularly considering low figures of 1999 year. But long-term upsurge of the Russian economy based on primary and energy industries have raised a question about the type of its development and about its place in the world division of labour. As a result of raw materials growth, for the last years Russia has become closer to exporters of energy resources taking into account qualitative indicators. But the main resource – human capital – is not used yet.

 

In author’s opinion in the short run most likely the macroeconomic situation in the state won’t change and the economic upsurge will continue. But they forecast strengthening of factors that are going to retard economic development. Among them for example is a tendency not strictly dependent on Russian authorities. Today it can be stated that lowering of the world economy’s growth rate has already begun since the intensive development continuing for several years has cut down abundance of production facilities in all parts of the world which creates the prerequisites for the deceleration.

 

But Russian potential of economic growth is also decreasing – for the last years reserves of standby capacities and labour surplus has to a great extent been depleted. Despite high investment activity of the last years, obsolescence and deterioration of capital assets of most industries, transport, housing and utilities is remaining at a very high level. Moreover the exchange rate of the ruble has returned to the middle of 1999s which aggravates the situation with Russian producers whose competitiveness is already low considering price and quality. There is continuing rapid growth of import while market segmentation is taking place. Russian goods are found to be more valuable than cheap ones with comparable quality from Asia states. This also forces Russian consumers with low and medium income to opt for Asian products in respect that wealthy groups still prefer mainly European imports.

 

Much in this situation is dependent on how successful Russian business will be, which is in need of developing new conditions and motivations for modernisation as well as diversification of production. The report’s authors think that policy of the state should not be directed at a support for certain industries and companies but at reducing risks related to investing and innovations, at establishing new mechanisms of stimulating fit to the level of enterprise competitiveness. According to Grigory Yasin it is necessary to unblock the road for expansion of leaders and also to help “rear echelon” with its business development to expand list of leaders as well as to stimulate conditions to exclude outsiders from the market in order to release resources for new, more effective players.

 

Generally experts believe that further development of the Russian economy depends on how successful and quick will be modernisation. “Transition to a new model of innovative growth is a declared aim,” said Leonid Grigorjev. “But the forming of the innovative model is happening too slowly; most structural reforms for the last two years have advanced not much. Russia needs to form its own model of the economy and the society keeping in mind the world experience.”

 

Under conditions of near entry into the World Trade Organization and strengthening of international competition, Russian business will have to solve not easy problem of finding its own place in the sun. It takes for granted that there are already no free markets for Russian businessman. Markets of mass-market products are virtually entirely occupied by low-cost producers, which there is no prospect to compete with in cost reduction. And companies of advanced countries have monopolised markets of unique high-technology products. Here can one only wedge in rare special spheres. But following this one can not notice odds that are opening in new growth markets. To get involved in an added value chains in early stages of their forming is an infrequent opportunity to move from overtaking and imitating model as well as an opportunity to realise already existing in Russia competitive advantages.

 

An example of such a growth market is a production of scientific and technical innovative products and services where since 1990s the process of globalisation has taken place. There is a reason for supposition that getting involved in this chain is going to lift restrictions that prevent implementing innovative potential of Russia.

 

By the way the late research of UNCTAD (United Nations Conference on Trade and Development, the body of UN General Assembly) based on the results of survey of transnational corporation managers showed that Russia is positioned very high by them amid countries that are most attractive for future outsourcing of Research and Development. It is noticeable that the states of Central and Eastern Europe passing ahead Russia according to the indices of innovative potential are not considered by transnational corporations (at which the lion’s share, approximately 2/3, of all world expenses for commercial Research and Development has come) as attractive for innovative outsourcing. At the same time China, India and Russia among developing countries are leading on these grounds.

 

Generally experts believe that it is improving competitiveness and expanding capacities in non-primary spheres of traded sectors that should become joint national aim of business and authorities. Only diversification of the economy along with gradual growth of national innovative capacities, involving in the world division of labour, attraction of investments and progressive approach to the technological limits will be able to reduce risks and lead out Russia at a new way of stable growth.