“If one wants to trade in Russia, one has to produce such products that will be in demand anywhere in the world”, – Vladimir Salamatov

The competitive growth of the Russian business was discussed in the WTC

Moscow, Russia, 30 September. International business forum “The competitiveness of the Russian business in international markets” organized by the WTC Moscow, the Chamber of Commerce and Industry of the Russian Federation and “Kommersant” publishing house took place in the World Trade Center Moscow. The event brought together public officials, regulating authorities, representatives of the CCI and business associations.

The forum was moderated by Vladimir Salamatov, Director General of the World Trade Center Moscow, and Dmitry Butrin, Deputy Editor of the Economic Policy of “Kommersant” PH. During panel sessions, the following key issues were discussed: means of support of domestic producers in the face of sanctions; correlation of the import substitution with the competitive growth of the Russian production; methods for increasing the share of small and medium-sized businesses in Russia's exports and the development of their export potential.

Andrey Slepnyov, Minister for Trade of the Eurasian Economic Commission, explained that Western sanctions will have a noticeable overall effect and an impact on the position of the Russian Federation and the Customs Union in the world trade only if the restrictions will be protracted. However, due to the sanctions, the Russian government has already adopted an import substitution industrialization policy.

Panelists agreed that the import substitution is inextricably linked with the competitiveness of domestic production and exports. “Import substitution is the necessity caused not only by the sanctions, but also by an unacceptably large percentage that imported goods take in the consumption in Russia”, - said Yevgeny Primakov, member of the Academy of Science, President of the “Mercury Club”. According to Mr. Primakov, the substitution must contribute to the competitiveness of the goods produced in Russia. To achieve this result, the problem of technical and technological development should be solved in the first place. This substitution policy should not lead to the closure of the Russian Economy. The Government is obliged to promote exports of the value added goods.

His reasoning was supported by Andrey Slepnyov. “Taken without exports, the import substitution does not provide the competitiveness of products. More than once we have seen such examples, when we performed the import substitution by implementing higher customs restrictions or via non-tariff measures. Typically, these projects end up in the reproduction of obsolete technologies. Generally, they lead to inadequate price quotes”, - he explained. “In order to be competitive in the world trade, one has to be competitive within the domestic market”, - marked Alexey Mordashov, Director General of “Severstal”.

“The only way producers have is to see the market as an international arena. Some people may believe that it is possible to manufacture last-century products with no changes and upgrades applied. But to rely on this idea means to follow the road to nowhere. If one wants to trade in Russia, one has to produce a product that will be in demand anywhere in the world, even in countries with the highest standards. Businesses have to take that there is no other way anymore,” - noted Vladimir Salamatov.

Yet, he said, out of 7.5 million Russian companies only 1% are exporters. The WTC Moscow’s CEO also cited data on the Russian export position in the international market according to a study prepared by the experts of the WTC Moscow. “We take a significant share of international market in the armaments and military equipment sector: raw nickel is supplied in the amount which covers 28% of the market needs, cast iron - 30% of the total consumption”, - he said. However, a number of other categories of production important for the global trade hardly include any value added goods. “If we take products of the mechanical engineering, nuclear reactors and fuel rods supplies is the only segment where we occupy 20.9% of the entire market”, - said the WTC Moscow Director General.

Then the participants proceeded from the statement of the problems to the discussion of ways to address them.

Andrey Slepnyov spoke about the way free-trade zone may help to solve the problem. “Free-trade zone has a very significant impact on the process of the import substitution and the technological development”, - he said. “A free-trade zone shared with a technologically more advanced partner usually leads to the inflow of technology, but more likely by means of replication. A country advances its own technologies if one of the free-trade zone partners is a developing country, i.e. a country that is willing to accept reproducible goods. This subtle nuance must be taken into account, it is important to realize that free trade with technology giants can to some extent suppress the technological development in certain industries”.

Other participants talked about the necessity of the state support to exports and the stimulation of the enterprises’ competitiveness. Yevgeny Primakov said that the competitiveness and the demand for the Russian goods depend largely on the quality and prices offered, and products’ technical and technological characteristics are particularly important. “We need to start creating in Russia such conditions, which will contribute to these qualitative characteristics”, - he said. Yevgeny Primakov also stated the need for the development of state institutions on the basis of public-private partnership.

During the discussion, it was also noted that in order to improve the competitiveness it is necessary to improve the business climate as well, i.e. to remove administrative barriers which lead to additional expenses for businesses. “To develop specific solutions and to engage in the consistent work on improvement of the business climate in our country – we need a dialogue”, - said Alexei Mordashov.

Andrey Klepach, Deputy Chairman, Member of the Board of Vnesheconombank, explained that to make a serious technological breakthrough that would at least create an alternative, if not completely meet the need for imports, it is necessary to solve the problem of the competitiveness in the next few years. “As the examples of partnership with “Siemens” and other companies show, the availability of alternatives shapes a different way to access technologies. Therefore, the issues of technological updates and technological breakthrough are of the essence”, - he said.

However, such a breakthrough has to be supported by a solid set of measures in the economic policy. The Government must get the State programs implementation under control; the Central Bank “must take real steps in order to provide enterprises with “long-term money”, and the enterprises themselves should reduce expenses by improving the management, optimization of their facilities and staff. “In fact, we need a certain revolution in management”, - marked Andrey Klepach. Overall, he said that “if we want to be competitive, we must be bold and should carry out an aggressive economic policy”.