President of the Chamber of Commerce and Industry of the Russian Federation, Mr. Sergey Katyrin: the situation itself stimulates the structural transformations of the economy.

Russia Economy Crisis Sergey Katyrin

On October 13 the Trilateral Russian-Belarusian-Austrian business forum, held in Minsk, was organized and conducted by the Chamber of Commerce and Industry of the Russian Federation, the Belarusian Chamber of Commerce and Industry and The Austrian Economic Chambers. The first forum of this kind was held last year in Austria and thanks to its resounding successes a third forum is set to be held in Moscow next year.

Recent crisis developments have prompted the Russian economy into a period of restructuring, with the situation itself stimulating businesses and the government alike to implement structural reforms – Which was the thesis upon which The President of CCI Russia, Mr. Sergey Katyrin spoke at length at the recent second Russian-Belarusian-Austrian business forum held on October 13 in Minsk.

In his speech, he answered the main questions that Western businesses ask their partners in Russia.

It can be agreed that “Yes”, today the country is undergoing a period of difficulties, but according to the forecasts of The World Bank Group, the stabilization of world oil prices has prevented a sharp decline in the volume of GDP in the current year. Recent crisis developments have accelerated the process of economic adjustment and structural reforms. Experts believe that by no later than 2017 growth in the Russian economy will be resumed. At the same time the level of public debt held by Russia is much lower than debts of many developed countries (in 2014 the ratio of public debt to GDP was 17.9 percent, while back in 1999 it was a staggering 99 percent). In other words, Russia still remains a stable market and has the resources to offset most of the negative external trends, according to Mr. Sergey Katyrin.

Mr. Sergey Katyrin also emphasized that widespread media statements about the so-called “turn of Russia to the East and a withdrawal from Europe and the United States” does not reflect the real situation. For example at the end of 2014, 48 percent of Russia’s trade turnover was related to European countries, while 27 percent fell on the APEC countries and 12 percent was in the CIS.

According to the head of CCI Russia, companies in the Russian Federation, unlike a number of other partners, are well aware that leaving the market is very easy thing to do, but it will be much harder to return: with the niche sectors already being occupied. So there currently is no withdrawal of Russian businesses from Europe. Furthermore, in some areas, the opposite process is noticeable. In terms of hard currency the price of Russian products is declining and high-tech Russian manufacturers have begun to increase their presence in Western markets. A prime example of this symbiosis can be seen in the Stavropol company “Monocrystal” which produces sapphire glass, which in particular is used by the American company “Apple”. It is significant that Americans had not imposed a ban on the import of Stavropol products as it is very beneficial to them. It was summarized by Mr. Sergey Katyrin that “We could build a productive and mutually beneficial cooperation in such industries with high added value”.

One of the priorities of the Russian Federation is the deepening of ties, under the framework of The Eurasian Economic Union, with foreign businesses being given the opportunity to do business in the EEU under the universal and transparent rules of international trade. After the customs clearance process, which should be done just once while crossing the border into the Union, goods can move freely within the territory covered by the EEU.

An important factor in the development of Russia in the coming years is import substitution. The essence here is not an attempt to close its market, but to increase the production of quality products and the use of internal resources. Russia responds to external constraints by an extension of freedom and increasing openness. While current media stories would have people thinking differently the evidence speaks for itself: in the last year more than 60 new companies, with foreign participation, including those tied to the EU, have started operations in Russia.

There are examples of successful import substitution in high-tech industries as well, such as in the production of oilfield equipment. Here the dependence on imported components was extremely high. A company from Urals has been buying key components for the construction of drilling rigs in the United States and in Germany. Now, due to the sanctions, their partners have stopped deliveries, but the company has brought the degree of its own equipment production up to 90-95 percent. Moreover, the products proved to be in demand in foreign markets. The most interesting thing is that there is much more attractiveness in the parameters of “price–quality” compared with that of their manufacturing counterparts from other countries. Following the opening of a factory manufacturing carbon fiber in the Special Economic Zone “Alabuga” (Tatarstan) the company now plans to supply 7 percent of the world market of this sought-after material by 2020.

Today is Russia’s bid for regional development and support for local businesses. And Western businesses are realizing the serious prospects of the so-called “Russian province”. In fact Mr. Sergey Katyrin is certain that: “Those who will enter the local markets today–will win tomorrow.” 

CCI Russia news report