Russia : There are big questions about the import substitution program. During the pandemic, a paradoxical situation emerged. On the one hand, the borders were closed, and it became more difficult to deliver goods. On the other hand, the share of imported products increased sharply. Why did it happen? And what to do, especially on the eve of the next sanctions?
PRODUCTS IS, GOODS – NO
Let’s start with the positives. Our economy regularly supplies Russians with food products. The share of foreign food has decreased over the years of import substitution. Somewhere to zero, somewhere small deliveries still remain. On average, 23% of foreign products are on store shelves.
Quite a different situation – with non-food products. As Vedomosti calculated based on Rosstat data, the share of imports in this area increased from 49 to 53% over the first 9 months of last year. And in general and on average, the share of foreign deliveries (if we take products, goods and services) in our economy amounted to 40%.
GROWTH DURING THE PANDEMIC
The increase in the share of imports is explained by several factors. First, the rise in price of foreign goods. For example, only palm oil increased in price by almost 60%. And our companies buy it for about a billion dollars a year. In addition, electronics, household appliances and everything related to cars have risen in price. This is due both to the lack of microchips at the global level, and to the rise in price of cross-border transportation by several times.
Secondly, the development of global marketplaces. Buying goods abroad has become much easier. The pandemic has only spurred online trading processes. As a result, the share of imported products in the “basket” of every Russian family has increased.
Thirdly, the inconsistency of the Russian import substitution program. On the one hand, officials verbally encouraged the production of domestic analogues. On the other hand, they did almost nothing to prevent foreign products from entering our market (parmesan is an exception to the rule). And that in conditions of perfect competition is still winning the Russian one. Maybe this is correct from the point of view of a retail consumer and even a large plant modernizing production. But entrepreneurs state that in such conditions they see no reason to substitute imports for anything.
IMPORT SUBSTITUTION 2.0
In 2020, the government adopted the import substitution program 2.0. They changed their approach a bit. We made a list of equipment and goods that need to be replaced. And they provided domestic producers with preferences to participate in government tenders.
In addition, according to experts, the big problem is that the Russian domestic market is too small for the production of unique high-tech products. Companies initially need to focus on exports. Then the domestic market itself will replace imports. After all, if a domestic product is competitive abroad, then it will be in demand within the country.
By the way, the government is already doing this. Over the past year, the volume of non-commodity non-energy exports increased by 36% – up to $191 billion. This is the largest increase in recent years. Nevertheless, the potential in this area is great. According to Rosstat, in Russia only 2% of the country’s enterprises export something. For comparison, the world average is 10-15%.
HOW THIS WILL AFFECT PRICES
However, while we are heavily dependent on imports, this is reflected in our wallets. As the Central Bank said many times last year, Russian inflation was the result of foreign inflation. Prices due to the pandemic and the launch of the printing press in the US, Europe and Asia began to rise around the world. And since we depend on imports in many areas, almost everything on our shelves has also risen in price. And, most likely, will continue to rise in price.
– For example, the rise in prices for “palm tree” is associated with the failure of the contract with Indonesia “fighters in exchange for oil”, the crop failure and the increase in the costs of its production and transportation. And since the “palm tree” in the Russian food industry is “our everything”, an increase in prices for milk, confectionery and other products where it is used is inevitable. What, by the way, the milkmen have already warned about, – says Nikita Krichevsky, professor, doctor of economic sciences
Recall, as recently reported by Rosstat, in just three weeks of this year, prices in the country rose by almost a percent – this is four times more than in the same period a year ago. The Central Bank still believes that they will be able to bring down the inflation rate to 5% this year. But, most likely, in the near future they will still revise the forecast.
