Libmonster ID: SE-373

RUSSIA IN THE SYSTEM OF INTERNATIONAL INDUSTRIAL RELATIONS*

For many years, private businesses and the Russian authorities have pinned their main hopes on the energy-producing industries, ferrous and non-ferrous metallurgy. Domestic and foreign investments flowed here, and these industries were the focus of the government's attention, since they brought basic incomes to the treasury and allowed it to increase the Stabilization Fund. The political lexicon includes the characterization of Russia as a "great energy power". Vladimir Putin stated at the end of 2005 that turning our country into an "energy superpower" is a strategic task1. This was confirmed in 2006 at the G8 St. Petersburg Summit. Such a strategy is typical for a country that has large natural reserves of mineral resources, but significantly lags behind the world level of development of not only the manufacturing industry, but also agriculture. Such countries naturally use the comparative advantage that they have-liquid and gaseous fuels, metals and other mineral resources that are competitive in price and quality.

With such a lopsided economy, Russia is destined to play the role of a fuel and raw materials appendage and vegetate on the sidelines of the global economy. After all, our "energy superpower" is second only to Mexico and Spain in terms of its share in world commodity exports (1.7%), and in terms of high-tech exports in 2005. It was three times behind the Philippines, 10 times behind Mexico, 13 times behind Malaysia and China2. The highest echelons of government finally started talking about the need to diversify the domestic economy, the development of high-tech industries, including nanotechnologies, and began to quickly engage in industrial modernization.

Meanwhile, the global economy has long been transformed into a knowledge economy. And those countries that actively exchange medium - and high-tech goods and services flourish here. The share of these goods in world exports increased from 34% in 1980 to 54% in 2000. If this trend continues, we can expect that by 2010 the share of medium-tech products will reach 1/3, and high-tech products will approach this level. In 2020, the share of both will be approximately 35%, while the share of fuel is unlikely to exceed 8%, and other basic resources-7%3. On this narrowing patch ,the "energy superpower" will have to fight for survival. How to avoid such a bleak prospect?

At first glance, this is not difficult. It is only necessary to protect domestic producers with protectionist barriers from foreign competitors; create favorable conditions for innovative business; expand and accelerate the conversion of the defense industry, where high technologies have so far been preserved at a decent level. All this is true and is already being implemented. But this is clearly not enough to turn the economy towards high technologies. We must not forget that such a turn requires a modern, highly developed machine tool base, which determines the possibilities for modernizing other industries. Its contribution to the industrial production of advanced countries is from 35 to 50%. This makes it possible to upgrade equipment in most industries every 7 to 10 years. Estimates of the domestic machine tool industry range from "barely moving" to "lagged behind forever".

Here, Russia lags far behind not only developed countries, but also many new industrial countries. According to Rosstat, the average age of industrial equipment in 2004 was 21.2 years, and the share of completely worn-out equipment exceeded 27%. Renewal of the machine park is extremely slow - by 1.8% per year, as new machines and equipment are not available

Yuri SHISHKOV, Doctor of Economics, Professor, Honored Scientist of the Russian Federation, Chief Researcher of IMEMO RAS.

* The article was prepared with the support of the Russian Humanitarian Science Foundation in the framework of project No. 06-02-0245a.

1 See: Orlov D. Should Russia be an "energy superpower"? / / Izvestiya. 17.01.2007.

2 Calculated by: UNCTAD. Database, Trade Structure by Product. Geneva, 2006.

3 See: Vedomosti. 24.08.2006.

4 See: Kvasov D. The running machine / / Expert Volga. 25.06.2007.


page 15
US production is 82 times less than in Japan, 50 times less than in Germany, and 31 times less than in China5. And the quality of equipment produced in Russia today leaves much to be desired, since most models were developed in the 70s-80s of the XX century. In developed countries, the share of machine tools with numerical control (CNC) is close to 50%; in the production of molds, dies and foundries, it is even higher - 85%, while in our country this figure does not exceed 5%. In Russia, such machines are produced by an order of magnitude less than in China, and by two orders of magnitude less than in Germany.6 And in recent years, we have created no more than one or two high-tech automatic or semi-automatic lines for machine-building enterprises per year.

All this, of course, affects the state of the domestic aircraft, automobile and shipbuilding industry, the production of household appliances, etc. It is necessary to import high-tech equipment and high-quality finished products from other countries en masse. The Russian industry annually purchases 2.5 - 3 thousand machine tools from domestic manufacturers, and 8 thousand from abroad. 7 In the total volume of Russian imports, the share of machinery, equipment and vehicles in 2006 was 47.7%, while in exports it did not exceed 5.8%. For many years now, the import of such products is many times higher than the export. In the same year 2006, the negative balance of foreign trade in machinery reached 48.2 billion rubles. USD 8.

Purchases of equipment abroad, on the one hand, allow to increase the technological level of domestic engineering, but, on the other hand, suppress the self-development of the industry. Low investment activity, high depreciation of fixed assets, and backward technologies are typical for those industries where competition from imported equipment is most noticeable today (machine tool construction, agricultural engineering, and road construction equipment production).

Do not forget that the country does not always have enough qualified labor resources to successfully master advanced imported technologies. That large private capital is still reluctant to invest in domestic engineering industries, preferring to "skim the cream" in the highly profitable raw materials sector (oil, gas, aluminum, fertilizers, etc.). That the most innovative small and medium-sized businesses remain the stepson of the state. That all of these are structural problems that require a lot of effort over the years to solve. And during this time, the world's leading countries will go even further along the path of the knowledge economy.

However, the situation is not hopeless.

EXPERIENCE OF OTHER COUNTRIES

As world practice shows, technological breakthroughs can be made even in less developed countries. The analysis undertaken by UNIDO experts is very interesting in this regard. They calculated the per capita volume of value added in the manufacturing industry of emerging market economies in 1990 and 2002, including in medium-and high-tech industries. Our calculations for two dozen countries based on these data show that in 2002, the highest levels of per capita value added in medium - and high-tech industries were achieved in the newly industrialized countries (NIS) of South-East Asia and Israel. This is followed by the second tier of NIS: Malaysia, Thailand, Brazil, Mexico, Argentina, South Africa, as well as the Czech Republic and Hungary (see Table 1).

Not only the levels of per capita value-added indicators, but also their growth rates are very characteristic here. Over the past 12 years, China has managed to almost triple the value added in medium - and high-tech industries per capita, Thailand has increased it by 2.5 times, South Korea and Malaysia-by 1.5. In Russia, on the contrary, this indicator has decreased by more than a quarter. And this is despite the fact that over the same period, the population in the country did not grow, but declined.

High rates of development of technologically complex industries have allowed many emerging economies to actively assert themselves in the world markets of high-tech goods - electrical and electronic equipment, aerospace equipment, precision instruments,fine chemicals and pharmaceuticals. By 2006, the share of such goods in the Czech Republic's exports reached 21.2%, Indonesia -25.5%, Mexico-30.8%, China - 37.2%, Hungary - 39.5%, Thailand - 41.5%, South Korea - 47.2%, Taiwan -54.9%, Malaysia - 70.8%. Its maximum value is recorded in the Philippines - 79.8%9. All these countries are actively integrating into the circle of leaders of the world economy of the XXI century. Against this background, Russia with its 5.6% looks like an outsider-

5 See: V. Mukhin. On the defense industry will hang up the machine tool industry / / Nezavisimaya gazeta. 23.06.2007.

6 See: Russian Economy in 2006, Moscow, 2007, p. 235.

7 See: Kvasov D. Cit. op.

8 See: Russia in figures. 2007. Moscow, 2007. pp. 456, 463, 466.

9 См.: Global-production.com. High-tech exports. June 2007 (http: //www.global-production.com/scoreboard/indicators/hitechex-ports.htm/).


page 16
Table 1. Value added in medium - and high-tech industries per capita in 20 countries, in international dollars 1995

A country

1990

2002

A country

Increase / decrease from 1990 to 2002

United States dollars.

rating

United States dollars.

rating

%

rating

Singapore

3475.3

1

5766.3

1

China

296.0

1

South Korea

1232.9

3

3114.4

2

Thailand

244.8

2

Taiwan

1483.6

2

2576.9

3

South Korea

152.6

3

Israel

1130.9

4

1462.9

4

Malaysia

149.2

4

Malaysia

396.2

10

987.2

5

Indonesia

148.9

5

Czech

813.2

5

914.3

6

Taiwan

73.7

6

Hungary

453.6

8

773.0

7

Hungary

70.4

7

Argentina

413.1

9

582.4

8

India

67.2

8

Saudi Arabia

359.1

12

552.6

9

Singapore

65.9

9

Brazil

471.4

7

468.0

10

Saudi Arabia

53.9

10

Thailand

123.5

15

425.8

11

Poland

52.0

11

Russia

539.3

6

397.1

12

Argentina

41.0

12

South Africa

366.0

11

384.4

13

Philippines

31.0

13

Poland

225.3

14

342.4

14

Israel

29.4

14

Mexico

253.2

13

319.3

15

Mexico

26.1

15

China

52.0

18

205.9

16

Czech

12.4

16

Indonesia

48.6

19

121.0

17

South Africa

5.0

17

Philippines

78.8

17

103.2

18

Brazil

-0.7

18

Romania

218.1

16

99.7

19

Russia

-26.4

19

India

27.1

20

45.3

20

Romania

-54.3

20


Calculated from: UNIDO. World Industrial Development 2005. Vienna, 2005. P. 157-160.

Only countries rich in natural resources, such as South Africa (4.3%) and Saudi Arabia (1.2%), are worse off.

How did the first and second wave NIS manage to make such a breakthrough? A well-thought-out industrial and foreign economic strategy played a decisive role. The countries of Southeast Asia and China have been developing both import-substituting and export-oriented industries since the 1970s. Strengthening the country's export potential, as you know, involves attracting foreign direct investment (FDI) from more developed countries. They bring with them not only, and often not so much financial resources, but advanced technologies, know-how, effective management and marketing. At the same time, the development of domestic industry (import substitution) requires selective protectionism, otherwise more powerful foreign competitors can ruin domestic producers. The combination of benefits and dangers of inclusion in global economic relations requires a well-thought-out economic policy. This is how Japan, South Korea, Taiwan, Hong Kong, and Singapore operated.

Second-wave Asian NIS acted more decisively, gradually expanding FDI access to import-substituting industries. Japanese economists Mitsuo Ando and Fukunari Kimura note: "From the mid-70s to the mid-80s, these countries attracted selective FDI mainly in import-substituting industries. During this period, potentially competitive national industries were protected by allowing foreign companies to operate only in designated regions, such as export-processing zones. Although export-promoting FDI was certainly welcome. In 1985-1986, Malaysia and Thailand, and in 1991-1992. The Philippines, Indonesia, and China have moved from a policy of selective selection of FDI to encouraging essentially any foreign investment. They strive to attract as many foreign companies as possible and form a productive capacity in the region.-

page 17
However, they retain trade barriers in import-substituting industries"10.

Such a strategy makes it possible to increase the potential of domestic producers replacing imports, while at the same time increasing the competitiveness and export potential of those enterprises that directly or indirectly interact with foreign companies. This is largely achieved by developing production cooperation between national and foreign enterprises based on dividing the manufacturing process of a particular end product into separate operations and placing them in different countries.

The international division of the production process (IDP) is influenced by the same economic imperatives as the international division of labor in general-reducing the relative costs of labor and capital per unit of product produced and increasing its price competitiveness on this basis.

Labor costs and capital costs are closely interrelated. In order to reduce labor costs, you can introduce more productive equipment, up to automatic, almost completely replacing live labor. But for the entrepreneur, it is not the displacement itself that is important, but the reduction in the cost of a unit of production. If high-performance equipment costs more or at least as much as you can save on staff fees, then such a modification makes no sense. The costs of labor and capital are also interrelated in another way: the more complex the production technology of a particular product or its component, the more skilled the labor that ensures such a production process must be. But the higher the qualification of labor, the more expensive it is. Thus, any manager constantly has to maintain an optimal ratio between the payment of live labor and the cost of equipment (more precisely, the part of it that is transferred per unit of product in the production process).

This task is made easier by the fact that the production of any final product goes through a number of stages that require labor of different qualifications. For labor-intensive and low-tech industries, the optimal solution may not be to replace live labor with machine labor, but to bring them to those countries where labor of a similar skill level is much cheaper. So, for example, the payment of one manufacturer of electronic chips (including various surcharges) in the United States in 2002 was 300 thousand dollars a year, in Canada - 150 thousand, in Ireland-75. In Taiwan, an employee of the same qualification would have received less than 60 thousand dollars, in India - 30 thousand, in China - 24 - 28 thousand dollars 11. The same scheme is used to reduce other costs - transport, environmental, fiscal, etc.

As a result of the active development of international industrial cooperation, the share of parts and components in the trade turnover of manufacturing products is constantly growing. In 1992-2003, it increased 1.2 times (see Table 2). Its growth is particularly rapid in the newly industrialized countries of the first and second wave. The share of intermediate products in the structure of their foreign trade turnover is significantly higher than in developed countries.

The transfer of certain stages of the production process to developing countries is a direct result of the activities of TNCs deploying their cooperation networks around the world. A good example here is the American company Intel - a leading manufacturer of semiconductors, which accounts for a quarter of the world's research and development in this area and the same part of global sales. The most capital-intensive stages of semiconductor production (manufacturing of silicon boards and their filling) They are carried out mainly in the United States, while more labor-intensive ones (assembly and testing) are taken to countries with relatively cheap labor. At the beginning of this decade, of the 13 companies that produce semiconductors and other computer components, nine were located in the United States, two in Israel, and one each in Ireland and Malaysia. Of the 11 assembly plants, three were located in Malaysia, two each in the Philippines, China and Costa Rica. By the end of 2001, all these enterprises employed 86.2 thousand people, of which about 2/3 were in the United States, 11% in Malaysia, 8% in the Philippines, 4% in Ireland, 3% in Israel, 2% in Costa Rica, and 1% in China12. Similarly, other TNCs in this industry operate: Toshiba, Motorola, Hitachi, Infineon, Philips, Samsung.

As a result of the activities of these TNCs, the countries where their subsidiaries are located have significantly increased their share in the global semiconductor market. By 2000, it had increased to 10.6% in Taiwan, 8.8% in China, 7.8% in Malaysia, and 3.2% in South Korea. Overall, the share of the eight countries in this group (including the Philippines, Thailand, Ireland and Costa Rica) increased from 7% in 1985.

Ando M., Kimura F. 10 The Formation of International Production and Distribution Networks in East Asia // NBER Working Paper 10167. Cambridge MA. December 2003. P. 5.

11 См.: UNCTAD. World Investment Report 2005. Geneva, 2005. P. 174.

12 См.: UNCTAD. World Investment Report 2002. Geneva, 2002. P. 126 - 127.


page 18
Table 2. Parts and components in international trade in manufacturing products

Country and group of countries

Cost of parts and components, billion US dollars

Share of parts and components in export / import, %

1992

1996

2003

2003 to 1992, times

1992

1996

2003

2003 to 1992, times

Export

The world at large

446.7

729.4

1047.8

2.4

17.9

20.3

21.1

1.2

Developed countries

375.9

552.4

667.5

1.8

18.6

20.4

20.2

1.1

Developing countries

70.8

177.0

370.3

5.2

15.0

19.8

23.1

1.5

Philippines

0.8

8.8

20.7

25.9

19.8

52.5

63.8

3.2

Malaysia

10.0

23.5

33.9

3.7

38.7

42.6

42.7

1.1

Singapore

13.0

39.4

56.5

4.3

27.0

39.7

46.7

1.7

Taiwan

12.8

22.4

23.6

2.6

28.3

28.8

39.5

1.4

China

3.6

9.8

59.5

16.5

5.5

9.8

15.2

2.8

Thailand

4.1

9.5

15.8

4.7

19.1

23.4

26.7

1.4

South Korea

11.4

26.7

43.4

3.8

17.1

25.2

25.5

1.5

Hong Kong

14.1

27.9

62.4

4.4

12.9

26.7

29.3

2.3

Import

The world at large

408.2

705.8

1044.3

2.6

16.8

19.8

20.7

1.2

Developed countries

299.0

462.4

582.5

2.0

16.1

18.4

17.0

1.1

Developing countries

109.2

243.4

461.8

4.2

19.5

23.0

28.6

1.5

Philippines

1.9

10.9

19.1

10.1

24.8

43.6

63.1

2.5

Malaysia

11.0

27.1

36.5

3.2

35.2

47.5

55.7

1.6

Singapore

16.0

50.3

49.6

3.1

30.0

42.8

49.2

1.6

Taiwan

12.4

27.5

55.5

4.5

16.9

35.0

37.3

2.2

China

10.6

20.8

105.3

9.9

17.6

21.1

34.3

2.0

Thailand

6.8

20.9

17.2

2.5

24.7

32.9

32.5

1.3

South Korea

12.2

22.6

35.5

2.9

25.2

27.4

33.6

1.3

Hong Kong

15.6

31.2

65.6

4.2

14.7

20.4

31.4

2.1


Источник: Athukorala P. and Yamashita N. Production Fragmentation and Trade Integration: East Asia in a Global Context. Clermont. CA. 25.02.2005. P. 26 - 27.

the total share of developed countries (USA, Japan, England, Germany, France, Italy) and Hong Kong declined from 73% to 38.9% in the same period13. Thus, the production of semiconductors is gradually moving from the countries of the world's scientific and technological vanguard to less developed countries.

Similar processes occur in other manufacturing industries. At the same time, in order to obtain cheaper imported parts and components, large corporations are increasingly using contractual forms of interaction with enterprises that are not part of the system of this TNK. Thus, the global market for contract manufacturing links in the electronics industry expanded from $ 58 billion in 1998 to $ 139 billion in 2002, or 2.4 times 14. This means that MRPP networks extend beyond individual TNCs to form truly global production systems. As a result, the manufacturing process of a complex end product is increasingly relying on outsourcing, i.e. on the supply of relatively cheap parts and components from outside.

Such processes open up new opportunities for less developed countries, which were not known in the past, to join scientific and technological progress. Of course, it starts with the simplest-

13 See: Ibid. P. 128.

14 См.: UNCTAD. World Investment Report 2002. P. 139.


page 19
Table 3. US trade in automotive products with Brazil and China, USD million

Brazil

China

import parts and components

exporting parts and components

import of cars

import parts and components

exporting parts and components

import of cars

1997

1223

613

1

795

311

1

1998

1240

954

2

1037

132

2

1999

1360

454

2

1284

251

1

2000

1248

401

167

1635

225

2

2001

955

444

625

1758

258

3

2002

1275

454

622

2242

344

8

2003

1474

480

546

2788

510

19


Source: U.S. Automotive Trade. 1997 - 2003. On the base of U. S. Bureau of Census. Wash., 20.01.2004.

most time-consuming operations. But we should not forget that such operations are integrated into a single production process and therefore subject to strict technological requirements for quality standards, delivery times and many other requirements that meet the global level of competitiveness. By reducing production costs, the parent company cannot compromise the quality of its products, otherwise it will immediately be squeezed out by competitors, and irreparable damage will be caused to the trademark.

All this forces suppliers of parts and components, as well as enterprises that assemble final products from them, to catch up to the level of world standards. For this purpose, industrial training is organized in a less developed country (often with the help of the parent company), skill schools are created, etc.Some of the staff can be trained abroad at the enterprises of the parent company itself. The management staff consists mainly of people who have received higher education in universities in developed countries. Over time, and by historical standards quite quickly, the general qualification and level of production culture of local personnel increases. This allows us to move on to mastering more complex stages of the production process, for example, from assembling computers to manufacturing their components, or, conversely, from manufacturing relatively simple parts and components to manufacturing high-tech finished products.

This trend, for example, can be clearly traced in the exchange of automotive products between the United States and two less developed countries - Brazil and China (Table 3). At first, American automobile TNCs moved the production of parts and components there, which were then imported to the United States or delivered to third countries. Subsequently, Brazil and China have established their own assembly of cars, so competitive that they are successfully sold in the United States itself.

WHAT DOES RUSSIA LOOK LIKE AGAINST THIS BACKGROUND

Over the past decade, the volume of Russian exports of parts and components (in current prices) has doubled (in developing countries - an average of 5.2 times), and the volume of their imports has tripled (in developing countries - 4.2 times). Thus, in terms of growing into international cooperation in the field of mechanical engineering and automotive industry, we are significantly lagging behind the developing world, not to mention the newly industrialized countries. But the dynamics of the share of parts and components in Russia's foreign trade in manufacturing products looks even worse. If this share in world exports increased by almost 17%, then in Russian exports it fell by 41.4%. In global imports, it increased by 31.8%, while in our country it fell by 30% (Table 4)15. In other words, Russia's involvement in international production cooperation is decreasing. This is especially noticeable against the background of rapidly integrating East Asian countries into the global market space (Table 2).

What are the reasons for this situation? There are several of them. But the main ones, as B. Lazebnik, Chairman of the Board of Directors of Intercos IV, has convincingly shown, are rooted in the socialist past of our machine building industry.16 In the period of the planned economy, when the main thing was not the quality of products, but the fulfillment of tasks on the shaft, most large machine-building enterprises preferred to have their own auxiliary workshops for the production of tools, molds, and metal products, ___

15 In order to avoid distorting the impact of fluctuations in the prices of fuel and raw materials on the overall structure of world trade, comparisons are made only for manufacturing products. However, it is these products that occupy a leading place in the trade turnover. In 2005, its share in the total value of world exports and imports exceeded 85%.

16 See: Lazebnik B. Export in mechanical engineering is primarily the right partnership relations. Konkurentsiya i rynok [Competition and Market]. 2004. N 22.

стр. 20
Table 4. Structure of Russia's foreign trade in manufacturing products, %

Export

Import

intermediate products

including

end products

intermediate products

including

end products

semi-finished products

parts and components

semi-finished products

parts and components

Russia

1996

83.2

77.4

5.8

16.8

56.9

48.2

8.7

43.1

2001

66.1

60.0

6.1

33.9

54.2

45.5

8.7

45.8

2006

75.1

71.7

3.4

24.9

45.8

39.7

6.1

54.2

For reference: the world as a whole

1995

50.9

32.8

18.1

49.1

29.2

12.2

17.0

70.8

2000

53.1

31.6

21.5

46.9

50.7

29.1

21.6

49.3

2005

59.1

37.5

21.6

40.9

52.7

30.3

22.4

47.3


Calculated from: UN. COMTRADE database. N.Y. (http://comtrade.un.org/db/).

Up to 90% of the component base was made by our manufacturers themselves. Only tires, glass, and electrical equipment were bought on the market , according to M. Blokhin, director of the National Automobile Components Association. - In the last 10 - 15 years, the situation is changing, but still the percentage is very high - about sixty"17. Within the framework of such a "natural economy", it was much easier to achieve the necessary quality of components, their receipt on time and in the required quantity, than through production cooperation with other state-owned enterprises, for which teams from above were incomparably more important than any agreements with partners.

But this is a direct path to technological stagnation. As the chairman of the Automobile Component Manufacturers ' Committee of the Association of European Businesses, D. A., recalls. Osipov, "all vertically integrated companies had suppliers (automotive components. - Author). Having reproduced the same part for decades, such suppliers did not have the incentives to improve quality, as well as the engineering, human and financial capabilities, since the entire responsibility for the final product was borne by the customer-the automaker"18. Of course, even then there were cooperative ties between enterprises, but subcontractors systematically disrupted deliveries, shifting the blame for non-fulfillment of plans to each other.

This psychological legacy is very tenacious. The Soviet tradition of treating any buyer, other than the state that allocates funds, as second-rate, who will buy everything that is offered to him, still affects. A low technological and legal culture has also been preserved from the past. In violation of the signed contracts, you may still be supplied with parts or components that do not meet the specified standards. It is very difficult to abandon the guarantees of reliability (at least relative) provided by the "natural economy". Manufacturing is a very inert field. Its tradition is not to change anything, while the market requires constant innovations.

To a certain extent, this also applies to the pride of the Russian machine - building industry-the military-industrial complex. A native of the military-industrial complex B. Lazebnik testifies: "Even in its best years, the same powerful defense complex, as part of the conversion, had no chance of joining international production cooperation without a serious transformation, because it would not have met at least some serious requirements of world quality standards."19

In the early years of the transition to a market economy, Russian machine builders, by inertia, focused on the cooperative ties that developed during the Soviet period, primarily in aircraft construction, automobile construction, military equipment production and in some other industries. Therefore, in the first half of the 1990s, a significant share of Russian exports and imports of parts and components accounted for the Commonwealth. In December 1993, the Ashgabat Agreement on the Development of Industrial Cooperation was signed, which exempted enterprises involved in the joint production of certain final products from paying taxes and duties on cross-border trade. However, it really started working only in February 1998 and was implemented

17 Expert Volga. 07.05.2007. In the same place.

18 Ibid.

19 Ibid.


page 21
mainly between enterprises of Russia, Ukraine, Belarus and Kazakhstan.

By 2004, about 70 Russian companies were involved in cooperative relations with Ukraine. Thus, the AN-148 short-haul jet aircraft developed jointly by the Voronezh Aircraft Building Society and the Antonov Kiev Aviation Company consists of 69% Russian components and 31% Ukrainian components.20 The first four aircraft will be assembled in Voronezh by the end of 2008.2 Joint production of engines for the MS-21 family of aircraft will begin on the basis of cooperation between the Russian MMPP Salyut and the Ukrainian JSC Motor-Sich22.

But industrial cooperation within the CIS is complicated by a number of problems. First of all, because components supplied from neighboring countries do not always correspond to the current level of technology, so Russian enterprises began to give preference to their import from other countries. This way you can quickly improve the technological level of your own production. In addition, there are also political obstacles. So, taking into account the desire of the Ukrainian leadership to join NATO, measures were taken to limit the dependence of the Russian defense complex on suppliers of parts and components for military-industrial enterprises. In May 2005, the Russian Government unilaterally repealed its own decree that provided tax benefits to participants in such cooperation in accordance with the Ashgabat Agreement.23

At the same time, Western partners ' confidence in Russian business and the reforming economic and legal system has increased in recent years. World-class engineering companies began to show interest in the domestic automotive industry and some other industries. Factories for assembling (mainly from imported parts and components) cars of foreign brands are growing in Russia like mushrooms after a rainstorm. Since 1997, Avtotor has been operating in the Kaliningrad Region, assembling cars of the South Korean brand Kia, as well as models of the German company BMW and the American General Motors. Since 1999, TagAZ has been producing Hyundai cars in Taganrog. Since 2002, the plant of the American company Ford has been operating in the Leningrad Region, and since 2004, the company Avtoframos has been operating in Moscow with the participation of the French company Renault. Near St. Petersburg, the American concern General Motors, Japanese Toyota Motors and Nissan Motors are completing their enterprises. In 2007, the first stage of the German Volkswagen plant was put into operation in the Kaluga Region, and the Chinese Great Wall plant in Tatarstan. The Swedish company Volvo plans to build a truck factory in the Kaluga region. French Peugeot Citroen, Japanese Suzuki Motor and Italian Magneti Marelli24. It is expected that by 2010, 1 million passenger cars will be rolled off their production lines annually.

However, this invasion of foreign car assembly plants in Russia requires appropriate provision of their parts and components. Given the relatively low labor costs, it would be desirable to establish their production in our country, in close proximity to car assembly plants. This would allow, among other things, to reduce transport costs, avoid burdensome customs procedures, and avoid creating significant inventory (due to unpredictable border crossing times). But domestic manufacturers are not yet ready to make components at the level of world standards: there is no necessary experience in the role of so-called system integrators, there are no accumulated technologies and design skills, and there are few financial resources.

According to the Ministry of Industry and Energy of the Russian Federation, out of two thousand Russian manufacturers of parts and components for the automotive industry, only 5% have grown to the world level.25 But in order to stay afloat, they also need to cooperate with foreign colleagues not only to acquire new technologies, but also to borrow modern management methods and strategic planning. For the rest, the chances of survival are close to zero, especially in conditions when they began to be squeezed by manufacturers of cheaper automotive components from China, Turkey and India.

In this situation, Russian imports of parts and components for transport engineering are growing rapidly: from 1999 to 2006. it increased 5.5 times. A more complete picture of its dynamics and the geographical structure of Russia's international industrial relations in the form of cooperation is given in Table 5. As can be seen from the table, the geography of purchases of parts and components for vehicles is changing in favor of suppliers from abroad.

20 See: Kommersant. 01.01.2006.

21 See: http // www.derrick.ru

22 See: http // www.armstass.ru

23 See: Kommersant. 01.01.2006.

24 See: Kuznetsova O. V. et al. Investment strategies of Large business, Moscow, 2007, pp. 246-247; Vedomosti. 02.04.2007.

25 See: V. Zucker. Lot of units / / Expert Severo-Zapad. 05.03.2007.


page 22
Table 5. Geographical structure of Russia's foreign trade in parts and components

Vehicle parts and components

Parts and components for other machines

total, USD million

% of total

total, USD million

% of total

CIS countries

EU-15

other countries

CIS countries

EU-15

other countries

Export

1996

1190

48.1

13.0

38.9

1179

52.7

10.3

37.0

1999

1745

18.3

35.8

45.9

911

25.9

9.0

65.1

2002

1350

26.9

17.7

55.4

1465

31.3

6.2

62.5

2006

2175

40.8

13.5

45.7

2874

47.4

5.0

47.6

Import

1996

10041

15.8

38.5

45.7

1271

42.3

27.0

30.7

1999

6607

12.2

55.1

32.7

744

35.2

28.1

36.7

2002

10798

10.7

50.6

38.7

1164

30.3

26.4

43.3

2006

36175

10.0

42.9

47.1

5084

10.6

31.9

57.5


Calculated from: UN. COMTRADE database N.Y. (http://comtrade.un.org/db/).

technologically advanced countries of Western Europe and other regions. And this is good from the point of view of overcoming the lag of the domestic engineering industry. As for Russian exports, the situation is reversed. After the crisis of 1998, an increasing share of it is accounted for by the CIS countries, while the share of the EU-15 has sharply decreased. And this is bad, because the opportunities for including Russian enterprises in the technological chains of well-known Western manufacturers of machinery and equipment are narrowing, and therefore the process of bringing domestic machine builders to their level is being slowed down.

In general, the government should pay close attention to raising the Russian machine-building industry to a world-class level through cooperation with more developed foreign companies. And since 2005, the policy in this area has begun to change fundamentally. The development of strategic and structural transformations of both individual branches of mechanical engineering and the entire complex has begun. Their goal is to achieve the technical level of industry in developed countries. In the "Concept for the development of the Russian Automotive Industry for the period up to 2010" presented in May 2005 by the Ministry of Industry and Energy of the Russian Federation, industrial assembly of foreign cars on the territory of Russia is one of the priorities. The government-approved concept for the development of the Russian aviation industry for the period up to 2015 also sets a course for expanding international cooperation.

In order to implement these priorities, at the end of 2006, the rates of customs tariffs for automobile parts and components imported for industrial assembly, as well as for components and certain types of raw materials for the production of aircraft engines were reduced.

Later, zero import rates were set for this category of goods. However, their introduction is due to the need to gradually reduce the volume of external purchases and expand our own production. It is stipulated that the volume of import of components for the automotive industry in 24 months after the start of assembly was to be reduced by 10%, after 42 months-by another 10%, and after 54-by another 26. In essence, this means that specialized domestic manufacturers of components in the next decade should rise to world quality standards. This is not an easy task. However, even here you can rely on the help of foreign companies of the corresponding profile. There are already encouraging examples. The Russian SOK Group, which produces a quarter of domestic automotive components, has established a number of joint ventures with such well-known companies as HALLA Climat Control, Delphi, and HELLA. Cooperation of this kind can accelerate the adaptation of our automakers to new market conditions.

Unfortunately, only a narrow segment of the Russian mechanical engineering industry has seen positive developments so far. The main part of it, including machine and instrument engineering, is still distanced from international industrial cooperation. The import of parts and components for these industries is more than 7 times lower than their import for the production of vehicles. If urgent measures are not taken, the domestic machine-building industry is doomed to further lag behind the world level. With all the ensuing consequences for the Russian economy as a whole.

26 See: Russian Economy in 2007, p. 332.


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