Page 34 - RusRPTSept20

COVID has decimated Russian business, a new report from consulting firm FinExpertiza finds. From March-May, the profits of Russian businesses (excluding small firms) fell 67% on an annualized basis. This is the worst decline since the firm began conducting the analysis 16 years ago. Over a third of Russian companies found themselves in the red during this time, cumulatively losing 1.65 trillion rubles ($22.6bn). The remaining two-thirds of companies earned profits, bringing the total profit of Russian firms from March- May to 1.4 trillion rubles ($19.2bn).
At the end of July, president Vladimir Putin approved a law that gives the government the power to designate minimum domestic content in procurements of the public sector and state-owned enterprises (SOEs), Bank of Finland Institute for Economies in Transition (BOFIT) reported on August 14.
The domestic-content rules had been on the table for a while as a part of Russia's import substitution policies. The new law increases the opportunities for the government to favour domestic producers. Certain imported products are already banned for public procurements under earlier legislation and domestically produced products already enjoy a competitive edge in SOE procurement.
As bne IntelliNews argued recently in “The Moscow Consensus” countries in the emerging markets have partly rejected the liberal free market ideology of the so-called Washington Consensus and adopted instead a hybrid Moscow Consensus where the state plays a more important role.
Part of this is limited protectionism to allow domestic industry to compete against better quality and lower priced foreign imports. This also means a partial rejection of the ideas of free trade and globalism. Part of the motivation is also political as countries like Russia seek a measure of autarky for national security reasons and are willing to forgo the better profitability of commerce based entirely on private enterprise in exchange for the political power maintain control over the most strategically important companies brings.
It is still unclear, which branches are affected or how much domestic content will be required. Deputy prime minister Yuri Borisov mentioned that the domestic-content for public sector and SOE procurements currently averages around 30%. Sergei Chemezov, CEO of the state-owned conglomerate Rostech, estimates that the domestic content of high-tech procurements for SOEs is currently only around 3–5%. The total value of public sector and SOE procurements last year was about 30 trillion rubles (400bn euros), which corresponds to nearly 30% of GDP.
Some observers see the domestic content quotas as largely an effort to
34 RUSSIA Country Report September 2020 www.intellinews.com