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SUCCESS SECRET SUCCESS SECRET

a wide variety of products were ‘‘imposed‘‘on consumers is an absolutely unrealistic task for the The ‘‘export-oriented import substitution‘‘ became even more active after the devaluation
work of Russian officials in conditions of very high intensity (not to be confused with efficiency). of the ruble in 2014-2015. All domestic costs became much lower than in neighboring countries,
Third: for most types of modern equipment, poor product quality is a rarity. In modern and the level of salaries in cities with a population of less than 1 million people and in rural areas
automated production with integrated quality control, this is almost impossible. This applies not on average was lower than in Chinese special economic zones. Many Russian enterprises, still
only to European and Japanese equipment, but also to Russian and Chinese. competing fiercely with each other in the domestic market, found that their products began to be
in demand abroad. With very good quality, it now costs half the price. Goods tourism has arisen.
Myth 7: support for import substitution projects is technology support yesterday Foreigners began to come to Russia to purchase our goods, up to cars: quality control at Ford
When the state supports investment projects, but instead requires the purchase of factories in the Russian Federation, in The United States is one, and our price is lower.
domestic equipment, from this it does not at all follow that it will be obsolete. Entrepreneurs Now many new projects are presented to investors already with sections in business plans
are not enemies of themselves and they will not buy what quickly breaks or will be exploited at devoted to export prospects. And the Industrial Development Fund generally gives priority to
great cost. They will study the entire market and choose the best equipment in value for money. projects that define themselves as an ‘‘export-oriented import substitution‘‘.
Moreover, if they do not find a suitable one, they will persistently to prove to the authorities
that import cannot be done so far, and exchange this condition state support for some other, for Myth 10: the ruble will strengthen - and all efforts to reduce import dependence will be
example, for participation in a particular social project. By the way, the Industrial Development ruined
Fund pays close attention to the level of Perhaps this is the most serious myth of those considered. The strengthening of the ruble
purchased equipment. In addition, often it and the associated decline in prices for imported goods may resume the crowding out of domestic
turns out that the technology is not today products, which lasted for many years. Our non-commodity goods and services will begin to lose
and not yesterday, but tomorrow. market niches. There is such a risk, but, like any risk, it must be assessed, not mythologized.
Now, despite the sanctions, our What can be the reasons for the strengthening of the ruble and what is the probability of their
economy remains open and marketable, occurrence? Among all the reasons, we distinguish two main ones: the increase in the price of oil
entrepreneurship is not prohibited, and, and the lifting of sanctions and anti-sanctions, and, therefore, a powerful inflow of capital into the
therefore, any private initiative to implement country.
an investment project in Russia based on This is unlikely to happen. First, the likelihood that the price of oil in the coming years will
the import of equipment or components steadily overcome the bar of $ 60 per barrel, is minimal. Secondly, world history shows that
and fully private financing has a chance. sanctions can usually be imposed quickly and simply, and canceling them is a long and very
However, such projects are not enough for difficult undertaking. A classic example: the Jackson-Vanik amendment lasted more than 20
our country, and the state is only forced to years after the formal reason for it disappeared introduction.
fill this gap by helping private borrowers Likely scenario: sanctions and low oil prices are a long time, which means the scope for the
with cheap lending. development of import substitution is great. Moreover, do not be afraid of a variety of sources
to expand import substitution, especially those that involve non-budget financing. For example,
Myth 8: support for import substitution projects is support for those who simply got use the purchase by the Bank of Russia of long bonds of development institutions. This will not
a refusal from banks immediately affect the prices of the consumer market, will not affect budgetary obligations, but
Banks refuse not only because the project is bad, inefficient or unpromising in terms of will allow to realize in Russia modern, tested in the USA, Japan and in many other countries non-
competition. Often there is not enough security. Or the interest rate does not allow to bring the inflationary emission mechanisms.
project into the zone of confident payback. On the other hand, the bank is forced to present
additional conditions and covenants to the potential borrower, which it is not able to fulfill.
However, the same project with the same initiator can be implemented in other countries.
Therefore, the refusal of a Russian bank from lending is far from always a consequence of the kommersant
poor quality of the project.
Our banks operate in Russian conditions, the main of which for them are the requirements
and actions of the Central Bank. Regulation of the foreign exchange market through a sharp
increase in the key interest rate in December 2014 led to higher inflation and more difficult
access to finance. Even worse, the investment process is affected by constant requirements
for additional accrual of reserves for loans issued to finance long-term projects. As a result,
private project financing in Russia is almost impossible without state assistance. Joint actions
of banks and various development institutions, such as The Industrial Development Fund, the
SME Corporation (formerly the Credit Guarantee Agency), the Monotown Development Fund,
etc. This activity is largely compelled, a consequence of the Central Bank’s policy.

My th 9: even after implementing the import substitution project, export will not
work
This myth is usually based on previous ones and assumes that the result import substitution
- low-quality and uncompetitive products, which have no chance to win a niche in the world
market. Life itself refutes this myth: an increasing number of Russian goods and services that
successfully compete with domestic imports enter the world market. This process began many
years ago, when the ruble was relatively strong, and competition in non-oil markets abroad was
quite not an easy task. But even then, almost every large enterprise has at least something,
yes exported from Kalashnikov assault rifles to accounting programs of 1C.

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