Attention!

The VVS company provides exclusively analytical services and does not consult on theoretical issues of marketing fundamentals(calculation of capacity, pricing methods, etc.)

This article is for informational purposes only!

You can familiarize yourself with the full list of our services.

In contact with

Classmates

Three years have passed since the introduction of sanctions against the Russian Federation in 2014. At the very beginning, the question arose of reducing the dependence of the country's economy on Western producers. The government created an import substitution program, the results of which can now be assessed by the decline in the import of imported goods. The highest profits came from certain import substitution sectors in 2016; we will analyze them below.

The most developed sectors of import substitution in Russia

Among the ten most dynamically developing segments of the Russian economy, which are included, mechanical engineering occupies the last step.

• Place number 10. Mechanical engineering.

The fundamental sector of the economy of the Russian state, unfortunately, was more than 80% dependent on the import of products from outside. This means that the entire economic system of the country is vulnerable. It should be noted that at this stage, the work of machine-building enterprises, suspended due to restrictions, is being restored. For example, the Saratov Heavy Gear Cutting Machine Plant is resuming its activities, the Chernovskiye TsEMM enterprise is once again producing components for mining equipment, and new models of hydraulic excavators are rolling off the Uralmashplant assembly line.

• Place No. 9. Textile production.

In various sectors of the sector, imports ranged from approximately 30 to 50%. The main problems of light industry that import substitution can solve: there are not enough enterprises in the country engaged in the production of fabrics, sewing clothes, and there is also a limited supply of primary products on the domestic market - cotton, flax, etc.

In this industry of import substitution, new or redirected old production has already begun work: the clothing factory of BTK Knitwear LLC in the Tula region has been modernized, the Textile Industry company has opened in Kabardino-Balkaria - one of the largest knitwear manufacturers in the country.

Breeding work is underway to develop cold-resistant cotton varieties for cultivation in cool agricultural regions of Russia. Thus, the Volgograd region has been a supplier of this raw material on the domestic market of the Russian Federation for two years now.

• Place No. 8. Production of fish products.

Previously, import substitution was not a problem in this industry, since imports here were relatively small. But here, thanks to investments, significant changes have appeared. LLC Fishing Company Polar Sea+ opened a fish and seafood processing factory in the Murmansk region with the ability to produce up to 10,000 tons of finished product per year. Among other things, it uses super-freezing technology to produce frozen fish.

Three years ago, tilapia was supplied to Russia exclusively from abroad; now this fish is grown in the Astrakhan region. The new farm will produce up to 1,000 tons of products per year. And the Khabarovsk Territory is implementing an import substitution program - creating a fish processing enterprise on the basis of old workshops.

• Place No. 7. Tourist services.

Many Russian regions, before the introduction of the import substitution policy, were of little interest to the tourism industry due to the lack of infrastructure, developed routes and interesting sites to visit. At the level of regional authorities, new tourism brands are being developed and investors are being attracted. This industry is looking for destinations that attract not only those who like to actively relax and get emotional relief. The emphasis is on intellectual, gastronomic and medical tourism, visiting new unique cultural centers.

Novorossiysk implements a new type of service for the region - wine tourism. A number of new routes are being introduced, such as the “Silver Necklace of Russia”, with a focus on import substitution, expanding the existing Altai resort areas. The introduction of a national ticket reservation system is very important for the development of domestic tourism.

• Place No. 6. Oil and gas production.

The oil and gas industry brings the largest revenues to the treasury of the Russian Federation. A number of enterprises in this sector actively participated in their industry’s import substitution program in 2016 and earlier. Gazprom responded promptly - it will receive specific equipment for the gas industry from the domestic plant Trubodetal.

The import substitution strategy promotes the development of domestic manufacturing bases through investment programs. Thanks to them, Prompribor began to produce equipment for transporting raw materials from the well itself to the processing site.

• Place No. 5. Medical industry.

In this industry of import substitution, the emphasis is on pharmacological innovations and the creation of something fundamentally new. Russian analogues of imported drugs are being introduced. Generics of medicines that were previously imported from abroad are already produced in Kazan. Intelligent prostheses for children are manufactured in Arkhangelsk, innovative drugs to combat tuberculosis and atherosclerosis are created in the Irkutsk region. In accordance with the new industrial policy and focus on import substitution, clustering of pharmaceutical production is being introduced in the regions, which will help stabilize the industry and integrate scientific developments and widespread production.

• Place No. 4. Transport production.

Imports almost played a key role in the production of basic parts for most types of transport. After the introduction of new economic strategies for a number of transport complexes, the use of domestic components increased to 93%. Russia, addressing the issue of import substitution in this industry, is expanding its production, and Transpnevmatika OJSC will now produce the latest braking equipment for trains at its base. Including for Gazprom, Kurgankhimmash launched the production of offshore tank containers, which until now have not been produced in our country. The Ulan-Ude LVRZ has mastered the production of components previously imported from Ukraine for the repair of diesel locomotives.

• Place No. 3. Production of computer software.

Unfortunately, the use of foreign software still prevails in the country. Without office suites and special programs, the work of large companies and corporations will be paralyzed, and the public administration system will fail. The transfer of major enterprises and government bodies to Russian software developments is one of the most important tasks of import substitution.

To build reliable information systems in each industry that are protected from intrusions of various kinds, our own Zircon integration platform has been created. The development of the Unified Register of Russian Software has been completed. In fact, Russian Railways, Rostelecom, Sberbank and other key companies of the Russian Federation were excluded from their work by Western programs. Work is actively underway on import substitution in the field of mobile operating systems.

• Place No. 2. Chemical industry.

Leading chemists, as part of the program for this sector of import substitution, are tasked with synthesizing substances that can open up new opportunities for Russian industry. As a result of research, the first plant in the Russian Federation for the production of modern packaging was opened in Tatarstan. PJSC Omsk Kauchuk is restoring the production of commercial latex. And Nizhnekamskneftekhim began producing polyethylene for cable insulation coating, previously produced from foreign materials.

• Place No. 1. Agricultural production.

Western sanctions have caused noticeable changes in the country's agricultural sector. A colossal layer of agricultural products required import substitution - from meat and dairy products to elite seeds. Several years of work to saturate the domestic market with such goods have yielded noticeable results.<

For example, Altai supplies marbled beef under the import substitution program, and production is growing. Over 1,500 hectares of area have been allocated for growing horticultural crops in Dagestan. The Cherkizov Group is expanding its poultry farming in the Lipetsk region. Thanks to the construction of the greenhouse plant, TyumenAgro has become the largest supplier of fresh plant products in the region. Every year the development of all areas of the agricultural sector in the Russian Federation is gaining momentum.

The leading sector of import substitution in 2016 is agriculture

One of the highly profitable industries in Russia is the agro-industrial complex. Its resources, with an appropriate level of technical support, were sufficient to support production in this segment. The laws of economic competition dictate the need to increase the efficiency of all subjects of market relations.

But our producers, unfortunately, were not sufficiently prepared for foreign commodity expansion; this was partly the reason for the reformation of economic policy. Import substitution has become the best solution in this difficult situation. For the Russian agricultural sector, it is intended to become a kind of bridge for the transition to a new technological level of work.

The concept of the import substitution program in the industry harmoniously fits into the main ideas of the “Doctrine of Food Security of the Russian Federation”, approved in 2010. The latest document has been revised several times, but its essence remains unchanged: in the Russian market it is necessary to create conditions that allow domestic producers to stand firmly on their feet, which will make the industry's economy virtually independent of the import of goods from outside. Import substitution eventually became one of the ways to implement the doctrine. The decrease in the import of imported products, by the way, led to a correction in the development program for the Russian agricultural sector.

But questions also arose in the field of macroeconomics, technological base and agro-ecological factors. These problems may be exacerbated in the event of a significant reduction in imports or a complete rejection of foreign products. Experts recommend not to be overzealous with restrictions and maintain a balance.

Objectives for the development of the agro-industrial complex:

The primary task in this area of ​​import substitution is to support the integration process, which is aimed at improving the interaction of economic entities in the agricultural sector at different levels of management.

Optimization of effective control and management of the agro-industrial complex, which will help increase the productivity of farming as the basis of the entire industry.

Stimulating (as part of import substitution) the introduction of new economic instruments to support the industry, optimizing logistics in the process of interaction between partners, actively resolving issues of distribution and consumption of finished products and raw materials.

As a result of a study of the work of agricultural enterprises, their ineffectiveness in meeting the needs of modern consumers was revealed. This applies to both the quality of the product and secondary issues of interaction between all subjects.

The strategic goals that the state import substitution program sets for farmers can be achieved provided that a number of issues that have arisen in this industry for a long time are resolved. Among other things, it is necessary to expand the flow of investment in agriculture, optimize efficient land use, land reclamation, eliminate production stagnation in cattle breeding, stimulate domestic mechanical engineering to solve the needs of agriculture, etc.

Factors and features of agricultural development in the Russian Federation:

This industry is still partially dependent on supplies from abroad. It is not possible to fully provide the corresponding niches with your product in all its segments. As a result, there is a imbalance in production efficiency in various sub-sectors.

In the agricultural sector of import substitution, everything significantly depends on government support. Therefore, a whole array of measures, including a program for the development of private farming, is being developed at the state level, with an emphasis on regions with great agro-industrial potential.

The technical and technological backwardness of the industry is an important problem of import substitution, which stands in the way of increasing the efficiency of agricultural enterprises. The income of primary level producers in the agricultural process is not enough to modernize the technical base.

Market accessibility for producers also plays a big role. The backward infrastructure hinders the solution of the tasks set by the import substitution program in agriculture. Its inefficiency greatly affects the industry itself and the economic situation as a whole. This is clearly reflected in small enterprises, which are already struggling to compete with large chains of Russian commodity producers.

At this stage of the import substitution program, the Russian market is closed to foreign manufacturers. But it is completely unreasonable to reject foreign experience in the agricultural sector. For example, import substitution in agriculture can lead to a system based on the principle of closed production within the industry. Manufacturers will be involved in logistics chains and supplying goods to shelves. But a deep modernization of interaction patterns between market participants at all levels will be required. But the producers themselves will significantly increase their income, and for the consumer the price of the product will be significantly lower.

Problems in the development of the import substitution industry

The Federal Customs Service indicated that by mid-2017, the import of foreign products into Russia increased by almost 1/4. Various conclusions emerge. For example, the process of import substitution in any sector is so far nothing more than a utopia for the Russian economy. Or maybe this is the result of increased demand, i.e. the increased percentage of purchases shows that the crisis situation for consumers and investors is gradually being resolved. In any case, the ruble exchange rate is still a key stimulator of imports.

Compared to favorable times for the country, import figures are low, despite a jump in this figure at the beginning of 2017. In the second half of the pre-crisis year 2014, Russians purchased foreign goods worth $152 billion. And the last result slightly exceeded 1/2 of the data for this period.

The “machinery and equipment” category, despite the achievements of the mechanical engineering industry in import substitution, is the leader in foreign supplies. May 2017 – 52.2% (of total imports), June – 53%. Last June, 2016, showed 49%, and these figures can become proof of positive trends in the country’s economy.

But imports of consumer goods have also increased significantly. Thus, in June, footwear and textile products were imported by 36.2% more. The total amount turned out to be over a billion dollars. Imports of medicines also increased slightly.

The strengthening of the ruble exchange rate was enough for a rapid increase in purchases from abroad. At the beginning of 2016, the average value of the dollar fluctuated around 70 rubles, and 57-58 rubles in the first half of 2017. The above examples showed the inconsistency of import substitution programs for most industries.

There is an exception. Import indicators in the agricultural sector and food production continue to decline. Against the background of a jump in import purchases in other industries, a decrease of 3.1% seems noticeable. The tasks in this area of ​​import substitution are still gradually being realized.

The decrease in imports is partly due to the continued reduction in spending by our citizens. The demand for premium products, most often of imported origin, has fallen almost to zero. And the lifting of the embargo in the food industry is not yet expected.

But a major problem in macroeconomics may arise: with an increase in imports, GDP growth (part of which is net exports) will begin to decline, due to the fact that the balance of payments will decrease. Although, according to experts, this is a matter of the distant future.

Russian industry, like the entire Russian economy, after the devaluation of the ruble in December 2014, has been “living” for several years under the new exchange rate of the national currency and in the conditions of its free formation. These years allowed all participants in the process to accumulate practical experience of living in such conditions, to actually test previous (theoretical) ideas about the benefits and consequences of ruble devaluation for the Russian economy, to adapt to the actual exchange rate of the national currency and to formulate their ideas about its desired change. However, quantitative assessment of these processes and identification of problems and positions of economic agents turned out to be difficult tasks for domestic statistics.

The traditional approach to the analysis of import substitution, based on foreign trade statistics, allows for a limited analysis of these processes in modern conditions. Understanding the complexity of measuring import dependence and import substitution and the associated problems with the high demand in modern conditions for real data forces us to turn to a more flexible tool - surveys. The results obtained in this way can provide a much more complete and in-depth picture of these problems than general foreign trade statistics.

The attitude of Russian industry to the devaluation of the ruble

At the beginning of 2015, with the onset of the official crisis, authorities and analysts began developing anti-crisis measures. As part of this work, the Laboratory conducted a survey of industrial enterprises in order to assess the effectiveness of the then discussed set of measures to support Russian industry. We also included two “exchange rate” anti-crisis measures in this set: “strengthening the ruble exchange rate” and “continuing the devaluation of the ruble.”

Domestic producers, who, in accordance with traditional ideas, were supposed to rejoice at the devaluation of the ruble due to the inevitable switch of consumers from more expensive imports to Russian analogues, the strengthening of the ruble was put in first place among the anti-crisis measures considered by officials at that time. 58% of enterprises voted for it - the same number as for the tax cut. And only 2% of enterprises were in favor of continuing the devaluation in February 2015 (see Fig. 1). This, at first glance, unexpected result is quite consistent with the pre-crisis attitude of Russian enterprises towards the devaluation of the ruble. A similar monitoring of anti-crisis measures in 2012-2014, launched by us during the discussion of the possibility of the so-called “second wave of the crisis,” demonstrated a very definite attitude of Russian industry towards any variants of devaluation known to it: both sharp (like 1998) and smooth (like 2008-2009). The first option always took last place in the ranking with 1-4% of votes, the second is 2-4 positions higher with the support of 10-13% of enterprises.

Thus, the industry, not theoretically, but practically, faced with the devaluation of the ruble at the beginning of 2015, needed, to use the terminology of system programmers, a “rollback” of the ruble exchange rate.

The demand of Russian industry for a strong ruble is determined by the latter's high dependence on imported equipment and raw materials. Our surveys in 2014 (April and December) showed the critical dependence of Russian industrial enterprises on imported equipment, components, and raw materials (see Fig. 2). In April 2014, when, let us recall, the terms “devaluation” and “import substitution” were not part of the vocabulary of the majority of politicians, economists and production workers, 40% of enterprises admitted that they would not be able to refuse to purchase imports no matter how much their prices increased . At that time, this result was perceived calmly and had more academic significance than political significance. By chance, exactly the same question was included in the December (2014) questionnaire and - what’s surprising! – showed exactly the same results: about 40% of enterprises were still not ready to refuse to purchase imports no matter how prices increased. Even in the context of the strongest devaluation of the ruble since August 1998, when a jump in import prices moved from a hypothetical scenario into reality.

Problems of import substitution in Russian industry

The obvious reluctance of Russian industrial enterprises to refuse to purchase imported equipment and raw materials even in the face of an inevitable (which became obvious to everyone in December 2014) price increase forced us to begin monitoring obstacles to import substitution in 2015. Over the past four years, we have asked the question six times: “What prevents your company from refusing to purchase imported equipment and raw materials in favor of domestic?” The answers give a fairly complete picture of the real problems of import substitution in enterprise procurement.

The main problem in refusing to import was and still remains the banal lack of Russian analogues of any quality. It turned out that the January (2015) assessments of import substitution barriers were not an emotional outburst that followed the shock December devaluation of the ruble. And the four-year monitoring did not reveal significant positive results in terms of the creation in the territory of the Russian Federation of production of new (i.e., previously not produced) equipment and raw materials (see Fig. 3).

Second place in the general industry ranking of obstacles to import substitution consistently belongs to the low quality of Russian analogues of the imports usually purchased. A significant portion of enterprises (a third on average over six surveys) constantly point to this problem. Other restrictions on import substitution are mentioned by Russian industrial enterprises much less frequently. Formally, according to the results of six measurements, the industry gave third place to insufficient government support for the production of domestic equipment and raw materials - i.e. assessment of the authorities' policy in the field of import substitution. On the one hand, the ineffectiveness of official policy is not that great - a modest 18% at most. On the other hand, its result has not yet been discovered by enterprises; enterprises consistently consider the physical absence of Russian analogues to be the main problem of import substitution. This combination suggests that Russian industry does not place much hope on the state in the field of import substitution and relies mainly on its own strengths, including in adapting to the new ruble exchange rate. And in this regard, by the end of 2017, the domestic industry demonstrated clear success: the negative impact on output of “the weakening of the ruble exchange rate and the rise in prices of imported equipment and raw materials” (wording from the IEP questionnaire) at the end of 2017 decreased to 6%.

Estimates of already produced Russian analogues of imported equipment and raw materials are also quite stable and definite. On average, 11% of its buyers among Russian enterprises have complaints about inadequate quality prices for Russian products that can replace imports, and these complaints have not changed in scale over the four years of devaluation.

Particular attention should be paid to assessments of the ability of Russian industry to increase output as part of import substitution. The problem of meeting the demand for products already produced in the Russian Federation is mentioned by an average of 12% of enterprises. Russian industry has sufficient reserve (idle) capacity to produce products in the event of an increase in demand for it as part of import substitution.

Thus, over the years of the existence of Russian industry in the conditions of devaluation and the state policy of import substitution, the structure of restrictions on import substitution, according to enterprises, has not fundamentally changed.

Successes of import substitution

However, the processes of import substitution are underway and, judging by the political news available at the time of writing, will remain relevant for our economy for a long time. In such a situation, there is a need to monitor them, ideally, in our opinion, on a quarterly basis and not only the actual processes, but also the plans of enterprises in this area. This problem is solved by new indicators of regular surveys of industrial enterprises of the E.T. Gaidar Institute of Economic Policy.

As our monitoring of 2015-2018 shows, Russian industry has almost always managed to achieve the greatest success in the field of import substitution when purchasing machinery and equipment (see Fig. 4). The maximum intensity of this process was recorded in the second quarter. 2015, when 30% of industrial enterprises reported a reduction in the physical share or a complete refusal to purchase imported machinery and equipment (compared to the second quarter of 2014). Perhaps the result of the first quarter. 2015 had a more impressive scale of import substitution, but on the other hand, it would probably have been the first and too emotional reaction to the shock of the December devaluation, especially in terms of plans.

However, in the next thirteen quarters of our monitoring, Russian industry begins to reduce the intensity of actual import substitution. And in the fourth quarter. In 2017, only 7% of enterprises report a decrease or complete zeroing of the physical share of imports in purchases of machinery and equipment. Russian industry refused imported raw materials and materials less intensively due to the lower potential for import substitution in this area. The maximum scale of import substitution for raw materials amounted to 22% and by the fourth quarter. 2017 decreased to 8%. The reasons for such modest successes were most likely the dependence of Russian industry on imports that had formed in previous years. When purchasing imported equipment, Russian enterprises are forced to switch to raw materials and supplies that are adequate for imported equipment, which are not produced here, but are supplied by foreign manufacturers who usually offer complex supplies and do not miss the opportunity to tie the Russian buyer to their products at all stages of their use.

Another reason for the slow import substitution of imported raw materials and supplies was the sluggish nature of the 2015-2016 crisis, which did not lead to a sharp reduction in demand for domestic products and, accordingly, output in Russian industry. In such a situation, there was no need for a large-scale (simultaneous) refusal of increasingly expensive imported raw materials and materials, which supported the demand of enterprises for the raw materials and materials they use, including imported ones.

Let us now consider the industry's plans for import substitution (see Fig. 5) from the third quarter. 2015 (July 2015 survey) to IV quarter. 2018 (October 2018 survey).

Quarterly import substitution plans show that the industry only in 2015 planned a less intensive import substitution of raw materials and materials than of machinery and equipment. Plans for 2016-2017 have already demonstrated the identity of the intentions of Russian manufacturers in this area. The obvious failure of investment plans and the completely non-failure (non-crisis) scale of the fall in output predetermined such a divergence in the plans of Russian industry in 2015. The situation in 2016 is already different: Russian industry was able to assess the features of the protracted crisis of 2015-2016, adapt to new production conditions and to new exchange rate policy of the Bank of Russia. Including in the field of investment. The plans of the latter began to lose the pessimism of the first crisis year and began to show some signs of a possible increase in investment in their own production. The strengthening of the ruble exchange rate and relatively good financial results allowed enterprises to once again turn to imported machinery and equipment.

A feature of import substitution plans has always been the unconditional modesty of even the intentions of manufacturers in this area: the scale of their planned import substitution has always been inferior to the scale of import conservation planned by them for all categories of purchases (both equipment and raw materials). Those. industry preferred (or rather, due to identified obstacles to import substitution, was forced) to maintain the previous share of imports in new equipment and raw materials used.

Investment preferences and investment plans of Russian industry

The import substitution policy, which received high priority after Russia entered the war of sanctions in August 2014, and since December 2014 also received universal support in the form of a weak ruble, acquired new features in 2018. In April, the Ministry of Industry and Trade of the Russian Federation already developed measures to force import substitution: it prepared an extensive list of machinery, equipment and materials that state-owned companies will not be able to buy abroad from July 1 without the approval of the government commission on import substitution.

In such conditions, Russian industrial enterprises show (or are forced to show) a high interest in domestic machinery and equipment. This conclusion is supported by the results of two IEP surveys: 2011 and 2018. During these surveys, conducted in the wake of the last two crises, enterprises were asked the same set of questions about equipment from which countries were actually purchased in the previous period, planned to be purchased in the near future, and would be preferable to purchase.

Let us first consider what equipment (produced in which countries) was actually purchased by Russian industry in the years preceding the two surveys (see Fig. 6). The main suppliers of means of production for domestic enterprises have always been Western Europe and Russia itself, with a small but still advantage of imports. Double devaluation of the ruble in December 2014 and the sanctions war of 2014-2017. had little impact on the geography of purchases of machinery and equipment from the main supplier countries. Western Europe retained first place in 2018 with a 71% level of actual popularity among Russian industry after a 77% level in 2011. However, domestic manufacturers of machinery and equipment were unable to acquire new buyers in their country.

But more significant changes have occurred among second-tier supplying countries. The share of Russian enterprises purchasing American and Japanese equipment decreased between the two surveys from 33 to 22%, which is still not as large as could be expected in the context of the strongest devaluation of the national currency since 1998 and administrative bans on supplies/purchases equipment. Equipment suppliers from China and India, on the contrary, benefited from the sanctions war, which Russia entered in August 1914. They were able to achieve sales of their products to 35% of Russian industrial enterprises after 19% seven years earlier. The decrease in the prevalence of purchases of machinery and equipment produced in the CIS countries is most likely explained by the curtailment of trade between Russia and Ukraine for political reasons.

At the next stage, we will consider the investment preferences of Russian enterprises – i.e. what equipment the domestic industry would like to buy in 2011 and 2018. As the graph shows, the preferences of domestic enterprises have undergone obvious changes over the past 7 years (see Fig. 7). Firstly, the preference (prevalence of preferences) for Russian equipment took 2nd place in the 2018 ranking. Now half of the Russian industry prefers to buy domestic equipment. Secondly, the most severe losses (from 40% of the level of preferences to 27% of the level) in the eyes of Russian enterprises and in the conditions of 2018 were suffered by manufacturers in the USA and Japan, which as a result fell back to 3rd place. Thirdly, machines and equipment made in Western Europe remain the most desirable for domestic enterprises - even after the weakening of the ruble and many years of sanctions war. The latter, perhaps, is not conducted very consistently by the parties, although sometimes loud public “skirmishes” occur. As a result, now 69% of Russian enterprises would like to purchase machinery and equipment from Western Europe. Fourthly, equipment from China and India has a very low preference in the eyes of Russian enterprises. The maximum that manufacturers from these countries were able to achieve is 8% and is on the same level as the preference for equipment from the CIS countries. The latter lost several points of preference by 2018 due, most likely, to the severance of economic ties between Russia and Ukraine in previous years.

Let us now consider the investment plans of Russian industry - which countries actually plan to purchase machinery and equipment in the coming years and what equipment domestic enterprises planned to purchase in 2011 (see Fig. 8). The answers to these questions show a fundamental change in the intentions of Russian industry. If in 2011 Western European equipment was confidently ahead of Russian equipment in plans (72% of enterprises were planning to purchase the former versus 50% of enterprises intending to buy Russian), then by 2018 the plans were equal (purchase of both equipment was included in the plans of 65% of enterprises ). Thus, the policy of investment import substitution is a clear success. At least in a quantitative aspect.

A partial answer to the question about the quality of the replaced Western European equipment is provided by data on the increase in the share of enterprises whose plans include the purchase of equipment made in China and India. This share has doubled and is, rather, a sign of a transition to cheaper, more accessible (including under sanctions) and still lower quality equipment. And at the enterprise level, this circumstance is well understood. If we compare the preferences and plans of enterprises in 2018, the plans for purchasing equipment from China and India significantly exceed the preferences of enterprises: 35% versus 8%. Russian industry, therefore, is now forced, due to current circumstances, to switch to not the best equipment. In 2011, a similar transition also took place, but was on a smaller scale: 18% of enterprises then reported plans to purchase Chinese and Indian equipment, while only 4% of enterprises wanted to have it. A similar situation arises with regard to Russian equipment. About half of Russian enterprises would like (prefer) to purchase it, but 65% of enterprises plan (will be forced) to do so in the next years.

The import substitution policy, which replaced the modernization policy in 2014, definitely faces difficulties, which will be overcome in 2015-2018. It's premature to say. Pre-devaluation assessments of enterprises in 2014 showed the critical dependence of Russian industry on imports. And the main obstacle to import substitution in industrial procurement remains the lack of production in the Russian Federation of the equipment, components and raw materials needed by enterprises. Even after four years of active implementation of the official import substitution policy. The second problem of import substitution is the low quality of domestic products. At the same time, Russian industry is able to satisfy the increase in import-substituting demand for those products that are already produced in the country, i.e. has sufficient idle capacity. In such a situation, domestic enterprises are forced in the absolute majority to maintain the same share of imports in their purchases, both actual and planned. Strengthening the ruble exchange rate and successful adaptation of industry to the sluggish crisis of 2015-2016. allowed the industry to reduce the scale of import substitution in its purchases in 2017 to a minimum of four-year monitoring.

Import substitution is the process of gradually replacing foreign goods with domestically produced analogues. In Russia, this issue became particularly relevant after 2014, when the country faced sanctions. We decided to use Rosstat data to see how the import substitution program is progressing in the Russian Federation, in which areas it is being implemented, and which areas it affects.

In our previous material “”, we discussed in detail the structure of imports to Russia. Then it turned out that the country was spending a lot of money on purchasing foreign equipment and machine tools. This position takes up almost half of all imports. Also at the top of the ranking of key goods imported into the Russian Federation are medicines, clothing, and meat.

And it is in these industries that the authorities want to restore order through the import substitution program, achieving independent production of import-substituting goods and products.

And using the example of the first table, we can already see how the process is progressing. Since 2014, when Russia banned the import of agricultural products, raw materials and food from a number of countries into its territory with retaliatory sanctions, the country has actively developed its own production. For example, it is clear that the production of beef, pork, milk, cream, and cottage cheese has grown well.

Production of import-substituting products in the Russian Federation (Rosstat)

Name	2014, thousand tons	2016, thousand tons	2018, thousand tons
Fresh cattle meat, chilled	185	195	226
Steamed pork, chilled	1438	1947	2427
Sausage products	2475	2436	2276
Frozen fish fillet	110	141	157
Processed liquid milk	5349	5569	5568
Cream	115	125	149
Cottage cheese	387	410	499
Butter	250	251	258
Cheeses	499	605	473

In 2016 there was a big jump in cheese production, but, as Rosstat data show, for some reason in 2018 we again rolled back to the result of five years ago. Perhaps because Belarus is showing good activity in supplying dairy products to the Russian market. Judging by the following table, Minsk, thanks to Moscow’s sanctions, found itself in a very advantageous situation, becoming almost the main supplier of food.

Let us recall that Russia has imposed food sanctions against the United States, EU countries, Canada, Australia, Norway, Ukraine, Albania, Montenegro, Iceland, and Liechtenstein. The sanctions have been extended several times and are currently valid until December 31, 2019.

Import of products prohibited from import from countries on the sanctions list

Name	Total for 2018, thousand tons	Key suppliers for 2018, thousand tons
Cattle meat, fresh	100,5	Belarus - 98.6
Fresh pork	61,3	Chile - 29.2 Brazil - 12.3 Argentina - 7.4 Belarus - 6.7
Condensed milk and cream	166,8	Belarus - 146.1 Uruguay - 6.2 New Zealand - 3.1
Yogurt, kefir	116,9	Belarus - 108.2 Kazakhstan - 8.0
Butter	89,3	Belarus - 68.2 New Zealand - 6.7 Uruguay - 6.6
Cheeses and cottage cheese	266,8	Belarus - 224.6 Serbia - 11.4 Argentina - 11.3
Potato	573,0	Egypt - 361.4 Azerbaijan - 64.5 Belarus - 53.4 China - 53.1
Fresh tomatoes	577,7	Azerbaijan - 169.9 Morocco - 91.6 China - 88.0 Belarus - 57.1 Türkiye - 34.9 Iran - 34.8
Cabbage	137,7	China - 45.3 Belarus - 22.1 Uzbekistan - 21.7
Bananas	1 556,7	Ecuador - 1,494.9 Costa Rica - 22.2 Guatemala - 12.5
Citrus	1 682,8	Türkiye - 578.5 Egypt - 274.4 Morocco - 237.7 China - 180.1 South Africa - 156.9
Grape	320,0	Türkiye - 92.6 Uzbekistan - 52.2 Moldova - 37.1 India - 29.7
Apples, pears	1 121,7	Moldova - 246.5 China - 167.7 Serbia - 132.0 Belarus - 122.6 Argentina - 100.1
Coconut nuts, cashews	26,3	Philippines - 8.1 Indonesia - 6.6 Vietnam - 6.5 Ivory Coast - 2.4

Thanks to import substitution, the share of imported food products in retail trade resources fell from 2014 to 2018 from 34% to 24%. The share of imported consumer goods over the same period decreased from 42% to 36%.

Share of imports in the volume of retail trade resources

Year	Share of imported consumer goods in retail trade resources, %	Share of imported food products in retail trade resources, %
2018	36	24
2017	35	23
2016	38	23
2015	38	28
2014	42	34
2013	44	36
2012	44	34

If we look in more detail, the share of imported beef, pork, poultry, and milk has fallen significantly.

Share of imports of individual goods in their commodity resources

Name	January-September 2014, %	January-September 2018, %
Meat and poultry, including offal	19,6	7,7
Beef, including offal	59,1	45,1
Pork, including by-products	17,0	2,0
Sausage products	2,4	1,6
Flour	1,0	0,9
Vegetable oils	14,0	17,9
Powdered milk and cream	45,2	34,5

The success of import substitution is noticeable not only in the field of food security. Active work is also underway in such areas as:

In order to implement state policy to promote domestic products, a Government Commission on Import Substitution was created, which regularly holds meetings.

Light industry

At one of the last meetings the situation in light industry was discussed. Head of Government Dmitry Medvedev said that 23 areas of import substitution have been identified in light industry. The industry roadmap is almost half complete. According to Medvedev, competitive production of fabrics, leather, clothing, and footwear has appeared in the country. Samples of modern equipment for athletes produced in the Russian Federation began to appear in stores.

At the end of 2018, supplies of textile products and footwear from the Russian Federation to the CIS countries increased by more than 10%. Exports to other countries around the world increased by about 5%. At the same time, as experts note, there is still a lot of work left, since the share of imported clothing and footwear on the Russian market is two-thirds.

Mechanical engineering

Achievements are also being recorded in mechanical engineering. For example, in 2017, the production of Russian cars increased by almost 20%, including cars from world brands. Also, the production of domestic agricultural machinery increased by 21%, which today already occupies more than half of the country’s market. The production of food equipment, that is, machines for milk production and meat processing, increased by almost 20%. About a third of the equipment is exported. Production of construction and municipal equipment jumped by 27%.

In total, at the end of last year, almost 640 billion rubles were invested in the creation of Russian industrial substitutes for foreign products. Of this amount, the state accounted for only 70 billion rubles.

IT

Separately, I would like to dwell on import substitution in IT. On the one hand, there are a number of problems that slightly slow down the large-scale transition to domestic software. Among them:

• Lack of full-fledged Russian analogues
• Established user habits
• Lack of funds for improvements
• Fears of failures during the period of adaptation to new systems
• No sanctions for using foreign designs

But on the other hand, the process has started and it cannot be stopped. For example, there is an active register of domestic software, from which state-owned companies must select products when purchasing. Today the registry already contains more than 4 thousand titles of Russian software. Market participants will clearly not be constrained in their choice.

Let us remember that the registry was launched in 2016. The register may include products of companies in which a controlling stake belongs to a citizen of the Russian Federation. When creating a Russian product, the use of foreign components is allowed, but to be included in the register, it is necessary that deductions to the foreign partner do not exceed 30% of the turnover.

At the end of last year, the head of the Ministry of Finance, Anton Siluanov, signed a directive according to which state-owned companies must develop a plan for an active transition to domestic software. By 2021, the share of Russian IT developments in state-owned companies should exceed 50% of the volume of software used.

But not only state-owned companies are switching to domestic software. An analysis of import substitution projects shows that educational institutions, the judicial system, ministries, departments, etc. are actively switching to the Alt operating systems, MyOffice office software, and Kaspersky antivirus.

Considering such advantages of domestic analogues as low cost compared to foreign models, better understanding of user needs, prompt technical support, it is likely that the process of import substitution will only accelerate.

Pharmaceuticals

There has also been some progress in the area of ​​drug import substitution. For example, at the end of 2017, the share of Russian drugs for the treatment of hepatitis exceeded 77%. In the case of cardiovascular diseases, the share of domestic drugs is close to 85%. Russian solutions are used to treat oncology in 60% of cases. Over the past 5 years, almost 90 billion rubles have been invested in the development of domestically produced drugs.

The country is actively strengthening its position in foreign markets. Supplies of pharmaceutical products abroad in 2017 increased by 16.6% to almost $700 million.

In conclusion, I would like to note that although sanctions have had a positive impact on the development of domestic production, in general, mutual trade restrictions slow down the growth dynamics of the country’s economy. Ordinary citizens, whose real incomes have been declining for several years in a row, also suffer from this. They can only save the situation. These are the ones that new clients can take on free terms.

Import substitution is the reduction or cessation of imports of certain goods by launching our own production of similar goods.

The most promising sectors for import substitution are the following:

• machine tool industry (the share of imports in consumption, according to various estimates, is more than 90%),
• heavy engineering (60-80%),
• light industry (70-90%),
• electronics industry (80-90%),
• pharmaceutical,
• medical industry (70-80%),
• mechanical engineering for the food industry (60-80%).

Import substitution in these and other industries is possible only if there are appropriate free production capacities and competitive enterprises that can offer quality products at market prices.

In the long term, reducing import dependence is possible through innovation and stimulating investment in technical sectors and the creation of new industries.

Opinion: it is impossible not to notice the country’s enormous successes in the field of agriculture and food industry. Think about it - in the 90s we received humanitarian aid, people were starving. And now we are the first in wheat exports.

Chicken, pork, and for some time now beef – the country is completely self-sufficient. Turkish tomatoes were banned, everyone immediately noticed that it turns out we have excellent vegetables from Rostov - much tastier than any foreign ones. By the way, Turkey is promoting agriculture on its territory by banning the import of fruits and vegetables from other countries - and no complaints against them.

Pasta products - even Italians who know a lot about this consider products from Russia to be of very high quality.

There is a problem with cheeses. She has made progress over the years, but there is still work to be done.

As for clothing, Ivanovo also produces a full range: yes, there are questions about styles and fashion, but the quality is higher than what is massively imported from abroad.

Unfortunately, there are failures in the field of high technology, robotics, biotechnology - at least this is noticeable based on press analysis.

Another positive thing: according to statistics, over the summer of 17 the production of medicines was significantly increased.

According to the Ministry of Industry and Trade, if a well-thought-out policy of import substitution is implemented by 2020, we can count on reducing import dependence in various industries from the level of 70-90% to the level of 50-60%. And in a number of industries it is possible to reach lower levels.

Being an open country, integrated into the international economic system, it is difficult for Russia to produce a whole range of goods, due to the fact that these goods produced here will be more expensive. This is criticized because Russia has oil, electricity is cheaper than many of its neighbors, wages are not high - there are all the conditions to develop its industry and agriculture.

A great danger is that for the oil industry, a significant part of the components and services for servicing equipment and wells is provided by foreign companies. In the event of their demarche, the level of oil production will fall. But replacement measures are being taken, including, judging by the media, joint measures with other oil-producing countries.

Definitely, after more than 20 years of an exclusively raw material economy, when we sell metals, oil, gas, fertilizers, and import almost all vital products, it is very difficult to quickly adapt to new rails and start producing many goods ourselves. However, the market economy, demand and a large number of entrepreneurs solve this problem (a similar situation occurred after the war with).

The state creates special industry funds that support large enterprises working in the field of replacement.

What was the reason for the import substitution program

Sanctions restrictions from Western countries have affected supplies in the defense-industrial and fuel-energy complexes and new technologies. Russia has limited the import of a number of food products from countries that imposed sanctions.

Such a large state as Russia cannot be dependent on other countries. During the period of instability of the 90s, the country's leadership, while solving current problems, could not make plans for the future. Now they are being built tens of years in advance, they are being calculated.

The discourse of socialism has been raised. Society became keenly interested in the economy and the paths of the country.

It cannot be said that the reason for import substitution is only sanctions and tense relations with several countries (note that we are talking about only a few countries, albeit very developed ones). Opportunities arose, the country rethought itself and its place. Yes, some things will be more expensive (now almost any product in any country will be more expensive than in China or India), but we cannot not produce our own.

Import substitution in the food industry

• Canned vegetables. "Astrakhan Canning Company" Astrakhan region.
• Dessert. Makfa LLC. Chelyabinsk region.
• Telapia fish. "Fish-breeding complex". Astrakhan region.
• Salmon. "Murmanrybvod". Murmansk region.
• Whey processing. "Lianozovsky Dairy Plant". Moscow city.
• Semi-hard blue cheese. "Tbilisi Creamery" Tbilisi
• Cheese. Cheese factory "Russian Parmesan". Moscow region.
• Sunflower oil. Agrofirm "Rus". Belgorod region.
• Lysine. Agroholding "Yubileiny". Tyumen region.
• Coffee. "Gazpromneft gas station network." Moscow region.
• Meat products. Meat processing complex. Mordovia.
• Meat. Breeding farm "Ladozhsky". Leningrad region.
• Chicken meat, egg. LLC Poultry Farm Vladimirskaya. Astrakhan region.
• Trout caviar. Trout breeding plant "Adler". Adler

Exhibition Import Substitution

The basis of the exhibition is made up of collective expositions of Russian regions, which will represent enterprises, organizations and departments involved in the production of import-substituting products. The Moscow region is represented by both individual cities and enterprises. However, it was interesting to see what they were doing in the regions.

Ryazan Oblast.


Voronezh region.


Vologda Region.


Lipetsk region – very bright, representative, one of the best stands.


Altai Territory - this stand is always surrounded by attention - it is also very representative and interesting.


Tula region.


Krasnodar region is stylish and noticeable.

Next is our small sketch of individual stands.


Domestic motherboards and information security systems.


Snowmobiles.


Something incredibly large and powerful, and even with a boat motor at the back.


We rake everything out.


Mobile trading solutions.


Medicine.

The main law for economic growth in the country is the excess of exports over imports of goods. Stimulating import substitution has been used by many countries, and this policy is currently being practiced.

Import substitution is the process of replacing imported goods with domestic ones.

To implement the import substitution program, the government of the country can use several methods, which are used both individually and in combination:

• tariff methods - involve increasing duties on imported goods;
• non-tariff methods, within which quotas are established or the need to obtain certain licenses for the import of goods is introduced;
• stimulating the production of goods on the territory of the state itself.

Many countries have moved through import substitution, and their experience shows both the positive and negative aspects of import substitution.

We present a comparative description of import substitution in Table 1.

Table 1

Positive aspects of import substitution	Negative aspects of import substitution
Increase in employment of the population in conditions of development of own production;	The efficiency of national companies decreases as a result of softening competition;
Increasing the economic security of the country;	With small volumes of the domestic market, restricting imports will lead to an increase in production costs;
Increasing the level of education when it is necessary to develop innovative industries for the country.	Substitution of high-tech products is difficult if the development of its products is insufficient.

Problems of import substitution in Russia

In 2014, the Russian government set a course for import substitution. Stimulating domestic producers was chosen as the main method of its implementation.

The need for import substitution in the domestic economy is long overdue. The Russian economy has long been exclusively focused on raw materials, which has led to import dependence in industry, trade and other sectors.

According to the Government of the Russian Federation, the share of imports in industry for machine tool building is 90%, for mechanical engineering - 70%, - 60%, for equipment in the energy industry - 50%, agricultural machinery - from 50 to 90% (depending on the product category). In the pharmaceutical industry, the share of imports reaches 90%.

The impetus for the development of an import substitution program was the sanctions of Western countries against Russia.

At the beginning of 2014, state program No. 328 “Development of industry and increasing its competitiveness” was prepared, the implementation period of which is scheduled until 2020.

Import substitution program in Russia: from words to deeds

In the fall of 2014, the Government began to actively support investment projects as part of import substitution.

• directly, namely through subsidies, grants and preferences;
• indirectly - through an increase in the volume of commercial loans that banks provide to enterprises on preferential terms.

The main sectors of the economy that received the opportunity of state support within the framework of the import substitution program are:

The dependence of the domestic market on foreign supplies has a long list of goods, which enhances this importance. Russian industry today cannot satisfy domestic demand both quantitatively and qualitatively.

One of the reasons for this is the decline in the domestic industrial market in the last twenty years.

It is possible to overcome import dependence if domestic manufacturing plants are able to produce competitive products comparable in price and quality to foreign analogues.

There are two ways to implement import substitution in Russian industry:

• full utilization of production capacities and their expansion;
• technological update of the production process.

The government has developed 20 separate import substitution programs, which include more than two thousand areas of production, including:

• pharmaceutical production;
• chemical production;
• automotive industry;
• machine tool and other areas.

For each industry, enterprises that will take part in the program have been identified, and incentive measures have been developed for them that take into account their specifics.

To monitor the implementation of these programs, working groups have been created that summarize interim quarterly results and also help establish communication between the manufacturer and the buyer.

According to the results of the 3 quarters of 2016, there is an increase in production in the following areas (compared to the same period last year):

• steam boilers, nuclear reactors +17%;
• machines +10%;
• medications +11.8%;
• cast iron and steel pipes +6.9%.

Import substitution in the IT sector

The 21st century is the century of high technology. But the current situation in the Russian software market leaves much to be desired. The country's dependence on foreign software is high, both for domestic use and at the level of large enterprises.

Displacing global brands from the market by even 10% will not be an easy task, since the massive purchase of the IT base was made from Western suppliers, and is now being serviced by them. Even in the banking sector, the use of Western software is ubiquitous.

The main task in implementing the import substitution program in the IT sector is not the rejection of foreign programs, but the creation of such conditions in the country under which:

• High-quality software will be developed in the country;
• In software development teams from different countries, at least half of the team will be represented by Russian programmers;
• The intellectual property for the developed software will belong to domestic enterprises.

In Table 2 we present the results of the implementation of import substitution in the IT area that must be achieved.

table 2

Thus, if the results of import substitution are positive, Russia will be able to move away from import dependence in many sectors of the economy. Stimulating domestic production will create jobs and improve the financial situation of the country's population.