Krasnoyarsk Economic Forum 2015: The future of export development
Export support and development lay at the heart of expert initiatives in the course of specialized brainstorms on “How and what to sell to Asia?” and “National export policy: to whom does devaluation present fresh opportunities?” organized by EXIAR on 27-28 February 2015 as part of the Krasnoyarsk Economic Forum.
The session “How and what to sell to Asia?” (February 27 2015) was given over to discussing experiences and forming initiatives on geographical and commodity diversification of Russian output, increasing the percentage of non-commodity exports to Asia and the unique aspects of entering Asian markets.
Russia’s total trade turnover with Asia-Pacific countries (including India) is second only to the EU in foreign trade. According to Russian customs data, Asia-Pacific trade amounted to $222.3 billion and increased by 0.5% compared with 2013. This includes exports totalling $111.4 billion (6.8% growth) and imports of $18.9 billion (a 5.3% decrease).
Russian exports to Asia-Pacific countries comprise:
- mineral commodities (primarily oil and derivatives) - 69.2%
- metals and metal products - 8.3%
- chemical industry products 5.9%
- cars, transportation equipment and vehicles - 5.8%
- timber and paper products - 4.1%
- precious stones and metals - 2.7%
- food and agricultural goods - 2.7%
- other goods - 1.3%
Imports to Russia comprise:
- cars, transportation equipment and vehicles - 58.1%
- chemical industry products - 10.8%
- clothing, textiles and footwear - 8.5%
- food and agricultural goods - 8.5%
- metals and metal products - 6.1%
- other goods - 5.5%
According to Alexey Tulpanov, who moderated “How and what to sell to Asia?”:
“As a result of the work of our panel of experts, we managed to produce a range of initiatives.
First and foremost, we formulated sector-specific priorities in Russian exports to Asian-Pacific countries. We termed this “Sector priorities for advanced development.” In doing so, we took into account the fact that the focus in choosing sectors must reflect demands, including those of the future, that is, of the 21st century. Our forecast is that demand fr om Asia will now be for energy, water resources, waste management, timber processing, agricultural production, IT and service industries.
Our second outcome was defining geographical priorities and “anchor countries.” We discovered that Asia fundamentally trades internally: it both exports and imports little. Around 80% of its trade turnover consists of trade between countries within the region. Therefore, we concluded that in order to effectively sell goods to Asia, we must create joint enterprises and locate our production there. There is the perception that if the goods are produced in an Asian country, they will be easier to sell.
It’s also essential to define “anchor countries,” via which to enter Asia: countries which have the fewest barriers, and wh ere Russia is welcomed and understood. We must kick-start work in such countries, and then from there move more deeply into the region.
The next initiative comes from feedback from the business community: to organise a system for letting businesses know about the special aspects of doing business and overcoming barriers in Asia.
The interesting statistics were brought up during the discussion: it turned out, in terms of the number of barriers to Russian export, the USA occupies first place (with more than 4,000 barriers), followed by China (with around 3,000 barriers). If we wish to go into Asia, we will have to solve these problems.
Our experts also underscored the necessity of actively working towards certifying Russian goods in local markets. This is a major problem, and we are lagging behind here. Without governmental assistance, we won’t get anywhere.
We also heard a suggestion to change the approach towards organising trade missions to Asia: namely, basing enlarged trade missions in “anchor countries”, organising sector-specific terms of reference regarding highly sought-after goods at a local level and micro-level work within the country.”
In the discussion and development of the initiatives on the question of “How and what to sell to Asia?”, the following experts took part: Stanislav Voskresensky, the Deputy Minister of Economic Development of the Russian Federation; Viktor Evtukhov, State Secretary and Deputy Minister of Industry and Trade; Viktor Ermakov, Representative of the Russian Presidential Commission for Entrepreneur’s Rights and General Director of the Russian Agency for Small and Medium Enterprises; Alexey Kalinin, Director of SKOLKOVO Institute for Emerging Market Studies; Oleg Kalinsky, Director of the Pipe Industry Development Fund; Alexey Nazarov, Director of the Global Strategy Group for KPMG in Russia and the CIS; Mr Iwao Ohashi, Advisor on Japan and APAC at the Association of Industrial Parks in Russia and former Director of the Nomura Research Institute; Ivan Polyakov, the General Director of the Interstate Corporation of Development; His Excellency Djauhari Oratmangun, Ambassador of Indonesia to Russia; Roman Gubenko, Director of the WTC's International Business Centre “Russia in the WTO”; Takafumi Nakai, Head of Japan Association of Trade with Russia and NIS (ROTOBO); Andrey Ivanov. Global Head of Trade Finance and Correspondent Banking Department at Sberbank; Dmitry Noskov, Executive Manager at Exim Ltd. and others.
The session “National export policy: to whom does devaluation present fresh opportunities?” (February 28 2015) was devoted to discussing the development of non-commodity exports, financing instruments and non-financial support.
Exports are one of the key factors driving national economic development. Russian exports have traditionally relied heavily on fuel and energy, which means not only increasing the output of such products but also, as a matter of necessity, diversifying our export activity. The economic situation as of the end of 2014, encompassing the lowering of oil prices and the weakening of the ruble, signals extra challenges in solving these tasks.
Trends in non-oil and gas exports
|Export volume in billions USD||2010||2011||2012||2013||2014|
Petr Fradkov, the First Deputy Chairman of the Board of Vnesheconombank (the State Corporation Bank for Development and Foreign Economic Affairs), who moderated the roundtable discussion, “National export policy: to whom does devaluation present fresh opportunities?”, concluded:
“Given the unusual economic conditions, there is right now a real opportunity to create a system of export support, based on a partnership between business and the government.
We divided the fruits of our discussion into two categories: what we want from the government and from the business community.
What we want from the government
In creating export support bodies and developing support tools, the government has expended a considerable sum on financial support instruments and on promotional activities.
But there remains one difficulty: they are not unified. We want the active involvement of the government in developing a regulatory framework, for all the tools to work effectively alongside export promotional activity. We are waiting for demand targets for each sector in world markets and for geographical priorities.
What we want from the business community
From the business community, we expect that it will not rely solely upon state support tools, but also provide competitive goods. According to data from the Ministry of Industry and Trade, there have been periods when 90% of Russian production has been the subject of complaints.
But we have before us a unique chance to aggressively break into new markets. Given the recent devaluation of the ruble, the lowered cost of production places us in an advantageous position compared with international manufacturers.
External communications, EXIAR