Industrialization by Diktat

The New Russian Industrial Policies


During the noughties the Russian economy boomed pretty much like most of the BRICS, led by resources such metals, oil and consumer spending, but after the crisis what could turn on the economic engine?

In the recent months Russian authorities have targeted several fields to further develop the economy, this aiming toward sectors such Technology, Aircrafts and Construction, all this after the image of the proud country was tarnished by the dependence of commodities, such initiatives aimed to attract new investment from multinational companies in several fields or aiming to modernize the most backwards sectors of the economy, but this renewed interest to attract money, improve its economic status and enhance it’s competitiveness just come up partially as several reforms are still pending.

Technology: In this field going directly pledging for investment to the new area soon-to-be a silicon-valley-like area sounds interesting, but so far reforms are lagging on intellectual property, investor protection and less government raids to companies and harassing, investors keep asking whether the current president is able to push a broader reform, or if the current talk from the highest circles of the government are just picking global winner from which national companies can gain technology and know-how, while already some Russian companies and investors are playing tough, like buying slowly social networks such Facebook and developing local search companies, they still look like laggards in top of the line hardware and software.

Aircraft: With a reforming Aeroflot Airline turning in to a business class carrier and gaining market share from titans such British Airways and Air France, on routes to Russia, but not until the WTO accession Aeroflot will be able to regain on routes and enlarge the passengers, but also again the high circles from the government come orders to buy local, and avoid buying from Airbus and Boeing as the local aircraft builder Sukhoi needs clients for their passengers jets, again while building a world class airline, as a tool to fuel demand from local producers, in other fields seem to develop more technology rather than appeal foreign investors as the lack of producers for larger jets, turn the idea of moving facilities in to a very politicised subject.

Construction: The soviet legacy on the cities formerly under the rule behind the iron curtain, is about large apartment complexes with little architecture features and lack of colour, according to the president Dmitry Medvedev as many as 77% of the Russian population lives in this kind of crowded spaces, whoever in this field Russia it’s playing with local developers and easing large lands to turn it in to low density housing, the barrier to achieve such goal, is the largely private banking system, Russians already suffer from high interest rates and a timid mortgage market that doesn’t match the economic size and disposable incomes of Russians, but while unable to lend by direct government orders like in the previous 2 cases, probably this will be the area most likely to look like a market led sector.



Sources:

http://www.cbsnews.com/stories/2010/06/23/tech/main6610878.shtml?source=related_story

http://www.businessweek.com/magazine/content/10_19/b4177036186682.htm

http://www.businessweek.com/magazine/content/10_27/b4185007612464.htm

http://www.themoscowtimes.com/news/article/putin-tells-aeroflot-to-buy-russian-planes/410154.html