Do It Yourself, or Back to the Future?

сделай-самThe international economic sanctions aimed not at certain Russian politicians and leaders but at entire industries, primarily – military-industrial complex, exposed a tangled ball of problems which for some obscure reason for a long time remained unseen for our officials from their high places. Obviously, they did not read the press either – experts and analysts for many years kept repeating over and over again that in machine-building, ship-building, aircraft-building the share of imported component parts was enormous. And this situation was not in the least a result of the country’s industry inability to manufacture the required components but occurred due to the conditions – legislative, economic, systemic – our industry was put into.

The recession goes on

Inter-state cooperation is a good and useful thing, sometimes – even necessary. However, the initially erroneous stake on hydrocarbon export which, thanks to the TV anchormen efforts, converted the “raw-material appendage” into an “energy super-power” plunged this very “power” into the category of technologically retarded countries lagging behind the technological leaders by 20 and in some aspects – even by 30 years. Various innovations and nanotechnologies failed to work as well, they cannot appear by themselves – in the quiet laboratories of the lone inventors detached from the required facilities as the present-day industry.

As a result, we are again facing the task of a new industrialization, development of the components’ manufacture and all the related industries (it is common knowledge that a couple of parts may be manufactured in a streamlined manner even in the desert, but even in this case going without import would be impossible). Consequently, targeted investments are required and in the current situation in the international politics the only source of these investments is the government.

Industrialists do understand it like no other people. “Machine-building in our country is developed not thanks to but in spite of. Large companies are in rather a complicated situation. It is not necessary to mention small ones. They are either dead or tied to basic industries, for example oil industry. For a very long time in our country there was no internal consumption – everybody preferred purchasing imported products. Prices for metal were growing. For the utilities – leaping up – from 10% to 20% per year. Nobody had the time to compensate for the cost price. Even state companies which included indexation and obtained state orders could not catch up with the utilities’ prices. We became absolutely uncompetitive world-wide, in regional scale we did not witness breakthroughs either. Our products by 30% consist of imported components. These are, basically, electronics, low-voltage equipment, electrical motors, gearboxes, variable frequency drivers. We do not know Russian peers,” claims Sergey Kravchuk, Director General of GC Uralcrane, in the interview to New Day – New Region Agency.

The industry state is confirmed by the official statistics as well. Thus, in January – August 2014 industrial production index of such industry-critical region as St. Petersburg dropped by 8.2%. This is reported by referring to St. Petersburg Statistics Service (Petrostat). Bryansk machine-builders reduced the production scope by 8% from the year beginning. In monetary terms the production drop amounted to nearly RUR 16.8 bln. This is reported by Interfax Agency referring to Anatoly Zadorozhny, the Chairman of Bryansk Regional Council of Machine-Building Plants’ Directors. Klintsovsky Truck Crane Plant alone expects nearly 7.7% production scope drop upon 2014 results.

Ship-Building, VAT and Federal Antimonopoly Service

The need of the amendments to the laws without which the development of the Russian ship-building is impossible was discussed by the experts of the Federal Agency for Fishery at the meeting held in late August. The discussion focused primarily on the manufacture of cutting-edge resource-saving fishing boats at Leningrad Shipyard “Pella” and Persey LLC – medium-range vessels for the operation on “under-utilized water bio-resources of the Barents Sea”. The project was approved in November 2013 by the supervisory board of the Agency for Strategic Initiatives to Promote New Projects (ASI). Of course, fishing boats are not combat destroyers, for their manufacture imported components may be used. However, in this case the single ship-building industry of North-West is discussed in which, for historic reasons (i.e. those dating back to nearly the time of Peter the Great), civil ship-building cannot be separated from military ships’ manufacture regardless of the title-right and corporate principle based on which the dockyards are separated. So, at the meeting the dockyards’ managers pointed out that to develop Russian ship-building the companies must be exempt from VAT and customs duties in case of building the ships in Russia. Credit interest rates must also be subsidized. ASI representative supported the proposal on the ship-building subsidization and suggested submitting a request for the amendments to the federal budget to allocate extra funds for these purposes. At the meeting the attendees also said that to solve the problem of the research fleet renewal and extension the industry research financing must be increased. Over the recent years this financing was gradually sloping down. Besides, it is necessary to build new rescue ships – to provide fishing and navigation safety. All these aspects are not mere right things, they are copy-book maxims known to any specialist who is to the slightest degree knowledgeable in the industry problems. And these problems did not arise overnight, right after the imposition of economic sanctions against Russia and the response “foodstuff” restrictions. They have been accumulating for many years, to be more exact – for already decades. But they need to be solved today, further delaying is no option.

Meanwhile the pressure of the federal authorities onto the country’s ship-building – voluntary or not – is going on. Thus, the Ninth Arbitration Court of Moscow rejected the appeal of St. Petersburg Baltiysky Zavod, JSC concerning the ruling of the arbitration court on the case of the violations during the bids for rolled metal products purchase. The ship-building company tried to dispute the resolution of the Federal Antimonopoly Service (FAS) on the acknowledgement of the breaches in the procedure of the bids for the purchase of rolled metal sheets for the construction of the nuclear-powered icebreaker LK-60Ya Arktika (Project 22220).

Certainly, the court in our country is independent and the FAS does the important and big business – it restricts monopolism in our economy. But for some reason it turns out that these are not fuel companies or retailing networks that are punished for the corporate conspiracy but industrial companies for the “breaches in the bids procedure”. Of course, the law must be observed but it would be good to remember that it must be obeyed by every economic entity, not only those whose breaches are more vivid, more formalized and more readily demonstrative.

Surely, one cannot say that the federal authorities do not pay attention to ship-building. They do pay attention but on the selective regional principle. Thus, Ship-Building Plant “Zvezda” located in the Far East became the venue of the meeting chaired by the military-industrial complex and defense order supervisor Dmitry Rogozin. At the activity the arrangement of the ship-building cluster in Primorsky Krai was discussed (in Vampausu (Five Hunters) Bay and Bolshoy Kamen Bay) where profile machine-building and engineering companies will be located.

For the purposes of the cluster management a consortium consisting of the representative of Gazprombank and NOVATEK has been established. Well, the consortium formation will be finished only by 2016, and the entities interested in the project still have the time to get there. By the way, it is by that year that the federal government plans to provide the completion of the new “Zvezda” dockyard Phase 1 construction. The entire project implementation requires RUR 111.7 bln. Phase 2 provides the construction of the dry dock for heavy-tonnage vessels – Q-Max class LNG carriers and VLCC oil tankers. Phase 3 provides the construction of the dockyard for oil platforms in Mysovoi village, the construction completion time is 2018.

Nanotechnologies and financing

As far as Russian nanotechnologies’ development is concerned, RUSNANO Company responsible for this offered Chinese partners creating a joint investment fund, ITAR-TASS reports referring to the Company CEO Anatoly Chubais, “(During the board session) the idea of the joint investment fund was proposed, 50/50 Russian and Chinese money, with the target of investing into nanotechnologies geographically focused on Russia and China”.

With RUSNANO participation nanotechnology centres in Udmurtia and Krasnoyarsk Krai are currently being established. All in all in Russia twelve such centres already work. These centres are a kind of “single counter” for the innovators to promote their products not only in their regions but in other constituent entities and abroad.

But while the innovators are waiting for hard Chinese RMB’s, nanotechnologies financing are just another burden on the same industrialists’ shoulders. Thus, NanoTechMed Plus LLC from Novgorod invests on billion roubles into the creation of the scientific and production medical centre in Vsevolozhsk District, Leningrad Region. The project is devoted to carbon medical products’ manufacture, the first stage provides streamlining of nano-structure carbon bone implants. The Kommersant Newspaper writes of the importance of this project against the general import-substitution trend. And the very fact of this project startup is an evidence of the fact that Russian industry is capable of mastering the breakthrough technologies – in certain areas and independently.

As far as import-substitution is concerned, two opinions – at first glance, diametrically opposing ones – are noteworthy. Thus, in the interview to Nakanune.RU web-portal Professor, PhD (Economics), Chairman of the Russian Economic Society Valentin Katasonov pointed out, “Import-substitution is a good idea, just brilliant. From my point of view, to start talking about import-substitution it is necessary to return to the state that existed not even 20 years ago but at least two years ago. I am hinting that two years ago such misfortune as signing and ratification of the Agreement on the Russian Federation’s joining the World Trade Organization occurred. Which import-substitution we are talking about if we are within such organization which merely does not allow us to rise from the knees, does not allow us to breathe”. A peculiar in absentia answer was given to him by the Chairman of Mercury Club, ex-Prime Minister Yevgeny Primakov at the session of the State Council, “The core of the import-substitution must be science and technology development… It is right that we imposed return sanctions. But their main purpose was, as far as I understand, to eliminate the escalation of the sanctions aimed against us. This is by no means a way to the isolationism”.

Boris Nikonov