"For three years in a row we have been seeing declining estimates of the level of competition, first of all, among small businesses operating in the local markets: the share of respondents saying there is a high or a very high level of competition keeps going down (from 53 % in 2015 to 48 % in 2017), as does the share of those that say the number of their competitors has increased (49 % in 2017 vs 58 % in 2015)," Tatiana Radchenko, Deputy Head of the Analytical Center, said in an interview to a Kommersant correspondent.
For three years in a row we have been seeing declining estimates of the level of competition
Commenting on the report Assessing the State of Competition in Russia published by the Analytical Center the other day, the expert noted a number of positive trends. Russian businesses are planning to expand their operations. The share of those who plan to penetrate new markets in the next 3 years is now 25 % while back in 2016 it was 27 %. The share is also high for those who have in the past three years used at least one way to make their products more competitive. For the second year in a row 97% of the businesses have given that answer. The expert also noted that the share of those who have never tried to make their products more competitive was just 5 % in 2015, while in 2014 (in a more stable economic period) it was 10 %. This, in her opinion, means that macroeconomic problems prompt businesses to do something to at least optimize their costs, if not leave the market at all.
It makes sense to ask about the impact that the sanctions and the state import substitution policy are having on competition. Ms. Radchenko noted that this factor is not estimated directly in the survey. "The role that foreign companies are playing in the Russian market can be indirectly estimated through the change in the number of foreign competitors," the expert noted. "Foreign companies were leaving the market at the fastest rate in February-March 2016 (21 %). In 2017, this trend was less significant at just 8 %." This, in her opinion, is testimony to two facts: fist, most foreign competitors left the Russian market in 2015, in the first year after the introduction of the western sanctions and the devaluation of the Russian ruble, and second, new foreign competitors have not yet come to the market in large enough numbers.
Another important trend noted in the report is the increase between 2015 and 2016 in the number of those who believe that the government is only getting in the way of business with its actions and initiatives (40 % in 2017 vs 33 % in 2016-2015). It is worth noting that there has been a notable increase since 2016 in the number of business people criticizing the government across all categories of business, from small businesses to major corporations. "This can be explained by several factors: first, this may have to do with the frustrated hopes of business for massive state support during the economic downturn, second, as budget revenue declines the question of tax discipline becomes ever more pertinent; third, 2016 saw the drafting (and in some cases passage) of a number of rather controversial bills (such as Yarovaya amendments), plus businesses are also noting a marked increase in the so-called non-taxation fees the state imposing on businesses," Ms. Radchenko believes.