Exporters need support

12 september 2016

The Analytical Center has conducted a study into the development of non-raw materials exports and international cooperation. In order to identify priorities in how to support exports, a strategic session was held in July, and participants included representatives of businesses, federal executiveauthorities, and the expert community. The results can be found in the presentation. The Analytical Center also organized a number of surveys of Russian companies who export their products and services and experts on exports to identify key barriers to growth in exports and international cooperation.

The strategic session and the survey essentially identified two key areas, where exports could be supported and expanded. First of all, manufacturers need integrated support at all stages of product development, starting with R&D and all the way to optimization of logistics in the country (support in the form of financing as well as information support), and secondly, exporters need to be given support in overseas markets.

The results of the discussions and the findings of the survey demonstrated that administrative and customs barriers or export procedures are not the main obstacle to growth in exports. However, they can complicate and slow down the process, driving up costs and distracting entrepreneurs from the production cycle. Optimizing tax and customs procedures would help reduce the amount of both time and money spent on exports, which would help make Russian products more competitive in the global markets.

Manufacturers of exports-oriented products surveyed in the study said that one of the main problems they face is lack of cheap financial resources that Russian companies need to expand production and improve product quality.

Certification systems are a serious barrier to exports, as they can be used as a tool to suppress foreign competition. For example, in Europe, a new quality standard is being introduced for the forest industry, SBP, and it focuses, among other things, on the amount of energy expended to deliver the products to consumers, which automatically excludes Russian companies from the game on account of long distances between their production facilities and potential customers in Europe. Russian companies want the government to monitor these risks and lobby Russian interests by participating in the creation of new rules in international markets.

In order to grow exports, product development can be carried out in one of two ways: products could be developed for the domestic market and then some of them could be sold in foreign markets, or products can be developed explicitly for exports (an example of that would be production of natural gas for electronics manufacturers for which there is practically no demand in Russia). In the former case, an active industrial policy is needed to encourage domestic demand for more modern products, materials and components, including restrictions on purchases of outdated products and subsidizing costs for companies that buy innovative products. If R&D is to be carried out specifically for exports, support is needed through tax exemptions, accelerated depreciation of R&D costs, VAT refunds on purchases of imported components.

Another relevant issue is that a government strategy is needed to support exports in specific industries and exports of specific products as well as with regards to providing information resources allowing potential exporters to get information on what is in demand in other countries and what kind of support is available to them (support navigator).

Read more here.