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Section 10. Economic security
Mariya Marchenko, Peoples' Friendship University of Russia, Ph D. student, the Faculty of Economics E-mail: m.marchenko.education@mail.ru
ROLE OF IMPORT SUBSTITUTION IN THE RUSSIAN TEXTILE INDUSTRY
Abstract: In sanction economic development, new approaches to ensuring economic security and strengthening the country's competitiveness are being considered. The transition from the raw material development model to the non-raw material contributes to search factors that enhance the country's internal potential. One of such factors is based on import substitution.
This paper focuses on the significant importance of import substitution for the sustainable development of the Russian economy. The necessity of implementing the policy of import substitution at the present stage of the country's development is being proved. Measures of state financial support for reducing dependence on imports in the textile industry are presented. Finally, it is concluded that effective implementation of the import substitution policy is impossible without sufficient funding from the Government.
Keywords: import substitution, textile industry, governmental support, competitiveness.
1. Introduction
Most developing countries use the import substitution policy to ensure economic security. Formation, development and measures improvement of import substitution plays a dramatic role in the economic security of the country and its regions, especially during the crisis in the economy or political instability. Today, market structure themselves have created strong incentives for further linearization, as many economies increasingly depend on imports for domestic consumption, production and re-export. The more countries rely on global and regional value chains, the greater the demand for trade liberalization (Baccini et al. forthcoming, [3]).
Unstable exchange rate of foreign currency, sanctions against Russia caused a decline in imports of goods. This forced the government to consider the issue in more detail. There was a need to replace im-
ported goods, including the textile industry, with domestic counterparts and in search of a new raw material base to reduce the cost of finished products.
It should be noted that import-importing production has a great strategic importance for the country, since effective mechanisms of industrial protectionism are being developed. The country's economy was not ready for a rapid transition to import-substituting production, not only in the textile industry, but as well as in the Russian industry. This is due to the lack of well-established production mechanisms, the lack of high-tech equipment for production and the lack of a highly skilled workforce. To implement the mechanism of transition to import substitution, adequate financing is needed, which will allow starting the production of domestic goods that were not produced in Russia before. The increase in the volume of the existing production of domestic goods must
be optimized taking into account the needs of the market.
The hypothesis of this paper is based on the fact that systematic implementation of measures to reduce dependence on imports as an important condition for ensuring economic security and competitiveness of the country in the world economy is possible only with the optimal level of financial support.
2. Import substitution as a factor of sustainable development of the Russian economy
The idea of import substitution is not fundamentally new. Such representatives of the school of mercantilism as T. Man, W. Petty explained the importance of protection measures as a necessary condition for the growth of the national economy of the country (Aspromourgos [1]). Basically, the main ideas of mercantilists were the substitution of imported goods by domestic counterparts and the dominance of the export of goods over their imports. In Russia, these views were shared by Pososhkov, Tatishchev, Ordin-Nashchoki. Mendeleev defined the essence of protectionism in creating economic conditions for the development of industry, and not in restricting or banning imports (Mendeleev [6]). Modern economists believe that phased import substitution and restructuring can become the basis of Russia's modernization (Bordunov, [2]).
Consequently, the main characteristic of the policy of import substitution is the industrialization of the domestic economy through differential import restrictions. Such a policy presupposes the creation of a suitable environment for the growth of the national industry of high redistribution (Klimova et al., [5]). Thus, import substitution is seen as increasing the competitiveness of domestic goods, on the one hand, and reducing import dependencies, on the other hand, which entails strengthening the country's position in the world arena and increasing its economic power.
3. The demand for implementing the import substitution policy at the present stage
The problem of implementing measures to reduce import dependence is always of great interest. Despite the fact that the need to solve the import substitution problem has existed for a long time, Western sanctions can be considered as the main incentive to introduce import substitution, however, they can not be perceived as an exceptionally positive phenomenon (Shirokova et al., [7]).
To ensure the planned development of the domestic economy, it is important to assess competently the extent of import dependence. Some scientists note the possibility of a threat to social security, as the share of imports according to experts is:
- clothes - 80% (actually more);
- medicines - 70%;
- household appliances - 40-95%;
- cars - 70%
- food products - more than 35% (Gritsenko, [4]).
Import substitution should be seen as a process of activating domestic industry, rather than simply replacing imported goods with cheaper domestic counterparts. The Russian market at the moment is really filled with imported products from textiles and leather. They are goods from China, Vietnam, Kazakhstan, India. The value of imports in 2014, according to the Federal State Statistics Service, was $287,063 million, in 2015, $182,902 million, and in 2016 - $182267 million. Such a decrease in imports is due to a change in the rate of development of the domestic economy.
Although the volume of imports of textiles, textiles and footwear for 2016 amounted to 10979 million US dollars, which is 6% of the total volume of imports of the Russian Federation, the importance of the textile industry increases every year, as the use of textiles goes beyond the general consumer goods and increasingly used space and military needs, which provides strategic importance for the development of the industry. Therefore, it is extremely important to implement measures to support the textile industry to modernize the production of goods,
improve the characteristics of the products and ensure demand in the domestic market of the country.
4. Current state of the textile industry in Russia
Currently, the textile and clothing industry is an important economic complex, which provides jobs for 268.7 thousand people in 15802 companies and geographically separated units as of 2015. However, the annual average number of employees fell by 64.3 thousand people by 2015 in comparison with 2010, and the proportion of unprofitable organizations from the total number of operating companies is about 30% for the last 6 years. At the moment, the textile industry suffers a crisis, although a positive trend has emerged. For example, the volume of
Starting in 2013, the volume of imported products is decreasing. This dynamics can be traced both for goods imported from the CIS countries, and for the countries of the Far Abroad. This is explained, in particular, by the entry into force of the state program "The development of industry and the increase of its competitiveness". To support the light industry in 2014, the amount of budgetary appropriations was allocated from the federal budget in the amount of 1.7 billion rubles, and in 2015 another 1.5 billion rubles.
The import-oriented course of development of the textile industry is impossible without measures of financial state support, such as:
- implementation of a program to support investment projects on the basis of project financing,
shipped goods of own production increased from 264 billion rubles in 2014 to 283 billion rubles by 2015. The need to transform the textile industry causes the urgency of searching for a new model to overcome the crisis.
5. Measures for import substitution in the Russian textile industry
Dependence on imports in the textile industry may be weakened through the implementation of integrated support for the industry, which in turn is impossible without adequate financing.
Textile goods come from the CIS countries and far abroad. The volume of imports of textiles, textiles and footwear for 2011-2016. is given in Table 1.
for which investment projects are selected, for the implementation of which loans are subsequently issued on special preferential terms;
- concessional loan financing from the Fund for the Development of Industry;
- conclusion of a special investment contract (SIC). The parties to the agreement are the investor and the Russian Federation (subject, municipal entity). The volume of investments can reach 750 million rubles;
- subsidizing the organizations of the light and textile industries in terms of reimbursing part of the costs of paying interest on loans received to replenish working capital, financing current activities and implementing new investment projects for technical upgrading;
Table 1.- Import of textiles, textiles and footwear 2011-2016.
Years Import of textiles, textiles and ootwear (in actual prices)
CIS countries foreign countries
million US $ as a percentage of total imports million US $ as a percentage of total imports
2011 2263 5,1 14502 5,6
2012 3327 7,4 14720 5,4
2013 2043 5,2 15997 5,8
2014 1670 5,0 14648 5,8
2015 1194 5,6 9653 6,0
2016 1513 7,7 9466 5,8
- support for small and medium-sized business- entities of the Russian Federation in order to provide
es, which is implemented as part of the implementa- state support to small and medium-sized enterprises
tion of a special program to provide subsidies from at the regional level. the federal budget to the budgets of the constituent
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