CC BY
43
Г. Никипорец- G. Nikiporets-Takigawa,
Такигава, N. Kolpakov
Н. Колпаков
СОЦИАЛЬНО-ПОЛИТИЧЕСКИЕ ВЫЗОВЫ РАЗВИТИЯ РОССИЙСКОГО БИЗНЕСА НА СОВРЕМЕННОМ ЭТАПЕ ОТНОШЕНИЙ РОССИЙСКОЙ ФЕДЕРАЦИИ С ЗАПАДОМ
Аннотация
Напряженные отношения между Российской Федерацией и Западом являются одним из актуальных вопросов современной мировой политики. Сложившаяся ситуация характеризуется взаимными политическими и экономическими санкциями и тяжелым состоянием дипломатических связей. Такое положение представляет различные вызовы социально-политического характера для развития российского бизнеса. Целью данной статьи является изучение этих проблем и мер, которые российское правительство предпринимает для их решения. В целях реализации данного исследования авторы проанализировали официальные документы, такие как Стратегия экономической безопасности до 2030 года, материалы форумов и конференций (например, Форум Гайдара) и соответствующую литературу от выдающихся ученых в этой области (В.А. Черненко, А.Н. Шохин и др.). Методы исследования включают обзор соответствующих источников и научной литературы, анализ актуальной статистики и метод анализа и синтеза. В результате этого исследования авторы пришли к ряду заключений. Нынешний климат отношений между Российской Федерацией и Западом, безусловно, повлиял на состояние российской экономики, показывающей слабые перспективы роста. Несмотря на то, что стратегическое видение основных угроз и вызовов для российской экономики было изложено,
SOCIO-POLITICAL CHALLENGES FOR RUSSIAN BUSINESS DEVELOPMENT AT THE CURRENT STAGE OF RUSSIA-WESTERN RELATIONSHIP
Abstract
The tense state of relations between the Russian Federation and the West has been in the focus of modern global politics, especially in the last few years. Strained diplomatic relationships and mutual political and economic sanctions characterize the current situation. This disposition presents various challenges of social and political character for Russian business development. The purpose of this article is to examine these challenges and measures the Russian government implements to address them. The authors analyzed official documents such as Economic Security Strategy until 2030, proceedings from forums and conferences (e.g. Gaidar Forum) and relevant literature from distinguished scientists in the field (V. Chernenko, A. Shokhin, etc.) in order to realize this research. Research methods include review of appropriate sources and scientific literature, analysis of relevant statistics and method of analysis and synthesis. Several conclusions were made as a result of this research. The current climate of the relationship between the Russian Federation and the West has certainly affected the state of the Russian economy, with bleak prospects for growth. Even though, the strategic vision for main threats and challenges to Russian economy has been laid out, the specifics of resolving these remain
особенности их решения остаются неясными.
Ключевые слова:
санкции, российская экономика, экономический рост, социально-политические проблемы, отношения бизнеса и власти.
vague.
Key words:
sanctions, russian economy, economic growth, socio-political challenges, business-government relations.
In April, 2017 Idriss Jazairy, Special Rapporteur of the UN Human Rights Council, dealing with the negative impact of unilateral coercive measures, stated in his report that over 3 years of economic sanctions Russia has lost approximately 52-52 billion USD, while the countries who imposed sanctions, like the USA, EU states and others, have lost around 100 billion USD [17, p. 11; 20, p. 4].
Within the framework of the essential transformations that are occurring in the Russian economy and the taking into consideration evolving dynamics of the economic development, certain measures need to be implemented to combat critical challenges and threats to the economic security of the Russian Federation [13, p. 5-8].
In conditions when challenges of political and military nature have increasing influence on matters of economy and economic measures are used to achieve political goals, the Economic Security Strategy of the Russian Federation until 2030 was established in May 2030. This document highlights internal and external economic and socio-political challenges for Russian economic security and provides strategic vision of resolving these issues.
According to the Economic Security Strategy until 2030, we can highlight the main challenges to the economic security of the Russian Federation:
- "desire of developed countries to use their advantages, including information technology, as a tool for global competition;
- restrictions on access to international financial resources and modern technologies;
- fluctuations in global commodity and financial markets;
- changes in the structure of global demand for energy resources and the development of "green" technologies;
- creation of interstate economic associations without Russian participation;
- vulnerability of the financial and banking system;
- insufficient investment in the real sector of the economy;
- gap in the field of advanced technologies between the Russian Federation and developed nations;
- increased conflict potential in the zones of economic interests of Russia, as well as near its borders
- high level of criminalization and corruption in the economic sphere;
- insufficient development of transport and energy infrastructure;
- ineffective public governance" [16, p. 3-6].
The Gaidar Forum is an annual meeting of government officials, public figures, businessmen and scientists, that acts as "the Russian Davos Forum" and "is an important source of information on major trends in social-and-economic and political development, status of business environment and investment climate of Russia, ... the participation in the Forum makes it possible to determine the prospects for further economic growth and integration of Russia into the global economy". The Ninth Gaidar Forum, held in M oscow from January 16th to 18th, 2018, witnessed a record number of participants, bringing together 15,400 people and holds special significance in the context of working out the most effective ways of implementing the Economic Security Strategy [7].
On January 15, the TASS press center hosted a conference where the program of the event was presented. The Rector of The Russian Presidential Academy of National Economy and Public Administration (host of the Forum), Vladimir Mau, stated that in 2018 the economy will not be the central topic of the forum. "... we want to say that there are things more important than economics, beyond economics." - he noted. Among the most important events, there were also discussions about the digital society, panels and issues affecting education and health [12].
However, Gaidar Forum also highlighted certain pessimism, among the experts, regarding the current state of the Russian economy and the prospects for its growth. Such were the results of the audience's vote on the question: "Do you agree with the statement that the world economy recovered from the 2008 crisis and the Russian economy from the crisis of 2015-2016?": 13.9% voted for the "both did", "global economy recovered, Russia - did not "50.18%, "global economy did not recover, Russia did"- 7.69%, "both did not recover "- 28.94% [7].
It is necessary to add that Russia rose in the ranking of Doing Business-2018 to 35th place. In 2017, Russia's result was five steps lower - 40th. By
the "May decrees" of 2012, President Vladimir Putin set the task of achieving the 20th position in this rating by 2018. In 2012, Russia was on the 120th place in the ranking of Doing Business. Nevertheless, as noted in the report, in order to provide additional business benefits in Russia, efforts are needed in two areas: "Obtaining building permits" and "International trade" [4].
The basis for this research is founded by the Economic Security Strategy of the Russian Federation until 2030 [16] and works of the Prime Minister of the Russian Federation Dmitriy Medvedev [13]. Multiple scientific articles were written on the topic of the consequences of the Western sanctions on Russia and Russian business and economy development. Among distinguished Russia authors it is necessary to highlight the works of Gorshkov Vycheslav [9], Sazhina Muza [21; 22]. Chernenko Vladimir [1], Shokhin Alexander [25], Philatova Irina [7], Kosov Mikhail [10], Kossov Vladimir [11], Yarkova Tatiana [26]. The proceedings and interviews of the Gaidar Forum 2018 [7] and X Week of Russian Business 2017 [14] were also carefully examined. The works of the foreign experts and scientists such as Peter Rutland [19; 20], Richard Connolly [2;3], Iana Dreyer and Nice Popescu [4] also proved to be beneficial for this research and provided a new perspective.
The main methodological principle chosen in this work is an interdisciplinary approach, which allowed to consider the object of research from the point of view of political, economic and sociological theories. A dialectical method was used, which made it possible to process a significant array of secondary sources and offer a dynamic and predictive analysis. Research methods include review of appropriate sources and scientific literature, analysis of relevant statistics and method of analysis and synthesis.
Economic Security Strategy of the Russian Federation not only determined the main challenges to the economic security of the country but also presented goals and objectives that shall direct the government's effort. We can highlight the following objectives:
1. Strengthening the economic sovereignty of the Russian Federation;
2. Increasing the resistance of the Russian economy to effects of internal and external threats and challenges;
3. Supporting economic growth;
4. Maintaining the potential for scientific development and increasing the competitiveness of the economy;
5. Maintaining the potential of the military-industrial complex;
6. Improving the quality of life of the population [16, p. 6].
The US and the EU announced the sanctions imposed in March 2014 against Russia as measures to force it to fulfill unconditionally the demands of the United States and a number of Western countries regarding Russian position on Ukraine and the Crimea. The content of sanctions indicates that they are aimed at international isolation of Russia, the weakening of its economy. The group of economic, financial, and other types of sanctions refers primarily to the three sectors of the Russian economy: banking, oil and gas, and defense. [2, p. 56-77; 19, p. 5]. Nevertheless, there are threats concerning the reducing the volume of imports to Russia in strategic sectors. The main items of Russian imports, accounting for more than 80% of the total volume of Russian imports from non-CIS countries, are machinery and equipment, chemical products, etc. [9, p. 64-65].
In response to these sanctions, Russia imposed a ban on the import of agricultural products, raw materials and food products originating in the United States of America, the countries of the European Union, Canada, Australia and the Kingdom, Norway [3, p. 751].
It is important to note that the most important direction from the Strategy, such as the dependence of the economy on imports and the import substitution program, completely disappeared from the Strategy. Among the challenges in the sphere of economic security there is not a word about the critically high dependence on imported products. Although neither in agriculture nor in manufacturing, the country has reached a level of high sovereignty. Imported goods in the structure of consumption in a number of industries above 50%, Russia simply can not afford a competitive (or at least protectionist-supported) alternative to imported goods [7, p. 265].
The consequences of the sanctions imposed on Russia are likely to be most pronounced in the investment sphere. Thus, restrictions on the export of high-tech equipment may lead to postponement of the implementation of some new investment projects [5, p. 2]. However, the pace of implementation of such investments may fall on its own against the backdrop of weak global demand and low oil prices. Restrictions on new medium and long-term borrowings will lead to a reduction of external financing of new investments [6, p. 193]. In this regard, the special relevance is gained by the development, adaptation and implementation of the company's strategy, taking into account the prevailing economic situation, that would not only allow the organization to
be preserved as an economic entity, but also contributed to the transition to a new level of development.
It should be noted that the Russian Federation is import-dependent in the field of food security, despite a serious attitude towards the agro-industrial complex, which has very unattractive indicators of its development and requires serious investment by the state [25, p. 142].
Table 1. Indicators of Russia's foreign trade in food and agricultural raw materials for its production, million USD [25, p. 142]
Relative deviation of
Indicators 2015 2016 2016 by 2015, %
Goods turnover 42 804,6 41 946,1 98,0
Import 26 584,0 24 902,0 93,7
Export 16 209,0 17 044,0 105,2
Trade balance -10 386,0 -7 857,7
The data of Table 1 in terms of the negative trade balance shows the presence of import dependence. However, we should pay attention to the positive dynamics of the measures performed by Russia, namely: the level of food imports fell by 6,3%, and exports increased by 5,2%.
It is possible to deduct how sanctions affect the food security of the Russian Federation. Sanctions lead to an increase in consumer prices. For example, consumer prices rose by 27% for certain types of meat products from 2013 to 2016 [23, p. 62]. Sanctions lead to a decrease in consumption, to a small increase in domestic production and to growth of consumer [25, p. 144-145].
If we analyze sanctions against the financial sector, it is especially alarming that banks that fall under sanctions are either completely or partially controlled by the state. That is, sanctions can and should be viewed as a challenge to the state as a whole. In addition to sanctions, international rating agencies in 2014 lowered Russia's credit ratings to "below investment" level, regardless of the real macroeconomic indicators at that time, which corresponded to ratings at 2-3 steps higher. This circumstance seriously hampered access to Russian organizations, which were not subject to sanctions, to world capital markets. This, as well, leads to increase in consumer prices, stagnant wages and increase in unemployment [10, p. 214].
Another factor that presents itself as a challenge for Russian economy and business development and is augmented by the effect of sanctions is the low level of development of the high-tech sector, while knowledge-intensive industries play a strategic role in ensuring the quality and pace of the development of the economy of any country. Today, Russia's lag in applied technological norms from the leading countries - the US, Japan, Taiwan - is about 2025 years. Industrial output with a high degree of processing accounts for about 7% of Russian exports, while in Germany this figure exceeds 80%. [1, p. 36]
At the Gaidar Forum, OECD experts noted that Russia's economic growth potential has declined from 7% to 1.5% since the beginning of the 2000s. OECD attributed this to low labor productivity [7].
Table 2. Labor productivity [1, p. 36]
Countries Labor productivity, PPP (thousand USD) Labor productivity, dollar rate (thousand USD)
USA 107,6 107,6
EU 69,3 74,5
Russia 33,9 28,1
If the average labor productivity in Russia, calculated at purchasing power parity, is 3.2 times lower than in the US, then in some sectors this gap is even more significant. Therefore, in comparison with the United States in Russia, labor productivity in the social sphere, education and health care is 6 times smaller, in agriculture - 6.4 times, in construction - 2 times, in the financial sector - 3.5 times [1, p. 37].
Yet another challenge facing the Russian economy is maintaining a healthy relationship between the state and the private business and being responsive to how industrialists and entrepreneurs cope with the consequences of sanctions [11, p. 249-252]. The economic sanctions that have hit Russia have exacerbated many of the country's economic problems. It was expressed in:
- increasing the risks for the state. These are geopolitical risks, economic risks (inflation, crisis), systemic risks (high level of corruption, inefficient management system, lack of control over society) [15, p. 125];
- aggravation of the contradictions between the state power and Russian business as a consequence of the sanctioning pressure of Western countries. The negative impact of direct sanctions, initiated by the United States, posed a number of difficult problems for Russian business: the renewal of licenses of companies working with foreign partners; the severance of relations with Russian companies because of political considerations; measures forcing Russian producers of public catering good to enter the big-scale market unprepared, etc;
- negative dynamics of registration of individual entrepreneurs. The number of registered IEs as of January 1, 2015 was 3 500 000 against 4 000 000 as of January 1, 2013;
- imperfection of mechanisms for bringing state support to business. First, the financial resources allocated annually from the federal budget for the development of small and medium-sized businesses; second, readiness for cooperation with small and medium-sized businesses. Programs of such cooperation are developed by federal bodies, and their implementation depends on regional government bodies that do not always ensure the implementation of cooperation programs [21, p. 125; 22, p. 8].
In November 2017, the Russian Union of Industrialists and Entrepreneurs conducted a survey "Business Environment Index of the Russian Union of Industrialists and Entrepreneurs". Participants were asked additional questions about the consequences of imposing sanctions on Russian business. 55 companies participated in the questionnaire on this topic. 70,4% of respondents indicated "industry" as the main type of economic activity. About 11% of companies belong to the energy sector. The construction sector companies accounted for 9,3%, while the transport and communications sector companies -7,4%. The majority of respondents (83,3%) are classified as "big business", representatives of medium-sized enterprises accounted for 7.5%, and small businesses - 9,2% [18].
48,1% of companies that participated in the survey believe that economic sanctions affect the activities of enterprises. 38,9% deny the impact of sanctions on their companies, and 13% found it difficult to answer this question. The following questions revealed which effects from sanction turned out to be more drastic for businessmen: The most critical for Russian business was the rise in prices for raw materials, equipment, components associated with the imposition of sanctions by the EU countries, the United States, Japan and oth-
er countries - this was stated by 64,6% of respondents. The reduction in the availability of loans and credit (48,9%) and the reduction in investment (35,4%) follow as presenting the most tangible negative effects of sanctions. The least tangible effect was discovered regarding these issues: Problems with goods export (6,4%), termination of cooperation in the oil and gas sphere (9,5%) and termination of cooperation in the defense sphere (11,4%) [18].
These polls demonstrate that even though some aspects of sanctions did not affect the surveyed entrepreneurs severely, nevertheless other serious issues still persist and need to be further addressed in domestic and foreign policy [14; 24].
The current state of the Russia-West relation, specifically the regime of mutual sanctions, certainly has a drastic effect on the Russian economy and business development. Russian economy, struggling with certain challenges like corruption, scientific and technological lag, and ineffective public governance economic situation under the pressure of economic sanctions witnessed the aggravation of the.
The government implemented a number of measures and policies, which, in the end, succeeded in neutralizing some of the negative effects of the sanctions: support of import substitution and export of non-commodity goods:
- promoting the development of small and medium-sized businesses by reducing financial and administrative costs;
- reduction of tensions in the labor market and support for effective employment;
- creation of opportunities for attraction of circulating and investment resources in the most significant sectors of the economy;
- optimization of budget expenditures by identifying and reducing inefficient costs, concentrating resources on priority development areas and meeting public obligations;
- compensation of additional inflationary costs to the most vulnerable categories of citizens (pensioners, families with several children).
Increasing the stability of the banking system and creating a mechanism for the rehabilitation of ineffective system-forming organizations.
These measures ultimately led to gradually stabilizing the economy and combating the inflation rate.
However, our research showed that a number of issued still stay relevant and pose as valid challenges and threats to Russian economic security. As the
sanction regime continues, and new sanctions are implemented from both sides we can expect the further exacerbation of the current problems. The Russian government and business need to cooperate closely in strengthening Russian economy and find new ways and specific measures and policies that would secure the welfare of the population of the Russian Federation as well as national economic interests.
References
1. Chernenko V.A., Shvedova N.Ju. The risks of the Russian economy under international sanctions. Theory and practice of social development. 2015. №4.
2. Connolly R. Russia's Response to Sanctions: How Western Economic Statecraft is Reshaping Political Economy in Russia. Cambridge: Cambridge University Press, 2018.
3. Connolly R. The Empire Strikes Back: Economic Statecraft and the Se-curitisation of Political Economy in Russia. Europe-Asia Studies. 2016. №4.
4. Doing Business 2018: Reforming to create jobs. URL: http://www.doingbusiness.org/content/dam/doingBusiness/media/Annual-Reports/English/DB2018-Full-Report.pdf (accessed 08.09.2018).
5. Dreyer I., Popescu N. Do sanctions against Russia work? European Union Institute for Security Studies, 2014. [Electronic resource]. URL: https://www.files.ethz.ch/isn/186485/Brief_35_Russia_sanctions.pdf (accessed 08.09.2018).
6. Ershov M. What Economic Policy Does Russia Need Under the Sanctions? Problems of Economic Transition. 2016. №3.
7. Filatova I.V. Challenges and threats to economic security in the framework of the implementation of the Economic Security Strategy of the Russian Federation until 2030. Economic Sciences. 2017. №6.
8. Gaidar Forum. URL: http://en.gaidarforum.ru (accessed 08.09.2018).
9. Gorshkov V.G., Denisov M.S., Kolyhanov D.A. Modern challenges to the Russian economy: crisis and sanctions (a look at the problem). Bulletin of the Altai Academy of Economics and Law. 2016. №1.
10. Kosov M.E. The financial system and the security of the Russian economy in terms of sanctions. Economic Sciences. 2016. №6.
11. Kossov V. On Economic Sanctions, Okun's Misery Index, Male Premature Mortality, and Possible Directions of Small Enterprise Development in Russia. Journal of East-West Business. 2014. №4.
12. Mau V. You can't build an economy on rudeness. Interview with Rector of the RANEPA Vladimir Mau for Gazeta.ru. 15.01.2018. URL: https://www.gazeta.ru/business/2018/01/15/11612906.shtml (accessed 08.09.2018).
13. Medvedev D.A. Socio-economic development of Russia: the acquisition of new dynamics. Economic issues. 2016. №10.
14. Russian Business Week. URL: http://nrb-rspp.ru (accessed 08.09.2018).
15. Nesvetailova A. Against All Odds? Russia's Financial Crisis and Global Geopolitics. The International Spectator. 2016. №1.
16. On the Strategy of Economic Security of the Russian Federation for the period up to 2030: Presidential Decree of 13.05.2017 №208. URL: http://kremlin.ru/acts/bank/41921 (accessed 08.09.2018).
17. Report of the Special Rapporteur on the negative impact of unilateral coercive measures on the enjoyment of human rights, on his mission to the Russian Federation: Human Rights Council. Thirty-sixth session. URL: https://documents-dds-ny.un.org/doc/UNDOC/GEN/G17/225/95/PDF/ G1722595.pdf?OpenElement (accessed 08.09.2018).
18. Russian Union of Industrialists and Entrepreneurs. URL: http://eng.rspp.ru (accessed 08.09.2018).
19. Rutland P. Back to the Future: Economic Retrenchment in Russia. Russian Analytical Digest. 2016. №180.
20. Rutland P. The Impact of Sanctions on Russia. Russian Analytical Digest. 2014. №157.
21. Sazhina M.A. The economic crisis as a result of political and economic sanctions against Russia and trajectories of recovery. Bulletin of the International Institute of Management LINK. 2016. №3.
22. Sazhina M.A. The interaction of state and business in Russia in the context of political and economic sanctions. Economic Sciences. 2015. №8.
23. Shakleina M. V., Shvecova K. D., Shaklein K. I. Assessment of the impact of sanctions on the market of meat and meat products: an analysis of the state and prospects of market development. Problems of development of the territory. 2018. №1.
24. Shohin A. The results of the X Week Russian business. Power. 2017. №4.
25. The impact of sanctions on national food security. Bulletin of the Prikamsky social institute. 2018.
