ALEXEY VEDEV: RUSSIAN ECONOMY IS SICK TO DIGEST INVESTMENTS
Forbes magazine published an article “Money indigestion. How to set investments work for Russian economy” by Alexey Vedev, Head of Financial Studies Department of the Gaidar Institute.
Alexey Vedev wrote: “Launch of a new investment cycle with an annual increase in investment of at least 5% starting this year and increasing its share in GDP fr om current 21% to 25% in 2024 is among the tasks set to the government by the President in his address to the Federal Assembly”.
However, according to the author, Russian economy differs from most of OECD countries by its structure of investments inadequate to demand and inappropriate quality of investment process.
Expert highlighted that “economy of Russia is sick to digest investments converting them into fixed capital too slow and costly. The long-announced but never-completed technological modernization of a number of key industries coupled with lack of a state systematic approach to organizing and stimulating high-tech import represent a separate problem in the development of national investment package, regretfully remained outside the focus of national projects”. As a result, “new investment policy presented by the Head of state is being activated against the background of slightly incorrect ideas about investing in fixed assets as of a process of building a basis for future growth”.
However, the article stated that “the issue is not the fact of import dependence of investments in fixed assets, rather it is its scale and depth. The experience of 2014-2015 showed that even Russian manufacturers of relatively unsophisticated equipment who wished to expand their market share were able to achieve exceptionally modest success.”
Alexey Vedev underlined: “The state should determine specific area of equipment manufacturing, wh ere achieving parity with imports is obviously not realistic against progressing technological lag and degradation of production of capital goods, what functional equipment can serve as a full-fledged alternative to import and what is necessary for development of its sustainable production and service”.
Expert of the Gaidar Institute concluded: progress in solving the issue of equipment modernization is associated “with the mythical stimulating effect of the implementation of state economic policy. Mobilization of financial resources for national and other strategic projects initiated by the state automatically reduces the resource base for ordinary investments in fixed assets implemented by companies based on their own assessments of business prospects and investment climate”.
However, according to the author, Russian economy differs from most of OECD countries by its structure of investments inadequate to demand and inappropriate quality of investment process.
Expert highlighted that “economy of Russia is sick to digest investments converting them into fixed capital too slow and costly. The long-announced but never-completed technological modernization of a number of key industries coupled with lack of a state systematic approach to organizing and stimulating high-tech import represent a separate problem in the development of national investment package, regretfully remained outside the focus of national projects”. As a result, “new investment policy presented by the Head of state is being activated against the background of slightly incorrect ideas about investing in fixed assets as of a process of building a basis for future growth”.
However, the article stated that “the issue is not the fact of import dependence of investments in fixed assets, rather it is its scale and depth. The experience of 2014-2015 showed that even Russian manufacturers of relatively unsophisticated equipment who wished to expand their market share were able to achieve exceptionally modest success.”
Alexey Vedev underlined: “The state should determine specific area of equipment manufacturing, wh ere achieving parity with imports is obviously not realistic against progressing technological lag and degradation of production of capital goods, what functional equipment can serve as a full-fledged alternative to import and what is necessary for development of its sustainable production and service”.
Expert of the Gaidar Institute concluded: progress in solving the issue of equipment modernization is associated “with the mythical stimulating effect of the implementation of state economic policy. Mobilization of financial resources for national and other strategic projects initiated by the state automatically reduces the resource base for ordinary investments in fixed assets implemented by companies based on their own assessments of business prospects and investment climate”.