Russian Economy General News: #1

Had one manager at my workplace just come back from Hong Kong and he loved it. Although, that city is different than the rest, but its great for tourism plus great for just purchasing anything.

When reading through sdelanounas of some cities and towns with pictures and description, sure looks beautiful.

TR1 wrote:Nice indeed. If only Russia was not getting bad publicity due to our stupid outbreak of Gay-phobia/ the occasional skin-head beatings, it would be even higher I think.

More like, if it wasn't for the stupid (and deliberate) outbreak of Western propaganda and attempted political subversion via trying to organise a 5th column.
The amount of BS that they write about Russia on this is astonishing.

That's always been the case, Russia has been the big bad (or sick and weak, depending on your choice) bad guy forever. BBC coverage of Russia has always been lul-worthy.

The Gov passing stupid laws and getting bad publicity is something Russia can avoid on its own terms.

Speaking of which, I am going to Moscow tomorrow. Been a while since I've seen my birth city covered in snow.

TheArmenian wrote:2013 Russia Grain Harvest Rises 26% to 92 Million Tons

Harvest would be even bigger by at least another 20%  if not for the huge floods that ruin it.

Economic Development Ministry Says Economy Will Lag for 20 Years

yes ofcourse , so russia must expand now to grow faster...
either that or moon base

Where did they get their predictions? anyhow, it sure would lag if they don't do anything. they were certain it would grow larger no more than 4 months ago. if they cannot tell what the economy will be in 4 months, I doubt they will know in 20 years.

There is a reason why there is such a thing as investments and development. If you sit on your asset and don't do anything, then stagnation continues.

seeing as how there is countless of investments and projects going on now, it is pretty tough to determine how an economy will do in the next couple of decades as we don't know how well these new industries will end up doing.

I doubt they will sit around as people need money, especially oligarchs, so more likely things will either move forwards or backwards till things change. Only thing that gives some indication that it could "lag" is austerity. and this could be an indication they have one. other than that, there isn't much to trust in the figures of economic growth, especiall since no one say the economic collapse was happening in 2008.

As well, during the golden years, they were claiming that Russia was going to be third richest country and everything at current growth etc etc. Take these crystal ball predictions with a grain of salt.

Anyway, after reading article, it seems more like an attack on Putin, as well as giving odd information like lack of wage growth and investments, when it has been noted that investments is higher than ever, and wages were the top blame as wage growth was high and production sated the same. So it seems the article is screaming with bullshit.

Sberbank of Russia reports RAS 319 bln rbl net profit growth Jan-Oct

MOSCOW, November 9 (Itar-Tass) - Russia's largest retail savings bank Sberbank has declared its net profit under Russian accounting standards (RAS) increased by 7.5 percent year-on-year over January - October 2013 and totalled 318.8 billion roubles.
The bank’s financial statement say total provision charges made 99.5 billion roubles against 41.9 billion roubles a year earlier. In October they totalled 16 billion roubles.
Last month Sberbank allotted over 710 billion roubles of corporate loans, which is 40 percent more than last year's monthly average. Over the past ten months the bank granted a total of about 5.3 trillion roubles in corporate loans. In October, the corporate credit balance grew by 157 billion roubles, or 2 percent, with dollar decline versus the ruble weighing on the loan portfolio growth because of revaluation of foreign currency loans. In effect, the bank’s portfolio had increased 7.2 percent since the year-start.

Banking sectors, as sad as this is, is really what drives an economy these days. It is all about investments they make, properties they own, assets they own (business'), etc. Sberbank owns a lot of property as well as investments in Russian enterprises, be it JSC or private. These are the same banks that decide how good economies do and how well they will progress.

One hope I have is for the BRICS bank to be a true competitor of World Bank and IMF, and to be able to do a good job to get the countries involved and the countries who want to be involved, to be able to allow easier access to investments to each other. While China has huge investments in Russia, as well as vice versa, it would be good if India, Brazil and South Africa have big investments in Russia and vice versa. South Africa would be a good place to start in order to access to the rest of Africa. Russia already has some pretty big investments already there. But it would be nice to see Denel South Africa to invest in co-development of military technologies in Russia, as they have a lot to offer. Brazil has a lot to offer in terms of automotive, spare parts and pharma. India has a lot to offer in terms of technologies and standard domestic goods. This combination would do very well for Russia's economy and to bring in cheap goods to be developed in the country through JV or just plain old investments, and they don't have to worry about the cheap goods from Europe coming in through Ukraine if they do get into EU.

I believe this year, Russia is going 3rd in gold production, surpassing USA. 

The extraction and production of gold in Russia for the first 9 months increased by 13.4% - to 185.96 tons

Viktor wrote:I believe this year, Russia is going 3rd in gold production, surpassing USA. 

The extraction and production of gold in Russia for the first 9 months increased by 13.4% - to 185.96 tons

Darn you, I was about to post that  

Yeah, Russia is really digging up the gold and increasing their national reserves of Gold Bars in order to have some sort of levy if something happens to the global economy. But the more they dig up and process, the more there is in the market, the lower their value becomes. Not to mention the market for such metal is pretty much controlled so gold is expensive for a reason. Much like the Diamond market (which BTW, Russia is probably one of if not the largest in).

More news:

Russia for the first 9 months increased production of LPG (propane and butane) 5.5%

lol russia lost billions in a failed polysilicon nitrol project. 
there are many failed projects like this all across russia

actually out of rusnanos projects, 22 are failures. not bad considering the amounts of projects they have. notil is being reworked as a end goods facility now rather than raw material.

at the time of induction, silicon was expensive. its dirt cheap now.

not all projects are gonna be successful. remember US' with the high tech push a year ago? majority of those industries are bankrupt now. It's a real hit and miss.

Good thing is, they are trying, and out of all of their attempts, some a failures and others are success.

would you rather they not invest at all because some projects are failures? Not all are, and the money that is being put in goes to other groups as well like construction companies and part plants. the infrastructure projects can be converted.

The S word

Austin wrote:The S word

Thank you Austin. That is a good piece.

It pretty much puts into place what the underlying problem is and what solution is. Many industries need to invest in their own development, which only so far, key major enterprises are doing. There are companies who have decided to upgrade and self invest and did well like the ceramics plant in moscow I mentioned a while back. More companies need to move in that direction. Maybe a company in Russia needs to move forward with a proposed idea of making affordable robotics and automated machines for industry. Or seek outside companies to open more production plants in Russia.

Industrial output only grew in a few regions in Russia while the rest stagnate. This needs to be addressed, and only way to do so is improve the companies finances: modernize the facility itself - meaning new lighting and heating systems, generators, ect. And modernize production - make newer end goods (innovation), increase automation, change suppliers, ect.

I find many companies are just lazy. Good example is a company like Blackberry. The ceramics plant I mentioned should be used as a good example. Maybe there should be a national fund or tax exemption program for x amount of years for industrial upgrading. So many look for tax loopholes to prevent paying taxes, maybe this is one that could actually pay off for both parties in the long run.

i would say russia needs gradual but total liberalisation in light industries ,not so much in heavy...
the problem is with all this intervention as you too noticed ,people will become lazy and stagnant , they will expect the state to do everything and solve all problems.
also russia should become less and less dependent on oil domestically and save as much as can for exports.instead domestic consumption is rising.

Rpg type 7v wrote:i would say russia needs gradual but total liberalisation in light industries ,not so much in heavy...
the problem is with all this intervention as you too noticed ,people will become lazy and stagnant , they will expect the state to do everything and solve all problems.
also russia should become less and less dependent on oil domestically and save as much as can for exports.instead domestic consumption is rising.

I agree. Maybe introduce more biofuels and natural gas as a form of fuel. Maybe even introduce more renewable options to people and industry like solar power panels and windmill (there is a facility at where I work that was built around renewable energy. Even though it cost $80m to build, they save around 4 - 5 million a year on energy costs, that is not including the amount the company is rolling through that facility in terms if products. Domestic consumption has grown a lot, and even if it somewhat stalled a bit, its much higher than before. As well, too many companies are feeling the pinch because of the costs in employees as well as cost in use of goods. To fix this, they need to increase production, in order to do that, they need to increase automation. As well, improve their infrastructure to use newer technologies to lower costs of resources. As well, look at doing more than one product.

Best example was what we were talking about, Nitol plant. All it did was make silicon which really, could make a company lots of money a year or two ago with the value of silicon then, but if your only product is that, then prices drop as much ad they did, then the company would go under, especially the company still had to pay off the loans, which could not at those prices. Now they have to close it for a time till they change manufacturing. Now Nitol plant will make end goods for solar panels and such, which now, they make the silicon and an end product, so even if silicon fluctuates further down, then they can deal with that since they produce more.

As well, a new facility was built to make ceramics for electronics and such, which Russia mostly imported before. Now they make it themselves, as a lot of high tech semiconductors are now made in Russia (again), but as much as it is claimed as a new facility, I believe it is a modernization of an existing facility as that it is a company making such ceramics on top of other items.

I find in Russia, there are too many companies who make just one thing. Doing so can make things cheaper and could make someone rich quick, but it is also far more prone to failing as well.

There is still ongoing of privatization of industries. Maybe tractor companies, and spare part plants should be privatize. Same thing with majority of auto factories and some metal companies too. Keep some in state control just in case the others that are privatized do cut and run (problem with priavtization in Russia), but still gives a chance for those who do want to improve the country, do so.

And yes, people do become too complacent and expect government to bail them out, hence why many areas are so poorly developed.

Good News for Russia

UN sub-commission recognizes Sea of Okhotsk enclave as part of Russia's continental shelf

http://voiceofrussia.com/news/2013_11_15/UN-sub-commission-recognizes-Sea-of-Okhotsk-enclave-as-part-of-Russias-continental-shelf-5176/

Great news, just great. 

Korea, Russia to Cooperate in Gas, Railway Projects

A joint statement contained 35 agreements on mid and long-term plans for railway projects and also signed around 15 memoranda of understanding to cooperate in shipbuilding, transport and energy.

its kinda interesting phenomenon of russia , to observe...
theyve opened their country to WTO and their economy actualy started slowing down...    

Rpg type 7v wrote:its kinda interesting phenomenon of russia , to observe...
theyve opened their country to WTO and their economy actualy started slowing down...    

WTO was never a good idea in the start. Russia has to create protectionism at the same time looking for foreign investors to open plants in the country, and they were doing so when not in WTO. But being in WTO, they have to be lax on certain tariffs, so there isnt much a need to open a plant in various forms in Russia to tap into its and CIS market now do to being now cheaper to just export it to the country.

the oppening to WTO actually showed how weak and stressed the Russian economic enterprises are!
If their economy was truly strong it would be accelerating and expanding... it will take some time to stabilise.

Rpg type 7v wrote:the oppening to WTO actually showed how weak and stressed the Russian economic enterprises are!
If their economy was truly strong it would be accelerating and expanding... it will take some time to stabilise.

I find the whole global economic system rotted to be honest, as I see this here in Canada as an example.  We are technically a bigger resource export nation than Russia is (in terms of more reliance on raw materials) but just better at banking.  Manufacturing as far as anyone is concerned, is dead in the western world.  Only real manufacturing are heavy industrial systems.

I would say that there may not be anything politically wrong with Russia's economic enterprises are, but how incompetent they are and can be.  Actually, when Renault and Nissan took over Avtovaz, they did not really change much to the plant, but just changed contracts with different enterprises, and released a newer vehicle which all showed massive profit to the company.  Better management.

An example is the latest Smart Phone for the Russian Railways.  Technically, it is supposed to be Russian, but it isn't.  At most, the case is Russian while the rest are Chinese.  They are capable of building one in Russia made with Russian goods.  If by any chance it cannot be made with Russian ARM processors or what not, they could import the chip itself and make the PCB and the various components for it, even the battery.  But they didn't.  Nokia has a production plant in Russia for christ sakes.

The other thing that is happening is Russia is unfortunately a much hated country by many in the west.  Biggest example was T-Platforms.  When it was becoming competitive and started to export HPC's to USA, they were blacklisted, as a lot of the components are from USA or designed in USA, like AMD and Intel microprocessors.  So now no one really knows what is happening to T-Platforms.

Did this really teach anyone a lesson in Russia regarding this?  Some did, some did not as they see they are somehow "different" and may not get blacklisted.  Now the ministry of Industry and Trade had their armed twisted and now is seeking the Elbrus 4C microprocessors development, which will be 28nm technology and will be an 8 core processor, but wont be out till 2015 and will more than likely only end up on HPC systems and industrial equipment.  In Russia, there are a lot of companies that can be competitive.  Many Russian companies can be competitive.  Gazprom is another example of failure due to management.  Almaz Antey is continuously having issues due to Management.  Yet companies who have good management seem to be competitive and do very well: Avtovaz (only happened when someone else took over), MCST (when someone else took over), Sitronics (just because they are way too big and operate all over the world), ect.

But many companies in Russia want the cheap buck, and really, they are pulling the same card from the USA.  Difference is, in the USA, the test product will be made in USA then manufactured en mass elsewhere.  In Russia, only a few technologies is done like that.  Rest is created and tested in China, and then is exported to Russia.  Management in Russia pays Chinese engineers to come up with the device, rather than Russian engineers.  All because they save a few roubles.

All the successful companies so far, in Russia, are joint venture companies between state and private from other countries, and many people on the board of directors for the JV enterprise in Russia are foreigners, and foreigners seem to be more successful in Russia.

I truly think the only way Russia could save itself and its enterprises if they actually smarted the hell up and start looking at the big picture, and force its managers to actually start investing in local development rather than just an end product imported to re-sell to the market.  Doesn't help though when even state run enterprises like Russian Railways doesn't even follow that tactic.  So much for Medvedev's movement in turning Russia into major developer of semiconductors like China.  Only way that can happen is when companies start asking for local developers to start pushing these things.

And look what a private enterprise does: Technopolis GS

The Microelectronics Development, Research and Production Center "GS-Nanotech"

GS-Nanotech is the Russia's first manufacture producing microprocessors with topology of 45 nm
Producing capacity: up to 350 000 pieces per month
Total investment value – RUR 4,2 bln
Projected proceeds – RUR 3,5 bln per year

They already released a product using a Russian processor, which I believe is from Module, so a DSP.  Why cant more companies be like this?

RPG, why can't you be this good at talking to others as you are with me here? You show that you are quite reasonable here and I have changed my view of you quite a bit.

And you are right, this has shown us a couple of things, and hopefully, those in Russia too. 1) you cant rely on other countries for your economic growth, so not to expect them to try and play fair with you, as well as actually properly accept you in WTO. 2) Build up your local enterprises and actually protect local industries as long as they are actually contributing to the economy. Building an end product using Russian products, rather than building them outside and selling at home. In this case, those companies are fair game and if they survive, let them, if not, let them die. 3) Provide some sort of economic development and incentive program for helping out industries that really want to start local production of said goods. 4) Create an Autopact like system (What we have in Canada) in Russia. Example: Hyundai only sold few vehicles in the past in Canada, so importing them wasn't that big a deal as it really wasn't much a hit at the economy. But because Hyundai started to sell high amounts of vehicles per year in Canada, they were forced to open an assembly plant and use local spare parts plant (which also operates in Russia now - Magna International) for their vehicles. Brings in lots of money to Canada. It was one of the few policies that actually saved the automotive industry in Canada. S.Korea is very interested in setting up in Russia simply because a lot of economic ties between the two of them are sprouting up, and many goods from S.Korea makes its way to Russia. So now they produce TV's I believe in Chechnya, Automotive at Solers plant, and Avtotor, and now they are upgrading a shipyard and looking to do more co-development in the shipbuilding industry as Hyundai is great to work with apparently.

These could be ideas to help their system. I think that even after the Soviet Union, too many enterprises are running on the assumption (as you mentioned) that they will be saved so they can just do whatever dirty business they can, and as well, just trying to make a quick buck and run away. There is also the issue of just monodevelopment. Meaning that they are just building 1 thing per plant. These specializations are not as effective as they used to be as their incomes are less, thus their R&D is less, etc. So it is more worth to just aim at getting more larger enterprises. Leave the small companies to the smaller communities.

Russia's GDP grew by 1.3 percent in the first ten months

Thats poorer than expected of 1.8 % , not a good sign for things to come

Austin wrote:Thats poorer than expected of 1.8 % , not a good sign for things to come

Well, this will then start lighting a fire under certain peoples butts as the biggest threat to their wealth and comfy positions, is a poor economy.

Dont trust predictions. As example of this.

Austin, why is it bad things to come? Unless you hate Russia or something. Cause this will force change and development.