Russian Economy General News: #11

This a very detailed article and a must read(I read it in full, several times), the only thing I disagree with the author is about Trump.

I think this comment by one of the readers, sums  it up perfectly:

"The hatred of China is recent, and currently over-dramatized by Trump, mostly for own reasons. And the neocons still think there are means to “contain” China’s economic growth (they will fail’), while Russia’s sabotage of an increasing number of their evil plots around the world is hard to prevent.
Consequently, Russia remains the greater threat for the empire, as Putin has been increasingly frustrating their second biggest tool for control after the $ – regime change. Belarus, Venezuela, Syria, to which should be added Turkey, and other less known spanners in the wheels.
And of course, Crimea, which the regime-changers refuse to get over…
Worse of all: the new weapons.
And to add insult to injury, the vaccine with the nose-thumb name, Sputnik V.
The cumulative effect of these steps is proving so irritating that Matthew Ehret’s warning about a neocon-driven “total war with Russia, China…” should be taken seriously.
Certainly Putin does, if this statement is anything to go by:
“And since Dec. 2019, the first strategic missile regiment with the Avangard system has been on full combat alert.” (See here for context: http://en.kremlin.ru/events/president/news/64058

https://thesaker.is/hyperinflation-fascism-and-war-how-the-new-world-order-may-be-defeated-once-more/




This article was mostly about finances, so I posted it here.

Manufacturing, IT, construction to become economic growth drivers in 2021-2023

According to Russia’s social and economic development outlook for 2021 and the planned period of 2022 and 2023, growth rates in the base sectors (excluding mineral production) will rise to 3.6-4.1% in 2021-2023 after a decrease of 5.3% in 2020

MOSCOW, September 27. /TASS/. The sectors ensuring investment expansion, export-oriented manufacturing industries, IT, construction and transport sectors are expected to become Russia’s economic growth drivers in 2021-2023, according to the country’s social and economic development outlook for 2021 and the planned period of 2022 and 2023 presented by the Economic Development Ministry.

"In terms of sectors, economic growth drivers in 2021-2023 will be sectors ensuring the investment development pattern, export-oriented manufacturing sectors, IT, construction and transport sectors, as well as real estate and professional services," according to the outlook.

Growth rates in the base sectors (excluding mineral production) will rise to 3.6-4.1% in 2021-2023 after a decrease of 5.3% in 2020. Meanwhile export-oriented sectors (chemical industry, food sector, wood processing) will become growth leaders. Moreover, the increasing investment activity coupled with a surge of non-commodities and non-energy exports, will support accelerated development of engineering.

"That said, growth rates in the extracting industry will be moderate in 2021 - 1.2% (in 2020 - decrease by 8.4%) amid the influence of weak external demand and the current terms of the OPEC+ deal through 2022," the ministry said. It expects growth rate in the extracting industry to speed up to the peak level of 4.7% in 2022 amid the projected growth of crude oil production with further stabilization.

https://tass.com/economy/1205453

kvs wrote:Russia's GDP growth has been "suppressed" by large foreign debt paydowns in recent years.  These growth estimates do not mean much since they
project based on previous GDP dynamics.   The real Russian economy which does not shrink because of debt paydowns appears to have been
on a 6-8% growth trajectory.   This is supported by the tempo of new factory openings and reflects the import substitution stimulus which
extends into manufacturing and not just agriculture.   Any evaluation of Russia's economic state has to remove the BS downsizing of the
GDP from paydown of foreign debt.   This reduction of foreign debt is not coming at the expense of domestic consumption and is a ridiculous
and vapid accounting definition for GDP evaluation.

What is the magnitude of the foreign debt paydowns you reference? Are you referring to Russian government or private/quasi government Russian companies?

The second part.

kvs wrote:

calripson wrote:

kvs wrote:Russia's GDP growth has been "suppressed" by large foreign debt paydowns in recent years.  These growth estimates do not mean much since they
project based on previous GDP dynamics.   The real Russian economy which does not shrink because of debt paydowns appears to have been
on a 6-8% growth trajectory.   This is supported by the tempo of new factory openings and reflects the import substitution stimulus which
extends into manufacturing and not just agriculture.   Any evaluation of Russia's economic state has to remove the BS downsizing of the
GDP from paydown of foreign debt.   This reduction of foreign debt is not coming at the expense of domestic consumption and is a ridiculous
and vapid accounting definition for GDP evaluation.

What is the magnitude of the foreign debt paydowns you reference? Are you referring to Russian government or private/quasi government Russian companies?

Why would I only consider government contributions when discussing GDP?  

I have a post in this thread where I use the dollar paydown in 2018 to compare it to the nominal ruble GDP size converted to dollars.   The paydown
for 2018 was about 4% of GDP.   So if there was no growth in 2018, Russia's GDP would have shrunk by 4% just because of the debt principle retirement.
This is absurd.   And these principle payments are also absurdly categorized as "capital flight".   More utter nonsense.

In 2018 the total principle repayment was about $520 billion - $454 billion = $66 billion and the Russian GDP was $1658 billion for the same year, so
we have 4% of the GDP was put in the negative column.   Using this voodoo accounting Russia's GDP grew 2.3% in 2018.   In reality it grew 6.3%.
This figure is consistent with the wage growth for that year.

Russia's total external debt peaked at $733 billion dollars in late 2014 and went down to about $480 billion dollars in 2019.   That is a drop of
$253 billion US dollars over four years.   All of this change is ludicrously counted as GDP contraction.   This is why the huge stimulus from
import substitution (where $1 of imports becomes $2 of GDP growth) was so "anemic" over the same period of time.  
 

Obsession with GDP is a pervasive feature of the west.
I would consider it silly to think that losing all of your industry and a solid chunk of your population is the sign of a developed country, but apparently the Baltic states are simply amazing when compared to 1989.
A lot of people make the mistake of discussing Russia's problems as a feature of the economy. The problem is not a lack of money, there's quite a lot of it to go around. The problem is the retards in power at all stages, from tiny villages to the ministry of foreign affairs and the kremlin itself. Hell even the kremlin has acknowledged this to some extent with all the recent pissed off talk of money allotted for development projects sitting around unused. People at the local level are so incompetent they prefer to not spend the money than come up with good ways to use it.
As for the strength of Russia's economy, just the way the agrarian sector has shot up to the top of the world and the reduction of the influence of oil prices on our budget and macroeconomic stability is enough to consider a massive and fundamental breakthrough as far as I'm concerned. This government deserves credit for this.
I mean it's mind-blowing that the agrarian industry has grown so much that they complain about lack of storage, transport and export infrastructure. This in a country that imported all manner of edible goods for decades.
As always, there's good and bad news when looking at everything.

Russia's major problem how I see it is it's too top heavy in power. Like you said, regional leaders are stupid and incompetent. Most rely on the main halls of the Kremlin to come up with all the ideas and allocation of money while they sit there, twiddling their thumbs and waiting for their check.

I know constitutional changes is supposed to help fix that, but it will take a long time it works.

Some regions have great leaders. Most don't

kvs wrote:
I am not going to apologize for the crap you describe.  But it is a sad fact of life everywhere.   The problem is that in Russia it is overhyped but in the
west it is never talked about or propagandized as abnormal.   The level of this incompetence and corruption is higher in the west but you do not
hear anyone wailing about it.    In Russia we have the unrealistic expectation that it can be removed.   It can't.   The only solution is to downsize
Russia's bureaucracy that more than doubled under Yeltsin.   Some "reformer".   I would also downsize local government.   Money should be funneled
directly instead of through local power structures.

I suggest an NSF style funding model.   Elements that need funding should put in proposals and prove their need for it.   Various organizations can
afford to have full time staff writing proposals.   For profs in the USA there is a 30% hit in time spent on writing proposals yet they can still get
research done and write papers.   In fact, writing proposals helps organize one's thinking about the research to be done and what papers can
be written.   For organizations the time penalty is zero.   And the management will have to get its shit together to get money.  

It's an interesting model, would we worth implementing for some things to see how it pans out.
But yes, reducing management overhead would be a great place to start.

Rules and regulations with some kind of government or non for profit organization (Russia has a few of them) that monitor companies conducts along with local authorities conducts is what would keep the private entity honest.

As you said, transparency of the financial transfers, payments and transactions in day to day activity is another way to keep dishonest people honest as the finances are tracked easily so they need to have an explanation for what happened.

I was reading a article by Pepe Escobar and this really caught my eye:

"Some of the best tech brainpower in South Korea happens to be Russian."

Why is that Russian brainpower not in Russia and helping set up semiconductors manufacturing in Russia?

https://thesaker.is/china-deploys-sun-tzu-to-prevail-in-the-chip-war/

par far wrote:I was reading a article by Pepe Escobar and this really caught my eye:

"Some of the best tech brainpower in South Korea happens to be Russian."

Why is that Russian brainpower not in Russia and helping set up semiconductors manufacturing in Russia?

https://thesaker.is/china-deploys-sun-tzu-to-prevail-in-the-chip-war/

Because you can make literal boat-loads of money doing this anywhere else but Russia.
I've always said we need to invest a massive amount of money in this industry and guarantee salaries of at least 80k USD, then we'd have a chance. But the government doesn't like that kind of massive investment, so we drag on with old people and those who are too patriotic/settled/lazy to move.
It's sad, but has been the case for a while.
Same reason a great number of excellent scientists abroad are russian, and mathematicians, and physicians etc etc etc...

That isn't true.

In Russia you can actually make boat loads of money. A guy can make a boat load of money opening a car wash in Russia. The designers aren't all Russian either.

Russia invested, especially with the import substitution, more than ever in high tech and continues to do so now.

You will always find token people from all over the world working in these places.

It's rather common sense. But I see it's an oxymoron.

I'll explain like this. I dealt in hiring process for south Koreans in the past. Answers are rather simple.

In South Korea, it's like a mafia state but business style. In other words, 4 companies own the country. Hyundai, Samsung, Daewoo and LG (maybe) and they control nearly every economic aspect of South Korea.

Now average South Korean is paid shit. And cost of living is high in places like Seoul. Outside it isn't too bad though. And you do get a good quality of life if even a bit expensive.

But it's like every major industry - you can get job offers making huge money if you have a skill in that field. But since it's a small country and small competition, the number of specialists needed have dropped considerably. To the point the government is telling people not to bother with higher education as there are no jobs in those fields. But there is the odd demand here and there where they are willing to pay the amount.

In Russia or elsewhere is the same but on a grander scale. Yes, you can get a high paying job at Rosatom, or Rostec, or etc etc etc. But demand is limited and if positions are filled, well guess what? Gotta look elsewhere. Problem is average Russian is very educated. But if the demand for that job isn't needed, guess what? You look elsewhere.

It's like programmers in Canada. High paying job right? Wrong. It's a small portion are paid well but on average, the wages had dropped for application developers across the board. Not enough work vs the amount of people there.

Start ups exist but many fail too. Not all ideas are great ideas.

My colleague is actually a computer engineer who worked in Taiwan designing controller boards for hard drives. He was eventually let go and had to move to Singapore because he couldn't find work in Taiwan for computer engineering - and that is all the country is known for.

It isn't all black and white.

miketheterrible wrote:I'll explain like this.  I dealt in hiring process for south Koreans in the past.  Answers are rather simple.

In South Korea, it's like a mafia state but business style. In other words, 4 companies own the country.  Hyundai, Samsung, Daewoo and LG (maybe) and they control nearly every economic aspect of South Korea.

Now average South Korean is paid shit.  And cost of living is high in places like Seoul. Outside it isn't too bad though. And you do get a good quality of life if even a bit expensive.

But it's like every major industry - you can get job offers making huge money if you have a skill in that field.  But since it's a small country and small competition, the number of specialists needed have dropped considerably. To the point the government is telling people not to bother with higher education as there are no jobs in those fields.  But there is the odd demand here and there where they are willing to pay the amount.

In Russia or elsewhere is the same but on a grander scale.  Yes, you can get a high paying job at Rosatom, or Rostec, or etc etc etc. But demand is limited and if positions are filled, well guess what? Gotta look elsewhere.  Problem is average Russian is very educated. But if the demand for that job isn't needed, guess what? You look elsewhere.

It's like programmers in Canada.  High paying job right?  Wrong. It's a small portion are paid well but on average, the wages had dropped for application developers across the board.  Not enough work vs the amount of people there.

Start ups exist but many fail too.  Not all ideas are great ideas.

My colleague is actually a computer engineer who worked in Taiwan designing controller boards for hard drives.  He was eventually let go and had to move to Singapore because he couldn't find work in Taiwan for computer engineering - and that is all the country is known for.

It isn't all black and white.

Fair point, you're right on that but I'd probably say that the overall amount of these high-paying jobs is smaller than it should be in Russia.
There are also for sure industries that are suffering from under-investment and mismanagement. I specifically know about the ones in science, since that's my field.

Science in Russia is more pertained to military and universities. Up until maybe 40 years ago, that was the same with the west - all science fields were only universities and military.

Even in Canada most scientific fields is either government (CDC as example) or universities (McGill for Neuroscience. Buddies brother studies there in that field at the university and they survive off grants).

Scientific field never is a money maker.  Most high tech companies of the past and even now in most parts of the world will pay grant money to universities to do the research and development for them. If they succeed, they get a bonus.

Hence why engineers where I work come and go so quickly.

Sorry, but the field you chose is a field not worth working in. No matter where you go.  Flooded with talented and capable people but just not enough demand especially thanks to China and India flooding the human science market.

My cousin is a chemical engineer at a university here. She can't find work cause guess what? That job is mostly aimed at oil and gas industry here and we are hurting cause of low prices.

Yeah, Russia SHOULD be investing more. But even if they invest infinite amount of money, end result will be the same - too many people and not enough real innovation thus not enough companies because many of their "ideas" are not practical or sell-a-ble.  

In the end, if you go into such a field, don't ever expect high wages (neuroscientist can make less than a construction worker in Montreal).  You do it for passion.  And only expect to get a job in either military where you may not get paid tons, but get other benefits like cheap or free housing, other bonus', etc. Or work for a major industry like Gazprom, Rosneft, Telecom Company, Food Processing R&D or a University where maybe 1 - 2 people get paid very well and the rest get paid mediocre because they are not really needed that bad.

I have seen this and heard enough of this in almost every major profession in my time on this earth. My father is a electrical and computer engineer. He worked for the military and telecom companies under government (NORAD) contracts.  And even he would be inbetween jobs from 1979 to 1988. When Soviet Union collapsed, he was forced out into the civilian market and his skills only earned him work at places where they manufacture com systems (like Nortel) or manufacturers of gaming technologies (for casinos and what not).  And they paid rather poorly, considering what the cost of living was like in our household.  He built fricking radar systems that detected stealth planes like F-117 before Serbians did (because it was never flown at the time. He knew the Russians had radar capable of detecting it since the first unit flew), and in the end? Nothing.

People migrate to where they can find work.  There is a belief as well in Asia that foreign workers are better quality than domestic. Hence why a white person can get paid more for same job in India than an Indian person would. Even if the Indian guy is more smart than the white guy.

So the question should be asked: why are there so many white people from Germany, Spain, USA, etc working in engineering fields in countries like Korea, China and Japan?  May have to do with being offered a good opportunity than they had back home, even if back home hires tons of engineers and what not of their own?

BTW, science field is a broad term. There are sciences that are pointless for most aspect and others very needed.  

Maybe if these specialists were savvy they could open their own private institution in Russia like many rich business people are now doing, and offer R&D for business's and boom, you will do well.

But we know you science type are not entirely savvy in economics. But that is because economics isn't a science. It's a lot of bullshit instead.

Rodion_Romanovic wrote:

It is not only a problem of Russia or Korea... in Italy the pay for engineers with a master's degree and several years of experience is much less than in northern Europe (with typically also much more unpaid overtime). I even saw some cases (in the south of italy) in which some graduate engineers were paid less than a supermarket cashier...

That was my red line... italy was a good place to live until before I was a teenager... entry in the damned European Union destroyed a big chunk of the economy and made everyone except a few families much poorer.

By the way, now they are trying to call back specialists working abroad. If (as an italian citizen) you worked abroad for at least 5 years (and you were regularly registered in the embassy list as italian living and working abroad), when you get a job offer in your field in italy  you have a good tax discount for the first 5 years (it can easily account to more than 500 euro saved from taxes each month).

I know some friends that used the opportunity, but overall it is absolutely not worth.  I go back only for holidays ...

I would first consider moving to Moscow, Sochi or Kazan than going back to live in Italy...

I'll go back to Italy when european union collapses (and maybe italy as a country as well, and there is the need to restart something)...

Even if it is not as bad as it was Russia in the early 90s I can understand the feelings of the people that left their motherland...(you feel betrayed by your own country and you see little by little the things you held dear being destroyed or rejected)...

Living abroad is not always easy and there are a LOT of things I do not like either (especially here in Merkelland)... however I do not care as much as I would over there...

I tend a bit to fool myself... if I see or hear about something really stupid happening in italy, I think that at least I am not living there, and if see something that I fully deem wrong or stupid here in this (former?) barbaric land (everyplace not Roman or Greek was barbaric by definition ;p, but I can make an exception for Russia as Moscow was called the third Rome)
I think that it is not my country, and that I am only a guest.

Yeah I have a lot of Italian friends and have heard the same many times over. It's definitely a difficult choice to settle down somewhere or leave your country, especially if you have family bonds that you value.
I've heard of the return bonus as well, but as you say it doesn't seem worth it due to the lower wages. It's sad because I love Italy, it really seems like a warmer Russia with many similarities.

miketheterrible wrote:Science in Russia is more pertained to military and universities. Up until maybe 40 years ago, that was the same with the west - all science fields were only universities and military.

Even in Canada most scientific fields is either government (CDC as example) or universities (McGill for Neuroscience. Buddies brother studies there in that field at the university and they survive off grants).

Scientific field never is a money maker.  Most high tech companies of the past and even now in most parts of the world will pay grant money to universities to do the research and development for them. If they succeed, they get a bonus.

Hence why engineers where I work come and go so quickly.

Sorry, but the field you chose is a field not worth working in. No matter where you go.  Flooded with talented and capable people but just not enough demand especially thanks to China and India flooding the human science market.

My cousin is a chemical engineer at a university here. She can't find work cause guess what? That job is mostly aimed at oil and gas industry here and we are hurting cause of low prices.

Yeah, Russia SHOULD be investing more. But even if they invest infinite amount of money, end result will be the same - too many people and not enough real innovation thus not enough companies because many of their "ideas" are not practical or sell-a-ble.  

In the end, if you go into such a field, don't ever expect high wages (neuroscientist can make less than a construction worker in Montreal).  You do it for passion.  And only expect to get a job in either military where you may not get paid tons, but get other benefits like cheap or free housing, other bonus', etc. Or work for a major industry like Gazprom, Rosneft, Telecom Company, Food Processing R&D or a University where maybe 1 - 2 people get paid very well and the rest get paid mediocre because they are not really needed that bad.

I have seen this and heard enough of this in almost every major profession in my time on this earth. My father is a electrical and computer engineer. He worked for the military and telecom companies under government (NORAD) contracts.  And even he would be inbetween jobs from 1979 to 1988. When Soviet Union collapsed, he was forced out into the civilian market and his skills only earned him work at places where they manufacture com systems (like Nortel) or manufacturers of gaming technologies (for casinos and what not).  And they paid rather poorly, considering what the cost of living was like in our household.  He built fricking radar systems that detected stealth planes like F-117 before Serbians did (because it was never flown at the time. He knew the Russians had radar capable of detecting it since the first unit flew), and in the end? Nothing.

People migrate to where they can find work.  There is a belief as well in Asia that foreign workers are better quality than domestic. Hence why a white person can get paid more for same job in India than an Indian person would. Even if the Indian guy is more smart than the white guy.

So the question should be asked: why are there so many white people from Germany, Spain, USA, etc working in engineering fields in countries like Korea, China and Japan?  May have to do with being offered a good opportunity than they had back home, even if back home hires tons of engineers and what not of their own?

BTW, science field is a broad term. There are sciences that are pointless for most aspect and others very needed.  

Maybe if these specialists were savvy they could open their own private institution in Russia like many rich business people are now doing, and offer R&D for business's and boom, you will do well.

But we know you science type are not entirely savvy in economics.  But that is because economics isn't a science. It's a lot of bullshit instead.

Yes you make a lot of fair points. I've just spoken to a lot of people who have done research in Russia and there are a lot of things that could be improved dramatically even without increasing investment. For example, a lot of reagents need to be ordered from abroad, often these get stuck at customs for so long that they are either not available when they're needed or they spoil. Just having a streamlined customs processing setup for life-science research like most countries do would save time and money like you wouldn't believe. We've already discussed incompetent officials here, but I truly believe if it was a clear priority to improve our scientific education infrastructure, people would have figured this out ages ago. I know for a fact that people complain about this all the time and it just goes into one ear and out of the other.
And look, I'm not saying every scientist should be paid 4k a month, but when your stipend is a few thousand roubles, you're not even going to consider pursuing a career at home. And yes, there are many industries that aren't needed, but one the one hand the government keeps stressing the importance of certain fields and then there is this complete lack of support in the crucial early levels that leads to our best minds moving abroad.
One of the main reasons I came here instead of staying in Canada was a lack of funding. Research in Canada right now is really struggling unless you're doing cancer-related things.
I'm not really doing it for the money, I just like research. But depending where you look, if you willing to move, it's still possible to get paid well.
As for opening up my own business, maybe one of my podcasts will blow up

Anyways, don't take my ranting for a serious argument. I just got into a mood thinking about what led to my own family leaving Russia and what stories I've heard from those who have left or plan to leave.

No worries.

I just know quite well reality of the scientific field without being a part of it only because of experience with those who are part of it currently or where part of it and from different countries.

As I said, unless you end up working for the big boys in Russia, you aint gonna get crap. And if you are at a university getting the R&D contracts, you better be in a good position to get the money.

And yes, I heard about stuff like custom issues regarding on things you need. That is why I think the universities should be given some kind of exemption or fast track system so they get what they need.

Beaurocracy stands in the way of anything and everything everywhere. Unless you are a mafia run state like South Korea where the businesses rule, not the government.