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Has Russia Been Caught in a Crucial Dependence on Importation?

Sergeev V.A.

Zaitsev A.A.

Against the background of the crisis of the Russian economy - which was marked by a drastic decrease in the Gross National Product, a decrease of industrial and agricultural production, a cut in the income of the population, a sharp decrease of investments being made into the main capital and growth of enterprises and organizations in all industrial branches of the economy - foreign trade turnout nonetheless grew in 1992-98 by 35.3%. Internal trading of products increased by 27.4%, export of goods increased by 34.5%, and import of goods increased by 36.3%. As a result, the export contribution to the GNP for the mentioned period steadily increased, as well as the import contribution in the resources of the economic subdivisions. All this testifies to the growing role of foreign trade in the economy of this country. The export of goods is now one of the techniques of survival of the industrial enterprises and the most important source for undertaking measures to maintain the industrial base. Furthermore, imported goods - whose amount and structure was definitely influenced by the continuing reduction in domestic production and relative stabilization of the rouble as compared to foreign currency - provided sufficient levels of market saturation as a result of the demand of the consumer for the goods.

The results of the development of foreign trade in Russia in the last few years proved the stability of export and import amount. Any further increase in sales of fuel, raw materials, and other products which comprise the basis of Russian export, will lead to the exhaustion and depletion of non-renewable resources. Currently, export growth depends on the capacity of Russia to develop a market of high technological production.

Far more critical is the problem of the Russian domestic markets dependence on purchasing goods in foreign markets. Having quickly opened its own market, Russia has experienced sufficient difficulties to defend itself for the conditions of massive inflow of consumer, machine, and technical goods from abroad.

Having acquired a considerable positive balance under the conditions of liberalization of foreign trade, Russia has not succeeded in the rationalization of its import structure. The absence of working mechanisms in the regulating of imports, in conjunction with non-competitiveness of many domestic goods in the domestic market, resulted in a considerable increase in the inflow of alcoholic drinks, tobacco goods, expensive cars, and electronics.
A wide range of consumer goods comprise a significant share of Russian imports. Presently, import proportion is equal to approximately one half of the resources of retail goods turnover. The domestic market of consumer goods in Russia has become dependent on deliveries of imported food, electric appliances, clothes, and footwear.

Russias dependence on the import of food has been growing as well. More than 40 % of food comes from abroad; this necessitates enormous sums of money. In 1997, an amount of money equivalent to profits acquired from annual oil exporting was spent to accommodate these needs.
What are some ways to change the structure of our domestic market so as to support favorable condition for an increase in domestic goods production and sales?

The import of machine-building products can be considerably increased with the help of the industrial organization of the many different domestic plants that are able to produce goods competitive in comparison (not only in quality but in price as well) to imported goods. This refers first and foremost to electronic equipment, mining products, as well as oil, gas, chemical industry equipment, etc.

A partial solution to the problem lies in the reorientation of food purchases into the countries of the former Soviet Union. Some success has already been achieved in this sphere.

Changes in the geography of food purchases resulted in this distribution of food purchases from within the republics of the former Soviet Union for 1997: grain import was equal to 82%, canned meat equaled 39%, white sugar equaled 65%, condensed and dried milk equaled 35%. But not all import possibilities had been exhausted. For example, Central and Eastern European locations are insufficiently utilized as import resources, whereas in the 1980s the USSR had made 2/3 of its consumer goods imports from these areas.
In spite of the positive dynamics of a range of macroeconomic figures - such as those pertaining to the lowered inflation rate, the stability of the rouble exchange rate, a certain growth of the GNP and increased profit in industries - during the first months of 1998, there had been (since the end of 1997) an increase in crisis tendencies primarily in the sphere of budget, balance of payment and financial market, all of which have also become a reality in the economic sector since the spring.

As a result of the economic crisis of August 1998,

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