Russian business focused on "survival"

The problems of the business climate in RUSSIA are exacerbated by the ruble exchange rate and cheap imports, showed a survey of more than a thousand companies conducted by ICSI, Expert RA and the Stolypin Institute. Business focused on survival

More than 40% of Russian entrepreneurs do not plan to produce new products in the next year or two, and those who are going to do this mainly seek to adapt existing products to new conditions. Such results were obtained in the course of a joint study by the Expert RA rating agency, the Institute for Comprehensive Strategic Studies (ICSI) and the Growth Economics Institute. P.A. Stolypin (available from RBC). In fact, a significant part of Russian business today is focused not on development, but rather on survival, the authors of the study conclude.

The survey was conducted in November 2022 in the form of a questionnaire. it was attended by 1056 managers and owners of companies representing mainly small and medium-sized businesses. These are mainly construction companies, wholesale and retail trade organizations, manufacturing industries.

The results of the survey indicate high risks of long-term stagnation of the Russian economy, the authors of the study warn. “Companies that follow survival strategies don't invest in people, don't develop new products, don't explore new markets. As a result, many market opportunities may be missed, and the economic recovery will be extremely slow,” they write.

Modest plans for the release of new products

According to 43% of respondents, the economic environment had a generally negative impact on business. According to 48% of respondents, in the next one or two years they are aimed at maintaining current production indicators or simply at maintaining operations as such. There are far fewer optimists who plan to increase output by more than 30% - about 12%.

Rising costs, lack or instability of market demand impede the development and introduction of new products to the market, the authors of the study emphasize.

Only 22.5% of respondents announced plans to release more technologically advanced goods or services in the next two years. Only 10% of respondents spend more on research and development (R&D) than 2% of revenue per year. Most companies make minimal investments in R&D. Read on RBC Pro 10 stocks that will not be affected by economic problems in 2023 The population of CHINA has decreased for the first time in 60 years.oil and gas from Russia A child swears: how parents should react to this

Russia as a whole is characterized by a low level of efficiency of R&D costs, which is determined by the ratio of R&D costs and exports of products from high-tech industries. Economists estimated that the country's losses due to the lack of efficiency of the R&D sector amounted to about $58 billion. The Central Bank experts, describing possible scenarios for the structural transformation of the Russian economy against the backdrop of sanctions, noted in the spring that at a certain stage “reverse industrialization” could occur - based on less advanced technologies: the production of machinery and technologies will increase, but at a lower technological level.

According to the Gaidar Institute for Economic Policy, which conducts monthly market surveys of Russian industrialists, in September-December 2022, output showed near-zero dynamics, which gave officials and analysts reason to talk about the stability of Russian industry. Issue plans after the failure in March subsequently "got rid of pessimism" and were quite optimistic until the end of the year, but failed to show growth to pre-crisis levels, according to the materials of the institute.

The trend towards the absence of large-scale plans for the release of new products by businesses has been going on for the past five years, and the share of entrepreneurs who are really interested in launching their production ranges from 30-40%, Alexey Poroshin, member of the General Council of Business Russia, CEO of First Investonomika, commented on the results of the survey to RBC .

Inaccessible loans and cheap imports

Top managers and owners interviewed reiterated a number of messages that have been cited in the past as serious constraints on the business climate, including insufficient protection of business rights and state dominance in the economy.

The vast majority of entrepreneurs surveyed agree that borrowed funds are difficult to access for business:

17% reported that raising borrowed funds for their companies is not fully available; 80% consider rates on loans for business development and collateral requirements of banks to be too high; 65% of respondents complain about too short terms for the provision of loans by banks.

Entrepreneurs pointed to the problems caused by the dominance of state-owned companies and institutions in a number of key industries. Thus, 77% of respondents noted that “large state-owned banks use their near-dominant position in the market, which hinders the increase in the availability of credit.” And 80% said that the courts often have a "state bias" in disputes between private business and government agencies.

In addition, entrepreneurs complained about the insufficient level of infrastructure development, problems with logistics, high fiscal burden, weak protection of their rights - in particular, the “accusatory bias” of the Russian judicial system against business.

According to the Gaidar Institute, in December the average minimum rate on loans offered to industrial enterprises stopped declining and rose to 11.2% per annum after 10.9% in November. The share of enterprises that declared normal availability of loans amounted to 51%.

The situation is aggravated by the overvalued ruble and the high fiscal burden, which puts Russian companies at a disadvantage compared to suppliers of cheap imports, according to a study by Expert RA, ICSI and the Institute. Stolypin. The inevitable result of the overvalued exchange rate will be the switching of Russian consumers to cheap imports, according to 45% of respondents who see the risk of Chinese and other suppliers from friendly/neutral countries dominating the Russian market.

Suggested ways to solve problems

The problems that business claims are largely the result of the economic policy pursued by the state, the authors of the study summarize. Two-thirds of the businessmen surveyed agree that the authorities are more focused on solving current problems to the detriment of long-term priorities, government policy does not encourage business to return to the development path, but only helps some companies to “stay afloat”. Such an approach could lead to the fact that now emerging market opportunities for business may be irretrievably missed, economists warn.

Based on the survey, they offer the following support measures:

a general decline in interest rates in the economy; interest rate subsidies; increasing the availability of long-term investment loans; reducing requirements for borrowers; activation of monetary policy, preventing excessive appreciation of the ruble; reduction of the tax burden and insurance premiums for organizations that make capital investments in equipment and create new jobs.

In addition, the authors advocate extending the moratorium on tax audits of small and medium-sized businesses (ended in 2022), holding a tax amnesty for small and medium-sized enterprises and limiting the number of scheduled and unscheduled audits for businesses.

A new stage has come for the Russian economy, when business must invest in development, but it is not used to and cannot do this because of expensive finances, still not enough comfortable regulatory environment, high taxes in general, says Anton Sviridenko, DIRECTOR of the Stolypin Institute for Growth Economics . In his opinion, government policy should be aimed at stimulating business development. “For 30 years we have been accustomed to living in the mode of simple reproduction, but we need to learn to live in development,” he believes.

According to Poroshin from Delovaya Rossiya, unprecedented support measures for business are being taken in the country. “For example, the program of concessional lending to SMEs allows you to take investment loans at a rate of 2.5% per annum. Together with the Industry Development Fund with grant support for the launch of high-tech products, we can easily reach an effective rate of 3-4% per annum,” he said. At the same time, he agreed with the opinion about excessive collateral requirements: “Banks need to work out various mechanisms for guarantees from the state, for example, project financing funds.”

As for the reduction of interest rates, the representative of "Business Russia" considers this an inalienable desire of every entrepreneur, but "the current rate is acceptable for business development."

His colleague on the General Council of Delovaya Rossiya, co-owner of the Orlan Systems marketplace, Alexei Mostovshchikov, called all business proposals relevant, with the exception of the activation of foreign exchange policy. “With a serious weakening of the ruble, along with falling incomes of the population, effective demand will further decrease, which will negatively affect the entire business as a whole. Only companies that EXPORT their goods will benefit from this measure,” he said.

The main strategic direction for industrial and economic policy now should be the replacement of high-tech products that used to come to Russia from the West, says Georgy Ostapkovich, director of the Center for Market Research at the Institute for Statistical Research and Economics of Knowledge at the National Research University Higher School of Economics. “Now, first of all, the knowledge economy should work, we will not fill up with money [we will not stimulate] import substitution,” he told RBC.

The expert called business proposals to reduce the tax burden and increase the availability of borrowed funds “traditional requests for “give me money”. According to him, large strategic enterprises that make the main contribution to GDP are already working with "all possible subsidized loans", while small and medium-sized businesses "are given small bonuses." “Of course, we need to help, but where there is an opportunity. Apparently, it is necessary to choose some priorities - that is, not everything [to support], from tractors to chips, but, for example, at the first stage, to engage in transport engineering, ”said Ostapkovich.