EU – Russia Programme “Partnership

for Modernization” and Its Role in the Technological Upgrade

of the Russian Economy

Elena Lenchuk (Institute of Economy, RAS)

Russian-Finnish Seminar “Industrial Modernization: Is It Possible to Boost Innovation in Russia”

Moscow, October 27, 2011

Implementation of the 2020 Innovation Strategy of the Russian Federation: Target Indices

Index 2010 2013 2016 2020

Russia’s share in the global exports of high-technology products, %

0.35(2008)

0.4 1.1 2

Share of organizations implementing technological innovation in total sample (level of innovation activity), %

7.7 (2009)

9.6 15 25

Share of innovation products and services in the total exports of industrial products and services, %

5.5 (2009)

8.2 12 15

Share of innovation products and services in the total volume of industrial products and services, %

4.9 7.2 15.4 25

Gross domestic expenditure on R&D, % of GDP

1.3 1.5 1.9 3.0

The main sectors of the Russian economy in terms of competitiveness in the global market

Technological breakthrough: opportunities to take a significant share of global market

• Aircraft construction• Nuclear energy• Rocket-space systems (launching)• Specific market segments of nanoindustry

Technological parity (achieving the level of world’s leading economies) - joint efforts and/or technology exchange are possible

• Metallurgy• Transportation• Traditional Energy production• Chemistry

Below the world level: compensation of technology gap, education, search of opportunities for import substitution

• Civil shipbuilding• Pharmaceuticals• Machinery construction

A drop in the machinery production (1990-2009)

1990

(the RSFSR)

1995 2009

Metal cutting machines,including:high precision

CNC

74 200

-

-

18 030

667

280

1 882

7

222Civil aircrafts 124 65 42

Motor trucks 665 000 256 000 91 700

Tractors 213 600 10 400 1 600

Structure of Machinery and Equipment by Age

Machinery and Equipment 2006 2007 2008 2009

Up to 5 years old 11 13 13 14

5 –10 years old 18 21 18 24

10 – 15 years old 25 26 28 25

15 – 20 years old 17 18 16 14

20 – 30 years old 18 14 14 14

More than 30 years old 5 3 5 4

Average age of machinery and equipment, years

14.4 13.1 13.7 13.0

Import of machines, equipment and vehicles, as well as

technologies and technical services

2005 2008 2009 2010USD mio % to the

totalUSD mio % to the

totalUSD mio % to the

totalUSD mio % to the

total

Imports total 98708 100 267040 100 167457 100 229000 100

Import of machines, equipment and vehicles

43436 44.0 140759 52.7 72639 43.4 98600 43.0

2007 2008 2009 2010

Import of technologies and technical services

Number of contracts

Annual payments,USD mio

Number of contracts

Annual payments,USD mio

Number of contracts

Annual paymentsUSD mio

Number of contracts

Annual payments,USD mio

1426 27.18 1735 55.3 1554 1.48 No data No data

Foreign Direct Investment to Russia

(USD billion)

2005 2006 2007 2008 2009 2010

12.9 29.8 55.1 72.9 36.5 41.2

Foreign trade of the Russian Federation

indicators

2007 2008 2009 2010

ValueUSD mio

% to the total

ValueUSD mio

% to the total

ValueUSD mio

% to the total

ValueUSD mio

% to the total

total

Export 351928.2

100.0 467911.9 100.0 301666.5 100.0 396644.3 100.0

Import199746.3 100.0 267040.2 100.0 167348.0 100.0 229045.0 100.0

Вalance of trade

152181.9   200871.7   134318.5   167599.3  

EU -27

Export195879.5 55.7 265537.7 56,7 160933.6 53.3 210779.1 53.9

Import7209.6 43.7 116575.1 43,6 75394.6 45.1 95603.2 42.1

Balance of trade

108669.9   148926.6   85539.0   115175.9  

The basic principles to build the Partnership for Modernization

• creation of the diversified competitive economy;• strengthening bilateral trade and economic interaction; • expanding opportunities for investment in key sectors driving

growth and innovation;• creating favourable conditions for SMEs;• strengthening cooperation in the sphere of innovation and

R&D;• alignment of technical regulations and standards;• ensuring the effective functioning of the judiciary and

strengthening the fight against corruption;• promoting people-to-people links and enhancing dialogue

with businesses

The key initiatives presented at the 1st EU-Russia Innovation Forum, Lappeenranta, May 25-27, 2010

Key initiatives regarding Russia-EU innovation cooperation

Key initiatives regarding Russia-EU Partnership for Modernization

To consider the innovation cooperation the top priority in Russia-EU Partnership

To foster the modernization of Russian companies

To ensure the formation of the Common Space of Innovation and R&D Cooperation

To introduce the visa-free regime between Russia and the EU

To enhance mechanisms, promoting innovations and spreading information about innovative business projects

To develop and implement a series of pilot projects in the sphere of energy efficiency and energy saving

To develop a programme, stimulating joint initiatives in the field of innovation cooperation between Russia and the EU, and envisaging appropriate financial and organizational support

To promote law enforcement

Doing Business (2011 rating, 183 countries)

Country 2008 2009 2010 2011

Kazakhstan 80 70 74

59 (+15)

↑

Belarus 115 85 64

68 (-4)

↓

China 90 83 78 79 (-1) ↓

Russia 112 120 116 123 (-7) ↓

Brazil 126 125 124 127 (-3) ↓

India 120 122 135 134 (+1) ↑

Ukraine 144 145 147 145 (+2) ↑

Components of the rating system 2010 2011  

Enforcing contracts 18 18 (0) -

Registering property 45 51 (-6) ↓

Getting a credit 87 89 (-2) ↓

Protecting investors 92 93 (-1) ↓

Closing a business 93 103 (-10) ↓

Paying taxes 103 105 (-2) ↓

Starting a business 104 108 (-4) ↓Trading across borders 162 162 (0) -

Getting a construction permit 182 182 (0) -

Government supporting and stimulating measures in Russia’s cooperation with foreign countries

in technology and innovations•To draft and pass the law on the basic principles of the policy

aimed at: attracting foreign direct investment in high-tech and innovation

production, establishing the regulatory and legal framework, including the state

institutions responsible for setting up the policy and rules in foreign investment in accordance with the strategic objectives of innovation-based development of the national economy;

•to annually update the list of top-priority industries, that require investment, at the federal and regional levels;

•to improve the selecting procedures for projects in the field of investment cooperation with due regard to the tasks of innovation-based modernization of the Russian economy;

continued• to create a system, promoting foreign investments, with the participation

of a broad competitive network of the state institutions, commercial banks and insurance companies in order to reduce political and commercial risks of the foreign capital;

• to create consulting agencies engaged in selecting and procuring high priority projects, attracting investors interested in such projects, and promptly ensuring turnkey deals;

• to provide the government with expertise and evaluation of all the major investment projects;

• to promote harmonization of Russian and international technical norms and regulations (as well as to create a system of mutual acknowledgement of certificates);

• to develop a national monitoring system in the field of investment climate in order to set up favourable conditions for foreign direct investments and improve the country’s image abroad.

Thank you for attention!