Export supplies of the most significant group of goods – that is, fuel and energy commodities - accounted for USD 257.4 bln. Against the background of fairly low value volumes of 2009, the 2010 export of crude and oil products posted an intense growth (1.4 and 1.5 times, respectively). The growth was fueled solely by the global price environment. The physical Section 4.
The Real Sector of the Economy volume of exported crude rose just by 3.6%, oil products – by 8.9%, while contractual prices for these commodities rose by 33.3% and 36.2%, respectively. With contractual prices for natural gas adding 9.1% and the physical volume of its exportation increasing by 1.3%, its export value was over USD 43.5 bln., or by 10.5% up vs. the 2009 figure. The aggregate export of the three fuel and energy staples – namely, crude, oil products and natural gas, rose in 2010 by 34.7%, while their proportion in the structure of export soared from 59.6% in 2009 to 64.9% (Fig. 48).
Metallurgical exports rose by 22.8%, up to USD 39.5 bln. According to FCS, physical volumes of raw aluminum plunged by 7.8%, nickel – by 1.8%, copper – by 10.3%. Despite the fall in the physical volumes, the value of export supplies of non-ferrous metals was on the rise, thanks to the price rise for them on the global market. Driven by a simultaneous increase in export prices and supplies in quantitative equivalent, the value volume of ferrous metals surged by 28.4%. When compared with 2009, the 2010 aggregate specific weight of metals, including metal manufactures, in the overall volume of export supplies was down by 0.7 p.p. – to 10.6%.
100% Other goods 90% Machinery, equipment, and vehicles 80% 70% Metals and metal manufactures 60% 50% Timber and paper-and-pulp products 40% Chemicals, caoutchouc 30% 20% Mineral products 10% 0% Food stuffs and raw agricultural 2008 г. 2009 г. 2010 г.
materials Source: FCS.
Fig. 48. Commodity Structure of Russian Export (%) The chemical industry and its supplier/consumer industries increased its supplies by 30.3%, up to USD 22.8 bln., while the specific weight of goods of this group tumbled from 6.2% to 6.1%. nonetheless.
Export of timber and paper and pulp products soared by 13%, up to USD 9.2 bln., with export of processed timber products adding 16% - up to USD 3.0 bln, which in physical terms was equivalent of 9.9 mln. ton, or by 9.4% up vs. the respective index of 2009. The volume of export of unprocessed timber surged by 0.9% - up to USD 1.8 bln. The 2010 export of unprocessed timber in natural equivalent slid to 21.2 mln. m3., or by 1.9% against the 2009 figure.
RUSSIAN ECONOMY IN trends and outlooks By contrast to the 2009 trend of a substantial rise in export supplies of food stuffs, in 2010, export of food stuffs and agricultural raw materials slid by 2.9%. Supplies of goods of this particular group are estimated at the level of USD 8.1 bln., while their proportion in the aggregate export plummeted from 3.3% to 2.2%. The 2010 physical volume of export of wheat and meslin plunged by 29.4% on a year-on-year basis and accounted 11.8 mln. ton. As a reminder, in the summer of 2010, in anticipation of a poor harvest the RF Government imposed a temporary ban on export of wheat, barley, rye, corn and flour (effective between 15 August and 31 December 2010). The reason behind the move was an unheard-of drought and wildfires that seriously affected the volume of the harvest.
After its substantial contraction in 2009, the value volume of export of machinery and equipment rose by 1.7% in 2010 and accounted for USD 19.6 bln. The increase was fueled chiefly by a 21.3% growth in supplies to Far-Abroad countries; however, because of an advanced growth in value volumes of export supplies of raw materials, the proportion of machine-engineering products in export slid from 5.8% to 5.2%.
Nearly a half of export of goods of this group fell on weaponry. According to estimates made by the Federal Service for Military-Technical Cooperation (FSMTC), in 2010, Russia cashed in as much as USD 10 bln.- plus from sales of arms and military hardware and now breathes the US’s neck in this respect. However, one should not anticipate a further increase in arms sales, as, first, the global market for arms is expected to shrink in the years to come and, second, the Russian MIC corporations seem to increasingly fall behind their competitors overseas, which gradually lowers competitiveness of its manufactures.
So, Russian export showed no signs of change in its goods structure. The improvement of its qualitative indicators rests mostly upon the growing demand and rising prices of hydrocarbons and crude, ie. the economy remains dependent on the state of affairs on the world market for minerals.
4.6.5. Structure and Dynamic of Import Against the background of the stalled growth in physical volumes of export (practically across all the key goods) imports were increasing substantially. In 2010, import supplies into the territory of Russian Federation were worth a total of USD 248.8 bln., or up by 29.7% on a year-on-year basis (Table 54). It should be noted that import increase rates in individual months of the summer of 2010 were over 30% vs. the 2009 figures, while in August the respective rate accounted for 53.2%. As a result, it took the share of import in the domestic consumption just several months to bounce back to its pre-crisis level.
In the conditions of a moderate price rise in import prices the increase was secured chiefly by growth in physical volumes of import supplies.
Fra-Abroad 29.2 31.4 40.3 48.2 60.1 76.4 103.5 138.6 191.2 253.1 167.7 213.countries Increase rate, % on a year-on-year basis Physical vol- 84.4 129.2 129.1 117.6 119.2 124.2 122.4 130.1 127.1 113.5 63.3 135.ume index Price index 82.1 86.7 94.3 93.4 98.7 106.1 106.5 105.5 107.6 117.8 99.1 101.Source: CBR, the RF Ministry of Economic Development.
The Real Sector of the Economy Since early 2010 import of goods has been consistently on the rise: in Q1 2010 vs. Q2009- by 18.8%, in Q2 vs. Q2 2009– by 32.5%, Q3 – 39.8%, while in Q4 the increase rate was down to 25.8%. That said, it was Q4 when the value volume of import was the biggest one in 2010 and accounted for USD 75.9 bln. (68.6 – in Q3, 58.2 bln. – in Q2, 45.7 bln. – in Q1). Such a notable increase in import supplies became possible thanks to the Rb. appreciation.
In contrast to the negative dynamic of import supplies in 2009, the year of 2010 saw the value volume across all the enlarged items of the trade classification surge.
Import of machinery, equipment and vehicles increased considerably – by 39.7%, up to USD 98.6 bln. The specific weight of machine-building products in the structure of import rose from 43.9% up to 45.4% (Fig. 49). Within this particular group, increase was noted across most of items: the import value of passenger cars was up by 33.8%, while the one of trucks - -2.3 times. The physical volume of importation of passenger cards increased by 33.8% on a year-on-year basis, while that of trucks – 2.2. times.
100% 90% Other goods 80% Machinery, equipment, and vehicles 70% Metals and metal 60% manufactures Textile, shoes 50% Timber and paper-and-pulp 40% products 30% Chemicals, caoutchouc 20% Mineral products 10% Food stuffs and raw agricultural materials 0% 2008 2009 Source: the RF Ministry of Economic Development Fig. 49. Goods Structure of Russian Import (%) In 2010, the nation purchased food stuffs and agricultural raw materials from overseas in volumes at 19.1% greater than in 2009. That said, import of food stuffs from the CIS countries soared by 22.5%, while the one from Far-Abroad countries – by 18.7%.
Physical volumes of import supplies of condensed milk and cream surged nearly 6-fold, barley – 3.4 times, sunflower seed oil – 2/6 times, raw sugar – 1.7 times.
Meat imports were down by 15.7%, or by 345,000 tons. In 2009 the country imported 2.mln. ton of meat. It was poultry supplies that suffered a serious blow due to the ban on impor RUSSIAN ECONOMY IN trends and outlooks tation of poultry processed with the use of chlorine-containing preparations, which suspended for long supplies of chicken legs from the US. The ban was lifted only in mid-August after the US producers complied with Russian requirements, but import supplies failed to fully recover and their volumes ultimately dropped by 36.5% (by 340,000 tons). In 2009, import supplies accounted for 942,000 tons.
The beef import was down by 2.5% (16,000 tons) vs. the 2009 figure of 636,000 tons.
Meanwhile, pork supplies remained practically unchanged when compared with the 2009 figure of 633,000 tons. As a result, the proportion of imported meat on Russia’s domestic market accounted for 20.6% in 2010. It is beef which remains the meat product Russia still most strongly depends on: the specific weight of import supplies of beef in 2010 matched the prior year’s level (26.7%). Imported pork held 20% of the market in 2010 vs. 23% reported in 2009, while chicken broiler -17% vs. 27%.
Import of chemicals and products of related industries increased by more than one-third – up to USD 35.9 bln. Import supplies of medicines were up by 30.9%. While the chemical sector is considered a leader of the renewed growth, the dynamic of import evidences no import substitution processes in the sector. Back in 2008, the proportion of imported chemical products on the domestic market was 13.3%, while in 2010 – already 16.5%; so, domestic producers lost a fraction of the national market to their Western rivals.
A similar situation is noted with regard to textile, textile garments, and footwear: the share of import of these items rose from 4.2% in 2008 up to 6.7% in 2010, while the 2010 value volume of the respective import supplies was up by 49.5% on a year-on-year basis. That can be ascribed to increase in the physical volume of import of clothing, cotton fabric and leather footwear, as well as the price rise for cotton hair and leather footwear.
In the 1st half 2010 CBR estimated the proportion of import goods in the retail sector’s inventories to soar by 0.5 p.p. and stand at 43%. The increase rate in imported food stuffs was p.p. and accounted for 35%.
Today, Russian producers of investment and consumer goods have no capacity to substantially boost the output of competitive products. Hence, there is no possibility to meet the growing investment and consumer demand without attracting sizeable volumes of imports. A further appreciation of the national currency and the overall rise of economic activity in the country should propel a further expansion of imports.
4.6.6. Regulation of Russia’s Foreign Trade The rise of the Customs Union formed by Russia, Belarus and Kazakhstan made the headlines in 2010. The Union now embraces over 60% of the populace of the whole post-Soviet zone and produces over 85% of its GDP, while the volume of GDP of the three nations combined is over USD 2 trln.
The year of 2010 saw the work on development of the Union’s customs law, including the Customs Code, international treaties and decisions made by the Commission of the Customs Union, be in progress.
The forging of a new normative and legal base of regulation of the foreign trade sphere is carried out in compliance with the strategic document of the member states of the Union “Stages and timelines of formation of the single customs territory of the Customs Union of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation”.
The main stages of formation of the single customs territory of the Customs Union and the respective timelines are as follows:
The Real Sector of the Economy 1. The preliminary stage (until 1 January 2010).
During that stage, the work was in progress on designing a normative and legal base and organizing a stage-by-stage transfer of the agreed upon types of government control, except for the border one, onto the external contour of the single customs territory.
The draft Customs Code of the Customs Union had been developed by 1 October 2009. By that time, there three nations had also crafted proposals on amending the normative and legal base with regard to developing provisions of the Customs Code relating to a uniform employment of forms and methods of customs control and customs clearance procedures.
As well, the parties developed and prepared for adoption international treaties on collection of VAT and excise taxes in the territory of the Customs Union in the absence of customs clearance and customs control procedures.
The parties have been coining the Uniform Customs Tariff and a uniform system of nontariff regulation measures in the frame of the Union; they were devising a mechanism of accrual and allocation of future customs duties and a uniform methodology of running the foreign trade statistics and the one of mutual trade between the Union member states.
On the basis of an analysis of the effective trade regimes of the three member states with regard to third nations the parties identified existing discrepancies and came to an accommodation of their unification. They also evaluated the effective constraining measures of economic nature in mutual trade and reached an agreement on conditions of their cancellation and replacement with uniform rules of competition, subsidizing and other forms provision of state support.
The parties developed measures that should secure a sustainable functioning of the single customs territory after the transfer of the agreed upon types of the state control onto the external borders.
2. The first stage (1 January – I July 2010) Since 1 January 2010 the uniform customs and tariff (including tariff benefits and preferences) regulation and the non-tariff one came into effect, including:
• The uniform customs tariff and the system of non-tariff regulation measures;
• Abrogation of the existing constraining measures of tariff and non-tariff nature in the mutual trade between the three nations;
• Launch of exercise of the joint control at the Russian-Kazakh border.
Functions in the sphere of customs-tariff and non-tariff regulation were mandated to the Commission of the Customs Union as a single regulatory body.
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