In the period between January and May 2006, the Russian foreign trade turnover totaled 174,7 billion US dollars ( 129% against the period between January and May 2005 ), including 118,7 billion US dollars ( 131.4% ) of export, and 55,9 billion US dollars ( 124.4%) of import, according to the Bank of Russia. The trade surplus remained positive, 62,8 billion US dollars ( against 45,4 billion US dollars in the period between January and May 2005 ).
According to the Federal Customs Service of Russia, export earnings of Russian oil exporters grew by 40.5% to 38,908 billion US dollars in the period between January and May 2006 against 27,billion US dollars over the corresponding period of the previous year. In the period between January and May 2006, physical volume of export supplied of Russian oil fell 2.2% to 94,085 million tons year on year. Exports accounted for 52.6% or oil production within a period of the first five months in 2006. In the period between January and May 2006, export of oil and fuel and energy products accounted for 35.1% and 51.4% of the total Russian export volume ( against 32.6% and 52.7% in the period between January and May 2005 respectively ).
In May 2006, the average actual export price of oil was 439,3 US dollars per ton (105.0% against April 2006 ). The world market’s price of Urals oil amounted to 472,8 US dollars per ton in May 2006 ( 99.5% against April 2006 ).
The oil export duty in Russia is going to reach a record braking level of 216,4 US dollars per ton since 1 August 2006. Furthermore, duties on oil products are going to reach a record breaking level as well since 20 August 2006. The duty on light and middle destillates, gazol, benzol, toluene, xylol, propane, butanes, ethylene, propylene, butylenes, butadiene, as well as other condensed gases is expected to amount to 158,1 US dollars per ton. For the time being, the tax duty on the above listed oil products is 146,9 US dollars per ton. In addition, the export duty on fuel oil, lubricants and exhausted oil products is expected to grow from 79,2 up to 85,2 US dollars per ton.
In the period between January and May 2006, the amount of Russian export earnings from natural gas exports grew 52.2% year on year. Russia exported a total of 81,6 billion cubic meters of natural gas, which is by 0.49% above the figures attained in the corresponding period of 2005.
Rates of import supplies kept growing fast under support of the growing internal demand and real effective gaining of the Russian national currency. The Russian currency gained 9.4% against the US dollar, 3.2% against the Euro, its real affective rate being 5.4% in the period between January and May 2006, according to the estimates made by the Ministry for Economic Development and Trade of Russia. In May 2006, against the previous month, the Russian currency gained 1.9% against the US dollar in real terms, while it lost 2% against the Euro, and its effective rate decreased by 0.7%.
In May 2006, the personal real disposable cash income kept growing. In the period between January and May 2006, they grew by 18,1% against the previous month, and 10.5% year on year ( against 8.1% in the period between January and May 2005 ), according to the Federal State Statistic Service of Russia.
The average growth in the parameters of exports and exports to other than CIS country-members in the period between August 2006 and January 2007 is forecasted to be 26% and 27% respectively against the corresponding period between 2005 and 2006. The average growth of imports and imports from other than CIS country-members over the same period is expected to reach 18% and 28% respectively. The average trade surplus with respect to all countries and other than CIS countrymembers in the period between August 2006 and January 2007 is expected to reach 34% and 26% respectively against the corresponding period between 2005 and 2006. Trade surplus in the in the period between August 2006 and January 2007 is expected to reach 88 billion US dollars.
Hence, the growth in exports to all countries is predicted to reach 21.5 in 2006. Annual growth of exports to other than CIS countries, imports from all countries, and imports from other than CIS countries is expected to reach 19%, 16.5% and 23% respectively.
Contrary to expectations, Russia and the United States failed to sign a protocol on Russia’s accession to the World Trade Organization during the G8 Summit in July 2006. For the time being, the issues on duties on goods, access to service markets have been resolved, and some progress has been achieved in negotiating the issues concerning intellectual property protection and agricultural goods.
However, the US party provided that meat supply certificates should be issued without auditing the veterinary control system. The currently applied standard procedure makes issuance of a meat export permit conditional upon the relevant check has been made for compliance with the Russian veterinary requirements.
Furthermore, Russia has encountered new obstacles in the name of Moldova, the Republic of Georgia and Costa Rica. To date, Costa Rica has refused to sigh the relevant protocol of Russia’s accession to the WTO due to high customs duties on cane raw sugar in Russia. Costa Rica demands that Russia should reduce considerably these duties and increase quotas on raw sugar supply to Russia. These demands are indirectly supported by the United States advocating a more open access for supply of goods and services from developing countries.
The WTO recognized the right of the Republic of Georgia to withdraw its consent to Russia’s accession to this organization. The Republic of Georgia demands that Russia should meet the three requirements as follows. The key requirement is legalization and legitimization of two check points located on the Russian-Georgian border in Tskhinvali and Abkhaz areas, which should be located only in the places approved by both states. The other two requirements are to establish an excise line at the Kazbegi – Verkhniy Lars check point, as well as forgery control.
There are issues to be resolved with Moldova as well. Since there is an agreement on free trade between Russia and Moldova, no negotiations were expected between the two countries. However, Moldova has recently announced its intention to discuss the issues concerning exports of vine, fruits and vegetables to Russia, as well as VAT collection during Russian gas export.
Therefore, Russia’s accession to the WTO has been postponed indefinitely.
However, the World Trade Organization itself has been facing crisis. The negotiations that took place in Geneva in July 2006, that were supposed to determine terms and conditions under which the key WTO participants should liberalize their agricultural and services markets, were postponed indefinitely. This collapse of negotiations make dim the development outlooks for this organization.
At the negotiations on a ‘Doha round agenda’, representatives of the European Union, the United States, Brazil, Australia, Japan and India intended to agree upon initial terms and conditions of an agreement on world trade which is supposed to reduce to a reasonable extent the limits in world trade for the WTO country-members, and, above all, in the agricultural and services markets.
The main problem at the negotiations was uncompromising stands of both the United States and the European Union, the former demanded that the European Union should reduce drastically its subsidies to the agricultural industry, while the latter demanded that the United States should open the US agricultural market for European agricultural products.
Both the latest preparatory negotiations and the entire negotiation process, which was named after the capital of Qatar where a resolution was made in 2001 to liberalize the world trade fail to bring any results, failed to bring any positive results.
The idea of the Doha process: the poor Southern and Eastern countries have been making efforts to convince the well developed Western and Northern countries to reduce subsidies to their domestic agricultural producers. Such step could open the markets of the European Union and the United States for exports from Asian, African and Latin American countries. The well developed countries, in turn, have been insisting on reduction of import duties imposed on industrial products at the Southern and Eastern countries.
The price behind the issues is very high. According the World Bank, the world economy would gain 300 billion US dollars annually through reduction of all duties and subsidies. In doing so, developing countries would gain at least 86 billion US dollars, which far beyond the value of the aid provided by the developed countries annually. Under the circumstances, however, the Doha round as part of the WTO negotiations is unlikely to end in time. National interests of the WTO country-members prevail over the free trade principles.
N.Volovik New Instruments for Innovation Activity Development This paper provides a review of new government’s initiatives aimed at promoting innovation activity in the Russian Federation, namely venture financing, research and technology park, as well as indirect and administrative regulation measures. In addition, analysis is made of innovation sensitivity of the economy, key factors constraining innovation activity as a basis for assessment of adequacy of the developed measures aimed at promoting innovation and technological development in the Russian Federation. Possible ways of the federal government engagement in supporting innovations are described as well.
Over the last several months, the Russian Government has been actively engaged in preparation of documents on new instruments designed for promotion of economical innovation development in Russia. Creation of research and technology parks, venture financing, as well as fiscal and administrative regulation, have been selected as the key instruments in this respect.
With regard to the project research and technology parks, only creation of an engineering and transport infrastructure is supposed to be financed with the budget funds. Other costs will be covered by private investments. Venture financing is going to be developed to support small innovation firms at their early stage of development. Two types of venture funds are expected to be set up: ‘Fund of Funds’ and a special venture fund operating in the filed of information and communication technologies. Application of both schemes are drawn on the international practice, where they proved successful. The first model will be implemented by establishing an OJSC called Russian Venture Company (RVC) under 100% control by the government. The RVC is intended to conduct tenders to select venture management companies and purchase units of venture funds established in the form of close-end unit funds selected by the management companies. The Fund of Funds will have a budget in the amount of Rb 15 billion allocated from the Investment Fund. The budget funds are expected to cover 25% to 49% of each of high-tech companies established on the basis of the venture funds’ funds. To attract private investments to these companies, the government’s share of the revenues generated from invested budget funds is going to be equal to 1/5 of the Bank of Russia’s rate of refinancing, i.e. 3% per annum. Private investors will receive the rest of the revenues.
The second model of venture financing provides for establishment of a OJSC called Russian Innovation Fund for Information Technologies for a period of three years, which is intended to support the development of enterprises and infrastructure of the information and communication technologies sector. The government is going to allocate Rb 1,4 billion for this purpose, and private investments are expected to account for Rb 1,5 billion. The general principle of budget financing of small firms with the funds of this Funds is similar to the first model: budget funds will be added provided that private investments account for at least 51%.
It should be noted, however, that the government used to support the venture funds and research and technology parks in the previous periods as well, but the mechanisms applied at that time were less effective. First of all, such ineffectiveness resulted from the fact that the government would normally finance R&D rather than infrastructure, let alone insignificant, short-term amounts of money. For instance, the government failed to pay in full its initial contribution for the purpose of establishment of the Venture Innovation Fund, and public co-financing of the Fund’s projects accounted for not more than 10%.
Indirect and administrative regulation measures, which are going to be introduced at this time, can be considered a standalone approach. These measures provide for a 50%, instead of previously applied 30%, reduction of enterprises’ tax base on account of carried forward losses of previous periods, and full reduction since 1 January 2007; introduction of an additional 10% allowance for depreciation to be granted for purchase of new fixed assets, which would allow enterprises to upgrade their current equipment. Finally, a list of 700 items to be exempted from customs duties has been prepared, which includes the machinery and equipment not manufactured in the Russian Federation. The latter allowance has been introduced for a period of nine months, but this period could be adjusted and extended as appropriate. This allowance is expected to promote purchases of new equipment.
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