NONFERROUS METALLURGY DIFFERENCE BETWEEN MAIN ESTIMATIONS OF DEMAND CHEMICAL AND PETROCHEMICAL CONSTRUCTION INDUSTRY TIC* FERROUS METALLURGY FOOD MACHINE- BUILDING LIGHT -10 -5 0 5 10 15 20 --BALANCES OF CHANGES IN DEMAND * TIC Ц timber industrial complex Fig. 18. Changes of the position of branches of industry within the space of main estimations of demand in 2005ЦHowever, as seen from this chart, not all the branches had a positive vector of the changes of the main indices of demand. In non ferrous metallurgy, the rates of growth in demand became slightly lower, but the degree of satisfaction with its vol ume increased. In the food industry, while the rates of growth in demand remained the same, the degree of satisfaction with the volumes of sales became somewhat lower. Ferrous metallurgy, while having rather substantially increased the rates of growth in demand, still could not achieve, judging by the decreasing difference be tween estimations, the desirable volumes of sales. Five branches demonstrated, by the results of 2006, both increasing rates of growth in demand and growing satis faction with its volumes. The construction industry achieved the highest growth of sales by the yearТs results, as compared to the results of 2005, while satisfaction increased only slightly: the expectations there, in view of the current construction RUSSIAN ECONOMY IN trends and outlooks boom, had been somewhat greater. Slightly lower was the increase of the rates of sales growth in machine building, but that branchТs principal achievement was the shift toward positive values of the differences between the estimations of demand Ц the yearТs results for the first time demonstrated the prevalence of enterprises sat isfied with their volumes of sales. The rates of growth in demand in machine building have been positive since 1999 (with the exception of 2002), and therefore now the sales volumes there became so great that the majority of enterprises (50 % against 47 %) have become satisfied.
The trajectory of the food industry within the space of the rates of growth in demand and the differences between its estimations has demonstrated certain problems with sales in that branch during the last two years (Fig. 19). Firstly, in 2005 the rate of growth in demand became slower by comparison with 2004. At that time, however, this circumstance did not cause strong worries among the en terprises belonging to that branch: the difference between the estimations of de mand went down from 22 p. p. to 20 p. p. Last year, the rates of growth in demand did not change by comparison with 2005, and then it became a problem from the point of view of producers, who were forced to rethink their attitude to their vol umes of sales. The difference between the estimations УnormalФ and Уbelow normФ was already 13 p. p., which appeared to be the worst result of the three last years. It should be noted that the demand for the branchТs products was growing only dur ing these years. In 1999 Ц 2002, food enterprises failed to achieve a positive dy namics of demand, although in 2000 Ц 2002 the rates of decline were very close to zero, while the degree of satisfaction with demand was growing, especially in 2001.
DIFFERENCES BETWEEN ESTIMATIONS OF 1993 DEMAND -50 -40 -30 -20 -10 0 ---BALANCES OF CHANGES IN DEMAND Fig. 19. Changes of the position of the food industry within the space of main indices of demand in 1993 Ц Section The Real Sector The improvement of the estimations of demand in Russian industry in occurred mainly due to the performance of non state enterprises (Fig. 20). The dif ference between the estimations УnormalФ and Уbelow normФ became as high as p. p. in that branch. At state owned plants, the estimation Уbelow normФ prevails, and during the last four years this prevalence has been stable, within the range Ц 14ЕЦ9 p. p. Thus, the state sector still cannot achieve the volumes of demand that would be normal from the point of view of its performance, that is, to adapt to the developed market situation. As a result, in 2006 it fell behind joint stock companies by 28 points. It should be noted that in the 1990s both these sectors were demon strating a similar dynamic of estimations, and the first major gap between their es timations occurred as late as 2001, but at that time in both sectors the estimations Уbelow normФ were prevalent. The problems with demand in 2002 once more lev eled the difference between the estimations by form of ownership, but the year 2003 already demonstrated the advantages of non state enterprises, the majority of which managed to achieve УnormalФ volumes of demand. In 2004 the estimations УnormalФ among joint stock companies were voiced by an absolute majority, and such a situation has been maintained until now.
Joint-stock 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 -State-owned ----Fig. 20. Average annual differences between the main estimations of demand (normal Ц below norm), by forms of ownership, in 1993 A similar differentiation of the estimations of demand by the size of enter prises can also be seen (Fig. 21). The leading position in the prevalence of the es timations УnormalФ in 2006 still remained with big enterprises, among which 59 % were satisfied with the demand for their products, and only 38 % cannot achieve normal volumes of sales. By comparison with the previous year, the difference be tween these estimations improved by 9 points and achieved an absolute high.
RUSSIAN ECONOMY IN trends and outlooks There is no doubt that the situation at medium size enterprises (with the staff of 501 Ц 2000) also improved. For the first time during all the 15 years of follow up, the majority (54 %) of enterprises in that group achieved volumes of demand that were normal for them, and as a result were no more falling so far behind in the dif ference of estimations from Уthe leader groupФ Ц big enterprises. In the group of small enterprises, there still exist problems with sales: they display a prevalence of the estimations Уbelow normФ. However, the year 2006 also saw an obvious break through in that group, after three years of УstagnationФ. Normal volumes of sales were achieved by 43 % (in 2003 Ц 2005 only 36 %), while the percentage of the estimations Уbelow normФ went down to 53% (after 61 % in the three previous years).
STAFF OF MORE THAN 1992 1994 1996 1998 2000 2002 2004 --1--501---Fig. 21. Average annual differences between the main estimations of demand (normal Ц below norm) by the size of enterprises in 1993 Ц 3.2.3. Dynamics of competition In 2006, Russianа€ industry was developing under conditions of stable com petition: no important changes in competition intensity among enterprises during last year were noted, by comparison with 2005. The main indices of competition, monitored by the IET since 1995, demonstrated that the level of competition in all three areas (domestic Ц inside Russia, competition with near abroad, competition with far abroad) remained at its previously observed level Ц the absolute high throughout the whole period of follow up (Table 37). To be more precise, all the indicesТ in fact, went down, but very slightly (by 0.02 Ц 0.09 points), and therefore it would be more correct to speak about the unchangeability of these indices, es pecially if one takes into account the fact that in 2005 the growth of the indices Section The Real Sector amounted to 0.27 Ц 0.45 points and was a historic high for all the 12 years of fol low up.
Table Annual indices of competition with different producers Russian From near abroad From far abroad General index 1995 3.39 2.65 2.79 2.1996 3.46 2.82 3.01 3.1997 3.55 2.81 3.02 3.1998 3.52 2.79 3.09 3.1999 3.61 2.73 2.87 3.2000 3.60 2.70 2.80 3.2001 3.73 2.89 2.90 3.2002 3.87 2.93 2.96 3.2003 3.95 2.92 3.08 3.2004 3.94 2.82 3.03 3.2005 4.21 3.27 3.49 3.2006 4.12 3.20 3.47 3.Thus, in 2006 enterprises did not feel that there were occurring any funda mental changes in the conditions for their competition on their sales markets, as compared to the year 2005. Such estimations appear especially unexpected against the background of the prevailing opinion (at least as it is voiced in the mass media and in the public speeches of government officials) that the growing vol umes of import are ousting Russian commodities from the sales markets. In truth, Russian manufacturers, whom experts, journalists and government officials are so eager to protect, are voicing very different opinions.
No cardinal changes in 2006 occurred in the spread of competitive markets across Russian industry, either. Competitive markets in this case are understood as the share of enterprises in Russian industry which can report a certain competition with other manufacturers on their sales markets. The share of competitive markets tells nothing about the intensity of competition on those markets Ц it simply demon strates the fact of a certain degree of competition that can be felt by enterprises.
As shown by the results of our follow up, industrial enterprises felt the existence of competition with other Russian manufacturers in 2006 on 92 % of the markets, while one year yearlier this index amounted to 94 % (Fig. 22). The competition with manufacturers from far abroad increased by 3 p.p., and now 73 % of Russian en terprises do compete with commodities shipped from beyond the borders of the former USSR.
RUSSIAN ECONOMY IN trends and outlooks % DOMESTIC FROM FAR ABROAD FROM NEAR ABROAD 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Fig. 22. Dynamics of the share of competitive markets The highest numbers of markets where commodities were competing with those from far abroad were registered in 2006 in ferrous metallurgy (83 %), timber industrial complex (81 %) and machine building (78 %). The Уother poleФ (lowest numbers of markets where commodities were competing with those from far abroad) is represented, which is, by the way, quite predictable and of little interest in terms of economic analysis, electrical power engineering (33 %), fuel industry (35%) and the construction materials industry (46 %). Then follow the food industry (52%) the light industry (61 %) (according to the All Russian Classifier of Branches of the National Economy [OKONKh]). While the existence of 52 % of markets where commodities compete with those from far abroad in the food industry appears to be quite predictable, the situation in the light industry, where only 61 % of enter prises feel that they are competing with producers located outside the territory of the former USSR, is not quite compatible with the constantly voiced declarations that enterprises belonging to that branch should be protected from imports. In fact, almost 40% of manufacturers there do not notice any competition with im ports on their sales markets (Fig. 23). It should be noted that this is true in respect to both УwhiteФ and УgreyФ imports, because the enterprises, when estimating the level of competition they are faced with, take into account all the commodities that are shipped into this country and then enter the sales markets, no matter what their status might be in terms of customs clearance. As for the number of markets where domestic commodities compete with those from near abroad, in the light industry it is slightly higher Ц 65 %. The decreasing share of markets where commodities compete with imports (both from near abroad and from far abroad) Ц by 11 and p. p. in 2006 Ц is associated, most probably, with improved customs control and Section The Real Sector the resulting lower competitive capacity of УgreyФ imports on the domestic market.
And almost all the sales markets in the light industry are competitive in respect to Russian manufacturers: 98 % of enterprises in the light industry experience com petitions with other Russian manufacturers. And this latter index has remained rela tively stable (in the interval of 94 % Ц 98 %) since 2002.
% DOMESTIC FROM NEAR ABROAD FROM FAR ABROAD 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Fig. 23. Dynamics of the share of competitive markets in the light industry The light industry differs not only by its extremely high share of markets with domestic competition, but also by the highest level of that competition and its growth in 2006. The index of domestic competition in this branch increased during one year by 0.21 points and amounts now to 4.48 (by a 5 point score) Ц approxi mately in the middle between the estimations УmoderateФ and УstrongФ (Fig. 24).
This is a historic high of the 12 year period of following up the competition in that branch. As for the competition with imports, it, on the contrary, became weaker.
And the decrease of the indices of competition with imports was also the greatest for the whole period of follow up: the competition with commodities from far abroad УlostФ 0.56 points, with commodities from near abroad Ц 0.40 points. Pres ently, the competition with commodities from near abroad is estimated by enter prises in the light industry as being at the level of 3.09 points (that is, УweakФ ), while the competition with commodities from far abroad Ц 3.28 points (slightly above the УweakФ level).
RUSSIAN ECONOMY IN trends and outlooks STRONG FROM RUSSIA MODERATE FROM FAR ABROAD WEAK FROM NEAR ABROAD NONE 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Fig. 24. Dynamics of the levels of competition with different manufacturers in the light industry In machine building, the share of competitive markets in 2006 continued to grow in respect to all types of competition (Fig. 25). At the same time, the share of markets with domestic competition has also become very close to maximum: in 2006 this index grew by 2 p. p. and reached the level of 97 %. The highest growth of competitive markets was registered in machine building in respect of competition with commodities from far abroad: this index grew in one year by 6 p. p. and is now 78 %, which is much higher than in the light industry. And a year ago the competi tion indices of such markets in both these branches were approximately the same.
It seems that the proper regulation of customs control had the strongest impact on the imported commodities produced by the light industry and has no noticeable ef fect on the markets for the products of machine building, because in the latter case the share of УgreyФ commodities is much smaller. On the whole, during the post default period the share of markets where commodities compete with those from far abroad grew by 20 p.p. and achieved in 2006 its historic high.
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