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average annualized exchange rate of ruble per US dollar growth






average annualized exchange rate of ruble per DM growth






volume of trading at the stock market in the RTS for the month (millions of USD)






the value of the RTS-1 Index by the end of the month






growth in the RTS-1 Index (% a month)






*/ estimated

S. Arkhipov, S. Drobyshevsky

Investment in the real sector

In 1999, enterprises and institutions of all forms of ownership invested in capital assets Rb. 598.7 bln. Last year, for the first time over the last eight years, the dynamics of investment in capital assets gained a positive value: the increment of investment in capital assets made up 1.0% compared with 1998.

The change of the situation in the domestic market and the growth in demand for domestic products have initiated the process of more intensive use of operating production capacities and vigorous introduction of reserve capacities into operation. The production expansion, thanks to modernization and reconstruction of the accumulated potential has determined the vector of change of reproductive and technological structure of capital investment. The specifics of 1998 became the growth (at more than 10 per cent points) in the share of expenditures on purchasing machinery and equipment in the structure of investment expenditures. That took place on the background of the fall in the share of expenditures on refurbishment and major overhaul. In the conditions of the changing competitive environment, the motivation of investment activity experiences a certain transformation. With the intensifying orientation towards intensive import substitution, one noted the growth in innovational activity, introduction of new technologies and some acceleration in the capital assets renewal process through the increase in expenditures on purchasing new equipment. Given that the funds are limited, investment decisions are determined by both the expansion of presence in the market and problems of enhancement of products’ quality and their meeting modern standards, assortment extension, and technological aspects of decreasing production costs.

Table 1

The proportional weight of industrial enterprises by purposes of innovation activity
in the overall number of innovational active enterprises, as %





Replacement of the obsolete products





Extension of assortment





Maintenance of traditional sales markets





Creation of mew markets


Contraction of expenditures on wages and salaries





Contraction of material costs





Contraction of energy consumption





Providing meeting modern standards





Enhancement of quality of products





Source: Roststatagentstvo

Chart 1

Source: Rosstatagentstvo

The change in the GDP production structure was accompanied by the reallocation of investment resources in favor of the sectors producing goods and industries of production infrastructure. The share of investment in industry and transport grew most substantially compared with 1998. The rapid development of communication based upon introduction of new technologies over the last five years determined the sector’s high attractiveness for both domestic and foreign investors. The fall of investment activity in the service sector is determined primarily by the contraction in the share of investment in the sector of housing and utilities. That can be attributed by both further drop in the government’s activity in the said market and the fall in the share of private investment in house building. With no strategy in place of attracting the population’s savings and their transformation into investment, such a powerful source of economic development is not introduced in the economic turnover

According to some preliminary data, with the dynamics of investment in industry being positive in 1999, one noted a growth in investment in the manufacturing industries and consumer sector. The comparative analysis of the investment structure by the industrial sectors shows that relative to 1998 the share of investment in the light and food- processing industries grew by almost 6 points and in machine building- by 1.5 points. The fuel and energy sector, the share of which in the overall amount of investment in the industrial sector is accounted for almost 50%, also experienced positive results from the investment activity renewal in 1999. The oil- extracting sector increased the volume of exploitation oil drilling and overcome the long- term trend to the decrease in the number of oil wells

Chart 2

Source: Roststatagentstvo

The growth in investment activity in terms of industry branches is related to the enterprises’ improving financial situation and growth in production profitability. By the economy as a whole profit grew as mush as by almost 300% vs. 1998. According to the data on January- November 1999, almost all the sectors, which produce goods, had a positive balance, and the share of unprofitable industrial enterprises dropped by 10.4 per cent points compared to January- November 1998. With the profit growth, one notes its growing significance as a source of financing investment activity- from 11.2% in 1998 up to 14.2 in 1999. In addition, it should be noted that in 1999 some growth of the share of credit institutions and FDI became characteristic if the structure of sources of financing investment in capital assets. All the aforementioned processes give certain grounds to estimate trends in investment activity in 2000 with some optimism.

O. Izryadnova

Withdrawal of licenses and dynamics of private individuals deposits

The systemic banking crisis raised several questions concerning the state of private individuals’ banking deposits prior to and immediately after the license withdrawal. The theory argues that sinking banks may pursue an aggressive policy aimed at attraction of deposits by offering more attractive terms and conditions than their competitors which do not experience any financial difficulties. How do banks with problems and their customers behave on the eve of the license withdrawal in Russia Do banks succeed in attracting new resources or the owners of deposits show greater awareness and withdraw their deposits from the falling banks Have the crisis had any impact on the behavior of the depositors of the sinking banks, and if so, how exactly Yet another aspect of the problem is as to how the dynamics of deposits change immediately after the license was revoked, how fast the balances on the private individuals’ accounts change over the Quarter after the license was revoked.

Since the data on deposits in foreign exchange equivalent prior to 1998 is not available, the analysis was limited to the dynamics of deposits in Rb. Equivalent. We have monitored the period starting from 4 months prior to the withdrawal of the license and until 3 months after the licenses were revoked. The banks, whose licenses were re-established later were not considered as well as the banks, the financial reports of which were unavailable and the banks which have not any obligations on private individuals’ deposits during the period concerned, regardless of whether they had ever operated in the said segment of the market before that period of time.

We compared the dynamics of private individuals’ deposits within three periods of time:

The year prior to the crisis (between July 1, 1997- June 30, 1998);

The second half of 1998, during which there was the mass withdrawal of deposits from banks;

8 months in 1999 (Limiting this period with 8 months of 1999 was related to the necessity of analyzing the Quarter after the license was revoked, to compare the data), during which the total amount of Rb.- denominated deposits renewed its growth in commercial banks (Sberbank of Russia exclusive).

Table 1

Characteristics of the samples of banks with withdrawn licenses





Number of banks revoked licenses




Including the banks which had private individuals Rb. deposits




The share of banks which had Rb. Deposits of private individuals




First of all, one should pay attention to the growth in the number of banks that held private individuals’ deposits on the eve of the license withdrawal. Given that prior to the beginning of the systemic crisis the per cent rate of such banks would be 79%, in 1999 it reached nearly 90%.

As to the afore- mentioned questions, as the figures below show, the owners of Rb.- denominated deposits show their awareness of the bank’s state and try to withdraw their money form the falling banks not only during the period of the clients’ panic, which accompanies the emergence of the systemic banking crisis, but also over the period of relative stability of the banking system.

As the figures show, in 3 months prior to the license withdrawal, almost half the banks experience the fall in the amount of private individuals’ deposits (47 to 54% of banks). At the same time, during the crisis period one may note the growth in the share of banks, which experience the contraction in the amount of the said deposits at over 10% during 3 months prior to the withdrawal of their licenses. Given that during the period between mid- 1997 through mid- 1998 the share of such banks was 16%, it became 20% over the second half 1998, and 22% - in 1999.

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