sepheronx Thu Apr 07, 2016 11:22 pm
NationalRus wrote:bullshit, not the government needs to spent more of something it doesnt have in the first place but reforming the trading policy's across borders, russia is one of the hardest nations for privet business to trade
compare our hours needed and licenses needed (43 hours of paperwork)
to a country were its really easy
why the hell joining WTO if the government wants to fuck russian business's in the ass long and deep anyway
That doesn't make any sense what you are referring to. Russian businesses usually only sell domestically. It is said something like 10% of all enterprises in Russia export, and the rest rely entirely on domestic consumers. They could reduce these regulations but then it ends up happening both ways and will end up crushing Russian businesses as Europe will simply flood Russia.
What has hurt businesses is everything else, like the obscene tax code that makes it difficult when dealing with taxes for a business, or due to authorities and the number of visits by a regulator and regulators being extremely anal either for a bribe or just because of the rules.
That is changing though.
A Different Voice wrote:If the underlying conditions prompting the import substitution policy change, to what degree will the policy have resulted in malinvestment? Economic conditions will improve in Russia. It may be next year. It may be the year after. But things will improve. Oil prices will stabilize at a higher level than now. the ruble's value will increase. Government spending will increase. The recession will end and so will sanctions. When these things happen, the goods that Russia invested to be able produce will have no market. Russia will no longer be a lower costs producer. Cheaper and better goods will again flood in from abroad. Will the import substitution policy be judged a wise economic policy 5 years from now?
Import substitution policy would work much better if the government spent more.
A Different Voice wrote:An example for discussion purposes is investment in food production. Once sanctions are lifted, wages increase, the ruble's value increases, etc. what will be the economic return on the investments made in food production?
Greater share of the Russian market. Even if Western products return, they will face a stronger competition.
Yes and no regarding spending more. The government is reducing spending but the population is actually increasing spending. One thing that was mentioned by the economic minister was that spending among Russians has increased in Ruble terms but obviously less in dollar terms due to exchange rate. But it isn't just exchange rate either, it is also the fact that the cost of goods have changed. So instead of Russians purchasing T-Shirts and jeans for an average of $20 - $80 equivalent, they are doing it at $20 even instead. Thus it looks like a drop when it really isn't. Discount and thrift shops are the booming industry in Russia. This is of course all in consumer goods. Things that require heavy industrial equipment import substitution and the like, is indeed due to government spending and investments. Which they are not holding back on. They are just moving money around as something like Vladimir said regarding about debt payments. Kinda interesting stuff.
sepheronx wrote:Ruble won't go higher again, not to where it once was. As well, the west damaged relations with Russia and after said investments are operable, domestic prices will drop considerably. And besides agricultural goods and equipment, most import substitution is in military at the moment, so government will favor domestic as they learned from their mistake buying from west.
As you may have noticed, most major moves to domestic development is happening as JV between other companies from other nations. So they will see to it their investments sticks. Others like drilling equipment and or other heavy industrial equipment manufacturing, are partially owned or operated by the companies who purchase said equipment, I Gazprom. Dunno if this is bad due to monopolizing, but it is needed.
And after a while of production, prices will be cheaper than EU because initial investment cost I gone and Ruble will always be cheaper than Euro.
We may never see oil at prices like $80bbl. And with Ruble floating now, CBR can always devalue it through speculators or currency dump if it becomes too expensive.
You are wrong in both claims. You have too much trust in Euro, but EU is actually bankrupt with too large debt and when domino effect will start, Euro will be worthless paper and very quickly disappear as well as EU will.
Other thing is, that value of Ruble is artificially lowered. When RCB stop supporting Ruble and leave it in free float, it actually prove to be extremely stable currency. There was shocks in world markets, which causes to lower the value, but when it is over, Ruble grow again. It have little ups and downs, but all in all it is very stable currency. The main problem for Russia is, how to keep Ruble value that low. They have low debt, big reserves, stable economy and more and more gold in their stocks. Sooner or later it will have to grow and its value will be higher than that of $ and Euro.
Maybe, but the future is always uncertain. It is true that the Ruble has been doing quite well in terms of balancing out and finding its "right" spot. Issue is though, its value is significantly less than it was before. And as I said, they can always "hedge" against it via selling Rubles or in this case, increasing the supply of it. Dirty trick that I am not entirely sure I would agree with, but we have seen the CBR manipulate the valuation of the Ruble in the recent year through various methods. When the Ruble was climbing back up in the low 50's, the CBR dumped rubles and thus dropped the value again. I was worried it was a bad tactic, but I imagine it was mainly due to try to keep the Ruble low so that it makes import substitution valuable, as well as cheap for foreigners to set up shop. Now they got engine manufacturers and such in Russia, 3 of them (foreign), in 1 and 1/2 years. Not bad.