IN RUSSIA at the moment, lots of people are talking about "import substitution". The price of the nation's main export, oil, has collapsed; and the West has slapped on sanctions as punishment for the Kremlin's meddling in Ukraine. (Russia has also imposed counter-sanctions on the West.) So, Russia needs to find new ways of earning export revenues; and it needs to produce more stuff domestically so it can "substitute" for the imports that it can no longer buy.
However, import substitution is not going well. This is for a variety of reasons, which we detail in our recent article on the Russian economy. Foreign investors are not interested in Russia at the moment; and there is little appetite for the serious structural reforms that would get the non-oil parts of the economy going. Non-oil exports are down; manufacturing and agricultural output are stagnant.
Nonetheless, some readers may still be puzzled by such poor performance. Despite all Russia's problems, the fact remains that thanks to the collapse of the rouble, Russia's currency, the country is now extremely cheap. In 2013 a dollar was worth 30 roubles; now it's worth roughly 75. Surely there would be no better time for Russia to develop non-oil export...Continue reading
Source: Business and finance http://ift.tt/1o23i66
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