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In Russia, import dependence is decreasing. However, this trend is not observed in all industries. Replacement of critical components of import production remains problematic and has become even more difficult to procure

Import substitution in Russia generally shows positive dynamics. In 2023, 36% of Russian industrial enterprises increased the share of domestic equipment, components, raw materials or technologies in their production compared to the previous year. Such data is contained in an information review prepared by the Center for Market Research at the Institute for Statistical Research and Economics of Knowledge at the National Research University Higher School of Economics as part of the fundamental research program. Its main results were revealed by the Russian Ministry of Industry and Trade at the end of April.

Dynamic import substitution

According to the review, the leaders in the growth rate of equipment import substitution dynamics were enterprises specializing in the production of computers, electronic and optical products - an increase compared to 2022 was noted by 51% of respondents. Next come electrical equipment (47%), medicines and materials (47%), vehicles, trailers and semi-trailers (44%), coke and petroleum products (42%), and other finished products (40%). The latter include, in particular, medical instruments and equipment, games and toys, as well as sporting goods.

If in 2022 65% of all Russian industries were critically and highly dependent on imported equipment, then in 2023 only 43% were the same. The review prepared by the National Research University Higher School of Economics also showed a decrease in the dependence of production on foreign components from 48% in 2022 to 34% in 2023, raw materials - from 32 to 18%, technologies - from 25 to 14%.

Analysts note that in 2023 the number of enterprises with Russian equipment increased, which is not inferior in its characteristics to foreign counterparts: this trend was recorded in 15 of 23 industries of the manufacturing segment. On the other hand, the number of respondents who said that it was easier to buy critical components of the production process in the past year has decreased: from 54% in 2023 to 37% in 2024.

This purchasing trend was primarily observed in enterprises producing clothing, textiles, furniture, fabricated metal products, food products, coke and petroleum products, as well as vehicles and equipment.

«Consistent policy of the state to support enterprises, create conditions for the production of materials and components gives its results in reducing import dependence and ensuring technological sovereignty», - said Deputy Head of the Ministry of Industry and Trade of Russia Vasily Osmakov. In his opinion, the research of HSE confirms this trend: «Production of Russian industrialists occupies more and more links in production chains».

National projects against import dependence

At the end of the 2010s, the share of foreign added value in the final consumption of the industrial sector in Russia was 39%, says Maxim Orlov, Candidate of Technical Sciences, head of the “Development of New Structural Materials” complex at the NTI Center “Digital Materials Science” at Bauman Moscow State Technical University. In the USA, this figure was 37%, and the leader was China with an indicator of 20%. However, the experience of the COVID-19 pandemic, Western sanctions and complications in trade relations with some countries has shown the importance of supporting entrepreneurs in substituting foreign goods.

The state began to support companies engaged in the production of alternative solutions in strategic areas through national projects. In general, the market for import substitution in the Russian industry today is estimated at about 5.2 trillion rubles. (excluding aircraft and shipbuilding). The IT sector accounts for about 500 billion rubles.» - says Peter Shcherbachenko, Associate Professor of the Financial University under the Russian government.

According to the expert, import dependence has already been significantly reduced in some sectors of the economy. One of them is the oil and gas industry, which was helped by state support programs and investments of large companies.

«Oil and gas corporations (for example, «Rosneft»), as well as such state companies as «Rosatom» and «Rosteh», have become pioneers in increasing the use of Russian scientific research. Among other things, they are developing a scientific base directly at enterprises», - says Alexander Kovalenko, Candidate of Economic Sciences, responsible secretary of the Coordinating Council of the non-State Security Sphere of Russia. It adds that, according to a number of studies, over the past two years, the proportion of enterprises experiencing difficulties due to the departure of western suppliers has decreased by almost a third, to 40%.

There are irreplaceable ones

Meanwhile, in some industries, the issue of import substitution is still acute. For example, in the production of medicines. Thus, in 2023, the share of drugs of foreign origin in rubles was 56.7%, in packages - 31.2% (AlphaRM data). The manufacture of equipment for microelectronics and machine tools is also experiencing difficulties. According to Arthur Consulting project director Nikolai Nazarov, first of all we are talking about machines with numerical control, as well as precision (high precision) machines. According to the Ministry of Industry and Trade of the Russian Federation, import equipment accounts for up to 75% of total deliveries.

Russia also lacks microelectronics production technology smaller than 90 nanometers. The chip size of world leaders is 3-7 nanometers, the gap is very large. In Russia until 2030 it is planned to launch the production of chips measuring 14-28 nanometers», - says Nikolai Nazarov.

In turn, Alexander Kovalenko points out that one of the problems of industrial import substitution, gradually coming to the fore, becomes a shortage of personnel in almost all industries and at all levels. Russian companies in the industrial sector are establishing technological production, as well as gradually solving the problem of fair wages and expanding social obligations for their employees. However, there is still a shortage of labour and engineering skills. According to Alexander Kovalenko, this may be due to the fact that in the digital age it is quite difficult to explain to prospective students the advisability of enrolling in a particular chair, despite all the efforts of the state in the field of import substitution.

Government intervention

To accelerate the processes of industrial import substitution, the state is taking a number of measures. Roman Tinyaev, director of the Mechanical Engineering and Technology practice at the consulting company Strategy Partners, includes among them the provision of financial support, tax incentives and subsidies for companies engaged in import substitution. In addition, new legislation was being drafted to encourage the development of domestic production and educational programmes were being conducted to train specialists. “The President proposed to launch an additional 50 engineering schools in the country. This is the right vector for a fundamental solution to the problem of technological sovereignty in the field of industry,” says Nikolai Nazarov.

According to Roman Tinyaev, first of all, industrial import substitution is supported in those areas that are most critical for the country. Among them - agriculture, food and defense industry, engineering, pharmaceuticals, information technology.

Maksym Orlov recalls that the possibility of using domestic raw materials and equipment has a direct impact on the degree of technological sovereignty, and therefore on the defense capability of the state. As an example, the expert cites the absence of production of epichlohydrin in Russia - the most important monomer used in production in many industries. In particular, it is made of glycerin, epoxy resins, paper, circuit boards. “Now there is a difficult process of restoring its production in Russia. And not without the participation of foreigners, whom we taught this production, but ourselves lost the skill,” the expert emphasizes.

Scale perspective

According to a study conducted by OMD OM Group in April 2024, Russians believe that domestic companies can replace imports in such segments as cosmetics, household chemicals and IT. In the last segment, import substitution is increasing in the areas of cybersecurity (12% per year), cloud technologies (18%) and office software (15%), says Petr Shcherbachenko.

According to Nikolai Nazarov, in the coming years the Russian pharmaceutical industry may switch to the production of generics for a number of imported drugs, since this is a matter of ensuring health. Technological evolution is possible in the machine tool industry, but completely moving away from dependence on imports will be difficult and very costly, the expert believes.

“In the machine tool industry, the scale of production matters: with a limited volume of the sales market, it will be difficult for Russian manufacturers to compete on price with Chinese suppliers. If we talk about the segment of microelectronics, to close the gap in the production of chips will require great efforts at the level of the state to consolidate the necessary technologies and ensure the market», - said Nikolai Nazarov.

According to Alexander Kovalenko, it will be possible to talk about the prospects of import substitution in Russia only when the country will have its own base of modern scientific research and technological solutions aimed at creating completely independent industries, they are based on raw materials and human resources.

Source: https://www.rbc.ru/industries/news/6650b4ec9a79474b64c96730?ysclid=lwypl64ep010376964