5 September 2019
KEY CONCLUSIONS
Investment inflow
is central to improving Russia’s labour productivity
“Why does the Russian Far
East have higher (labour productivity – Ed.) indicators? The investment
component plays an active part here. The share of investment in the Far East’s
GDP is higher than the Russian national average. We’re seeing major projects come
in because of the advanced special economic zones. A large number of investors
go and implement projects with high levels of productivity. It affects general economic growth,” Maxim
Oreshkin, Minister of Economic Development of the Russian Federation.
“Rosstat’s figures show
that labour productivity has increased by 1.8% compared to last year. That
figure is 2.4% in the Russian Far East. On the whole, those results aren't bad.
<…> The Russian Far East is an interesting region in the eyes of foreign
investors. If we take a look at the statistics, we can see that in 2011, the
Far East's share of all foreign investments in Russia was somewhere around 4%.
Now, the Russian Far East accounts for 25–30% of foreign investment. Investors
are coming here,” Alexander Ivlev, CIS Managing Partner, Deputy Regional
Accounts Leader for Central, Eastern and Southeastern Europe & Central
Asia, EY.
Increasing labour
productivity is key to increasing the economic competitiveness
“In theory, the situation
in Russia is not that bad, but there is room for improvement. The World
Economic Forum rated the competitiveness of various countries. Russia is
currently in 43rd place out of 140 countries. It's not bad, it's a good result.
Nevertheless, there is room to grow. Labour productivity is one of the key
factors that will help propel us further,” Alexander Ivlev, CIS Managing
Partner, Deputy Regional Accounts Leader for Central, Eastern and Southeastern
Europe & Central Asia, EY.
PROBLEMS
Businesses’ lack of
management and technological skills
“(The labour productivity
problem – Ed.) results from a number of factors. There is a lack of
management and technological skills in many enterprises. For many years, there
weren't any kind of education programmes; a lot of them fell apart when the
Soviet Union did. So, there was nowhere to get these skills from,” Petr
Zaselsky, Deputy Minister of Economic Development of the Russian Federation.
“Maybe large corporations
do have high-level business goals, but they translate poorly when it comes to
company structure, subsidiaries, and affiliates. We are currently implementing
a labour productivity project in Russia and we are only working with private
enterprises. Participation is voluntary, but not a single daughter company,
‘granddaughter’ company, or large corporation has come by. Why is that? Because
they are waiting for an order from above. They have to be told to create new
equipment, lower production costs, and then, maybe, they'll get to work. It's a
somewhat different mentality. Everyone's used to working in a planned economy,”
Nikolay Solomon, General Director, Federal Competence Centre (FCC).
Excessive
regulation
“Of course, we need to work
on administrative barriers. Primarily, these are industry standards. Currently,
the ministry of economic development is working on transforming the business
climate. The regulatory guillotine should soon be in working order,” Petr
Zaselsky, Deputy Minister of Economic Development of the Russian Federation.
Lack of financing
“There is a lack of project
financing instruments and interest rates are fairly high,” Petr Zaselsky,
Deputy Minister of Economic Development of the Russian Federation.
Underdeveloped
transport infrastructure
“Infrastructure plays a
major role here (in the Russian Far East – Ed.). Anyone who's travelled
across the Russian Far East knows that it's practically impossible to get from
one city to another. You always have to either go through Central Russia or
Moscow. This presents a serious challenge to business development. We've got
people, we have more people coming in, we've got investors, strong economic
partners – we've got it all. We have everything that we need for development,
except for infrastructure,” Petr Zaselsky, Deputy Minister of Economic
Development of the Russian Federation.
SOLUTIONS
Improving
management
“Labour productivity is a
high-level indicator that reflects everything that's going on in an economy. We
talk about needing to increase the volume of investment. We talk about the
quality of existing capital. These are the technologies that are being used. We
talk about the quality of human capital. Of course, it's also very important to
bring all of these elements together and utilize them properly. And that’s a
question of management quality,” Maxim Oreshkin, Minister of Economic
Development of the Russian Federation.
“(We must) change our
management philosophy. Because if owners don't want it, then there won't be any
changes. They have to serve as the instigators of all of these processes. And
then we can get to employees’ philosophies. Because it's not enough for
managers’ philosophies to change. The workforce must also be retrained,” Koh
Poh Koon, Senior Minister of State, Ministry of Trade and Industry of the
Republic of Singapore.
Fostering
investment in tech and human capital
“We need to invest more,
<...> We need to implement technologies. For example, the next few months
will see the launch of a new project to implement and develop artificial
intelligence technologies. <...> By our estimates, this could add up to
1% of annual growth by 2030 if we play our cards right. <...> That’s
investment quality. With each year, Russia invests more and more in the quality
of human capital. That includes education and the research environment,” Maxim
Oreshkin, Minister of Economic Development of the Russian Federation.
“First off, you've got to
invest in machine engineering, equipment, and tools used in production.
<...> You need high-tech equipment. Second, you've got the human factor,
your workforce. <...> You've got to improve infrastructure, because if you
don't have infrastructure, regardless of what you do, you won't be able to
sell,” He Zhenwei, Secretary General, China Overseas Development Association.
Digitalization
across all economic sectors
“Digitalization is
currently one of the most important strategic areas. Digitalization is not a
goal in and of itself, it is an opportunity to increase an enterprise’s
competitiveness both in the local market and internationally. There are many
examples of us helping our clients increase their productivity. In automotive
construction, we actively work with Kamaz. The last Kamaz freight truck was
developed using our Siemens PLM Software, which allowed almost all of the
R&D to go digital, helping the company create a new product. <...>
Another example: we worked with Russian Railways to create an analytical centre
for collecting big data from Lastochka trains, locomotives used by Russian
Railways on the country's railroads. This has essentially allowed for a
transition to condition-based maintenance. <...> The same thing is
happening in agriculture. With the help of digitalization and weather forecast
analysis, you can turn pumps on in time to prevent flooding,” Alexander
Liberov, President, Siemens in Russia.
“The majority of our recent
progress in this area (improving labour productivity – Ed.) is happening
thanks to digitalization. What have we done in Russia? We modernized all of our
facilities; we've digitalized all of our preparation procedures. <...> As
a result, we were able to lower order wait time by one minute over the last
year. You currently have to wait an average of 140 seconds from the moment
you've made your order to the moment you receive it. In certain locations,
we've been able to reduce this time to 120 seconds. All of this increases
customer satisfaction,” Marc Carena, Director General, McDonald’s in Russia.
“Using IT technology, we
have been able to more than double our labour productivity. We are in the top
three companies in Russia in this area (labour productivity – Ed.), though we
also look good compared to Chinese, Japanese, and I think, European and
American companies in terms of throughput,” Sergey Kolesnikov, President,
TechnoNICOL Corporation.
“High-tech and robotics are
always valuable, and we always keep in mind that this is investment in quality
and productivity. <...> Digitalization helps us identify deviations
faster and react faster,” Katsutoshi Nishimoto, Senior Vice President, Toyota
Motor Europe.
Developing
logistics and transport infrastructure in the Russian Far East
“We are currently working
with our colleagues in the Ministry for the Development of the Russian Far East
on creating additional productivity centres as part of a national project, in
order to logistically cover the Far Eastern region,” Maxim Oreshkin, Minister of
Economic Development of the Russian Federation.
“The Russian Far East is a
unique opportunity to create infrastructure in an area that, unfortunately, is
not yet fully developed. If you look at global best practices, then Canada,
just like the Russian Far East, is surrounded by water. They have a low
population density, are primarily focused on extraction with low levels of
processing. At the same time, in the province of Saskatchewan, they were able
to create a centre that collects practically all of the products being imported
from Asia that then get distributed all over North America. We in the Russian
Far East can serve as a bridge that connects China and Europe and other areas,”
Alexander Ivlev, CIS Managing Partner, Deputy Regional Accounts Leader for
Central, Eastern and Southeastern Europe & Central Asia, EY
For more information, visit
the Roscongress Foundation's Information and Analytical System at www.roscongress.org/en.