billion USD amount of Russia’s non-commodity exports in 2016
share of Russia’s noncommodity exports in 2016 (a 4 pp increase)
In 2016 the share of Russia’s non-commodity exports hit a 12-year record with a 4 pp increase to 38.2% of total exports (USD 109.1 billion). While the share of non-commodity exports is still lower than the share of commodity exports, the 2016 results reveal some positive trends. The increase rate of the share of non-commodity non-energy products was 9.5 pp higher than that of total exports. In physical terms Russia’s noncommodity exports have steadily increased. Indeed, in 2016 it grew by 3.2%, which exceeds the world trade growth forecasts made by international organizations.
Metal, engineering, chemical, food, and timber and paper products account for the largest share of Russia’s non-commodities exports.
Europe, East Asia, the CIS and the Middle East are the main destinations of Russian exports. However, the situation is slightly different for the non-commodity exports: here the main destination is the CIS States (23%), the second key destination is East Asia, then Europe and the Middle East. The historical ties going back to the Soviet times enabled many smaller-scale exporters to carve out a niche in the CIS company services market. However, in the recent years the share exports to the CIS countries has decreased due to a more rapid growth of exports to other regions. At the same time, the list of countries importing Russian products has also expanded, so there is every indication that the companies are entering new markets.
In the recent years several industries of the Russian economy have accumulated a significant export potential. This applies to the industries that have the highest level of value adding and a visible multiplier effect, in particular engineering, agricultural machine building, railroad rolling stock manufacturing and aircraft engineering. Developing these industries may give a boost to the related enterprises in heavy and light industries as well as in transport sector. Increasing the export potential of high-technology industries and utilizing the competitive advantage of the services sector, in particular engineering, design, geodesy and construction, will be critical for the sustainable growth of the Russian economy.
Increasing the share of non-commodity exports will support the diversification of the economy, thus helping reduce its dependence on commodity prices and ensuring a stable flow of revenues to the budget. Another important result to be expected will be the growth in the high value-added production and a demand for highly qualified personnel.
State support will be especially important for small and medium enterprises which are among the first to respond to the changes in the market. Such support will promote the development of private entrepreneurship on the basis of the market mechanisms of demand and supply to become a part of the global production and logistics networks.
Potential exporter companies face certain challenges in an unstable macroeconomic environment and given the tough political conditions. The challenges are not limited to the lack of access to finance; they also include strategic tasks such as finding partners and new markets, or promoting goods and services. The majority of the exporters are mature companies that have the resources for the production of the goods intended for export. However, when these companies enter new markets they may face situations they are unprepared to handle. For smaller companies planning the very first exports of their products, the situation is aggravated by their insufficient knowledge of the requirements, restrictions and specifics of operating in the international markets. The competition that Russian exporters face is not so much about the price, it is rather about the quality, marketing, logistics and financial support package.
The increase in the share of non-commodity exports in the recent years corresponds to the main national policy objectives. Increasing the share of non-commodity exports has been identified as a priority in foreign trade. Russia’s ability to rekindle economic growth will largely depend on its export capabilities, and an increased turnover of high valueadded products may drive the entire economy.
In 2016 the Russian government included supporting non-commodity exports in its list of priority areas. The government expects a 7% increase in non-commodity exports and a 10% increase in the number of exporters. According to the Strategy for the development of small and medium business up to 2030 signed by Prime Minister Dmitry Medvedev in June 2016, the share of small and medium enterprises in Russia’s total exports is supposed to increase almost twofold, from 6.5% in 2015 to 12% in 2030. To sustain these objectives, a unified export support system, that Eximbank of Russia is part of, needs to be created.