Can Russia beat Chinese consumer goods?

The Federation Council, with the participation of Minister for Industry and Trade, Denis Manturov, formed a program for the development of the industry. The program stipulates the allocation of three billion rubles from the budget. The funds will be assigned in stages before 2020 to improve the competitiveness of products.The Russian light industry that has been invaded by foreign production is going through hard times. Products of the Russian light industry face serious competition with mostly Chinese, Indian and Turkish goods. They lack quality and may often be hazardous to health, but they attract customers' attention with their low prices and a wide assortment. 

Meanwhile, according to the result of 2012, domestic products were sold in the amount of 689 billion rubles in Russia, whereas the profit from selling foreign goods was much larger - 2.111 trillion rubles. The difference is enormous, but the fact official imports made up only 1.108 trillion rubles is more amazing. The rest accounts for counterfeiting products. 

The inflow of illegal goods, first of all, leads to considerable losses in tax revenues and the lack of quality control. It is easy to calculate that from $1 trillion rubles, the budget will lose about 200 billion rubles. To combat violations, an interdepartmental commission will be established to monitor the situation throughout the country and take timely measures. In areas of "high risk," such as the China-Kazakhstan border, special customs posts will be installed. Their functions will include inspection of goods of corresponding profile.

In addition to the restriction of illegal imports, it is necessary to develop production locally. Domestic products often arrive with high unattractive prices. Low production, lack of equipment and inhumane purchasing cost of raw materials do not allow to keep prices at competitive levels. Russian enterprises of light industry are in dire need of comprehensive state support.

Problems related to raw materials are more complicated. Cotton does not grow on the territory of the Russian Federation; wool and flax are produced in tiny amounts. All these goods come from abroad. The delivery of raw materials from abroad inevitably affects the cost of production. The revival of the industry is impossible without the formation of agricultural units. The Astrakhan region, in Russia's south, may become the center of the cotton production in the country, whereas the North Caucasus is seen as a source of wool. Vologda is ideal for the cultivation of flax.

The equipment of companies also leaves much to be desired, the production fund is outdated and does not allow to work at full capacity. Seventy million rubles will be allocated for the purchase of new machines. Patriotism and merits of old Soviet times is not enough to become a leader. Therefore, consumer will have a chance to become acquainted with "Made in Russia" brand. 

Another option in the struggle against counterfeit products is the destruction of all seized products. Until recently, products were allowed to be released on the market. However, experience showed that such a state of affairs was not profitable at all. Overhead costs would eat up the lion's share of profits, and the cost of storage and evaluation of goods would very often exceed the proceeds. On May 22, the State Duma adopted a radical law, under which all confiscated goods should be destroyed to reduce the circulation of counterfeit products and unload customs terminals.

Illegal production in Russia makes up one third of the market, affecting the budget and limiting the growth of domestic production. Russian counterfeit products are much rarer than foreign ones - they are mostly alcohol and CD/DVD disks). Toughening the laws in relation to confiscated goods can lead to both the development of light industry and the revival of illegal trade.

Maria Abramova.

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Author`s name Dmitry Sudakov