Studies Eastern European Markets
Eastern European Markets
ADVANTAGE NORTHWEST RUSSIA

Preface

ETLA, the Research Institute of the Finnish Economy, has decided to carry out a large-scale project on the economic development of Northwest Russia. In an economic sense Northwest Russia is the most important area for Finland and Finnish companies among the seven federal districts of Russia.

The aim is, together with participating Finnish companies, to increase our knowlwdge of business activities in the region. There will be separate research reports on, at least, the Northwest Russian forest, ICT, basic metal and energy clusters, and a summary report combining all the results of the project.

The project is a joint project of the Center for Strategic Research (CRS) in Moscow, the foundation of which was initiated by President Putin, and Solid Invest, a consulting and research company in St. Petersburg.

Published titles:

EMERGING CLUSTRES OF THE NORTHERN DIMENSION.

Competetitive Analysis of Northwest Russia - A Preliminary Study.
FROM RUSSIAN FORESTS TO WORLD MARKETS.
A Comparative Analysis of the Northwest Russian Forest Cluster.
ENERGY3. RAW MATERIALS, PRODUCTION AND TECHNOLOGY.
A Competitive Analysis of the Northwest Russian Energy Cluster.
THE MELTING IRON CURTAIN.

A Competitive Analysis of the Northwest Russian Metal Cluster.
BUSY LINES, HECTIC PROGRAMMING.
Competitive Analysis of the Northwest Russian ICT Cluster.

Inquiries and orders:
Taloustieto Oy
Lönnrotinkatu 4 B, 00120 Helsinki
FINLAND
Tel. + 358 9 609 909, fax +358 9 601 753


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Grigori Dudarev, Hannu Hernesniemi and Pavel Filippov
EMERGING CLUSTRES OF THE NORTHERN DIMENSION
Competetitive Analysis of Northwest Russia - A Preliminary Study

Abstract

The study presents the initial results of research in to yhe competitiveness and prospects for further growth of the industries of Northwest Russia. It also highlights the opportunities for over-the-border cooperation between Finnish and Russian companies.

The structure and main features of seven key sectors of the Northwesy Russia were examined. The forestry, base metals, energy, food and ICT sectors were studied using a method of cluster analysis. The study demonstrates that all the necessary elements for the formation of internationally competitive clusters are found in these sectors.

The transport and logistics sector to a great extent determines the cost level and even competetitiveness of local manufacturers. The construction materials industry benefits from natural resources, but it is fragmented and lacks the govermental and private efforts necessary for its development.

Interviews with the executives of key companies and an analysis of what the sector needs showed that there is a high potential for over-the-border cooperation based on complementary resources, such as experience, technologies and the knowledge of global market by the Finnish companies, on the one hand, and the natural resources, cheap and highly qualified labor force, educational base, and broad local market that Northwest Russia offers, on the other hand.

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Grigory Dudarev, Sergey Boltramovich and Dmitry Efremov
FROM RUSSIAN FORESTS TO WORLD MARKETS
A Comparative Analysis of the Northwest Russian Forest Cluster

Abstract

This study examines the Northwest Russian forest industry, tradionally the region´s most important industry, its competitiviness and fure prospects. The transition to the market economy and privatization have left their mark on the industry. Demand and markets have changed, requiring new strategies, operation models and industrial policy. The book analyzes competitiveness employing the so called cluster analysis approach.

The competitiveness of the Northwest Russian forest industry is currently based on production factors, whose conditions have, however, deteriorated during the reform process.Machinery and equipment are outdated, productivity is low and production consists mainly of products with low value added. In principle, the Northwest Russian forest cluster has all the necessary elements that, if developed and improved, could make the cluster competitive. Such developments and improvements require substantial investments and cooperation amongst companies.

The book also introduces the most important forest industry companies of Northwest Russia. For many companies export revenues are the main source of income. Investments in production and infrastructure are needed to keep exports at their present level and to increase them. Foreign investors can play a very important role in the development of the Northwest Russian forest industry, if the risks associated with, and barriers to, investment are reduced.

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Pavel Filippov, Grigory Duradev and Alexey Osipov:
ENERGY3. RAW MATERIALS, PRODUCTION AND TECHNOLOGY
A Competitive Analysis of the Northwest Russian Energy Cluster

Abstract

Energy industries in Russia and in Northwest Russia in particular are of the utmost importance and occupy the largest shares in the total industrial production and exports. Northwest Russia is developing into the major export hub for the Russian energy exports. It means that the appropriate infrastructure and potential to establishing processing facilities are created in this area.

Energy industries play also an important role as essential suppliers for many local producers. As many Northwest Russian manufacturing industries are still very energy consuming, energy efficiency and energy costs will have a strong effect on their profitablity. Therefore, the transition to the market economy led to profound changes in the industry structure and allocation.

These changes need to be assessed in order to adjust the business and industrial policy-making to changing circumstances. Analysis of the Northwest Russian energy cluster consisting of oil, gas, coal and peat production and processing, power generation and power engineering industries as well as supporting industries and associated services (prospecting, maintenance and transport, etc.) was aimed to serve this purpose. The analysis was carried out basing on trade and industrial statistics, company data and interviews. As a result the growth prospects and competitive advantages and disadvantages of the energy clusters are identified and described.

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Sergey Boltramovich, Grigory Dudarev and Vladimir Gorelov:
THE MELTING IRON CURTAIN.
A Competitive Analysis of the Northwest Russian Metal Cluster.
2003, 140 p.

ABSTRACT: This book presents the Northwest Russian metal industries and the most important companies, and examines their competitiveness and future prospects. Metal industry plays an important role in Northwest Russia. Its share in the industrial output is over 20%. The transition from the socialistic economy to the market economy, and privatization have reshaped the industries. In the Soviet period metal industry produced raw material for domestic munitions, machine building and construction. After the collapse of the domestic demand, metal companies were forced to, and managed to enter the export markets. The book analyzes competitiveness employing the so-called cluster analysis approach. Relatively cheap and abundant raw materials, energy, transportation and labor force are the main components of the cost competitiveness of companies. Production technologies are, however, outdated. Productivity is low and production consists of products with low value added. In principle, the Northwest Russian metal cluster has all the necessary elements needed for a competitive metal cluster. Yet, improving competitiveness requires substantial investments, which would also help to solve environmental problems.

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Andrey Averin and Grigory Dudarev:
BUSY LINES, HECTIC PROGRAMMING.
Competitive Analysis of the Northwest Russian ICT Cluster.
2003, 161 p.

ABSTRACT: Northwest Russia and particularly St. Petersburg were a globally important development center for information and communication technologies (ICT) during 1850-1950. The region's position of strength deteriorated after this period as a consequence of the choices made about technology and Soviet secrecy. However, the region and its ICT industries still enjoy the benefits of education provision, the research-oriented tradition and inherited human and industrial capital. The transition to the market economy opened up many opportunities but also resulted in the evaporation of uncompetitive producers like giant electronics manufacturers. It also reduced financing and changed the priorities for R&D and education. At the same time, breakthroughs in telecom technologies and the overwhelming success of mobile communications greatly influenced the ICT industries in Russia. Understanding the major changes and trends is crucial for industrial policy and business strategy decision makers. In this study, we identify the Northwest Russian ICT cluster and the key matters related to its competitiveness and growth prospects in the new environment. The study demonstrates that inherited production factors, as well as growing domestic demand, form the background of the growth currently experienced. Russia already has a competitive edge in offshore programming. However, focused industrial policy is urgently needed in order to make the cluster's growth sustainable and create long-term competitive advantages.

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Inquiries and Orders
Taloustieto Oy
Lönnrotinkatu 4 B, 00120 Helsinki.
Puh. (09) 609 909, fax (09) 601 753.

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