January 15, 2021 21:05

Value chain integration and global market presence: regional experience

Value chain integration and global market presence: regional experience

How to assess the contribution of a region and a federal center to the creation of value chains? Can localization of industrial assembly operations become the basis for export-oriented growth of a region? How does regional economic policy affect business competitiveness? The main topic of the expert discussion "Value Added Chains: How to Scale Up the Best Regional Practices?" held as part of the second day of the Gaidar Forum 2021 was the discussion of the best regional practices in building up new production facilities and adaptation of the existing production resources.

Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs (RUIE), Vladislav Shapsha, Governor of the Kaluga Region, Igor Artamonov, Head of the Administration of the Lipetsk Region, Sergey Kogogin, General Director of KAMAZ PJSC, Dmitry Komissarov, Chairman of the Board of Directors of Transmashholding JSC, and Natalya Volchkova, Vice-Rector of the Russian Foreign Trade Academy took part in the discussion.

Global value chains (GVCs) reflect the current architecture of the international trade and industrial cooperation. Participation in GVCs shapes the opportunities for industrial development and for development of service sectors at various stages of product value creation. Cooperation as part of GVCs allows countries to unlock the potential of national economic sectors. For Russia, participation in GVCs appears to be an important factor in achieving the national development goals. For the majority of Russian companies the most important factors of competitiveness are formed at the regional level. A number of subjects have already accumulated successful experience with various formats of companies' participation in GVCs, but it is not yet possible to scale up successful practices to other regions.

During the pandemic, many countries began to close down, a trend that was also observed before the pandemic, started the discussion Alexander Shokhin, head of RUIE. "And our practice of import substitution has shown the same substitution of global chains by the domestic market."

"The resources of a single locality in the Russian Federation are not enough to create, for example, a car from "a" to "z" and serve the entire market. And the world market defines this, in turn, as competitiveness," said Natalia Volchkova, Vice-Rector of the Russian Foreign Trade Academy. “From this point of view, the mechanism of the reverse chains of the “import-production-export” type allows us to produce not the entire commodity, but only a component or several components of it and supply it within the final product to the entire world market," said Natalia Volchkova.

Speaking about the industrial success of the Kaluga Region, its Governor Vladislav Shapsha noted that initially the region was not prepared for automobile production. And all the industrial capacities consisted mainly of defense enterprises. But the retraining of personnel and active search for investments allowed the region to integrate itself into the new production chains.

 "Today, together with the three groups, namely Volkswagen, Volvo and Mitsubishi, we have 30 facilities built that supply components to these groups. At some point, these facilities were built for the domestic market. But they have managed to evolve, integrate themselves into GVCs. There are other examples. For instance, Volkswagen independently built an plant producing internal combustion engines, and today the company is the third largest engine manufacturer in Russia," said the head of the Kaluga Region.

The Special Economic Zone "Lipetsk" is still an example of how GVCs can be used effectively. The Lipetsk Region was one of the pioneers, and today it is actively using the opportunities offered by this tool. "Today we have the largest production of potatoes for McDonald's, and we have recently opened a coffee plant. Besides, there are metals, ammunition... So many different stories. We are the world export leader in a number of businesses. I mean that we have unique logistics and resources. This includes energy resources," said Igor Artamonov, head of the Lipetsk Region Administration.

The head of the region emphasized that 5-7 new plants are built every year in the Lipetsk Region. "But at the same time, it is very important that each new production facility should be complementary to the existing one," Igor Artamonov stressed.

Self-sufficiency and high quality of products are the best way to stay inside the GVCs, regardless of crises and political wars.  Dmitry Komissarov, Chairman of the Board of Directors of Transmashholding JSC, in response to the question asked by the head of RUIE regarding how the company manages to protect itself from the influence of Western sanctions and keep its place in the competitive environment of Western companies, said: "We don't feel the impact of sanctions. We have full-cycle products, which means we develop them ourselves." 


Photographer: Gerdo Vladimir / TASS

The Gaidar Forum “Russia and the World After the Pandemic” will be held on January 14 and 15 at the Presidential Academy. The Forum will traditionally open the annual business agenda of Russia. In 2021, this large-scale event will be held in a hybrid format, both online and offline.

This time, the main discussion track will be social and economic transformations that have occurred in the country and the world as a result of the COVID-19 pandemic. The expert discussions will be focused on the national and global development goals and the search for practical solutions to the most urgent challenges of today. The Forum’s participants include ministers from the Russian Government, members of the Federal Assembly, governors of the Russian regions, largest world experts, representatives of foreign states.

The general partners of the Gaidar Forum are Gazprom PJSC and Gazprombank JSC.

The strategic partners are Russian Railways OJSC, Johnson&Johnson, ACIG Group, Novartis.

The partner of the forum is MasterCard, Russian Direct Investment Fund (RDIF)

The discussion partners are Magnit, Pepsi, Huawei, Coca-Cola, AstraZeneca, Takeda, EY.

General media partners: TASS, Business FM, RIA Novosti, RBC. Strategic media partners: Interfax, Rossiyskaya Gazeta, Kommersant Publishing House, RIA FederalPress, Invest-Foresight magazine. Main media partners: Anews, News.ru, lenta.ru. International media partners: Russia Today.

Media partners: PRO Business TV channel, AEI PRIME, Polit.ru, Strategy magazine, Public Administration magazine, Ekonomika i Zhizn newspaper, Econs portal, Finam, Bankovskoye Obozreniye magazine, Parlamentskaya Gazeta, Snob media project, Echo of Moscow radio station, Nauchno-Obrazovatelnaya Politika Telegram channel.