World Bank says Russia losing competitive edge

8th June 2011, Comments 0 comments

The World Bank on Wednesday blamed Russia's ballooning dependence on natural resource exports on low labour productivity which it said was stifling competitiveness abroad.

The bank also said that Russian exports of services were beginning to decline and were falling even further behind such export-driven countries as China and fellow members of the BRICS rapidly emerging economies including India and Brazil.

The bank's latest country survey was unusual in part because of its open criticism of the policies pursued during the 2000-2008 presidency of Vladimir Putin -- an era highlighted by repeated commitments to economic diversification.

The World Bank identified a "decomposition of export growth over 2000-08 period" that shows "no contribution of the increase of exports of new products to either new or old geographic markets to ... overall export performance."

"Although a result in part of higher commodity prices, this increase may also indicates a loss of export competitiveness of Russia's non-resource sectors," it said.

The bank also noted that oil and natural gas comprised less than half of Russia's exports before Putin had assumed the presidency.

But that figure had risen to two-thirds while natural resources -- which in Russia also include metal and such products in timber -- made up about 80 percent of exports while high-tech sales came "mainly in the defense industry".

The World Bank then concluded that the "competition and innovation" policies which are now being pushed by Putin's successor Dmitry Medvedev can contribute to long-term growth when combined with a focus on productivity.

"Results show that productivity is key to exports and that lack of competition and entrepreneurial innovation are relevant obstacles to the emergence of new, potentially exportable products," the bank report said.

"Enhanced competition and innovation policies could contribute to export diversification," it added.

© 2011 AFP

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