EBRD: Diversification in Russia failed.

By bne IntelliNews December 17, 2012
In its study Diversifying Russia European Bank for Reconstruction and Development (EBRD) concludes that despite declarations of importance of diversification in the past decade, Russia made little progress in diversifying the dependence on revenues from natural resource. EBRD notes that oil and gas account for 70% of country's exports, contributing more than half of the federal budget, resulting in a non-oil fiscal deficit of more than 11% since 2009. At the same time, domestic competitiveness remains weak with 3% of the companies exporting its produce abroad vs. the rate of 15%-17% in the developed economies. R&D spending is also low at 1% of GDP, coupled with restrictive migration policies and lack of skilled management. EBRD gives the authorities credit for admitting the problem and recent efforts of developing such high-tech hubs and projects as RusNano, Skolkovo, and others. At the same time, pouring public finances into targeted industries is believed to work worse than supporting education, private investment, and cooperation between public and private sector. EBRD believes that causes of weak diversification are fundamental, such as weak business environment, insufficient supports for exports, and human resource problems.

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