Statement of Ashish Shah at the conference on “Strategies of Russian companies after the WTO accession”
Speech by Mr. Ashish Shah, Acting Deputy Executive Director, International Trade Centre
Delivered on 12 November 2013 at the conference on “Strategies of Russian companies after the WTO accession”, World Trade Center Moscow Congress Center, Moscow, Russia
(CHECK AGAINST DELIVERY)
Excellencies, ladies and gentlemen
Thank you for giving me this opportunity to address you today on this very important occasion and at this highly prestigious conference. Let me begin by saying that there is no doubt that, like in all other countries acceding to the WTO, Russia has had to face challenges in adapting to the winds of change. These challenges are concrete and affect the very fabric of Russia’s economy.
I would go as far as to say that every time trade is opened, whether through accession to the WTO, through regional initiatives such as the Eurasian Customs Union or through bilateral initiatives, companies need to adjust.
But although opening of markets bring with them certain challenges in the short-term, we need to bear in mind that the primary reason for opening up markets, and indeed for joining the WTO, is to be able to capitalize on the opportunities that this change brings about. As I heard one expert say: “short term pain for long term gain”.
The question then becomes one of getting ready to tap into these new opportunities and to manage change and build new capacity to adjust to the new economic environment.
Ladies and Gentlemen,
Russia took a great leap of faith by acceding the WTO in 2012. It agreed to gradually open its markets to the world but more importantly, it opened the world to its own companies. The greatest challenge today is to ensure that these Russian companies can be competitive as they are exposed to the forces of the global market.
We at ITC view Russia’s accession to the WTO as a great step forward providing a unique opportunity for enhancing Russia’s economic competitiveness. I say this being fully cognizant of the challenges that remain: including the need to modernize equipment, raise productivity, improve skills, and the urgent need to move up the value chain with a greater focus on more knowledge-intensive industries – in order to put Russian industrial production on a globally competitive footing.
In fact, WTO membership is all about creating a conducive business and regulatory environment for local businesses – both large businesses but also SMEs, which can help foster their international competitiveness.
Russia has made a number of important commitments through its membership in the WTO. These commitments cover a number of areas such as intellectual property rights, soft infrastructure services, (namely telecommunications, financial services and transport among others) and commitments relating to technical regulations, sanitary and photo-sanitary measures. I am aware that structural and regulatory reforms are being put in place to meet these commitments. We are confident that this will contribute to improving the national business and regulatory environment, which will ultimately promote competitiveness of local business and allow them to access international markets.
Ladies and Gentlemen,
We find ourselves in a challenging situation today. On the one hand, we see that Russia is putting in place a range of necessary reforms to catalyze economic growth following its accession to the WTO. On the other hand we are faced with the challenge of a gloomy forecast for global economic growth. Current forecasts for 2013 are not very encouraging: 0% for Europe, 1.6% for the United States and 1.6% for Russia. It is evident that the global economy is still struggling to recover from the aftermath of the global financial crisis and turbulences in the Eurozone area.
We all know Russia is blessed and well endowed with inputs. You have abundant natural resources and you have a very well educated population. We believe that a conducive business environment will go a long way in unlocking entrepreneurship spirit and promoting private investments which are so essential to spur economic growth.
In addition, growth depends on technological advancements which to a large extent depends on the ability to innovate. Russia has a tradition of high level technology-driven innovation and this provides an excellent platform for future growth.
Our experience from other countries suggests that it is incremental innovation that drives long-term and sustainable growth. Incremental innovation is driven primarily by small and medium sized enterprises. According to the Ministry of Economic Development, there are around 1.7 million SMEs in Russia, including micro-enterprises, contributing to 21% of Russia’s GDP (as compared to up to 60% in Europe or China). It is therefore indispensable that efforts be undertaken to grow the SME sector as there is a huge untapped source of potential growth and jobs in this sector.
There is a need to create a conducive business environment which will help foster growth and investments in the SME sector. Investments in developing strong SMEs can help build competitive industries, promote incremental innovation, create jobs and incomes. ITC works in many countries around the world in doing exactly that: help build competitiveness of SMEs and help them integrate into national, regional and global value chains.
Ladies and Gentlemen,
The ITC has been working on trade and competitiveness issues with a focus on SMEs for almost 50 years. The topic of today’s Conference is therefore of particular relevance to us.
ITC works with the private sector and complements the work of the WTO and UNCTAD, its parent agencies. Whereas UNCTAD provides advocacy, awareness raising and technical assistance to develop a conducive policy environment for trade and investment, the WTO helps build the multilateral trading framework and ensures compliance therewith. ITC works closely with these two agencies to help transform the opportunities of market access generated by WTO accession into real business opportunities for SMEs.
So how do we do this?
Through various initiatives on the ground, we connect a large and wide population of small businesses to regional and global value chains, buyers and investors. This is done in a number of different ways:
We help SMEs become internationally competitive and export-ready and then facilitate their access to markets by bringing them into direct contact with buyers and investors.
We also build the capacity of policymakers and trade promotion organizations to better support exporters and create a better environment for businesses to flourish.
So why and how is our work relevant for Russia and how do we view Russia’s needs?
Let me begin by saying that unlike other countries we work in, Russia already has a clear sense of its trade-related needs.
Allow me, however, to share our perspective on what we think are the key needs and challenges moving forward:
We believe that the full benefits of WTO membership will depend on whether Russian companies, and in particular SMEs, have the capacity and skills to compete in global markets and live up to the demands of increased competition at home.
Russian companies will need to first understand the substance of the new rules but also the trade opportunities which have been created for Russian businesses.
I would wish to seize the opportunity to congratulate the World Trade Center for its extraordinary efforts over the past year in making Russia’s business sector more aware of these opportunities. We will continue to partner with them to offer companies comprehensive and user-friendly online databases, which provide full, detailed and real-time information on market access, trade flows and market intelligence. In a world driven by the digital economy, timely and relevant trade intelligence is key for economies to become competitive and understand and take advantage of trade opportunities.
In addition to understanding the opportunities, companies, in particular SMEs, will need assistance to help them to add value to their products and meet international market access requirements. These include improved quality of their products to meet international standards, improved packaging and labelling as well as value adding measures such as improved logistics, better branding of products and more efficient marketing. A careful assessment will need to be made to identify the gaps and the role that trade support institutions and state administrations can play to address them.
We at ITC believe that we can play a role in this regard. I am very pleased to note that together with the Government of Russia, in particular the Ministry of Economic Development, and other partners, we have already been able to identify first steps for our cooperation.
Please allow me to outline briefly just a few examples of the new initiatives that we are planning to put in place in the context of Russia’s WTO post-accession support. They all aim to support Russia’s business sector to benefit from the opportunities created by WTO accession.
The first area of collaboration is the WTO training programme for the business community from Russia and the CIS countries. This training programme consists of a two-week intensive training course: one week in Russia and one week in Geneva. Training modules will cover a number of topics such as technical regulations and SPS, trade in services, intellectual property rights and others. The programme will blend national and international expertise with national experts coming from MGIMO, VAVT, High School of Economics and others, and international expertise being sourced from ITC, WTO and UNCTAD.
Given the size of the country and its diversity, the second initiative we are currently discussing includes developing regional export strategies for regions in Russia. We will start working in this area in 2014.
The third, very important initiative which is under discussion, is the establishment of an interactive Trade Information Portal for business, government and civil society on WTO issues.
Ladies and Gentlemen, I would wish to conclude with the following remarks:
My key message to you today is that there are concrete solutions available to help companies take proactive measures to use WTO membership as a way to boost their competitiveness and benefit from new trade opportunities.
I am here to reiterate ITC’s commitment to work with the Government of the Russian Federation and our partners such as the World Trade Centre Moscow, the Chamber of Commerce and Industry, academia and many others to implement these concrete solutions.
ITC sees these initiatives and projects as a new era in its collaboration with Russia, responding to Russia’s needs and in particular to the needs of its business sector in the post-WTO accession period.
I thank you again for your kind invitation and your kind attention. Thank you.