1. Impact of stimulation of high technology machine building on the Russian economy development 6 th International Conference on High Technology and Basic Research October 16-18, 2008, St. Petersburg Institute for Financial Studies

2. 2 Why this topic is urgent There is a need for a shift from energy and feedstock to investment and innovation type of the economy development. A new source of economic development is needed. There is enough finance that has been taken away from the energy industry and parked in state-owned funds. A mechanism to transform financial resources into investments should be worked out and utilized.

3. 3 Basic hypothesis Goods must be recognized competitive in the international market Goods must be recognized competitive in the domestic market =

4. 4 Competitiveness criteria Exports in 1992-1998 and 1999-2007. Export capability of high technology machine building enterprises after 2010 (prospective product samples).

5. 5 Competitive industries of the high technology machine-building complex Defense industry PAK FA, Su-30MK, MiG-29OVT АТП VVER-1500, PAES power plants Aerospace sector of the space and rocket industry ‘Angara’ space launching vehicle Civil aviation SSJ, MS-21 Automotive industry Toyota Camry, Renault (В and С), Fiat Ducato High technology machine-building complex High technology machine-building complex exports growth of $ 4-5 billion per annum

6. 6 Production and investment process model Creation of an informational and analytical database to explore inter-branch interactions and evaluate the multiplicative effect SEMMII Investment ‘point’ (efficient industry) DEMMII Multiplicative effect Production unit Investment unit Private capital use procedure State investments A mechanism of return on state investments

7. 7 SEMMII main results GDP growth ratesIndustry gross value added Oil and gas +- Coal +- Electronics +- Ferrous metals -+ Non-ferrous metals -- Chemical and petrochemical industries -+ Machine-building -+ High technology machine-building is the most efficient industry

8. 8 Estimated output of foreign made cars in Russia in 2008-2015, million units

9. 9 Import substitution in the automotive industry in 2008-2015 0.00.0 10.0 20.0 30.0 40.0 50.0 60.0 20082009201020112012201320142015 % 0 50 100 150 200 250 Billion rubles Localization Import substitution

10. 10 Import substitution in civil aviation in 2008- 2015 0.00.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 20082009201020112012201320142015 Billion rubles 0.00.0 10.0 20.0 30.0 40.0 50.0 60.0 % Import substitution (2006 prices) Share of Russian airliners in airlines’ purchase mix

11. 11 Import substitution in power engineering in 2008-2015 0 20 40 60 80 100 120 20082009201020112012201320142015 Billion rubles 0 5 10 15 20 25 30 35 Billion rubles Investments in energy industry basic production funds (left) Import substitution (right)

12. 12 Additional growth in industry shares, pct (average in 2008-2015) DEMMII-I, pct Stimulated industries EnergyMetallurgy Chemical and petrochemical Machine- building Energy1.270.150.200.10 Metallurgy0.021.140.060.19 Chemical and petrochemical0.02 0.850.04 Machine-building0.02 0.040.85 DEMMII-II, pct Stimulated complexes industries EnergyMetallurgy Chemical and petrochemical Machine- building Energy1.280.190.210.19 Metallurgy0.021.320.060.38 Chemical and petrochemical0.02 0.930.07 Machine-building0.020.550.253.49

13. 13 Estimated GDP growth in 2008-2015 105.0% 105.5% 106.0% 106.5% 107.0% 107.5% 108.0% 20082009201020112012201320142015 GDP, Ministry of Economic Development and Trade GDP, high technology machine-building (DEMMII-I) GDP, high technology machine-building(DEMMII-II)

14. 14 Conclusions Overall industry development is only possible provided high technology machine-building is stimulated. Exports enhancement only has a short-run positive impact on the economy and will almost come to a zero effect by 2015. Substitution of imports in high-technology machine building (and in metallurgical conversion) leads to stable economic growth and diversified production.

15. 15 Main research findings All private investment sources have been consolidated and systematized, their use procedure has been worked out to improve investment attraction. The state should start injecting funds at the stage of upgrading and extension of production facilities and construction of new objects. This will accelerate formation of companies’ basic assets. A mechanism of overall evaluation of the multiplicative effect of high technology machine-building exports enhancement on the industry has been worked out. A mechanism of return on state investments to efficiently transform state funds into investments, free part of the state money and allot it for social problems has been worked out.

16. 16 Thank you for attention!