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12.08.2014

"Import substitution should be a national trend" (Rustem Khamitov's interview for "The Russian newspaper")

EU's sanctions against Russia are becoming more large-scale. Recently, the Russian government announced plans to rebuild the economic model of development and use the import substitution using inner resources, especially in strategic sectors. "The Russian newspaper" has decided to ask Rustem Khamitov, the head of Bashkortostan, if regional authorities and industrial companies are ready to refuse supplies from abroad?


Mr Khamitov, How far does the domestic industry depend on foreign suppliers today?

Rustem Khamitov: Actually the overall picture is very colorful. We have, of course, the industries, which almost don’t depend on foreign providers, but we have also entire industrial sectors which cannot work without imported components and technologies. If we talk about oil refining, petrochemistry and chemistry, the "flagship" of our industry, we know that technological processes are clear to everyone; they are the same all over the world. And the equipment is not super-complex and unique; we can produce it in our country. For example, the burners, which are used in oil refinery equipment and are imported from abroad, can be easily produced in Russia. Accelerants for oil refining processes can also be produced in the Republic, we have underutilized factories, but many companies buy these products abroad. We have many examples. I'm sure we need to rebuild the work of our enterprises and to start a real import substitution.

But, you must admit that there are industries, for which the import substitution will be hard...

Rustem Khamitov: First of all it is engineering industry. It directly depends on machines, equipment and materials which are in short supply. Over the last 20 years domestic machine-tool industry felt into decay and it seems that in the near future it will not be restored. For instance, Sterlitamak machine-tool plant produces modern machining centers and machines, but for various reasons, the demand for it is small.
It is obvious that our scientists provide engineering industry with new interesting developments. But we need modern technology to apply them. In recent years, money invested in science was not enough; divisions of many enterprises disappeared, which were engaged in research and development. And the result was predictable: many industrial centers "stuck" to the import and don't want to refuse it. So we need to take serious measures. The big companies need to analyse the whole chain of its suppliers in details. The CEO very often says: "I'm for Russian products, for all domestic", but his Deputy buys components from abroad. We see it in practice. We need to create a system of motivations to attract industrial enterprises by attractive terms. The import substitution should be a main trend. In the future we should be so dependent on imports, as it was during  last 15-20 years. It is dangerous from all points of view.
Besides, I think it is important to involve the regional authorities in the process of change over to domestic supplies. I am sure that the Federal Ministries cannot execute this work without Russian subjects, because at the local level we know the companies, their owners, we feel when we can use administrative measures or persuasions. We are interested in products increase.
Import ban is a unique chance for our farmers to gain a new impulse to the development.


In your opinion, to what extent can we realistically reduce import dependence, for example, by 2020?


Rustem Khamitov: theoretically we are able to work independently in all industries. But it is hard to say, how it will be in reality. For example, today the import ratio in the communications industry is about 95 percent. We have developments at the enterprises of Ufa which could reduce the import dependence about 50 percent. Actually it is a huge market with a turnover of tens or even hundreds of billions rubles. And we have technologies, businesses and professionals, who could execute this work. But today this industry is monopolized by foreign companies, including American companies. We are almost absent in the market of communications equipment. This is unacceptable!
The situation is similar in the chemical industry. Today our country has 20 percent of world's reserves of raw materials for the chemical industry, but we produce only one percent of the total world volume of such products. As a result almost all fine chemicals are foreign. We ship abroad hundreds of thousands tons of products of the first processing and plastics, and get back corps of medical devices and home appliances, lining of car, parts of agricultural machinery and so on. Actually we have the opportunity to halve the import.

I have to mention one more issue: will the Republic be able to keep itself in connection with the introduction of the ban on import supplies to Russia?

Rustem Khamitov: Of course. And we will help other regions, which face with difficulties. First, we share first place in the country in milk production. We work on the modernization of old farms and construction of new ones. Secondly, we have developed plant growing and we harvest about 2 million tons of grain even in a dry year. It is enough for us.
As for vegetables, I remind: Bashkortostan has the largest greenhouse facility in Russia; they grow cucumbers and tomatoes and green. In Soviet times our potatoes grown in the North-East of the Republic, was known and loved in many parts of the country. Now it is the time to revive the potato cultivation, and we have already done it.
Generally the ban on import supplies is a unique chance for our farmers to gain a new impulse for development, to expand the market and to increase production volume. Of course, if we want  to refuse an import completely, we will need to reconfigure our agricultural sector, to adapt to new realities. But, ultimately our farmers will be in the black. I recommend Bashkir products to everyone, because it is delicious and environmentally friendly. And all meals on my own table are made from domestic, native products.

If you walk around the city, you will see that many facilities are renovated, and some parks are digging over. It's obvious that the Republic is preparing to very important events. In the next year Ufa will host the SCO and BRICS summits. Is it  the reason of improvement of the territory?


Rustem Khamitov: As for the improvement of the city, I can say it is our long-term program. It is not directly dependent on the upcoming summits. The program started in 2010-2011. We want  both Ufa and all settlements of the Republic to be comfortable for living. The improvement costs our budget a lot of money, but we try to solve this issue. Of course, the result will be a part of preparation for the summits. We want to show that our capital Ufa is successful, beautiful and modern city, where guests are always welcome.


Do you plan to carry out any common projects with China, India, Brazil during the preparation for the summits?

Rustem Khamitov: Our cooperation with the BRICS and the SCO countries started more than ten years ago. We supply aviation engines, produced by the Ufa engine plant, in India more than 30 years ago. The enterprises, built with the participation of our specialists, appeared in our country ever since that time.
 China is interested in our tire market. We are negotiating for sitting of plants, which produce tires, in the Republic. China is also interesting in timber processing, chemistry and mining of metal ore mining, zinc, copper, and iron. Now our manufacturers appraise China more objectively than it was before the sanctions.
We also have points to contact with Brazil, for instance, engineering industry and aviation manufacture. The chemical industry, oil production, oil refining, and etc. are promising directions for us. By the way, the Brazilians produce Marcopolo buses on our Neftekamsk automobile plant ("NefAZ"). Several dozen of these buses are already in use.
Meanwhile, we understand that we need to think about other areas of cooperation. Our colleagues among the SCO and the CIS countries have always been in a close economic alliance with us. It is well known that the state priorities have shifted from West to East. This situation plays into the hands of Bashkortostan, which is a region located at the crossroads of Asia and Europe, we consider ourselves as Eurasians, after all. The East is close to us.


Now there are lots of talks about the fact that every region needs its own brand. What about Bashkortostan?


Rustem Khamitov: When people talk about Bashkortostan, they always remember about Bashkir honey and Bashkir oil. I really like the adjective "bashkir". It gives a positive shade to all our products, is also satisfies the ear.
The term "territorial branding" comes from the market economy. It is obvious that the regions are competing for attraction of money and resources, for attracting the attention of investors. And a well-chosen brand gives undoubted advantages to the region. We work on the brand creation for our cities for some years. For example, Birsk is an old merchant city with 400 years of history, with houses built in XIX century. Its brand is "tasty city", where you can eat well, taste different viands, and feel the atmosphere of an old merchant city, with its regularity and deliberation.
Of course, to choose a single brand for large areas is difficult. I think we'll find a general idea of Bashkortostan starting from Bashkir honey. Personally, I associate our Republic with the words "warm, welcoming, hospitable territory", which is always friendly for guests. And we're also very reliable. We never let anybody down.

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