The World Bank
Europe and Central Asia Region
Finance and Private Sector Development
Trade Promotion in Russia:
Issues for Discussion*
South-South Knowledge Exchange -- GDLN
March 31, 2011 8:00a.m.-10:15 a.m. EST
* Prepared by Paulo Guilherme Correa, Donato de Rosa, Jose Luis Guasch,
Juan Julio Gutierrez, Jorge Pena and Jose Guilherme Reis.
Background and Context
• Design and implementation of Regional Export
Promotion strategies, policies and programs
• The World Bank was invited to present a strategy
for economic diversification in Russia.
– The study , of which this activity is part, focus on
trade, competition and innovation
– A draft of the report will be available by May 2011
– This presentation will present some results of the
report including some possible solutions
– Focus on How to promote exports at regional level?
Objective of this event
• In this conference, we will hear from
practitioners and from those involved in
supporting export promotion activities at both
national and sub national levels
– International Trade Center, Geneva
– The Minas Gerais export promotion agency in
Brazil
– The implementation of simplified export system in
several countries in Latin America
Plan of the Presentation
• Part I: Some Analytical Results
• Part II: Summary of Best Practices in Export
Promotion
• Part III: One example -- the Latin American
Simplified Export Promotion System
4
Analytical work
• Russia’s recent export
performance in terms of:
– Possible export
diversification paths – new
products; new markets
(trade data)
– Export “demographics”:
entry and survival into new
markets (customs data)
– Exports and the Investment
Climate (2008 ES)
Possible Export Diversification Paths
Expanding exports
in the non-oil and gas sector
SAME product
SAME market
SAME product
NEW market
NEW product
SAME market
NEW product
NEW market
5
Shrinking product base
Sectors
1 Agriculture, meat and dairy, seafood
(HS 1-10, 12-14)
2 Food, beverages, tobacco, wood, paper
(HS 11, 15-24, 44-48)
3 Extractive industries
(HS 25-27, 68-71)
4 Chemicals, plastics, rubber
(HS 28-36, 38-40)
5 Textiles, apparel, leather, footwear
(HS 41-42, 50-65)
6 Iron, steel, and other metals
(HS 26, 72-83)
7 Machinery, electronics, transportation
equipment (HS 84-89)
8 Other industries
(HS 37, 43, 49, 66-67, 90-97)
Exports
2000
(US$ ‘000)
3507689
Share
2000
(%)
3.67
Exports
2008
(US$ ‘000)
7905731
Share
2008
(%)
1.92
RCA
2008
CAGR
(00-08, %)
0.48
10.69
5573963
5.84
15300000
3.72
0.66
13.46
51900000
54.30
282000000
68.42
3.12
23.57
8231924
8.62
31700000
7.70
0.59
18.37
1297617
1.36
910094.7
0.22
0.04
-4.34
20400000
21.39
58200000
14.13
1.43
13.99
3788678
3.97
14100000
3.43
0.1
17.88
770968.5
0.81
2111613
0.51
0.09
13.42
Russia’s exports are dominated by extractive industries and heavy
manufacturing (69% in 2008 as compared to 54% in 2000)
6
Russia and Brazil trade patterns differ
Russia
Brazil
.8
Agriculture, meat and diary, seafood
.8
Chemicals, plastics, rubber
4
Extractive industries
3.3
.7
.7
.1
.1
1.2
3.3
3
1.7
1.2
.5
.5
Machinery, electronics, transportation equip.
Other industries
.2
.1
Other industries
Textiles, apparel, leather, footwear
.2
.1
Textiles, apparel, leather, footwear
0
1
Extractive industries
Iron, steel, and other metals
1.7
Machinery, electronics, transportation equip.
.7
.6
Food, beverages, tobacco, wood, paper
3.3
Iron, steel, and other metals
4
Chemicals, plastics, rubber
.5
Food, beverages, tobacco, wood, paper
2.4
Agriculture, meat and diary, seafood
.6
1
2
rca9698
3
4
rca0608
.3
.2
.8
.7
0
1
2
rca9698
3
4
rca0608
 Russia exhibits revealed comparative advantage in only two sectors (extractive
industries and iron and steel). Brazil exhibits revealed comparative advantage also in
agriculture products, and foods and beverages in addition to those two sectors.
7
Unexplored geographic markets
Predicted vs. actual exports - Total
Predicted vs. actual exports – Non-oil exports
Predicted v Actual Exports
ITA
18
CHN DEU
USA
IND
JPN
DEU
USA
CHN
ITA
16
IND
JPN
14
BRA
10
12
BRA
5
8
10
15
Log of Predicted Exports, 2006-2008
20
Predicted v Actual Exports
8
10
12
14
Log of Actual Exports, 2006-2008
16
18
8
10
12
14
Log of Actual Exports, 2006-2008
16
18
 Only considering the “gravity” between Russia and over 130 of its trading partners, it is apparent that it
under-trades with China and India as well as with several G-8 countries including the U.S., Italy and Germany
(located above the 45-degree line), and has a stronger export relationship with Brazil and Japan than would
have been predicted by the gravity model. When excluding the oil and the gas sectors, Russia under-trades
with many more countries.
8
Premature death of exporters
BRIC's Export Relationships
.6
.4
0
.2
probability
.8
1
Survival Rate 1999-2008
0
5
Analysis Time
Russia
China
10
Brazil
India
Comparing export activities of Russian companies during 1999-08 to the BRICs, it appears that
the probability of a Russian “export event” surviving to the second year is about 0.57, and
maintaining such activity for five years is 0.22. In comparison, the survival rate of China’s export
relationships is much higher.
World Bank Economic Diversification DFSG
Study
9
Searching empirically for the ‘binding constraints’
Firm-level evidence
• Simultaneous equation model to capture interaction between
dependent variables
• Robustness checks
– Different definitions of TFP
– Different proxies for selected variables
• Missing variables
• Use of IV estimator to alleviate the endogeneity coming from
simultaneity bias
• Once we have a consistent estimation of the parameters of
the system of equations, we evaluate the relative importance
of each variable on the sample means of the dependent
variables.
World Bank Economic Diversification DFSG
Study
10
Structure of the equation system
Endogenous
variables
Explanatory variables
Equation 1
TFP
Probability of
exporting
Equation 2
Employment
Probability of
exporting
Equation 3
Probability of
exporting
Equation 4
Probability of
receiving FDI
Probability of
exporting
Equation 5
Probability of
introducing
product
innovations
Probability of
exporting
Probability of
receiving FDI
Probability of
investing in
R&D
Probability of
introducing
new products
Probability of
receiving FDI
Probability of
investing in
R&D
Probability of
introducing
new products
Probability of
receiving FDI
Probability of
investing in
R&D
Probability of
introducing
new products
Probability of
investing in
R&D
Probability of
introducing
new products
Probability of
receiving FDI
Probability of
investing in
R&D
World Bank Economic Diversification DFSG
Study
Probability of
upgrading
existing
products
Probability of
upgrading
existing
products
Probability of
upgrading
existing
products
Probability of
upgrading
existing
products
Competition
variables
Investment
climate
variables
Competition
variables
Investment
climate
variables
Competition
variables
Investment
climate
variables
Competition
variables
Investment
climate
variables
Competition
variables
Investment
climate
variables
11
Productivity, exports and the IC
 Simultaneous equations to
model the interrelations
among dependent variables
(Y) and the IC variables

(Y) = TFP, demand for labor,
exports, FDI and R&D investment

(IC) = competition, innovation,
infrastructure, skills and other control
variables (sector; location)
TFP,
42.1
Other
variabl
es,
57.9
 More productive firms are
more likely to export

a 1% increase in TFP is associated
with an increase in the probability of
exporting of 11%.
TFP is able to explain up to 42.1% of
why firms export in Russia (relative
to other variables).
12
Investment climate effects
on TFP
Innov. Competition
Infrs.
Finance and
corporate governance
Regulatory
env.
Quality
Labor skills
Other control vars.
25.96
Exports
& FDI
%
30
12.17
11.40
9.1
9.2
7.30
8.88
8.69
3.39
5
0.55
2.45
1.34
10
6.10
14.18
15
5.59
6.5
-0.54
6.4
-9.79
-10
-1.42
-3.68
-5
-1.22
0
-2.13
% contributions
20
10.78
25
-15
1.1
1.2
2.1
3.1
1.1 Dummy for exports
1.2 Dummy for FDI
2.1 Dummy for new product
3.1 Domestic competition
3.2 Dummy for informal competition
4.1 Shipment losses in exports
3.2
4.1
5.1
5.2
6.1
6.2
6.3
5.1Days to clear customs in exports (interac.)
5.2 Dummy for gifts in tax inspections
6.1 Dummy for loan
6.2 Sales paid after delivery
6.3 New fixed assets financed by internal founds
6.4 New fixed assets financed by equity
7.1
8.1
8.2
8.3
9.3
7.1 Dummy for quality certification
8.1 Staff with computer
8.2 Dummy for training
8.3 Experience of the manager
9.1 Dummy for incorporated company
9.2 Dummy for importer
13
Investment climate effects
on the propensity of firms exporting
TFP
Innovation
Competition
Infrastructure
Regulatory
environment
60
Quality
Other control variables
58.37
70
Finance
32.71
40
30
2.1
2.2
3.1
1 TFP (log)
2.1 Dummy for R&D
2.2 Dummy for new product
3.1 Domestic competition
3.2 Dummy for informal competitors
3.2
4.1
4.2
5.1
5.2
8.1
-5.29
5.3
6.1
8.2
4.1 Power outages
4.2 Electricity from own generator
6.1 Purchases paid for after delivery
5.1 Informal payments in tax inspections
5.2 Manager's time spent in bur. issues
5.3 Dummy for gifts to get certificates
8.1 Dummy for more than 5 competitors
8.2 Dummy for increased prices
8.3 Dummy for sales decreased
-1.08
7.1
-4.45
4.74
1
-4.56
-10
6.07
2.22
-3.76
0
-0.27
1.44
3.82
10
2.42
20
7.61
% Contributions
50
8.3
7.1 Dummy for quality certification
14
Conclusions
Export diversification should focus on:
1. Expanding potential of Russian exports of existing
products in existing geographic markets
2. Developing new products to expand the export basis
3. Helping firms to break into and survive in export
markets is important
4. Productivity agenda can not be dissociated
(Competition and the investment climate)
15
PART II: EXPORT PROMOTION
POLICIES
What do we know about export
promotion policies?
• Recent econometric evidence suggests that there are clear benefits
from active export promotion – on average EPAs have a positive
effect on exports (Lederman, 2010).
• There are, however, decreasing returns to scale in resources
devoted to export promotion.
• Institutional characteristics: private sector representation and
public funding act positively.
• Other aspects emphasized in the literature: Funds need to be large
enough (Gorg 2008); strong leadership, skilled staff and
international presence (Hogan 1991).
• This last point has been further explored in recent research(Bergeik,
2010): according to him, having embassies and consulates in the
recipient countries is more important than having EPAs.
17
Export Promotion Policies and SMEs
• A survey conducted by USITC for the USA confirms that many
impediments to international trade disproportionately affect SMEs.
• The most frequently encountered impediment for manufacturers
was high transportation and shipping costs, reported by 88.5
percent of SME manufacturers and 93.6 percent of large
manufacturers (table 6.2). 4 Language or cultural barriers were
reported by the second largest share (82.2 percent) of SME
manufacturers.
• Overall, services firms encountered fewer impediments than
manufacturing firms. The three impediments encountered most
often by SME services firms were “foreign sales not sufficiently
profitable” (58.7 percent), “difficulty locating sales prospects” (55.8
percent), and “transportation and shipping costs” (53.6 percent).
Less than half of the large services firms had encountered any of
the impediments on the Commission’s list.
Export Promotion Policies and SMEs
• SMEs face more constraints – trade barriers,
including both tariffs and nontariff measures,
disproportionately affect SMEs relative to large firms.
Informational barriers are also more present.
• Type of instrument is important for the success of
exporting SMEs: export consortia, fairs, shows and
more frequent interaction with EPAs (Alvarez 2004)
• Recent research (Cadot et al, forthcoming) uncovers
evidence of synergies between exporters at the
national level in developing countries, supporting the
view that informational barriers are relevant.
Sub National EPAs
• Many countries – especially the large ones –
have opted for the creation of sub national
agencies. This can be observed in countries
like USA, Canada, Russia, Brazil, among others.
• But much less is known about sub national
export promotion agencies: the
implementation problems they face, their
relationship with federal agencies and
ministries, etc
PART III – THE
LATIN AMERICAN
SIMPLIFIED EXPORT SYSTEM
Latin American -- Simplified Export System
for low-valued exports
• Program aimed as Micro and SME firms and exports:
– Weight limits per package: 50 kilos; Value Limit per package US$10,000
• Solution responds to the need to counter two major hurdles faced by the
country: overly complicated and costly export formalities and lack of
access to an affordable transport means.
– No need work with custom agent; one simple page application to complete
• Idea is to exploit capillarity of large pre-existing postal networks to offer
affordable transport of low-valued exports from locations that private
carriers would not serve
• A significant share of all Brazilian exporters now take advantage of this
procedure
• Preliminary assessment suggest positive impact
• Experience being employed in other countries in Latin America
22
Brazil’s Simplified Export System for lowvalued exports
DECLARACIÓN EXPORTA FÁCIL
Guía Postal; CP-72, EM-1, CN-22, CN-23
(A)
DSE N°
Aforo:
Services Offered
• Free packaging: three sizes
available
• Pick-up Service
• Insurance Service Optional
• Credit availability
• Unlimited number of packages
• Three type of services:
express, priority and economic
• Electronic tracking of package
Código de Barras
Número de Guía Postal
Fecha :
Exportador (remitente)
1
R.U.C. del Exportador
Dirección
D
E
Ciudad
País
Código Postal
Persona de Contacto
2
Importador (destinatario)
P
A
R
A
Dirección
E-Mail
Tel/ Fax
Ciudad
País
Código Postal
Tel/Fax
Persona de Contacto
3
E-Mail
DESCRIPCIÓN DE MERCANCÍA
SERIE
Subpartida Nacional
Valor venta /
N° de bulto
Descripción de la Mercancía
Cant./TUF
N° y Fec. C.
Regimen
de pago
Pres. y/o Apli.
1
2
3
4
5
4
Diligencia de Aduanas
Total V. Venta.
Total. Bulto
Moneda de V.
N° Certificado de Origen
Tipo de Cambio
Otros Doc. Adj.
Fecha
Hora
Total Serie
Firma y Sello
5
4
6
Instrucciones del Exportador en caso de no efectuarse la entrega
Devolver
Abandonar
Oficina de Origen de SERPOST
Controles sanitarios, fitosanitarios u otras restricciones
Si
No
7
Fecha:
Hora:
Nombre:
Código del Expendedor:
Entrega en Destino
Fecha:
Hora
Nombre:
Documento de Identidad:
Firma
8
Firma
9
Persona que Entrega el Envio a SERPOST
Nombre:
N° DNI
Firma
10
Peso Bruto (tarifado)
Valor Total Flete
Certifico que la información contenida en la presente declaracion es exacta, es decir, que las mercancías declaradas no constituyen objeto peligroso y/ o prohibido por las normas de la Unión Postal
Universal ni por la legislación interna; sometiéndome en todo caso, a la responsabilidad administrativa, civil, tributaria y/o penal que ubiere lugar, eximiendo de dichas responsabilidades a SERPOST S.A.
Asimismo, acepto pagar los gastos resultantes de la ejecución de las instrucciones impartidas aquí para el caso en que el envío no pueda ser entregado. De otro lado, como dueño o remitente de la
mercancía descrita en esta declaración, autorizo a SERPOST S.A. para que en mi representación, participe en el reconocimiento físico de las mercancías, toda vez que como Administración Postal del
Estado Peruano está facultada a someter los envíos postales a control aduanero.
Fecha :
Firma del Exportador
23
Most Commonly Exported Products
– Agroindustry
– Textiles and
Clothing
– Leather and Shoes
– Wood Products
– Metalmecanics
– Fisheries (canned)
– Jewelry
– Paintings, Ceramics
– Software and Chips
24