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ST 002-13 2013-02-06

Backgrounder Russia: raw materials giant on its way to becoming a modern industrial nation

As a raw materials supplier, Russia is a giant. With natural gas, oil, diamonds, and gold and numerous other raw materials, the world's largest country in terms of surface area generates high annual trade surpluses. In 2011 alone, 516 billion USD of exports were contrasted with only around 305 billion USD of imports. But as soon as raw materials prices decrease, most recently as with the 2009 crisis, that picture reverses. The Russian government recognized this dependency on raw materials as a risk and is thus aiming to modernize the Russian industry. Doing so opens up highly interesting growth perspectives for international machinery construction in the years ahead.

At the turn of the millennium, the catchphrase from the BRIC states with strong growth did the rounds: Brazil, Russia, India, and China were forecast to exhibit a huge economic development. The actual trend exceeded expectations, at least in China, Brazil, and parts of India. Russia, by contrast, only partially fulfilled the predictions. Although the world's largest country, whose nominal GDP in 1999 only ranked 22 out of the largest economic nations, had moved to ninth place by 2012, that growth was predominantly based on increased raw materials prices. Raw materials make up around 80 % of Russian exports and finance a considerable portion of the national budget.

One million machines at least 20 years old

The Russian industry has traditionally been very strong in raw materials extraction and processing, the heavy manufacturing industry, the chemicals industry, woodworking, the textile industry, and aircraft manufacturing. A significant portion of that industrial basis works with outdated machines and facilities and is predominantly not competitively on an international level. The Russian Union of Machine Builders determined that over one million machines that are 20 years and older are in use in Russian factories. An industry survey showed that 30 % of the companies had last updated their means of production during the Soviet era. Only 25 % of the companies surveyed had realized comprehensive modernization measures in the past five years. That considerably reduces the international competitive ability.

In the early phases of a modernization wave

The Russian industry has traditionally focused on a domestic market largely protected from foreign competition. Only nine percent of industrial concerns even strive to export beyond the Commonwealth of Independent States. But Russia's entry into the WTO in 2012 considerably increases the competitive pressure for the Russian industry on the domestic market in the long run.

In addition to the country's aims to modernize the economy and the rising import pressure, there is also a third trend: according to the Association of European Businesses (AEB), the Russian automotive market is equal with the largest Western European market, Germany, with approximately three million vehicles sold. The Russian government pursues the goal that as many of the vehicles sold in the country as possible are produced in Russia. Western and Asian automotive manufacturers and suppliers are thus establishing a significant number of new production capacities in Russia.

There is also a considerable need for textile, tools, and plastics machines. At present, machine import is growing annually and achieved the mark of approximately EUR 29 billion in 2011. In the first quarter of 2012 alone, Russia's import in the machinery, equipment, and means of transportation commodity group increased disproportionately by 27.2 % as compared to the same period of the previous year: total imports increased by only 12.6 % in the same period.

Demographic trends accelerate automation

There is no way around a comprehensive modernization of the overall industry, including due to demographic trends. According to Feri EuroRating Services, the Russian population, which is currently at around 143 million people, is set to decline by eight million by 2020. This trend has already revealed itself through increasing wages and a shortage of skilled workers. That increases the pressure to automate and replace manual human labor simultaneously in the modernization process. At the same time, Russia remains Europe's most heavily populated country with a continually increasing purchasing power despite the demographic trend. Maintaining that purchasing power in the country requires massive modernization of industry and infrastructure.

Bosch Rexroth in Russia

Bosch Rexroth has been present in Russia since the 1990s with its own regional subsidiary and has certified a wide range of components and modules according to Russian GOST standards. Above all, the company has established a local network with numerous Russian partners in order to meet local customer requirements through local added value. Modern system solutions for mobile machines, especially in the sectors of agriculture and construction, increase efficiency with low energy consumption. As a general contractor or partner to regional engineering companies, Bosch Rexroth has already updated steel and roller mills to state-of-the-art technology with modern drive and control technology. As a general contractor for stage technology, the company was involved in the six-year complete renovation of the famous Bolshoi Theater in Moscow.

Bosch Rexroth AG is one of the world’s leading specialists in the field of drive and control technologies. Under the Rexroth brand name, the company supplies more than 500,000 customers with tailored solutions for driving, controlling, and moving. Bosch Rexroth is a partner for Mobile Applications, Machinery Applications and Engineering, Factory Automation and Renewable Energies. The company provides customized solutions tailored to the needs and specifications of each individual market. As The Drive & Control Company, Bosch Rexroth develops, produces, and sells components and systems in over 80 countries. As part of the Bosch Group, Bosch Rexroth and its 38,400 associates generated approximately 6.4 billion euros in revenue in 2011.

To learn more, please visit www.boschrexroth.com

The Bosch Group is a leading global supplier of technology and services, active in the fields of automotive technology, energy and building technology, industrial technology, and consumer goods. According to preliminary figures, more than 306,000 associates generated sales of 52.3 billion euros in 2012. The Bosch Group comprises Robert Bosch GmbH and its more than 350 subsidiaries and regional companies in some 60 countries. If its sales and service partners are included, then Bosch is represented in roughly 150 countries. This worldwide development, manufacturing, and sales network is the foundation for further growth. Bosch spent some 4.5 billion euros for research and development in 2012, and applied for over 4,700 patents worldwide. The Bosch Group’s products and services are designed to fascinate, and to improve the quality of life by providing solutions which are both innovative and beneficial. In this way, the company offers technology worldwide that is “Invented for life.” Additional information is available online at www.bosch.com and www.bosch-press.com

 

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Susanne Herzlieb
Maria-Theresien-Straße 23
97816 Lohr am Main
Phone: +49 9352 18-1573
susanne.herzlieb@boschrexroth.de