IS RUSSIA INVOLVED IN GLOBAL VALUE CHAINS?

Abstract

The Framework of the long-term socio-economic development of the Russian Federation until 2020 stipulates that «without penetration to new markets of goods and services with high value added share, Russia’s role in the global economic development and its efficient participation in the international division of labour are doomed to decline». The priorities of the social and economic policies, according to the Framework, include «increasing integration of manufacturing industries in the world economy on the basis of their involvement in the global value chains». 

In this regard, it is widely believed that Russia, due to the orientation of is exports towards raw materials, is not involved in the international production networks, and the inclusion in these networks requires a radical diversification of the economy with the accelerated development of its manufacturing industries. 

An economic and statistical tool, which has recently become available to researchers, is capable of producing relatively accurate estimates with regard to the above statements, and to analyse the position of Russia in global value chains. A computational method based on inter-country input-output tables has been proposed to identify the flows of value added driven by final domestic demand and exports, and to distinguish their sectoral and national origin and destination. 

Using the inter-country input-output computational framework and new OECD input-output data in this study leads to a conclusion that Russia’s integration is quite high in the downstream value chain. It is the mining sector – i.e. mostly extraction of oil and gas – that is responsible for this level of integration that may not be optimal, but is significant by global measurements. Meanwhile, a comparison with other countries casts doubt on the assumption that the reliance on manufacturing industries would allow Russia to derive greater value added from its exports.