All economically successful nations have, at one moment of their development, pursued strongindustrial and technology policies aimed at gaining and securing a competitive advantage in theglobal economy. The objective of such policies is of course to maintain or even improve a currentstandard of living but also, through the support to a country’s industrial and R&D sectors, tofoster the emergence of innovative commercial products that will secure the country’scompetitive advantage. This process, which often occurs over a long period of time andcorresponds with an effort to adapt to new competitive and technological conditions is what isoften referred to with the word “modernization”.The concept of modernization therefore doesn’t only apply to industrial, structural and socialadaptation processes in developed nations trying to “renew” their economies, but can also beused in relation to the efforts of developing countries to catch up with their competitors in thedeveloped nations. At the heart of all modernization efforts lies the need to renew thefundamental technological and industrial structures of a country.As a result, modernization strategies don’t differ dramatically from each other, even thoughvariations are possible, and they can be applied in most countries around the world. This is alsotrue for Russia, where modernization initiatives are already being implemented in a number ofeconomic sectors.The following modernization efforts appear particularly important for Russia:
Acquiring foreign technological know-how
The acquisition of technological know-how and the recruitment of highly-skilled employees canbe achieved with the purchase of foreign technology companies or through foreign directinvestments in the country’s R&D sector – which often benefits from strong state-supportedmeasures. Tax incentives for direct investments and joint ventures with international partnerscan play an important role here, although foreign investors tend to be very cautious with regardto potential technology transfers.In Russia, the country’s 24 special economic zones have played a key role in attracting foreigninvestors, promoting the diversification of the economy and enhancing the country’s innovationpotential. The Russian state has invested $1.5 billion in special economic zones since theircreation in 2006, and private investors have contributed another $8.3 billion. The specialeconomic zones cover crucial sectors for Russia’s economic modernization such as industrial tools,ship building and logistics. Private investors there benefit from tax rebates, public subsidies andless bureaucratic procedures.
Promoting import substitution
Despite the gradual disappearance of blatant protectionism, public authorities in most countriescontinue to use tools allowing them to purse, albeit indirectly, a modern form of importsubstitution policy. These include, for instance, agreements with foreign companies according towhich imported high-end products consist - at least to a certain extent - of parts manufacturedlocally (so-called “local content clauses”). Such indirect protectionist measures are useful forsupporting the development of innovative production capacities.