New Institutions for Socio-Economic Development

The Change of Paradigm from Rationality and Stability to Responsibility and Dynamism

Elena G. Popkova, Elena Zavyalova, Elena G. Popkova, Elena Zavyalova

• Publisher: De Gruyter
• Year: 2021
• ISBN:
  9783110699913
• Edition: 1
• Topic: Économie
• Subtopic: Théorie économique

The strategies and practical approaches for socio-economic development are undergoing systemic changes under the influence of new developments in global economic systems and markets.

The most significant factors influencing such changes are connected to the start of the Fourth Industrial Revolution (Industry 4.0), which is impacting all economic systems to a greater or lesser extent. The creation of the digital economy and transition to Industry 4.0 particularly increases the significance of hi-tech for socio-economic development.

Secondly, there is now a transition underway from a period of unlimited globalization and comprehensive integration to more limited globalization and selective economic integration. The growing importance of regionalization on the global economic system is manifested in the formation and rapid development of new integration unions at the regional or country level (e.g., the EU and the EAEU), and company level (e.g., regional sectoral economic clusters, special economic areas, technological parks, and innovative networks).

Thirdly, there's an urgent need for faster innovation, which leads to the formation of more innovative economies. The global financial crisis drew attention to the problems of managing sustainability and achieving balance in socio-economic development. The formation and exponential growth of the information society, based on digital technologies, is now stimulating the growth and significance of corporate social and environmental responsibility as a prerequisite for entrepreneurial success.

Thus, the paradigm of socio-economic development is changing from absolute rationality (economic effectiveness) and stability – which has historically been associated with problems of stagnation – to responsibility (limited and socially-oriented rationality) and dynamism (quick innovative development based on leading technologies). This book aims to provide a scientific substantiation for this new paradigm.

Part I: Institutions of Strategic Foreign Economic Interaction and the Latest Experience of their Functioning in the Modern Global Economy

1 Definition of Strategic Directions of Modern Foreign Economic Interaction between Russia and Germany

Natalia G. Shchegoleva

Lomonosov Moscow State University, Russia

ORCID:https://orcid.org/0000-0002-8046-5531

Olga I. Terenteva

Lomonosov Moscow State University, Russia

ORCID:https://orcid.org/0000-0003-3977-3644

Introduction

After the collapse of the USSR, the Russian Federation and Germany are strategically important partners. During this period, both states experienced various kinds of political and economic events that somehow influenced their trade and economic cooperation. The anti-Russian sanctions introduced in 2014 led to the most significant changes in the economic interaction between Russia and Germany. The relevance of the chosen topic is due to the need to determine the vector of transformation of foreign economic cooperation between Russia and Germany in the medium term.

Methodology

Due to the extremely difficult current geopolitical and macroeconomic situation, the problem of effective foreign economic interaction between Russia and Germany does not lose its relevance, but, on the contrary, is at the epicentre of attention of Russian scientists: Belov et al., 2020, Pavlova N. (Pavlov, 2019), Gracheva M. (Gracheva, 2019), Komarova A. (Komarova and Lushchik, 2019), Lebedeva O. (Lebedeva, 2017), Taranovskaya E. (Taranovskaya, 2019), Fischer P. (Fischer, 2016), Giucci R. (Giucci and Walter, 2017), Meyer K. (Meier, 2004), Rara A. (Rahr, 2009), Trumpert R. (Trampert, 2015).

In this chapter, based on comparative analysis, content analysis, methods of synthesis, induction and deduction, the transformation of foreign economic cooperation between the Russian Federation and the Federal Republic of Germany from 2000 to the present is investigated.

Results

Since 2000, Russia has been the fastest growing export market for German products, excluding 2009, the results of which showed the consequences of the international financial crisis.

The structure of Russian exports to Germany over the past twenty years has practically not changed. Its main components are mineral products (oil, coal, gas), metals and products from them, wood and products from it, jewelry (natural and artificial pearls, precious metals). In import to Russia from Germany, on the contrary, the finished goods with the high added value (machines, the equipment, the equipment, products of chemical industry) prevail.

Despite the consequences of the global financial crisis, German enterprises continued active foreign economic cooperation with the Russian side. For example, Russian Railways and the German company Siemens AG have been working in the field of projects related to the development of Russian railways since 2010.

The next stage in the development of foreign economic relations between the Russian Federation and Germany is the period from 2011 to 2013, when countries managed to overcome the consequences of crisis processes.

At the same time, the effective interaction between Russia and Germany underwent significant changes after the introduction of anti-Russian sanctions in 2014, which was primarily reflected in the volume of trade between the Russian Federation and Germany, which so far has not reached the pre-crisis level, despite the observed positive dynamics since 2016 (Figure 1.1)

Source: Ru-Stat (2019)

Figure 1.1: Trade turnover of the Russian Federation and Germany, USD USA.

Exploring the retrospective of Russian-German investment cooperation, it should be noted that German companies have always considered the Russian market as promising and capacious, and still adhere to the so-called “long-term market development strategy” in the Russian Federation, which involves the creation of their own branches and industries in the Russian regions, as well as the active attraction of local highly skilled labor. German companies mainly use an internationalization scheme in Russia, accelerating market development and contributing to risk minimization (Figure 1.2).

Source: compiled by authors

Figure 1.2: Long-Term Market Development Strategy Algorithm.

It should be emphasized that cooperation in the investment block between the Russian Federation and Germany is one of the most important areas in foreign economic relations of these countries, which has an impact on the dynamics of exports and imports of goods and services, as well as the areas of scientific and technical cooperation.

German companies, due to the opening of their own assembly plants in the Russian Federation, attract local suppliers of component products, increasing competitiveness by minimizing transaction costs. As for positive externals for Russia, the following can be distinguished:

• German companies get the opportunity to put the sign “Made in Russia” on their products, which improves the image of Russian products when using foreign technologies;
• Inclusion of Russian companies in global production chains;
• creation of new jobs;
• tax revenues to budgets of all levels of the Russian Federation.

An analysis of the dynamics of foreign direct investment (FDI) in Germany and Russia showed that in general, they were characterized by relative stabilitybefore the imposition of sanctions in 2014. However, with the accession of the Crimea to Russia and events in the eastern regions of Ukraine, FDI inflows to Russia, including from Germany, decreased in 2014–2015. However, since 2016, there has been a positive trend in direct investment from Germany to the Russian Federation (Figure 1.3), thanks to which pre-crisis indicators were achieved (16 billion euros in 2013).

Source: compiled by the authors based on data from the Central Bank of the Russian Federation (2020)

Figure 1.3: German direct investments in the Russian Federation for the period of 2015–2019.

In 2019, there is also a decrease in the total number of German companies in the Russian Federation (4661) compared to 2013 (about 6200). Therefore, every fourth company left the Russian market, but the remaining ones are actively developing business in the Russian Federation and 56% of German companies operating in Russia were able to increase their turnover, and every third company will continue to invest in the Russian Federation.

In turn, Germany was the main recipient of FDI from Russia in 2019. Investments amounted to $8.2 billion, most of which were in the oil and gas industries. Therefore, a key role in the flow of direct investment was played by such a large-scale project as the construction of the Nord Stream-2 gas pipeline, the development of which began in 2010.

Next, we will consider key industries in which both Russian and German companies actively invest. The distribution of German investments by type of economic activity clearly demonstrates that the largest amount of funds in Russia is directed by German invest...