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INTERNATIONAL ENVIRONMENT:LABORATORY INSTRUMENTATION MARKET IN
RUSSIA
Konstantin Bulanov
November, 2012Moscow
Table of contents
Executive Summary...................................................................................4Introduction................................................................................................51. Global trends in laboratory analytical instrumentation market.......6
1.1. Market definition and structure.......................................................61.2. Historical overview and size of the market.....................................71.3. Current industry state: globalization and recession impacts..........81.4. General trends and drivers of the market.......................................91.5. Outlook for the future development..............................................10
2. Essential aspects of targeted market in Russia..............................122.1. Key macroeconomic indicators....................................................122.2. Business environment in Russia..................................................132.3. Analysis of R&D segment in Russia.............................................132.4. Related industries overview.........................................................15
Conclusions..............................................................................................17Appendixes...............................................................................................18References................................................................................................19
Executive Summary
This report shows analysis of the current state of the global market for laboratory analytical instrumentation and points out the opportunities for foreign players in case of internationalization to Russia.
The market is mature in the US and Western Europe. Meanwhile it’s becoming more affected by the globalization involving the emerging economies in Asia and the Pacific Ocean region.
Russia as well can be considered as potentially attractive market for laboratory instrumentation vendors. A huge social potential for R&D due to a relatively high level of education amongst the population supported by the special-purpose governmental programs, economy modernization and a general focus on innovation in all industries may generate a significant demand for the state-of-art instruments in the coming years.
Definitely the international players should keep an eye on Russia as it would represent a new interesting geographical market for the expansion when the Chinese and Indian markets are saturated.
IntroductionThis report has been prepared on the request from Swiss laboratory analytical
instrumentation manufacturer Büchi Labortechnik AG. This company currently has subsidiaries in 14 countries outside Switzerland and plan to establish a representative office in Russia. At the time being the company has one exclusive distributor to cover the whole Russian market (OneSource, 2012; GlobalData, 2012).
The major purposes of this report are to evaluate global industry trends for the laboratory analytical instrumentation market, to connect them with general premises for internationalization at the time being and to provide a comprehensive analysis for Russia as a new potential location for direct business activities of Büchi Labortechnik AG.
A set of recommendations in the third part of this report would shed light on some critical aspects for successful start-up of a subsidiary in Russia.
1. Global trends in laboratory analytical instrumentation market1.1. Market definition and structure
Laboratory analytical instrumentation is required for two main purposes – R&D and quality control – at production enterprises in a wide range of industries as well as for fundamental scientific research in non-profit organizations (universities, independent research centers, clinics, etc). It creates a specific split between major market segments by end users which are inherently belong to relatively independent vertical markets (Unni, 2003a; Unni, 2003b):
1. Chemical 2. Petrochemical 3. Pharmaceutical 4. Power generation 5. Semiconductor and electronics manufacturing 6. Food and beverage7. Biotechnology8. Life Sciences9. Academic Research Institutes
Such a variety of industries gives huge opportunities for market players to diversify their product offering by different end-user application within manifold of almost 80 individual instruments techniques (SDi, 2012) and focus efforts on the most attractive segments. Meanwhile analytical instrumentation manufacturing itself is a very sophisticated industry requiring significant knowledge and intellectual property assets for product development, capital-intensive machinery and tooling operated by highly-skilled staff for production along with historically gained and maintained customer loyalty based on long-term investments into brand awareness within targeted market segments to successfully sell out these specific goods. That is why a current pool of laboratory analytical instrumentation manufacturers is dominated by a moderate number of large companies with comprehensive history in the industry and focus on innovations, complemented by a large bunch of approx. 900 competing small firms in niche markets trying to emerge by making alliances (Hillstrom et al., 2011). Nevertheless the former top 50 manufacturers enjoy three-fourths of global industry revenues (SDi, 2008).
25%
15%
10%
40%
10%
Structure of Laboratory Analytical Instrumentation Market by product
Mass Spectrometry
Chromatography
Spectrophotometry
Other instrumentation
Accessories
Diagram 1. Structure of LAI market by products (based on Hillstrom, 2011)
Their products are divided into three specific segments: mass spectrometry instrumentation, chromatography equipment and spectrophotometric devices with addition of prevalent sector of non-systematized and general analytical equipment representing approx. 40% of total market (Hillstrom et al., 2011). Minor segment of spare parts, accessories and replacement components gives the rest 10% of revenues.
The area of interest for Büchi Labortechnik AG company lies in the widest segment of non-categorized equipment which on the one hand gives an opportunity to avoid tough competition in the oligopolistic market segments of mass spectrometry, chromatography and spectrophotometry (SDi, 2008), but on the other hand requires more attention to local and minor suppliers of analytical equipment for general purposes (separation) and niche applications (Kjeldahl analysis).
In terms of types of demand in the global market for laboratory equipment apparently the most promising segment for instrumentation manufacturers is initial systems installations which usually require brand new and state-of-art instrumentation followed by service demand for equipment maintenance and repair along with aftermarket sales of accessories and consumables (SDi, 2008).
53%35%
12%
Structure of Laboratory Analytical Instrumentation Market by demand
Initial Systems
Aftermarket
Service
Diagram 2. Demand for laboratory instrumentation (SDi Global Assessment Report, 10th Edition, 2008)
1.2. Historical overview and size of the marketBesides some rather primitive and custom-made units developed by individual
scientists and engineers earlier the laboratory analytical instrumentation industry itself started to form in 1950’s. Scientific innovations in the area of basic analytical methodologies created a strong foundation for the future technical evolution of laboratory equipment during further 60 years (Studt, 2010). Those revolutionary discoveries in the middle of the last century were supported by a steadily growing market due to economic expansion after the World War II and significant improvements in production processes giving the main role for global technological leadership for several decades to the United States (Hillstrom et al., 2011).
However, for a long time this market was still considered as very narrow and negligible in the light of globally dominating industries. This statement is illustrated by the fact that US government classified analytical instruments as a separate industry in 1987 only (ibid.).
Modern era of laboratory instrumentation market development in 1990’s was influenced by strengthening expectations from healthcare sector (new drugs development by pharmaceutical companies, prevention of new viruses spread) and growing
environmental concerns and regulations. As a result major manufacturers focused their efforts on product quality improvement, customer service and new product introductions (ibid.). Both of these growth drivers (healthcare, environmental) as well as development vectors for market players remain relevant up to date. The pharmaceutical industry holds it positions of major end user for laboratory equipment, contributing approx. 40% to the total market revenues (Frost & Sullivan, 2005).
As most part of global activities in the area of fundamental biotech and life science research, pharma R&D and environmental testing at that time was associated with developed economies (chiefly US and Western Europe with their strong educational, research and environmental safety investments) the laboratory analytical instrumentation industry achieved maturity relatively quickly – in the middle of 2000’s – as the needs of newly established laboratories in these regions were satisfied (Unni, 2004; Kumar, 2005a, Frost & Sullivan, 2005).
In spite of maturity in the developed countries and because of financially favorable conditions of global economy before 2008 crisis in further 3-4 years laboratory instrumentation market maintained a rapid growth rate mainly by means of sweeping development in new life science areas like proteomics, metabolomics, biomarker research, etc. fueled by significant government funding and grants (Durga, 2009). However, this pillar appeared to be weak to sustain market growth during turmoil of the world financial crisis and resulted in a sharp decline in 2009 with a sluggish recovery afterwards (SDi, 2012).
Depicting quantitative parameters of this market one may observe its virtually doubling in size in the last decade from $22B in 2000 through $30B in 2005 up to the current size. According to recently published data its overall size reached $44B in 2011 (ibid.).
1.3. Current industry state: impacts of globalization and recession Besides the new application in life science area there was another source of growth
potential in this market which realized into revenues for analytical equipment vendors and served as a second pillar to prevent the industry from a deeper fall in 2009. The name of it is globalization of analytical instrumentation industry.
Globalization proved itself primarily by a growing demand in emerging markets of China and India (Frost & Sullivan, 2003; SDi, 2012). According to Frost & Sullivan globalization will remain the key driver for the laboratory equipment market in the coming years (Frost & Sullivan, 2012a). The beginnings of this process emerged from efforts of several Asian governments to increase the quality of food and beverage products supplied to local markets by strengthening regulations in this area. New testing requirements and quality control measures have generated additional demand for modern analytical instruments in these countries (Frost & Sullivan, 2005).
Another reason for globalization sprang from changes in the main instrumentation consuming industry of biopharmaceuticals by shifting both manufacturing and R&D from the US and Europe to cheaper offshore countries supported by increasing availability of well-educated and skilled researchers in these countries and an overall leveling of the world’s base of technology and science. It reflected into the decline of biopharmaceutical industry in the US along with its rapid growth in Asia (Studt, 2010).
The recent global financial crisis significantly diminished venture capital funds supporting drug discovery and biotech industry (ibid). But researchers estimate the impact of global recession on the industry of laboratory instruments as uncertain and arguably unrelated which is illustrated by positive growth experience of the industry in 2010 and
2011 after a sharp decline in a single year of 2009 (SDi, 2012). Apparently this phenomenon is accounted for by geographical expansion of the market to emerging economies especially like China and other Asia Pacific countries which became involved to greater extent into the global manufacturing of pharmaceuticals.
In the laboratory decision makers surveys made recently by Frost & Sullivan’s experts in the US and other developed countries this statement is substantiated by very modest expectations for budget increases: academic, pharma and industry laboratories insiders anticipate the same or marginally improved funding conditions with majority of spending on laboratory consumables, i.e. outside of laboratory instrumentation. (Frost & Sullivan, 2012b; Frost & Sullivan, 2012c).
This creates additional arguments for laboratory analytical instrumentation manufacturer to implement geographical expansion strategy and make internationalization efforts into emerging regions outside the US and Western Europe. Several major players in the industry such as Fisher Scientific Inc. and PerkinElmer already announced reduction in staff globally preparing for further uncertain recovery of global economy, but most importantly they transfer attention to markets of Asia Pacific region especially to China (Frost & Sullivan, 2012a).
1.4. General trends and drivers of the marketResearch analysts mark out several general trends which drive the global laboratory
analytical instrumentation market in recent years (Mathew, 2007):
Figure 1. Analitical instrumentation market trends (world). Source: Frost & Sullivan
Demand for laboratory automation results from laboratory customers’ intention to increase their productivity dictated by rising running costs of laboratory operations and lack of skilled staff. That is possible only by reducing or excluding entirely all routine and labour-intensive procedures with modern easy-to-use automation systems.
Providing total support to the customers creates the basis for additional differentiation of an analytical instrumentation vendor from rivals by comprehensive service
and support at all stages of vendor-customer relationship. Services market has already integrated into the total instrumentation market globally.
Process analytical technologies reflect long-term tendency in the laboratory instrumentation market to move from complicated universal measuring instruments for scientific application to narrow-application simple devices suitable for industrial workshop environment for running quality control and finally transforming into in-line analytical solutions for production process.
Consolidation between vendor and customer helps multi-national vendors for laboratory equipment to expand successful relationship with their key account end users to different locations according to their geographical expansion with new manufacturing and R&D sites. This trend serves as advantage to mentioned large multi-national companies and negatively impacts smaller sized market players making them dependent on performance and marketing activities of their agents and distributors.
Growth of environmental analytics instrumentation market is supported by increased awareness and concerns of governments and societies regarding environmental issues. That has created a completely new segment within global laboratory analytical instrumentation market referred to as environmental analytical instrumentation with swift growth in the number of environmental testing laboratories all over the world (e.g. for pollution control).
Rising concern over bioterrorism after several acts of terrorism led to toughening of legislation in the area of, for example, drinking water control to prevent mass poisoning as a result of premeditated illegal actions. It also gave birth to some new application areas in analytical instrumentation like explosive materials and narcotics detection in the airports.
1.5. Outlook for the future developmentIn addition to above mentioned currently widely manifested market trends there are
some new tendencies on which the laboratory analytical instrumentation manufacturers should keep an eye in order to be competitive in the challenging global business environment (Studt, 2010, Ravishankar, 2012):
Increasing role of integration for laboratory equipment requires availability of open protocols and interfaces between different instruments to be able to perform as a united analytical system representing the next stage of equipment automation by incorporating separate instruments into laboratory information management system (LIMS) network via conventional wired or modern wireless (Bluetooth, Wi-Fi) solutions.
Further simplification of instruments utilization would relieve restrains of skilled operators’ availability by developing user friendly graphic interfaces based on touch-screen technologies and reducing the need for trainings for personnel. This will result in further cost reduction for laboratories and support their current intention to maximize productivity of laboratory operations.
Application oriented instrumentation development must satisfy the needs of growing number of industrial end users which will demand the most advanced but at the same time least expensive solution for the specific application at hand. Vendors may optimize their costs for new products by developing simple one-purpose devices with factory fixed adjustments instead of more costly universal equipment.
2. Essential aspects of targeted market in RussiaAs it appears that the detailed research on specific laboratory analytical
instrumentation market in Russia is not available from reliable sources, the major premises for demand of these goods are considered below, which are: general conditions in R&D sector within country and a current state of main industries utilizing laboratory equipment for quality control operations.
2.1. Key macroeconomic indicatorsDue to large population, huge territory and abundance of natural resources Russia
represents an important player on the global economy arena.
But the path of Russia’s integration into global environment after decades of being a closed economy was thorny. The first achievements of transition to market-oriented model were upset by 1998 crisis. Further years with sustained surge in commodity prices gave the Russian government a sufficient period without economic perturbations to improve public finances and regulatory framework. During the period of 1998-2008 the real GDP grew by about 7% annually in average, accompanied by even faster growth of GDP per capita caused by the decline in population (OECD, 2011a).
But the stumbling block of the Russian economy structural weakness remained still in spite of ambitious reforms. High dependence on the commodity prices in global raw material markets (chiefly in hydrocarbons, ferrous and non-ferrous metals segments) resulted in a dramatic downturn of economy during 2008 global financial crisis (ibid).
However, the recession of the Russian economy was not protracted as the recovery of global trade was relatively quick. Nevertheless, many observers couldn’t consider this recovery as a sign of future sustainable economical growth since primary export only wouldn’t allow Russia to grow rapidly in harsh competitive environment of post-crisis world (ibid).
The Russian government shows understanding of this critical challenge to country’s future and addresses some additional measures to support innovation and modernization of domestic economy. A dedicated Presidential Commission for Modernization and Technological Development was created in 2009, followed by an upgrade of governmental Commission on High Technology and Innovation in 2010.
This strategic focus on innovation driven by a strong support of R&D activities in Russia will create additional demand for modern analytical instrumentation in the local market within coming years. The comprehensive external analysis of R&D segment will be provided in the following part of this report.
Macroeconomic forecasts show a moderate growth rate of the Russian economy at the level of 4% (the annual real GDP growth) versus pre-crisis 7% (OECD, 2011a). This on the one hand creates positive circumstances for developments in domestic industries and on the other hand requires significant efforts from the government and business to pursue innovation in different areas in order to keep growth performance at the level of other emerging economies.
A more specific macroeconomic indicator GERD for the sector of interest will be introduced later in the external environment factors analysis framework.
2.2. Business environment in RussiaAs mentioned above intentional efforts of the Russian government during last
decade resulted in some progress in reducing corruption, reforming public administration and strengthening the rule of law (OECD, 2012a). But these basic components of
institutional environment are still below the desired level. According to the World Economic Forum’s Global Competitiveness Report Russia is still ranked on 133 th place out of 144 countries by the quality of public institutions, 85 th place by innovation capacity and 67 th by overall country competitiveness level (WEF, 2012). This appears to be the main obstacle for improving business environment in Russia.
The World Bank also ranks Russia at the modest 112th place out of 185 countries by the ease of doing business index based on 10 major aspects of conducting business activities (World Bank, 2013).
The Russian economy is dominated by a short list of very large enterprises with emphasis on state-owned corporations and private financial-industrial groups, which in total generate almost one third of the national GDP. However, there is a growing sector of small to medium-sized enterprises competing within different segments of economy, but only less than 2% of them are positioned as small innovative firms (OECD, 2011b).
Positive evidence from the Russian economy is represented by its progressing internationalization proven by continuously growing FDI flows and stocks (with the exception of 2008-2009 crisis period) with a huge potential for further growth in this area. According to the 2012 World Investment Report Russia is currently on 60 th place for inward FDI performance and on 9th by inward FDI potential index (UNCTAD, 2012). This investment environment is favorable for the development of innovations but still not fully realized due to constrains discussed above. The government continues to stimulate inward FDI’s by removing barriers for foreign acquisitions in strategic sectors of industry in 2011.
Russia’s accession to the World Trade Organization in 2012 may also help innovation by giving domestic SME’s a direct access to international markets, especially in high-technology sectors.
2.3. Analysis of R&D segment in RussiaAs the scope of consideration for this report lies in industries and economy
segments demanding laboratory analytical instrumentation for R&D and quality control purposes the external environment factors analysis has been conducted for R&D sector in Russia, followed by brief overviews of main industries requiring instrumentation for production quality control operations.
The PESTEL analysis (see Appendix 1) shows that Russia has significant social potential for becoming one of the global centers of research activities in the future supported by positive political and legal aspects.
2.4. Related industries overview The major industries in the global market demanding laboratory analytical
instrumentation for quality control purposes were shown above in paragraph 1.1. Amongst industries which are highly developed in Russia with the most significant volume for the whole economy one may mark out Chemical (including deep oil refining), Pharmaceutical and Food&Beverage sectors.
Chemical industry in Russia with 1,25% share in GDP and 2,7% from total FDI in 2011 produces chiefly mineral fertilizers, synthetic resins and plastics, rubber, coatings and paints, synthetic fibers, detergents, etc. It doesn’t have a leading share within entire global chemical industry, but contributes significantly to the production of selected products: ammonium nitrate (40% of global production), potassium fertilizers (20%), carbamide (17,5%) and ammonia (16,5%). The industry tends to produce primary forms of chemicals with export orientation on CIS, EU and Asia-Pacific countries (EMIS, 2012a; Ivanov, 2012).
The industry consists of both big domestic players (EuroChem, Uralkali, Acron, etc.) and global transnational enterprises (BASF, Bayer, Dow Chemicals) creating a promising opportunities for international laboratory equipment manufacturers.
Pharmaceutical industry has a relatively low share in domestic economy (0,16% of GDP in 2011) with prevalence of imported drugs to satisfy huge domestic demand of the biggest market within CEE region: more than a half of total $26M pharmaceutical market turnover in Russia is to be contributed by imported drugs in 2012 (Espicom, 2012). But this sector is critically important for the government in order to maintain major social indicators and provide national security and population health. For the purposes of pharmaceutical sector development a dedicated strategy till 2020 has been developed by the government and is financed from the state budget. This strategy implies stimulation of domestic production, innovation and further expansion abroad (EMIS, 2012a; Espicom, 2012).
Participants of the industry in Russia are domestic, joint-venture and international enterprises (Pharmstandard, Valenta, Stada, KRKA, Gedeon-Richter, etc) are obliged by recently amended legislation to comply with international pharmaceutical manufacturing standard GMP by January 2014 (Espicom, 2012). This will require a significant renovation of quality control functions from all industry players generating the demand for state-of-art laboratory instrumentation.
Food&Beverage industry is an important sector of domestic economy for Russia fed by 38,5% share in consumer consumption spending which serves the fastest growing food&beverage national market in Europe. Russian F&B market is anticipated to become the biggest within Europe by 2015 according to Association of European Businesses (EMIS, 2012b).
Following growing consumers’ expectations for product quality the leading Russian F&B manufacturers (Baltika, Wimm-Bill-Dann, Cherkizovo Group, United Confectionary Manufacturers, etc) constantly improve their quality control procedures to catch up with international players which entered domestic industry by greenfield investments or acquisitions (Coca-Cola, Fritolay, Unilever, Mars, etc). Both groups of industry members provide a sustainable demand for analytical instrumentation in quality control area.
ConclusionsThe data analyzed in this report allow to work out a set of recommendations which
are to be used by the management team of Büchi Labortechnik AG to take decision on internationalization to Russia:
1. Internationalization in general is critically important for any vendor within global laboratory analytical instrumentation market to provide further growth by means of geographical expansion into new regions.
2. As the company of interest already has subsidiaries in the most attractive markets of Asia and Pacific Ocean region it can implement expansion strategy into other countries with high potential for development of major industries requiring modern analytical equipment.
3. Russia represents one of the most promising candidates for internationalization by Büchi Labortechnik AG. Russia already has considerable chemical and food&beverage industries with domestic and international players. Moreover Russia’s government supports the intensive development of local pharmaceutical industry according to long term strategy. This strategy also implies harmonization of local legislation with modern international regulations in the pharmaceutical industry.
4. Taking into account poor quality of public institutions in Russia and a high risk of corruption it is recommended to set up a stricter control of all financial transactions, distributors’ activities and local business procedures by headquarters.
5. An appropriate strategy for the market penetration would be a moderate investment into representative office to cover primarily key sales & marketing activities with further transformation into subsidiary with a separate legal entity in Russia. This will allow aligning the subsidiary size to actual sales volumes in Russia as the risk of obstacles for the business is still high.
6. The specifics of cultural and language aspects of the business environment in Russia urge company on to hire sales & marketing team in order to avoid barriers with domestic customers. For the initial period all managerial decision should be taken by headquarters or a dedicated manager for the internationalization project.
7. It’s recommended to start with setting up the business relations with current international key accounts via their production and R&D sites in Russia and further expansion on purely domestic potential customers within targeted industries (chemical, food & beverage and pharmaceutical).
8. A special attention should be paid to the academic laboratories sector. Russia has one of the biggest national Academies of Sciences with considerable funding by government from the state budget.
Appendix 1. PESTEL analysis of R&D sector in Russia
Pol
itica
lPolitical factors are represented by a new strategic approach to the Russian
economy modernization developed by the government after 2008 crisis. It involved several federal ministries and commissions: Ministry of Education and Science, Ministry Economic Development, governmental High Technology and Innovation Commission, President’s Commission for Modernization and Technological Development of Russia’s Economy. Together they formed a strong source of consolidated power in policy decisions and financing general innovation initiatives within the Innovation Development Strategy of the Russian Federation to 2020 and the State Program for Development of Science and Technology for 2012-2020. Common objectives of these governmental programs are to create competitive and effective R&D sector as a key driver for economy modernization (OECD, 2012b).
Pos
itive
Eco
nom
ical
Economical factors of R&D sector in Russia’s economy are illustrated by gross domestic expenditures on R&D (GERD) as a percentage of GDP. This indicator for Russia (1,16% in 2010 with +5,2% 5-year CAGR of absolute value) is still significantly lower than the one in late Soviet period (more than 2%) and the current average level for OECD members countries (2,33%). This phenomenon roots in robust growth of GDP in 2003-2008 due to exports of extraction industries with low R&D intensity and Russia’s status of emerging economy with relatively low GERD/GDP versus technological frontier countries (ibid.).
Diagram 3. Evolution of gross domestic expenditure on R&D as percentage of GDP (OECD Main Science and Technology Idicators 2010-11)
Relatively low GERD also results from lack of financing of these activities by business sector generating approx. one third of GERD versus two thirds from the government. Meanwhile a great deal of even this scanty business sector expenditure is funded by the government not by the business itself (via spending on state-owned enterprises and corporations). At the same time the performance of business and governmental R&D activities is vice versa: almost 2/3 of Russia’s R&D is carried out by the business sector and slightly more than 1/3 by governmental and higher educational institutions (ibid.).
This shows a significant disbalance in R&D financing in Russia caused by low attention of business to the importance of innovation, restricted efficiency of investments into R&D and the historical structure of separated Soviet science and industrial production systems still not overcome by the country.
Low efficiency of investments is strikingly illustrated by the structure of GERD in Russia: 50% goes to compensating direct labor costs, 40% - to other current costs and only 3,4% into instruments and equipment (versus 40% in developed economies) resulting in worn out and retarded R&D infrastructure (ibid.). Undoubtedly this will be the first topic to address by the government in order to implement the above mentioned government’s strategic plans.
Neg
ativ
e
Soc
ial
Social factors for innovation and R&D sector development in Russia are favorable. Russia generates one of the highest proportions of engineering and science graduates world-wide. The Russian population is well-educated with exceptional 54% level of tertiary qualifications amongst adult population (OECD, 2012c). This parameter in Russia is almost the double of average level in OECD members and G20 countries creating a great social potential and the capacity of Russia to catch up with the current global level of innovation and R&D activities.
Meanwhile R&D and scientific occupations are not considered by the Russian population as rewarding. Partially this result from years of decline in fundamental researches and lack of investments into R&D from industry. But eventually this purely social concern lead to a particular decrease in numbers of R&D personnel over the last decade but slower than in the early 1990’s.
Diagram 4. Total R&D personnel (Source: HSE, 2010)
Pos
itive
Tech
nolo
gica
l
Technological factors of modernization process of Russia’s economy in its reflection on R&D sector emerge from traditional strengths of Russian researchers in physical and materials sciences leveraged by federal investments into nanotechnology targeted on gaining the world leadership in this area. Most innovations are welcomed in already developed resource-based industries to increase productivity as well as in such industries like nuclear energy and aerospace (OECD, 2012b).
Neu
tral
Env
ironm
enta
l
Environmental factors are represented by relatively weak progress in setting up environmental policies and implementing global environment protection initiatives (carbon taxation, emissions restrictions, measures to change the consumer behavior, etc.). At the time being the only area for improvement for the Russian government is energy efficiency stipulated in the Federal Law on Energy Saving and Increasing Energy Efficiency dated 2009 (ibid.). It appears that this block of factors would have marginal impact on the sector of interest in the coming years.
Neu
tral
Lega
l Legal factors can be considered on the basis of policies deployed by the Russian government to support Innovation Development Strategy. The first group of these measures is aimed at removing administrative barrier and improvement of framework conditions for innovation in general. The second group is directed on state-owned enterprises in order to move them to innovation development strategies (ibid.). P
ositi
ve
Appendix 2. Major macroeconomic and social indicators
1. Consolidated budgetTable 1. Macroeconomic indicators 2009-2010 and forecast till 2013 (Source: OECD Economic Outlook 90 Database)
Table 2. Labour force status and structure (percentage) of the Russian population 1992-2010 (Source: OECD, Labour Force Statistics Database)
Appendix 2. GERD data details
Diagram 5
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