Collapsing Branches

This category of industries is marked by declines in both output and financial results and includes textiles, clothing, and leather and construction-materials industries (stone, clay, and glass in the tables). These industries also have the smallest scales

of R&D performance and the lowest R&D intensity among all the main sectors (Tables 4.3, 4.5, and 4.6).

4.7.1 Overall output trends

In the textiles, clothing, and leather sector, which in Russia has traditionally been called light industry, output declined by 80 percent from 1991 to 1995. The lower output was due to a decline in demand which, in turn, was due to a fall in real income per capita and competition from imported products. The output decline was the largest among industrial sectors.

In the cotton industry, the output decline in 1992 and 1993 was also caused by interruptions in supplies of raw materials from the Central Asian republics of the former USSR. Some plants were idle for several months because they were without raw materials. In 1994 the state offered loans to enterprises for purchases of raw materials, but cotton-manufacturing output still fell by 25 percent in 1995.

Despite the output decline in this sector, some enterprises successfully ex-panded production of goods that were in demand, such as outdoor clothing. Al-though the sector primarily serves the domestic market, some textile and clothing enterprises managed to export their products. The real appreciation of the ruble in 1995, however, hit the export end of the clothing industry hard.

Demand for construction materials (stone, clay, and glass) is determined by construction investments rather than, as in textiles and clothing, by current house-hold consumption. Construction output began to decline in 1989 and, as expected in grave depressions, fell more rapidly than the industry as a whole. Rises in the relative prices for construction materials forced construction firms to undertake measures to reduce materials consumption in the construction process.

The one flourishing part of the construction sector is in small-scale individual housing in the countryside. As a result of this growth output increases were evident from 1994 to 1995 in asbestos and asbestos cement pipes (by between 11 percent and 17 percent), polished glass (by 8 percent), and so forth. In contrast, output of materials for large-scale construction, especially for industrial building, decreased by a factor of two to three from 1990 to 1995.

Due to a gradual revival in general investment activity in the Russian economy, the possibilities are good for obtaining external financing for the purchase of high-quality construction materials for housing and industrial construction (Vorontsov, 1995). There are also good prospects for manufacturing state-of-the-art components for construction of one- and two-story homes and farmhouses, as well as effective wall materials, and increasing the use of articles made from local raw materials (clay, sand, lime, and so on).

4.7.2 R&D and innovation

Innovation activity in light industries has been comparable to that in the food industry. Although 18 percent of the enterprises introduced innovations in 1994, only 13 percent of the enterprises plan to introduce innovations between 1995 and 1997, placing light industry, together with the coal and construction-materials industries, at the bottom of the list of industry sectors.

The small amount of innovation activity of light-industry enterprises and the reductions of budgetary appropriations caused a decline of 85 percent in the number of R&D personnel from 1989 to 1994. By the beginning of 1995, there were only 2,700 R&D personnel left in the light industry sector. Only 2 percent of light-industry enterprises contracted for R&D in 1994. There were, however, some new industry structures in which innovation was twice that of the sector average. For example, 22 percent of the enterprises of the Roslegprom joint-stock company and 30 percent of enterprises in the Rostekstil textile group introduced innovations. In R&D institutions attached to the governmental Department of Textile and Light Industry, the share of federal financing was 65 percent of R&D expenditure in 1994, but in industrial companies it was only 7 percent.

Government R&D financing in this sector has lacked specific goals, and most of the funds available have been used to finance the remaining R&D institutions rather than to carry out a coordinated program with clear objectives. The exceptions are small-scale projects financed by the MSTP directed at the creation of new tech-nologies for new textile and cotton materials, including those with unconventional fibers.

The bleak financial outlook of the construction-materials sector negatively affects the innovation activity of its enterprises. On average, only 12 percent of enterprises introduced product or process innovations in 1994, the lowest among the main industry sectors. The share of enterprises that contracted out R&D was only 3 percent in 1994. The exception was the glass industry, where the share of innovative activity (21 percent of enterprise) approached the industry average.

Having neither sufficient enterprise demand nor serious budgetary support, the R&D effort of the construction-materials sector decreased markedly. R&D personnel declined sixfold from 1990 to 1994.

Budget funding of R&D is low for the construction-materials industry. The Federal Economic Program on Dwellings allocated little to R&D projects in this sector in 1995. Again, there was an exception for Rosstrom, an industrial associa-tion serving the construcassocia-tion-materials industry. In 1994 only 9 percent of the R&D carried out by the association was financed by the federal budget. The association received 49 percent of its financing from non-budget funds and 40 percent from enterprise contributions.

The analysis of budget-supported R&D projects in the construction-materials industry shows that the majority of the projects are oriented to the needs of housing construction, primarily individual houses (cellular concrete for low-level dwelling, fiberglass-reinforced plastic items based on thermoplastics, sanitary equipment of high reliability and duration, technology for manufacturing cement-fiber tiles, and so on). However, a number of projects are also aimed at the creation of technolo-gies for manufacturing materials for large-scale industrial and public constructions (vulcanized roofing polymer film, prefabricated buildings made of thin monolithic concrete shells, and aggregates for light concrete).

The current policy considers housing construction one of the key sectors nec-essary to fill the future housing needs of the Russian population, and therefore could become a “money pump for the economy.” R&D institutions in related fields should be more active in offering their services to enterprises in the sector.

4.8 Conclusions

The prospects of R&D in industry sectors vary from sector to sector and strongly depend on economic conditions. In principle, market research should be able to identify those segments of the market in which Russian products could be compet-itive. The federal government should then provide R&D funding to enterprises in these segments. The rationale for increased activity of the government is that cur-rently even the most prospective industries are operating under difficult economic conditions and the enterprises are barely able to support R&D. Government support would enable R&D institutions to survive and maintain their research capabilities for the economic recovery and renewal of growth of the Russian economy.

Innovation Activity of