Competitiveness at the Crossroads: Choosing the Future Direction of the Russian Economy

The report synthesizes, interprets, and draws implications about Russia's economic progress, applying the Porter competitiveness framework. It is part of a Strategic Audit of the Russian Federation, a broader set of research activities coordinated by CSR to provide a sound analytical basis for long-term economic policy planning in the Russian Federation. The Russian economy has been studied by numerous international organizations, academics, and other analysts. This report draws on these studies, but differs in three main respects: First, it focuses on the microeconomic underpinnings of competitiveness at the level of firms, clusters, and the business environment in which firms compete. Existing studies tend to focus on macroeconomic policies, the legal system, and other broader aspects of economic context. Second, we offer an overall, strategic perspective focusing on overall priorities for the future. Existing studies tend to concentrate on detailed assessment of individual policies. Third, this report is intended not only for a technical audience but to inform both policymakers and the broader Russian community about the state of the economy during a very complex historical transition. The report is organized in three sections. First, it outlines an analytical framework to understand the medium- and long-term foundations of Russian prosperity in today's global economy. Globalization, technological change, and widespread economic reforms in other countries have shifted both the imperatives and opportunities for competitiveness. Second, we assess Russia'current competitiveness, highlighting the roles of the country's legacy, its broad economic context, microeconomic conditions, and current economic policies. Third, we offer overall recommendations for policymakers, along with priorities for further research, that seek to address the real complexities the country is facing. We are well aware that Russian leaders have to conduct economic policy in an environment of many distortions and complexities, where generic advice based on simple economic models is insufficient.