Why pay more for quality, go local!

Russians Forced To Buy Local

By Greg Myre

Just a few years ago, imports were so scarce that an American visitor with an extra pair of Levi's blue jeans could ignite a bidding war on the streets of Moscow. Today, Russia is one of the most import-addicted nations in the world -- a remarkable 48 percent of all consumer goods here are foreign made, according to the State Statistics Committee.

The businessman hasn't made it until he's chauffeured to work in the quiet comfort of a Mercedes sedan. A middle-class family eats American chicken on Chinese plates while watching a Mexican soap opera on their Japanese television. Even a poor Russian stopping at the corner kiosk for sausages and cigarettes is likely to be buying imports.

This dramatic transformation has created a huge problem: in the current crisis, most Russians can't afford imports, and the country's feeble economy can't produce many of the most basic things people want to buy. And it's not just the wealthy 'new Russians' who've had their lifestyles pared back. Imports have infiltrated almost every sector of the economy, but now they're at least twice as expensive because the ruble has fallen from 6 to 15 against the U.S. dollar.

Russia's economy has been shrinking for a decade, and the latest crisis has once again driven it into full-fledged depression, with this year's contraction expected to be around 5 percent. Prices have soared 67 percent since August and could climb 300 to 500 percent by the end of the year, according to Central Bank forecasts.

Consider chicken, a major Russian import. American drumsticks began appearing in Russian stores during George Bush's presidency, and to this day they are fondly known as 'Bush legs.' Tyson Foods, a leading American exporter to Russia, slaughters its birds in Arkansas, sends them to New Orleans, ships them across the Atlantic Ocean and trucks them into the Russian heartland. When they finally hit the freezer section at Russian supermarkets, they are competitively priced -- at least until the ruble crashed -- and are far superior to Russian chicken that comes from just down the road.

Russian agriculture has so withered that the country imported 73 percent of its sugar, 37 percent of its fish and 35 percent of its meat last year, said Nikolai Kharitonov, leader of the Agrarian Party. This year's drought-stricken grain harvest is expected to be the smallest since 1957. 'During the seven years of pseudo-reforms, the country has been plundered, industry has stopped functioning, and Russian agriculture has the rights of a step-daughter,' Kharitonov said. Hundreds of foreign companies took part in the recent World Food Moscow trade exhibition, all vying for a slice of what had been a rapidly expanding import market. Instead, many of them may soon be leaving Russia.

'Last chance to look at imported food,' Kommersant newspaper joked in an article on the trade fair.

Russians who quickly grew accustomed to filling their shopping carts with Kellogg's Corn Flakes, Skippy peanut butter and Baskin Robbins ice cream are now facing sticker shock. 'Before the crisis, I didn't even check the prices,' said Dmitri Teterin, a concert pianist lugging groceries out of Seven Continents, an upscale supermarket stocked almost entirely with imports. 'Now I'll have to start looking in the Russian shops.'

Some sample prices: Nescafe Gold coffee, $15 for a half-pound. Blue cheese from France, $25 a pound. Heineken beer, nearly $3 a bottle.

President Boris Yeltsin tried to launch a 'buy Russian' campaign last year, but even he wasn't too persuasive. 'Yes,' Yeltsin conceded, 'our cars are not as good as foreign-made ones and break down more often.'

Go for a beer truck, for the ultimate in keg living!

The economic emergency has achieved what Yeltsin's exhortations could not. Imports to Russia fell 19 percent in August compared to a year earlier, and the trend seems certain to continue, the government said. Customers have already moved to stores selling cheaper Russian goods, and the crisis could stimulate some Russian industries to produce more. But many businesses and shops that depend on imports could be ruined.

As Russian capitalism has evolved, the initial wave of kiosks that sold imported candy bars, cigarettes and booze in the early 1990s has been followed by trendy boutiques and American-style shopping malls in Moscow. Even the remote corners of Russia are now served by an army of 'shuttle traders' who fly to Europe, the Middle East and Asia, stuffing their suitcases with inexpensive clothes and shoes that they sell back home. Russia had been exporting enough oil, gas and other natural resources to pay for the imports. But energy prices are sagging, imports are costlier and something has to give.

St. Petersburg, the country's busiest port, has seen a roughly 50 percent drop in imports since August, customs officials said. 'The ships have virtually disappeared,' said Viktor Yatsuk, director of Barbaletta, a major freight-handling company. His firm processed 51,000 tons of food in July, but only 17,000 tons in August. In the first half of September, it handled one ship with 1,300 tons of bananas.

'This is terrible,' said Yatsuk, who has placed all but 20 of his 300-member staff on unpaid leave. 'There are no imports at all.'

The Times (UK) October 17 1998

Feast or famine for shoppers in Moscow

By Anna Blundy

There are two kinds of shopper in Moscow. One is the ubiquitous old lady in a headscarf who is on a pension of 450 roubles a month - if she receives it at all - and has to scour evil-smelling state shops for Spam-like sausage, scraps of festering meat and cabbage that might still be edible if she tears all the outside leaves off.

The other is the well-dressed woman in her twenties who despite the crisis still shops at places once reserved exclusively for foreigners where everything is shipped in from Finland, including Roquefort cheese, fresh lychees and packets of flaked almonds.

This type can also afford Moscow's various markets, where Georgian men with black flashing eyes and gold teeth sell perfect peaches (25 roubles a kilo), whole piglets (200 roubles each) and live langoustines from a tank (100 roubles a kilo).

There is no in-between. Not because there is a shortage of people earning between 450 roubles a month and ú 6,000 a month, but because there is a produce abyss between luxury and subsistence.

Since the beginning of the economic crisis on August 17, prices of most goods have more than doubled, with imports down 45 per cent on last year. The rouble has fallen from six to the US dollar to around 15. It is expected to fall further over the next few months, which means that those fortunate few with dollars to spare are finding life a great deal cheaper.

But for the vast majority of the Russian population, basic foodstuffs are now priced out of their reach. Needless to say, their salaries and welfare payments, such as they are, have not increased with inflation. Last year Russia imported more than a third of food consumed here. Not only are imports down by nearly half this year because of the economic crisis, but this year's harvest is the worst since 1967.

If you fed your family from state-run shops in Moscow, you would still find all the staple goods that constitute dinner. In what was billed as a bread shop, I found some foul spare ribs at 28.30 per kilo, some very sorry-looking sausages at 30 roubles, bread for 3 roubles, standard Soviet cheese for 35.60, and flour for 12.50. The real bargain was vodka at 26 roubles a bottle. This seemed cheap, but a week's shopping would wipe out the average pension.

Over at the "Jet" supermarket, there was more abundance, although the management apologised for a temporary absence of fruit and vegetables. Bread cost 4.20, cheese 110.60, milk 7.30 and a can of Coke 8.60. A month ago, that can of Coke cost nearly 1 GBP, now it is less than 40p.

At the market, heaps of watermelons, pomegranates and peaches leap out at you wherever you look, Georgian women in bright scarves shout out their prices and the air smells of garlic and spices. There was no absence of anything, yet the country has asked the EU and the US, according to Boris Nemtsov, former Deputy Prime Minister, for food aid.

While in the provinces many basic foodstuffs are in painfully short supply, it would be a lie to say Moscow was suffering a food shortage. But it would be true to say it was suffering a severe shortage of people who can afford to buy it.

Rossiyskaya Gazeta November 17, 1998

"Buy Russian, or the Kind Of Benefit Which Can Be Derived From the Crisis"

Article by Vladimir Lysenko, State Duma deputy and member of the organizing committee for the establishment of the association Buy Russian Goods:

The August financial collapse has brought us to a practical solution to the age-old problem: how can Russia"s industry be forced to work for the impoverished market under the conditions of the sharp curtailment of importing? And, first of all, the light and food industries which directly serve the needs of the people. After all, the prices for imported goods have tripled in accordance with the dollar"s exchange rate. In the meanwhile, those for our domestic foodstuffs and light industry"s products have increased by factors of 1.5-2. And whereas, a month ago, the Russian buyer gave preference to imported products, he is now taking our domestic products quite eagerly.

Under these conditions, there are two paths. To reduce the customs duties on the imported goods and to fill up the store shelves with them anew, their prices having again been made comparable with those for Russian products. Or to turn toward domestic industry, providing it with state support. We went along the first path, hoping that industry itself, under the conditions of the market and private competition, would get out of the crisis. And we got deplorable results.

Now, however, a unique moment has arisen--to make an abrupt lunge finally and, following this, a breakthrough as well in the further development of domestic industry. And to establish on this basis a solid ruble, to carry out a structural reorganization of the economy and to begin to solve the piled-up social problems. Of course, accomplishing this task will require changes in the very thinking of the political elite. And of the country"s population as a whole.

The stereotype which has emerged over the last few years that "nothing good can be produced in Russia" should be demolished by life itself. I will say more: following the national, professional and, finally, soccer patriotism which we need not bother with, we have already come close to "commodity patriotism," having "had our fill" of second-rate Chinese and Turkish consumer goods. Thus, over the last 2 years, 90 percent of Russia"s citizens, without advertising of any sort, have turned to our domestic foodstuffs.

Now it is necessary to take the next step—to return prestige to our light industry"s goods. After all, in many respects, they are also of better quality than the overseas ones. But it will not be possible to get by here without the help of the mass media and public organizations. It is necessary to educate the Russian fans of domestic "commodity patriotism." The same kinds of domestic-brand admirers as those which, for example, the soccer clubs currently have. After all, no matter how Spartak [Spartacus] or Dinamo [Dynamo] do in the championship tournament, their ardent admirers" hearts are always on the home team"s side. They will not put on even the most beautiful foreign clothing, preferring the simple red-and-white Spartak or white-and-blue Dinamo cap and scarf to it.

I believe that Russia greatly needs a federal program of support for the light and food industries. We have looked enough at foreign experience. Let us look at our own. At least, that of the beginning of the twenties. Remember: the uplifting of the country"s economy, which had been destroyed by the Civil War, had been begun during the NEP [New Economic Policy] period with the light and food industries and agriculture. And after just 2 years, we had fed and dressed the country and had established the conditions for the conducting of industrialization.

Now, however, the light and food industries are producing in all around 3-4 percent of the state treasury"s tax revenues. If they were exempted from the payment of taxes at least for a time under the obligatory requirement that the saved funds be directed into the further development of production, then, after just a year, they would fill the country with good-quality domestic goods. They would also increase the taxable base by no less fourfold and would establish a powerful springboard for uplifting our industry"s other sectors. And these are not empty words. I will cite just one example. In September, the cosmetics association, Svoboda [Freedom], the largest one in the CIS, under the conditions of the reduction in importing, increased the volume of products being sold by a factor of more than 2. At the same time, the total of the taxes being collected from the enterprise increased precisely by a factor of 4. Possessing significant capacities and manufacturing capabilities, Svoboda, with the state"s support, could increase the output of natural soap, of toothpastes, of creams and of shampoos by factors of 2-2.5, supplying domestic consumers completely with personal care and hygiene products.

And such examples are numerous. There are other enterprises in Russia, which are capable of clothing, shoeing and feeding their countrymen. It is just necessary to take them under the government"s wing now.

What kind of support are we talking about?

First, about a revision of the customs rates. At the present time, these rates for finished imported products, strange as it may be, are lower than those for the industrial greases, oils and accessories, without which our domestic producer cannot manufacture fragrant soap, attractive tubes for toothpaste and so on and so forth. However, throughout the entire world, the practice is the opposite. Everywhere, quotas are being established for finished products being imported, which, in addition, are also having a higher customs fee being imposed on them.

Second, I would propose giving "tax vacations" for a year to the food industry as well, which would be recouped a hundredfold in the future. Especially since its current share in the state budget is small.

Third, state credits and interest-free loans are necessary for these sectors. And we will get the money for these purposes from the imposition of a state monopoly on alcohol production.

And fourth, I think that it is necessary to protect domestic industry more aggressively from unfair competition. Both within the country andabroad.

After all, it is generally known that the USA and the European Union are setting quotas on the importing of our products into their own countries. But here is our market--the most open one in the world. Here, we are ahead of the entire planet. Last year, for example, the Americans limited the importing of coats from our sewing association, Vympel [Pennant], into the USA to 50,000 units. They turned out to be more elegant and cheaper than American ones. Yet, these same Americans filled our country with "Bush knives" [name transliterated] (subsidized by the state) and ruined our poultry processors. And when an attempt was undertaken to interfere with this "freedom of trade," the U.S. vice president himself got involved in this dispute. Yet everything remained as before.But look what is written in the rules for the American government"s allocation of grants to citizens and organizations of other countries: "...under no circumstances should you buy a commodity not produced in America, if you have not first proven to the government in writing that an American commodity is not available in a given region."

Is it really possible to compare this with the chaos which is reigning in our country, when everything, beginning with fountain pens and right up to staff vehicles for officials, are being purchased abroad?

The most important part of this federal program should be a "commodity patriotism" educational campaign organized through the SMI [mass media] and public organizations. Today, few people know about even the high-quality domestic goods: our enterprises do not have "mad" money for advertising. Therefore, I would like to appeal to our broadcasting companies, both state-owned and private, to take a patriotic step at last: to allow the best Russian enterprises to advertise their products either free of charge or at preferential rates for, let us say, half a year.

I would like to call upon our regional and municipal authorities to establish in each city and in each region municipal stores, in which our domestic goods would be sold. Without the numerous add-ons and, thus, at lower prices affordable for the population. Such stores have already appeared in Moscow.

Organizational steps in this direction are being undertaken. The association, "Buy Russian Goods!," is being established in the capital city by the efforts of managers, entrepreneurs, politicians, the public, journalists, and advertisers and it is being called upon to protect our commodity producer. Founding conferences for its regional organizations have already taken place in Moscow and St. Petersburg. In line are Omsk, Kirov and other cities.

Incidentally, in the second half of the 19th Century, there existed in Russia the most powerful "Society To Assist the Flourishing of Domestic Industry," which was supported by the state in every possible way. Written in the first paragraph of its charter was: "The society has the goal of maintaining the examination and clearing of foreign goods being imported through customs." And the state carried out the decision of the Russian manufacturers without a murmur, understanding that this was to the benefit of Russia"s industry and, thus, Russia as a whole as well.

Has our own positive experience over a hundred years really taught us nothing at all?

In conclusion, I would like to turn to our citizens who are having a very hard time today. When each of you considers what to buy, think about the fact that you are the ones who are deciding the fate of Russia"s economy. If you buy a Russian product, then the money will go to a domestic enterprise and its workers will receive their wages on time. And then they will be able to pay the taxes and this money will go to the budget-funded workers and the pensioners. Who, in turn, will be able to buy your own enterprise"s products.

By putting the squeeze on importing, we will help each other and ourcountry.