that still reflects political decisions instead of economic efficiency 1.
Companies grew up at locations that were determined according to political and security considerations - not by the concept of the efficient economic geography. Company units were often too large in terms of productive capacities at a given stage of the value chain, but too small in terms of presence and capability across the value chain.and with it demand patterns also reflected political decisions, not individual choices. With citizens strongly influenced to live in the far north and east as well as in rural regions and smaller cities, a substantial population reallocation was inevitable 2. Greater urbanization has important potential economic and social benefits for Russia, but the transition will be painful. s Soviet past, however, left the country with important assets that it can build upon. The general skill level of the population is high, and education is held in high respect. The science system consists of a large number of research institutions employing a significant number of highly educated scientists and engineers, especially in natural sciences and technologies related to military uses. The basic physical infrastructure of the country also provided a good base to build upon, though it is now increasing inadequate., Russia s early steps towards economic reforms, especially the privatizations of the mid - 1990s, has left the population with a deeply cynical and biased view of the market economy. In Russia, the market economy has become associated with private monopoly, not competition.ownership and wealth are seen as the result of political connections and criminal behaviour, not entrepreneurship and value creation. This is one of the reasons why the population is strongly in favour of government actions that intervene and reign into the power of business. Unfortunately, there is little public support or pressure for the government to create more room for private entrepreneurship or ensure equal treatment of all companies.
Geography
Russia s huge geographic area creates the need for effective regional governance structures to improve the business environment at lower levels of geography. s location between Europe and Asia puts it in a potentially beneficial position alongside major trade routes. However, the inaccessibility of Russia as a transit country in the past and the weaknesses in its current business environment has left this opportunity untouched. Most global trade flows are far away from Russia. Russia is also a country with only a limited share of its population in coastal regions that could easily connect to the global economy. s neighbours are largely former Communist countries that share many of the same challenges that Russia is facing now. But Russia also borders to the European Union (through borders with Finland, the Batiks, and - through Kaliningrad - Poland) and China; countries offering interesting economic opportunities if Russia can take advantage of them. So far, relationships with neighbours have been mostly negative instead of seeking opportunities for win-win economic collaboration.
Natural Resources
Russia s significant natural resource wealth has facilitated rapid wealth extraction but created political and economic challenges. Russia s oil exports per capita were at $ 935 in 2005, and oil production per capita at about $ 1290 3 .has proven reserves of about 74m barrels oil (6.5% of total global reserves) and 48trill m2 natural gas (equivalent to 300m barrels oil; 26.7% of total global reserves), 4 and these reserves represent an annual value of $ 3,900 per capita for the next 50 years assuming an average oil price of $ 75 and a stable population.level of resource wealth is substantial, and has fuelled a boom since 2000. However, even this level of resources will not itself make Russia a wealthy country.the same time, economic volatility, due to unpredictable changes in world commodity prices and upward pressure on the real exchange rate, can easily undermine business investment and the emergence of a vibrant private sector outside of natural resources., natural resource wealth of this size creates huge incentives to capture and utilize the power and wealth that resource abundance provides, putting pressure on Russia s fragile political structures and government institutions.
2. Russia s microeconomic environment
2.1 Engendered structural dominance
the national level, the degree of concentration of industrial output in Russia does not indicate that the lack of competition is a structural problem. The four-firm concentration ratio 5 many industries aver...
