B. Dialogue business climate in russia

Foreigner: You represent the Independent Centre of Market Research, Mr. Pronin, don't you? What did the recent poll conducted by your centre reveal?

Russian: Yes, I'm head of our industrial research group. The poll you've referred to confirmed that in spite of the ongoing economic reforms the economic situation in Russia is still rather difficult.

F.: It is not surprising. You are having difficulties owing to the unavoidable problems which arose in the initial stages of transition to a market economy.

R.: That's right. The poll showed that the standard of living is worsening, the economic activity is sluggish, the industrial production is still falling and the registered unemployment is rising.

F.: But judging by your official statistics available, you've checked the drop in industrial production, haven't you?

R.: Yes, more than that. The tough monetary policy made it possible to curb the inflation, to stabilize the rouble, and to restructure our external debt.

F.: The most striking thing is that you restored and increased your hard currency reserves. So your enterprises seem to be adapting to the market conditions.

R.: That's true. However, those enterprises that wish to survive can't ignore limited demand owing to the drop in real incomes as a result of the liberalization in prices and the interruption of traditional trade links.

F.: I see. Did you include into your questionnaire any questions about export activities of enterprises?

R.: Yes, we did. Last year saw an increase in exports. The trend is continuing this year, which has given a boost to whole industries like ferrous and non-ferrous metal industries, and the fuel and energy complex.

F.: Has the poll revealed any structural changes in the country?

R.: Oh yes. A graphic example would be the service sector, including catering, banking, insurance and transportation businesses, which is developing very fast.

F.: The whole world recognizes the significant, I'd say, unprecedented progress Russia has made in implementing structural adjustment policies.

R.: It's nice to hear that. As the reforms continue, our society is undergoing drastic changes. The large-scale privatization has brought about private ownership which has caused the appearance of private property, the setting up of privately-owned businesses and the development of the non-state sector. Businessmen welcome the changes.

F.: Your emerging business needs support, I think. Are there any programmes to support business?

R.: Yes, we have quite a number of federal programmes to support small businesses and enterprises of different types of ownership which provide for tax benefits, information support and training of personnel.

F.: It looks like your business is beginning to play the role it plays in a market economy.

R.: Let's hope it's so.

Vocabulary list

A. wants потребности

economic resources экономические ресурсы

limited adj (зд.) ограниченный

scarce adj скудный, дефицитный, редкий

raw materials сырьевые ресурсы

labour resources людские ресурсы

labour force рабочая сила

entrepreneurship n предпринимательство

scarcity n недостаток, нехватка

save v копить, экономить, беречь

utilize v использовать

production of goods and services производство товаров и услуг

solution n решение

bring about v вызывать, приводить (к чему-л.)

economic growth экономический рост

employment n (зд.) занятость; занятие, служба, работа

stable prices стабильные цены

equitable adj справедливый

distribution n (зд.) распределение

revenue n доход (получаемый от сбора налогов)

social security социальное обеспечение

free enterprise свободное предпринимательство

market economy рыночная экономика

compete (with) v конкурировать (с кем-л.)

to make contact устанавливать контакты

to do business вести дела

allocation n распределение, выделение (ресурсов)

transaction n сделка

factor of production фактор производства

income n доход

countless adj бесчисленный, бессчетный

consumer n потребитель

producer n производитель

the law of supply and demand закон спроса и предложения

exceed v превышать

tend v иметь тенденцию act v действовать

to act on smb's/one's own behalf действовать по чьему-л. поручению / от своего имени

rationing device механизм распределения

price mechanism ценовой механизм

direct [d'rekt, da'rekt] v направлять

input ['nput] n вводимый ресурс

guide [ad] v направлять; определять

composition [ kmp'zn] n состав, структура

output ['autput] n выпуск, продукция

govern ['vn] v управлять, регулировать

market mechanism рыночный механизм

reflect [r'flekt] v отражать

consumer preferences ['prefrnsz] предпочтение потребителей

production costs издержки производства

determine [d't:mn] v определять

interaction [ ntr'kn] n взаимодействие

force [f:s] of the market фактор рынка

competition [ kmp'tn] n конкуренция

protect [pr'tekt] v защищать

benefit [benft] (from) v извлекать (получать) выгоду

economically [ ek'nmkl] adv (зд.) экономно

sophisticated technology [sfstketd tek'nl] сложная современная технология

to seek profits ['prfts] (зд.) стремиться получить прибыль

natural resources [ntrl r's:sz] природные ресурсы

freedom of enterprise ['entpraz] свободное предпринимательство

to be subject ['sbkt] to (зд.) быть подверженным, зависеть от

regulation [ reju'len] n правило, предписание

business cycle ['sakl] экономический цикл, цикл деловой активности

alternate [':ltnt] v чередоваться)

rapid expansion [ rpd ks'pnn] быстрое расширение

recession [r'sen] n спад производства

unemployment [ nm'plmnt] n безработица

economic policy [ eknmk 'pls] экономическая политика

fiscal ['fskl] policy бюджетно-налоговая политика

monetary ['mntr] policy кредитно-денежная политика

deal (with) v иметь дело (с чём-л.; с кем-л.)

challenge ['tln] n сложная задача, проблема; вызов

В. business climate ['klamt] деловой климат

represent [repк'zent] v представлять, быть представителем

market research [r's:t] маркетинговое исследование, исследование рынка

poll [poul] conducted by ... опрос, проведенный ...

reveal [r'vi:l] v раскрывать, выявлять, показывать

refer [r'f:] (to) v ссылаться (на)

confirm [kn'f:m] v подтверждать

ongoing ['lnou] reforms проводящиеся реформы

owing to ['ou t] prep из-за; по причине

unavoidable [ n'vdbl] adj неизбежный

initial ['nl] stage (первоначальный этап; начальная стадия

transition to a market economy переход к рыночной экономике

standard of living [stndd v 'lv] уровень жизни

worsen ['w:sn] v ухудшаться

sluggish ['sl] adj застойный, вялый, медлительный

registered unemployement [restd nm'plment] официальная (зарегистрированная)

безработица

judge v судить

official statistics available ['velbl] имеющиеся официальные статистические данные

check [tek] v (зд.) приостановить

drop n падение

tough [tf] adj жесткий

to curb [k:b] the inflation сдерживать инфляцию

to restructure the external debt [det] реструктурировать внешний долг

restore [r'st:] v восстанавливать

increase [n'kri:s] v увеличиваться)

hard currency reserves [hd krns r'z:vz] валютные резервы

adapt ['dpt] (to) v приспосабливаться (к чему-л.)

survive [s'vav] v выживать

ignore ['n:] v пренебрегать, игнорировать

real incomes [rl 'kmz] реальные доходы

following ['flou] prep после, вследствие

liberalization [lbrla'zen] in prices либерализация, высвобождение цен

interruption [ nt'rpn] of trade links разрыв торговых связей

questionnaire [ kwest'n] n анкета, опросный лист

trend n тенденция

to give a boost [bu:st] (to) стимулировать, дать толчок (чему-л.)

ferrous ['fers] / non-ferrous metals черные/цветные металлы

structural changes [strktrl 'tenz] структурные изменения

graphic example [ rfk 'za:mpl] наглядный пример

service ['s:vs] sector сектор услуг

catering ['ketr] n общественное питание

banking n банковское дело

insurance [n'urns] n страхование

to make progress ['prours] делать успехи, продвигаться вперед

implement ['mplmnt] v осуществлять, проводить

significant [s'nfknt] adj значительный

unprecedented [n'presdentd] adj беспрецедентный

structural adjustment ['stmnt] policy политика структурных преобразований

to undergo drastic ['drstk] changes претерпевать серьезные изменения

large-scale privatization [ pravta'zen] массовая (масштабная) приватизация

ownership ['оunp] n право собственности

cause [k:z] v быть причиной, вызывать

private property [ pravt 'prpt] частная собственность

privately-owned находящийся в частном владении

non-state sector (of economy) негосударственный сектор (экономики)

welcome ['welkm] v приветствовать

emerge ['m:] v возникать, появляться

small businesses малый бизнес

different types [taps] of ownership различные формы собственности

provide [pr'vad] (for) v предусматривать

tax benefit [ tks 'benft] налоговая льгота

information support [s'p:t] информационная поддержка

training of personnel [ps'nel] подготовка кадров

Phrases

to satisfy needs, wants

to distribute goods

to save resources

to produce goods, services

to utilize factors of production

to perform functions

to run enterprise

to conduct allocation of inputs

to choose policy

to pursue policy, functions

to repatriate profits вывозить прибыль

Small Businesses in Russia

Russia now has more than 900,000 enterprises, their number having increased to 5% in 1995. According to the State Committee for Statistics, small businesses accounted, in the first quarter of 1995, around 10% of the gross domestic product and their profits amounted about 20% of all enterprises. Small businesses employ 12% of the economy's work-force, or 8.1 million full-timers.

The Cassandra sociological service carried out a survey about the prospects of small businesses in Russia. In the opinion of 70% of businessmen questioned in the Cassandra sociological service, Russia's small business will develop to moderate rates this year; only 13% hope on faster development. This skepticism is due above all of the negative assessment of the country's financial condition given from71% of the respondents in regard to the development of small business. Only 1% of the respondents said these conditions were favorable, while 28% said they were satisfactory. In the opinion of 70% of the respondents, budgetary allocations to promote small business are not used effectively. There's no use hoping for any significant improvement in financial backing for small business this year, 59% of the respondents believe.

The businessmen also pointed out the inadequate role of banks. Forty-five per cent of the respondents believe credit institutions will participate financially in small business projects in 1996, while 31% believe their participation will not be active enough.

Words you may need:

gross domestic product (GDP) валовой внутренний продукт

moderate adj умеренный

respondent n респондент, участник опроса

inadequate role недостаточная роль

Economic Structure

In market economies economic systems are typically subdivided into three sectors. This subdivision is based in part on economic activities pursued and in part on the type of wants satisfied. The primary sector comprises basic activities, the extraction of economic goods from nature: agriculture, forestry, hunting and fishing, though the extraction of minerals frequently are assigned to the secondary sector which comprises handicrafts and industrial manufacturing of goods and certain material services such as fuel and power and the provision of water. Lastly, the tertiary sector consists of all final services: trade, transport, banking and insurance, public services, etc.

In this context it is worth analysing the development of British economy since the British were Europe's first industrial nation.

Anyone who has studied economics knows that in every country the first resource is land. Densely-populated Britain has not much of it, but until the 18th century England's economy had been based on agriculture and the manufacture of woollen cloth. In the late 18th century, the Industrial Revolution allowed Britain to become the first industrialized trading nation.

For 200 years manufacturing has been more important, but by the 1970s it was clear the Britain's old manufacturing industries were less progressive than the same industries in other Western European countries. Newer industries, such as car manufacture, were no better than the older ones like textiles. In general, the value of goods produced by a hundred workers had for many years increased much less than in West Germany. In some factories there were not enough new equipment; in others, new equipment was not being used efficiently. Many of the old industries were owned by the state.

After 1979, when Mrs. Thatcher's government came to power the nationalization process was reversed, many enterprises was sold off to the private sector. Many plants were closed and in a few years those which survived were no longer needing subsidies. New "high-tech" industries developed. Although manufacturing continues to play an important role, the number of people employed in manufacturing had fallen by a quarter in 1979-84.

Contrary to the secondary sector, the service industries expanded. More than half of all working people, whether employees or self-employed, are now providing services, working for schools, hospitals, social services, in public administration, in finance, banking, insurance, advertising, catering and entertainment.

Another recent change has been in the growth of self-employment. During the 1980s, the number of people working for themselves, and not as employees, had risen by half, from two million to almost three million, or more than one-tenth of the whole working population. This development were encouraged by the government through training courses and tax incentives.

Words you may need:

handicraft n ремесло

tertiary sector третичный сектор экономики (сектор услуг)

The Market System

The modern market economy is populated by three types of economic agents, whose ­­­­­­­interaction constitutes economic activity: consumers, producers, and the government. The main social purpose of the economy is to produce goods and services for the satisfaction of the needs and wants of consumers.

Consumers, typically, represent households that provide labour, and other factors to produce against an income which they use to purchase consumer goods or to save.

Producers, typically, represent enterprises or firms that acquire factors of production, or inputs – labour, land, and capital – from households and combine them to produce outputs, or commodities which can be classified into goods – tangible commodities – and services. The activities of firms move around the sale of their output at a profit.

The third basic element, the government, is involved with the economy, on the one hand, as a producer and consumer and, on the other hand, as a regulator, supervisor and promoter of economic activities.

The economic agents are engaged in a complex web of transactions involving factors of production and outputs. However, the volume of the commodities that can be produced and purchased is limited by the scarcity of resources. This fact has two important consequences as regards economic decision-making:

a) the utilization of resources has to be efficient. In terms of the welfare of economic agents, the utilization of resources is efficient when every opportunity has been exhausted to make some individuals better off without hurting the interests of others;

b) individual economic agents and society as a whole cannot simply use more, they have to make compromises between alternative uses.

Given these constraints, consumers, producers, and the government have to make rational decisions over available resources. Rational decisions reflect choices that draw maximum profit from given resources or obtain desired results with the minimum efforts or cost.

Words you may need:

constitute v составлять

household n семья, семейная единица

acquire v приобретать

tangible adj осязаемый, материальный, реальный

supervisor n контролер

promoter n лицо, содействующее какому-л. мероприятию

complex web сложное сплетение

welfare n благосостояние

to be exhausted (зд.) быть использованным

to make smb better off (зд.) поставить кого-л. в более выгодное положение

constraint n ограничение

Economic System

The functions of an economic system may be defined as follows:

a) to match supply to the effective demand for goods and services in an efficient manner;

b) to determine what goods and services are to be produced, and in what quantities;

c) to distribute scarce resources among the industries producing goods and services;

d) to distribute the products of industry among members of the community;

e) to provide for maintenance and expansion of fixed capital investment;

f) to fully utilize the resources of society.

Depending on how decisions are made and how the above functions are fulfilled different economic systems can be singled out. Many countries like Britain, Sweden, and France operate a mixed system (mixed economy) splitting the economy into public and private sectors.

In Britain, for example, about two-thirds of the economy and about five-sixths of commerce is conducted by private firms. The remainder of the activities of the economy are conducted by socially-owned enterprises. Some, like the Army, Navy, and Air Force, are clearly the sort of institutions that the state itself should control. Others have tended to be performed by the state because they are non-profitmaking, and as such are unlikely to be attractive to businessmen. Such activities as education and medical care are best operated as socially provided amenities for the benefit of all citizens.

In the commercial field certain goods and services are by their nature monopolies. Among these natural monopolies are gas, electricity, and water supply. The capital costs of such enterprises are too great for competition to be possible.

Transport is another natural monopoly. It would be uneconomic to run two railway lines from one place to another, or two different sets of half-empty buses along a country road.

These natural monopolies have, for economic, political, or social reasons, come to be run in the United Kingdom by nationalized institutions, or the municipal authorities, who provide the services required at reasonable prices.

Words you may need:

match v приводить в соответствие, выравнивать

effective demand действительный (фактический) спрос

maintenance n поддержание

fixed capital investment вложения в основной капитал

depending on prep в зависимости от

to single out выделять, выбирать

mixed adj смешанный

to split (into) v делить, дробить

non-profitnmking некоммерческий

amenities удобства; обслуживание

natural monopoly естественная монополия

capital costs капитальные затраты

Foreigner. Western businessmen used to complain that they couldn't work widely in the Russian market first of all because the forms of business organization were not developed. How do things stand these days?

Russian: The situation is different now. The ongoing reforms have drastically altered the environment in which Russia's enterprises are operating now.

F.: True. The massive shift you are making now from a command to a market economy is really unprecedented.

R.: You are right. Liberalization of economy, restructuring of production sectors, an extensive privatization programme have brought about real changes and led to the creation of types of business unit accepted throughout the world.

F.: You mean that now your businesses operate as partnerships, cooperative societies, and joint-stock companies.

R.: Yes, let me give you just one example. Like in the West, we have now two types of partnership. General partnerships with partners bearing joint and several liability for debts and wrongdoing and limited partnerships that include one or more general partners who bear full liability and run the business, plus one or more limited partners, who bear limited liability. They do not have a voice in the firm's day-to-day management, they are in much the same position as shareholders in a corporation.

F.: Now that you've mentioned corporations, do they play an important role in your economy?

R.: Yes. Like in the West, they exist as independent legal entities with the capital divided into shares. The liability of shareholders is limited.

F.: Your practice here fully coincides with Western principles. Creditors or people bringing lawsuits against corporations can make claims against the assets of the corporation only.

R.: Yes, limited liability is the biggest advantage of this form of business organisation.

F.: Our businessmen when floating a company, sign a memorandum of association, then they draw up articles of association and submit them to the registrar of companies issuing a certificate of incorporation. Is the procedure of registration complicated here?

R.: No, the procedure is similar to what you've said, and after the registration our companies can also do all the legal things like own property, employ people, sue and be sued in the courts and so on.

F.: All businesses seek profits. But in any market economy there is a certain number of business units which are non-profitmaking and are formed to confer certain benefits upon their members.

R.: You mean cooperative societies, don't you? Yes, we have such voluntary associations based on membership.

F.: Well, another point ... In market economies such activities as supplying gas, electricity, and water are conducted by state-owned enterprises. How about Russia?

R.: Natural monopolies including transport are controlled by the state in Russia, too. Besides, many other activities are conducted by socially-owned enterprises. For example, we have introduced a new form of unitary state enterprises.

F.: What's the idea?

R.: Such enterprises have no right of ownership of the assets. Assets are assigned to such enterprises to be used for economic activity.

F.: It's an interesting form. And how can foreign firms participate in Russian business?

R.: Oh, now it can be done in many ways which are stipulated by our legislation.

F.: If I'm not mistaken, in spite of all your reforms your legislation is still rather complicated.

R.: Yes, that's true, foreigners wishing to enter our market often have to take advice on legal matters.

Words you may need:

complain v жаловаться

forms of business organization формы организации бизнеса

alter v изменять, переделывать

command economy командная экономика

partnership n товарищество

cooperative society кооператив

joint-stock company акционерная компания

general partnership полное товарищество

liability n ответственность, обязательство

to bear joint and several liability нести солидарную ответственность

wrongdoing n незаконные действия

limited partnership коммандитное товарищество (товарищество с ограниченной ответственностью)

general partner главный партнер (с неограниченной ответственностью)

limited partner коммандитный (пассивный) партнер (с ограниченной ответственностью)

shareholder n акционер

share n (зд.) акция

legal entity экономический субъект

coincide v совпадать

to bring a lawsuit against smb возбудить судебный процесс против кого-л.

to make a claim предъявить претензию

assets n активы

to float a company образовывать акционерную компанию

memorandum of association учредительский договор

registrar n регистратор

certificate of incorporation разрешение на создание корпорации

to sue and be sued in the courts искать и отвечать в суде

confer v присуждать, передавать

In 1992 the economic situation in the Russian Federation continued to be very difficult, owing to large macroeconomic imbalances and to the unavoidable difficulties arising in the initial stages of the transition to a market economy. Nevertheless, significant progress was achieved in implementing structural adjustment policies in some areas.

Real GDP and industrial production are estimated to have dropped by 19 percent in 1992. Oil extraction fell by 15 percent, while the output of natural gas remained unchanged; agricultural output fell by 8 percent. The fall in output reflected a number of factors, including the decline in demand associated with the drop in real incomes following the liberalization of prices in January 1992; the short-run effects of the economic transformation; the interruption of traditional trade links with the countries of the former Council for Mutual Economic Assistance (CMEA) and the states of the former Soviet Union; and cutbacks in investment and military spending.

Monthly inflation rates began to decline after the jump in prices associated with price liberalization in January 1992. However, this trend was reversed around midyear and between October 1992 and March 1993, monthly inflation rates were between 20 percent and 30 percent. Between the end of 1991 and end of 1992, consumer prices increased by over 2,300 percent. The acceleration of inflation after midyear reflected a substantial loosening of financial policies. Real wages dropped sharply in connection with the liberalization of prices, but recovered somewhat in the course of the year and at year-end stood at 90 percent of their 1987 level. Registered unemployment remained low.

Words you may need:

macroeconomic imbalances макроэкономические диспропорции

are estimated to have dropped по предварительным подсчетам, сократились

oil extraction добыча нефти

short-run adj краткосрочный

cutback n снижение, уменьшение, сокращение

spending n расходы

reverse v поворачиваться в противоположном направлении

acceleration n ускорение

loosen v ослаблять

recover v (зд.) восстанавливаться