Theoretical Basis for Composition of Economic Strategy for Industry Development

Abstract

1. Introduction Machine-manufacturing industry, just like other sectors of the Russian economy, is in a situation of permanent influence of long-term systemic challenges that determine not only the global trends, but also internal destabilizing factors. Both financial and political crises have had a negative impact on the economy as a whole, but the industry is a kind of framework of the national economy, which is based on the defense and aerospace industry, and a number of other strategically important industries and areas of production. Also high level of development of machine-manufacturing and engineering industry helps to solve the problems of economic and social character, due to spillover effect. The role of the engineering industry for the country is further enhanced by the solution of such complex tasks, as import substitution, the reform of the military-industrial complex and modernization of manufacturing industries. Thus, the aim of our research is to develop adequate current realities of the economic development strategy of the machine-manufacturing industry, taking into account all the problems as well as offering a balanced solution to them. 2. Base part of research The above challenges necessitate the development of the economic development strategy for the industry, including its long-term investment plan. Challenges can be roughly grouped into the following categories: 1. Strengthening of competition on the global machine-manufacturing market. Prior to the 1990s, the leaders of machine-building were countries such as the USA, the USSR, Germany and Japan (Budik and Schlossberger, 2015). However by the 2000s the picture has changed dramatically, the place of undisputed leader in the production of machine tools was transferred to China, followed by Japan, Germany, Italy, South Korea and Taiwan. Japan, Germany and Italy dominate the production of the most complex and sophisticated machinery. According to Eurostat, the United States went down to 7th place in the world, and Russia is now 21st (Kondratiev). Nowadays, the mechanical engineering and metal processing account for about 20% of the total volume of industrial production in Russia, and the annual turnover of the industry is more than 55 billion US dollars. For comparison, in the US, Japan and Germany the share of engineering products as the total industrial production is around 36-45% (Zavalko). According to forecasts composed by IMF World Economic Outlook for 2025 the top producers will the countries that are now developing, with China, EU, USA and Japan still retaining the leading positions. The total volume of machine-building production will increase by 2025 to reach $ 930 billion, corresponding to an annual growth of 3.8% (Kondratiev). 2. New wave of technological changes in the industry, reinforcing the role and importance of innovations (Dasanayaka and Sardana, 2015; Giannarakis, 2016). A new technological foundation is being formed, based, on utilizing IT and nanotechnology. Each year the US invests, on average 2-2.5% of GDP on scientific research in the sphere of manufacturing and engineering, and in the EU countries this proportion is 3% of GDP. In the US, the share of state financing of engineering projects can reach up to 50%. Given this, the process of adapting the achievements in the military and aerospace industry is then carried out. Germany has also carried out a series of reforms to renew the manufacturing sector, financing the operation through effective fiscal policy. Currently, every third manufacturing plant in Germany is considered innovative, with two-thirds of total engineering production being exported (Zavalko). 3. Increase in importance of role of human capital as the main factor of economic development, the deficit of qualified engineering workers, aging and deterioration of the qualitative composition of staff. 7-10 years ago, this given problem was attempted to be solve by trying to attract foreign staff, however foreign top-managers were not able to solve all the internal problems of the industry, due to not being familiar enough with Russian specifics (Sayfieva, Ermilina). …