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By opening the trade borders we first of all remove protection from the Russian consumer

Vadim Dadyka, Director General of AtomSvet LLC: “By opening the trade borders we first of all remove protection from the Russian consumer”.

Many experts argue about the pros and cons of Russia’s recent accession to the World Trade Organization (WTO). Obvious benefits for domestic companies to expand their geographical presence on the global market get lost against the background of significantly increased competition. Each business sector is assessing its prospects and experiencing new difficulties in its own way. Vadim Dadyka, the Director General of AtomSvet LLC, told us how to consolidate a company’s position on the domestic market and what companies producing high-tech products do not have to look for abroad.

— Russia officially joined the WTO last month. What domestic companies can expect from this event?

— In terms of big business WTO accession is definitely positive. It removes the barriers, provides additional opportunities to raise funds in investment projects, and simplifies the import of modern technological equipment for production upgrading. Nevertheless, for medium-sized manufacturing companies the situation is ambiguous, and I think it will only get worse. Our company producing LED lighting fixtures is also in the group at risk.

Prior to WTO accession foreign manufacturers of LED products imported to Russia had to pay customs duty of 15-20%, which is now cancelled. This will hit the Russian manufacturers directly: cheap low-quality products from the Asia-Pacific region already present on the market will cost another 15-20% less. Thus, most consumers will make their choice in favour of cheap foreign products.

As a result, by opening the trade borders we first of all remove protection from the Russian consumer. Experts often wonder whether there is a need to protect the manufacturer. I believe there is not, in any circumstances: as soon as the manufacturer becomes protected, he starts to stagnate as there is no need to develop further. Still it is necessary and even vitally important to protect the consumer.

— How do you think the consumer can be protected?

— In Western countries there is a clear product certification system informing the consumer on product quality. Russia has planned the WTO accession for almost 20 years, but unfortunately the barriers preventing the flow of low-quality products after “opening of the borders” have not been established during this time. “Chinese” LED lighting fixtures already now dominate on the market.

They have extremely low performance. So if there is a decline in prices for such “energy-saving” products due to removal of import customs duties, a number of Russian companies will cease to exist at all. Unfortunately, they will not survive the price reduction in the market.

— How much time it will take to develop new quality standards?

— There is a very simple way. We may consider U.S. standard system as a model. It is clear, understandable and strict legally established standardization procedure. Perhaps, some prefer to purchase lower quality, but cheap products. It won’t be forbidden, but information about its low consumer qualities should be indicated on such product. There is a need for product ranking. Europeans, for example, were among the first to have introduced the energy consumption classification system for household appliances.

In their stores two washing machines or dishwashers of different energy consumption class stand together: the cheaper is labelled class “B” and the more expensive class “A”. Therefore, in Europe consumers have the right to choose, they are protected in this regard, while in Russia there is no such protection and regulatory guidelines have not been developed, because the buyer does not have fully objective information about products purchased.

— AtomSvet LED lighting fixtures are widely used by Russian enterprises. Are you afraid of advanced competitors from Europe?

— We have no fear, because our products are superior to European counterparts in a number of characteristics. Low energy consumption and automated lighting control system based on our company’s complex approach allows up to 75% of an enterprise’s lighting power to be freed up. Moreover, due to our developments AtomSvet LED lighting fixtures can reduce the loss of light by more than a factor of 2 compared with other energy-saving lighting fixtures. The cost of our products is very competitive due to sound local manufacturing content in Russia.

— Now it is easier not only to import, but also to export the products. Are you planning to enter the foreign market?

— At this point we are not looking look at external markets, as we believe the Russian market to be very large and promising. Still we do not reject the idea of supplying our lighting fixtures abroad in the near future. Recently we received a request for a project calculation from Germany. By conducting analysis and marketing research, objectively assessing our strengths we made a decision to obtain European quality certificates to supply products to the EU. The research showed that our products are much better than European ones in a number of parameters. The price is also adequate. So why not buy goods from us?

— Who can win on this growing market: Russian or foreign manufacturers?

— One of our researches has shown that the main motivation-sapping factor for our consumer is the lack of barriers for low-quality products import. We are talking about the lighting fixtures, stated performance characteristics of which do not correspond to the actual ones.

For instance, a businessman invests in the modernization of his enterprise’s lighting system and plans to save further by reducing energy consumption. But he purchases low-quality equipment that quickly breaks down, creates unexpected problems and leads to even higher costs. The same thing may happen with a state company.

Despite the fact that LED products are purchased through formal tenders and bids, it is difficult to exclude the low-quality product seller at once, because price is the priority. As a result, enterprises purchase cheap lighting fixtures, which soon fail and do not correspond to the claimed performance characteristics. The risk of getting low-quality products stops many people making the transition to energy-saving technologies. Therefore, the winner on our market will be the one, who can best combine efficiency and product quality.

V. V. Dadyka interview to be published in Money magazine
September 2012

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