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Localization of manufacturing with a pool of local producers of parts, feedstock and equipment clustering around a foreign enterprise, is a straight-forward way to promote import substitution. Examples in Russia include Siemens locomotive production, which has gathered about 100 Russian suppliers, and plants of Volkswagen, Peugeot & Citroën, and Volvo, having altogether formed an automotive cluster in the Kaluga Region. The Russian authorities are determined to roll out this experience to other regions and industries.
The expansion of cross-industry clusters is a priority of Russia’s industrial development strategy through 2035. Those are set to become the local powerhouses and drive socio-economic development, encouraging the growth of both large producers, and small and medium-sized businesses.
An efficient tool of the cluster economy is localization of manufacturing, which creates a pool of local suppliers around an enterprise with foreign equity participation.
An example is the Kaluga automotive cluster centred around Volkswagen Group Rus, Peugeot-Citroën Mitsubishi Automotive and Volvo.
Another successful example is Siemens.
The segment has a bright outlook as some promising projects backed by federal and local governments are in the pipeline:
However, some challenges are still there.