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The Reasons For Russia's Trade Woes Are Stowed Inside That DHL Package

DHL trucks in Moscow
DHL trucks in Moscow
Kirill Zhurenkov, Sergei Melnikov, Olga Filina

MOSCOW - There are four global logistics companies (DHL, FedEx, UPS and TNT) that are generally considered barometers of the global economy. They told of a crisis before it had engulfed the world, when international exchanges began to lag as trade was slowing down, and the price of shipping packages became cheaper.

That’s why economists are interested in these companies. And a study done by DHL last year has caught the attention of a lot of experts around the world: an index of global integration, showing which countries were open to globalization and which ones were closing in on themselves. The index took into account not only economic factors such as the movement of capital, but also non-economic factors, such as the quality of Internet connections, the number of international phone calls and the number of immigrants and international students.

It was a view into globalization from a, well, global point of view.

The most recent edition of the index came out just recently. It shows that global integration is not more than 20 percent for most countries in most categories, and that the difference between well-integrated and more isolated countries is wide. The Netherlands, considered the most integrated country, scored 88% integration on the index, while Burundi, the lowest, ranked 10. According to the study’s authors, that means that fears over globalization are probably exaggerated.

Russia, already low, dropped two places in the rating compared with last year, falling to 68th place in 2012. Russia isn’t able to break into the world's leadership in globalization not only because of a weak economy, but also because of bureaucracy, which can especially be a problem for logistics companies like DHL.

Off the grid

The study reports that major logistics companies complain about problems with the Russian customs systems, and the requirement that they gather hundreds of documents to transport even the most simple, everyday goods. This helps explain why in Russia global integration has been fueled primarily by private individuals who want to buy goods overseas and communicate with the rest of the world.

“Of course, the level of globalization in any country comes from the intensity of the country’s commercial and business contact,” explained John Pearson, general director of DHL Express in Europe. “But the sum of all private packages is also considered. In Russia’s case, that is fair. Russia’s e-commerce is very active, and people buy household items and clothes from overseas. Ahead of the holidays the private international packages send to Russia increases, which means that Russians buy gifts from overseas.”

But Russian experts say that if the country doesn’t solve its infrastructure problems, it is not going to be able to get around the problems with integration on a national level.

Anatoli Fedorenko, head of the department of logistical infrastructure at the National Research University, notes that the World Bank surveys rank Russia 138th in terms of the functioning of the customs service. "We’re 83rd in terms of the railroad system. For comparison, Ukraine and the Baltic states are close to the top of those lists,” said Fedorenko.

One problem leads to another - the low speeds required for commercial traffic on Russian roads means international road shipments comparable with Soviet times. There is also a technical problem: The railroads in Russia are slightly wider than European railroads, so European trains can’t run on Russian tracks, and train cargo has to be transferred from one type to the other in Belarus. The good news, though, is that recently a new project to extend “Russian” rails to Vienna was approved, as well as the construction of a special center in Vienna designed to transfer rail cargo from one type of train to the other.

“It’s easier in Europe - it’s united. But logitistics is also closely related to the economy," Fedorenko explains. "As long as we are sending raw materials to Europe, we only need pipelines, shiplines and railroads. And they’ll be building other things, too, like new roads and air cargo centers.”

Still, there is yet another connection that Russia is not doing so well with. According to DHL, the average Internet connection speed in Russia was 32 bytes per second, compared to 163 bytes per second in the Netherlands. Here, you can feel the difference.

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