The issue of industrial competitiveness is especially important for Russia. The coming years will see continued cost pressure on enterprises’ inputs and further real exchange-rate appreciation, which will have to be matched by productivity increases. The 1998 financial crisis remains a vivid reminder of what can happen when productivity fails to increase in line with input costs or an appreciating exchange rate, rendering a country’s industry increasingly uncompetitive. Industrial competitiveness, however, is not only a general, but also a structural issue in Russia. The dual structure of the economy (see Chapter 1) means that productivity in a number of sectors, especially outside the natural resource industries, is still at levels that raise questions about their longer-term viability. It is therefore important ...