KOMMERSANT: "REGIONS IN SEARCH FOR DEVELOPMENT WAYS"

One of the panel sessions of the current St. Petersburg economic forum (SPIEF) will be dedicated to creation of centers of economic growth in Russian regions. Correspondent of BG Vlada Gasnikova learned what had to be done for attraction of investments to Russian regions in the difficult time.
In accordance with formulation of description of this panel session by organizers of SPIEF, Russian government tries to encourage competition among the regions in the field of development of comprehensive investment projects that will allow attraction of international investors. Program of the forum says, "Formation of multi-industry economic clusters with participation of various companies for provision of mutual support in the process of general growth and development is now a condition for creation of dynamic business environment. However, only a few projects are ready for consideration by potential investors by now."
Elena Lashkina, press secretary of the Economic Development Minister, has reported to BG that a group of federal targeted programs aimed at development of the regions is being currently fulfilled in the country. Lashkina says, "The goal of the programs is creation of necessary transport, engineering and social infrastructure. Measures of these programs are partially financed at expense of the federal budget."
According to the Economic Development Ministry, in 2014 the federal budget allocates 22.3 billion rubles for fulfillment of the program of economic and social development of the Far East and Baikal Region (the program is intended for the period until 2018), it allocates 3.2 billion rubles for social economic development of the Kuril Islands (the program is intended for the period between 2007 and 2015), for development of the south of Russia (the program for 2014-2020) it allocates 4.67 billion rubles, for social economic development of Republic Ingushetia (program for 2010-2016) it allocates 4.93 billion rubles, for the federal targeted program for development of Kaliningrad Region (until 2015) it allocates 12.73 billion rubles.
Officials of the Economic Development Ministry call special economic zones the most important element of development of territories and cities in Russia. Lashkina says, "Mechanism of special economic zones allows formation of comprehensive plans for creation and development of modern infrastructure, attraction of private investments to Russian economy, creation of favorable conditions for running business, as well as new highly qualified working places. Comprehensive support of investors is provided in the framework of the institution of special economic zones through granting of tax allowances and customs preferences."
As of April of 2014, there were 28 special economic zones functioning on the territory of Russia. Six of them belong to industrial production zones (in Tatarstan, Lipetsk, Samara, Sverdlovsk, Pskov and Kaluga regions); five are technical implementation ones (Moscow, St. Petersburg, Tomsk, Dubna, Tatarstan), three are port ones (in Ulyanovsk and Murmansk regions and in Khabarovsk Territory), five are tourist recreational ones (in Republic Altai and Buryatiya, in Altai and Primorsky territories, in Irkutsk Region). A tourist cluster consisting of eight zones now was created at the end of 2010 and in March they were supplemented with a similar special economic zone in Chechen Republic. Besides, now the Economic Development Ministry has applications for creation of an industrial special economic zone in Vladivostok, tourist zone in Tver Region and in other subjects of the Russian Federation.
Officials of the Economic Development Ministry call creation of industrial special economic zone Moglino in Pskov Region where the zone is managed with assistance of Singapore-based company Jurong Consultants that has experience of development of projects in 46 countries and special economic zone Innopolis in Tatarstan where a zone is created inside of new Innopolis city examples of comprehensive approach to development of territories.
Lashkina adds, "In the framework of fulfillment of directives of the President the government is also currently working out creation of territories of outrunning development including preparation of the legislative base that makes provisions for peculiarities of their creation and functioning."
Uneven distribution
EMT Area principal of Stockholm School of Economics Russia Igor Dukeov states that centers of economic growth are distributed on the territory of the country unevenly. Dukeov adds, "Most often, they are created near a megalopolis because already existing infrastructure and resource base are used in this case. Centers of economic growth or territories of outrunning economic development like they are also called develop in the regions that can attract significant quantity of investments. According to this definition, economic conditions should be created for appearance of such territories first of all. After such conditions are created it makes sense to speak about marketing promotion of such territories that is, naturally, a mandatory condition for rapid development of such regions."
Marketing director of research consulting company Alt Roman Osipov said that in the course of one of the projects the company analyzed experience of long-term successful development of the regions: it detected the territories that outran other regions of Russia according to the speed of economic development and growth of the quality of life for five to ten years. Osipov said, "Several regions and their groups that demonstrated stably outrunning growth were singled out: first of all, these were oil regions growth of which was stimulated by development of oil and gas companies, namely Sakhalin, Tyumen and Omsk regions. Second, these were southern regions: Chechnya, Krasnodar Territory growth of which was stimulated by investments from the federal center. Third, these were Leningrad and Moscow regions growth of which was caused by high investment attractiveness due to closeness to the capital cities and correct use of this potential by local authorities. Finally, these were several regions development of which was based on efficient management to a bigger extent, namely Kaluga Region, Tatarstan, Belgorod Region and Perm Territory." According to him, Kaluga was the most interesting example of how a region has developed without any special natural advantages, mostly on account of efficient management and well arranged relations with investors and as a result of this managed to ensure long-term growth of the economy that was far superior to the average Russian one.
There is a potential
Analyst of managing company Finam Management Maxim Klyagin forecasts that taking into account specific of the Russian economy based on processing and export of hydrocarbons in the middle term role of the main drivers of growth will be retained by the regions that are the biggest suppliers of oil and gas revenues. Klyagin adds, "Diversification and development of non-raw material sectors of the economy definitely remains the most important task. In case of a favorable scenario in the middle term centers of growth will shift to big industrial and financial agglomerations, which is a typical picture for an industrial model of developing countries to which Russia belongs too with continuing active processes of urbanization. In the optimistic scenario development of the post-industrial model with decentralization and prevailing of the role of hi-tech and science-intensive industries and the highest value of human capital remains possible too on account of broadening of investments in R&D."
David Barkan, professor of the chair of marketing of the Graduate School of Management of St. Petersburg University, presumes that against the background of unfavorable investment climate it is necessary to think, first of all, about the points of growth in the regions that do not require significant investments that cannot be taken from anywhere now. Barkan says, "Talented startup businesses in the areas where serious investments are not required at the first stage and brains and Internet technologies are sufficient may become such points of growth."
Barkan calls improvement of climate for small businesses one of conditions for development of the regional centers. Barkan states, "At present, small businesses account for 12-12.5% of the GDP in Russia and in developed countries this share reaches 70-80%. Clever economic policy is necessary in the regions. Of course, it is impossible to abolish on the local level what has been approved on the federal level but in the regions it is possible to improve local conditions: to grant premises to businesses, as well as allowances for payment for public utilities services and improved connection to the infrastructure. In such case regions will be able to provide points of growth."
Roman Osipov presumes that regions that are remarkable for some competitive industries and companies or have natural preconditions for development in the form of natural resources, beneficial geographic location (transit, border, tourist) or historic factors have potential for outrunning growth. According to Osipov, another factor for possible economic development is presence of normal authorities and governance system in a region that has shown that it can manage resources efficiently and create opportunities for business like, for instance, in Kaluga Region. The analyst adds, "economic development in Russia is excessively centralized being excessively concentrated around megalopolises and Moscow, that is why it is worth thinking about decentralization of development."
Local experience
St. Petersburg and Leningrad Region that account for about 6% of the GDP of Russia in aggregate are among the most developed Russian regions and are traditional leaders according to some key social economic indicators. Together with Komi Republic and Archangelsk Region these two subjects are the key locomotives of growth of the economy of entire Northwest.
Klyagin from Finam Management characterizes these regions, "These subjects of the Russian Federation are remarkable for high business activeness, investment attractiveness, developed industrial sector and comfortable social indicators. Among the key competitive advantages are beneficial geographic location, developed infrastructure and transport logistic system that provides for big-scale foreign economic activity, big internal consumer market and high level of development of the social economic sector."
Osipov from Alt presumes that in the period until 2020 these regions need to focus on development of their strong points: smaller administrative regulation than in Moscow with presence of developed infrastructure and human potential. Osipov says, "This allows launching and development of business faster and cheaper, especially in competitive sectors. A perfect example of this is retail where all federal retailers come from St. Petersburg because in our city it has been possible to develop faster and the environment is much more of a market kind than in Moscow."
According to him, St. Petersburg and Leningrad Region need to focus on attraction, support and development of the business that is focused on the market competitive environment and not on administrative resource; on development of innovative sectors and on promotion of tourism, logistic and transport.
Dmitry Yalov, deputy governor of Leningrad Region for economy and investments, says that government of the region is working in several directions that concern investors. Yalov states, "First, this is creation of land plots with engineering preparation. The first question of an investor when it comes to a region is: where to accommodate the production facilities. It is necessary that supply of land plots be big, that their price be reasonable and that they have high-quality engineering preparation for accommodation of production facilities. That is why we treat this work with big attention: we prepare industrial parks at expense of the regional budget and we have worked out mechanisms for support of the private investors that create industrial parks on the territory of the region."
The deputy governor says that the second key limitation for investors is deficit of qualified human resources. Yalov explains, "We have entered the group of pilot regions where the project of the Ministry of Education and Science will be developed with participation of money of the World Bank for modernization of the regional system of preparation of human resources. One of the main ideas is implementation of a pilot dual system of education when students study for two or three days a week and have practice at a production facility for two or three days. We also take all main measures for support of investors: accompanying of investment projects in "one window" mode, available tax allowances and active participation of investors in work of the consultation bodies of the government."
Priorities of development of Leningrad Region are determined by the investment strategy until 2025: these are automotive industry, chemical and petrochemical industries, transport and logistic sector, production of construction materials, food industry, radiology and pharmaceutics. Yalov stresses, "Priorities can definitely be corrected but I need to say that we have not invented them. Development of the investment strategy was done taking into account the trends of development of Leningrad Region and with participation of experts and representatives of business from each sector."
He said that in the 1990s the region enacted a law on tax allowances on time, which allowed positioning of the region in a new way and creation of a good base of investors. The deputy governor reported proudly, "Now we corrected it in accordance with the new conditions. Time has come for work with investors in "one window" mode now. One of our know-how methods is fully functional system of land plots for investors. Unlike in other regions, in our region this integrated system is worked out in detail for hundreds of land plots. Besides, it is convenient and accessible for business."
Marketing to help the regions
International experience shows that marketing of territories can help development of a region significantly. In this case it is possible to divide marketing into two directions: b2c or consumer marketing aimed at the end consumer will be suitable for attraction of people to tourist regions. Osipov says, "In this case b2b marketing is arrangement of relations with investors, active work with them in other regions of Russia and abroad and propaganda of our capabilities and achievements including marketing of the region on the federal level, for the federal authorities that decide whose projects to support in a priority manner. Kaluga and Belgorod regions are illustrative examples of how the regions have managed to promote themselves very efficiently and to attract many investors, new projects and specialists."
Yalov says that people in Leningrad Region already see results of the regional marketing, "At least two regional investors from among the visitors of the "Investment portal" of Leningrad Region per week turn to our Agency of Economic Development. These are those whose projects the agency accompanies further."
The Agency of Strategic Initiatives of Russia has recommended the "Investment portal" of Leningrad Region to other regions as an example of successful work but Yalov remarks that marketing is efficient only in combination. The state official is convinced that "It is impossible to make only a good site or only to take part in shows and to receive a good marketing effect. It is necessary to act in all directions: to conduct negotiations, to visit industry shows, to organize investment presentations of the region, to participate in big shows and forums, to communicate with mass media and to develop the site. Only then all these measures in combination will lead to success."
Professor Barkan says that cooperation with the boldest foreign companies that would risk coming to Russia now is potential for development of Russian regions. Barkan presumes, "Marketing of Russian regions should be clearly directed abroad because, by and large, everyone is in a similar condition in Russia. Smart regional marketing does not require significant expenses: first of all, this is participation in foreign shows and forums under the slogan "Any war ends with peace." There are many people in the West who are ready to risk and for whom the boundless Russian market is interesting. If the regions have something to rely on like real ideas, scientific potential of the local higher educational institutions and startup businesses, it is necessary to start promoting themselves in this difficult time. This bold move will be at least appreciated abroad."
He advises formation of a team of regional marketers from clever people thinking in the same way who should mandatorily have brilliant knowledge of the English language. They will be able to determine a certain country for promotion of the region and will be ready for big work with business angels and risk funds.
As an illustration of big opportunities for Russian regions in the existing crisis situation Barkan quotes the statement of Konosuke Matsushita, founder of Matsushita Electric (Panasonic, Technics and National brands), "Good times are good but bad times are better."

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