Leveraging Comparative Advantages vs. Broad-Based Regional Development Strategies

Leveraging Comparative Advantages vs. Broad-Based Regional Development Strategies

Leveraging Comparative Advantages vs. Broad-Based Regional Development Strategies

The issues associated with the reliance of successful economic development of the Russian regions and improvement of their investment attractiveness and competitiveness on a variety of both subjective and objective factors were discussed at a panel session entitled ‘Leveraging Comparative Advantages vs. Broad-Based Regional Development Strategies’ on June 16.

The choice of a regional development strategy amidst new conditions is an urgent topic for the today’s regional economic policy of Russia.

Alexander Misharin, First Vice-President of the Russian Railways, pointed out that agglomerations development is a great challenge. The modern world is living the 5th–6th stage of economic development, while Russia is still in the 4th energy-oriented stage. According to the World Bank forecasts, quite soon around 80.0% of the developed countries’ population will be living in agglomerations. Russian transportation system is not just infrastructure but also a new quality level of population mobility, new technology and 5% higher labour productivity.

High-speed transport is a key development driver, which should be used the way it is done in Japan, Western Europe and China. China has over 20 thousand kilometres of high-speed rail roads and agglomerations of up to 500.0 million people.

According to Boris Dubrovsky, Governor of Chelyabinsk Region, we are now through with narrow specialization of regions. Today it can be preserved only in individual cases (Kaliningrad Region, the Far East and Primorye). Russian regions need comprehensive development. It is necessary to create all conditions for life and work there. For that end, comfortable conditions for business should be set up. Everybody in the world competes for brains. Even Academician Igor Kurchatov used to say: “We’ll build a theatre. If there’s no theatre, there’ll be no science. No science – no bomb!”

Vladimir Region was represented by its Governor Svetlana Orlova. Social infrastructure is being actively built. Investment has reached USD 80.0 billion. Innovative glass heat insulation and membrane water treatment technology are being developed. The Gus-Khrustalny plant has been reconstructed. Production of machinery of the 7th generation that leaves behind the Japanese analogues has been launched. High-professional staff is being actively trained. A cluster of the most advanced pharmaceutical production, including for oncological treatment, has been set up. The region is seen as very attractive not only by investors but also by tourists – tourist traffic grew by 800.0 thousand people per year in 2015.

According to Alexey Dumin, Acting Governor of Tula Region, Tula represents a traditionally strong sector of the Russian military industrial complex. Economy is being diversified by various lines with simultaneous active support of small and medium-sized business. The objective is to bring its share in gross regional product to 40%. Every region has its own way but the goal is the same.

President of OPORA Russia Alexander Kalinin informed the participants that every year his Non-Governmental Organization of Small and Medium-Sized Businesses measures business environment by four parameters: HR, sales, finance availability and readiness for investment. While the dynamics of the first three indicators are positive, the results for the business readiness for investment are going down. Business perception of the situation also differs from region to region. The most well-doing businesses are based in Moscow and Moscow Region, St. Petersburg, Tatarstan, Krasnodar Region and Nizhny Novgorod Region.

Aleksey Komissarov, Director of the Russian Foundation for Technological Development, reported that the Foundation had provided support to 94 projects. Six projects had been already completed in 2015. The key areas are: machine-building, pharmaceuticals, metal working and electronics. Most of the projects are implemented in Moscow and Moscow Region, St. Petersburg, the Republic of Tatarstan, Kaluga Region and Vladimir Region. The Foundation is actively working with Tula Region. Regional industrial development funds are also expanding.

Andrei Nikitin, General Director of the Agency for Strategic Initiatives (ASI), explained that the key distinction of leading regions from the rest lies in the ability of the regional head to define strategic development goals of the region for several years to come and organize work for accomplishment of those goals. Trust and understanding of goals is the key issue for any investor.

Jacek Pastuszka, Vice-President for Eastern Europe Region of Carlsberg Group, represented Baltika company that operates in eight Russian regions, and shared his Company’s positive experience of working on the creation of an agricultural cluster in Tula Region (malting barley cultivation and water treatment). He spoke for the adoption of balanced regulations that would take into account the Carlsberg Group’s negative experience of working in Chelyabinsk Region (the brewery was closed).

Andrey Sapelin, First Deputy Chairman and Management Board Member of the State Corporation Bank for Development and Foreign Economic Affairs (Vnesheconombank) informed the participants that Vnesheconombank is drafting a new operating strategy to fit the new conditions. According to Mr. Sapelin, regional economy needs to be diversified, and the best evaluation of business performance would be export capability at not less than 20–25.0%. The Bank has set up and successfully operates a Foundation for developing mono-industry cities.

Alexander Zhukov, First Deputy Chairman of the State Duma of the Russian Federation, said that the regions need to understand and define their competitive edge and choose their priorities. It should be neither narrow specialization nor broad-based development, but in any case some sort of cooperation based on the competition strategy of the region. “The winner is the one who wins the battle for human brains.” The Russian Federal Assembly has adopted appropriate laws that enable the regions to create a favourable investment climate and successfully develop.

According to Dominique Fache, Director of Sophia Antipolis Foundation, there is a need for a long-term strategy, to have education, culture and science. It is necessary to bear on the regions.

Ivan Fedotov, Acting Executive Director of the Association of Innovative Regions of Russia, Vice Rector of RANEPA, explained that regional economies surely need to be diversified, including on a cluster basis. This is a perfect tool for developing regions. There could be two-three specializations but not a hundred of them. Every region should apply a comprehensive approach in the matters of its development.

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