Russian needs new economic growth drivers

27 march 2018

"We've come to a new stage in the development of our regional policy, which means we need to improve our interdepartmental and interregional coordination and analyze the implementation of state programs - not just in the context of specific industries, but also in the context of specific regions," - said Deputy Head of the Analytical Center Mikhail Pryadilnikov, opening the round table entitled New Geography of Economic Growth.

At the same time, any federal agenda must draw on the specific economic growth potential that exists in the regions. Unfortunately, systemic studies of the regional economic growth factors and the development of economic links between the regions won't be enough. We've attempted to fill this gap, and have joined forces with the World Bank to draft a report assessing the economic potential of the Russian regions and how these capabilities can be used in the most effective fashion

"We've analyzed the Russian regions in terms of their economic growth potential and have come to understand that some of the federal subjects far exceed their estimated economic development potential while others are performing far below it. In order to rectify this situation, the regions need to share the experience and knowledge they have gained by holding various events and discussions," stated Country Director and Permanent Representative of the World Bank in Russia Andras Horvai.

According to Dmitry Sivaev, a World Bank urban development specialist, the economic potential is the level of productivity that a regional economy can achieve in principle based on its fundamental structural characteristics. In his opinion, Russia needs new economic growth drivers, which it can find by analyzing the diverse trends of regional development.

The report identifies four priorities for the federal center, Mr Sivaev noted. "First of all, agglomeration effects need to be minimized. After all it's in the large cities that we're seeing the highest level of productivity, but we don't have many large cities, so the hierarchy of cities is greatly distorted in Russia," the specialist said. In the meantime, the urban heirarchy is being corrected primarily through sub-urbanization. According to Mr Sivaev, we need to start working on the creation of large and dense agglomerations to offer comfortable living conditions. The second priority is related to investments, the third one is the development of high-tech sectors of the economy, and the fourth is the development of human potential. Even though Russia was in a very good place in this respect initially, it is now beginning to lag behind on quality of education and human potential for innovations," the expert explained.

In Mr Sivaev's opinion, the role of regional governments in local development should not be underestimated. The regions must look for ways to expand their own capabilities, maximizing the use of their tax authority and creating a broad coalition with their local business communities. "It's very important to utilise the best practices of regional development. Attracting investors, creating development institutions and effective use of state programs are already bearing fruit. Improving the business climate, the reform of oversight and supervision and implementation of measures to support small- and medium-sized businesses are going to translate into tangible progress in the future," the specialist summed up.

The experts also believe that it is necessary to pay more attention to the development of infrastructure, public spaces and urban services, as well as encourage coordination between municipalities within agglomerations.