Investment development of Russian regions backed up by natural monopolies

The article considers the issues of the relationship between business investment activities and the economic and social development of the regions. Based on the statistical data analysis it is shown that the decrease in investment activities negatively affects all key indicators of regional development after a short period of time. The article shows that a peculiarity defining Russian economy is that its significant part is actually controlled by natural monopolies. At the same time, they are strongly sensitive to all the problems of socioeconomic development of the country's territories and, therefore, are parties concerned in ensuring sustainable and qualitative growth of regional economies. Today many of the natural monopolies implement large-scale investment programs with allocated substantial resources. The analysis of these investment programs showed that they all contain components that contribute to the development of the region where the manufacturing facilities or transportation capacities of these companies are located. It is concluded that a systemic state investment policy aimed at stimulating real investments, rather than "portfolio" ones, is required to address the problem of sustainable economic growth.peer-reviewe

Russia's energy sector between politics and business

Contents: Jeronim Perovic, Robert Orttung: Russia's energy policy: should Europe worry? Russian oil and gas production. Russia's oil and gas industry in an international context (7-26). Part I Russia's energy policy: economic challenges and political strategies - Daniel Simmons, Isabel Murray: Russian gas: will there be enough investment? (27-30); Julia Kusznir, Heiko Pleines: The Russian oil industry between foreign investment and domestic interests. FDI and state ownership in the oil and gas industry (31-35); Susanne Wengle: Power politics: electricity sector reforms in post-Soviet Russia. Attitudes of the Russian public towards the privatization of UES (41-44). Part II Russia's new energy frontiers - Indra Overland: Shtokman and Russia's Arctic petroleum frontier (45-49); Nina Poussenkova: All quiet on the eastern front... (50-55); Elana Wilson Rowe: Regional influence in oil and gas development: a case study of Sakhalin (56-62). Part III Energy and foreign policy - Jeronim Perovic: Russian energy power abroad (63-66); Andreas Heinrich: Gazprom's expansion strategy in Europe and the liberalization of EU energy markets. Gazprom joint ventures, EU gas imports (67-74); Matteo Fachinotti: Will Russia create a gas cartel? (75-78); Yoshinori Takeda: Russia's new political leadership and its implication for East Siberian development and energy cooperation with North East Asian states (79-84). Part IV Ecological challenges - Roland Götz: Russia and global warming - implications for the energy industry (85-88); Petra Opitz: Energy savings in Russia - political challenges and economic potential. Russian CO2 emissions and energy consumption in international perspective (89-96)

From knowledge to wealth : transforming Russian science and technology for a modern knowledge economy

Russia possesses a sophisticated science and technology (S&T) infrastructure (research capability, technically trained workforce, and technical research universities) which, even today, is a world leader in many fields. Despite this world class basic research capacity, Russia's exports are primarily raw materials. At a time when wealth depends to an increasing degree on knowledge, Russia does not have an effective system for converting its scientific capacity into wealth. Russia's S&T resources are isolated bureaucratically (they are deployed in the rigid hierarchical system devised in the 1920s to mobilize resources for rapid state-planned industrial development and national defense), functionally (there are few links between the supply of S&T output by research institutes and the demand for S&T by Russian or foreign enterprises), and geographically (many assets are located in formerly closed cities or isolated science/atomic cities). Overcoming these inefficiencies and adjusting the S&T system to the demands of a market economy will require a major program of institutional and sectoral reform. Part I of this paper describes the ambiguous legacy of the Soviet S&T system and the status of the Russian S&T sector after 10 years of transition. Part II describes the evolution of the Russian system of intellectual property rights protection from Soviet times to the present and argues that Russia will never develop a successful commercialization program until it clarifies the ownership of the large stock of intellectual property funded with federal budget resources. Part III outlines a comprehensive 10-point sectoral reform program to improve the efficiency of government research and development spending and link the Russian S&T system with market forces.ICT Policy and Strategies,Public Health Promotion,Scientific Research&Science Parks,Agricultural Knowledge&Information Systems,General Technology,ICT Policy and Strategies,Scientific Research&Science Parks,Science Education,Agricultural Knowledge&Information Systems,General Technology

Basic Research in Russia: Human Resources and Funding

This paper describes the current status and recent trends of basic research in Russia, measured in resource terms. The extensive growth in the numbers of R&D institutions, researchers and investment until the late 1970s provided the creation of an extremely large R&D base which was greater in scale than most of the industrially developed countries. It firstly concerns substantial highly-qualified human resources which made Russia famous for considerable achievements in basic research and military-oriented technologies. The transition to a market economy has a strong influence on the resources of R&D in Russia. Changes in the objectives of economic, social, and political progress reflect in transforming the institutional structure of the economy, the fast growth of the private sector, the conversion of military industries, and the gradual integration of Russia into the world economy. These processes take place in conditions of economic recession, rapid inflation, a growing deficit of the state budget, a worsening social situation, and political instability. Further progress of basic research in such a critical economic situation faces significant difficulties which should be observed in order to formulate an appropriate policy in this area

Geographical Dimensions of Russian Energy Developments

For decades, energy production and use have been of primary importance for the economy of Russia and the former Soviet Union. These newest energy plans support the country's economic connections with the west and global economy. Many factors in energy production and logistics (and politics) promote the integration of Russia with Europe, and almost only with Europe. This economic connection between Russia and the EU countries seems to be profitable for both sides, as their economies are mutually complementary. The formation of such mutual interests causes new security configuration in the foreign policies of these countries. The former empire's parts bordering on Russia in the west, Belarus and first of all Ukraine, have become problematic due to transit payment conflicts. Consequently, the focus of logistic visions is geographically transferred to the north. Russian companies develop northern pipelines and ports as well as plan the construction of new oil and gas pipelines through Fennoscandia. On the other hand, these northern infrastructure plans are also a pure geographical coincidence, in the way that new oil and gas deposits lie in northern high-latitude zones. Logistic investments near the border regions of Finland are supported by the factor that the shortest way for gas (and partly oil) transportation to Central Europe is through the Baltic Sea area. Russian Energy plans bring about re-integration: Close cooperation between Russia and the European Union in the energy field can bring the former COMECON countries and the Baltic states, when they get EU membership, back into the energy system, from which they wanted to be separated ten yeas ago. It seems evident that the Russian Energy developments will have spin-offs to localities of the European North. How, to which areas, and to what extent is worth dicussing and elaborating on.

Reducing structural dominance and entry barriers in Russian industry

Many industrial firms in Russia have undergone changes in ownership, but relatively few have been competitively restructured. Using survey and other data, the author suggests that much of Russian industry is immune from robust competition because of heavy vertical integration, geographic segmentation, and the concentration of buyers and sellers, in selected markets. Moreover, regulatory constraints protect incumbent firms from competition with new entrants, both domestic and foreign. The author sketches a reform agenda for Russia's post-privatization program, which emphasizes the restructuring of anti-competitive structures and the reduction of barriers to entry. The author's proposed reform agenda calls broadly for strengthening Russia's nascent rules-based framework for competition policy to reduce discretion, increase transparency, and improve accountability.Markets and Market Access,Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Small and Medium Size Enterprises,Environmental Economics&Policies,Economic Theory&Research,Private Participation in Infrastructure,Small Scale Enterprise,Microfinance

The role of natural resources in fundamental tax reform in the Russian Federation

The Russian Federation has one of the richest natural resource endowments in the world. Despite their importance in the Russian economy, natural resources do not contribute as much as they could to public revenues. Large resource rents (excess payments, or above-normal profits generated by natural resources in scarce supply) are dissipated through subsidies and wastage, or appropriated by private interests. Failure to tax this rent means that taxes must be levied elsewhere (on capital and labor) to sustain revenues, thereby depressing investment and employment, or that potential revenues are foregone. Failure to reinvest rent means that Russia perpetuates the tradition of exporting low value-added raw materials and excessive capital outflows, and retards its transition to sustainable economic development. The author provides estimates of the average and total current rent on crude oil, natural gas, and round wood in Russia. The sum of appropriated rent on oil and gas was estimated at US$9 billion in 1999 (in excess of$15 billion in 2000), or about 18 percent of consolidated tax revenues. The appropriated rent on round wood was estimated at US$191-1,032 million. A more appropriatenatural resource taxation system would enhance the fiscal role of natural resources as well as create better incentives for resource conservation and environmental protection. Two conditions further reinforce the appeal of such a reform. First, the state still owns most of the natural resources, which theoretically facilitates change in resource pricing and taxation. Second, the cost of adjusting the tax system is relatively low at this time since Russian tax policy is undergoing thorough reform. Increasing rent taxation should be relatively straightforward since the system already exists. What mainly needs to be done is to differentiate the fees to reflect objective rent-generating conditions by withdrawing the rent and imposing higher taxes on profitable resource deposits. A seemingly desirable instrument-true differentiation of rental payments-does not exist in Russia despite legislative provisions that it should. Several natural resource taxes are specific taxes (set per volume), regardless of the market price or production cost. Such taxes favor profitable deposits and penalize marginal ones. The author's study should be given serious consideration in the renewed debate on tax reform and in the context of Russia's structural reform program. It is in line with the proposals of the new governmental economic strategy, particularly with boosting the share of natural resources in generating revenue and reducing income tax rates. The extra advantage to rent taxation and revenue recycling is that it would allow the government to lower the tax burden without leading to a budget deficit.Economic Theory&Research,Public Sector Economics&Finance,Payment Systems&Infrastructure,Environmental Economics&Policies,Banks&Banking Reform,Environmental Economics&Policies,Economic Theory&Research,Public Sector Economics&Finance,Banks&Banking Reform,Municipal Financial Management

Substantiating the Transformations in the Priorities of the Innovations and Technology Development of the Russian Regions amid the Global Crisis

The purpose of this research is to substantiate the necessity for Russia to adopt a neo-industrialization policy as a tool for overcoming the consequences of the global crisis. The research hypothesis assumes that the competitiveness of Russian regions in crisis conditions cannot be enhanced without transforming the regional innovation priorities with regard to modern science and technology developments, production demands for modernization and import substitution, and accelerated the formation of the high technology sector. The authors believe that one of the main reasons for the current structural crisis in Russia is ignoring the determining impact of the innovations and technology development on the country’s regional socio-economic systems as a whole. The verification of this hypothesis based on the analysis of the official statistics revealed a number of negative tendencies impeding the country in overcoming the crisis phenomena through accelerated development of modern technological paradigms: decreasing staff component and deteriorating quality of the Russian science, widening the gap between the financial support in Russia and developed countries, reducing opportunities for innovation business development, and a lack of motivation for manufacturers to engage in innovation activities. The authors substantiate the necessity to strengthen the state innovation policy for the recovery of Russia’s socio-economic situation. They propose a methodological approach to choosing the priorities of innovation support for the economic development of Russian regions based on a comprehensive review of the condition and challenges in the development of research potential, the region’s business environment, and its ability to master innovations. Calculations are made to assess the possibility of creating innovation activity centers in the Russian regions of various types aimed at increasing the specific weight of high-tech companies focused on the production of innovations to address import substitution and economy neo-industrialization tasks urgent for Russia. The authors developed their own methodology to evaluate the possibilities of forming various types of innovation activity centers in the Russian regions aimed at increasing the specific weight of the high-tech sector and creating domestic high-tech companies, and focused on the production of innovations to address import substitution and economy neo-industrialization tasks urgent for Russia. The article is addressed to innovation management experts.The article has been supported by the Russian Foundation for Humanities, Project № 14–02–00331 "Innovation and Technology Development of the Region: Assessment, Projections, and Ways of Progressing"