WHAT IS A GOOD

PROJECT?

R E G I ON A L D

E V E L O P ME N T

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ПРЕЗИДЕНТЕ РФ -20121

PROFESSOR CAROL SCOTT LEONARD PRANEPA, CO-DIRECTOR, CENTER FOR

RUSSIAN STUDIESFELLOW ST ANTONY’S

COLLEGE, OXFORD UNIVERSITY

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OUTLINEMulti-level Governance: Age of

ExperimentationChallenges for regionsExperimentation as a Way of Governing

The example of KalugaWhat is a Successful Project?

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MULTI-LE

VEL

GOVERNANCE

A G E OF E

X P E R I ME N T A T I O

N

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MULTI-LEVEL GOVERNANCEEvolving Patterns

Regions, previously ignored, now central totheorizingHistorical industries and new sectors Traditions of governance evolving, TaylorismdecliningGlobalization of Trade and Information

Current Era: one of Experimentation

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DECENTRALIZATIONUS and Germany:Regions acquiring greater authority over

programsCoordination between Federal and

Regional levels for cross-border issuesSustainability policies: they work better at

the regional levelAt all levels: Integrative policy approaches

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ISSUES FOR REGIONS: THE ENVIRONMENT IN THE US• Environmental issues previously

resolved at the Federal level now allocated to regions

• State spending grew far faster than Federal Spending

• From 40% in 1980s to 60% of programs now at state level; states spend twice the amount

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EQUALIZATION OR GROWTH:THE TRADE-OFF IN REGIONAL POLICYFederal and Regional programs

Some fiscal transfers for welfareSome sectoral policies Some competitive pressures

Multi-level planning is criticalMake up for regional differences in capacity for solving problems, capacity for learning new routines, economic advantages

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BOTH GOALS IMPORTANTChoices require flexibilityThe answer tomorrow may be different from

the answer todayIs the answer going to help govern better?

I.E.:Does the answer promote learning, is it

incentive compatible with growth, is it incentive compatible with multi-level cooperation

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REGIONAL/FEDERAL PROGRAMS MUST BE COORDINATEDCanada, Austria and Switzerland, among

federations, have the greatest difficulty coordinating regional and national planning

US and Germany are more successful, there is more devolution at planning stage and more federal support for local plans

New: Multi-level regulation, combining positive hierarchical coordination with innovative and competitive regional policies

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MANY FEDERATED STATES ARE RELATIVELY CENTRALIZED

Tax collection almost entirely centralized for efficiency (mobility of the tax base and tax composition within the country)In Russia—lack of trust in fairness and organizational capacity of the regions; an effort to increase tax discipline

Legal and administrative affairs are centralizedSpending (via transfers) is largely targeted funds

Who decides what to target?

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CENTRALIZATION TENDENCIES

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DIFFERENT COUNTRIES DIVERGECanada allocates decision-making

downward (except not to municipalities)The principle is adaptivityProfit tax is federal, but provinces can add to it

The chart below shows how this has evolved:

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RUSSIAN FEDERALISM: EXPERIMENTATION

Centralized Soviet command economyDecentralization in the early 1990sRecentralization in late 1990s, vertical imposedPost 2012 re-decentralization

The 83 Regions:

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RUSSIA’S FAST ADVANCING REGIONS:

MOST = NEXT =

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WHY MANY COUNTRIES STILL FOLLOW CENTRALIZED MODELRegions can be greatly influenced by interest groups,

and devolution can lead to extreme inequalityRegional interests can dominate over classic views of

efficiency (example—regions in Canada resist the VAT)

Also, provincial voters can be unsure about trade-offs (education vs health care—young/old voters)

Also, this system is expensive: Russia is still moving toward an improved administration

But regions may eventually acquire the profit tax revenue

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DISTRIBUTED GOVERNANCET R E N D S

State (polity=C) has shrunk

Society (society=A) has expanded

New actors link all three

Policies are shared Technologies “co-

evolve”

B O U L D I N G T R I A N G L E

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EXPERIMENTAL GOVERNANCE

Supple public and private organizations

Capable of regularly redistributing responsibility according to the nature of the task rather than on the basis of a rigid authority structure.

Spontaneous determination of the most appropriate level for wielding power and taking responsibility

Weakening the attribute of most prevailing governance systems--hierarchical or top-down methods for determining goals and means

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CHALLENGES FO

R

RUSSIA’S REGIONS

K E Y I SS U E S

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REGIONAL GENERAL ISSUESWaterElectricitySewagePoliceRoadsEducationCare: disabled, elderly, unemployedEmergencies: floods

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SPECIAL ISSUES

Diversification in energy abundatnt regions Ecology-Exploration Trade-off in ArcticAgricultural infrastructureDrought and FloodTransportationOne-industry TownsCorruption and Trust

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EACH SPHERE HAS BUNDLE OF TASKS

For example, Human Resources

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HUMAN RESOURCESMust be approached by:

Multi-level governmentNew technology (digitalization of records)Training for E-governmentYouth programs (Tatarstan!)

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DROUGHT IN RUSSIA

’S

SOUTH

What is

the answ

er?

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DROUGHT MANAGEMENT WILL DIFFER

In Rostov, Volgograd, Stavropol and Kalmykia Republic (South)

Saratov, Orenburg (Volga federal district)

Kurgan, Chelyabinsk (Urals) Kemerovo (Siberian federal district)

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DROUGHT MANAGEMENTCaused by combinations of meteorological, hydrological

and storage water deficiencies: long-term response Surface water storage: on and off-stream storages. Groundwater Re-use: treated sewage and grey water. Storm water: for treatment and supply by water authorities. Networking systems: transfers of water within and between

basins which were previously independent harvesting and supply systems.

Rainwater tanks Dead storage pumping: water contained below conventional

offtake levels. Cloud seeding: a potential long-term measure, previously

undertaken by the CSIRO to stimulate rainfall from suitable cloud formations.

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FLOODING

Federa

l , Lo

cal a

nd Region

al Inter

actio

n

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REGIONAL PROJECTS FOR FLOOD MANAGEMENT

Stormwater Flood Management Grants to manage stormwater runoff to reduce floodingGroundwater recharge, water quality improvements, ecosystem restoration benefits, and reduction of in-stream erosion and sedimentation.

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FLOOD MANAGEMENT: REGIONAL AND LOCAL

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EXPERIMENTAT

ION

A S A W

A Y OF G

O V E R N I NG

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WHAT SEEMS TO WORKIdeas from other transition

countriesIdeas from the EUIdeas from Russia’s own experience

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ANSWERS EMERGINGRegions as “Investment Machines”• Coordinated policies toward inward

investment• Combined efforts by Regions, State,

Localities• Good government • Predictability• Trustworthiness

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ANSWERS FROM RUSSIA: LEADERSHIP

In the 1990s, right resources seemed to be the answer (no military industries)

Now it is clear that the right leaders is the answer

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THE KALUGA JO

INT SUCCESS

Spilling ov

er with

succe

ss

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FEDERAL AND SUBNATIONAL EFFORTPro-Investment Strategy

Begins 2006Results staggering:

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STARTING POINT: 1998Location: • Along Moscow–Kiev motorway, backbone of the spatial

economic organization • Proximitiy to Moscow (170 km)Regional economy • Military-oriented (one/half employees in 1980s)• Machine-building• Production of transportation and related equipment (mainly

for railroads), • Science, nuclear physics research Russia’s First

Nuclear Reactor: in Obninsk (106,000 population)

• Few natural resources (some ag, timber, logging) • Wood-working and paper industries

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THEN DECLINE, THEN GROWTHIn 1990s, output shrank by almost 60%

After 2006, it began to grow far faster than Russian average

As next figure shows* *Dmitry Zimin, “Promoting Investment in Russia’s Regions,”

Eurasian Geography and Economics, 2010, 51, No. 5, pp. 653–668.

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WHAT HAPPENED?“Investment Promotion Machine” as in

Central European States• Foreign involvement does not always produce

wealth (financial gap, no spillovers)• Require consensus among political and

economic elites at national/regional/local level• No single project can do it• Requires stable, predictable and honest

government• Greenfield investments work best

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KALUGA PROJECTS (2005-8)WITH FEDERAL SUPPORT

• Public funds invested in industrial parks (techno-parks)

• Public funds invested in transportation infrastructure (Federal investment in Moscow-Kiev motorway connecting Kaluga/Obninsk with Moscow

• Investment financed by borrowing (new corporation)

The Russian Detroit

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PUBLIC AND PRIVATE PARTNERSHIPTECHNOPARK “VOLVO-VOSTOK”

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INDUSTRIAL ZONES• Created four industrial zones

(linking Kaluga, Obninsk with businesses)

Public funds reconstructed them, then carefully sold to private investors• Created One-stop shop for

investors (Kaluga Regional Development Agency)

Helped investors with permissions (environmental, safety), services, meetings with public officials

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STARTED WITH 4 MAJOR INVESTORSVolkswagen, PSA joint venture,

Samsung Electronics and Volvo Trucks

A stream of others followedOnly Greenfield projects: property

rights still insufficiently protected

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SPILLOVERSReal estate investors (housing

construction boom)Residence and Entertainment ParksEntry of investors from many

countriesSouth Korea, Russia, French, Swedish

Foreign retail chains

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RESULTSRegional Industrial Output

Grew by 63% from 2006-2008Particular in automotive industry

Foreign investment skyrocketedRetail sector grewPublic sector funded a new Development

Corporation to look for more funds

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PARTNERSHIPSFederal level industrial policy:

High duties on imported carsAllows foreign automotive investors to bring in parts duty freeLocal production required for 30% of total cost

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EXPLOITING PROXIMITY TO MOSCOWTransportation infrastructure allows

close communicationAs Moscow grows more expensive,

Kaluga is attractive alternative for investors

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PROBLEMSCorruption continuesThere are high costs—constructionFinancial crisis struck Kaluga

Debt rises (result of borrowing)Budget income fell by 4% (nominal)

However, federal transfers rose by 14%

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SUCCESSFUL REGIONAL PROJECT

Weak Regional

Leadership Investment “Machine”

Federal Support

Greenfield Investment

One-Stop Shop

Transportation improvement

Federal Support

Brownfield Investment

Tax Incentives

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WHAT IS A SUCCESSFU

L

PROJECT?

C O N C L U S I ON

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TECHNOLOGICAL AND INVESTMENT ORIENTATIONTechnologies that foster economic,

social and technological dynamism, participation

Outcomes must include learning, changing

Reconciliation of winners and losers

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DIFFUSION OF GOVERNANCE CAPACITY

Foundation is the law at the Federal level

But there are intangibles to be produced by regional policy-making: By delegating: find creative solutionsBy localizing stimulate learning and participation

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ADAPTABLE TASK-ORIENTED PROJECTS

Federal level can resolve what would create conflict at the regional level

Regions can learn to work through these conflicts

Find a balance between loose and controlled governance that suits the situation

Flexible supply networks for newly identified needs

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LOOSE AND CONTROLLED GOVERNANCE

Contracts should be transactional or relationalDepending on whether the task calls for loose or controlled governance

Relational tend to be more effective

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INDICATORS FOR CONTROLLED PROJECTS

Results or process orientedOutcomes are important

Demographic, social, economicResponsibility for projects is

localized and clearMilestones and targets well defined

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INDICATORS FOR LOOSE GOVERNANCE

Improved skills and processesImproved trust between levels of governmentAmicable agreements

Implemented by “soft laws” rather than commands and strict regimes

Milestones: Innovation, adaptability, and learning capacity

Development of networks of independent actors.

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THE E

ND

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