RAS 12 - JRL 6535
ECONOMY
5. DEFENSE INDUSTRY: THE REGIONAL DIMENSION
SOURCE. Alexei Izyumov, Leonid Kosals, Rosalina Ryvkina and Yurii Semagin, "Market Reforms and Regional Differentiation of Russian Defence Industry Enterprises," Europe-Asia Studies, Vol. 54 No. 6, September 2002, pp. 959-974.
This is the first published study of the Russian defense industry that focuses on the regional dimension. Each year from 1997 to 2000, Alexei Izyumov (University of Louisville, Kentucky) and his colleagues from the Russian Academy of Sciences sent survey questionnaires to the directors of about 1,500 defense enterprises located in all the 50 regions that have significant defense industry. Respondents were asked 70-100 questions about the social and economic situation of their enterprises. The response rate was in the range of 10-15 percent, which is quite high for such a demanding questionnaire, but it entails a serious risk of sample bias that the authors fail to address.
The trajectory of Russian defense industry as a whole over recent years is marked by precipitous decline in the early and mid-1990s bottoming out in 1997 and succeeded from 1998 by rapid recovery (37 percent rise in output in 1999, then 25 percent in 2000). However, the extent and nature of this recovery show a strong regional differentiation.
The authors distinguish in this regard four types of region:
* Nine regions that make up the "territorial nucleus" of Russia's defense industry: Moscow city and Moscow region; St. Petersburg; Nizhny Novgorod, Novosibirsk, Omsk, Sverdlovsk, and Perm regions; and the Udmurt Republic. Here are the leading defense manufacturers, research institutions, and design bureaus. Most remain state-owned; many are engaged in aerospace. Their favorable economic and social situation rests on priority allocation of state orders and (in many cases) on income from military exports.
* A further eight regions in which the economic and social situation of defense enterprises is fairly good thanks to their successful use of capacity to produce civilian goods for the home market and (in some cases) for export: Smolensk, Kaluga, Ryazan, and Kemerovo regions; the Altai territory; and Arkhangelsk, Astrakhan, and Kaliningrad regions, where the main focus is on shipbuilding.
* Fourteen regions in various parts of Russia in which the economic and social situation of defense enterprises is average.
* Nineteen regions in which the economic and social situation of defense enterprises is poor. Most of these regions are situated in the "red belt" of southern European Russia; the group also includes Pskov and Vladimir regions, the Marii El Republic, and the Primorsky territory. Most defense enterprises in these regions are small and have obsolete equipment. Being privatized, they do not receive major state orders, and both their military and their civilian output is non-competitive, even on the home market.
The authors see the main contrast as being between the "center" -- defined as Moscow city and region and St. Petersburg -- and the "periphery" (everywhere else). Defense enterprises in the "center" were better equipped to withstand the trial of the lean years, to preserve at least in part their technological base, and so to benefit from the less unfavorable conditions of recent years. However, the figures presented by the authors indicate (contrary to their claim) that the technological gap between center and periphery is much narrower than it was even a few years ago. Thus in 1997 26 percent of respondents in charge of central enterprises said that their technology was obsolete, as against 38 percent of respondents in charge of peripheral enterprises. By 2000 the corresponding proportions were 51 and 54 percent respectively.
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