#1 - JRL 7209
Izvestia
June 4, 2003
UNITY OF OPPOSITES
Russia remains a country of many different countries
Author: Natalya Ratiani
[from WPS Monitoring Agency, www.wps.ru/e_index.html]

A NATION WITHIN WHICH BASIC ECONOMIC INDICATORS VARY BY AN ORDER OF MAGNITUDE, AND NO CHANGES TO THIS SITUATION ARE EXPECTED FOR THE NEXT TWO PRESIDENTIAL CYCLES, IS A NATION WHICH IS PRACTICALLY DOOMED TO FALL APART THROUGH NATURAL ECONOMIC PROCESSES.

The Economic Development Ministry has announced that the difference in per capita gross regional product (GRP) among Russian regions has decreased from a factor of 50 to a factor of 30. By comparison, there is no more than a four-fold difference in GDP between the European Union's poorest new recruits (Bulgaria and Romania) and the EU average. In the world today, a fifty-fold difference in GDP can be observed between the economies of the United States and Zimbabwe, for example. But in Russia, this kind of gap may be found between regions.

According to Deputy Economic Development and Trade Minister Muhamed Tsykanov, there has been some success over the past two years in reducing the per capita GRP gap. In 2002, the regions varied by a factor of 180 on investment per capita, by a factor of 20 on registered unemployment, by a factor of 15 on average income as compared to the poverty line, and by a factor of 14 on income levels. The government is aiming to halve these differences by 2015.

Is there anything to be proud of here? A nation within which basic economic indicators vary by an order of magnitude, and no changes to this situation are expected for the next two presidential cycles, is a nation which is practically doomed to fall apart through natural economic processes. Politics won't even be necessary.

The Economic Development Ministry says that reducing these gaps is one of the most important things that need to be done to ensure Russia's economic development. However, Auditing Commission Chairman Sergei Stepashin is more pessimistic: he says the number of regions requiring high levels of subsidies will rise to 39 by the end of this year, from its present level of 31. On the one hand, says the Auditing Commission, regional governments have a very limited capacity to shape their own revenues. On the other hand, money provided by the Regional Development Fund (set up in 1998) for the purpose of eradicating these differences has been distributed in a haphazard and non-transparent manner; this is also acknowledged by the Economic Development Ministry.

The Economic Development Ministry considers that it's possible to improve this situation by a new method of distributing funding to regions, recently developed within the federal targetted program for reducing regional differences in socio-economic development. According to the Economic Development Ministry, the main goal of this method is to introduce automatic distribution of resources. One ministry source told us: "It shouldn't be up to any individual state official to decide how funding is distributed; everything will be set out in advance." This ought to rule out any possibility of excessive lobbying for the interests of one region to the detriment of another, and enable resources to be directed at regious which are really underdeveloped and in need. The program for 2003 is funding 43 regions (including Kirov, Ivanovo, Vladimir, Altai, Dagestan, and Marii El). The funding will only be provided for social services, infrastructure, and housing and utilities. The regions will have to provide for themselves in terms of investment and wages.

However, it's not enough to have a methodology. And by no means all experts fully realized the significance of the political factor in the problem of reducing gaps between Russia's regions.

Dmitrii Orlov, deputy director of the Political Techniques Center: "Equalizing development levels of Russian regions is an important goal, but it's not the main goal of the regional policies which should be implemented by the new parliament and the president. The government should set itself the task of raising real wages and company revenues in those regions where industry is actually located - not those which have the most attractive tax conditions. Of course, there needs to be some levelling of conditions here."

Most political parties aren't thinking of reducing differences among regions either. Yabloko is the only party to include levelling out regional imbalances in its policy program. Yabloko proposes to develop regulations for managing property in the regions which would make it possible to effectively influence regional economic develpment. Yabloko also includes some specific proposals for attracting investment to the regions. But the Union of Right Forces, for example, calls for phased federative reforms, viewing the expansion of regions as a means of levelling out their economic development. United Russia presents a melange of proposals from the regional leaders connected with the party.

What's more, regional issues are not reflected in the policy programs of the parties to any great extent. They are inevitably squeezed out by an ideological approach. Experts believe that if Russian political parties were really relying on regional support, the demands of regional leaders would play a more prominent role in their policy programs. But the parties consider it more important to have their policy programs set out "values rather than specific goals". It would appear that the value of preserving Russia's integrity as a state is a secondary goal for them, at best. But history indicates that no other country with such vast gaps in development between regions has retained its territorial integrity for long.

(Translated by Gregory Malutin)