World Bank Discusses Analytical Work Program On Regional Development At The Fifth Perm Economic Forum

Demidkhovo, September 12, 2009 – The World Bank, embarking on a program of analytical and advisory work on growth and regional development issues, discussed the program’s motivation and objectives with Russian experts and policymakers at the Opening Plenary Session of the Fifth Perm Economic Forum. The Forum brought together a few hundreds of policymakers from the central, regional and municipal administrations to idyllic Demidkhovo.
 
The World Bank’s participation at the Perm Forum marked the fourth event of a continual dialogue between the Bank and Russian experts and policymakers on issues related to growth and regional development. Earlier engagements included a brainstorming roundtable at the Bank’s Moscow office, a seminar at the Xth International Academic Conference on Economic and Social Development at the Higher School of Economics and a forum at the Leontief Center (St Petersburg).

Chorching Goh, the task team leader of the work program began with a brief presentation of the rationale and goals. “The program of work is a response to top Russian leadership’s vision of an innovative, modern, diverse, and high-income economy.”

President Medvedev, in various occasions has expressed his vision for a modern and diversified Russia. “The economy needs forward movement but is instead going around in circles… I would push to diversify the economy… I would personally oversee the modernization of the economy.” Such vision was echoed in Prime Minister Putin’s opening speech at the World Economic Forum in Davos. “We need to develop a number of fundamental market institutions, above all, a competitive environment, has become more acute… The crisis is only making us move more actively …to effect a qualitative renewal of Russia in the next 10 to 12 years… We are also working to create a platform for post-crisis development…”

Goh noted that “we are at a juncture to do something useful. The Bank’s work program is a collaborative partnership with Russian experts aimed to inform the post-crisis development strategy. What has faltered is that Russia’s spatial policies are orthogonal to her structural reform. Sectoral transformation that accompanies development has a spatial dual. Spatial policies in Russia have to be made more consistent and congruent with her sectoral policies.”

For Russia, the largest country in the world, its geographic distribution of economic activity, will matter more than any other nation. Besides having a difficult internal geography of the longest domestic distance which hinders access to market, Russia also has the longest legacy of a non-market economic system. Because location decisions are not easily reversible, Russia has to overcome perhaps the most difficult economic geography of any nations. But Russia is in a favorable location on the globe. It abuts the largest market - European Union - on the west, and adjoins the fastest growing region - Northeast Asia - on the east. How can Russia handle the longest domestic distances, overcome the longest legacy of distorted economic decision-making, and take advantage of its fortunate location on the globe? By policies that better appreciate the market forces of agglomeration, migration and specialization. This program of analytical and advisory work will identify the most important policy measures for Russia to facilitate the spatial transformations necessary for making the transition to high income country status.

A short motivational clip was played to highlight the issues to be studied. Participants were overwhelmingly supportive and appreciative of the film. “One thing that we will surely remember from this Forum is this film. It’s well-made, and the messages were powerfully conveyed, and how true they are too,“ remarked Professor Andrei Kolesnikov, Rector of the Perm State Teacher Training University.

“Russia must recognize the advantages of its location, and focus on connectivity to other markets and economies. And, as the film shows, we do resist changes. How true. We don’t move. We don’t change our economic production. Then, how would we diversify our economy?” commented Alexey Kubrin, Deputy Presidential Plenipotentiary in the Privolzhsky Federal District.
 
Goh closed the presentation by reiterating Russia’s aspiration to be an innovative, high-skilled, and modern economy. “To encourage innovations, we have to be pro-agglomerations because an overwhelming proportion of innovations take place in urban agglomerations. To promote education, we have to be pro-migration because often the gains can only be had by moving. And, to seek modernization, we have to be pro-specialization and competition because the market is outside Russia.”

The Bank’s work program fits well with the Forum’s theme, “Competition, Engine of Development,” Oleg Chirkunov, the Governor of Perm Krai, succinctly summed it up. “Competition powers growth, and the question is how to start the competition mechanism that will bring about efficiency -- so that the environment would begin to develop by itself choosing the best, shaking off the useless and ineffective?”