This was the theme of the round table “Russian villages are open for business: small business & entrepreneurship – the foundation of the rural economy” which took place in the Moscow office of the World Bank on February 5, 2007 and was jointly organized by the Association of Small and Medium-sized Enterprises of Russia (OPORA of Russia) and the World Bank. It was co-chaired by Oscar de Bruyn Kops, Acting Country Director of the World Bank in Russia and Vladimir Bogoslovsky, Chairman of Committee on Self-Governance, OPORA of Russia.  Participants included federal, regional, and local government officials, representatives of the State Duma, analytical and consulting organizations, Public Chamber and other civil society groups (Download list of participants: ENG | RUS).

Vladimir Bogoslovsky opened the round table with his presentation outlining the different forms of agricultural small businesses that exist in rural areas.

Issues Discussed

Despite the opportunities, participants noted that needed actions at both central and local levels are insufficient to capitalize on these advantages in the Russian rural context.

Historically, rural development in Russia equaled agriculture and to this day the pace of diversification of the rural economy is slower than desired, as participants pointed out.  To date, there is insufficient attention to bringing together the main elements for diversification of the rural economy, including development of small scale farming, rural businesses, and improved delivery of infrastructure and social services by rural local governments.  Participants felt that the existent policymaking channels do not yet allow for integrated rural development to be fostered at the national level.

The presentations and discussions pointed to several reasons for this.  Firstly, there is insufficient cooperation or communication among  relevant ministries (Ministry of Regional Development, Ministry of Economic Development and Trade, and the Ministry of Agriculture) to allow for development of such an integrated rural development approach. Secondly, the various sectoral initiatives by federal ministries do not yet add up to a mutually reinforcing program for rural areas.  Furthermore, the funding that is being allocated by federal bodies for rural development could be used more efficiently.  Participants also spoke of the need to develop better communication between federal policy makers and local practitioners, which include local governments, businesses and rural residents.

One of the points highlighted by the round table was the need for a broader rural development strategy.  Cooperation and coordination between federal, regional and local level actors is key to developing such a rural strategy.  This should be based on an open, consultative process, rather than a closed, top-down initiative. The way forward for developing such a viable rural development strategy in Russia would be through engaging all interested parties (federal, regional and local government, civil society, and experts/donors), by creating clarity among various participants about local needs, and by developing not just top down, but also horizontal and bottom up vectors for interactions.

In fact, there are already cases of effective, community-driven initiatives spearheaded by effective and legally-empowered local governments. The goal of the World Bank-funded pilot project “Local Governance and Civic Engagement in Rural Russia” is to empower villages in taking control over their resources through strengthening formal and informal local governance institutions and engaging the public in local government decision-making activities. The project manager in Charities Aid Foundation-Russia explained why strong and open local governance is important for rural territorial development and how good local governance creates a more conducive environment for business development. The project has also supported the creation of community foundations which are a transparent mechanism for attracting off-budget funds and small business support for local development (Download presentation by L. Ovchinstseva, CAF in Russian).

The round table gave Russian participants the opportunity to learn about international experiences and methods of rural development.  Policies and techniques that have proved successfully introduced elsewhere include building the capacity of local governments, creating social development funds with clear indicators of community participation and assessment of the effectiveness of the use of resources, and comprehensive targeted programs that take into account particular needs and history of the locality.  In Romania, for example, community development funds have been created in villages that are financed from the national budget but distributed locally.  In Poland, regional development programmes have been introduced that aim to train local authorities and create more transparent and accountable management structures (Download presentation by Maria Amelina, Senior Social Development Specialist, the World Bank in Russian).  In another example, the Irish government has developed a strategy for rural development that goes beyond funding for agriculture alone, to include tourism, although like Russia agriculture still plays a significant role in the Irish rural economy. Over the past twenty five years, national government strategies in Ireland have recognized that the future sustainability of these areas depends on strengthening the institutional capacity at national, regional and local levels in order to provide direction and coherence for rural development policy and to support initiatives of local entrepreneurs. (Download presentations by Professor Chris Curtin: English | Russian; and by Professor Jim Deegan: English | Russian.)

The Way Forward

To move forward with such an integrated rural development approach in Russia, a suggestion discussed at the roundtable was the creation of an interagency working group involving federal ministries and representatives from local governments, small and medium-sized enterprises, Public Chamber/other civil society representatives, and international experts.  Such working group could be charged with developing a joint strategy for rural development, including proposals for needed incentives, implementation channels, and effective delivery of supporting public services at the local level.

For the World Bank, the round table provided valuable input into the Bank’s operations in Russia which are now focusing significantly on supporting regional development under the new Country Partnership Strategy for 2007-2009.  To the extent regions working with the Bank see rural development as their priority, the Bank is ready to cooperate and assist them in this.  The round table showed that there is much work to do to achieve a broad and sustainable approach to diversification and business development in rural areas which would lead to improved living standards of the rural population in Russia.