WHAT

IS A

GOOD

PROJECT?

RE

GI O

NA

L D

EV

EL O

PM

EN

T

July

24, 2012 ЛЕТНИЙ КАМПУС

АКАДЕМИИ ПРИ ПРЕЗИДЕНТЕ РФ -2012

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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

Experimentation

Challenges for regions

Experimentation as a Way of Governing

The example of Kaluga

What is a Successful Project?

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MULTI-L

EVEL

GOVERNANCE

AG

E O

F EX

PE

RI M

EN

T AT

I ON

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MULTI-LEVEL GOVERNANCEEvolving Patterns

Regions, previously ignored, now central to

theorizing

Historical industries and new sectors

Traditions of governance evolving, Taylorism

declining

Globalization of Trade and Information

Current Era: one of Experimentation

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DECENTRALIZATIONUS and Germany:

Regions acquiring greater authority over programs

Coordination between Federal and Regional levels for cross-border issues

Sustainability policies: they work better at the regional level

At 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 welfare

Some sectoral policies

Some competitive pressures

Multi-level planning is critical

Make up for regional differences in capacity for solving problems, capacity for learning new routines, economic advantages

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BOTH GOALS IMPORTANTChoices require flexibility

The answer tomorrow may be different from the answer today

Is 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 centralized

Spending (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 adaptivity

Profit 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 economy

Decentralization in the early 1990s

Recentralization in late 1990s, vertical imposed

Post 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 inequality

Regional 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 F

OR

RUSSIA’S

REGIO

NS

KE

Y I

SS

UE

S

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REGIONAL GENERAL ISSUESWater

Electricity

Sewage

Police

Roads

Education

Care: disabled, elderly, unemployed

Emergencies: 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 RESOURCES

Must be approached by:

Multi-level government

New technology (digitalization of records)

Training for E-government

Youth programs (Tatarstan!)

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DROUGHT IN

RUSSIA

’S

SOUTH

What

is th

e an

swer

?

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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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FLOODIN

G

Feder

al ,

Loca

l and R

egio

nal In

tera

ctio

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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EXPERIM

ENTATI

ON

AS

A W

AY

OF G

OV

ER

NI N

G

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WHAT SEEMS TO WORK

Ideas from other transition countries

Ideas from the EU

Ideas from Russia’s own experience

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ANSWERS EMERGING

Regions 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

Spillin

g ove

r with

succ

ess

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FEDERAL AND SUBNATIONAL EFFORTPro-Investment Strategy

Begins 2006

Results 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 followed

Only Greenfield projects: property rights still insufficiently protected

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SPILLOVERS

Real estate investors (housing construction boom)

Residence and Entertainment Parks

Entry of investors from many countries

South Korea, Russia, French, Swedish

Foreign retail chains

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RESULTSRegional Industrial Output

Grew by 63% from 2006-2008

Particular in automotive industry

Foreign investment skyrocketed

Retail sector grew

Public sector funded a new Development Corporation to look for more funds

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PARTNERSHIPS

Federal level industrial policy:

High duties on imported cars

Allows foreign automotive investors to bring in parts duty free

Local production required for 30% of total cost

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EXPLOITING PROXIMITY TO MOSCOWTransportation infrastructure allows

close communication

As Moscow grows more expensive, Kaluga is attractive alternative for investors

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PROBLEMS

Corruption continues

There are high costs—construction

Financial 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

PROJE

CT?

CO

NC

L US

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 solutions

By 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 relational

Depending 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 oriented

Outcomes are important

Demographic, social, economic

Responsibility for projects is localized and clear

Milestones and targets well defined

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INDICATORS FOR LOOSE GOVERNANCE

Improved skills and processes

Improved trust between levels of government

Amicable 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

END

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