On the Issue of Sustainable Economic Development of the Regions

The goals and tasks pertaining to the issue of sustainable development of the Federation's subjects have been established on a comprehensive basis with due regard for Russia's nationwide interests and priorities.

The formation of a sustainable economic development model implies reliance on high production efficiency and rational consumption based on highly productive employment, human capital quality improvement, innovations, and environmental safety. It is important not only to recognize the existence of links between sustainable development and the corresponding economic, social and environmental processes, but also to elaborate a comprehensive long-term support program.

The incorporation of sustainable development goals into government programs and the strategic planning documents that are being prepared on the federal level in the framework of sectoral and territorial goal-setting activities can conduce to better implementation of the Spatial Development Strategy of the Russian Federation, as envisaged in the Federal Law On Strategic Planning in the Russian Federation and the List of RF Government Programs. Government programs are grouped into five strategic blocks: Balanced Regional Development; Effective State; Innovative Development and Modernization of the Economy; New Quality of Life; National Security.

High inertia which is clearly manifest in the processes of territorial and spatial development has produced a change in the ranking of RF subjects by their competitive capacities and investment attractiveness in the domestic market and strengthened the constraints imposed by infrastructural, administrative, and labor-related factors. The aggravation of problems in the sphere of regional development was an upshot of the combined effects of the controversial trends in the inertia-dominated national wealth distribution system and in the dynamically changing system of economic factors that shape the current market environment.

Based on an analysis of the pace of development of the Federation's subjects in the context of changing general economic conditions and with due regard for the provisions stipulated in regional development programs, it has become possible to explain the specific features of each territory and to assess the risks and benefits of each region depending on the decisions adopted in the framework of government investment and social policies. The performance of regional policy mechanisms and tools is assessed on the basis of their proclaimed goals and priorities, qualitative and quantitative parameters, and the practices of dealing with the issues of lowering administrative barriers and promoting development institutions and the infrastructure needed for the support of businesses and administrative structures.

The Russian economy demonstrates, both on the federal and regional levels, an increasing differentiation and disproportions with regard to certain parameters like investment indices, entrepreneurial climate, and administrative performance. The issue of ensuring proper assessment of the results of regional investment policies in the framework of the methodology applied in the creation of institutional and regulatory environment has been supported at the federal level, and so has provided a foundation for a set of practical recommendations designed to improve and adjust regional investment policies and promote efficient territorial governance principles.

The tools employed in the assessment of investment activity effects are, as a rule, the macroeconomic indices of each territory, which in some cases are augmented by the estimates of the current situation provided by the business community. As demonstrated by Russian and international best practices, positive effects in the sphere of investment attraction depend on the ability to lower the administrative barriers. In this connection, it becomes fundamentally important to properly assess the performance of federal and regional bodies of executive authority in terms of improving the investment and entrepreneurial climate as a factor responsible for a successful sustainable economic growth trajectory.

The traditional approach views investment activity as something that depends on the degree of industrialization in a given region, because it relies on a well-shaped investment infrastructure consisting of specialized industries and big enterprises capable of ensuring a certain critical investment volume even if the existing conditions are unfavorable. However, the modern investment and industrial policy model aims at comprehensive development of industrial and social infrastructure for sustainable growth, and relies on coordinated measures designed to efficiently use the resource potential, to alter the existing system of spatial and economic relations, and to implement new progressive forms of organizational and administrative structures.

A favorable investment climate displays certain specific features like improving the mechanisms employed in attracting investments into the regions, simplifying the procedures for doing business, creating appropriate infrastructure, borrowing available best practices, and developing proper tools for monitoring and assessing the quality of administrative performance.

The assessment of regions' economic sustainability and potential for recovery after economic crises relies on an analysis of the entire system of indices describing their investment climate, business environment, risks, and potential. Their investment climate ranking in the eyes of investors depends on a comfortable environment for doing business, and for the regions themselves it is an instrument of critical appraisal of their own activity from the point of view of available best practices in achieving a better investment climate provided by the 'leader' regions.

Olga Izryadnova – Head of Structural Policy Department