Internationalization of Russian Northern Regions: Trends and Perspectives

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1 Internationalization of Russian Northern Regions: Trends and Perspectives Andrey Kazakov, Advisor, High North Center for Business at University of Nordland

2 High North Center for Business and Governance ESTABLISHED in 2007 MAIN TASKS: o To be a network center for challenges connected to the High North o Utilize existing competence at University of Nordland and its academic and industry partners o Make this competence available for Norwegian, Russian and International enterprises and wider audience 2

3 PARTNERS Industry Academic institutions Public Partners 3

4 What are the Northern Regions of Russia? 4

5 What are the Northern Regions of Russia? 5

6 Why Internationalization? International cooperation strengthens regional economic development and helps delivering good services to citizens. International know-how is necessary in today s society International work is an important tool in contributing to the development of the Region. This strategy is a management tool, both politically and administratively. Cooperation on the international arena and participation in international networks and projects is both demanding and rewarding. Trade and industry needs to adapt to the international market due to increased competitiveness and globalization. Adapted from Internationalization Strategy for Oppland County, Norway 6

7 What is Competitiveness? PRODUCTIVITY = COMPETITIVENESS REGION S HOMEWORK A nation s competitiveness depends on the capacity of its industry to innovate and upgrade... PROSPERITY, regional economic development and helps delivering good services to citizens National prosperity is created, not inherited. It does not grow out of a country s natural endowments, its labor pool, its interest rates, or its currency s value, as classical economics insists... Based on Michael Porter The Competitive Advantage of Nations 7

8 What is Competitiveness? Inherited Prosperity Prosperity is derived from selling natural resources or property or a like; Prosperity is limited by the amount of resources; Focus towards the distribution of wealth among interest groups: Regional interest groups, stakeholders in power, etc Created Prosperity Prosperity is derived from creating valuable products and services; Prosperity is created by firms Prosperity is based on productivity of companies in the economy Creating the conditions for productivity and innovation are the central policy question Government is the central actor in the economy as owner and distributor of wealth; Resource based revenues allows unproductive and inefficient practices to persist and to exist Companies are central actors in the economy The government s role is to create the enabling conditions Adapted from Michael Porter Norwegian Competitiveness: Where Does the Nation Stand? 8

9 Determinants for Productivity & Competitiveness Microeconomic, Political, Legal, Social Environment for Competitiveness GDP FDI Labor conditions: Availability, Costs, Skills, Population Number of joint ventures through years Industrial Development: Key leading industries: Driving forces for regional developments Availability and Level of Innovative Industries General Business Environment/Clusters/SEZ Internationalization: Laws, actions by authorities, availability of partners, institutions for cooperation, channels for cooperation 9

10 Where Regions Stand so far? Governors Ranking* Regions Investments Potenial ** Place Governor / Region Points Region Potential / Risk 1 Yamalo-Nenets Aut. Okrug 95 Moscow High / minimal 2 Kaluga region 93 St. Petersburg High / minimal 3 Tatarstan Republic 92 Tatarstan Republic High/minimal 4 Kemerov Region 90 Kaliningrad Region High / level 2 6 Moscow 88 Kemerov Region Middle / moderate 12 Komi Republik 82 Arkhangelsk Region Low / moderate St. Petersburg 79 Komi Republic Low / moderate Arkhangelsk Region 58 Murmansk Region Low / moderate Murmansk Region 52 Kaluga Region Low / moderate Nenets Aut. Okrug 47 Nenets Aut. Okrug Very low / moderate Sources: *Izvestia newspaper, **RA Expert, 10

11 Potential Index Where Regions Stand so far? Moscow St. Petersburg Sources: RA Expert, Risk Index 11

12 Where Regions Stand so far? Microeconomic GDP - decreasing FDI - decreasing Labor conditions: Availability of skilled personnel negative Costs of personnel growing Productivity of personnel - decreasing Population - decreasing Number of joint ventures through years not increasing Legal basement: exist, but just exist Industrial Production Index decreasing Special Business Environment/Clusters/SEZ not yet really in force Barriers for foreign investors, businesses. 12

13 Where Regions Stand so far? What are Main Challenges for Foreign Companies working in North of Russia? Can be and there are several.. Infrastructure, transparency, cross-cultural differences, administrative barriers and safety of Investments and etc... BUT, one of most crucial is Arkhangelsk region - Murmansk region - Lack of Information! GOOD Example! Kaluga region

14 Where Regions Stand so far? Prevailed Forms of Internationalization: Bilateral Agreements Participation in International environmental projects Co-operation via international organizations Cooperation in the field of higher, education, culture and sport Acting through and under Federal Diplomacy Actions Creating a region s positive image, Promotion of the Region through events 14

15 Where Regions Face to? Challenges connected to: Economy (stagnation or very slow growth) Not diversified Economy Labor Force Demographic conditions Opportunities: New projects in the Arctic Area Political Stability (or inflexibility?) Good relations and experience of international cooperation with neighbors (Norway, Finland, Sweden) 15

16 Regions Competitiveness Position? Michael Porter Norwegian Competitiveness: Where Does the Nation Stand?,

17 CONCLUSION 17