RUSSIAN REGIONS IN THE WORLD ECONOMY AND THE COORDINATION IN RUSSIA ’ S FEDERAL REFORM

1. RUSSIAN REGIONS IN THE WORLD ECONOMY AND THE COORDINATION IN RUSSIA’S FEDERAL REFORM

2. Democracy is a device that insures we shall be governed no better than we deserve. George Bernard Shaw

3. SUBJECT OR REGION? • “subject” is preferable in the context of our research, since the term “region” has a very wide range of definitions which often causes ambiguity. • subject is a territorial unit of a state which is located at the level underneath the ethnic state level and is politically self-governed. A subject is recognized by the constitution or legislation of a state, which guarantees its autonomy, ethnic identity, powers and organization.

4. The international activity of the subjects a system of multi-level interconnected processes whose participants are state and political institutions, commercial enterprises and non-profit organizations, public and political figures, social groups pursuing their own goals and using different methods to achieve them.

5. Influenced by many different factors: • the consequences of globalization • the subjective characteristics of the regional leaders which explain their motivation or political authority. • If we view the international activity of the subjects according to a pluralist “open” definition, an important role belongs to the commercial and industrial associations, companies and non-profit organizations which expect that their participation in the international activity will bring concrete results

6. Goals of conducting international activity set by the authorities of the subjects: • Protect the subject’s economic, political, cultural, etc. interests and the realization of priority development tasks through participation in international activity. • Political goals include the following: striving toward constitutional recognition of national identity, attracting international support in the subject’s opposition to the federal center (for example, regarding the issue of distribution of powers between the federal government and the subject), and finally, conducting activity aimed at receiving the status of a sovereign state. • Support economic development targeted toward attracting international financial resources, developing markets, creating joint ventures, implementing advanced technologies for competitive recovery of production, searching for materials, reducing burden of working on foreign markets (e.g., opening foreign production branches).

7. Increase the volume of internal travel in the federal subject. This goal is connected with attracting foreign investment, as, first of all, it is necessary to create a competitive infrastructure in the region and then put forth a serious effort in marketing and advertising services on the international market. • Support the resolution of national foreign policy tasks, including in situations in which there exist factors preventing the development of international contacts on the national government level or in cases in which the subjects’ vigorous activity may cause an expected negative reaction of a foreign state, while the federal government stays “excluded”

8. Support the democratization process in the world, as it is democratization that the international activity of subjects is based on. • Unite the effort of subjects of different states in realizing joint projects in economic, humanitarian and social spheres, protecting the environment, preserving cultural heritage, securing international solidarity. • Coordinate regional development planning, especially in realizing big projects in transport and communications. Develop international relations with the purpose of experience and information exchange in the areas of politics and state building, planning, research, technologies and others.

9. Three areas of international activity of regions • political, • economic • cultural Declaration of European Regionalism mentions that the sphere of the subjects’ international responsibility (within the limits of their competency) is broader than the three main areas (political, economic and cultural) and also includes ecology, regional and national planning, scientific collaboration.

10. Political scientists agree that the diplomacy of subjects will receive further development and will be characteristic of most states in the 21st century. International activity develops most intensively in stable democratic states. In many cases, the diplomacy of subjects begins its legitimate development after the collapse of ruling dictatorships.

11. Historical background of Regional Incentives • After he was elected President in 1991, Boris Yeltsin began to appoint presidential representatives in republics and other territorial units. The status of those presidential nominees was not defined in any law and was regulated by presidential decrees. • In 1994, President Yeltsin issued a decree confirming all earlier appointments (before the 1993 Constitution entered into force) to the office of presidential representative in constituent entities. • The same legal status of presidential representatives remained until Putin's reforms in May 2000.

12. Administrative and Territorial Division 89 administrative territorial divisions: • twenty-one republics, • six territories: kray, • forty-nine oblasts (provinces), • one autonomous oblast, • ten autonomous regions (okruga ). The cities of Moscow and St. Petersburg have separate status at the oblast level. Population size and location have been the determinants for a region's designation among those categories. The smallest political division is the rayon.

13. GLOBALIZATION • INCREASES THE ROLE OF ECONOMIC POLICY IN GENERAL AND THE ROLE OF GOVERNMENTS ON THE INTERNATIONAL AREA • THE INVOLVMENT OD THE SUB-NATIONAL UNITS BECOME A PART OF THE SOLUTIONS OF THE PROBLEM • THE PARTICIPATION IN INTERNATIONAL ECONOMICS BRINGS FORTH CERTAIN DIFFICULTIES IN THE IMPLEMENTATION OF FOREIGN POLICY AT THE FEDERAL LEVEL, AND • KNOWING THESE DIFFICULTIES IS NO LESS IMPORTANT AS KNOWING THE BENEFITS AND ADVANTAGES OF THE GROWING INTERNATIONAL ACTIVITY OF MEMBERS OF A FEDERATION

14. PROBLEMS: • attempts of sub-national members to go beyond foreign economic activity and international cultural cooperation to their interference in the solutions of purely foreign political issues • non-coordinated activity of sub-national units in the international arena also creates a certain threat for any federation, since it can lead to chaotic fragmentation of the foreign policy and non-coordinated positions • important to find an optimal combination of federal interests and the interests of regions

15. WTO MEMBERSHIP • STRICT TERMS CHANGES IN RUSSIAN INDUSTRY • HOW 89 REGIONS REACT TO THE ENTERING WTO? • DO REGIONS NEED FEDERAL AID TO MEET THE CHALLENGES?

16. Reasons for the development of the subjects’ international activity • development of democracy • the spreading of subsidiarity principle in the relations between different levels of power. • the international political situation

17. Russian regions profile • Mining regions. Tyumen, Komi, Yakutia, Magadan, Buryatia, Khanty-Mansiisk, Yamalo-Nenetsky District, Sakhalin and others. Attracting investments to these regions depends on progress in signing of production Sharing Aggreements (PSA). The legal basis for such agreements has been worked out in principle, and a number of examples is available of successful operations of foreign companies both in joint ventures, and on the basis of PSA. • Urbanised industrial regions: have, in various combinations, heavy and light industries, the traditional and science-intensive military-industrial complex. (Nizhny Novgorod, Samara, Yekaterinburg, Perm, Chelyabinsk, Krasnoyarsk, Tomsk, regions of the Non-black earth centre, Udmurtia, Kuzbass). The major intellectual and industrial potential of these regions makes it possible to rely to a certain extent on successful development of a number of sectors and districts. Some of them in 1997 can become the Тlocomotives of RussiaУ

18. The trading and industrial pattern is typical for regions with major ports (Murmansk, Archangel, the Primorye Territory, Kaliningrad) as well as for the two capitals: todays capital - Moscow - and St.Petersburg which was the capital of the Czarist Russia. The capitals also have the science-intensive military-industrial complex, traditional heavy industries. Concentration of financial capital and new business activities are typical of them.These regions choose openness, external expansion based on their financial resources and geographical locations. • Agri-industrial regions with the balance of industries and agriculture (the Non-black earth center, major part of the Volga River basin, South Russian regions, Don, Kuban, Stavropolye, Kurgan, Orenburg, Omsk, Novosibirsk, Irkutsk). The bulk of the Russian population resides there. A significant part is played in the industrial structure by small and medium-sized enterprises, mainly in processing agricultural produce.

19. RUSSIAN LEGISLATION Not all legislation is adopted now in Russia at the federal level. Article 76.4. of the Constitution provides that, outside of the jurisdiction of the Russian Federation and the joint jurisdiction of the Russian Federation and the governmental subunits of the Russian Federation, the republics, territories, regions, federal cities, autonomous regions and autonomous areas shall establish their own legal regimes, including the adoption of legislation and other regulations, a scheme much like that of the US.

20. Article 71. . The jurisdiction of the Russian Federation shall include: • the adoption and amendment of the Constitution of the Russian Federation and federal laws and supervision over compliance with them; • … • … • establishment of the system of federal bodies of legislative, executive and judiciary power, procedure for the organization and activities thereof; formation of federal bodies of state power; • federal and state property and management thereof; • determining the basic principles of federal policy and federal programs in the field of state structure, the economy, the environment, and the social, cultural and national development of the Russian Federation; • establishment of the legal framework for a single market; financial, monetary, credit and customs regulation, emission of money and guidelines for price policy; federal economic services, including federal banks;

21. the federal budget; federal taxes and levies; federal funds of regional development; • federal power grids, nuclear energy, fissionable materials; federal transport, railways, information and communications; space activities; • foreign policy and international relations of the Russian Federation, international treaties of the Russian questions of war and peace; • foreign trade relations of the Russian Federation; • defense and security; defense production; determining procedures for the sale and purchase of arms, ammunition, military hardware and other equipment; production of fissionable materials, toxic substances, narcotics and procedure for the use thereof; • defining the status and protection of the state border, territorial waters, the air space, the exclusive economic zone and the continental shelf of the Russian Federation; • … • federal conflict of laws; • … • … • …

22. Article 72. The joint jurisdiction of the Russian Federation and the subjects of the Russian Federation shall include: • ensuring compliance of the constitutions and laws of the republics, charters, laws, and other regulatory legal acts of the territories, regions, federal cities, the autonomous region and autonomous areas with the Constitution of the Russian Federation and the federal laws; • protection of the rights and freedoms of man and citizen, protection of the rights of ethnic minorities; ensuring legality, law and order, and public safety; border zone regime; • issues of the possession, use and management of the land, mineral resources, water and other natural resources; • delimitation of state property; • management of natural resources, protection of the environment and ecological safety; specially protected natural reserves; protection of historical and cultural monuments; • general questions of upbringing, education, science, culture, physical culture and sports; • coordination of health issues, protection of family, motherhood, fatherhood and childhood; social protection including social security;

23. implementing measures to combat catastrophes, natural disasters, epidemics and eliminating consequences thereof; • establishment of the general guidelines for taxation and levies in the Russian Federation; • administrative, administrative-procedural, labor, family, housing, land, water and forestry legislation; legislation on the sub-surface and environmental protection; • cadres of judiciary and law-enforcement agencies; the bar, notariate; • protection of the original environment and traditional way of life of small ethnic communities; • establishment of general guidelines of the organization of the system of bodies of state power and local self-government; • coordination of the international and external economic relations of the subjects of the Russian Federation, compliance with the international treaties of the Russian Federation. • 2. The provisions of this Article shall equally apply to the republics, territories, regions, federal cities, the autonomous region and autonomous areas.

24. Article 73. • Outside of the jurisdiction of the Russian Federation and the powers of the Russian Federation on issues within the joint jurisdiction of the Russian Federation and the subjects of the Russian Federation, the subjects of the Russian Federation shall exercise the entire spectrum of state power. • Art. 76.6 of the Constitution provides: "In the event of a contradiction between the federal law and a regulatory legal act of a subunit of the Russian Federation issued in accordance with part 4 of this Article, the regulatory legal act of the subject of the Russian Federation shall apply." Few fundamental federal laws designed to consolidate political, financial and economic positions of Russia's regions and municipalities.

25. PUTIN’S REGIONAL REFORM May 2000, President Putin made significant changes to the federal system in Russia. • seven federal districts to encompass all of the 89 constituent units of the federation. • seven "Plenipotentiary Presidential Representatives" to be accountable to the President for the interests of the central government in each of the districts.

26. Regional reform • The administrative integration of Russian regions will contribute positively if the decreasing number of regions (‘subjects’) leads to policies that would better take into account these regions’ competitive advantages. • Reasonable decentralization of the decision-making process with a recognition of the international interests of the states along with the leading role (but not the monopoly) of the federal level in the field of external policy • The establishment and development of relations with foreign partners by sub-national units must lie within the common foreign political strategy of the federal state • The joint coordination and correlation of external activities

27. MAIN AIMS OF THE REFORM • the inconsistency between constituent entities' laws and federal laws. In many cases this results from a lack of coordination between the federal centre and regions in the drafting of regional laws; • the proper use of federal budget money, transferred to constituent entities to cover certain expenses, needs to be ensured by a federal body.

28. Tasks, assigned to the Presidential Representatives • organizing activities in their respective federal districts to ensure that domestic and foreign policies are implemented by the local branches of federal departments; • monitoring the local implementation of federal-level decisions; • ensuring that the President's personnel policy is respected; • reporting regularly to the President on national security issues as well as the political and economic situation in the federal districts; • recommending measures to be taken by the President concerning local matters.

29. Several priorities: • the North Western federal district: seeking external investment and executing infrastructure projects; • the Southern and Far Eastern federal districts: executing social and economic development projects; • the Central federal district: improving citizens' economic security and fighting economic crime, as well as supporting entrepreneurial development; • the Ural federal district: the same priorities as the Central district, but in the Urals the Representative's staff also deals with the development of specific economic sectors and regional financial-industrial groups; • the Volga federal district: the Representative is trying to make this district a "laboratory of innovation" with new technologies.

30. INTERNATIONAL RELATIONS OF RUSSIAN REGIONS BECAME A COMPONENT OF THE FOREIGN ECONOMIC POLICY • THREE ASPECTS: • the promotion of exports to foreign markets; • encouragement of incoming visiting foreign tourists; • the attraction of new investments from abroad

31. Interaction with national governments • The level of the subjects’ partnership with the federal government is defined by their constitutional organization, which also defines the bases of their interactions in external relations. Historical traditions of partnership and subjects’ counseling with the federal center also have a great importance for the successful internal politics of a national state.

32. Forms of international activity of subjects • Including subjects’ representatives in the composition of national delegations in case of events such as official visits of foreign delegations, meetings and negotiations with foreign leaders, preparation of international agreements, activities of international organizations and state-level conferences. • In federal states where subjects are represented in supreme organs of legislative power (for instance, in the upper chamber of the parliament), they have a real mechanism for influencing state policy, including that in the sphere of external relations. • The authorities of the federal subjects, as far as their own competencies go, try to create more attractive conditions for foreign investors and encourage promotion of domestic products onto the world market by using financial and organizational means. State coordination of the subjects’ external economic relations may be directed toward forming structure of imports and exports which would reflect the strategic priorities of their economic development.

33. Signing and realization of international agreements • Participation in the activities of international unions • Activity of foreign legations • Delegation exchange, participation in international activities • Presentational activity

34. Other forms of international cooperation: • international inter-parliamentary connections, • cooperation in the spheres of education and staff training, research, culture, and environmental protection. • tourism sphere is a substantial source of budgetary recharge and creation of jobs for many states and subjects. • socially-oriented programs are also created in the process of international integration.

35. Organizations involved: The Ministry of Foreign Affairs of Russia is responsible for coordinating the external relations of federal subjects and ensuring the division of rights between the subjects and the federal government. Department of Connection with Federal Subjects, Parliament and Public Organizations (DSPO) developed a number of typical agreements of the federal subjects with their foreign partners as well as recommendations on reception of higher level foreign delegations in the federal subjects and the drafting of international agreements and a variety of other materials on issues of international links and external economic relations of the federal subjects. MFA has branches in the federal subjects

36. Regional Openness • Institutional • Functional

37. Regional “openness”: 4 types 1.CENTRAL REGIONS: • Cultural and political centers, concentration of financial resources, power and developed infrastructure 2. “BORDER” REGIONS • Situated on the sate borders of the country • Developed infrastructure (transport) 3. “EXPORT” REGIONS • Main industries producing export commodities 4. INTROVERT REGIONS • lack of the necessary experience of economic management in free market conditions.

38. As a whole, the development of external economic relations, mostly based upon trade and attracting foreign investments, is often the most important and actively developing component of the international activity of federal subjects. In many countries, there has appeared a tendency to gradually re-orient the economic relations of the subjects toward foreign countries, thus damaging internal trade. This is especially characteristic of border areas, as well as for the subjects which produce highly competitive industrial or agricultural products or possess natural resources demanded on world markets.

39. Substantial regional variation in international-trade participation within Russia: e.g., the capital cities of Moscow and St. Petersburg are major centers of international commerce, while the Mordovian, Adyegey and Tyva Republics are almost completely isolated from world markets.

40. REGIONAL DISTRIBUTION OF FOREIGN INVESTMENT10 main regions (%)

41. Legal base for regional foreign trade and investment • Federal Legislation • Constitution • Federal Laws • Legislation of Russian Regions • Regional Laws (mainly investment regulations) • International Legal Documents and Norms • International Agreements mainly on cross-border or regional cooperation)

42. Federal Laws • Federal Law of the Russian Federation on Basis of State Regulation of Foreign Trade activity (2003) • Federal Law of the Russian Federation on Coordination of International and Foreign Trade Relations of the Subjects of Russian Federation (1999) • Federal Law of the Russian Federation on International Agreements of Russian Federation (1995)