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The Strategic Dilemma of Regional Innovative Development

The Strategic Dilemma of Regional Innovative Development. Nikolay A. Potorochenko. Head of Innovative Activity Department Siberian Branch of Russian Academy of Sciences Irkutsk Scientific Center mob. ph. +7 914 87 444 22 e-mail: potor@baikal.ru .

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The Strategic Dilemma of Regional Innovative Development

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  1. The Strategic Dilemma of Regional Innovative Development Nikolay A. Potorochenko Head of Innovative Activity Department Siberian Branch of Russian Academy of Sciences Irkutsk Scientific Center mob. ph. +7 914 87 444 22 e-mail: potor@baikal.ru

  2. From the point of view of economic geography Irkutsk region is a vast territory having the same surface area as France and Germany’s ones taken together and including areas with extremely uneven degree of development. Population density in Irkutsk region is currently about 3 per km2 while France and Germany have a population density of over 200 per km2.

  3. The natural resourcespotential Gold Oil Coal Industrial forestry areas Tin Magnesites Natural gas Iron ore Potassium salts Niobium

  4. Rapid social and economic transformations that have taken place in Russia during last 15–20 years have led to the significant changes in the structure of economic activity centers distribution. At the same time, the population settlement pattern that has been shaped in 20th century during the Soviet period in the process of industrial development practically doesn’t change. Companies’ owners raise efficiency to the detriment of the territory development interests. Sometimes because of production closures or cutbacks even rather large settlements loose all socio-economic perspectives.

  5. Irkutsk region’s unquestionable competitive advantages: - Advantageous geographical position and geopolitical significance of the region that is located at the crossroads of Asia and Europe; - Region is rich in raw materials including energy resources such as hydrocarbons etc., metals, lumber or materials used in construction materials production; - Considerable amount of low-cost energy resources; - Developed processing industries; - Relatively developed transport infrastructure and high transit potential; - Lake Baikal that is a unique natural object of world-wide significance, it contains roughly 20% of the world's surface fresh water and about a half of all potable water on Earth; - Rich cultural and recreational potential; - A wide network of research and educational institutions.

  6. Irkutsk region’s key problems: - Extractive economy and low technological level of enterprises cause the lack of motivation in innovations; - Key enterprises of the region are owned by the largest Russian and international financial-industrial holdings, that causes the lack of enterprises independency and makes it possible that owners withdraw considerable part of income and are not concerned about socio-economic development of the territory; - Uneven socio-economic development of the territory; - Serious environmental problems; - Infrastructure underdevelopment and the lack of legal and financial instruments for the support of innovative activities and of small business; - Low income level and living conditions which are not always acceptable; - Negative demographic and migration processes (i.e. high death rate and considerable population and especially young people outflow).

  7. Irkutsk region development can follow two different (alternative) scenarios: the “inertia” scenario – continuation of extractive economy development the “innovations”scenario – refusal of development based exclusively on natural resources extraction 2011 2015 2020 2025 Stereotypes of existing planning practices make these two scenarios mutually exclusive ones.

  8. The “inertia” scenario – continuation of extractive economy development In the middle term - new mineral deposits would be developed, new jobs would be created in underdeveloped areas of the region, transport infrastructure would develop and social security programs would be supported by regional administration but only on the basis of the residual view of social welfare. In the long term - Any hope that over time resource-intensive big business will become mature enough to adopt innovations or to take part in socio-cultural or infrastructural development of the area is illusory. Consequently, in case that region chooses this “inertia” strategy it runs the risk of progressive problems aggravation and of benefits loss, i.e. the risk of turning into outsider of innovative development in the following 8–10 years. 2011 2015 2020 2025

  9. The “innovations”scenario – refusal of development based exclusively on natural resources extraction and concentration of all regional resources aimed at the development of the “new” regional economy along these directions could become a “strategic” breakthrough into the “innovative” future. During the whole planning period this scenario presupposes significant economic structure changes, fold increase of long-term investments in infrastructure and research-intensive production development. In addition it is necessary to change priorities of budget expenditures increasing support for programs and projects, and sometimes this necessity are not obvious for the majority of regional population. Strengthening of the region’s position in the competition for the attraction of federal resources should be accompanied by the protection of regional interests in relationship with big business. Even being risky this approach to the highest extent conforms to Russia’s development conceptual vision. Its implementation could bring considerable strategic bonuses. 2011 2015 2020 2025

  10. Irkutsk region development can follow two different (alternative) scenarios: the “inertia” scenario – continuation of extractive economy development the “innovations”scenario – refusal of development based exclusively on natural resources extraction 2011 2015 2020 2025 Stereotypes of existing planning practices make these two scenarios mutually exclusive ones.

  11. Irkutsk region has found itself in a situation similar to the mathematical game theory Prisoner’s Dilemma. The choice of the first scenario could ensure 5–10 subsequent relatively stable years but it would run counter to the progressive regional elites’ interests as well as it couldn’t ensure that federal domestic policy programs would be implemented. The second scenario, despite high risks, closely corresponds with federal priorities but faces the resistance of big business and of the “old” regional elite that defends big business interests. The pursuit of relative stability can result in choice of the “inertia” scenario in spite of the fact that innovative scenario can give potentially much more significant results.

  12. A rational solution to this dilemma is balanced development scenario. • This scenario presupposes: • Refusal of the usual administrative stereotypes; • Cooperative behavior strategy; • Symbiosis of the most positive aspects of two approaches to the strategic development of the region mentioned above; • Formation of regional territorial structure on the basis of concentration of resources along three key planning axes and within three key development centers; • Elements of regional territorial structure should have different economic and social specialization; • Projects that are to be implemented in compliance both with “inertia” scenario and with alternative “innovative” approach should be distributed logically during the whole planning period.

  13. In the middle termthe priority could be given to the projects aimed at new raw materials development. At the same time, benefits gained from these projects shouldn’t be spent on reproduction of extracting economy. Rather, they should be accumulated and spent on infrastructure development and on the preparation of “innovative” scenario launch. In the long termaccumulated resources would allow to launch innovative projects aimed at new knowledge-based economy development.

  14. the “inertia” scenario – continuation of extractive economy development the “innovations”scenario – the refusal of development based exclusively on natural resources extraction balanced development scenario 2011 2015 2020 2025

  15. Regional territorial structure Yakutsk First planning axis Along this axis both in middle and in long terms transport and logistics nodes of federal or of regional importance could be created. Existing industrial sites could be used for the placement of enterprises engaged in mineral resources deep processing or in research-intensive production. Ust-Ilimsk Krasnoyarsk Bratsk Ust-Kut Tayshet Trans-Siberian Railway Irkutsk agglomeration Trans-Siberian Railway Ulan-Ude Chita

  16. This area is the most promising one for the implementation of natural resources development projects in the nearest 10–12 years. New hydrocarbons, iron ore, and potassium salts deposits development in the long term should be accompanied by the deep processing of mineral resources and lumber. Taking into account the perspective of North Siberian Mainline construction, one could expect that this axis would be able to play a role of Trans-Siberian Railway “latitudinal alternate”. To make it possible, multimodal logistics, transport and distribution centers of regional (in the cities of Bratsk and Ust-Ilimsk) and of interregional (in Ust-Kut) importance should be created. Regional territorial structure Yakutsk First planning axis Second planning axis North-Siberian Mainline Ust-Ilimsk Ust-Kut Krasnoyarsk Bratsk Tayshet Baikal-Amur Mainline Trans-Siberian Railway Irkutsk agglomeration Trans-Siberian Railway Ulan-Ude Chita

  17. Regional territorial structure Yakutsk First planning axis Second planning axis Third planning axis Lena-Nepa-Lensk Mainline North-Siberian Mainline Along this planning axis in the long term the “inertia” scenario projects aimed at Irkutsk region natural-resource potential realization and at provision with the resources for the development of new industries such as gas energy, gas chemistry and petrochemistry along the first planning axis in the years 2020-2025 are to be implemented. Ust-Ilimsk Krasnoyarsk Bratsk Baikal-Amur Mainline Ust-Kut Tayshet Trans-Siberian Railway Irkutsk agglomeration Trans-Siberian Railway Ulan-Ude Chita

  18. North-west development centre North-east development centre South development centre Regional territorial structure Yakutsk First planning axis Second planning axis Third planning axis Lena-Nepa-Lensk Mainline North-Siberian Mainline Ust-Ilimsk Krasnoyarsk Bratsk Baikal-Amur Mainline Ust-Kut Tayshet Trans-Siberian Railway Irkutsk agglomeration Trans-Siberian Railway Ulan-Ude Chita

  19. The South development centre 1.Lake Baikal capitalization increase, that means that the lake should be regarded not only as a unique recreation resource but also as a strategic stock of fresh water, tourism services development; and establishment of centers for education and innovation are the priorities for the territories located near Lake Baikal. On the basis of this special economic zone a large tourism industry cluster oriented both to Russian and to the world markets should be created. 2. The agglomeration of the cities of Irkutsk, Angarsk and Shelekhov is one of the key elements in the regional development strategy. To attract and to retain skilled professionals by sustaining of high living standards is the strategic goal of this project. Human capital concentration will create the necessary prerequisites for innovative activity which is supposed to be based on unique developments of Irkutsk agglomeration research and education centers. Irkutsk agglomeration can become a centre for large-scale economic projects management, an international financial centre, a centre of engineering education, and of tourist flows distribution. 3. Agglomeration’s neighboring territories in conformity with their traditional specialization will be used for the effective agro-industrial complex development.

  20. The North-West development centre includes industrial cities of Taishet, Bratsk, Ust-Ilimsk and Zheleznogorsk-Ilimscky. This territory in the middle term will be the ground for the projects of mineral resources development. In the long term its potential is supposed to be used for establishment of high-tech enterprises dealing with raw materials complex processing and with high value added goods production. Creation of forest industry cluster that would combine all the chain of lumber production process from logging to woodworking and wood processing should be a foundation for the North territories competitiveness.

  21. The North-East development centre on the basis of Ust-Kut city in the long term is expected to play a role of interregional transport, logistics and industrial node where extraction, processing and transportation of raw materials (oil, natural gas, lumber) are concentrated. The city of Ust-Kut is located at the railway, aviation, highways and Lena river navigation crossroads. The Eastern Siberia – Pacific Ocean oil pipeline runs here. After construction of “Vilyuy” highway and of Lena–Nepa–Lensk railway mainline strategic significance of this transport node will increase.

  22. North-west development centre North-east development centre South development centre Regional territorial structure Yakutsk First planning axis Second planning axis Third planning axis Lena-Nepa-Lensk Mainline North-Siberian Mainline Ust-Ilimsk Krasnoyarsk Bratsk Baikal-Amur Mainline Ust-Kut Tayshet Trans-Siberian Railway Irkutsk agglomeration Trans-Siberian Railway Ulan-Ude Chita

  23. If the strategic approach to Irkutsk region economic geographic zoning described above is accepted, it is evident that concentration of economic activity within these marked zones will make it necessary to search for the most adequate way of social infrastructure development. Along planning axes and in the development centers it is necessary to create zones of socio-cultural priority development with high living standards which would concentrate regional resources to stimulate influx of creative population groups including professionals from other regions.

  24. The Strategic Dilemma of Regional Innovative Development Nikolay A. Potorochenko Head of Innovative Activity Department Siberian Branch of Russian Academy of Sciences Irkutsk Scientific Center mob. ph. +7 914 87 444 22 e-mail: potor@baikal.ru Thank you for your attention!

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