Discussion Papers 2008. No. 65.
Regional Transformation in Russia
CENTRE FOR REGIONAL STUDIES
OF HUNGARIAN ACADEMY OF SCIENCES
DISCUSSION PAPERS
No. 65
Regional Transformation
in Russia
by
Gyula HORVÁTH
Series editor
Zoltán GÁL
Pécs
2008
Discussion Papers 2008. No. 65.
Regional Transformation in Russia
ISSN 0238–2008
ISBN 978 963 9797 81 9
© Gyula Horváth
© Centre for Regional Studies of the Hungarian Academy of Sciences
2008 by Centre for Regional Studies of the Hungarian Academy of Sciences.
Technical editor: Ilona Csapó.
Printed in Hungary by Sümegi Nyomdaipari, Kereskedelmi és Szolgáltató Ltd., Pécs.
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Discussion Papers 2008. No. 65.
Regional Transformation in Russia
Contents
Introduction ............................................................................................................. 5
1 Macro-political survey ....................................................................................... 6
2 Spatial aspects of the power structure and economic development
of the Soviet Union .......................................................................................... 10
2.1 Core regions in the Russian and Soviet empires....................................... 10
2.2 The illusion of local and regional autonomy during the 1920s ................ 17
2.3 Attempts at space-centric economic management at the end of the
1950’s, and the failures of regional policy ............................................... 25
3 The regional portrait of the new Russia ........................................................... 30
4 Regional social problems ................................................................................. 35
5 The Russian settlement structure ..................................................................... 39
6 Deficiencies in regional development policy ................................................... 44
6.1 The slow process of institutionalisation of regional policy ...................... 44
6.2 Outdated territorial-administrative structure ............................................ 46
7 Fundamentals of the new regional development strategy ................................ 51
References ............................................................................................................. 56
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Discussion Papers 2008. No. 65.
Regional Transformation in Russia
List of figures
Figure 1
The economic regions of the planning committee, 1921 ................................ 13
Figure 2
GDP per capita in the Russian federal districts, 2004 .................................... 33
Figure 3
Population density indicators of the Russian federal regions, 2002 ............... 36
Figure 4
Spatial distribution of Russia’s larger cities, 2002 ......................................... 39
Figure 5
Regional administrative units of Russia, 2007 ............................................... 47
Figure 6
Federal districts of Russia .............................................................................. 48
List of tables
Table 1
Main macroeconomic indicators in Russia, 1991−2004 .................................. 7
Table 2
Sectoral structure of the GDP in Russia, 1990–2005 ....................................... 9
Table 3
Employment sector structure in Russia, 1990–2005 ........................................ 9
Table 4
Ranking of Soviet Republics – in terms of investment and production
per capita, 1928–1978 .................................................................................... 11
Table 5
Regional units, 1922–1937 ............................................................................. 13
Table 6
The significance of Russia’s three industrial regions based on employee
numbers and production value, 1900–2000.................................................... 15
Table 7
Significance of the eastern regions in specific product areas ......................... 15
Table 8
Population changes in today’s large cities, 1897–2005 .................................. 16
Table 9
Proportions of the population living in regions with differing development
levels, Russia, 1993 ........................................................................................ 31
Table 10 The ten most important Russian federal regions in national GDP terms,
1994–2004 ...................................................................................................... 34
Table 11 Regions with a large number of mono-functional cities, 2004 ....................... 35
Table 12 Proportion of ethnic minorities in the Russian population, 2002 ................... 38
Table 13 Cities providing the largest industrial output, 1970–1996 ............................. 42
Table 14 Main data of the Russian village network, 1989–2002 .................................. 43
Table 15 Distribution of population in the villages according to size, 2002 ................. 43
Table 16 Main data of federal districts, 2005 ................................................................ 49
Table 17 Sectoral structure of GDP in the federal districts, 2004 ................................. 49
Table 18 Elements of polarised regional development ................................................. 51
Table 19 Problems and development tasks in the individual regions ............................ 53
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Introduction
After several years of debate and inconclusive results, the problems of regional
policy have now come to the fore of the political agenda in the Russian Federation.
The 1993 Constitution left the issue of state structure far from resolved. There has
been no effective institution for implementing regional policy. The central leader-
ship has declared a clear commitment to federalism. In the current situation, how-
ever, ill-conceived attempts in the area of regional development might result in a
backtrack to unitarism and a compromise of democratic values in an effort to
strengthen central state control.
Throughout the last half of the nineteenth century, Russia’s economy developed
more slowly than did that of the major European nations to its west. Russia’s
population was substantially larger than those of the more developed Western
countries, but the vast majority of the people lived in rural communities and en-
gaged in relatively primitive agriculture. Industry, in general, had greater state in-
volvement than in Western Europe, but in selected sectors it was developing with
private initiative, some of it foreign. Between 1850 and 1900, Russia’s population
doubled, but it remained chiefly rural well into the twentieth century. Industrial
growth was significant, although unsteady, and in absolute terms it was not exten-
sive. Russia’s industrial regions included Moscow, the central regions of European
Russia, St. Petersburg, the Baltic cities, Russian Poland, some areas along the
lower Don and Dnepr rivers, and the southern Ural Mountains.
The reform policies in the last Tsarist period were designed to modernize the
country, secure the Russian Far East, and give Russia a commanding position with
which to exploit the resources of China’s northern territories, Korea, and Siberia.
In spite of a severe economic depression at the end of the century, Russia’s coal,
iron, steel, and oil production tripled between 1890 and 1900. Railroad mileage
almost doubled, giving Russia the most track of any nation other than the United
States. Yet Russian grain production and exports failed to rise significantly, and
imports grew faster than exports. The state budget also more than doubled, ab-
sorbing some of the country’s economic growth.
Regional disparities during the Soviet epoch, after the Revolution of 1917 were
diminishing until the mid-century point and started to rise only after that. Soviet
policy towards the regions is broken down into several periods during which cen-
tral direction and a degree of decentralisation have alternated.
Russia inherited from the Soviet Union an economic structure that was geo-
graphically highly unbalanced. Capital accumulation and industrial location were a
result of a concerned government policy to locate key industry in a small number
of regions. But even after the collapse of the Empire, the gap between more pros-
perous regions, including Moscow and St. Petersburg, and less developed ones, has
not been reduced. Actually, the gap has widened during the last decade of transi-
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Discussion Papers, No. 65.
tion. The paper describes regional disparities and their influencing factors, analyses
regional socio-economic imbalances, losers and winners of the transition. Finally,
it gives a summary of regional development policy documents and main targets of
the regional policy.
1 Macro-political survey
In the late 1980s a slow democratic transformation began in Russia, the largest
member republic of the Soviet Union, and the country acquired independence in
1991. At first, despite widespread discontent among the population, market reforms
needed to be introduced by means of shock therapy and by the forced privatisation
of state enterprises. This strategy evoked strong opposition within the government
which was seeking transformation and also within the (conservative majority) leg-
islature. By 1993 the forces opposing reform had been defeated, but it had also
become clear that the price of this shock therapy was too high for the still-fragile
Russian democracy. Consequently, the radical reform programme was temporarily
put on hold and the transition towards a market economy continued, although often
clumsily and ambiguously. Although by 1997 the Russian economy had halted the
decline caused by the transformation, financial and fiscal discipline had been
deeply undermined by corruption and by a soaring crime-wave. In the following
year a serious financial crisis, which left its mark on the global economy, shook the
country due to the unfavourable effects of a number of internal and external fac-
tors. In Russia, however, the 1998 economic crisis was followed by continuous
economic growth, and from the turn of the millennium the reform policy was given
new impetus. As a result, there has recently been a major leap forward in the ex-
pansion of privatisation, in the restructuring of the financial, energy and rail-trans-
portation sectors, in the reorganisation of agriculture and in the fields of employ-
ment policy and tax and pension reform. However, the situation of the Russian
economy strongly depends on the volatile global market price of energy resources,
which, together with various crisis symptoms, makes the future of the country and
of market reform rather uncertain (Aganbegyan, 2004).
Russia is a country undergoing transformation on a huge scale and where ex-
periments involving vague, imprecise policy decisions were made over a long pe-
riod – all in the name of the change of regime. By the end of the ‘90s social proc-
esses had still not established the basis of a successful reform policy, although the
intellectual capacity had been available from the very first. The transformation,
therefore, started to develop only after the 1998 crisis, when, in addition to the
decisive counter-crisis and to reform measures, the favourable changes in the
global market for energy (mainly natural oil and gas) made a substantial contribu-
tion to the boom (Table 1).
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Discussion Papers, No. 65.
Table 1
Main macroeconomic indicators in Russia, 1991−2004
Indicator
1991
2000
2004
Natural population growth, percent
−1.5
−6.6
−5.9
Estimated life expectancy, years
67.8
65.3
65.3
Unemployment rate, percent
5.2
9.8
7.1
GDP growth rate, percent
n/a
10.0
8.12007
Students in higher education, per 10,000 population
190.0
324.0
495.0
Inflation rate, percent
1,608.8
20.2
10.9
Source: Federaľnaia sluzhba gosudarstvennoi statistiki.
The introduction of the market economy in Russia (as in other ex-socialist
countries) also caused a rapid increase of prices, which peaked with the hyperin-
flation of 1992. The rate of currency depreciation slowed year by year from 1992
to 1997, and after the 1998 crisis a lower rate of inflation (albeit still galloping)
developed. At the same time, between 1992 and 2002, the unemployment rate rose
by 40 percent (until 1998 by 150b), which was caused by the dismissal of a large
number of the employees of state enterprises. The transformation-related recession
in the Russian economy reached its nadir when the volume of real GDP declined to
60 percent of the 1990 level. This increased by only 1 percent in 1997 and dropped
back to 58 percent in 1998 due to the financial crisis. In 1999 the re-start of eco-
nomic growth produced a favourable change in the misery, unpopularity and im-
balance indices. In 2002 the GDP volume compared to the 1990 level increased to
72 percent, although, in early 2001, global economic stagnation, the September 11th
terrorist attacks and the ongoing recession slowed down Russian economic growth,
calling into question the plan for the GDP of 2000 to double by 2010.
Despite the fact that Russia liberalised its economy considerably during the
1990s, the government was unable to adopt stringent budgetary restrictions for a
long time. This led to large-scale state borrowing and, finally, to the sudden finan-
cial crisis of 1998. The competition for resources between old and new enterprises
due to weak financial discipline made state support for the private sector more
difficult, although private enterprises had been promoted at the beginning of the
transformation process. The concentration of state power within a narrow oligar-
chic elite favoured the old enterprises, and those new arrivals with good political
connections. Moreover, later in the transformation the emergence of new market
players was hampered by the selective incentive schemes (Barnes, 1998; Shleifer
and Treisman, 2000).
The Russian Federation has a large-capacity, technological-scientific infra-
structure (research potential, technically skilled labour, technology universities),
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and it is currently a world leader in numerous fields. There are, however, very few
practical links between the scientific and technical output of research institutes and
the demands of Russian or foreigner enterprises. Moreover, a huge proportion of
resources is still concentrated in the formerly closed – or, currently, still isolated –
research cities. As a heritage of the post-World War II US–Soviet superpower ri-
valry, a significant part of R&D is still used for military purposes even in today’s
Russia. As a result, between 1994 and 2000, national defence spending from the
state budget for R&D increased from 30.8 percent to 38.3 percent and, in respect of
space research, from 9.2 percent to 12.5 percent.
The dissolution of the Soviet Union resulted in the disintegration of what was,
in many respects, an autarch and so-called unified national economic complex, and
the severance of long-standing production and technology links between the former
federal republics. Changed economic conditions made it necessary for the re-
emerged Russian Federation to join the international division of labour more
strongly, and this required alignment with global market prices and the implemen-
tation of sectoral reforms.
In the sectoral structure of the Russian economy, in addition to the retreat of ag-
riculture, industry and construction, the expansion of the tertiary sector is evident.
In the case of production and employment this tendency is more readily analysable
thematically on the basis of the data shown in Tables 2–3.
Between 1990 and 1999 the total percentage of agriculture, industry and con-
struction of GDP (at current prices) decreased from 61.4 percent to 39.6 percent.
Conversely, that of services increased from 38.6 percent to 60.4 percent. In GDP
production terms, agriculture, industry and construction all fell by 40 percent, 80
percent and 60 percent respectively. The relative importance of manufacturing
within industry declined by 60 percent, that is, it declined from 24.2 percent to 13.8
percent. At the same time the high total percentage accounted for by mining and by
electricity-, gas- and water-supply also rose by 10 percent (from 12.8 percent to
14.7 percent) – which may be linked to increased prices. Within services the im-
portance of commerce and accommodation services increased by 270 percent, fi-
nancial services and property transactions doubled, public administration rose by
60 percent and “other services” including education and health-care grew by 20
percent, but the importance of transport and telecommunications declined slightly.
As a result of privatisation, between 1991 and 2001 the private sector’s share of
GDP rose by 5 percent (to 70 percent) in Russia itself, whilst in the whole of the
Commonwealth of Independent States (CIS) it rose by an average of 10 percent (to
50 percent). In the Russian Federation several industrial companies have changed
ownership during the last ten years. Due to strong vertical integration, geographical
fragmentation (as well as to the limited number of potential buyers and sellers of
companies approaching privatisation on selected markets) Russian industry is not
vulnerable to market competition. Furthermore, legal barriers set up by the state
protect the old companies facing competition from newcomers, both domestic and
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foreign firms. If obstacles which make it more difficult for new companies to enter
markets are to be avoided, then antitrust measures need to be adopted. This also
applies to a competition policy based on generally accepted principles if discre-
tionary powers are to be curtailed, transparency increased and accountability im-
proved.
Table 2
Sectoral structure of the GDP in Russia, 1990–2005, current prices, percent
Sector
1990
1995
1999
Agriculture
15.5
6.7
6.0
Industry
37.0
28.1
28.5
Processing industry
24.2
17.3
13.8
Construction
8.9
7.9
5.1
Commerce & accommodation services
5.2
18.2
19.1
Transport & telecommunications
9.3
11.1
8.9
Financial services & property transactions
3.0
6.7
5.9
Public administration
3.0
5.2
4.9
Other services
18.1
16.1
21.6
Total
100.0
100.0
100.0
Source: Federaľnaia sluzhba gosudarstvennoi statistiki.
Table 3
Employment sector structure in Russia, 1990–2005, percent
Sector
1990
1996
1999
Agriculture
13.9
13.6
11.8
Industry
29.4
24.2
23.7
Processing industry
26.5
20.6
19.1
Construction
10.8
8.4
5.7
Transport & telecommunications
8.2
10.9
13.3
Commerce & accommodation services
7.7
7.9
9.1
Financial services and property transactions
8.5
7.7
4.3
Public administration
2.1
4.1
7.6
Other services
19.4
23.2
24.5
Total
100.0
100.0
100.0
Source: Federaľnaia sluzhba gosudarstvennoi statistiki.
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2 Spatial aspects of the power structure and economic
development of the Soviet Union
2.1 Core regions in the Russian and Soviet empires
In the development of Russia the years of the late 19th and early 20th centuries pro-
duced a breakthrough. A dynamic transformation took place in the Russian econ-
omy, although the prospects of achieving West European development levels
seemed unrealistic. The moderate, (even, in some cases, more striking) signs of
modernisation disguise the basic fact that Russia still remained a traditional society
even at the beginning of the 20th century and following a significant period of mod-
ernisation which involved radical change. The more modern did they wish to make
the country, the more underdeveloped did it become, and the adoption of Western
patterns served the conservation of Eastern structures (Dixon, 1999). One cause of
the current underdevelopment of Russia is that market-determined development
failed to bring the country closer to the West. Also in Russia the modern state
aimed from the outset at influencing development and counterbalancing market
weaknesses. Support for this can be found in the writings of Alexander Gerschen-
kron who stated that, in Europe, competitive industrialisation simply increased the
pressure on backward countries: on one hand it created ideologies of modernisation
and industrialisation (including various version of state Marxism) and on the other
hand it also forced states and governments to support the development of national
economies with their own resources (Gerschenkron, 1962, 1970).
One of the visible signs of the underdevelopment of the country was the ex-
tremely high level of spatial differentiation. If we examine the economy, infra-
structure, settlement network or the educational level of the population, the differ-
ences between European and Asiatic areas were huge. In the last decade of the 19th
century the most developed industrial areas of the realm were the provinces of
Moscow, Warsaw, Vladimir and Saint Petersburg. In these locations, industrial
employment per thousand inhabitants was between 32 and 82 persons, while in the
least developed areas it was between 1 and 7. According to data from 1892, 1.09
million people (1.2 percent of the total population of 89.15 million of European
Russia) worked in manufacturing industry and mining.
In the first decade of the twentieth century industrial production data of the
major regions showed 10–12 fold differences. At the beginning of the 20th century
the production value of the manufacturing industry averaged 31 roubles for Russia
as a whole, but the figures were 87 roubles for the Northwest regions and Baltic
areas, 78 roubles for the Central Russian industrial area and a mere 8 roubles for
Asiatic Russia. In 1940 the spatial disparities in industry were even more signifi-
cant. The per capita industrial production of the individual republics of then Soviet
Union was 923 roubles in the Russian Federation and 71 roubles in Tajikistan. The
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differences in the industrial production indicators between the most and least de-
veloped areas increased from eleven- to thirteen-fold during this thirty-year period
(Westlund, Granberg and Snickars, 2000). The favourable position of the Russian
territories is clearly outlined by investment data: over fifty years Russia was the
clear beneficiary of Soviet investment policy. This is evident from the changes in
production volumes. However, in this latter case the performance of the Baltic
republics merits attention (Table 4).
Table 4
Ranking of Soviet Republics – in terms of investment and production per capita,
1928–1978
Republic
Investment
Production value
1928–
1946–
1956–
1970
1982
1940
1956
1967
1978
1932
1951
1960
Russia
1
3
2
4
1
1
4
3
3
Ukraine
3
5
4
9
11
3
6
5
6
Byelorussia
9
10
13
8
7
7
15
6
5
Uzbekistan
10
14
14
11
13
6
13
13
14
Kazakhstan
6
8
1
2
3
8
5
9
7
Georgia
5
4
12
13
8
5
12
11
10
Azerbaijan
2
2
6
14
12
2
7
12
11
Lithuania
–
12
6
6
5
–
8
4
4
Moldova
12
15
15
10
9
11
9
8
9
Kyrgyzstan
11
12
10
12
14
10
11
10
13
Tajikistan
5
12
10
15
15
12
14
14
15
Armenia
8
9
10
7
11
4
10
15
8
Turkmenistan
8
7
8
5
6
9
3
7
12
Latvia
–
6
6
3
2
–
2
2
1
Estonia
–
1
3
1
4
–
1
1
2
Source: Westlund, Granberg and Snickars, 2000.
The new economic policy (the NEP), which followed the war-time economy at
the beginning of the 1920s, is the only period of regional policy in the Soviet Un-
ion when there was an extremely high demand for a reduction of spatial disparities.
In the mid-1920s, the mobilisation of local resources became a fundamental task in
the cause of economic reconstruction, but a lack of resources meant that the central
government was incapable of implementing it, and for this reason the economic
organising authority of regional state institutions became important. The clear po-
litical ambitions of the proletariat and of the united peasantry brought an entirely
new factor to the reorganisation of regional economies. Provinces with economi-
cally weak and underdeveloped industry were incapable of creating the necessary
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links between industry and agriculture and the problem of supplying the population
with basic industrial products was insoluble (Shtoulberg, Adamesku, Khistanov and
Albegov, 2000). The scientific results of researchers into Russian economic geog-
raphy concluded that to integrate the peripheral areas colonised by Tsarist Russia
into one unitary state needed very special means.
The first general industrial reform of the Soviet Union was introduced in the so-
called GOELRO Plan (State Electrification of Russia) which involved the electrifi-
cation of the country. The public administrative conditions for implementing this
monumental plan which included constructing power stations and developing in-
dustry to utilise the produced energy, and the smaller regional units were unable to
work out overall economic development programmes. Parallel to the plans for
electrification, the work of transforming the public administration of the country
was in progress. The government used proposals relating to the geographical re-
gions of Russia early in the modernisation of public administration and the estab-
lishment of regional bodies of central state authorities (Tarkhov, 2005). The first
version of the GOELRO Plan suggested a total of 9 regions to organise the imple-
mentation of the plan, but finally, after much debate, 21 economic regions desig-
nated by the Russian central planning committee were approved to work out energy
and general economic development programmes and to organise their implementa-
tion (Figure 1). Twelve of these regions were situated in the European part of the
country and 9 in the Asiatic. However, local political elites effectively forced the
creation of new economic regions, the first five-year-plan being worked out for 24
and the second for 32. The political power of these regions lay in the fact that the
local offices of the Russian national economy determined development plans for
the whole region jointly with the local authorities within the regions and worked
hard to gain more central resources.
During the NEP, fundamental changes were introduced into the administrative
organisation system of the country. The elimination of bodies dating from the old
Tsarist administration had started, but many elements of the old administration had
coexisted with the new forms for 15 years or so. The Stalin constitution enacted in
1936 produced radical changes (Table 5).
The main activity area of the first industrialisation concept of Soviet Russia was
the already industrialised European part of the country (west of the Urals). More
than half of the industrial investment was made in the old industrial areas, border-
ing on the Volga and adjacent to the Urals, in the Kuznetsk Basin. The new indus-
trial plants established close to raw material sources (not for spatial development
purposes, but for defensive reasons) contributed to an eastward shift of the indus-
trial heartland of the country, and in the 1930s these areas became the main focus
of industrialisation. For example, in 1936 36 percent of new investment was made
in these areas, and in 1937 the output of the old industrial areas was 68 percent
higher than in 1925. Between 1930 and 1950, the growth in the machinery manu-
facturing areas of Moscow, Gorky and Kuibishev was many times higher than the
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Figure 1
The economic regions of the planning committee, 1921
Legend: 1 – Northwestern; 2 – Northeastern; 3 – Western; 4 – Central (Industrial); 5 – Vjatka–
Vetluga; 6 – Ural; 7 – Central Volga, 8 – Southwestern; 9 – Southern Highlands (Industrial); 10 –
Lower Volga; 11 – Central Black Earth (Chernoziom); 12 – Caucasian; 13 – Western Kyrgyz; 14
– Eastern Kyrgyz; 15 – Central Asian; 16 – Western Siberian; 17 – Kuzneck–Altaic; 18 –
Yenisei; 19 – Lena–Angara; 20 – Yakut Lander; 21 – Far Eastern.
Source: Khorev, 1981. p. 114.
Table 5
Regional units, 1922–1937
Name
1922
1929
1937
Federal republics
3
6
11
Autonomous republics
9
15
22
Autonomous regions
10
16
9
Border regions (krais), regions (oblasts)
–
8
47
Districts (incl, ethnic)
–
176
35
Administrative districts
–
2,426
5,567
Governorates
84
16
–
Uiezd (administrative districts)
759
298
–
Volost (rural districts)
15,072
1,595
–
Source: The author’s own construction based on Tarkhov, 2005 (appendices).
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production of the textile industrial area of Ivanovo. The industrial output of Omsk,
Novosibirsk and the Kuznetsk Basin was much higher than the value of production
in Tyumen, today’s leading industrial area. Before World War II the, collective
industrial output of Moscow (the metropolitan area) and the Moscow oblast was
significantly higher than that of Siberia. The industrialisation of the Central Asian
peripheries, on the basis of statistical surveys, seemed to be an extremely large-
scale operation: the increase in industrial output of Kazakhstan, Armenia and
Georgia was 12-fold, of Kyrgyzstan 14-fold and of Tajikistan 26- fold between
1928 and 1937. At the same time, 300 thousand people worked in the 3,500 newly
established industrial plants, although employment per plant averaged less than
100.
In the second half of the 1930s, quasi-democratic regional policy disappeared
from the Soviet Union. The regional economic councils were disbanded and the
federal republics, established under the 1936 Constitution, determined regional
policy. The economic management role of the republics was, in practice, very
modest and far less than that of the former economic regions. The economic re-
sponsibilities of the republics were limited to the implementation of their part of
any national plan: at most they had a degree of independence in arranging the mod-
ernisation of ethnic peripheral areas.
The dynamic development of new industrial areas started during World War II.
From the Western parts of the country 2,600 industrial plants were relocated to-
wards the East. Of these, 58 percent were moved to the Urals and to the Volga area
and 16 percent to Western Siberia (Treivish, 2002). In 1941, most Moscow compa-
nies were evacuated from the city to the east and to Siberia. As a result, the pro-
duction of the European industrial areas was halved. According to data relating to
value, the significance of Siberia was even less, but there was an essential growth
in terms of numbers employed (Table 6). After World War II, the development of
Western areas accelerated. 7,500 factories which had been destroyed had to be
rebuilt, while, in the eastern areas, the oil, gas and other raw material producing
industries based on the geological research into natural resources dating from the
‘30s started at the end of the ‘40s. The Eastern regions (Kazakhstan, Siberia and
the Far East) strengthened their position in raw material production terms (Table
7).
At the beginning of the last century the key areas in the development of manu-
facturing or processing industries and in the modernisation of living conditions,
both in Russia and in the Soviet Union, were the historical city networks. Until the
Bolshevik Revolution, city development in Russia had progressed in much the
same way as under the rules of European urbanisation. Occasionally, the normal
flow of development was modified by administrative reorganisation and both fa-
vourable and unfavourable changes occurred. In Tsarist Russia, administrative
functions as one means of encouraging city development (a factor of under-devel-
opment) combined with economic factors, although with a significant time-lag. At
14
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Discussion Papers, No. 65.
the end of the 19th century, the urban population amounted to 15 percent of the
total. The first census in 1897 listed 461 towns or cities in the European part of the
country and 51 in the Asiatic part. The urban population exceeded 20 thousand in
15 percent of towns. Of the 76 larger cities, two (Moscow and Saint Petersburg)
had populations of over 200 thousand, five (Astrakhan, Kazan, Saratov, Rostov-on-
Don) between 100 and 200 thousand, whilst 17 had from 50 to 100 thousand and
52 from 20 to 50 thousand. In 1926, the number of towns with a population of
more than 100 thousand increased to 22 (Table 8).
Table 6
The significance of Russia’s three industrial regions based on employee numbers
and production value, 1900–2000, percent
District
Number of employed
Production value
1900
1925
1950
1975
2000
1900
1925
1950
1975
2000
Old industrial areas1
64
61
42
40
33
50
65
68
42
30
New European
30
33
39
41
47
33
31
27
38
40
industrial areas
Eastern regions
6
6
19
19
20
17
4
5
20
30
Key: 1 Saint Petersburg and surroundings, Central industrial region and the Central Urals.
Source: Treivish, 2002.
Table 7
Significance of the eastern regions in specific product areas, percent
Product area
1940
1960
1965
Electricity
9.2
21.6
29.4
Natural gas
0.5
2.4
78.8
Coal
28.7
35.9
58.8
Iron ore
1.7
11.1
16.3
Timber
23.4
26.2
37.3
Cellulose
–
9.3
29.6
Artificial fertilisers
6.9
15.9
13.7
Cement
13.5
21.4
26.0
Source: Shtoulberg, Adamesku, Khistanov and Albegov, 2000. p. 43.
15
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Table 8
Population changes in today’s large cities, 1897–2005, ‘000 inhabitants
City
1897
1926
1989
2005
Chelyabinsk
25
59
1,030
1,095
Khabarovsk
16
44
598
579
Irkutsk
52
98
622
583
Yaroslavl
71
114
629
605
Yekaterinburg
43
136
1,363
1,304
Kazan
130
179
1,085
1,110
Krasnodar
66
163
619
715
Krasnoyarsk
27
72
912
917
Magnitogorsk
…
2101936
439
417
Moscow
1,039
3,641
8,677
10,407
Murmansk
13
73
472
325
Naberezsnije Celine
…
91939
505
508
Novosibirsk
701915
120
1,309
1,406
Nizhny Novgorod
90
186
1,435
1,289
Omsk
38
162
1,149
1,143
Perm
45
168
1,092
989
Rostov-on-Don
120
177
1,008
1,058
Samara
92
271
1,257
1,133
Saint Petersburg
1,265
1,616
4,435
4,600
Togliatti
5
…
629
705
Ufa
49
97
1,080
1,058
Vladivostok
29
108
631
587
Volgograd
56
148
995
999
Voronezh
81
120
882
849
Source: For 1897 and 1926: www.populstat.info/Europe/russiat.htm [6 April, 2008], for 1989 and
2005: Chislennost naseleniia RSFSR. 2001.
As part of the reform programme at the end of the 19th century, the Russian In-
terior Ministry elaborated a twenty-year urban development strategy for the Euro-
pean part of the country. In practice, however, very little of this ambitious plan was
realised: Murmansk, Tuapse and certain other settlements were given municipal
rights. Urban settlements and other proletarian strong-points were seen as political
allies of Soviet power and 90 settlements were given town status between 1917 and
1926. During the period of the first five-year-plan (1921–1925), most of these
towns were organised in the Urals-Kuznetsk industrial area, and Novokuznetsk,
Prokopevsk and Belovo were also elevated to town rank at that time. The rapid
industrialisation resulted in a wave of announcements of new towns, and by 1939
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Discussion Papers, No. 65.
100 new settlements were designated as towns, and within the Russian Federation
itself the number of towns increased to 520 (Lappo, 2005).
The logic of industrial development also left its mark on urban development
during and after World War II. Characteristic of this period was the increase in
terms of quantity of the Trans- Urals city network. 80 percent (that is, 182 towns)
of today’s 230 towns of Siberia and the Far East were raised to town rank post-
1917. In pre-revolutionary Siberia there were 51 urban settlements; during World
War II 12, in the following 45 years 107 settlements were designated as towns and
12 new towns were even organised in the 1990s (Leksin, 2006).
2.2 The illusion of local and regional autonomy during the 1920s
The first decrees of the 1917 Revolution dealt with the transformation of power
relationships. The first administrative orders of Soviet power, which concerned the
Supreme Economic Council, labour supervision, the organisation of local authori-
ties and the designation of new boundaries for regional authorities, aimed at im-
plementing the administrative regional scheme and integrated economic zoning.
Conflict between different regional organisational strategies was rooted in the
appraisal of autonomy and federalism from different points of view. The decision
on “The Federal Institutions of the Russian Republic”, accepted in January 1918 at
the 3rd All-Russia Congress of Soviets, was drafted in a spirit of democratic cen-
tralism, that is, it laid down quite clearly that federation could only be organised in
such areas whose peculiar lifestyle or ethnic composition differs from their sur-
roundings. Attacks were directed at the “republics” which claimed semi-independ-
ent statehood, elected their own government and commissars and issued local
banknotes. Regional autonomy was organised in different territories of the country.
Considering its ideological grounds, the Siberian independence movement, the so-
called “oblastnichestvo” was the most respected organisation. The movement was
founded by Siberian university students studying in Saint Petersburg in the 1860s
and who, returning to Siberia, carried on the fight against Russian colonists and
demanded the total autonomy of the region and a federal transformation of Russia.
From 1918 the central authority continuously strove to eliminate the Siberian au-
tonomist organisations (Bykova, 2001).
As a result, and due to measures adopted by the “republics” of the Urals, Kursk,
Tver and Kaluga which conflicted with decisions of the central government, the
issue of further organisation of new, larger regional administrative bodies (the so-
called regional unions) was removed from the agenda. These regional confedera-
tions were one variation of the state’s new regional organisational arrangements.
The conflict between different factions grew to its most intensive in the period
when the first Soviet constitution was being prepared. The wing of the Bolshevik
Party led by Lenin expected the constitution to provide for the effective harmoni-
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Discussion Papers, No. 65.
ous cooperation of local and central bodies, whilst the regional federalists did not
abandon their original ideas. In addition, there were other concepts which tried to
build the state on a federal system of professional alliances. Lenin emphasised the
dialectic connection of centralised state power and local autonomy and at the time
of the publication of the Decrees creating fundamental institutional systems of
economic administration he committed himself in these terms: “Every attempt to
established stereotyped forms and to impose uniformity from above, as intellectu-
als are so inclined to do, must be combated. Stereotyped forms and uniformity
imposed from above, have nothing in common with democratic and socialist cen-
tralism. The unity of essentials, of the substence, is not disturbed but ensured by
variety in details, in specific local features, in methods of approach, in methods of
exercising control, in ways of exterminating and rendering harmless the parasites…
The more variety there will be, the better and richer will be our general experience,
the more certain and rapid will be the success…” (Lenin Collected Works, Vol. 26.
p. 413., p. 415.).
In time, the political fight between the followers and opponents of the Lenin
wing turned to the field of economic policy. The first trade union debate, held in
January 1918, showed signs of this, different views concerning the duties of trade
unions and the regulation of industry and labour supervision clashing. In their the-
ses, published after the Treaty of Brest, the “Leftist communists” – Bukharin,
Preobrazhenski and others – expressed their opinion that: “The form of public ad-
ministration is bureaucratic centralisation and this has to develop in the direction of
a regime of commissars, the stripping of autonomy from local soviets and the ef-
fective abandonment of the bottom-up type of “common state”” (quoted by
Szamuely, 1979. pp. 99–100.). The authors highlighted their own economic man-
agement ideas in these terms: “The management of companies should be passed to
mixed bodies made up of workers and technocrats and these should be supervised
and managed by national economy soviets. The whole of economic life should be
subordinated to the organising influence of these soviets…” (the same author, ibid.
p. 101.).
To offer some insight into the deeper motives of the conflict, let us review – in
the broadest possible terms – what happened in the field of economic organisation
in Soviet Russia up to the Spring of 1918. The first steps to introduce a socialist
state institutional system – the publication of orders concerning workers’ control
and the Supreme Economic Council – were taken in 1917. Both institutions – in the
same way as privatisation in the economic sector – had an overall local organisa-
tion system. Whilst between the Supreme Economic Council and its local bodies
(the economic departments of the Soviets or, in the absence of these, the local
bodies of the Supreme Economic Council) the dominant feature was of a hierarchi-
cal management system, the All-Russia Workers’ Control Council (a product of the
influence of the Mensheviks) was incapable of effective operation. Since most
industrial firms were privately owned, supervising the production of the private in-
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Discussion Papers, No. 65.
dustrial sector was the basic activity of the Supreme Economic Council at the very
beginning of its operation, and it was entitled to intervene only in cases involving a
narrow range of state companies.
Later, its local-regional bodies, as they grew stronger with the progress of na-
tionalisation, were able to organise and regulate both the public and private econ-
omy in their area and to do this with relative harmony between local and state in-
terests. In their operation, this dual subordination ensured the implementation of
principles of democratic centralism. These were socially open organisations since
the membership of these councils comprised the body elected by the councils of
factory committees, representatives of the Soviets and company professionals. In
this way the regional economic councils organised, regulated and planned all eco-
nomic sectors within their area of competence. Their decision-making power was,
in practice, unlimited in the whole sector of production, distribution and consump-
tion.
However, as matters developed, the cautious nationalisation efforts of the local
economic institutions of central state power were made unworkable by the sponta-
neous actions of local workers’ control councils and, due to this, the rapid nation-
alisation which had started in the country could not be followed by regularisation
aimed at stabilising management relations. Soon the problems of socialist man-
agement were in the foreground of the political, and also the economic, conflict.
Decentralisation, growing from nationalisation movements, did not slacken speed;
rather it boosted the economic decline and anarchy of production. In this way the
problem of combining the two management methods (individual responsibility and
labour- controlled production) arose very sharply.
The conflict was a success for the Leninist faction. The decision concerning the
management of nationalised enterprises was made from the top and promoted the
harmonisation of local and central interests, implemented individual responsibility
management and ensured broad initiative from the working classes and centralism
(the central discipline of management). Factory management boards (and director-
ates-general of “mixed enterprises” operating industrial plants physically far re-
moved from each other in terms of distance) were subordinated to bodies of re-
gional national economy councils and regional management of nationalised enter-
prises (to the central directory in the case of enterprises managed directly by the
Supreme Economic Council). Regional management (comprising candidates
elected by the People’s Soviet of representatives of factory management boards
and the coalition of regional trade unions) were bolstered in their office by the re-
gional national economy soviet, and the mechanics of creating management bodies
also stabilised the position of the individual management concept.
Within a short period of time the management mechanism of the universal, ru-
dimentary economic operational war-time communism seized control of the direct
horizontal links between the basic units of production and the development of strict
vertical organisation management hierarchy, while the “glavk” (chief committee)
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Discussion Papers, No. 65.
system eliminated, temporally inactivated, or, rather, stripped all power from every
element of local-regional economy management which had formed and was gradu-
ally showing signs of operational maturity (Malle, 1985). Article 61 of the first
Constitution of the Russian Soviet Federal Socialist Republic (RSFSR) was drafted
in the following form: “Regional, provincial county and rural organs of the Soviet
power and also the Soviets of Deputies have to perform the following duties: a)
Carry out all orders of the respective higher organs of the Soviet power; b) Take all
steps for raising the cultural and economic standard of the given territory; c) De-
cide all questions of local importance within their respective territories; d) Co-or-
dinate all Soviet activity in their respective territories” (1918 Constitution [Funda-
mental Law] of the RSFSR). It suggested the strengthening of centralisation in that
the organisational system of the central authority was defined thematically and,
perhaps, by the fact that in the basic law there was no mention of an organisational
system of production management.
The operation of industrial centres, which were poor in terms of experience,
professional individuals and methods and which coped with the performance of
rudimentary plan indices with difficulty, was hindered by the high numbers of units
managed (one industrial directorate looked after, on the average, some 60 firms
(which were widely separated in spatial terms). Therefore, what was started was
the organisation of planning deconstruction and monitoring of the so-called unions
or trusts at the meso-level. In the early 1920s, 179 trusts (comprising 1449 firms)
were in operation (Venediktov, 1957). The two-tiered form of company manage-
ment deriving from trusts organising on a sectoral base, clearly strengthened cen-
tral influence. However, the creation of these American-style “trusts” (groups of
nominally independent companies which are centrally directed) to enforce regional
discipline, suggests acknowledging the need to take steps due to a lack of horizon-
tal connections.
There can be no doubt that there was a part to play by local economy manage-
ment bodies in relaxing corporate verticalism. At the very beginning of the revolu-
tion, the managing bodies of regional economies were national economy councils
operating in dual subordination. This type of body was not eliminated during the
era of glavkism, but their former authority was withdrawn, and so they became the
executive bodies, managing local small-scale industry for the Supreme Economic
Council to the end of 1919. The effective organisers of the economy were the local
branch organisations (“apparatus”) of the industrial chief committees. These local
council organisations increasingly started to point out the operational mistakes of
economically isolated vertical unions – not merely because of their economic bases
being restricted to the extreme, but also because it became quite clear that main-
taining production was impossible with the centralist methods due to fluctuations
in production factors, chaotic transportation conditions etc.
Relatively soon it also became clear that local economy management bodies,
with their lack of proven methods and of trained professional staff, could only op-
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erate within a narrow range, primarily in the direct and operative management of
production, based on decentralised decision-making authorisation. Since the Su-
preme Economic Council was incapable of effective management of the companies
directly subordinate to it, regional industrial offices were created and many prov-
inces came within their competence. On the one hand, these new executive bodies
of the Supreme Economic Council directly managed the companies under their
control, while, on the other hand, they harmonised the activity of all the economic
units of a certain area. Their task was to manage the work of provincial (regional)
national economy councils and the economic departments of the Soviets.
The changes in the field of economic management were uniformly adopted by
the 8th All-Russia Congress of Soviets in December 1920. The Congress passed
important resolutions for each level of management. It suggested that the main task
of the Supreme Soviet of the National Economy would be the overall planned
management of industry and it also proposed the expansion of functions and au-
thority of local national economy councils. The resolutions on local economy man-
agement bodies transformed the industrial directorates and chief committees of the
Supreme Economic Council into the managing, regulatory and supervisory bodies
of provincial national economy soviets. The most important position adopted by
the Congress may be the resolution which suggested the creation of provincial and
district coordination bodies, economic conferences (Russian: ekonomicheskoe
soveschanie, abbr. EKOSO) to promote the implementation of a unified national
economy plan.
At the very beginning of 1921, district and provincial economic councils met
and regional coordination bodies were created in areas where organisational units
already in existence were able to cope with the new functions. The Council of La-
bour and Defence created a specific committee to arrange the regulations of re-
gional economic conferences. The Council of Labour and Defence passed the
committee’s proposal and a document was published entitled “Provisional decrees
concerning regional economic bodies”.
This resolution indicated the responsibilities of congresses – that is, that they
need to observe the implementation of economy-related decisions of supreme bod-
ies, draw up the economic development plans for their region, coordinate the work
of provincial economic congresses in their area of competence, control the execu-
tion of production programmes of the unified National Economy Plan and, last but
not least, by means of their activity, encourage and improve the development of
local innovation and initiative. The regional economic congresses operated as
bodies of the Council of Labour and Defence and their president was appointed by
the Council.
The Bolshevik leadership tried to restore the functions, defined in the original
plan, of local economic bodies through the new economic policy. At the same time,
the regional economy congresses, covering many provinces, embodied regionally
organised centralism and it was necessary to beware of these becoming an obstacle
21
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Discussion Papers, No. 65.
to local initiatives and local economic policy. Therefore, the XI All-Russia Con-
gress of the Russian Communist Party (Bolsheviks) considered it necessary to em-
phasise that: “Whilst we thought it appropriate both from economic and technical
aspects that state companies with a similar profile or dealing with each other
should come together under a unified management on a provincial, regional or
nation-wide scale, at the same time we need to fight against the revival of the re-
jected system of ‘glavkism’. Based on the resolution of the 9th Congress of Soviets,
the companies placed in the hands of local soviets together with their unions, re-
main under the management of provincial executive committees and they can only
be handed over to national or regional unions by agreement or in the absence of
such, by a decision of the Presidency of All-Russia Central Executive Committee”
(Congresses of the Communist Party of the Soviet Union. p. 701.).
In August 1922, after debate by various bodies, the All-Russia Central Execu-
tive Committee and the Council of Labour and Defence passed a joint resolution
concerning extending the authority of regional and provincial economic con-
gresses. The economic and planning influence of soviets was considerably
strengthened by this resolution, which transferred the redistribution of state finan-
cial means between authorities to the competence of regional economic councils
and defined specific responsibilities, ensuring greater independence for the creation
and distribution of independent financial funds.
Democratic centralism in the operation of economic conferences was ensured
by this dual subordination since they were required to report on their activity both
to the competent executive committees of soviets and to the Council of Labour and
Defence. However, the contradictions in the explanation of the relationship of cen-
tralisation and decentralisation left their mark on the new economic management
system, not to mention the problems originating from disagreements over the crea-
tion of power-structural social relations.
At that time, dual subordination was not used mechanically. Lenin indicated,
that “Dual subordination is needed, where its is necessary to allow for a really in-
evitable difference. Agriculture in Kaluga Gubernia differs from that in Kazan
Gubernia. The same thing can be said about industry, and it can be said about ad-
ministration, or management as a whole. Failure to make allowances for local dif-
ferences in all these matters would mean slipping into bureaucratic centralism, and
so forth. It would mean preventing the local authorities from giving proper consid-
eration to specific local feature, which is the basis of all rational administration”
(Lenin Collected Works, Vol. 33. p. 366.).
The institution of economic conferences, in terms of its organisational disci-
plines and its operational and characteristic features, was either already able, or
soon became able, to harmonise central and local objectives, to coordinate the ver-
tical and horizontal socio-economical processes, to harmonise sectoral and regional
interests and, last but not least, by enhanced financial and funding independence, to
become an important link in the economic management of the planned economy. A
22
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Discussion Papers, No. 65.
well-functioning, coordinating institutional system of sectoral and regional plan-
ning and regulation was established without eliminating or radically transforming a
satisfactorily functioning economic organisation system of socialism, and without
having made any concessions at the expense of the functions of central govern-
ment, so strengthening the totally planned nature of the economy. The economic
soviets could accomplish their direct economic management tasks effectively only
with the involvement of the broad masses, and so it is no accident that they were
kept in evidence as the essential sphere of action of economic democracy. The
reports of the economic conferences accumulated much useful information about
the spatial operation of the economy. These documents are rich source material for
today’s researchers.
After the foundation of the Union of Soviet Socialist Republics in 1922, a
republic economic council was organised in the Russian Federation for the
management of economic councils and, for a while, the coordination bodies of the
other federal republics were held jointly by the Council of Labour and Defence,
after which the republic EKOSO-s were also organised. These organisational
measurements already managed to show some sort of centralisation tendencies
which were proved by the partial reorganisations made in 1923. At this time only
the district-level economic conferences were dismantled, but in the second half of
1924, most of the regional and provincial economic councils started to be
liquidated. The two most effectively operating, and at the same time located the
farthest distance from central government and with a specific power structure,
economic coordination body, the Siberian Revolutionary Committee and the Far
East Revolutionary Committee (the institutions of oblastnichestvo) were liquidated
only in 1925 and 1926 (Abdulatipov, Boltenkova and Yarov, 1992).What are the
factors originating from the development of the Soviet economy of the 1920s and
concomitant with the formation of power-political relations which strengthened the
positions of the sectoral-central management of the economy, and, for no short
time, disrupted the success of sectoral and regional aspects of the earlier balance of
forces in the management of economic operations?
First, there is no doubt that the sphere of activity of central management in the
economy was broadened by the economic policy programmes which ensured the
proportionality of the spatial location of the country’s forces of production. The
Soviet Union selected its economic development strategy in such a way that, on
one hand, it would be possible to reduce the economic gap between it and the
developed countries and, on the other hand, the rapid development of the areas
actually lagging would start after the economic, political and social emancipation
of nations and ethnic groups had been guaranteed. In this way, economic policy
must, in the interest of the whole country, ensure effective spatial development and
equalisation of difference in development levels of the regions.
Second, the degree of freedom of action of regional management of the econ-
omy was increasingly restricted by the tendencies towards centralisation of corpo-
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Discussion Papers, No. 65.
rate management which developed in the company organisation system. An essen-
tial element of the new economic policy was the creation of opportunities for self-
financing and independence. However, it soon became clear that most state firms
were unable to cope with their production organisation functions (in the mixed
economic relations situation which derived from fierce competition and with an
under-trained specialist team), it was desirable to concentrate company manage-
ment functions and force companies into uniting with others (forming trusts as
mentioned earlier) and organising them in a vertical or horizontal way. At first,
most of these “trusts” were under the direct management of the Supreme Economic
Council, but later they were transferred into the competence of the newly-formed
economic Conferences of federal republics, although 72 defence and export-ori-
ented companies producing strategic goods, or strategically important industrial
and transportation trusts remained under the direct control of the Supreme Eco-
nomic Council of the Soviet Union. The local industrial trusts operated under dual
subordination (the republic’s, provincial and regional economic conferences). I
need hardly say that the management of the trusts demanded differentiation from
central bodies. This reorganisation was typical of the Supreme Economic Council
and, within the scope of it Central State Industry Directorate (consisting of sectoral
directorates) was organised at federal level. The establishment of the centrally ini-
tiated and strongly centralised system of trade and product distribution for the in-
dustrial syndicates resulted in a further tightening of economic objectives and
processes, managed by regional bodies. Both industry directorates and syndicates
quickly built up their regional organisations, although these, because of their de-
concentrated nature, were almost exclusively enforcing sectoral interests and the
central will and were completely isolated from regional bodies. We can conclude
that the establishment of the concentrated and centralised company structure is an
obvious obstacle to the success of management relations which result clearly from
the regional division of labour.
Third, parallel to this narrowing of the area of competence (and accelerating the
process) of spatial economy management bodies, a hierarchic institutional system
of national economic planning was set up. In favour of compiling and implement-
ing the national economy plan, the regional economic conferences formed planning
boards. The activity of these was, basically, the arrangement of the annual and
long-term economic development plans of their region, but, beyond that, they car-
ried out considerable fact-finding and conceptual work, e.g. the division of certain
areas into districts. The regional planning committees gradually took over the fun-
damental planning functions of regional economic councils and these latter became
local industrial departments, joining up with the communal departments of the
Executive Committees of the Soviets. The significant changes in sectoral manage-
ment which were confirmed by Supreme Soviet legislation up to 1932 clearly
showed the sole leading principle of the economy.
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2.3 Attempts at space-centric economic management
at the end of the 1950’s, and the failures of regional policy
As a consequence of the temporary loss of ground of the established Stalinist po-
litical regime it became clear by the end of the 1950s that the multi-stage sectoral
management systems of the planned economy had created a whole chain of adverse
events. The majority of the negative influences arose from the over-centralised
character of the decision-making process. No insignificant part in this process can
be attributed to the fact that the structure of centralised management was so differ-
entiated that the multi-coloured sectoral management made the effective develop-
ment of inter-sectoral coordination, of inter-corporate cooperation almost impossi-
ble, and the product-oriented system of sectoral organisation became the bedfellow
of sectoral chauvinism and autarchy. The excesses of sectoral management are, for
instance, illustrated by the fact that, in the middle of the 1950s, the number of in-
dustry-related ministries was around ten (even in those republics with low eco-
nomic potential) and the number of industry directorates subordinate to these was
in the neighbourhood of several dozen. An additional source of difficulty was that,
due to the large number of coordination duties appearing at regional level, coop-
eration between the local and regional management and control bodies (not only
councils acting in tight dual subordination circumstances should be included in
this, but regional parties also), central management was almost uncontrollable. The
politico-economic practices of the era neither demanded horizontal cooperation nor
considered it a fundamental principle of economic organisation.
The negative influences of hierarchic sectoral management exerted on regional
development revealed themselves in a most complex manner in the Soviet Union.
By the middle of the 1950s, the extensive industrialisation which significantly
changed the regional structure of productive power was already complete. Eco-
nomic necessity (according to which, if an increasing proportion of is spent on
improving living standards and on the improvement of the retail infrastructure,
increased economic performance can only be achieved with the increased utilisa-
tion of existing fixed assets together with a slowing growth rate of new facilities)
showed itself here for the first time. At the same time, the economic results drew
attention to the fact that complicated sectoral management is quite unable to influ-
ence in any rational or direct way the fundamental units of the economy.
At the plenary session of the Communist Party in July 1955, a number of the
opinions voiced pointed out the failings of the economy. According to these, the
development of economically practical forms of production organisation, of indus-
trial cooperation and specialisation is stunted by the inflexible, sectoral industrial
management so burdened with parallelism. The scope of measures which were
taken very rapidly after the plenary meeting is shown by the fact that, in that same
year, several Russian Federation ministries were liquidated and in the companies
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Discussion Papers, No. 65.
operating at republic and local and regional level the number of staff increased
from 33 percent in 1950 to 47 percent (Bishaev and Fiodorovich, 1961).
The need for radical changes in economic management was also voiced at the
plenary session of the Central Committee of the Communist Party in February
1957. The resolution adopted in respect of the modernisation of manufacturing and
construction industry organisations committed itself, among the various alterna-
tives of multi-stage industrial management, to management on a sectoral basis. The
plenum considered the principal starting-point of reorganisation to be the approach
of management to production, the expansion of the spheres of authority of the fed-
eral and autonomous republics, the enhancement of the economic organisational
role of local and regional bodies of the council, party and trade unions, and the
increased involvement of the masses in economic management.
To provide a new basis for the regional management system was the direct con-
sequence, and, in fact, to some extent a precondition for concepts to be realised. In
the reformed regional scheme economic regions played a key role. Their estab-
lishment and designation were the fundamental motives for the establishment of
the practical units of economic and administrative regionalization. Economists and
economic geographers of the era saw this as a guarantee of the effective operation
of the new administrative regional units (Alampiev, 1959, 1963; Kolosovskiy, 1958,
1961). They tried to support their advantage over the former administrative units
with several arguments. In the first place they asserted that the new administrative
regions are economic complexes and, although much smaller than the former eco-
nomic regions, their specialised character becomes more clearly distinct. The
higher standard of specialisation provides more advantageous conditions for the
establishment of simpler management forms and the opportunity to develop re-
gional chauvinism and autarchy is smaller in the less structured units. Further
arguments for the economic regions were the economic processes and the more
reasonable concerted character of the operating basis of regional governmental
organisations and those of the Party. The coincidence of the politico-governmental
sphere of power and the economic sphere could significantly expand the sphere of
authority of regional planning and regional management in general, and increase
the depth of their potential for influence, so also enhancing local initiative.
A much deeper change to the regional organisation system lurked behind the
formal changes to the spatial basis of the economic management system. (Earlier,
the new economic regions followed the boundaries of former regional administra-
tive units. At first, it was planned to establish 92 regions (oblasts), although their
actual number turned out to be 105 – a figure soon afterwards reduced to 47.) The
economic councils established in the administrative regions became the organisa-
tional repositories of comprehensive administrative reform. These were bodies
subordinate to the Council of Ministers. The Act of 1957 outlining their jurisdic-
tion highlighted especially the fact that these economic councils are administrative
bodies and can be controlled by the Council of Ministers of the Soviet Union only
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through the republic’s councils of ministers. Thus, the control of the economic
councils did not follow the traditional principle of dual subordination. Their rela-
tions to the regional councils was featured by the fact, that on the one hand they
had to report on the activities of the companies operating under their jurisdiction to
the executive committee of the council, and on the other hand, in complex eco-
nomic development matters they were obliged to maintain close coordination with
the councils. (Thus, in terms of organisational principles the economic councils
significantly differed from the similar institutions of the 1920’s. That is, the major-
ity of the then existing regional economic bodies operated in dual subordination: as
the independent organisational unit of the Soviet region it was also under the con-
trol of the Supreme Economic Council.)
The law treated the economic councils as regional management and special ad-
ministrative bodies. Their structure distinctly followed sectoral principles. Through
these sectoral bodies (directorates general, directorates) the economic council di-
rectly controlled the companies attached to it. The controlling authority of sectoral
directorates covered the corporate operation in full. They were responsible for the
material-technical supply of production, for the development of interregional coop-
eration and of cooperative relations within their district; they virtually controlled
the tiniest details of industrial planning and organisation. Their task was to approve
the corporate organisational and operating rules and regulations and to appoint the
leaders of the producing industrial units. It was not accidental, therefore, that those
criticising this organisational structure regarded as the key inadequacy of the or-
ganisational system, that the “Company – economic council” two-stage chain of
control remained, in practice, three-stage.
The other organisational direction of the division of labour established in re-
gional economy management was represented by soviets (councils). While indus-
trial organisations and organisations of the construction industry were controlled by
the economic councils, local Soviets were responsible for agriculture, and for the
non-producing sphere. Through the gradual decentralization of administrative ju-
risdictions the economic management independence of these councils strengthened
at the beginning of the reforms. However, at the beginning of the 1960’s, a process
began under which local industrial companies were withdrawn from their jurisdic-
tion and finally handed over to the economic organisations. Based on their man-
agement relations to the economic sphere, the government – power organisations
(unified up to this point) were divided into two types: industrial (urban) and agri-
cultural (rural) Soviets, and the political establishment was also reorganised based
on the production functions. In the agricultural areas, kolkhoz and sovkhoz (Soviet-
style collective farms and State farms respectively) production directorates were
established to carry out public administrative and party duties instead of district
party committees.
The number of economic councils was reduced to 47 in 1962, and the three-
stage planning system (economic region, administrative region and district) was
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replaced by a four-stage system. 16 economic macro-regions comprised the upper
level; an increased number of regions of the economic councils made up the
second, 137 autonomous republics, administrative regions (krais and oblasts) made
up the third, whilst 2,724 districts were the fourth level.
Summarising the results of this era of Soviet economic management, we can
confirm that regional factors definitely outweighed sectoral management, and
through this the upper decision-making levels were deprived of the possibility of
uniform management, concept creation and execution. It is obvious that, in this
way, a number of aspects of sectoral optima, represented by the specialised sectors
and covering the entire country could not prevail. The mobility of budgetary in-
vestment instruments among the individual areas significantly decreased. As for
industrial development, regional interests came into prominence: two-thirds of
industrial investment was initiated and financed by the economic councils, and
there was no uniform industrial development concept in operation, not even a sec-
toral one.
The economic councils aimed at the large-scale improvement of industry in
their respective regions, specialisation was overshadowed and economic relations
between individual regions weakened. Even though the elimination of the hugely
over-centralised management of industrial companies, of corporate isolation within
a single economic district (due to subordination to the supreme authority) proved
successful, the power of the local bodies formally increased. Nevertheless, reor-
ganisations could not bring visibly better results in production, since it was only an
organisational restructuring of management which took place: the administrative
regulation methods of production remained dominant in corporate management
(Zaleski, 1967).
Management difficulties which could be linked to the organisational structure
had not lessened; in fact, they had even increased to some degree by conflicts and
disputes concerning the delimitation of the regional units of public administration,
economic management and planning. Representatives of the disciplines dealing
with the spatial aspects of socio-economic processes proved several times con-
vincingly that spatial basic units – in contrast to the principles of the reform – are
not economic regions (Khrushchov, 1966; Probst, 1965; Shkolnikov, 1965). The
first version of the economic management region system was unfavourable for
long-term planning, while the second version was unsuitable to reconcile the com-
plicated management relations which had developed in the region. The less stable
regional organisational system also provided reasons for the strong differentiation
of the economic productive capacity of regional units and of the standard of pro-
duction. All of these hindered regional equalisation; it did in fact further increase
the differences. This process was even supported by the fact that the regional ori-
entation of economic management had scarcely any effect on regional planning;
the degree of complexity of regional plans even decreased. The planning activity of
the economic councils – however obvious the analogy seemed – could not be iden-
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tified with regional planning. The planning activity of the local regional bodies of
the council covered only the relatively narrow local economy. Regional plans were,
in effect, made only on the federal republic level (Pavlenko, 1984; Pchelintsev,
1966, 1983). Despite the beneficial effects of the elimination of sectoral isolation
which earlier hindered development, the uncalculated adverse effects (which con-
flicted with the basic concept of economic management) reduced the effectiveness
of the economic operation, and this contributed to the long-term decline in the rate
of economic growth in the Soviet Union.
We can identify several unique features of the regional economic structure of
the soviet era even though the prevailing State ideology and policy did not recog-
nize the failure of the planned economic decision-making system in shaping the
spatial structure. The main features of the regional organisations of the Soviet em-
pire were:
1) The strong concentration of population and economy (especially industry
and services) in the European parts of the country. On the other hand, the focal
point of the extraction industry was in the areas extending East and South of the
Urals. In the middle of the 1980’s, an annual 1 billion tons of raw material flowed
from the eastern regions to the western industrial areas, involving up to 3,000
kilometre of haulage. Industrial development programmes of Siberia and the Far
East were exclusively limited to the production of raw materials, and workers were
given special motivation not to leave the area. These solutions were both extremely
expensive and unsuccessful.
2) The implementation of extreme, specialised regional development pro-
grammes in the spirit of “gigantomania” in the interest of demonstrating the supe-
riority of sectoral ministries. In many regions and cities, development was based on
a single sector of the extractive industry. For example, in the area of Ivanovo, the
majority of output was provided by the textile industry, and in the Udmurt Repub-
lic – and in several Siberian cities and towns – by the defence industry. The spatial
concentration was facilitated also by corporate organisational means. In the differ-
ent sectors of innovation-sensitive processing industry huge monopolies had been
established and by 1990 some one thousand large company controlled the Soviet
manufacturing industry.
3) The autonomous operating conditions of settlements were restricted and the
social sphere was heavily influenced by large companies. For example, the city
management of Magnitogorsk was exclusively undertaken by the steel-works and
that of Togliatti by the automobile factory. Several other examples could be
enumerated.
4) The member republics of a formally federal, but essentially unitary, State
possessed only restricted economy development powers.
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3 The regional portrait of the new Russia
After the dissolution of the Soviet Union in 1991, with the switch to the market
economy and with the disintegration of common economic space, the regional dif-
ferences became much stronger. The effects of economic liberalisation were differ-
ent in the individual areas of the country. The deep and protracted political crisis
made its effect felt in every region of the country, governmental investment (the
main source of regional development funds) had been reduced to a minimum and
the former close economic relations between member republics had been broken
(Artobolevsky, 1993). Industrial production decreased most significantly in the
European Central, Southern, and Far East federal districts, whilst the decline of
industry in the Siberian and North Russian areas – rich in natural resources – is
minor, although still significant. The winners from these changes were exclusively
the European centres of Russia. The development of Moscow and Saint Petersburg
shows post-industrial features and a considerable proportion of the new market
organisations (financial institutions, business service providers and export compa-
nies) are located in these two cities. Among the regions of the country, those who
found themselves in the most acute situations were those whose economy was
dominated by giant corporate concentrations, and narrow specialisation (Table 9).
After the dissolution of the Soviet Empire a considerable regional reorganisa-
tion was introduced into the Russian Federation, and during the past fifteen years
or so the fundamental directions of changes influencing the country’s economic
and spatial structure were:
– A new state political position evolved after the collapse of the Soviet Union
(the former internal peripheries becoming external peripheries),
– The elimination of the planned economy and the development of new market
relations,
– The opening of the Russian economy to external markets,
– A new type of regionalisation in Russia, with the transformation of the econ-
omy producing several cross-administrative-border organisations – for in-
stance in the energy sector and in transport,
– The evolution of a new stage of urbanisation, in which urban lifestyle and
infrastructure are shaped, no longer directly according to industrial and tech-
nological requirements, but according to modern, environmentally friendly
factors which better serve improvements to the quality of life and living con-
ditions.
The switch to the market economy most of all affected the various industrial
sectors. By the mid 1990’s, industrial production was reduced to one-half of its
earlier level, although the decline of production varied in the individual regions.
The value of industrial production decreased by 50 percent in the North Caucasus,
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by 63 percent in the Kaliningrad region and by some 50 percent in the Trans-Urals
regions. When examining smaller spatial units (oblasts or provinces) a highly dra-
matic decrease can be observed. Industrial growth was characteristic of only 17
spatial units. The main driving force of regional differentiation was the transfor-
mation of the sectoral structure of industry. The decline was largest in the textile
industry, precision engineering and in the chemical and timber industries. These,
and the regions with economies based on some routine or undistinguished local
industry – firstly, in the peripheral areas inhabited by ethnic minorities – show the
worst features of depression. For example, in the multi-national autonomous re-
publics unemployment rates are as high as 30 percent, while the rate of unemploy-
ment in raw material-producing areas is only 4–5 percent. When these two types of
region are compared, the income of the population shows a 10 to 15-fold differ-
ence. In one-third of the county’s regions, half of the population lives below the
minimum subsistence level. The wages of the economic sectors also show signifi-
cant differences: the average wages of those working in the fuel industry are three
times higher than the national average and double those in light industry.
Table 9
Proportions of the population living in regions with differing development
levels, Russia, 1993
Type of region
Population, ‘000
Percentages
Backward
34,745
23.4
Depressed
35,073
23.7
Stagnating (temporarily)
30,527
20.6
Developed
47,900
32.3
Total
148,245
100.0
Source: The author’s calculations based on Bandman, Guzner and Seliverstov, 1996. pp. 211–243.;
Bilov and Smirniagin, 1996. pp. 181–183.
The regions which were established during the days of the Tsarist dictatorship
and under the logic of the created regions (oblasts) encountered serious problems
when faced with the free market. A considerable proportion of Russian public ad-
ministrative units were unable to meet the competitive conditions set by market
requirements. First of all it was those regions which hit difficulties whose operation
had earlier been determined by geopolitical factors (the production sites of de-
fence-industry complexes were closed military districts), or whose growth had
been influenced by a single, giant company. According to experts’ estimates, as the
direct consequence of inadequate regional management, the annual loss of GDP
amounted to 2–3 percent (Novikov, 1998).
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Due to the lack of organisation, the market optimisation forces influencing the
economy and the spontaneous migration of the population exerted significant pres-
sure on the infrastructural networks in the emerging regions. At the same time huge
amounts of infrastructure-related plants lay unused in the ports, and in the large
energy hubs: one tenth of Russian power-stations has not been producing for years
and several hundred kilometres of pipelines through which, earlier, considerable
export activity was realised, remained unutilised. The infrastructure networks of
the two emblematic Russian metropolises, Moscow and St Petersburg, could no
longer meet the requirements of economic development.
The inherited economic base has also contributed to the fact that Russia today
may be regarded as an expressly raw material extracting country, and the raw mate-
rial extracting regions can be considered as truly competitive on the world market.
These regions rank first on the country’s investment list and the largest amounts of
capital and numbers of qualified labour force flow into them. The major proportion
of infrastructural development over the last ten years has been devoted to the road
network of these areas; roads were constructed to link mines and quarries with
seaports and border-crossings. However, the underdevelopment of a modern urban
infrastructure represents a considerable obstacle to future innovative development
in these areas.
Nevertheless, the new regional hierarchy does not help strengthen cohesion.
The outdated public administrative structure of the country and the rigid regional
boundaries hinder the spatial expansion of beneficial economic and social proc-
esses. Leading regions are unable to exert pressure on other regions, and the losses
due to regional segregation are very significant. For example, due to the lack of
cooperation, different regions of Northwestern Russia are developing their ports
and road-networks individually.
One of the signs of weak cohesion is the large differences among regional units.
Based on gross regional product (GDP) per capita, the difference between the
poorest and the richest oblasts (provinces) in Russia was forty-four fold (double
that of the income difference between the world’s poorest and richest countries).
Among the (then) 89 regions, the GDP per capita exceeded the national average in
only 16 oblasts (Figure 2). Although over the whole country (which was divided
into seven macro-regions – the so-called “federal districts”, managed by a Presi-
dential plenipotentiary envoy – the performance of four of these macro-regions
exceeded the national average, large variations can be seen among their individual
units. The GDP per capita of the Urals federal district, comprising four oblasts, is
208 percent of the national average. This figure is for the Tyumen oblast, the Rus-
sian region with the best performance in this federal district, 564 percent in contrast
to the other units of the region (whose average is 40–80 percent). In the least de-
veloped Southern federal district (which comprises eight regions i.e., republics of
national minorities and five oblasts with a Russian population), the average GDP
per capita amounts to 49 percent of the national average.
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Figure 2
GDP per capita in the Russian federal districts, 2004,
Russia = 100
Key: 1 – Federal district; 2 – Region (oblast).
Source: The author’s compilation based on the data of Osnovnye pokazateli sistemy nacionaľnyh
schotov.
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Discussion Papers, No. 65.
After turn of the millennium regional differences widened still further. In 1994 the
GDP per capita of the ten most developed Russian federal regions was 2.50 times
that of the national average, while in 2002 it was 3.3 times. In 2004, out of the 89
regions, 10 produced more than half of the country’s GDP (Table 10).
Table 10
The ten most important Russian federal regions in national GDP terms,
1994–2004
1994
2004
Subject
Percent
Subject
Percent
Moscow (City)
10.2
Moscow (City)
19.0
Tyumen
6.3
Tyumen
13.0
Sverdlovsk
3.8
Moscow
3.8
Moscow
3.6
Saint Petersburg
3.6
Saint Petersburg
3.2
Tatarstan
2.8
Samara
3.2
Sverdlovsk
2.6
Krasnoyarsk
3.0
Samara
2.5
Nizhniy Novgorod
2.8
Krasnoyarsk
2.3
Bashkiria
2.7
Krasnodar
2.2
Chelyabinsk
2.7
Bashkiria
2.1
Total
41.5
Total
53.9
Source: Konceptsiia strategii sociaľno-ekonomicheskogo razvitiia regionov Rossiiskoi Federacii. p. 5.
The majority of regional units show weak competitiveness on the global mar-
kets, and the lack of success of Soviet regional development is shown by the fact
that not even a single modern, regional productive cluster has been established:
monoculture is characteristic of one quarter of the Russian regions. Productive
relations do not manifest themselves in networks, but large vertically organised
companies manage economic co-operation. 60 percent of the output of the timber
industry in the (long industrialised) Tver region, which has a relatively diversified
economic structure is produced by four large companies, and 44 percent of the
production of the engineering industry is produced by three large companies.
Mono-functional cities are located in the Central, Urals and Siberian federal dis-
tricts in the greatest numbers. They account for 61 percent of urban settlements
and, as the population of four-fifths of these settlements exceeds 50 thousand, their
share of the city network is considerable. In the mono-functional cities of the
Sverdlovsk region there live 50 million inhabitants (42 percent of the region’s ur-
ban population); the situation is more unfavourable in the Volgograd, Tyumen and
Archangelsk areas, since, in these, more than half of the urban population live in
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cities which are maintained by a single industrial sector. According to this indica-
tor, Siberia’s position is no better either, since 41.0 percent of the urban population
here is concentrated in such cities. (Table 11). First and foremost this city-network
feature explains why the majority of Russian investment and infrastructural pro-
jects flows into the extraction industries and into the large companies, since, in
these terms, sectors which are competitive on the international markets carry insig-
nificant weight.
Table 11
Regions with a large number of mono-functional cities, 2004
Region, republic
Number of cities
Number of mono-
Proportion of population
functional cities
living in mono-func-
tional cities, percent
Chukotka
3
3
100
Khakassia
5
4
80
Karelia
13
10
77
Ivanovo
16
12
73
Sverdlovsk
47
33
70
Kemerovo
20
14
70
Nizhniy Novgorod
23
17
68
Source: Konceptsija strategii sociaľno-ekonomicheskogo razvitiia regionov Rossiiskoi Federacii. p. 9.
4 Regional social problems
Sharp demographic and social inequalities are characteristic of Russia’s currents
spatial structure. In the first place the unequal spatial distribution of the population
may be considered as the greatest. The Central-Western and Southwestern regions
can be deemed the demographic gravity zones of the country, totalling one quarter
of the country’s area, but three-quarters of its population. All of this is reflected in
the extreme differences of the indicators of population density (Figure 3).
As a consequence of forced industrialisation, a large proportion of Russian set-
tlements are unable to reproduce their population in any regular manner. The ag-
glomerations of the large cities show long-term stagnation in respect of demogra-
phy and migration. Among the 13 largest Russian cities with populations of more
than one million, only the populations of Moscow, Rostov-on-Don and of Volgog-
rad have continuously increased. For example, Perm, which earlier had one million
inhabitants, no longer features in this category. The population of Russian cities
decreased between 1991 and 2002 by more than 4.5 million (3.9 percent). On the
basis of industry-based urbanisation, new types of population-reproducing phe-
nomena became general, with both the birth-rate and the mortality-rate decreasing.
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Over most of the country the natural increase steadily dropped, and, while in 1990
this could be seen only in the ageing Central and Northwestern regions, by 2003 it
was characteristic of 73 spatial units (oblasts) of the country. The only exceptions
to this phenomenon are the eastern and southern peripheries where high birth rates
are still common today. The country has several regions where, during the last 15
years, settlement populations decreased by one-third, and it is the first time in the
country’s history that the village has lost its self-reproductive capacity.
Figure 3
Population density indicators of the Russian federal regions, 2002, persons/km2
Source: Bradshaw and Palacin, 2004. p. 22.
If we assume the indefinite continuation of current natural increase rates, Rus-
sia’s population loss by 2050 may reach 1.8 percent per annum, whilst the propor-
tion of the population of pensioner age may grow from the 20 percent of 2002 to 34
percent. In the meantime, the ageing population staying in work will also decrease.
By 2010 the number of those on the labour market is expected to be 3.6 million
lower, and this number will decrease by a further 7 million by 2015. The dramatic
decrease of the country’s population and the migration tendencies also involve
risks in geopolitical terms. In Siberia and the Far East a demographic vacuum may
develop, and this may be an opportunity for mass immigration from the surround-
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ing countries, a development which would be clearly inconsistent with the eco-
nomic and political interests of Russia.
Beyond the one-sided nature of the migration processes – the adverse situation
evolving due to a significant decrease in the number of immigrants and to a steady
increase in the number of emigrants – the low rate of mobility of the population
also hinders regional development. There are several regions in the country whose
development is handicapped by serious shortages of labour, and, according to pre-
dictions, from 2006 these areas may show an increase in their shortage of labour
over a five-year period from 0.25 percent to 1.20 percent. However, to maintain a 7
percent growth rate of GDP would also require the same growth rate in the working
age population. These problems could be remedied with an increase in population
mobility, but mobility is currently impeded by several factors:
– The bureaucratic infrastructure for registering labour and residence has not
yet been set up. People do not find homes in the places where jobs are to be
found and cannot find jobs where they live;
– Financial resources for public utility services needed to retain their
population are lacking in the regions;
– High travel costs deter commuting by workers.
The commuting habits of the inhabitants of Russia today differ little from the
features of early industrialisation. The poor level of mobility can be explained by
the low qualification level of much of the workforce. The education system has not
yet adjusted to market conditions. Institutions of vocational training were estab-
lished under the old Soviet system, and significant changes have not yet been im-
plemented. Even in those areas which are still growing strongly, the labour market
shows a one-sided picture: in respect of technical activities there is a significant
lack of a skilled workforce, while in many branches of the humanities considerable
over-education is evident. Effective working relationships between education and
the economy have not been established.
As a consequence of spontaneous spatial development, Russian society shows a
very diverse picture. According to sociology surveys, 3 percent of the population
can be regarded as wealthy (even as millionaires), 20 percent belong to the middle-
class, 70 percent can be included in temporary groups, whose members may some-
times climb a rung of the social ladder, but often slip back. Among the latter, 30
percent can be considered definitively poor and 10 percent live in extreme poverty.
The social division of Russian society hinders social reform, exerts an adverse ef-
fect on the growth of the internal market, and the current consumption level is an
obstacle to a more rapid economic growth. Due to the low income levels of the
population as a whole, it is impossible to introduce modern forms of financing, one
cannot count on any contribution to development from the population and the
workings of civil organisations are slow and protracted (Consultations With the
Poor... Russia; Sharpe, 2007).
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After the change of regime, radical changes took place in the relationships of
ethnic groups living in the country. Earlier, relations with ethnic minorities had a
favourable influence on the cultural development of the multi-national empire. In
fact, the Russian proportion of the population of the old Soviet Union was 55 per-
cent, while the Russian population of today’s Russian Federation is 82 percent
(Table 12). Regional educational and cultural institutions of the different ethnic
groups were closed down, the evolving ethnic enclaves and a lack of the institu-
tions needed for ethnic communities to exist has led to ethnic seclusion over the
regions of the country. The mobility rate of ethnic minorities is also somewhat low.
Social problems in the ethnic regions tend to accumulate, economic growth is low
and the unemployment rate is high. Social stagnation incites conflict and in many
cases central government needs to deploy the military to maintain order in these
regions.
Table 12
Proportion of ethnic minorities in the Russian population, 2002
Ethnic group
People, ‘000s
Percent
Percentage of 1989
Russian
115,869
79.8
96.7
Tatar
5,558
3.8
100.7
Ukrainian
2,944
2.0
67.5
Bashkir
1,674
1.2
124.3
Chuvash
1,637
1.1
92.3
Chechen
1,361
0.9
151.3
Armenian
1,130
0.8
212.3
Mordvinian
845
0.6
78.7
Belarus
816
0.6
67.5
Avar
757
0.5
139.2
Kazakh
655
0.4
103.0
Udmurt
637
0.4
89.1
Azerbaijan
622
0.4
185.0
Mari
605
0.4
94.0
German
597
0.4
70.9
Kabard
520
0.3
134.7
Ossetic
505
0.3
128.0
Dagestan
510
0.3
144.4
Buriat
445
0.3
106.7
Yakut
444
0.3
116.8
Kumi
423
0.3
152.4
Ingush
412
0.3
191.5
Lesg
412
0.3
160.0
Total
145,164
100.0
98.7
Source: Konceptsija strategii sociaľno-ekonomicheskogo razvitiia regionov Rossiiszkoi Federacii.
p. 21.
38
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Discussion Papers, No. 65.
5 The Russian settlement structure
The clear beneficiaries of forced industrialisation and political ideology were, for
many decades, the cities. The urbanisation level of the country can be regarded as
outstanding even in international terms with 73 percent of the population living in
cities. The urban population reached its peak in 1990 when the population of Rus-
sian cities reached 108.9 million. A steady reduction, however, produced a decline
to 104.7 million by 2005. It is quite understandable that, in the more thinly inhab-
ited areas, city networks are also rare (Figure 4).
Figure 4
Spatial distribution of Russia’s larger cities, 2002
Source: Bradshaw and Palacin, 2004. p. 54.
In Russia at the beginning of the 21st century, there were 1,097 cities registered
as such. This means that the number of cities had doubled and that the urban
population had septupled over one hundred years. In 2001 the population of 15
percent of these cities (specifically, 163) exceeded 100 thousand. There were 11
cities with more than one million inhabitants, 23 with 500 thousand to one million
and 57 with 200–500 thousand inhabitants. Most of the remaining 900 or so small-
and medium-sized cities are located in European areas.
Elements of the Russian city network established in the Soviet era – more than
half of them – appeared very weak during the period of the change of regime. The
ability of companies in set up towns and cities collapsed. Companies previously
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producing almost exclusively for the internal market took part in running cities –
and with considerable funds. As a result of the change to a market economy, thou-
sands of companies were closed, and military orders also dropped significantly.
(Military establishments had a prominent position in every fifth city in Russia.)
However, the two groups of the Soviet-type city network, the capitals (Moscow
and Saint Petersburg) and the administrative centres of the regions (regional capi-
tals) were the absolute winners in the change process. There are significant differ-
ences between the two federal cities. The 21 percent of the Russian is produced in
Moscow, while Saint Petersburg which has a half of the population of the federal
capital city, produces less than 4.0 percent of the GDP only. Moscow is a typical
post-industrial metropolis. 84 percent of its GDP comes from the services (in Saint
Petersburg 63 percent, respectively (Zubarevich, 2006).
The regional centres are, in general, the largest cities of their federal subject or
region and their share of the population of their territory is large. The city of No-
vosibirsk provides 53 percent of the population of its region (oblast), Tomsk 47
percent and Kaliningrad 45 percent of their eponymous oblasts and Izhevsk 40
percent (of the Udmurt Republic). Forty to seventy percent of a region’s GDP is
produced in the centres of the public administration units; almost every economic
indicator exceeds the regions’ averages by 10–30 percent. Likewise, these regional
seats spend the major part of the budget of their region: Yekaterinburg 50 percent,
Perm 60 percent and Chelyabinsk 75 percent. Inhabitants of the regional capitals
spend, on the average, 42 percent more on market services and consumer goods,
and build significantly more apartments. In the city of Yaroslavl, for instance, each
inhabitant purchased 65 percent more in the way of services and consumer goods
in 2004 than those living in the Yaroslavl oblast (i.e., the federal subject) (Leksin,
2006). 90 percent of undergraduates study and 80 percent of scientific researchers
work in these cities. These centres are the clear beneficiaries of the post-Soviet
transformation: 95 percent of privatised state assets are to be found in these cities,
and the expansion of the banking system and international relations also helped to
enrich the interest groups living here. The middle-classes of these regional centres
and “Oil Cities” comprising ca. 2.50 million people enjoy 90 percent of the annual
income (50 billion dollars) of this social stratum.
Russia is the archetypal example of the fact that contradictions may arise be-
tween the degree of urbanisation and the extent of urbanisation. The Soviet Public
Administration Law set the administrative requirements for the promotion of a
town to quantitative requirements relating, primarily to the size of population, al-
though the circular infrastructure and institutions of urban lifestyle were almost
totally absent from the Russian small- and medium- towns. Following the change
of regime there began a transformation of Russian cities. Changes are traceable
both in the number of cities and in the numbers of the urban population. The num-
ber of urban settlements actually decreased in Russia, and the reason for this un-
usual phenomenon is that, during the temporary period of crisis, many agricultural
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Discussion Papers, No. 65.
towns applied to be downgraded to village or settlement level to enable its inhabi-
tants to pay lower public utility charges and to be able to take up allowances re-
lated to agricultural production. Due to the collapse of large city economies, large
cities (those with over 500 thousand inhabitants) by the mid-90s had lost 2.6 mil-
lion inhabitants, while the population of cities with fewer than 100 thousand in-
habitants increased by 1.6 million. A majority of cities in this latter category are lo-
cated in the southern, poorly urbanised, regions and in the territories of ethnic mi-
norities, but it is a general rule that the growth of cities in the emerging regions has
increased steadily, while in depressed areas the crises primarily occurred in cities.
A reorganisation of the industrial performance of Russia’s larger cities also too
also place. Significant changes can be read in Table 13 illustrating changes in the
order of the fifteen Russian cities with the largest economic capacity. Moscow and
Saint Petersburg have maintained their positions during the past 25 years, while the
home of the textile industry – the Russian Manchester – Ivanovo, together with the
important engineering centres of Yekaterinburg and Rostov rank lower, and
Nizhniy Novgorod slipped back from third/fourth place to eleventh. Chelyabinsk,
Ufa and Samara (all with a diversified economic structure) were able to retain their
positions. The spectacular advance made by Togliatti, a city with an innovative
industrial structure (automotive and petrochemical industries) should be an exam-
ple for Russian city development. The cities included in this ranking in 1970 pro-
duced 28 percent, and in 1996 20 percent of Russia’s industrial output.
The dominance of some regional centres of public administration which, earlier,
had had leading positions in the Russian network of large cities, came to an end,
and new competitors appeared in the regions. The development of the regional
city-competition is at the same time proof that the picture which still exists of a
strongly centralised Russia may slowly change.
The rural population of 39 million people (23 percent of the country’s popula-
tion) lives in 155 thousand settlements, but the size of these rural settlements is
very small with an average population of 249. The population of 95 percent of all
villages is below 1,000. However, the proportion of the population living in these
small villages was, in 2002, only 52 percent of the rural population (Table 14).
The spatial arrangement of the village network is also uneven. There are large
differences in the density and size of rural settlements. A settlement network with
small villages is typical of the Northwestern and Central federal districts and for
those along the Volga; in these large regions the population of less than 50 percent
of the villages is over 100 people (Table 15). According to the census returns for
2002, the population of only 0.1 percent of villages exceeds 5 thousand. Three-
quarters of the villages categorised as large or very large (631 villages) are situated
in the Southern and Siberian federal districts and along the Volga. The population
living in large villages amounts to 16 percent of the total village population. This is
highest in the Southern federal district at 23 percent (Vserossiyskaya perepis’
naseleniya 2002 goda).
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Table 13
Cities providing the largest industrial output, 1970–1996
Name
Position in ranking order
Share of Russian industrial output,
percent
1996
1970
1996
1970
Moscow
1
1
5.80
8.50
Saint Petersburg
2
2
2.50
5.00
Togliatti
3
64
1.90
0.30
Chelyabinsk
4
3
1.50
1.50
Omsk
5
7
1.30
1.10
Novokuzneck
6
9
1.20
1.00
Lipeck
7
30
1.20
0.50
Samara
8
6
1.10
1.20
Ufa
9
10
1.10
1.00
Cherepovec
10
26
1.10
0.60
Nizhniy Novgorod
11
4
1.00
1.50
Surgut
12
–
0.90
–
Norilsk
13
32
0.90
0.50
Krasnoyarsk
14
8
0.90
1.10
Magnitogorsk
15
18
0.80
0.90
Perm
17
12
0.70
1.00
Yaroslavl
18
11
0.70
1.00
Kazan
23
15
0.60
1.00
Yekaterinburg
24
–
0.60
–
Novosibirsk
26
16
0.60
0.90
Rostov-on-Don
45
17
0.30
0.90
Cheboksary
51
14
0.20
0.90
Ivanovo
52
17
0.20
1.00
Source: Treivish, Brade and Nefedova, 1999. p. 278.
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Horváth, Gyula : Regional Transformation in Russia.
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Discussion Papers, No. 65.
Table 14
Main data of the Russian village network, 1989–2002
Description
Number of villages
Population, ‘000s
1989
Population distri-
population
bution, percent
= 100
1989
2002
1989
2002
1989
2002
Number of unpopulated
9,309
13,087
–
–
–
–
–
villages
Number of inhabited
152,922 142,201
39,063
38,737
99.2
100.0
100.0
villages
Of which
below 10 persons
30,170
34,000
155
168
108.9
0.4
0.4
1111 – 1150 persons
44,674
38,070
1,150
950
82.6
2.9
2.5
1151 – 1100 persons
18,094
14,903
1,312
1,082
82.5
3.4
2.8
1101 – 1500 persons
40,072
36,315
9,710
8,922
91.9
24.9
23.0
1501 – 1000 persons
11,524
10,832
8,087
7,570
93.6
20.7
19.6
1001 – 3000 persons
6,984
6,409
10,819
10,009
92.5
27.7
25.8
Over 3001 persons
1,404
1,672
7,830
10,036
128.2
20.0
25.8
Total
162,231 155,288
39,063
38,737
992.0
100.0
100.0
Source: Zolin, 2006. p. 80.
Table 15
Distribution of population in the villages according to size, 2002, percent
Federal district
Proportion of villages
unpopulated
below 10
11–50
51–100
above 100
Central
10.00
28.40
30.50
9.30
21.80
North-Western
13.40
36.80
29.40
6.80
13.60
Southern
2.30
2.90
8.20
8.80
77.80
Volga
5.90
14.60
20.40
12.20
46.90
Urals
3.80
7.30
13.10
10.90
64.90
Siberian
2.20
6.00
10.60
9.90
71.30
Far-Eastern
5.90
6.90
9.00
8.30
69.90
Total
8.40
22.70
24.00
9.40
35.50
Source: Zolin, 2006. pp. 81.
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6 Deficiencies in regional development policy
6.1 The slow process of institutionalisation of regional policy
Following the change of regime, almost all the elements of Soviet-type regional
development collapsed. The largest loser in the economic disintegration was the
Russian Federation which had earlier clearly profited from artificial integration.
Disintegration also strongly influenced the regional position of the Russian econ-
omy and can be characterised by:
– Increase of transport costs, devaluation of product structures, decline of con-
sumption, and, as a consequence of the possibilities for establishing newly di-
rected economic relations, the interregional exchange of commodities signifi-
cantly changed. The degree of contraction in interregional product turnover
exceeds that of the decrease in production;
– Regional budgets collapsed and the steady resources gap and increasing debt
stock stepped up the conflicts between central government and the regions;
– Maximising increases in income resulted in unrestrained exploitation; the
economic separatism of regions became general;
– Due to increasing transportation costs, the interregional flow of labour
dropped to a minimum level.
After the downfall of communism, divergent processes crept into the economic
and political fields as well in the Russian state which was declared as unitary.
Among political factors, the central government and the division of power between
the regions played a significant role. In principle, the new Russian Constitution
regulated power relations and eliminated most of the regulations which discrimi-
nated against the regions. However, the economic crisis of 1998 made it clear that
economic collapse could not be prevented solely by political means, and integra-
tion organised on a market basis must be supported by means of economic policy.
From that point onwards we may talk about the re-evaluation of regional economic
policy. The concept of regional policy first appeared in the Russian governmental
documents in 1992. In that year Boris Yeltsin addressed a regional political presi-
dential message to the State Duma (the Russian Parliament). Regional political
committees had been established in the Lower and Upper Houses, and the political
parties had also included the problems of regional development in their pro-
grammes. In 1996 President Yeltsin issued a decree concerning “The main direc-
tions of regional policy in the Russian Federation”. The presidential document
considered the goals, means and institutions of regional policy. Its key elements
were:
– The economic, social, legal and organisational principles of the federation
must be elaborated;
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– Starting from the constitutional regulation, the basic requirements of social
security must be defined independent of the type of development potential
which an individual regions may have;
– The principle of equal opportunity must be established in all regions of the
country;
– Regional environmental programmes must be prepared;
– Serious attention must be paid to the development of strategic regions;
– The climatic and natural endowments of regions must be fully exploited;
– Guarantees must be in place for the operation of local government.
This series of duties did not differ much from the regional politic goals of the
Soviet regime, but it can still be considered a major success as the prelude to mod-
ern regional policy in Russia. The document gave rise to wide-ranging debate and
the dialogue initiating the improvement of Russian public administration also
originated primarily within political and professional circles.
In order to finance regional political duties the State Duma established a fund to
subsidise federal regional units, the source of which was 15 percent of the tax in-
come calculated net of customs and import duties. The primary aim of the fund was
to subsidise regions struggling with acute problems; although almost every region
obtained assistance. Of the 89 regions (oblasts), no fewer than 81 benefited from
these funds, the majority of which were spent on solving budgetary problems.
This attempt to establish stability for operating regional development institu-
tions failed. In the central institution of Russian economic policy, the Presidential
Executive Office, a regional policy unit had not been established, and initially the
Ministry of Economy was in charge of regional policy. Basically, however, its
duties did not extend beyond preparing the government’s annual report. In the
middle of the 1990s, a new central organisation (the Ministry of National Problems
and Federal Relations) s charged with responsibility for regional policy, and in
2000 an independent Ministry of Regional Policy was set up. In the first phase of
Russian regional policy – according to the unanimous opinion of experts – there
were only formal results to be reported. However, the concept of policy has taken
root and its institution has appeared on the scene in the area of central public ad-
ministration, although to date factual results can be seen only in the elaboration of
some regional programmes (Artobolevsky, 2000).
The stabilisation of the state budget and accelerating economic growth have en-
abled the government – from the end of the 1990s – to spend more on reducing
regional differences. However, the experiences of the past five years or so have
made it clear that the government’s regional measures are not effective, and the
measures applied have exhausted all of its (initially promising) potential. In the
application of regional policy the Russian government faced new challenges. While
earlier, during the era of primary industrialisation, it aimed to reduce regional dif-
ferences by establishing industries which required a large workforce and which
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Discussion Papers, No. 65.
concentrated on producing standardised mass products, the new policy, although
with the same targets, had to employ strategies to open new markets and enlarge
the domestic market. The “levelling” subsidies granted from the budget to back-
ward regions in respect of their adaptation to market conditions clearly reduced the
effectiveness of the national economy, since, even though the purpose was redistri-
bution, these subsidies took considerable resources away from the leading regions.
The mechanism also put the developed regions into a difficult position, in that they
were not able to adapt to international market competition. “Levelling” as a re-
gional policy objective became an obstacle to stimulating the regional expansion of
innovation, and also to meeting the requirements of competitiveness. Leading re-
gions could only utilise their development motivation in a very limited way, and in
the subsidised regions the feeling of dependency harmed public morale.
The proposed package of regional policy measures was also poor, and a major
proportion of those applied consisted of governmental transfers and objective
programmes. Modern regional policy measures appeared only slowly in state
policy – and to a limited degree. The reform of public administration and the
reorganisation of the budget made their effect felt only at macro-level. The meso-
level remained unchanged since conditions for regional development had not been
established.
No comprehensive analysis in respect of the regional situation had been elabo-
rated and different forms of development had not been drawn up. No information
was available on regional features. Due to such deficiencies, it was simply impos-
sible to apply differentiated regional policy. The planning system of the units of
regional public administration is underdeveloped, with settlement- and regional
planning not in harmony. The concept of interregional cooperation is almost un-
known in Russia and there are no valid principles and rules for utilising budgetary
resources. The country does not have a regional development strategy, and so the
government’s concepts and decisions cannot include any concrete and regionally
differentiated concepts regarding the suppression of poverty, the increase of GDP,
the modernisation of industrial regions in decline and a homogeneous country.
Measures influencing the development of individual regions fall exclusively within
the new regional organisation of the country do not appear in legislation and budg-
etary planning. The national settlement network development concept, adopted in
1994, is not taken into account neither by local authorities nor by business.
6.2 Outdated territorial-administrative structure
The regional public administration of the country is outdated. Today Russia is di-
vided into 83 regional public administrative units, including 21 republics, 7 border
territories (krais), 46 provinces (oblasts), 1 autonomous region, 6 autonomous dis-
tricts and 2 federal cities (Figure 5). In 1917 there were, on the territory of Russia
46
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Discussion Papers, No. 65.
Figure 5
Regional administrative units of Russia, 2007
Republics: 1. Adygeya; 2. Bashkiria; 3. Buryatiya; 4. Altay Republic; 5. Dagestan; 6. Ingushetiya; 7.
Kabardino-Balkariya; 8. Kalmykiya; 9. Karachay-Cherkessiya ; 10. Karelia; 11. Komi; 12. Mari
El (Mari); 13. Mordoviya; 14. Yakut (Saha); 15. North-Ossetia (Alaniya); 16. Tatarstan; 17. Tyva
Republic; 18. Udmurtiya; 19. Hakasiya; 20. Chechnya; 21. Chuvashiya. Borderlands (krais): 22.
Altay; 23. Krasnodar; 24. Krasnoyarsk; 25. Primorye; 26. Stavropol; 27. Khabarovsk; 28. Perm.
Regions (oblasts): 29. Amur; 30. Arkhangelsk; 31. Astrakhan; 32. Belgorod; 33. Bryansk; 34.
Vladimir; 35. Volgograd; 36. Vologda; 37. Voronezh; 38. Ivanovo; 39. Irkutsk; 40. Kaliningrad;
41. Kaluga; 42. Kemerovo; 43. Kirov; 44. Kostroma; 45. Kurgan; 46. Kursk; 47. Leningrad; 48.
Lipetsk; 49. Magadan; 50. Moscow oblast; 51. Murmansk; 52. Nizhniy Novgorod; 53. Novgorod;
54. Novosibirsk; 55. Omsk; 56. Orenburg; 57. Oryol; 58. Penza; 59. Pskov; 60. Rostov; 61.
Ryazan; 62. Samara; 63. Saratov; 64. Sakhalin; 65. Sverdlovsk; 66. Smolensk; 67. Tambov; 68.
Tver; 69. Tomsk; 70. Tula; 71. Tyumen; 72. Ulyanovsk; 73. Chelyabinsk; 74. Chita; 75.
Yaroslavl. Federal cities: 76. Moscow; 77. Saint Petersburg. Autonomous region: 78. Jewish
(Birobidzhan). Autonomous districts: 79. Buryatiya; 80. Nenets; 81. Ust-Orda Buryat; 82. Hant-
Mans; 83. Chukchi; 84. Yamal-Nenets.
as it is today, 56 regions (gubernia). By 1950 this had changed to 84 regional ad-
ministrative units. During the last half-century the number at meso-level (disre-
garding new and abolished units) remained unchanged. The sizes of the regional
administrative units show considerable differences. The 22 larger oblasts – those
with more than 2 million inhabitants – comprise 25 percent of the number of ad-
ministrative units, while 56 percent of the country’s population live there. The ad-
ministrative borders hamper new forms of development and they fail to meet the
requirements for economies of scale. The legal regulation of regions does not com-
ply with international standards, and the country has hardly ratified a single docu-
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Discussion Papers, No. 65.
ment on European regional cooperation. A review of “regions” is under way in the
spirit of the reform of Russian public administration, and to date a few have been
merged, with further mergers expected. Each region (federal subject) has its own
government, ministries and budget, and, if necessary, subsidies can be granted
from the central budget.
In 2000 seven federal districts were established by Presidential Decree. Each of
these “super regions” embraces a number of existing regional administrative units,
and, according to the presidential concept, the new seats of the districts became the
regional centres of the subordinated regions (Figure 6, Tables 16–17). The duties
of the Presidential Procurators appointed as the leaders of the districts involve en-
suring that the regional leaders of the district observe Federal laws and budgetary
policies, elaborating new social and economic programmes and gathering statistical
data for the central administration.
President Putin hoped that the new districts would boost the regions’ political
and economic relations to Moscow, and that the effectiveness of public administra-
tion would improve. Instead of holding governorship elections in the regions of
Russia, the regional leaders were appointed by the central administration in 2004
(although the decision had first of all to be approved by the local parliaments); it
was a measure aiming at centralisation. Both the Russian opposition and foreign
political circles strongly criticised the curtailment of regional autonomy and the
democratic changes of the 1990s in such a manner (Lynn and Kuzes, 2002, 2003;
Petrov, 2002).
Figure 6
Federal districts of Russia
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Table 16
Main data of federal districts, 2005
Description
Area,
Population,
Main town
Population Urbanisation Employed
‘000 km2
millions
of main
level,
in industry,
town, ‘000s
percent
percent
Central
650.70
36.50
Moscow
10, 383
79.10
21.20
Southern
589.20
21.50
Rostov
1,068
57.30
18.10
North-western
1,677.90
14.30
Saint Petersburg
4,661
81.90
23.30
Far Eastern
6,215.90
7.10
Khabarovsk
583
76.00
20.20
Siberian
5,114.80
20.50
Novosibirsk
1,426
70.40
22.40
Urals
1,788.90
12.50
Yekaterinburg
1,294
80.20
25.60
Volga
1,038.00
31.60
Nizhniy Novgorod
1,311
70.80
25.60
Source: According to the data of www.gks.ru [15 March, 2008] the author’s compilation.
Table 17
Sectoral structure of GDP in the federal districts, 2004, percent
Federal district
GDP per capita,
Agriculture
Industry
Services
thousand roubles
Central
121.86
3.2
18.3
78.5
Southern
50.01
15.6
18.
65.9
North-Western
107.06
2.5
36.2
61.3
Far Eastern
103.50
4.0
31.3
64.7
Siberian
85.35
17.1
35.1
57.8
Urals
212.56
2.0
47.7
50.3
Volga
78.43
8.1
37.2
54.7
Total
102.01
5.1
31.2
63.7
Source: Osnovnye pokazateli sistemy natsionaľnyh schotov.
According to the logic of centralisation, decentralisation only promoted the
break-up of the federation and supported the measures taken in favour of regional
separatism – something which, in the case of Chechnya, arose in its worst possible
form. According to leading Russian opinion, the self-interest of corrupt local elites
replaced those alleged fundamental principles of autonomy which, in the Soviet
era, had led to the establishment of the federal state of Russia. The governing po-
litical forces were filled with increasing frustration at the worsening of regional
problems and inequalities and their own incapacity to retain the key elements of the
federation under their control. The Kremlin, therefore, became convinced that it is
fundamentally necessary to restore Moscow’s firm power over Russia’s regions in
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Discussion Papers, No. 65.
order to preserve national homogeneity and to protect the public against the dual
dangers of separatism and terrorism. The Russian president made clear that his
objective is to have the governors report to the president, to make them serve the
Russian state and not the local mafias. The officially formulated goal of the cen-
tralising reforms is to eliminate thoroughly the wide-ranging and lavish corruption
and manipulation which, by influencing local elections and politics, committed
regional leaders to local interest groups rather than to Moscow, and, finally, to
make local leaders personally responsible for the completion of developments im-
plemented in their respective regions (Leksin, 2005).
Administrative reforms have their internal logic, and it seems that these changes
– by explicitly and deliberately eliminating local participation in decision-making
through election – will inevitably reduce Moscow’s ability to govern the country
effectively in the future. The changes raise the question as to whether Russia will
continue to be considered as a Federal state when power is divided between the
centre and the regions. It seems likely that it will not. In addition, the administra-
tive reforms will very likely enhance the political tensions in such republics as
Tatarstan, where the dangers involved in the independence movements at the be-
ginning of the 1990s could be averted by transferring certain areas of economic and
political sovereignty from Moscow to Kazan. Basically, the reaction against con-
sidering Russia as a multi-ethnic/multi-territory state has begun. Ethnic territories,
such as Tatarstan and the republics of the North Caucasus are downgraded to “re-
gions”. The autonomy of Tatarstan, which was outlined in a revolutionary treaty
concluded with Moscow in February 2004, has been considerably curtailed since
Putin came into power in 2000. Moscow no longer concludes similar power-shar-
ing treaties with other regions, and it has also begun to restrict the validity of those
treaties already in existence. The Russian Ministry of Nationalities (which was
basically removed from the Ministerial system was reorganised in March 2004 as
the Ministry of Regional Policy). In the course of the debate in Moscow on the
appointment of regional governors, new suggestions were made with respect to
limiting the authority of regional parliaments, to the direct appointment of mayors,
and even to the total elimination of autonomous republics and regions, effectively
demanding the return, albeit in an altered form, of the Tsarist provincial system
(Shvetsov, 2006).
The concept of a “bottom-up” approach to federal organisation, most visibly
supported by Tatarstan and its president, Mintimer Sajmijev, and which urged an
even division of political power between the centre and regions, was rejected by
Moscow, leaving no doubt that the Federal order, if it is to be retained at all, will be
created on a “top-down” basis. It will not be based on mutual agreement between
the centre and the regions, but on what Moscow considers to be right to authorise
the regions with (Vardomskiy, 2006).
50
Horváth, Gyula : Regional Transformation in Russia.
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Discussion Papers, No. 65.
7 Fundamentals of the new regional development strategy
The Ministry of Regional Development completed the country’s regional develop-
ment strategy in 2005 (Kontsepciya strategii sociaľno-ekonomicheskogo raz-
vitiya…). The eight-chapter document gives a general survey of the regional dif-
ferences of the country, and it outlines the requirements of regional policy. The
document defines the basic principles of modern regional policy in the following
terms:
1) Multi-pole development policy. Measures aiming to diminish regional differ-
ences must be developed according to the features of the individual regions.
Development resources must be concentrated and directed to poles which are
able to initiate and maintain innovation processes. As the modernisation of
the country has just begun, innovative measures should be directed towards
growth centres. In order to realise this policy, pilot regions should be deline-
ated (Table 18);
Table 18
Elements of polarised regional development
State policy
Decreasing regional
Polarised regional
differences
development
Fundamental goal
Determination of interven-
Delimitation of growth
tion region in different
areas
parts of the country
Regional administration
Determining regionally
Establishing the legal regula-
compact units adjusted to
tion of the pilot regions
administrative boundaries
Regulatory responsibility
Proportionate allocation of
Allocating State resources to
resources among the subsi-
the development of the inno-
dised regions
vation potential of the pilot
regions, to stimulate connec-
tion to the global economy
Source: Konceptsiya strategii sociaľno-ekonomicheskogo razvitiya regionov Rossiyszkoy Federacii.
p. 25.
2) Complexity. In the interest of implementing the principle of equal opportuni-
ties set out in the constitution, and of realising national cohesion goals,
budgetary assets should be redistributed to those regions which had been
overlooked in the realisation of current programmes. Backward regions fal-
ling outside of the range of prioritised growth poles must not be ignored.
Development concepts must also be prepared for backward regions. The
51
Horváth, Gyula : Regional Transformation in Russia.
Pécs : Centre for Regional Studies, 2008. 59. p.
Discussion Papers, No. 65.
duty of central federal bodies is to determine the regional development
sources in a differentiated manner which takes into account all of the options
which best serve reform;
3) Complementary effectiveness, synergy. Regional policy goals must be deter-
mined in close harmony with other reforms in progress in the country. In al-
locating regional development funds, the cooperation of the regions must be
considered and individual forms of subsidy need to be reconciled;
4) Differentiation of regional policy. Russia’s move towards global integration
affects the individual regions of the country in different ways. There are con-
siderable differences in development potential and in the situation of indi-
vidual regions. Diversified and differentiated measures will be necessary in
the different types of region (Table 19);
5) Subsidiarity. Local organisations must be given a great degree of independ-
ence in the social and economic development of regions. The most compre-
hensive means of this is the decentralisation of power.
The draft of the regional concept indicates that the modernisation of the country
and an increase in GDP can be achieved by improving the activity of the regions. It
defines the goals of central (federal) level regional policy as follows:
– To improve the living conditions of the population living in the territory of
Russia.
– To establish conditions for stable, high quality economic development.
– To strengthen the competitiveness of Russia and of its regions on the interna-
tional market.
The draft lays down the goals for regional policy as:
1) Establishing the competitiveness of Russia and its regions. By considering
aspects of the market economy it shall enable the achievement of economic
growth resources through the concerted development of the economy and
settlement network. Comprehensive infrastructural development pro-
grammes shall be initiated. Internationally competitive production clusters
shall be organised in the innovation-intensive sectors.
2) Encouragement of new regionalisation processes, reconsideration of re-
gional resources. Regional cohesion and the development of a unified eco-
nomic area shall be established by respecting regional and local independ-
ence. Obstacles to the free movement of labour, goods and services are to be
eliminated and regional markets have to be opened. Small- and medium-
sized enterprises have to be supported.
3) Development of human resources, enhancement of the spatial and sectoral
mobility of the population. Improvement of the country’s population repro-
duction indicators, financial encouragement for young people to establish
52
Horváth, Gyula : Regional Transformation in Russia.
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Discussion Papers, No. 65.
Table 19
Problems and development tasks in the individual regions
Regional configurations
Development problems of the
Tasks to be undertaken
regions
Raw material extraction regions
Infrastructural backwardness, envi-
Human resource development. La-
ronmental and settlement develop-
bour force settlement. Environmental
ment conflicts of interests
programmes. Effective settlement
policy.
Endangered zones
– Border regions
Extensive emigration of population.
Organisation of cross-border co-
Narrowing of social infrastructure.
operation. Establishment of transport,
Defective communication networks.
cultural and logistics centres. Exten-
Weak cultural interaction. Conflicts
sion of labour resources. Stabilisation
arising from identity. Problems
of population numbers. Infrastructural
threatening public order.
improvement. Strengthening of social
security institutions. Revision of legal
– Regions affected by ethnic
Events threatening the safety and life regulations. Strengthening of border
problems
of the population, state order and
guards and improvement of public
national integrity,
– Regions threatening state order
security.
and the integrity of the country
Technology transfer regions
Lack of workforce. Lack of indus-
Import of developed technology.
trial areas. Weak infrastructure. Poor Encouragement of strategic investors.
business services.
Human resources development.
Innovative regions
Lack of regional components of
Elaboration of regional innovation
national innovation system. Weak
strategies. Improvement of communi-
institutions of market organisation.
cation. Education of labour force.
Lack of qualified labour force.
Organisation of technology transfer
centres.
Cities of international importance
In Russia, the number of interna-
Settlement of international corporate
tional cities being able to success-
centres. Acceleration of infrastruc-
fully participate in the global com-
tural development. Establishment of
petition is limited. The city network
high-quality urban environment.
is outdated; the cooperation between Establishment of administrative and
cities is weak.
service provider institutions of Fed-
eral importance.
Old industrial regions
Living conditions of inferior stan-
Organisation of industrial parks.
dards. Outdated technical facilities.
Reindustrialisation. Rehabilitation of
Weak market relations. Lack of
former industrial settlements. Diver-
qualifications.
sification of the economy.
Newly industrialised regions
High rate of unemployment. Weak
Programmes serving the migration or
infrastructural fundamentals of city
adaptation of the population. Em-
development. Many social conflicts.
ployment enhancement measures.
Low development level.
Extended budgetary resources. Infra-
structural development.
Source: Konceptsiia strategii sociaľno-ekonomicheskogo razvitiia regionov Rossiiskoi Federacii. pp.
27–28.
53
Horváth, Gyula : Regional Transformation in Russia.
Pécs : Centre for Regional Studies, 2008. 59. p.
Discussion Papers, No. 65.
families. Through the improvement of the educational system the skilled la-
bour stock of the regions and the stability of the population must be in-
creased. Migration programmes must be elaborated in order to harmonise the
demographic and employment processes of the individual regions, in order
to promote the adaptation of migrants to Russian society. The ethno-cultural
behaviour of the population must be improved.
4) Improvement of the ecological condition of the regions. Economic develop-
ment programmes must be subjected to environmental analysis. The ecologi-
cal systems of the regions must be improved by energy- and raw material-
saving technologies.
5) Improvement of the quality of public administration, budgetary reforms in
the regional units representing the regions. Encouragement of public ad-
ministrative organisations to use new management methods (strategic plan-
ning, efficiency- enhancing measures, different forms of co-operation, pub-
lic–private partnership).
The draft document defines five priorities for regional development. First, it
highlights the need for the fastest possible change from the policy of basic gap-
reduction to that of polarised development. Different levels (international, regional,
district) of growth centres of the country must be determined for concentrated de-
velopment policy. Regional units which
a) are characterised by high commodity-, passenger-turnover rates,
b) have scientific and higher educational institutions of international and na-
tional importance,
c) produce innovations of national importance,
d) have growth rates above the national average,
e) have high-quality intellectual capital and a skilled labour stock,
f) have strategic partnership already established, or be relatively easily estab-
lished between the participants in public administration, the civil sphere and
the economy and
g) have the capacity to stimulate the development of neighbouring regions
within a decade may be considered as “pulling” regions.
The document mentions the regional elements of the national innovation system
as the second priority. With respect to this, it mentions several possibilities: the
integration of closed regions (old military complexes) into regional economies,
huge support for the seven Russian Science Cities in order to establish technologi-
cal transfer centres, the designation of regional research universities (support for
basic research and research transfer) and the organisation of special economic
zones in the prosperous regions.
The third priority of the concept is industrial modernisation and the organisation
of competitive industrial clusters. The employment of new industry organising
54
Horváth, Gyula : Regional Transformation in Russia.
Pécs : Centre for Regional Studies, 2008. 59. p.
Discussion Papers, No. 65.
possibilities – serving the development of a network-like economy – will face the
traditionally vertically organised Russian industry with serious difficulties. Support
for the new economy will necessitate a great deal of government assistance.
The fourth priority includes employment policy and population mobility activity
and it enumerates countless means and institutions of modern European practice.
The fifth priority refers to administrative and budgetary matters. The adminis-
trative modernisation programmes on the agenda include the reorganisation of in-
ter-departmental cooperation and the establishment of monitoring systems. The
reform of the budgetary sphere represents the biggest challenge. The overall fi-
nancing system of local governments must be reorganised.
One measure serving the realisation of the strategic concept was the establish-
ment of an inter-departmental committee within the framework of the Ministry of
Regional Policy which will primarily undertake “soft” reconciliation tasks, prepare
itself to revise the implementation of the concept and will operate the monitoring
network. The concept proposes to set up a federal regional development agency
which would undertake concrete organisational and consulting tasks with respect to
the implementation of regional and inter-sectoral programmes and would also
manage resource coordination. The other institution to be set up is a National Re-
gional and City Planning Institute, which, in the form of a holding company, would
be an important player in regional planning.
The strategic concept also indicates the implementation schedule. According to
this, in the first stage (2005–2008), research will proceed, and priorities include
reconciliation between the regions. Pilot regions will be determined and the previ-
ously mentioned institutions and the monitoring network will be established. In the
second stage (2007–2010) the complete range of measures of the new policy are to
be developed in the pilot regions, the new system of government support is to be
introduced and regional objective programmes will be launched. In the third stage
(2011–2020), an increasing number of regions will join the new system, and the
objectives, measure and institutions of Russian regional policy will become mean-
streamed.
55
Horváth, Gyula : Regional Transformation in Russia.
Pécs : Centre for Regional Studies, 2008. 59. p.
Discussion Papers, No. 65.
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No. 1
OROSZ, Éva (1986): Critical Issues in the Development of Hungarian Public Health with
Special Regard to Spatial Differences
No. 2
ENYEDI, György – ZENTAI, Viola (1986): Environmental Policy in Hungary
No. 3
HAJDÚ, Zoltán (1987): Administrative Division and Administrative Geography in
Hungary
No. 4
SIKOS T., Tamás (1987): Investigations of Social Infrastructure in Rural Settlements of
Borsod County
No. 5
HORVÁTH, Gyula (1987): Development of the Regional Management of the Economy in
East-Central Europe
No. 6
PÁLNÉ KOVÁCS, Ilona (1988): Chance of Local Independence in Hungary
No. 7
FARAGÓ, László – HRUBI, László (1988): Development Possibilities of Backward Areas
in Hungary
No. 8
SZÖRÉNYINÉ KUKORELLI, Irén (1990): Role of the Accessibility in Development and
Functioning of Settlements
No. 9
ENYEDI, György (1990): New Basis for Regional and Urban Policies in East-Central
Europe
No. 10
RECHNITZER, János (1990): Regional Spread of Computer Technology in Hungary
61
Discussion Papers 2008. No. 65.
Regional Transformation in Russia
No. 11
SIKOS T., Tamás (1992): Types of Social Infrastructure in Hungary (to be not published)
No. 12
HORVÁTH, Gyula – HRUBI, László (1992): Restructuring and Regional Policy in
Hungary
No. 13
ERDİSI, Ferenc (1992): Transportation Effects on Spatial Structure of Hungary
No. 14
PÁLNÉ KOVÁCS, Ilona (1992): The Basic Political and Structural Problems in the
Workings of Local Governments in Hungary
No. 15
PFEIL, Edit (1992): Local Governments and System Change. The Case of a Regional
Centre
No. 16
HORVÁTH, Gyula (1992): Culture and Urban Development (The Case of Pécs)
No. 17
HAJDÚ, Zoltán (1993): Settlement Network Development Policy in Hungary in the Period
of State Socialism (1949–1985)
No. 18
KOVÁCS, Teréz (1993): Borderland Situation as It Is Seen by a Sociologist
No. 19
HRUBI, L. – KRAFTNÉ SOMOGYI, Gabriella (eds.) (1994): Small and medium-sized
firms and the role of private industry in Hungary
No. 20
BENKİNÉ Lodner, Dorottya (1995): The Legal-Administrative Questions of
Environmental Protection in the Republic of Hungary
No. 21 ENYEDI, György (1998): Transformation in Central European Postsocialist Cities
No. 22 HAJDÚ, Zoltán (1998): Changes in the Politico-Geographical Position of Hungary in the
20th Century
No. 23
HORVÁTH, Gyula (1998): Regional and Cohesion Policy in Hungary
No. 24
BUDAY-SÁNTHA, Attila (1998): Sustainable Agricultural Development in the Region of
the Lake Balaton
No. 25
LADOS, Mihály (1998): Future Perspective for Local Government Finance in Hungary
No. 26
NAGY, Erika (1999): Fall and Revival of City Centre Retailing: Planning an Urban
Function in Leicester, Britain
No. 27
BELUSZKY, Pál (1999): The Hungarian Urban Network at the End of the Second
Millennium
No. 28
RÁCZ, Lajos (1999): Climate History of Hungary Since the 16th Century: Past, Present and
Future
No. 29
RAVE, Simone (1999): Regional Development in Hungary and Its Preparation for the
Structural Funds
No. 30
BARTA, Györgyi (1999): Industrial Restructuring in the Budapest Agglomeration
No. 31
BARANYI, Béla–BALCSÓK, István–DANCS, László–MEZİ, Barna (1999): Borderland
Situation and Peripherality in the North-Eastern Part of the Great Hungarian Plain
No. 32
RECHNITZER, János (2000): The Features of the Transition of Hungary’s Regional
System
No. 33
MURÁNYI, István–PÉTER, Judit–SZARVÁK, Tibor–SZOBOSZLAI, Zsolt (2000): Civil
Organisations and Regional Identity in the South Hungarian Great Plain
No. 34
KOVÁCS, Teréz (2001): Rural Development in Hungary
No. 35
PÁLNÉ, Kovács Ilona (2001): Regional Development and Governance in Hungary
No. 36
NAGY, Imre (2001): Cross-Border Co-operation in the Border Region of the Southern
Great Plain of Hungary
No. 37
BELUSZKY, Pál (2002): The Spatial Differences of Modernisation in Hungary at the
Beginning of the 20th Century
No. 38
BARANYI, Béla (2002): Before Schengen – Ready for Schengen. Euroregional
Organisations and New Interregional Formations at the Eastern Borders of Hungary
No. 39
KERESZTÉLY, Krisztina (2002): The Role of the State in the Urban Development of
Budapest
62
Discussion Papers 2008. No. 65.
Regional Transformation in Russia
No. 40
HORVÁTH, Gyula (2002): Report on the Research Results of the Centre for Regional
Studies of the Hungarian Academy of Sciences
No. 41
SZIRMAI, Viktoria – A. GERGELY, András – BARÁTH, Gabriella–MOLNÁR, Balázs –
SZÉPVÖLGYI, Ákos (2003): The City and its Environment: Competition and/or Co-
operation? (A Hungarian Case Study)
No. 42
CSATÁRI, Bálint–KANALAS, Imre–NAGY, Gábor –SZARVÁK, Tibor (2004): Regions
in Information Society – a Hungarian Case-Study
No. 43
FARAGÓ, László (2004): The General Theory of Public (Spatial) Planning (The Social
Technique for Creating the Future)
No. 44
HAJDÚ, Zoltán (2004): Carpathian Basin and the Development of the Hungarian
Landscape Theory Until 1948
No. 45
GÁL, Zoltán (2004): Spatial Development and the Expanding European Integration of the
Hungarian Banking System
No. 46
BELUSZKY, Pál – GYİRI, Róbert (2005): The Hungarian Urban Network in the
Beginning of the 20th Century
No. 47
G. FEKETE, Éva (2005): Long-term Unemployment and Its Alleviation in Rural Areas
No. 48
SOMLYÓDYNÉ PFEIL, Edit (2006): Changes in The Organisational Framework of
Cooperation Within Urban Areas in Hungary
No. 49
MEZEI, István (2006): Chances of Hungarian–Slovak Cross-Border Relations
No. 50
RECHNITZER, János – SMAHÓ, Melinda (2006): Regional Characteristics of Human
Resources in Hungary During the Transition
No. 51
BARTA, Györgyi – BELUSZKY, Pál – CZIRFUSZ, Márton – GYİRI, Róbert –
KUKELY, György (2006): Rehabilitating the Brownfield Zones of Budapest
No. 52
GROSZ, András (2006): Clusterisation Processes in the Hungarian Automotive Industry
No. 53
FEKETE, G. Éva – HARGITAI, Judit – JÁSZ, Krisztina – SZARVÁK, Tibor –
SZOBOSZLAI, Zsolt (2006): Idealistic Vision or Reality? Life-long learning among
Romany ethnic groups
No. 54
BARTA, Györgyi (ed.) (2006): Hungary – the New Border of the European Union
No. 55
GÁL, Zoltán (2006): Banking Functions of the Hungarian Urban Network in the Early 20th
Century.
No. 56
SZÖRÉNYINÉ, Kukorelli Irén (2006): Relation Analysis in Rural Space – A Research
Method for Exploring the Spatial Structure in Hungary
No. 57
MAUREL, Marie-Claude – PÓLA, Péter (2007): Local System and Spatial Change – The
Case of Bóly in South Transdanubia
No. 58
SZIRMAI, Viktória (2007): The Social Characteristics of Hungarian Historic City Centres
No. 59
ERDİSI, Ferenc – GÁL, Zoltán – GIPP, Christoph – VARJÚ, Viktor (2007): Path
Dependency or Route Flexibility in Demand Responsive Transport? The Case Study of
TWIST project
No. 60
PÓLA, Péter (2007): The Economic Chambers and the Enforcement of Local Economic
Interests
No. 61
BUDAY-SÁNTHA, Attila (2007): Development Issues of the Balaton Region
No. 62
LUX, Gábor (2008): Industrial Development, Public Policy and Spatial Differentiation in
Central Europe: Continuities and Change
No. 63
MEZEI, Cecília (2008): The Role of Hungarian Local Governments in Local Economic
Development
No. 64
NAGY, Gábor (2008): The State of the Info-communication Markets in Dél-Alföld Region
– Hungary
63