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Institutional Policy and the Role of Foreign Direct Investment in the Far East of Russia

  • INSTITUTIONAL PROBLEMS OF REGIONAL DEVELOPMENT
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Abstract—

The article studies investment flows and their impact on the diversification of regional economies of eastern federal subjects in the context of new institutional incentives created by state policy in the Far East after 2013. The dynamics of foreign direct investment (FDI), including the main sectors, and its relationship with the rate of economic growth are considered. The study was based on official statistical information from the Federal State Statistics Service and the Bank of Russia using GIS technologies and comparative and correlation analysis. The distribution of FDI flows by type of economic activity uses the classification of the Bank of Russia, which corresponds to the methodology of the UN International Standard Industrial Classification (ISIC4) and its European equivalent (NACE2). Calculations have shown that while there is some regression between per capita investment from all sources and rate of economic growth in regions in Eastern Russia, there is practically no correlation between FDI and GRP growth. New state policy tools aimed at attracting FDI during the period under review made no significant contribution to diversification of the economy of eastern regions. In most regions, the bulk of this investment went to the minerals sector. The shares of FDI directed at the manufacturing, agriculture, construction, trade, hotels and restaurants, and the entertainment industry, since 2015, as a rule, have amounted to no more than 1% of the total Russian values in the corresponding sectors. There is no reason to believe that to date, FDI, the incentives for which were intended to create new Far Eastern institutions, have made a significant contribution to the development of a modern high-tech economy in eastern regions. The Far Eastern institutional transformation did not change the “extractive” nature of economic (and political) institutions. Economic preferences for Russia’s East to some extent have contributed to attracting investment, but mainly only in conditions of support from the federal budget and state guarantees. The authors believe that the problem of gradual transformation of institutions towards increasing their “inclusiveness” is coming to the fore. Integration at the regional level of investment policy and supporting entrepreneurship can become a significant step along this path, if Far Eastern development institutions are “reformatted” to solve this problem, providing the necessary resources.

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Notes

  1. State program of the Russian Federation “Social and Economic Development of the Far East and the Baikal Region” approved by Order of the Government of the Russian Federation of March 29, 2013, no. 466-r.

  2. The status of priority development areas with a detailed description of functions is enshrined in Federal Law no. 474-FZ of December 29, 2014 (http://www.kremlin.ru/acts/bank/39279). It provides for the use of various mechanisms of economic stimulation of development processes for territories with this status. Since 2014, these tools have been most actively used in Eastern Siberian and Far Eastern regions. To a large extent, this was due not only to the development tasks of these regions, but with the so-called “turn to the East,” i.e., the idea of significant expansion of the sphere of international economic relations with Asia-Pacific Region countries.

  3. Extractive institutions include those focused on extracting economic or political rent and redistributing it in the interests of elites and small groups with economic and/or political power. They are the opposite of inclusive institutions that provide favorable conditions for productive activity and growth of its efficiency in the interests of the majority of citizens (Acemoglu and Robinson, 2012; Natkhov and Polishchuk, 2017).

  4. Federal State Statistics Service (Rosstat). Information and analytical materials. https://rosstat.gov.ru/compendium.

  5. Bank of Russia. Statistics. https://www.cbr.ru/statistics/.

  6. Since 2018, Zabaykalsky krai and the Republic of Buryatia have been included in the Far Eastern Federal District.

  7. For example, depreciation of the ruble increased the income of raw materials exporters and, at the same time, increased the costs of import-dependent sectors.

  8. Investment portal of Sakhalin oblast. Priority development areas. http://investinsakhalin.ru/ru/ploshchadki/toser/.

  9. http://www.transrivers.org/pdf/20200429CSO%20Statement_ on_High_Quality_Projects.pdf.

  10. www.wwf.ru/resources/news/article/11353.

  11. The buyers of the Amazar pulp mill acknowledged that they misinformed the Hong Kong Stock Exchange. http://www.transrivers.org/2019/2892/.

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Funding

The paper presents the results obtained in the framework of the Program for Basic Research, Siberian Branch, Russian Academy of Sciences (topic no. FUFR-2021-0001, state registration no. 121032200126-6) and the Russian Foundation for Basic Research (project no. 19-010-00485).

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Authors and Affiliations

  1. Institute of Natural Resources, Ecology and Cryology, Siberian Branch, Russian Academy of Sciences, 672090, Chita, Russia

    I. P. Glazyrina & L. M. Faleychik

  2. Transbaikal State University, 672039, Chita, Russia

    I. P. Glazyrina & A. A. Faleychik

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  1. I. P. Glazyrina
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The article has been substantially updated and revised by the authors for publication in Regional Research of Russia.

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Glazyrina, I.P., Faleychik, L.M. & Faleychik, A.A. Institutional Policy and the Role of Foreign Direct Investment in the Far East of Russia. Reg. Res. Russ. 11, 625–637 (2021). https://doi.org/10.1134/S2079970521040043

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