Page 16 - RusRPTJan21

generates – which is​ ​very low​ in Russia. This is partly because the investment climate in most of the country remains hostile or at least difficult.
Russia’s investment rate in 2019 was a mere​ 2​ 0.6%​ of its GDP. In effect, investment is heavily​ ​concentrated​ in Moscow and the Moscow Region (in 2019 it was 21%) and in oil and gas producing regions (typically in a small number of large projects).
The federal government could then use the national projects to direct investments into other regions, but in reality, this is rarely followed by an organic growth of investment.
Regional governments and economic elites could also fill the gap, but due to a significant fiscal and political centralization that took place in the past two decades, most of them – especially oil and gas-producing regions – have transferred a growing chunk of their revenues to Moscow and most of them rely on federal redistribution in the form of grants and subsidies, a lot of, which come with strings attached.
Regional budgets rely on own revenues too, including 17% percentage points of the 20% they charge in corporate income taxes, but large companies are often headquartered in Moscow or St. Petersburg and are also taxed in these cities – a frequent source of frustration for the regions. Regional governments, on average, spend​ ​70-80%​ of their budgets on health care, education and social transfers, and have barely any room to support development beyond road and housing construction.
Some do it anyway. Regional development institutions, of, which there are roughly 200 in Russia’s 83 regions (plus the occupied Crimea) more or less fulfil the same role as federal development institutions (officially at least), only on a much smaller scale. They take the form of regional budgetary funds to support entrepreneurship or technological innovation, but they can also be business incubators – for instance, industrial parks – that support small and medium enterprises. What is common in regional development institutions is that they tend not to be too successful. A 2015​ ​study​ by the Russian Academy of Sciences found, for instance, that the only really successful institution was the industrial park of the Kaluga Region, but this was mostly due to the infrastructural development of the region (and likely business-friendly policies), not necessarily the park itself.
The deadlines of the national projects may have been​ ​pushed back​ to 2030 due to the pandemic, but the so-called key performance indicators (KPIs), a set of highly quantitative measurements that the federal centre uses to evaluate the performance of regional governors, were not abolished or suspended; governors are still incentivized to prioritize spending on the projects. Regional budgets, however,​ ​suffered.​ Their total loss of revenue in the first eight months of the year was more than RUB500bn ($6.7bn) and unlike the federal budget most of them cannot rely on budgetary reserves, either. Regions across the board benefited from increasing revenues in 2018 but the reserves accumulated from these have been​ ​exhausted​, while their financial obligations only grew.
16 ​RUSSIA Country Report​ January 2021 ​ ​www.intellinews.com