Неэргодическая экономика

Авторский аналитический Интернет-журнал

Изучение широкого спектра проблем экономики

Russian Investment Forums As a Regional Development Institution

Developing and transition economy countries have two specific features: first, the capital deficit problem in these countries is particularly acute, and second, traditional capital redistribution channels either do not work or work poorly. In view of this, economic agents in these countries look for other options of investment market organization, using not very traditional methods for this purpose. One of these in Russia is the institution of regional investment forums.

Introduction

 

Development institution building covers a wide range of topics and subtopics. This includes the system of indicative planning, the network of regional development agencies, and innovation institutions. In advanced countries, development institutions are well established and have a rich history of emergence and evolution. But in developing and transition economies, such institutions cannot be built overnight. As a rule, there is a need for intermediate institutions that would provide the basis for the subsequent introduction of development agencies and elements of indicative planning. In recent years, such an intermediate institution has emerged in the form of regional investment forums, which are most widespread in Russia. This phenomenon has not been reflected in the literature in the West for an obvious reason: in the West, such institutions are of little importance since there is no pressing need for them. In many developing countries, on the contrary, the institution of forums has not yet matured and has yet to find its place in the national economy. Against this background, Russia has gained unique experience in the dynamic development of such an auxiliary institution as investment forums.

Considering the above, this article is an attempt at a systematic study of the phenomenon of investment forums in Russia (as distinguished from economic forums, an earlier and more general phenomenon, partly reflected in a work by S. Naumova2). In contrast to earlier publications on this topic,3 we will look at the international context of this phenomenon and show its counterparts in other countries; we will also demonstrate how the content of the concept of “forum” differs in developed and emerging countries. In addition, we will substantiate the thesis that the institution of forums is not an independent (final) but an auxiliary (interim) development institution that makes it possible to go over to the next stage in creating a regional development system in the country. A theoretical basis for the construction of institutional chains is provided by Viktor Polterovich.4 Along with that, some of the questions discussed in previous articles by Balatsky5 will be further developed in this article, with generalization and empirical evidence. The prospects of the market of regional forums in Russia are discussed separately.

 

1. The Institution of Regional Investment Forums: Developed and Emerging Countries

 

In the world, there are always those who have a surplus of capital and those who are badly in need of it. This encourages the formation of various market mechanisms and channels through which investment demand and supply could “meet” without hindrance. In developed countries, this mission is mainly accomplished by stock exchange mechanisms and numerous financial institutions: banks, investment funds, regional development agencies, etc. Developing and transition economy countries have two specific features:

first, the capital deficit problem in these countries is particularly acute, and

second, traditional capital redistribution channels either do not work or work poorly.

In view of this, economic agents in these countries look for other options of investment market organization, using not very traditional methods for this purpose. One of these in Russia is the institution of regional investment forums. Let us note that mechanisms vaguely resembling such forums do exist in Western countries, but in Russia they have gained much greater popularity, turning into what is probably the main instrument for attracting investment to its regions.

How well does Russia fit into international trends in regional development?

In other countries, the institution of forums has a limited field of application. As a rule, these are web forums where various matters are discussed and consultations are given. They may deal with the subtleties of investment planning, the strategy of where and how to invest. An example of such a forum is the Northwest Alternative Investment Managers Forum in the United States. This forum is an organization with 501 members representing nonprofit organizations. Its objective is to turn the US Northwest into a place suitable for life, work and business. The forum has become known throughout the world due to its investment speakers, who cooperate with the management of regional support funds and private banking communities. Let us emphasize that this forum, its website and bulletin mainly serve to inform investors and not to make deals6 as, for example, is the case in Russia.

Web forums informing users about new investment instruments and opportunities have become widespread. They include the Overseas Property Investment Forum, 20127 which contains information on real estate around the world, the Investment Banking Forum, etc.

Developed countries also have experience in holding regional investment forums, which demonstrate the region’s potential in order to attract investment. Atypical example of such forums is the Tourism Investment Forum, 20128 held in the Canadian province of Alberta. But such events in advanced countries, as a rule, focus on particular industries and are something in the nature of fairs for the sale of goods and resources. For example, the Alberta forum offers hotels, land, tourism industry products, etc.

Social investment forums, which are most widespread in the USA (e.g. US SIF), play a special role in developed countries. Forums of this type have recently acquired a more accurate and modem name: forums for sustainable and responsible investing (SRI).9 However, social investments are “secondary” in the sense that they are based not on decisions to launch new production facilities but on some kind of additional socially–oriented investments made by large and prospering companies. In this sense, social investments are a form of redistribution of production investments already made. For investment forums in Russia, it is important to address the “primary” task: to find capital for financing new production. Besides, for all its relevance and usefulness, SRI is not so much a business activity as an image–building effort for functioning companies.

The institution of regional investment forums, whose purpose is to attract investment to the region, is much more widespread in emerging countries. For example, participants in the Indonesian Regional Investment Forum in 2008 signed about 200 contracts worth nearly $19 billion. The forum organizers themselves frankly say that they act as “matchmakers” who advertise business segments of their country to foreign investors.10

Of some interest is the COMESA Investment Forum in Dubai, which brings together policy makers, business leaders and senior managers from Africa’s most successful companies to unveil new projects and highlight the business potential of the 19 member countries of the Common Market for Eastern and Southern Africa.11 Dubai, being an open window on world trade, thus acts as an operator that redistributes foreign direct investment in Africa.

The Regional Investment Forum “Investments and Development” in Moldova operates in the same vein, with presentations of investment projects, farmers’ fairs (exhibitions) and conclusion of agreements. The forum’s main goal is to attract European investment into the country.12

An interesting initiative is the regional Silk Road Investment Forum, launched in China in 2006. This forum is designed to develop the regional highway through the joint efforts of China and the countries of Central Asia, including through more active investment in various projects being implemented along this historic route.13

The forum that is closest to Russia (in terms of content) is the regional Malopolska Investment Forum in Poland, attended by representatives of self–governments, development support institutions, the country’s central administration and entrepreneurs.14 They discuss measures to attract new investment to Malopolska Province, promote the Lesser Poland business brand, prepare attractive investment offers, and create an integrated system of investment services that would include marketing, planning and administrative activities.

Russia has not only joined the movement to create the institution of regional investment forums, but has also become perhaps one of its most active operators.15

 

2. Regional Investment Forums in Russia: Nature and Specifics

 

Any forum is a public meeting and an open discussion of specific questions or, in other words, a platform for real dialogue.16 In this context, it is not surprising that at a certain point this idea was adapted to investment platforms where market participants could meet to discuss and resolve various problems. In the event, the information component of forums was augmented by a financial component, and this helped to turn them into something similar to a regional stock exchange. Later on, these forums took the form of semiofficial administrative and bureaucratic events, so that important meetings, negotiations and signing of agreements were timed to coincide with them. In addition, regional forums began to perform an image-building function, seeking to create a positive image of the region in the eyes of Russian and world public opinion. Thus, the function of social cooperation has become quite evident,17 and Russian regional investment forums have evolved into a fairly complex instrument of regional investment policy.

It should be noted that forums mainly aim to attract direct (including foreign) and not portfolio investment. This automatically implies direct contact between the authorities and the investor who plans to locate new production facilities in the region.

Initially, the main reasons for the emergence of the movement to create regional forums were a shortage of funds for normal economic development in the regions and the independence of the regional authorities in formulating territorial development policy. Today this movement in Russia has a history of at least 15 years. In this period, numerous investment and economic forums have appeared in different regions of the country, and some regions have even hosted several forums (in St. Petersburg, for example, there are four significant forums), with economic forums appearing earlier.18 At the same time, many previously created forums have ceased to exist. Some fell short of expectations, and others eventually changed their business orientation. For example, the Kaluga economic (industrial) forum has transformed into the Obninsk Innovation Forum. In a number of cases, such changes are of an opportunistic nature and reflect shortterm political trends, while sometimes there are valid reasons behind them as when Kaluga Oblast (Region), having strengthened its economic position as an industrial region, decided to intensify activity in the innovation market, which led to a change of “label.” Similarly, the Kuban International Economic Forum, first held in 2002, was known under this name for five years and in 2007 was rebranded as the Sochi International Investment Forum.

All of the above points to the appearance of a trend towards a differentiation of forums.

It should also be noted that the language currently used to name forums is diverse. They can be economic, social, investment, industrial, innovation, business, etc. A logical question is what are the differences between them. In fact, there are no fundamental differences between such forums because all of them are essentially investment forums and their purpose is to attract capital to the region. This is exactly why investment agreements and contracts are concluded at all forums, and their total value is the main result and indicator of the level of the event. The industry affiliation of forums adds a specific dimension to the process but does not change its main content. Hence, all types of forums taken together can be seen as a single phenomenon with emphasis on their investment function. In this article, we give priority to forums oriented towards the “primary” attraction of capital to the region.19

Historically, investment forums appeared in Russia as an informal institution without clearly defined powers, functions or organizational forms. But since then they have made significant progress towards institutionalization, turning into a strictly controlled formal institution. Today the main task of forums is to attract investment. For this reason, the traditional economic assessment of their activities implies taking into account the value of all business agreements and contracts signed at each forum. For example, participants in the 9th International Investment Forum Sochi 2010 signed 179 agreements worth a total of 295 billion rubles (almost $10 billion). This amount was divided as follows between different levels of government: 42 agreements (180 billion rubles) were signed by Krasnodar Kray (Territory), and 137 agreements (115 billion rubles) by municipalities.20 But the economic effectiveness of the forum can be inferred not only from the amount of investment agreements, but also from its dynamics. For example, the value of agreements signed during the Sochi Forum in 2007 tripled compared to 2006 (from 140 billion rubles to 455 billion rubles).21

But this method for assessing the effectiveness of forums is very approximate and can only be used for preliminary estimates. The point is that agreements signed at such forums are, as a rule, memoranda of intent. This means that part of these agreements and memoranda subsequently turn into business deals and contracts, which are actual investment commitments made by companies. But even these contracts require implementation and involve significant time lags in contract disbursements. Sometimes contracts are terminated, frozen, not completed, etc. This is why the direct economic effect of regional forums is much lower than the official figures for agreements concluded.

Meanwhile, in this respect many forums have also made some progress. According to available data, the share of agreements signed at the Sochi Forum and transformed into contracts is now about 50%. Moreover, this share is constantly growing, partly due to tough action by the administration, whose efforts are geared directly towards the final result in the form of contracts without any interim agreements or memoranda. This makes government–business relations more rational and practical.

Let us note that forums are very costly events. But display stands, expositions, presentations and promotional activities generate significant income for the forum organizers. Overall, according to experts, forums are non–profit events with zero net income. A substantial deficit (or surplus) is not typical of regional forums. Financial flows are “balanced” at the expense of sponsors.

At present, regional forums continue to act as an information and dialogue platform for addressing certain messages to the investment community and the federal center, which tries to dissociate itself, for various reasons, from the solution of regional problems. A characteristic example here is the Kaluga Industrial Forum: in 2010, it opened with a significant speech by Governor Anatoly Artamonov, who publicly blamed the federal authorities for demanding a “kickback” from his region for permission to open an international airport. Evidently, that speech met with an adequate response in the upper echelons of power and accelerated the receipt of a permit. Thus, forums sometimes operate as an informal instrument for “pushing” regional projects at the federal level.

Generally, such forums also induce the local authorities to review the situation in their region. Only then can they make more reasonable offers to investors. For example, a forum in Khakassia was aimed at discussing opportunities for the use of a unique regional resource such as the great number of archeological monuments (more than 30 thousand units) in its territory. The republic’s administration has managed to raise this topic to a federal and then to an international level. If the region is able to launch its cultural tourism project, this can lead to an increase in the salaries of cultural workers and the development of museums, so helping to change the entire face of the region.

Today, almost every region already regards the creation of its own regional forum as a “matter of honor.” To estimate the degree of regional interest in such an initiative, we conducted a survey of regional experts,22 asking them to assess, on a 10–point scale, the usefulness of the institution of investment forums in Russia. The average score of the responses was 8.3, which means that regional experts were almost unanimous in their high rating of the usefulness of forums. For reference, only 10.8% of respondents were undecided, which shows they were disoriented as to the mission of regional forums.

It should be noted that a balanced approach is already well established among regional executives. A typical view was expressed by Maksim Shereykin, Vice Governor of Kaluga Region: forums by themselves cannot give the region anything, but as an element of the overall system of work with producers and investors they are well justified and have a tangible effect.23 Such an understanding implies that the regional authorities see them as a channel for the promotion of products made in the region. And the need for such channels is becoming ever more obvious.

The humanitarian component of investment forums should also be mentioned. For example, they rely in large part on the services of young volunteers. Observations show that many of these volunteers are quite sincere in their desire to assist the organizers, taking their responsibilities informally and working with enthusiasm. The authorities’ effort to arrange such a dialogue with young people in the region is in itself a positive phenomenon and helps to form a full–fledged civil society.

All of this leads us to the understanding that apart from the direct economic effect of forums (investment inflows), one can speak of their indirect economic effect (promotion of finished products and development of related industries), which increases the real importance of such events. Moreover, there are various social effects: potential investors’ contacts with other investors and government officials, greater mutual trust, deeper knowledge about potential partners and markets, a better understanding of the future, information of the public, pressure on the federal bureaucracy, etc. In this sense, the total effect of forums is the sum of the direct and indirect economic effects and the social effect; in reality, it is naturally much greater than the official figures for agreements concluded.

 

3. The Evolution of Regional Forums in Russia

 

In recent years, some regional forums have “grown” significantly. For example, the 9th Forum Sochi 2010 was attended by representatives of 32 countries, delegations from 53 subjects of the Russian Federation, and heads of entities from 32 regions; the work of the forum was covered by about 1,000 members of the media from 18 countries. The St. Petersburg International Economic Forum (SPIEF) is even larger: in 2010, it brought together 4,200 participants from 87 countries, including 207 representatives of Russian federal authorities, 83 heads of RF entities (including 43 governors), and 1,134 representatives of the media from 24 countries. Support for the work of the forum was provided by 10,000 technical service personnel and temporary employees.24

The growing scale of such events and the experience gained in holding them have at least several important consequences, which form distinctive trends in the development of regional forums.

First, there is a globalization of the political agenda of forums. Along with purely economic tasks, forums begin to perform political and diplomatic functions. For example, four major government agreements with the participation of the then Russian Prime Minister Vladimir Putin were signed at the 9th Forum Sochi 2010, as well as an agreement between the government of Russia and Abkhazia on checkpoints at the Russia–Abk– hazia border. An agreement on the South Stream gas pipeline was signed at the Sochi Forum in 2011. Let us recall that the forum was preceded by yet another “gas” conflict between Russia’s Gazprom and Ukraine with the involvement of the European Union. A settlement of this conflict through the signing of an agreement was timed to coincide with the Sochi Forum. Although such a “peacekeeping” mission of the forum at first glance appears to be quite reasonable, this also raises many questions to which there are still no answers. For example, what then is the mission of the Ministry of Foreign Affairs of Russia, which should provide a platform for resolving such conflicts with its direct participation? What are Russian diplomats doing if major Russian companies resolve all issues directly with neighboring countries and the European Union?

Without making categorical statements, let us nevertheless note that such mixing of current business contacts with political and diplomatic functions does not exactly fit into the well–established traditional system of executive power.

Second, forums are turning into significant cultural events. Many festivals, competitions, fairs and concerts are timed to take place during forums. Moreover, many world–famous pop stars are invited to perform at them. For example, the 9th Sochi Forum 2010 featured a program of cultural and sports activities. This included a concert by pop star Tom Jones for the forum’s participants, guests and city residents, performances by well-known Russian groups and companies, and festivals such as Kuban Cuisine and Kuban Wines. Even the organizers of the 1st International Forum in Khakassia in 2011 invited Jose Carreras, who gave two concerts, including a concert for the forum participants. Thus, regional forums are actually transforming into some kind of “city days” or, more precisely, “regional days.” So far it is difficult to make a definitive assessment of this trend.

Third, there is a bureaucratization of forums. This is manifested in many ways: increased and sometimes unprecedented security measures; blocking of roads to the forum venue; differentiation of participants, their status and “clearance” levels (for example, the Sochi and SPIEF forums have three types of badges: for representatives of the media, business and government); the appearance of VIP participant status, whose acquisition is only partially regulated; the introduction of strict selection procedures for participants (for example, SPIEF refuses to accredit many media outlets), etc. Naturally, the very nature of forums implies meetings behind the scenes and closed–door conferences for private negotiations between investors and regional government officials regarding investment. This, among other things, may justify the holding of conferences from which journalists are barred. In a sense, this is evidence of the authenticity and maturity of current forums, at which there is room for informal constructive negotiations as well as high–profile meetings. But now that forums have become formal institutions, they are subjected to increasing regulation, which leads to their destructive bureaucratization.

Fourth, forums are being personified. The transformation of forums into high–profile nomenklatura events has inevitably led to the development of a syndrome that could be called “forum with a recognizable face.” Today many of the most significant forums in the country are associated with certain political figures. For example, the Sochi Forum is inseparably linked with Vladimir Putin, SPIEF with Dmitry Medvedev the Krasnoyarsk Forum with Governor Aleksandr Khloponin, and the Tver Forum with Governor Dmitry Zelenin. These figures personify the respective forums, and it is often difficult to imagine them without each other. A sharp weakening of the position of the Krasnoyarsk Forum after Khloponin’s transfer to the North Caucasian Federal District is characteristic in this respect. Many analysts believe that a similar fate awaits the Tver Forum after the resignation of Governor Zelenin. Although the role of the personality in holding a forum cannot be secondary, the use of people as “brands” to lure investors to such events has perhaps become too obvious and obtrusive.

Fifth, there are signs of a thematic (information) redundancy of forums. The point is that at some investment forums the function of discussing mutual business interests and launching real investment projects by the regional authorities and investors weakens with time. Forums often turn into debating societies for VIP participants in the presence of the media. For example, the thematic agenda of the Sochi 2011 Forum was truly boundless. Among the various round tables and session meetings there was an obvious “no load run”: a meeting of leading economists to discuss the country’s future. There were also meetings of a frankly imagemaking and corporate nature, i.e., interesting only to their participants. An overloaded agenda leads to an explosive increase in the number of participants and forum costs, makes it difficult to identify the problematic trend of the meeting, and obscures the purpose of the event. This tendency manifests itself as forums “mature” and their reputation grows.25

The popularity of the institution of forums also leads to the transformation of traditional regional investment platforms into international projects. For example, the First Investment Forum “Russia–Israel: The Way to Cooperation”26 took place in September 2011. And the number of such forums is increasing. Our survey has allowed us to gauge the demand for such international platforms. Experts were invited to answer questions about the regions’ interest in forums held abroad, their desire to take part in such forums, and their readiness to participate in them. Four platforms were rated on a 10–point scale. Based on the results obtained, we constructed two indexes, whose values are given in Table 1. The table provides clear evidence of an already well–established interest in participation in large investment forums hosted by recognized business centers of the world. In particular, this is apparent from the fact that the index of interest for all four cities is higher than 5 (the boundary between interest and disinterest). Priority here is given to Chinese platforms, which shows once again that Russian regions are steadily turning towards relations with the Asian economic giant. The index of readiness is somewhat lower than the index of interest, and this is quite logical. In the event, the four cities maintain their rankings, but for Dubai and Delhi there is more evidence of unreadiness than readiness to participate (readiness index score lower than 5).

 

Table 1Russian Regional Demand for Foreign Forums

Host city

Index of interest, score

Index of readiness, score

Shanghai

6.8

5.6

Hong Kong

6.6

5.4

Dubai

5.8

4.7

Delhi

5.4

4.3

Source: Author’s calculations.

 

Thus, Russian regions in search of investments are already prepared not only to host forums and take part in similar forums hosted by other regions, but also to attend such events in other countries. In this connection, it is characteristic that only 2.8% of the experts polled could not answer our question. This figure can be seen as a sort of index of uncertainly regarding the advisability of participation in such events. Overall, we can say that regional forums have accomplished an important mission: they have “emancipated” the regions and opened them for extensive contacts in the global investment market.

Going back to the topic of bureaucratization of forums, one should mention another trend noted by some experts. As regional forums “mature,” the federal authorities take a growing interest in them. At a certain point in time, when the forum develops into a large-scale event of national importance, the federal center “comes to life” and tries to gain control over it. This has already happened to the Sochi Forum, which is supervised, not to say controlled, by the RF Ministry of Economic Development. The ministry’s power ranges from decisions on the allocation of the forum’s budget to organizational decisions. In view of this, many proposals on how to organize the forum are arbitrarily rejected by the ministry as it always has the final say in this matter. This ministry takes a similar position regarding SPIEF; at any rate, its power to select and accredit media to the forum is almost unlimited.27 The Baikal Forum is drifting in the same direction: in 2011, it took place under the patronage of the RF Federation Council. Such “influence” will strengthen the forum to some extent, which is why it will be held every year instead of every two years. Other examples include the Krasnoyarsk Forum, supervised by the RF Ministry of Finance, and the Murmansk Forum, whose main organizer and “user” is the RF Ministry of Foreign Affairs.

Let us note that there are many federal departments figuring among the official organizers of regional forums, and this can also be misleading. Meanwhile, there is always one department among them that supervises the forum and “calls the tune.” In recent years, this tendency has become particularly pronounced.

At present, the effect of a gradual increase in the influence of federal structures on regional forums is difficult to assess definitively. On the one hand, the initial democratic spirit of this market platform, designed to attract investment, is being destroyed as forums are turning into bureaucratic events. On the other hand, regions often benefit from such relations with the center, attracting more public attention and thus receiving support from the federal authorities.

 

4. The Market of Regional Forums: Competition and Hierarchy

 

According to our estimates, the number of regional forums is much greater than thirty. At the same time, they are by no means equivalent. Some have a fairly long history as, for example, SPIEF, which has marked its fifteenth anniversary, and the Sochi Forum, which is ten years old; others have existed for only a few years, and still others have been held only once. Some forums take place every year, and others, once every two or three years. Some forums have a considerable budget and use their region’s popular image, while others have very little money and are obliged to overcome people’s unfavorable opinion of their region.

Despite these differences, all forums have the same purpose: to attract the attention of investors, with a subsequent flow of capital to the region. But this resource is limited, which leads to implicit competition between forums. Thus, one can speak of the emergence of something like a market of regional forums in which domestic and foreign investments are “divided up” among various regional projects.

A typical example of competition between forums is probably the fact that for eleven years the Russian government’s Foreign Investment Advisory Council (FIAC) met within the framework of the St. Petersburg International Economic Forum, and since 2008 its meetings have been held within the framework of the Sochi Forum.28 Such cases when regions take over the initiative in the area of investment is a very typical phenomenon.

The very existence of a market of regional forums dictates the need to put some order into this market by ranking forums according to their attractiveness to investors and potential participants. This is a relevant task not only for the actual players in this market, but also for its “environment.”

Recently, a standard method has been used to determine the disposition of market participants: reputation rating. An attempt to produce such a rating for Russian regional forums was made in a work by Balatsky.2930 The rating was based on seven criteria (factors) for assessing the attractiveness of each forum: recognition, prestige, bureaucratization level, financial affordability, desirability of participation, attendance, and effectiveness of participation. A simple quantitative assessment was planned only for the attendance factor; all other factors were assessed by experts on a scale of 0 to 10. For the factors of recognition, prestige, desirability of participation and effectiveness, the relationship between the score and the rating of the forum was positive: the higher the score the better; for the factors of bureaucratization and affordability, the relationship was negative: the higher the score the worse.

Leaving aside the results of the rating, let us only consider how fully the experts utilized the proposed survey scale of 0 to 10. Did they use the entire scale or did the greater part of it remain “idle”?

The answer to this question is given in Table 2, which shows the maximum and minimum values of average forum scores. As it turns out, the 10–point scale was used insufficiently for only one factor: bureaucratization; for all other factors it was used quite adequately. Table 2 also helps to understand for which factors the differences between forums were most pronounced. It turns out that the biggest differences were for recognition, prestige and desirability of participation; for all other factors, the differences were less significant.

 

Table 2. Distribution of Factor Scores for Regional Forums

Criterion

Maximum

Minimum

Range

Recognition

9.76

0.40

9.36

Prestige

9.73

1.02

8.71

Bureaucratization

2.31

0.00

2.31

Affordability

7.46

1.00

6.46

Desirability

8.86

0.68

8.18

Attendance

4.30

0.00

4.30

Effectiveness

5.72

0.00

5.72

 

Another thing that catches the eye is that the level of bureaucratization, first, differed little between forums, and second, was everywhere concentrated in the lower part of the scale. This means that the factor of bureaucracy and over–regulation does not deter regional participants. Despite the obvious trend towards increasing bureaucratization of forums noted above, it has evidently not yet reached a scale that would seriously prevent investors from meeting government officials. Hence another preliminary but very important conclusion: regional investment forums are a truly democratic institution, as was initially planned. This fact is certainly very encouraging.

Another clearly visible pattern is that the most recognizable, prestigious and desirable forums are usually the most bureaucratized and expensive ones. For example, SPIEF and the Sochi Forum, which are at the top of the ratings for five reputation criteria, bring up the rear in bureaucratization level and affordability. This is evidence of traditional market logic: participation in forums that have earned a high reputation and turned into well–known brands becomes costly and burdensome. Thus, at a certain stage of their development, forums imply capitalization, which turns the regional platform into an expensive event for its participants.

 

5. Verification of Forum Survey Data

 

Ideally, the compilation and public disclosure of data on regional forums should include feedback, i.e., the response of the forum participants to the results of the rating. For example, regional representatives can get into contact with the rater and submit their proposals for including in the list of forums yet another young or little–known forum not captured by the previous round of surveys. This will make it possible to create a constantly expanding database of all forums with their ratings.

The main purpose of the surveys is to enable market participants to analyze the systems for ranking forums according to each assessment criterion. Such data will allow forum organizers to understand their weaknesses and take measures to eliminate them. As a case in point, let us note that the Sochi Forum, which ranked below SPIEF on five criteria, also lost out in terms of bureaucratization level and affordability, thus breaking the general pattern identified. For the Sochi Forum organizers, this fact should be a signal to review the model of their event.

It is interesting that this example is based on surveys conducted before the 10th Forum Sochi 2011.31 Meanwhile, that anniversary forum took place about two weeks after the survey and indirectly confirmed the validity of its findings. In this context, let us mention three characteristic incidents at that forum.

Overemphasis on security measures led to the following:

(1) during a tour of the exposition by the then Prime Minister Vladimir Putin, the forum was virtually closed to entry;

(2) Russian Vice Premier Igor Sechin, Energy Minister Sergey Shmatko and Rosneft CEO Eduard Khudaynatov were late for the plenary session because the delegation of which they were part was stopped at the entrance by security guards and they were allowed to pass only after long negotiations and phone calls; and

(3) security guards did not let in Norilsk Nickel General Director Vladimir Strzhalkovsky, who left the forum grounds saying that he did not plan to sponsor the forum any longer.32

Thus, the low rating of the Sochi Forum on “bureaucratization level” index can be regarded as quite objective.

Some facts allow additional testing of survey results. At the Sochi Forum, for example, every journalist with a video camera must go through four similar security checks, which carries the “wasteful” actions of security guards to the point of absurdity. At the St. Petersburg Forum there is nothing of the kind, and this shows that the rankings for bureaucratization level are correct.

The “bureaucratic” experience of the Sochi Forum in media liaison is of interest in this context. After the Sochi 2011 Forum, its organizers analyzed all publications about the forum to keep track of information on their event. But in this commendable effort they went too far, dividing all publications into “good” (with positive comments) and “bad” (with negative comments). Then all media outlets that ventured to publish a “bad” item were put on a “blacklist.” It is not surprising that such an arrangement led to a curious incident when a certain media outlet was blacklisted although the article it published had been prepared at the request of the forum’s press service and been subjected to its prior “censorship.” As the forum organizers plan, the blacklisted media should be “punished,” that is, in the future they will not be accredited to the forum. This fact shows once again that the institution of forums has undergone serious bureaucratization.33

In our opinion, a systematic analysis of regional investment forum ratings by means of surveys will help to “polish” the forums themselves and turn them into a more effective instrument of regional investment policy.

 

6. The Prospects of the Forums Market and Regional Development Institutions

 

We have already noted the fact that the movement of regional investment forums has gone beyond the borders of Russia, generating international investment platforms in countries within the area of Russian strategic interests. At the same time, there is also a counter–flow: increasing interest from foreign counterparties. For example, according to available data, right after the 2008 crisis a Canadian investment company whose employees had actively attended Russian regional forums in search of business partners throughout the crisis years opened a representative office at the Canadian Embassy in Moscow. In other words, the institution of forums is seen by foreign economic agents already at the very top as a perfectly normal channel for interacting with Russian partners in matters of investment in Russia.

One can say that the market in question so far constitutes only a small part of its potential size. For example, our survey covered only 29 forums. But ideally each region should have at least one forum of its own, so that their total number should reach 83. Considering that some regions such as St. Petersburg can have more than one forum, their number can increase to 150–200. Consequently, the domestic market of investment forums is still in its infancy and utilizes about 15–20% of its potential.

However, this market is not confined to investment forums but already includes numerous industry (“sectoral”) forums. For example, the Tula Economic Forum has been held since 2006 and focuses on the development of Russian cities and improvement of the urban environment.34 The International Information Technology Forum in Nizhny Novgorod, held since 2008, is devoted to the IT market and the problems of e–govemment.35 The All–Russia Forum “Infrastructure Projects in Russia: Business–Government Partnership” has been meeting since 2009.36 In 2012, Kursk hosted the 1st Central Russian Economic Forum. Other forums already in operation include the Business and Culture Forum in the Trans–Baikal region, economic forum “Samara Initiative,” Oryol Economic Forum, Pacific Economic Congress, Far Eastern Economic Forum in Khabarovsk, International Economic Forum in Veliky Novgorod, Russian Economic Forum in Yekaterinburg, and Dagestan Economic Forum. All these forums concentrate on specific problems and can be included in the category of traditional investment forums only tentatively. Some can be called institutional while others are mainly informational (dialogic) forums. Nevertheless, each of them implies the public disclosure of various innovations and projects with subsequent investment decisions. The potential for such forums is somewhat lower than for investment ones and, according to our estimates, ranges from 60 to 70 forums.

To gain a better understanding of the prospects of forums, it is necessary to correctly determine their current institutional status. The point is that forums are a typical auxiliary (intermediate) regional development institution, already studied in sufficient detail.37 In developed countries, this institution usually takes the form of a national network of regional development agencies (RDAs), which acts as the operator of regional investment projects.38 But the creation of effective RDAs requires the fulfillment of numerous conditions, including the existence of a developed civil society. Moreover, experience shows that the construction of an appropriate national RDA model takes decades, if not centuries. In view of this, in previous decades Russia was not prepared for the establishment of a “final” development institution in the form of RDAs. This is why a strategy for building an “intermediate” development institution in the form of regional investment forums has been spontaneously implemented in the country. Ideally, experience gained in organizing forums and launching investment projects should make it possible to go over to the next stage: the establishment of RDAs proper. It should be noted that today this idea is actively promoted in academic literature,39 while in practice certain prototypes of RDAs have already been organized in almost all Russian regions, and in some regions fairly successful RDAs are already in operation.40

As the record shows, experience gained in organizing regional forums provides a good basis for the establishment of RDAs. The Krasnodar Territory and Kaluga Region, which have successfully traveled the road to the establishment of forums and have started building RDAs, serve as an example in this respect. Certainly, forums are a less mature development institution than RDAs, but a mature market of regional forums is exactly what will make it possible in the future to set up effective RDAs.

Eventually, the numerous investment and industry forums will probably merge together with the subsequent establishment of RDAs on this basis. In the long term, the RDA institution will apparently replace the institution of forums, but their mutually beneficial coexistence, elements of which are already in evidence, may last for quite a long time.

 

NOTES

 

1. This article was prepared with the financial support of the Russian Foundation for the Humanities (Project No. 11-02-00493a).

2. S.Naumova, “Russian Economic Forums: Significance, Problems and Solutions,” Ye.Yasin (ed.), XI International Scientific Conference on Economic and Social Development Problems. In three books, Moscow, 2011 (in Russian), (http://www.hse.ru/data/2011/08/08/1268227908/conf2.pdf)

3. Ye.Balatsky, “Regional Investment Forums in the Russian Economy,” Kapital strany (The Capital of the Country), 12.09.2011. (http://kapital-rus.ru/articles/article/190927/); Ye.Balatsky, “Regional Investment Forums in Russia: Assessment of Attractiveness,” Mir izmereniy, No. 11 (129), 2011.

4. V.Polterovich, Elements of Reform Theory, Moscow, 2007 (in Russian).

5. See Note 3.

6. Northwest Alternative Investment Managers Forum (2012) (http://kapital-rus.ru/arti-cles/article/190927/)

7. Overseas Property Investment Forum (2012) (http://www.propertycommunity.com/forum/)

8. Tourism Investment Forum (2012) (http://www.tpr.alberta.ca/tourism/investment/TI-forum.aspx)

9. The Forum for Sustainable and Responsible Investment (2012) (http://ussif.org/)

10. Indonesian Regional Investment Forum. (http://www.setneg.go.id/index.php?option=com_content&task=view&id=2175&Itemid=26)

11. Eleven days to the 4th COMESA Investment Forum in Dubai, (http://www.comesaria.org/site/en/news_details.php?chaine=eleven-days-to-the-4th-comesa-investment-forum-in-dubai-u-a-e&id_news=8&id_article=119)

12. The Regional Investment Forum “Investments and Development” (http://www.geneva.mfa.md/announcements/482374/)

13. Investing in Silk Road Development (http://www.undp.org.cn/modules.php?op=modload&name=News&file=article&catid=14&topic=50&sid=269&mode=thread&order=0&thold=0)

14. 3rd Malopolska Investment Forum (http://www.en.marr.pl/3rd-malopolska-investment-forum.html)

15. This is evident, in particular, from the fact that more than half of all regional forums found in the Internet (even in its English–language segment) using search engines are Russian forums.

16. S.Naumova, op. cit.

17. Ibidem.

18. Ibidem.

19. Initially, economic forums differed from investment forums in their wider range of topics discussed and a wider geographical spread of participants. Today these distinctions have blurred, so that the boundary lines between the two types of forums are only historical and semantic.

20. The Results of the 9th International Economic Forum Sochi 2010,” Bujet.ru, 16.09.2010 (http://bujet.ru/article/90450.php)

21. The Results of Krasnodar Kray Participation in the Sochi 2007 Forum, 6th International Investment Forum Sochi 2007 (http://www.forumkuban.ru/arxiv/2007/index.php)

22. Representatives of 37 subjects of the Russian Federation took part in the survey (see Note 3).

23. “Deficit of Investment Projects in the Sphere of Innovations,” Kapital strany, 25.05.2011 (http://www.kapital-rus.ru/articles/article/184934)

24. St.Petersburg International Economic Forum (http://www.forumspb.com/ru/programme/SPIEF2010/Statistics.html)

25. The 2nd Obninsk Innovation Forum provides a typical example of “dead weight personnel”: among the speakers at one of its workshops there were many “boys” and “girls,” that is, very young people who either spoke in platitudes and truisms, uttered incomprehensible phrases or made altogether erroneous statements. Practitioners expressed doubts about the usefulness of these reports (Ye. Balatsky, “The 2nd Obninsk Innovation Forum: Field Notes,” Kapital strany, 21.05.2011 (http://www.kapital-rus.ru/articles/article/184745). “Empty” workshops and speeches are a typical example of the forum’s information redundancy.

26. First Investment Forum “Russia–Israel: The Way to Cooperation,” Association of Business Organizations of the Republic of Bashkortostan (http://www.aop-rb.ru/actions_of_partners/82/)

27. Experts have noted another fact: a media outlet denied accreditation to SPIEF applied for assistance through its own channels to the Ministry of Economic Development of Russia, which settled the question in two days.

28. See Note 2.

29. Ye.Balatsky, “Regional Investment Forums in Russia: Assessment of Attractiveness,” Mir izmereniy, No. 11 (129), 2011.

30. Let us note that for developed countries there is no point in ranking forums; instead, they rate investment programs, investment sites and investment banking business schools, identify geographical “green areas” for investment, etc. But all these methods of assessment have no relation to ranking local investment platforms. Thus, the concept of forum rating has a totally different meaning for developed countries than for Russia.

31. “Rating of Regional Investment Forums,” Kapital strany, 11.09/2011. (http://www.kapital-rus.ru/articles/article/190845/)

32. “Nornickel CEO Barred from Sochi Economic Forum,” Lenta.ru, 16.09.2011 (http://lenta.ru/news/2011/09/16/noenter/)

33. The nature of bureaucratic barriers at forums is clearly evident in this example: they apply not so much to investors as to the media. It is partly because of this that the bureaucracy phenomenon does not, for the time being, deter the key participants in such forums, namely investors.

34. About the 4th Tula Economic Forum 2011. Development of Cities: Innovations Plus Development Potential. Economic Forum (http://www.tula-forum.ru/)

35. M.Kross, “The 4th International Information Technology Forum Ends in Nizhny Novgorod,” Rossiiskaya gazeta, 28.04.2011 (http://www.rg.ru/2011/04/28/reg-privolzhe/end-anons.html

)

36. A.Melnikov, “Megaprojects: A Challenge to the State or Simple Need?” Kapital strany, 07.10.2011 (http://kapital-rus.ni/articles/article/l92496/)

37. V.Polterovich, “Regional Institutions of Modernization,” Kapital strany, 12.10.2011 (http://kapital-rus.ru/articles/article/192669/)

38. Ye.Balatsky, “Regional Development Institutions and Their Peculiarities: International Experience,” Marketing Survey of the Population of Krasnodar on Readiness to Participate in the Special Housing Accumulation Program. Report on Research Work, Moscow, 2011.

39. V. Polterovich, “Regional Institutions of Modernization.”

40. Ye.Balatsky, “Regional Development Institutions and Their Peculiarities: International Experience.”

 

Translated by Irina Borisova

 

 

 

 

Official link to the article:

 

Balatsky Ye. Russian Investment Forums As a Regional Development Institution// «Social Sciences», Vol.45, no.1, 2014, pp.3–19.

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