Russia: Diversifying Growth, Maximizing Human Potential, and Improving Governance and Transparency

Challenge

Russia is an upper middle-income economy that strives to move to a high-income status. The country has a favorable short-term fiscal outlook due to a sizable budget surplus.

In the short term, Russia is still vulnerable to over-dependence on oil and gas and to a prolonged recession in Europe that could trigger a global slowdown.

In the medium and longer term, the country will depend on the success of establishing a new growth model that addresses two critical challenges: i) increasing competitiveness and fostering innovation to diversify the economy and ii) coping with demographic change pertaining to Russia's declining and aging population, which is leading to a shrinking workforce. These call for a policy of modernization across many areas: business environment, innovation, public administration, and social services.

Regional development continues to be a challenge. Across the 83 regions, there are significant contrasts in socio-economic conditions. Russia's long-term complex challenges call for coordinated actions by all levels of the Government to become an advanced, high-income economy. Russia's "Strategy - 2020" clearly recognizes these critical challenges.

Approach

The WBG's unique, three-dimensional approach engages in Russia on three levels: nationally, regionally, and globally.

At the national level, the Bank aims to maximize its development impact mainly by reaching out to the poorer regions of Russia. As the largest country in the world and a regional growth and migration pole in Europe and Central Asia (ECA), Russia has an important impact on regional and global challenges.

At the ECA regional level, the WBG supports "Russia as a Donor Initiative" (RDI) through technical assistance for capacity strengthening. The Government will likely concentrate its development aid on poorer countries in ECA with which it still has strong economic and historical links.

At the global level, the Bank provides advisory services and knowledge to support Russia's efforts in providing global public goods. It assists Russia to enhance its voice in international forums such as the G8, G20, and the Asia-Pacific Economic Cooperation (APEC), and supports the country's integration into the World Trade Organization (WTO).

To stay relevant in an advanced middle-income country like Russia, the Bank must innovate constantly. The CPS positions the WBG as a partner of choice for Russia based on its global knowledge leadership in development. The partnership with Russia involves financial services and diverse knowledge products, some of them on a reimbursable basis.

Results

Strong progress in land registration and cadastre listings:

• The average time for completion of transactions in immovable property was reduced to 51 days in 2009 from four months in 2004 (baseline).
• Regulatory changes have had considerable effect, but reorganization and adaptation to new technologies in offices moderated (and sometimes reversed) time savings.
• The average time a client spends in a cadastre office (per visit) decreased to 59 minutes in 2009 from 2 hours in 2004 (baseline).
• Seventy percent of surveyed clients (2009) were satisfied with the operation of cadastre offices.

Improvements in the efficiency of customs-service delivery and reduction of "rent-seeking" behavior:

• At physical inspection sites, import declarations were reduced from 30 percent in 2003 (baseline) to 7.6 percent in 2010. Non-energy export declarations were reduced from 15 percent in 2003 to 1.8 percent in 2010.
• For exports, the average time for customs clearance at the border (Vehicle Customs Checkpoints) dropped from 40 minutes in 2003 (baseline) to 17 minutes in 2010 at all sites. The average customs clearance time measured from lodging of customs declaration to issuance of a release note decreased from 40 hours in 2003 (baseline) to eight hours in 2010.

Quality improvement in the delivery of public services:

• In 2007-2010, 102 multi-functional service centers were established in over 46 regions leading to waiting time halved for some administrative services.
• Services were standardized and citizen access was simplified. In 2010, over 2.5 million people used the centers.
• Reducing the number of interactions between clients and officials also lowers the chance of corruption. Significant initiatives are taken in the regions for reforming government administration.

Successful implementation of various national health programs, supported by international organizations, helped reverse negative health trends:

• In 2008, general practitioners delivered care to about 65 percent of the population in Chuvash Republic, up from 13.1 percent in 2003; in Voronezh, from 3 percent to 30 percent.
• During 2002-2007, patient satisfaction increased from 48 percent to 65 percent in Voronezh; from 67 percent to 73 percent in Chuvash Republic.
• Since 2004, TB mortality in the general population has decreased by 25 percent and among prisoners by 35 percent.
• Routine drug resistance surveillance is now in place; in 2009, over 90 percent of culture-positive cases were tested for resistance to first line anti-TB drugs.
• The percentage of HIV-positive infants born to HIV-infected women decreased from 13.2 percent (baseline) to 10.6 percent in 2009; incidence rates of syphilis, gonorrhea and other sexually-transmitted diseases and the prevalence rate of HIV reduced considerably.

Enhancing Russia's global role:
Development of the Overseas Development Assistance (ODA) strategy:

• "Russia as a Donor Initiative (RDI)", the Bank's technical assistance financed by the United Kingdom's Department for International Development (DFID), helped strengthen ODA statistical capacity, create a development-focused university curriculum, and work out a strategic communications program for ODA.
• Policy dialogue on capacity building was conducted by the RDI Advisory Group (comprised of the Ministries of Finance, Foreign Affairs, Education and Science, Civil Emergencies, and RosSotrudnichestvo) and was co-chaired by the Bank, with UNDP, Oxfam, the German Society for International Cooperation (GIZ), and USAID participating as observers.
• The Bank-supported International Conference on New Partnerships in Global Development Finance (Moscow, February 17-18, 2010) launched "Moscow Process" to broaden the global development community and to modernize multilateralism.

Bank Contribution

Given Russia's size and strong financial position, engagement with the WBG has been selective and strategic. Results from more than 70 projects financed with the World Bank's support since 1992 have helped Russia maintain prudent macroeconomic policies, make public administration more efficient, restructure the health sector, and educate children for the global information society. The Bank is planning new operations in areas such as: financial sector development, infrastructure development, energy efficiency, and forestry protection.

Today, the International Bank for Reconstruction and Development is financing 10 investment projects in Russia for the total amount of US$ 987 million. They support Russia's efforts to raise financial literacy and delivery of housing and communal services, develop treasury and customs, and foster modernization of a hydro-meteorological system and judicial reform implementation.

The Bank's "knowledge services" – including reimbursable technical assistance – cover a wide range of activities that are well aligned with Russia's own development challenges, including human development, social assistance, public private partnerships, and capacity-building for official development assistance. Periodic Russian Economic Reports provide analysis on public expenditures, professional education and skills, poverty reduction, and other topics.

Since 2007, the World Bank Group has provided Government-endorsed reimbursable technical assistance to more than 30 of Russia's sub-national governments.

Partners

In Russia, the Bank is working with government counterparts at the federal, regional, and sub-regional levels. It also works in close cooperation with other multilateral institutions, such as the International Monetary Fund (IMF), the Eurasian Development Bank (EDB), the European Union (EU), the European Bank for Reconstruction and Development (EBRD), and the World Health Organization (WHO). The Bank also partners with bilateral agencies, including DFID, and technical partners, including NGOs.

The WBG fosters partnerships with leading Russian universities and academia, and continues to support Russia's growing and varied civil society in its public-private partnership roles.

An example of partnership is the CPS consultations with the major stakeholders, which brought together: 42 federal representatives and seven local governments; over 60 participants from more than 40 different civil society and business communities, think tanks, academia, and other stakeholders from eight regions of Russia; and more than 30 researches representing about 20 different think tanks and stakeholder agencies.

Moving Forward

The Bank's 2012-2016 Country Partnership Strategy will support Russia's efforts to:

• Increase growth, modernization, and diversification through better management of public finances, improved investment climate and innovation, a stronger financial sector, better infrastructure, and more effective protection of the environment.
• Expand human potential by strengthening skills and social services through improvements in the quality and efficiency of education, health, and social protection, including the pension system.
• Deepen Russia's global and regional role related to Russia's efforts as a provider of assistance to less developed countries and the provision of global public goods.
• Improve governance and transparency through more accountability and better service standards in public administration, procurement, and financial management (as a cross-cutting theme).

The Bank is setting up a CPS implementation and results monitoring system to track progress in its contributions towards achieving the country outcomes defined in the CPS results framework. This review process will also provide inputs for the planned CPS Progress Report in 2014, when adjustments in the CPS results framework would be made, if considered necessary.

Beneficiaries

"Establishing personal contacts between the Department of Regulatory Impact Assessment, leading western experts, and representatives of Russia's business community has set the stage for new initiatives and projects," said Mikhail Pryadilnikov, Coordinator of regulatory impact assessment projects under the World Bank/DFID Program for Governance Reform in Russia. " It has helped bridge the gap between Russian and European government regulatory institutions, and helped foreign investors get a better understanding of business conditions in Russia."

"We have constantly felt support from the World Bank Program and very much appreciate its help in our work on improving quality of public services," said Maxim Parshin, Deputy Director of the Department of State Regulation in Economy of the Ministry of Economic Development. "We do hope that our cooperation with the World Bank will continue."