Republic of TatarstanThe City of Kazan

Michal Rutkowski The World Bank Country Director

The Russian Federation

The World Bank: Moving Closer to Russia’s Regions

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Presentation Outline

1. Russia’s Development Challenges

2. The World Bank Group in Russia

3. 2012-2016: The New Country Partnership Strategy for Russia (CPS)

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1. Russia’s Development Challenges• Russia’s Economic Outlook• Constraints to Growth and Diversification• Challenges for Skills and Social Services• Governance Challenges

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Russia’s Economic Outlook and Policy Challenges

* Conditions in global financial markets have improved during the first quarter of 2012 after several months of heightened uncertainty. But global recovery remains fragile.

* Russia’s economy is expected to grow in the range of 3.5-4 percent in 2012, depending on oil prices and the rate of recovery in global demand.

* The balance of payments position is expected to deteriorate in 2012, while capital flows are likely to remain volatile, reflecting remaining global uncertainties.

* Aggregate unemployment is expected to remain under 7 percent but as the economic activity returns to pre-crisis level, further reduction in unemployment and poverty will be slow.

* Russia may also face fiscal pressure, if the prices for its main commodity exports decline due to a slowdown in global demand.

* To reduce fiscal vulnerability, Russia needs to exercise fiscal restraint and to rebuild fiscal buffers while oil prices are still high.

* Russia needs to establish a new growth model that addresses two critical challenges: increasing the competitiveness of the economy; and coping with demographic change.

Constraints to Growth and Diversification

Dependency on fossil fuel production and export – a dominant concern

Low level of technology and knowledge

Huge variations among regions

Weak business environment

Weaknesses in the financial system

Infrastructure constraints

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Challenges for Skills and Social Services

Vulnerability to poverty remains a concern

Low fertility, high adult mortality and morbidity rates

Skill mismatches in the labor market

Inequality and social exclusion

Regional disparities in development and living standards

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Governance Challenges

Excessive and often ineffective regulation

Corruption seen as an obstacle for growth

The judiciary viewed as weak

Disparity among the regions

Low efficiency of public services

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The Word Bank Principles of Engagement with Russia

>> Global Knowledge and Innovation

>> Focus on Results

>> Flexibility and Selectivity

>> Timeliness/ Fast Response

>> Coordinated WBG Support

2012-2016 CPS Engagement Areas

Increasing Growth and

Diversification

Management of public finances

Investment climate/innovation

Financial sector development

Sustainable development and

effective protection of the environment

Expanding Human

Potential

Education, health, and social protection

Skills for economic development

Socially inclusive development

Deepening Russia’s

Global Role

Global public goods

Russia as a donor

Improving Governance

and Transparency

Public administration,

procurement, and financial

management

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2012-2016 CPS Choice of Instruments

- AAA – ESW, TA

- Reimbursable TA, Fee-Based Services

- Investment Lending – SIL, FIL, TA

- Results-Based Lending (if approved)

- Sub-national lending (direct or through intermediary)

- Guarantees

- “Virtual” Lending (project services without lending)

2012-2016 CPS Levels of Engagement

Global

Regional

Federal

Sub-national

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Regional Focus: Overview

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1. Russia’s Regions: Diversity of Challenges

2. The World Bank Group: Activities and Instruments

Russia’s Regions: Diversity of Challenges

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Regional Human Development Indicators

Russia’s Regions: Diversity of Challenges

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Some regions are experiencing very high unemployment rates

with attendant social risks

Tatarstan Republic

Astrakhan oblast

Kaliningrad oblast

Republic North Osetia-Alania

Kurgan oblast

Altai Republic

Kabardino-Balkaria Republic

Tyva Republic

Ingush Republic

0 5 10 15 20 25 30 35 40 45 50

Unemployment in Tatarstan Republic is below Russian average

Unemployment, %, average for November - January 2012

Source: Rosstat.

Enhanced Focus on Sub-national Level

Lending instruments to reach regions • IFC Sub-national Financing (no sovereign

guarantee)• IBRD Financial Intermediary Loans (FILs)• IBRD Direct Lending (with sovereign guarantee)• (conditions apply, e.g. fiscal situation)

TA support for less advanced regions• Possible federal government/IBRD fund to finance

analytical/advisory work in poor regions

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The World Bank Group: Activities and Instruments

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Lending Products for Regions • IBRD Flexible Loans

― Require federal intermediary or sovereign guarantee― Long maturities up to 30 years― Competitive and flexible pricing in USD

The World Bank Group: Activities and Instruments

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Providing Finance and Advice

The World Bank Group: Activities and Instruments

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Knowledge Products for Regions

• Analytical and Advisory Activities (AAA)e.g. Studies on

- Doing Business in Russia 2009 - Monocities - Regional Development and

Growth Agglomeration- Social Expenditures

•Reimbursable Technical Assistance (RTA)- More than 20 RTAs completed- Current RTAs in regions:

Education (Kazan, Yakutia)Health (Kirov)Urban Transport (Moscow, St. Petersburg)Investment Climate (Moscow)Doing Business (30 regions)

www.worldbank.org/russia

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