TEN YEARS OF INTEGRATION TO THE GLOBAL WORLD:

THE CASE OF NIZHNY NOVGOROD’S INTERNATIONAL ADJUSTMENT

Andrey S.Makarychev

Nizhny Novgorod Linguistic University

International Policy Fellow, OSI, Budapest

Policy Paper

February 2001

1. Presentation of the Issue

Studying the case of Nizhny Novgorod oblast (NNO) as a regional actor in wider international context is worthwhile for different reasons. First, this region was a closed area till 1991 due to heavy militarization of its industry in the Soviet times. The whole decade of 1990s was the period of gradual adjustment of the regional elites and institutions to the international environment. NNO started to reclaim its historical reputation as the commercial “pocket of Russia”.

Secondly, during 1990s the region experienced two different patterns of governance: the first one, explicitly liberal and innovative, was associated with its first post-Soviet governor Boris Nemtsov, while the second one, much more conservative and traditional, was put into practice under the governorship of Ivan Skliarov. Under Boris Nemtsov NNO became a laboratory of economic reform, working closely with the World Bank, its International Finance Corporation, British Know How Fund, US Peace Corps, International Executive Service Corps, Citizens Democracy Corps, Eurasia Foundation and numerous Western NGOs on privatisation and economic reforms. Transitions from the closed region to one of the regional pioneers of market reforms and later on to the “post-Nemtsov” times give us a good chance to trace the evolution of NNO from the viewpoint of both domestic and foreign policies.

Thirdly, a number of politicians from Nizhny Novgorod were promoted from 1997 to the federal government. Sergey Kirienko (former prime minister in 1998) and Boris Nemtsov (leader of the Union of Right Wing Forces party which finished fourth in 1999 parliamentary election) are the two most prominent of them.

Fourthly, in May 2000 Nizhny Novgorod was selected by President Vladimir Putin as the center of newly created Volga Federal District, one of seven in the country. This made NNO political credentials distinctive from the neighbouring regions. Nizhny Novgorod as the “capital” of VFD got a new chance for becoming one of locomotives of Russia’s transition. New models of governance experimentally are being elaborated here, new ways of anti-crisis solutions are looked for.

Fifthly, not much unfortunately was written in the West about international relations of this region. In 1999 the Institute for Advanced Studies in Vienna ranged NNO as the third region in Russia in terms of political risk for investors, only after Moscow and St. Petersburg. NNO received the following marks (out of 10): 6 in “continuity of the regional voter preferences”, 6 in “fragmentation of the regional political spectrum”, 6 in “organization and power of the radical political parties”, 5 in “presence of the strong interest groups”, 3 in “legislative stability and proper implementation of treaties”, 2 in “state ownership in the economy”, 5 in “support of foreign trade”, 4 in “regional tax policy”, 5 in “crime rate”[1].

Kathryn Stonner-Weiss, one of few Western scholars studying the region, recognized that many Western institutions were able to achieve greater success in NNO than in other provinces of Russia. Yet at the same time she couldn’t find any convincing sociological arguments to prove the hypothesis that people of NNO are greater supporters of radical economic reforms or possess of more visible “democratic culture”. What is more, she found that electoral activity of NNO population – one of key element of democratic culture - was lower in comparison to other regions of the central part of Russia[2].

World Bank study of 1999 distinguishes such characteristics of Nizhny Novgorod as one of highest price rates in the Volga region, and relatively low percentage of small enterprises per thousand residents. NNO and Tatarstan are main recipients of foreign investment per capita, and also showed the highest regional output by joint ventures among their neighbours. NNO is one of those Volga regions with highest real social wage, where the purchasing power of low income groups was significantly increased. NNO was also reported as the region where official statistics and documents were difficult to obtain[3].

What is missing in these papers is the account of domestic mechanisms fostering or inhibiting region’s adaptation to the global milieu, analysis of main actors and institutions operating in the area of region’s foreign relation, and assessment of potential of each of them. My attempt in this paper is to extend the expertise of NNO international participation to these new issues, discuss basic problems existing in this field, and try to describe some perspectives for the nearest future. Apart from studying official documents, statistics, and regional media I have also conducted a series of expert surveys which gave important sense of attitudes and perceptions of both regional and international experts regarding the issues under consideration[4].

2. NNO in Wider Regional Context

2.1. NNO and the Federal Government

The power-sharing Agreement between the administration of NNO and the federal government of June 1996 confirmed the oblast’s right to operate as a participant of international and foreign economic relations, both individually and representing the federal government, unless this participation contradicts the federal legislation. NNO has the right to conclude treaties and agreements with territorial units and ministries of foreign countries provided that they are overseen by federal authorities.

According to additional June 1996 agreement between the Russian government and the administration of NNO oblast, the latter is committed to render assistance to the military enterprises located within its territory. The federal government basing on the solicitation of oblast administration, decides on whether the military plants and factories should get the right to have their own contacts in the foreign military markets.

There is a number of federal institutions in NNO dealing with foreign relations. For example, one of them is the local branch of “Roszarubezhtsentr”, organization whose mission is to foster and facilitate economic cooperation between local enterprises and foreign partners.

Economically, NNO is located in the group of regions with middle level of development, according to the Ministry of Economic Development & Trade. It is estimated that by 2003 seven out of twelve indicators of economic development will be worsened.

Here are the basic indicators of current situation:

	Investment per capita, RUR thousands	Foreign commerce turnover per capita, USD	Percentage of small enterprises employees	Unemployment rate	Density rate of highways
Russia average	4,41	572,78	11,89	2,5	11,4
NNO	3,46	247,75	13,61	1,6	23,8

Forecast for 2003 looks as follows[5]:

	Investment per capita, RUR thousands	Foreign commerce turnover per capita, USD	Percentage of small enterprises employees	Unemployment rate	Density rate of highways
Russia average	14,21	885,5	14,12	2,2	12
NNO	7,72	420,3	14,87	1,2	26,4

2.2. NNO and Volga Federal District

Nizhny Novgorod is eager to become political epicenter of the Volga Federal District. Yet the road to integration within VFD is not an easy one.

The Report to the President issued by Sergey Kirienko’s think tank in fall 2000 accused the regional governors in forming the economic climate suitable for a rather limited number of “proxies” (especially those enterprises with largest rate of export revenues), granting special immunities and privileges to them, establishing red-tape hierarchies, erecting barriers for free movement of goods, introducing “administrative taxation” for business operators, giving budget subsidies to insolvent and inefficient enterprises, and other protection measures incompatible with integration to the global world. Strategies of survival of the regions in international arena are chiefly related to either arms export (the perspective which is based on maintaining international conflicts and arms race), or raw material export. Neither of the regional governments proved to be capable of turning into organizational, intellectual, or financial leaders within the framework of concrete international projects. As a result, there was a “revolt of capital” which was quick to protest against troublesome administrative restrictions and tough regulations by running away from the regional governments. The number of depressive regions have increased after the August 1998 meltdown, while the aggregate role of the regions in elaborating nation’s strategic priorities has decreased. In this sense one may assume that the regional governments neglected the new spatial design of the global world in which the shapes of the market forces don’t coincide with the administrative borders, and failed to adequately react to the most essential international challenges[6].

However it is still undetermined in what capacity the new federal districts would participate in the global world. Even within Kremlin there is no clarity with regard to the new structure of regional powers. One year after Putin’s reform there is still no consensus among policy makers as to its long-term effects. Federal districts are still in search for their both domestic and international identities.

3. Domestic Actors of Globalization and Their Institutional Performance

We now switch to looking at those institutional actors that are heavily involved in international networks and move forward the globalization process at the regional level.

3.1. Regional Administration

3.1.1. Legal resources. The Law “On International and Interregional Agreements of NNO” was adopted in 1995. It states that:

- NNO as autonomous participant of international processes has the right to conclude agreements with administrative and territorial units of foreign states, or with an international organization;

- In the areas of joint responsibility of regional and central governments the administration of NNO negotiates with the federal center the perspectives of international agreements. In case of federal center’s refusal to approve the agreement drafted by the administration of NNO, the later might take the case to the Constitutional Court;

- Both the administration of NNO and Legislative Assembly are empowered to sign international agreements. The approval from the part of the Legislative Assembly is required if the agreement under consideration necessitates passing new laws, involves the issues of loans, credits, or leasing natural resources and realty in possession of the state;

- Any legally registered organization in NNO (enterprises, social institutions, NGOs, parties, etc.) has the right to initiate the procedure of concluding international agreements. Solicitations are to be considered by either executive or legislative bodies, which take the decision on starting negotiations with foreign partners[7].

In 1996 the NNO Legislative Assembly adopted the Law on Guarantees for Private Investments. According to this law, the NNO organs of both executive and legislative powers are able:

- to set up preferential tax rates, temporary regional tax exemptions, tax withdrawals. Yet only projects above USD 1 million might qualify;

- to provide preferential loans and loan warranties. The Regional Legislative Assembly by its decree specified that these loans in no way should exceed 2,5% of the budget expenditures;

- to provide conversion of the regional budget’s debts to investors into securities with a discount possibility. The truth is that this is a lengthy procedure since it necessitates registration of the emission in the Ministry of Finances with subsequent updates in the regional budget;

- to provide non-financial services, such as state orders on favourable conditions, assistance in creating business infrastructure, renting land and purchasing non-housing buildings;

- to provide customs privileges. However formally this issue falls into the competencies of the federal authorities, and the regional administration is in a position only to solicit those privileges.

The legal guarantees include:

- provision of non-spreading the actions of regional acts worsening investment conditions, within the period of 3 years from the date of signing investment contract (applicable only to private investors);

- state registration of investors’ rights for realty that legally fastens the property rights.

The property guarantees include:

- reimbursement to investors omitted profits and losses incurred by non-legal actions or intertness of officers of the regional bodies;

- provision of investors’ commitments by property and money means.

Sources of regional guarantees’ provision are:

- regional budget means;

- assets of regional non-budget funds;

- realty and other property of the region.

In 2000 two new legal acts were adopted - Law “On State Support of Investment Activities in Nizhny Novgorod Oblast” and Decree of NNO administration “On Procedures of Signing, Registration, and Accounting of Investment Agreements”. Both stipulate that regional tax privileges are applicable to those investment projects with RUR 5 million of initial investment and RUR 25 million of follow-up funding. Privileges include not only partial tax relieve but also better conditions for leasing the land and realty, purchasing shares of state-owned enterprises, etc.[8]

Yet despite those advantages there are some reservations regarding NNO legislation in the area of foreign investments. Their critique basically touches upon the issue of preferences toward specific investors. In fact, NNO legislation grants tax privileges to investors based on several criteria[9].

First, it matters in which industry funds are invested, and how much. The NNO Legislative Assembly had lifted duties to the military equipment produced for exportation[10]. In 1997, it had also passed legislation providing tax benefits for manufacturers of automobiles and assembly parts, with investments of not less than USD 20 million and USD 5 million respectively. In 1998 investment projects in food industry were tax exempted provided that investment capital reaches the amount of RUR 6 million. Glass manufacturers might also take advantages of the regional Law of 1999 provided that the investment funds are equivalent to USD 65 million or more for the period of five years. In October 2000 the oblast Prosecutor have made formal warning stating that this Law is in conflict with the federal legislation[11].

Secondly, the NNO legislation grants preferences to those investors with the government’s shares not exceeding 25%. Those preferences are not guaranteed if the investor starts performing other functions (supplier, retailer, etc.)

Another controversial idea born to incite foreign investments and technologies was to set up free economic zones, basically for those enterprises that go through military reconversion procedures. This gave the start to the creation of the so called Territorial Production Zones (TPZ) with simplified regime of commercial, monetary, fiscal and customs regulations. The idea was given by Grigory Yavlinsky’s think tank “EPICenter” in 1993 as a part of the program of technical and scientific capacity building in the region[12]. Its realization became feasible when the Russian government in January 1995 issued the decree “On Investment Tax Credit for Several Enterprises of NNO”. Few days later NNO administration started its practical implementation[13].

The advantages of TPZs were:

- For the period of 5 years, provision of an annual investment tax credit for the sums transacted to the Federal budget and cashed in accordance with the law;

- exemption from profit, value added and property taxes, the regional road fund, and part of the excise duties paid to the regional budget;

- exemption from taxes paid to the city budget and to the district where the TPZ is located;

- decrease in payment of public utilities;

- a possibility of accelerated depreciation rates of equipment and building;

- substantial customs privileges.

In particular, using TPZ legislation, the State Customs Committee was in a position to issue temporary licenses for constructing and maintaining the “free storages” for those enterprises that were parts of TPZs (mostly these were defense industry plants like “Lazur”, “Saliut”, Petrovsky factory formerly funded by the federal government). Nizhny Novgorod Customs Department was also empowered to introduce temporary rules facilitating taxation of TPZs participants[14].

In a similar way, the Investment Zone of the closed administrative territory Sarov was established in 1997. Enterprises registered in this zone get up to 75% exemption from budget payments. In 1998 the enterprise for producing diamonds and brilliants was established in Sarov.

The TPZs and the “investment zones” were a response to the failure of the federal reconversion program. Yet from the very beginning their implementation was resisted by regional tax authorities. Finally, at the end of 1990s local legislators officially put under question the advantages of these “zones”, arguing that high expectations of the past years were miscalculated, and that the free zones do not fuel the growth of the regional economy. The regional budget is said to loose RUR 260 million due to Sarov zone, which was called “a hole in regional economics”[15]. Actually the TPZ advantages are given to a specific plant or factory only for a period from 1,5 to 3 years on the basis of achieved economic outcomes[16].

3.1.2. Institutional resources. According to the Charter of NNO, it is the Regional Legislative Assembly that is in charge of approving the programs of economic development, introducing tax and tariffs benefits, determining the conditions of issuing regional loans. Yet in practice these affairs were predominantly decided by NNO administration[17].

Within the structure of the NNO administration there are two units in charge of international cooperation: the Department of International Contacts and the Department of Foreign Economic Contacts & Resources. This division roughly corresponds to that one between the Ministry of Foreign Affairs of the Russian Federation and the Ministry for Foreign Economic Cooperation. Interdepartmental Board on Foreign Economic Activities was established in 1998. The problem is that there is no sufficient clarity in sharing roles and responsibilities between these organs, which creates functional overlapping and bureaucratic impediments.

Regional administration is also in charge of humanitarian issues related to foreign contacts. Thus, Adoption Sector of the Department of Education has important prerogatives in regulating the process of adoption of local orphans by foreign citizens (creation of regional database, registration of foreign applicants, allowing adoption of those children who were not requested by Russian citizens within five months, monitoring post-adoption reports)[18].

The region’s administration created also a number of independent (though patronized by official authorities) institutions to foster international cooperation. These include:

- Regional Investment Promotion Agency, 1996;

- Regional Development Agency, 1997. This institution was financed from the budget of the Russian – Dutch Technical Assistance Program;

- Regional Center for Volunteer Certification which deals with solving technical issues facilitating the access of NNO products to the foreign markets[19];

- Center for Business Information which provides access to information resources worldwide;

- “PRINT” Institute which facilitates an access to international markets for local technologies and know how,

- Regional Agency for International Technical Assistance, mostly working on TACIS-sponsored projects[20];

- Association of Participants of International Internships which promotes those young professionals with experience in studying and working abroad[21];

- “Applied Inter-science” institute which is in charge of promoting internationally local high tech products.

3.1.3. Transport infrastructure.

NNO is a part of TACIS-sponsored program of integrating this region into one of European transportation corridors (Berlin - Warsaw - Minsk - Moscow - Nizhny Novgorod, with possible extension to Kazan’ and Ekaternburg). To implement the project it would be necessary within nearest five years to upgrade container terminal, reshuffle of communication system, overhaul of railways, build up a new customs check point and create a new information network. According to estimation, the sum of about USD 20 million is needed[22].

3.1.4. Political resources.

In terms of political regime, we find a somehow “hybrid” situation in regions such as NNO. We observe here competition between different actors, but the outcomes of political rivalries are to a significant degree shaped by the so-called “administrative resources”. It means that either the federal center interferes into the sphere of regional politics using administrative tools, and supporting in one way or another some political actors and marginalizing others, or regional leaders apply their administrative capital for achieving their political goals.

Transition from liberal and pro-Western to “patrimonial” and protectionist regime (from Boris Nemtsov to Ivan Skliarov) was relatively easy here. Sergey Barzilov’s characterization of certain provincial leaders in terms of the advent of “village guys” with their rural mentality running against modernization, is quite applicable to Ivan Skliarov’s governorship.

One major reason for this lies in the way power is organized in the region. Regional officials may be different in their political orientation and attitudes, but most of them were quick to establish their own “patronage networks” based on personal connections, rather than on a formal institutional setting. In this respect, the relationship between power and business can constitute a major obstacle for NNO drive towards structural changes and cooperation with international institutions.

Elections as one of universal democratic instrument is not a panacea: “in nascent democracies… there is a danger that the winners in early elections will structure institutions to their own advantages, or subvert democracy altogether”[23]. Also important to note that in Nizhny Novgorod under Nemtsov the region’s economic advancement was very much linked to regional administration. As soon as the governor steps down, “the mechanisms that have brought the region to its point could go with him”[24].

At the same time, there are some institutional limitations for regional autarky: thus, Ivan Skliarov who is usually referred to as self-minded ruler prone to non-democratic solutions, had to play by democratic (at least procedurally) rules in the parliamentary election of December 1999 as one of the founders of “Fatherland – All Russia” block.

3.2. Municipal Authorities

The full-fledged system of self-government in the city of Nizhny Novgorod (CNN) was established rather lately – in autumn 1998 when Yurii Lebedev was elected the mayor of the city. Before that there was a lot of uncertainty with the mayor’s post and powers: the first chief executive of CNN was fired by the President because of the conflict between him and the governor. Then it was a brief period of the mayorship of Ivan Skliarov who was completely controllable by the governor, and when Skliarov himself became the regional chief executive, he was succeeded in the top of the city administration by Andrey Klimentiev who immediately in the aftermath of the election was accused in financial wrongdoings and jailed. Yurii Lebedev’s predecessors didn’t show high profile in international issues, with some rare exceptions like former mayor Dmitry Bedniakov’s contract with the “Khuri Enterprises, Inc.” to become the first U.S.-based company to open its fast food restaurant in CNN[25].

CNN administration had the legal right to sign investment agreements with foreign companies and conduct a variety of other international-related activities. The main body in charge of contacts with foreign partners in the CNN administration is the Department of Interregional & International Relations. Among its tasks are:

- coordination of international plans between administrative units of the city administration and municipal districts;

- increasing of the export potential of the city manufacturers;

- assisting those city enterprises that produce import substituting goods;

- facilitating all issues related to issuing visas and providing foreign partners with duly prepared invitations[26].

In 1999 the CNN administration hired former Director of the International Relations Departments at NNO administration Igor Maskaev to become the representative of the city in Moscow. His duties include conducting negotiations with international organizations interested in working in Nizhny Novgorod[27].

Some structural changes were introduced in the sphere of foreign relations. The Agency for Economic Development was established within the city administration, and the proposals to grant tax relieves for investors were introduced to the City Duma.

The CNN administration was the first administrative unit to react to drastic decrease of foreign tourists coming to the city. The Office of Tourism in the CNN administration launched a new program aimed at increasing the attractiveness of the city to foreign visitors. Certification of excursion guides and special vehicles, establishment of the City Center of Hospitality, launching a new project “Gifts from the Pocket of Russia” and other initiatives are underway[28]. In July 2000 CNN mayor Yurii Lebedev announced the forthcoming privatisation of three major hotels in the downtown.

In a less formal way, the mayor of CNN started the practice of meeting with the Club of Foreign Residents of Nizhny Novgorod that unites business people and educators living in this area. Meetings with the representatives of foreign communities (Vietnamese, Korean, Azeri) were also convened.

CNN is the participant of trilateral cooperation project “Local Democratic Network” involving also Bologna (Italy) and Tampere (Finland) within the framework of the “Twinned Cities” program administered by TACIS. The project commenced in 1999 was one of 19 supported applications out of 60 candidates. It is aimed at upgrading information networks in CNN and opening here several public offices with free access to the city databases, and educational retraining. The budget of the project is USD 120 million[29].

Based on existing “twinning” experience, CNN mayor Yurii Lebedev in June 2000 signed another trilateral agreement – between CNN, Tampere and Essen. It will focus on municipal management, water supply system, environment protection, sports and youth policy[30]. Private companies, as well as EU funds will be involved[31]. Twinned relations were established as well with Linz (Austria), Brno (Czech Republic), Hampshire country (Great Britain), though with much less efficacy.

The CNN administration works with the Eurasia Foundation on updating the system of social services. In the cultural spheres, CNN administration signed an agreement with Goethe Institute implying popularising the German arts in Nizhny Novgorod. Architectural exposition of the CNN was also held in Tampere. CNN administration is in close touch with the Soros Foundation which funds the project of increasing Internet access to several districts of the city[32].

Yurii Lebedev was criticized in the local media for paying too much attention to international projects at the expense of dealing with local problems, yet this criticism is a good indication of the changes occurred within municipal power. The challenges of globalization make the CNN administration to jealously monitor the city’s image abroad. In August 2000 the mayor of CNN pledged to file a legal suit against British newspaper Sunday Times which published an article claiming that “Nizhny Novgorod is at the forefront of … a return to medieval vigilante patrols and punishment” referring to the alleged practice of putting on public display thieves and drug addicts[33].

The expert survey conducted for this study showed that comparing NNO and CNN in terms of the development of the resources for international activities, the experts (both local and international) were almost unanimous in giving the priority to CNN. The largest gap between the region and its main city was recorded in the development of supporting service (hotels, telecommunication facilities, etc.). All other indicators - institutional and administrative resources, implementation of international agreements, Internet-based marketing strategies, intensity of external social contacts (sport, tourism, exchange programs), participation in international trade, investment attractiveness, and direct contacts with foreign NGOs - also gave clear advantage to the CNN.

Yurii Lebedev’s administration from the very beginning was determined to position itself autonomously vis-а-vis the oblast authorities. Nonetheless it is not that easy to determine the demarcation line between the powers of regional and municipal administrations. Thus, the investment agreement with the “Spring Investments” group regarding the construction of the hotel in Nizhny Novgorod downtown was co-signed by both regional and city authorities. The case raised much controversy since the agreement was unilaterally abrogated by the NNO governor[34]. In contrast to the position taken by the governor Ivan Skliarov, CNN mayor Yurii Lebedev pledged to keep building the hotel and honour the rights of investors, thus stressing that foreign entrepreneurs should make a distinction between the leaders of the city and those of the oblast[35]. Nonetheless the CNN still lacks much needed investment attractiveness, and many promising international projects are being delayed due to insufficient tax incentives and lack of political guarantees, the fact that was publicly recognized by the Director of the Agency for Economic Development of Nizhny Novgorod Roman Vvedensky in August 2000.

Another widely resonated story shedding some light on regional – municipal relations was the purchase of 24 second hand “MAN” buses by the CNN mayor[36]. The deal concluded during Yurii Lebedev’s visit to Munich and Frankfurt in spring 2000, immediately provoked harsh criticism in the region, since non-electric public transportation falls into the jurisdiction of NNO administration. Consequently, the CNN Duma refused to vote for corroborating financial guarantees to this contract in the form of “Sberbank” loan arguing that the mayor should have spent these funds for buying new local buses produced by Pavlovo factory. The city legislators were also claiming that the CNN administration cut the deal with the “MAN” company without prior consultations with experts or announcing any sort of public tender[37]. Another problem was custom duties which the federal government refused to lift. Under these circumstances, the CNN administration was severely criticized for the perspective of cancelling all preferential and “social” rates while using the German buses, since the monies spent ought to be returned as soon as possible.

Debates about CNN - “MAN” commercial deal raised a number of important issues ranging from raising competitive advantages of Pavlovo buses to defending the local market from foreign automobile producers eager to create in the region the whole network of car-related facilities (including technical services, spare parts, gas stations, etc.)[38]. This story is also an instructive illustration of interrelatedness of all levels of political institutions in Russia each of them having its say in international policy: municipal, regional, federal and foreign actors were directly involved in decision making process and had to interact with each other.

It is also worthwhile mentioning that political confrontation with NNO administration have led to huge financial problems for CNN. Its budget for 2001 was cut from RUR 6,3 milliard to 2,2 milliard which might have deplorable consequences for the whole city.

Apart from the CNN, it is interesting as well that the city of Bor which has also the status of local self-government unit, in 1998 became the Russia’s leader in terms of incoming foreign capital: according to the statistics, there was about 1 million USD of foreign investments per capita (in comparison to average 14 USD per capita in NNO). “Glaverbel”, “Parmalat”, “Tudor”, “Europe Foods GB”, “Balta”, “DHAL Leipzig” and other major Western European companies have invested or established their joint ventures in Bor[39].

Vladimir Ivanov, the head of Bor administration, explained this phenomenal success by two reasons. First, the local self-government is committed to relieve foreign businessmen from dealing directly with numerous supervising red-tape institutions like offices of sanitary and environmental control. In case of possible claims from them the Bor administration pledges not to involve investors and not to harm their interests. Secondly, prior to signing investment contract the Bor administration lobbied the decision of the NNO Legislative Assembly to offer 5-years no-interest credit to investor, should the changes in federal legislation require more payments in taxes[40].

3.3. Individual Enterprises

About 72% of the enterprises located in NNO are in private property. There are 642 companies with foreign capital in NNO. The total number of institutions involved in international trade and commerce in the region is 1192[41].

It was Nizhny Novgorod where the first privatisation auctions in Russia were held. In 1993, the EBRD chose the NNO to pioneer its Small Business Lending Program. In 1997 a post-privatization pilot project designed by the World Bank and funded principally by British Know How Fund was launched.

Modern financial instruments are being increasingly used by local banks. The most recent example came from NBD Bank which now is logged in ANELIKN and TransCHEQ systems.

The following table illustrates the dynamics of NNO international trade in the last four years (all figures are in millions of USD).

	1997	1998	1999
Export	951,7	687,8	916
Import	629,9	462,8	274
Saldo	322	225	600

3.4. Media

Media - as a part of the “knowledge market” (“market of ideas”) - is an important actor in terms of integration of the regions into the world communication structures and adapting the dominating norms and standards of the “information society”. Media is an important actor of the market of telecommunication and information technologies and services which increasingly becomes global. Regional and municipal institutions have their say in developing local communication markets and establishing their rules.

Media is also important for developing civil society institutions and the middle class in the regions which is one of major prerequisites for projecting onto Russia the worldwide norms of democracy, pluralism and open society. Thanks to media civic institutions become more important political actors and obtain wider opportunities for influencing the decision making in such areas as ecology, human rights, anti-corruption policy, etc.

The local media market is dominated by outlets adhering to liberal (65%) or centrist views. Only 20% of newspapers are controlled by regional authorities[42]. Nonetheless the assessments of information openness of NNO are rather modest. According to the study of Public Expertise Project, the region’s index of the freedom of the access to information is as low as 38%, index of the dissemination of information is as low as 22,4%[43].

Actually about 20 thousand residents of NNO regularly use the e-mail, and more that 7 thousand work with Internet[44]. In June 2000 American Intel Corporation started from Nizhny Novgorod its series of workshops aimed at expanding the scope of e-commerce in Russia[45].

In the communication sector, “Nizhegorodsviazinform” in cooperation with the American company “US West” established a joint stock company to carry out installation and handling of digital cellular communication systems of GSM standard. Another considerable project in this sector was implemented by “Nizhny Novgorod Information Network”, 26% shares of which belong to the British investment fund “Flamington”.

NIS Company of Nizhny Novgorod had signed cooperation agreement with iDirect company of USA to upgrade communication channels and create Internet Stock Exchange. Projects with several American companies (APV Capital Management. I.L.A Group, Metromedia) are under consideration[46]. NIS was contracted by Boris Nemtsov who is in charge of implementing joint project with Soros Foundation aimed at providing Internet access to secondary schools, hospitals, libraries and museums[47].

Media coverage is important for international advertising of the region’s resources as well. Some regions widely use media publicity for strengthening their international credentials. Thus, Nikolay Petrov and Alexei Titkov deem that NNO, along with some other Russian regions, is one of regional newsmakers in Russia. Among the most important newsmaking factors they call widely known reputation of the head of the region. At the same time other events, including the negative ones, are important for media community - political conflicts (between regional authorities or between region and the federal center), sensational results of election, corruption scandals, failures to honor international obligations[48]. In general, according to “Versia” weekly report of February 2001, NNO belongs to the group of those regions with highest level of media conflictuality[49].

International exchanges in media are indispensable since they help to attract more resources to this sphere and have “demonstration effect”. It is in Russia’s interests to support the efforts of international organizations dealing with communication flows, information security, and media. However there are many hurdles for globalization of local information markets:

n there are numerous restrictions for free circulation of information. Regional bureaucrats and “old-style managers” are reluctant to provide media outlets with information referring to secrecy, public safety, fear of criticism, etc. Glasnost Defense Foundation had uncovered numerous cases of undue limitation of access of journalist to vital information (selective invitations to attend important meetings, refusal to submit sensitive data to media community, administrative control, etc.) Meanwhile, information hidden by authorities and public servants might be crucial for investors, foreign partners, etc. Internet is weakly used as a means of debating problems of business and entrepreneurship.

n the information culture of the citizens is rather low. The demand for high-level information services in the regions is still rather law (there is more interest to sensational information than to media analysis). What is more, the vulgarization of regionalist ideology have led to ignorance of and lack of attention to international information in the regions.

n information infrastructure is still underdeveloped, there is a deficit of qualified specialists in media business, information management, etc.

3.5. Universities and Academia

Universities and Academia possess their own resource base for becoming globally oriented institutions. Firstly, many Universities are islands of free political discourse and agents of liberal thinking. This makes Universities very important actors in Russian provinces. As Raymond Struyk pointed out, their goals extend well beyond those of a conventional educational institute; “these organizations often wish to become actively involved in policy prescription and in program implementation and evaluation”[50].

Second, Universities are gateways to the cyberworld. The Open Society Institute paid for establishing 33 Internet centers in non-central Universities all across Russia, including that one in Nizhny Novgorod.

Third, cooperation with foreign partners makes Russian provincial Universities more independent – from Ministries and regional authorities – in financial terms owing to grants and technical resources. From 1999 the Soros Foundations runs “Megaproject” which lays the foundations for networking liaisons between leading Moscow universities and their regional partners. Nizhny Novgorod University takes part in this project.

Fourth, many NNO Universities were capable of establishing joint degree programs with their counterparts from the West. This is an important measure to prevent brain drain and form a new generation of Russian regional leaders.

Fifth, projecting and adapting foreign models and principles is important. Educational marketing, creating Boards of Trustees, introduction of new specializations (like ecological management, human resources development, organizational behavior, public relations, and others), flexible tuition fee policies – all this is part of the Universities’ strategy for survival and development.

All these efforts are undoubtedly geared towards integration of local Universities and think tanks into the international academic community. However there are certain hurdles in this area.

First, the procedure of assessing and evaluating existing programs sometimes is very formalized. Foreign donors usually require figures, often at the expense of the content of the change. Allen Kassof commented that “much of the American response to the new situation had been of a technocratic nature, with a pragmatic ‘fix-it’ mentality that has been applied in the past to Third-World countries[51]

Second, foreign sponsors tend to rely too heavily on local institutions in distributing funds and controlling projects implementation. The practice shows that there is no guarantee that the administrators of Russian institutions in charge of funds distribution operate as impartial actors – corporate solidarity, clan structures within the academic community and group collisions do matter. Usually, Western partners disregard the negative role of University bureaucracy. It is common practice for example that American grant-making institutions refrain from participation in selecting exchange students from regional Universities to be sent to the USA.

Third, the creation of regional branches of international institutions without clear functions and roles turns into wastage of resources. This fact is well illustrated by regional Soros foundation office in Nizhny Novgorod.

Fourth, the practice of distributing funds beyond formal grant competitions might create an impression of “special relations” between certain grant-making institutions and its Russian recipient. This practice could be based on pre-existing contacts or personal sympathies, but by and large it has a negative impact on the image of Western institutions.

4. Foreign Actors and Their Projects

Statistically speaking, NNO maintains economic cooperation with 188 countries of the world. Its export contains mechanical engineering and machine-building goods (28,3%), wood processing products (20,2%), oil and chemical products (16,8%), energy (14,4%), metals (4,8%), glass (0,72%), etc. Mainly export goes to Western countries (71%) - Germany, Switzerland, Hungary, USA and Turkey.

NNO imports basically mechanical engineering and machine-building goods (29,8%), oil and chemical products (15%), metal products (13,7%), food raw materials (10,9%), wood processing products (5%). Again, major partners are Germany, France, USA, Italy and Great Britain. Nord Rhein Westphalia lander and Flanders province opened their offices in Nizhny Novgorod.

What we see in these figures is that the most developed countries prevail in financial and economic transactions of NNO. According to the oblast’s Department for External Economic Relations, the most dynamic international projects implemented in NNO are those financed by:

n PSO program (the Netherlands), with total investment of USD 16,5 million (agricultural projects, city lighting upgrade in the city of Dzerzhinsk, environmental purification systems, etc.);

n “Glaverbel” company (Belgium) in Bor glass factory, with total investment of USD 15 million;

n FIAT corporation (Italy) in “Nizhegorodmotors” joint venture (USD 9,3 million);

n TACIS program of the EU (USD 6 million) aimed at upgrading transport infrastructure[52].

In general, foreign institutions are motivated not only by making money but even to a greater extent by fostering structural reforms of Russian corporate actors. The EBRD had openly declared that among the purposes of its investments in Russian industrial enterprises (basically regional ones) were restructuring “natural monopolies” (basically in those sectors dealing with natural resources like oil and gas) and the car-manufacturing industry. The EBRD also stated that it will support only those Russian clients that adhere to high standards of corporate management and practice honest business practices.

Much efforts of the foreign institutions is devoted to business consulting and information management. Swisscontact foundation supports, for instance, the Morozov Project named after Russian pre-revolutionary philantropist and entrepreneur. Among its priorities are business education, professional communication for small and medium-size business, business administration[53]. Within the framework of ISCRA project London Business School and Know How Foundation provide training for top managers of those companies from Nizhny Novgorod that pursue far-reaching international strategies[54]. European Bank for Reconstruction & Development launched the project of small and medium banking credits for local enterprises.

Among most promising projects in humanitarian areas are Japanese investments in rebuilding of the Comedy Theater in Nizhny Novgorod, aid to “Gematologia” Foundation from the province of Lombardia, and others[55].

Among CIS members Ukraine is the most important partner with 14,1% of all trade turnover. Belarus (with 7,5%) and Kazakhstan (4,9%) are significantly less important, ranging approximately as countries of Eastern Europe[56].

To sum up, we see a set of “agents of globalization” in the region each having their own resources and strategies. These actors do closely interact and communicate with each other. Their international projects are not isolated – rather they complement each other: private investment are unthinkable without financial services, industrial projects are incorporated into cooperation agreements between the regions or international programs of financial or technical assistance.

5. Scope of the Problems of International Cooperation at the Regional Level: Communication Analysis

International contacts is one of those spheres where the NNO administration is being severely criticized. Thus, Boris Nemtsov, the vice speaker of the State Duma and former NNO governor, in February 2000 said that 2 million UDS of foreign investments – which constitute only 0,38% of all foreign monies invested in Russia – is a “shame” for regional administration. Though the Department of Foreign Economic Contacts of NNO administration anticipates from 90 to 100 million USD in investments in the year 2000, in financial terms, export of NNO products (paper, chemical material, etc.) prevails over importation.

There are still multiple reasons for critique.

5.1. The first set of problems is due to the gaps between local and foreign business and commercial standards. For example, there is only law firm in Nizhny Novgorod specializing in international law[57]. The same goes for facilities: there is only one hotel (strangely enough located far away from the down town) which corresponds to highest international standards.

5.2. The second problem deals with marketing and selling the merchandise produced by NNO enterprises in cooperation with foreign partners. The trouble here is that the use of foreign technologies and material raises the production price (especially after August 1998 financial crisis in Russia). Thus, Pavlovo bus plant (being one of beneficiaries of the European bonds) experiences dramatic difficulties with selling the buses assembled with “Volvo” parts.

Similarly, “Nizhegorod Motors” had to raise up to 70% the proportion of the assembling parts for new cars to be produced jointly with FIAT which means the lowering of prices up to 6 thousand USD, in comparison to initially planned 17 thousand USD[58]. Relatively low prices already attributed to GAZ cars informal nickname “the death of Volkswagen”. Nonetheless GAZ problems are multiple: there is still 65 million USD debt to the EBRD, the dealers’ network is both corrupted and insolvent, and the license for duty-free customs storage was revoked as a retaliation for huge (USD 12 million and RUR 80 million) debts for the customs operations. Some predict “inevitable financial and technological collapse” of GAZ and its subsequent closure[59].

To lower expenditures and production costs, some enterprises with foreign capital have to reconsider its personnel policy. There were not yet mass scale lockouts or labour cuts, yet the issue of possible unemployment is being discussed in Nizhny Novgorod[60].

Dutch scholar Andre Mommen notes the lack of confidence of foreign investors in Russian production facilities and outlets and finds inadequate the tempo of modernization of Nizhny Novgorod industrial enterprises. In his view, dragging on with launching new GAZ – FIAT joint venture is a problem, because in the meantime Western firms already developed new models with lower emission norms, lower fuel consumption, etc. That cars will compete on price, not on quality. This proves that Russian regions trusting on this kind of outlets will live stormy weather again[61].

GAZ problems is a good illustration of close interdependence of domestic and international issues. To compete internationally, GAZ needs restructuring. Profitableness of “GAZ” is about 4%, which is a disaster in international terms[62]. It was estimated that for the sake of efficiency from 20 to 30 thousand from 110 thousand of GAZ employees have to be dismissed[63]. GAZ is also financially in charge of huge housing area and supporting facilities, which has to be transferred to the municipal budget. Both problems are of obvious social background.

Another problem is low quality standards of local production. For example, GAZ minibuses lack emergency exits and reinforced frame between the floor and the roof, which is a serious shortcoming for international markets[64]. In result, “GAZ” is loosing competition and market. “GAZ”’s failure to become strong international actor have led to increasing expansion to NNO car-building market of major Russian companies - “Sibal”, “Alfa”, “Severstal”[65].

5.3. The third problem lays in the sphere of politization of financial and economic projects. This was the case in Autumn 1999 when governor Ivan Skliarov trying to escape from accusations in mismanaging the Eurobonds presented this issue as a political one blaming his predecessor Boris Nemtsov and his colleague (also of Nizhny Novgorod origin) Sergey Kirienko who was the prime minister at the time of August 1998 financial crash.

Another, and even more telling example, was Ivan Skliarov’s decision to block the construction of four-star hotel in Nizhny Novgorod downtown arguing that archaeologists discovered at this site remnants of medieval tombs. The head of Russian Orthodox Church in NNO, as well as different nationalist groups, supported the governor’s demands, and the issue received high-profile coverage in the local media. Foreign investors were dissatisfied and insisted on continuing the construction under initially negotiated conditions, threatening to take the issue to the courts. Finally the governor failed to prove that the “force major” clause might be applicable to the issue, yet the contract was terminated and foreign investors left the region.

5.4. The fourth - and related - problem is foreign policy perceptions of the regional elites. Attitudes to the whole set of globalization issues are quite diverse among policy makers in NNO. On the one hand, NNO has already positioned itself (mainly due to Boris Nemtsov’s governorship) as an international actor. Besides, the economic rationale pushes regional decision makers to get adjusted to the challenges of globalization by searching for foreign investments, offering new opportunities for international business and advertising the region’s possibilities internationally.

On the other hand, as local policy analyst Ivan Yudintsev suggests, NNO “is still surrounded by a kind of ideological barrier, a sort of psychological iron curtain”[66]. Some foreign visitors concede that NNO “looks more isolated from the outside world than Moscow and St.Petersburg”[67].

A number of reasons might explain these troubles. First, in public speeches of NNO high administrators one can easily find lots of inadequate, outdated and sometimes messy perceptions of the realities of international relations. For example, in vice governor Alexander Batyrev’s words, “Lithuania is leaning towards Russia and is ready to come back to Russia”. Being asked about his assessments of the electoral success of the Freedom Party in Austria in February 2000, he interpreted it as an attempt to “play the Russian card” and “distance Austria from Russia”[68].

Second, communist conservatism, nationalist feelings and reservations about the West are deeply rooted in the mentality of certain groups regional elites. This is how the State Duma deputy and former director of Nizhny Novgorod Chamber for Trade & Commerce Gennady Khodyrev exposes his attitudes to the United States: “Yes, we are much more clever than they are. We know ourselves what to do. Americans are miserable. They have a couple of bucks instead of eyes, and a piece of gold instead of the heart. What should we discuss together?”[69]. Another member of the State Duma from Nizhny Novgorod Nikolay Benediktov is known for his extreme anti-semitism and negativism with regard to IMF and foreign NGOs working in Russia.

Some NNO representatives in the State Duma stick to clear-cut nationalistic vision of foreign policy issues. Thus, 3 out of 8 members of the lower chamber representing NNO voted against SALT-2 ratification in April 2000, labelling the treaty as “the tragic mistake” that would make Russia a “country of wild pacifists”[70].

Nationalist components of the regional political discourse were boosted during the war in Chechnia and Russia’s isolation in Europe. Vadim Bulavinov, a member of the Russian delegation at the PACE Session in Strasbourg where Russia was accused in excessive application of military force and its membership in PACE was frozen, explained this reaction from the West as “silent revenge” of former USSR satellites and “interference to our domestic affairs”. Similar assessments dominated in NNO media covering the conciliatory position towards Chechnia taken by the Nizhny Novgorod Human Rights Association and its attempts to form in NNO the Society of Russian – Chechenian Friendship. Local human right activists were accused in working mainly for the foreign audience[71].

It is not that rare to find anti-Western philippics in the regional mass media. Thus, one of notorious local journalists Vadim Andriukhin repeatedly questions the intentions of international NGO working in NNO, misrepresenting them as “intelligence units” searching for classified information under the legend of scholarly survey or poll research[72]. Some academic publications – including those ones of the Nizhny Novgorod State University which is paradoxically the regional resource center of the Soros Foundation – extensively reproduce negative images and suspicions in regard to the West[73].

The NNO governor Ivan Skliarov himself sticks to the same track. In his speech before the Second Congress of the Russian Regionalist Studies in September 1999, he linked directly the autonomy of local self-government with the foreign influences alluding that the concepts of grass-roots democracy might be imported to Russia “with a purpose”.

Anti-semitism feelings might be also encountered in Nizhny Novgorod political discourse. Those, in May 2000 the media widely covered the statement of Vladimir Torin, the press secretary of the NNO Legislative Assembly Chairman, arguing that the governor “Skliarov’s advantage is that he is ethnically Russian, while Sergey Kirienko has troublesome uncertainties about his religion and ethnicity” (an allusion to Jewish roots of the former prime minister). In a similar way Mr.Torin declared that in Nizhny Novgorod “the bankers are very well recruited from a certain Middle Eastern nationality”[74].

One can also see multiple misperceptions among the directors of state-owned enterprises with regard to the West. According to one of major Russia’s businessmen Kakha Bendukidze, “many industrialists here naively believe that they are going to compete with each other. Nowadays, in the era of proliferation of global companies, it is funny listen people speaking about exceptionality of a certain territory. I am always told here in Nizhny that the oblast administration needs to rule and control everything, but this is unreasonable”[75].

The same idea was shared by Russian economist Igor Lipsit lecturing in Nizhny Novgorod. In his words, from 60 to 65 percent of the directors of state-owned plants and factories treat investments as mere funding or as a credit. “These directors are eager to get these monies without changing the structure of the property, since they are reluctant to share their powers within their enterprises. This is the source of all conflicts emerging immediately when the investors try to participate in managing the property”[76].

Suspiciousness towards foreign business became evident in June 2000 in the aftermath of NTV Channel comments on deteriorating ecological problems in Dzerzhinsk, the second city of NNO in terms of population and the home to major chemistry producers[77]. The mayor of Dzerzhinsk Sergey Trofimov explained negative TV coverage by the desire of foreign competitors to spoil the image of the city and to block further investments to its chemical industry. NNO administration has supported this interpretation and denounced “the information attack” sponsored from abroad[78]. NNO media has also reproduced this reasoning to accuse foreign countries in industrial espionage and stealing secrets from Dzerzhinsk enterprises.

All this questions the assumption that regional elite operates as rational actor in building overseas communications with the international community. There is still much room for unjustified fears and isolationist sentiments in policy making circles of NNO, the fact that hampers region’s switch-over to globalization.

5.5. The fifth problem is crime. Among high-profile stories were the murder in 1996 of the director of Bor glass factory Vladimir Maximov and scandalous arrest in 2000 of the president of Nizhny Novgorod Association of Unesco clubs Olga Chechulina. Andrey Klimentiev, one of Nizhny Novgorod tycoons with business interests in Norway, was jailed in 1998 for fraud and extortion. GAZ dealers network is also highly criminalized, according to law enforcement reports of 1999-2000.

Expert survey data might well complement our findings given above. Two groups of experts - local and international ones - were asked to range the significance of the main obstacles impeding foreign relations at the regional level in Nizhny Novgorod. The outcomes are presented in the table below.

	*Local Experts*	*Foreign Experts*
1	Imperfection of the legal base for foreign economic relations	Imperfection of the legal base for foreign economic relations
2	Regional bureaucracy	Regional bureaucracy
3	Scarce development of regional information infrastructure	Inadequate accounting system in Russia
4	Barriers for Russian export in foreign countries	Crime and corruption in the region
5	Geopolitical ambitions of the federal center	Scarce development of regional information infrastructure
6	Crime and corruption in the region	Underdevelopment of transport facilities in the region
7	Inadequate accounting system in Russia	Deficit of resources in the region
8	Underdevelopment of transport facilities in the region	Geopolitical ambitions of the federal center
9	Cultural dissimilarities between Russia and foreign nations	Barriers for Russian export in foreign countries
10	Deficit of resources in the region	“Fast money” strategy of foreign companies operating in the region
11	“Fast money” strategy of foreign companies operating in the region	Cultural dissimilarities between Russia and foreign nations

It is obvious from this table that the two groups were unanimous in drawing attention to legal imperfections and red-tape problem as major inhibitions for successful globalization of the region. Foreign experts are more concerned with the resource base for international operations than their local counterparts, yet both groups recognize that this is not a top problem. Interestingly enough that despite much debated “East-West” cultural gaps, foreign interviewees don’t put much attention to this matter (locals are a bit more serious about it yet not significantly). Foreigners are more sensitive to inadequacies of the Russian accounting practices, while the locals tend to lower this issue in the list of their priorities. At the same time, local experts do believe that barriers for Russian export in foreign countries count and matter, while international respondents are more sceptical in this issue. Foreign experts also turned out to be more tolerant to geopolitical ambitions of the central government, but more critical to the state of regional transportation networks..

6. Implementation Issues and Recommendations

Despite multiple obstacles and impediments, globalization does change a lot in the region: the way the political relations are organized, the structure of business enterprises, as well as the social milieu. Without international cooperation it would be impossible to introduce new advanced standards for production, run ecological management programs, develop charity initiatives, advance new banking technologies, and so forth.

Yet globalization had double-faced effect on the region. At one hand, it weakened the capacity of administrative and bureaucratic institutions in the regions to supervise economic development. Interestingly enough, these were private Russian companies - trans-regional and trans-national in fact - that took control over “industrial giants” of NNO (“GAZ” and “Red Sormovo” factories purchased by major Russian tycoons Oleg Deripaska and Kakha Bendukidze). This is a good indication that in domestic market those financial and industrial groups owned by Russians might win the competition with foreign capital.

Not accidentally, these are the largest enterprises that were acquired by “outsiders” and face drastic restructuring in increasingly competitive business environment. The advent of “outsiders” signals “partial liberation of capital from the concerns” of administrative bodies[79]. The capital has more room to make its own decisions in its own interests.

At another hand, the challenges of globalization provoked an administrative response from the federal center in the form of seven federal districts. There are good chances that NNO will gain certain economic advantages from its political centrality within VFD.

At the same time, the problem is that the West lacks a clear strategy towards Russia in general and its regions in particular. Many foreign donors seem to have “more money than ideas”[80]. Some experts claim that in many fields of technical assistance there is no serious and comprehensive analysis of the work done by foreign institutions and its effectiveness. No comprehensive account of failures was accomplished so far, mainly because of the fear that such a report might provoke harsh criticism in the West and question the basic political and ideological assumptions of Western engagement. Legal reform is a telling case in point. Referring to Steven Holmes, “thus far, foreign legal advice to Russia has not done that country much good... The assistance community has failed to come to grips with the obstacles inhibiting the rule of law in Russia... Ironically, assistance programs have been undermining trust building. Typically, donor aid has the effect of peeling elites away from serving society by pressuring them to act in the interests of the donor in order to secure future funds”[81].

As there is no clear strategy, it comes to no surprise that there is also a lack of coordination between Western grant-making agencies and centers. In the opinion of Marten van Heuven, “intergovernmental organizations are poor cousins to bilateral contacts in implementing engagement with Russia. The West will continue to face the challenge of having to coordinate bilateral and intergovernmental channels to fashion an effective pattern of engagement with Russia... Without that, the array of presently available intergovernmental venues will only aggravate the lack of clarity as to Western means and objectives”[82].

Implications for the West

1. Foreign institutions should not treat regions (especially as pivotal as NNO) as unitary actors - which is usually the case when it comes to analysis of relationship between the center and regions, or between regions themselves. Deeper comprehension of region’s international actorship is needed, to include more profound look at different intra-regional “agents of globalization” such as industrial enterprises, banks, NGOs, media, municipal authorities, and so forth. Each of them pursue individual strategies of switching to the global world and therefore should be tackled differently.

2. Most of the foreign business, financial and commercial institutions operated in NNO face the problem of expanding their social horizons. It seems that their sphere of interest is overwhelmingly circumscribed by rather narrow professionally oriented circles of entrepreneurs, bankers, traders, etc. Unfortunately there are too few examples of effective and thoughtful public relations and media strategies implemented by foreign firms and companies in NNO. Lack of due publicity and clarity in articulating their strategic goals in the region worsens the public perceptions and attitudes towards foreign institutions and forms misperceptions of these institutions as exclusive clubs of self-interest, elite-driven and reluctant to make social commitments. Foreign actors have to be more explicit about their possibilities, explaining their methods, resources and tools as applicable to the region. This pro-active PR strategy might help in overcoming negative myths and stereotypes about globalization in the region. Foreign journalists and policy analysts could more frequently come to NNO and publicly discuss the issues of globalization in wider audiences (students, teachers, artists, writers, parties activists, social workers, NGO leaders, etc.).

3. Many of international institutions in NNO do not still use their potential and advantages to the full scale. For example, local Soros Foundation office, the British Council, the American Center in the Linguistic University, Unesco-funded structures, Peace Corps branch could switch from merely information units to region-wide cultural and social institutions integrating different social and professional interests in various fields of regional life (education, environment, volunteering, gender issues, fundraising, campaigning, etc.) Potentials of local alumni of numerous international exchange programs and the Association of Foreign Residents in NNO are still underestimated and need to be recalled for the sake of bringing new expertise in regional reforms.

4. The road to globalization should not be paved exclusively by regional or municipal administrators. To activate the involvement of wider social and professional layers in international exchanges and networks, it would be helpful if foreign governments insist on including different non-governmental groups in NNO delegations coming to various international forums (presentations, seminars, exhibitions, etc.). This will contribute to the process of opening new international perspectives for local NGOs.

5. Sergey Kirienko as the most liberal and pro-democratic of all heads of the federal districts merits international support and special treatment. He is undoubtedly committed to reforms aimed at creating business-friendly environment in VFD. Kirienko’s efforts to integrate the VFD regions on market principles are worth of all possible intellectual, technical, organizational and other forms of international assistance. It is politically important to get positive feedback from international community in the initial period of creating new institutional structures in the federal district. Such issues as spatial development, subnational integration, inter-ethnic relations, borders and security, and others might be debated and tackled together by ad-hoc task forces of both local and international specialists.

Some possible alternative scenarios of future development of NNO as a part of VFD are represented in the table below.

*Scenarios*	*Implications for NNO*	*International Implications*
1. Consolidation within VFD	NNO becomes politically the core region of VFD, and maintains leadership in top-priority economic areas (chemical industry, communication technologies development, car-building, defense production, etc.). In a long-term perspective NNO might start competing with other centers of federal districts for political influence in the federation and distribution of resources among the districts.	VFD strengthens its international actorship oriented both to the West and the East (Kazakhstan, Caspian Sea countries). The bulk of regions comprising the district will have to lower their international profiles.
2. VFD as a loose decentralized alliance of different regions with several competing regional centers of influence	NNO as one of several “gravitational poles” in VFD competes with its neighbors (especially Tatarstan, Samara and Saratov oblasts) in transportation, oil processing, and other areas. VFD fails to turn into a unified political and economic actor.	Domestic competition between the regions will be complemented by a rivalry for foreign credits and investments, as well as international reputation
3. Further centralization of the political process and reimposition of unitarism (with possible residuals of some formal federalist procedures)	Federal districts lose their importance. NNO deals directly with the federal government in solving the most pressing issues of budget, infrastructure upgrade, energy supplies, etc.	The shape of foreign economic relations of NNO will be basically decided in Moscow.