Public policy in support of mobility and the case of

Russia Northern Restructuring Project

Government of Hungary – World Bank Conference on

Social Inclusion in Eastern Europe and Central AsiaBudapest, September 2007

Andrei R. MarkovThe World Bank

amarkov@worldbank.org

This presentation The rationale of public policy for

mobility in ECA: Economic reform related considerations; Extreme case of the Russia North.

Main features of the Northern Restructuring project

NRP results and outcomes Lessons for mobility/migration support

policy

Public policy for increased mobility in ECA – Why?

Correct the legacy of inefficient spatial distribution of settlements and population generated by command economy

Permit labor inflow to primary urban aglomerations associated with increased economic growth

Reduce high barriers to mobility: Information (on jobs, housing) is scarce and costly; Housing and rental markets underdeveloped; Private sector mobility support rare (while movement is

cash intensive process). Address social dislocation and exclusion

associated with increased mobility (take care of immobile groups)

Russia Northern economic development – a case for inefficient spatial allocation

Massive case of Northern subsidization (up to 4,7% of annual Soviet GDP)

Growth of Russia Northern Population, particularly in urban fully fledged settlements

Increase of the “Cost of Cold” - Temperature per capita went down leading to increased costs of GDP production

Russia became “colder” from min 11.6 to 12.6 C in 1930-1990

Canada became “warmer” from min10 to min 9 C in 1930-1990

Economically “excessive” population in Siberia 10-15.7 mlns by econometric calculations (up to 1/3)

Economic shock of the 1990-s and the Russian North

Market liberalization of 1992, elimination of unaffordable subsidization and industrial contraction of 20 to 55% ;

Spontaneous contraction of the Northern population Most resourceful, skilled and mobile left. Sharp increase of pensioners’ share in the population

Imbalance of municipal budgets, increased pressure on social and municipal infrastructure;

Reduced access to services and interruptions in supplies because of budget and capacity constraints;

Major increase in number of Northern population seeking public support for out-migration from the North (up to 800000).

Net Migration in the Russian Far North, 1979-2005

Net Migration in the Russian Far North, 1979-2005

-250,000

-200,000

-150,000

-100,000

-50,000

0

50,000

100,000

150,000

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005

Perestroika period

Price liberalization,economic reforms

Northern Restructuring project($80 mln, effective 2002)

Dual Mission: Improve sustainability of municipal budgets Facilitate out-migration of socially vulnerable groups

Main principles: Subsidize voluntary out-migration from three Northern

municipalities, reduce barriers for mobility, generate savings out of reduced population.

Main project components: Migration allowances issued through certificates; Information system on housing in the “Mainland”; Information and PR campaign; TA for infrastructure consolidation and HCS management

reform.

NRP - Geographic dimension

NRP – Vorkuta case

NRP- outputs

4527 households (10028 people) migrated from the North

Housing information system in place/ push to real estate market development

600000 sq. M of consolidated housing Complete reorganization of Susuman district

(from large permanent population to seasonal+core sceleton population)

Isolated Settlements closure in Vorkuta (Promishlennij, Maldijak, etc).

NRP- economic results Consolidated budget savings:

$9.5 mln from out-migration; $12.6 mln from infrastructure consolidation; Project full cost recovery – less than 5 years.

Reduced federal budget obligations for out-migration support

Improved efficiency of service delivery in the North (HCS unit costs reduced by 14.5%)

Improved quality and access to social and HCS services in the North

Improved coverage of population by targeted social assistance from 4 to 15 % of households

NRP – lessons for public policy

Understand the linkage of mobility and economic development;

Identify “natural” migration directions Be aware of “push” and “pull” factors

Reduce barriers to migration Prevent clustering of migrants in recipient

localities Voluntary participation in migration programs Be aware of immobile groups – address their

needs through other means Social monitoring, program redesign and

operational feedback are KEY to success

Thank you