st.petersburg: yesterday, today, · pdf fileof doing business (as well as russia as a whole)...

ST.PETERSBURG:

YESTERDAY, TODAY,

TOMORROW

Kuznetsova Natalia

Professor of the faculty of Economics

St.Petersburg State University

Main issues 1. Historic preview

2. Conditions and factor of socio-economic

development of Petersburg

2.1 Competitive advantages of St.Petersburg

2.2. Restrictions of St.Petersburg economic

development

Industrial organization development

Foreign companies in St.Petersburg

How to do business in St.Petersburg

3 Socio-economic Development of St.Petersburg

Scenarios

4 St.Petersburg Mission And Functions

11/28/2013 2 Kuznetsova Natalia

St.Petersburg:yesterday,today,tomorrow

Historic preview-general information

St. Petersburg is the second largest city, a major seaport and a Federal City of the Russian Federation. The city, often described as the most Western city of Russia, is located in northwestern Russia on the delta of the Neva river at the eastern shore of the Finland Gulf - a part of the Baltic Sea. The city, is one of the main cultural centers of Russia and its historic central district is today an UNESCO World Heritage site. St. Petersburg was the capital of Russia from 1712 until the Russian 1917 October Revolution. Today the city has a population of about 5 million inhabitants living in its metropolitan area.



http://www.nationsonline.org/oneworld/russia.htm

Location of St.Petersburg in Europe



http://blog.otel.com/wp-content/uploads/2010/07/607px-Map_of_St._Petersburg.png

General information

That is the old plan-

map of St.Petersburg

with the main parts of

the city done by the

first architect of

St.Petersburg Petr

Eropkin (1698-1740)

who was the first to

get European special

education in Italy and

conducted the general

plan of St.Petersburg,



http://www.mapmarket.ru/files/f.2011.01.08.14.38.13..1.jpg

Historic preview

St. Petersburg was

founded by Peter the

Great in 1703 who

moved the capital of

Russia from Moscow

to St.Petersburg as a

first port opening the

country to Europe. It

is titled the cradle of

three Russian

revolutions (1905,

1917, 1918) 11/28/2013 6

Kuznetsova Natalia St.Petersburg:yesterday,today,tomorrow

http://www.lonelyplanet.com/maps/europe/russia/

http://www.lonelyplanet.com/maps/europe/russia/

Main historical data of St.Petersburg history. Periods of

Emperors Romanovs’ ruling+Soviet+Russian periods.

Modernization without Enlightenment(G. H. von Wright)

• Peter I (Great) 1703-

1725 (6-th Russian tsar)

• Catherine I 1725-1727

• Peter II 1727-1730

• Anna Ioannovna 1730-

1740

• Elisabeth I1741-1761

• Peter III 1761-1762

• Catherine II (Great)

1762-1796

• Paul I 1796-1801

• Alexandr I1801-1825

• Nikolaj I1825-1855

• Alexandr II1855-1881

• Alexandr III 1881-1894

• Nikolaj II 1894-1917

• USSR1917-1991

• Russia 1991-2013



http://www.spb-rf.ru/istoriya_spb_1703.htm














































































Modernization without enlightenment in Russia

• Any attempts of modernization and reforms in Russia were replaced by recoil back and counter reforms that coincides with long 50-years Kondratieff waves (Rjazanov V.T.)

• 1720 - modernization of Peter the Great.

• 1770 - Ekaterina II modernization

• 1820 – Alexander's I modernization

• 1870 – Alexander's II modernization

• 1920 – Lenin - Stalin's modernization

• 1990 – modernization Gorbachev – Eltzin - Putin

Why?

Rjazanov V.T. " Economic development of Russia” St.Petersburg., 1998



Contemporary Map of St.Petersburg



http://www.lonelyplanet.com/destinationRedirector?openMap=true&ethylCobjId=9029

Soviet history of Leningrad St.Petersburg was renamed thrice – in 1914 into

Petrograd and in 1924 – after the death of Lenin – to

Leningrad in 1991 –back to St.Petersburg

After the 1917 revolution Petrograd-Leningrad

developed as the second center of industrial

(presumable military) development having about 3000

industrial enterprises



Soviet history of Leningrad between wars

Leningrad by the end of the 30-th had 18 research

institutions specialized in the R&D in the military

investigations

Before the WWII Leningrad and Leningrad oblast

occupied the second place according the enterprise’s

concentration under the conduct of the Ministry of

Defense - 38 factories (17,3% of the total), in Moscow

and Moscow oblast - 68 enterprises (31%), region of

Ural, Siberia and Far East 30 enterprises(13,6%),

Ukraine 26 (11,3%) .



War industrial history of Leningrad

In the beginning of the war Leningrad was severely

bombed, was at the siege during 900 days, MIC

enterprises were evacuated to Ural, Siberia and Far

East.In spite of that through the period of 1942-1943

Leningrad industry gave the Army 836 new tanks,

renovated 1346 tanks, 150 of heavy naval guns, more

than 4.5 thousand guns for Red Army infantry, more

than 12 thousand machine and hand guns, more than

200000 machine-guns, famous “Katusha” rockets,

millions of artillery shells and mines, detonators,

radios, telephones,etc. Leningrad shipbuilders built

407 and repaired 850 ships. I.V.Bistrova (2006) «Soviet MIC: problems of development(1930-1980 гг.)»

«Soviet MIC: from Stalin to Khrushchev” (2000) London



Soviet history of Leningrad

• By the end of Soviet era Leningrad

acquired about 50% of the Soviet

innovational potential being a locomotive

of Economic growth and a second best

center of the Soviet education



2. CONDITIONS AND FACTOR OF SOCIO-ECONOMIC

DEVELOPMENT OF ST.PETERSBURG Competitive advantages

of St.Petersburg

St. Petersburg is a leader among the Russian regions

according to the Regional Index of competitiveness

(RCI), which reflects the actual implementation of the

seven factors of competition: markets, institutions ,

labor , scientific , natural and capital resources (in the

form of financial and fixed capital). This index is based

on 138 primary indicators consistently integrated into

seven partial indices based on comparisons with their

average regional values (Table 1).



Table 1 Competition ratings of “growth poles”

Top-7 St.P – 5. St.P. aglomeration - 2



2.1 Competitive advantages of

St.Petersburg

• According to RCI index we can identify seven

top regions - the " growth poles " , which form

the most significant contribution to the socio -

economic development of Russia : Moscow ,

Moscow region , Tatarstan, Sverdlovsk Region ,

St. Petersburg, Krasnodar and Krasnoyarsk

Territory ( Figure 1).



Figure 1. St.Petersburg RCI Position



2.1 Competitive advantages of St.P

• St. Petersburg is a leader both in the integral

index , and in the most part of individual indices.

• Comparative competitive advantages of St.

Petersburg, triggering it to the highest position

among other Russian regions by index RCI, are:

a large domestic market , active position in

foreign markets , transport infrastructure , the

development of education, information and

communication, innovation and technology, the

large tourist resources, good residential

provision.



2.1 Competitive advantages of St.P

• However, international comparisons show

another picture (Figure 2.). St.Petersburg takes

a position above the average according to the

indicators: the quality of life, the quality and

efficiency of infrastructure, the level of innovation

it occupies the second (from five) place among

other groups of world-known cities. But in terms

of doing business (as well as Russia as a whole)

St. Petersburg is positioned at the bottom of the

list , and even among Russian cities

St.Petersburg is lagging behind.



Fig.2. St.P in 2thinknow rating. Cities of innovations 2012-2013



2.1.2 Competitive advantages of St.P

• Comparative analysis of the place of St.

Petersburg in the Russian and international

rankings of cities and regions in terms of quality

and standard of living, quality of infrastructure,

ease of starting and running a business,

innovation index are shown in Table 2.



Table 2. St.P position in Russian and International ratings Rating title Rating discription St.Petersburg position

Mercer Quality of Living Sur- vey – World- wide Rankings 2012

Quality of Living ranking:460 cities of the world.

163 (from 460)

Economist In- telligence Unit Rating (2012)

Quality of Living in the 70 cities of the world

28 (from 70)

Mercer City Infrastructure Ranking 2012

Quality of Infrastructure Ranking : 460 cities of the world

160(from 460)

2thinknow: Innovation Cit- ies Global Index 2012-2013

Innovational potential rating 445 cities of the world

84 (from 445)

Forbes: 30 Best Russian cities for business development 2012

30 Best Russian cities for business development

29 (from 30)

Doing Business in Russia in 2012

30 best Russian cities for doing business

22 (from 30)



2.2 Restrictions of economic development 2.2.1 Labor resources The shortage of labor, (clearly felt from the beginning of 2000s), has become in

St. Petersburg a serious limit of economic growth.

The shortage of labor resources is defined by serious imbalance in the labor

market - the inconsistency between qualitative and quantitative parameters

of the labor supply and labor demand. There occurred a serious weakening

of links between the labor market and vocational training.

The number of educational institutions of primary vocational education and the

number of students in them has decreased in 4 times. At the same time

hypertrophic growth was observed in the higher educational institutions –

universities the number of which increased in 2 times.

Hence! St. Petersburg enterprises are experiencing a serious shortage in

working professions and technicians specialists and essential polarization of

wages according to the industry (Figure 3).



Figure 3. Wage differentiation in different

industries



2.2 Restrictions of economic development 2.2.1 Labor resources

In 2000 the number of unemployed (by the ILO methodology See

Figure 4) exceed the demand for workers in 2.8 times, by the

middle of the first decade of the XXI century one observes a

reverse situation: the number of vacancies has increased . In

2011, 51 thousand unemployed was accompanied by 58.5

thousand job vacancies. By the end of 2012 demand for

workers increased to 65.8 thousand jobs. The most acute

shortages are in industry, construction, transport, trade, housing

and utilities, and in some social sectors. Labor shortages are

covered in St. Petersburg by immigration of workers from other

regions of Russia, first of all, from a nearby Leningrad region,

as well as from foreign countries, mainly from the CIS. The

number of foreign workers in St. Petersburg, has increased

from 6.2 thousand people in 2000 to 147.3 in 2011.



Figure 4.Unemployment rate in St.P



2.2 Restrictions of economic development 2.2.2 Investments

• In 2009-2012 investment performance was unstable. In

comparison with the crisis 2009 the volume of attracted fixed

capital investment in 3 years (2010-2012) fell by 9.1 % (in

comparable prices of 2009). The volume of construction

decreased over the same period by 3.5 %. In 2012, the volume

index of investment in fixed assets in St. Petersburg was 92.6

% , while in Russia as a whole - 106,6 %, in the North- West

Federal District - 101.5 % , the Leningrad region - 100 8 %. The

level of investment in fixed assets per capita fell from 72.8

thousand rubles in 2011 to 69.9 thousand rubles. According to

this indicator in 2012 St. Petersburg is inferior to all leading

Russian regions.

11/28/2013 27



The comparison of investment projects with a total investment of

over 50 million rubles investment activity in the North-West

Federal District (2012) shows that St. Petersburg’s indicators

are 2 times lower than in the Leningrad region (number of new

projects - 8 to 16). A major problem is the extremely low share

of foreign direct investment flowing into the economy of St.

Petersburg. Total foreign investment into the St. Petersburg

financial sector in 2012 amounted 10.8 billion dollars. The

share of foreign direct investment in 2012 fell to 8.3 %. Increase

in the share of foreign direct investment remains an urgent task

for the city.




The current decline in investment activity is explained by the

1.general economic market conditions and, in particular, by

2.the conservative policies of major investors who have to

carry out the adjustment of the risk assessment. However, the

investment pause is associated not only with the uncertainty of

the economic situation in the country, but also with the

3.revision of city investment policy priorities in which a

number of major projects was suspended. Regulatory

uncertainty combined with the complexities of obtaining town

planning consents, connection to the engineering and energy

infrastructure, rising costs of building materials reinforce the

investment activity decline and disparities in industrial

organization dynamics (Figure 5).



Figure 5 Production volume in different industries



2.2 Restrictions of economic development 2.2.3 Engineering, energy-power and transport

infrastructure

The economic development of St. Petersburg is

constrained by high costs on the access of built (and

reconstructed) objects to engineering and energy

infrastructure. In general, the city keeps the balance of

power and the connected load on the electrical

system, heating, water and sanitation and gas supply.

However, in some parts of perspective building

construction reserve capacity for certain types of

resources is either unavailable or will be expired soon.




infrastructure

This situation is caused by insufficient power sources (power

centers), or the lack of transmission and distribution

networks necessary to transmit power to the regions of

promising residential, public, business and industrial

development. In particular, the development of new residential,

public, business and industrial area northwestern and northern

parts of St. Petersburg may be limited by the depletion of

reserves of electric and thermal power.Expansion of power

engineering and energy infrastructure is constrained by a lack

of funding, which is largely a consequence of the low growth

rates of tariffs on energy and utility resources over the last few

years.Another limiting factor is the high level of wear and tear

of fixed assets of energy and utilities sector. This leads to high

accident rate of energy supply systems in St. Petersburg.




infrastructure

• The development of St. Petersburg transport infrastructure

lags behind the growth in freight and passenger traffic as well

as current and future transportation needs. The transport

network has practically exhausted its capacity, resulting time

and cost increase for transport and growth of negative effect on

the environment and public health.

• The problems of transport infrastructure functioning are

compounded by the non-optimal nature of the accommodation

allocation on the territory of the city, bad type of residential,

public and business and industrial zones mixture location.

Plans for new residential areas, industrial, retail and storage

areas are weakly linked to the project of engineering, transport

and energy infrastructure St. Petersburg development. 11/28/2013 33


2.2 Restrictions of economic development 2.2.4 Territory

St. Petersburg is characterized by a high

level of the territorial provision. The area

of Saint Petersburg is 1.4 thousand

square kms. In comparison to the other

Russian and world metropolitan areas St.

Petersburg has low population density and

territorial development reserves chances.

The density of St.Petersburg population is

3.5 thousand people. per 1 sq.km.



2.2 Restrictions of economic development 2.2.4 Territory

• However, in St. Petersburg more acute shortage of developed

engineering areas for growth. Such situation is determined by

the inefficient structure of land use. For example, residential

land and public and business buildings occupy only about 16 %

of the territory of St. Petersburg. Residential zones and public

and business buildings are surrounded by large areas of

industrial, communications and agricultural purposes , many of

which are used ineffectively .

• The limited resources of the territorial development leads to an

increase in the transfer of economic activity ( both existing and

potential) of St. Petersburg in the adjoining districts of the

Leningrad region. The development of the economic sector and

the growth of the population of St. Petersburg constrained by

existing administrative boundaries.



2.2 Restrictions of economic development 2.2.5 Internal constraints of economic development of

St. Petersburg

Among the major problems (13) hindering the

development of St. Petersburg, are the following:

1. lack of basic resources development, especially investment

2. reduction of budget revenues as a result of changes in tax

laws and decline in investment activity ;

3. shortage of developed engineering-communication-

transport areas for the expansion of existing and the creation

of new industrial, residential, public and business city

territories (as a result there is an increased building density,

height rise of residential buildings, the reduction of green

spaces and public spaces, the preservation of industrial zones

near the center of the city, alluvium areas in the waters of the

Finland Gulf);



2.2 Restrictions of economic

development

4. the presence of natural difficulties associated with adverse

weather conditions and a large number of water bodies;

5. delay in the development of objects of power engineering

and transport infrastructure necessary for the needs of the

population and the economy;

6. the need to invest huge funds in the reconstruction of the

historic center, the settlement and repair (or demolition) of

dilapidated housing;

7. an acute shortage of qualified labor of required skill level,

the practice of attracting a large number of migrant workers

employed in low-skilled jobs, the illegal migration;

8. environmental degradation;

9. lack of power facilities utilization and processing of

household and industrial waste;




development

10. high mortality rate, especially among the male

population;

11. an aging population, increasing the burden on the

working population and the social sphere;

12. high levels of residents of the city stratification by

income and a high level of concentration of income

(the majority of the population uses their income to

maintain current levels of consumption);

13. lack of St. Petersburg countryside zone regulatory

issues and the areas in St. Petersburg metropolitan

area - members of the Leningrad region.




development

The main features of the development of St. Petersburg

will be the transition to innovative type of development

and a significant increase in human capital indicators.

Table 3 illustrates a ranked list of internal constraints to

St.Petersburg development.

Ratings reflect the importance of a factor in terms of the

impact it has on the development of the city in the

context of its basic functions, and the degree of

manifestation (intensity) of a factor , based on the

maximum value of 9 points (the most significant) .

11/28/2013 39


Table 3. Restrictions for the economic development and

the implementation of St. Petersburg functions Ristrictions estimate

Function : a place for a comfortable stay

The high level of wear headworks and networks for all types

of engineering infrastructure 8.6

The presence of vast areas of industrial enterprises,

landfills and polygons, the lack of availability of waste

disposal

8.5

Extensive development of the city , carried out at the

expense of natural land development 8,4

The continued formation of poor quality of the urban

environment at the newly built-up areas and reclaimed 7,6

The use of old, out-of-date technologies , norms , standards

and principles of Housing 7,5

Noise Pollution Caused By Transport 7,4

The critical water pollution and sediment Gulf of Finland to

the dam 7,2

Poor quality of housing and communal services 7,2

High level under-reparation of apartment buildings 6,7

Low- preventive activity in the primary health care 8,5



Table 3.Restrictions for the economic development and

the implementation of St. Petersburg functions(cont) Ineffective adaptation of migrants 8,2

Aging of the population and the growth of social obligations 8,2

The wage level is lower than in Moscow 6,8

Function: Education and Research Center

Non-compliance issue structure of vocational education to the

labor market 8,1

Insufficient level of attractiveness of educational

institutions for foreign students and the world's leading

educators and scholars

7,4

Aging workforce , inefficient mechanisms for training and

promotion of teachers 7,2

Inefficient system of vocational guidance of youth 6,8

The need to adapt training programs to the growth in the

number of migrant children in enrollment , the development of

inclusive teaching methods

6,7

The aging of scientific staff 8,2

Low domestic demand for domestic innovational product 7,9

High risks associated with the development and implementation

of the final product innovation

Brain drain

7,4

7.1




the implementation of St. Petersburg functions(cont) Function: Cultural Center

Loss of places of interest, reducing the value of the

architectural appearance 7,7

Low level of integration into the international cultural

events and institutions 7,3

Low level of demand for the cultural heritage of a large

part of its population 7,2

Seasonality in the conduct of large-scale cultural events 7,1

The low level of support for contemporary art 6,5

Function: The Travel Center

Development of infrastructure lags behind the needs

(hotels, resorts , sports and entertainment , water

tourism )

8,0

Price not competitive hotel industry 7,4

The high cost and a significant length of visa procedures 7,2

Peripheral position relative to the main centers of Europe

and Russia 7,1

Climate, the unsightly appearance of the city in winter 6,8




the implementation of St. Petersburg functions(cont) Function : Business, Financial Center

High administrative barriers and corruption charges 7,8

Inconsistent economic and investment policy of the city

government 7,6

The prevalence of short and relatively expensive money in

the financial market 7,6

The deficit of engineers and technical profile 7,0

High prices for commercial real estate 6,5

Function: Industrial Center

Low level of innovation activity in the historical

industries 8,1

A large proportion of industrial production , which are

localized in the city - the players at the closing markets 8,0

Low productivity and slow the process of updating

production facilities in key sectors 7,9

Insufficient domestic market for advanced industrial

sectors 7,1

A significant proportion of defense industry 7,0




the implementation of St. Petersburg functions(cont) Function: Transport and Logistics

Center Traffic jams, unreliability and high

risk traffic 8,1

The lack of coordination in addressing

the critical issues of agglomeration 8,1

Order backlog of urban development

needs of the transport system 8,0

Development projects areas are not

provided with the development of

transport projects

7,7

The loss of land for the development of

the road network 7,6

Weak development of the road network ,

uncomfortable interchange reins , high

risk for pedestrians

7,6 11/28/2013 44



• The industry. St.-Petersburg saved considerable

industrial potential thanks to leadership in production

on a number of branches – energomashinery,

shipbuilding, instruments production with the high

value added. Enormous industrial enterprises survived

through the transitional period of 25 years ((1989-

2013)

• WE could observe two types of this survival reflected

in 2 cases

• Kirovskij zavod

• LOMO



Industrial clusters

• According to Pharmexpert Market Research Center,

St. Petersburg is the most investment-attractive region

of the Russian Federation Clusters & business sectors

• AEROSPACE CLUSTER - General

overview Aerospace cluster was established in

September 2012

• AUTOMOTIVE INDUSTRY

• PHARMACEUTICALS & MEDICAL INDUSTRY

CLUSTER

• RADIO-ELECTRONICS

• SHIPBUILDING

• IT 11/28/2013 46


http://www.doingbusiness.ru/index.php?option=com_k2&view=item&id=288:aerospace-cluster&Itemid=455

http://www.doingbusiness.ru/index.php?option=com_k2&view=item&id=281:automotive-cluster&Itemid=423

http://www.doingbusiness.ru/index.php?option=com_k2&view=item&id=280:pharmaceuticals-and-medical-equipment-cluster&Itemid=426

http://www.doingbusiness.ru/index.php?option=com_k2&view=item&id=280:pharmaceuticals-and-medical-equipment-cluster&Itemid=426


• However the considerable share of the industrial

productions localised in a city, is referred to the

old closing markets characterized by out-of-date

technologies causing low labour productivity and

conpetitiveness.

• To overcome this drawback the city’s industrial

organization should stimulate investment and

innovational activity growth as well as

acceleration of structural reforms. The latter

could be reached via foreign companies

involvement.



Foreign Companies in St.Petersburg

• One can observe more than 643 foreign companies in

the city of different countries (France - 95, the GB-56,

Germany - 234, USA- 108, Finland-150) and -

different industries ( high-tech, trade (135 -1),

Production real sector (76 – 2) Equipment delivery

(59- 3) services - ads(4), finances(5),,

telecommunication(26), legislative(28),

consultancy(30), etc) • Great Britain -56

• France -95

• USA-108

• Finland-150

• Germany -234

• Total -643

Figure 6



Figure 6. Foreign companies in St.P: country/industry



Doing business in Russia

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Do not attempt to do business in

Russia unprepared: Socially,

culturally, and economically.…




• Important tips: general, Date and

Time, Appointments, Negotiations,

Entertaining and manners •



3. Socio-economic Development of

St.Petersburg

• We assume three scenarios of St.Petersburg

development

1. Conservative

2. Medium-optimistic

3. Innovational



4. St.Petersburg MISSION AND FUNCTIONS

By now it is possible to designate the following set of Sankt -

Petersburg functions adequate to its goals(Table 3), Prior

transport-communication development and system of

governance causing territorial reallocation of St.P. zones and

converting the city into the center of sustainable development

and hence:

1. A place for comfortable residing;

2. The political centre (of Russia, NWFR, the Baltic region of Europe, the

Arctic centre, the centre of the international cooperation);

3. The cultural centre,

4. Educational and a centre of science;

5. The business, financial centre;

6. The tourist centre;

7. Industrial centre ;

8. The transport-logistics centre.



Conclusion I. St.P.has rich history, cultural and intellectual traditions

II. There are certain competitive advantages: a large domestic

market , active position in foreign markets , transport

infrastructure , the development of education, information and

communication, innovation and technology, the large tourist

resources, good residential provision.

III. There are certain restrictions of economic development:

labor, capital, territorial, infrastructural reflected in

IV the following problems of St.P development:



The problems of St.P development

1. lack of basic resources development,

2. reduction of budget revenues ;

3. shortage of developed engineering-communication-

transport areas

4. natural difficulties;

5. delay of power engineering and transport infrastructure y;

6. the need to reconstruction of the historic center capital;

7. shortage of qualified labor;

8. environmental degradation;

9. lack of power facilities utilization

10. high mortality rate,;

11. aging population;

12. high levels of stratification by income

13. lack of St. Petersburg countryside zone



Conclusion

V. There are certain differences in national and

foreign companies’ tactics and strategy

VI. There are 3 possible scenarios of St.P.

development: conservative, moderate,

innovational

VII. The mission and function of St.P. is connected

with the model of sustainable development



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