Comparative Analyses of Contemporary Economies.
Moscow, Georgia, Western Siberia, Ukraine and Kazakhstan
The 2000 election in Russia saw Vladimir Putin take over from Boris Yeltsin. With the entrant of the new president came some political semblance in the country. Most of the wealth in the new Russia was and is still concentrated in Moscow. The city accounts for approximately 25 percent of all the countrys tax revenues (Vorhees and Berkmoes 18), despite it being only 0.006 percent of the Russian Federations landmass. Moscow also has the highest concentration of businesses, commercial banks, high-end retailers and commodity exchanges. Starting in the mid-1990s, Moscow has also become among the priciest cities in the world.
According to Vorhees and Berkmoes, the newly found economic and social freedom has led to Moscow becoming a free city where everything goes (19). As such indulgence, libation, liberation and defiance are in open display. More to this, corporate decadence is for sale in the city. This means that Moscow has no surprises for the cynics, and no limits for the ambitious.
The location of Moscow in Europe further gives it economic advantage over other cities in Russia. The city is located in the central region of Russia. The entire Moscow region has a large enough population (especially in the northwest side) to drive the economy of the region.
According to 2003 statistic published by Belov, the Moscow region alone accounted for 5.6 indutrial production in the entire country, while accounting for 16.2 percent of fixed assets in it. Further, Moscow accounted for 28.7 percent of all retail trade turnovers in Russia.
Some of the indicators cited by Belov as the main contributors of the superior economic performance of Moscow include the citys well-developed infrastructure, a wide range of real estate facilities and the accumulation of financial resources in the region. People in the region have managed to combine intellect, cultural and their administrative potential to create an economically thriving city.
According to 2002 statistics, the Gross Domestic Product in Moscow was estimated at 70 billion (2217.9 rubles). This amounted to a 20 percent of the entire countrys GDP. Considering that the regions population accounts for only 6 percent of the countrys population. This means that a lot of the countrys wealth is concentrated on a few people.
Economists have found a link between GDP growth in Moscow and the same in the entire country. In 2000 for example, Moscows GDP was at 7.7 percent growth, while Russia registered a 7.5 growth. In 2001, Moscows GDP was lower at 4.5 percent and so was Russias GDP at 5.1 percent. When Moscow registered 3.0 percent GDP in 2002, Russia registered 4.1 percent. This means that although seen to thrive as a separate entity from the bigger country, Moscows growth usually corresponds to economic growth patterns in the whole of Russia
Statistics obtained from the Department of Economic Policy and Development in Moscow indicates that the food industry, power generation and machine building remain the leading economic industries in Moscow. In 2001, the food industry accounted for 29.3 percent economic productivity, while power generation accounted for 9.1 percent. Machine building on the other hand accounted for 27.6 percent economic productivity. Other contributors included the production of construction materials (4.7 ), clothing, textile and footwear (2.9 ), chemical industry (5.1 ) and other small industries (21.3 ).
In Moscow, the small industries play a significant role in the regions economy. In 2002 alone, the small industries grew by three percent and as a result, their contribution to the Gross Regional Product (GRP) accounted for 10.9 percent. The St. Petersburg is second in Russia having 12 percent of the regions businesses in the small industry classification. Moscow and St. Petersburg are the only two regions in Russia that meet the small businesses development criteria in developed countries. Moscow has 20 small companies per every one thousand people, while St. Petersburg has 23 such companies for every thousand people.
The city has also managed to attract foreign investment from different countries across the world. The biggest foreign investors are Germans accounting for 18.0 percent, Great Britain with 17.0 percent, Luxembourg and Cyprus each with 12.0 percent and France with 10.0 percent. Others include USA (6 percent), Switzerland (4.3 percent), the Netherlands (6.0 percent) and Italy (3.0 percent) (Dept. of economic Policy development in Moscow).
The concentration of wealth in Moscow also means any interruption in the economy, like the just ending financial crises, is likely to have a bigger impact on the city too. However, the ripple effect will most likely be felt in the entire country, especially considering its contribution to the countrys GDP. According to Murchie, the global economic downturn hit Russias businesspersons quite hard. Most of the super rich people in Russia have thriving businesses in Moscow, mainly because the city is the epitome of business expansion and growth in the entire country.
Like any region experiencing economical expansion, Moscow has its fair share of challenges. According to information provided by the president of Russian Shito-Ryu Karatedo Federation, environmental pollution is becoming a major concern not only to the citizens, but also to the Russian government. Of concern is the rate of water and air pollution by heavy chemicals. According to Dubinin, this is especially true in the south and southeastern parts of the Moscow region. Several sites have also been discovered as having been polluted with radioactive material. For Moscow unfortunately, the pollution is not selective and it is suspected that the pollution could easily penetrate the densely populated residential areas and even public gardens (Dubinin).
Moscow and Western Seberia have some economic commonalities. This mainly relates to the two regional economies dependencies of extractive industries. According to Minakir and others, Western Siberia is the only region in the Far East that beats Russia in its share of extractive industries, which stands at 16.7 percent in Russia compared to 36 percent in Western Siberia (45).
Unlike Moscow, which has something of everything, Minakir and others note that the economic development of Western Siberia is more specific in industrial material production rather than in processing industries, as is the case in Moscow (45). As the main economic region in the Far East, Western Siberia accounts for at least 8.7 percent of food industry production, with fish and seafood forming the bulk of this sector. The region also relies heavily on the logging industry, it accounts for 7.9 of the countrys timber, cellulose paper and wood processing output.
The region also produces rolled metal and pig iron for sale to the Far East, and depends on this as a main source of revenue (Minakir et al 53). More to this, the region has vast oil fields and is home to the largest oil refinery in Russia. Other natural resources in Western Siberia include coal and steel, which are used for the production of chemicals and machinery. Moreover, agriculture is also practiced in the region and as such, products such as wheat, oats, sugar beets, rice and dairy are exported from this region to other parts of the country.
The social-economic indicators released in a 1999 survey gave Western Siberia a positive profile for its contribution to the countrys GDP. This was mainly from a combination of factors, which include a substantial population. The survey further indicated that the regions gross product and the industrial productivity rates were half the mean rate recorded in the entire Russia. Because of this, people working in this region were more likely to earn more than other workers in other regions in Russia. In fact, the wage levels in the 1999 statistics were above the national average by one-third (University of Aberdeen).
Like Moscow city in the Moscow region, the Kemerovo region has a predominant role in Western Siberias economy. Kemerovo occupies only 7 percent of the western Siberias land mass. However, the area is home to 25 percent of the regions total population. It also accounts for 30 percent of the regions urban population (Kommersant). Some of the regions exports include coke, coal, cast iron, rolled metal cement, glass, plastic materials, electrical products, synthetic fibers and heavy machinery among others. Like Moscow, Kemerovo and the entire Western Siberia are facing immense challenges in environmental conservation. There is deep-seated concern among environmentalists that Western Siberia may be trading the welfare of their environment for wealth.
According to Wiget and Balalaeva, the wetlands in Western Siberia are threatened by the constant oil spills that trap water therefore causing flooding and the subsequent destruction of forests, in addition to fires that easily start where the oil has been spilled causing acid rain.
Siberia region lies in the northern part of Asia, with huge parts of the eastern and central Russian Federation lying within the regions boundaries. Unlike Moscow, Siberia is not restricted by size, since its total landmass encompasses an approximate seventy-five percent of Russias territory (Hill 324). The geospatial position of Siberia places it across the Eurasian landmass thus contributing significantly to Russias economic development. The Siberia region is a primary repository of Russias natural gas resources, and is therefore critical in the economic development of the country. Others resources from the region which contribute significantly to the national kitty include fur, salts, minerals and timber. The oil reserves in the Western Siberia region remain the economical backbone of Russia today despite having served the same role in the past. This is because the region holds 80 of the countrys oil reserves, 85 of natural gas reserves and 80 of the coal deposits. In addition, the area accounts for 40 of the countrys timber resources among other precious minerals (Hill 324).
According to Hill, Siberias vastness and natural resources wealth does not contribute to the national kitty as much as it should. In fact, the region suffering from decaying industries, forbidding climate and vast distances accounts for a major drain in the Russian budget (324). The absence of significant private investors means that the economic future of Siberia lies squarely on the hands of the government. However, in the past, the government has failed to make the Siberian region economically viable, and thus its sustainability has always been pegged on increased federal subsidies.
According to Hill, the federal government has failed to sustain capital investment in the oil rich areas in Siberia (326). This means that in the past, government explored and got as much oil resources as possible without re-investing enough capital to ensure sustainability. The government especially continued lifting oil from wells developed in the Soviet era without drilling new ones. As a result, it is estimated that most oil are nearing the extinction of resources, and their production capacities are either at a plateau, or is tapering off. Hope for the region however remains with the huge untapped potential in resources. This however requires a great deal of investment, especially in the infrastructure that will enable government to access the untapped mineral deposits (Hill 327).
According to Shen, Ukraines economy has been a casualty of planned imbalances that were perpetuated for decades soon after the Soviet rule was over (33). Despite the countrys agricultural and industrial potential, lack of responsible economical guidance was largely to blame for this state of affairs. The great potential for Ukraine remains its proximity to Eastern Europe on the west and the continued growth of the black sea ports.
According to Subtelny, agriculture remains the biggest single occupation in Ukraine. As such, the country continues serving as a breadbasket for the entire region. The agricultural production in the country alone is sufficient to feed the entire population of what used to be the Soviet Union. In recognition of the great potential that the sector has, the Ukraines government has invested heavily in farm inputs and machinery in order to boost production.
Unlike Moscow and Western Siberia, Ukraine does not have sufficient natural deposits to fuel in its economy. This is especially so because its natural gas and oil reserves are largely exhausted. However, it is relatively wealthy in mineral deposits. In 2007, the government admitted that it was facing challenges in almost all sectors of its economy. According to Kinakh and Medish, 70 percent of all energy used in the country was imported from other countries. The government also admitted that the investment climate in the country was not appealing to foreign investors and neither was it good enough for small businesses. In this aspect, Ukraine was beaten by Moscow, which as observed elsewhere in this paper has at least 20 small businesses for every one thousand people.
The over involvement of government in businesses has also had the economy of Ukraine lagging behind as compared to other economies in the region (Kinakh and Medish). This is because too stringent measures by the government kill the spirit of entrepreneurship. The Ukrainian government has been fretting with the idea of a free-market economy, yet the same government contradicts itself by applying some price limits on products on services. This means that investors cannot trust the government with the concept of a free market economy and thus many of them choose not to invest in the country.
According to information released in 2009 by FutureBrand, investors are starting to show interest in Ukraine, especially in the banking, agro-industries and the real estate sectors. Some of the strong areas cited by investors as desirable in Ukraine include effective job markets, macroeconomic stability, strong education system, and a large marketing scope. However, the country also has noticeable drawbacks such as an ineffective commodity market, unstable government policies, unstable government institutions, a weak financial sector and the slow adoption of new technologies by the government and the business community at large (FutureBrand).
Despite the shortcomings in Ukraine, its economy is fairing quite impressively. According to 2008 estimations, the economy was ranked number 45 among other economies in the world with an estimated GDP of USD 399, 866 billion. Ukraine also has a ferrous metal industry, just like Moscow and Western Siberia. The countrys metal industry produces steel, cast iron and pipes. In 2005, the country was ranked as the eighth largest producer of steel. The chemical industry in the country is also vibrant, producing sulfuric acid, coke and mineral fertilizers. Like other economies relying on industrial development, Ukraine is also faced with immense environmental challenges.
Like Ukraine, Georgias economy has suffered significantly from the mismanagement in the 1990s. However, Georgias economic destabilization had more to do with civil strife in the country as opposed to lack of proper economical guidance. According to information obtained from CIA fact book, the country relies heavily on agriculture and industry to drive its economy. Like other economic regions and countries analyzed in this paper, Georgia has a generous amount of natural resources and therefore the mining industry plays an important role in the countrys economy. The mining industry is reliant in copper and manganese.
Like Moscow, the Georgian economy has developed a strong link with private investors who have introduced liberalism in trade, investment and the business sector at large. Unlike Ukraine and West Siberia, Georgias central government believes in the creation of government-formulated policies, which must be effective in enhancing economic performance in the country. The financed services on the other hand are relegated to the private sector, whose activities and service delivery must meet set governing standards (World Bank). Because of these measures, Georgias economy grew by 10.5 percent in 2008.
Although Georgia does not have a wealth of natural gas or oil deposits as some of the regions or countries analyzed in this paper, its proximity to the Black Sea means that the country is able to benefit as a transit point. The countrys strategic position on the Silk Road also offers it undue advantage as a transit point for goods being shipped between Asia and Europe. More economic potential as described by the World Bank is in the countrys tourism sector. Tourists are attracted to the country by the mountainous terrain and the rich culture (World Bank).
Kazakhstans economy is the largest in Central Asia. Like other economies in the post-Soviet region, it also relies heavily on gas and oil industries. After the countrys independence in 1991, Kazakhstan has been a large supplier of gas and oil to countries that used to be the Soviet Union. At independence, the country has four economic pillars manufacturing, mining, agriculture and gas and oil (OECD, 28). According to Karatnycky and others, Kazakhstans economy was dependent on the production and export of a few commodities (220). This includes metals, natural gas and crude oil. These three commodities accounted for 70 percent of all the countrys industrial output. The situation has not changed much to date. Kazakhstan has been hailed by the International Monetary Fund as being among countries with an impressive banking sector, which scored highest among the post-Soviet states in 1999 (Karatnycky et al 220).
In the past few years, Kazakhstan has benefited immensely from the steep increase in world prices in some of its main exports. This includes the rise in oil prices, metals and grain. The country has healthy trade relations with China and Russia. The difference between Western Siberia, Ukraine and Kazakhstan is that the latter has invited international investors to the major economic sectors (Encyclopedia of the Nations). This means that in spite of the government being a major stakeholder in oil exploration and marketing, international oil marketers like Exxon Mobil and Chevron Texaco have invested in the country as well. As a result, the potential of the country to be a world class exporter of oil are looking good in the short-term.
Social and economic conditions and environmental problems in Estonia and Latvia
Estonia and Latvia have both had social, economic and environmental problems as individual nations since the collapse of the Soviet Union. For the two countries, the social, economic and environmental conditions all seem to play a vital role in the development of the countries. Of importance in the two countries are the problems involved in the transition from economies under the Soviet Union to independent economies.
Under Soviet Rule, both Latvias and Estonias environments and infrastructure were in near ruin (Laar). Worse, the Estonians did not believe much in the countrys capacity to be a better state. The Latvians on the other hand had serious economic shocks to contend with in their bid to transition from the Communist rule to the free market environment (Encyclopedia of the nations). Environment was thus not among the first priorities that the Latvian government focused on. With a radical government taking over in Estonia in 1992, Estonians were promised of drastic reforms from the countrys past came into place. The new government started the reform agenda with monetary reforms and macro economic stabilization efforts. Under this, the country introduced its own currency, while emphasizing the need for transparency in all government transactions. To ensure a steady regional environment, Estonia needed the involvement of other Baltic countries in the environment agenda.
According to Laar, the Estonian government still suffers challenges to date in getting its people to think independently. This is mainly because the socialism imposed during the Soviet Union era had instilled in them the dependency mentality. The social fabric therefore had to be restructured in order to encourage people to do businesses and therefore create opportunities for the economy to grow. The need to foster competition by encouraging foreign investors has also been important to the government. However, the conservatives are afraid of such openness, therefore leaving requiring the government once again to show the way.
Auer notes that Estonians have deep-seated sentiments about how the environment should be handles (353). Estonians have a specific perception about the unique nature of their countries environment. However, Estonians have different perceptions of how the environment should be handled. These disagreements usually take a political perspective. Latvians do not however seem to care much about their environment and it is only through the intervention of the government that the society is starting to learn the importance of environment conservation. Statistics from a 2005 survey revealed that Latvia is farming more and getting 2.6 percent GDP from farming (Bureau of European and Eurasian Affairs). This was gotten from 133,000 farms. Estonia on the other hand, had 27, 700 farms and managed to get 2.4 percent GDP from farming (Stonkule et al 3).
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