Free economic zones in the context of economic changes in Russia

Abstract

THE LONG DOMINATION of the command economic system in Russia has left a closed and structurally distorted economy rejecting technological innovation. The deep economic crisis experienced by post-socialist Russia offers scope for the exercise of special and highly diversified influence by the utilisation of foreign capital. Regulation of 'joint ventures with the participation of Soviet organisations and companies from capitalist and developing countries' was initially introduced by a Resolution of the Council of Ministers of the USSR on 13 January 1987 and a Decree by the Presidium of the Supreme Soviet of the USSR of the same date. Soon afterwards it was realised that more incentives were needed to attract foreign direct investment to the Soviet economy. This was the starting point for the discussion concerning free economic zones (FEZs) as one of the most popular and controversial instruments of the attempted open economic policy in the former USSR and in Russia. Despite numerous speeches by political leaders advocating the creation of FEZs, and publications in the specialist literature, there is still no clear notion about the general process of setting up open territories and the mechanisms of their development. Hence the current underestimation of the complexity of the practical issues involved, resulting in the faltering of the FEZ policy in Russia and the absence of visible practical results. This article assesses the Russian experience with FEZs from both the historical point of view and the theoretical one. Despite their inevitable interrelation, singling out different stages within the general evolution of the FEZ policy is helpful in