Growth points or black holes: How efficient are state stimulation tools for territorial development?

Abstract

The paper evaluates the efficiency of state stimulation tools for territorial development that have been actively applied in Russia in recent years, based on the concept of growth points. It reviews special legal regimes of doing business in local areas where investors are granted tax, infrastructure, and other benefits. Newest legislative mechanisms of territorially focused preferential incentives, such as special economic zones, territorial development zones, and territories of advanced development are analyzed. Based on the extensive factual and statistical data on the use of such mechanisms, it is concluded that although this field has become a priority for Russian state spatial development policy, the adopted approach is not only ineffective, but also clearly counterproductive. Instead of serving as points of growth and sources of diffusion of innovations, the analyzed local areas have transformed into black holes, i.e., business enclaves, excluded from cooperative ties with the surrounding economic areas and even discouraging their development by pulling out resources, particularly the highly qualified workforce. The paper explores the factors behind the transformation of the expected (and demonstrated abroad) advantages of zonal tools into drawbacks thereof. A series of principle positive recommendations are formulated: (a) the need to abandon “silver bullet” solutions and unsystematic work and opt for tailor-made approaches to the use of specific zonal mechanisms according to the needs of each individual project; (b) nationwide coordination and harmonization of related state decisions; (c) analysis of precedents involving similar management tools as an investment project, accompanied by appropriate assessment of its efficiency; (d) transition from the state paternalism based on the dependency of territories in regional policy to the promotion of regional self-development in the context of a federal state.