Investors, Politicians and Bureaucrats

Officials make all the difference, especially when it comes to investment climate. However, the opposite is also true: the electorate’s mood depends heavily on the conditions the region has created for investors.

Too many officials?

Investment climate is in many ways determined by the structure of a region’s entire bureaucratic machinery, even down to the municipal level. In certain regions this machinery requires up to two years to approve an investment project. While they wait, investors lose more than time and patience; they also lose significant amounts of money (in part due to “lubrication” of the corrupt bureaucratic machinery). However, there are also regions (such as Novgorod Province) where the entire bureaucratic procedure related to investment takes only two weeks. Unfortunately, due the lack of information on how the bureaucratic machinery of all Russian regions operates forces us to limit ourselves to circumstantial evaluations of officials’ efficiency in the area of investment.

Investment is the final step resulting from years of effort to create a positive investment climate, as reflected by our ratings. Thus, if we evaluate officials according to the compound criterion of “conditions created and results achieved” (Table 8), the most efficient administrations are in St. Petersburg, Moscow city, Krasnodar Territory, Tatarstan, Moscow Province, Bashkorostan, and Yarslavl, Samara, and Novgorod Provinces. The least efficient bureaucrats work in Tuva, Dagestan, Ingushetia, Bryansk Province, the Jewish Autonomous District, and a handful of the smaller autonomous districts.

A self-fulfilling prophecy

Elections results present yet another piece of circumstantial evidence regarding officials’ effectiveness. We have noted a correspondence between the results of efforts to improve investment conditions and the likelihood of reelection. Though too little time has passed to say for sure, this prediction appears to be a self-fulfilling prophecy. The heads of the regions with the most promising outlooks (for example, the governors of Leningrad Province, Belgorod Province, and the president of Mordovia) were reelected by a wide margin in the very first round of elections.

Map 3 The Effectiveness of the Governing Bodies in Attracting Investments into regions