Conceptualizing FDI in the Russian regions : Primore, Khabarovsk, and Sakhalin

Abstract

Since the Soviet Union collapsed in 1991, Russia has attracted a minuscule proportion of global FDI-only 1 percent of inflows to developing countries. Worse, most of Russia's FDI is "market-seeking"-geared to the domestic market-rather than the more productive export-oriented variety which dominates global FDI flows. Well over half of Russia's FDI goes to Moscow and St. Petersburg, a disparity which aggravates the developmental dislocation between the national center and the rest of the vast country. In this dissertation, I examine variation in regional-level FDI policies-a key factor in attracting FDI to the regions. The empirical work focuses on FDI in the export-oriented industries of three regions in the Russian Far East--Primorskii krai, Khabarovskii krai, and Sakhalin oblast--all of which have been the object of intense interest from foreign investors. The three developed widely variegated FDI policies: During the 1990s, Primorskii krai grew increasingly hostile to foreign investors, Khabarovsk largely ignored foreign investment, while Sakhalin, actively sought out foreign investment. The dissertation finds that policy variation is a product of gubernatorial power. It shows that regional governors wielded decisive power in policy areas which directly affected FDI inflows-foreign acquisition of stock in privatizing Russian enterprises, joint-ventures, the development of legislation governing.foreign investment into new "greenfield" ventures. Examining a wide range of explanations for regional policy variation, the dissertation finds that objectivist theories can not adequately explain variation in the govemors' FDI policies.

(cont.) Focusing on the role of ideas, the dissertation develops an ideational model of causation which argues that the disparate ways in which the governors defined the post-Soviet crisis, explained its origin, and understood the concepts of a new era-democracy, reform, "Subject of the Federation," and patriotism-determined which FDI policies they considered legitimate. Ultimately, the policies of those governors who effectively "sold" their ideas in the locality-by cultivating support among regional elites and embedding their ideas into regional institutions-endured.