3.2. Prognosis and Strategy
Priority
Problems
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The situation in Nizhni Novgorod Oblast
is defined by a general crisis in certain aspects, including:
- the problem of food supplies;
- the oblast's dependence on inter-regional
ties;
- the high proportion of defence plants;
- the large size of enterprises; and
- the high proportion of urban residents.
According to rational consumption criteria,
the oblast provides only half of the regions meat and dairy
product requirements with its own resources, and less than
half of its grain requirements. The high share of defence
plants in the oblast's industry, and the concomittent sharp
decline in military contracts and related instability, has
engendered a major problem: the need to radically change
an enterprise's production profile and the lack of requisite
resources to finance the technical overhaul. The large size
of the enterprises constitutes another problem for investment
and conversion to joint stock companies.
The oblast is one of the most urbanised
in Russia, and consequently has the highest proportion of
pensioners among the oblasts and republics in the region.
The situation in the countryside is particularly tragic.
Like the rest of Russia, Nizhni Novgorod Oblast is also
characterized by growing crises in all social aspects. The
first signs were noted several years ago. The decline in
industry's scientific and technical level and equipment
obsolescence were observed throughout the 1980s; falling
agricultural production, from 1987-1988; and the decline
in population rates, since 1989. Even before the start of
the reforms, the oblast was one of the depressed regions,
similar to the Central Urals. Increased fuel and energy
prices, the lack of a defence concept, a conversion programme
and the requisite investment conditions prevented any potential
restructuring of the oblast.
The region, a net consumer of energy, is
largely oriented toward military production. Its industrial
base is rapidly becoming technically obsolete. Enterprises
attempted to survive in an unregulated market and in the
face of runaway inflation. Unfortunately, it transpired
that the oblast's industry was poorly prepared for the transition
to a market economy. Attempts to survive and function in
a market environment were hampered by the imbalanced structural
base (only 16% of industrial output consists of consumer
products), the overabundance of giant
state enterprises, the overloaded social infrastructure
and the high degree of dependence on strictly assigned suppliers.
Assessments of a dynamic model for Nizhni Novgorod oblast's
economy also affirm the extreme vulnerability of its industry
in the new conditions (see below). Prior to the rouble's
stabilisation, economic relations will depend on a consolidation
of financial settlements via direct commodity exchanges
(barter). Stabilisation articles in Nizhni Novgorod oblast,
including petroleum products and automobiles, play a primary
role. Such output is the mainstay for overcoming the crisis.
On the whole, the oblast is enduring with
great difficulty a period of critical importance for Russia.
Although the money supply issue has been resolved for the
short term (with the preparation of a consumer loan for
the oblast), and manufacturing output has decreased by only
8.5% (against 13.5% for the country as a whole), negative
phenomena in the production, consumer, and social spheres
have been observed. In January-May, profits for all types
of economic activity rose by only 5.3 times, in contrast
to 8.5 times in the rest of Russia. This reflects yet again
the irrational structure of the oblast's industrial base
in market conditions, given the current price system. The
ratio between the growth in the population's monetary incomes
and the consolidated price index was 0.63 over six months
(and 0.67 for the entire country), i.e., the oblast population's
real incomes are dropping more quickly. Unemployment is
rising steadily. The potential worsening of the economic
crisis and the population's lack of confidence in the future
remains. The most critical situation has arisen in the agricultural
sector, which is failing to fulfil the needs of the oblast's
population. The situation has deteriorated considerably
owing to the disintegration of the mechanism for obligatory
centralised supplies, and the bans on exports of agricultural
produce to separate oblasts and republics. In the given
situation, the region's authorities are doing their best
to create an economic stabilization buffer by developing
bilateral and multilateral horizontal ties with other regions
of Russia and CIS Republics, and new economic forms (privatization,
land reform, conversion of enterprises into joint stock
companies, stimulation of entrepreneurship, support for
small businesses, monthly free-trade actions, etc.).
At the same time they are preparing radical
restructuring measures and creating a self-sufficient market
economy. The latter group of measures includes the transformation
of the social infrastructure and the attraction of foreign
investment to Nizhni Novgorod oblast.
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