Federalism and Local Politics in Russia

94 Oksana Orachevaand the Okrug. 39 There is a clear trend showing that the most educated andactive part of the Komi-Permyak Okrug population would like to migrate, asthe Okrug social and economic conditions are unsatisfactory. And oneshould accept that any economic development would be problematic withoutsufficient development of human capital.At the same time, unlike the situation in the Chukotka AO (which hasmaintained its status as a fully-fledged subject of federation) and YevenkiyaAO (which has merged with Krasnoyarsk Krai), political elites in Komi-Permyak Okrug have been unable to offer attractive economic packages toattract industry to the territory. The presence of better business conditions inPerm Oblast (where there is low level of profit tax – 20 per cent instead of 24per cent) has resulted in the inevitable migration of Okrug businesses to theOblast, thereby reducing the Okrug’s budget revenues.Those who put forward economic justification for the merger claimed thatafter it was completed, the social and economic situation in the Okrugwould dramatically improve. According to the ‘Prognosis for Socio-Economic Consequences of Unification of the Perm region and the Komi-Permyak Autonomous Okrug’, adopted by the Perm regional legislature, oneof the major goals of the merger is to recover those mechanisms that wouldallow the regional economy to function effectively thereby improving theliving standards of citizens who reside in both the Oblast and the Okrug.Several strategies were recommended to achieve this goal: the complex use ofnatural resources, the formation of a competitive economy, the developmentof small businesses, structural reorganization of the Krai’s economy, andinvestment in infrastructure, etc. 40 However, it is still unclear what mechanismsshould be used to achieve the stated goals. During the current transitionperiod, during which time the Okrug has benefited from substantial economicsupport form the federal budget, there has been no pressing need toenact such radical reforms.It was agreed that in 2004-6 the federal budget would support a number ofvery important infrastructure projects, including: construction of a railwayline between Grigorievskaya station and Kudymkar (so far the Okrug has norail connection with any other regions, the nearest railway station is about100 kilometres away from the Okrug capital); the construction of roads aspart of the North corridor connecting Perm, Kudymkar and Syktyvkar,including the bridge over the Kama river; and the building of a gas pipelinefrom Ocher (Perm Oblast) to Kudymkar. 41 Later, some new projects wereput on the agenda – there was a revival of the Belkomur project (a railwaycorridor that connects Kudymkar with the White Sea via Syktyvkar andArkhangelsk) 42 and the construction of a nuclear power station.However, it is difficult to assess to what extent these economic goals couldbe achieved by the merger of a poor Okrug with a much richer Oblast.Despite the deep economic crisis the Okrug’s economic development in2001-4 was characterized by some growth – a 12.6 per cent increase inindustrial production. 43 However, many projects, which were offered, now