The Institute for Regional Economy of the North is currently the only scientific entity in Russia called to develop scientific grounds for economic policy, development of market economy, social and economic policy and rational accommodation of productive forces and branches of the national economy in the North taking the Republic of Sakha (Yakutia) as an example. Mikhail Nikolayev, Doctor of Economics and First Deputy Director of the Institute, in his interview to Rough&Polished told about the activities of this scientific body. 

Please, say a few words about major research projects pursued by the Institute for Regional Economy of the North. Who are your customers and for what purpose do they order such research? 

The uniqueness of our institute consists in that in the long term it is and will remain the only economic research establishment located on the huge territory of the Asian North spanning from the Northern Urals to Kamchatka. The institute is now carrying out scientific research along the following three basic directions: 

- Consistent patterns and specific features in formation and development of regional economy in the North 

- Development of scientific grounds for social and economic policy in the North regions 

- Problems in the fields of theory and practice while pursuing innovative development of regional economy.

Our major customer is the Ministry of Education and Science of the Russian Federation, and also regional ministries of education and science and economic development. 

One of the research tacks of your Institute is the economy of the rough and polished diamond complex. Could you tell our readers about the research performed by your Institute in this respect? What kind of studies offered by your Institute has been used in practice in the diamond industry of Yakutia? 

Along this theme our research is focused on defining major directions for effective development of the enterprises belonging to the rough and polished diamond complex levelling possible recessions in the economy of the Republic of Sakha (Yakutia) under the conditions of a sharp decrease in demand for the industry’s production and aggravated world competition, all based on a comprehensive approach to solving this problem. 

Our purpose is to define a development strategy for Russia’s rough and polished diamond complex increasing its enterprises’ competitiveness in the environment of aggravated competition and crisis phenomena in the global economy. The key concept of our work is to consider the rough and polished diamond complex of Russia from the point of view of the world diamond business and regional diamond industry. 

Taking into account the specificity of diamond business and insufficient level of study in relation to economic problems of the diamond industry because of its non-transparence we needed new methods, models and techniques for our research. Creation of an economic toolkit which permits to estimate competitiveness and innovative development of the rough and polished diamond complex enterprises in Russia allows defining directions for their effective development in the conditions of aggravated competition in the diamond business and under the global financial crisis. 

As for our studies applied in practice, it is possible to say that our Institute is taking part in drawing up various programs for developing concrete projects in the diamond industry. 

We left behind the year of 2009 marked by efforts to overcome the sharp phase in the global economic crisis and in Russia’s economy. What is your point of view as far as the condition of Yakutia’s economy and its rough and polished diamond complex are concerned? 

The Republic’s economy is characterized by currently low liquidity at enterprises and organizations. The average ratio value between working assets and short-term liabilities in the republic’s industries and enterprises is not satisfactory for the overwhelming majority of industries and economic activities. 

In the world’s rough market after many years of increased diamond output and rising prices there occurred a slump which will continue until the situation in the world financial market will be completely restored. Shortage of rough diamonds used for diamond jewelry manufacturing, which in 2020 is expected to run at $0.5-1.0 billion, will stimulate a rise in prices for rough diamonds and facilitate increased diamond output. 

The diamond output level reached in 2008 and maintained in 2009-2010 will permit Russia to considerably increase its share in the global rough output, which is currently a major problem in the Russian diamond mining complex. During these years, the ALROSA Group due to the global crisis in the diamond business has a unique chance to become a leading diamond-mining company in the world. 

There are expressed occasional opinions that Yakutia’s modern budget is in many respects based on payments from the enterprises belonging to the rough and polished diamond complex. Do you agree with that? 

No. Right now, the realities of the modern tax and budget system stipulate a strong dependence on gratuitous federal fund transfers and to a lesser degree on non-tax payments incoming from the remaining assets belonging to this region. 

Did your experts predict the crisis in the Russian economy? When, in your opinion, will it end? 

Yes, we study theoretical and practical problems related to manifestations of the global economic crisis and its influence on various industries and the social sphere in Russia and the Republic of Sakha (Yakutia).

 Many economic institutes and scientific economists all over the world participate in drawing up anti-recessionary programs, and they also develop new theories which in the future could help to make more precise predictions about initial and final crisis phases. 

It is possible to agree that the modern economic crisis is considerably different from all the previous crises and consequently other approaches are necessary to develop new methods and models explaining the world economy of the third millennium. The global financial crisis has shown with all evidence that the existing economic theories do not wholly comply with the modern level of society development and do not take into account those enormous changes in the world which occurred within two last decades.  

Some economists in Russia and abroad say that recession may have another comeback. Will you comment on this?  

The crisis process from the point of view of its essence is wavy, and everything depends on its aggregate peak phase – it may influence the economy as a whole depending on the condition of all its components, outlined by a territory. 

Diamond miners and manufacturers often point to China and India as large emerging markets for their production. Being an economist, do you believe these markets are capable to replace the United States and Europe in this respect? 

To understand the nature of changes in the world diamond business it is necessary to define the alignment of forces in the world’s geopolitical order. In this case we shall view the world geopolitical order as a rather steady distribution of geopolitical forces on a global scale and as a stable system of geopolitical interaction.  

To study the world order it is necessary to consider, on the one hand, inertial development processes (in the course of centuries) and, on the other hand, international relations, political communications, etc., for different time intervals.  

Geopolitical periods (cycles) are characterized by certain cycles of hegemony. Focusing of an entire cycle on a hegemonic state, i.e. influence of this nation appears to be decisive for the rest of the world. Hegemony of certain states comes in the following logic sequence: some nation gets obvious undeniable advantages in economy, then in trade and world finance. At the same time such a nation acquires political power as well. There comes an opportunity to streamline the world in one’s own interests (by means of balance of forces). Political hegemony is accompanied by cultural leadership.  

As it happens, the peak of hegemony is very short, after which the hegemonic state loses its power. Hegemony is picked up by some other nation. It is noteworthy that there is a sort of special communication between political hegemony and economic leadership. So the replacement of leadership is inevitable, from the point of view of evolution – everything depends on precedence, and this means that everyone has a chance, Russia including. 

Currently, the United States is an undoubted leader in global diamond consumption, while among other participants of diamond distribution there is going a re-deployment of forces, and India does not enter any more into the group of leaders, while the countries in the Asia-Pacific Region (APR) outstrip the Middle East and Europe in their consumption. The volumes of consumption among the latter have already come even. The high consumption level in these countries is first of all explained by favorable economic conditions and a sales system created by their governments. In the near future, the United States, APR countries, Middle East and Europe will remain major consumers of loose diamonds; there may emerge such regions as China, South America and Russia. 

What will 2010 look like for economic development of Russia and its rough and polished diamond complex? 

First of all it is the correct and timely actions taken at the federal level which help to overcome the crisis situation and stabilize the country and its regions. There is no pessimism about it taking into account the latest results of Russia’s economy. There are complicated problems to be solved, but they are not impossible problems.  

As to the rough and polished diamond complex, the problems related to lost positions in the market, revival of the lapidary industry, making the legislation conform with the market requirements do not give enough optimism to say the industry is competitive. Everything will depend on external factors. 

What are your institute’s plans? If it is possible, tell us, please, about the formation of the North-East Federal University and the role of your institute in it. 

The development program of the North-East Federal University up to 2018 defines the following priority routes of scientific, educational and innovative activity: 

- Innovative technologies, development of equipment for extracting and processing industries under the extreme conditions of the North-East

 - Sustainable wildlife management, ecological safety taking into account the specificity of northern nature 

- Preservation and development of cultures belonging to peoples inhabiting the North-East of this country and translation of their national values.

Realization of all these projects by the North-East Federal University will require wide fundamental studies and applied social and economic research.  

In this connection the institute plans to carry out research activities within the following priority projects: 

Specific features and consistent patterns of development in regional economies in the North.

Theory and practice of wildlife management economy in the North. 

Development of scientific grounds for a complex social and economic development of North-East regions of the Russian Federation on the basis of rational development of their unique natural resources and active participation in inter-regional and international integration economic relations. 

Organizational and economic grounds for innovative development of industry complexes, territorial and production clusters and regional infrastructure taking into account the essential influence of regional conditions. 

Substantiation of methods and mechanisms for implementation of social policy and demographic development, for increasing the population’s level and quality of life in the North. 

Improving regional financial policy and management of financial systems with the purpose of maintaining sufficient build-up and effective utilization of financial resources. 

Rough&Polished, Yakutsk