Report - UNDP Russia

country’s fuel & energy regions report adramatic increase in unemployment. The crisishas demonstrated again that the existingrelationship between the federal center and theregions lacks sustainability and fails tostimulate institutional modernization of fuel &energy territories.The Chapter also offers analysis of theHuman Development Index (HDI). In 2007 overone quarter of Russia’s regions (22 out of 80)were rated as ‘developed’ by the HDI. Thethreshold for this group is 0.800. In 2006 Russiahad almost twice fewer developed regions (12in total). The improvement reflects growth ofthe income index. Nearly half of the developedregions are specialized in extraction of fuel &energy resources (more than half if regionsspecializing in processing of these resources areincluded). Consideration of the populationchart for high HDI regions makes the progressmore vivid: in 2007 one third of Russia’s peoplelived in regions with high HDI, while only a yearbefore only a quarter lived in such regions. Ingeneral, 2007 was very successful for Russiafrom the point of view of human development,but it should be remembered that the mainfactor in this success was income growth, whichrelied excessively on international marketprices for oil and metals.Chapter 3: Personal Incomes, theEnergy Sector and the Crisis points out thatprogress of personal incomes and employmentdetermine the vector of human developmentchange in the aftermath of the crisis. Personalincomes in Russia on the eve of the crisis were1.3 times higher than in the last years of theSoviet period. But development of the Russianmarket economy had created incomes frombusiness and real estate, which came torepresent a significant part of personalincomes, and these were the incomes, whichsuffered most from onset of the crisis. Thechronic nature of the crisis became evident inearly 2009 and the Russian labor market beganto react in its traditional fashion: salaries shrankfaster than employment rates.Energy-related business hastraditionally been highly paid and not verylabor intensive. Employment and wages indifferent energy industries reacted differentlyto the crisis: the effect was serious in the oilsegment, but much less serious in other energyindustries. The overall energy sector reportedsmaller reduction of employment and payrollindicators compared with the nationaleconomy as a whole. The energy sector hasrelatively low intra-industrial payrolldifferentiation, and cannot be a source ofpersonal income inequality due to its smallnumber of employees.The main impact of energy sectordevelopments on living standards of ordinarypeople is via housing utilities. The share ofexpenditures on housing utilities in Russianhousehold budgets is small compared withother countries. There are two main reasonsfor this: inadequate technical and institutionalstate of the housing utility segment in Russia,which entails low-quality services; and highdifferentiation of household expenditures onutilities, which means that significant tariffincrease would force most Russianhouseholds to seek social assistance(subsidies) or become non-payers.Rising living standards, popularizationof high-tech living habits, as well as growinghousing construction during the period ofeconomic growth have resulted in increasingenergy consumption by the public. Thesetrends will continue, entailing further increaseof the household share in overall energyconsumption.Chapter 4: The Energy Sector andPublic Health points out that environmentalpollution caused by the energy segment is aserious health hazard. Development of theenergy segment should take account both ofexisting environmental conditions in variousregions and new environmental requirementsissued by international authorities. Manypolluting fuel refineries and energy plants arelocated in population centers and some are in9