Report - UNDP Russia

various other long-term problems in addition tofinancing. These regions find it difficult todiversify their economies due to negative impactof rising prices, which lowers competitiveness ofnon-resource industries. Nevertheless, humandevelopment potential in these regions can berealized if more funding is combined withinstitutional modernization of the socialenvironment, increasing efficiency of suchinvestments.There are much greater opportunities forhuman development in regions with diversifiedeconomies, large cities, more ‘modernized’ lifestyle, and established networks of social services.But Russia’s centralization means that theseregions are strictly limited in their efforts byshortage of financial resources and of authorityto act. The new crisis has once againdemonstrated that the existing relationshipbetween the center and the regions lacksstability and does not stimulate institutionalmodernization of more developed regions. Insuch regions the main vector of development, setby federal government, should be supplementedby competition between social practices, helpingthese regions to choose a path of developmentthat will help them to attract and retain the mostscarce of Russia’s resources – people.43