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Informal cross-border exchanges: reaction to institutional transition

Informal cross-border exchanges: reaction to institutional transition. Ryzhova Natalia Cand. of Science (in Economics) Amur State University, Blagoveshensk, Russia. PURPOSE -.

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Informal cross-border exchanges: reaction to institutional transition

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  1. Informal cross-border exchanges: reaction to institutional transition Ryzhova Natalia Cand. of Science (in Economics) Amur State University, Blagoveshensk, Russia

  2. PURPOSE - is to develop of understanding concept of “informal border trade” with regards to Russian-Chinese case and to link it with paradigm of “institutional market transition”.

  3. STRUCTURE: • theoretical background; • research methodology; • comparison of Chinese & Russian border openness; • description of informal cross-border practices; • assesment of informal China-Russian exchanges & openness. • discussing how informal border trade is related to market transition.

  4. 1st part.Theory of transition & openness In theory following transition paradigm must lead countries to show good economic performance. The transition paradigm comprises flexible price regime, minimal government interventions, private ownership as well as openness to international trade.

  5. 1st part.Theory of transition & openness However there is empirical evidence that openness is not important for economic growth in Africa (Edwards 1998; Yanikaya 2003 and others). Moreover trade openness may even retard growth (Baliamoune 2002). Unexpected outcomes for African countries can be attributed to low quality institutions.

  6. 1st part.Definition In the research context absence of ‘rule-of-low’ = informal cross-border trade. Informal cross-border trade can be referred to as (a) largely unobserved trade of goods and services, passing through, and in the neighborhood of the established customs points along the borders of countries (in the broad sense) (b) unobserved people’s trade of goods in the neighborhood along the borders of countries (in the narrow sense)

  7. 1st part.Statement of the research topic Despite occasional papers about informal border trade in Inner Asia, there is a little evidence about current situation with Russian-Chinese, Russian-Mongolian and other cases in the literature.

  8. Blagoveshchensk (RF) A m u r r i v e r Heihe (PRC) Blagoveschensk Heihe 2nd part. Methodology Case-study approach. Pair of borderline cities Blagoveshensk and Heihe is examined as a special case. Study design comprises inclusive observation, statistical data, mass-media publications, as well as individual interviews.

  9. 3rd part. Chinese border openness “Open border belt” includes: • Capitals of borderline provinces • Borderline cities with openness status (Heihe and Suifenhe of Heilongjiang; Hunchun of Jilin Province; Manzhouli and Erenhot of Inner Mongolia Region; Tacheng, Bole and Yining of Xinjiang Uygur Region; Hekou, Wanding and Ruili of Yunnan Province; Pingxiang and Dongxing of Guangxi Zhuang Regionс • Border economic zones(the same cities + Dandong) • Inland сustoms • Borderline trade zones

  10. 3rd part. Chinese border openness “Open border belt” in Heilongjiang province

  11. 3rd part. Russian border openness Customs + Absence of legislation concerning border trade

  12. 4th part. Informal cross-border practices • Informal border practices exist in several areas: cross-border trade, public catering, construction, industry (including mining), agriculture, logging; also job placement and intermediary services. Trade center. Heihe

  13. 4th part.Practices of informal cross-border trade

  14. 4th part. “Fonar’ ” has to prove that all items in his bag (“baul”) are for “personal use”. Otherwise bag goes to Customs TemporaryStorageDepot followed by customs duties. Straw-men (“Kirpitch” & “Fonaries”) at the border “Baul” (“баул” = big carrier bag)

  15. 4th part.Dynamics of informal cross-border trade

  16. 4th part. 1998: “trade on the ground” (open, non-organized bazaars) 2006: trade in kiosks and open organized bazaars

  17. 4th part. 208: trade in trade-center Near of the biggest trade center “Amurskaya fair” in Blagoveshensk appeared “shuttle-trader” in the bronze.

  18. 4th part.Enforcement Russian authorities regularly tried to increase border trade enforcement. “24 cargos weigh 35 kilo and below were transported from China to Russia through Nizhneleninskoe customs service point by tourist group. Birobodzhan customs services staff having investigation established that all these cargos were received by tourist from tourist agency representative. As a result tourist agency was charged with smuggling” (news from Russian Federal Customs Service official)

  19. 4th part.Main markers

  20. 4th part.Conflict of interest? (1) “In My Honest Opinion, “our” officials “protect” mythic “state interest”, but they don’t care about INHABITANTS RIGHTS” (“Всё дело в том ИМХО - "наши" чиновники "защищают" мифические "интересы государства", а на ПРАВО ГРАЖДАН своей страны – плевать”) (2) Let’s set a custom-house on fire (предлагаю сжечь таможню) // IloveMedvedevIlaveMedvedev…(ЯЛЮБЛЮМЕДВЕДЕВАЯЛЮБЛЮМЕДВЕДЕВЯЛЮБЛЮМЕДВЕДЕВАЯЛЮБЛЮМЕДВЕДЕВАЯЛЮБЛЮМЕДВЕДЕВАЯЛЮБЛЮМЕДВЕДЕВАЯЛЮБЛЮМЕДВЕДЕВАЛЮБЛЮМЕДВЕДЕВАЯЛЮБЛЮМЕДВЕДЕВА) http://forum.amur.info/. Internet forum concerning changed enforcement

  21. 5th part. Assessment of informal Sino-Russian exchanges countries level data Sources: Uncomtrade Database (http://comtrade.un.org)

  22. 5th part. Assessment of informal Sino-Russian border trade cities level data Source: Main indicators in cities at prefecture level (www.chinadatacenter.org); Amurskiy statisticheskiy yezhegodnik (Statistical Yearbook of Amur Oblast); Amurskyi Custom office. Internal statistical data.

  23. 5th part. Assessment of openness Level of “formal” export-openness (volume of export/ GDP, Gross Domestic Product) – according to the official data Level of “formal” and “informal” openness of Amurskaya oblast (volume of turnover/ GDP)– according to author assessment Source: www.chinadatacenter.org; Amurskiy statisticheskiy yezhegodnik (Statistical Yearbook of Amur Oblast); Amurskyi Custom office (internal statistical data); Central Bank Statistical data (internal)

  24. Unlike Russia, China created special border openness institutions. Borderline regions have institutional asymmetry. Market institutions were substituted by informal ones, which resulted in further strengthening of informality in border Russian-Chinese exchanges. Currently informal border trade plays a significant role in the economy of borderline Russian region, but authorities try to decrease informality. Formal economy of Russian region has become less open (in contrast to economy of Chinese provinces, which have become more open). That is why Russian borderline region does not follow “transition paradigm”, as “transition paradigm” includes only formal openness. Unlike formal openness, informal openness is perfect in the Russian region. But does informal openness lead to market economy or not? And does reduction of informal openness develop formal one? 5th part. Summary

  25. Informal cross-border exchanges: reaction to institutional transition Thank you for listening Author's photos as well as photos from AmurInfo site (http://www.amur.info/) are used to illustrate my findings.

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