Irkutsk
Ulan-Ude

Blagoveshchensk
Chita
Yakutsk

Birobidzhan
Vladivostok
Khabarovsk

Magadan
Yuzhno-Sakhalinsk

Anadyr
Petropavlovsk-
Kamchatsky
Moscow

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Amur Region: results - 2015, trends - 2016

East Russia continues the cycle of analytical publications devoted to the results of the past year and the analysis of the situation in the current year in the socio-economic and political spheres of life in the regions of the Far East and Eastern Siberia

The socio-economic development of the Amur Region can now be associated with laying the foundations for future probable growth, while the current state of affairs in the region remains very difficult, especially in the financial, budgetary and social spheres. The region has found itself in a situation where its former resources have been exhausted, and the launch of new projects is urgently required, but their quick implementation is simply impossible. Therefore, while the leadership of the region and its residents have to wait and survive, especially since little depends on them: key decisions are made by FIG and federal authorities.

Amur Region: results - 2015, trends - 2016

Rostislav Turovsky

Doctor of Political Sciences, Professor of HSE, Scientific Editor East Russia
In the Amur Region, the factor of geographical location worked very well, since the region is not only located on the border with China, but also after the launch of the ESPO oil pipeline has become a key transit point on the way of transporting Russian energy resources to a neighboring state. However, if the oil pipeline “passed” the regional economy, then the new Power of Siberia gas pipeline, the construction of which has already begun in Yakutia and the Irkutsk region, can have a much more powerful impact on the region and turn it into a growth point for the Russian fuel and energy complex. We are talking about the creation of a large gas processing and gas chemical complex. In a sense, the Amur Region was lucky, since several years ago gas processing was planned in the Irkutsk Region - in connection with the development of the Kovykta field, which was already being prepared at that time, the gas of which contains impurities in the form of helium, etc. However, the inclusion in the export project of two equal fields located in different regions of the country - Kovykta and Chayandinsky, required the creation of processing at a more convenient point where both streams converge, and this point was the Amur Region.

Last year, a number of principled decisions were made to launch a gas project in the Amur Region, where Gazprom and SIBUR are the stakeholders. By his order, Prime Minister Dmitry Medvedev included this project in the system of facilities of the "eastern route" of gas transportation and export. Gazprom signed an agreement with the Ministry for the Development of the Russian Far East, and the promised investments amounted to 800 billion rubles. It is assumed that a priority development area (ASEZ "Svobodnensky") will be created for this project, investments in which can reach 1,3 trillion rubles. It is not surprising that such a large-scale project received the direct support of the head of state, who launched it last fall while in the Amur Region.

So far, of course, we are talking only about projects and promises. It is no secret that the Power of Siberia project itself is experiencing difficulties caused by the fact that the demand for Russian gas from the Chinese side in the volume Russia wants is not guaranteed. In the years before the launch of the gas pipeline (deliveries are planned to start in 2019), much can still change, given the growing crisis in the Chinese economy. On the Russian side, there is still no complete clarity about the gas-chemical component of the project, for which SIBUR is "responsible". So far, Gazprom is showing more activity, planning to start processing gas. It is also noteworthy that the decision to apply the TOP regime to the gas project, which will certainly be beneficial to Gazprom and SIBUR. Also, this move will make it possible to talk about the success of the TOP project as a whole, since it promises huge investments, probably much larger than in all other TOPs.

Regional ASEZs and industry projects

Meanwhile, the Amur Region, even without this project, distinguished itself in creating the TOP: last year, the government approved two such territories, which indicates special attention to this region (two TOPs, along with it, received last year only the “central” regions of the Far Eastern Federal District - Primorsky and Khabarovsk Territories). However, the ease of making decisions on the Amur TORs was largely due to the requirements for federal budgetary funding, which were obviously absent in their projects. ASEZ "Priamurskaya" will be financed only from extra-budgetary sources. In addition to business, the regional and city budgets will invest in the Belogorsk ASEZ. Moreover, problems may still arise with regional financing of the PDA, given the critical situation in regional finances (see below).

Thus, the already approved ASEZs of the Amur Region, in fact, also do not have full guarantees of their implementation. The projects themselves, however, look quite positive. ASEZ "Belogorsk" is focused on the agro-industrial complex. Here it is planned to create deep processing of soybeans ("Amuragrocenter"), the production of animal feed ("Agrotechnology") and a bakery ("Belkhleb"). ASEZ "Priamurskaya" involves the construction of a small Amur refinery, a cement clinker production plant and a logistics center. As you can see, the projects of the Amur ASEZ, in contrast to the future gas megaproject, on the contrary, look very local. But for a lagging region this is very important.

The raw material industry, more familiar to the region, gold mining, also received federal support. In this case, the number of priority investment projects included gold mining in the remote Selemdzhinsky district in the BAM zone, which the Petropavlovsk group is going to carry out. Electricity infrastructure facilities will be built here at government expense. Recall that the Russian-British Petropavlovsk is already one of the leading players in the region, actively engaged in gold mining. But in the most recent years, the company has found itself on the brink of financial ruin, and only recently has the situation been rectified. Federal support for her new project also played a role here. Although another ambitious project of this group - to create mining and processing of iron ore (Garinskoye deposit) in the Amur Region is far from being realized. Even larger projects for the development of coal deposits (the Herbikano-Ogodzhinskoye deposit) and the construction of perhaps the most powerful thermal power plant in the country with the expectation of export to China did not receive a clear perspective last year either. Rostec showed interest in this project.

Therefore, for now, the mining industry of the Amur Region is limited to gold mining, but this is not bad either. In addition, there have been attempts last year to secure government support for the small copper-nickel mine Kun-Manye (UK's Amur Minerals). But in this case, no decision has been made. The region seeks to cooperate with the Far East Development Fund and expects, together with interested businesses, to attract its funds. Governor Alexander Kozlov himself at the end of last year was included in the government commission on the socio-economic development of the Far East and the Baikal region, which, by the way, does not include all the heads of the subjects of the Far Eastern Federal District.




Big projects, big problems ...

Meanwhile, in the Amur Region, another federal megaproject, the Vostochny cosmodrome, is being implemented with great difficulties, in the future, designed to replace Baikonur. However, here the picture was overshadowed by an endless series of scandals caused by financial irregularities, non-fulfillment of contracts, delays in the payment of wages, fraud in the allocation of funds to contractors, etc. A significant part of the funds allocated by the center was not utilized at all. The Accounts Chamber, for its part, considered the cost of many objects overstated. During the year, in parallel with the construction, investigations of the machinations of the former management of Dalspetsstroy (a structure of the federal Spetsstroy) and contractors continued.

As a result, as expected, it was not possible to meet the deadlines for the project. One of the turning points was the visit of Vladimir Putin to the cosmodrome under construction. At that moment, the obvious decision to postpone launches to 2016 was announced, with the obligatory completion of the construction of the long-suffering cosmodrome, which is the largest recipient of federal funds in the Amur Region. There are, however, fears that in the context of budget cuts and the forthcoming optimization of the Federal Space Program (FKP), not all plans will be fulfilled. In particular, it is planned to reduce the number of launch sites. Nevertheless, the launch of the cosmodrome is still approaching.

Among other large and unfinished projects in the region, the construction of the Nizhne-Bureyskaya HPP, which is part of the RusHydro structure, continues. It is expected that it will also be launched in 2016. Recently, a dispute arose between the company and the authorities of the Amur region over financing the preparation of the reservoir bed (the regional authorities believe that RusHydro should do this at its own expense). We should also expect an inflow of investments through Russian Railways, which is modernizing the BAM and Transsib and should receive funds from the NWF for this.

Thus, the Amur Region looks like a region with a considerable number of unfinished but promising projects. At the regional level, there is also a revival that can stimulate the growth of small and medium-sized businesses, which is so important for the territory. Firstly, since the time of the former governor Oleg Kozhemyako, the authorities' interest in the agro-industrial complex has been evident, given that the Amur Region in the Far East is still one of the most favorable agrarian regions, incl. for growing soybeans. One of the results of this interest was the project of TOP "Belogorsk".

Secondly, attempts are being made to organize and raise the tourism potential to a higher level, primarily through cross-border Chinese tourism. Last year, the influx of Chinese tourists to the region has already grown without any drastic decisions. Now it is planned to build a cable car across the Amur, about which an agreement was signed between the Russian and Chinese governments. This could be a simpler and cheaper solution than the bridge that has been talked about for over 20 years (although a new bridge project is also in the works). Tourism is also seen as a good way to revive business in Blagoveshchensk. In the meantime, the region, alas, received an “unsatisfactory” rating based on the results of the implementation on its territory of the federal target program “Development of domestic and inbound tourism in the Russian Federation”.

So, a situation is emerging when authorities at all levels and interested businesses create conditions for the future development of the Amur Region, which can become one of the economic leaders of the Far Eastern Federal District. This is also shown by the corresponding statistics. Last year (according to data for January-November), the Amur Region showed an increase in investments in fixed assets by 38,6%, becoming one of the leaders of the Far Eastern Federal District in terms of investment dynamics (second in terms of growth rates after the Magadan Region). There was a huge increase in the volume of construction work - by 66,4% per year (the leader in the Far Eastern Federal District in terms of growth dynamics). Although such a successful dynamics is associated with several projects, work on which may be completed in 2016 (the same cosmodrome and hydroelectric power station). Therefore, to maintain the level and dynamics of the region, the earliest launch of new projects in the same ASEZ, gold mining, etc. is needed. Otherwise, the rise may be replaced by a decline, and further dynamics will be wave-like, if not abrupt.

On the other hand, the current economic base of the region is too weak to count on. The industry of the Amur region last year sank heavily - by 9%. In the agro-industrial complex, we can talk about stagnation at most (a decline of 2%). Do not lead to new or planned projects and to improve the social situation. Real money incomes of the population decreased by 4,9% over the past year. The decline in retail trade turned out to be even more noticeable - by 6,2% (one of the worst results in the Far Eastern Federal District, along with the Magadan Region). The lack of positive shifts in trade indicates, incidentally, that Chinese tourism does not contribute to the development of the trade sector in the Amur Region, which, however, is not surprising.



The budget crisis

Under these conditions, the budget crisis, of course, was not accidental, the signs of which, without any reservations, can be spoken about in relation to the Amur Region. Moreover, the aggravation of the financial situation in this case is explained by the reduction in federal aid, which hit the region hard. The revenues of the consolidated regional budget last year fell in absolute terms - by 3%. The decline in income was due to a sharp reduction in federal transfers - by 27,7%. Moreover, the decline in subsidies amounted to 41%, i.e. there are almost half of them. Previously, large-scale subsidies for the region were associated with overcoming the consequences of the catastrophic flood in 2013, and since then it has been steadily declining. Subsidies were also cut - by 13,25%, incl. to equalize budgetary provision - by 6,8%. Only on subventions the center even increased its assistance to the region - by 9,1%. But this did not save the general situation.

Thus, a rather strange situation arose when the center began to treat the Amur Region as a region where the financial situation was improving, considering this as a reason for refusing support. In part, this position was correct, since the region's incomes increased, indicating a stable and even improving position of business structures. Own income increased by 9,85%, incl. on income tax - by 12,3%. The only major tax that stagnated was, as expected, income tax (up 0,6%). For all other significant taxes and fees, the state of affairs was very good: an increase in excise taxes by 8,3%, in taxes on total income - by 7,9%, in mineral extraction tax - by 21%, and in property tax organizations - even by 31,9%. However, as already stated, this did not help offset the reduction in federal transfers.

As a result, the authorities of the Amur region chose the path of austerity, although this could have negative consequences on the eve of the gubernatorial elections. However, they had no other options, since the debt burden on the region was already enormous, and the center, for one reason or another, stopped injecting into the region. The Amur Region reduced its budget expenditures by 13,8%, becoming one of the Russian leaders in terms of the rate of their reduction (it was worse only in Sevastopol). Moreover, she very toughly walked precisely on socially significant expenses that can affect the well-being of the population. One of the main "victims" turned out to be housing and communal services - a decrease in expenses by 34,9% (the largest in the Far Eastern Federal District). Education (minus 12,8%, the sharpest decrease not only in the Far Eastern Federal District, but also in Russia as a whole), health care (-13,7%, the sharpest decrease in the Far Eastern Federal District), social policy (-15,7 %), culture (-13,35%). Interestingly, spending on physical education and sports increased (by 6,9%), but in general they are small. "Economic" items were also reduced, but to a lesser extent: road facilities - by 6,5%, agriculture and fishing - by 8,8%. Expenditures on general government issues, however, remained at the same level (minus 0,8%). Part of the savings had to be spent on debt servicing (an increase of 40,1%, and their very share reached 3,7% in the expenditure side of the budget). At the same time, despite the reduction in expenditures, the budget at the end of the year was still reduced with a significant deficit - 17,8%, the largest for the regions of Russia. It is noteworthy that the budget for 2016 adopted in the region provides for further cost cuts.

The dead-end situation in which the Amur Region finds itself in terms of its financial position is largely caused by the region's debt burden, the further growth of which would be extremely dangerous. As of January 1, 2016, the Amur Region had the third largest public debt in the Far Eastern Federal District (more than 30 billion rubles), just slightly inferior to the Khabarovsk Territory (and seriously inferior only to Yakutia). The ratio of state and municipal debt to the region's own income was 79,6% at the end of last year. At the same time, the authorities of the Amur Region clearly do not want to remain in debt bondage: over the year, the state debt grew by only 8%, which is very good by Russian standards and is below the average. The region remained with the same level of budget loans (an increase of 0,8%), but nevertheless increased its debt to banks (by 12,8%). At the same time, it is said in the public sphere that in the future the regional authorities, on the contrary, will repay debts to banks, which may lead to an increase in the volume of budget loans that are attracted for on-lending. In the meantime, the municipalities even slightly reduced their debt (by 1,1%).

Thus, the Amur Region began to “tighten the belt”, trying to survive the unfavorable period. Again, we emphasize that the center, while making and considering various “major” decisions, did not take into account the current needs of the region, which may have been explained by the weakening of the lobbying resource after the change of the governor.



Change of power and political situation

In such difficult socio-economic conditions, governor elections were held, caused by the transition of Oleg Kozhemyako to Sakhalin and the appointment of Acting Governor Alexander Kozlov, who had held the post of mayor of Blagoveshchensk since the year before last. On the one hand, the continuity of power was ensured in the region. The young manager Alexander Kozlov, who took over as head of the region at the age of 34, worked in one team with Oleg Kozhemyako and, with his support, was elected the head of the regional capital. On the other hand, the new head of the region got a heavy financial "legacy", he allowed an imbalance in relations among the elites and, moreover, was not very popular (in the elections for the mayor of Blagoveshchensk in 2014, he won 38,7% of the votes). The center also did not actively support Alexander Kozlov, incl. finance (except that before the elections the region was given a budget loan, and in the summer they restructured the debt, postponing payments from 2016 to 2019).

As a result, the elections in the Amur Region were among the most competitive in the country.

Moreover, in conditions when Alexander Kozlov barely overcame 50 percent the bar in the first round, the Liberal Democratic Party initiated speeches and rallies for the cancellation of the results of the first round, claiming falsifications. Although no real violations were found, and the party did not continue the tough conflict with the governor. A de facto alliance with Fair Russia, which refused to participate in the elections, helped Aleksandr Kozlov, which ensured the victory of the governor in the first round. It is noteworthy that the earlier replacement of the head of the regional party organization of the "Social Revolutionaries" with a more loyal to the authorities caused acute internal conflicts there, but the party was not allowed to go over to the opposition.

Aleksandr Kozlov's relations with United Russia also developed with difficulty, since he made a decision to replace the senator from the executive branch, who was the secretary of the regional political council of the party Nikolai Savelyev. This led to a decrease in the activity of party members for the head of the region. Although, in the end, Alexander Kozlov did not lose anything, having led the experienced public and political figure Alexander Suvorov to the Senate, while the party was headed by the speaker of the regional legislative assembly, Konstantin Dyakonov. The change of power in Blagoveshchensk also proceeded quite smoothly, where, as one would expect, the direct election of the mayor was abandoned. The city administration in the status of the head of the municipality is now headed by Valentina Kalita, who worked as deputy and first deputy mayor in 2004-08 years. (then she worked in business structures), and the city duma was an experienced deputy, a native of doctors Stepan Popov.

Nevertheless, there is still no need to talk about the stabilization of the management situation in the region. One of the reasons was the flow of some of the personnel to Sakhalin, following Oleg Kozhemyako. As a result, the reorganization of the regional government and personnel changes have become a permanent process. By now, the composition of the executive branch has stabilized. Alexander Kozlov seeks to strengthen his position in power and take it under his control. In addition, he is engaged in constant inspections of the budgetary sphere, being for obvious reasons concerned about the problem of the effectiveness of budget expenditures.

As a result, the state of affairs in the Amur Region can hardly be called anything other than turbulent and contradictory. Large and promising projects are combined with very complex realities. At the same time, the regional leadership has not yet gained sufficient apparatus weight and influence at the federal level to effectively promote regional interests. The New Year does not promise any breakthroughs so far, and therefore the “survival mode” will still characterize the current situation.
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