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Chukotka: results of the year

How to keep the growth rate?

Chukotka: results of the year

Chukotka is, perhaps, one of the most difficult subjects of the Far Eastern Federal District. In Russia there are very few similar regions where financial and economic indicators can vary from year to year, and in any direction. This instability was vividly evidenced by the results of last year, although in 2014 they were more likely with a plus sign.

Chukotka is distinguished by extremely unstable economic and financial indicators, which testifies to the region's weak economy with its vast territory, a tiny population of about 50 thousand people. and a small number of operating industrial enterprises and investment projects, which are also very expensive due to extreme conditions. Nevertheless, in January-August 2014, the volume of industrial production in Chukotka grew more than one and a half times. In the first half of 2014, agricultural production increased by almost half. Okrug authorities made a number of decisions aimed at the development of reindeer herding and crop production, and providing the region with food. In general, the year turned out to be very successful for the Chukotka Autonomous Region, but, given the trends of the past years, it does not at all mean that the region expects rapid growth in the future.

Meanwhile, the current successes of Chukotka were also noticed at the federal level. The region, according to the results of 2013, fell into the top twenty most effective (occupying just 20 place) and was among the three subjects of the Far Eastern Federal District, which were awarded government grants (together with Sakhalin and Yakutia). However, this success, with closer examination, can not be called unambiguous. Such a high place of Chukotka took, first of all, at the expense of its first place in terms of the level of support of the population of the regional executive power. Given the huge size of the territory and the lack of communication, it is not known how large-scale and representative was the sociological survey that gave similar results. Although its loyalty to the population of Chukotka has been demonstrating in the elections since the middle of the 1990-ies, and protest moods and actions for it are not typical. There are no serious opposition structures in the region: even the Communist Party of the Russian Federation could not establish its regional branch here for a long time. If we talk about assessing the effectiveness of the authorities in the social and economic sphere, it was not so high and gave Chukotka the opportunity to be considered at best a medium. In terms of the level of development of the social sphere, the region was at 66 place, according to the level of economic development - at 52-m, and on both indicators, its position deteriorated.

The Budgetary Paradox

It should be noted and a paradox that is not surprising when it comes to such a specific region, that in the same 2013, the Ministry of Finance, on the contrary, considered Chukotka the most inefficient DFO region in terms of the quality of budget management. This was the only region of the DFO, which fell into the worst - the third group. According to the results of 2013, Chukotka excelled and the highest in the Far Eastern Federal District, while the extra-high level of debt burden on its budget (it amounted to 123%). Thus, in reality, it is unlikely that 2013 was successful for Chukotka and its authorities. But in 2014, there have been positive trends in both the economy and the financial sphere. And the federal center began to pay much more attention to the support of this region, which in general is also very unstable.

If we talk about the budget situation, the income of Chukotka is relatively small. In the Far East, only in the Jewish Autonomous Region they are even smaller. At the same time, the region is subsidized. In January-October 2014, its own revenues amounted to 53,2% of all regional revenues, that is, in other words, almost half of Chukotka's funds are received through federal transfers. An analysis of Chukotka’s fiscal sphere shows that there is a raw material sector in the region that contributes to filling the budget, but it is not so large. Thus, the share of income from income taxes in their own regional incomes is 29,5%, at the level of Yakutia and significantly worse than Sakhalin (income tax provides 35,6% of the region’s own incomes). It is also interesting that Chukotka is the leader in the Far East in terms of the importance of revenues to the regional budget of the mineral extraction tax (16,9%). This tax is essential in the Far East only for it, Yakutia and the Magadan region. On the contrary, there are no prerequisites for the development of small business in the region and, as a result, taxes on total income make up the entire 1,7% of own tax and non-tax revenues of the regional budget.

In conditions of an insufficiently stable commodity sector and the enormous costs caused by the climatic factor, Chukotka is forced to rely on the federal center and its assistance. As is known, the Ministry of Finance applies the highest index of budget expenditures in relation to Chukotka, and this makes it possible to receive large subsidies for equalization of fiscal security. They provide the largest part of budget revenues - about 40%. However, the region, in contrast, receives relatively few subsidies and subventions. Therefore, the formation of its budget is a very simple way and on a very small number of channels.

However, 2014 made Chukotka the leader of the Far East in terms of growth of budget revenues. This happened mainly due to the next revision of the volume of subsidies for equalizing the budgetary provision in favor of this region: this volume for the year (or rather, according to data for January-October) increased in 40 (!) Times. Interestingly, budget subsidies, on the contrary, were cut more than threefold. Subventions have experienced relatively moderate growth - by almost 20%. But in general, federal transfers increased by 4,5 times, which, of course, was a huge achievement for Chukotka.

It is important to note that, although the region also knocked out large transfers, at the same time it began to provide a very substantial increase in its own revenues - by 17,7%. A good trend is, first of all, a sharp increase in income from income tax - by 65%. Increases in 34,8% of revenues from the tax on mining, also indicating a new growth in the raw materials sector of Chukotka. On the contrary, income from income tax fell (by more than 6%), revenues from excise taxes, taxes on aggregate income, etc. decreased. The region received a lot of money from selling its assets (growth of revenues by 56%).

Thus, in 2014 (according to the data of January-October) the budget incomes of Chukotka have grown in record way 1,8 times. The main role in this was played by the federal center, but the dynamics of its own income looks good. Nevertheless, given the fundamental problems of the unstable Chukchi economy, which is always reminiscent of the spasmodic dynamics of its indicators, this can not be considered a long-term trend, and each year in Chukotka is different from the others.

As regards the expenditure policy of the Chukotka authorities, first of all, pay attention to a high share of expenditures on housing and communal services (23,3%). Leadership of Chukotka in the Far East on this indicator is not surprising, since utilities in the Far North are worth a lot of money, and there is nobody to take care of the state apart from the state. Due to intensive state support and new construction, Chukotka is characterized by extremely low indicators of dilapidated and dilapidated housing (total 3,6%, according to data for 2013 year). Although the share of loss-making utilities is still high, amounting to 40% (for the same 2013 year).

High costs make Chukotka spend large sums on articles of the national economy, where it finds itself among the leaders in the Far East. But, on the contrary, social expenditures in Chukotka are not so great. One of the outsiders in the region is the share of education spending (22%), incl. The main outsider on the costs of preschool education (total 2,8%). Despite the small population, taking into account the huge index of budget expenditures as a correction factor, it turns out that education and health expenditures per capita or the number of pupils or children attending kindergartens are at the lowest level in Chukotka Compared with all other regions of the Far East.

The social sphere of Chukotka, therefore, is not adequately resourced. Again, at the expense of a small population, it turns out that the region is best provided by teachers, places in kindergartens, doctors and hospital beds in the Far East. But the salaries of state employees in Chukotka significantly lag behind the average in the region. As a result, in 2013, in education they were only 73% of the average (which was one of the worst results in the Far Eastern Federal District), in healthcare - 78%.

Not surprising feature of Chukotka is a rather large number of employees in state and municipal government. In severe northern conditions, this is one of the few opportunities to receive a guaranteed and good salary. Therefore, for example, the number of officials per capita in Chukotka is greater than anywhere else in the Far Eastern Federal District. However, the costs for national issues are at the same level, amounting to 8,1% of the district budget.



There will not be a breakthrough?

Obviously, the center will not be able to increase and further federal financial assistance to Chukotka and will not. The prospects for Chukotka depend on investment projects, the situation with which can not be called unambiguous. For example, again confirming its reputation, the region experienced a threefold decline in investment in the first half of last year. The region is at the start of the implementation of new projects, but the funds in them have not yet gone. If the situation develops in an optimistic scenario, the region will solve two interrelated tasks: attracting large-scale public investments in the electric power industry and launching raw material projects in the western part of Chukotka (Pevek and Bilibino districts) that need new infrastructure. Positive expectations remain with respect to Western investment. The Canadian company Kinross Gold, despite the sanctions and tough stance of its government, has retained interest in its Chukchi assets (the Kupol and Dvoinoye fields, the Vodorazdelnaya field), which are already in operation and will gradually be put into operation.

At the same time, without active support from the federal authorities, the region is still unable to survive under current conditions. This explains the constant attempts to promote Chukotka's interests in negotiations with leading government officials. However, Chukchi projects, on the other hand, are not so important for the Russian economy as a whole, not a single breakthrough project exists there. Therefore, the arguments of the Chukchi authorities do not look so strong in the eyes of the federal center, and the region is supported more from social motives, or through effective lobbying. As a result, Chukotka turned out to be the only Far Eastern region where it was not planned to create territories for outstripping development (although this issue is not completely closed). Priority investment projects claiming federal support were reduced to one project that fell into the second group.

Most actively, Chukotka is now promoting its energy projects, on which the future of its raw materials sector depends. In this regard, it urgently needs support from the government, as well as in partnership with the authorities of the Magadan region, which it was part of until 1993. The current closed-circuit power system of Chukotka with its high tariffs is the strongest deterrent, creating excessively high costs for large businesses. These questions have been repeatedly discussed with government officials, and some positive developments have finally emerged.

As you know, the energy problem of Chukotka is aggravated by the fact that with 2019 gradual decommissioning of Bilibino NPP, a unique power plant, will begin. It is assumed that the nuclear power industry in Chukotka will not disappear and will be represented by a floating nuclear thermal power plant that will anchor next to Pevek. At Pevek, a coal-fired power plant will also be modernized, with a service life of up to 2025. New or upgraded power lines should connect Pevek with Bilibino and nearby gold deposits (Kupol, Dvoinoye). At the same time, it is expected to link Chukotka with an extended power line with the Magadan Region, where the Ust-Srednekanskaya HPP is supposed to work for the mining industry of the region. As a result, the Chukotka power system will be merged with the Magadan power system. Other sources of gold (Peschanka, Kekura), as well as copper (Baimskoye), should receive their energy supply sources or power lines to new power plants.

Thus, in the western part of the region, a new energy system and a new, related raw materials sector of the Chaun-Bilibinsky industrial region should appear. The main perspective of Chukotka is connected with this. The calculations of the Chukchi authorities are such that the implementation of this plan should begin as early as 2015. As the meeting of the governmental commission in December 2014 showed, the federal center supports these plans and calculations. The authorities of Chukotka are also counting on the reconstruction of the airport in Pevek and, in general, pay great attention to the airport infrastructure, the development of which has also been repeatedly discussed with federal officials.

In addition, Chukotka may become one of the beneficiaries of the new Arctic policy of the federal center. According to the decree of President V.Putin, it is entirely related to the Arctic zone and is the only such region in the DFO (Yakutia is assigned to the Arctic zone only partially). Therefore, Arctic projects of the federal government should be extended to Chukotka. The center will also pay attention to the development of the eastern part of the Northern Sea Route, which is beneficial to the ports of Chukotka, including the same Pevek.

The "double" dependence

The peculiarity of Chukotka, however, is its "double" dependence, both from the federal center and from private FIGs. Among the latter, the group of R. Abramovich, the former governor of Chukotka, whose company possesses a number of strategically important licenses in this territory, is, of course, dominant. The business of R.Abramovich, along with Kinross Gold, is most interested in the development of the electric power industry in Chukotka and the construction of an energy bridge from the Magadan Region. This will provide electricity Baimskoye copper deposit, gold deposits Kekura and Peschanka. Probably, the lobbying resource of this FIG has its influence on the promotion of these projects. It was the Baimskoye field that appeared on the list of DFO investment projects claiming state support, presenting Chukotka in this list in the singular.

The political background in the meantime remains very favorable for the authorities, enjoying the loyalty and support of the population, as already mentioned above. R. Kopin is quite noticeable at the federal level, often falling into high positions in expert ratings. His work is highly evaluated by federal experts. In 2014, the mayor of the regional capital of Anadyr was successfully replaced. Former Mayor A. Shchegolkov resigned, and his place was taken by First Deputy Governor I.Davidenko. Then he calmly, with two formal competitors was elected to the position with the result of 83,1%. Thus, the governor strengthened his influence on the municipal authorities of Anadyr, while not abandoning the institution of direct elections. For all 100%, the new Duma of the district center, consisting of 13 United Russia and two representatives of the LDPR, which habitually plays the role of a sparring partner of the party of power (the LDPR candidate was nominated in the election of the mayor of Anadyr) is loyal too.

Although it should be noted that the elections in Chukotka far from always have a referendum character, and in remote territories there are a lot of local contradictions. For example, in the elections for the head of the Chukotka region, the candidate of “United Russia” L. Yurochko won, but its result was not as impressive as that of I. Davydenko (46,8%). In the village of Providence, there was a split in the elite, as a result of which a member of United Russia, an independent candidate D.Olhovik won first place in elections, and the official candidate of the party A.Devyatkin was only the third. However, political life in Chukotka still remains very sluggish, and conflicts arise only during individual local election campaigns.

So, it is very difficult to ensure sustainable socio-economic development in Chukotka. It is important to ensure that the region does not fling from side to side year after year. Opportunities for this exist. First, even if the volume of federal transfers that was received in 2014 is preserved, it gives Chukotka authorities good opportunities to finance their projects. Secondly, our own tax base is still growing, and this is encouraging, since growth is related to the implementation of mining projects. Thirdly, the decision on the development of the Chaun-Bilibin industrial hub and construction of the energy infrastructure will allow the region to realize its most promising new project. The authorities of the region, and the FIG of R.Abramovich are interested in this, and the government supports the project. The Bering coal basin project is less advantageous for the region, but it has a more convenient geographic location, and it can be launched relatively quickly if there is investment. If all these plans are implemented, the Chukotka budget will receive the extra funds that are very necessary for it, which will help improve the social and transport situation.

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