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The Far East: Economic Phobias and Geopolitical Ambitions

Once again, that the new is a regularly forgotten old

The Institute of Economics and Industrial Engineering of the Siberian Branch of the Russian Academy of Sciences publishes the "EKO" magazine, known and recognized in the scientific world, from the year 1970. Several issues of this journal in recent years have been devoted entirely to the development of the Far East. On the eve of the Eastern Economic Forum, the IEIOPE SB RAS decided to compile the best publications on these topics in the book. Readers of IA Eastrussia have a unique opportunity to get acquainted with some texts even before it leaves the press - within the framework of the joint project "ECO - Far East". The authors of the first material in this series are the academician of the Russian Academy of Sciences Pavel Minakir and the director of the Institute of Economic Research FEB RAS Olga Prokapalo.

The Far East: Economic Phobias and Geopolitical Ambitions
Photo: TASS, special project BAM - 40 years (
The modern “turn to the East” actually reflects the growing need for strengthening the eastern geopolitical and geo-economic vector in conditions when the possibilities of an extensive increase in export earnings in European markets are exhausted, and new opportunities for extracting foreign trade rent have not appeared.

The last 15 years for the Russian Far East took place under the sign of the "vigilant care" of the media, a huge number of regional experts and managers of all ranks about the development of the region, which allegedly faces dire threats not only for him but for the whole of Russia. Among them - "oblivion of the region center", the prospect of separatism, "Chinese expansion", depopulation, primitivization of the economy, etc.

For the first time in modern history, the thesis of the need to "save" the Far East from all these threats was voiced in 2001 in Blagoveshchensk by Russian President Vladimir Putin. Then the events began to develop quickly. In 2002 the next state program for the development of the region was adopted. In 2008-2012, huge state funds were invested in the preparation and holding of the APEC summit in Vladivostok, in 2012 the Ministry for the Development of the Far East was created, in 2013, the plenipotentiary representative of the President of the Russian Federation in the Far East was appointed simultaneously the vice-premier of the government of the Russian Federation, in the 2015-2016 years, federal laws on the "new economic policy" in the Far East (TORs, Vladivostok free port, "Far Eastern hectare") were adopted, new incentive measures were introduced (transport subsidies, ergotarifov).

All this created the illusion that the history of the development of the Far East began only now, and the past was a chaotic heap of delusions, failures, failures, with the consequences of which the "national priority for the entire 21st century" proclaimed in 2013 was called to struggle.

In fact, the economic and political history of the Far East began in the middle of the seventeenth century, when Russia reached the Sea of ​​Okhotsk. The creation of the Okhotsk fort in 1647 completed the 60-year history of movement through the whole of North Asia. But only after the incorporation (1858 of the year) of the Northern Amur region and (1859 of the year) of the Ussuri region in the Russian Empire, systematic activity began on the economic development of the region and the geopolitical capitalization of Russia's Pacific status. From the moment of the southern part of the Far East joining Russia, the economic colonization of the region itself and the formation of the eastern vector of the country's military geopolitical intentions were two sides of the same coin: one or the other came to the fore.

And the modern "turn to the East" actually reflects the worsening of the need to strengthen the eastern geopolitical and geo-economic vector in conditions when the opportunities for extensive increase in export revenues in European markets have been exhausted, and new opportunities for extracting foreign trade rents have not appeared. At the same time, the idea that the Far East - semi-desert or desert territory (in the economic sense), intensely cultivated in the ordinary consciousness, is completely untrue. For 150 years in the region developed economic and social complexes. Yes, in the 1990-s the region lost a significant part of its economic potential and population. But it happened in other regions of the country. Yes, the state of its infrastructure, which, like the economy, was oriented toward resolving military and political tasks, requires considerable modernization and development in order to meet new demands dictated by geo-economic policy. This kind of infrastructure modernization took place in the region for the last 10 years. But is it sufficient to trigger the generation of social and economic development in the region? Can economic and social development in the Far East be supported without "extraordinary" institutional and financial regimes?

During the 160-year period of colonization and development of the social and economic environment in the Far East, a peculiar cyclical approach and tools for regional development emerged, both in the sphere of the "center-periphery" relationship and in the field of "geopolitics-geo-economics". Without a claim to the accuracy of the chronology, we can distinguish the alternation of periods as centralized control and provision of development resources, as well as relative autonomy in determining the goals and objectives of development, as well as the formation of economic resources.

Cycles of regional development and management in the Far East
Period The main source of development resources Target setup
1860-1917 years. National Center Population of the region. The creation of an economic base for access to the Asia-Pacific region and the establishment of Russia's military-political control in Northeast Asia
1922-1930 years. Intraregional Generation and Export Revenue Restoration of the region's economy
1930-1945 years. National Center Creation of military-industrial base
1946-1960 years. Intraregional generation Maintenance of the economic and social environment in the region
1960-1990 years. State Center and Foreign Borrowing Development of the military industrial base and creation of a national export base
1991-2002 years. Intra-regional generation, foreign investment and export earnings Maintenance of the created socio-economic complex
2002-2016 years. Combination of intraregional and centralized sources Creation of an infrastructure corridor for national raw materials exports, creating a positive image of Russia in the Pacific region

In fact, the history of the management of the development of the Far East falls into two large periods. The first almost 60 years is a consistent, government-funded policy of increasing military, economic presence on the Pacific Coast and settling the region in order to ensure Russia's geopolitical dominance in the Pacific. The newly annexed lands were economically and demographically deserted. In 1861, special substantial benefits were introduced for migrants from Siberia and European Russia: allotting tithes to a family in 100 for a family with an installment payment plan of 20 years, exemption from taxes and recruitment for 20 years, the right to buy land at 3 for ten rubles , the free establishment of factories and plants and the introduction of free trade throughout the territory of the general governorship. The result was impressive - by 1880, more than 500 thousand people moved to the Far East. At the same time (following the example of the development of Australia by England), prisoners began moving to the Far East. In order to overcome geographical and transport isolation from European Russia, in 1860, the seaports of the Primorsk region were granted the right to free trade in foreign goods.

Since 1880-ies, Russia entered an industrial race, and domestic capital demanded new markets. There was a need to create a powerful military and economic base in the Far East to protect Russian interests. And with 1881, new benefits were introduced for resettlement to the Far East, in particular the state's obligation within five years to partially reimburse the expenses of the settlers from the treasury. Since 1891, the construction of the Ussuri railway has begun, which has increased domestic consumer and production demand. By 1896, the population of the Amur governorate general exceeded 1 million people. A new impetus was the resettlement of peasants from European Russia to the region as a response to the Stolypin reforms. Until the First World War, the region quickly and successfully developed.

After the end of the Civil War and up to 1930, the center could not help the region, which operated in a regime of relative autonomization. All resources were concentrated in the most effective at that time branches (forestry, fish, gold mining, coal). As before, the main market for them was North-East Asia, and foreign trade revenues played a significant role in the formation of accumulation and consumption funds in the region. Attempts to attract foreign capital through concessions to projects to restore the region's economy failed: their subject was the same effective industries, which were guided by local resources. There was an implicit competition, to which the ideological concerns of the Center were added, which led to the rapid curtailment of concessions.

Of decisive importance was, of course, fiscal and financial autonomy in this period, although the region's budget deficit was about 30% and was financed from the Center. By 1928, the accumulated capital in the economy of the Far East exceeded 1 billion rubles (more than 60% accounted for by industry and transport). At the same time, the sixth part of all the accumulation resources was provided by an active foreign trade balance. Already by the time of 1928, this allowed to restore the prewar level of the economy, which still remained at the same time agrarian (70% of the region's gross product).

Since the end of the 1920-ies, a rollback began from the NEP and the creation of an integrated national complex. In this new political zigzag autonomous operation of the Far East, of course, did not fit. In addition, the significantly increased scale of the Far Eastern economy itself required significantly more resources, which resulted in a closer alignment of regional development goals and resources with the all-Union ones. Due to the inertia in the design of the first five-year plan, the region was tasked with intensifying its production specialization in every way, which should ensure an increase in the "exportation of its products to the USSR for covering normal needs." However, firstly, the course of the first five-year plan showed that the expectations for the growth and restructuring of the region's economy under the previous scheme of resource provision are heavily overstated (in 1928-1932, investments amounted to more than 1 billion rubles, which corresponded to all the accumulated to 1928 regional Capital, but the growth of industrial production instead of the planned 400% reached "only" 200%). Secondly, the situation on the Far Eastern borders deteriorated sharply due to Japan's military preparations and the growing border conflicts.

As a result, decisions of the All-Russian Central Executive Committee and the Political Bureau of the Central Committee of the CPSU (B.) On the economic development of the Far East were already adopted in 1930. For the first time, the task was to provide a higher rate of industrial development for the sake of creating a "own solid material base" autonomous in the main production and infrastructure elements of the economic complex, capable of providing an army and navy in the rear during a large-scale military conflict. Since 1932, a massive redistribution of all-Union resources in favor of the Far East began, with more than 7 billion rubles invested in its economy (6,8 times more than in the previous five-year period). The main investment targets were not export resource industries, but completely new ones (shipbuilding, chemistry, car repair, energy, oil refining, fuel industry, non-ferrous metallurgy). The transport infrastructure grew particularly rapidly (investment growth over 1928-1932 years - 4700%). As a result, industrial output increased 3,35 times, and in heavy industry 4,3 times. The Far East has turned from an agrarian into a super-industrial region with an industry share in gross product of more than 80%.

To provide labor, a purposeful resettlement policy was implemented, the main component of which was the forcible transfer of prisoners. According to Lloyd's indirect data, more than 1 million people were transported by sea to the Far East alone, as much as the population of the region by the beginning of the 20th century.

In 1938-1942 years it was planned to continue the accelerated development of the industrial complex of the Far East, allocating more than 19 billion rubles in capital investments (2,7 times more than in the second five-year period). Over 10 billion rubles was invested in the region before the war. The share of the region in the all-Union capital investments increased to 7,5%. The outbreak of the war did not hamper the development of the economy. The share in investments has even increased to 7,8%. The extraction of gold, tungsten, molybdenum, and oil has significantly increased. There was ferrous metallurgy. The population exceeded 4 million people.

After the end of the war, the situation in the economy of the Far East became similar to the 1920-mi years. The resources had to be reoriented to rebuild the European regions, and the military tension, which required the creation and expansion of the military-industrial potential, also seemed to disappear after the victory over Japan and the establishment of the PRC. The share of the region in centralized capital investments decreased by half, although their absolute volumes remained large (it was necessary to support almost 500-thousand military unit and industrial-military complex). But unlike the 1920-ies, when resources at 70% were formed within the region and at the expense of foreign trade income, after the war the reduction in the opportunities for obtaining centralized resources was not compensated by foreign trade revenues, although by 1958 the volume of foreign trade turnover of the Far East increased in comparison with 1938 year in 15,5 times. The region has lost its special institutional status, and with it the priority in allocating centralized accumulation resources, but also the possibility to use foreign trade revenues as such a resource. Without these significant factors, which offset the "enclave" of the regional economy in the 1920-X, the situation deteriorated significantly.

It was during this period that the idea of ​​growing problems in the economy of the Far East arose because of the lack of resources for "integrated development". Since 1920-s, central planning was based on the canonical concept of regionalization, according to which economic regions were treated as economic combines in which "all individual elements are brought into mutual relation by the mutual conditioning of the production processes themselves." This approach implied that the economic region (district combine) should be a combination of proportionally developing industries on the territory of the economy. Of course, the lack of resources in 1950 to maintain such proportionality and the formation of an economic barrier on the western border of the region due to the growing competition from Siberia, as well as the limited opportunities for using the external market, have led to a number of disproportions.

It was necessary to concentrate resources in the fields of specialization, limiting the development of complexing industries and infrastructure. However, even with the availability of resources, the narrowness of the domestic market excluded the formation of a “proportional complex” oriented towards intraregional consumption, and because of the increased costs, such a complex could not be oriented towards the all-Union market. The way out was to restore the elements of the 1920's regional development model, when external demand determined the scale and structure of the economy of the Far East ... From a practical point of view, it was not so much about trading effects, but about attracting investment from abroad. The actual trade effects were partially restored in the form of coastal trade, which, it is true, was mainly important for local industry.

The concept of export specialization turned out to be in demand in the conditions of reforming the Soviet economy, based on the principles of market efficiency in the use of economic, including spatial resources. Very quickly this concept was converted into political decisions, opening the way for attracting foreign investment to the Far East in the form of compensation agreements that stimulated the development of timber, fish, coal, gas production complexes in the region and somewhat improved the balance of the consumer market. In essence, as in the 1920-ies, the situation of a "special" economic region was created for the Far East.

By the middle of the 1960-s, due to the aggravation of the geopolitical situation in the Far East due to the threat of a military conflict with China, priority was restored in the distribution of centralized investments that were directed, in accordance with resolutions of the Central Committee of the CPSU and the USSR Council of Ministers of 1967 and 1972, in the development of heavy industry, the creation of defense enterprises and the infrastructure of the region. The development of the industrial complex and the construction of new enterprises required a significant increase in the number of employees, which caused a new wave of resettlement in the Far East. Along with the strengthening of the military group, this significantly increased the population of the region. The construction of the Baikal-Amur Mainline, a typical military infrastructure project that was ideologically based as a program for the economic development of new territories, became the apogee of centralized resource “pumping up”.

The average annual growth rate in the region's industry due to increased investment in the heavy and defense industry began to outstrip the average alliance (108,8% vs. 108,5%) for a short time. For specialization industries that more than half formed the general industrial growth rate, there was not enough resources, as well as auxiliary and servicing industries, whose capital intensity increased almost twice as compared to the pre-war period.

However, in the 1980-ies the situation has changed significantly. The shortage of development resources, which experts and specialists of the State Planning Committee of the USSR and the RSFSR were persistent and tasteful, actually concerned centralized resources. But introduced from the mid-1960-ies regime to promote the integration of the region's economy with neighboring countries, primarily with Japan and China, where economic reform began since the end of the 1970-X, began to yield results. The growth rates in the specialization, auxiliary and maintenance sectors have significantly increased. Nevertheless, in these years, criticism of the approaches and results of the development of the economy of the Far East was the most intensive for the entire post-war Soviet period, although the thesis of the disbalance of the regional economy as the main reason for its unsatisfactory development was clearly insufficiently argued.

By the end of 1980, the economy of the Far East was a rather diversified complex, in which the branches of industrial specialization were clearly distinguished, and the cooperative ties were oriented almost entirely to the intra-union market. The share of exports in the industry of the region was only 3,8%, despite the significant volumes of raw materials exported, which was supported, including, by compensation agreements. Far East enterprises exported about 40% of all-Union shipments of roundwood, 7% of pulp, 25% of fish products. Logging, coal, mining industry imported a significant part of the process equipment, components and raw materials.

But foreign markets were not for the region's economy a serious alternative to the domestic market. At the same time, the prospects for using the domestic market as a driver of regional development under the conditions of an already clearly visible transition to market principles of resource allocation and the formation of cooperative ties have become increasingly worse ...

The history of the formation of the institutional and economic cycle testifies to the fact that the region successfully developed either when the enclave was supplemented by economic and financial autonomy (as in the 1920), or was compensated by the role of the region in solving the geopolitical tasks of the country, which caused full patronage by the state , Guaranteed the supply of resources, market demand and financial balance (as in 1860-1916, 1930-1945, 1965-1980 years).

The last attempt in the Soviet era to "save" the economic complex of the region was made after the speech of Mikhail Gorbachev in Vladivostok (1986 year), which proclaimed a "turn to the East", a course for integration with the Pacific economies. The main goal was declared the transformation of the Far East into an economic and trade and financial bridgehead of the USSR in the Pacific, for which it was intended to increase the economic and demographic potential of the region. It was already impossible to do this only at the expense of centralized resources. Therefore, the long-term state program for the comprehensive development of the productive forces of the Far Eastern economic region, the Buryat ASSR and the Chita region adopted in 1987, offered a number of incentives (establishment of joint ventures, tax breaks for foreign investors, allocation of a part of customs revenues in favor of the Far Eastern regions). This was the last attempt to preserve the economic complex of the region, using it to solve the geopolitical task of the state, and the first attempt to create a model of international cooperation based on a mixed economy on the scale of a single region, which is an economic and institutional enclave.

It is impossible to judge the results of this experiment, since instead of 15 years it lasted only incomplete five. This is enough to get the return on investment, but not enough to see the institutional effects. The resources for ensuring significant growth effects were clearly insufficient (the estimated capital intensity of 1% of the growth in industrial output was inferior even to the period of 1976-1980 - 530 million rubles and 580 million rubles, respectively.As a result of a significant change in regional development trends, 1990 did not happen, and In 1990 compared to 1985, coal production decreased, the input of electric power was only 30% of the planned, the extraction of oil and gas offshore, from 117 new facilities In the construction sector, only 40 was introduced, 7% decreased timber removal, plans for the production of pulp and cardboard were made only at 80-90% .The local budget deficit was almost 40%.

Since 1990, the allocation of centralized resources for development has been virtually paralyzed. The introduction of contract prices for final products with fixed prices for raw materials led to a flood of revenues in the European regions of the country. Before the regional economic complex, the prospect of autonomization again loomed. But the situation was worse than after the Civil War, when the task was to restore almost completely destroyed economy. By 1990, a powerful and diversified economic complex was created in the region, which required enormous resources for its operation, which could only be obtained within the framework of centralized redistribution.

The alternation of phases "state patronage - autonomization" only seems at first sight to be accidental: at the basis of this institutional cyclicity lies the change in the correlation between the importance of geopolitical and socioeconomic problems proper, which are solved by the state in the Far East. When the geopolitical tasks of the country come to the fore, for which a certain level of state support is required, the development of the region acquires a particularly high appreciation of the utility in the system of priorities for the spatial distribution of state material, financial and institutional resources. And when geopolitical tensions in the Far East decrease, the attention and resources of the state are shifted to other priorities, and the region is either left to itself (as in 1920 or 1990), or is losing opportunities to develop its economy, infrastructure, social sphere for Account resources generated in other regions. And, of course, he can not claim exclusive institutional regimes.

(ECO Journal, No. 4 for 2017 year, abridged version.) To be continued.
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