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Far East: benefits and tools for investors

Why were created TOP and other measures to support investments in the east of the country

On the eve of the Fourth East Economic Forum, EastRussia and the Far Eastern Federal University continue a series of mini-lectures on the most pressing issues on the agenda of the event. The second lecture is given by the Associate Professor of the Department of International Relations of the Eastern Institute - the School of Regional and International Studies of the FEFU, the candidate of political sciences Leonid Kozlov - about whether the territories of advanced development have affected the economy of the Far East.

Far East: benefits and tools for investors
Photo: VEF-2017 / TASS Photobank

Leonid Kozlov

Associate Professor, Department of International Relations, Eastern Institute - School of Regional and International Studies, FEFU, PhD in Political Science
Special project TORA and Free Port
In this matter, we must first explain that the economic development of the Far East can not be considered a center apart from social and political tasks. From a purely economic, entrepreneurial point of view, the most profitable in the Far East is the rotational method of production and exploitation of natural resources. The population here is rare, the distances are large, the climate is mostly cold, floods are frequent, so almost all the production with more or less high added value will lose to central Russia and neighboring regions of Northeast Asia. But the shift method and the absence of a permanent population due to them create for Russia in the long term a political threat of losing control over the territory of the Far East. Therefore, economic development is an intermediate goal of Russia's regional policy in the Far East, and the final one is the creation of a permanent population, carriers of civil self-consciousness of the Russian Federation, loyal to our state.
Influence of growth points, named TORs, on the economy of the Far East, we can not adequately assess now, simply because they are basically not built. TORs, whatever they are, should be separate sites with water, sewerage, electricity, a hard-surface road, and preferably with a railway impasse, and also with a fence and a checkpoint. Only after this, the investor can start production here at full capacity. Zones with preferential economic status in the world today there are thousands, so a successful transnational company with innovative technologies will hardly seriously consider placement in the TOP until its full commissioning. It is clear that the arrangement of such a site requires large investments, but still much smaller than the launch of factories and entire industries, as it was in the Soviet period.
In our country, after the proclamation of the TOR initiative, the authorities tried to minimize costs and accelerate accountability, so they heavily used the old areas and involved local businesses that would work in the region without TORs. Of course, some effect for the directly participating business from such a TOP will be, but a significant macroeconomic result is unlikely to be expected.
Another problem is that only local monopolists are able to provide TORs with utilities, which are not very enthusiastic that they are forced to equip new industrial zones in the open field. According to the initial plans of the center, in 2018, some of the TORs should have already become competitive internationally, and in practice some are still under construction, while others are old candies in a new wrapper.
Another problem with TORs is that there are too many of them. All relevant specialists in the regional economy and socio-economic geography agree that production and transport and logistics economic zones are a piece product, and even a prosperous state does not have so much extra money to create them in bundles. The main task of special economic zones is the diffusion of innovations; in other words, the host country tries to spy on successful transnational companies, how they work, learns something from them, helps start their own innovative entrepreneurs. As examples of the significant beneficial effects of special zones on the national economy, the World Bank usually leads underdeveloped hot countries, where energy and labor costs are minimal. The exception is China, but even there, with an in-depth acquaintance with the subject, the main role of special zones in the macroeconomic breakthrough of the country in 1980-2000-ies. looks doubtful.
In the Russian economy, special zones have never played a significant role (for example, they attracted only about 9% of foreign direct investment), and their main advantage was precisely in the diffusion of innovation. In any case, even if the center does everything according to approved recipes in the world, that is, it will build one TOR for each major city, but it will build on the world level, it will take another five years to assess their effect on the regional economy. While current TORs are being created, migration outflow from the Far East continues. However, the TOP is better than nothing, and where most of the work is done, of course, they need to be put into operation.
It seems that economic benefits throughout the Far East have a faster and more pronounced effect on the regional economy and on the mindset of local residents. In addition, they make it possible to profitably work for small and micro-businesses, including in remote settlements, which is ordered to travel to TORs due to a lack of competencies and seed capital. However, in order to attract large and medium-sized businesses to the Far East from other regions and countries in large numbers, these benefits should be very large. S.S. Artobolevsky, one of the leading domestic experts in regional development, believed that investors come to the peripheral depressive region, when the state compensates them for at least 30-40% of the placement price.
When planning growth points, Russian officials traditionally like to use the term "clusters", but they understand them more like Soviet territorial production complexes (TPK), in which one company complements the other. TPK is also a good thing, but to create it requires the resources and powers of the administrative command system. Under the clusters, the founder of this theory, Michael Porter, understands, first and foremost, a community of the same type of producers, sharply competing among themselves in a limited territory and in this competition bringing their products to the highest quality. Accordingly, creating points of growth in the form of production clusters made sense, especially in those industries of the Far Eastern economy, where there is internal competition, that is, in the processing of fish, wood, some agricultural products (eg soybeans), in maritime logistics, etc. While the TORs look like a random set of residents who, in principle, showed interest in this project, and to the cluster effect there is very, very far.
As a specialization of growth points in the Far East, science and tourism are also voiced. In the first case, probably, there are real prospects for Vladivostok, in the second - for Vladivostok and Kamchatka. At the same time, in the TOPs, in the scientific cluster, and in the sphere of tourism, the center should pay close attention to the issue of a comfortable living environment. Now it is horribly uncomfortable in comparison with central Russia. Only one view from the window of the train from Vladivostok Airport to the city center can plunge a potential investor, scientist, and tourist into despondency.
In general, new federal measures to support investors in the Far East since 2007 have been adopted in such a quantity that now it is possible to limit their manual setting in those situations when they stall at the local level and also strengthen the fight against corruption in the implementation of development projects. Regional and municipal authorities received quite a few new duties, often without additional funding, as in the history of the Far Eastern hectare, and this often causes difficulties that the plenipotentiary personally has to decide.
In general, coordinating the actions of the center, regions, municipalities, state corporations and private business in one government program is an arduous task, therefore, the developers of Russia's regional policy can be advised to focus on deregulating the local economic initiative instead of inventing new administrative superstructures. And also they need to have patience, because, as the world experience shows, in this case a stable positive result if it does, then not earlier than in 10-20 years.
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