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Far East in anticipation of VEB

Will the consolidation of the development institutions of the Far East help optimize the management of the territory?

The Far Eastern Federal District (DFO) has been in the focus of attention of the federal authorities for several years. However, the rather complex system of macroregion management that has existed since 2013 has been criticized more than once. As a result, the reform of development institutions announced in November 2020 by the Government of the Russian Federation will end with the creation of a single "superinstitute" for the development of the Far East in the system of the state corporation VEB.RF (VEB.RF). Will the new structure be an exclusively financial instrument for the development of the Far Eastern Federal District? Or will it take an important place in the development and implementation of the macroregion's development strategy? How will it interact with the federal executive authorities responsible for the Far East? An expert from IAA “East Russia” tried to answer these questions.

Far East in anticipation of VEB
Photo: web.rf

Roman Tarantula

Entrepreneur, member of the Russian Geographical Society

The Far Eastern Federal District occupies 40,6% of the territory of Russia, but only 5,6% of the country's population lives here. The economy and social sphere of the macroregion are not in the best condition. As a result, the Russian leadership pays special attention to the development of this territory. So, back in 2013, the President of Russia declared the development of the Far East a national priority for the country of the XXI century.

Long-term national programs, a specially created system of public administration, preferential regimes for business and investment are far from all measures designed to ensure the accelerated development of the Far Eastern Federal District. Despite some economic and social successes, many challenges remain in the development of the region. In particular, criticism of the expert and business community is caused by the ramified system of public administration in the Far East, which now consists of the Deputy Prime Minister of the Russian Federation - Plenipotentiary Representative of the President in the Far Eastern Federal District, the Ministry for the Development of the Far East and the Arctic (Ministry for the Development of the Far East) and several so-called "development institutions" that existed in the form of state funds, autonomous non-profit organizations, joint stock companies.

According to federal laws, the Plenipotentiary represented the President of Russia within the Far Eastern Federal District, and also ensured the implementation of the constitutional powers of the head of state on the territory of the district. The Ministry for the Development of the Russian Far East is responsible for coordinating the implementation of state programs, managing federal property, and supervising the exercise by the state authorities of the subjects of the powers of the Russian Federation. Development institutions solve specialized tasks in the selected areas, between which it was not always possible to establish precise boundaries for the distribution of responsibilities and powers.

It is noteworthy that before the launch of the Reform, few people mentioned the important role of VEB.RF in the development of the Far East, which for several years has been a key actor in the implementation of many projects in the macroregion. The state corporation is represented in the Far Eastern Federal District both independently and through subsidiaries of the Far East Development Fund (FRDV), the Russian Export Center (REC), VEB-Leasing, etc.

2019-2020 became the period of the greatest investment activity of the state corporation in the macroregion. VEB and its subsidiaries financed the construction of a terminal for domestic airlines at the Khabarovsk airport, a coal transshipment complex in the port of Vanino, a mineral fertilizer plant in Primorye, a mining and metallurgical plant in Transbaikalia, and a gas processing plant in the Amur Region. By mid-2020, VEB.RF's investment portfolio in Far Eastern projects exceeded 600 billion rubles. In addition, the state corporation has launched a number of programs to support small and medium-sized businesses in the Far Eastern Federal District. Thus, in the specified time period, the prerequisites were formed for the formation of a "superinstitute" for the development of the Far Eastern Federal District in the structure of VEB.RF, which only needed to be given an organizational shell.

However, a number of facts give reason to believe that upon completion of the Reform, it is VEB.RF that will become a key player in the development of the Far East, which will not only manage financial resources, but also influence the internal and external economic agenda in the macroregion by defining priority areas for the development of territories, influence on the authorities, building independent relations with foreign partners. With such a development of events, the plenipotentiary and the Ministry for the Development of the Russian Far East will significantly lose their political weight in the macroregion, and the main task of their activities will be to create the necessary conditions for the implementation of projects of the state corporation.

First, the leading role of the project financing strategy in the development of the Far East is evidenced by the significant strengthening of VEB.RF with a “Far Eastern bias”. The government had the opportunity to "sew" the reorganized and liquidated development institutions into the structures of specialized executive bodies, however, it took the path of increasing the capacities of the state corporation. Thus, VEB.RF acquires the powers of two specialized Far Eastern development institutions: the Agency for the Development of Human Capital in the Far East and the Arctic (ARCHK) and the Agency for the Promotion of Investments and Export Support (IPA) of the Far East. The Far Eastern power of VEB will also be strengthened by Rusnano, which is joining it, which also has certain interests in the macroregion, for example, being a co-founder of the Far Eastern High Technologies Fund. The Corporation for the Development of Small and Medium-Sized Enterprises and the Industrial Development Fund will be fully managed by VEB.RF. Both structures are also implementing a number of projects in the Far East of the country, and their entry into VEB.RF will lead to a common denominator in the state program for supporting small and medium-sized businesses in the Far Eastern Federal District.

Secondly, the fact that VEB.RF will become a leading player in the economic and political life of the Far East is also indicated by the new arrangement of state top managers associated with the macroregion. Chairman of VEB.RF Igor Shuvalov from 2008 to 2013 as First Deputy Prime Minister was already in charge of the development of the Far East. In 2013, the post of "Far Eastern" Deputy Prime Minister was established, who at the same time became the President's Plenipotentiary in the Far Eastern Federal District. At that time, Assistant to the President of the Russian Federation Yuri Petrovich Trutnev was appointed to the post, who was entrusted with responsibility for the macroregion and who bears it to this day. Many political scientists then called these changes in the composition of the Government "an apparatus success" and a "successful gambit" by Igor Shuvalov, who relieved himself of direct responsibilities for managing a complex macroregion, but at the same time did not lose his influence in the Far Eastern Federal District and retained the position of first vice -premiere. Today, I. Shuvalov, not being a member of the Government and receiving extensive "Far Eastern" hardware and financial resources, becomes de facto the supra-institutional curator of Russian policy in the district. De jure, the authority to manage the macroregion is still reserved for the “Far Eastern” Deputy Prime Minister Yuri Trutnev.

In November 2020, Alexei Chekunkov was appointed to the post of Minister for the Development of the Far East and the Arctic, who for six years headed the FRDV, which is part of VEB.RF. Experts call Chekunkov a person from Shuvalov's team, and his appointment to the ministerial post is an unconditional career advancement. In addition, Chekunkov is not a politician or an official in the classical sense of these terms. Throughout his career, he has been working in finance and investment, including private. Probably, his appointment as minister is intended to increase the efficiency of the Ministry for the Development of the Russian Far East in support of investment projects. At the same time, given the dominant role of VEB.RF in the Far East, the new minister is unlikely to be expected to actively participate in the political agenda.

Thirdly, in favor of the fact that VEB.RF will become for the Far Eastern Federal District something more than just a source of project financing, the experience of working with foreign partners accumulated in the state corporation also speaks. Most likely, the authorities will endow the Far Eastern "superinstitute" with broad international powers, hoping to give a new impetus to the stalled "turn to the east." For example, VEB.RF's Asian subsidiaries such as VEB Asia Limited and Russian Trading Company, which are now attracting foreign investors to Russian projects and promoting domestic exporters in the Asia-Pacific markets, can be directly or indirectly involved in the development of the Far East. Moreover, the current head of VEB.RF, Igor Shuvalov, has a long history of building relations with Asian partners. In 2008-2018, as First Deputy Prime Minister, he was responsible for the development of state policy in the field of foreign economic activity and foreign trade, while overseeing the Asian direction of cooperation. As head of VEB.RF, he represents Russia on the SCO Council of the Interbank Organization, and regularly meets with high-ranking officials from China, Japan, and Singapore.

Thus, in the near future, a new Far Eastern "superinstitute" will be formed in the country, which, most likely, despite its project and financial profile, will play a leading role in the system of public administration of the macroregion and exert a key influence on the political agenda.

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