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Kolyma in 2016: looking for a sustainable development strategy

Rostislav Turovsky on the development of the eastern regions of Russia

Kolyma in 2016: looking for a sustainable development strategy

Rostislav Turovsky

Doctor of Political Sciences, Professor of HSE, Scientific Editor East Russia
The past year for the Magadan region was in a certain sense transitional. Regional development still largely depended on the extraction of precious metals. At the same time, in 2015, Kolyma launched a new large project - the Pavlik field (the Arlan Group), which provided an increase in the mining industry. A new and even larger project will be the Natalka gold deposit (the Polyus Company) in the coming years, but it should be a long time before it is launched. Therefore, 2016-th year was, on the one hand, a year, the results of which continued to be affected by old projects and, on the other hand, a year of new hopes. But directly in the past year, there were no qualitative changes in the region.

On the achievements of past years

The data on investments, which last year in the Magadan region fell sharply, by 41% (according to the data for January-September, 2016), are the brightest indicator of the appearance of a "pause" in regional development. Similarly, a sharp decline occurred in the construction sector, where the volume of work for the year decreased by 29%. All this is clear evidence of the completion of the launch of new gold deposits, after which a temporary decline occurred. The main indicators of the functioning of the regional economy meanwhile changed little, but still found themselves in the "plus". So, the industry showed an increase of 1,6%, and agriculture (which, however, is on the Kolyma underdeveloped) - by 2,2%.

Following the results of 2015, Magadan Oblast entered the top 20 of the country's best regions according to the level of effectiveness of the regional government estimated by the government. The emergence of new raw materials industries and the successful operation of the old ones (primarily in the same sphere of gold and silver mining) had a very positive impact on filling the regional budget, although the financial and budgetary situation in the Magadan region remains controversial, especially because of the accumulated debt burden. Nevertheless, last year the region was able to substantially increase its budget, whose revenues amounted to 32,9 billion rubles, incl. Own tax and non-tax revenues - 23,4 billion rubles (71,2% of all revenues). Thus, the level of subsidization of the region remains significant, but has slightly decreased. The Magadan region demonstrated the best in the Far East dynamics of tax and non-tax revenues, which grew by 2016% in 25,8 (the fifth place in dynamics across the country). In general, the region's revenues grew by 20,5% - this was the fourth indicator for the regions of Russia and again the best in the Far Eastern Federal District. First of all, the growth was ensured at the expense of the leading enterprises of the region, which provided a record increase in revenues from the profit tax - by one and a half times. As a result, revenues from income tax in the regional budget almost equaled income from income tax, which also grew (by 11,7%). An important tax for the region, given its specialization in the extraction of precious metals, remained a tax on the extraction of minerals, the proceeds of which also increased significantly.

At the same time, the federal center provided significant financial assistance to the Magadan region, from which Kolyma always depended heavily (but now, due to positive shifts in the industrial sector, this dependence falls). Total revenues of federal transfers increased by 13,3%. On the one hand, the federal government gave the Magadan Region a little less grants for equalizing the budgetary provision (by 3,1%), which indirectly indicates an improvement in the financial situation in the region, and also corresponds to all-Russian trends. The income from the subvention line decreased (by 5%). On the other hand, the center generously endowed the Magadan region with large amounts of subsidies for the implementation of various projects - these revenues grew by almost 70%, thereby ensuring the overall growth of federal financial support for the region.

However, the improvement of the financial situation does not give immediate effect in the conditions of the Magadan region in the financing of certain significant budget items. The financial problems of the past have accumulated in the region, and the achievements of the last year have finally allowed to resolve them. One of these problems is a large public debt for the region, amounting to 2016 billion rubles as a result of 12,1. Last year, the state debt of the Magadan region remained at the same level (municipal debt amounting to 2,1 billion rubles, decreased by more than 10%). The peculiarity of the region is the prevalence of bank loans in the structure of the debt. Like most regions, the Magadan Region worked to reduce dependence on bank loans, but at the same time it increased the volume of budget loans. Not surprisingly, the increase in debt servicing costs in the region grew by a quarter, and to date, the share of costs for this item in the Magadan region is the largest among all regions of the Far East (4,2% of budget expenditures).

The increase in budget revenues also allowed the Magadan region to solve the traditional problem of the budget deficit and complete the year with a balanced budget. Therefore, regional authorities saved money and increased spending by only 3%. In the end, this allowed to form a realistic balanced budget, which can not be considered a major achievement of last year. Savings were achieved at the expense of housing costs, which fell by 18,8%. In the regions of the Far North, utility costs are always high for objective reasons, but the Magadan region probably had to choose what to spend and what not to spend its money for.

At the same time, social articles have become a priority for regional authorities, which can partly be explained by the policy typical of the pre-election period. For both leading items of expenditure — education and health care — growth was achieved (by 2,8% and 6,1%, respectively), and overall social expenditures made up about half of budget expenditures. Remarkable is the still more significant increase in social policy spending - by 11,4%. Along with the social sphere, the focus of the regional authorities was on roads, the costs of which increased by 16,7%. More attention began to be paid to agriculture financing (an increase in expenditure of 8,6%). Thus, in the context of increased budget revenues, Magadan Oblast balanced the budget by reducing expenditures on housing and communal services, but did not save on other items.

However, the social situation in the Magadan region remains difficult. The success of the commodity sector did not affect the situation of the majority of the region's inhabitants, in particular those who live in the regional capital. On the contrary, the social situation in the remote northern region remains vulnerable. This showed a very sharp decline in real money income, which stands out for the worse, even taking into account the negative all-Russian trend (by 13,2%, according to data for January-November, 2016). In particular, the same success in gold mining does not directly affect the daily life and income of the majority of citizens. Not surprisingly, with the social well-being of the residents of Magadan Oblast, there are notable problems, and this reflects the results of the Duma elections, although on the whole they turned out to be quite favorable for the authorities. It is not possible for the Magadan region to achieve adoption at the federal level of a law permitting the extraction of placer gold for private entrepreneurs. This fishery needs both development and decriminalization, but there are no powerful lobbyists behind it, and therefore the overdue decision is postponed.

Stuck in networks

Meanwhile, the rate of large-scale industrial gold mining remains the most natural and most successful development of the regional economy. After the successful launch of the Pavlik field, the key and repeatedly postponed project of the Natalka deposit again comes to the forefront, the launch of which will ensure a significant increase in production in the region and will be a major event for the entire industry. The federal authorities reaffirmed their intention to assist Polyus with the development of this project. The corresponding order was signed following the results of one of the governmental meetings, and it provides for allocating almost 9,9 billion rubles for the construction of infrastructure, and in a very short period up to 2018. This is a solution to the old problem of construction of power grids and substations, because of which the project was skidding a lot Years, whereas the former owners of the "Pole" could not break through his decision.

But, judging by everything, the decision on the energy infrastructure for Natalka will not be easy now. During the year, the issue of putting into operation the Orotukan-Palatka-Tsentralnaya power transmission line was acute: there was a problem with the technical connection of power lines to the Magadanenergo networks (this company belongs to RAO ES of the East) and its cost. In this issue, disagreements arose between Magadanenergo and Far Eastern Energy Management Company: the situation aroused criticism of Trutnev and demanded his intervention. From the launch of this line, in turn, the construction of the power transmission line "Ust-Omchug - Omchak-Novaya", which is necessary for the Natalka deposit, depends. This line is planned to be launched in 2019, which will allow commissioning the field itself. However, it seems that these difficulties are temporary and will be overcome, taking into account both the already adopted government decision on financial support for the project, and the powerful lobbying potential of Polyus.

Even more complex is the solution of the fundamental issue of expanding the traditional raw material sector in Kolyma, and in general about improving the investment climate in the northern region, where the business potential for objective reasons is limited. In the territory of the Magadan Region, a special economic zone continues to operate, but it still does not bring any noticeable changes in the social and economic situation in the region. In particular, the industrial sector still does not enjoy the preferences of the SEZ, as raw materials producers have other interests, and small-scale production focused on the local market in Magadan have weak prospects. And while the presence of the SEZ in Magadan remains one of the formal reasons why the federal authorities are in no hurry to create new special economic regimes here, such as territories of advanced development. The regime of the free port is not extended to Magadan. It turns out that in a sense Magadan Oblast became a hostage of its old SEZ project, successfully lobbied in due time by the late governor V. Tsvetkov. SEZ not so long ago, extended its preferences, but the region does not integrate into the new agenda of social and economic development of the Far East.

Last year, the authorities of the Magadan region once again tried to return to the issue of creating a coal mining industry in the region with the help of the TOR regime. It is about the Omsukchan coal cluster (the project of the Eastern mining company of the group ICT and O. Misevry), the creation of which is complicated by the need to solve infrastructure problems. With small volumes of coal mining, it is also required to build a coal terminal in the bay of Pestraya Dresva, and a road for transportation of coal from Omsukchan to Galimogo and further to Pestra Stresva. While the federal center is not ready to allocate funds for this project, considering that the project of the Natalka Gold Deposit, which is more profitable from all points of view, still remains a priority.

The previously announced attraction of Japanese capital to the coal industry in the region also cannot yet be realized: neither commercial interests nor the composition of a potential international consortium remain unclear. Although the region was visited by representatives of Japanese companies JOGMEC, JFE Techno Research and the Institute of Energy Economics of Japan. Their cooperation with the North-Eastern Coal Company and the Kolyma Coal Company remains potentially possible. Japanese partners are invited to participate in the development of Lankovskoye, Melkovodninskoye and Chaybukhinskoye brown coal deposits. However, here the competitive advantages of the Magadan region are weaker than those of other regions of the Far Eastern Federal District. Although the gradual launch of coal mining in Chukotka and Kamchatka may inspire optimism with regard to the remote northern regions, however, the Magadan region is lagging behind its neighbors.

New Hopes

Another idea was the formation of a tourist-recreational cluster in the Magadan region and also within the framework of TOP. Here, examples of similar projects on Sakhalin and Kamchatka played a stimulating role. But against their background, Magadan looks, of course, a less promising tourist region, and it is difficult to expect the emergence of substantial demand from tourists from other regions of the country, not to mention abroad. Therefore, the idea to create a TOR in Khasynsky area on the basis of the sanatorium "Talaya" also remained unfulfilled.

In the commodity sector, certain hopes are placed on completely new directions for the Magadan Region - oil production and copper production. However, with the development of the shelf of the Sea of ​​Okhotsk, there were no breakthroughs. Rosneft continued to claim new shelf areas, including the Magadan-4 site. Together with the Norwegian company Statoil, it conducted exploratory drilling on the previously obtained site of Magadan-1, but no big results can be said. Therefore, the prospect of turning the Magadan region into a new oil and gas region is still not visible. And it is obvious that priority from this point of view will remain already mastered and continuing to assimilate Sakhalin.

An interesting topic last year was the possible construction in the interior of the Magadan region, on the basis of the Oroek metallogenic zone in the Srednekansky region, of a copper smelter with a capacity of up to 160 thousand tons per year. With this project, the Dukat Mining and Geological Company, based in Omsukchane (the main shareholder and CEO - Y. Radchenko), acted. Until now, this local company has not been engaged in such large projects and has worked in partnership with other players, mainly engaged in geological exploration. And the prospect of a new plant looks very vague, since there is neither infrastructure, nor even at least preliminary decisions on state support. Y.Radchenko himself is also not ahead of the event, proposing to make a feasibility study in 2018, and to start the combine by 2021. Again, there is reason to believe that this project will not be a priority for the state due to its high costs. and private business is unlikely to "pull."

In these conditions, the Magadan region is proceeding in a traditional way, solving its pressing issues. So far, with the introduction of new economic regimes is not possible, the rate has been made for a long-term plan for the integrated social and economic development of Magadan. Such a plan has just received support from the Ministry of the Interior, which it is working with the government of the Magadan region in the framework of the working group that they created. Thus, the Magadan region managed to fit into another trend - the creation of plans and strategies for the socio-economic development of individual Far Eastern cities. Along with Magadan, Komsomolsk-on-Amur and Svobodny in the Amur Region serve as examples. Taking into account that the raw materials industries are located in the interior regions of the Magadan Region, and the bulk of the population lives in the regional capital and, judging by the statistics, obviously does not thrive, such a plan is very necessary for Magadan. Undoubtedly, the issue of attracting financial resources to Magadan, including federal subsidies, will also be important, since it is unlikely that the city will be able to cope with its problems with its own forces.

One of the main limitations for the socio-economic development of the Magadan Region and its capital remains transport accessibility. There are some changes in this direction, but problems remain. So, Magadan airport received the status of a federal airport. However, at the same time, the reconstruction of the airport was delayed, when it was necessary to eliminate defects in work already done and to extort additional federal funds for this. As a result, the works were transferred from the state program "Development of the Far East and the Baikal Region" to a specialized state program for the development of the transport system, which, perhaps, will allow to expand financing and complete the project more quickly.

Inner peace

With all the problems of the region, the socio-political situation in the Magadan region remains calm, which was also shown by the Duma elections of September 18. Within the framework of the FEFD, the Magadan Region was not distinguished by any extreme indicators. She showed a good turnout by the Far East standards (40,5%), and the result of United Russia, although noticeably lagging behind the national average, also allowed the Magadan region to be considered the Far Eastern "middle peasant" (44,7% of votes). Like the entire Far East, the Magadan region gave a lot of votes to the LDPR (19,2%), and the results of the Communist Party of the Russian Federation (14,8%) and Fair Russia (7,7%) were slightly higher than the national average.

The calm course of the election campaign, which reflected the objective balance of political forces in the region, underscored the results of the voting in a single-member district. O. Bondar won the victory here, having significantly strengthened her positions in regional politics in recent years, being the head of the "United Russia" faction and the first vice-speaker in the regional Duma. To date, the situation is that all key political leaders of the Magadan region represent one team, or at least are able to cooperate constructively with each other. Duma elections consolidated this trend, determined earlier in the regional and municipal elections. Governor V.Pechenyi, in turn, continued to successfully interact with the federal center, as evidenced by his meeting with President V.Putin.

Thus, in 2016, the Magadan Region was able to take advantage of the results of the implementation of its previous raw material projects, as well as federal support. This made it possible to noticeably improve the financial and budget situation and increase the financing of the social sphere. However, the economic development of the region in the current mode is somewhat stalled, and the need for new projects is growing. One of them, of course, is the Natalka gold deposit. But it is obvious that the rate on one field will not be sufficient for a region where the socio-economic situation for objective reasons cannot be called sustainable and for these reasons it is difficult to beat the more successfully located territories of the Far East. Therefore, the issue of development plans and strategies and the use of various preferential regimes becomes even more relevant for the Magadan Region.
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