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Kolyma self-sufficiency

Governor Vladimir Pechenyi about how his region lives without a TOP

Magadan region is a region of concentration of mineral wealth and severe climate. Its main resource - Kolyma Gold - continues to beat records on extraction indicators and moves the entire economy of the Far Eastern North forward. However, Kolyma's prospects are not only related to the mining industry. What are they and why the region has not yet taken advantage of the opportunities of the regime of the territories of advanced development, Governor of the Magadan Region Vladimir Pecheny told EastRussia.

Kolyma self-sufficiency
Photo: Vladimir Pecheny / TASS / VEF Photobank
- Vladimir Petrovich, in the minds of the majority, Kolyma is still gold. Is this still the case?
- Mining remains the most important branch of the regional economy, and on the scale of the country, which is under external sanctions pressure, its importance can hardly be overestimated. Over the past year, almost 28 tons of gold were mined in the region, which is 3,4 tons more than in 2015. The plan was exceeded by 3%. Silver fell by 21,1% to 889,23 tons, but it is planned. In general, for the coming years, the trend in the extraction of precious metals is positive. The guarantee of this is the beginning of the implementation of a number of investment projects of private companies, with the co-financing of which the Fund for the Development of the Far East and the Baikal Region can act. In general, for 2017 it is planned to produce 30,5 tons of gold and 675 tons of silver, which will give the region revenues in the amount of 20,4 billion rubles.

- Other industries were not so successful?
- You know, the statistics are very encouraging. It clearly shows that the region has developed steadily. The index of industrial production increased by 0,3%, for the extraction of minerals it practically remained at the level of the previous year, for the production and distribution of electricity and water - an increase of 0,2%, in the manufacturing industry - by 9,4%. In general, the state of the economy in 2016 is characterized by a decrease in inflation rates, a recovery of positive dynamics in the market for goods and services, an increase in the volume of shipped products by main types of economic activity. At the end of 2015, the regional budget deficit was 33,1%, or 5,16 billion rubles, at the end of 2016 it decreased to 3,3%, or 671,8 million rubles. The main reasons for the positive dynamics of tax revenues were the rise in prices for gold and silver, as well as an increase in gold production.

- It takes us back to the mining site. The investment projects you mentioned are the development of the Yano-Kolyma gold province, potentially the largest mining center in Russia?
- Quite right. Nine gold ore objects of the province are located in the Magadan region, five - in Yakutia. On our side are the main ones: Pavlik, Natalkinskoe, Rodionovskoe, Igumenovskoe. The first two are currently the most relevant. At Pavlik, commissioned by the ARLAN investment company in 2015, 3,8 tons of ore gold and 1 ton of ore silver were obtained over the past year. The target for 2017 is at least seven tons of gold. In the future, it is planned to receive up to 2 tons of gold annually from the Pavlik, Pavlik-18,5, and Rodionovskoye deposits. A mining enterprise is currently under construction at the Natalka deposit. The investor is the company "Mine named after Matrosov". Commissioning of the Natalkinskoye field is scheduled for 2017. Its development will become the most important component of the regional economy.

- Do you need the regime of advanced development territories for the development of these projects or the mining industry as a whole?
- Very interesting question. The extraction of gold and silver is highly profitable and attractive for investors, even in the ordinary tax regime. But the development of extraction of non-ferrous and ferrous metals - zinc, molybdenum, copper, iron and much more than our region is so rich - needs to be stimulated. Therefore, this issue should be approached selectively. In the Ministry for the Development of the Far East, they also think so. And yet: on the basis of the already accumulated practice, amendments are being prepared to the law on TOP. A clarification will be made that only new industries can use this regime. After all, the purpose of this law is not to support already existing enterprises, but to attract new investments, create new jobs and increase economic activity around key investors. 

- But the Magadan region has not yet established its TOP in any industry, whereas in some other subjects of the Far Eastern Federal District there have long been not one. Why?
- The creation of TOP is not in itself the main goal. Yes, if investors implementing projects in the Magadan Region are interested in the benefits and preferences that are provided in the TOP mode, we are ready to support their initiative. But in the industrially significant part of the Magadan region, since 1999, another preferential tax and customs regime has been in force - a special economic zone (SEZ). It is located within the administrative boundaries of the city of Magadan, where 79% of the population lives and 86% of the economic entities of the region are located. These potential investors use a familiar and long-understood regime. And on the lands of the SEZ, by the way, the creation of ASEZ is prohibited by law.

- And the benefits provided by the SEZ suit everyone?
- The SEZ regime has been tested in the Magadan Region for 17 years. All the shortcomings that prevented previously operating business entities, identified and eliminated. During this period, the whole legal and regulatory framework has been formed. The registration procedure as a participant in the SEZ does not take a long time, does not require special knowledge, does not bear financial costs. The preferential tax regime provides for partial exemption from the payment of corporate profit tax and the mineral extraction tax (in the share of the federal budget), customs - the turnover of all foreign goods, except for excisable, without customs payments. Almost all the largest enterprises in the region that produce 65% of industrial products have already received the status of a participant in the SEZ. At the end of the 2014 year, a federal law was adopted providing for the extension of the SEZ to 2025.

- In other words, since everything is in order with the SEZ, are TOR not needed?
- When extending the SEZ regime, the main focus is on increasing the investment attractiveness of the region, developing infrastructure. In the future, we see the inclusion of new mechanisms in the SEZ regime to attract investors and create new industries. As for the creation of a TOP outside Magadan, today we are seriously considering such a possibility and are working on all possible options. Applicant industries: inbound tourism, agricultural production, mining and processing of non-ferrous metals. Maybe something else that potential investors might be interested in.

EastRussia help. Magadan Region is a large entity of the Russian Federation in the North-East of the country (the area is more than 462 thousand sq. Km, the population is about 150 thousand people), rich in various types of minerals. According to experts, the dominant role in the total cost of all mineral resources in the region is accounted for by hydrocarbons (41,7%) and coal (27,1%); the share of non-ferrous metals is 10,6%; noble - 11,9%. Industrial development of the region began in the year 1928. During this time, more than 3 thousand tons of gold, more than 13 thousand tons of silver, about 72,5 thousand tons of tin, more than 85 million tons of coal were mined in the Magadan region. 
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