Irkutsk
Ulan-Ude

Blagoveshchensk
Chita
Yakutsk

Birobidzhan
Vladivostok
Khabarovsk

Magadan
Yuzhno-Sakhalinsk

Anadyr
Petropavlovsk-
Kamchatsky
Moscow

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Magadan: year's results

Center support and uncertainty in the economy

Magadan: year's results

Continuing to use the SEZ institute for the formation of a favorable investment climate, the Magadan region is not yet achieving so major successes in the implementation of investment projects proper, which could be called breakthroughs. Nevertheless, industrial growth continues in the region, caused by an increase in the extraction of traditional Kolyma goods - gold and silver.

In 2014, the Magadan region actively interacted with the federal authorities and achieved its main success: a bill was passed that extended the special economic zone regime to 2025. At the same time, the boundaries of the SEZ have been extended to the borders of the whole region (originally the SEZ was created within the boundaries of the city of Magadan).

The activity of the governor Vladimir Pechenyi, who regularly contacted the center during the year, contributed to the growth of its political influence and public support. Interestingly, according to the 2014 average indicator of the regional power efficiency rating issued by the Civil Society Development Fund, it was Vladimir Pechenyi who took first place among all the leaders of the Far Eastern Federal District. Considering that this rating is based on sociological data, and at the same time, as is commonly believed in the expert environment, reflects the opinion of the presidential administration, this is clear evidence of the success of the governor of the Magadan region in both directions. By the way, the government's rating of the effectiveness of regional authorities for 2013, based mainly on socio-economic statistics, but taking into account public opinion, put the Magadan Region in 25th place, and this is undoubtedly its achievement. According to the indicator of economic development within the framework of this rating, the region took a good 34th place, and according to the indicator of its dynamics - 30th.

Budget imbalance

However, the Magadan region remains far from the most economically significant Russian region, although, of course, it occupies an important niche in the extraction of precious metals. In the Far East, Kolyma is on one of the last places for its budgetary revenues, outrunning only Chukotka and the Jewish Autonomous Region. At the same time, it is consistently among the most subsidized regions of the country, and can not provide for itself, given, of course, the high cost of everything caused by remoteness and climatic conditions. According to the results of January-October 2014, own revenues amounted to 58,7% of the regional budget: approximately on the same level of dependence on the federal center there are other subsidized subjects of the Far Eastern Federal District (Yakutia, Chukotka, Jewish Autonomous Region), with the exception of the much more subsidized Kamchatka.

The own revenues of the Magadan budget consist mainly of income tax (44,6%), which indicates the economic weakness of taxpaying enterprises. Income tax gives much less - 20,4%. At the same time, the mining industry of the Magadan Region replenishes its budget quite well due to the tax on the extraction of minerals (14,7%): in percentage terms, only Chukotka gives more, and in absolute terms - Yakutia. Above the average share of total tax revenue from small businesses (5,75%). At the same time, revenues from the property tax of organizations in the Magadan region are small, and here the region is one of the outsiders in the Far Eastern Federal District.

Mining, small businesses and other sectors of the economy of the Magadan region still can not meet its budgetary needs, given that the economic costs in this region are among the largest in Russia. Therefore almost 32% of its budget are subsidies, more than 5% - subsidies, and almost 3% - subventions.

Nor can we talk about the growth of the regional budget. On the contrary, in January-October 2014, its income fell by 4%. This stems from the federal center, which began to cut funding: in 2014, compared with the execution in 2013, transfers from the federal budget fell by more than 17%. The losses were mainly due to a decrease in subsidies (by 36,2%), while subventions still increased. But the main type of federal aid, subsidies, nevertheless decreased by 10,3%, although the region's needs for this money remain large.

For its part, the region's economy is still unable to provide it with its own income, which grew by only 3%. Moreover, there was a decline in income tax revenues, and revenues from corporate property tax also decreased (they increased from income tax, taxes on total income, MET).

As a result, the budget of the Magadan region was marked by a noticeable deficit, which in October 2014 amounted to 24,6%. At the same time, plus the budget situation, the region did not manage to accumulate debts: its debt load following the results of 2013 amounted to 22,8%, which according to the current Russian standards is not high. Nevertheless, the problem is that, having experienced a decrease in revenues due to the fall of federal transfers, the region could not cut its expenses, which, on the contrary, increased by almost 3%. This created a budget imbalance.

Emphasis on health

One of the features of the Magadan region is the need for large expenditures on utilities. These expenses remained among the most significant in the budget (19,4%) and almost did not change in volume. The share of housing and utility expenses in the Far Eastern Federal District was higher only in Chukotka and Sakhalin. In the Magadan region, the need to resolve the issue of resettlement from dilapidated and dilapidated housing (its share was 2013. 10%, and the region ranked second in the Far Eastern Federal District) is great. More than 60% was the share of loss-making organizations in the housing and communal services sector.

As for the social sphere, special attention was paid to the government of the Magadan region by health care, increasing its expenses more than 6,2 times. As a result, they accounted for 16,8% of regional budget expenditures, and Magadan Oblast became the leader in the Far Eastern Federal District. Given the small population, the region is well provided with doctors and hospital beds in hospitals, and the infant mortality rate is one of the best in the Far Eastern Federal District. But salaries in this area lagged considerably, and regional authorities spent a lot of money to raise them. It is interesting to note that Magadan Oblast ranks second in the DFO in terms of the share of expenditures on culture, although it is small (4,7%).

But on the other hand, the regional authorities were forced to reduce the level of funding in the direction of "social policy" (various benefits, etc.), the cost of which was reduced by half. Therefore, in terms of the share of these expenses (9,6%), the Magadan Region is among the outsiders of the Far Eastern Federal District. The situation with the financing of the educational sphere is not the best, although it grew by 6,3% and accounts for a substantial share of budgetary expenditures (22,5%). But according to this indicator, the region is again closer to the outsiders of the Far Eastern Federal District. Among the lowest in the Far Eastern Federal District are the costs per student and per child attending kindergarten.

The region is poorly provided with teachers, and their salary level, in relation to the average in the region, was the worst in the Far Eastern Federal District (2013% in all). Although the Magadan region is one of the best in the DFO indicators of the provision of kindergartens (due to a small need).

Expenditures on items of the national economy also decreased, especially on road facilities (by almost 17%). As a result, these items constitute 12,5% of budget expenditures, and by the standards of the FEFD it is not much. There is, of course, no developed road network in the region, but the need to maintain and expand it certainly exists.

On the other hand, the costs of nationwide issues in the Magadan region do not decrease, they grew by 6,8%, which was affected by the reorganization of executive bodies. Their share was 8,15%, which is higher than the Russian average, but lower than the average for the Far Eastern Federal District. In the region, officials are paid relatively large salaries. For the first half of the year 2014, they exceeded average salaries in the region by more than 1.5 times. It is also worth noting that in the Magadan region as a whole, the number of officials is quite large in comparison with the population (more it is only in Chukotka).

How to create a climate

Trying to improve the financial and economic situation, which, as our analysis of the regional budget shows, is not brilliant, the authorities need to pay even more attention to the investment climate. The special economic zone in its previous version failed to provide an investment boom. There are positive trends, of course. Thus, in the first half of the year 2014, the Magadan region became the leader in the growth of investments in the Far Eastern Federal District (by 25,4%). On the other hand, the region attracts very few foreign direct investment. Their volume was significant only in 2011-12., Then they actually did not become again.

Last year, new attempts were made to attract foreign investors to Kolyma. One of the important events was the agreement of the regional authorities with RusHydro and the Japanese Kawasaki Heavy Industries on the construction of a plant for the production of liquefied hydrogen (but it is far from the start of its operation: in 2017 it will start in a pilot mode, in 2024 - in an industrial mode) ... In addition, the regional authorities are seeking to attract Korean investors to the Omsukchan coal cluster project (see below). There were also attempts by Polyus Gold to negotiate with Chinese investors on participation in the development of the Natalka field.

The main hopes in the investment policy of the Magadan region still lies on the commodity sector of the economy. Last year, new prospects appeared in the development of deposits of precious metals, the regional authorities actively promoted a new coal project.

The paradox is that taking decisions in the interests of the Magadan region (we also remind that in 2014 the meeting between Vladimir Pechenoi and Vladimir Putin took place, and Dmitry Medvedev visited the region directly), the federal authorities still do not help her with money enough. During the past year, the governor was a notable figure at the federal level, and not only in connection with the promotion of the law on the extension of the SEZ and the increase in its attractiveness. One of his initiatives was called upon to use reserves in gold mining: Vladimir Pechenyi proposed to allow individuals to extract placer gold.

Vladimir Pechenyi also announced himself with initiatives aimed at the development of fisheries (this issue was one of the main issues during Dmitry Medvedev's visit). It should be noted that the prospects for fishing in the Magadan region have improved in connection with the decision of the UN Commission on the Continental Shelf on the recognition of the Sea of ​​Okhotsk as an internal sea of ​​Russia (before that the central part of the sea was considered international waters). For their part, the authorities of the Magadan region have proposed to expand the number of fish producers who could work under a simplified tax scheme, paying a single agricultural tax: amendments to the Tax Code suggest raising the bar for the number of employees of the enterprise, in case of exceeding which the “usual” tax legislation applies. Directly on the territory of the region, the governor intends to develop the Magadan fishing port, and this issue was discussed during the visit of the Minister of Agriculture Nikolai Fedorov.

Another subject of special attention of the regional authorities was the development of sport, and here, too, it is not just about local interests alone. The Magadan region intends to compete with Kamchatka, offering a project for its ski resort. Issues of development of sports were discussed at the meeting of Vladimir Pechenogo with Vitaly Mutko, and a separate Ministry of Sport was created in the region.

Magadan Oblast also needs initiative in relations with the federal authorities to finance costly infrastructure projects. In particular, the Kolyma federal highway continues to be built in the region, the costs of which increased significantly last year. A new important issue is the connection of the energy systems of the Magadan Region and Chukotka, which is actively lobbying the neighboring region, and the authorities of the Magadan Region support it in this. It is assumed that the new power transmission line will connect the two regions, and this, in particular, will allow using the capacities of the completed Ust-Srednekanskaya HPP. Although there is still no complete clarity regarding the "export" of Magadan electricity, since electricity may also be needed in the region itself, where it is planned to launch new fields. Finally, the Magadan Region is counting on federal funding for the construction of hydraulic structures designed to protect against floods (Vladimir Pechenyi discussed this issue with Federal Minister Sergei Donskoy).

Attention is gold!

As for the new investment projects that can be supported by the Minsk region, the Magadan region is expected to be represented in them both by the commodity sector and the agro-industrial complex. The appearance of projects in the sphere of the agro-industrial complex should not be surprising, since a distant region with high food prices needs self-sufficiency in food. Therefore, as an area of ​​advanced development, he proposed the agro-industrial complex "Magadansky" in the territory of the former poultry farm "Severnaya": the project was supposed to be used for the development of pig production and greenhouse vegetable production (in addition, regional authorities help to expand production at the poultry farm "Dukchinskaya").

But later, more attention began to be paid to mining projects that promise economic returns. There are two main directions here - mining of coal and gold. To create a TOP, the Omsukchan coal cluster began to be considered, which involves not only coal mining, but also the construction of a road to the sea and a port terminal. Only one project is listed as a potential priority investment project from the Magadan Region. This is a group of gold deposits controlled by the Arlan investment company and its subsidiary Pavlik Gold Ore Company OJSC (Pavlik, Pavlik-2, Rodionovskoye deposits). Since there are no other projects announced from the region, it is highly likely that this single project will eventually receive federal support. Both the regional authorities and the company itself, which is not among the industry leaders and "giants", are interested in this.

Due to government support, thus, in the extraction of precious metals in the Magadan region, next changes can occur. On the one hand, the situation around the largest project of the Natalka Gold Deposit, which is dealt with by Polyus Gold, remains unclear. Commissioning of this field was planned for both 2013 and 2014 years, but it did not happen. Now the company says that the launch is generally postponed for an indefinite period due to a decrease in the reserves estimate of the field and against the background of a fall in world gold prices. The authorities started talking about a possible revocation of the license, but the problem remains.

On the other hand, on the other hand, there is a revival in small fields. The Arlan Investment Company is gradually expanding its activities, which, as you can see, has the support of both regional and, possibly, federal authorities. In the coming years, it is planned to start developing a number of other deposits, which belong to Nedra LLC (Shturmovskoe ore field), Geocenter OJSC (Igumenovskoye deposit), Srednekanskaya GRK (Tokhto deposit). A major player, Polymetal, also has new projects (for example, Burgali area). Thus, the number of players in the mining industry of the Magadan Region is growing.

The development of the fuel and energy complex is an important prospect in many regions of the Far Eastern Federal District, and the Magadan Region is no exception. The project of the coal cluster is being promoted by the North-Eastern Coal Company, a member of the Eastern Mining Company, a joint project of the ICT group (which, we recall, partially controls Polymetal) and the owner of the Sakhalin coal assets O. Misevra. Thus, the ICT group will be able to “unfreeze” one of its “non-performing” assets in the Magadan Region. Meanwhile, the authorities of the Magadan region have confirmed their interest in the project by signing an investment agreement with the North-Eastern Coal Company.

The development of the Magadan electric power industry continues, where the main stake is placed on the hydropower potential of the Kolyma. RusHydro plans to launch the third hydroelectric unit at Ust-Srednekanskaya HPP in 2018. Electricity can be used to supply new mining projects both in the region itself and in Chukotka.

Somewhere on the horizon, the prospect of turning the Magadan region into an oil region has emerged, which may promise it a significant change in the budgetary situation for the better. The Magadan Oblast is theoretically capable of becoming the “second edition” of Sakhalin, albeit probably a smaller one. But so far this work is just beginning, and it is too early to predict success. Thus, the project of Rosneft and the Norwegian Statoil on the Magadan-1 block has not been formally canceled and does not look as problematic as the Arctic shelf projects that Rosneft had to stop. At the same time, the timing of its implementation may take many years, and in the current circumstances of the Magadan region, one should hardly rely heavily on the fuel and energy complex.

Stable policy

As for the political situation in the region, it turned out to be, perhaps, the most stable in comparison with other regions of the Far Eastern Federal District. The gubernatorial elections in the Magadan Region have already passed, and the elections to the Regional Duma will be one of the main events of 2015. It is worth noting that after winning the elections, Vladimir Pechenyi, like many of his colleagues, took up strengthening the power vertical and strengthening control over local government ... As a result, the region is undergoing significant local transformation. First, the direct election of local heads is changed to a city manager model. Secondly, the municipal districts are being transformed into unified municipalities - urban districts. Such transformations were carried out in the Omsukchan and Srednekansky districts, where, thus, the two-tier model of local self-government was eliminated. The ongoing changes make the governance system in the Magadan Region simpler and maximally closed on the figure of the governor.

2015 will be more saturated with political events than last year, at least in connection with the upcoming elections to the regional Duma. However, it is unlikely that this campaign will be associated with any difficult problems for the regional authorities. Opposition in the region is extremely weak, while the position of the governor is steadily strengthening. The question of the economic prospects of the region remains more complicated. Still, the project of the largest gold ore deposit is being postponed, oil production - even more so, and the regime of the special economic zone itself does not promise an economic boom in the far northern region, where similar experiments were carried out earlier. Therefore, at this stage, it is important that other, not so large, but probably more reliable projects develop steadily - gold and silver mining at new deposits, possibly coal mining. The region has good opportunities for increasing the volume of investments. However, it will not be easy to solve its budgetary problems and reduce the level of subsidies. This, in turn, influences the solution of social problems. Thus, despite the obvious strengthening of relations between the region and the federal authorities and the activity of Vladimir Pechenyi, as well as the presence of a number of mining projects, qualitative changes in the Magadan Region will take more time.

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