This text is translated into Russian by google automatic human level neural machine.
EastRussia is not responsible for any mistakes in the translated text. Sorry for the inconvinience.
Please refer to the text in Russian as a source.

Magadan region: results - 2015, trends - 2016

Life in debt and stake on gold

As in most other regions of the Far East, the socio-economic development of the Magadan region remains mixed, there are both ups and downs. And last year showed in different directions just the extreme results, both the best and the worst. At the same time, the region again began to rely on one of the main branches of its specialization - the gold mining industry. Last year, just in this area, new positive developments began, which allow us to predict the successful growth of gold mining in Kolyma for a strategic perspective.

Magadan region: results - 2015, trends - 2016

Rostislav Turovsky

Doctor of Political Sciences, Professor of HSE, Scientific Editor East Russia

The Golden Age of Kolyma

First, one of the main events of the past year in the Magadan region was the start of production at the Pavlik deposit in the Tenkin district. Capital group Arlan, which owns the asset, was among the key investors in the Magadan region and launched its first major project in the gold mining industry (gold was not the original specialization of this group, but in recent years it switched to it, making at the same time a bet on Magadan region). The activities of Arlan will now probably contribute to the growth of gold production in the region as a whole, and the company intends to quickly enter the top ten of the leading gold producers in Russia. At the same time, there is a prospect of gradual commissioning of all new gold deposits, although at this stage it is too early to say when this will happen, and to what extent this extraction will develop. But, one way or another, after Pavlik, the remaining deposits of the Arlan Group, such as Burkhalinsky, Shakhskoye, Utinskoye, Rodionovskoye, can also be earned.

Secondly, after long negotiations and even conflicts, the process of developing the Natalka deposit, which is among the largest in Russia, has finally moved off dead center. Moreover, during the past year it was still impossible to confidently assert that the project will take place. Moreover, on the part of high-ranking officials, including the governor of the Magadan region, Vladimir Pecheny, there were proposals to withdraw the license from Polyus Gold. As is known, in connection with the suspension of the project, there was a threat of dismissal of its employees, which also excited the regional authorities. However, in the end, the lobbying efforts of the company and the family of Senator Suleiman Kerimov, who controls it, have been extremely successful at the federal level. Thus, Suleiman Kerimov once again demonstrated his influence. At the very end of last year, the federal government agreed to take part in financing the infrastructure component of the field, which actually stimulated the whole process. The project will receive state infrastructure support from the federal budget through the Ministry of the East Development in a record amount of 9,9 billion rubles for this mechanism, and the co-financing of the project from the Far East Development Fund is also considered.

Thus, following the Pavlik deposit, the Natalka deposit, which, by the way, is located in the same area of ​​the Tenkin district of the Magadan region, can also begin its work. Moreover, both the Arlan and Polyus Gold teams demonstrated their ability to cooperate with the authorities and coordinate their interests with them. This process allows us to speak about very bright prospects for the traditional Kolyma industry.

Against this background, regional authorities have tried to contribute to the development of gold mining. Vladimir Pecheny began to actively advocate the development of Russian legislation, which allows legal entrepreneurs to become involved in gold mining for individual entrepreneurs. Kolyma has a long tradition of prospecting, but now there is no legal basis. It is assumed that the new law will allow to stimulate small, but also significant, alluvial gold mining (at the level of 250-300 kg per year), as well as create on this basis a successful small business (and with it up to 2 thousand jobs), in which the region is also interested. The initiatives of Vladimir Pecheny aroused a positive reaction in public opinion, found support from Yuri Trutnev, Alexander Galushka, and the Ministry of Natural Resources, but for the time being it was not possible to finally “break through” the actual legislative initiative. In any case, the region has a margin of safety associated with the development of large deposits by influential companies, which were discussed above.

However, it was not possible to avoid one negative event in the gold mining industry of the Magadan Region. The first and only refinery on Kolyma was closed, the launch of which was once one of the most important projects and the pride of the late governor V. Tsvetkov. But the plant could not become competitive, and gold producers in the region did not make a bet on it, handing over the products to factories in other regions of the country.


Spaces without TOR

Preparations for the development of new fields, both in the Magadan region and in Chukotka, are increasingly pushing to create an integrated energy system in these regions. In an interesting way, a new stage of integration of the two regions is being planned, which once formed a single whole in the political-administrative space, since the Chukotka Autonomous Region was part of the Magadan Region. Thus, the realization of not only the local infrastructure project of the Natalka deposit, but also a large-scale energy bridge, designed to connect the two regions and provide electricity to the western regions of Chukotka, in which a number of large deposits of copper, gold and others are supposed to be developed, is coming to a head. as a result, an agreement was signed. However, it is still too early to talk about a fast and guaranteed implementation of the energy bridge project. Despite the development of the power industry and the construction of a new Ust-Srednekanskaya hydroelectric station, the Magadan region is unlikely to have such large amounts of excess electricity. The question is topical, what means will be used to finance the construction of an energy bridge, and will this project pay for itself? Thus, the transformation of the Magadan region into an energy “donor” remains in question.

One of the successes of the Magadan Region was the extension of the special economic zone until 2025 year, in accordance with the federal law adopted in 2014. At the same time, as is often the case in Russian practice, the adoption of the law does not yet mean that all related With him, calculations and hopes immediately begin to be realized. The past year has gone to agree on various details. For example, a government decree on SEZ was signed in August, and the program for the development of a special economic zone was adopted only in late December. Since 1 January 2016, the law on new features of the tax regime in the SEZ has been implemented (it assumes a lowering of the income tax rate in the part that goes to the regional budget). Therefore, the real results are not just the extension of the SEZ period, but also the improvement of the conditions for investors, incl. In the hope of stimulating with their help the real sector, it will be possible to speak only at the end of 2016, if not later. Despite the fact that the SEZ regime operates in Magadan from 1999, it had no obvious impact on the economic development of the region (unlike the analogous case of the Kaliningrad region, where real results were achieved in the form of growth in the production of cars, furniture, electrical engineering and etc.). Therefore, the extension of the SEZ period should be viewed not simply as inertia and situational success of the region, but rather as a "second birth" of the project, with the expectation that it will finally stimulate the development of the territory.

Meanwhile, against the backdrop of a slow continuation of the next attempts to turn the Magadan SEZ into a driver of economic growth, the region has not been able to get government support to launch the territory of advanced development (TOP). As a result, having the SEZ, Magadan region remained the only region of the Far East where it does not exist, and its TOP is not yet expected. At the same time, the region repeatedly offered its options, but remained with nothing. Recently, the calculation was made for the TOR in the Omsukchan District, where it was planned to start coal mining, as well as build an 140-kilometer road to the sea and a small port terminal in the bay of Pestraya Dresva. The beneficiary of this process was the Eastern Mining Company, a very influential player engaged in coal mining in Sakhalin (WGC is a joint project of the ICT group with strong positions in the Magadan Region and owners of the Sakhalin coal industry, headed by Oleg Miseyrov). However, it was decided to create a coal TOP in Chukotka, and the Magadan TOR project appeared to the federal government to be not very promising. Alternative and more "tempting" variants of TOP in Magadan region remain undeveloped.

After the Free Port of Vladivostok began work, the authorities of the Magadan Region, as well as a number of other regions, became interested in this prospect. There were proposals for the establishment of the Free Port in Magadan. However, the Magadan region did not get into the draft law “On the Free Port of the Far East” prepared by the Ministry of Eastern Development, and even in the peripheral situation of Magadan, taking into account the ambiguous experience of the Magadan SEZ in this regard, the prospects of the Free Port are questionable.

It is noteworthy that the region failed to promote its interests in the fishing industry. During the year, the regional authorities have repeatedly demonstrated their concern with the state of the fish factories and retail prices for fish. In relations with the center, an initiative to transfer control powers to Khabarovsk followed the closure of the Okhotsk territorial administration of the Federal Agency for Fishery (as a result, the federal agency’s territorial office remained in Magadan). Also, the Magadan region was not included in the project of the fishing cluster, which appeared at the beginning of 2016.

Thus, for the time being we can only say that the Magadan Region is trying to develop based on its old resources. There are new perspectives in gold mining, attempts are being made to revitalize the work of the SEZ. But there is no progress in the less “traditional” directions, neither initiatives of the regional authorities, nor the decision of the center are noticeable. Neither the coal nor the fishing industry received an incentive to grow. Oil exploration on the shelf also does not give breakthroughs (although not only Rosneft, but also Norwegian Statoil confirmed their participation in the project), while the region still has to face the more prosaic problem of high cost of fuel and lubricants. In order to debug relations with suppliers of fuels and lubricants, the regional authorities concluded cooperation agreements with Rosneft (the main supplier of fuels and lubricants) and Gazprom Neft. As already mentioned, the region remains without TOR, which makes it worse for the rest of the DFO regions.


Deficiency 14% - not a sentence

As a result, the Magadan region remained in a difficult financial situation, which did not improve in 2015. Moreover, the region was greatly "failed" by the federal center, which reduced the subsidies to the Magadan region. So, gratuitous transfers from other budgets, ie, in fact, federal transfers, turned out to be 22% less in the consolidated budget of the region than in 2014 in the last year. Especially sharply the subsidies fell (by 27,1%), including their main Type - subsidies for the alignment of budgetary security (at 24,2%). And according to the decline in the volume of subsidies for equalizing the budgetary security Magadan region showed an anti-record among all the subsidized regions of the Far East and took second place from the end of Russia as a whole. It looked very strange, as the Magadan region by no means became a prosperous region with a balanced budget to so reduce its financial assistance. In neighboring Kamchatka, where the need for subsidies is also very high, nothing like this happened. True, the center slightly increased subsidies (by 4,9%) and maintained the same level of subventions (decline in 0,6%), but in total this regional budget did not help.

Thus, the region's budget began to experience obvious overloads. A positive factor was the growth of own budget revenues (by 19%), which testified to the success of large regional taxpayers (mainly gold and silver producers). For example, the growth in income tax was fantastic 68,3%, in fact and ensuring the growth of the region's revenues. Stressing the positive trends in the mining industry, revenues from the mineral extraction tax (by 45%) also sharply increased. With salaries and, accordingly, income tax, the situation was worse, and income from income tax remained almost unchanged (decline by 0,3%). Of the taxes significant for the regional budget, there was a decline in the corporate property tax (by 9,1%).

Thus, the region, at the expense of its large taxpayers, was able to compensate for the sharp reduction in federal subsidies. This allowed him to provide a small overall increase in the revenue side of the budget by 1,85%. However, the absence of a financial failure (that is, the replacement of declining subsidies with own revenues) is difficult to recognize as a positive trend. The regional authorities could not (or did not want) to optimize their expenses, which grew more than their income (namely, by 5,1%). The result was a huge, 14-percent budget deficit. Magadan region has also become too active in increasing debt obligations. Its public debt has increased over the year by 89,3%, which was a record in the DFO and the second indicator of the negative dynamics in the country as a whole. Debts on budget loans increased by 51%, but the fact that the region increased its debts to banks is especially striking, which is not typical for many other subjects of the federation (an increase of 94,1%, fourth in terms of dynamics in the country and the first in the DFO). The debt increased the region in order to allocate funds to the municipalities for balancing the budget: municipal debt grew only by 7%. The final ratio of state and municipal debt to own revenues of the consolidated budget of the region reached 77,5%. This is not a record in the Far East (and, by the way, the volume of public debt of the Magadan Region is still inferior to Chukotka), but a very dangerous level of the indicator, given the too sharp dynamics. Thus, all the signs of an unbalanced budget situation were manifested.

In the context of the complicated financial situation ("thanks", in this case, the center), the region chose to maintain and even increase its spending obligations. The expenditures for the largest articles were saved - housing and communal services (growth by 1,7%) and education (decline by 0,3%). On healthcare, growth was achieved at 4,3%, and in social policy at 7,4%. Even more significant positive dynamics was noted in the road economy - an increase in expenses by 12,5%. The region did not reduce the costs for national issues (an increase of 3,4%), but this was partly due to the holding of regional and municipal elections, as the costs directly to the activities of the authorities were reduced.

Thus, the Magadan region in its financial policy behaved as if there was no crisis in the country. Undoubtedly, in the region in recent years, the regional budget's own revenues have increased with the reduction of federal subsidies. But the reverse side of this process were both the budget deficit and the build-up of debts. It is also worth noting that the region was still criticized - from ONF, at its federal health forum (the fault was the inadequate development of the ambulance service). This issue was later posed to the governor and Vladimir Putin. Then ONF criticized the purchase by regional authorities of special ambulances. However, there was still no acute conflict between the governor and ONF, and Vladimir Pechenyi was hardly criticized at the federal level. The same ONF, for example, included Magadan Oblast among the Russian leaders in accessibility of social facilities for disabled people.


Did the residents feel it?

In addition, a gap has emerged in the region between the dynamics of the social and economic situation. In the economy, everything was very good. The Magadan Region showed excellent performance in the investment sphere: growth in January-November 2015 amounted to 49,6%, and no other region of the Far Eastern Federal District showed such positive dynamics. This coincided with the launch of the same Pavlik and others field. Although it is interesting that the volume of construction work in the region fell again (by 7,1% per year). Industry in the region grew by 6,5% over the year (the second growth indicator in the Far Eastern Federal District), and agriculture by 16% (although, of course, with low turnover in general). In the agricultural sector of the Far Eastern Federal District, the Magadan Region was generally the only region where growth took place.

At the same time, the Magadan region has been a vivid example of when "abstract" (for the population) financial and economic indicators are not immediately converted into raising the standard of living of citizens. On the contrary, in the Far Eastern Federal District, it distinguished itself against the backdrop of all the successes of its production sector with weak social dynamics. So, real money incomes of the population fell in January-November 2015 by 8,2%, and the retail trade turnover for the year decreased by 6,1% (one of the worst results, together with the Amur region). The region, largely due to the fault of its peripheral situation, was also distinguished by a noticeable price increase, especially for food products (by 16,5% as of December 2015 in relation to December 2014). As a result, ordinary people in the region could not become the beneficiaries of its economic growth and did not experience its advantages.

The reluctance of the regional authorities to optimize expenses was probably related to the conduct of a large-scale election campaign, which included elections to the regional duma, the Magadan city council and representative assemblies of the rest of the municipalities. Due to the weakness of the opposition, the decrease in the level of intra-elite contradictions and the skillful public policy of the regional authorities, the elections had a very favorable result and were a new step towards strengthening the position of Vladimir Pecheny.

The main campaign - elections to the regional Duma - ended with an increase in the electoral ratings of United Russia (from 50% to 57,7%, compared to the regional elections of 2010 and 2015) and Fair Russia (from 11,2% to 13,5 , 16%), which came into second place, while the Communist Party and the LDPR reduced the level of support (the Communist Party from 11,4% to 13,7%, the LDPR from 10% to 17%). The RPR-PARNAS party did not pass registration and could not take part in the elections, but it could hardly claim significant support either. This led to a slight redistribution of seats in the regional Duma: the Communist Party of the Russian Federation lost one mandate, being left with one and only deputy, and "Fair Russia" acquired, and its representatives were two. The Liberal Democratic Party had only one deputy left. The United Russia faction ended up with the same number of deputies - 21 out of XNUMX, and completely dominates the legislative body.

The dynamics of the city elections in Magadan was more difficult, because instead of a completely majority system, a mixed one was introduced here, and half of the deputy corps was elected according to the lists. It is interesting that the number of deputies in the city (28) is still greater than at the regional level (21). The result of the transition to a mixed system was the expected appearance in the City Duma of single representatives of other parties - two from the Communist Party and the "Fair Russia", one from the LDPR. In the city of the Communist Party came out in second place by the number of votes (14,1%), ahead of "Fair Russia" (13,8%) and LDPR (8,9%). But United Russia retained its full dominance, having received 23 mandate (in the past, the faction included 19 deputies, but the rest were elected as self-nominated candidates and there were no representatives of opposition parties). Her electoral rating in the city elections was quite good 52,3% of votes, slightly less than in the region as a whole.

Thus, none of the opposition parties could become a clear leader in the protest field. The Communist Party of the Russian Federation, which at times achieved good results in the Magadan Region, conducted the last campaign unsuccessfully. Against this background, United Russia consolidated its dominance, and at the personal level, the governor managed to increase his level of influence over other authorities. Thus, S. Abramov, who came from his “city” team, took the position of the speaker of the regional duma and the head of the key committee for economic development, budget and taxes (the former speaker, the most experienced deputy A. Alexandrov did not run for office anymore). A.Popov remained in the city, occupying this post with 2005, and the head of the city and his administration, instead of S.Abramov, was finally approved by Y.Grishan (according to the charter of Magadan, as it was recently allowed by federal law, the head of the municipal education is at the same time the head of the administration and is appointed by the deputies, and not elected by citizens). O. Bondar also stands out among those who strengthen their positions in the regional government: in 2014, after A. Shirokov left the Federation Council, she already became head of the United Russia faction in the regional duma, head of the regional affairs and local affairs committee self-government and the first vice-speaker, and retained its position after the election. At the city level, the transport business owner S.Smirnov went up, taking the position of the first vice-speaker of the city duma (earlier - a simple deputy). As for the regional executive authority, here we can note the emergence of a significant player in the face of the new First Deputy Governor B. Zhuravlev, who has extensive experience in business structures.

In general, to date, the reform of local self-government has been completed in the region. It led to the almost complete abolition of direct elections to municipal chapters: last year only the elections of the head of the Omsukchan district were held, but the elected head O. Yegorkin is the head of the representative body of authority there, and not the administration as before (the administration is headed by the former head of the abolished Omsukchan district C . Kucherenko). But even more interesting is the fact that in the Magadan Region, due to the extremely small number of rural residents, a two-tier system of local self-government has been eliminated. On the site of the former municipal districts, city okrugs are formed, which are single municipal formations, although they can occupy vast territories. Last year, elections were held to the representative authorities of all the city districts, which in themselves were not accompanied by any big surprises and splashes of protests.

Thus, the political sphere of the region has been very successfully reorganized and is under the control of the governor Vladimir Pechenogo. This makes it easier for the authorities to contain protest moods, the grounds for which have become stronger, despite the economic successes of the region. The region has found some new prospects in the economy, but it lacks the complexity in development and even more so - economic diversification. The support of the region by the center is also fragmented, and in a number of positions, its decline was noted, in fact, correctly, but in the context of the fact that we are talking about the active support of the Far East and the MO by the federal center, which requires intensification of lobbying efforts. 

September 17: current information on coronavirus in the Far East
Digest of regional events and latest statistics