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Pavel Minakir: "The key to the development of the Far East is not handouts, but freedom"

They are still trying to solve the problems of the Far East, as if the region was similar to Central Russia, says Pavel Minakir, economist, academician of the Russian Academy of Sciences, scientific director of the Institute for Economic Research of the Far Eastern Branch of the Russian Academy of Sciences, member of the Presidium of the Far Eastern Branch of the Russian Academy of Sciences.

However, the growth points dissolve in the sparse population, the real level of salaries of the Far Easterners is lower than in the western regions of the country, and preferential regimes are beneficial only to the investors themselves and give little to the regions other than reporting. But the scientist also knows the answer - and he told EastRussia.

Pavel Minakir: "The key to the development of the Far East is not handouts, but freedom"

"Economic growth is not the same as development"

- The "pivot to the east" as a new vector of policy was proclaimed almost ten years ago. In your opinion, will the Far East achieve sustainable economic growth, or will everything go as it is - in "leaps", if we mean by them large projects that are beginning to be implemented here and there?

- You know, such questions baffle me. First, who said that there is no sustainable growth? Statistics show that the economy is growing all the time. Another thing is that it grows weakly: there is growth, but it is frail. True, it is like this in the country as a whole after 2011, and nothing specifically criminal for the Far East is happening. If we operate with the official data of Rosstat, the growth rate of GRP for 2015-2019 is 106,8% for the economy of the regions of the Far Eastern Federal District and 106,4% for the entire country. This is the first thing. And second: why should there be some kind of epochal economic growth in the Far East? Who needs it?

- If we talk in terms of the Far East's “lagging behind” rhetoric, as they have done in recent years, then everyone needs growth in order to “catch up” with the western part of the country.

- No, I understand: there is a ministry for the development of the region, and it should regularly report that development is taking place. And since the outstripping growth was declared in 2012, then the development should also be outstripping. But why and what should it be ahead of? And what do they generally want from the Far East? What is the power not happy with here? In terms of macroeconomics, given the above indicators, I see no problems in the Far East. Moreover, we know that the Far Eastern Federal District is 11 constituent entities of the federation. All are completely different: there is the Far North, there is the Chinese border, there are almost subtropics ... For this whole territory, what is "advanced development", what do we want? Do we want to develop the Vladivostok region? Khabarovsk? So let's develop them in a targeted manner. So far, it’s not working out very well. 

"The Far East is inevitably enclaves"

- Officials seem to understand that the region is very different, therefore, they use the term “growth points” together with the slogans of “advanced development”.

- So these "points of growth" did not come out of nowhere. Structural analysis shows that 80% of the capital investment that follows incentives in the Far East is investment in the extractive industry. Money comes where there is something to get. It is obvious.

They will come to Chukotka, Magadan, Sakhalin, which actually receives more than 90% of all investments, especially foreign ones, without any priority development zones. Point projects will certainly arise where there are natural resources that are effective for development. Especially if there are markets for them, and they are. The example of Sakhalin is indicative.

- But investors also say something else: without the construction of infrastructure, many fields are unprofitable. And if the state does not help us in this, we will never come there. But if it helps, we will build production facilities, we will pay taxes ...

- I recently returned from Magadan and Kamchatka, I saw all this with my own eyes. Investors come there, there is a TOP, deposits have been developed there for a long time, and will be developed for a long time - both old and new. But what does it mean “we will not come there to develop the deposit”? Investors come, like they even bring something. And the situation is not changing. Because everything that they bring, they bring in order to receive rent and safely withdraw it from there, this rent. That's all for a short time.

- Of course, preferences bring benefits primarily to business, but not to the regions, this has been talked about for a long time. But don't these tools give a developmental effect at all?

- Well, let's talk about the TOP, although they were just spied on in another place, and even transferred to completely unusable soil. Of course, investors use these benefits, they say thank you. Not only is there gold, which cannot be mined near Moscow, but only somewhere in Chukotka and Magadan, or iron ore, as in the Jewish Autonomous Region, they also give benefits and build infrastructure. This is generally a class!

But how do big mining projects work? It's very simple: to the Far East and from the Far East caravans of aircraft are flying, which are filled with healthy young men - shift workers. Those who fly often, they see it. We have worked out the watch, they will be replaced by a new watch. Now, after all, it is not the 70s, when each plant is thousands, and sometimes tens of thousands of employees and the whole city around. The technologies are different, the labor intensity is completely different.

- But there is an internal logic in preferential regimes. First, investments in production, followed by an influx of employed people, and then the improvement of infrastructure, an increase in the quality of life and replenishment of the treasury. In an ideal picture and from Moscow it is seen so, but what does not work like that?

- Yes, there is such a mechanistic model: investments come, in this regard, first builders come, then the operators, bring families, children need to go to schools. Good new settlements are emerging, some new hearths. This is what is happening now, for example, in the Amur region next to the cosmodrome - a whole city is being built. A similar effect can be expected during the reconstruction of the Baikal-Amur Mainline.

But the Far East is not a European densely populated area, like the Moscow region, where the effect of a large project is like a cumulative explosion and diverges in circles: more and more new businesses appear, more and more people are involved. The Far East, purely physically, is 40% of the territory of the Russian Federation. Look, 40% is the whole continent. There is an extremely high degree of localization here, and it will still be enclaves. An area of ​​7 million square kilometers cannot be an entire developed region in principle. It's just a geographic space. 

"High Far Eastern salaries are fairy tales"

- Well, the outstripping development of the entire Far East only thanks to the TOP or FPV regime is, of course, a stretch. But paid taxes, new high salaries - is this reality?

- You know that territories receive from new investors, after, of course, they start paying taxes? Personal income tax to the regional budget, that is, payroll tax. Income tax, and then if it is shown. Mineral extraction tax, which goes mainly to the federal budget. But the main tax in fact, and that is why it is federal, is value added tax. But all major investors come to the Far East to extract resources in order to export them. This is the specialization of the Far East. And if you export, then all VAT is returned to you, that is, even the federal budget does not receive VAT.

And what's the territory with the investors? What are people? People get paid. But with all the “northern” allowances, real wages are still lower than the average in Russia. Moreover, these "scissors" between the federal salary and the average Far East salary are expanding over time. In the Soviet Union, wages were higher in the Far East by an average of 18%. By the mid-90s, parity had been achieved. After that, scattering began in different directions. Well, what do you want from people, where will they go, why?

- It turns out that the Far Eastern salaries are almost 1,5 times higher - is that? ..

- Fairy tales. Although, at the same time, no one has canceled the existing law since Soviet times, according to which, after three years of experience of living and working in the regions of the Far East, an employee is entitled to a salary ratio of 1,5.

- But they probably don't pay him? Business does not pay, only government agencies?

- Business says: we have a market ... This is their market, they think that they have a market. In general, there is a so-called law of a single price on the market, including for labor. If we are talking about the Far East as a kind of single economic region, then there is a Far Eastern labor market. In this market, in principle, the price of labor should be formed on a single basis. If a business pays someone 20% more, and someone - as much as in Voronezh, and in state organizations they pay an official salary, as in Voronezh, but multiply it by 1,5, then what kind of a single labor market are you talking about? , and what does the market have to do with it?

- Why doesn't the state punish, this is a violation of the law?

- You yourself said that the state needs an investor to come to the Far East. So it says: come, bring the workers. And investors say: in order for workers to go, they must receive a salary twice as high as, say, in Ryazan. And if we are talking about mining, say, gold, then you can pay high salaries - at least twice as much. And if we are talking about some other production that can be located in Ryazan, then it will be located in Ryazan. Why would such an investor need income tax benefits? His main expenses are the wages fund, raw materials and fuel.

- But does it mean that if the business is not high-margin, then no TOP will help create it in the Far East?

- I will cite agriculture as an example. RusAgro can save significantly more on costs near Moscow. The only logic is to place such a production in the Far East - the huge Chinese market is nearby. The investor will come only there and when the uninterrupted and profitable functioning of the business is ensured - with resources and demand.

Demand can be made by the economy itself, as it is doing in China, or you work exclusively for export, like the entire mining industry in the Far East. Close export tomorrow, and it will all be closed, with the exception, perhaps, of gold mining, which the Central Bank buys out in some part, and high-tech companies. 

"Freedom VS preferences "

- It turns out, in your opinion, for the economy of the entire Far East a faster growth rate than the average Russian one is neither needed nor achievable?

- Economic growth and economic development are interrelated things, but they are not at all identical. You know, in the 90s, too, all the talk was about the all-Russian growth rates, and there was a special program in which my colleague Professor Popov participated. To achieve a high growth rate, he said, is “three seconds”: keep constant, annually high growth in public investment, and you will have a high growth rate with a certain multiplier.

And now you will have growth, but what's the point? At the same time, no significant development in terms of business prosperity, income growth, quality of life, growth in the competitiveness of manufactured products may occur. And, as a rule, it doesn't. So what do you want to do? So that the Far East should develop faster than all other regions? What for? I don't hear the answer.

- Well, of course, they say: you need to stop the outflow of the population and achieve an influx, that is, achieving growth is a condition for the Far East not to become empty.

- At the peak of the economic development of the Soviet Union, after the construction of the BAM, which attracted a lot of people here, the population of the Far East was 8,1 million people. Now, after two additional constituent entities of the Russian Federation were administratively, that is artificially, “attached” to the Far Eastern Federal District, this population is 8,13 million people. With all modern support measures. Only as many people can live on any territory as can live - this is the law of economics. And if today a larger number of the population in the Far East is not needed? This population will not be able to feed themselves here, do you understand?

- And what, leave the Far East as a region of "perpetual watch"?

- The same Vostochny cosmodrome is being built by bringing in foreigners and specialists from all over Russia because the population of the Russian Federation is actually only 145 million people. For comparison, the Chinese population in the border zone in the Far East is more than 120 million people. Do we want to compete with China in terms of population? Let's then move the whole country to the banks of the Amur. And since the Far Eastern economy is 52% of the economy of the public sector, let’s then, I exaggerate this, following the people, will we transfer the entire federal budget here?

And the key to the question is that development is the existence in the Far East of such conditions under which any business would develop, creating the so-called endogenous economic turnover, that is, generating income for itself. Here's what to create. And you will not do this with any TOP.

- What about?

- At one time we suggested: you don't have to play with all these TOP, there are long-tested options. There is a narrow strip in the Far East along the Amur and Ussuri valleys, plus South Sakhalin, plus the Greater Vladivostok region, the very south of Kamchatka - so create a continuous tax-free business zone for these regions. A solid area with no customs border. And do not be afraid of these crowds of Chinese who will inevitably begin to move back and forth - build a normal civilized regime for regulating migration and stay in the country. Let the people here develop everything themselves. 

"The tasks are formulated incorrectly"

- And do you think that this will attract the population better than preferences, "Far Eastern hectares" and preferential mortgage rates?

- There was an experience of settling the Far East without state support. The family of my wife, for example, moved here without any agitation, because it was hungry there, but in the Far East it was satisfying: taiga, a river, fish, animals. And there were few overseers, that's what matters. People go there, and business goes where it is more comfortable to function. Where it is freer, more promising and more satisfying to live. And no state will entice anyone by any benefits.

At the same time, people must know and see real "success stories", and this will not appear in two years or even in five. Then it is theoretically possible that a person familiar with the Far East, for example, on watch, can decide to move. Or continue flying on a watch, which, by the way, suits many: the salary is good and the conditions, in general, are not bad. Or move your family, build a business, a career. The second person can only do if he gets the iron confidence that it is much better than flying away from his family. Would you go to the Far East to live and work with your family?

- If normal conditions were created for me, then of course.

- Here! This is where it begins: either create conditions for a specific worker, or conditions already exist in specific places in the Far East. Salary, infrastructure, housing, working and recreation conditions, health and education system, communication with the rest of the country and within the Far East ...

- But somehow people are still attracted, and they move to the Far East to work even from Moscow.

- High salaries for two to four years. To make a career and return not as a candidate of sciences, head of the department, but as a vice-rector, who has saved up money for an apartment in an elite district of Moscow, why not go? This is an idea that has been exploited for decades in the Soviet Union, there is nothing new in this method. Then people booked apartments for themselves in the European part of the country and went, especially to the northern regions of the Far East, where there were high salaries, six-month paid vacations, a whole bunch of benefits, good supplies, unlike the rest of the territory. Then in the Far East it was possible to earn money and feel like cool people.

- Is it possible that officials for so many years cannot decide what incentives are really necessary to attract the population?

- Now an absolutely incorrect task has been formulated, understandable only for the so-called "excellent students in macroeconomics": a high growth rate is needed. How far this is from the real economy, here's a simple example. The Far East is close to the resorts of Hainan Island, but you have to pay a lot of money to fly there. This is how our air traffic was built. There are no cheap Chinese companies in these directions, only Russian ones fly, and the state subsidizes these companies for the transportation of passengers from the Far East to Crimea or Moscow. So many people in the Far East prefer these very destinations, because it is cheaper to fly there. The family budget can handle such a vacation trip once a year, but not to Seoul or Hainan.

But in a prosperous economy, by and large, it is not necessary for people to be given handouts through subsidies from the budget. Let there be market prices, but their family budget must match these prices. And they should be able to earn this budget in their region. This is called "economic development."

And when the ministry reports, and often with data errors: here, before 2014 we had 1% growth, and after 2014 it became as much as 1,5% - this is no longer funny. Consequently, officials do not see a different economy, they do not know. For them, statistics are important, a report to the boss.

- But thanks to the proclamation of the policy of "turning to the east", the regions of the Far East at least began to allocate more substantial support from the federal budget, right?

- In 2020, 11 constituent entities of the Federation of the Far Eastern Federal District accumulated 1,2 trillion in tax and non-tax fees on their territories. Of this amount, 300 billion rubles went to the federal budget. 450 billion rubles were returned to the Far East from the federal budget. Thus, the Far East received an additional 150 billion rubles from the federal budget in addition to what was collected on its territory. This is less than 10% of 1,2 trillion rubles.

- Will there be an effect if the regions, as you said, start earning themselves, collect more and more taxes?

- With the current distribution system, nothing will change from this. Suppose the region earned more taxes and everything else than last year. The transfer from the federal budget is reduced to him: they say, you don’t need that much. Because there is a certain average value per capita for all industries, and exactly how much you should spend. If you cannot spend that much, we will add it for you. If you don’t do anything, we will add more for you. And if you do well, we will add less for you. We have an absolutely archaic, with all digitalization, tax system, and an absolutely savage administrative regulation system.

- So, for the development of the Far East, it is necessary to reform not tax rates, but the management system?

- Well, why, and the tax system too. Germany is also a federation, and its GDP is comparable to Russia's GDP - it is $ 4 trillion against our almost $ 2 trillion, according to the World Bank. In Germany, 50% of the collected tax is transferred to regional budgets, while there are special rules for distribution to regional budgets: regions that are poorer receive relatively more. What do we do with our VAT? We transfer 100% to the federal budget. And this, of course, is not a problem of the development of the Far East, it is a problem of the entire country.

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