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Primorsky Krai: results - 2015, trends - 2016
East Russia launches a series of analytical publications devoted to the results of the past year and the analysis of the situation in the current year in the social, economic and political spheres of life in the regions of the Far East and Eastern Siberia
Primorsky Krai in 2015 and early 2016 found itself in an extremely contradictory situation, which at the same time clearly reflects the features and problems of the Far Eastern regional policy in general.
Doctor of Political Sciences, Professor of HSE, Scientific Editor East Russia
On the one hand, it was Primorye that became the main and largest beneficiary of the decisions taken by the federal authorities aimed at improving the investment climate in the Far East and ensuring sustainable economic growth. On the other hand, the current processes recorded not an improvement, but rather a worsening of the socio-economic situation, not to mention the complete absence of the desired outrunning growth. Thus, the new mechanisms of socio-economic development in the region have not yet started working, and the introduction of these mechanisms is proceeding very slowly. The old reserves of the region associated with the Soviet legacy and the transit function of Primorye, meanwhile, have been completely exhausted.
Throughout the year, new decisions by the federal authorities continued to be adopted with regard to Primorye, and this determined the vector of regional development. It was the Primorsky Territory that eventually became the owner of the most complete list of all kinds of projects initiated by the center. The largest number of territories of advanced socio-economic development appears here, the first and still the only free port has been created, a special economic zone continues to operate, and a gambling zone begins to function. But with the implementation of each project, serious problems are also associated, most likely caused by external circumstances - a general deterioration in the financial and economic situation in the country, weak interest in Russia on the part of foreign investors. However, Russian bureaucratic delays also became a noticeable negative factor for regional projects last year.
Growth points - first steps and first results
In this regard, the most remarkable, one might say - textbook was the situation with the free port of Vladivostok, which is seen in theory as a breakthrough pilot project launched in Primorye, which has all the necessary economic and geographical prerequisites for this. As you know, the idea of a free port was announced by V. Putin in his 2014 presidential address, and in 2015 the necessary federal law was developed and adopted at a very fast pace, which came into force on October 12.
The Free Port is an improved version of a priority development area in terms of fiscal conditions and administrative procedures, which is clearly oriented towards cooperation with the outside world. It is difficult to call it an analogue of the "free port" known from the world practice, since in this case we are not talking about a single port or even a purely coastal territory, but in fact about the entire southern part of Primorsky Krai, where there are not only seaports, but and airport, land border crossings. At the same time, in the process of discussing and adjusting the relevant draft law, some of the conditions of the free port were made even more favorable: the territory increased from seven to 12 municipalities, and the division of the free port into zones with different specializations (industrial, port, technology and innovation, tourism) was ruled out. In general, unlike the previous law on the TOP, the law on the free port caused much less controversy and controversy.
However, at the same time, the implementation of the free port project in practice ran into a number of obstacles. One of the key ideas - the transformation of the coastal part of the Primorsky Territory into a territory with the most lightweight state border regime - remained on paper: it turned out to be a difficult task to quickly implement this idea in Russian conditions. The eight-day visa-free regime for foreigners staying on the territory of the free port has not been earned. The free customs zone regime does not function either. In other words, the “gateway to the outside world” that can be created through a free port in the Primorsky Territory remains closed.
Without a foreign economic component, a free port does not differ so much from priority development territories, and therefore it faces the same problems - a slow influx of investors, who represent mainly Russian business, most often regional ones. Strong prospects for investment growth in such conditions are still not visible. It is noteworthy that at the first meeting of the Free Port Supervisory Board in October, only one application was approved (Pacific Investment Company with a hotel construction project), and only eight more applications were prepared and approved for the second meeting in December. The concession made by the authorities is also characteristic: if at first it was said that the free port would include only new projects, then in the end five supported projects are among those that are already being implemented. The largest new project, the Big Port of Zarubino, which the Summa group is engaged in, remains outside the free port.
From a formal legal point of view, the TOP project that was launched earlier is also developing very successfully in the Primorsky Territory. The region is becoming the leader in the number of TOP, which can also be explained by its most favorable economic and geographical location in the Far East. During 2015, two TOPs were approved (Mikhailovsky and Nadezhdinskaya), and at the beginning of 2016 the region became the leader, having already received the third TOP (Bolshoi Kamen). At the same time, more or less realistic projects of two more TOP, which were discussed earlier, appeared on the horizon - "Russian Island" (instead of the failed project of the eponymous special economic zone of tourist and recreational type) and "Neftekhimichesky".
At the same time, the "filling" of TOP by investors is not easy. So far, the capabilities of the TOP are primarily interested in the Far Eastern business, seeking to reduce the tax burden and use federal budgetary resources to their advantage. Relations with large federal investors are more difficult to build, as shown by the situation with the leading Russian agricultural holding RusAgro, which announced its refusal to enter the Mikhailovsky ASEZ, but then continued to work. Nevertheless, the Primorye TOPs do not remain without anchor investors. In the same "Mikhailovsky" this position was taken by the company "Mercy Trade", in "Nadezhdinskaya" - "Inkom DV", "Primorsky Confectioner" and "Nevada-Vostok".
The start of the annual Eastern Economic Forum (EEF) in Vladivostok is also of great importance for the prospects of Primorsky Krai. Vladivostok is getting an excellent opportunity to consolidate its role as a leading center for cooperation between Russia and the APR countries, thereby using the potential created earlier during the APEC summit. But the first EEF was clearly for informational purposes, and did not provide any breakthrough in relations between Russia and the APR. Primorsky Krai used this platform to conclude investment contracts, but mainly with Russian companies. It was at the forum that agreements were signed with the investors of the Mikhailovsky ASEZ (for 45 billion rubles) and the Nadezhdinskaya ASEZ (7 billion rubles).
We can say that the PDA mechanism in the region has begun to work, albeit not on the scale that could radically change the socio-economic situation in Primorye. And so far, a significant part of investments is planned in the agro-industrial complex, which is not a core area of the coastal economy and is unlikely to have an export perspective.
It is noteworthy that in Primorye, a tendency is likely to spread when the federal government begins to "offer" TOP to large federal financial and industrial groups, primarily to state-owned companies for their projects. In the case of Primorsky Krai, this means strengthening the position of Rosneft in the region. Firstly, in its interests the Bolshoi Kamen ASEZ has already been created (in the closed city of the same name), its main object will be the new Zvezda shipyard, which is seen as the leading Russian manufacturer of offshore equipment, tankers for the transportation of liquefied natural gas, etc. ... Secondly, in the long term, the future TOP "Neftekhimichesky", also created in the interests of "Rosneft" - to reduce the tax burden on its project of the largest oil refining and petrochemical production in the Far East in Nakhodka (VNHK, Vostochnaya Petrochemical company). Earlier Igor Sechin tried to get funds from the National Welfare Fund for the Zvezda and VNHK projects. After a long battle with the apparatus, however, a compromise decision was made to activate the TOP regime for both Zvezda and VNHK. In addition, at the end of December, a government plan was approved for the implementation of the strategic investment project of the Eastern Petrochemical Complex (which, in particular, involves the creation of a PDA in 2017). Against this background, however, the controversial issue of transferring a large and possibly controlling stake in VNHK to the Chinese side represented by China National Chemical Corporation (ChemChina) has not been resolved. Since such a decision is political and can be called unprecedented, it is not surprising that it stalled.
Thus, the implementation of really large investment projects in the Primorsky Territory is still gradually beginning. These projects are connected, moreover, with the interests of one financial industrial group - Rosneft, and their form is nevertheless the TOP. But so far it is difficult to assess their prospects, since the demand for their products (especially in relation to the shipyard) is far from obvious. In any case, the government made positive decisions on them, and this creates an important prospect for the region, while at the same time contributing to the transformation of Primorsky Krai into a new Russian center for the fuel and energy complex and related industries. Gazprom's project to create an LNG production facility in Vladivostok, on the other hand, appears to be on hold and may be canceled (during the year, there were conflicting reports about Gazprom's plans, from promises to launch the plant at the end of 2018 to hints that that there will be no plant at all).
Therefore, all possible "TEK" projects are unlikely to be implemented in Primorye, but even one of them, such as VNHK, can have a huge impact on its economy. The same applies to port projects. Here a clear (but also still future) leader emerges in the person of Zarubino, while, for example, the coal terminal in Sukhodol Bay, which caused environmental protests and discontent with regional authorities, will probably not be completed. The issue of financing such a powerful transport hub near the Russian-Chinese border, as Zarubino sees it, has not yet been finally resolved. Nevertheless, the project of international transport corridors "Primorye-1" and "Primorye-2" with an exit from the northeastern provinces of China to the ports of Primorsky Krai (with the expectation, mainly, for transshipment of grain and containers) continues to be developed, and the chances for its launch are growing. This will allow realizing the transit potential of the region in another new version - for the transit of Chinese goods.
Projects that are not related to the fuel and energy complex and seaports find themselves in a more difficult situation during the crisis, and this was clearly demonstrated by the situation around the new special economic zone in Vladivostok. The crisis in the Russian automotive industry could not but affect its functioning. As a result, not only the main, but also the only partner of Sollers in this project was the Japanese Mazda (Toyota and SsangYong left), cooperation with which continues (a memorandum was signed on the establishment of a plant for the production of engines). In order to keep this, in essence, small, but significant production for the Far East, Dmitry Medvedev signed a decree in August on subsidizing the transportation of cars produced in the Far East to the rest of the country. Sollers - Far East OJSC entered the official list of the most important backbone enterprises for the Russian economy. Then it was decided to grant subsidies to the plant to pay the utilization fee. Thus, the federal government did everything possible to prevent the car plant from shutting down, and the lobbying abilities of its owner, Vadim Shvetsov, played a role in its preservation.
Finally, among the various growth points created in the Primorsky Territory, a gambling zone finally began to work last year. However, the process of its creation and expansion does not promise to be fast either. It just could be accelerated by the introduction of a visa-free regime. In the meantime, the first casino has started operating in this zone, and against this background there have been further promises of large-scale investments (it is said about their volume of up to $ 2,2 billion). Not only Russian, but also foreign (primarily Chinese) businessmen are taking part in the development of the gambling zone. Although, of course, turning Vladivostok into a second Macau will obviously not work.
In the future, last year it was also planned to transform the Primorsky Territory into the leading organizational and production center of the fishing industry in the Far East, and in fact, the entire country. During the year, many meetings were held at the highest level on the fish industry, and one of the key decisions was the creation of a fishing cluster in Primorye. But in this case, the specific organizational forms are still not worked out.
New development tools - against current negative trends
As already mentioned, the rapid process of creating more and more development institutions in the Primorsky Territory was combined with unfavorable current trends in the regional economy. Particularly striking is the decline in the physical volume of investments in fixed assets, which, according to data for January-November 2015, amounted to 4,6%. This is far from the worst dynamics in the Far Eastern Federal District, but still, in the Primorsky Territory, at the same time, TORs were created, a gambling zone was launched, a free port was opened, and all this did not affect the real investment process in any way. The former economic opportunities of Primorye are clearly exhausted. This is clearly evidenced by the decline in industrial production (by 12,3% per year, one of the worst indicators in the Far Eastern Federal District) and a very noticeable reduction in the volume of construction work (by 20,4%). The latter fact emphasizes that the construction of new facilities related to ASEZs, etc., has not yet begun in the region, and all new infrastructure exists mainly on paper. There are no positive trends in agriculture, which should experience rapid growth in the future due to the agro-industrial specialization of the ASEZ created in the region. In the meantime, the decline in this industry amounted to 6,3% over the year.
Thus, the real economic situation in Primorsky Krai continues to deteriorate. So far, this has not influenced, however, the social situation in the region, which by inertia remains at a good previous level. For example, real money incomes in the region even increased, albeit by 1% (in January-November). There was no decline in retail trade (growth for the year by 0,8%). The increase in consumer prices in the Primorsky Territory, of course, was significant (by 11,9% for goods and services in general and by 12,8% for food products, as of December 2015, compared to December 2014). but it roughly corresponded to all-Russian tendencies and even lagged behind them a little.
Although the specific reasons for the growth of social protest in the region are already beginning to appear. The past year was marked by an increase in protest activity in Primorye, and trade unions played a significant role in this process. Monotowns became the main points of protest. A tense situation developed in Dalnegorsk, where employees of the Mining and Chemical Company Bor held protest rallies in connection with the accumulated wage arrears. At the main city-forming enterprise, Dalpolimetal, it was also restless. Both Dalpolimetal and Bor intend to cut staff. Bor's assets are likely to be transferred to a new legal entity. All this is fraught with an increase in unemployment and a decline in production indicators. The coal miners are also in an unstable position: the rally of workers of the Luchegorsk coal mine, who also fear mass layoffs, received a great response.
Thus, the small “traditional” mining economy of the Primorsky Territory is on the verge of closure, which, of course, negatively affects both industrial production and social tensions in single-industry towns. However, in the southern, "seaside" part of the region, where business is more developed, social well-being has not deteriorated so sharply, and people there have long been accustomed to dealing with problems on their own, not relying on the state and its projects. Although in this part of the region, where the bulk of the population lives, not all is well, as evidenced by the labor protests at the Radiopribor plant in Vladivostok.
The situation with the regional budget also remains quite good, although there are also weakly expressed negative trends in the financial policy of the region. At the end of last year, the Primorsky Territory significantly surpasses its traditional rival, the Khabarovsk Territory, in terms of budget size (revenues amounted to almost 108 billion rubles, yielding in the Far East only to the obvious leaders - "raw materials" - Sakhalin and Yakutia). The budget revenues of Primorye, like in most regions of the country, have grown, but this growth, again, as in almost everywhere, was below inflation. It amounted to 2015% in January-December 5,2 (hereinafter, data on the execution of the consolidated regional budget for the specified period and the author's calculations related to them are used).
But attention is drawn to the fact that the growth of budgetary revenues in Primorye was largely due to the support of the region by the federal center, which is interconnected with the actually privileged status of the region in the federal Far Eastern policy. Federal transfers in the region increased by 7% (while they decreased in Russia as a whole), and own revenues - by 3,8%. In particular, Primorye has become one of the leaders in the country in terms of the dynamics of the inflow of federal subsidies (an increase of 28,2%), and this is a direct indicator of both special federal support and lobbying opportunities. True, the volume of grants and subventions decreased (by 5,2% and 2,8%, respectively), but subsidies more than covered this decline.
As for the region's own revenues, their growth is mainly due to the good financial performance of business structures operating in the region. Income tax revenues, which depend on the operation of large enterprises, increased by a solid 12,6%, taxes on total income, which is an indicator of the work of small businesses, by 9,2%. As expected, there was no such dynamics for the income tax (an increase of 1,5%). Decreased in absolute terms receipts from excise and land tax.
Real needs of Primorsky Krai
Thus, federal subsidies and taxes paid by businesses supported the regional budget quite well. However, given the considerable needs of a large region, Primorye needs substantially more funds. Ultimately, the regional budget turned out to be very well balanced, and was reduced with a minimal, almost zero deficit, since the region clearly held back the growth of expenditures (they increased by almost 2%), and saved part of the funds on socially significant items (see below).
For the first time, the situation with the state debt of Primorye became alarming, which even drew criticism from the federal authorities. Objectively speaking, this debt is still small and not critical. The state debt as of January 1, 2016 is 7,7 billion rubles (only the sixth place in the Far Eastern Federal District), and the amount of state and municipal debt is only 16,2% in relation to the own revenues of the regional budget (which is much lower than the average Russian indicators and better all regions of the Far Eastern Federal District, except Sakhalin). The reason for criticism was the sharp increase in debt on budget loans (15,8 times - this was a Russian record), caused by the fact that Primorye borrowed money from the federal government. But the region has reduced its debts to banks (more than four times, which is almost a Russian record, already in the good sense of the word). In general, the public debt of the Primorsky Territory actually decreased over the year (by 3,4%). A slight increase in debt was noted in municipalities (by 7,8% to 5,9 billion rubles, and also mainly due to budget loans). Thus, there is no need to talk about an unbalanced budget situation yet. But it is worth noting that the financial problems of the Primorsky Territory last year, to a slightly greater extent, began to be solved at the expense of federal resources. The costs of servicing the state and municipal debt showed an immediate increase of 24,6%, although they remain a very small part of budget expenditures (only 0,9%).
It is also interesting that the Primorsky Territory began to spend more money coming into the budget on “economic” rather than “social” items, which is partly due to its obligations in the implementation of new projects. For example, spending on the road sector increased by almost 15%, on agriculture and fishing - by 11,1%. On the contrary, the region is beginning to cut back on those expenses that directly affect the social sphere and the well-being of citizens. In particular, expenditures on education fell by 2,6% (due to a decrease in expenditures on preschool education by 8,3%, but with a slight increase in expenditures on general education by 2%), and on housing and communal services - by 1,7%. Spending on health care (by 4,1%) and social policy (by 4%) increased slightly.
The regional authorities have the right to consider that they have fulfilled their obligations to state employees by 2015. But at the same time it becomes clear that this was the limit of their capabilities, and they are not able to do anything more now. It is often said in the region that the regional budget has a social orientation, but this simply corresponds to all-Russian trends. The main budget items are, as elsewhere, education (25,3%), social policy (19,8%) and health care (15,7%). In many items of expenditure, Primorye is close to the national average (but in terms of the share of spending directly on social policy, it, in fact, became the leader of the Far Eastern Federal District and one of the Russian leaders). However, at the same time, the share of housing and communal services has already fallen to 7,1%, but the authorities are clearly increasing spending on roads (they accounted for 10,5%, and Primorye entered the top ten Russian leaders in this indicator).
Confrontation of elites continues
The political situation in the Primorsky Territory as a whole also remained stable, but there was no need to talk about the complete absence of conflicts. The latent confrontation between the “new” and part of the “old” elites of the region continued, expressed in the difficult relationship between Governor Vladimir Miklushevsky and Vladivostok Mayor I. Pushkarev. In many ways, it influenced the acute and quite open conflicts over the municipal elections in Spassk-Dalny and Spassky districts, where the group of influence of I. Pushkarev originates. Conflicts in the municipal elites also affected Nakhodka. These processes are a consequence of the purposeful policy of the governor, who is gradually trying to take control of power in the municipalities, but is faced with obstacles in the form of dissatisfied administrative elites and businesses.
Perhaps, by now, the region has already developed a balance of power within the elite, by the way, not so bad for the governor, if one does not set the goal of subjugating everything and everyone in the region. Although, at the same time, there was more conflicting information about whether and whether Vladimir Miklushevsky himself would continue to work in his post. The year before last, in connection with the governor's campaign, Vladimir Miklushevsky still clearly worked to consolidate his positions in the region.
Thus, the numerous decisions made by federal structures in relation to Primorsky Krai have not yet been converted not only into accelerating the pace of its socio-economic development, but even into maintaining the status quo. The regional economy begins to "sink" noticeably. Stability, but of an inertial nature, remains in the financial, social and political spheres. Apparently, the region has to wait until new projects finally start working and hope that this will happen. The past year has clearly shown that the region's existing opportunities in both the economic and social spheres have been exhausted. The region's ruling elites are successfully maintaining their positions by supporting the center and working for the future. Nevertheless, the pace of progress of new projects turns out to be too slow for the Primorsky Territory to easily survive the coming crisis years.