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Primorsky Krai: results - 2014

Primorye Territory: a new start in politics and economy

Primorsky Krai: results - 2014 continues the cycle of publications "The Far East - Results of 2014". The events of the last year have shown that the Primorsky Territory remains one of the key regions of the Russian Far East, and that high hopes and prospects of the federal authorities are still associated with it. 

As you know, after the end of the APEC summit in 2012, before which the region received huge federal money, there was a pause. Last year, in the process of forming the new Far Eastern policy of the federal center, it became clear that Primorye would be one of the main beneficiaries of this policy. The region received a strong federal support, many federal initiatives are associated with it today. Now Primorye is waiting for the implementation of a number of major projects. Against this background, the positions of the current regional authorities were strengthened, as Vladimir Miklushevsky successfully passed through direct elections.

"Income" region

However, for the time being it is possible to speak more about the emergence of important prerequisites and prospects than about any rapid development of a traditionally difficult region. At this stage in Primorye, there is still a shortage of large-scale production and investment, and a significant part of the economy remains in the shadows. This is evidenced by many statistical indicators. For example, in January-August 2014 in the industrial sector of Primorye declined. The decline in production occurred in agriculture. Therefore, the region really really needs new incentives for its development, since its existing base has been exhausted (it is no accident last year that the situation in such "old" sectors as the forestry sector, the fish industry, the mining industry, but breakthrough Solutions could not be found). It should be noted that the federal center, while evaluating the effectiveness of regional authorities in 2013, did not particularly appreciate the current situation in the region, which took only 69 place in the rating. The dynamics of economic development (which in fact was not the case) and the level of development of the social sphere were assessed as the lowest, while the remaining indicators were at an average level.

But during the past year, an improvement in the investment situation has already been noted. The development and, in some cases, the implementation of important projects. The volume of investments has increased significantly. Although, it should be noted, the pilot project of the Agency for Strategic Initiatives (ASI) gave extremely disappointing results of the state of the investment climate in Primorye. The region was in the worst - the fifth group (two other regions of the Far East, where this study was conducted - Yakutia and Khabarovsk Territory - were at least in the fourth, but also a disadvantaged group). This rating is based on a survey of regional entrepreneurs and shows exactly how they assessed the current situation. Probably, the regional authorities of Primorye really lack a constructive interaction with local business, which is clearly not satisfied with their investment policy.

Nevertheless, the merit of regional authorities under such conditions can be recognized as a situation in the financial and budgetary sphere, which looks good, given that the situation in the economy of the region is difficult to recognize as brilliant. Now in terms of regional revenues, including its own, Primorye ranks third, after the leaders of the Far Eastern commodity sector - Sakhalin and Yakutia. In particular, Primorye is ahead of these indicators of its traditional rival - the Khabarovsk Territory. The dependence of the region on federal transfers is not very high: at 78,5%, the province provides itself (hereinafter, the financial statistics for January-October 2014).

However, the analysis of budget statistics again demonstrates the weakness of the real sector of the economy in Primorye. Revenues from income tax make up only 18,1% of the tax and non-tax revenues of the regional budget. There is a clear bias towards income tax (41,7%). Probably, this situation is a legacy of those times when regional authorities relied mainly on federal transfers, while the business associated with them preferred to hide their profits, work in the shadows and withdraw funds from the region. Nevertheless, in Primorye there was a fairly successful small business, which just makes a good contribution to the regional budget. Thus, in terms of the share of taxes on comprehensive income in tax and non-tax revenues of the regional budget, Primorye ranks second in the Far East (this share is 8,1%). In addition, compared to other regions of the Far East, the Primorsky Territory has the highest share of land tax revenues (3,5%). A significant share of income is the corporate property tax (10,6%). Nevertheless, it is clear that the main problem in filling the regional budget is still the absence of large budget-forming enterprises-taxpayers. Port complexes with this function also do not cope.

Meanwhile, the federal center continues to play a significant role in filling the regional budget, although record financial injections remained in the recent past. Subsidies account for almost 10% of the revenue side of the budget. But more importantly, Primorsky Krai receives the largest amounts of subsidies and subventions in the Far East. In other words, the federal government continues to give funds to the region for certain projects (which usually go through subsidies).

The growth dynamics of the regional budget was positive last year, but on the whole it does not mean a sharp improvement in the situation. So, own income grew by 7,4%, which is certainly good, but these growth rates are lower than in Russia and the Far East in general. The main positive shift is the growth of income from income tax (by 12,8%), which nevertheless indicates a gradual overcoming of the situation prevailing earlier and the related distortion in the structure of income. In addition, economic entities began to give the Treasury much more income tax on their property (growth by a quarter). At the same time, the federal center continued to support the region with finances, although this support has undergone changes. The region began to receive more subsidies and subventions, but at the same time revenues from the main type of subsidies decreased - to equalize the budget provision (which is an indirect evidence of improving the budget situation in the region) and subsidies. This means that to increase financial support from the center, which will go to certain industries and projects, the region will have to use its lobbying capabilities more actively. If we continue the traditional comparison with the Khabarovsk Territory, the budget policy of Primorye looks more balanced. During the year, Primorye largely maintained its budget surplus. The debt burden on the budget was also small (according to the results of 2013, its indicator is 16,7%, the situation in the Far East was better only on Sakhalin).

Focus on health, education and social policy

At the same time, there are certain distortions in the expenditure policy of the regional authorities of Primorye. For example, the region spends little on housing and communal services, which has been switched to the "free float" regime. Housing costs are a little more than 6% of Primorye's budget expenditures, and the region spends about the same amount as the Magadan region. On the other hand, the attention of regional authorities to social issues is noticeably emphasized, which they constantly emphasize in the public sphere. Thus, Primorsky Krai is one of the leaders in the Far East for spending on health (the share of expenditures in the budget is about 15%). In terms of spending on education in general (more than 27%), the region did not become the leader of the Far East, but it ranks first in terms of the share of spending on pre-school education (almost 8%). Also Primorsky Krai was the leader of the Far East in terms of spending on social policy (their share is more than 21%). Thus, by abandoning massive injections into housing and communal services, Primorye seeks to fulfill social obligations to the population in other areas.

At the same time, the authorities of Primorsky Krai spend a lot of money on national issues (8,6%, which is higher than the average for Russia and the Far Eastern Federal District). It is interesting that a significant part of the funds goes to representative bodies of government: it is in their financing that Primorye is the leader of the FEFD. But the share of spending on the media is small (0,3%) and lower than the national average and the Far East (despite the fact that there was a gubernatorial campaign in Primorye).

It should be noted that the situation in the housing and communal services in the Primorsky Territory is relatively good, which in fact can testify in favor of the scenario of its "denationalization". For example, Primorsky Krai has the smallest share of dilapidated and emergency housing in the Far East (2,3% according to 2013 data). Although the share of loss-making utilities is still high (almost 44% for 2013 year), but still not a record.

The attention of the regional authorities to social expenditures in the Primorsky Territory is certainly necessary, since there are successes and shortcomings in the region in the social sphere. For example, in the educational sphere, a low level of salaries and a low level of availability of teachers are visible (the worst indicator in the Far East). In healthcare, which, we recall, is better financed than in most Far Eastern regions, Primorye has achieved relatively high levels of budgetary salaries. The result for the population, by the way, is not bad: life expectancy in Primorye is on the second place in the Far East after Yakutia. However, in terms of the provision of beds, the Primorsky Territory again turns out to be an outsider in the Far East (whereas the level of medical care is at an average level). Thus, the edge still does not have enough spending on the educational sphere in general, as well as on improving the state of the medical infrastructure.

The rate on Primorye

Relations with the federal center are especially important for the Primorsky Territory, since its favorable geographical position still promises great prospects for the region, but it still does not have enough resources for its own development. The federal center has indeed demonstrated more than once that it relies on Primorye as a key and strategically important region not only of the Far East, but also of Russia as a whole.

In particular, Governor Vladimir Miklushevsky received full and unequivocal support for the center in the elections. He was allowed to be elected ahead of time, and long before the end of his term (in this regard, he became one of the record holders, reducing his term for the sake of transition to a new political quality of an elected governor). The Ministry of Eastern Development has confirmed its interest in the region by deciding to host its largest regional office. During the year, the federal authorities made many decisions testifying to the privileged status of Primorye. By the decision of the government, a new special economic zone of an industrial-production type was created here (in the interests of the automotive industry). At the very end of the year, an initiative to create a free port regime in Vladivostok came from the lips of the head of state. The Ministry of Regional Development, while it still existed, included among the pilot projects for the creation of agglomerations and the Vladivostok agglomeration, the project of which had long been promoted by regional authorities. Solving the problems of a number of single-industry towns of Primorye and their federal funding in this regard can be facilitated by their inclusion in the first, most problematic category (which included Dalnegorsk, Yaroslavsky and Svetlogorye with their dysfunctional mining industry).

A number of strategically important projects that can be implemented in the Primorsky Territory are also at the center of attention of the federal authorities. These include four projects - the port of Zarubino, the shipyard Zvezda, the Eastern Petrochemical Company (VNKhK) and Vladivostok-LNG. Most of the new projects have industrial specialization, which can allow the region to solve its problems, which we mentioned above. But, of course, a significant part of the prospects are related to infrastructure projects, among which, in addition to the port of Zarubino, the transport corridors "Primorye-1" and "Primorye-2" (last year there was an initiative to create a corridor "Primorye-3"). The region needs a project of a fishing industry cluster, as well as measures to develop coastal fish processing. There is a revival in the process of creating a gambling zone in the Primorsky Territory, one of four that may exist in Russia under the current legislation.

Primorsky Krai is important for the federal center and as a border region, with the participation of which it is possible to promote major international projects. For example, last year cooperation between Russia and the DPRK intensified, and land communication with North Korea is carried out only through Primorye. From the side of the regional authorities, new proposals were made to develop cross-border cooperation between Russia and China, including through the creation of tourist clusters, the facilitation of the visa regime, etc.

Competition projects

At the same time, the abundance of potential projects and influence groups interested in their implementation created a somewhat unexpected situation of uncertainty. The competition between the projects and their initiators has become aggravated, and in these conditions there are very few projects, the implementation of which can be considered guaranteed. This is evidenced by the situation with those projects that Minskvokrazvitiya is engaged in, and which are called upon to create new conditions for the socio-economic development of the Far East. For example, under the territory of advanced development in the province, it was proposed to give five sites at once with very serious prospects. But in the end, it was decided (perhaps temporarily) to abandon a number of initiatives to stimulate the largest projects implemented by federal FIGs (VNKh and Zarubino). The "modest" TOR project "Nadezhdinsky" came to the forefront. At the same time, the positions of TOR on Russky Island can also be considered safe, especially since this project is important for the Far Eastern Federal University, which was once run by Vladimir Miklushevsky.

But an even more difficult situation arose around the list of priority investment projects, when none of the projects of Primorsky Krai fell into the first group. At the same time, in the second group, which constitutes a kind of “waiting list”, there are four coastal projects at once (production of mineral fertilizers, methanol production, reconstruction of the Nakhodka sea fishing port, creation of the Center of Nuclear Medicine on Russky Island). Of course, the Primorsky Territory will not remain without TORs and priority investment projects. But the general interest in this region has created a new competitive situation, when some projects have to be sacrificed.

In addition, during the year old regional problems also reminded of themselves. Some of them, probably, will force the federal center to be restrained at realization of new seaside projects. As you know, some objects of the APEC summit were not completed, and this last year did not escape the attention of the head of state during his visit to Vladivostok. The most scandalous story with the construction of the oceanarium resulted in the institution of criminal cases and arrests. Formally, this has nothing to do with new projects and the current regional elites. But it is obvious that the federal authorities will try harder to control their implementation than before.

The growing interest of large federal FIGs to Primorsky Krai is also a trend of recent years, creating in the region, which in the 1990-s. Was considered "closed" for external players, an entirely new situation. Perhaps, the group "Suma" with its new project of the port in Zarubino promoted its interests more successfully than others. First of all, it managed to reach an agreement with the Chinese side (including the authorities of Jilin Province) on the use of the port for the transit of goods from the north-eastern provinces of China, which are landlocked, to the coastal eastern and southern regions of this country.

Projects of leading state corporations, in turn, promised the region growth in industrial production and tax revenues, but remained at a preliminary stage. Gazprom's Vladivostok-LNG project is gradually being implemented, but throughout the year it has been repeatedly said that it can be frozen and canceled. Until now, it is not entirely clear whether this project will be provided with raw materials (given recent arrangements for the export of pipeline gas to China), and whether it has a market. Moreover, during the year competition arose between the Far Eastern LNG projects, of which hardly all can be realized. As you know, on Sakhalin at the same time, the same Gazprom intends to expand the capacities of the existing LNG plant, and Rosneft is promoting its Far Eastern LNG project.

As for Rosneft, in Primorye it intends to implement a project to create oil refining and petrochemicals (VNKh), but it faced difficulties in finding financing. Obviously, Rosneft would like to rely on funds from the federal budget, but in the process of struggling for the National Wealth Fund (NWF), it encountered resistance from some government officials. As a result, the long-conceived project is still in a somewhat suspended state. Igor Sechin's sphere of interests includes the project of building a new shipyard Zvezda, which was discussed including with the participation of Vladimir Putin (we also remind that Vladimir Putin signed the decree "On the Development of Shipbuilding in the Far East" on 21 2014). Last year, Igor Sechin took control of the entire Far Eastern shipbuilding and ship repair center, headed by its board of directors. At the same time, the issue of the specialization of the new shipyard and its customers has not yet been fully resolved. In particular, Russian LNG producers have already preferred to place orders for the construction of tankers-gas carriers abroad. Probably, the rate will be made for the construction of offshore equipment, which is especially important for Russia in conditions of sanctions.

Among the influential leaders of state corporations, meanwhile, there are interests in Primorye and Sergei Chemezov. His Rostech plans to build a port of Vera in the closed city of Fokino for the export of coal, which will be mined in the Amur region. But before the implementation of this project is still far. Another fairly influential player - the group "Siberian Business Union", acting in an alliance with the structures of Gennady Timchenko, already had problems in the implementation of the project to build a coal terminal in the bay of Sukhodol, against which environmentalists spoke. The principal position on this issue was taken by Vladimir Miklushevsky, who decided to ban the construction of open type coal terminals in the region.

At the same time, while many projects remain projects, industry in the region is "held back" by other players. Among them is the "Sollers" group, which, with the participation of Japanese business, managed to create a small but actively promoted production of cars in the public sphere. Now it is supposed to expand from 75 to 100 thousand cars per year. In the interests of this project, the federal government created a special economic zone in Vladivostok.

Elected with support in 77,4% votes 

Meanwhile, in the political sphere of Primorsky Krai, Governor Vladimir Miklushevsky successfully consolidated his leading position. Considering that he is a relatively new figure in the region and not integrated into the previously established elites, it really was important for him to use early gubernatorial elections to confirm political superiority. The task was successfully solved, especially since the parties of the parliamentary opposition were not able to nominate strong rivals. Vladimir Miklushevsky used in his interests and political agreements with the "Fair Russia", which did not expose its candidate, and the most famous of its representative, State Duma deputy S. Goryachev in exchange became a member of the Federation Council from the executive power of the region. The Communist Party could nominate only its regional leader V. Grishukov, who gathered protest votes, especially in Vladivostok (although he did not conduct an active campaign), but far behind the leader who won 77,4% of votes. However, the elections were held in conditions of low turnout, which was to be expected, given the specifics of the region and this campaign.

The governor’s campaign allowed Vladimir Miklushevsky to become a prominent figure not only in the regional information field. He, perhaps, is more effective than all the Far Eastern regional leaders has organized his PR campaign and is ahead of them in his mentioning. Moreover, even purely regional plots with his participation often receive coverage in the federal media.

Also, Vladimir Miklushevsky received a carte blanche to change the interests of the regional political field. During the year, he made efforts to establish control over local elites and municipalities, and we can say that the vertical of power in the region as a whole is formed. During the campaign, an interesting move was the appointment of vice-governors curators of various municipalities. Vladimir Miklushevsky himself made the so-called "big journey" across the region, accompanied by the setting of tasks. Already after the elections, it was decided to spread the model of the city manager everywhere, including in Vladivostok, whose head Igor Pushkarev could be called one of the most influential political figures in the region. In the meantime, the mayor of another important city, Ussuriysk S. Rudits, was forced to leave his post, and a criminal case was opened against him. "Victims" of the work of law enforcement agencies in the province were many municipal officials, which allowed the governor to act more harshly and confidently. As a result, the governor ensured the loyalty of local elites and politically isolated their most powerful representatives, such as Igor Pushkarev. In addition, he used the electoral campaign and as an opportunity to carry out changes in his team and co-opt into it both people from his personal environment and representatives of the local elite (in particular, the prominent representative of the local elite, V.Usoltsev, became stronger on the positions of the first deputy governor) .

Thus, the 2014 year was for Primorsky Krai a year of strengthening the governor’s power vertical and creating new opportunities for socio-economic development. With the support of the federal authorities and the participation of large financial-industrial groups, large-scale investment projects have appeared in the region, which can contribute to the diversification of the economy and finally lead to the emergence of truly large taxpayers. However, the implementation of these projects is not guaranteed, and some of them are competing with each other for federal money and support. Therefore, it is too early to say that the “bottom line” will indeed be done, but in any case it is clear that Primorsky Krai will not be ignored and will retain its status as a privileged region, receiving, if not one, then other preferences in its development. 

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