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Sakhalin Region: a successful year and a struggle for the future


EastRussia continues the cycle of publications "The Far East - Results of 2014". During January, the portal will publish expert materials on tangible achievements and shortcomings in the development of the regions of the Far Eastern Federal District. The new publication is dedicated to the Sakhalin Region and its economic phenomenon.

The Sakhalin Region in 2014 became, perhaps, the most successfully developing region of the Far East. During the year, it demonstrated excellent indicators of economic growth, and the situation in the budgetary sphere was strikingly different for the rest of the regions not only of the Far East, but also of Russia as a whole.

The successes of the region were noted in the governmental rating of the effectiveness of the executive authorities of the subjects of the federation for 2013 the year in which Sakhalin took the eleventh place and took the best positions in comparison with other regions of the Far East.

Undoubtedly, Sakhalin's strong place is the economy, which is growing mainly due to the fuel and energy complex. According to the rating of economic development, as evidenced by the rating, Sakhalin was on the fifth place in Russia, a rather high place - the eighth was taken by him on the basis of the assessment of the dynamics of the situation in the social sphere. Judging by the preliminary results of 2014, when there was also growth in industry and agriculture, and budget revenues increased very sharply, the positive trend proved to be quite stable.

Self-sufficient region

An important achievement of Sakhalin in the financial and budgetary sphere was its access to self-sufficiency. Now in the Far East, two regions - Sakhalin and Yakutia - have the largest budgets, significantly exceeding all other regions. But Sakhalin is a donor, and Yakutia is the largest recipient of the federal budget. In other words, the Sakhalin budget has no equal in its macroregion in terms of its own revenues. Thus, in January-October 2014, its tax and non-tax revenues exceeded 131 a billion rubles, whereas in Yakutia they amounted to almost 78 billion, and in other regions even less. Sakhalin is the only subject of the Far East, which does not receive subsidies for equalization of budgetary security, which makes it possible to call it a donor.

The undoubted advantage of Sakhalin lies in the presence of large and successful enterprises, which, no less important, honestly pay taxes to the regional treasury. The income to the regional budget in the 2014 year on income tax has more than doubled compared to the previous year, and it was this tax that gave more than 60% of the regional budget revenues (in addition, the region sold its property, and this ensured about 15% of revenues Its budget, again in other regions of the Far East, there was nothing like this). This situation in Russia is now extremely rare.

In general, the regional budget has grown over the past year by about 1,7 times, incl. own revenues increased 1,8 times. The increase in budget revenues last year made it possible to pay off debt obligations in the amount of 4,5 billion rubles, reduce the deficit of 6,7 billion rubles and create a reserve fund with the goal of leveling the effects of falling oil prices in 2015 year. In many respects, this was due to the peculiarity of the payment of income tax by foreign enterprises working on offshore projects: it is credited to the budget based on the results of the annual report submitted to the tax authorities once a year in April.

At the same time, however, unlike other regions of the Far East, Sakhalin is difficult to count on strong financial support from the federal budget. The volume of federal transfers declined last year, and revenues from subsidies, usually associated with various projects and industries, have fallen particularly sharply. Sakhalin had to implement regional projects mainly at its own expense. The region’s budget for 94-95% today consists of its own revenues.

What is more expensive than good roads?

It is not surprising that with such incomes and a small population, the expenditure policy of the regional authorities of Sakhalin is also their undoubted advantage. Financial resources allow Sakhalin to spend big money on roads and utilities, which other regions of the Far East cannot allow. Last year, the island region became the leader of the Far East in expenditures on road facilities, and in terms of expenditures on housing and communal services, it was almost equal to Yakutia. A feature of the Sakhalin region is the fact that it is housing and communal services that take the first place in the expenditure side of its budget, while other regions tend to reduce these costs and save money.

During the year, regional authorities paid special attention to roads and housing and public utilities. This was demonstrated, for example, by Alexander Khoroshavin’s meetings with heads of municipalities, at which housing and utilities issues were discussed, and local heads were often criticized for their inefficient work. Expenditures on education and health care play a smaller role in the structure of the regional budget, but they themselves are large, and are per capita among the largest in the macroregion.

It should be noted that the authorities of the region are often criticized for allegedly excessive spending on their own needs and public relations, however, this criticism can hardly be called justified. For example, in terms of expenditures for the functioning of the highest official of the subject of the federation and the heads of municipalities, Sakhalin ranks last in the Far East. The costs of media support, including obviously unprofitable, but socially important district newspapers, unique publications in Nivkh and Korean languages, occupy rather modest 0,27% in the expenditures of the consolidated budget of the region, yielding a lot to the expenses of Yakutia and being in third place in the macroregion. forward also Khabarovsk region. Salaries of officials from the regional executive power exceed the average salary in the region by about one and a half times, which is an average figure for the Far East. Thus, the regional authorities were not at all inclined to “devouring” increased budget revenues and acted quite carefully, paying increased attention to housing and public utilities and roads.

At the same time, many positive changes have been made in the social sphere of the region. There are more 90 various measures of support for the population. One of the most important indicators was the improvement of the demographic situation on Sakhalin and the Kuriles. Last year, for the first time in the last 20 years, the birth rate on the islands exceeded the death rate. According to the main indicators of the social sphere, the region occupies a middle position in the Far East, and it has something to strive for. At the same time, the authorities now have good opportunities to finance the social sphere and improve its performance, which is gradually happening.

Sakhalin reduces dependence on the fuel and energy sector

Sakhalin remains one of the most successful Russian regions in attracting investments. True, in terms of foreign direct investment, Primorsky Krai competed with it. But Sakhalin has outperformed other regions of the Far East in terms of investment in fixed assets per capita. The regional authorities themselves carried out an active investment policy, as evidenced by equally high indicators of investment expenditures from the regional budget.

An important direction in the investment policy of the regional authorities is to bet on the diversification of the economy. Obviously, the region is too dependent on the fuel and energy complex, which in turn is subject to strong market fluctuations. For this reason, the regional government seeks to pay increased attention to fisheries (which is also attractive for foreign investments, for example, Japanese), the timber industry, and agriculture. Issues of diversification of the regional economy were discussed, in particular, at a meeting that was held in the region with the participation of Yuri Trutnev.

Although, of course, the key projects on which the main indicators of the regional economy depend, are still connected with the fuel and energy complex, and the region can not get away from this. In the past year, the Sakhalin-1 project has developed quite successfully: the Berkut platform was launched at the Arkutun-Dagi field; the licensed site Severnaya tip of the Chayvo deposit was put into commercial operation. This will increase oil production and compensate for its future decline in other exploitable deposits of this project. For other key projects, however, complete clarity did not come, although their discussions and design work were quite successful. First of all, these are new projects for the production of liquefied natural gas, which has become Sakhalin's most important export commodity, the third stage of the Sakhalin-2 project and the new Far East LNG project. In addition, a large investment project on the island is launched by RusHydro, it is about the construction of the Sakhalin SDPP-2.

On the other hand, there are problem points in the economic sphere, which leads to outbreaks of social protest. Last year, the problems of the coal industry and, first of all, at the mine "Udarnovskaya" in the city of Shakhtersk, which was on the verge of closure, were reminded of themselves. At the same time, regional authorities expressed their readiness to provide financial support to the company in order to avoid a crisis. Not everything went smoothly in the construction complex, where protest actions caused salary delays at Transstroy-Sakhalin enterprises.

Will there be TOP in Kuriles?

Economic growth in Sakhalin, meanwhile, creates a difficult context for the region's relations with the federal center. The federal authorities treat Sakhalin as a prosperous region, which means that it is difficult to obtain federal support. One of the key issues is the launch of a new FTP from the 2016 in the social and economic development of the Kuril Islands. The current FTP is being completed next year, and its funding is already decreasing. In general, both the results of the implementation of the previous FTP, and the prospects for the future in the past year were assessed quite positively. A notable event was the visit to the region of the head of the presidential administration, Sergei Ivanov, who, in particular, visited the Kurile Islands, where a new airport on Iturup was built by that time. In the new FTP, much attention is also being paid to the transport infrastructure of the Kuriles, especially the port and road infrastructure. Meanwhile, the federal government supported the concept of the new FTP and approved its cost parameters.

At the same time, Sakhalin is not easy to fit into the new projects that are being promoted by the Ministry of Regional Development. Among the proposals on the location of the territories of advanced development (TOP) Sakhalin did not figure for a long time, which is not surprising, in general, because it is already developing at an accelerating rate. However, in December, at the federal level, a proposal was made to create a TOP on the Kuriles. Meanwhile, regional authorities have begun to actively promote their initiatives to diversify the regional economy for inclusion in the list of priority investment projects in the Far East. They made a bet on the fishing industry (complex on the Kuril Islands Shikotan) and wood processing (production in Alexandrovsk-Sakhalinsky district). Last year, there was an old idea to build a bridge to connect Sakhalin with the mainland, but it is obvious that the federal authorities still disagree on such an expensive project.

Perhaps more important for Sakhalin now is the activity not so much of the federal government as the leading state corporations represented by Rosneft and Gazprom. Last year, each of them gave Sakhalin considerable attention, considering it as one of its main regions. Rosneft, with great fanfare and with the virtual participation of Vladimir Putin (via telebridges), opened production in the new section of the Chayvo field and the new Sakhalin-1 project. As before, the company's close relations with the regional authorities were also noted, which was confirmed by the agreement on cooperation signed by the parties. Great hopes are placed on the new project of Rosneft to create an LNG plant on the island. For its part, Gazprom stressed the interest in Sakhalin by placing its subsidiary Gazprom Dobycha Shelf in the region. Successful negotiations were held with the main partner for the Shell Sakhalin-2 project on expanding LNG production in Korsakov. Moreover, the head of state was also involved in these arrangements, who met with the Shell leader and expressed support for the project. In the conditions of the aggravated international situation, it is extremely important that neither Shell nor ExxonMobil left the Sakhalin projects, and they continue their work.

However, the difficulties created by the competition between Gazprom and Rosneft. In particular, it resulted in a protracted conflict over Rosneft’s admission to the Trans-Sakhalin gas pipeline, which was never resolved during the year. The situation around the new Far Eastern LNG projects as a whole remains uncertain, since it is unlikely that all these projects will be provided with both raw materials and a sales market. Therefore, it is impossible to say with certainty that the new project of Rosneft will be successfully implemented.

The crisis on Sakhalin felt

The political background of Sakhalin's social and economic development was also contradictory. On the one hand, the political situation in the region was quite stable, as evidenced by the results of municipal campaigns. The candidacy of "United Russia" S. Nadsadin won a confident victory in the election of the mayor of Yuzhno-Sakhalinsk. Successful for the "party of power" was the election of mayors of North Kurilsk, Aleksandrovsk-Sakhalinsky and others. "United Russia" took 16 from 25 seats in the municipal elections of the regional center. In general, the elections showed the absence of strong opposition and split of elites in the region, as it was at the beginning of the zero years. Although they were characterized and typical of the Far East civil passivity, when, for example, the turnout in the election of the mayor of Yuzhno-Sakhalinsk barely exceeded 20%.

On the other hand, the regional authorities did not ignore public scandals. First of all, the criticism of the actions of Alexander Horoshavin again sounded. The structures of the ONF again attacked the expenditure policy of the regional authorities, accusing them of unreasonable spending on arranging their premises and adjacent territories (previously, Alexander Khoroshavin was accused of inflated expenditure on PR). There was also criticism from Sergei Shoigu, who considered that the Sakhalin governor did not provide timely calls for storages and, thus, is not ready to work in wartime conditions. It is noteworthy that the problems arose mainly with the federal structures, indicating that relations with them are not well-established.

The further development of events on Sakhalin, after a quite successful 2014 year, begins to strongly depend on the economic and political conjuncture. Now it is difficult to predict that the region's economy will continue to grow rapidly. In general, for Sakhalin, given the "monocultural" nature of its economy, there are strong fluctuations in investment and budget revenues. In the most recent years, the region has reached its new peak, but the conjuncture is capable of changing for the worse. Politically, the region is strongly influenced by the approach of the governor's elections. Moreover, threats to the current government come from the federal level, where probably there may be groups of influence who are interested in putting the "rich" subject of "their" person at the head. Therefore, periodic attacks on Alexander Khoroshavin and his low places in the ratings of near-Kremlin structures testify to the existence of such groups of influence who are interested in exerting pressure on the Sakhalin governor. It is also unclear whether the region will hold early elections in 2015, or they will end on time and coincide with the Duma elections of 2016. There is no clear decision on this issue, not only regarding Sakhalin.

Thus, Sakhalin is now very important new investment projects, since the past year, rather brought the fruits of old projects. First of all, decisions of the federal authorities and FIGs are required regarding how, where and by whom LNG production will be developed in the Far East. Ideal for Sakhalin would, of course, be to implement a project for expanding the existing plant and building a new one, while at the same time reconciling the interests of the state corporations behind them. The slowdown in the implementation by Gazprom of the Sakhalin-3 project is undesirable, and possible negative trends were already discussed last year due to the lack of foreign investors. In relations with the federal government, the region is required to provide good funding for the “Kuril” program, and this will be difficult to do in current conditions. Under these conditions, regional authorities are required to display remarkable lobbying abilities both in the economy and in politics, taking into account, of course, the prospect of gubernatorial elections. 

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