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Yakutia: Results - 2014

A recipient on the way to donors and to sustainable development?

Yakutia: Results - 2014 continues the cycle of publications "The Far East - Results of 2014". During January, the portal publishes expert materials on the main achievements and shortcomings in the development of the regions of the Far Eastern Federal District. Next in line is the Republic of Sakha (Yakutia).

In 2014, positive trends in the economy as a whole remained in Yakutia. At the same time, one can not speak of rapid economic growth in the region. In the industry there was a slight increase, whereas in agriculture there was a rather stagnation. However, the existing plans and projects allow Yakutia to hope for further economic growth, and more active than last year.

The past year was full of events and was quite successful for Yakutia. Positive tendencies of social and economic development were noted in the republic, and the head of the region Yegor Borisov went through difficult for him direct elections.

Very positive for the image of the republic in the eyes of the federal center was the summing up of the 2013 year. According to the official assessment of the effectiveness of the regional executive power, conducted by the federal government, Yakutia took the second place after Sakhalin in this rating among the Far Eastern regions and 17 in Russia as a whole. Hit in the top twenty allowed Yakutia to receive a government grant for the achieved success. It is important to note that for all the federal authorities considered within the framework of this assessment, there has been an increase in indicators. The level of development of the economy (12 place in Russia) and the dynamics of the development of the social sphere (15 place) were best evaluated. The level of social sphere development was worse (52 place), which is quite typical for the Far East.

In one piggy bank

First of all, the financial and budgetary situation in the region testifies to positive trends. Yakutia in the Far East has the largest budget, competing in this respect only with Sakhalin. True, there is a significant difference between Yakutia and Sakhalin, since Sakhalin is a donor to the federal budget, and Yakutia is a major recipient. At the end of January-October 2014 (this material uses the available budget statistics for this period), for example, own tax and non-tax revenues accounted for only 56,25% of the consolidated regional budget revenues, and the rest came through interbudgetary transfers. Nevertheless, even in terms of its own budget revenues, Yakutia is ahead of all regions of the Far East, except for the obvious leader in the person of Sakhalin.

A very positive fact is the high level of income tax revenues in the budget of Yakutia. The share of this tax in the country's own tax and non-tax revenues was 31,7%, it is higher only on Sakhalin. On the contrary, the share of income tax is lower and amounts to 26,9% (it is lower again on Sakhalin). These data suggest that there are strong profitable enterprises in the republic, mainly in the commodity sector, which provide large revenues to its budget.

Speaking about the republican budget, it is also important to note a significant share of the mineral extraction tax (12,1%). This is due to the decision taken in due time by the federal authorities on the enrollment of all mineral extraction tax on diamond mining in regional budgets. Yakutia is not a leader in terms of the percentage indicator in the Far East, but in terms of collection, it is certainly ahead of all regions (it gives about 60% of the fees going to the regional mineral extraction tax budgets in the Far East). In addition, Yakutia is leading in the Far East in terms of the share of revenues from the use of regional and municipal property (more than 6%) and payments when using natural resources (more than 2%). All this testifies to the availability of diverse sources and possibilities for replenishing the regional budget.

At the same time, a somewhat paradoxical situation is associated with the Yakut budget, when the republic, being far from poor and provided with various natural resources, is at the same time leading in terms of the volume of federal transfers received by its budget. This is caused mainly by the amendments to the northern conditions in force in the country, thanks to which the republic can claim large amounts of subsidies. As a result, about a third of the revenues of the republican budget is provided by federal subsidies, mainly of their main type - subsidies for equalizing budgetary provision. A very convenient situation for Yakutia arises, when considerable own revenues and large federal transfers add up to more than a solid budget. But it is worth noting that by actively directing subsidies to the region, the center does not give it so many subsidies and subventions, which is especially noticeable when analyzing the structure of regional budget revenues, where the three main components are profit tax, income tax and subsidies for equalizing budgetary security. For example, theoretically Yakutia could receive much more funds from the federal target program. But this is hardly beneficial to the center, which is already pumping huge funds into Yakutia.

At the same time, Yakutia's own successful development already allows the federal authorities to raise the issue of reducing subsidies, which is happening. Last year, the volume of subsidies received by the regional budget fell by almost 4%, and federal transfers in general - by 2%. The decline in subsidies was even more noticeable - by more than 5% (but the subventions that go to the execution of the powers delegated by the center, on the contrary, increased by 11%). On the other hand, the region's own revenues increased by more than 17% last year. In terms of this indicator of budgetary dynamics, Yakutia again yielded to Sakhalin and was on a par with Chukotka, ahead of the rest of the Far East. Particularly noticeable was the increase in income from income tax - by more than 40%, which once again shows the excellent dynamics of the manufacturing sector. The income from the mineral extraction tax, which is paid mainly by ALROSA (20%), also increased significantly. As a result, despite the reduction in federal transfers, regional budget revenues increased by more than 10%. For a number of months, this provided a noticeable surplus of the regional budget, and the debt burden on it is not so great (it amounted to 37,7% at the end of 2013), although it could have been even less with such income.

Utilities is a priority

It is not surprising that Yakutia is the leader in the Far East in terms of budget expenditures. At the same time, the income allows the authorities of the republic to direct a significant part of the funds for conditionally "political" purposes, which was all the more necessary during the election campaign. The large expenditures on the functioning of the authorities and on the media are also in line with the republic's traditional political ambitions. Yakutia is the leader in the Far East in terms of the amount of funds spent on national issues (although their share in budget expenditures is closer to the average for the district). It is striking that in Yakutia, especially a lot of money is spent on the functioning of the top regional official and municipal leaders. On the contrary, which is also curious, the Yakut parliament is cheaper than legislative assemblies, for example, Primorye and Sakhalin. At the same time, the cost of maintaining the apparatus does not mean high salaries of average officials. The excess of the salary of employees of regional executive authorities over the average salary in the region in Yakutia is only 17% and less than in all other regions of the Far East. Also, Yakutia is distinguished in the Far East by the largest, both in absolute numbers and in percentage terms, in the level of media spending. Although this is only 0,6% of budget expenditures, it is clearly more than in other regions. The republic with its vast territory seeks to control its entire vast information field.

On the other hand, Yakutia spends not so much on the national economy (almost 12% of spending). If we talk about the individual articles of these costs, then, since there are few roads in the region, the costs for road maintenance are the smallest in the Far East (3,6%). At the same time, another tradition of Yakutia is state support for agriculture, which, however, can not yet be called effective. Agriculture accounts for more than 5% of budget expenditures, and Yakutia is ahead of the entire Far East in this indicator. It would be superfluous to recall that the current head of the republic Yegor Borisov was responsible in his time in the government for the agro-industrial complex, whose interests are close to him.

The housing and communal services of the republic are very costly, which accounts for 16,3% of budget expenditures. Of the expenditures on the social sphere, the education sector receives especially a lot (32,1% of expenditures), and in this respect Yakutia is again ahead of other regions of the Far Eastern Federal District. The specificity of Yakutia, like other republics of Russia, can be considered a high level of spending on the cultural sphere (4%, which is quite a lot by Russian standards). However, on the contrary, the share of expenditures on health care in Yakutia is the smallest in the Okrug (only 9,2%). The share of spending on social policy (12,1%) is also below the average in the Far Eastern Federal District. Thus, expenditures on the social sphere in Yakutia show their own imbalances, although it cannot be said that any of its directions looks clearly deprived.

The prospects for the socio-economic development of the republic and the filling of its budget depend on the inflow of investments. The investment climate of Yakutia is assessed by rating agencies, for example, Expert RA, rather high. Last year there was an increase in the volume of investments. In terms of per capita investment, Yakutia was second only to Sakhalin and Kamchatka, with their small population. The development of the fuel and energy complex continues in the republic, which makes its raw material sector more diversified and allows counting on even larger budget revenues. Still, the oil and gas fuel and energy complex, according to the experience of other regions, is able to give the budget much more than the same mining of diamonds, the production of precious metals or coal.

Gradually, Yakutia is turning from a "diamond" region into an oil and gas region, while having opportunities for increasing the production of other minerals - the same diamonds, gold, iron ore, rare earth metals, coal, etc. But outside the oil and gas industry, too many large projects have already accumulated , which are implemented with obvious delay or are idle. Suffice it to recall the extremely unstable situation around the Elga coal deposit, interconnected with financial problems and the unclear future of Mechel.

At the same time, Yakutia is still poorly developed by foreign companies, and investments come mainly from Russian business funds and from the budget. Back in 2013, there was a decline in foreign investment. The volume of foreign direct investment in Yakutia is small and unstable. In the long term, we can count on the further attraction of Canadian investments, despite the complicated relations between Russia and this state. The Canadian company Silver Bear Resources is gradually preparing to launch the vertical silver deposit. Last year, against the background of the intensification of relations between Russia and the countries of the Asia-Pacific region, Yakutia in this direction had its new opportunities. For example, the cooperation agreement between RAO ES of the East and China's Dongfang Electric provides for the development of solar energy in Yakutia. The Sakhatransneftegaz company, controlled by the government of the republic, has signed an agreement on the expansion of the Yakutsk gas processing plant with the South Korean Hyundai. Nevertheless, it is still difficult to count on a sharp increase in foreign investment in Yakutia.

The social sphere in Yakutia looks ambiguous today too. Above, we noted that the republican budget spends relatively little on health care. From a formal point of view, this may be justified. For example, in terms of life expectancy, Yakutia leads the Far East. Infant mortality is lower only on Sakhalin. However, the level of salaries in health care in relation to the average salary in the region in 2013 in Yakutia was the lowest in the Far East. Both health care and education in Yakutia are well enough staffed, but salaries still need to be tightened (in the field of education in 2013, the wage gap from the average for the region in Yakutia was not so great as in some other regions of the Far East, but the lag itself was significant and even slightly larger than in health care). The relatively low provision of kindergartens attracts attention, where Yakutia, together with the Khabarovsk Territory, looks like an outsider in the DFO.

Thus, weaknesses in the social sphere of the republic remain. Increased attention to housing and communal services is clearly required, which, however, is realized by the authorities, judging by their spending policies. For example, Yakutia was characterized by the highest proportion of dilapidated and emergency housing in the Far East, and the elimination of this problem is an installation that comes from the very top. Exceeds half the share of unprofitable organizations in the housing and utilities sector. Under these conditions, the republic needs a carefully thought-out budget policy, given that it has the means to solve problems.

The result without privileges

Yakutia has always claimed a special relationship with the federal center, but now it can no longer be called a privileged region that achieves everything it wants. This was clearly demonstrated by the events of the past year. For example, if we talk about the election of the head of the republic, then Yakutia turned out to be one of the few regions where an active critic of the authorities was admitted to the elections. As a rule, such scenarios are not allowed in Russia now. However, through the ONF, there have been no claims to the expenditure policy of the Yakutian authorities so far, and the ONF “worried” completely other regions of the Far Eastern Federal District.

The progress of the Yakut projects within the framework of the new Far Eastern policy of the federal center could not be called smooth either. It is noteworthy that the republic failed to prepare and coordinate with the authorities in the center and with interested businesses any one obviously passable project of the priority development area. Instead, a kind of "scattering" began. At first, the projects “Northern World” (diamond cutting and tourism) and “Basalt - new technologies” (new generation building materials) were considered, then the “Zarechye” project (production of liquefied natural gas, methanol and urea) came to the fore, although it was actually not worked out. Plus, the agro-industrial ASEZ, close to the direct interests of the republic's authorities, was previously announced, but with small chances of success.

On the eve of the elections, the center made a "gift" to Yakutia by transferring to it 25,5% of the shares of the Lensk United River Shipping Company, which allowed the republic to increase its block of shares to a controlling one. Although this did not radically change anything, since the shipping company, strategically important for the region, was actually controlled by the regional authorities before that. More complex lobbying for the bridge across the Lena, meanwhile, was very long. The emergence of some uncertainty around this project was the result of the federal government's policy aimed at redefining priorities in the transport sector in the face of growing budgetary constraints and in connection with the annexation of Crimea. However, despite this, the regional authorities continue to promote their infrastructure projects that involve interaction between rail, road and river transport. An important role is given to the village of Nizhniy Bestyakh near Yakutsk, which is the terminal point of the railway and should turn into an important transport hub and, possibly, an industrial center. At the federal level, the republic's authorities are promoting a number of infrastructure projects for their inclusion in the Far Eastern FTP and co-financing from the federal budget (gas pipeline, power transmission line, highway, etc.).

The situation around the most important economic entity, ALROSA, was and remains quite complicated. During the year, the government curator of ALROSA was replaced, which became Yuri Trutnev. The complex process of changing the president of the company itself began, which was never completed: F. Andreev left, but the new permanent leader has not yet been agreed upon. At the same time, the authorities of Yakutia tried, of course, to lobby people beneficial to them for this position, however, it is too early to judge the results. The question of the company's strategy turned out to be a controversial one. Yu. Trutnev insisted that it should include not only mining, but also cutting production. However, there were no changes in strategy. At the same time, ALROSA's diamond production for 9 months of 2014 decreased by 5%. The company's profit fell sharply. Production fell sharply at the oldest deposits included in the Mirninsky and Udachninsky GOKs. ALROSA, in fact, needs to make new strategic decisions, and it needs to invest heavily in the development of underground mining, on which its future depends.

But the most problematic economic player among the large financial and industrial groups was, of course, Mechel, which found itself under the burden of heavy debts to state banks. His fate was constantly discussed in the federal government, causing sharp controversy, but the decision was never made. For Yakutia, this means the preservation of uncertainty around one of the main investment projects - the Elga coal deposit. At the same time, if Yakutia is still able to influence ALROSA's policy (although the federal authorities have long seized the main levers of control), in the case of Mechel it is forced to simply wait for the results and hope for the best.

Meanwhile, a new prospect of successful cooperation with the federal center has arisen in Yakutia due to the growing attention to the Arctic. Vladimir Putin signed a decree on the territories of the Arctic zone, where five uluses of Yakutia were assigned (although Yakutia itself classifies 13 of its territories as Arctic). This makes it possible to count on Yakutia's participation in federal programs for the development of the Arctic. The center also paid attention to the military-strategic component of its Arctic policy, recreating a permanent military base on the New Siberian Islands. For its part, last year in Yakutia was declared the Year of the Arctic, the implementation of the target program "Socio-economic development of the Arctic and northern regions of the Republic of Sakha (Yakutia) for 2014-2016 and for the period until 2020" began, a state committee for Arctic affairs was created ...

Large federal FIGs, in general, positively influenced the prospects for the socio-economic development of Yakutia. First of all, the positive trends were set by the leaders of the Russian state fuel and energy complex, whose influence on Yakutia is steadily growing. Gazprom continued to develop the Chayandinskoye field and launched the construction of the Power of Siberia export gas pipeline. An agreement on the sale of gas was signed with the main buyer, the Chinese corporation CNPC. Rosneft found a foreign partner for the development of the Srednebotuobinskoye field, which, contrary to assumptions, turned out to be not CNPC, but British Petroleum, which became the owner of a 20% stake in Taas-Yuryakh Neftegazodobycha. In addition, the project for the construction of a new power plant - Yakutskaya GRES-2, which RusHydro is engaged in, is gradually being implemented.

An alliance of two politically influential structures - the state corporation Rostec and the private group ICT - is becoming a new player in the mining industry. Since 2015, they have begun drilling operations at the famous Tomtor rare earth metal deposit, which is scheduled for production in 2020. There are real chances that this long abandoned project will be implemented. The structures of "Rostec" also proposed the above-mentioned project of the TOP "Zarechye", also demonstrating their growing interest in the republic.

From private FIGs, close to the country's leadership, G. Timchenko's group, represented by the Kolmar coal company, is increasing its influence in Yakutia. It is not surprising that her project of the Inaglinskoye field turned out to be among the priority investment projects of the Far East, supported by the Ministry for the Development of the Russian Far East. In fact, by doing so, it was positioned as the most important raw material project in the region receiving federal support. Although it certainly cannot be called a breakthrough, it is not that great.

Of other private FIGs, the Evraz group is consolidated in the region. But her project for the iron ore Taezhny GOK still cannot be called realistic. Throughout the year, the company tried hard to secure government support for itself. The issue of closing the deal to buy shares from ALROSA, which remained a co-owner of the project, was also difficult to resolve. As a result, the Taezhny GOK project may become a priority for the state, along with the Kolmar project, but the clarity has not yet come. Recall that this is part of the former mega-project for the development of South Yakutia, which did not take place at all due to the lack of funds from the state.

Into the future - with optimism

The political background in Yakutia could not be called completely stable due to the elections, which were accompanied by criticism of the head of the republic Yegor Borisov and signs of a split in the Yakut elite. Out of 30 regions where direct elections of regional leaders were held in 2014, the results of the head of Yakutia were the second from the bottom, although quite high (58,8%), and a second round was not needed. Nevertheless, Civic Platform candidate Ernst Berezkin performed quite successfully, gaining a solid 29,5% of the vote (the rest of the candidates actually played up to Egor Borisov, as did the potentially strong candidate of A Just Russia Fedot Tumusov, who refused to participate in the elections).

But on the whole, the political situation remained under control, and the victory in the elections now allows Yegor Borisov to increase his success, as he proved in a difficult struggle his status as a dominant player. During the year, many personnel changes were carried out in the republican government (but the head of government, loyal to Egor Borisov, remained in place). It is noteworthy that Yegor Borisov remains a supporter of political compromises and intra-elite agreements, not trying to build a rigid vertical in the region. Thus, in Yakutia, unlike most regions of the country, they retained direct elections of heads at the city and district levels, including elections of the mayor of Yakutsk, which promise to be difficult (now the mayor is a former political rival of Yegor Borisov and another influential representative of the Yakut elite Aisen Nikolaev). Last year, district elections did not create any special problems for the head of the region, but at the same time, quite sharp conflicts arose in a number of areas (for example, in Nyurba and Neryungri). The alliance of Yegor Borisov with his predecessor Vyacheslav Shtyrov, who retained the status of senator from the republic, also survived (and the influence of Vyacheslav Shtyrov in the Federation Council fell as he lost the post of vice-speaker).

The financial and economic indicators achieved by Yakutia and the end of the nervous period in the political sphere related to the direct elections of the head of the region allow us to look to the future with optimism. New incentives in the development of the republic should create the fuel and energy complex. The economy of Yakutia remains predominantly raw, but it is no longer so dependent on the diamond industry, which makes it more stable, given that diamond mining is just losing momentum. At the same time, uncertainty may remain around a number of important raw materials and infrastructure projects, as well as the activities of ALROSA. The republic continues to need significant investments in the social sphere and housing and communal services, as well as in more active attraction of foreign investments. There are prerequisites for Yakutia, with all its wealth, to gradually withdraw from the number of main recipients of the federal budget and become financially more independent. At the same time, in our opinion, a strategically thought-out and reliable organization is needed both of the relations of Yakutia with the federal center and numerous FIGs and its budget policy.

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