STATE DUMA: TARGETED APPROACH ESSENTIAL TO DEVELOPMENT IN RUSSIA’S FAR EAST
25 January 2017
A resolution on the development of Russia’s Far East has been adopted by the Russian State Duma following a speech by the Minister for the Development of the Russian Far East Alexander Galushka during Government Hour. Following a review, the resolution was confirmed by a clear majority, with 427 deputies voting in favour.
The resolution recognizes the need for a consistent targeted approach to development in the Russian Far East that creates positive conditions for economic growth in the region as a whole, as well as increasing standards of living and boosting socioeconomic development to exceed the national average.
The State Duma Committee on Regional Policy and Issues of the North and Far East and the Russian Government are enjoined to consider the need for further legislation on government measures to support the accelerated socioeconomic development of the wider region.
As noted by Mr Galushka, efforts to build a firm regulatory base for development in the Russian Far East are ongoing. “Last year, we saw unprecedented attention directed by the lawmakers of this country towards the development of the Far East. In 2016, a total of seven federal laws were passed with the goal of increasing and accelerating the development of the region. Some of the actions now being taken are decades overdue. We will be drafting further legislation in 2017. We plan to develop and implement a series of fundamentally new mechanisms to stimulate economic growth and improve standards of living”, said the Minister.
As Nikolay Kharitonov, Chair of the State Duma Committee on Regional Policy and Issues of the North and Far East, pointed out “during Government Hour we all agreed that a new strategy with regard to the development of the Far East should be drawn up as soon as possible.” He added that “the proposal being put forward in this draft resolution by the Accounts Chamber of the Russian Federation and the members of the State Duma, with the support of the Ministry for the Development of the Russian Far East, is to designate as essential the establishment of a legislative basis for the accelerated development of the wider region.”
Valentina Pivnenko, First Deputy Chair of the State Duma Committee on Regional Policy and Issues of the North and Far East, said that the State Duma was actively considering initiatives for speeding up the development of Russia’s eastern territories. “In tandem with the Government, we are finding ways to realize the state strategy on development in the Far East, and build the necessary regulatory and legal base to ensure that not only is the region a priority, but that it goes on to become a properly developed region and comfortable place to live.”
The resolution recommends that the Government work together with the regions in the Far East to create a system of interdependent and well-balanced measures, performance targets, and indicators for state programmes at both the federal and regional level. These should support the integrated and rapid development of the Far East, taking into consideration the impact of priority projects on achieving targets and the need to attain the targets laid out in the May 2012 decrees issued by President Vladimir Putin.
Rostislav Goldstein, a member of the Council of the Federation and representative of the executive body of the Jewish Autonomous Region, commented: “Accelerating the development of the Russian Far East is a major national project. An unprecedented number of legislative initiatives aimed at the socioeconomic development of the Far East have been proposed by Presidential Plenipotentiary Envoy to the Far Eastern Federal District Yury Trutnev and Minister for the Development of the Russian Far East Alexander Galushka, and adopted by the federal authorities. We are talking about laws governing the allocation of free hectares of land in the Far East, advanced special economic zones, Vladivostok Free Port, the alignment of energy tariffs in the Far Eastern Federal District, and tax breaks and incentives for businesses, amongst others. This work is continuing even now, as the regulatory base takes shape and is complemented by new measures to support the region and draw out its full potential. And the potential really is huge. The Russian Far East is located at the heart of the new world economic order which is emerging today in the Asia-Pacific region. The Far East is our bright future. It is high time we left our alien ‘Western’ past behind us.”
Vladimir Miklushevsky, Governor of Primorsky Territory, commented: “Accelerating the socioeconomic development of the Russian Far East is now a federal policy priority. The task was initially set by President Putin. Today, we are already seeing the practical results of what has been a huge project, affecting the entire system. Most importantly, we are seeing the huge demand for the new support mechanisms. Vladivostok Free Port is already home to 120 residents who have invested a total of more than RUB 185 billion. In the three advanced special economic zones in Primorsky Territory we have 27 residents who intend to put more than RUB 207 billion into the area’s economy. The incentives we are offering are unprecedented, and the number of those wishing to become residents is therefore growing daily. We expect to see a long-term inflow of investment, and the doubling of the gross regional product over the next 5–7 years. In this regard, the initiative to extend reduced insurance contributions for investors in advanced special economic zones and the Free Port regime comes at a particularly good time, as it will result in the arrival of even more new businesses.”
In preparing the federal budget for 2018 and planning for 2019–2020, the Government is advised to prioritize the implementation of measures included in the state programmes and Presidential decrees, which are aimed at supporting the accelerated development of the Far East. It is suggested that particular attention be directed towards implementing measures to improve living standards and create favourable conditions for investment.
The adopted resolution recommends that the Government consider apportioning additional capital to the Far East Development Fund. As Alexei Chekunkov, CEO of the Far East Development Fund, pointed out: “The Fund is currently involved in 13 investment projects worth a total of more than RUB 180 billion; the Fund’s contribution to these projects is RUB 24 billion. The Fund is also pursuing work on several dozen of the most important projects in the region, which will require over RUB 1 trillion in investment. For every rouble it invests, the Fund is able to attract around seven roubles in private investment. We therefore estimate that the Fund will require capital funding in the region of RUB 100 billion up to 2025.”
One of the more pressing issues facing the Far East is the need to reduce energy tariffs in line with the national average. The main idea, according to Alexander Galushka, is to “establish an economic level playing field for the Far Eastern regions.” The law will require a reduction in energy costs for industrial consumers in the Far East to meet the national average, which is currently RUB 3.19 per kWh. In some regions of the Far East, prices are as high as RUB 30–40 per kWh. On average, prices across the region are being lowered by 30%.
“Lowering energy tariffs to the national average will help businesses in the Far East to save up to RUB 40 billion annually. This is yet another example of the investment tools available in the Far East. Energy tariffs will start to come down on 1 July 2017 and will continue to do so over the next two or three years”, said Mr Galushka.
As Nikolay Kharitonov stressed, the emphasis should be on the expedited drafting of the regulatory and legal acts needed to implement these measures.
Lyudmila Talabaeva, a senator from Primorsky Territory and member of the Council of the Federation Committee for Agrarian and Food Policy and Environmental Management, commented: “For Primorsky Territory, lowering energy tariffs is extremely important. With tariffs as they are, much higher than the national average, our businesses are at a significant competitive disadvantage. We hope that reducing these rates will result in the further growth of investment in the Far East.”
“The most important change to the system made by the country’s leadership is the alignment of energy tariffs”, echoed Vladimir Miklushevsky. “This law, adopted by the State Duma last year, is addressing a particular sore point. It is a well-known fact that industrial development was held back in large part by the high cost of energy. This is especially the case when we compare with the central regions. Now that the problem is being dealt with at the source, those involved in the agriculture industry are already paying 10–15% less for their electricity than previously, and manufacturers are saving as much as 25%. Within the next three months the regulatory base for this law will be fully established, but in practice Primorsky Territory will benefit from the favourable conditions from the beginning of the year.”
An initiative to amend the Far Eastern Hectare law was also approved. Deputies noted the need to eliminate the incorrect representation of land boundaries on the cadastral map.