No need to direct Siberia’s development from Moscow

Drawing by Niyaz Karim. Click to enlarge the image.

Advocates of different approaches to developing Russia’s eastern regions are once again debating at the Krasnoyarsk Economic Forum. I am positive that no state-owned corporation, foundation or government ministry can ever resolve Siberia’s problems, for obvious reasons.

First of all, in 2012, products and goods extracted or manufactured beyond the Urals accounted for almost 75 percent of Russia’s total export value (around $410 billion).

At the same time, according to preliminary estimates, total economic investment in Siberia and the Far East in 2012 amounted to 1.9 trillion rubles (about $62 billion). If the federal government were serious about developing Siberia, it would make much more sense to leave some of those revenues in the region.

Second, only markets can now provide a real understanding of where to invest. Meanwhile, the government and its agents are focused on pouring money into gigantic projects that will never pay back. Development strategies for Siberia and the Far East focus on initiatives such as rebuilding cities in the Arctic, building a bridge to Sakhalin, or digging a tunnel beneath the Bering Strait.

All of this might be interesting from Moscow’s perspective — except, no more than 160,000 people cross from Sakhalin to the mainland each year, a tunnel to Alaska would cost several times Russia’s annual trade with that American state, and the Trans-Siberian Railway is mainly used to export iron ore and coal.

Third, Siberia now requires huge investments in the social sphere — a task much more readily accomplished by local rather than federal government. At the same time, a bridge to Sakhalin, a tunnel to Alaska, redevelopment of the Arctic shore, and the railway projects will all cost $150–200 billion over 10 years, which is 1.5 times the amount spent on housing construction in all the territories beyond the Urals throughout the entire post-Soviet period.

Siberia is a unique part of Russia. It has always been a place where, voluntarily or not, social activists from all across Russia have congregated. Russians beat Americans to founding pioneer towns on the Pacific Coast; we laid railway tracks there almost at the same time as they did.

When was it that we fell behind and why?

It happened quite a long time ago, mainly because we started developing Siberia as a dependent territory governed from Moscow. We fell behind because we founded the first university in Siberia 300 years after we conquered it, while the British did that just 50 years after they started colonizing New England.

In my opinion, instead of establishing a new state-owned corporation, the government should take a completely different approach to making Siberia and the Far East prosperous.

First, meaningful steps must be taken to develop budget federalism. At least a quarter of taxes generated from natural resource must be spent on the region’s development, with spending decisions to be made with broad participation by the general public (ideally through local referenda or polls). In no way would this undermine the federal center’s positions.

Second, Siberia’s economic efficiency must be improved. The experience of the United States and Canada has demonstrated that northern towns do not need to be rebuilt: the territory should be developed by bringing workers there on a shift basis instead.

The ideas of “formation of large anchor communities for advance development of the territory” — as stipulated in the strategies for developing Siberia and the Far East — make no sense and are counterproductive. Siberia has no population problem: The average population density beyond the Urals is 5.87 people per square mile, compared to 1.6 per square mile in Alaska and 0.07 in Northern Canada.

There are, however, problems with how this population is employed: Productivity at state-owned companies (such as Russian Railways) is one-sixth or less of that in Europe or Japan. The task today is to compress the territory, rather than expand it, and to make its economy more efficient.

Third, Siberia should play a greater role in the Pacific’s economic and political life: The economy of the entire region is only 1/34 the size of that of China, for example. We need to become part of the Pacific economy and establish ties not only with China, but also with South Korea, Japan, Australia, and Canada — and, for that matter, with the United States as well.

The idea that the Pacific is limited to Asia alone is wrong. Asian countries facing the Pacific account for 48.6 percent of its combined GDP, while North and South America together account for 46.1 percent. Russia is a natural balancing force in the region, rather than just China’s sidekick. Yet, for some reason, this is more evident when the situation is viewed from Siberia rather than from Moscow, which has recently set its eyes firmly on Beijing.

Vladislav Inozemtsev is the director of the Center for Post-Industrial Studies and a member of the board of Russia’s Ministry for Regional Development.

First published in Russian in Vedomosti.

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