Transcript Document

Institute of Economy, Russian Academy of Sciences
Nataliya Smorodinskaya
Kaliningrad: Baseline Tendencies
of Social and Economic
Development in the 2000-s
International Workshop
“Water Resources Management and Development
for Economic Growth and Environmental Sustainability in
Kaliningrad Oblast”.
Org. by SIWI, Warsaw, 15-17 March, 2010
Kaliningrad: general facts
• Federal district: North-Western. Border with:
Lithuania and Poland
• Size: 75th out of 83 regions in Russia in terms of area
(15 100 km)
• Distances to some European capitals (km):
• Vilnius (350 ) Riga (390), Warsaw (400 ), Berlin (600 ),
Stockholm (650 ), Helsinki (660 ), Copenhagen (680),
Oslo (850) and… Moscow (1200 )
• Inhabitants: 937 400
Keytowns:
economic
peculiarities:
• Largest
Kaliningrad
422 400, Sovetsk 42 700,
• since
1991, special SEZ
(free trade 33
and 300. Share of urban
Chernyahovsk
41 status
100, Baltiysk
other
exclusive federal
favours)
population:
77%
• since 2004, unique enclave position within the EU
• Main industries: food (fishing), fuel (oil), machine
Kaliningrad as of the Russian Total:
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Area 0.1 %
Population 0.7 %
GDP 0.5 %
Enterprises 1.0 %
Industrial production 0.6 %
Retail trade 0.5 %
Exports 0.5 %
Imports 3.9 %
FDI 0.6%
KD is much more than a regional case...
It is the best magnifying glass to observe all-Russian realities
As free-customs enclave KD is the most open economy
in Russia. As enclave inside the EU it is the most
exposed locality to global competition
This unique combination makes KD an amplifier of:
• all-Russian economic trends
• all-Russian structural disbalances
• all-Russian social illnesses
Federal Underlying Policy Priorities
towards Kaliningrad
Not to loose the levers of control over the territory in the
enlarged Europe
1. To
bound KD’s life-support systems centripetally to
mainland Russia (infrastructure, power supply, communication)
- to provide free flow of traffic to local ports and military facilities
- to ensure easy terms of cargo, gas and energy transit deliveries to KD
2. To hold any extension of the Western economic
presence in KD
-
to narrow down the EU-Russian cooperation on KD to the
issues of its immediate life-support (transit-points), while avoiding
discussion of its fundamental modernization priorities
Kaliningrad’s specialization as the SEZ :
not an exporter to EU but just an intermediary for
pushing duty-free consumer imports to Russia
US$ m
6000
5515
5000
4368
4000
3450
3000
2690
2000
1260
1000
0
874
826
519
432
250
2000
2001
2002
GRP at official exchange rate
Total imports
Deliveries to mainland Russia
2003
2004
2005
Imports were
sky-rocketing
far above
GRP and all
trade flows
Sales to RF
in RUR just
followed
imports…
Exports
proper were
almost flat
2006
Total exports
Exports proper (excl. transit flows)
KD’s import-led pattern of growth in the
booming 2000-s: Imports reached unrivalled levels of
30-50% above GRP. Exports kept 60-65% below GRP (and started
to grow only after 2004, due to Russian oil transit flows)
% of GDP
180
Exports proper (cleared from
160
transit oil) = max 30%
140
Manufacturing exports (excl.
local oil) = max 11%
120
100
80
This was incomparable with
130-150% for imports, also
mostly manufacturing
60
40
20
0
2000
2001
Total imports
2002
2003
Total exports
2004
2005
2006
Exports proper (excl. transit flows)
GRP, rate of growth, %
Kaliningrad GRP growth rates as compared
to Russia and Baltic states
For many years KD has been operating under a hidden
state of default, with the growing trade and fiscal deficits
covered from the federal budget. The higher were the
GRP growth rates, the larger were the shortages
By 2006, KD’s actual deficit (as cleared from transit flows) amounted to US$ 4bn, or
92 % of GRP. If not growing oil exports, it would have exceeded GRP by a quarter
US$, m
2000
2001
2002
2003
2004
2005
2006
4000
3000
2000
1000
0
-307
-1000 -576
-2000
-2,825
-3000
-4000
-4,003
-5000
-6000
Total exports
Total imports
Total trade balance
Exports proper (excl. transit flows)
Cleared trade balance
Kaliningrad’s import-led industrial growth is
purely statistical…
Deliveries from SEZ to Russia (cars, TV, etc.) are formed for 70-85% by
imported components, but statistically registered in value as KD industrial
output
KD macro-pathologies may enter the Guinness Book of Records:
• To be competitive at remote Russian markets, import-processing firms (...% of
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industrial output) regularly avoid or evade taxes
KD runs a second economy in the shadow (95% of GRP)
Official economy grows under decreasing level of private investment and tax
collection
budget rests on oil industry as the largest taxpayer (it makes only 9-11% of
industrial output, but 70-80% of net KD’s revenue)
KD faces a dope dependence of business on state money, and of public sector,
on external aid
Vicious Circle of Economic Growth:
“Shortages - federal subsidies – higher growth – more shortages –
- more federal assistance”
To make an economic advance,
KD should rely on three basic assets:
•
Rich natural landscape, advantageous geographical location in the centre
of Europe, and unique cultural and historical heritage
• Dynamic neighbourhood of rapidly growing Baltic states, geographical
proximity to Scandinavian countries (technological leaders of the EU), and a
natural chance to get linked to numerous infrastructural and communication
networks in the BSR
• High market adaptability of the local population due to its wide-range
engagement in the small-business and individual entrepreneurial activities
under years of the SEZ regime. Today, this experience could be renewed and
substantiated through developing flexible and innovative forms of economic
activity
Currently these assets have either a negative value or no value at all.
But they will get their natural investment attractiveness once KD’s
economy starts moving towards integration into Europe
Amending federal incentives for Kaliningrad:
ideology of the 2006 Law on SEZ
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Three main federal motives to revise the old Law on SEZ:
to stop shadow leakage of federal money into local private pockets and reorient KD
to European export markets
to prevent KD from rapid lagging behind its neighbours as new EU-members
to bring the SEZ in compliance with international standards applied in WTO
In late 2005, Boos was appointed the governor just to clear out KD. But the new
Law appeared to be a compromise between rational economic reasons and
alarmist security concerns.
The Law prioritized:
• Russian investment inflow to KD instead of foreign
• Big Russian newcomers to KD (to become “locomotives of new industrial clusters”)
•
instead of local SME
Building large industrial plants instead of stimulating new economy
The 2006 Law on SEZ in Kaliningrad:
benefits for Old SEZ Residents
«Old» SEZ residents based on customs favours granted
by the 1996 Law on SEZ
• firms registered in KD before April 2006, may use their
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customs benefits
imported foreign goods are exempted from customs duties
and taxes
goods delivered to other RF regions are exempted from
customs duties if:
- commodity classification code has changed at the level of first
four digits
- share of the added value has reached at least 30 %
Favours for “old” residents will be in force till the
end of March 2016 (for 10 years)
The 2006 Law on SEZ in Kaliningrad:
benefits for New SEZ Residents
New SEZ residents based on tax favours introduced by
the 2006 Law on SEZ
• New firms conducting a capital investment at least 150 mn
RUR (USD 5.3 mn) in the region’s industrial sector over 3
years may use the tax benefits
Tax benefits offered for an investor:
• corporate income tax and property tax are 0 % for the first 6
years and reduced by 50 % for the 7-12 years after the
investment
The 2006 Law will be in force till the end of March 2031
(for 25 years)
The new Law on SEZ hasn’t changed KD’s
pattern of growth but rather enhanced its
ability to generate negative value added
• no large capital came to KD, rather local firms re-registered as new SEZ
residents (56 as by 2009)
• a bulk of small firms were deprived of any SEZ favours and had ruined
• no new export facilities, rather assembling firms established daughters to
make double use of both customs and tax favours
KD economic “achievements” by 2007-2008:
• Imports rise by € 1bn a year, to reach €6.6 bn in 2008. KD has the largest in RF
imports per capita and per unit of GDP, with China as the largest supplier.
• VA of imported goods is more than twice as high as VA of exported. In 2008,
trade deficit ( €5.8 bn) was 30% above GRP (€4.4 bn)
• skyrocketing growth in import-processing (food, cars, TV sets) and, therefore, in
manufacturing output (a 2.6 fold increase y-o-y) under miserable investment of
assembling firms (0.7% of the total)
Now the crisis (globalization) has started to
wash away Kaliningrad’s pattern of growth…
In the booming 2000-s:
• 2000 – 16% (RF -10)
• 2002 – 10 % (RF – 5)
• 2005 - 13% (RF – 6)
During crisis
years:
• 2008 - 9.1 %
(finalized)
• 2009
GDP growth rates in KD and Russia
- 13.9 %
(RF = - 7.9% )
KD’s industrial production as compared to StPetersburg and Russia as a whole
Until the start of the crisis assembly industries were making
KD the leader but in 2008 KD sharply slowed (2.5%)
and in 2009, went down (- 11.8%, and -- 18% for
Kaliningrad inflation rate (%)
2000
2002
2004
2006
2007
2008
Producer prices in KD
27.7
23.8
8.8
0.5
-2.0
-2.0
Consumer prices in KD
17.5
9.8
11.7
7.9
11.2
15.2
Consumer prices in RF
20.2
15.1
11.7
9.7
9.0
14.0
For reference , 2008: Lithuania – 10.9%, Poland – 4.2%, Estonia – 10.4%
In 2009, CPI in KD reached 16.3% by official local estimation
Kaliningrad calamities as of 2009 …
• - 14.8% for index of industrial production , - 13.9% for rate of GRP
• Construction has fallen by 64%
• Like in Russia as a whole, a sharp rise of tariffs in HC services
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(production and distribution of electricity, gas and water)
Small business swept away by major firms
Unemployment rate – 11.6% (RF- 8.2%). Each third-forth is dismissed
or under the risk of dismission
Good news: the import-processing firms have started to look out for
export markets beyond Russia… But they have too littlel to offer.
General Tendencies accompanying the
economic crisis in Russia (since autumn 2008)
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1.
The crisis has so far reinforced existing tendencies:
state control over the economy
oil-oriented structure of the economy,
the ruling elite's economic expansion at the expense of private businesses,
the preservation of political power and status-quo
2. In 2010, social protests in Russia are becoming
increasingly political
Protests staged in Kaliningrad (10,000-12,000 people) were followed in February 2010 by similar demonstrations in
Angarsk, Irkutsk (4000) and Samara (4000).
3
. Further monopolization of the Russian economy
A new wave of accelerated redistribution of assets in key sectors. A section of the political elite which
using the crisis to take over selected strategic assets in their private interests.
4. Macroeconomic trap – how to secure social stability under falling federal finance
Key concerns of Mr. Boos as a governor show
that Kaliningrad is a mirror of Russia
1. Economic concerns:
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How to ensure the local major businesses (Avtotor the first) a sufficient
volume of federal favours for the future, to successfully get round the
crisis challenges (the growing unemployment is not the last problem )?
How to save the budget? Under the existing set of federal guidelines and
incentives for KD, the local community is objectively unable to improve KD’s
economic structure and social situation. Just like his predecessors, Boos is
doomed to go on seeking additional rents, money and benefits from the
federal centre
2. Political concerns:
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to strictly follow Moscow guidelines and to preserve the existing level of
administrative power
•
to keep KD under control through authoritarian style of ruling and
toughening verticals of power even more than on the federal level.
By 2009, local Duma has become completely subordinated to Boos. MPs have lost any
independent say on Governor’s activities and the question of state-property redistribution.
Risks and limitations of the Project for
reforming KD water system management
1. Full dependence of the regional authorities upon
Moscow
2. Communities of remote regions are just a tool in
Moscow’s strategic games and commercially
beneficial foreign contracts
3. For Moscow, ecology issues are a third-rate
priority as compared to good bargains or social
stability at separate enterprises
4. General moods of political and business elites,
both federal and regional, to preserve the
status-quo as long as possible (instead of
speeding modernization)
To be continued…
Thank you for attention!