BALLANCED ECONOMICREGULATION of the ARCTIC ZONE:PROPORTION of STATE and PRIVATESECTORS
Zikunova I.V., Doctor of Economics,
Speaker of the Legislative Dume ofKhabarovsk krai

Economic Interest towards Arctic• Strategic long-term economic benefits• Resource and shipping potential of the ArcticZone

The experience of development andimplementation of State Arctic Policyof Russia• Specific nature of the Region excludes thetraditional combination of State and Private
self-regulation mechanisms in the Arctic Zone

Main interests of Russian State Policyfor Development of the Arctic Zone
• Strategic utilization of Arctic resource potential for theneeds of socio-economic development of the country;• Preservation of the Arctic as the Zone of Peace andCooperation;• Environmental conservation of Arctic eco-systems;• Utilization of the Northern Sea Route as a universal
Russian transport line of communication in the Region;
Strategy of the Development of the Arctic Zone of RussianFederation and National Security till 2020

State Program «Socio-Economic Development of the Arctic Zoneof Russian Federation», enacted by the decree of theGovernment of RF from 21.04.2014 № 366.
• Industrial exploration of the region.
• Three main sub-programs:
1) «The formation of base development zones and theirmaintenance, arrangement of conditions for advanced
socio-economic development of the Arctic Zone of RussianFederation»;2) «Development of the Northern Sea Route and arrangement ofnavigation in the Arctic»;3) «Development of oil-gas and industrial machinery technologies
and equipment, needed for the exploration of Arctic resource
potential»• Among the first - the goal to arrange the conditions for rising thelevel of life quality and safety of the population of Arctic Zone ofRussian Federation.

2020: Russian National Interests• Sovereignty and territorial integrity of Russian Federation;• Arctic – territory of peace, stability and beneficial co-operation;• High living quality and prosperity of the population of Russian
Arctic Zone;• Arctic – strategic resource base for economic growth of RussianFederation;• Northern Sea Route – competitive transport communication line;• Protection of the environment;• Protection of the indigenous environment.
Strategy of the socio-economic Development of the Arctic Zone of RussianFederation and National Security till 2035

Priority of Social Strategical Goals inthe Development of the Region• New high-tech methods for healthcare development;• Population access to first aid;
• High-quality education;• Development of professional education;• Correspondence of industrial specialization of Arctic
development zones;• Partnership with private companies;• Ecology, environmental management, protection ofindigenous heritage;• Transport accessibility;• Connection of territories.

Russia is going to develop the ArcticRegion:• on long-term economic development
principals;• strengthening of its presence in the region on
basis of sustainable development: economic
interests, ecology responsible resourcesmanagement, development of human capital;• with regard to national and regional identity.

Arctic for Russia:• Region of long-term global competitor
advantages;• Conditions of achievement – large industrial
projects and development of arterial transport
infrastructure;• Characteristics of economic model – second
generation of governmental documents.

Economic model of Arctic Development: linkwith the regions specifics• Huge energy and natural resources potential;• Remoteness from centers of economic development;• Huge territory is unexplored;• Low density of population;• Designing of special-economic and social developmentcharacteristics from scratch;• Arctic transport route is parallel to Euro-Asian transportartery;• The biggest Icebreaker Fleet;• Effect of military-strategic factor.

The model of pivotal zonation• Concentration of industrial sectors;• Project-based approach• Coordination of all economic activities on thestages of designing, goal-setting, financing andimplementation;• Zone geography: Kolskaya, Archangelsk,Nenets, Vorkutinskaya, Yamal-Nenets,
Taimiro-Turukhanskaya (Norilsk), NorthernYakutia and Chukchi.

Combined public-private model ofdevelopment• Three main subjects:
1) State – on behalf of public authorities anddevelopment institutes;2) Large-scale business – strategic partner of thegovernment in terms of development of theregion;3) Small and Medium Business – with the goal
to satisfy the final demand of Arctic
population and tourist’s flow.

State goals:• To create the transport and energy infrastructure;• To create healthcare, cultural and educational
infrastructure;• Development of science, sports and recreation;• Housing construction, arrangement of comfortzone;• Arrangement of competitive level of living inorder to long-term anchoring of the populationin pivot zones.

State investment expenses• Positive shocks for economic activity;• Fillips for the development of consumption
market;Difficulties:✔ Remoteness of the Development Zones;✔ Lack of competitive market for placing ofcontracts;✔ Rotating scheme initial construction;✔ revenue churn to the regions-origin of workingforce.

Important• Preferential tariff rates of natural monopolies;• Strict governmental control over the effectiveness andpurposefulness of state investments;• Encouragement of engagement of competent contractors;• Principle of simultaneous social objects construction;
In order to:• Get as much multiplicative effect as possible;• To form the motive of long-term settlement of thepopelation as fast as possible.

Large-Scale Business: production andtechnological competences• Enters the Arctic Region with commercial purposes;
Readiness of private capital for social and corporate
obligations:• Investments into social infrastructure and professional
education – opportunity to eliminate labor risks andcombined systematic risk;• High level and cost of investment risks – the reason to enact
the preferential regimes.
• Instruments: investment tax credits, tax easement, special
tariff rates of natural monopolies, co-financing of theinvestments.

Small and Medium Business

1. Economic spheres of common specialization;
2. Traditional economic activities of Indigenouspeople.

1. SMB: economic spheres of commonspecialization• Retail business and food services, tourism andrecreation, passengers transportation, additionaleducation, consumer services and healthcare;• satisfaction of final demand, which is based on
consumer incomes of population;• Descending of the effects of market self-regulation,effects of competition.
• Need of time and compelling starting conditions inorder to attract entrepreneurs.
• Term – steadiness, strictness and consistency of statepolicy for the development of the Arctic Zone.

Controversies of SMB development• Enforcement of the demand for SMB services andgoods is not creating sustainable competitiveeffects;• Accompanied by additional expenses and loses fororganization of competitive tendering;• Loses because of shipments in uncompetitiveconditions.
• effective: soft tariff rates of transport and energy
implementation.
• effects of network operators, usage of roundroutes of transportation.

2. SMB in traditional economic activities ofindigenous• Development of agriculture, hunting, fishery, procuring
natural products, tourism;• Trends for ecology responsible behavior and consumption;• Tolerance and acceptance of multicultural differences;• Value of traditional culture;• High and specific consumption interest.
• IMPORTANT: governmental support of tourist infrastructure
and merchandising of recreational products and indigenous
products, event-management for attraction of tourists.

Russian Arctic Development Policy:
first results•••••••

Stabilization and growth of population;
Growth of shipments via the Northern Sea Route;
Preferential regimes are counting from multiplicative expectations 1 to 10.
«The whole Russian Arctic became a special economic zone. It is the biggest economic zone
in the world (its territory is approximately 5 mln. square kilometers). Today any entrepreneur,
who is ready to invest into Russian Arctic no less than 1 mln. rubles, can obtain a resident
status», – Yurii Trutnev, vice-premier of the Government of Russian Federation, Presidential
Envoy to the Far Eastern Federal District.
Ministry of the Russian Federation for the Development of the Far East and Arctic received 13
claims for support of investment projects with private investments of 212,5 bln. rubles.
7 investment projects with overall private investments of 187 bln. rubles are approved.
The Arctic Development Fund for financing the social development: it is planned to enlist into
it 50% of tax and non-tax revenues from new projects, which are implemented with state
support in Arctic Zone of Russian Federation.