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Artur Niyazmetov: Salary and Environment Are the Key Factors for Development

The integrated social and economic development plan for Komsomolsk-on-Amur presumes an accelerated pace of development. One of the first planned construction projects is the deferrization and demanganation plant for water intake from the Amur River, which will start operating at the end of 2016. What else is included in this plan, how it was developed, and how it will be implemented – this is what we discussed in an interview with the Deputy Minister for the Development of the Russian Far East, Artur Niyazmetov.

Artur Niyazmetov: Salary and Environment Are the Key Factors for Development
– Artur Kamilovich, what are the first activities we can expect from this integrated plan before the end of this year?

– This year, we are going to allocate about 2.126 billion rubles to finance the activities within the framework of the plan, including 936 million rubles from the federal budget. The main project that we have been advocating for a long time already is the construction of a deferrization and demanganation plant for water intake from the Amur River. This work has been going on for a few years now, financed under the auspices of the Federal Program called “The Economic and Social Development of the Far East and Baikal Region until 2018”, and that is why this project is already about to finish. We need just a little bit over 330 million rubles to complete it.
In addition, this year we have already witnessed the completion of several of the organizational activities included in the plan. For example, a certification and testing center was set up; a plan for supplying heat to the city came into effect; an agreement was concluded for cooperation between the Ministry of Culture and the Krai's Administration for carrying out exhibition activities. Moreover, the decree of the Labor Ministry was amended to allow residents of Territories of Priority Development to participate in the regional program for increased labor resource mobility. This June, in Komsomolsk-on-Amur, they held the third Far Eastern Congress of Engineers called “Science‑Engineer‑Industry”. The Krai has become actively involved in preparing design documentation for the construction projects, funding for which will become available starting in 2017. Thus, due to proactive work, the project documentation for the Komsomolsk Engineering School is already finished. Now, we are discussing the issue of whether or not the construction on this project can actually begin this year.

– Will federal funds allocated to Komsomolsk-on-Amur be subject to budget cuts?
– Sure, questions about optimizing the law related to the state budget were raised. However, the 10-percent reduction in projects did not affect us any way. Our colleagues in the Ministry of Culture are presently looking for the ways to find 75 million rubles for reconstruction of our Drama Theater. The year 2016 was difficult as we were literally forced to stay within the already approved budget.

What about the idea of building a dam to protect the city from a repeat flooding?
– The initial resources should become available in 2017. The design estimate documentation is ready, but it still requires official technical examination. All of this year's projects are ready to go, from the standpoint of the prepared design estimate documentation. The applicant - in this case, the local administration, is to cover the expenses.

In the course of negotiating on the list of projects, which are part of the integrated plan, were there any serious disagreements over the requested sums?
– Yes, such issues did arise. For example, regarding the sports arena, originally foreseen to be constructed as part of a Supplemental Agreement on the Creation of Social Infrastructure of the Komsomolsk Territory of Priority Development, and which was subsequently included into the plan. The costs of the project increased substantially, but there was no question of any unjustified cost overruns. We simply decided to implement the project on a larger scale. There is some logic to this: a sport arena should be a multi-purpose object, so you can use it not only for sport competitions, but also, for example, for concerts.

Were there other issues, which could have led to increased costs factored in, such as foreign currency exchange rate fluctuations?
– For one thing, the task was perfectly clear to both the region and the city: it is not allowed to exceed budget under any circumstances. We are not talking about the buildings that require some kind of unique construction materials, irreplaceable by domestically produced equivalents. Although, we understand that even the simplest construction, if you look at it closely, will always require some imported materials or equipment.

Do you have a possibility to revise the sums, once the project estimates are complete? Otherwise, do you have to stay within the limits?
– I will put it this way: all state agencies and companies involved in implementing the plan have confirmed that each of the projects under this plan has certain associated costs. Sure, you cannot rule out the possibility that some costs may need tweaking. For example, that dam project – it is very tough to find anything similar, though they did try. Although the project documentation shows the complete picture, much depends on the initial assessment, including that of the ground itself.

– Why was there a government-level negotiation meeting, when, as you say, other state agencies had already approved all points?
– In order to get the plan accepted, we followed the unusual path. We brought together all the interested state agencies and asked them to consider the issue of funding the construction project separately from the questions about the feasibility of its construction. We split the work in two stages. First, we assessed the validity of the work requests, presented by the city and the Krai: if this structure is necessary and the stated costs valid. However, when it came to financing, we decided to take it to a different forum, to the government itself, and review it with the participation of the Ministry of Finance and the Ministry of Economic Development.

Then, what is the algorithm for implementing the plan via the sources of funding?
– It was set by the draft government order. The first step was for the state agencies to see if it was possible to find funds for the planned projects within the existing budget allocations.
Now, in fact, the plan gives specific instructions to federal organs of executive power for its execution and for the prioritization of construction projects.

Does this mean that you will need to "push" someone else aside?
– Not necessarily, as not all financing has been allocated to projects. Much of the funding assigned based on tender procedures, meaning, it is not definite which project will win the tender contest. The order includes assignments for federal organs of executive power to ensure changes in the tender selection criteria for the allocation of funds from the federal budget. The purpose is to reduce such criteria to a level, which guarantees the possibility that Khabarovsk Krai and Komsomolsk-on-Amur will be able to participate in such tenders for priority funding of the activities set in their plans.

Okay, and if a state agency says that the agreed-upon allocations are insufficient for the construction projects in the plan?
– The procedure for claiming for additional needs within the framework of next financial year's budget preparation process is still effective.

– Apart from the construction projects, the plan also contains items related to the development of infrastructure and industrial production. Does the plan, for example, answer the question of what to do with the Amur Shipbuilding Factory and Amurmetall? In recent years, these have seen declines in production volumes and bankruptcies.
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 – Half of the 33 planned measures are specifically associated with that issue, related to development of the industrial core of the city: not just those two companies, but also a third important enterprise, which is the Komsomolsk‑on‑Amur Aircraft Plant. Concerning Amurmetall, the regional authorities will be coordinating a plan to help the company out of its crisis via governmental support. In this case, they might receive some preferential tariffs as they did before in 2011. The company obtained special rates for rail transportation of scrap-metal and principal raw materials.

What about large corporations, the United Aviation Construction Company and the United Shipbuilding Company? Were they involved in this process?
– There are points that require the development of proposals with regard to order volumes and cooperation mechanisms for local businesses. The state corporations supported this idea. They are already working on the range of components, which they will be ready to purchase from firms located in Komsomolsk-on‑Amur. Procurement has its own specifics. We held a meeting with the participation of the Federal Antimonopoly Service and the corporations themselves and, as a result, included a point in the project plan for amending legislation on purchases. For now, law does not always allow for long-term purchases from one exclusive supplier.

One more point of the plan, which seems important, is making Komsomolsk-on-Amur more accessible. However, development of transport infrastructure always needs huge funding that is not available now. How will this contradiction be resolved?
– Let us go point-by-point. How does one get to Komsomolsk-on-Amur now? By train, by air, or by road. All the three types of travel are included in the plan. Via highway: right now, the issue of transferring this to federal ownership is under consideration. First, however, we have to finish construction and conduct testing. The second issue relates to rail transport, and is probably even more controversial. In fact, it is probably the only one which is not regulated by the integrated plan. We had a meeting at the Ministry of Transport, with the participation of Russian Railways, and they stated that the capital investment required to speed up the service is no less than 50 billion rubles. So far, we reached a total and complete agreement on one point: the plan must include improving comfort and safety of passenger service. In this concern, Russian Railways, for example, plans to update its passenger railcar fleet. The issue of increasing the speed of transport requires an additional technical and economic feasibility study, and the Krai Administration has taken on the responsibility to carry out similar investigations into this. The performance of calculations should be exercised in 2016–2017. During that time, they intend to work out the final solution to the highway problem.
At that point, a decision can be taken on which mode of transport to develop, and how this should be done.

– What role will air travel play in all of this?
– As you know, Komsomolsk-on-Amur has two airports: Dzyomgi and Khurba, which are both operated by the Ministry of Defense. There is a point in the plan for the development of regularly scheduled flights based on the military's plans for further development of these bases. During 2016, they are to determine which of the airports will be the primary one for civil aviation; the more convenient one is, obviously, Dzyomgi. There are some difficult issues here, some concerning ownership, but these can be resolved at the federal level.

– And which mode of transport will have the quickest effect? Has there been an evaluation of this?
– In our first estimate, we still think this would be rail. Not only is it cheaper, but it also better fits the ideas of developing the tourist infrastructure around Komsomolsk-on-Amur. That is important. For example, the Kholdomi Skiing Complex has investors developing it. In addition, in Asia, they are quite interested in industrial tourism. The key airport is located in Khabarovsk, and if we can provide a "short-cut" to Komsomolsk-on-Amur, it will result in an inflow of tourists. At the very least, the Ministry of Culture supported the inclusion of the tourism cluster surrounding the city into the federal program.

– We will guarantee loading for our local companies, improve transport accessibility, and build social facilities. Will that be enough to keep young people from leaving?
– For the development of any urban agglomeration, two factors are of key importance: salary and environment.
By loading local manufacturing companies, this issue is partially addressed, especially because young people, as it is assumed, will enroll the system of continuous education, going from engineering school right into active operation on the factories. Social facilities are of the same importance. Actually, quite a lot depends on the concerted actions of all those involved in the city's development, especially municipal authorities. That is why this plan foresees the creation of a new architectural conception for development.

– And it would not be a bad idea to start building these apartments, especially for young families, would it?
The region was already included this year in the federal program "Homes for Russian Families". This program helps lower the cost per square meter by offering land and compensation for expenses associated with infrastructure creation – up to 4,000 rubles for each square meter, if the house costs more than 35–40 thousand rubles per square meter. For builders, this is attractive, and it is a resource for active use during the development of Komsomolsk-on-Amur. Last year we revised the criteria for participation in the program – the Far East Region can reduce the capacity of its projects for inclusion into the program. We got some relief, and the city needs to take advantage of this.

And the key indicator that the program is working will be – what?
– The amount of people who will be living in Komsomolsk-on-Amur when all the development stages end. We plan on 263,000 people. Now, we have 253,000. Of these, 8,500 should come from a positive migration surplus, with 1,500 from natural population growth. In recent years, the Far East has seen a positive dynamic of natural population growth – this is the result of work done by the authorities in the area of healthcare, among other things. However, another problem remains – we have a net migration outflow, which is partly negating all our efforts. Moreover, which is even more important, it is the most qualified specialists who tend to leave. If we can stop that process, or even overcome it, no work would have been in vain.