Krasnoyarsk Territory Governor Alexander Khloponin being interviewed
Photo: Ilya Pitalev
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Our State Is a Centaur
// Alexander Khloponin tells Kommersant about his model of national development
Projects
Krasnoyarsk Territory Governor and United Russia leader Alexander Khloponin has positioned himself as part of the “new right” in the party of power. Having entered politics from private business, Khloponin is today oriented toward a strategic role for the state in partnership with big business and the South Korean model of corporate development, suggesting that large-scale investment be made on that basis in Siberia and the Far East. Khloponin told deputy Kommersant editor-in-chief Kirill Rogov about how he sees that model and the political processes in contemporary Russia.
The United Russian congress created the impressed of a pompous Soviet function. And you presented a grandiose program for the development of Siberia and the Far East there.
I am not completely in agreement with that assessment. The head of the party, Mr. Gryzlov, made a presented a strategy for the advancement of the country from a policy of stability to a policy of development, a strategy to activate economic policy. My report concerned the technology for the realization of that strategy through the further development of Siberia and the Far East.
Why is that important? Today, we have dynamically developing partners to the south. That is the Southeast Asian market, where the pace of economic growth is something that we can only dream of. But they also have significant population growth. Both require significant resources. And those resources are only in Russia. If we do not reorder our policy in Siberia and the Far East, an enormous number of risks arise. Risks to economic sovereignty and territorial integrity in the final account. Because in Siberia and Russia's Far East, we see the opposite happening. Investment is decreasing, there is economic stagnation, depopulation and the absence of a sound migration policy.
By our calculations, there are 22 large investment projects in the portfolios of large companies that have not been implemented in the East because of various administrative limitations and infrastructural shortcomings. The model that we are proposing was not invented in Krasnoyarsk Territory. It is in use in many countries, in Southeast Asia, for instance. It is a model of private-state partnership, the model of so-called “corporate development.” The principle is that infrastructure and administrative solutions in the mandate of the state and commercial investment is the mandate of business. A pilot development project in the lower Angar River region shows that every ruble the state invests can attract three to six rubles from private business. Let's say business is prepared to invest $90 billion in Siberia and the Far East over 10-15 years. That is no les than a $150-billion investment in the GDP. To service such an investment package, we need $20-30 billion in state investment in infrastructure. Russia can afford to spend $2-3 billion per year to eliminate the risk of losing the eastern part of the country and in a surge in the GDP of Siberia and the Far East.
Okay. How exactly will the model of private-state partnership look in the format of the pilot project on the Angar?
That is a project for corporate development that involves federal funding, regional funding and private business. Plus the organization of part of the investments by Vneshekonombank. It was the main financial partner in the project.
Who was private business represented by?
Private business was represented by GidroOGK, the hydroelectric subsidiary of RAO UES of Russia, by Rosneft, and by Basic Element, which is ready to build an aluminum plant there. A number of companies were represented that were interested in the construction of a paper and cellulose plant and there are other potential participants, metals interests, for example.
You speak of private-state partnership, but all the “private” parties are state-owned companies, that is, companies where the main shareholder is the state.
It's not important who the shareholders are. The task of any shareholder, whether it is the state or a private entrepreneur, is to receive the maximum profit. Basic Element is an absolutely private company. The project on the lower Angar is ready. It can be implemented next year. In the first stage of its implementation, without taking the development of the oil and gas complex in northern Evenkia into account, the state will invest $800 million in infrastructure and private business will invest $5 billion. Taking the oil and gas complex into account, business will invest more than $22 billion, of which about $4 billion will be infrastructure investment, mainly pipelines.
Sounds big. But one question arises. Now the state is able to make investments because of the particular current market conditions for energy providers. But in three or four years, it may be unable to meet its investment obligations.
The state isn't investing in air here and isn't burying its money in a treasure chest. The state receives a return on its investments. That's tax flow; the federal budget receives real income from employment. It is distributing that money well and profitably enough.
In the 1980s, there was a concept of long-term building. It was used to cover up the same situation. In the 1970s, massive projects were begun. Then, when oil export income dried up in the 1980s, there was simply not enough money to finish them.
On the other hand, all of Siberia, including Krasnoyarsk Territory, got a boost in the 1970s. And that, if that is what we are talking about, is what the Russian state exists on today. It exists on those investments that were made in the 1970s. All of those oil deposits that are being worked today were developed and, actually, discovered in the 1970s. The metal plants that today bring income into the federal budget were all established on the wave of industrialization in the 1970s, the Kosygin industrialization. The second stage of the development of Norilsk Nickel was the construction of the Nadezhdinsky plant, the Krasnoyarsk hydroelectric plant, the Sayano-Shushenskaya hydroelectric plant. Today, the country lives on those investments.
So the logic is that, while prices on raw materials are high, it's time for state investment in Siberia…
Russia has always developed its expanse from left to right, from west to east. Every new surge in the East has been a reaction to definite challenges and threats. Today we have challenges connected with the need to find new sources of economic growth and threats connected with the underdevelopment of the eastern part of the country. The state should only fulfill its regulatory function and define a strategy. You know that the pipeline infrastructure is a state mandate. But, without understanding where that pipeline leads, no one will develop anything. It can't be otherwise.
When I hear about state-private partnership, I always think about the Moscow-St. Petersburg road. You remember – the one that nothing is left of except a big pit and hefty debts. There are a lot of people who have the same reaction.
Private-state partnership should never be thought up by bureaucrats. Otherwise, there will be only a debt-ridden pit, or more than one. The state should not independently determine what infrastructure it builds where. A high-quality project for private-state partnership also comes from business interests.
Business and the people should be the state's clients. The state should create the conditions for development or let business create those conditions. For example, there are projects connected with the construction of ports. That's because the problem for the resources located in Siberia and the Far East is that the market for them is 4000 km. away in one direction or the other. The state can participate in that project not through funding but through preferences, tax breaks for the business that processes the resources and transports them. Here the thing us that there is no transportation problem for the resources themselves. From the point of view of expenses, the resources are best covered for transport. In nickel export, transportation expenses amount to no more than 5 percent of the cost. That means that it is more profitable to export nickel in its raw form than to process it into ingots and supply them.
Maybe then no processing is needed if it is less profitable and that can be done closer to the sales markets?
No. On the contrary. Raw materials should be the base for receiving investment capital that will be reinvested in deep processing. In my view, there are two objects for export in Siberia and the Far East. Those are raw materials and high technology. That is, money from the export of raw materials should be reinvested in processing and the development of modern technology in energy and transportation, and those technologies can be sold for a very high price.
And without state investment, of course, that is impossible. Now everyone is concentrating on that. It would seem that you and Mikhail Khodorkovsky look at the situation from completely different points of view. But his proposals are exactly the same – state-private partnership, investment in this, investment in that. Just the numbers are even bigger.
Well, let's not confuse apples and oranges. I'm saying that parameters should be set for the Stabilization Fund and market risks connected with a fall in prices. The rest should not go for the social safety net, benefits and salaries, but for infrastructure projects that will then created added value and that will pay salaries and serve the social infrastructure.
I would like to return to the party congress. We used to say that United Russia is the party of power, but now it is almost a matter of the formation of a one-party system. It was open said at the congress that that would be not bad at all and references were made to the Liberal Democratic Party of Japan. Do you also find the one-party system a promising model for development?
No. It's wrong. But we are in the process of building both a civic society and a political system. If you look at our state now, it is a centaur, with the human part looking into the 21st century and wanting to live in a democratic state with a range of definite freedoms, and the other part is an animal from the 20th century and demanding benefits and guarantees from the state. When we turn from a centaur into a person, then the model should work differently. Let us move on to the party. The party's problem is that people were first elected, let's say, governor, they took office, and then they joined the party. That construct should be different.
Therefore, questions were raised at the congress about converting to an entirely different plan. Elections are held for the legislative assembly in Krasnoyarsk Territory. United Russia wins. United Russia nominates its candidate for governor. The communists win, the communists make the nomination. Then the party will be able to make that request both as the cabinet and as a party structure.
But a strong party is one that not only wins at the elections and gets it governor, not just nominates him.
I agree completely. The party should appoint, not nominate. Today we have a transitional construct.
There's one thing I can't help asking in this context. You once became governor in a suspenseful race. Is it more comfortable to be elected or appointed governor?
For today, I completely support the practical appointment of governors, and think that it is correct. That is related to the fact that the population is significantly apolitical, especially the young people. There are no civic institutions that can defend their positions. As a result, the governor becomes the hostage of the part of the electorate that goes to the polls and takes to the streets holding signs. And no matter how right that governor is, you have to make a left turn in two years and practically drag the region in the other direction because that is the segment of the population that goes to the polls.
How should the problem of the 2008 presidential elections be solved in light of your centaur theory?
It seems to be that, ideally, there should be parliamentary elections. And the party that wins should propose its candidate to the president.
We already know what party that will be.
What are you talking about!? Listen. Krasnoyarsk Territory is the Russian New Hampshire. In Krasnoyarsk Territory, United Russia has never taken more than 32 percent of the vote. We also have the Union of Right Forces, which is fairly active in Krasnoyarsk, and the LDPR, communists and Yabloko.
But in reality, we know that it will be United Russia. And it will nominate its choice for president?
No. I am afraid that we are not ready for that. That is the ideal. I am saying that it is possible that, when civic institutions exist, society can place its order. Society should place its order to parties in the competitive political sphere. We don't know how to place that order today. That is why party platforms are so washed out and parties so weak.
And so how should the problem of 2008 be solved in this situation?
I said what I would like to have. It seems to me that there is no more important task than forming civic society and creating the opportunity for society to take an active part in political and economic life. That is why, historically, we have worked with the formula that we have the authorities and don't want to participate in state management ourselves. It is better for us to hire a tsar. That is the motivation that exists. If we do not change it, then we will have successors for the rest of our lives.
Kirill Rogov
All the Article in Russian as of Dec. 06, 2005
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