Главная Industrial development of remote resource areas: global world changes
Industrial development of remote resource areas: global world changes Печать E-mail

Andreev OA, affiliate professor of the Baltic Institute of Ecology, Policy and Law in Murmansk
Vesa Rautio, researcher Alecsandri Institute of the University of Helsinki (Finland)
John Round, a lecturer in the University of Birmingham (United Kingdom)
Tyukkyulaynen Markku, Professor of Geography University of Joensuu (Finland)
(The Challenges of Going Global: Industrial Development in Remote Resource Regions)

This article examined the development of two northern outlying areas of Russia, Murmansk and Magadan region in Soviet times. These two areas play an important role in rebuilding the country after the Second World War. Very rich in natural resources, they were quickly populated and industrialized immediately after the war to supply the country's economy in natural materials.

Studies show the similarities and differences in areas, which are based on the internationalization of the regions. On the one hand, the Murmansk region became part of the global market for copper-nickel ore, but on the other hand, Magadan was facing serious structural problems, such as the peripheral location and lack of government support. The main purpose of this article - to answer the question: What are the basic conditions for successful development of Russian peripheral areas in the post-Soviet period?

The development in the soviet period, the population of northern Russia has always prevailed, as compared with other Nordic countries.

Despite the rapid growth of the Russian economy since the crisis in 1998, socio-economic well-being of the peripheral districts of the Russian Federation has not improved. For example, some areas in the north of Russia is still forced to deal with the many structural problems without any federal support provided by the state. The new regional policy of the Government of the Russian Federation is based on a rather old idea of the poles of development, rather it is an updated version of the portfolio of development projects as the solution to the problems of geographical economics.

The new regional policy of Russia is divided into 3 categories based on the economic potential of the country: the growth of the central districts of the country, support the main areas, as well as the peripheral regions of the country.

The support includes two categories: primary and old industrial areas. Peripheral category includes two subcategories: areas at risk. Chechnya and Ingushetia were in the special category, they are classified as special areas. A new regional policy gives preference to areas such as Moscow and St. Petersburg in the growing national economy and in providing solutions to various socio-economic problems. According to our objectives, we are studying the backward areas. Murmansk is a major area, and Magadan are at risk, which includes areas with serious socio-economic problems.

Post-soviet period in the Murmansk region

Murmansk Region is the brainchild of the Soviet period. More than 90% of the population - urban, and most of the urban facilities were built for the development of the fishing, mining and metallurgical industry. Indeed, one aspect of the Soviet system was the convergence of urban and rural populations, where clearly was visible retardation and low education. For example, in the Murmansk area, even fish and reindeer herding activities of highly centralized, which is a clear difference with neighboring countries such as Finland and Norway (Rautio 2003: 38). Moreover, the region has always been an important military region of Russia with a large number of military bases located in the north along the coast of the Barents Sea. Harbor and Murmansk Severomorsk are important commercial and military ports.

In the early 1990's it was obvious that the economic system of the North, which was established in Soviet times, was not developed economically and environmentally (Bardshaw 1995:199). Some areas in the north of the Russian Federation must have been working on the basis of a market economy without any experience and coping in the world market, given the economic trends.

The decline of the domestic market, rising inflation, which absorbed the savings of consumers, as well as social insecurity has led to instability, as people in the Soviet Union did not know for decades. However, some areas of the Murmansk region were relatively stable, partly due to the ability of major enterprises to pay wages on time, and a marked decrease in the population facilitated the social problems in the region.

The enterprises adaptation to the world market

The Murmansk area for today depends on the mining sector. The main enterprise in area - «Norilsk nickel » which is engaged in manufacture among other nickel and a palladium (accordingly 18 % and 50 % of world production of 2006) (Morgan 2007). Global mining enterprise «Norilsk nickel» has some combines in region. Taxes of the enterprise and other payments to local administrations cover about 40 % of the regional budget. Privatization of «Norilsk nickel» has been finished in 1997 and 10 years after the enterprise became the international leader in mining business, and at the same time it connects Murmansk area with the world market.

B the beginning of 1990 the company was the state enterprise. The enterprise has been privatized in the middle of 1990 that has led to the big internal changes. For example, ten years later have appeared branches worldwide, but the amount of hired workers was reduced up to 40 % though manufacture has increased for 40 % without what or innovations (Rautio and Kosonen 2006 : 43).

After three years after privatization of the enterprise, more than 90 % of production have been exported on the global market, and its profit made almost 2 billion dollars (Rautio 2003 : 53). Economic rise of «Norilsk nickel» was extremely important for Murmansk area, thousand well paid posts, duly payment of taxes and other payments of the company have appeared.

Three years after the privatization of enterprises, more than 90% of products were exported to the global market, and its profit was nearly $ 2 billion (Rautio 2003: 53). Economic take-off «Norilsk nickel» was extremely important for the Murmansk region, there are thousands of good paying jobs, the timely payment of taxes and other payments the company.

Post-soviet era in the Magadan region

North Russia, with its narrow profile of production, low population density, geographic isolation and harsh climate would never have become a favorable location for the Russian economy. However, due to the large mineral reserves, Magadan Region has always been an important region that contributes to the economy of Russia.

Before the collapse of the Soviet Union, the North-East of Russia has undergone three stages of development. The first stage was characterized by studies of Russian «pioneers» in search of new economic opportunities. During this period, was established infrastructure, but that does not mean that the area was completely under state control, even when gold was discovered in 1920. Because of the shortage of labor and infrastructure, were initially used as a market-based methods for the development of the area, as well as foreign investment. Stalin was aware of the value and importance of the area in the economic sphere. He believed that we should develop the northern regions more quickly than in other countries at the same latitude, thus we prove the superiority of the Soviet system (McCannon 1998). To achieve this Kolyma region was under the control of the Far East Construction Trust (Dalstroy) and it was decided that gold mining in the area, which led to the development of the General Directorate of camps in the north-east of the country. Soon, the area of economic activity was under control «Dalstroya» and 90% of the population were inmates (Slavin 1972). Magadan was built to manage the camps. The city is located in the Gulf, to be able to move inmates throughout the year. Nordlander (1998: 810), studying archives g.Magadana, found that about one million people died during that period.

Adaptation of enterprises to global markets: mining and fishing industries in Magadan

The economic downturn 1980 is not particularly felt in the north-east of the Soviet Union. But by the end of decades of structural changes in the economy of the area were evident, requiring significant investments in gold. The state was more than able to provide subsidies in connection with the country's economy is rapidly falling.

Gold in the area was still in the price. There have been many attempts to stabilize the mining industry. The importance of mining in Magadan region can not be overstated, as it is more than 70% of output in the region and 60% income tax. Although the production of gold does not stop at the end of 1990., Industry undergoing a crisis (Mikhailov and Volkov 2000: 19).

The level of gold production was maintained through the field «Kubaka», for 1997-1999. produced 47% of gold in the region, as shown in the table. Deposit «Kubaka» was closed in 2005 and its production in 1990 only temporarily escaped the problem. The need for a short time to increase production meant that the extraction of gold from its deposits rapidly depleted. Because of extraction is higher than the specification and reduce government spending on infrastructure, gold production declined by an average of 3.5% per year in the 1975-1991 biennium. Tenfold decrease in investment capital in the post-Soviet Magadan adversely affect the situation, and failure to adapt to new technologies has led to depletion of the deposit (Lavrov 1998: 17).

In order to avoid the crisis in mid-1990. region has been obliged to ask for help to foreign investors. The Government was unable to provide the necessary means, so it was decided to sell 53% of the shares of the company «Kubaka» American company «Kincross Gold». The project was successful in January 1998 in Magadan was registered company «Dukat Silver», 70% of which belonged to a Canadian company «Pan American Silver», the remaining shares owned by the company «Russian Geometall».

Another major production in the Magadan region - this is fishing industry. It was confronted about the same problems as the mining industry: the federal control has hindered the development of production and the need for investment.

The social consequences of the collapse of the fishing industry are obvious. Approximately 17% of the population survive through Magadan fish, and foreign competition and the acquisition of licenses in the future will increase the price of fish. The program for the protection of the environment (United Nations Environment Programme 2006) pointed out that the problem sector led to the emergence of social and economic problems in the Magadan. They also noted that the industry suffers from corruption. Taken together, this led to the depletion of marine stocks, which, according to the UNEP, made it necessary to tighten control over the formulation of fishery products. Foreign investment, corruption, poaching, and ill-interference of federal government - all this means that the regional administration is not paying enough attention to the fishing industry.

Future prospects

Murmansk and Magadan are very dependent on natural resources and enterprises, working with them. However, this does not mean that the future of the Murmansk and Magadan regions depends entirely on the world market prices for raw materials or strategies of the largest enterprises in the regions.

Socio-economic development in post-Soviet period the region is different from one another. The difference is primarily in the mining sector. On the one hand, the need for change in the mining sector in Magadan - the process is still incomplete and does not foresee any change in the near future. On the other hand, the Murmansk region extracts many benefits of the strategic alternatives «Norilsk nickel» modernize the structure of the company profile of production and exportation of products to world markets.

Investment in the Murmansk region have grown significantly over the last few years. Investments profitable Magadan region, is almost non-existent because of the regional administration, a skeptical attitude towards foreign investors.

In our study areas is clearly visible to potential natural resources. Using this capability provides many opportunities for the development of areas, but we need the desire, commitment and cooperation of three sectors: the residents, administration and business sector.

Bibliography: 46 source


Unpublished articles


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