Oleh Soskin,
Director of the Institute of Society Transformation
Reality of Donbass “economic miracle”
Social-economic analysis
Today, the Ukraine goes, no doubt, to new stage of its development. Presidential election -2004 - their move and results - become critical moment in histories of our state. Ukrainian people and world community expect that new management of the country will conduct the new politician, directed on formation European, democratic Ukraine. Important syllabic such politicians can become the weighted approach to development of the interconnected between region of the country, only avoid internal conflict and save the unity and wholeness state.
One of the most complex problems, with which face nearly all country of the world, there is achievements social-economic balance on administrative-territorial level of state management. It is important to form such administrative fission of the country, for which each of its territorial units was social and economic self-contained. This means that she must produce such gross income value which sufficient for:
- deduction of the territory and population, which lives on this territory;
- developments all its forming – an infrastructure , cultural, social-demographic etc.;
- introducing the comprehensive program investing developments of the territory.
The similar problems exist, for example, in Italy, where more developed, including economic, there is north of the country, and less developed - a south. The problem of the uneven territory development not gets round France also, where Paris is exceedingly developed with fringe and more retarded rural terrain. Such questions worried in Germany and other country. Each state chooses the own way of their decision. For example, Poland for overcome breakup in social-economic development between east, west and central parts of the country have conducted, in my opinion, very successful territorial-administrative reform. The amount provinces were for short with 49 before 16, are reduced amount region, are advanced managerial system by country. The Polish experience there is useful for using in Ukraine.
During operating the Kychma's model, question comparatively inequality social-economic development of the miscellaneous Ukraine’s region was discussed enough often, but, regrettably, did not dare. The problem, which for long-lasting time was impounded in deaf corner, at the last period burst with new power and had special quip in the course of presidential campaign 2004. The row of the leaders of the east areas of the Ukraine has begun openly to declare that powerful to them regions hold the economy of the whole country and there is its breadwinner. Mythological conclusion is done on this base about that that existence of the Ukraine as developed European state will be an impossible if its east areas will start conduct independent economic politician.
Rather wide-spread there is one more myth amongst Ukraine high circle orient - about possibility of the forming the South-East Ukrainian Autonomic Republic, which, upon their estimation, capable to develop the quick rate and satisfy behoove rank to need of their own inhabitants. In composition of this formation is offered first of all to include Doneckuyu, Luganskuyu, Harkovskyu and Dnepropetrovskyu area of the Ukraine. Such a separatism of the frame of mind has supported the certain circles so named office scientific workman, a part of powerful elite in AR Crimea.
The Present chieftain east Ukrainian region warn that in the case of receipts to the authorities in Kiev europium adjusted politician, who will keep the state glance, east areas can put the questions about forming the federations, turning the Ukraine on federative device even about branch east-south areas. The similar statements and calls are based on statement, that that east areas capable by itself to realize the process of the extended reproduction, leading element which will be an export sector.
In Ukrainian society enough is actively formed myth, which is woke; waked in Doneck at the beginning initially 2000 began the economic prodigy, which creator was Viktor Yanukovich, former chairman Doneckoy regional state administration, along with its command. Exists statement about that that exactly Yanukovich has transformed Donbass from depression on such that dynamic develops.
For the other myth, Donbass (Doneckaya and Luganskaya area) there is self-confident in social-economic plan, he financial holds whole Ukraine and can form the own state substance together with Harikovska and Dnepropetrovska area.
Only scatter brought above myths, shall analyze their main parameters. First of all research the real economic situation, which formed in Donbass region, shall show the main sources, which artificially created so named “donbass economic prodigy” for four years.
Firstly, Doneck and administrative-territorial unit Donetchiny were given appreciable tax privileges through mechanism of the operating the special economic areas (SEA) and special mode to investment activity. Accordingly Law of the Ukraine about special economic areas and special mode to investment activity in Doneckoy area", accepted Verhovna Rada of the Ukraine on December 24 1998, special economic areas "Doneck" and "Azov" for period 60 years in border such territory :
- SEA "Doneck" - in the south Doneck city area 466 hectares;
- SEA "Azov" - in the south Mariupol city Doneckoy area area 314,8 ga.
The special mode to investment activity is entered on territory of the priority development (TPD) for period 30 years and acts in priority type of economic activity, which list defines the Ukraine’s Cabinet of Minister.
To territory of the priority development of the city were referred on Donetchine: Artemovsk, Vugledar, Gorlovka, Dzerzhinsk, Dimitrov, Dobropilya, Doneck, Druznivka, Enakievo, Zhdanvka, Zugres, Ilovaysk, Kirovsike, Kostyantinvka, Kramatorsk, Krasnoarmysik, Chervony Liman, Makeevka, Mariupol, Novogrodivka, Selidove, Slovyancke, Snizbe, Torez, Harcyzsk, Shahtarsk, as well as regions: Amvrosivskiy, Volnovarskiy, Kostyantinivskiy, Marinskiy, Slovianskiy, Starobeshivskiy and Shahtarskiy.
In special economic area and on territory of the priority development, accordingly acting Ukrainian legislation, installed special customs, tax modes and other conditions of the realization to economic activity.
Accordingly “Law of the Ukraine about special economic areas and special mode to investment activity in Doneck area”, beside subject of business activity, which act on territory SEA, tax on profit leaves on rate 20 percents. The foreign exchange, which enters from sales of products, goods (work, services), worked out or given in special economic area, is freed from obligatory sale. The Law also provides making the favorable investment climate. For this purpose to gross income of the enterprise, located in SEA, is not included, but then and is not taxed tax, got in accordance with investment project amount to investments in the manner of:
- a facility;
- material valuables;
- non-material asset, cost which in converted currency confirmed accordingly law (the procedures) of the country-investor or international commercial customs, as well as expert estimation in Ukraine, including legalized on its territory of the copyright, right on inventions, useful models, industrial samples, signs for goods and services, know-how etc.
The Law has provided introduction in special economic area "Azov" and "Doneck" mode of the special customs zone, which means using the certain order of the import goods and the other subject on territory SEA and export and other subject from territory of this zone. For example , in the event of import goods and the other subject (except excise goods) because of borders of the customs territory of the Ukraine on territory of the special economic areas "Azov" and "Doneck" for use in border of these zones entrance customs duty and value added tax do not manage. In the event of export and the other subject (except excise goods) from customs territory of the Ukraine on territory of the special economic area "Azov" export customs duty does not manage, but value added tax manages on zero rate. In the event of export from territory of the special economic area "Doneck" for borders of the customs territory of the Ukraine goods and the other subject, worked out, including completely, or it is enough processed or processed in SEA, export customs duty and excise collection do not manage, but value added tax manages on zero rate [1].
The greater privileges are given and subject to business activity, which function on territory of the priority development in Doneck area. The Law of the Ukraine about special economic areas and special mode to investment activity" gives a chance enterprise, which act on TPD, use special cut investment activity [2]. He allows to free for a period of realization of the investment project, but not more than for five years, from imposition by entrance customs duty raw material, material, subjects, equipment (the equipping), except excise goods, and value added tax - an equipment (the equipping) during their import in Ukraine. Accordingly special mode to investment activity for three years is freed from taxation profit, got from realization investment project, approved by advice, on produce and acting enterprise, their branch and other structured subsection. To gross income of the enterprise, located on territory of the priority development, for the reason taxations is not included got in accordance with investment project amount to investments in determined type (in the same way, either as in SEA - refer to above).
So, SEA and TPD - that instruments, which introduction has provided "dynamic development" Doneck area. Why this miner's lands were given such enormous privileges and advantage? First of all so to remove the social voltage on Donetchina, where much city functions only due to working the certain mines, absolute majority from which today there is unprofitable.
Secondly, from 1 July 1999-go before 1 January 2002 on enterprise is blazed-metallurgical complex of the Ukraine was conducted experiment, which purpose was a creation for them conditions required for increase the volume of production product and arrivals in budget, through granting the tax privileges [3]. From 1 January 2002 before 1 January 2003 action of the experiment were continued by taking the special law about the most further development is blazed-metallurgical complex" [4].
The specified experiment enabled the metallurgical industrial complex greatly to reduce the tax load and thereby to enlarge the volume of the facilities, which were directed on development own enterprise. It thereby was practically given enormous privileges Doneck financial-industrial group, which belongs to the majority metallurgical combine. Then named FIG exceedingly was quickly enriched, but got due to experiment incomes become foundation of the formation enormous capital known now not only in Ukraine, but and outside of her borders doneck oligarch and their financial-corporative groups.
In Doneck region were formed efficient (with standpoint of money-laundering) production chain: coal - coke - iron ore - a metal –metal production. Profit was formed on the last section chain, when metal goods were realized abroad through foreign commercial structures, as follows offshore companies.
These turned into powerful schemes, which allow and today sell Ukrainian coal on understated prices, together with that buying equipping and material required for operating the mines, on high prices. These differences caused to fast development and fortification of Doneck corporative group.
So, the second instrument, by means of which was realized "economic prodigy", were a more powers, given by experiment, which lasted before 1 January 2003 But also the first (SEA and TPD), and the other instruments were artificial. They inflicted and undamaged other area and city of the Ukraine, to account which privileges Donetchina gets.
Then much easy refuse the myth about that Donbass capable by itself to function on base of own financial resource. For official data, during last five years Donbass and Its city were given 10s mlrd. grn. by redistribution financial resource through state and local budgets. Possible expect that majority of given money were broken and assigned to leader doneck corporative groups. Only mites goes to plain folk and miner, who are so indigent and intimidated that satisfied even such beggarly handout. Confirm the brought thesis is easy enough if analyze the given State budget on 2004, where clearly determined facilities, which stood out on coal area. Budget -2004 provided such expenses in fuel-energy complex of the Ukraine:
- Restructure coal and peat extraction industry - 784 mln. 44,1 thous. grn.
- Rescue actions on coal-mining enterprise - 157 mln. 66,4 thous. grn.
- State support coal-mining enterprise and partial covering the expenses from prime cost of the product - 651 mln. 412 thous. grn.
- State support construction and technical re-equip enterprise from mining of coal, lignite (the borax of coal) and peat - 1 mlrd. 218 mln. 141,8 thous. grn.
- Guard of the work and increasing of the safety on coal-mining enterprise, including degassing coal layer - 55 mln. grn.
- Participation in acquisition large powered energy supply compressor and electrotechnical of the equipping for equipping of the coal mines - 24 mln. grn.
- Acquisition to experimental party nitric-membrane station for extinguishing fire on coal-mining mines - 25 mln. grn.
- Partial covering the expenses on payment of indebtedness miner from regress suit and lump allowance on loss of the professional ability to work - 54 mln. grn.
- Making the unified telecommunication system supervisory control for automated management mountain machine and technological complex (UMMM) on coal-mining enterprise for increasing of the safety - 75 mln. grn.
- State support coal-mining enterprise, which moves on redemption of indebtedness from salary for past years workman coal-mining enterprise, except that, which are liquidated, - 721 mln. 275,6 thous. grn.
- Increasing action to safety of the mining coal, including creation and introduction heat-and-power engineering modules to salvaging the coal methane - 130 mln. grn.
- Development of the state research programs for provision of ecological safety in sphere fuel-energy complex - 9 mln. 300 thous. grn.
Thereby, on need of the coal area, which is glorified Donbass, from State budget only in 2004 was in general chosen 3 mlrd. 904 mln. 239,9 thous. grn. We see, budgetary fund was used, amongst the other, and for payment of indebtedness from salary, regression, pension miner since today coal enterprises not in possibility to pay them on all amounts through greater debts [5].
The second channel of the redistribution state resource in favor of Donbass region and other east territory - an allocations in state budget of our country of the facilities on “social- economic development city and region of the east areas”, which today so persistently show separative moods. In border of this channel of the financing in 2004 city Stahanovu (Luganska area) was given 5 mln. grn., city Chuguevu (Harikovskaya area) - 1,5 mln. grn., Amvrosiskomu region (Doneckaya area) - 2 mln. grn., Miner's region (Doneckaya area) - 2 mln. grn. Harkov and area have got a tasty morsel from State budget : 70 mln. grn. and 45 mln. grn. accordingly. In Makeevsky town budget (Doneckaya area) is directed 20 mln. grn. for covering the expenses, in accordance with transfer in public property vein fund and other object of the social infrastructure Makeevsky metallurgical industrial complex name Kirova.
Thereby, on social-economic development city and region of that areas, which strive be united in so named South-East Ukrainian Autonomous Republic, from State budget our country of the facility were directed in 2004 for amount of 145,5 mln. grn. [8].
At the same time the sources of the formation local budget, as is well known, are income-tax from people and charge per the land. However, east areas of the Ukraine not very carefully fill the revenue part their own budget to account of the specified sources [6]. For official data, in 2003 the lowest of the factors of the growth on local budget in Ukraine existed in Luganska area, and in Harikovska area occurred the reduction of the volume of the arrivals of the local taxes and incomes to local budgets. Was not provided and performing the planned indicators on local budgets Dnepropetrovska area (99,8%), Donecka area (97,1%), Luganska area (99,2%) in 2003.
The third channel of the redistribution of the state money in favor of Donbass connected with granting the social privileges and payments. For instance, in State budget of the Ukraine on 2004 is provided social protection miner, who have forfeited the worker of the place. From the main of the financial document state stood out 51 mln. 328, 2 thous. grn. Doneckoy area and 38 mln. 115,3 thous. grn. Luganskoy area on creation new worker places workman to coal industry, which are freed in connection with closing the mines [7]. The considerable amounts also move on payment help families with children, poor families, invalid from the childhood and handicapped children, granting the privileges to miscellaneous category populations. On specified integer 255 mln. 177,1 thous. grn. were sent in budget Doneckoy area, Luganskoy - 70 mln. 801 thous. grn. then Kiev - only 42 mln. 119,5 thous. grn. For construction vein military regional budget Harikovschiny has got from State treasury 15 mln. 245 thous. grn. then regional budget Chernigovschiny was got only 6 mln. 496,2 thous. grn.
The fourth channel of the financing of the east areas of the Ukraine is enormous allocations from State budget facilities for reduction actual disproportion between local budgets through non-uniformity of the location of budgetary institutions network. For example, for this purpose budget Dnepropetrovska area was given 22 mln. 368,9 thous. grn. then Sumskoy area - only 8 mln. 209 thous. grn. [8].
We should mention that regional budgets of Harikovska and Luganska areas in 2004 have got subsidies of the alignment from State budget in amount of 30 mln. 512 thous. grn. and 87 mln. 707,6 thous. grn.. Such sort subsidies are given also many cityes and Ukraine’s east region . For example, in such cityes of Donecka area, as Artemovsk, Gorlovka, Dzerzhinsk, Dimitrov, Dokuchaevsk, Druzhkivka, Enakievo, Kirovsike, Konstantinovka, Krasny Liman, Makeevka, Novogradivka, Selidove, Slovyanivka, Snizne, Torez, Shahtarsk, is directed from State budget total 163 mln. 64,7 thous. grn. Famous Enakievo, V. YAnukovich native land, in 2004 has got from State budget 9 mln. 113,0 thous. grn. [9].
We obviously see that east areas of the Ukraine not finished by attention of the centre and function mainly, than count of the state facility and miscellaneous of the sort privilege. Donbass presently not capable by itself to develop as separate independent territorial unit. It hasn’t sufficient sources, possibilities and money amount for realization of the process of the extended self-reproduction. As we have shown on example of the State budget 2004, development of the economy and social sphere of the regions of the East Ukraine is based on billionth subventions, which are given to regional budgets, districts and cityes.
The new Ukrainian authority must demonstrate today the skill to strategic thinking and form the regional economic policy, built on factor of the real growth. In Donbass particularly it is necessary to develop the strategy of the development, which will provide the activation of local enterprises and introduction of innovations. It is necessary to abandon from regional policy, the main instrument of which are internal and external borrowing, mass expropriation of the income beside small and average business, redistribution state financial resource in favor of doneck financial-corporative systems.
For prevention such negative process we consider for necessary to open up a discussion for urgent need administrative-territorial reform in Ukraine which will strengthen local self-governance. It is important to acquaint the broad public circles with objective picture of social-economic development of the miscellaneous regions, analyze and show their real potential, level of dependence from state and other regions of the country.
- Law of the Ukraine about special economic areas and special mode to investment activity in Donecka area — zakon.rada.gov.ua/cgi-bin/laws/main.cgi
- Special mode to investment activity on territory of the priority development accordingly Law of the Ukraine about special economic areas and special mode to investment activity in Donecka area — zakon.rada.gov.ua/cgi-bin/laws/main.cgi
- Law of the Ukraine "About undertaking the economic experiment on enterprise is blazed-metallurgical complex of the Ukraine — zakon.rada.gov.ua/cgi-bin/laws/main.cgi
- Law of the Ukraine "About the most further development is blazed-metallurgical complex — zakon.rada.gov.ua/cgi-bin/laws/main.cgi
- Addition 3 to Law of the Ukraine about state budget of the Ukraine on 2004" - "division expenses of the State budget of the Ukraine on 2004 — http://zakon.rada.gov.ua/cgi-bin/laws/main.cgi?page=4&nreg=1801%2D15
- Material of the meeting to Ukraine’s Ministry of finance about execution local budget in 2003 from 05.03.2004. — www.minfin.gov.ua/control/uk/publish/article/main?art_id=37663&cat_id=42657
- Addition 7 to Law of the Ukraine about State budget of the Ukraine on 2004" - "division expenses in 2004, which are realized to account of the facilities of the Fund obligatory state social insurance of the Ukraine on event of the unemployment, on creation new worker places workman to coal industry, which are liberated in connection with closing the mines — zakon.rada.gov.ua/cgi-bin/laws/main.cgi?page=17&nreg=1344%2D15
- Addition 6 to Law of the Ukraine about state budget of the Ukraine on 2004" – “budget activities relations of the state budget with local budget on 2004 — zakon.rada.gov.ua/cgi-bin/laws/main.cgi?page=15&nreg=1344%2D15
- Addition 5 to Law of the Ukraine about state budget of the Ukraine on 2004" – “transfers budget activities (subsidies of the justification and facility, which are sent in state budget) between state and local budget on 2004 — zakon.rada.gov.ua/cgi-bin/laws/main.cgi?page=14&nreg=1344%2D15
December 29, 2004 |
[version for printing]