Some Inconsistencies in Adopting Tools for the Development of the Russian Arctic


Photo Source: Wilson Center

Priority Development Area (PDA) is usually part of the territory of the Russian Federation, where a special legal regime has been established for running business or developing economic activities.

Ten years ago, the creation and development of PDAs was solely on the Far Eastern agenda. However, many of these topical Far Eastern developments have been extended into the Arctic, and the problems existing are more or less similar.

In total, eighteen PDAs are being developed in Russia, three of which are located in the Arctic zone, including the Arctic Capital PDA in the Murmansk (established in 2020), Yakutia PDA in the Republic of Sakha Yakutia (2018, not to be confused with Southern Yakutia PDA) and Chukotka PDA in Chukotka Autonomous Area (2015).

The government says that 17,000 people are expected in total to work in these three Arctic PDAs. What’s been done in this regard?

So, the Arctic Capital PDA residents have invested more than 190 billion rubles (nearly $2 billion) in projects’ implementation in 2023. Almost 5,000 jobs have been created. Meanwhile, in Chukotka, residents have created almost 6,000 jobs, in Yakutia - almost 9,000.

Today, PDA residents are provided with a wide range of benefits and privileges including reduced insurance rates and taxes, e.g. reduced tax rate for mineral extraction, land, and property. Well done.

However, despite the new jobs and the volume of investments, the results of the PDAs are ambiguous. Experts say that the decision to create PDAs turned out to be either zero or a small plus for the State. At the end of 2022, State budget expenditures were covered by tax revenues.

On the other hand, PDAs work only in the interests of large companies and their specific projects, which thus reduce their taxes and other expenses. At the same time, the Far East economy remained structurally skewed in favor of low redistribution products' export, and the outflow of population is still high.

Yet, the potential interdependencies, risks and benefits need to be thoroughly considered while creating and expanding the PDAs in the Arctic. Otherwise, the result could be rather a PR action than a deliberate policy.



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