Yulia Goncharova

In May 2001, 38-year old businessman Sergei Darkin won the gubernatorial elections in the Maritime Territory by a landslide. He spoke with Expert about his views of his role as governor and the economic future of the Maritime Territory.

- I get tense every time I hear certain words, like “politician,” “democrat,” or “champion of a strong state.” In Russia, these words have been compromised and have almost become insults. Still, I make no secret of the fact that I am all three, and a lobbyist for the Maritime Territory’s interests to boot. Many of my colleagues are of the opinion that today very little depends on regional authorities and that the federal center decides everything. But this is not the case. I know that a lot depends on the governor. I could lobby for a lot of business projects but often I don’t on purpose, because I don’t consider them necessary to the territory’s population or the country as a whole. It’s difficult to influence me. I’m responsible before the people, first of all, for my professional work to improve the quality of their lives. In doing so, I can’t be hostage to any political group or party, and I can’t be hostage to businessmen as far as lobbying for their interests is concerned. The Maritime Territory’s politics and business are wide open. If I gave preferential treatment to someone, I could eventually find myself in a situation when the interests of the territory’s population do not agree with those of these parties or businesses. So, why should I give cause for such a situation to arise? I have my own idea of government, and it’s very simple: the state must teach, heal, and protect… I try not to interfere in business on principle. The regional administration creates the conditions for that make things easy for business and business pays taxes. These are the simple rules of the game, and we must follow them in our work. Without question, transparency is one of the conditions for this work, and both sides should comply. As a result, last year, our gross regional product increased by 7 percent and turnover by 45 percent. This doesn’t mean that everything is going off without a hitch in the region. This merely indicates more money is leaving the shadow economy, and it’s very important.  
- Are you equally transparent to the federal government? Your fellow governors believe that it is not to their advantage to report income…
- The point is not even that it is not to regions’ advantage. The problem is that the rules of the game change frequently, and it’s impossible to make long-term plans at the local level. Though the Maritime Territory, in fact, has nothing to complain about: today, the territory gets as much from the federal budget as it pays in taxes. We see that President Putin is not indifferent to the Russian Far East and to the Maritime Territory in particular. However, we can only rely on ourselves: over the last three years, the territory’s budget revenue has doubled. By the way, there is another point regarding relations with entrepreneurs. I’m pretty sure that if this revenue was concealed, this would affect my relations with business here, within the territory. On the other hand, I realize fully that the federal state lives off the federation subjects– it simply can’t be any other way. The state has many vital functions and it needs funds to perform them. In fact, before taking some new steps, it is important for the Ministry of Finance to consider carefully how they will affect the regions.
- What is the territory’s potential for increasing its budget revenue?
- It’s clear that if large companies, such as Evrazholding, Severstaltrans and many others, didn’t operate in the territory and didn’t pay taxes here, there would be a gap in the budget. In the past, we used to sign various cooperation agreements with companies. However, we have begun to give this practice up recently. Today, it is sufficient to monitor the status of current payments and to investigate each case individually. For example, SUEK is active within the territory. Last year, the company increased production output by 1 percent (coal production increases 10 percent annually in the territory), while it paid 6 million rubles less in taxes. We held talks with the holding’s management, and the territory’s budget received the money. I realize that companies pursue their own investment policies but I will not tolerate budget revenues being less than they should. The railroad was the second “red” item in last year’s budget. We took a look and the volume of rail transport was increasing, while tax payment declined. We began to investigate why. It turned out that the decline was objective: in addition to current payments in 2002, the Far Eastern Railroad paid off old debts, and therefore, we experienced lower payments. This is how we look into each industry and each enterprise. Monitoring is a normal activity. For example, we constantly negotiate with Dalenergo regarding rate reduction. We do not put pressure on them; we make objective calculations and propose resources and ways to reduce rates.
On the other hand, increasing revenue is, of course, not an end in itself. For example, I always opposed auctions of fishing quotas. I tried to convince the federal authorities that because of auctions fishermen don’t know what prices will be, how much of the quotas they could buy, or whether they could afford to buy them at all. Last autumn, the government gave up the auction principle of quota distribution. Someone could argue that because of this, the territory’s budget will receive a billion rubles less in 2004, the amount transferred as the result of auctions. But I realize that if the situation didn’t change, our fishing industry would die out tomorrow. So, there was no choice: fishermen need to have a planning horizon of at least five years. In this case, in the near future they will be able to provide the budget with taxes several times greater than what yesterday’s auctions supplied.
- Have you already dealt with the fishing industry?
- You know, the situation there has always been clear. I know where every kopeck goes. And it’s clear for those who really want to understand the situation. The majority of fishermen did not begin to poach because their lives were so wonderful… I think that now that auctions have been eliminated, the situation will improve; it is already changing distinctly. The fishing season closed April 10, and I can state that the fishermen did good work. The situation with unreported products has also changed. While in the past they made up 20-25 percent, now they are 10-15 percent. This is high. I head a working group on reforming Russia’s fishing industry in the presidium of the State Council. We propose to administratively re-direct the flow of seafood products to our ports, process them here, and only then sell them. Incidentally, this is the way things were until 1990. In doing this, we will get rid of most of the poachers, create added value, create jobs, and increase tax revenues.  Over the past few years, we have succeeded in almost completely restoring the coastal infrastructure. Coastal fish-processing plants have increased in number to over 100 at present. At meetings of the State Council’s working group, we have worked out a strategy for fishing industry development, and now we’re working out a practical algorithm. Just think about the title, “Russia’s Fishing Enterprises and Their Operations on World Markets to 2010.” It’s not simply a way to get the industry out of crisis. It’s already a kind of expansion and integration into the world community. There are interesting projects, and if they are implemented, Chinese fish-processing plants will be left without fish. Another matter is that no one expecting us, the Russians, to enter the world market: Japanese, Chinese, and even Danish companies have been using our fish for a decade now. We have to work hard and well to reach the world level. The question is who we will be on this market – masters, partners, or simply raw commodities suppliers. While today the Far East sells $2-3 billion in seafood products, we believe we could realistically double this figure.
- Regional authorities talk a lot about supporting business. Yet according to businesspeople, everything is in fact limited to granting minor tax breaks and partially subsidizing interest on loans. Then, the authorities and businesspeople go their separate ways.
- It seems to me that often business representatives point to the authorities without first making full use of their own resources. It’s wrong to start a conversation with what business should get to make it develop. Our task is, first of all, to create conditions for business investments in the Maritime Territory that are transparent and as comprehensible as possible. I know that we’ll begin to work and develop well only when the authorities champion and help business. An entrepreneur comes and says, “I want to set up an enterprise in the region.” Our task is to ask him, “What should we do to this end?” There is a standard kind of support that we can offer on the spot. What else can we do to help the entrepreneur? What should we give in terms of information?
Unfortunately, inefficient owners remain the main problem in all industries. Many of them are still unable to understand that we live in a market environment. Only 33 percent of our entities in agriculture are profitable, while the rest expect subsidies and grants… Therefore, the territory’s authorities help through a variety of privileges only those who are able to become competitive and, undoubtedly, in the industries that will produce a multiplicative effect. For example, shipbuilding has begun to develop in our territory. There was no shipbuilding in the Maritime Territory previously, only repair. It’s like making a jacket versus darning it – the difference is huge. We are learning from Khabarovsk Territory and China…Dockyards are eager for additional orders. Our fishermen have become customers. I have already said that the territory’s administration gives subsidies to enterprises in the fishing industry for building ships in the amount of the property taxes paid by the companies. Plus we subsidize a part of the interest rate on loans and grant coastal fishing licenses. We have interested banks – the administration gives guarantees against the regional budget and vessels under construction. The fish caught by these ships would be processed at our fish factories. Here is a chain that will produce a huge multiplicative effect.
You know, we aren’t ignoring engineering or the defense contractors that accounted for nearly 30 percent of the territory’s economy… But if enterprises have been more or less idle for a decade and there hasn’t even been a faint attempt to reequip, we have to understand and accept the truth – we have all but lost these enterprises. Millions of dollars of investment are required to make them operational again at full capacity – at times, it is simpler to build a new plant nearby.
But the main thing is that we are trying to make conditions as interesting as possible for manufacturers and businesspeople, not only to make things comfortable for business. In the Far East in general and in the Maritime Territory in particular, a third of the population lives below the poverty line. There are many rich people but there is virtually nothing in between. So, our main task is to raise the population’s standard of living via business development. We have already reached the top 30 fastest growing regions, and I think that in a couple of years, we’ll easily enter the top 20.
- Business’ task is to make maximum profits, while the authorities’ task is to protect citizens. Do you, as a person who has come to power from the world of business, have any inner conflicts when making decisions?
- No, I don’t, since a businessman is really a manager. What is business? It’s the ability to invest funds and make a profit. A businessman’s task is to form a team that wants to achieve, to seek the required skills, and to organize his business. All these abilities can and should be used in managing a region. And I’m glad that they are in demand today. This makes me believe in our country’s future.

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