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DISTRICT-GARDEN

The Caucasian Plenipotentiary Alexander Khloponin has a new plan for the development of the Caucasus ready. His Best Scenario: Ten Years of Rapid Growth

The Dagestan state-owned enterprise "Directorate for the creation of infrastructure for the Anji glass container plant under construction" has just started work. But in the new draft strategy for the development of the Caucasus, which has just been submitted to the government, a place has already been found for it. In the next five years, the plant, which does not yet exist, can receive almost 4 billion rubles. In the meantime, the money has not come, the company is buying vehicles for budgetary funds: two Toyota Camry in a luxury configuration with an engine capacity of 3.5 liters. Their price is 2.6 million rubles.

The Caucasus is reminiscent of Looking Glass. On the one hand, everything is falling apart, everything needs to be repaired, inter-ethnic tension is growing, there are terrorist attacks almost every week. On the other hand, officials in the Caucasus drive a Porsche Cayenne, and although jobs are sorely lacking, there are no hungry or beggars on the streets, and demographic statistics are the best in the country. It has the lowest level of urbanization in Russia, but the poorest Caucasian republic, Ingushetia, ranks second in per capita number of higher education diplomas among the employed population after Moscow.

In November, President Dmitry Medvedev declared that the North Caucasus was "the most serious domestic political problem." It is clear what he means: the corruption, violence, clan system, and autonomous way of life that have plagued the Caucasus are a threat to the rest of Russia. But there are no proposals for solving these problems in the development strategy of the Caucasus. The author of the strategy, Deputy Prime Minister and Presidential Envoy to the Caucasus Alexander Khloponin, as a high-ranking government official described the situation, "preferred to focus on a purely economic task."

This document is available from Newsweek. It has not yet been approved, and the government is already looking forward to heated discussions about it. This week a United Russia conference will be held in Nalchik. Putin will make a report there on the future of the Caucasus. If ideas from Khloponin's plan are heard in it, the government will catch the signal, and the document can be agreed upon very quickly.

At stake is not only and not so much the fate of the Caucasus. It is also about the future of Khloponin himself. He was appointed practically without competition—there were no people wishing for this position among the country's top officials. And now he has the opportunity to demonstrate to the Caucasian leaders and clans that he is indeed an effective lobbyist and knows how to resolve serious issues in Moscow.

ACTIVE GROWTH PHASE

The draft strategy itself, a hefty volume of almost 200 pages, was born in a hurry and in pain. This is an economic document: it contains neither a plan to fight corruption, nor an analysis of the political situation in the district, nor assessments of the existing models of political culture and political diversity of the North Caucasian republics. Like a diamond, the authors of the draft strategy draw their own line: the fight against the shadow economy—special conditions for development—explosive business growth—new jobs. And the result is prosperity. However, in order for everything to work out, doing only what is already planned is not enough.

Two of the three scenarios for the development of the district until 2025 do not involve solving all the problems and reaching the planned growth rates. In one case (“inertial scenario”), social stratification will grow, the business climate will not improve, with terror and interethnic conflicts everything will be as before. The "basic scenario" is more optimistic: it provides for the growth of state investments in the Okrug's economy. But small and medium-sized businesses will still be left out of this prosperity, which means that the situation on the labor market will not change.

The Caucasus' only hope for rapid and convincing growth is in the third scenario, the "optimal." The region's economic growth will outpace the country's economic growth ("in some periods, more than 10% per year"), small and medium-sized businesses will flourish, and the Caucasus itself "is actively integrating into the Russian and world markets."

The strategy proposes to divide the work into two stages. In 2010-2012, the "necessary conditions for growth" will be created: the launch of priority projects, the creation of district development institutions, and the development of new investment projects. In 2013-2025, the Caucasus should enter a “phase of active growth”: there will be no end to investors, projects will become profitable, and social programs will finally give the desired results.

The document does not provide the total amount of additional budgetary funds needed to implement the "optimal scenario". But Newsweek calculated that in addition to the 130 billion rubles already provided for three years, the Caucasus will need 209 billion rubles (60 billion of which are for priority projects) to implement the ten most expensive investment projects in the next ten years. But from the budget it will be necessary to spend more on medicine, education and infrastructure. It is very difficult to say today how much the Caucasus will cost Moscow. The Ministry of Regional Development, which helped the plenipotentiary to prepare the document, is aware of the situation and does not intend to ask the government for a trillion, says an employee of this department.

But the Ministry of Regional Development and Khloponin's embassy do not want to remain without state money either. The authors of the project propose to create a special district development institute, formalized as a structural unit or subsidiary of Vnesheconombank. Its capital should also be formed "with the key participation of VEB and / or the largest Russian banks." The Development Institute should coordinate the implementation of investment projects in the district and "take part in the selection and co-financing of projects, including the implementation of projects from scratch." The document also proposes to endow the institute with the functions of an agent of the Russian government and the Ministry of Finance for the provision of state guarantees.

"AGREE BEFORE THE END OF THE DAY"

Prime Minister Putin gave the order to develop a Caucasian strategy on January 23, and employees of the Ministry of Regional Development, Khloponin's secretariat, and hired consultants worked on it all spring. The Ministry of Regional Development involved the National Direct Investment Agency in the development of the project, and, according to a ministry official, it submitted a draft back in mid-May. Then the strategy was rewritten in the Ministry of Regional Development itself, and on June 17 it was sent for preliminary approval to the Khloponin secretariat. In its final form, the text of the project appeared a few days ago.

After a meeting with the plenipotentiary on June 23, the departments were instructed to think for the last time which of the programs they supervise in the Caucasus can be started ahead of schedule, and submit final comments to the Ministry of Regional Development by June 25. Then the draft was subtracted again, and on June 29 it was sent to the departments with the note “please agree before the end of the day.” Only the Ministry of Culture and the Ministry of Sports agreed with the Ministry of Regional Development, while the rest, including both departments of the financial and economic bloc, are still thinking.

The haste with the strategy was due to two circumstances. Firstly, in the very order of Putin it was indicated that the deadline for submitting the strategy to the government was June 2010 and, therefore, before July 1, in any state of readiness, it had to be handed over. Secondly, for two weeks now the government has been preparing that same United Russia conference in Nalchik, where Putin will make a report. Last time, when the same conference was held in Novosibirsk, the Ministry of Regional Development prepared a draft strategy for the development of Siberia in exactly the same way.

It is difficult to say how long interdepartmental approvals will take. The draft strategy lacks the most important thing: a consolidated estimate of additional spending from the budget over the next three years. This means that the Ministry of Finance, for example, will first ask for such an assessment, and only then will it take up the content of the document. In the Ministry of Economy, according to an employee of the department, they will look at how the document is "harmonized" with the main government economic doctrine - "Strategy-2020".

BALANCE IS A FINE MATTER

"To solve only economic problems in the Caucasus is not to solve anything," political scientist Alexander Kynev is sure. There it is necessary to create new political institutions capable of balancing the interests of regional elites, he says. Accelerated urbanization, which the Ministry of Regional Development is betting on, from Kynev's point of view, will only aggravate the situation - too primitive political institutions and too complex an ethnic picture.

Ibragim Yaganov, chairman of the Union of Farmers of Kabardino-Balkaria, gives an example of how innovations can harm the Caucasus: “We have built hydroponic greenhouses in the Baksan region, where they grow vegetables using Italian technology. Today, these monsters are destroying the economic structure of entire regions. We have mountains of cheap hydroponics, and hundreds of peasants do not know where to sell their relatively expensive, but very high-quality vegetables.”

Direct and understandable economic ties hardly work in the Caucasus. The authors of the strategy write that 60% of the district's economy is in the shadow. This is a record figure for Russia. But Khloponin wrote his strategy as if it were a depressed province of Canada, where a few smart economists and bankers can fix everything.

In order not to mess with the already existing corrupt authorities, Khloponin proposes to create a parallel system of governance in the Caucasus: a development institution, agencies for labor migration, subsidized mortgage lending, and a number of private-state investment funds. Khloponin wants to get the right to turn certain districts and settlements of the district into tax offshores "similar to the draft law on the Skolkovo Investment Center." Then the plenipotentiary will be able to distribute financial resources and benefits among the Caucasian leaders.

MEET THE CAUCASUS

In the North Caucasus Federal District, they give birth more, live longer, do not borrow from banks and work little

Index

Caucasus

Russia

Industrial production (% of 1990 level)

17–24

48–49

Fertility rate (per 1000 people)

13.9

12.1

Mortality rate (per 1000 people)

12.1

14.6

Average life expectancy

(years, men/women)

64.74/75.5

61.83/74.16

Unemployment (%)

from 8 to 55 (average - 16)

Urbanization (%)

The volume of ruble deposits in banks per capita (rubles)

6210

18 120

Source: project "Comprehensive strategy for the socio-economic development of the North Caucasus Federal District until 2025" of the Ministry of Regional Development of Russia as of June 30, 2010

DISTRICT - GARDEN

If Khloponin's strategy suddenly works, the Caucasus District will become one of the most prosperous in the country

Index

2008

2025

GDP per capita (RUB)

79 000

219 000

Average salary (rubles per month)

9 600

23 800

Unemployment rate (%)

Share of manufacturing in the economy (%)

Provision of hospital beds (per 10,000 people)

78.5

93.7

A POSSIBLE CONTRIBUTION

The budget for the next three years has been drawn up with a deficit, and Plenipotentiary Khloponin wants state-owned banks to spend money on the Caucasus. Investment projects are ready

The most expensive projects of the strategy of Plenipotentiary Khloponin

Project

Cost (billion rubles)

Region

Complex for processing Caspian gas into polyethylene

112

Stavropol

Oil refinery complex

48.2

Chechnya

Regional industrial park "Nevinnomyssk"

15.6

Stavropol

JSC "Chechen-auto"

12.2

Chechnya

Verkhne-Krasnogorskaya HPP

11.2

Karachay-Cherkessia

Cement plant at the Alagir field

10.4

North Ossetia

Hotel, spa and yacht club

Dagestan, Caspian coast

Polyethylene terephthalate plant

9.9

Kabardino-Balkaria

Gotsatlinskaya HPP

5.6

Dagestan

Source: appendix to the project "Comprehensive strategy for the socio-economic development of the North Caucasus Federal District until 2025" of the Ministry of Regional Development of Russia as of June 30, 2010