Economic development of the North Caucasus. Part 2


Author: Alexander Karavaev, deputy CEO of IAC MSU, exclusively to VK


Continuation. See "Economic development of the North Caucasus"


The tourist cluster will be the most expensive direction; it includes the development of the Caucasian Mineral Waters and of the North Caucasus tourist area (it also includes the resorts of Krasnodar Territory and Adygea). As part of the project, it is planned to build five new world-class ski resorts Lagonaki (Krasnodar Territory, the Republic of Adygea), Arkhyz (Karachay-Cherkessia), Elbrus-Bezengi (Kabardino-Balkaria), Mamison (Republic of North Ossetia - Alania) and Matlas (Dagestan) by 2020. In this tourist area, 803 km of slopes and 104 thousand places for tourists will be built. Investment of 451.44 billion rubles (about 14.7 billion dollars.) is planned. The project involves the staged creation of more than 330 thousand jobs in the region. In the summer of 2012 Prime Minister Medvedev agreed with the arguments of Ramzan Kadyrov on the need for the participation of the Chechen Republic in the tourism projects.


Tourism in Russia as a business area is not quite so popular, as the price of services is very high. Therefore, the development of resorts in the Caucasus and the Caspian Sea is quite a bold experiment with high risks. But it is necessary to give credit to Moscow, which has already managed to find means to develop the most expensive project of the NCFD. Thanks to refund guarantees in case of political risk, Khloponin was able to attract reputable investors to the construction of ski resorts (the Ministry of Finance is ready to compensate 70% of the investment in the event of force majeure, and the investors are free of taxes on the property for 10 years and of tax on the ground for 5 years).



The company of the top manager of French investment bank Natixis Ravi Viswanathan is ready to invest nearly 735 million euros in the project. Among the partners of the North Caucasus Resorts, the French state bank Caisse des Depots et Consignations (10 billion euros) is listed. One of the main conditions for the participation in the project is only French developers and general contractors are to be involved in the construction. This agreement follows the signing of a memorandum of understanding on cooperation between the two countries in the development of the tourism cluster in the North Caucasus by Dmitry Medvedev and French ex-President Nicolas Sarkozy at the G8 summit in Deauville.


The Kremlin proposes to major local oligarchs, including the owner of "Nafta Moscow" Suleiman Kerimov, to think about investing in the Caspian region. Thus, given the original cost of the project amounting to almost 11 billion euros, the North Caucasus Resorts has already found third-party investors with nearly 12 billion euros. In the future the budget of the North Caucasus Resorts may increase to 783 billion rubles (18.7 billion euros); in May 2012, Dmitry Medvedev gave an instruction to expand the tourism cluster by creating new resorts on the Caspian and Black Seas, as well as in the Caucasian Mineral Waters.



An unexpected idea was a proposal to create a regional low-cost airline. In December, the corporation introduced the concept of such a carrier and recovery plans of regional air service to the government. In principle, this step can be considered natural. Tourism market research showed that a serious impairment of the resorts of the North Caucasus, including ticket prices, which accounts for the bulk of this amount, is almost impossible. The only opportunity is to create a low-cost company and sell package tours. Thus, the airline will be an adjunct to the resort. The volume of investments was previously estimated at 6.2 billion - this is the cost of the priority measures to be implemented before 2015. Of this amount, 5 billion rubles is needed for the creation of the airline and the formation of the fleet, 1.2 billion - for subsidizing the costs of the airline's regional air transportation. According to the adviser of the chairman of the board of the North Caucasus Resorts, Fyodor Shcherbakov, if the acquisition of the fleet will be subsidized by the state, then by 2026, the activities of airlines can reach break-even point. Now the North Caucasus Federal District, despite the rather advanced airfield and airport infrastructure, has practically no flights between airports in the region; this is certainly not conducive to social and economic development. In addition, neither does artificial monopolization reduce prices. For instance, Sochi airport is among the most expensive in the world according to aircraft maintenance...



All these projects are often referred to as a kind of cost of the Kremlin for the loyalty of the Caucasus. But besides VIP-upgrade there are also realities at local level. Let us look at the demographic aspect. Soon the region's population will reach 10 million. In this case, the coverage of pre-school education is only 58% of the national average. Almost 51% of educational institutions are working in three shifts (about 600 thousand students). Naturally, the state program also involves the development of the social sphere: the construction of schools, hospitals and infrastructure. However, most of the plans for the construction of schools are planned to be implemented in 2016. It turns out that it is not a priority.



Another problem is the fact that the construction of social infrastructure is greatly affected by corruption. Spreading of means causes an accelerated growth of inflation and increases the cost of local government services in health, education and law enforcement. A similar effect has repeatedly arisen not only in the Caucasus. In spring 2012, the head of the Prosecutor's Office in the North Caucasus Federal District Artem Melnikov found that the region has not taken sufficient measures to compensate for the damage caused by theft and misuse of budget funds. In 2011, only 2.8% (69 million) out of a total of 2.5 billion rubles is compensated in civil and criminal proceedings. According to Melnikov, in 2011, supervising the use of budget funds the prosecutors revealed more than 14 thousand cases of violations of law, 1766 people were charged, the courts considered and granted nearly 600 lawsuits by the prosecutors.



In conclusion, we'll say a few words about the image. The publicity of the leadership of the NCFD is very peculiar. Khloponin actively participates in interviews and briefings. But, for example, the official website of the Federal District provides almost no intelligible information, not only for investors but generally for a person interested in the situation in this complex region. The section "Economy and Investment" is not functioning, and the section "Legal Framework" is simply empty. There is no trace of the state program and the conditions for investment in the site. Here is such an inexplicable paradox under the guidance of Khloponin, who has been in the leadership of "Norilsk Nickel", of the Krasnoyarsk region, and who is reputed to be the most savvy senior manager in the structures of the regional government of the Russian Federation.



The current federal target programs in the North Caucasus

1. "South of Russia" - designed for 2008-2013, the total amount of funding is 145 billion rubles ($52 billion from the Federal Budget).
2. "Socio-Economic Development of the Chechen Republic" - ended in 2011, the total amount of funding is 124 billion rubles ($112 billion from the federal budget).
3. "Socio-Economic Development of Ingushetia" - valid until 2016, the total funding for the program is 32 billion.
 4. There is no separate federal program for the development of Dagestan. But Dagestan receives about 55-56 billion per year in budget subsidies (estimated by MP Gadzhimet Safaraliev). In addition, the coast of Dagestan is included in the North Caucasus Resorts.



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