The Strategy of Social-economic Development of the North Caucasus Federal District (NCFD) until 2025

The Strategy of Social-economic Development of the North Caucasus Federal District (NCFD) until 2025

 

The Strategy of Social-economic Development of the North Caucasus Federal District until 2025

 

I. General information

The Strategy of Social-economic Development of the North Caucasus Federal District (NCFD) until 2025 determines the main trends, measures and means to achieve stable development and national security in Kabardino-Balkaria, Karachay-Cherkessia, Dagestan, Ingushetia, North Ossetia-Alaniya, Chechnya and Stavropol Territory - part of the NCFD.

The strategy was developed according to the concept of long-term social-economic development of Russia until 2020, the concept of demographic policy of Russia until 2025, the strategy of national security until 2020, the transport strategy until 2030, railroad development until 2030, Russian energy strategy until 2030, water strategy until 2020.

The strategy of developing the NCFD until 2025 includes economic aspects. The North Caucasus Federal District has rich resources for the development of agriculture, tourism, power industry, mining industry, and transport. However, these natural advantages of the region are not used properly, as the region is still not of interest to investors, due to economic instability.  Some subjects of the region have the lowest level in the economic and social sphere, high unemployment, unrest and inter-ethnic tensions. The North Caucasus Federal District is a region of low income and low foreign-economic activity.  The region is less developed than other subjects of the Federation and is subsidized by the Federal Center. These subsidies are used mainly to support the system of social insurance and are not invested in production.

The main aim of the Strategy is to improve the development of production in the region and to improve the quality of life of its residents. The strategy will also switch from a policy of stability support to economic boost. The government will increase the number of work places and invest in economic development. It will assist in integrating the economy of the NCFD with the national and global economy.

 

II.      Social and economic situation in the North Caucasus Federal District

1. Macroeconomic situation

Many subjects of the Federation that are now parts of the North Caucasus Federal District were heavily affected by the crisis of the 1990s due to the objective reasons. The production decrease in the 90s was 17 – 24%. The tempo of economic growth in 2005 – 2009 has shown that the local authorities managed to elaborate a sufficient economic plan. The leaders of the economic development are Dagestan, Kabardino-Balkaria and North Ossetia – Alania. However the region is still developing rather slowly.

The sector of agriculture forms 22% of the gross regional product (in Russia in general this figure is 5%). The manufacturing sector forms 15% of the gross regional product (in Russia – 19%).The biggest part of the gross regional product is formed by the sphere of governing and social insurance – 55% (in Russian Federation – 15%). The level of unemployment in the North Caucasus Federal District is high – from 8 to 55%. All subjects of the Federation in the North Caucasus Federal District provide a low quality of life.

2. Population and labour resources

Demographics, labour resources, and migration

Demographics of the North Caucasus Federal District differ from that of Russia in general. Now the demographic situation in the region is stable to the increase of birth and decrease of death rate, as well as mass migration to the region. The population of the region increased from 1990 to 2009 by 1.68 million people and is now 13.437 million people. In the year 2009 the natural increase of the population in the North Caucasus Federal District was 75.6 thousand people.

The distinguishing feature of the demographics of the region is that the percentage of the Russian population is reducing due to the low birth rate among Russians and migration of the Russians to other regions of the Federation. At the same time the number of the representatives of the titular ethnic groups is on the increase due to the high birth rate and low death rate.

These processes affect the demographics of the region. The most obvious it is in the Republic of Chechnya, where the number of non-Chechen population in the last decade has reduced in several times. That is why one may admit that Chechnya is now a mono-ethnic republic. Almost the same is the situation in Ingushetia.

The birth rate in the North Caucasus Federal District is the highest in the Russian Federation. Especially high is the birth rate in Chechnya (29 new-born children per 1000 residents) and Dagestan (19 new-born children per 1000 residents). That is why the percentage of the young people in the North Caucasus Federal District is higher than in other regions of the Federation. Especially high is the percentage of the youth in such subjects of the Federation as Chechnya (32.9%), Ingushetia (28.9%), and Dagestan (25.4%).

The death rate in the region is lower than in other regions of Russia.  The average death rate in the North Caucasus Federal District is 8.7 deaths per 1000 people (in Russian Federation in general - 14.6). The lowest death rate in 2009 was in Ingushetia (3.7), Chechen Republic (5.3) and the Republic of Dagestan (6.1).

One of the most acute problems still is the high death rate among babies, even though in the last decades the situation has begun to change for the better due to the success of the public healthcare. In the same time the average life expectancy in the North Caucasus is the longest in Russia.

The level of urbanization is rather low due to the traditional agricultural specialization of the region. The percentage of rural population in 2009 was 51.2%, in 2010 51.1% (in Russia this number is 26.9), that means that 4729.1 thousand people live in rural area. In the Republic of Dagestan, in the Republic of Ingushetia, and in the Republic of Karachay-Cherkessia the percentage of the rural population is 56 – 57%. In the Chechen Republic the figure is 64.7 percent. The infrastructure in the rural areas is rather poor and that prevents labour migration and determines low quality of life of the local residents.

The forces migration is another acute problem. Various ethnic and international conflicts force people to migrate to other regions of the Federation.  In 2008 population loss due to migration formed 11.9 thousand people. In Dagestan this figure was 9.8 thousand people, in Kabardino-Balkaria 2.9 thousand, in North Ossetia 2.7 thousand, in Karachay-Cherkessia 1.9 thousand, and in the Chechen Republic 1 thousand people. Population increase due to migration was registered in Stavropol Territory.

The problem of migration is to be solved by the Federal Center together with local authorities. This will require a series of political, social, economic and cultural measures. The average annual labour migration from the region to the other regions of Russia should be on the level of 30 – 40 thousand people. This will stabilize the demographic situation in the region and lower unemployment level.

 One third of the population of the North Caucasus Federal District is young people. This means that the Government should adopt a sufficient youth policy. Such a policy should focus on the development of youth organizations, trade union and labour market. The Federal Government together with local authorities should support young entrepreneurs and young families, support education and healthcare system, popularize sports and national traditions of the Caucasian people, and tolerance.

 

Quality of life

 

One of the most acute problems of the region is a low level of public healthcare development. In all subjects of the North Caucasus Federal District the lack of hospitals and policlinics as well as qualified doctors and nurses is evident. The situation is worsening due to the migration of the qualified specialists from the region.

In 2009 the North Caucasus Medical Center of the Ministry of Public Healthcare and Social development of the Russian Federation was established. The Center is a modern, well-equipped medical institution, its future seems promising.

Public healthcare in the North Caucasus Federal Center needs immediate measures. The death rate in the last four months has increased. More people are now dying from infections, cancer, and heart deceases.  More and more people are dying from tuberculosis, especially in Kabardino-Balkaria and Ingushetia. Cancer is a a great problem in the Chechen Republic and in Stavropol Territory.

There are less qualified doctors in the region than in Russia in general (38 doctors per 10,000 people and 44.1 doctors per 10,000). Medical staff is also less numerous (81.6 per 10,000 people and 94.1 per 10,000 people).

Public education is also inappropriate.  The level of education in the North Caucasus is lower than in other regions of Russia. Employed population having higher education forms only 26.2 per cent of total population (in Russian Federation in general the figure is 27.1 per cent), specialized secondary education – 22.2 per cent (in Russia – 26.7 per cent).

That means that the education level is still rather low. Many children are unable to enter a kinder garden and achieve pre-school education. The qualification of teacher isn’t high enough. The number of teacher also isn’t enough. Material support of schools is inappropriate. The number of the school children is reducing. The number of secondary schools in Kabardino-Balkaria, Ingushetia, Chechnya, North Ossetia – Alania, Dagestan and the Stavropol Territory is 1.8 – 2.3 times smaller than in the Russian Federation in general.

The number of higher educational institutions in several the subjects of the North Caucasus Federal District is lower than in Russia in general. Only in the Republic of North Ossetia – Alania and in Kabardino-Balkaria this figure is greater than in Russia in general.

The lack of qualified staff in all spheres of economy is obvious. This problem occurs in tourism, governing, food industry, agriculture, building, and public healthcare. That’s necessary to elaborate special educational programs for staff.

All over the region population is facing one more problem. That’s the lack of accommodation. The most favourable is the situation in the Republic of North Ossetia – Alania, there the level of housing in 2008 was 26.1 square metres, while the average number in Russia in general is 22 square metres. In the Stavropol Territory this number is 21.2 square metres and in Karachay-Cherkessia 20.1 square metres. In spite of low housing level the quality of living places is higher than in Russia in general.

Infrastructure in the region is developed heterogeneously. In Russia in general only 76% of the living places have running water, in the North Caucasus this figure is 90%. However is Dagestan the figure is 54% and 57%.

Home construction activity in the North Caucasus Federal District is less dynamic than in other regions of Russia. In 2009 only 302 square metres of accommodation were built per 1000 people. In the Central Federal District the figure is two times greater.  The reasons of low home construction activity are as follows: low paying capacity of the local population, the fact that credit system isn’t developed enough, high prices on accommodation. High accommodation prices are explained by the fact that home construction is rather costly for high prices on land and building materials.

At the same time the demand for accommodation is going to increase due to the population increase. 60 million square metres of accommodation are to be built in order to provide the population with 22 square metres per person. If the present day tempo is preserved, only 7 million will be built.

At the present time several governmental programs are already being realized in the North Caucasus Federal District. The federal special-purpose program “Accommodation” for 2002 – 2010 several measures were taken, as well as in the framework of the federal special-purpose program “Social development of rural areas”. However the amount of money spent on these programs doesn’t allow to solve the existing problems.

The cultural development of the region still isn’t brought up to standard.  The region is suffering from the lack of cultural institutions such as libraries, arts schools, theatres, concert halls. The material and technical basis of the existing institutions is rather poor. Many historic monuments have to be repaired. Cultural institutions also suffer from the lack of experienced staff.

 

Labour market

 

The situation on the labour market in all subjects of the North Caucasus Federal District is a problem one. The total number of unemployed people in the region in 2010 is 766.6 thousand people or 18% of the economically active population, while in Russia in general this figure is 8.2 %. The highest level of unemployment was registered in Ingushetia (53%), Chechnya (42%), and Dagestan (17.2%). The problem is especially acute in the rural areas. More than one half of all unemployed people are young.

The problem is so grand that it can be solved only by a prolonged state policy. The main measures that are to be taken are as follows: the government should stimulate the opening of the new work places in region; the government should improve the system of education in order to provide the enterprises with well-qualified staff; the government should pay special attention to young people, support youth educational program; the government should favour the development of labour migration; the government should support the special secondary.

 

Interethnic relations

 

The North Caucasus Federal District has a complicated ethnic structure of its population. Numerous ethnic groups live on a rather small territory, and this factor affects the political life of the region. Political stability in the Caucasus depends on the interethnic relations/

Nowadays the region is inhabited by

 

2743 thousand Russians (29.9% of total population of the Federal District)

1485.2 thousand Chechens (16.2%)

785.3 thousand Avars (8.5%)

511.7 thousand Kabardinians (5.6%)

488.8  thousand Dargins (5.3%)

476.5 thousand Ossetians (5.2%)

462.2 thousand Ingushes (5%)

399.1 thousand Kunyks (4.3%)

59.5 thousand Lezghins (3.9%)

187.6 thousand Karachays (2%)

148 thousand Laks (1.6%)

106.8 thousand Balkars (1.2%)

 

Today some certain negatives tendencies are evident in the sphere of interethnic relations. Religious and ethnic extremism is one of the most acute problems of the region. Ethnic conflicts are the greatest threat for the public security and well-being of the population of the North Caucasus.

 

The situation in the North Caucasus is affected by the international terrorism. Terrorists are trying to aggravate the situation and supported the separatist movements. Religious radicalism imported from abroad is a great danger for this region of Russia. In addition to these international factors some internal factors do also affect the situation in the region, among them are ethnic tension and corruption.

The Federal Government together with the local authorities should do its best to prevent ethnic and religious conflicts in the region, to stop the dangerous process of mass migration of the Russians from the region.

 

3. Potential of natural resources

The North Caucasian Federal District has a unique complex of balneological resources - mineral, thermal waters and therapeutic mud. It has about 30% of all Russian mineral waters, which is close to the resources of the central regions of the European part of the Russian Federation. There are also about 70% of the thermal waters on this territory. Bearing in mind that the amount of minerals is limited, the regions of the North Caucasian Federal District haven’t a high potential for increasing the contribution of extractive industries to the economy. Although developing some hydrocarbons and mineral ore deposits is important for developing the economies of some of the mentioned regions. In the structure of the explored natural resources of the Russian Federation the North Caucasus Federal District has 41% of the tungsten, 11% of the molybdenum, up to 2% of the copper, zinc, lead and titanium, 4.8% of the oil and 2.1% of the gas. The Republic of Karachay-Cherkessia and the Republic of Kabardino-Balkaria have the largest amount of tungsten, while Kabardino-Balkaria has the most molybdenum. The biggest copper deposit in the North Caucasus Federal District is in Kizil-Dere in the Republic of Dagestan, which has 1.4% of all Russian reserves. The biggest zinc deposits are in the Republic of North Ossetia-Alania (the Dzhimidonskoye, Kadat-Khampaldanskoye, Kakadur-Kanikomskoye ones), the Republic of Karachay-Cherkessia (the Urupskoye and Bykovskoye ones) and in the Republic of Dagestan (Kizil-Dere). At the level of remaining reserves all these deposits are small, as the largest part of the resources is being developed. All lead deposits of the North Caucasian Federal District are concentrated in the Republic of North Ossetia-Alania. The largest part of these is located in the Dzhimidonskoye deposit. In spite of the developed infrastructure, the North Caucasian Federal District's contribution to hydrocarbon production of the Russian Federation is insignificant. The main obstacles to hydrocarbon production are the development of a large part of the deposits and a reduction in developed fuel and energy resources. The main oil reserves of the North Caucasian Federal District are located in the Republic of Chechnya. The important deposits of the district are the Starogroznenskoye, Goryacheistochninskoye, Goyt-Kortovskoye, Severo-Bragunskoye, Velichayevsko-Koldeznoye, Zhuravskoye, Zimne-StavkinskoyepPravoberezhnoye and Malgobek-Voznesenskoye-Alkhazovo deposits. The best potential deposits of titanium and zirconium are the Beshpagirskoye and Pravoberezhnoye fields in the Stavropol region of 1700 square meters in total. Titanium and zirconium are highly rare strategic minerals. The Russian Federation does not produce them and only imports ilmenite, rutile and zircon concentrates. Demand for the minerals is 2-3 times higher than consumption. Geological prospecting works are conducted in the North Caucasian Federal District according to the long-term programme of subsoil research and reproduction of the mineral reserves of Russia, based on the balance of consumption and production of the minerals. The financing of the geological exploration works in 2009 from the federal budget is 309 million rubles, including hydrocarbons - 54.1 million rubles and for minerals - 254.9 million rubles.

 

In 2010 geological prospecting works (titanium, zirconium, ore gold, nonmetals) are planned to decrease depressing tendencies in the economy and to provide building materials for the construction of facilities for the XXII Winter Olympic Games in Sochi. Water resources of the North Caucasus Federal district meet the requirements of the population and branches of economy. Various water resources are located here - The Caspian Sea, the Kuban reservoir, the Dovsun Lake in the Stavropol region; the Blue Lakes and Chegen waterfalls in Kabardino-Balkaria; the Kuban, Terek, Zelenchuk, Sulak, Bolshaya Laba, Ardon, Fiagdon, Sunzha and other rivers. Various types of superficial waters give an opportunity to develop tourism (health-improving, recreation, sports, ecological, fishing, beach) and hydro power

energy. The Kuban, Terek, Sulak and Sunzha rivers are the water mains. The basin of the Kuban is characterized by tense water balance with water deficit even in medium draught-afflicted years which cause problems in municipal, industrial and agricultural water supplies. Hundreds of living places and over 600 000 hectares of planted area are in a risk zone of flooding and dangerous processes on riverbed. The main problems of the basin of the Terek are flooding, lack of regulating reservoirs and unsatisfying conditions of protective hydro technical facilities, as well as polluting of water resources by oil products and sewage.  Erosive processes can be observed in the channels of the Kuban, Terek and Cherek rivers, along the tributaries of the Andiyskoye Koisu, Avarskoye Koisu, and Samur. Erosive processes in the territory of the Republic of North Ossetia-Alaniya reach high level in springs when mud flows and

valanches happen. In the Stavropol region such processes in the protected resorts area (the Caucasus Mineral waters) are erosion of unprotected banks and earth dykes caused by flooding and intensive melting of glaciers.

In the North Caucasus Federal District there are over 300 reservoirs of season and day regulation. Regulated flow is used mostly for irrigation and fish farming. The regulated flow is most developed in the Stavropol region where about 100 reservoirs with total useful capacity of 2,15 cubic kilometers are used. Many off-stream storage reservoirs are located in the channels of flow redistribution. They are the Sengileyevskoye reservoir working from the Kuban water coming via the Nevinnomsyk channel; the Kuban reservoir located in the Big Stavropol Channel redistributing water of the Kuban River to the waterless parts of the Caspian Sea's basin; and

the Yegorlykskoye reservoir partly working from the Kuban river water and redistributing flow of the Yegorlyk River. The other reservoirs are smaller and used for irrigation, water supply, fish farming and hydro power energy. The Chograi reservoir located on the border of Kalmykia and the Stavropol region is used for irrigation, water storage, drinking water supply and fish farming. The quality of water deteriorated because of bad hydrological regime increasing mineralization of water. The Big Stavropol channel is a channel of complex use, intaking water from the Kuban River and supplying water for 4 hydro power plants and several towns of the Caucasus Mineral waters. In the territory of the Stavropol region also there is the Nevinnomysk channel intaking water from the Kuban River and the Tersko-Kumsky channel intaking water from the Terek River. Kabardino-Balkaria, Chechnya and Ingushetia are located in upper and middle course of the Terek River. Regulated flow is not high here -the useful capacity of the reservoirs is of 12 million cubic meters. Mostly it is small reservoirs used for irrigation. Regulated flow in Dagestan is not high as well - total useful capacity of 11 reservoirs is 1,44 cubic meters. The other reservoirs are used for energy, water supply or irrigation and are mostly located in the

basin of the Sudak River. In the territory of Karachay-Cherkessia there are the Kuban and the

Ust-Dzhegutinskiye reservoirs used for fish farming or land improving works. There are three water systems - the Big Stavropol channel, the Zelenchuk hydro power station and the regulating reservoir at the Eshkakon River. The hydro technical facilities located in the North Caucasus Federal District are mostly depreciated and need major repairs or re-equipment, or part or full reconstruction of main buildings.

 

 

 

4. Production potential

 

The main kinds of well-developed industry in the North Caucasus Federal District are extractive and manufacturing. Extractive industry and manufacturing provide the local population with employment and the local budget with taxes. Industry forms 11% of the gross regional product and 11% of the population are working in this sphere of production. In the period 2009 – 2010 industry provided 22% of all taxes. In the Republic of Chechnya that figure is 69%.

Among the most successful spheres of production one should name the production of oil products (29% of the income of extractive industry and manufacturing) as well as chemicals, the food industry, machinery building, and production of construction materials. 6% of the income of extractive industry and manufacturing are formed by the extraction of natural resources.

The North Caucasus Federal District doesn’t play an important role in the production of hydrocarbons in the Russian Federation. The share of the region in the total income in this sphere of production is 1%. Oil production is especially well-developed in Stavropol Territory, Chechnya, and Dagestan. These three subjects of the Federation provide 97% of the region’s income in the sphere of oil production. 0.6% of the total amount of the oil and 0.2% of the gas produced in Russia are produced in the North Caucasus.

The hydrocarbons produced in the North Caucasus are generally highly-enriched but the absence of systematic geological research has brought this sphere of oil industry to stagnation, while the production of gas has even decreased. Gas resources are located mainly in Stavropol Territory, Chechnya, and Dagestan. These three subjects of the region produce 1.3 billion cubic meters of gas. Chechnya and Dagestan are the most capable of developing hydrocarbon production. In addition to this, the deposits of the Caspian shore seem promising. The deposits of the Russian sector of the Caspian shore are now being developed by such public corporations as “Gazprom”, “Rosneft” and “Lukoil”. Oil refining is concentrated in the Republic of Dagestan and in the Republic of Ingushetia; production in Chechnya was almost destroyed.

The territory of the North Caucasus Federal District has rich deposits of non-ferrous, noble and rare metals such as gold, silver, copper, zinc, lead, tungsten, cobalt, molybdenum, and platinum. There are several enterprises of non-ferrous metallurgy in the region, for instance in Nalchik and in Vladikavkaz.

Noble metals production seems promising. According to the data provided by geologists, rich resources of noble metals make it possible to start mass production in the region. This would provide the local population with new jobs and improve the economic situation in the region in general. Among the biggest deposits of noble metals are the Raduzhnoye gold and silver deposit and some others. Centralized production of noble metals may be profitable, in spite of the fact that local deposits are not rich. However, this production will be possible only if a strategic investor is found.

The prospects for local light industry seem promising enough that in future it could potentially replace imports. The development of this sphere of production is quite profitable for comparatively small expenditure and quick recouping of costs. Every rouble invested in the light industry of the region soon brings 6-8 roubles of income. The development of this sphere would create new workplaces and provide the local population with all necessary products.

In the sphere of the shipbuilding industry it’s reasonable to modernize production, in the sphere of radio electronics it’s necessary to improve production, in the sphere of the motor industry and machine building it’s enough to support existing enterprises. The high-tech sector is to be developed as well. The production of light-emitting diodes and the means of remote control should be supported.

The timber processing complex in the North Caucasus Federal District is not developed well enough. At the moment the region produces 0.2-1% of the total amount of timber produced in the Russian Federation. 67% of the timber produced in the region is produced in Stavropol Territory. The reason why the timber production industry is poorly-developed is that the region hasn’t got enough resources for the development of this industry, as forests are rare.

The extractive industry and manufacturing form 4-17% of the gross regional product of the regions of the North Caucasus Federal District. In Russia this figure is 29%. This shows that industrialization of the North Caucasus has not yet been completed. The increase of imports and the decrease of exports are caused by the low competitiveness of the local enterprises and the low quality of the final products. Stavropol Territory is the most developed subject of the region. It provides 42% of the total income of the extractive industry and manufacturing in the region. In all subjects of the Federal District industry is developing in one or two industrial zones, other areas are agricultural. Capital resources all over the region are of a very low quality, especially in Chechnya, Dagestan, and Ingushetia.

At the same time the region has several advantages. Among them are rich natural resources (noble metals deposits, hydrocarbons), proximity to world markets and a fairly adequate infrastructure. All this makes the successful industrial development of the region possible. The priority spheres of production seem to be production of construction materials, light industry (production of fabric and shoes), the chemical industry, motor building, electro-technology and radio electronics, extraction of minerals and metallurgy and oil production.

In the Republic of Dagestan the priority spheres are light industry, the food industry, production of construction materials and the extractive and oil industries. In the Republic of Ingushetia - light industry, production of construction materials and the oil industry. In the Republic of Kabardino-Balkaria - light industry, extractive industry and metallurgy. In the Republic of Karachay-Cherkessia – production of construction materials, light industry, extractive industry and metallurgy. In the Republic of North Ossetia-Alania – the chemical industry, production of construction materials, light industry, extractive industry and metallurgy. In the Republic of Chechnya – the oil industry, the food and light industries and production of construction materials. In Stavropol Territory – almost all of the named spheres of production, the most promising seem production of construction materials, the chemical industry, and motor building.

The agricultural sector of the economy of the North Caucasus Federal District is the most important one. The sector’s share of gross regional product in 2008 was 18% (15% - agriculture and 3% - food industry). In Kabardino-Balkaria and Karachay-Cherkessia the share of the agricultural sector in the gross regional product is 26%. 24% of the population of the North Caucasus Federal District work in the sphere of agriculture. In several subjects of the region the main taxes come from the agricultural complex (37% of all taxes collected in Kabardino-Balkaria). The North Caucasus plays an important role in the agricultural complex of the whole country, providing 45% of the grapes, 10% of the grain and 5% of the sugar beet grown in Russia. Among the features of the agricultural complex of the North Caucasus is that private farms are the main type of enterprises.

The development of agriculture in the North Caucasus Federal District would help to replace imports of meat, milk and vegetables and improve the situation on the inter-regional market. This makes the development of the agricultural complex one of the main priorities of all subjects of the Federal District. The most promising spheres are production of meat (pork, beef, and poultry), milk and milk products (cheese, sour cream, and yogurt), grapes and wine, vegetables, mineral water, and sugar.

 

5. Prospects for tourism

 

The climate of the North Caucasus makes the region a place for tourism. The climate of the North Caucasus Federal District is the warmest in Russia. The average temperature in January is - 3.2° С, in July it is +20.4°C. The region is famous for its mountains (Elbrus is the highest mountain in Russia) and so can attract tourists interested in mountaineering. 490 km of the Caspian shore in the Republic of Dagestan can be used to establish new resorts. The International Tourism Organization approves the development of tourism in Dagestan; many experts believe that the republic is most promising region of Russia from this point of view.

The region may be used for health-improving tourism, mountaineering, practicing extreme sports, pilgrimage, and other kinds of activities. Kavkazkiye Mineralnyye Vody is the most popular region of the North Caucasus. In addition health-improving tourism is now developing in Dagestan, Karachay-Cherkessia, Kabardino-Balkaria, North Ossetia-Alania, Ingushetia, and Chechnya.

In spite of the big potential tourism of the region, it still is not developed enough. The North Caucasus Federal District brings only 6% of the total income of the Russian Federation in the sphere of tourism; that constitutes only 2% of the gross regional product. The reason is that the number of tourists coming to the region is rather small and that the private sector still dominates the market. The percentage of international tourists coming to the North Caucasus is smaller than in Russia in general. The tourism infrastructure is underdeveloped and service is usually rather poor. In addition to this, the North Caucasus has a bad image and so is unpopular even in other regions of Russia.

One of the most acute problems preventing the successful development of tourism in the region is the absence of investment. Investors are not ready to invest in the development of the Caucasian resorts due to the constant menace to public security. This is the main reason for the low competitiveness of the Caucasian resorts. The government should encourage investment, establish new resorts and improve the infrastructure of the region.

 

6. Transport

 

Transport is one of the most prominent spheres of the economy of the North Caucasus Federal District. It provides 10% of the gross regional product. The region is situated at the intersection of numerous trade routes and so is capable of profiting from transit. The most successful enterprise in the transport sphere is the “Russian Railways” public corporation. The total length of the railways in the region is 3 thousand km, the totla length of the highways is 24,788 km (2,577 km of federal highways and 22,211 km of regional ones). The main junctions are Stavropol, Mineralnyye Vody, Nalchik, Grozny, and Makhachkala. Makhachkala also has a port. This port is one of the main objects of the infrastructure of the Caspian region with a chance of becoming part of the “North-South” international transit system.

However, the transport sector still faces several problems. The regional infrastructure is not developed enough, service is often poor, the population’s mobility is insufficient and so the potential of the region is not used in the right way. Air transport needs serious modernization. The absence of an adequate air transport system in the region prevents its successful economic development. The federal highways are in very poor condition. The mass transit systems of the cities of the region are also in a bad state. Transport is often insecure.

The region is situated at the intersection of several international trade routes. Among them are the “North-South” trade route connecting Moscow with Iran and the countries of the Gulf, its turn-off that connects Russia with Georgia, and the “Trans-Caspian” route. The “North-South” trade route is an international project aimed at helping Russia’s integration into the global economy. The operation of the route requires certain measures to improve the infrastructure of the region, cooperation between government and individuals, inter-regional and international collaboration.

 

7. Power industry

 

The North Caucasus Federal District is profitable from the point of view of the power industry. In 2008 the power capacity of the region was 1 billion kilowatt-hours. The power system of the North Caucasus Federal District is stable due to the connections with the power systems of the Urals, the South Federal District and Volga territories. However, a decrease in the production of energy is now evident. The amount of energy produced has reduced from 3189 kilowatt-hours in 2005 to 1029 kilowatt-hours in 2008 (or by 31%).

The main problems of the power industry in the region are the abuse of its rich resources, misappropriation of energy, mass arrears of payment for delivered energy (3.3 billion rubbles in 2010), poor condition of the infrastructure and absence of serious investment in the power industry sector.

In order to lower prices for individuals they make prices for businesses extremely high (money is necessary to improve the infrastructure and to repair transmission facilities and power stations that are in very bad condition nowadays). This makes the business of many companies unprofitable.

 

8. Nets and communications

 

The share of the telecommunications sector in the gross regional product (GRP) of the North Caucasus Federal District is not very significant. In 2008 the share of the sector was estimated as 0.2 % of GRP (7.1 billion roubles). The total volume of communication services in the North Caucasus Federal District is less than 0.2% of the all-Russian rate. Stavropol Territory and the Republic of Dagestan have the most significant share of this sector in GRP, of 0.32%. Major communication service markets are Stavropol Territory and Dagestan, with 4.4 billion roubles and 1.9 billion roubles respectively, making up 90% of the market.

The level of development of the communications market in the North Caucasus Federal District is lower than the average Russian rates. The index of communications service volume per capita is three times smaller in the North Caucasus Federal District than in the Central Federal District and half that of the average Russian index. The telecommunications sector is quite promising in the North Caucasus Federal District. An index of the communications service volume per capita amounts to between 2,500 and 4,200 roubles. The North Caucasus Federal District fixed-line telephone system is less developed than the Russian average. In 2009 there were 135.4 fixed-line phones per thousand people. The level of mobile phone communication development is quite low in the North Caucasus Federal District, with only 987 numbers of mobile phone communication per thousand people. The North Caucasus Federal District is characterized by heavy differentiation in the penetration rate of mobile phone communication.

The penetration rate of the internet in the North Caucasus Federal District is one of the highest in Russia. The highest penetration rate is in the Republic of Ingushetia and in the Republic of Karachay-Cherkessia.

The penetration rate of central channel broadcasting in the constituents of the Russian Federation in North Caucasus Federal District is high, about 95% of the population (the average rate in Russia is 97%). The broadcasting level of regional television and radio companies amounts to between 90.2% and 97.8% (the average level in the Russian Federation is 90.6%) except for the Republic of Ingushetia, the Chechen Republic and Stavropol Territory, where this level doesn’t reach 50%. The level of broadcasting such channels as “NTV”, “Kultura” and ”Sport” is lower than that of central channels’ broadcasting. Radio broadcasting varies greatly. Broadcasting of “Radio Rossii” covers a significant part of the population, from 90 to 98% (the average Russian level is 97%). The coverage of other radio companies is much poorer than average in Russia.

9. Small and medium-scale business

316,698 small and medium-scale business entities operate in the North Caucasus Federal District. A significant part of small and medium-size business entities are focused on trade and the priority sectors of the North Caucasus Federal District’s economy, such as building, the agricultural sector and tourism. The North Caucasus Federal district is characterized by the high number of individual entrepreneurs. Whereas the number of individual entrepreneurs corresponds to the average Russian rate, 280 people for every 10 thousand citizens, the number of small and medium-size enterprises in the constituents of the Russian Federation included in North Caucasus Federal District is 2-7 times less than the average in Russia.

Poor reserves of production and office space, the poor quality of the transport and logistic infrastructures, impeded access to energy capacities, lack of qualified engineers and technical experts, and also administrative restrictions are the main deterrent factors to small business development in North Caucasus Federal District. In addition, there is the problem of a high rate of illegal business.

To boost population employment and provide small and medium-scale businesses in every constituent of the Russian Federation included in North Caucasus Federal District with equal and profitable conditions, a corresponding dedicated program “Development and support of small and medium-size business” was developed and approved. The average level of expenditure obligations co-financing in constituents of the Russian Federation included in North Caucasus Federal District amounts to 80%. In 2009 federal funding of the program arrangements in the North Caucasus Federal District grew six-fold, from 182.4 million roubles to 1125 million roubles. In 2010 the total volume of the program arrangements financing amounts to 1295 million roubles (15.1% growth).

To provide small and medium-size businesses with access to financing it is necessary to envisage:

- Support for first-time entrepreneurs with grants (grants for establishing one’s own business, carrying out education programs for applicants);

- Development of a micro-financing system (loaning for replenishment of funds to enterprises as well as to credit unions);

- Foundation of guarantee funds (regional funds for guarantees of payments for small and medium-size business);

- Support of small and medium-size business entities, including farm enterprises, by subsidizing a part of the interest rate on obtaining credits;

- Establishment and development of infrastructural interregional elements for small and medium-size business support and development.

To promote access to infrastructure it is necessary to develop and boost the effectiveness of business incubators and small business development centers. Through the dedicated program “Development and support of small and medium-size business” it is expected to provide first-time enterprises with different consulting services and help in searching for premises.

Solving the sales problem (access to external markets) is about additional support for exports of small and medium-size business products.

Eventual arrangements are:

- Providing first-time enterprises with consulting services to fulfill their export potential;

- Subsidizing exhibition activities of enterprises;

- Subsidizing part of the interest rate on equipment purchase for fulfilling export potential.

A commission on administrative barriers will improve the situation on administrative restrictions for business. Within the fulfillment of the particular program it is reasonable to carry out annual investigations of the situation on administrative barriers for entrepreneurs at regional and city levels, as well as holding roundtable conferences on reduction of administrative barriers with the participation of representatives of Federal State governmental authority and the state governmental authority of constituents of the Russian Federation.

 

10. Banking activities

 

In 2010, 58 credit companies operated on the territory of the North Caucasus Federal District, 52 of which were registered in constituents of the Russian Federation included in North Caucasus Federal District.

In the amount of savings the North Caucasus Federal District doesn’t reach the average Russian level. The individual savings market is most developed in Stavropol Territory and in the Republic of North Ossetia - Alania. The total volume of deposits of credit companies in the North Caucasus Federal District amounts to 119.8 billion roubles, less than 1% of the all-Russian volume.

The major share of individual and corporation credits is provided in Stavropol Territory. The total volume of credits amounts to 1.2% of the all-Russian market. As of May 2010 the largest number of credit companies is registered in the Republic of Dagestan, 32 entities, most of them in Makhachkala. The Republic of Dagestan and the Republic of Karachay-Cherkessia have the largest numbers of people per credit company. As of the 1st of June 2010 the total volume of assets of credit companies in the North Caucasus Federal District amounts to 266 billion roubles, which is less than 1% of the total volume of assets of credit companies in the Russian Federation.

The level of credit companies’ development in the North Caucasus Federal District is low. An asset share of the GRP of constituents of the Russian Federation included in the North Caucasus Federal District amounts to no more than 10%, which restricts their external credit accommodation. Moreover, credit companies of these constituents of the Russian Federation are developing differently.

 

11. Foreign economic activities

 

Total external turnover (exports and imports) of products amounts to $73.5 billion in the Russian Federation in 2008. The share of the North Caucasus Federal District in this turnover was 0.4%. In 2005-2008 North Caucasus Federal District product exports grew on average by 7.7% a year and reached $1.7 billion.

In 2005 in monetary terms the most significant share in North Caucasus Federal District exports was made up of products from the fuel and energy complex (38%), the chemical industry (33%), and the agricultural complex (17%). In 2008 the share of the agricultural complex grew to 29%, and the share of the chemical sectorgrew to 44%. Meanwhile, the share of the fuel and energy complex reduced from 38% to 4%.

Within the framework of exports Stavropol Territory commands the largest share, with 72%; 17.1% for the Republic of Dagestan, 5.9% for the Republic of North Ossetia - Alania. The share of the other republics is less than 5%. Stavropol Territory exports a significant part of products of the chemical industry and the agricultural complex. The Republic of Dagestan exports machinery and products of the metallurgical industry. The Republic of North Ossetia - Alania, exports mainly metals and metal products. The Republic of Ingushetia and the Republic of Karachay-Cherkessia are developing exports of agricultural products, the Republic of Kabardino-Balkaria exports products of the chemical industry. The Chechen Republic exports mainly wood and cellulose and paper products. About 70% of the North Caucasus Federal District’s exported products go to non-CIS countries, mostly from the Republic of Ingushetia, the Republic of Dagestan, Stavropol Territory and the Republic of North Ossetia - Alania. Exports from the Chechen Republic and the Republic of Kabardino-Balkaria go to CIS countries. Export flows are most important for Stavropol Territory. 10.7% of its GRP is from exports. On average this rate amounts to 5.7% in North Caucasus Federal District. Except for Stavropol Territory the relation of exports to the GRP is less than 5% in other regions of the District. Exports are least important for the economy of the Republic of Kabardino-Balkaria and the Chechen Republic. The North Caucasus Federal District is characterized by the low competitive ability of products.

 

12. Exhibitions

 

Exhibitions and fairs are to be organized in the District to boost investments in various branches of industry and to support local enterprises and producers. The activities are also aimed at the promotion of sport, healthy lifestyles, motherhood and childhood protection as well as at the development of economic ties between the North Caucasus and other Russian districts and foreign countries. Exhibitions and fairs are to be organized by special co-coordinating exhibition committees and commissions under the governments of the North Caucasian republics. Trade and Industry Departments are to head the operations of these commissions. Practical experience in the sphere of exhibition and fair organization is already being accumulated. However, the District lacks the accommodation and modern equipment for organizing the activities in question, so further investment is required.

 

13. Investment

 

Over the last few years the volume of investment into the District has grown considerably. However, the indicator of private investments per capita is the lowest in the Russian Federation, falling behind the average figures by 4.7%. The reasons for the low private investment indicator are:

- high level of risk, insufficient level of infrastructure development and lack of stimuli for private investors;

- absence of potential major investors on the internal market;

- lack of finance capabilities of local producers;

- low level of enterprise sector development;

- further attraction of private investment demands offering additional economic stimuli for investors (tax and customs privileges, guarantees, etc.), development of infrastructure and efficient co-operation with future investors.

 

14. Regional finances

 

The average indicator of the federal portion of budget income for all the republics of the District exceeds 50% (except Stavropol Territory where the figure is 38%). The index for the Chechen and Ingush republics is 91%. Tax income to the District’s budget is insignificant. The North Caucasian Federal District contributes only 0.9% to the tax budget of the Russian Federation.

The District’s budget expenditure in 2009 reached 283.8 billion roubles. The structure of the District’s expenses is similar to that of all other districts of the Russian Federation. The share of expenditure for social and cultural projects is 53% in the District (45.2% is the average indicator for the whole Federation). Charges for remuneration of labour reached 41% in 2009 (30% in other districts of the Federation). National economic development amounted to 17% of the budget expenditure.

 

15. Environmental protection and ecology security

 

The ecological situation in the North Caucasus Federal District is one of the most favourable in the whole Federation. The low level of industrial development of the District has contributed to this status. Tourism and agriculture were cited as the priorities of the District’s development by this Strategy, therefore protection and conservation of the unique ecology of the region are on the list of top priority tasks.

However, a certain number of ecological problems demanding immediate solutions exist in the District. Some zones in the North Caucasus suffer from an accumulation of oil production and storage waste. The level of oil pollution in Chechnya and Dagestan depends not only on the volume of production, but on the age of oil-fields and the number of wells.

The Chechen Republic suffers from severe soil cover disruption due to oil and gas processing and there is a risk of ecological catastrophe if no measures for modernization of oil field development are taken.

Kabardino-Balkaria lacks air control systems, while its industry and transport present some danger of air pollution.

The main sources of water pollution in the District are:

- alcohol producing plants located in North Ossetia and Kabardino-Balkaria;

- housing and communal services;

- oil waste dumping on the territories of the Chechen Republic. Ongoing deforestation leads to soil erosion and spring flooding. In its turn, this creates the danger of avalanches and mudslides in the mountainous areas.

For now, no efficient structure for the elimination of the products of human activity exists in the District.

 

III. North Caucasus Federal District development scenario

 

The elaboration of the District’s development scenarios requires an assessment of long and short-term economic priorities. Short term priorities for all the republics of the District lie in the area of agriculture. Therefore, the most important branches of industry are the light and food industries, as well as the tourism and recreation sector, which could offer a great number of new jobsites. The major part of investments should be provided by the federal government.

 

1. Definition of parameters for scenario realization results

 

The economic situation in the District is affected by inner processes as well as by global tendencies of economic development of the Russian Federation. Therefore it is possible to describe three development scenarios: inertial, general and optimal scenarios.

The main factors affecting long-term social and economic development are:

- the level of development of the relative advantages of the Russian Federation in the fields of energy and high technology;

- intensification and modernization of labour;

- the dynamics of infrastructure and energy network development;

- the growth of the population’s wealth and development of a middle class;

- the integration of the Eurasian economic space;

- the development of law and protection of consumers and producers rights;

- promotion of investments.

The inertial and general scenarios are based on the assumption that these conditions will not change considerably, while the optimal scenario is based on a more optimistic prognosis.

 

2. Inertial development scenario

 

The inertial scenario of the North Caucasus Federal District development stipulates fulfilment of all Federal projects and strategies provided for the North Caucasus Federal District;

Creation of a new tourist zone in Stavropol Territory;

Advancing average growth rates of the Russian Federation;

Renunciation of major new long-term projects;

Growth in economic inequalities of the population;

Growth of imports and reduction of competitive abilities of local enterprises;

Unfavourable conditions for private enterprises;

Growth of inter-ethnic tensions, terrorism and religious conflicts.

The share of the engineering industry and high-tech in the District’s economy drops. Following changes in social and economic development, indicators will be introduced as the result of the inertial scenario:

- gross domestic product will grow by 0.4% in 2025 as compared to 2008;

- the speed of gross domestic product growth in the period of 2008-2025 will be 5.7% per year;

- gross domestic product per capita will increase from 79,000 roubles in 2008 to 133,000 roubles in 2025;

- the average salary will increase from 9,600 to 14,000 roubles

- the unemployment will shrink by 2%;

- budget income per capita will increase from 5,100 to 14,600 roubles;

- average annual industrial development growth will be 7.3%;

- no cardinal changes in the level of living standards.

 

3. General scenario of the development of the North Caucasus Federal District

 

It was estimated that the public security problem can be solved only in 5-10 years. This means that a constant threat to public security will restrain the development of tourism and investment for at least another decade. That is why it's reasonable to focus on the development of agriculture, the extractive and oil industries, manufacturing, and machine building.

The general scenario includes modernization of technology, further development of the agricultural sector, the power industry and machine building, development of the transport system, tourism, and measures aimed at providing public security and preventing ethnic and religious conflicts. The average annual growth of the gross regional product in 2010 - 2025 is planned at 6.7%, with production growth of 8.7%.

The realization of the general scenario will bring the following changes to the economic and social life of the North Caucasus: gross regional product will rise from 79 to 172 thousand roubles per capita; the average salary will rise from 9.6 to 18.6 roubles per month; the official level of unemployment will go down from 16% to 9%; the percentage of the population whose income is less than the estimated living minimum will go down from 16.5% to 10.9%; budget income will rise from 5,100 to 17,500 roubles per capita.

The realization of the general scenario will affect the quality of life of the population in the following ways: housing area will rise from 17.1 to 20 square metres per head of population; the complement of hospital beds will rise from 79 to 80 beds per 1000 people; the number of qualified doctors will rise from 41 to 43 per 10,000 people; the numbers of people living in accomodation with a telephone will rise from 1,042,000 to 3,131,000; the numbers of those with mobile phones will rise from 9,038,000 to 21,173,000. The number of small and medium-sized enterprises will go up from 3.4 to 17 per 1000 people by 2025.

 

4. The optimal scenario

 

The optimal scenario, presupposing the full realization of this strategy, includes: dynamic development of the tourism sector, improvement of the social infrastructure, development of education, modernization of the public health care system, improvement of the quality of life of the local population, integration into the global economy, development of transport, provision of public security and social stability.

The average annual growth of the gross regional product in this case will be 7.7 per cent, with an average growth in production of 10.1 per cent. This will bring the following social and economic changes: gross regional product will rise from 79 to 219 thousand roubles per capita; the average monthly salary will rise from 9.6 to 23.8 thousand roubles per capita; the official level of unemployment will go down from 16 to 5%; the percentage of the population having an income of less than the estimated living minimum will go down from 16.5 to 9.2; budget income will go up from 5.1 to 20.4 thousand roubles per capita.

The realization of this scenario will cause certain changes in the life of the population. Housing area will rise from 17.1 to 24.4 square metres per capita; bed complement in hospitals will rise from 79 to 81 beds per 1000 people; the number of qualified doctors will rise from 41 to 44 per 100 people; the numbers of people whose living places have phones will rise from 1,042,000 to 3,632,000; the numbers of those who have mobile phones will rise from 9,038,000 to 24,560,000. By 2025 the number of small and medium-sized enterprises will go up from 3.4 to 17 per 1000 people.

 

 

IV. The mechanism of the realization of the optimal development scenario

 

The realization of the optimal development scenario will include two major steps. At the first stage the necessary conditions for the successful development of the region will be provided, including legislative support, investment and public security. The main priorities will be improvement of the investment climate and elaboration of special governmental programs. At the second stage elaborated mechanisms will be used in order to raise funds from individual investors and develop a system of social insurance, public healthcare and education.

 

1.  Major areas of development

 

As a result of the realization of the optimal development scenario, the North Caucasus Federal

District will become the most popular tourist center of Russia and the countries of the Commonwealth of Independent States, a region interesting for investors, a region providing high living standards.

The main achievements by 2025 will be as follows: the level of unemployment will drop to 5%, economic growth will be 8-10%, the economy will become more diversified due to the further development of agriculture, tourism and construction and the quality of life of the local population will improve.

The main results of the development of the social insurance system will be as follows: a decrease in the death rate, development of human resources, improvement of education, public security guarantees, a drop in the corruption level, greater investment, development of small and medium-sized enterprises, an adequate environmental policy, improvement of the infrastructure of the region and interregional cooperation.

In the sphere of employment management, the Strategy stipulates first-priority importance for resource and employment centers development as well as for co-ordination of their efforts with establishments of other districts of Russian Federation. It also states the task of creating a labor migration agency that would help unemployed residents of North Caucasus Federal District to find jobs in other districts of Russian Federation.

Prior importance is also attributed to the task of improving the level of education for North Caucasus residents within the District as well as in other regions, adapting the educational system to the needs of the region’s economy and creating conditions for permanent residence of Russian population on the territory of the District.

Efficient environmental monitoring will provide necessary level of protection for the environment and nature resources and strict control over casual, agricultural and industrial waste. Special attention will be paid to the mineral water, forest and oil-production areas.

Lists of higher-priority investment social projects for the period of 2010-2013 and Strategy realization projects are presented in the Attachments №1 and 2.

Industrial and agricultural sector development

Industry and agriculture are the most important economy sectors for realization of the Strategy.

Existing conditions permit creation of ecology-friendly food production and farming, agricultural waste re-cycling in the District that has a potential to become Russia’s leading producer of meat, wool, wine, mineral water and grain.

The priorities of agricultural and industrial development are:

- promotion and advertising of North Caucasian producers;

- granting access the common market of Russian Federation as well as foreign markets to the North Caucasian producers;

- attraction of investments and favoring modernization;

- melioration infrastructure development;

- upgrade of technical capacities of the region’s industry;

- incorporation of smaller enterprises in a common production and sale chain.

To grant access for North Caucasus producers to Russian marked creation of special centers is planned. The centers would co-ordinate the sales of grain. Government orders will favor local producers and ensure their protection.

The promotion of North Caucasian producers implies creating a common North Caucasian brand and support of Caucasian enterprises’ participation in Federal and international production exhibition.

The modernization implies development of technical fleet of the region as well as promoting the level of insurance and co-operation in the District, investment attraction and efficient regulation of electricity and water payments for the producers.

Reconstruction of the melioration system requires special attention. Low technological level of the agricultural production requires creation of special educational centers for farmers in each subject of the District.

Such centers should be created on the basis of current most efficient farms with the help of Russian Agricultural Academy and other scientific establishments. The co-operation of smaller

farms into production-sale chains is also necessary.

Industry development

One of the most important tasks of the Strategy is the development of industry and technology base of the District.

Higher-priority tasks of the Strategy in the area of industry are:

- stimulation of joint manufacturing ventures’ modernization and development;

- granting access to Russian and foreign markets to North Caucasian producers;

- efficient nature resources development;

- creation of staff resource.

Basic measures insuring modernization and development of manufacturing enterprises are:

- creation of industrial machinery fleet in the District (first priority is attributed to the light industry);

- creation of additional financial stimulation for small and medium enterprises.

Efficient development of natural resources implies allocation of funds to the infrastructure and roads, necessary for the development of promising fields by the government as well as by private individuals and companies. The procedure of obtaining a license for making an investment should be simplified.

Staff resource creation implies development of special programs in institutions of special education and grants for education in other Russian districts and abroad. Assistance in gaining access to markets implies Federal encouragement of local producers of the District to tender for manufacturing supplies and support of their participation in Russian and International exhibitions.

 

Tourism development

Tourism is one of the most promising branches of social development of the District, able to host more than 100,000 new jobsites. Main tasks of tourism sector development are:

- creation of modern infrastructure;

- improvement of District’s image and active promotion of its tourist advantages;

- insurance of tourists’ safety;

- staff base creation;

- encouragement of smaller and medium enterprises in the sphere of tourism;

- efficient protection and restoration of objects of cultural interest.

Development of modern heath and ski resorts requires major investments in infrastructure. State joint-stock company ‘Special economic zones’ and Investment Fund of Russian Federation will provide support for investment projects. The management and selection of more suitable projects will be conducted by newly created North Caucasus Development Institute. Special attention will be attributed to the improvement of North Caucasus image and promotion of region’s tourist attractions in Russia and abroad by creating a common brand for the region.

The development of tourist centers will require boosting the network capacity of current transport system. Higher priority is attributed to the development of air transportation (development of airports’ infrastructure in main spa centers Miniralniye Vodi, Stavropol, Nalchik, Makhachkala, Vladikavkaz). Highway network joining resorts of the District to tourist centers of Krasnodar Krai and Abkhazia is also scheduled for construction.

To improve the security level creation of District-wide network of security systems and tourist police as well as modernization of rescue services equipment and careful environment monitoring are planned.

To improve the level of service and create a regular staff basis special training programs including international experience exchange are being worked out. International tourist companies will be invited to work in the region. The State will support private initiative in the field of hotel networks creation and tourism services development.

History and culture monuments restoration and protection as well as nature parks and reserves form important part of tourism development program. Special attention will be paid to recreation zones, parks development. Massive construction activities in the resort zones may damage the unique microclimate necessary for medication, so smaller forms of construction will be favored.

The Strategy stipulates regular activities for protection and improvement of the environment and sanitary conditions of parks and settlements.

 

Transport network development

Strategic orientations and key projects

Transport network is the key sector for the realization of the District’s potential. High-priority tasks in this area are:

- creation of available and efficient network;

- improvement of the quality of transport services and reduction of transport expenditures;

- efficient realization of the District’s transit potential;

- improvement of the technical condition of District’s transport fleet;

- formation of competitive transport-logistic product providing efficient transportation of goods;

- increasing the mobility of the District’s population;

- increasing the level of transport environmental control;

- attraction of investments to the District’s transport system;

- promoting joint state-individual ventures in the field.

Road network

The development of road network of the District implies several important tasks:

- completion of the construction of road network connecting the District to international road system, improvement of the technological level of the North Caucasian road system;

- further development of the transit ‘North-South’ transportation route, necessary for future development of trade relations between Russian Federation and Near East;

- creation of necessary roads for the resort projects fulfillment;

- guaranteeing the clock round duration of the roads’ operation.

Road construction activities imply formulation of objects’ reconstruction and building lists based on following priorities:

- reconstruction of the most loaded highways and construction of major cities bypasses in correspondence to the State’s geopolitical interests;

- completion of almost fulfilled projects and realization of commercial road construction projects;

- reconstruction of Federal roads and their modernization;

- connection of smaller settlements with regular Federal road network.

Several infrastructure projects are planned within the framework of the transit ‘North-South’ route project:

- modernization and reconstruction of M-29 “Caucasus’ highway;

- reconstruction of Dagestani sector of the Astrakhan-Kochubei-Makhachkala highway;

- reconstruction of the M-29 highway on the border with Georgia to insure transport communication with South Ossetia.

One of the most important roles in the region’s road network is attributed to the roads leading to resort areas. Following projects will be realized in the framework of the ‘South of Russia (2008-2013) program:

- construction of Nijniy Zaramg – ‘Manison’ resort road;

- construction of Kislovodsk – Dolina Narzanov – Djili Su – Elbrus road;

- reconstruction of the Chikola – Matsuta – Kolin Art road;

- construction of Arkhiz – Dukka road.

The new network project should take into account creation of new recreational zones. The possibilities of Mineralniye Vodi – Cherkessk – Adler road construction will also be investigated in the period covered by the Strategy. Transit turnover will be boosted by construction of international Cherkessk – Sukhumi highway, connecting Russian Federation to Abkhazia.

Construction of Mineralniye Vody, Nevinnomissk and Beslan bypasses is also planned. Following Federal highways need reconstruction and modernization:

- Kislovodsk – Karachaevsk road;

- Grozny – Botlikh – Arakany – Levashi – Buynaksk – Makhachkala highway;

- Svetlograd – Blagodarniy – Budennovsk road.

 

Motor transport network

High-priority tasks in the District’s motor transport network development are the following:

- development of the car parks network;

- implication of modern technologies in traffic control;

- providing higher traffic security level.

Motor transport network also implies following tasks:

- financial stimulation of environment-friendly transport, usage of alternative fuels (like nature gas) in public transport;

- transport technology development;

- restriction of personal vehicles use in overlo