Economic development of North Caucasus

In mid-December the Medvedev government finally approved the draft state development programme for the North Caucasus Federal District until 2025. The tensions between different groups of officials were eased by the conflict of different governmental bodies (three ministries - the ministry of regional development, the ministry of finance and the ministry of economic development - were responsible for drafting the programme), social discussion and the opposition's criticism ('Stop feeding the Caucasus').

As the result, the programme's budget was decreased from 3.9 trillion roubles to 2.5 trillion roubles.

The main concept of the programme is development of the tourism industry and efforts to attract foreign investment in infrastructure and upgrading technology.

A year ago, on the initiative of Dmitry Medvedev, two Korean firms - Korea Western Power and CHT Korea - signed an agreement with the North Caucasus Resorts company in order to improve the local energy sector. The firms were expected to invest $1 billion in the region. According to the project, five coal power plants will be built in the North Caucasus. These power plants are expected to be environmentally safe. The next step is construction of solar and wind power plants. Still these are just plans.

Nowadays, the Eurasia Energy Holdings company suggests that it should manage the North Caucasus energy network. The network is now facing serious problems due to non-payment and the instability of the sector's management. For instance, the former head of the network was fired after he was criticized vehemently by Vladimir Putin, the next directing manager was fired in September.

For the presidential envoy to the North Caucasus Federal District, Alexander Khloponin, the notion about foreign investment in the region's economy has become some kind of idée fixe. The tourism industry seems to be the most attractive sector for possible investors because of the coming Sochi Olympic Games, lack of tourist facilities on the Caspian coast and the natural landscape that can be used for downhill skiing. Even though it seems unlikely that Chechnya may attract numbers of tourists, it's a good thing that at least some development takes place in the region.

The state as represented by the presidential envoy wants to be a manager involved in distributing financial funds and mediating conflicts among the local elites. However, the Kremlin itself is not ready to spend too much on the region's economy. That is why 90 per cent of the sum expected to be invest in the region will be provided by private businesses.

The programme first of all was designed to replace the existing federal targeted programmes, including the South of Russia federal programme and the programme of the social and economic development of Ingushetia until 2016. 476.6 billion roubles will be spend on these programmes. The second step is attempting to attract investment in regional industry. 1.318 trillion roubles are expected to be spent on this initiative.

The ministry of regional development believes that by 2025 investment in the region will constitute 6.2 trillion roubles (in 2012 the figure was 887.6 billion roubles) and foreign investment will reach 1.451 billion dollars. 460 thousand new jobs will be established in the North Caucasus. Of course the exact figures will be altered in future, but economic growth (if some kind of large-scaled crisis doesn't emerge) will improve the economic situation in the region anyway.

By Alexander Karavayev, University of Moscow
Exclusively to VK