The Caucasus to help in import substitution

Oleg Ponomarev, exclusively for Vestnik Kavkaza

At a session of the Governmental Commission on Socio-Economic Development of the North Caucasus Federal District, which took place on July 1st in Vladikavkaza, Premier Dmitry Medvedev dotted all the i’s in a question which is actively discussed – the theoretical cancellation of various programs in the NCFD.

One of the reasons for such discussions is an adjustment in the development of the tourist cluster in the North Caucasus due to the merger of the Republic of Crimea with Russia. Do the discussions have any grounds? Let’s analyze the situation.

At the session one of the key topics of the agenda was development of the industrial potential of the NCFD regions and staff training.

The premier noted that due to various problems with broken foreign economic contacts, the problem of import substitution is very important for the country today. According to Medvedev, the North Caucasus could be one of platforms for implementation of new projects and improvement of existing ones. There is potential for this.

“These are enterprises of the fuel and energy complex, engineering industry, metallurgical industry, forestry industry, and the defense industry complex,” the head of the government stressed.

Is there any sense in limiting the territory’s development, which is so promising? There is no sense.

“I would like to say that we don’t plan to change anything. All talk that, in the current situation and due to the appearance of new constituents of the federation, some state programs will be reconsidered and cancelled, are groundless. Development of the North Caucasus should be based on the decisions which we have already made,” the Premier concluded.

Almost all regions of the NCFD have positive potential, but their realization demands huge investments. State programs solve the biggest part of the problem. They define sources of financing. These are federal and regional budgets, as well as private investments and budgets of municipal entities.

The North Caucasus cannot be called a region which lacks federal attention. The district has the state program of “Development of the North Caucasus Federal District to 2025.”  Several subprograms are being implemented within the program. Moreover, two federal target programs are being implemented in the NCFD – the South of Russia (2014-2020) and the Socio-Economic Development of the Republic of Ingushetia 2010-2016. Recently, the program of Socio-Economic Development of the Chechen Republic 2008-2012 was ended. The federal target program of Socio-Economic Development of the Republic of Dagestan 2014-2019 is being developed.

The measures enabled to improve indices of socio-economic development almost in all spheres. Even skeptics have to admit that the North Caucasus became safer, socially more stable and attractive to investors. Industry, agriculture, small and medium-sized business are developing; schools, hospitals, other social infrastructure facilities are being built. Science, culture, civil society institutes are being developed. Investments is an important criterion, which defines a region’s health. To build an effective state-private partnership is a key goal for the North Caucasus and the state in general. By 2025 it is planned to attract 683 billion rubles of private investment into the tourist cluster of the NCFD.

As for recent examples – business interests and productive talks with the regional authorities of Italian investors in Stavropol Territory and of Japanese investors in Dagestan. And it is going on in the context of constant hysteria by the West about Crimea and the southeast of Ukraine. We can see that businessmen try not to interfere in politics.

The other aspect is this: the system was corrected in three directions – Crimea, the North Caucasus and the Far East. The territories are being governed by identical structures: a plenipotentiary embassy – a ministry on the territory’s affairs – a corporation which deals with development projects of the territory. There is no reason to think that such a stable new system has been built to be immediately changed.

And finally, Crimea and the North Caucasus belong to one country. Its general welfare depends on successful development of each region of Russia. It should be understood that Crimea cannot disturb the North Caucasus, just like fingers on one hand.

Denis Manturov, the Ministry of Industry and Trade of Russia:

To improve the investment climate, the local authorities and the Corporation for Development of the North Caucasus were suggested to provide business with wide information on measures of support within the existing federal programs and financial instruments of state banks.

Potential investors should understand plans of the local authorities on development of industry in all territories. All regions of the NCFD have relevant regional programs. Attraction of private capital is an important condition for diversification of industry, and the authorities are working on the direction.

Lev Kuznetsov, Minister for North Caucasus Affairs:

We need a new industrial policy in the Caucasus with the key role of the state, but considering the Soviet experience, it should be based on market instruments. An investment contract which is described in the new draft on industrial policy should play a big role. We ask a crucial question: who should be the main investor? The Ministry’s position is that one of key instruments should be a decision on location of manufactures of major Russian companies and corporations with state share in the NCFD. They should solve the problem of import substitution, localization of manufacturing of Russian companies and state corporations in the context of their development strategies.

Valery Ryazansky, the chairman of the Committee for Social Policy of the Federation Council:

I think the health resorts of the North Caucasus are a good example for Crimea. There is every opportunity for development of major resort zones. Of course, they lack professional staff, and this problem should be solved. I mean Crimea as well. Nobody can force people to go there. People have a right to choose. The Crimean authorities should create conditions for attracting private businesses, as well as in the North Caucasus.

Vladimir Gutenyov, first deputy of the chairman of the State Duma Committee for Industry:

Even though, during the Olympic Games, Sochi was declared to be resort number one in Russia, and after the merger of Crimea – the Crimean Peninsula, we should forget about development of the Resorts of the North Caucasus. As for economic benefits from Crimea, I am sure that Crimea not only helps us to solve demographic problems, regarding its 2-million population, but also plays an important ideological role.

Vladimir Gorchakov, Director of the Regional Office of “Expert RA” Rating Agency:

If the declared policy by Russia goes on, Crimea will see investment activity. In the near future it will be non-market investments. First of all, state investments will come to the peninsula, but sooner or later private Russian business, and someday probably foreign business, will invest in Crimea.

We can compare it with the North Caucasus. In the big republics, for example, in Chechnya, we could see an investment boom. This will come to Crimea as well.

Igor Umansky, President of the Association of Tour Operators of Russia:

If a bridge across the Kerch Straight is built, Crimea will actually become the Caucasus. I think the situation in Ukraine will develop. It won’t exist as a state in its previous form. So it was decided to diversify duties in the North Caucasus. The plenipotentiary envoy is responsible for security; but the newly-established ministry is responsible for the socio-economic sphere. Such a scheme of management was built into Crimea also.

We need to create a positive image of both Crimea and the Caucasus. The model demands political and economic investments. As for the Caucasus, its goal is to preserve stability in the context of settlement of the Ukrainian crisis.