Window on Eurasia: Investment Increasing More Rapidly in Stavropol than in Non-Russian Republics of the North Caucasus, Khloponin Says

Paul Goble

            Staunton, October 31 – Half of the increase in investment in the North Caucasus Moscow is promoting to pacify that unsettled region has gone to the predominantly ethnic Russian Stavropol Kray, whereas “the size of investments in the national republics” has been “more modest,” Presidential Plenipotentiary Aleksandr Khloponin says.

            Speaking to a Kislovodsk forum of major companies operating in his North Caucasus Federal District last Saturday, Khloponin said that investment in the district had increased by 113 percent during the first half of this year compared to a year ago and that as a result unemployment had fallen (expert.ru/2012/10/30/rabota-nad-kavkazskimi-oshibkami/?n=66995).

            But he acknowledged that much of this new investment had gone into the predominantly Russian Stavropol kray rather than the more unstable non-Russian republics and that this “inequality” was a matter of concern given that Moscow’s strategy is to promote economic growth there to undercut the appeal of those fighting against it.

             In addition to the imbalance between investments in Stavropol and those in the non-Russian republics, Khloponin identified five other problems with the pattern of investment.  First, he said the Corporation for the Development of the North Caucasus have failed to reach out and support small and mid-sized companies, thus limiting the corporation’s impact.

            Second, the presidential plenipotentiary pointed to “choke points” in the financial system, including what he described as “the still not too effective” government program which provides state guarantees to investors prepared to develop government-identified priority projects in the North Caucasus Federal District.

            Third, Khloponin noted “the passivity of local elites in the district, in the first instance, those in the organs of self-administration which are accustomed to using their own budgetary funds instead of working with investors.

            Fourth, he said that in his region, “the system of higher education has been seriously discredited” despite the survival of what he described as “a number of good higher educational institutions in the region.”

             Khloponin called for “the closure of ineffective regional branches of higher educational institutions of the capital, the centralization of the system of higher education, and the formation of a new ‘mark of quality’ on the foundation of the recently established North Caucasus Federal University.”

            And fifth, the Presidential Plenipotentiary pointed to the impact of “the negative image of the region in the media,” an image which reduces its attractiveness as a place for investment.  “Today,” he said, “Italian entrepreneurs are investing more in the North Caucasus than are Russian investors.  This means that we do not believe in ourselves and our potential.”