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Government to slash spending on North Caucasus government machinery

August 20, 2013, 16:27 UTC+3 Alexandrova Lyudmila

MOSCOW, August 20 (Itar-Tass) - The Russian government seems to have turned an attentive ear to “Stop Feeding the Caucasus!” calls, which have been so popular with many Russians over the past few years. A government commission met in session under the chairmanship of Prime Minister Dmitry Medvedev on Monday to agree that the bureaucratic machinery in the country’s southern regions is blown out of proportion. Just as the funds it devours. Civil servants in the North Caucasus will most probably have to brace up for dismissals and also for cuts in tax breaks.

This is not the worst of all problems, though. Experts believe that although the federal authorities have put huge financial muscle into the region already, an economic upturn in the North Caucasus is nowhere near in sight, the social sphere leaves much to be desired and the problems of security and corruption are still there.

Finance Minister Anton Siluanov has called for slashing the number of civil servants in the North Caucasus Federal District and the related overheads. He argues that budget spending in the North Caucasus republics is far above the national average.

Alongside the number of civil servants in the Caucasus the finance minister also drew attention to the amount of budget money spent on them. For instance, the fleet of office cars for officials of various rank costs a pretty penny. In that respect, Siluanov said, Chechnya is the champion, where the number of motor vehicles on the balance sheets of bodies of state power is 0.27 per employee, in contrast to Russia’s average of 0.06.

Federal budget spending on the North Caucasus republics has long worried both ordinary Russians and some political leaders. “Stop Feeding the Caucasus” rallies swept the nation back several years ago. The demonstrators were protesting against heavy transfers from the federal budget to the Caucasus in the form of subsidies and donations for various projects.

According to a Levada opinion poll in November 2012 the slogan Stop Feeding the Caucasus has the backing of 65% of respondents, in contrast to 23% of those who disagree with it.

The region’s problems are far more serious than just highly-salaried officials or luxurious office cars. The republics constituent of the North Caucasus remain heavily dependent on subsidies, Siluanov said in the resort town of Pyatigorsk. The Finance Ministry believes that tax breaks in the North Caucasus Federal District are twice Russia’s average and the system of benefits and civil service jobs involves far more local residents than elsewhere in Russia, while growth in federal financing is unable to address social problems in the district and quite possibly blocks the development of a market economy. Siluanov said the subsidizing of the North Caucasus Federal District in 2012 reached 20%, in contrast to 5% elsewhere in Russia.

In the budget of Ingushetia the share of federal budget transfers is 86%, of Chechnya, 80%, and of Dagestan, 67%. In the other areas of the district the situation is only slightly better, Siluanov said.

One of the reasons for the heavy dependence on the federal government is the regional authorities agree to establish large regional and local tax breaks, Siluanov said. He urged governors to slash these benefits, adding the property tax was outrageous - up to 90% of all taxpayers are exempt from it.

The North Caucasus Federal District emerged just recently. In 2010 it was separated from the Southern Federal District to incorporate Dagestan, Ingushetia, Kabardino-Balkaria, Karachai-Cherkessia, North Ossetia-Alania, the Stavropol Territory and Chechnya.

In 2010 the government adopted a strategy for the North Caucasus Federal District’s development up to 2025 to declare that the subsidies-dependent republics in the North Caucasus - these are in a majority - are expected to turn into investor-friendly regions, if not growth engines of the entire Russian economy. The original idea was to bring about a world class tourist cluster, capable of offering competition to European Alpine skiing resorts, which would serve as a powerful incentive to the revival of the North Caucasus.

In order to translate this idea into life the government in 2010 established the open joint stock company called North Caucasus Resorts. Ahmed Bilalov was appointed in charge of it. The tourist cluster project provides for the creation of seven Alpine skiing resorts with all crucial infrastructures and also beach resorts on the Caspian coast.

However, last spring President Vladimir Putin dismissed Bilalov from his post of Russian National Olympic Committee’s vice-president for disrupting the schedule of building Olympic facilities and for the misuse of funds. A while later Bilalov was removed from the post of the North Caucasus Resorts’ board chairman, when it turned out that 275 million rubles of budget money had been squandered.

Regional Development Minister Igor Slyunyayev has come up with an unhappy conclusion: as follows from his report, the net effect of five years of efforts under various federal programs in the North Caucasus Federal District is equal to nothing. The level of unemployment is still twice above the average one in Russia. Over the years the federal program Russia’s South has been in action (2008-2012) a total of 43.6 billion rubles of federal budget money has been spent on improving the socio-economic situation in the district, but in 2013 the list of problems is practically the same as in 2008.

Now a new program for 2012-2020 (bearing the same name, Russia’s South) will have to address the old-time issues. This time, according to the Regional Development Ministry’s estimates, it will require 230.2 billion roubles.

It looks like the regional authorities themselves are by no means interested in full-fledged development, says a senior researcher at the Caucasus Studies Center of the MGIMO University, Vadim Mukhanov. “The North Caucasus elites, whose members hold civil service jobs, prefer to stay idle by and large,” he is quoted by the daily Nezavisimaya Gazeta as saying. “They are in the habit of getting hefty financial infusions from the federal center, of using the financial transfers at their sole discretion and of distributing them among cronies and clans. What they are surely not interested in is development. They are a social stratum that soaks up all money pouring into the region like a sponge. This is the reason why the ordinary people in the North Caucasus republics live in squalor. And many prefer to join the shadow economy,” Mukhanov explains. In his opinion, the share of the shadow economy in the North Caucasus is over 50%, unemployment is sky-high and businesses enjoy no guarantees.