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North Caucasus demands more money to resolve its problems

August 20, 2013, 11:13 UTC+3

An overview of previous financing and programs showed failure to use funds effectively

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A meeting of government officials chaired by Prime Minister Dmitry Medvedev took place in Pyatigorsk, North Caucasus Federal District /SKFO/. It addressed SKFO development in keeping with the implementation of the new program "South Russia." The mass media noted that the "North Caucasian version of socialism" is demanding more and more money from the federal center.

At the meeting in Pyatigorsk, Finance Minister Anton Siluanov presented new data on SKVO economies, Kommersant writes. In his opinion, the SKFO enjoys twice as many tax incentives compared with the rest of Russia, its system of benefits and civil service employment apply for a greater number of residents, whereas increasing federal budget funding does not help resolve the SKVO's social problems, and possibly blocks the development of market institutions.

The position of SKFO leaders is simple: the development model does have shortcomings, but federal funding should increase in order to bring the SKVO development level close to Russia's average.

One of the reasons behind SKVO problems is considerable tax exemptions which the Finance Ministry believes are two times above the national average: as a result, SKFO republics fell short of 7.3 billion roubles of revenue in 2012.

Anton Siluanov recommended the SKFO republics to cut bureaucracy. Whereas Russia has 1.8 officials per 1,000 residents on the average, Chechnya has 3.5 officials per 1,000 of the population. Chechnya, with a relatively small population, is a place of registration for half of SKVO service cars.

The North Caucasus governors agreed with many Finance Ministry's claims, but said that taking measures would not rectify the situation.

Regional Development Minister Igor Slyunyayev made an important comment as he delivered his report: it followed that five years of implementation of various federal program in the SKFO yielded practically nothing. The unemployment rate still exceeds the national average by two times. During the implementation of the federal goal-oriented program "South Russia" (2008-2012), the federal budget allocated 43.6 billion roubles for improving the socio-economic situation in the region, yet the list of problems in 2013 has practically not changed from what it was back in 2008.

According to the Regional Development Ministry, the region lacks 35 percent of kindergartens and 50 percent of schools. It was expected that the establishment of a world-level tourism cluster in the region could be one of the key stimuli in the revival of the North Caucasus, and that this cluster would be able to compete with European ski resorts, the Nezavisimaya Gazeta writes.

To realize this project, the government set up the North Caucasus Resorts company and appointed Akhmed Bilalov its head.

In the spring of 2013 President Vladimir Putin fired Bilalov from the post of vice-president of the Russian Olympic Committee for failing to meet the sport facilities construction schedule and misuse of budget funds. Bilalov then was relieved of his duties as chairman of North Caucasus Resorts' board, as it had been found that the company had not used money effectively either. The company administration had spent funds on their own needs rather than on the tourism cluster.

Three years on, the region has nothing to boast of. One of the examples of economic confusion in the North Caucasus is record high electricity bills. The problem is so acute that the local authorities are beginning to use measures of last resort. On Monday, reports said electric utilities had begun to cut power to debtors in Dagestan.

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