Wednesday, 30 October 2013

Ignoring All the Problems Involved, Kadyrov's Chechnya Bets on Tourism

Published in Analytical Articles

By Tomas Šmíd (the 30/10/2013 issue of the CACI Analyst)

Chechnya’s economy has been struggling with long-term problems, which have had a significant and visible impact on standards of living in the republic. Post-war reconstruction of the economy is far from accomplished and development is still hindered by an enormous level of unemployment. This provides a ground for both emigration and open sympathies with the opposition, which is currently represented by the radical Islamist wing alone. The Chechen government itself endeavors to spur some sectors of the economy, e.g. the tourist industry; however any major progress can hardly be expected without the implementation of significant political-economic reforms, and above all, an improvement of civic freedoms.

BACKGROUND: According to representatives of Kadyrov’s regime, tourism should play a more significant part in the Chechen Republic's economic structure. Due to the Winter Olympic Games in Sochi, huge amounts of money are being invested to encourage the development of tourist infrastructure in the Northern Caucasus. A company named Kurorty Severnogo Kavkaza (KSK) plays a central part in this effort. Sergey Vereshchagin, who is closely associated with Alexander Khloponin, the presidential representative for the North Caucasian Federal District, took over as the head of KSK after the dismissal of Akhmed Bilalov.

Outside of Chechnya, this state-controlled enterprise is involved in other republics, including Adygea, Northern Ossetia, Kabardino-Balkaria, Dagestan and Ingushetia. In fact, Chechnya has long avoided using this company for building holiday resorts in the republic. However, in spring 2013, Kadyrov’s people set up a meeting with KSK to negotiate merging Chechnya’s holiday resort projects with the KSK holiday resort network. Though both parties expressed their willingness to merge, Kadyrov’s financial and economic interests proved to be of greater importance.

The leading project in Chechnya is the construction of an all-season ski resort called Veduchi, in the Itum-Kale district. In cooperation with Vnesheconombank, the Chechen multi-millionaire Ruslan Baysarov finances the whole project. More holiday resorts, all backed by Kadyrov, are being built around Kazenoy Am (Blue Lake). Kadyrov is also promoting the construction of a huge reservoir, called The Sea of Grozny, near the capital of Chechnya.

Taking a closer look at the Veduchi holiday resort, the whole project is worth 15 billion rubles (US$ 471 million). The ski resort, consisting of 19 ski slopes totaling 46 kilometers in length, is supposed to serve about 4,800 tourists at a time. However, low quality infrastructure poses an obstacle to effective transportation in the mountainous areas. Roads starting in the so-called forest belt and going into the high mountains are fairly clear in the summer, but are hardly usable in the winter as only off-road and military vehicles can pass. For this reason, the construction of the resort has not been started.

In the author’s own experience, the journey from Itum-Kale to Grozny takes about two hours, despite the fact that it is only 70 kilometers long. Moreover, getting to Veduchi takes nearly five hours. When starting from Shatoy and going towards Itum-Kale, the roads are barely passable as there is hardly any asphalt in use. Tourist resort projects do not budget for road construction. In negotiations with KSK, the Chechen government took on responsibility for building the infrastructure, and has had to request financial aid from the federal center to begin construction of the roads.

IMPLICATIONS: Either refusing to or simply being unwilling to foresee all the challenges involved, Kadyrov strives to bolster the tourism industry in his country. Constructing high quality infrastructure is one of the prerequisites of a successful tourism industry that needs to be solved. Kadyrov will also have to abandon the idea of protecting the monopoly of Aviakompania Grozny for air service. In comparison to other cities in the area such as Vladikavkaz, Nazran, Nalchik, and Makhachkala, plane tickets to Grozny are the most expensive. Additionally, Kadyrov has yet to realize that if tourism is to thrive, it requires a whole range of additional services that often involve small businesses.

However, the omnipresent corruption prevents people from running small businesses as local authorities often engage in blackmail. For this reason, predominantly younger Chechens leave their homeland to work in Russian or European holiday resorts. Moreover, frustration over the uneasy situation often becomes a key motivation for joining the anti-Kadyrov opposition, which is currently only credibly represented by Islamists. In addition, limited social mobility is related to the lack of true economic development. This connection, nowadays reinforced by the dominating position of Kadyrov’s clan, is often neglected. Similarly, there is a link between limited social mobility in the country and the radicalization of some groups in Chechen society.

There is not much one can achieve in Chechnya without bribery. A mere visit to the doctor requires a 5,000-ruble bribe. Because of corruption, there is no system of education. The corruption in Chechnya is so bad that a person who is interested in a real education and not just a degree is forced to study abroad. To build a tiny farm or start a small store involves so many bureaucratic obstacles and racketeering by Kadyrov’s militia that there is no realistic expectation of making a profit for those outside of Kadyrov’s clan. More often than not, those who disobey face tragic consequences. Extortion techniques involve arson, torture and even the death of the defiant individual.

Due to the existing levels of fear and tension, there is no way Chechnya can become a popular tourist destination. Since tourism is a luxury regular Chechens cannot afford, relying on local customers will not work. Additionally, the remaining nations of the Russian Federation, including the Russian majority, are used to Western and Mediterranean standards and are biased against Chechens. Outside of the Russian Federation, conventional and wealthy tourists do not tend to visit Chechnya. On the contrary, visitors to Chechnya are mostly adventurers. 

CONCLUSIONS: In terms of security, Chechnya’s situation is no more risky than that of Dagestan or Ingushetia. However, Chechnya's reputation constitutes an obstacle to economic and social development. Kadyrov’s political practices, his preference for monopolies, the suppression of ownership and entrepreneurial freedom, and the pandemic level of corruption are not making things better. Unless certain sectors of the economy are de-monopolized and small and medium-sized businesses are granted more favorable conditions for growth, chances are slim that Chechnya will ever become an attractive tourist destination. Grandiose holiday resorts in the mountains will only serve as a way of sucking funds from the federal budget.

AUTHOR'S BIO: Tomas Šmíd is assistant professor at Masaryk University. He was a Fulbright Fellow at the Central Asia-Caucasus Institute in 2010-2011.

Read 9878 times Last modified on Wednesday, 30 October 2013

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