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President of Russia Dmitry Medvedev: Good afternoon, Arsen Bashirovich,

I would like to hear from you about the situation in the republic, the social and economic situation. I would also like to hear separately about what you are doing to prepare for the start of the new school year. Tell me about how ready you are and what problems you have.

President of Kabardino-Balkaria Arsen Kanokov: Dmitry Anatolyevich, thank you for this chance to discuss Kabardino-Balkaria’s problems.

As far as the social and economic situation goes, we have drafted a development strategy for the republic to 2022, and a social and economic development plan for 2007–2011. Territorial planning and development programmes have also been drawn up.

To develop our strategy we identified the main growth sectors in the republic. They are high value-added processing of agricultural goods, the health resort and leisure sector, and industry. Development in these sectors has enabled us to double the republic’s budget over these last two years, from 7 billion [roubles] two years ago to 18 billion today.

We have also reduced the republic’s reliance on subsidies from 75 percent to 57 percent. Better tax administration and small business development boosts our revenue by around 5–7 percent every year.

There are some problems in getting people to invest in the North Caucasus. But we take part in practically all the different investment fairs (Russian and international) and we are succeeding in getting people to invest in Kabardino-Balkaria’s economy.

Dmitry Medvedev: At one of these fairs a while ago you showed me proposals for developing the tourism and recreation sector. Have you had any success in this area?

Arsen Kanokov: Yes, we have had some success, Dmitry Anatolyevich. We are taking part in and helped to draw up the “Southern Russia” federal targeted programme. Financing for development of the north face of the Mt Elbrus area has begun this year. We hope that this project will make it possible to bring 10,000 tourists into the region and create around 20,000 jobs in the service sector.

This year, 105 million [roubles] have been made available for the road from Kislovodsk to the north face. Kislovodsk gets 700,000 tourists every year and we could attract just as many to Kabardino-Balkaria and create jobs, as I just said. That is the first point.

Second, we are working hard to develop the main recreation bases built during the Soviet years – the Azau and Cheget fields. We are now building a second base at an altitude of 3,500 metres. The number of tourists is increasing every year.

Dmitry Medvedev: Do you have investors for these projects?

Arsen Kanokov: Yes, Interros is investing in the north face project and we have already signed an agreement. They have started work and have brought in specialists. What we have put in place for developing the north face of Mt Elbrus is a public-private partnership.

Several big companies, including UGMK Holding, are looking at two investment projects – construction of a cement plant and a cable production facility. Rosneft is examining the possibility of building an oil refinery in the Tersky District of Kabardino-Balkaria.

We are putting the main emphasis on developing small and medium business so as to increase the number of taxpayers. We have managed to reduce the various pressures on business. Two or three years ago we unfortunately still had a situation where businesspeople found themselves facing too much pressure and this forced some entrepreneurs to leave the republic and work in other parts of the country instead. Removing the barriers to business has made it possible to get some of the investors who left the republic in recent years to return.

Dmitry Medvedev: How are preparations for the start of the school year on September 1 going?

Arsen Kanokov: In 2007, we started work on 76 new facilities (for the first time in perhaps the last 15 years). Thirty-six of these sites were completed last year, including 10 new schools. It takes us 9–10 months to build a school now as opposed to 5–7 years in the past.

Dmitry Medvedev: Are these normal fully equipped schools?

Arsen Kanokov: Yes, absolutely normal and fully equipped. I saw one of these new schools, with two fully equipped gymnasiums and several classrooms fully equipped with computers, where 450 pupils will study. If there any delays in construction we can settle all the problems very quickly. We are quite well prepared for the school year. We have got all the schools ready, completely upgraded their technical equipment, and especially the kitchens, so that the children will have hot meals.

Dmitry Medvedev: Are wages rising?

Arsen Kanokov: Not as fast as we would like. We have had wage growth of 25–30 percent, including for teachers. The average wage in the republic today is around 8,600 roubles. Teachers are starting to enjoy a better income through the money they receive from the republic’s budget too, and from the increased money from the federal budget.

Dmitry Medvedev: You need to move over to the new system of wage payment in schools.

Arsen Kanokov: Yes, we have received the wage calculation scale. The government is working on this now and the executive authorities are drawing up and studying the methodology to be implemented.

Dmitry Medvedev: This is the only way to ensure a 25–75 percent increase in wages without an increase in payroll costs. The experience in other regions proves this, so you should also go ahead with this. As for the five percent of schools still not ready, they need to be got ready within the ten days that remain.