Billionaire's Plan to Save Single-Industry Towns
Published: January 31, 2014 (Issue # 1795)
Billionaire Oleg Deripaska's Basic Element on Wednesday outlined ways to breathe new life into hundreds of single-industry towns teetering on the edge of economic collapse.
Crude state subsidies should be jettisoned, the company said. Viable towns should be supported, while no-hopers must be wound down.
A holdover from the Soviet Union, 16 million Russians live in 340 single-industry towns across the country, according to the Economic Development Ministry. Their degeneration has long been a headache both for Basic Element and the government, as they try to hold the line between their frequent insolvency and the social consequences of allowing them to fail.
Related: Deripaska Brings in Magna’s Co-CEO for Basic Element
In 2009, workers in Pikalyovo in the Leningrad region near St. Petersburg blocked the main highway because local cement factory, owned by Basic Element, was on the verge of closing.
The situation was diffused only when then-Prime Minister Vladimir Putin flew in to offer a packet of state bank loans to fund overdue salary payments and make sure Deripaska — who owns many factories in far-flung regions — fully understood his social responsibilities.
Not all single-industry towns have the same grave outlook as Pikalyovo. Provided government help is applied in the right places, more than half are economically robust, said Sergei Lomanov of the Center for Strategic Research, a nongovernmental think tank commissioned by Basic Element to conduct the research.
Related: State to Resettle Some Single-Industry Towns
"There is no need to drag investors into many of these towns. Usually they already have small and medium-sized businesses running that need only baseline support from local authorities and, possibly, limited additional benefits," Lomanov said.
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