New Outlines for 'Monocities' Established

The Regional Development Ministry, concerned that the situation in 17 so-called monocities could collapse at any time, will classify such towns as either progressive or depressed as it determines which will get state help and which will eventually fall off the map.

The ministry has prepared a document, a copy of which was obtained by Vedomosti, spelling out how the state will support cities that are overreliant on one industry. The plans include an algorithm for working with monocities, said Andrei Neshchadin, a ministry official.

"The problems are very complicated, and every city has its own. This isn't something we'll be able to solve in a year," Neshchadin said.

A town qualifies as a monocity if it meets one of two criteria. The first is if more than 25 percent of its economically active population works at one business or a group of businesses that are interreliant as part of a “technological chain.” The second is if the output of such an enterprise or group of enterprises is at least 50 percent of the town’s overall production.

There are more than 400 such towns and cities in Russia, according to the ministry. They are home to 24 percent of the country's urban population, and before the crisis they accounted for 40 percent of gross domestic product.

The Khanty-Mansiisk autonomous district and the Sverdlovsk and Irkutsk regions have the highest concentration of monocities. And while economic factors, such as falling prices and depleted resources, have caused some of the problems, monocities are also seeing their populations shrink naturally and as people leave.

The Regional Development Ministry has proposed that 250 to 280 of the cities be monitored, with some possibly receiving support as early as next year. Sixty of them could see their situation worsen in the coming years, while 17 are already in crisis and are being monitored constantly.

"We'll work with the cities in the main list according to the plans in the document, but the situation in the 17 crisis cities could blow up at any time and requires an urgent response," Neshchadin said.

The state will help resettle people out of monocities that are classified as depressed. Neshchadin said the ministry had already decided to relocate people from two cities in the republic of Komi that have become economically unviable. The plants are using technology from 30 to 40 years ago with no modernization in the past 15 years, and the cities are located far from their markets.

Population centers listed in the progressive category will be diversified. "There's a chance for four types of cities to survive: those that are near major industrial centers, ones with unique potential, cities near major highways and those that can be redeveloped for farming," he said.

Towns in that list should prepare a stabilization program. If approved by the federal government, the city can apply for budget support. The 2010 federal budget has allotted 10 billion rubles ($332 million) for monocities, and the Investment Fund could provide another 10 billion rubles for construction.

Initially, however, the Regional Development Ministry plans to develop a stabilization program in the monocities, starting with three to five pilot projects, which will be chosen through a competition, Neshchadin said.

All possible means of support will be used in the progressive cities, including financing from state banks, grants from the budget, inviting companies to fulfill state orders, subsidizing electricity costs and restructuring tax arrears.

So far, there are no unified criteria for the programs, although they must be realized within three years and recouped within seven, Neshchadin said. And business owners will be required to take a more active role.

"Now the owners often consider any profit theirs and any losses as the government's. We call this phenomenon the Sayano-Shushenskaya syndrome," he said.

Owners that participate in the programs will be eligible for federal subsidies, according to the ministry's document.

A Evraz Group spokesperson said the company had developed measures for monocities, including to create new jobs. The company and the Kemerovo region government recently signed an agreement creating a 300 million ruble ($10 million) fund to support small business in Nizhny Tagil and Novokuznetsk, where Evraz has its NTMK and ZSMK plants.

EuroChem is following the situation in Kovdor, in the Murmansk region, where its plant is the main employer. The plant will not have to cut jobs and the company will find money to develop production, a spokesperson said.

"Our factories became regional centers for organizing public works and for re-training, for example at the Krasnoyarsk Aluminum Smelter," a United Company RusAl spokesperson said.

SUEK was thinking about monocities' problems two years ago, when it created its SUEK-to-Regions fund, spokesman Sergei Grigoryev said. The fund is using public-private partnerships to build housing and facilitate the development of small and medium-size business, he said.

"Our city is one of those 17 problem cities," said Sergei Veber, head of the Pikalyovo city administration. "We believe that the city could be saved by uniting its factories under one, effective owner like they were previously, not just through state support for social programs and infrastructure."