Russia to keep aiding Soviet-era single industry towns

Thu Sep 16, 2010 1:12pm EDT
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By Lidia Kelly

MOSCOW (Reuters) - Russia pledged on Thursday not to abandon its Soviet-era single industry towns, despite warnings from economists that many of the blighted cities are a drag on the country's economic growth. "The question of supporting mono-towns is important and pressing," deputy finance minister Anton Siluanov told journalists on Thursday. "When the (global economic) crisis hit, the mono-towns lost the most."

Although the 2011 budget does not envisage any specific funds, fiscally conservative Finance Minister Alexei Kudrin admitted earlier this week that the pre-presidential election year may bring a "desire to solve certain social issues."

Public discontent that flared up in the mono-towns last year could revive if their economies deteriorate.

Prime Minister Vladimir Putin, who frequently visits crisis-hit areas, pledged earlier this week to continue to prop up the country's industrial base.

Earlier this year, he ordered the allocation of 27 billion rubles ($875 million) from the federal budget to cash-strapped towns.

The problem gained prominence in 2009 after a general strike in Pikalyovo in Northern Russia. The town of 22,000 is almost entirely dependent on a cement-producing complex owned by one of Russia's richest men, Oleg Deripaska.

Putin chastised Deripaska and ordered him to restart the 50-year-old factory.

But economists argue that Russia is hampering its economic growth by channeling funds to towns that have long since lost their competitive advantage.   Continued...