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Moscow Times
April 30, 2009
Belykh Offers Change Kirov Can Believe In
By Nadia Popova / The Moscow Times

KIROV -- It's only been four months since liberal politician Nikita Belykh became the governor of Kirov, but local businessmen say the difference is like night and day.

Dubbed "Russia's Barack Obama" by one magazine, Belykh is steaming ahead on fulfilling promises to cut red tape for small businesses and attract foreign investment to one of the most economically depressed regions in the country.

Belykh, 33, keeps a blog, something unthinkable for his 65-year-old predecessor, requires regional officials to declare their incomes publicly and opened an anti-corruption museum that exhibits expensive gifts presented to officials.

Local businessmen said while it might be premature to evaluate Belykh's leadership, they were impressed with his openness and willingness to work like a partner rather than a governor.

"The former governor and his team used to tell us not to interfere, while Belykh has invited us to talk," said Igor Petukhov, chief executive of Lesstandart, a wood refining company. "This is more of a conversation between peers, and he doesn't tell us to come one by one, as we used to before, but to come together and discuss our problems."

Belykh is the first outspoken member of the opposition to be appointed to an influential state post in years. President Dmitry Medvedev placed Belykh in the post in January, spurring hopes that the Kremlin might embrace a more democratic political landscape. Some opposition politicians say Medvedev's democratic credentials are in doubt because of the ham-fisted mayoral election in Sochi last weekend and the ongoing trial of former Yukos CEO Mikhail Khodorkovsky. But Belykh's governorship is seen by others as a test case, and his success in Kirov could lead to more liberal politicians receiving state posts.

Belykh's decision to accept the nomination attracted criticism from the liberal camp, but Belykh said in an interview that he has not changed his ideological outlook.

"I understand that businesses have serious problems these days. Talking to them is a major part of my job now," Belykh said in his office in downtown Kirov, about 900 kilometers northeast of Moscow.

Cleaning Up Kirov

After Belykh came to power, some 200 officials left the regional administration. "Some of them left on their own, while others were fired," Belykh said, explaining the shuffle as an effort to streamline the staff amid the financial crisis.

Belykh, a former leader of the Union of Right Forces, a liberal party that was disbanded in November, has lashed out at bureaucracy on his blog, where he first floated the plan to create a museum for gifts worth more than 3,000 rubles given to his officials. Russian law forbids officials from keeping gifts worth more than 3,000 rubles ($91) for personal use.

"People would be able to check how corrupt the officials are," Belykh wrote on the blog. "You give an official a gift worth more than 3,000 rubles, then come to the museum in a month to check whether your gift is there. If it's not, you go straight to the prosecutor's office."

The museum is to open on the first floor of Belykh's administration building this week.

"To fight red tape, you have to begin with yourself," Belykh said in the interview.

He has amended a regional law to oblige officials to publish their annual tax declarations in the press beginning this week. "We are also working on a system of punishment for officials who provide false information in their public declarations," Belykh said.

To further distance himself from the previous administration, Belykh put up for auction the government car, a Lexus 570, bought for his predecessor, Nikolai Shaklein. The car, which cost 4.3 million rubles ($130,000), was to be auctioned off last Friday, but no bidders showed up, and the auction was postponed indefinitely.

Hopes are high that Belykh will bring long-lasting change.

"Kirov citizens are pinning as much hope on their new governor as the U.S. ... is on Barack Obama," Expert magazine wrote on Feb. 2. "It is rare in Russia that a governor has come to power with such a bank of trust as Nikita Belykh. People expect a miracle from him, just like they do from Barack Obama."

Daunting Challenges

Belykh, however, faces serious problems ahead. The Kirov region, whose budget is 40 percent subsidized by Moscow, is expected to post a deficit of 3.7 billion rubles ($112 million) this year. Industrial production plummeted by 17 percent in the first quarter, while salary arrears soared by 700 percent. The Kirovo-Chepetsk fertilizer producer and about 2,200 timber mills, which are among the region's biggest taxpayers, have seen their sales halve on average.

Some military enterprises, the region's pride in Soviet times, are in deep trouble. State-run arms producer Molot, based in the south of the Kirov region, has not paid salaries to its workers since November.

Belykh said the problem at Molot was linked more to bureaucracy than the economic crisis. He said the Finance Ministry has calculated that the plant needs a cash infusion of 380 million rubles, but the firm's management has refused to accept the money, saying it needs 450 million rubles to pay all of its debts and taxes and activate bank accounts frozen by the Federal Tax Service.

"The last time I saw my salary was in November," said Molot worker Yelena, 53, who asked that her last name not be published, citing fear of reprisals. "They have given us some food to cover part of the March salary -- flour, sugar, vegetable oil, canned meat and rice."

Yelena, speaking by telephone from Vyatskiye Polyany, where the plant is located, said she would support Belykh as a politician only after he helped obtain the money from Moscow.

Belykh said has he tried to help the plant, which produces carbines and sporting rifles, according to its web site. A plant spokeswoman said Molot also makes grenade launchers.

"What I can do is bombard the Finance Ministry with letters and talk nonstop on the telephone," Belykh said. "It's just a matter of persistence and will to solve the problem."

The Finance Ministry's press service was not immediately able to determine which department was dealing with Molot, and a spokeswoman said she received negative replies after making inquiries with several departments.

Molot spokeswoman Diana Nazarova said the plant has suffered financial difficulties for the past two years because of a scarcity of orders, a shortage aggravated by the crisis.

Molot's problems started when the state did not buy arms that had been produced, Belykh said, adding that state defense orders from the Kirov region for 2009 amount to 1.7 billion rubles.

"But it is all just on paper, while in reality Russian Technologies and other state-run defense companies don't place orders with Kirov military enterprises," he said, looking tired as he sipped black tea.

"There are lots of problems to solve. I only sleep three to four hours a day," Belykh said. "You may think it's cool to be the governor of a region, but it's actually a very tough job. Sometimes your body just can't stand it."

Other liberal politicians said it would be difficult for Belykh to manage the region, where cronyism is widespread and civil society is underdeveloped.

"It will be difficult to strike a political balance between Belykh's new team and local officials and bureaucrats," said Vladimir Ryzhkov, a former State Duma deputy. "Kirov has an extremely weak civil society and only nominal political parties with almost no democrats among them."

In the 2007 Duma elections, the Union of Right Forces received less than 1 percent in the region.

"The previous governor was unable to come up with a clear strategy for developing the region, leaving his successor with the task of starting that job almost from scratch," Ryzhkov said.

Ex-Governor Replies

Shaklein, the former governor, brushed off criticism. "None of the businessmen ever complained about a lack of open talk with the governor," Shaklein, now a Federation Council senator from the Kirov region, said Wednesday in an interview. "We fought corruption. ... I don't agree with any of these accusations."

He said people always criticize former authorities when new leaders come to power.

"Businesses thrived when we were in power," said Sergei Sharov, Shaklein's former deputy. He now owns a meat plant and advises Belykh on small business. "The number of small businesses increased by 1.5 times during the five years we were in power, through 2008, and tax revenues collected from small businesses rose by 3.4 times over that period."

Sharov said the administration assisted small businesses by opening 26 special centers where they could receive advice and file complaints about bureaucrats.

"But we couldn't control the towns' local administrations," he said. "The governor couldn't fire them even if they treated businessmen badly."

Courting Investors

Belykh said he could cut the profit tax to support small businesses if they could prove that turnover would increase as a result. Several businessmen said they believed that they would come to an agreement with Belykh on dropping the tax.

"It is easier for us to talk about the problems because we are from the same generation," said Petukhov of Lesstandart. "Many businessmen in Russia today are in their 30s or 40s, so they don't feel like they are on the same page as officials in their 60s who grew up in Soviet times."

He said local businesses had felt insecure under the previous administration. "You never knew what the administration would do to your business: close it, fleece it or torment it," Petukhov said. "It was a real problem if an official's business interests clashed with yours.

"The officials who oppressed business are now keeping silent to see what the new governor will do," Petukhov added.

Belykh said he didn't want investors to see Kirov as a Soviet backwater.

"I want to change the image of the Kirov region, it's too Soviet. In reality, however, it is not like that at all," Belykh said, vowing to be especially open to foreign investors.

"The situation with foreign investment is very bad in the Kirov region," Belykh said. "We want to create a system of maximum convenience for them. The agriculture sector and transportation and logistics businesses are open for foreign investment. And the work force is among the cheapest in Russia."

Some foreign investors said Kirov has a lot of hurdles to overcome to attract their money. "The bureaucratic barriers are very high in Kirov," said Andrei Metyolkin, chief executive in Russia for Teka Enterprise, a Spanish company that makes kitchen stoves in the Kirov region. "Besides, the infrastructure is terrible; there are simply no roads as soon as you leave [the city of] Kirov. But we hope the new governor with solve this problem."

The quality of 76 percent of the Kirov region's roads is unsatisfactory, according to statistics provided by Belykh's press office. The governor's administration has earmarked 1.8 billion rubles to build and resurface roads this year, down from the 2 billion rubles previously planned, the press office said. Expert ratings agency ranks Kirov in 71st place in terms of investment potential among all of Russia's regions.