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. Last Updated: 07/27/2016

Chechnya Finds First Foreign Investor: China

China will build a fish farm in Chechnya, becoming the first foreign investor to show real interest in pouring money into the war-ravaged republic, Chechen President Alu Alkhanov announced Thursday.

China Development Bank, which funds public works projects, is to bankroll the 100 million-ruble ($3.7 million) project to open the fish hatchery. The bank, possibly with other investors, will later build shops and restaurants to sell the fish, sinking a total of $300 million in Chechnya, Alkhanov said upon his return from China.

Chinese Embassy officials said they were unaware of the plans. Alkhanov himself seemed at a loss for words when pressed to explain why anyone should invest in the restive republic, where violence and disappearances continue despite Kremlin assurances of a return to normalcy.

The Kremlin itself has been pressing big businesses to divert some of their fortunes into the reconstruction of the North Caucasus. Putin urged business leaders earlier this month to invest some 14 billion rubles ($529 million) in the region, which includes Chechnya.

Alkhanov said four of 23 investment projects pitched to the Chinese, including the construction of a broadband network, a glass packaging plant and a food processing factory, had been earlier presented to Russian investors during the Kuban forum in the Krasnodar region.

Alkhanov said the final details of the fish farm, with financial guarantees from state-controlled Vneshekonombank, would be signed by Nov. 11 during a visit by Chechen officials to China.

"The most important thing is to carry out the first project, so the Chinese see the effectiveness and the safety of their investment," Alkhanov said on the sidelines of the news conference.

Alkhanov said "a good foundation for cooperation with the Zhejiang province" had been established during his visit. Zhejiang, located on China's southeastern coast, is home to 53 different ethnic groups.

Alkhanov said his delegation had presented specific projects with detailed investment cases, which inspired "wide interest from investors."

Russia-China trade turnover reached $29.103 billion last year, up 37.3 percent from 2004.

Given Chechnya's staggering social problems, though, Russian big business appears reluctant to spend money there. "The risks for entering Chechnya are very high," said Oleg Fomichyov, chief of the expert analysis council at the Russian Union of Industrialists and Entrepreneurs, or RSPP, the big business lobby group.

"Entrepreneurs are ready to deal with business risks, but not with risks to personal safety," Fomichyov said.

The republic's staggering unemployment rate of 80 percent means cheap labor. But this opportunity can only be tapped if the authorities ensure the safety of businessmen who come to work in Chechnya, Fomichyov said. Transportation and communication infrastructure, which is sorely lacking, must be built as well.

At Alkhanov's presentation, concerns about rebel insurgency and the need to rebuild destroyed housing in Grozny seemed to raise reporters' interest more than foreign investment.

Alkhanov said the government would reconstruct 85 percent to 90 percent of Grozny in two to three years, to make it look "the same or better" than it did in 1995, at the beginning of the first war.

Human rights abuses in Chechnya, widely covered by slain investigative journalist Anna Politkovskaya, also remain a big concern.

Alkhanov began Thursday's news conference with a minute of silence for Politkovskaya, who was shot dead in her Moscow apartment building on Oct. 7. He asked reporters not to ask questions about her murder because the investigation was ongoing.

Chechnya has a plan to improve its social and economic situation that will require 180.6 billion rubles ($5.94 billion) in investment from 2008 to 2011, Alkhanov said. The region is counting on the federal center to provide 142.3 billion rubles ($5.28 billion) of that amount.

While big businesses are not thrilled about the region, they will consider investing in well thought-out projects, Fomichyov said.

He said RSPP was drawing up a proposal to establish a privately managed investment fund through which businessmen could invest without establishing a physical presence in the North Caucasus. The fund also would invest outside of Chechnya, helping diversify risks, he said.

Delovaya Rossiya, another business lobby group, floated the idea of creating a state-supported North Caucasus investment fund worth 30 billion rubles ($1.1 billion). Unlike RSPP, Delovaya Rossiya would like the government to provide guarantees for investors, said a senior Delovaya Rossiya official, Nikolai Ostarkov.

Ostarkov said the biggest attraction of Chechnya was the government's eagerness for private money. "Businesses are counting on being able to solve all of their issues faster there," he said, in a reference to Russia's notorious bureaucracy.

Chechnya's economy is now dominated by state-run companies, including Sberbank and Rosneft.

Ostarkov and Fomichyov said they have never visited Chechnya.

But businessmen from the Zhejiang province might be coming to Chechnya soon. The province has a lot of experience with foreign partners and the Chechens are "content with our first meetings with the governor and officials of the province," Alkhanov said.

Joyce Man contributed to this report.