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Economic development of the Republic of Karelia in 2005

  Results of 2005

  Economic Policy

  Productive Industry



  Inter-Regional Cooperation

  Natural Resources
  and Ecology



Results of social and economic development of the republic within the 4-year period prove that measures taken by the Government of the RK in the field of economic policy yield positive results.

The main result of the active economic policy followed by the Government of the RK is growth of investments. Comparing two stages: from 1998 to 2001 and from 2002 to 2005, it is possible to see that the volume of investments into economy of th republic has grown more than twice.

Achievement of such volumes of investments allows to assert, that the economy of the republic has entered investment type of economic development which is the essentially new stage.

First of all, it provides quite high and steady rates of development of economy. Within the past 2 years growth of industrial production has made 110.7% and 118% accordingly. Within the 4 years growth of industrial production and the gross regional output has made 136% and 123% accordingly, that allows to speak about performance of election pledges by the Head of the republic regarding 30% of growth of economy.

Within the past 4 years more than 40 large and medium commercial investment projects in all spheres of economy have been implemented in the republic.

Alongside with it institutional changes are carried out. Within the 4 years the share of enterprises with private pattern of ownership has turned from prevailing (64%) into overwhelming (more than 72%), that indicates normal market basis for the further growth of economy.

Incomes of the consolidated budget of the Republic of Karelia in 2005 in comparison with 2001 have increased from 6,2 to 13,8 billion roubles, or more than twice.

Social needs' expenditure of the consolidated budget in 2005 in comparison with 2001 have increased by 5,9 billion roubles, or more than 3 times.

The amount of means from the budget of the republic on implementation of measures of social support rendered to the population for 4 years has increased 10 times on the average regarding each category of beneficiaries.

Monthly the republic fulfills its obligations by 100% allocating financial aid to local budgets which volume in 2005 in comparison with 2000 has increased almost 7 times, from 585 million roubles to 4 billion roubles. The basic channel of financial aid rendered to local budgets is the Regional Fund of Financial Aid for alignment of budgetary security of local budgets.

Within the past 4 years really posessed incomes of population of the republic have increased by 37.1%. The real added wages for the same period have increased by 52.9%.

All this indicates that, perhaps, not as fast as one would like it to be, yet the republic develops gradually and solves social problems. The economy gains inertia for moving forward, thus, the potential of social opportunities increases.

Priority directions of the further development of Karelia are defined proceeding from requirements of the administrative reform, reform of local self-government, Addresses of the President of the Russian Federation to the Federal Assembly, actions within the framework of priority national projects declared by the President of Russia. Besides, the strategic purposes stated in the Concept of social and economic development of the Republic of Karelia for the period till 2010, main of which is maintenance of steady increase of the level and quality of life of the population will be implemented.

In view of these program documents the following priority directions of development are defined in the republic:

  • modernization of education within the scope of the Education national project;
  • reform of public health services within the scope of the Health national project;
  • development of housing construction within the scope of the national project Affordable and Comfortable Habitation for the Citizens of Russia national project;
  • support of intensive farm productions within the scope of the Development of the Agroindustrial Complex national project, as well as cultivation and processing of fish and sea resources;
  • effective utilization of natural resources;
  • profound processing of wood;
  • development of infrastructure, first of all transport and customs infrastructure, and also in power engineering;
  • development of tourism;
  • development of small business;
  • development of innovative potential of the republic;
  • preservation of cultural heritage.

Immediate outlook tasks in the sphere of social policy are the following:

  • providing positive dynamics of real monetary incomes of the population;
  • providing general availability and socially comprehensible quality of the basic social services, including qualitative education, medical and social service;
  • realization of as much as possible effective protection of socially vulnerable categories of citizens;
  • change of ratio between the death rate and the birth rate towards birth rate increase and death rate decrease;
  • alignment of the average level of unemployment in districts;
  • improvement of living conditions of inhabitants of the republic.

The main objective of policy in the field of incomes of the population is essential decrease of the level of poverty due to maintenance of steady rates of economic growth, increase of monetary incomes of the population, increase of efficiency of programs of social protection directed on struggle against poverty, and also development of mechanisms of social partnership. The problem of increase of average wages and real incomes of the population will be solved due to attraction of investments into economy of the republic, modernization of industrial enterprises, reorganization and financial improvement of agricultural enterprises, development of the share and financial markets, development of new commodity markets.

The task of the demographic situation improvement will be solved due to creation of necessary conditions for decrease parent and perinatal deseases and death-rate, improvement of quality of health of future mothers, fathers and newborns, reduction of the number of handicapped children, preventive maintenance of children's physical inability, solution of the problem of providing young families with habitation. One of directions of death-rate decrease is struggle against narcotism, and also preventive maintenance of neglect and offences among teenagers and youth.

With a view of providing citizens with affordable habitation task have been to create conditions providing increase of consumer properties and availability of habitation, including budgetary support in purchase of habitation, also by means of mortgage credits, credits to young families and young specialists in the countryside.

It is stipulated to allocate 1377 million roubles from the republican budget for housing construction in the period from 2006 to 2010. By 2010 it is planned to increase commissioning of habitation up to 165 thousand square meters a year, that exceeds the standard of 2005 1.9 times.

Immediate outlook tasks in the sphere of economic policy are the following:

  • creation of conditions for real sector of economy development, increase of its efficiency;
  • providing growth of the gross regional output (GRO) and tax revenues on the basis of attraction of investments and modernization of economy, increase in industrial potential, increase of efficiency of use of natural and industrial resources and manpower, effective support of small and medium business, development of transport infrastructure, frontier inter-regional communications;
  • providing power equilibrium of the region for which it is necessary to create new and modernize generating capacities, create small power plants, introduce energy-saving technologies in production, on transport and at consumption of power resources;
  • technical re-equipment of enterprises for competitive production output, decrease in power consumption and material capacity of productions;
  • expansion of output of products of enterprises focused, first of all, on processing of wood and timber production, including articles of deep processing, metallurgical manufacture;
  • development of the market infrastructure directed on increase of the share of regional manufacturers in the final price of consumer goods and services;
  • increase of the share of regional products in the structure of basic food stuffs due to expansion of domestic manufacture on the basis of gradual escalating resource potential in rural economy and in the sphere of processing, strengthening of material and machinery resources of еру farming industry, first of all, on a leasing basis;
  • development of the transport infrastructure due to completing formation of a network of territorial roads, modernization of the basic inter-regional roads, development of river and sea transport; completing electrification of the major trunk-railways.

Priority directions of development of industry in the republic are timber industry and mining complexes.

For development of the timber industry complex of the Republic of Karelia in prospect the following primary goals are defined:

  • increase of the efficiency of work of logging enterprises under conditions of long-term competitive rent of wood lots;
  • attraction of investments and carrying out of technical modernization of enterprises;
  • reduction of export of round timber due to expansion of their processing in the republic. Building of plants for processing hardwood and low-grade wood raw material is planned.

Further development of woodworking is connected with escalating volumes of plywood and furniture production.

The concept of mining complex development of the Republic of Karelia provides effective integration of this sector of economy into the Russian and world markets, and also rational use of available natural resources. Implementation of the investment program of development of ferrous metallurgy in Karelia for the period till 2010 assumes:

  • prividing effective activity of the key enterprise of the branch - Karelsy Okatysh (Karelia Iron-Ore Pellets), Inc., - with increase in pelletizing up to 11 million tons a year due to development of Korpagangsky iron-ore deposit;
  • increase in volume of output of hardware products at Wärtsilä Hardware Plant by 2010 up to 70 thousand tons;
  • creation of base for commissioning a new ore mining and processing enterprise, producing chromite concentrate. In 2007 preparation of the project of the first turn of development of Aganozersky deposit of chromite ores is provided.

Among the tasks of Nadvoitsky Aluminium Factory (Branch of NAZ-SUAL) there are preservation of the achieved production volumes at total-lot loading of production facilities.

In production of nonmetallic building materials implementation of the developed investment programs provides:

  • increase in loading of available capacities by 10-15% and production volumes, accordingly;
  • diversification of the market of building materials with transition from exclusively raw orientation to processing.

Considering substantial growth of volumes of housing construction, maintenance of the building market with local high-quality building materials, products and elements, capable to compete to both Russian, and foreign production is provided.

For this purpose increase in production volumes with introduction of flexible technological lines for precast concrete factories, organization of composite schemes of construction of buildings, modernization and gain of release of foam concrete articles, escalating of manufacture of road-metal, creation of new manufactures producing innovative materials, including finishing materials, is planned.

One of perspective directions of power engineering development is gasification of cities and districts of the republic with use of natural gas.

For transportation escalating it is provided:

  • regarding railway transport - increase of carrying capacity of trains, increase of trains' speeds, decrease of the cost price per unit of transported cargoes; creation of suburban passenger company Karelprigorod; start of Ledmozero-Kochkoma piece of line that will allow to increase a transit freight flow from east regions of the country to the countries of Scandinavia, to increase volume of transportations of iron-ore pellets;
  • regarding domestic water transport - construction of boats within the new project, purchase of hovercraft boats; creation of the independent company for passenger traffic; end of reconstruction of hydroconstructions of the White Sea - Baltic channel;
  • regarding motor transport - increase in volumes of suburban and intermunicipal transportations as a result of road network development and purchase of new rolling stock;
  • regarding air transport - further development of partner relatios with domestic airlines working in territory of the republic with the purpose of rendering aviation services. It will allow to keep and develop small aircraft in the republic, to use opportunities of Peski airport and operating air stations in a number of settlements of Karelia to the full.

Major tasks in the field of informatization is development of legal space, formation of state information resources and information systems. Informatization of the Republic of Karelia in 2004-2007 republican target program is aimed at solution of this task, and for its implementation it is planned to allocate not less than 23 million roubles from means of the republican budget.

Proceeding from the task of preservation of tendencies of development of economy of investment type, it is provided that the volume of investments into the fixed capital in the Republic of Karelia should increase from 14,7 billion roubles in 2005 to 27,2 billion roubles in 2010, or by 23% in the comparable prices. If one considers volume of investments in relation to the gross regional output, then the predicted ratio corresponds to the "investment corridor" of 21-23% from the gross product, generated by the gained world experience.

In 2006-2008 implementation of more than 80 commercial projects in the republic is provided.

Considering geographical position of the Republic of Karelia, export orientation of its economy, as well as active international cooperation of the republic with countries of the Northern Europe, and also within the framework of the Barents Region, primary goals for customs infrastructure development in 2006-2010 are the following:

  • end of construction and acceptance in operation of the Suoperä international automobile check point;
  • reconstruction of Wärtsilä and Lyttä railway check points (stations);
  • providing trouble-free work of simplified check points.

In 2006-2008 it is provided to allocate 34,3 million roubles from the republican budget for implementation of actions of the Branch Target Program of the State Support of Small Business in the Republic of Karelia. It is expected, that by measures of the state support more than 500 organizations of small business and entrepreneurs without formation of a juridical person will be involved.

Increase of efficiency of the Government will be promoted by realization of administrative reform which main objective is providing availability and quality of the state services.

Within the scope of the reform restriction of intervention of the state in economic activities of subjects of business, reduction of superfluous state regulation is provided.

In enforcement authorities principles and procedures of management will be introduced by its results.

Depth and gravity of tasks set demands strengthening of cooperation between republican and federal enforcement authorities (including territorial), Legislative Assembly, local self-government, business, and public. The Government of the Republic of Karelia intends to expand this cooperation for further social and economic development of the RK, increase of standard and quality of life of its citizens.

Technical support
Created: April 13, 2006. Last updated: May 18, 2006.
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