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Economic development of the Republic of Karelia in 2005

  Results of 2005

  Economic Policy

  Productive Industry

    Timber Industry Complex

    Mining Complex


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Status of Productive Industry

Engineering Industry

Despite of a complex situation observed on some enterprises of the machine-building branch, it was possible to keep positive dynamics of the basic economic parameters as a whole in the republic and to achieve the majority of forecasted parameters. Index of industrial production regrding the "Production of machines and equipment" form of economic activity in 2005 has made 125.2% to the standard of 2004 and 160% - to the standard of 2001.

According to the republican program "Guidelines of the state policy of development of industry of the Republic of Karelia", engineering industry is considered among priorities, therefore the Government of Karelia pays special attention to problems of its development. General cooperation agreements with the largest enterprises - Petrozavodskmash Close Corporation and Onego Tractor Plant (OTP), Inc., are concluded.

Due to work of the Government of the republic with administrations of enterprises of engineering industry, it became possible to solve incipient problems more operatively, promoting development and maintenance of growth of volumes of production of output goods.

Petrozavodskmash Close Corporation developed new partner relations with enterprises of close and far foreign countries, contracts were concluded for production and delivery of paper-making machine to Byelorussia, equipment for oil-and-gas industry to Tatarstan, equipment for Moscow underground. Solution of a question on placement of order of the Ministry of Atomic Energy of Russia for production of containers at the enterprise for storage of nuclear fuel waste enters a completion phase. Assistance and support in expansion of cooperation with Archangelsk area is rendered.

The basic lead for further development of the enterprise and increase in volumes of its production is strengthening cooperation with Karelian enterprises, first of all enterprises of pulp-and-paper industcry, in order to participate in their modernisation and equipment programs. Petrozavodskmash Close Corporation has such joint programs with Segezha Pulp and Paper Plant, Inc., and Kondopoga, Inc.

Presence of a package of orders has allowed the enterprise to overcome slump in production, to provide loading and growth of volumes of production in 2005 (136.8% compared to 2002) and to define prospects for 2006.

Onego Tractor Plant, Inc., experiences complexities related to production distribution difficulties. Caterpillar logging equipment promptly concedes positions to wheel logging complexes of foreign manufacture. So, if in 2001 there were made 654 tractors at the enterprise, in 2005 there were made only 360 tractors of various modifications.

The Government of the Republic of Karelia accepted the order on assistance to Onego Tractor Plant, Inc., and measures which are directed on support of the enterprise are developed.

Positive dynamics of manufacture during the last 3 years is observed on "Avangard" Ship-Building Factory, Inc. In 2005 156% volume of manufacture to the standard of 2003 was achieved. However, the achieved level of production does not allow to solve the main problem of the enterprise which is repayment of debts to the budget (up to 240 million roubles).

For rendering assistance and support of machine-building enterprises of Karelia changes to the operating republican legislation on taxes and tax collections are made. According to the Law of the Republic of Karelia N913-ZRK of November 1, 2005, for enterprises of the engineering industry, engaged in production of machines and equipment for enterprises of timber industry complex, shipbuilding and ship repair, the property tax is established at the rate of 0.2% (earlier there was accepted the rate of 2.2%).

Within the period from 2002 to 2005 the enterprise Karhakos, Ltd., which today makes a foundation of such new for Karelia kind of activity as manufacture of electric equipment, electronic and optical equipment, works stably in the republic. From the moment of commissioning the first turn of its industrial base the enterprise has increased its volumes more than 18 times, having achieved production volume of more than 200 million roubles by results of 2005. For this period are the second and the third turns of the industrial complex were commissioned, that has allowed the enterprise both to increase its production volumes, and to solve a serious social problem through creation of new workplaces and to increasing the number of its employees more than 7 times. In many respects, thanks to this enterprise, the performance index of this kind of activity in 2005 has made 135%.

Light Industry

Measures are taken for increase in production volumes of light industry enterprises (textile and clothing manufacture). Clothing manufacture Torsten, Gerda, Erni, Petrostil keep gaining popularity in the republic and beyond its borders. Manufacture at the ex-Severyanka factory, Karelskiye Uzory, Ltd., factory (ex-Zaonezhskaya Vyshivka) are restored.

Despite of measures taken, it was not possible to liquidate decrease in production volumes regarding this kind of activity. The index of industrial production of textile and clothing manufacture in 2005 has made 88.1%, manufacture of articles made of leather and shoe making has made 39.5%

Generation and Distribution of Power, Gas and Water

Considering the vital value of power in economy of the republic, the Government pays constant attention to development of the branch, especially in recent years, during its reforming.

Bases of structural reform of the power industry have been put by the Governmental order of Russian Federation N 526 of July 11, 2001 On Reforming Power Industry of the Russian Federation and Federal law N35-ФЗ of March 26, 2004 On Power Industry. The purposes of structural reform of power industry are increase of efficiency of power industry enterprises and creation of conditions for their investment appeal.

The strategic task of reforming is translation of power industry into the mode of steady development on the basis of application of progressive technologies and market principles of functioning, maintenance of reliable, economically effective satisfaction of solvent demand for electric and thermal energy on this basis.

The Government participates directly in reforming power industry complex of the republic.

In November of 2001 the Government of Karelia created a working group which faced the task of reforming Karelenergo, Inc., in view of maintenance of the highest possible consideration of features and interests of the republic. In June, 2002 a tripartite Agreement on reforming a power complex of Karelenergo, Inc., was concluded between the Government of the Republic of Karelia, Russian Open Society UES of Russia and Karelenergo, Inc.

In 2005 the first stage of reforming of Karelenergo, Inc., was completed, division of the joint-stock company by kinds of activity and allocation of non-profile kinds was made.

There have been registered newly created joint-stock companies of Karelian Power-Selling Company, Inc., Karelenergo, Inc., and Karelian branch of the Territorial Generating Company N1, Inc.

Under conditions of the power supply system reforming reliable electrosupply of consumers was provided. Growth of power consumption since 2002 has increased by 14.8%, the general power consumption in 2005 has made 8655 million kWh.

In 2006 work on realization of the second stage of reforming that is inter-regional integration of companies by kinds of activity is expected.

In 2005 in the republic there has begun preparation for municipal power engineering reforming.

With a view of rendering necessary methodological and legal aid to institutions of local government in solution of the given tasks by the order of the Government of Republic Kareliya N89r-P of April 8, 2005 there was created a special working group comprising heads and experts of the branch ministries and state committees of the republic and the Regional power commission of the Republic of Karelia.

Alongside with reforming, attention was paid to power supply system development of. In 2002 - 2005 it was invested 1,1 billion roubles in power objects. Reconstruction of Hemäkoski, Ignoila, and Suuri-Joki small hydroelectric power stations of Ladoga lakeside was held. Reconstruction of Kondopoga hydroelectric power station proceeds. Development of network facilities was carried out. There were constructed and reconstructed about 160 km of high-tension electric networks. Settlements of Kepa, Luusalmi, Verhniye Vazhiny were put on centralized electrosupply.

According to the Cooperation agreement between the Government of the Republic of Karelia and Gazprom, Inc., construction of a gas main Petrozavodsk-Kondopoga is completed. The further gasification of available housing of Petrozavodsk, transition of industrial boiler-houses on natural gas was carried out. In the long term it is expected to switch a number of boiler-houses located in immediate proximity to the gas main on burning of natural gas (settlements of Meliorative, Novaya Vilga, Shuya, Beryozovka, Yanishpole and others).

With the purpose of decreasing manufacturing work power expenses, creation of conditions for application of power-saving technologies and equipment, providing increase of efficiency of use of fuel and energy resources, by its order N119r-P of March 15, 2004 the Government has approved the Republican target program on power-saving for the period till 2006.

Technical support
Created: April 10, 2006. Last updated: May 17, 2006.
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