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Economic development of the Republic of Karelia in 2006

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  Economic Policy


  Industrial Policy


  Natural Resources
  and Ecology


   Results of 2006

Economic Policy

State policy of Government of the Republic of Karelia in the sphere of economy was formed in view of priority directions of social and economic development of the Russian Federation in the midterm, solution of tasks set by President of the Russian Federation of acceleration in the rates of economic growth and has been aimed at increase in economic potential of the republic, increase of competitiveness of production of Karelian enterprises.

Priority directions of the state policy in the sphere of production of goods, in the field of finance and social sphere are formulated in the Concept of Social and Economic Development of the Republic of Karelia for the period till 2012 which defined the basic strategic purposes and problems of social and economic development of the republic in prospect.

According to the Concept, in the republic proceed implementation of economic programs on development of mining and timber complexes, investment and industrial policy, support of small business, reforming of housing and communal services, energy-saving, etc.

With a view of increasing efficiency of use of natural resources economic policy directed on support, stimulation and expansion of manufacturing activities is followed.

Purposeful support of the basic tax bearers among industrial enterprises of various branches is carried out.

Active work on attracting investments directed on updating of production assets, purchase of modern technologies is carried on. Measures on expansion of export potential of the republic due to increase in share of manufacturing production are taken.

Further assistance to development of innovative activity and formation of elements of innovative infrastructure is provided.

Development of transport infrastructure necessary for fuller natural resources development, development of tourism and other kinds of economic activities is carried on.

Government of the Republic of Karelia actively develops mutually advantageous inter-regional relations, solves problems in the field of international and frontier cooperation aimed at improvement of social and economic status of Karelia.

Actions held for assistance to development of real sector of economy of the republic have allowed to keep positive dynamics of the basic social and economic indices, though rates of industrial growth slowed down, which is also related to high rates of growth achieved in 2005.

Investment Policy

One of the major spheres of activity of Government of the Republic of Karelia in 2006 was attraction of investments and increase of investment appeal of the republic. Last year realization of the Investment Policy of Government of the Republic of Karelia for 2003-2006 program was completed successfully. The Program primary goal was to double volume of investments in comparison with the previous four-year period is executed. In 2003-2006 investments into fixed capital have made 55,7 billion roubles, at 26,8 billion roubles in 1999-2002.

By results of research made in 2006, AK&M rating agency has conferred the 29 place on Karelia among subjects of the Russian Federation on volume of investments per capita. The same agency in June, 2006, has published rating of relative credit status of subjects of the Russian Federation, where within a year Karelia has risen from the 55 to the 33 place.

As a whole for four years in the republic there has been realized more than 50 investment commercial projects in the sphere of industry and transport, 3 850 new workplaces were created. Among the largest projects of recent years there are the following: construction of Petrozavodsk-Kondopoga gas transmission pipeline, reconstruction of Karelsky Okatysh, Inc., modernization and expansion of production of Kondopoga and Segezha pulp-and-paper industrial complexes, reconstruction at Pitkäranta cellulose factory, Nadvoitsy aluminium factory, reconstruction of Pudozh quarry, electrification and reconstruction of Karelian site of Octyabrskaya railway, construction of three turns of Karhakos factory, Impilahti timber mill, Swedwood-Karelia enterprise, etc.

In 2006 with a view of stimulating investment activity and attraction of investments into economy of the region Government of the Republic of Karelia had continued rendering state support to investors implementing investment projects in the republic.

The most claimed form of state support of investors last year was granting preferential budgetary credits on competitive basis for implementation of investment projects.

Nine investment projects were recognized the competition winners, and the tender committee decided to allocate which 220 million roubles from the budget of the Republic of Karelia on paying returnable basis. Investment projects using measures of state support are implemented in the most various branches of economy: timber and wood-working industries, transport, agriculture and fish industry, tourism.

Projects that passed competitive selection in 2006 stipulate creating more than 200 additional workplaces and reception of budgetary effect in volume 339 million roubles.

During implementation of investment projects it is planned to reconstruct the PTVM30 boilers to shift to natural gas and automate equipment of Petrozavodskmash JSC boiler-house; purchase hovercraft amphibious passenger boats in Onego Stevedore Company, Ltd., for organization of all-the-year-round transportation of passengers across Onego lake; develop gabbro-diabase deposit and organize extraction of block stone with subsequent organization of manufacture of blocks at Drugoretsk deposit by Roskamen, Ltd.; modernize log-processing works in Karelian Saw-Sill, Ltd.; modernize enterprises producing food stuffs in Louhi regional consumer society and Yarmarka Firm, Ltd.

By results of 2006 among winners of competitions there are also such projects of the building branch enterprises, as Construction of shop producing houses of heat-insulated building panels in Kostomuksha (Inkod, Ltd.), Purchase of new equipment for repairing motorways of the republic (Most State Unitary Enterprise of the RK), Construction of factory producing ferro-concrete products in Karelstroimekhanizatsiya Joint-Stock Company.

In 2006 successfully were completed the following projects Purchase of sewing equipment and increase in volumes of operating production (LahtiJoint-Stock Company), Increase in volumes of manufacture and improvement of quality of building rubble at Shoksha deposit of quartzite-sandstones (Shoksha Quarry, Ltd.), Development of Stone-Working Production (Interkamen Joint-Stock Company). As a result of implementation of projects, enterprise had an opportunity to modernize technical base, increase volumes of production and taxable base, accordingly. The budgetary funds provided for implementation of projects, are reimbursed fully.

In total in 2006, in view of given earlier budgetary credits, implementation of 32 investment projects proceeded. Total sum of given credits makes more than 600 million rbl., thus each rouble of budgetary investments involved one rouble of investments from unappropriated sources for co-financing of investment projects. It has been created about 1 thousand new workplaces.

Such form of state support of investors, as has granting profit tax and property tax privileges and within the scope of investment preference policy on the basis of concluded investment agreements developed further. In total in 2002-2006 there has been concluded 20 investment agreements. Volume of investments according to projects makes 6 055 million roubles, during their implementation there will be created 2,6 thousand new workplaces.

For the beginning of 2007 there operate 13 Investment agreements concluded with six enterprises implementing investment projects. The sum of investments mastered within these projects makes 4 613 million rbl.

Investment projects for which enjoy investment preference policy are directed on creation of industrial productions in Ladoga lakeside, Kostomuksha, Petrozavodsk, and paper production modernization in Segezha.

Small business development is of growing importance in economy of the republic, therefore Government of the Republic of Karelia continues working on perfection of legislative regulations in the sphere of supporting investment activity and business.

Program of state support of small business in the Republic of Karelia in 2006-2008 has been developed and approved; for its financing in 2006 budget of the RK allocated 7 million roubles that three times exceeds volume of financing in 2005.

For subjects of small business implementing investment projects with use of bank resources, since 2006 the republican legislation stipulates subsidizing of interest rates on credit. A bill providing similar form of state support for large investors as well is at being negotiated.

In 2006 for the first time the republic has taken part in competition of the Ministry of Economic Development and Trade of the Russian Federation on selection of subjects of the Russian Federation for assignment of grants for financing of actions are carried out within the scope of rendering state support to small business. The Republic of Karelia's project winning in the competition Creation and Development of Infrastructure for Supporting Subjects of Small Businesses (Business Incubators) has allowed to involve 10 million roubles from the federal budget. The allocated means, along with means of budget of the Republic of Karelia, were spent on major overhaul of a part of a building located on Gulling quay, 11, in Petrozavodsk for accommodation of business incubator of the Republic of Karelia, providing it with computers and office equipment. Purpose of business incubator creation is formation of favorable conditions for becoming and development of small business in the innovative sphere and information technologies.

The Republic of Karelia participated in Days of Small and Medium Business of Russia 2006 in the All-Union exhibition center in Moscow and in the VIIth All-Russia conference of representatives of small enterprises Innovations and Small Business Development. Exposition of the Republic of Karelia presented there was recognized the best.

With a view of improving information support of business, within the scope of the e-Karelia project in 2006 Government of the RK together with Petrozavodsk State University, Chamber of Commerce and Industry of the Republic of Karelia there has been created a portal for small and medium business of the Republic of Karelia. The basic purpose of the project is support of subjects of small and medium business in promotion, training, marketing, effective utilization of modern information technologies, development of international business relations on the basis of application of information and communication technologies.

Fulfilled by Government of the Republic of Karelia work on state support of business promoted dynamical development of this sector of economy. In 2006 turnover of small enterprises has increased in comparison with the last year by 32.8%. The share of turnover of small enterprises has increased in general turnover on the republic from 30.2% to 32.6%. Investments into fixed capital of small enterprises in 2006 have increased in comparison with 2005 by 26.8%.

Important parameter of business development is "density" of small enterprises in subjects of the Russian Federation (counting per 100 thousand population). The Republic of Karelia can be considered among regions with average level of "density" - 661 small enterprise per 100 thousand people. For the period from 2002 to 2006 quantity of legal persons being subjects of small business has increased by 1 thousand units or 28.5% and has made 4,6 thousand enterprises.

In 2006 work of specially created in April, 2004, working group for support of investment projects, headed by Prime Minister of Government of the RK continued. The main task of group is consideration of course of implementation of projects in territory of the republic, assistance in the solution of problems which investors face, all levels depending on enforcement authorities. In 2006 there has been held 11 sessions of working group where 20 enterprises with certain investment projects were considered.

Activity of working group yields results. In August Swedwood Karelia, Ltd., (branch of Swedish concern IKEA) has put into operation woodworking complex in Kostomuksha (1 stage of the project). Among other significant project there are revival of timber mill in Solomennoye, Petrozavodsk. Due to arrival of new proprietors (ASPEK group of companies) the factory is being reconstructed completely. Large projects on development of building industry, customs infrastructure, construction of roads are implemented, new capacities for road-metal extraction are put into operation.

Database of investment projects which implementation is provided in 2007-2010, with total amount of planned investments of more than 40 billion roubles is in constant operation.

Increasing information openness of the republic for investors, creation of the investment-conducting medium and improvement of investment image of Karelia are important constituents of investment policy of Government of the Republic of Karelia.

In July, 2006 in Petrozavodsk there passed the second Investment forum of Northwest Federal District. The main organizers of the forum were Federation Council of the Russian Federation, Administration of Plenipotentiary of President of the Russian Federation in Northwest Federal District, Government of the Republic of Karelia. Within the scope of the Forum that has convoked more than 350 participants, round table discussions and seminars were held, agreements on the program of joint actions with Russian Rail Roads, Inc., were signed. The Forum was headlined in mass media.

In 2006 Republic of Karelia was presented at international and federal levels, most significant of those presentations were held within the scope of Investment Forum in St.-Petersburg Northwest: New Investment Opportunities; in Cannes (France) at the International Trade Exhibition of real estate objects; Days of Russian Economy in Finland (Helsinki); at meetings with delegations from China and Buryatia.

The Republic of Karelia for Investors site created in December, 2003, operates actively. In 2006 the number of registered visitings of the site doubled and has made more than 16 thousand people. The Web-site developed and introduced database of investment projects regarding 'points of growth' in the context of regions and cities of the republic that allows analyzing development of productive forces in the context of territories.

The third edition of Karelia Investment brochure in Russian and English has been published.

Great attention is paid to work with mass media on problems of investment activity.

In 2007 it is planned to approve the Investment Policy Program of Government of the Republic for 2007-2010.

The overall objective of the Program is creating high investment appeal of the republic, its branches and territories in order to provide influx of necessary volumes of investments and achievement of such planned economic and social parameters as economic growth quality improvement, life-support infrastructure improvement, growth of income per head, labour employment and implementation of normative parameters of national projects.

Due to the Program implementation it is supposed by 2010 to achieve the 27 billion roubles of investments into fixed capital, that corresponds to 170% growth in established prices to the level of 2006.

Primary tasks to be accomplished by of Government the Republic of Karelia in 2007 in the field of small business support are the following:

  • organization of becoming and development of industrial and innovative infrastructure in the Republic of Karelia aimed, first of all, to development of system of business incubators (including recovery of a rent rate share for beginning subjects of small business renting premises in business incubator);
  • subsidizing of an interest rate share of investment credits for subjects of small business;
  • development of infrastructure for support of small business, granting methodical, information, consulting support to small enterprises;
  • involving small enterprises in trade and exhibition activity for further promotion of their production.
Technical support
Created: April 18, 2007. Last updated: April 23, 2007.
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