Decline of growth rates in forest-logging industry (index of physical volume was 98% in 2000, 125% - in 1999) was determined by new custom tax rate introduced by the Government of the Russian Federation. Price increase for fuel and electricity also made negative influence on the cost of enterprises and profit decrease..

Decline in export prices for round wood is still kept at the same level because of the continuing price competition of Karelian exporters in external market. The problem is not solved yet.

Total logging in the republic made 6,4 mln cubic meters in 2000. It's 7% less than in 1999.

The weather conditions also influenced negatively the situation in forest-logging industry - warm weather at the beginning and at the end of the logging period.

17 logging enterprises out of 27 decreased volumes of production in comparison with 1999 by 413 thousand cubic meters. As a result, the budgets of all levels didn't receive more than 30 mln rubles.

Among the enterprises, having increased the volumes of production are: "Sokes" (117%), "Belomorsky LPE"156%), ÎÎÎ "Dial" (224%), ZÀÎ "Kemles" (120%), ÎÎÎ "Segezhales" (121%), ÎÀÎ "Lahdenpohsky LPE" (131%).

One of the positive trends is transition to assortment technology of logging. Rates of technological reconstruction in the republic take over the achievements of other regions. In 2000 the volume of assortment logging made 2,6 mln cubic meters (41%) from the total volume of logging. New technology is put to operation at ÎÀÎ "Ladenso".

In 2000 worsened finance situation of logging enterprises. In total in the industry profit decreased 3,5 times, cost per 1 ruble of produced production increased by 42%.

In woodprocessing industryphysical volume of production grew by higher rates (137%) than in forest complex on the whole. Timber production at ZÀÎ "Zapkarelles", ÎÎÎ "Letnerechensky LDZ", ÎÀÎ "Ilyinsky" and some others increased their production more than 2 times.

On the whole, in the republic in 2000 it was produced 771 thousand cubic meters of timber (123% in comparison with 1999).

Lahdenpohsky plywood factory is a branch of OOO "Bumexñ". Plywood production increased by 20% in 2000 and made 16 thousand of cubic meters.

But on the whole wood processing industry experienced significant losses - in 2000 65% of all wood processing enterprises sustain losses, which is the highest index in all industries.

Pulp and paper enterprises worked stable. Production growth was provided by all the enterprises of the republic of the branch. ÎÀÎ "Kondopoga" increased paper production volume by 6%, ÎÀÎ "Segezhsky PPM" increased bag paper production by 45%..

ÎÀÎ "Pulp Factory "Pitkyaranta" also increased its production volume. In 2000 pulp production made 72,5 thousand tons, in comparison with 1999 it is higher by 13%. Export made 80% of production.

Reconstruction is being held at the enterprise. Total cost made 136 mln rubles in 2000.

ÎÀÎ "Lyaskelsky pulp and paper mill" increased paper production by 66%. Reconstruction cost 15 mln rubles.

Main goals for 2001 are:

• stabilization of logging enterprises;
• renovation of fixed funds;
• cost decline on the base of business-planning;
• new kinds of products yielding, utilizing coniferous wood;
• increase of government influence on price policy of enterprises, including price agreements between logging and pulp and paper enterprises;
• search of new markets and investment attraction.

Metallurgy and mining enterprises influence total economic indices in the Republic of Karelia. These enterprises takes the second place after forest complex industries.

During 2000 the index of physical volume of ferrous metallurgy decreased till 94%. Actually, the decrease was planned by the leadership of OAO "Karelian granule". The goal of the activities is to redistribute iron mining volume to recover production of the function quarry. Volume decrease caused the total decline in iron granule production by 6,5% in comparison with 1999. But we also should mark profitability decline from 16% in 1999 to 3% in 2000.

In non-ferrous metallurgy the leading enterprise - Nadvoitsky aluminum factory - keeps the growing tendency of physical volume of production at the level of 8%. Profitability level is 19% and has a tendency to decreasing.

Mining complex of the republic is represented by the enterprises of stone processing, construction crushed stone, legmatite and shungite. this branch has considerable potential for growth and increase of its portion in general volume of industrial production.

In 2000 the rate of volume growth of crushed stone production made 130% in comparison with 1999.Chupinsky GOK produced more than 25 thousand tons of grained legmatite. Sales realization of products increased in 1,5 times at ÎÎÎ "NPK Carbon-Shungite".

General agreement with the largest Russian company "Aprossa" and Australian Eshton Mining LTD company about the creation of the joint venture for diamond prospecting and mining on the territory of the Republic of Karelia was signed.

In 2001 powerful mining enterprise on crushed stone production on the deposit Lobskoye-5 is scheduled to be put into operation. Liquidation work of the underground complex at the GOK "Karelslyuda". will be going on. The federal budget allocated 20 mln rubles for construction works at the enterprises located in Louhsky district.

Growth of volume rates by 22% is marked in machine making in 2000 despite of price increase for materials, spare parts and especially power carries.

At the same time, financial situation at the enterprises is still complicated and it caused by the lack of circulating assets; "old" debts, taxation penalty; decrease of solvent orders. As a result, the portion of the industry in general entering of taxation payment declined from 4,6% in 1999 to 3,7% in 2000.

The main machine making enterprises are located in Petrozavodsk (97% of the production volume). The tendency of decrease of the portion of large and middle enterprises (from 87% to 73%)has been marked lately. It means that the structure of the industry is being gradually changed and creation of small-sized and joint enterprises. But the largest enterprises, such as the ÎÀÎ "OTZ", ZAO "Petrozavodskmush", making 60% of volume products will still be the most influential in the industry..

The rates of product growth for pulp and paper and chemical industries has been rapidly increased at "Petrozavodskmush" more than twice increased casting for users outside of the republic.

Decline of solvent demand and increase of custom taxation for logging enterprises influenced production outcome of ÎÀÎ "Onega Tractor Plant". Trail tractors production decreased by 8,4% in 2000 in comparison with 1999. Nevertheless, the enterprise provided tax payment by 107,6% of charged taxes and at present is being reconstructed for new products outcome - tractor TLT-100.

ÎÀÎ "SSZ "Avangard" is in complicated financial situation. The main portion in the production volume makes power production and heat provision for the neighborhood district "Klyuchevaya". It is drastically important to transfer boilers to natural gas, which allows to decrease power cost for users.

The Government of the republic took the measures to support the machine making enterprises. They were:

• ZÀÎ "Petrozavodskmash" - in accomplishment of mutually beneficial project with ZAO "Kartontara"
• ÎÀÎ "OTZ"- in cooperation development with the enterprises of the Republic of Belorussia within the frames of the agreement between the republics;
• ÀÎ "SSZ "Avangard" - in agreement between the Petrozavodsk section of October railroad and ÀÎ "SSZ "Avangard" in allocation 3 mln rubles of the republican budget for the construction of the ship "Pribuzhye".

The main tasks for 2001 are: professional management at enterprises, search for new retail outlets, decrease of production expenses.

1999

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