Foreign-Economic Activity

In 2004 escalating foreign trade volumes accomplished by enterprises of the republic proceeded, and the highest parameters of volumes of commodity export-import transactions from the moment of the foreign trade activity liberalization in Russia, i.e. since 1993, have been observed. The volume of the foreign trade turnover of goods has made $1038 million, that is 21% more than in 2003. The positive foreign trade balance has made $646 million (133% to 2003). In foreign trade of the republic export prevails (81% of all turnover). Last year more than one half of the cost of the industrial output made in republic has been delivered for export.

Export of goods in 2004 has made $842 million (126% to 2003). Due to the fact that the basic trading partners of Karelia are the EU countries, strengthening of the European currency in many respects has determined positive dynamics of the export prices. Last year favorable conjuncture of foreign markets on a number of Karelian goods has been observed, some export prices have grown considerably in 2004 in comparison with 2003: raw aluminium (34%), iron-ore pellets (31%), newsprint (15%), cellulose commodity (11%), processed lumber (12%), raw timber products (7%).

Accepted by the Government of the republic orientation on attraction of investments into wood processing yields its results. In 2004 physical volumes of export of saw-timbers have grown 10%. Export of newprint by Kondopoga, Inc., grows dynamically, physical volumes have increased 30%, and cost volumes have grown 50%. Increased volumes of cellulose export by Pitkyaranta Pulp Mill, Inc., growth of physical volume in comparison with 2003 has made 6%.

At the same time round timber export remained at the level 2003 (3.5 million cubic meters). Our lumberers are still attracted by the Finnish market due to wood raw material high prices.

Cost of goods imported by enterprises of Karelia in 2004 has made $196 million, that has 4.1% exceeded parameters 2003. Import of products of investment destination, i.e. machines and equipment, has grown 56% and in cost expression has made $120 million. Expansion of purchases of the investment goods was promoted by measures on stimulation of investments into the republic.

In 2004 lot of federal laws in the sphere of foreign trade which have created more favorable and predicted conditions for development of foreign trade activities have taken effect. The core of them is the new edition of the Customs Code of the Russian Federation, and laws On Currency Regulation and Currency Control, On the State Regulation Bases of Foreign Trade Activity.

In the field of foreign trade activities the Government of Karelia sees its primary goals in continuation of work on preventive maintenance of inefficient export of Karelian goods, assistance to expansion of export potential of enterprises of the republic.

One of tools to influence efficiency of export is registering timber export contracts in the republic. Analysis of this registering testifies that for the majority of timber products export average contract prices in 2004 have heen higher than in 2003, their growth depending on kinds of timber products and conditions of delivery has made from 5% up to 46%. Special attention is paid to price examination of export contracts of the foreign trade activities participants using points of simplified passing. Only in the last three months of 2004 examination has been accomplished regarding 111 contracts, effect which has developed due to corrections towards export prices increase have made about 4,5 million rbl. The Government of the republic supported the initiative and prepared documents on some of the Karelian exporting enterprises on their participation in the All-Russia competition "The Best Russian Exporter of 2003". By results of the competition Segezhsky Pulp and Paper Plant, Inc., has been awarded with the rank of "The Best Russian Exporter of 2003".

Due to entering the finishing stage of negotiations on introduction of Russia in the World Trading Organization increase of information distribution among authorities and entrepreneurs on conditions and consequences of entering, professional training of employees knowing the WTO problematics, growth of competitiveness of Karelian production is an actual orientation in work of the Government. With this purpose at participation of the Ministry of Economic Development of Russia a training seminar and practical conference have been held in the republic.

The Government of Karelia assists and coordinates work of enterprises of the republic, unions, associations of producers of proposals on preparation of offers on custom duties optimization for consideration on the Interdepartmental Commission on customs and tariff regulation and protective measures in foreign trade at the Ministry of Economic Development of Russia.

In 2005 the solution of tasks in the sphere of foreign trade activities on preparation of business and authority for the introduction of Russia into WTO, increase of efficiency of foreign trade activities of enterprises and expansion of the foreign trade relations, formation of image of Karelia as a region open to economic cooperation will proceed.

Implementation of Foreign Relations

In 2004 the basic spheres of international cooperation of the Government of Karelia were bilaterial relations with partners from Finland, Sweden, Norway, Greece and the USA, work within the framework of international regional organizations (Nordic Council of Ministers, Council of the Barents Euro-Arctic Region), implementation and support of the European Union projects. Tasks of increase in the economic component of cooperation (including in the sphere of housing and communal services), increase of its social and economic efficiency for the republic, as well as search of new possible partners have been accomplished. Frontier and customs infrastructure have been perfected.

Concerning all international programs €3014 thousand of external financing has been attracted in 2004 within 64 projects. For 2005 implementation of new large projects "Construction of the International Automobile Check-Point Suoperä" (€5635 thousand) and "e-Kareliya" (€2 million) has been agreeed on.

In 2004 within the framework of frontier cooperation with Finland 34 joint projects which total cost made €2 million have been implemented. The most significant projects were Euroregion "Karelia", water inlets in settlements of Pryazha area Muezersky, the program of tuberculosis control, support of activity of small and medium business enterprises, recycling of dichlorodiphenyltrichloroethane containing pesticides, modernization of Ore Mining and Processing Enterprise's of Kostomuksha energy saving systems.

Priority spheres of cooperation within the Complex program of actions on cooperation of Karelia and Finland for the period from 2004 to 2006 have been are approved: economic cooperation (especially in the sphere of development of small and medium business), agriculture, public health services, social protection, environment preservation, transport infrastructure development, power, cooperation of public authorities.

Within the framework of cooperation with the province of Västerbotten (Sweden) 9 projects which total €220 thousnd have been implemented. Continuation of financing of the Swedish-Karelian information business center has been approved, the Protocol on intentions on realization of project providing training experts for the wood sector of Karelia has been signed. For 2005 implementation of the new project "Industrial Partnership of the Republic of Karelia and the province of Västerbotten" with the €213,5 thousand of financing under the TACIS program has been agreeed on.

Official actions dated for the 10th anniversary of the Agreement on cooperation with the province of Troms (Norway) have been accomplished. Cooperation with the USA became more active, trade and economic presentation in New York has been organized and contractual relationship with the state of Vermont have been renewed. Cooperation within the framework of bilaterial Contract with the prefecture Ilia (Greece) continued to develop.

In 2004 work of the Government of Karelia in the sphere of Barents cooperation proceeded, study of large programs and projects, including "Barents-link" which component is Ledmozero-Kochkoma railway communication has been accomplished. At participation of Karelia, priorities of economic, transport and investment spheres in the Barents cooperation have been strengthened, the corresponding regional working group have been created. The second meeting "Industrial Partnership in the Barents Region" and the BEAR Regional Council session have been organized and held in Petrozavodsk. Transfer of presidency in the BEAR Regional Council since November of 2005 to the Republic of Karelia has been agreeed.

Eighteen TACIS projects which total budget has made about €800 thousand have been implemented in 2004. Most significant of them are the following: "Improving Conditions for Small and Meium Business in the Wood Industry of Karelia" (€30 thousand), "Stone of Kostomuksha" (€25 thousand), the project on development of cultural and natural tourism "Four Seasons in Kalevala" (€80 thousand), "Countryside Development Program for Frontier Districts of the RK" (€50 thousand).

At participation of the Government of the republic the new Regional program of the EU "Neighbourliness - euroregion "Kareliya" providing of €4 million of financing from the EU till 2007 has been developed. In 2004 the Government of Karelia continued work in the sphere of boundary and customs infrastructure in the territory of the republic: development of the status of points of simplified passing (Suoperä, Syväoro), continuation of trouble-free work and arrangement of operating points of simplified passing.

The Projectof the International Automobile Check-Point Suoperä has been promoted considerably. Withthe federal budget support (8,5 million rbl.) design estimates has been developed. In December of 2004 the construction tender has been completed, and the contractor that signed the contract with Federal customs service of Russia has been revealed. Construction of the International Automobile Check-Point will begin in the Ist quarter of 2005.