The present Government of the republic has started to work in 1998. The mobilization plan problems had been set as the main task: setback in production cessation, adaptation of enterprises and population to market conditions. The mobilization stage has been passed in 1999 when production has started to grow. By estimations of experts, Karelia was one of the first regions in Russia to overcome the crisis among. Actions have been taken on maximal loading of production capacity, change of inefficient proprietors and management.
High rates of growth of economy in 1999-2000 were promoted by low rouble exchange rate and high inflation. Many export-focused enterprises have updated a part of the fixed capital for this time. Volumes of investments of enterprises have grown mainly due to internal sources. However, to the beginning of 2002 it became obvious, that post-default factors cease to work.
It has demanded transition to more intensive methods of economic policy, especially in the investment sphere which allowed to solve the ripened social problems and to set new problems.
In 2002 the Concept of social and economic development of the republic for the period till 2010 has been revised and inserted. The Basic directions of activity of the Government of the RK on social and economic development of the Republic of Karelia for 2002-2006 and actions for their realization have been developed, republican target programs of economic and social orientation have been accepted. Development of these documents was conducted on the basis of mandates, the All-Russian programs and messages of the President of the Russian Federation.
The overall objective for the forthcoming four years was creation of conditions for steady economic growth, modernization of economy and consecutive increase of the standard of living of the population on the basis of support of self-realization of citizens of the republic, use of potential of local self-government, decrease in social inequality and preservation of cultural values.
Conditions for development of the real sector of economy and increase of its efficiency were created by formation of the legal base for development of business, formation of the competitive environment, carrying out of the "open doors" policy for attraction of investments from outside of the republic, support of effective proprietors.
The Government took all-round measures on development of small and medium business and innovative activity. Special attention was paid to points of economic growth.
Increase of well-being of citizens of republic was the primary goal in the social sphere. For this purpose it was necessary to create conditions and effective stimulus for employment, including self-employment of the population, to promote development of housing construction, to achieve growth of real incomes of citizens no less, than 1.5 times, to increase financing of the social sphere, to keep unemployment at the level of 3%, to execute mandates, which meant to build schools, medical establishments, apartment houses for veterans, municipal objects.
Great financial assets are required to solve such scale purposes and problems. Only growing and effective economy was capable to fill and increase the budget of the republic. Therefore, the Government of the republic has emphasized economic development. To perform the plans it was necessary to achieve no less than 6-7% annual economic growth.
In 2002 the Government of Karelia has declared attraction of investments and increase of investment appeal of the republic as the basic economic priority. On the basis of the "open doors" principle the Investment Strategy for 2003-2006 Program has been developed and approved. The basic target reference point was doubling of volumes of investments. The social importance of investments is defined also by the fact that they create workplaces. Within the framework of the Program the republican investment legislation has been seriously advanced, new mechanisms of attraction of investments, their support and solution of problems of investors have been created.
One of such mechanisms is preferential budgetary crediting of investment projects due to means of bonded loans of the republic launched in 2002. For 4 years 26 enterprises received more than 409 million roubles of budgetary credits on a competitive basis for implementation of their projects. The total cost of these projects is over 900 million roubles, that is each extra budgetary rouble in addition involves one and a half rouble of unappropriated means. Twenty projects are already implemented. More than 120 million roubles of proceeds of the credit have been returned to the budget. As a result of implementation of all of 26 projects more than 800 workplaces will be created.
Along with preferential crediting tax privileges are given to investors. In total for 2002-2005 15 investment agreements on granting of tax privileges have been concluded. Realization of 9 agreements with the general planned volume of investments of 5,9 billion roubles and budgetary efficiency of more than 4 billion roubles proceeds now. Under these projects there will be created 2,3 thousand of new workplaces.
Within the framework of the Program great attention has been paid to support and implementation of large and especially significant investment projects. In 2002 and the beginning of 2003 negotiations with such large strategic foreign investors as Stora-Enso and PKS-Group Finnish concerns, Swedish concern IKEA have been carried on, arrangements on construction of new factories have been reached.
As a result of teamwork the Impilahti timber mill was launched in September, 2003 (Pitkäranta district).
In 2004 and 2005 the PKS-Group Concern has constructed and set in operation the second and third stages of the factory manufacturing electric wiring for cars and assembly of electronic devices in the city of Kostomuksha. In 2006 the number of workers will reach one and a half thousand persons.
It is expected, that within the first six months of this year the first stage of the Swedwood-Karelia project - a factory producing furniture components in Kostomuksha will be entered, and in 2007 - 2008 a factory assemblying furniture will be set in operation.
Within the reporting period more than 40 large and medium commercial investment projects in all spheres of economy of the republic were implemented in Karelia.
For support promotion of such projects a working group under the direction of the Prime Minister of the Government of the RK Pavel Chernov has been created in 2004. For 2 years 42 projects have been considered to be implemented in the territory of the republic, assistance to investors has been rendered.
Stimulation of investment activity of enterprises was promoted by competitions organized by the Government of the RK for the right of reception of wood resources in long-term rent, as well as inventory of license agreements on use of mineral resources. Inventory was put into practice with the purpose to check performance of conditions (including investments) stated in agreements by companies.
The policy of "open doors" has led to the fact that such large Russian companies and investors as SUAL and Severstal holdings, Gazprom Open Society, Railways Russian Open Society, Northwest Bank of the Savings Bank of Russia and a number of others companies today work successfully in Karelia.
To provide economic growth and formation of favorable investment climate is not impossible without corresponding infrastructure: transport, power, engineering and other communications, customs and boundary infrastructure. Therefore, constant growth of means directed on construction of such objects, with participation of budgets of Karelia and Russia, and also means of such large companies, as Gazprom, Octyabrskaya Railway has been observed in recent years.
Electrification of Idel-Svir and Sumposad-Malenga pieces of line of the Octyabrskaya railway is completed, goods traffic has begun on Ledmozero-Kochkoma piece of line.
A gas main Petrozavodsk - Kondopoga, the terminal of Besovets airport are constructed.
Highways with outlets to the state border (Wärtsilä), to the Arkhangelsk and Vologda areas appeared.
The international check point Suoperä is constructed and will be started up this year.
Alongside with it institutional transformations are accomplished. For 4 years the share of enterprises of the private pattern of ownership has passed from prevailing (64%) into overwhelming (more than 72%), that speaks of normal market basis for the further growth of economy.
The number of small enterprises has increased by over 1 thousand in comparison with 2002.
The volume of production made by small business has increased from 7,1 billion roubles in 2002 up to 12,2 billion roubles in 2005.
In the total turn of organizations of the republic the share of the turn of small enterprises in 2005 has increased to 30%.
Karelia is a frontier and an export-oriented region. Therefore, the Government of the RK pays paramount attention to support of exporters and corresponding infrastructure. As a result, in the past years export has been growing constantly, it allows exporters not only to exist, but also to develop actively. On results of 2005 the record volume of export is expected - more than $1 billion.
Results of social and economic development of the republic for 4 years testify that measures taken by the Government of the RK in the sphere of economic policy yield positive results.
Development of the competitive environment as a result of transition to a competitive basis of allocation of wood resources for the long-term rent and a number of other measures have allowed to increase volume of investments in timber industry complex of the republic where in 2005 it has increased in comparison with 2001 no less than one and a half times.
Constant raising of the investments in timber industry complex certainly affects consecutive growth of еру sphere of wood processing. The proportion of the processed and raw wood intended for export, moves towards the first one.
In 4 years in the timber industry complex such large investment projects, as a woodchip board manufacturing factory in the settlement of Pindushi, start up of the papermaking machine N10 and implementation of another 5 projects at Segezha Pulp and Paper Mill, start up of the papermaking machine N10 at Kondopoga Open Society, construction of saw-mills in settlements of Pyalma and Impilahti, creation of manufacture assemblying and after-sales service of modern harvesting equipment of Harvy Forester Open Company are accomplished. Today in the timber industry complex of the republic 39 more projects are under implementation, they are in sight of the Government of the RK.
The mining complex of the republic shows good results. Active involving of new deposits of a building stone and other minerals in economic activities, construction of new factories gives real increase in output. For 4 years 7 large investment projects is completed, such as technical reequipment of Shokshinsky Quarry Open Company, Interkamen Joint-Stock Company, construction of Lobskoye-5 factory, reconstruction of Sortavala grinding-sorting factory, development of Raikonkoski quarry, reconstruction of Pudozhsky Quarry Open Company and Karelkamen Open Society.
It has allowed to increase volume of rubble and gravel manufacture from 3,7 to 5,9 million cubic metres a year in 4 years.
Modernization and reconstruction of Karelsky Okatysh (Karelian Iron-Ore Pellets) Open Society in view of development of a new deposit has allowed to increase volumes of production of iron-ore pellets essentially.
Certain rise is observed in the field of engineering industry and metal working. Prospects here are connected with such enterprises, as Petrozavodskmash and Onezhsky Ship-Bilding Factory where the volumetric portfolio of orders is generated today.
Such field as trout-breeding becomes quite attractive for investments and development. Volumes of manufacture here for 4 years have grown more than twice. 21 enterprise already works in this direction.
Another perspective direction is development of tourism. The volume of investments into the sphere of tourism for 4 years has increased 3 times, volumes of travel and excursion services and of hotel services have increased considerably.
Complex measures are taken by the Government of the RK in the sphere of house-building. In the period of report putting of dwelling into operation exceeds a similar parameter 1998 - 2001 by 24%. The hypothec develops actively.
The main result of the active economic policy pursued by the Government of the RK was growth of investments. Comparing two stages: 1998-2001 and 2002-2005, it is possible to see, that the volume of investments into the economy of the republic has increased more twice. Thus, the Government has performed the task of doubling the investments.
Achieving such volumes of investments allows to approve, that the economy of the republic has switched to essentially new type of economic development, that is investment type.
First of all, it sets quite high and steady rates of economic development. 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 total regional product has made 136% and 123% accordingly, that allows to speak about performance of pre-election obligations by the Head of the Republic regarding 30% growth of economy.
However economic development is not an end in itself, but a basis for growth of incomes of budgets and opportunities of realization of essential social problems.
Increase in incomes of the budget is the evidence of economic growth. If in 2000-2003 the volume of incomes of the consolidated budget of the republic increased annually on 9-12 percent, then in last two years the increase already made 23-30 percent.
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.
Growth of incomes increases the political responsibility of the Government for target and effective utilization of budgetary funds - for timeliness and quality of budgetary services, reliability of system of social protection of the population, high rates of development of public infrastructure and positive dynamics of economic growth.
Since 2001 the volume of consolidated on-budget expenditures of the Republic of Karelia has grown from 6,3 to 13,5 billion roubles in 2005 or more than twice.
As a result of following budgetary policy the current maintenance of the spread network of establishments of public health services, education, culture and social security is provided in corpore, structural and organisational transformations accomplished, social orientation of expenditures of the budget of the Republic of Karelia increased.
The greatest share in consolidated on-budget expenditures of the republic is comprised of expenditures related to realization of social policy and maintenance of branches of welfare sphere which increase every year.
Thus, if expenditures on branches of the welfare block in 2001 made 48 percent of total amount of consolidated on-budget expenditures or 3 billion roubles, then in 2005 specified expenditures have already made 66 percent or 8,9 billion roubles. Thus, consolidated on-budget expenditures on social needs in 2005 in comparison with 2001 have increased by 5,9 billion roubles or 3 times.
For public health services from the consolidated budget of republic in the past to year it has been allocated about 2,6 billion roubles, that is 3 times more than in 2001.
Sources of financing of public health services expenditures are not only means of the budget, but also means of the fund of obligatory medical insurance and other unappropriated means. For 4 years, in comparison with 2001, expenditures of all sources have grown 2.3 times and have reached more than 3 billion roubles in 2005.
Today counting upon 1 inhabitant of the republic public health services expenditures exceed federal specification. Gradually, especially in last years, this break has increased even more.
The essential part of means goes for improvement of material and technical resources of treatment-and-prophylactic establishments.
Within 2002-2005 within the framework of the republican investment program cost of building and assembly jobs executed on objects of public health services has made 263,8 million roubles, including 29,0 million roubles from federal budget. Construction and reconstruction of the main building of the central district hospital in Olonets, city hospitals in Sortavala, Louhi, Kem, Segezha central district hospital proceed. More than 73 million roubles is allocated from the budget for major overhaul of buildings and constructions of treatment-and-prophylactic establishments. Medical ambulance stations in the village of Padany and the village of Vilga, maternity ward in central district hospital of Kalevala, local hospital in the village of Vidlitsa, ophthalmologic branch of V.Baranov republican hospital, polyclinic of the Republican dermatovenereal clinic, the central regional hospital on 100 beds with a polyclinic on 120 visitings in the settlement of Pryazha are set in operation.
Material and technical resources of public health services have improved considerably. For four years it has been purchased medical equipment and 180 units of sanitary transport at the cost of 268,2 million roubles.
Hi-tech methods in activity of establishments of public health services are introduced actively.
By virtue of low density and concentration of population the problem of availability of medical aid is of great importance for the republic. To solve the problem a multilevel system of exit activity of establishments of public health services, including use of complex specialized brigades and a mobile train ("a polyclinic on wheels") is created. Only in 2005 almost 300 trips to districts has been made, more than 27 thousand patients examined, of them 13 thousand children, 64 people have been operated and 1900 diagnostic researches executed.
Education on-budget expenditures in 2005 have made 3,9 billion roubles or 2,5 billion roubles more, than in 2001.
Today in the republic there are 819 educational establishments with a mid-annual contingent of 201,5 thousand trained and pupils. At that, since 1998 the Government of the RK annually opens new educational establishments with a view of maintenance of availability of qualitative education. However, putting into operation of new objects does not solve the problem of availability of educational services for each child completely. Therefore, decisive importance is attached to organization of transporting children to places of study as it is common in developed countries of the world. In 2004 - 2005 academic year more than 4,6 thousand children from 200 settlements were taken to places of their study. In 2004 the government bought of 25 buses for 15 million roubles for these purposes, and 21 more buses in 2005 for 10 million roubles.
With a view of the state support of development of languages and culture of Karelians, Vepsians and Finns implementation of the republican target program Ethnocultural Education in the Republic of Karelias in 2003 - 2005 proceeded. 42 establishments of the republic have the status of establishments with ethnocultural components of education, in which projects of the standard on Karelian and Vepsian languages are approved. Academic and methodological textbooks for pupils of forms from the second through seventh in Karelian and a pilot manual on history of Karelia are prepared. In preschool establishments with the ethnocultural component of education the program of teaching Karelian language is approved.
Since January 2001 a number of target programs on informatization of eucation is implemented in the republic. Due to implementation of the specified projects and programs, it became possible to provide 3 times more computers for pupils having achieved a parameter of 1 computer per 30 pupils. It is more than twice than on the average in Russia. Work on informatization of schools will be continued. In 2006 - 2007 it will be allocated about 100,0 million roubles for these purposes. It is possible to note, that in this area the republic became the winner of the competition within the framework of the e-Russia program in 2003.
Significant resources are intended for financing measures of social support of veterans, needy citizens and large families, orphan children and children left without care of parents, as well as preventive maintenance of children's homelessness and neglect.
Now more than 290 thousand inhabitants of Karelia (41.8% of the total number of inhabitants) are provided with measures of state social support stipulated by the current legislation. The Federal law N122, concerning social protection of preferential categories of citizens rendered decisive importance on drastic growth of expenditures on social support.
The volume of means from budget of the republic meant for execution of measures of social support for 4 years has 10 times increased on the average regarding each group of beneficiaries.
In 2001-2005 the number of the people provided by preferential sanatorium permits has grown essentially. The increase occured in 2005 has made more than 10 times.
The addressing principle in the sphere of social support gets the increasing value. It is traced through the volume of means of the budget of the republic allocated for implementation of the Address Social Help target program. Only for 2005 the volume of the program has made 150 million roubles and has almost 10 times increased in comparison with 2004. The principle of address support underlies maintenance of handicapped people with sanatorium treatment and cars. In 4 years with support of federal and republican budgets 617 motor vehicles have been purchased. Almost 1400 disabled veterans have underwent courses of sanatorium treatment in 2002 - 2004.
In 2003 the Republican center of rehabilitation of invalids opened in the settlement of Martsialnye Wody. Since the center stated to work 324 handicapped people passed rehabilitation there.
The Government of the RK pays great attention to aspects of family policy, including support of centers of social help to family and children.
Withinthe period from 2001 to 2005 the network of sports constructions of Karelia has received new objects corresponding to all modern requirements.
The total number od people going in for sports makes now more than 93 thousand persons or 13.2% of the population. In 2002 - 2005 on this parameter Karelia has taken the 2 place in the Northwest federal district.
In 2002 the Development of Physical Training and Sports target republican program has been developed. In 4 years the total sum of financing has reached 14 million roubles, and next years it will be exceeded considerably.
With the purpose of creation of conditions and preservations of creative potential of the branch of culture within four years for reconstruction, restoration of monuments of history and culture, strengthening of material resouses it has been allocated 555,6 million rbl., including 188,0 million roubles from the republican budget. Buildings of the National theatre of the RK have been reconstructed, thus, a modern theatrical platform, one of the best in Northwest of Russia, created.
Financing of the branch is carried out with use of program-target methods of management. Within a few years the target program Development of the Sphere of Culture in the Republic of Karelia operates in the republic. For 4 years of implmentation of the program 739 million roubles has been allocated for its financing. At that sources of financing of the program are not only means of the federal (246 million roubles) republican (278 million roubles), and local (50,8 million roubles) budgets, but also it is more than 160 million roubles of involved means.
Computerization of popular libraries is implemented widely in the republic, and results of their work impress: libraries have more than 322 thousand users which annually visit them more than 3 million times and use more than 7 million books.
Within the past four years due to international funds implementation of some the large-scale projects aimed at social and economic development of territories of municipal formations, such as Karelian Vacation, Development of Cultural Industries in Historical Villages of Kalevala District has been completed and proceeds.
Implementation of the Karelian Vacation project has allowed to create information tourist centres on the basis of municipal museums in Byelomorsk, Kem, Olonets, Sortavala to teach the employees of museums bases of tourist business, to develop new tourist routes, that also corresponds to priorities of social and economic policy of the republic.
The Government of the republic provided duly and in full indexation of wages of the budgetary sphere employees. Means for these purposes were basically found in the republic.
A share of consolidated budget expenditures of the Republic of Karelia on wages in 2001 made 33 percent, compared to 43 percent or 5,8 billion roubles in 2005. It is one of the highest parameters among subjects of the Russian Federation. It is especially important to note, that due to systematic work of the Government and financial bodies, payment of wages to workers in the budgetary sphere was stabilized in the republic.
The state support of agricultural production has increased essentially. The on-budget expenditures of the Republic of Karelia on the specified purposes in 2005 have increased 1.7 times in comparison with 2001 and have made 275 million roubles. The structure of expenditures on agriculture gradually varies with reorientation to technical renewal of agricultural productions. If in 2000 these expenditures were not financed from budget of the republic, in 2005 the share of expenditures on technical renewal of agricultural production in total amount of expenditures on agriculture has reached 16 percent.
Significant means from the consolidated budget of the republic are allocated for housing and communal services. Under conditions of reforming of housing and communal services and transition on absolute compensation of expenses of the enterprises of housing and communal services by the population from the beginning of 2005 the structure of the on-budget expenditures aimed at financing of the branch changes. The deterioration of engineering networks, as well as necessity of improvement of quality of services forces to switch from cash granting of the branch enterprises to charges on expenditures, modernization and repair of objects of municipal services. In 2005 more than 40 percent of means of the investment program of the Republic of Karelia were allocated for these purposes, while in 2006 it is supposed to allocate more than 44 percent.
Expenditures on the investment purposes increase constantly in expenditures of the budget. Since 2001 financing of the Address investment program of Karelia (without road construction) has increased from 154 million roubles to 496 million roubles in 2005 or 3.2 times. The republican target program Habitation which provides both move of citizens from shabby and drop-out housing resources, and the state support of young families, citizens living in a countryside, whose living conditions require improvement and purchase of habitation, development of hypothecary housing crediting is approved and works in the republic. If in 2002 the state support due to the budget of the Republic of Karelia within the framework of development of hypothecary housing crediting has been rendered to 21 family, then in 2005 444 families received it. Support of this kind was not rendered before 2002. The republic carries out of its obligations on allocation of financial assistance to local budgets by 100 percent monthly; in comparison with 2000 volume of this support in 2005 has increased almost 7 times, from 585 million roubles to 4 billion roubles. The basic channel of financial assistance to local budgets is the Regional fund of financial help on alignment of budgetary security of local budgets.
The Government of the RK constantly works on optimization of the number and expenditures on the maintenance of enforcement authorities. Since 2000 the number of enforcement authorities is reduced on 800 persons that has led to real saving of means of the budget of the Republic of Karelia.
Developed every fiscal year Program of state loans of the republic allows to satisfy needs of the budget for extra sources of financing completely, and its structure allows minimizing debt service expenditures. Annually more and more significant part of extra means (about 40 percent in 2005) goes for implementation of investment policy of the Government of the republic.
The essential part of the republican budget has been directed on creation of a socially significant infrastructure influencing the prospect of economical development as a whole, and also on attraction of federal target means on a co-financing principle.
During the reporting period the republic declared volumes of financing from the federal budget under all possible federal programs. Actually, 35 target federal programs and sub-programs were financed. Within the framework of these programs reconstruction of the White Sea - Baltic channel, Kizhi open-air museum, objects of Valaam archipelago, the National Theatre building, conservatory, construction of the academic and laboratory building of PetrSU, the Supreme court building and others was carried out. Construction and reconstruction of motorways of federal and republican value with 3,8 billion roubles of assignments in 2002 - 2005, including 3,1 billion roubles of federal means was carried out. Within the same period 51 objects of the sphere of housing and communal services, social, engineering, and transport infrastructure were put into operation in the republic due to all sources of financing.
In total 9,8 billion roubles was allocated in 4 years for implementation of federal target programs and federal address investment program, including 5,8 billion roubles from the federal budget, 1,9 billion roubles from the republican budget, and 2,1 billion roubles from unappropriated sources.
Within the past 4 years really had incomes of population of the republic have increased by 37.1%. The real wages during the same period have increased by 52.9%.
In recent years in the Russian Federation ratings Karelia has risen from the 51 to the 26 place on the level of social and economic development, on the 31 place on quality of a life, on the 10 place on use of information technologies. Among regions of the Northwest federal district on the index of industrial production growth Karelia wins first place, and is on the third place among subjects of the Russian Federation as a whole across Russia.
The republic has been recognized the winner among European regions, and was awarded with the honorary title of the European Region of 2003. In 2003 Karelia has been included in the group of 20 Russian regions possessing the most effectively working management personnel in еру sphere of attraction of investments.
Kareliya is on the 3 place in the Northwest federal district on the level of attraction of means from the federal budget per inhabitant (after St.-Petersburg and Leningrad region). This parameter is higher than on the average in Russia.
In the end of 2005 the Fitch Ratings international rating agency has awarded the republic with the most high investment credit rating at the A level, "stable" forecast. Among subjects of the Russian Federation only Yakutia and Komi have such high ratings.
The stated above facts testify that, perhaps not as fast as it is desired, yet the republic develops, solves social problems. The economy picks up inertia of moving forward, thus, the potential of social opportunities increases as well.
Now the Government of the RK develops the Program and Strategy of social and economic development of the republic till 2010, providing the further growth of economy, increase of the level and quality of life of the population of Karelia. Corresponding corrective amendments in the Concept of development of the republic will be brought.
The work will have to be done under conditions of reforming of the government and local self-government, differentiation of powers between levels of authority. Within the framework of administrative reform it is necessary to provide availability and quality of state services to the population. Work of the Government as a whole, and of every official, will be assessed according to the final result. The Government of the RK is ready for it.
Implementation of mainstream national projects Education, Health, Development of Agriculture, and Accessible and Comfortable Habitation - to Citizens of Russia is prioritized. Coordination Council at the Head of the RK for realizations of priority national projects, as well as working groups in corresponding ministries have been created. Detailed programs are developed, the personal responsibility for implementation of every action is distributed. Programs are supplemented with initiatives of the Head of the republic to be fulfilled at the expense of the republican and local budgets.
Low incomes of almost one fifth of population of the republic, high rate of unemployment in a number of districts, growth of housing-and-municipal services tariffs, delays of wages payment at a number of enterprises and other essential problems which remain solved yet can not but make the Government of Karelia anxious. The Government was guided by them developing the Program and Strategy of the republic development for the following four years.
Work on solution of these problems will be continued together with institutions of local government, heads and deputies of settlements, heads of enterprises and organizations, and people.