Could you speak on
the economic structure and economic situation in
Irkutsk region?
Judging from the results of 2002 we can say that
the pre-conditions for stable economic growth
have been shaping up in the region. We managed
to provide development of industrial growth, increase
in external trade turnover, and efficiency of
agricultural production.
The main indicator, which characterizes the extent
of effectiveness of economic development in the
region, is gross regional product. That is why
it is better to look at the economic structure
through contribution of separate sectors into
gross regional product. GRP in 2002 increased
by 4,4% compared to 2001 due to the significant
contribution of industry, transport and trade.
Agriculture occupies a small segment of only 6%
of GRP, and its role in the formation of GRP has
not changed significantly during last 3 years.
In 2002 GRP was formed mostly by the production
of goods - 52%; up to 40% of GRP was created by
industry; 16% by trade, and 12% by transport sector.
The share of taxes in GRP remained the same -
3%. There is a favorable tendency of decreasing
the share of goods produced and increasing the
share of services provided.
The key industrial sectors are non-ferrous metallurgy
and timber complex, which provide more than 40%
of the regional production.
The industrial structure of the region is characterized
by excessively high concentration of production
capacity, which makes modern industrial development
more difficult. Poor adjustability of the production
structure to rapidly changing market conditions
was historically entrenched, and it is now balanced
by the development of small businesses.
Mechanical industry laid the foundation for industrial
growth in 2002. This sector demonstrated stable
tempo of growth throughout the whole year - 30%.
Accordingly, the share of this sector in the industrial
production volumes increased from 13% up to 15,7%
in 2002. Regional production of machinery mostly
implies the production of end products with higher
added value compared to other sectors of the regional
economy.
Aluminium industry has exhausted the opportunities
of efficient growth by 2002 due to full utilization
of capacity, and the growth in this sector was
mostly provided by the gold industry. It was the
seasonal decrease in gold industry, which resulted
in the decrease of industrial production volumes
in the end of the year. The development of aluminium
industry mostly depends on toll operations; should
they be canceled, it would lead to significant
reduction of aluminium production.
The third important segment, which contributed
to industrial production growth in 2002, is timber
complex. Timber complex provided growth of production
volumes of 7,8% in 2002 among big and middle-sized
enterprises with the domination of primary products.
The growth of the industry was suppressed during
the year by high volumes of unshipped product.
Oil refining industry significantly strengthened
its positions in the end of the year. The index
of the physical volume in this sector amounted
in 111,8% in the end of the year. The growth of
volumes of oil refining operations by Angarsk
Petrochemical Company contributed to that. We
forecast further growth in oil refining industry
and approaching Western markets of oil products.
On January 1st, 2003 the Single State Register
of enterprises and organizations accounted 53,8
thousand subjects of all the sectors of the economy.
Their amount increased by 3,3 thousand units (by
6,5%) within the year. Small businesses provide
8,1% of the jobs places, 16,5% of construction
volumes and 4,7% of industrial production volumes.
The production of goods and services by small
enterprises increased by 24% compared to the year
2001.
Agriculture is not the leading sector of the economy
of the region because of its industrial focus
and rigorous climate conditions. GRP of agriculture
amounts in about 2% of GDP with the share of agricultural
land of 1,25%. Regional production provides the
region with potatoes, milk, vegetables and eggs.
Investment activity of the regional organizations
is not high and does not meet the demands of the
production expansion. Therefore, one of the current
leading directions of social and economic policy
is to encourage internal investment activity and
also attract extra investment from outside of
the region and from abroad.
What are the activities currently prioritized
by the administration? What actions are taken
by the administration of the region to improve
and modernize regional economy?
The period of anti-crisis management was over
in 2002, it had been introduced because of the
economic and social crisis in Russia in the nineties.
Therefore, the administration of the region transferred
to a new task-solving management method of the
social and economic development of the region.
In 2002 the administration worked out a program
of social and economic development of the region
until 2005, which determines social and economic
policy of the state power bodies of the region
during this period.
According to this program, the main tasks of the
State power bodies until 2005 are the following:
1. To enhance the life level of the population
through targeted social support, to stimulate
the growth of wages, to increase efficient employment
of able-bodied population.
2. To enhance the quality of life of the population:
through total satisfaction of material and cultural
needs of people, which requires the increase of
welfare, affordability of education and culture,
efficiency of medical services, stability of environment
and housing.
3. To create pre-conditions for production growth,
to improve production efficiency and quality.
4. To create favorable investment climate.
5. To develop innovations' potential, to support
the introduction of modern technologies in the
real sector and social sphere.
6. To increase the profitability of the budget
so that it could serve as the foundation for social
protection of the population, to turn the budget
into an active tool for regional economic policy.
7. To encourage social and economic policy at
the municipal level.
8. To create institutions for stimulation of economic
growth.
Thus, the main priority for administration is
to enhance the life level of the population through
stable development of the real sector of the economy
and the sphere of services. That is why the prospective
of the development of the region is determined
by the necessity to retain and develop the existing
production potential, to create economic and social
conditions for stable economic growth, to develop
diversified economy with the domination of small
and medium-sized enterprises; and finally to attract
extra investment sources.
Achievement of these goals is directly connected
with the establishment of new relations with the
owners of the budget and municipal enterprises
and group of enterprises. It also depends on applying
modern management methods, pursuing proper structural
policy, aimed to reduce indirect subsidies for
economic subjects by the budgets at different
levels.
According to all of the above, the administration
of the region is currently developing the following
guidelines:
· Industrial policy, which implies mutually
beneficial relations between the power bodies
and entrepreneurs and manufacturers;
· Investment policy directed at promotion
of the investment image of Irkutsk region among
potential investors, increase in credit and investment
rating;
· Innovation policy aimed at cultivating
the existing innovation potential, directing existing
intellectual resources to meet innovation demands
in the real sector and social sphere.
Within the framework of realization of the industrial
policy the following issues are being considered:
fostering industrial development, creating the
conditions, where manufacturers could act in the
interests of the region; legal basis for preferential
taxation for industrial enterprises, provision
of discounts to major businesses, willingness
to invest into social and regional production
infrastructure.
Within the framework of investment policy the
legislation is being improved, the mechanisms
of the State support of investment activities
are being worked out. A lot of work is done to
establish mutually beneficial contacts with potential
investors, and to reach according agreements.
As for the innovation policy, the procedure of
the State scientific order is being worked upon.
Various exhibitions, where the best achievements
of science are displayed, became traditional.
Exhibitions help to gap bridges between scientific
enterprises and organizations in need for advanced
technologies.
Irkutsk region is rich in natural resources,
which is a potential for investment growth, employment
and budget revenues. What measures are taken by
the administration of the region to attract foreign
investors? Could you speak about major investment
projects?
Truly, Irkutsk region is in the top 20 Russian
regions, which boast significant investment potential
due to unique reserves of natural resources, powerful
production capacity, qualified working force,
quite developed financial and investment infrastructure.
Irkutsk region places itself 7th among 89 regions
of Russia at the resource potential, which is
represented by significant water and timber resources,
and mineral resources (coal, oil, gas, gold, daze
etc.)
As it was already mentioned above, one of the
main guidelines of the investment policy pursued
by the administration of the region is to improve
the legislation. In Irkutsk region the measures
to boost investment activities are validated by
the law of Irkutsk region #38-oz from July 11,
2002 "about regional state investment policy
and stimulation of investment activity."
In compliance with the existing legislation, enterprises
and organizations engaged in investment projects
on the territory of the region are granted financial
support - tax discounts and investment tax credit,
budget credit, budget investment; legal entities
are subsidized to make up for the interest from
loans; subsidies and state warranties are provided
for joint investment projects. Moreover, non-fiscal
support is provided through discounts on natural
and labor resources of Irkutsk region, objects
of real estate, unoccupied land plots are provided
to commercial organizations for long-term lease.
Mutual cooperation including realization of major
investment projects with the countries of Asia
Pacific region is possible in the following spheres:
timber processing and chemical complex, gas, coal,
and fur. The development of tourism at Lake Baikal
is also of great interest. Overall, accumulated
investment potential makes possible the realization
of major strategically important investment projects
in the near future on the territory of the region.
In non-ferrous metallurgy - this is the project
to launch a new modern aluminium production facility,
which would allow to significantly improve both
economic and social indicators. Besides, the priority
project is also exploitation of the gold deposit
"Suchoi Log".
In the fuel and energy complex - this is the further
fieldwork and exploitation of Kovykta Gas Condensate
Deposit. In oil and chemical sector it is necessary
to start the construction of oil pipeline "West-East"
to supply oil products to the Russian Far East
and the countries of Asia Pacific region.
In mechanical and engineering - this is the realization
of the project together with India of the construction
of a new transport plane, and also modernization
and production of new types of cables.
Within the mobilization of internal sources of
investment the administration of the region is
working on investment agreements with regional
banks. Besides, work to improve the functioning
of the stock exchange market, which would be capable
of providing free movement of capital in the region,
plays an important role in the attraction of internal
investment.
Moreover, the administration is pursuing active
policy of attraction of external investment. The
Administration entered into the agreement about
cooperation with European Business Club - major
association of European commercial organizations.
The presentations of Irkutsk region are regularly
held in Japan and other countries. Irkutsk region
is interested in cooperation with the countries
of Asia Pacific region. We have something to offer
to potential business partners, we are open to establish
new mutually profitable long-term contacts. |
Could you tell us
about international activities of Irkutsk region
and cooperation with the countries of Asia Pacific
region?
Geographical situation of Irkutsk region implies
orientation on external economic and trade relations
with the countries of Asia Pacific region in the
first place. We have annual turnover of external
trade about 3,6 billion dollars. The main share
falls on three countries: China - external trade
turnover being equal to 1 billion 100 million
dollars, Japan - external trade turnover about
1 billion dollars, and India - about half a billion
dollars. Moreover, we have developed relations
with Mongolia, Korea, inter-governmental agreements
will soon be signed with Malaysia. They will create
conditions for the supply of scientific product
produced in Irkutsk region to Malaysia.
In 18th century Irkutsk region used to be a forepost
of Russia in the expansion into the Far Eastern
territories of Russia, and also in the diplomatic
contacts with the countries of North-Eastern Asia.
These traditions are carefully maintained. Merchants
used to trade with China, Mongolia, Japan, and
we stick to these traditions. International activity
of Irkutsk region is directed at the development
of multilateral cooperation with these countries;
it is a matter of trust in the first place between
Irkutsk region and these countries. As a rule,
this process leads to the establishment and development
of tight link. Four cities in the Irkutsk region
have twin cities in the Western coast of Japan.
These are the cities of Irkutsk - Kanazawa, Bratsk
- Nanao, Shelechov - Neagari, Usolie-Sibirskoye
- Kaga. These relations are very important to
us because they exist at different levels, at
the level of youth interaction, culture and exhibition
activities, and tourism. Irkutsk region has close
connections with two prefectures of Japan: Niigata
and Ishikawa. We also have such connections with
Gyeongsangbuk-do province of Korea. These relations
allow engaging ordinary civilians, officials,
and representatives of economic and business elite.
Irkutsk region has tight connections with Liaoning
province of China and the city of Irkutsk has
the twin city of Shenyang. The government of Russian
Federation took the decision, and as a subject
of Russian Federation Irkutsk region has the agreement
with the government of Mongolia. 40% of external
trade turnover between Russia and Mongolia falls
on Irkutsk region. The city of Ulaanbaatar has
tight connections with the city of Irkutsk.
Within the military and technical cooperation
between Russia and India, scientific production
complex "Irkut" took the obligations
to create aviation complex in India, e.g. to produce
modern fighter jets under the brandname of "Suchoi".
So, the presence of our goods and interests is
introduced at humanitarian, cultural, and economic
levels. Aluminium, coal, wood and timber products,
cellulose is the basis of our export to these
countries. The development of these countries
is directly connected with the development of
oilfields in Irkutsk region. Kovykta Gas Condensate
Deposit is currently the foundation for cooperation
between Russia, China and North Korea on gas export.
On the territory of Irkutsk region this deposit
is being exploited by the following companies:
Rusia Petroleum, which have British petroleum
as their shareholders, Tyumen' Oil Company, Interros
and the Administration of Irkutsk region. It is
planned to start gas supplies to China and The
republic of Korea by the end of the first decade
of 21 century.
The construction of oil pipeline from the city
of Angarsk, Irkutsk region, to the city of Daqing,
China, is now at the stage of the final decision-making.
It is planned to pump out up to 20 million tons
of oil annually, later reaching the level of 30
million tons per year. This indicates the level
of economic development of China and North Korea.
Japanese government expressed its willingness
to participate in exploitation of oil and gas
deposits in Eastern Siberia during the recent
visit of the Prime Minister and the summit in
Moscow.
We think that the cooperation with the countries
of Asia Pacific region did not realize its potential
to the full, therefore we carried out a large-scale
presentation of Irkutsk region in Tokyo in April
2002. Major Japanese companies and economic associations
showed genuine interest towards Irkutsk region.
During the year 2002 the representatives of these
associations visited Irkutsk region and met with
the representatives of Irkutsk business elite.
Due to the established contacts, the representatives
of major and middle-sized businesses are currently
being trained in Japan at the expense of Jetra.
Japanese businesses demonstrate willingness to
develop and strengthen cooperation in economy
and trade. In the territory of Irkutsk region
there are two Japanese-Russian joint ventures
for timber processing: "Igirma-Tairiku"
and TM "Baikal". "Igirma-Tairiku"
celebrated a 15 years' anniversary in 2002. It
was a pioneer enterprise in cooperation with Japan
already in the Soviet Union. During these years
the enterprise exceeded projected forecasts and
enhanced its potential significantly, it shows
stability not only in Japan but also at the European
markets. TM "Baikal" was founded in
the beginning of the nineties, it is developing
steadily both in the interests of its shareholders
and also in the interests of Russia and Japan.
It is notable that in the territory of Irkutsk
region the first project of construction of the
modern diagnostic center was realized within the
framework of long-term cooperation between Russia
and Japan, the government of Japan acted as a
creditor. 20 million dollars were granted for
the construction of the diagnostic center, which
was completed in 1999. The center provides services
not only to the population of Irkutsk region but
also to the population of Krasnoyarsk region,
Sakha Republic, Mongolia, Buryatia and Chita.
More than 300 000 people received qualified medical
aid. It should be noted that during the summit
in March 2001 Vladimir V. Putin and the former
Prime Minister of Japan Mr. Mori visited this
diagnostic center and gave positive assessment
of the results of this bilateral project.
In 1792 the first school for Japanese studies
was opened in Irkutsk. Japanese merchant Daikokuya
Kodayu, shipwrecked in the Sea of Japan, found
himself in Irkutsk, because the power of the Emperor
was concentrated there. He opened a school for
studying Japanese. In the territory of Irkutsk
region there is a unique monument of Russian-Japanese
friendship, which was created by joint efforts
of architects of Russia and Japan. It emphasizes
the significance of Irkutsk region in the cooperation
of Russia and Japan.
Irkutsk region have been building harmonious relations
between peoples of Russia, Japan, China, Mongolia
and Korea for a long time, these relations very
well fit in the modern world and in the further
development of bilateral cooperation. We consider
this cooperation prospective and profitable for
us.
I spent a week in China, met with the heads of
State Plan of China, the heads of the Development
Center of the State Council and the Center of
Economic reforms. We discussed new plans for mutual
collaboration. This was not only about exploitation
of oil and gas deposits and trade but also about
intensifying cooperation in the sphere of timber
business and tourism.
During the High Tech week in China, which took
place in 2002, Irkutsk region was represented
by a powerful exposition, and it impressed Chinese
participants.
Our current task is not only to maintain relations
with the countries of Asia Pacific region, but
also to develop them, and we are going to seek
new ways of doing that.
How do you see the future of Irkutsk region?
In general, the economic situation in the region
allows assessing the future in a positive way.
Currently, the factors have been shaping up in
the region, which would pave the way for the stable
development of the economy and social sphere in
the future. These factors are based on the competitive
advantages of our region.
The assessment of the results of social and economic
policy, under the program of social and economic
development of the region until 2005, should be
based first of all on the extent of fulfillment
of the main goal of the program. With the help
of the mechanisms of influence on the economic
sector, we plan to reach highest possible life
level for the population of the region. The administration
set the task to increase wages by 1.5 times by
the year 2005. The administration considers the
growth of wages in all the sectors of the economy
to be the main lever in the increase of welfare
of the population, production efficiency of the
local enterprises, labor efficiency and better
functioning of the labor market.
One of the factors, which contribute to the increase
of life level, is the spending power of the wages
of the population in the region. The administration
set the goal to increase this level by 18% by
the year 2005.
Moreover, special attention will be paid to the
reduction of poverty by 30% by the year 2005.
While enhancing the life level of the population,
the administration is planning to carefully target
social support and guarantee the access to the
basic social services like medical services and
general education to every civilian.
By all means, reaching these goals is impossible
without corresponding growth of the real sector
of the economy. The administration anticipates
the level of GRP to increase by 5% annually in
average due to the physical volumes index growth
in industry of 8%, the growth of volumes of services
provided by transport enterprises - 10%, construction
growth of 7%, and retail growth of 5% annually
until 2005.
What would be your final message to our readers,
who are potential investors and who are interested
in the economy of Irkutsk region?
We entered the 21st century now, the century
of new opportunities. Taking into account our
experience and knowledge we should be more advanced
and open for bilateral cooperation. I am inviting
everybody, who is interested in honest and civilized
business, to come to us. We are willing to present
attractive investment projects.
Once in two years in September in Baikal we are
holding the Economic Forum of Baikal, where business
and political elite get together. This is a good
platform for the discussion of cooperation perspectives,
and I hope that in 2004, the readers of the magazine,
who will get to know the economic opportunities
of Irkutsk region will find a new efficient investment
world and reliable partners for themselves. The
doors of Irkutsk region are open for everybody,
who comes with clear intentions, good ideas, and
offers. We will be creating all the conditions for
the attraction of investment within the legal framework
and political stability, and investment protection.
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