The Republic of Karelia  This information below is provided by Web-Server Karelia. Reprinted with permission. For more information, please visit their Web Site at http://www.karelia.ru The Republic of Karelia is located in the north-western part of Russian Federation, taking intervening position between the basins of Barents and Baltic seas. The total territory of Karelia is 172 400 sq.km. with a population of 800 000 people. The capital of the Republic is the city of Petrozavodsk situated on the shore of Onego lake (280 000 inhabitants). In the northeast, the Republic borders the White Sea with a shore line of 630 km. In the west, Karelia borders Finland (border line length approx. 700 km.) In the north, on Arkhangelsk Region; in the south, on Vologda and Leningrad Regions of the Russian Federation. The most part of the republic's territory (148 000 sq.km. or 85%) is comprised of state forest stock. The total growing stock of timber resources in the forests of all categories and ages is 807 million cubic meters. The mature and overmature tree stock amounts to 411,8 million cubic meters, of which 375,2 million cubic meters is coniferous. Agricultural holdings constitute 217,6 thousand hect., of which 85,4 thousand hect. are arable lands, 85,9 thousand hect. are meadows and 41,2 thousand hect. are pastures. There are 27 000 rivers and over 60 000 lakes in Karelia. Lake Ladoga and Lake Onego are the largest lakes in Europe. Lakes and swamps contain about 2 000 cubic kilometers of high-quality fresh water. There are 50 important minerals found in Karelia, located in more than 400 deposits and orebearing layers.
Karelia has been identified as having diamond deposits. Explorations are underway at the present time. Virgin woods, clean lakes and rivers, historical and cultural monuments attract hundreds of thousand of travelers to Karelia today and the flow of tourists will increase. The Republic has a rather well developed network of transport infrastructure. Water communications connect Karelia with the Barents, Baltic, Black and Caspian Seas (through the system of rivers, lakes and canals). Federal railway and automobile highways cross Karelia and connect Murmansk Region and Murmansk sea port with St.-Petersburg, Moscow, the center of Russia and with Finland. Regular airline service connects Petrozavodsk with Joensuu and Helsinki in Finland. Almost all the territory of Karelia is included in the European systems of honeycomb mobile network NMT-450 and GSM. In accordance with the Constitution of Russia, the Republic of Karelia is a subject of the Russian Federation. The Republic has its own constitution, legislative body (Parliament) and Government, headed by the Chairman-main executor of power and highest officer in the Republic. The Republic has its own administrative-territorial division, made up of 18 regions and towns. Local self-government is carried out within the bounds of administrative-territorial units. It is separate and independent of the system of state (republican) government in accordance with Russian and Karelian legislation. The main feature that determines the historical and cultural peculiarity of Karelia is its border position. The cultural originality of Karelia began forming before the appearance of clearly defined borders and before the crystallization of the features that distinguish the Russian and the European civilizations. Karelia, as a culturally original region of Northern Europe, appeared as a result of the interaction of the Baltic-Finnish and the Eastern Slavic cultures in the North. It was on the territory of the Karelian ethnocultural border that the top examples of the art of the peoples of different origins were preserved and recorded in the 19th century, such as the epic Karelian-Finnish runes which were compiled in the famous "Kalevala" and the Russian epic songs. The dialogue and the synthesis of traditions is the basis of the cultural originality of the region and characterizes all the stages of its history. Starting from the Middle Ages, Karelia was a territory on the border of the Swedish Kingdom and the Novgorod Republic, and later the Moscow Kingdom. Foreign Economic Activity Starting from the 1990s there have been significant changes in the nature of foreign economic activity and its influence on the economic situation both in the Republic of Karelia and in Russia as a whole. The unique geographical location of the republic, the border of Russia and the EU, the historical specialization of the Karelian economy allowed it to join the ranks of export-oriented regions of Russia, where the share of the exports in the total volume of output exceeds 40%. From 1991 till 1997 the cost volume of the external commodity turnover increased 23 times and exceeded 800 million US dollars in 1997. During the same period the exports increased 25 times and approximated 600 million US dollars in 1997. The growth rate of the external commodity turnover in Karelia during the period of 1992-1997 is six times higher than the nationwide growth rate. The main share of the external commodity turnover is constituted by the countries of the European Union (63% in 1997), which allows to consider Karelia one of the Euroregions with a high level of integration in the European Common Market. More than 80 countries of the world are trade partners of Karelia, the most important being Finland, Germany, Great Britain, Sweden and Turkey, which together constitute over 60% of external commodity exchange. Other major trade partners include the USA, the Ukraine, Poland, Norway, the Netherlands, India, Hungary and Switzerland. Starting from 1992 the republic received over 43 million US dollars in foreign investment. In Karelia there are over 200 functioning enterprises with foreign investment. Most of the enterprises are established by entrepreneurs from Finland (56%), the USA (6.8%) and Germany (4.3%). The main spheres of the economy, where enterprises with foreign investment are established are as follows:
Free Economic Zone in Kostomuksha The establishment of a free economic zone is planned in the city of Kostomuksha, located in the north of Karelia near the Finnish border. The Conception of the free economic zone has been confirmed as the official conception of the Government of the Republic of Karelia. At present preparation for technical and economic research and feasibility study is carried out. The preliminary research of the Kostomuksha district confirms its advantageous geographical location. The city is practically located in the center of Northern Europe, which includes the North of European Russia and Fennoscandia. This location allows quick and cheap transportation and telecommunication with both the Russian markets and the international markets of the European countries. The developed industrial potential of Kostomuksha, its border location and the traditional partnership with Finnish companies allow to develop cooperation, contractor relations and use the qualified personnel for further industrial development. The rich natural resource potential of the city and the nearby districts allows the formation of a certain specialization of the free economic zone, based on full processing of natural resources, and the creation of new jobs not only inside the zone, but also around it. The forming labor market and the well-developed social and industrial infrastructure create extremely favorable conditions for the establishment of new enterprises. The high level of business activity of the younger population of the city, especially in the sphere of foreign economic relations, investment and other forms of international business cooperation, is another factor contributing to the development of this project. The main conceptual principles of the establishment of the free economic zone are as follows: 1. The Free Economic Zone will be a limited territory and possess the attributes of extraterritoriality, which allows to introduce: the free customs regime of the duty-free import of goods into the free economic zone; benefits in the sphere of taxation and currency regulation; a simplified procedure of entrance and exit for foreign citizens. 2. The plan envisions the establishment of an industrial export-oriented free economic zone, where completely new enterprises are created. 3. The export-oriented free economic zone is defined as a limited area of a customs territory, within which a special regime of entrepreneurial activity is established for the zone participants who export a legally set amount of self-produced commodities belonging to the group of processing spheres of industry and corresponding to the conditions for commodities originating in the territory of the zone. 4. It is envisioned that the zone will receive an international status in the frame-work of the international agreement between Russia and Finland. This will allow the free economic zone to create a sustainable and attractive regime of operation, different from the national law. International Regional Cooperation At the end of the century the Republic of Karelia has started drawing up its own conception of territorial development. The special geographical location and the extensive border with Finland determines the priority character of international relations in the regional strategy of Karelia. The outward orientation of the development of the republic is determined by many factors, that can be summed up in one figure- over 40% of industrial output, services, trade, scientific projects, cultural ties and, consequently, the population of Karelia are directly or indirectly related to international activity. The strategy of the Republican Government can be formulated as "The Republic of Karelia: Euroregion 2000." This conception implies the transfer of the center of political, business and cultural activity from the Federal center to the regions, including Karelia. The progressive development is planned as a gradual process, in which the experience of regional construction of European countries must be used. The strategy "Euroregion 2000" envisions the establishment of market economy, the strengthening of the role of human rights and the further democratization of the society. We believe that today there are all the necessary prerequisites for the successful implementation of the Strategy. Since the end of the Cold War, Europe and the world are going through the process of the regionalization of international relations. The regional factor is important in the foreign policy of every state. Starting from 1991, when Karelia declared its sovereignty within the Russian Federation, and up to now the international ties of our region increased significantly and, in the last 2-3 years, have undergone serious qualitative changes. While in the early 1990s only a few Karelian towns had sister-cities in Finland, by 1995 the Republic had already signed partnership agreements with six provinces of Finland (Oulu, Northern Karelia, Kuopio, Mikkeli, Turku-Pori and Keski-Suomi), two Finnish commune unions (Savo, Southern Karelia), the Swedish province of Vasterbotten, the Norwegian province of Troms, Vermont State in the U.S., the Polish province of Chekhanovo and the Georgian region of Adjaria. Northern Europe has been and remains a priority direction for the next century. From 1993 Karelia has been a participant of the Council of the Barents Euro-Arctic Region, the Council of Baltic Sea States, the Assembly of Euroregions. The working program of the Nordic Council of Ministers has been going on for the last three years. In its framework there are a number of projects implemented with the participation of Karelia. One of the priorities of the foreign ties of the Republic is the bilateral cooperation with Finland, which is implemented on the basis of the Russian-Finnish agreement on cooperation on contiguous territories signed in 1992. So far over 250 projects were implemented in various spheres. The new quality was given to the international contacts of Karelia by the EU approaching the Russian-Finnish border. The entrance of Finland in the European Union meant that the only land border of Russia and the united Europe would be in Karelia. The Council of Europe and other international organizations are beginning to exhibit greater interest in the North-West of Russia, including Karelia. The implementation of the EU TACIS program in Karelia led to the establishment of joint projects with Danish, Finnish, Swedish, French and German partners. These projects are directed towards the reform of the system of republican and local government, education, health care and social welfare, forestry in the Republic of Karelia. Economics Most of the Karelian territory is hilly plain with noticeable traces of glacial influence. The wavy stone surface of the ground even now reminds of the ancient mountains. Karelia is often called "stone-lake-forest" land, emphasizing the main parts of the landscape, the unique combination created by the fantastically-shaped lakes separated by stony grounds covered with green taiga. The soils are of podsol, swampy-podsol, and swampy types. Forests (mainly pine and spruce) cover 49% of the territory. Minerals include mica, iron-ore, various construction materials (granites, diabases, marble), ceramic raw materials (pegmatite, spar). Besides, the Government of the Republic of Karelia together with Karelgeocom intends to announce in 1995-1999 open competitions for the right of using the mineral wealth with the purpose of geological research and extracting the following minerals: gold, diamonds, platinum, vanadium, uranium, tin, copper, molybdenum, zink, lead. 25% of the territory is covered by water. There are over 60 thousand lakes in Karelia. The largest ones are Ladoga and Onega lakes (17.7 and 9.9 thousand square km respectively). The largest rivers are: the Vodla, the Vyg, the Kovda, the Suna, the Shuya. The longest one, the Vodla, is 400 km long. The Kovda links 11 lakes. The Kem links 19 lakes. The total length of the waterway network is almost 83 thousand km. The Northern location of the Republic the processes of social and economical development of the Republic. It accounts for the relatively low economical level of the sparsely populated Northern regions of the Republic. The length of transportation network:
A modern highway runs along the October railroad and connects Karelia with Leningrad and Murmansk regions. From north to south the Republic is crossed by the Northern part of the October railroad. A commercial railroad Ledmozero-Kochkoma, which will link the western border with the October railroad, is under construction. The waterways go via Ladoga and Onega lakes, the White Sea-Baltic canal, and the White sea. Air-routes link Petrozavodsk with many regions of the Republic, with Moscow, St.-Petersburg, Archangelsk, Vologda, Syktyvkar, and other Russian cities, as well as with Joensuu and Helsinki, Finland. The main export articles include iron-ore pellets, timber and timber products, newsprint and cardboard, nonalloyed aluminum, as well as water transportation services. Major imports include machinery, equipment, and food products. The main trade partners of the Republic are Finland, Great Britain, Germany, and Eastern European countries. There are 382 enterprises with foreign investments registered in the Republic, with 41 countries as participants. 22% of the enterprises are fully owned by foreign investors. The Republic of Karelia has several advantages if compared with other regions of Russia. Among them are: a favorable geographical location (close to the central regions of Russia and to the Western-European markets), a well-developed water transportation system and an abundance of minerals. The structure of the economy of the Republic is industrially oriented and is characterized by the prevalence of extractive industries. The leading role in the industry belongs to the forest complex. The total timber resource, irrespective of categories and ages, is about 827.5 million cub.m, including 404 million cub.m of mature and over- mature wood, with 370.1 million cub.m of coniferous species. The role Karelia plays in Russian economy is determined by the branches using local natural resources (timber, wood-processing, pulp and paper industries, ferrous metallurgy, construction materials industry), and also by the well-established branches of machine-building, nonferrous metallurgy, and other industries working on imported raw materials. Karelia contributes 9.9% of Russian iron-ore output, it produces 22.6% of paper, 9.4% of pulp, 3.7% of timber, 3.1% of wood-fiber boards, 2.7% of dimension lumber, about 80% of paper bags. Karelian agriculture focuses on milk cattle-breeding, poultry farming, potato growing, vegetable-growing, and on growing animals for furs. Among the promising investment projects are the following:
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