The Arkhangelsk Region The following information was derived from the Web Site at http://www.dvinaland.ru/index_e.htm. Reprinted with permission. Geography Arkhangelsk region, as the biggest region of European part of Russia, occupies an extremely important geographical position in the country. For more than 400 years, Arkhangelsk has been the most important Russian seaport. It ensures not only trade, but scientific links with the rest of the world, for example serving as a center for scientific marine research. All of the great expeditions to the Arctic and to the North Pole began here. The strategic importance of Arkhangelsk is its proximity to the Northern Atlantic. The space launching site "Plesetsk", the Center of Nuclear shipbuilding in Severodvinsk and the Russian nuclear polygon on the Novaya Zemlya are located here. The Arkhangelsk region is situated in the North European part of Russia. Its coasts are washed by cold waters of three arctic seas: White, Barents and Kara. On the ancient geographic maps this area is called Dvinskaya Zemlya (Dvina Land). In 1708, upon the decree of Peter 1, it was renamed as the Arkhangelsk guberniya (province), and since September 1937 it carries the name of the Arkhangelsk region. The territory of the region is 590 thousand sq. km. Forests cover 39% of this area; agricultural land­1%; reindeer pastures­24%; islands­19%; and the rest includes rivers, swamps and lakes. Winter in this region is cold with temperatures as low as -26 degrees C. Summers are cool with an average temperature in July about 14­16 degrees C. The length of the day ranges from 3 hours 30 minutes (22 December) to 21 hours 40 minutes (22 June). Population The population of the region is 1 million people. The density of the population is 2.5 inhabitants per sq. km. The urban population accounted for 74%; and the rural population was 26%. Most residents live along railroads and in the basins of big rivers such as The Severnaya (North) Dvina, Vaga, Pinega, Onega, Mezen.   Natural Resources and Geology The Arkhangelsk region is a unique area with wealthy natural resources. Besides the traditional natural wealth such as forestry, which brought large enterprises of the timber chemical complexes here, the region has huge deposits of oil, gas and diamond resources. The Arkhangelsk region is rich in mineral raw materials. Preparations are now underway for mining diamond deposits, lime, dolomite, gypsum, building rocks, raw materials for cement production, iodine waters and jewelry agates. Exploratory-prospecting operations are being executed by the state enterprise "Arkhangelsk-geologia". In the north-eastern area of the region, on the territory of the Nenets Autonomous District, there are 73 deposits of oil, gas and condensate. A substantial contribution to the development of the industrial potential of the whole North-West of Russia is made by the "Rosshelf" company, which began the industrial exploitation of oil and gas deposits in the arctic shelf. In the Plessetsk district, the biggest in Russia, deposits of bauxite are located and being mined. In the future, the construction of an aluminum plant is planned. A large diamond deposit has been found and is being explored about 90 km north of Arkhangelsk. The geological and mining conditions of those deposits make it possible to set up a large-scale mining enterprise.   Business In the beginning of 1998, 17,027 enterprises and institutions representing different forms of property and management were registered in the territory of the region. The major part of the registered enterprises (65%) belongs to the private sector of the economy. Most private enterprises are concentrated in the following branches of the economy: agriculture ­ 91%; trade ­ 88%; construction ­ 80%; mediation agencies ­ 78%; industry ­ 70%; and transport ­ 54%. 56% of large and medium-sized industrial enterprises of the region represent a mixed form of property with 16% comprising state property; 6% comprising municipal property; 21% comprising private property; and 1% comprising public associations. Almost 130 enterprises and pieces of fixed and land property were privatized during 1997. Before that, 43 had been municipal property; 47 regional property; and 37 federal property. The timber industry seemed to stablize last year as production volumes stopped falling. This industry plays an important role in the regional economy. Timber, woodworking, and the pulp-and-paper industry comprised 40% of the total volume of regional output in 1997. In 1997, a 12% increase in the production of timber was registered, as compared to 1996. In 1997, the logging industry removed 8 million solid cubic meters of wood. Woodworking industry enterprises produced 1,542 thousand cubic meters of timber; 25 thousand cubic meters of plywood; and 14,538 thousand conventional square meters of wood-fibrous plates. Local pulp-and-paper mills produced 505 thousand tons of pulp; 195 thousand tons of paper and 483 thousand tons of cardboard. The biggest enterprises of the region include the joint stock enterprise "Arkhangelsk Pulp-and­Paper Mill"; the joint stock "Kotlas Pulp-and­Paper Mill"; the joint stock "Solombala Pulp-and­Paper Mill", and the "Solombala Timber Mill." The military-industrial complex of the Arkhangelsk region is unique and has considerable potential for production and research. In 1997, a drop in output was seen in the military­industrial complex of the region.   Agriculture Agricultural output is concentrated on meat and milk livestock products. There are about 176,000 heads of cattle. In 1997, 37,000 tons of grains; 356,000 of potatoes, 76,000 tons of vegetables; 41 tons of meat; 199,000 tons of milk and 196 million eggs were produced. There are 522,000 hectares of agricultural lands, including 258,000 hectares of arable land. On January 1, 1998, the herd of cattle was 124,000 including 53,000 cows. Arkhangelsk pedigree cattle breeding enterprise provides the purveyance and conveyance of pedigree cattle and poultry.   Transport The transportation network includes railway, automobile, sea, river and aircraft. The main railway lines of the region include Arkhangelsk-Konosha-Vologda-Moscow; Kotlas-Konosha-Vologda; Arkhangelsk-Obozerskaya-Murmansk; Kotlas-Kirov; and Arkhangelsk-Karpogori. The density of railways is 3 km per 1,000 square km. Automobile transport carries a considerable amount of internal transportation for goods and passengers. The highway Arkhangelsk-Moscow (M-8 gabarit) is an important transportation corridor for regional economies. It connects regional roads with many roads in Russia and many roads in other countries. Car density is 12 km per 1,000 square km. River transport is utilized mostly for interregional transportation. The length of usable river routes is about 4,000 km. Aircraft mainly provides for passenger transportation, the prompt shipment of goods to geologists, and forest protection. The main airports are "Talagi", and "Vaskovo" in Arkhangelsk, and the airport in Kotlas. Sea transport plays an important role in foreign trade, in service to coastal areas and islands located in the Arctic region. The main cargo ports are Onega, Mezen, and Naryan-Mar. The Arkhangelsk seaport is the oldest seaport in Russia. It is of vital importance to the region. Its freight turnover includes containers, various goods, metal, cardboard, pulp, oil and oil products. The port currently operates at 50% of its capacity. Railways belonging to Arkhangelsk, Solvytchegodsk, and Vologda railway departments are located in the territory of the Arkhangelsk region. The total length of the main railways is 1,860 km, including 1,100 km of the Arkhangelsk department, 725 km of the Solvytchegodsk department, and 35 km of the Vologda department. The total length of the underground railways of industrial enterprises is 2,360 km. 92% of loading operations are performed on enterprise-owned rail tracks and only 8% are performed on joint rail tracks. The main cargo is wood, and makes 41% of the total shipment in the Arkhangelsk department, and 49% of the Solvytchegodsk department. Decreasing of transportation volume led to personnel cutbacks. According to the data of the regional statistical board, the number of people employed in the enterprises belonging to the Ministry of Railways was 26,011 on January 1, 1997 and on November 1, 1997 it decreased to 23,421. In order to keep labor productivity at the same level as it was in 1990, the Ministry of Railways decreed that employees be cut by 50%. In the Arkhangelsk region, this figure totaled 12,000 people.   Communications Various types of communications are provided in the Arkhangelsk region by the state enterprise "Rossvyzinform". It provides the territory with postal, wire and telephone communications, radio and television broadcasting. The total capacity of the telephone stations of the state enterprises exceeds 200 thousand telephone numbers. The automatic telephone communications are established with almost all the cities, towns and districts of the region and with many cities of Russia. Radio-relayed line links Arkhangelsk with Moscow and is used for the transmission of three television programs. Remote settlements are being equipped with individual television centers of the "Moscow" model, which can receive two programs through satellites. JSC "Artelecom" provides the region with different types of communication: mail, telegraphic, telephone communication, radio, and TV broadcasting. JSC "Artelecom" supervises the work of 800 enterprises in communication and service centers. The "Rossvyazinform" carries on operations providing telephone networks to remote and almost inaccessible points and establishing permanent communications with the region's center by means of satellites.   Basic Finances The regional budget deficit was 190 billion rubles or 15% of the total sum of expenses. The share of tax receipts was 80% in the structure of the regional budget revenue. Income tax collected from natural persons was 27% and profit tax was 13%. 3,400 billion rubles from the budget were spent. The main projects of financing were education (28%), public utilities (20%), and health care (18%).   Investments in the Regional Economy Nearly 2,6 billion rubles has been invested in the economic development of various branches of the economy. The share of funds of enterprises and institutions of the non-governmental sector was 75%. 198 billion rubles were spent on the construction of objects provided by Federal Programs on investments. 15,961 thousand dollars and 2 billion rubles of foreign investments were sent into the regional economy in 1997. Direct investments accounted for $14 million. The largest sums of money were invested into the fuel industry (42%), woodworking, and the pulp-and-paper industry (96%). The largest investors are the U.S. (42%) and Germany (43%).   Investment Climate The Administration of the Arkhangelsk region makes every effort to create favorable conditions for the investors in the region. In 1997, the regional law "About the guarantees of investment activities on the Arkhangelsk region territory" was passed. The law is directed, first of all, at establishing a legal framework to grant guarantees of the region for realization of projects significant for the principal sectors of the national economy and social sphere. Forms of state regulation, legal protection of investment activity, investors' advantages and guarantees of the region are determined here. The purpose of the above-mentioned regional law is to ensure foreign investors equal treatment with domestic investors. A regional law on the Bond Loan of the Arkhangelsk region in 1998-2000 was passed by the Arkhangelsk Regional Assembly of the Deputies in July 1998. The purpose of this loan is to attract investment into the regional economy from the basic financial centers of Russia and foreign investors, to create a market of regional liabilities and to form the credit history of the region in the securities market. Money acquired after the issue and placement of the bonds will be directed at financing the projects. Their selection and realization will be carried out on a competitive basis. The securities will be placed for the sum of particular projects, selected by the Investment Council, significant for development of the regional economy. There is a pledge fund created to secure the invested resources. In development of the regional Foreign Investment Law, the Administration of the region worked out a project of a regional law on Preferential Taxation of investors. According to the bill, tax privileges will be given to those enterprises, which are engaged in industrial activity and put their own and attracted resources into realization of particular investment projects, approved by the Administration. At the same time there are tax privileges provided to banks and other credit institutions in a part of the profit received from crediting the investment projects. In January of 1999, a law on regional Free Economic Zone was passed. It has a frame character, and defines the legal and organizational mechanism of creation and functioning of a Free Enterprise Zone. The law is the first stage of the zone formation. It is aimed at the creation of a legal base for the economic growth of the branches and enterprises, which are vitally important for the region, and for the development of a interregional integration and transit infrastructure. In 1998, the regional economy acquired $16 million and 2 billion rubles of new foreign investment. New direct foreign investment amounted to $14,6 million. There are over forty investment projects and offers in the region's Administration. The Administration assumes substantial growth of amount of the investment projects in the near future.   International Contacts The work carried out in the field of international contacts is aimed at achieving maximum efficiency of foreign capital participation in the development of the regional economy. Foreign investments are a big priority in the most important branches of the economy and service sector of the region. Since the initiation of economic reforms in Russia, the enterprises of the region have used every opportunity to cooperate with foreign partners. There are about 180 enterprises with the participation of foreign capital working in the region, including the service sector. The region established fruitful working contacts with many European states and industrial companies which are attracted by the developed infrastructure, opportunities for the development of manufacturing and the quiet geopolitical situation. Co-operation with foreign partners in using the Plesetsk Cosmodrome (the only launching site in Europe) has good prospects. It offers a wide range of opportunities for joint scientific research and other projects in cosmic space. Many students from Arkhangelsk are trained abroad. So, young people from the region are being educated in Western business practices. The "Telemedicine for the Northwest of Russia" project is to be financed within the framework of the Barents interregional program. This sector is of great importance for the sphere of public health services and should promote the co-operation of medical personnel. The development of international tourism became recently one of the most important spheres of the regional economy. The Solovets Archipelago, Kenozero National Park, and the city of Arkhangelsk have good prospects to develop tourism. Negotiations with potential investors on the tourist potential of Solovets Islands are also underway. This includes the construction of hotels, the development of infrastructure, marketing and more. The development of the tourist industry in Northern Russian will help to revive the economy. The Russian-American Chamber of Commerce® is a nonprofit, nonpartisan organization acting to promote American business interests in the Russian marketplace. The Russian-American Chamber of Commerce® Last Updated: November 27, 2001. Copyright the Russian-American Chamber of Commerce® 1995-2003. All rights reserved.