Manufacturing industries, fuel andpower production, construction sector
farming and fishery
Social and Cultural SphereIncluding:
Health Care and Physical Training(Sports)
Servicing of the statedebt
The amount of housing in the region is 17.4M sq. m, of which nearly 80% of all housing estate and street mains were builtprior to 1971.
In terms of sewage water bio-purificationsystems, towns and communities in Kaliningrad Oblast are ill-equipped, with amere 5-8 % of their present needs met.
Wear and tear on the fixed assets of publicutilities is growing, reliability and robustness of sanitary and civilengineering systems get weaker and weaker at an increasingly fastpace.
Even though a series of nature conservingmeasures have been taken lately in combination with a reduction in dischargesof pollutants, the environmental situation in Kaliningrad Oblast remainsalarming. There no adequately developed infrastructure for the recycling andsalvaging of solid municipal and industrial waste, including waste-processingmills (wasteplexes); the issue of recovery and disposition of armaments andammunitions remains unsolved.
Current Measures Aimedat Improving Social andEconomic Situation in KaliningradOblast
In 1996 the Federal Law On The Special Economic Zone in Kaliningrad Oblast was passed, with a view to bringing conditions for the economicdevelopment in Kaliningrad Oblast in linewith those in the other regions of the Russian Federation.
As a consequence of the new Law, andintroduction, by the State Customs Committee of the Russian Federation and the Administrationof Kaliningrad Oblast on31 December, 1998, of the new procedure for the determination of origin of goods in theSpecial Economic Zone in Kaliningrad Oblast, foreign trade has become a substantial element of theoblast’seconomy.
Introduction of the new law made itpossible to expand therange of goods produced in the Special Economic Zone (FEZ) in KaliningradOblast, to create additional jobs, to attract foreign investors.
In 1999, the mechanism of FEZ enabled theeconomy of Kaliningradoblast to produce and deliver to Russia a $ 270 M worth of goods, or over 70 % of the totalindustrial output, in 2000 the figure exceeded $ 430 M, or 80% of the totalindustrial output in the region.
Registered in Kaliningrad Oblast are over1,800 companies with foreign interest, subsidiaries and representation officesof foreign companies. Investors from over 50 countries set up thesecompanies.
Between 1993 and 2000 the volume of foreigninvestments accumulated in the economy of Kaliningrad Oblast came to $ 62 M,65 % of which fell on direct investments. 2000 saw $ 19.1 M worth of foreigninvestments come into the economy, or by 104.8 pp more than in1999.
Analysis of laws and regulations determiningthe legal status and functioning of the Special Economic Zone in KaliningradOblast shows that not all the advantages provided for by the FEZ regime inKaliningrad Oblast were fully put to use.
Industrial and agricultural productionfigures dropped even faster as goods were imported on a customs duty freebasis; the industrial sector did not start to pick up until after the 1998financial crisis at a pace no different from that throughout mainland Russia,though. A certain positive effect was achieved with the imposition ofquantitative restrictions on the use of customs free zone.
Both foreign and domestic investors keep arelatively low profile in the region, with foreign investments steadily fallingin late 90’s.
Even low prices did not make for therecession in the real sector of the regional economy, which was followed in the90’s by a furtherworsening of a number of indicators, including those capturinghouseholds’ incomes incash; certain signs of recovery did not come into view until after thecrisis.
The fact that foreign trade went up wasattributable to imports rather than exports, hampered by transportationproblems with Lithuania and Belarus. Even though it is the only region inRussia with never-freezing ports, Kaliningrad Oblast failed to become themuch-spoken-about “window to Europe” for Russia.
Thus, Kaliningrad Oblast is lagging behindthe rest of Russia in terms of the per capita gross product by over 1. 5 times,as concerns capital investments in fixed assets, the level is half the level inthe entire economy, with the living standards falling behind 1.4 times.
Kaliningrad Oblast:Development Strategy
The policy vis-à-vis Kaliningrad Oblast pursuedby the Federal Government of the Russian Federation consists in securing its status as an integral part of the RussianFederation, developing its integration with the rest of Russia, making the mostof its position as an enclave in the European economic space as a whole,directing the region’seconomy towards a fuller use of its export capabilities.
As the Program is implemented, it will bepossible to ease the pressure that a variety of internal and external factorsof social, political and economic nature put on Kaliningrad region, given itsunique characteristic as an exclave/enclave in the RussianFederation.
The Region’s economic development strategyhinges on the concept of a successful Special Economic Zone, which provides foran accelerated development of the region in social and economic spheres,raising its living standards by promoting trade and economic cooperation withforeign states, including cooperation in the sphere of science and technology,ensuring investor-friendly climate in Kaliningrad Oblast, using Russiancompanies’ bestmanagement expertise, expanding region’s export capabilities.
The Federal Law Onthe Special Economic Zone in Kaliningrad Oblastestablishes a sound balance between national and regional interests, thussetting the ground for stability at the macroeconomic level.
In order for the legal framework to beimproved and the aforesaid law to be enforced, the following tasks should beaccomplished:
long-term guarantees be provided for stability and sustainabledevelopment in the Special Economic Zone in Kaliningrad oblast;
full analysis be made of all existing legislative and normativeacts of the Russian Federation and Kaliningrad Oblast, with a view toeliminating inconsistencies as regards the implementation and enforcement ofthe Federal Law On the Special Economic Zone inKaliningrad Oblast, and necessary amendments be madeto the respective laws and regulations.
One of the key preconditions necessary tosuccessful performance of the Special Economic Zone in Kaliningrad Oblast liesthrough a flexible management system, making it possible for informed decisionsto be made on a timely basis. Hence, the task to set up such a body that wouldfully concentrate on the development of the Special Economic Zone inKaliningrad Oblast, through the use of a wide spectrum of competencies anddecision-making power to do its job in the best possible manner. Itsdecision-making authority should be determined legislatively.
Another positive change could be broughtabout if the Russian Federation and the European Union agreed among themselvesto view Kaliningrad Oblast as a field for multilateral cooperation; Russia andEU could mutually agree on the following issues:
using international legal mechanisms, to guarantee legislativestability in the Special Economic Zone in Kaliningrad Oblast;
to apply EU standards in the Special Economic Zone in Kaliningradoblast with respect to certain types of activities and certain categories ofgoods;
to introduce a special simplified regime allowing citizens ofShengen states to visit Kaliningrad oblast and for citizens of Kaliningradoblast to visit Shengen countries.
The Program envisions the principle ofselective concentration of resources for high priority vectors, from the pointof view of compensating for the region's separation from the main territory ofthe Russian Federation and of turning Kaliningrad oblast into a zone producingfor export
1. One of theprerequisites for a better investment climate in Kaliningrad oblast is a moderntransportation system that must be put in place, along with a largeinternational multi-purpose transportation and communications hub; also,measures are needed to improve the tariff policy as regards transit movement ofgoods and passengers.
As the European Union expands, Kaliningradoblast is faced with a threat of its isolation from main transportation routes.The region will not be able to fully benefit from its unique geographicposition, unless an effective transportation and communications system is putin place to link Kaliningrad oblast with the main territory of Russia and theEU.
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