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Slide 1 of 24 Economic Development of Kaliningrad Oblast presentation by Evgeny Vinokurov IMEMO RAS, Moscow, UPMF, Grenoble E.Vinokurov Economic Development of Kaliningrad Oblast E.Vinokurov Economic Development of Kaliningrad Oblast Slide 3 of 24 Kaliningrad: general information • territory – 15 100 sq. km (0,1% of the Russian Federation) • population – 943 500 (0,6% of the Russian Federation) • Exclave of Russia / semi-enclave of the EU • part of North West Federal District (total 11 regions in it) • nominal GRP in 2002 – appr. USD 1100 mln. E.Vinokurov Economic Development of Kaliningrad Oblast Slide 4 of 24 Kaliningrad: general information • History (the 750th anniversary of Königsberg in 2005) • Special Economic Zone (SEZ) regime • Federal Task Programme for Kaliningrad Oblast development up to 2010 E.Vinokurov Economic Development of Kaliningrad Oblast Slide 5 of 24 SEZ regulations • Free custom zone – no import taxes • no taxes for outflows into Russia, if: - for electronics and household appliances - 15% VA + changing TN code’s 5th digit; - for other goods - 30% VA + changing TN code’s 4th digit (+ extra criteria for automobiles, tractors, etc.) • import quotes in 35 groups - meat imports most sensible. Attempt to defend local producer. E.Vinokurov Economic Development of Kaliningrad Oblast Slide 6 of 24 Shadow economy • Input-output matrix (Tatarinov) – 55% from the official economy • Household income survey (Fedorov) – real incomes 47% in excess of officials ones • Delphi method (Samson, Elisseeva) – 60-95% from the official economy • 70% of SE are non-illegal activities E.Vinokurov Economic Development of Kaliningrad Oblast Slide 7 of 24 Main economic sectors • fuel industry • machine building • food industry • agriculture • trade and catering E.Vinokurov Economic Development of Kaliningrad Oblast Slide 8 of 24 Kaliningrad GRP 15 10 5 0 -5 Russian Federation Kaliningrad region -10 -15 -20 1995 1996 1997 1998 1999 E.Vinokurov Economic Development of Kaliningrad Oblast 2000 2001 Slide 9 of 24 Most dynamic sectors • food industry (Russian markets) • trade and catering • communication • transport (European-Russian trade) • light industry • furniture (SEZ success story) • machine building E.Vinokurov Economic Development of Kaliningrad Oblast Slide 10 of 24 GRP (PPP) • PPP comparison Lithuania-Kaliningrad made by I.Samson group (based on 2001 data) • PP 95% from Lithuania (not taking into account investments and state budgets) • Final estimation – 90% from Lithuania, close to Warminsko-Mazurskie Voevodsvo, 75% from Poland • further research needed E.Vinokurov Economic Development of Kaliningrad Oblast Slide 11 of 24 GRP by sector in 2000 GRP by sector in 2000 Health, physical culture and social security 3% Real estate 2% Communications 3% Other sectors 9% Industry 39% Public administration 3% Education 3% Construction 7% Agriculture 8% Transport 9% Trade and catering 14% E.Vinokurov Economic Development of Kaliningrad Oblast Slide 12 of 24 Employment structure in 2000 Employment structure in 2000 Housing and communal services 5% Construction 7% Other sectors 5% Trade and catering 21% Transport and communications 7% Health, physical culture and social security 8% Industry 20% Administration 8% Agriculture 9% E.Vinokurov Economic Development of Kaliningrad Oblast Education 10% Slide 13 of 24 Industrial production growth Industrial production growth (% to previous year) 35 30 25 20 15 10 5 0 Russian Federation Kaliningrad region -5 -10 -15 1995 1996 1997 1998 1999 E.Vinokurov Economic Development of Kaliningrad Oblast 2000 2001 Slide 14 of 24 Consumer price indices Consumer price indices (% to previous year) 120 100 80 60 Russian Federation Kaliningrad region 40 20 0 1998 1999 2000 E.Vinokurov Economic Development of Kaliningrad Oblast 2001 Slide 15 of 24 Investment dynamics Fixed capital investments (% to previous year) 35 30 25 20 15 10 5 0 Russian Federation Kaliningrad region -5 -10 -15 1995 1996 1997 1998 1999 E.Vinokurov Economic Development of Kaliningrad Oblast 2000 2001 Slide 16 of 24 Foreign investments, tnd. USD 1996 1997 1998 1999 2000 2001 23548 11292 39371 18266 19143 24563 Direct investments 21505 10630 9211 4089 6618 3248 Portfolio investments 580 18 56 - - - Other investments (trade and other loans) 1463 644 30104 14177 12525 21315 Foreign Total investments •Investment boom in Kaliningrad in 1999-2001 was generated by investments from mainland Russia (estimations 5-10 times more than FI). •FDI comparisons with neighboring countries are thus E.Vinokurov Economic Development incorrect. of Kaliningrad Oblast Slide 17 of 24 Trade flows, 2000, mln.USD Russia 468.90 CEEС 432.20 249.70 201.20 EU+CEEС 642.00 Kaliningrad Oblast 354.90 EU (15) 392.30 153.70 245.80 Rest of the world 97.60 Import Export 343.40 670.15 996.90 E.Vinokurov Economic Development of Kaliningrad Oblast Slide 18 of 24 Foreign exports and imports Foreign Trade, USD mln 1400 1200 1000 800 Exports 600 Imports 400 200 E.Vinokurov Economic Development of Kaliningrad Oblast 01 20 00 20 99 19 98 19 97 19 96 19 95 19 94 19 93 19 19 92 0 Slide 19 of 24 Exports and imports per sector 1. Return to highest levels reached in 1995-97, 2. Exports of raw and semi-finished goods. 3. Imports of food products (consumption and food processing) as well as machinery for modernizing industries. Export, mln.$ TN VED Sectors Codes 1999 2000 2001 01 – 24 Food products 30,5 36,1 46,9 27 Fuel industry 91,7 159,1 133,0 28-35, 37-40Petrochemical industry 26 ,8 33,7 44,4 41-43 Raw leather and furs 3,7 5,2 7,3 Wood and its products, 44,47, 48 incl. printing production 28,4 59,0 56,8 61-64 Clothes and footwear 20,3 19,7 21,2 72-81 Metallurgy 31,0 35,8 21,3 84-90 Machine building 47,2 86,8 58,7 Other goods 7,9 17,2 13,6 OVERALL: 287,7 452,2 403,1 Import, mln.$ 2001 in 2001 in % to % to 1999 1999 2000 2001 1999 153,6 265,5 356,3 348,3 131,2 145,0 22,6 12,7 5,9 26,1 165,6 47,5 64,0 77,7 163,6 197,3 5,7 6,3 7,5 131,6 200,0 27,4 33,1 42,9 104,4 16,5 20,3 26,6 68,7 24,3 40,5 49,4 124,4 359,8 270,6 343,6 172,0 105,9 83,4 108,7 140,2 875, 2 888,0 1010,5 E.Vinokurov Economic Development of Kaliningrad Oblast 156,6 161,2 203,3 95,5 102,6 115,5 Slide 20 of 24 Main trade partners • Export: led by Poland – 27,5% (mainly raw oil), then Germany and Lithuania • Import: led by Germany – 25%, then Poland and Lithuania • 70-75% of foreign trade is realized the EU and accession countries. • 5,8% fall on CIS countries except Russia. E.Vinokurov Economic Development of Kaliningrad Oblast Slide 21 of 24 Trade with mainland Russia TN VED The data for 2000 Inflows, Outflows, mln.USD mln. USD 01 – 24 27 28-35,37-40 41-43 44,47, 48 72-81 Food products and raw materials Fuel and energy industry Petrochemical industry Raw leather and furs Wood and products Metals and products Other sectors Whole: 89,1 185,2 72 0,1 34,4 24,3 63,8 468,9 340,8 13,2 1,5 1 18,6 1,5 55,6 432,2 • In 2001 outflows grew up to 619 mln. USD (min. estimation) and outweighed exports. • Trade flows with mainland Russia grew rapidly and constantly since 1999. E.Vinokurov Economic Development of Kaliningrad Oblast Slide 23 of 24 EU enlargement and Kaliningrad economy • “EU and Kaliningrad” Communication of the Commission (2001): Enlargement will be favourable for Kaliningrad because accession countries will apply Common external tariff • Lower import tariffs of new EU members (most important Poland and Lithuania) – present export structure does not let use this advantage; non-tariff barriers remain/increase • Little changes on local markets • Lower Russian import tariffs may lead to lower price competitiveness of Kaliningrad goods on the Russian markets ( due to lower barriers for CEEC goods and lower costs of production for Russian enterprises) + СAP for accession countries • Visa problem • Energy problem • Cargo transit problem • Lower volumes of shuttle trade – especially important for small border towns E.Vinokurov Economic Development of Kaliningrad Oblast Slide 24 of 24 WTO accession and Kaliningrad economy Specifics: • Compatibility of Kaliningrad SEZ regime and WTO regulations in question • May lead to abolition of regional quotes on imports • No anti-dumping measures against Kaliningrad producers yet less relevant than for other Russian regions – • Possible increase in European-Russian trade would render positive effects on the region E.Vinokurov Economic Development of Kaliningrad Oblast Slide 24 of 24 People’s perceptions and desires for the future What option suits you the best? • 21% - Oblast will have with equal rights with other Russian regions • 38% - Oblast will remain Russian region, but it will have a special status • 19% - Oblast will remain Russian region, but it will act under its own laws (China – Hongkong model) • 5% - Oblast will become independent state 1. Practically no separatism 2. Wide support for special rights and status • 3% - Oblast will be returned to Germany • 14% - found it difficult to choose E.Vinokurov Economic Development of Kaliningrad Oblast