dk murmansk en

Regional supplement to the newspaper Ekonomika i Vremya 2009

For investors, business people, and wide range of readers

business mapof russia

Murmansk Region:People,Resources,Opportunities

Project on construction of the World Trade Center in Murmansk

JSC International Business Center Murman

The project aims to:

Create a modern office cluster that encourages the establishment

of businesses in Murmansk

Build a visible landmark that represents the new oil-age coming to Murmansk.

Establish a development that can incorporate a number of different

functions: First class flexible office spaces

(A, B category), meeting and conference

facilities, college facilities (BI for oil

& gas), a hotel with rooms of various

comfort level.

Offer a dynamic work environment to international companies and their

employees that consists of a wide range

of service facilities: restaurant, cafes,

shops, fitness centre, etc.

Create an open, green indoor environment that is in contrast to the outdoor arctic

conditions and that provides an attractive

working and communication environment.

Design a flexible structure that can be erected using a step by step strategy.

Build a total program of 60.000 m2 including underground parking.

Contacts JSC International business center Murman

Tel.: +7 (8152) 55-47-20

Fax: +7 (8152) 55-47-21

[email protected]

WTC-Region, Ltd.

Tel.: +7 (495) 258-17-09

Fax: +7 (495) 258-10-74

[email protected]

BB Eiendom AS

Tel.: +47 909 66 075

Fax: +47 75 58 24 26

[email protected]

Murmansk Region: People, Resources, Opportunities 3

from the publisher

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Dear readers:

You are keeping in your hands the second edition of the Business Map Russia devoted to Murmansk it is a regional supplement to the newspaper Ekonomika i Vremya. A year ago, we introduced our new information product to the business community, and we were genuinely pleased by the positive response on it by our partners and readers. The idea of annual reviews of economical and political life of the regions is not that new. But the media market of our country obviously lacks the analysis of the kind structured and well-commented. A large international business forum in Murmansk is a proper reason to issue such edition. The time that passed since the autumn of 2008 was rather hard. The recession offered a test for durability for both the national business and Russian state itself. Murmansk Region also has experienced difficulties, but the implementation of major industrial and investment projects is not postponed here for a long term. Therefore, the economic life of this region in the near future is going to be most intensive. Expected are the extra investments from the government and the advent of new foreign corporations.Our company, in turn, also seeks to promote the economic growth of the region prima-rily, through the arranging of transparent and objective information environment for all interested people, managers and entre-preneurs: for those who are already working in Murmansk land, and for those who are so far examining its opportunities. To achieve this goal, two major dedicated products of our company are designed: a weekly Ekonomika i Vremya and a series of Business Map of Russia devoted to Mur-mansk Region.When working over the regional editions, we have determined three key themes, without consideration of which can not be normal development for either business or for the state. The People is an assessment of professional skills and consumer abilities of the inhabitants of the region. The Re-sources concern raw materials, fixed assets, and technologies. The Opportunities stems from the two previous sections it is an attempt to forecast the development of the region on the basis of the data available. The results of our work are the pages of this is-sue. We hope that the information provided is going to be interesting and useful for our readers even in the nowaday uneasy situa-tion.We are grateful to the administration of Murmansk Region and Northern Chamber of Commerce and Industry, as well as our busi-ness partners and research companies for their fruitful cooperation that have contrib-uted to the producing of Murmansk edition. This years series of Business Map of Russia will be followed by the edition devoted to Vologda Region.I wish you a happy reading and every success in your business.

Alexander Evseev, Editor-in-Chief, Ekonomika i VremyaCEO, Publishing Company RIAL

Contents

business map of russia, a regional supplement to the newspaper Ekonomika i Vremya. Project leader: Alexey Smirnov. Editor of the Russian version: Valeriy Fenev. Editor of the English version: Elena Tolstyakova. 10,000 printed copies. Printed by TK Deviz Co.Ltd. Address: Office 4H, 60 lit. A, 17-ya Liniya V.O., St.Petersburg, 199178 Russia. Signed to be printed on 7.10.2009. Order 3687/1. Time of release: planned 20.00, actual 20.00. The newspaper Ekonomika i Vremya is registered by North-Western Regional Administration at the RF State Committee over Printed Media. Registered 3300.

People

Murmansk folks 67Statistics: age, education, employment, income and expenses

Our prime task 89 is to promote the development of businessInterview with Dmitry Dmitrienko, Governor of Murmansk Region

Resources

Money 1011Structure of regional budget, statistics, priority spheres of financing

Arctics 1213Resources of the region, exploration plans, fleet, and infrastructure

Economics Map 1415Industrial centers, transportation routes, investment opportunities

Fishery 1617 Trends of the industry, legislative amendments, statistics

Transportation Hub 1819Plans on development, new infrastructure, governmental and private investments

Real Estate 2021Trends of the construction industry, state of the housing, rental costs

Tourism 2223State of the industry, accommodation facilities, options for development

OpportunitiesOne with the brain 2425 could find a solution in such situationInterview with Anatoly Glushkov, Chairman of the Northern Chamber-of Commerce and Industry

Top 100 2627

4 Business Map of Russia

Facts & FiguresH

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A Midnight Country

The Lapps and the Sami A Hero City

It is officially considered that the Mumansk Region was formed by a special decree of the All-Russia Central Executive Committee on May 28, 1938. It is found in the Kola Peninsula, mostly above the Arctic Circle. In the south,

it borders the Republic of Karelia, while in the west Norway and Finland. It is washed by the White and Barents Seas. But these aus-tere northern lands were populated long before the historical decree of the Ex-ecutive Committee. In fact, it was the Novgoroders who were the first of the Rus-sians that made the path to the Kola Peninsula as long ago as in the 9th century. Much impressed by the phe-

nomena of the polar day and the polar night, they christened these lands a Country of Mid-night, in a poetical way.

Nights and DaysThe polar night (the period when the sun does not appear above the horizon) lasts here for more than a month, from the beginning of De-cember to the middle of January. Its duration in various localities depends on the geographical latitude.

Such phenomena are possible only above the Arctic Circle an imaginary line on the earth surface. Speaking of that, there is a railway station at the border of Karelia and Murmansk Region, which is called Polyarny Krug (Arctic Circle), and not far to the north from the sta-tion there is an obelisk designating the relevant geographical parallel (6633' to the north from the equator).

The Countries of the Arctic NightRussia is not the only country in the world keep-ing the permanernt settlements in the territo-ries where the Arctic night takes place. The phe-nomenon of the polar day and the polar night can be observed in a number of other countries. In 1996, their representatives established an intergovernmental organization Arctic Coun-cil, which comprises Russia, Canada, Den-mark, Finland, Iceland, Norway, Sweden and the USA.

The Gulf Stream and the Arctic The climate in the Murmansk Region is severe and unstable. It is formed, on the one hand, un-der the influence of cold air fronts of neighbour-ing Arctic, while on the other hand, under the warming impact of Atlantic.

As a result, a unique climatic situation occurs: the sub-arctic air masses are strongly eased by a warm current of the Gulf Stream, which allows for the navigation all year round.

In the north of the Kola Peninsula, the av-erage temperature in winter is 14C, while in summer, when the sun almost never leaves the sky, 14C.

In the central and in the southern part of Murmansk Region, the frosts happen to reach 40C in winter months. With that said, the summer there is drier and consider-ably warmer. The warmest area of the region is the southern White Sea environs. In the east-ern areas, the climate is more severe, and the largest number of days with strong storms is observed there.

The average annual precipitation in Mur-mansk Region is about 400 ml. They often fall out as snow persisting 250 days.

At the end of the 2nd beginning of the 1st millennium B.C., the nomads belonged to the Finno-Ugric group came from the North Urals to the Kola Peninsula. They were not that gi-ant guys (the average mens stature was 155 cm) with a relatively wide faces. As a result of mixing the newcomers with the aboriginal population of the region, the ancient Sami Finno-Ugric ethnic national group was gradually formed. By their physical appearance, they resembled the Europeans but also had the features with a vague hint on their Eastern origin. The Nor-wegians called them Terfinns and Ter Sami (referring to Ter or Tre, the then name of the Kola Peninsula), while the Russians used to call them Lapp and Lappari. By descriptions of the travellers survived to our days since the 9th century, the Sami wore no huts, lived in the

stone rifts, and ate only animals beasts and birds and sea fish. And they were Pagans and worshipped their own gods Seids.

In 1985, for distinguished merits in World War II Murmansk was conferred the title Hero City and the highest award of the Soviet Un-ion Order of Lenin and medal Golden Star. In the course of World War II, Murmansk was attacked not once from land and air. The Fas-cist troops aimed to conquer the city of strategic significance, but the city near the front resist-ed the attack of the enemy for more than forty months. Dislocated in the Transpolar 150-thou-sand Fascist army was governed by a Hitler di-rective: to capture the city and the Murmansk port, through which the cargoes arrived from the ally countries to supply the country and the army under the lend lease program.

The air attacks were most powerful in some days, the fascists made 1518 raids and dropped a total of 185 thousand bombs in the years of the war. By the number and density of the bomb attacks at the city, Murmansk is next to Stalin-grad only.

oil and Gas exploration

The Memorial to the Heroic Defenders of the Transpolar Lands


Facts & Figures

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In Murmansk, all nuclear-powered ice-break-ing fleet of the country (eight ice-breakers, one lighter carrier and several vessels for technical aid) is based. This fleet assists the program of the northern supplies, and also delivery of car-goes of the Norilsk Nickel MMC. The length of the route is about 6,000 kilometers. The use of the nuclear fuel ensures the vessels an un-limited cruising range with no additional fuel-ling. Furthermore, the territory accommodates the facilities of the nuclear submarine fleet of the country.

In 10 kilometers of Zapolyarny city there is a bore well of 12, 262 meters the deepest in the world. Hard-working Chinese dug the wells 1,200 meters deep in the 13 century. The Europe-ans beat the Chinese record in 1930 to pierce the terra firma at 3-km depth. At the end of 1950s, the wells became deeper and reached seven kil-ometers. But in the USSR they managed to beat this record near Lake Vilgiskoddeoaivinjarvi. It is Finnish for The lake next to the Mount Wolf, although there is neither mount nor wolves near it. Now the well is completely frozen.

The writer Benedict Erofeev, author of the im-mortal guide for the mysterious Russian soul a poem Moscow-Petushki, was born in the Murmansk Region (1938). This man of letters had a hand in mythologization of own biogra-phy; that is why the birthplace of Benedict Vas-silievich is mentioned in various sources as sta-tion Poyakonda, Chupa, and Town Zapolyarny simultaneously. Thus, it could be said that the route MoscowPetushki began in Murmansk.

The Captain

In 1954, the composer and musician Sergey Ku-rekhin was born in Murmansk. The heritage of the Captain (the friends called him so) are the dozens of his albums, music to the theatrical performances, feature and documentary films, producing of disk records of legendary national rock groups Aquarium, Kino, Strange Games, Auction, and Colibri. Or rather, it is unlikely that he was only a musician and only a composer. In one way or other, Sergey Anatoliev-ich had a hand in all processes related to modern culture and modern art.

A year before the birth of Andrey Malakhov, a publicist Maxim Kononenko was born here, bet-ter known to the reading Russia as Mr. Parker. The columnist of the Gazeta (Newspaper) pub-lication, editor-in-chief of The Bourgeois Jour-nal, he is also the founder and originator of the popular internet-project Vladimir Vladimiro-vich opened in autumn of 2002.

Let Them Speak

In 1972, in Town Apatity a popular TV presenter Andrey Malakhov was born. His biography is a denial of the myth that only the well-connect-ed people with celebrity surnames become the stars of the TV broadcasting. At the early 90s, the audience can only heard the off-screen voice of Andrey. But some day, when all presenters were on vacation, the management of the Good Morning program decided to use Malakhov as a replacement. Since that his glory began

Daily, in the murmansk region are

19 babies born

36 thousand letters mailed

267 TV sets sold

66 refrigerators purchased

457 tons of coal produced

1.7 ton of cheese eaten

16 new families made

2.5 tons of cod caught

3.2 tons of sausage eaten

114 tons of bread baked

22 pairs of shoes manufactured

The Nuclear Armada

Fish

Could Not Be Deeper

MurmanskPetushki

Mr. Parker

fish. On average, each sixth of the sea fish sold in Russia is caught exactly by Murmansk fisher-men. Of course, in the recent years the yields of the fishermen were not as good as those dur-ing the Soviet times. But they look forward to the renovation of the sector and development of completely new industry fish-farming. So what? In neighbouring Norway, they breed fish and make not bad money on it!

In the Murmansk Region, there are thousands of lakes and a countless number of rivers. Local basins are the place where the most valuable fish breeds live: salmon, trout, grayling, smelt, etc. The region is a true paradise for fishermen, and fishing tourism surely is one of the trademarks of the region and the area for gainful money in-vestments. But the region is also seaboard and is one of the major Russian suppliers of the sea


People

Thirty-five years old is the aver-age age of the Murmansk Re-gion resident. No wonder that the Murmansk residents do not hurry to get stuck to a family tie. And when the family is made,

a disappointment of the partner often follows soon. During 5 recent years, the number of marriages grew insignificantly in this northern region, while the number of divorces constant-ly increased. For the sake of justice, it should be noted that, after all, the number is grow-ing of those willing to enter into official mari-tal relations: in 2008, the marriage rate of the Murmansk resident (relative to 2004) has grown no less no more than by 16.2%.

The fact that the number of out-of-wedlock births gradually goes down thus indicating a desire of the region residents to stabilize family relations (about 0.3% a year).

In terms of demography, Murmansk Region (as compared with other territories of the North-Western federal district) looks quite well. By the level of natural loss of population (1.4), the re-gion keeps a honourable third position. And it is not by chance, because the Murmansk residents are not devoid of health (and for instance, as re-gards the flu incidence, they keep one of the last places in the North-West of the country).

What is a portrait of an average region resi-dent? They are young and strong in health. In 9 of 10 instances, they are urban residents. Well-balanced, well-educated, having a family, able and willing to work. And they are well aware where it is best to be employed

Always BusyAccording to the Russian Statistics Office, the number of the unemployed grew significantly slower in the first half of 2009 in Murmansk Region as compared to the other regions of the North-West federal district.

Since June 2008, this number increased here by 40 % only, while on average in the fed-eral district the increase is 107.4 %, and in the neighbouring Vologda Region 245.7 %. It has been always not that easy to find a lucrative job here, but the Murmansk residents are always on the go. You are going to sow what you have reaped

The Murmansk Residents: Hard-working and Hazardous

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The Murmansk people are one of the most well-to-do inhabitants of Russian North-West. The impersonal statistics indicates so. Moreover, they are young, ambitious, and hazardous. And it is not without reason that every tenth Murmansk resident of those questionned at a local internet portal is ready to travel to Las Vegas on a regular basis in case of closing all transpolar casinos. It means that not everything is that bad even during the recession!

A significant part of the Murmansk families (38.3%) do without children but the most widespread option of the social unit (73.3%) a family with one child. Alas, but the number of large families with many children is very low in this region of Russian North-West (just 2.6%)


PeopleAs of September 1, 13,600 unemployed were

officially registered in the region. It is one of the lowest figures not only in the district, but gen-erally in Russia. It is indicative that the number of free jobs grows gradually in the region (they number now about 7,000), and the number of the unemployed is reducing.

While a year before, the vacancies were twice as many, the local employment office is now able to assist the Murmansk residents to successfully find a gainful employment. For 8 months of 2009, it succeeded in finding the jobs for more than 17,700 people (45 % of the ap-plicants for such service), as a result the level of the unemployment registered in the region is only 2.6 %, which is significantly lower than with many neighbouring regions.

But while in the towns of the region it is eas-ier to find a job, in the northern areas distant from its center it is very difficult. In Murmansk, for instance, the relative weight of the unem-ployed against the overall number of emloyable population is 1.4 %, in Severomorsk it makes 0.7 %, while in the Lovozersky Area it is 7 %, and in the Terskiy Area 15.2 %.

It becomes quite clear why the rural dwellers tend to gravitate to the towns

Salaries are Getting UpThe Murmansk residents know how to make money. By the level of the salaries accrued, they are far ahead the average picture. And this is with regards to St.Petersburg, and the dis-trict, and the whole country.

In the first half of 2009, the residents of the transpolar region earned RUR 25,300 rubles monthly on average (in the North-Western Fed-eral District, the average income is RUR 20,300 only) and managed to add-up against 2008 both by the level of calculated (+14.1%) and the take-home (+0.1%) earnings.

While the larger part of the residents of the North-Western Federal District have discovered that their earnings are decreasing, the Mur-mansk Region inhabitants are gaining. As a result, a share of population with substandard income goes down in the region (for the recent 8 years, by 10%).

It should be noted that not only the employ-ees of commercial companies but the public sec-tor employees, as well as retirees, have compar-atively high income in the region. The average pension, for instance, was RUR 6,260 in January 2009, and the minimal local wage is RUR 7,063 (average in Russia is RUR 4,300). From 2005 to 2008, a nominal salary of the public sector employees in Murmansk Region has grown by 187%, and since January 2008, all regional pub-lic sector employees gets no less than minimal monthly wage.

Spending without Being FrugalWho earns much, they also tend to spend much. That allows for a living somewhat better than of the neighbours, and the expenses are planned in a different way.

In accordance to statistics, the residents of the regions spend less for food and goods (as well as for currency exchange) than the average for the North-Western Federal District, but they as-sign more money for savings and deposits. The Murmansk people spend only 28.5% for purchas-ing the foodstuffs, while the Pskov residents fig-ures are 35%, and the Vologda residents 41.8%, and the Leningrad Region residents 42.7% (ac-cording to the Russian Statistics Office).

Many residents of the region are able to buy not only the bare essentials but also expensive goods of long-term use, which includes the large household appliances and cars. The Murmansk residents also spend significantly more money for services than in the midland. Actually, the Murmansk residents take the first place in the

district by such indicator, being even ahead of the St.Petersburg residents. They also have no objections against going out for dining and win-ing

It should be remembered that the living ex-penses above the Arctic Circle are not that hum-ble. According to the Russian Statistics Office (for the first half of 2009), the Murmansk Region confidently takes the second place in the dis-trict after St.Petersburg by the level of monthly consumer spendings (RUR 13,260). Even in the Nenetsky Autonomous District, where mone-tary income of the population is twice as much, they spend less for day-to-day life, and the fair share of income is held over.

Against the Pskov residents, the Murmansk residents are not at all spendthrift, as their monthly monetary spending is almost twice as

much. And it is not only because the foodstuffs and the goods are significantly more expensive in the area of the permafrost: they just are used to indulge for the sake of certain human weak-nesses, and have a real ability to afford some-thing of the kind.

Let Us Peep into the FutureThe authorities of the Murmansk Region have the whole range of long-term plans (up to 2025), that give a lot of attention to the life level of the population, as well as the demography of the region.

According to the provisional figures, the factual income of the Murmansk residents (as compared to 2005) will increase 1.5 times next year, while in 2015 by 1.7 times, and by 2020 more than 2 times. The real wage, as the project originators envisage, will be growing even at a higher rate, and by 2020, it will increase 2.9 times, which is going to allow for a significantly reducing the share of the pauper population (at least, three times more relative to the level of 2005), along with the enhancement of the targeted aid and active social policy of the state authorities.

Changes are expected in the demography too. A rise in births that began in the Murmansk Re-gion in 2007 will be supported in every way by the government, so that in 2010, the result of 10.9 births per 1,000 of the population will be reached.

This is quite justified, as in the years to come the aging of the population is anticipated (this is also a Russia-wide problem in general), and it is not without reason that the additional financial expenses of the government will be required to discharge the social liabilities con-cerning the pension provisions and welfare aid. Thus, in 20112020, a drop of the number of the employed in the economy is expected at the level of up to 12.8% (while the level of the overall un-employment is going to be no higher than 1% after 2012).

Be that as it may, but the Murmansk folks never lose their good mood. And even the polar night that persistently mantles the region is not able to cast them down which goes without saying about the recession that happens signifi-cantly less often

statistics

Murmansk residents know how to make money. By the level of salaries, they are far ahead of the average indicators. And this concerns the district and the country in general. But do not forget that the living expense is significantly higher above the Arctic Circle

The

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average monthly earning calculated (1st half of 2009)

regions rur

Republic Karelia 17 719,9

Republic Komi 22 190,6

Arkhangelsk Region 19 137,2

specifically, Nenetskiy Area 42 748,6

Vologda Region 16 329,3

Kaliningrad Region 15 615,9

Leningrad Region 17 953,7

Murmansk Region 25 328,9

Novgorod Region 14 438,8

Pskov Region 11 897,2

St.Petersburg 23 297,6

Consumer expenses of the nWfD population (1st half of 2009, monthly average)

regions per capita, rur

Republic Karelia 8272,4

Republic Komi 12527,3

Arkhangelsk Region 9384,8

specifically, Nenetskiy Area 12092,4

Vologda Region 6466,0

Kaliningrad Region 9678,7

Leningrad Region 8252,8

Murmansk Region 13260,2

Novgorod Region 8862,5

Pskov Region 7913,4

St.Petersburg 15324,2

monetary income of the nWfD population (1st half of 2009, monthly average)











Pskov Region 10112,8


Turnover of the retail in nWfD (1st half of 2009)











Pskov Region 35696,7


Source: RosStat


People

Dmitry Vladimirovich, you headed Mur-mansk Region for not a very easy recession period. When you came, the personnel of the regional government was noticeably changed, including the people who were re-sponsible for the economic segment. What are economic goals of the regional admin-istration? Which are the priorities in the financial and industrial policy of the govern-ment under your control?

Indeed, I embarked on my work in spring this year, at the very climax of the crisis. The regional budget was not in its best condition that period lets say the hole existed in it to be urgently filled. I would not like to accuse anybody of that: the financial difficulties were quite objective by nature.

You know that the production and processing of raw materials gives a big share of our region-al economy. About 7080% of the budget come from 29 major businesses, including the Kola Metallurgical Company, Fosagro Co., etc.

Naturally, these companies that, among oth-er things, are to meet the demand from abroad, give us a significant infusion through the taxes. Price fluctuations on the world markets thus di-rectly affect the well-being of the region.

A drop of the commodity market that oc-curred at the end of the last year and the begin-ning of this year has resulted to a certain finan-cial tension.

So my first task when entering upon office of the Governor was the same as for a doctor: First and foremost, do no harm. No steps should have been taken which could worsen the finan-cial situation. And the second task was Help! That is, I had to think over a new economical prospect for the region, in order to find addi-tional sources for the economic growth

Our Prime Task is To Promote the Development of Business

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The Arctic has the utmost rich deposits of hydrocarbons. And Murmansk, which is a non-freezing deepwater port with an immediate access to the ocean, may become the main base for exploration of the Russian part of the Arctic shelf. Whatever difficulties are experienced, the crisis cannot last forever

Half a year ago, a new Governor was ap-pointed in murmansk region. Dmitry Dmitrienko, ex-military man, businessman, and federal official, took his office in the re-gion. The colleagues from moscow describe him as an efficient and energetic manager. if such is the case, it is exactly what the region with big ideas about several economical mega projects needs.


Peopleproposal is as follows: give us the fish for sale but the payment will be made in a month or two. It is not quite acceptable for us, because the fish producers need the operating assets here and now, since the fish is a seasonal product.

However, from my viewpoint the situation in the industry is changing, and in general the fish becomes a fashionable item of the menu in Russia, especially in big cities.

So the demand grows; the deliveries of fish production from the coastal cities to the cen-tral areas of Russia, the Urals, etc. constantly increase.

One more question, about major invest-ment projects to be implemented in the region, and specifically the development of the Stockman gas condensate deposit. Do they change the terms for investors or dates for the implementation of the project relat-ed to the crisis?

As far as the Stockman deposit is con-cerned, the pre-contract activity is now under-way and we believe that investor risks are mini-mal in the territory of Murmansk Region. We hope that in March 2010, when the major deci-sions are to be taken on this project by the con-sortium shareholders, any doubts of investors will be completely over. For all my knowledge, the major project participants give its prospects quite optimistic estimates.

Our another large project of the overall renovation of the Murmansk transport hub is already mentioned in a special-purpose federal program. It is planned to create an almost new port at the western coast of the Kola Peninsula. The hydrocarbon transshipment facilities, coal transshipment facilities, container transship-ment facilities should be included in it.

Also, a decision is in pending now whether the ferrous-ore concentrate transshipment fa-cilities are to be included there. At present, the RF Ministry of Transport has announced a ten-der for rendering the first stage of the works, and the preparatory procedures are under way. Potential investors also work at the feasibility study of the project.

I can not tell you right now who is going to be an investor until all tender procedures are implemented. I can only confirm that there are indeed the bids from the promising investors, but the specific names will be revealed after the completion of tender procedure only.

Are you ready to list them now, after half a year upon taking the office?

I believe that some things are obvious here: our major economic problem is unsufficient in-come from small and medium-scale business to the budget; therefore I consider my first and main task as encouraging the development of just small and medium-scale enterprises. It is the measure that will enable us to smoothen the consequences of price fluctuations on the world markets in the course of time. This is the first.

The other point of growth is the reform of our financial system so that to enhance the attrac-tiveness of industrial and construction projects for investments, as well as the projects from other allied areas of economy.

We are making the budget of 2010 so that on the one hand, not to lose the social focus that already exists, and on the other hand, to con-currently establish the premises for a new eco-nomic boost in the near, post-crisis future.

Besides, now we are going to undertake the revision of all regional special-purpose pro-grams and targeted programs; we are working with federal agencies and negotiating the op-portunities to co-finance various projects

Perhaps, it is the development of fisheries and fish processing that might become one of possible growth directions for small busi-ness. It is not a secret that the Murmansk fishermen preferred to forward their yield to abroad, not to Russia, for a long time. What is done here?

A good question. Indeed, we had such problem and it partially exists until now. How-ever, it is not quite regional but rather federal. The fishermen had difficulties both with the registration and the sale of the yield. But the ad-vent of the federal fishing act (amendments to federal act Nr. 333 adopted on December 3, 2008) has already removed a part of problems.

In any case, we have recorded about 17% growth of delivery of bioresources to the shore, and for specific kinds of bioresources such growth of delivery is 3040%. And this is despite all the phenomena due to the recession. In this regard, it can be probably said that another situ-ation takes place: while the fish and bioresourc-es come to us, a new issue arises the demand and the solvency of the Russians.

Commercial representatives come to Mur-mansk on a regular basis, and their main

But is the ratio of private and public par-ticipationin the development of the port al-ready determined?

About RUR 60 bln will come from the federal budget to construct the government fa-cilities: quays and hydraulic engineering units, navigation aids, etc. A mixed form of financing is expected for the renovation of existing railway stations and creating a new one near the port.

Most likely this will be the monies of both the Russian railways and other investors, and this is about RUR 29 bln more. The rest is private capital. In total, the project cost is estimated as more than RUR 150 bln.

The first international forum devoted to conquering the Arctic is opened now in Mur-mansk. Why now? And why in your city?

You know the Arctic is now considered the utmost rich region with the proven deposits of hydrocarbons so the focus of the business community on it is understandable.

It is Murmansk, which is the deepwater and non-freezing port with an immediate access to the ocean, can be the advanced base for explora-tion of the Russian part of Arctic shelf. What-ever temporary difficulties the world economy experiences, the crisis cannot last forever.

The strategic areas in the development of our country and our region will not change. The northern seas hide enormous riches under their bottom. Our common task both of Russian businessmen and our neighbours from other countries is to dispose of them as efficiently and carefully as possible. This is why we host such representative forum and hope that it will be held on a regular basis. Maybe even annu-ally. Anyway, the guests are always welcome in Murmansk!

A drop of prices on the world commodity markets has resulted in a certain tension for the regional budget, so my first task after taking the office of the Governor was in a way like a doctors: First and foremost, do no harm. And the second task was Help!

A DirectorySociAlly reSponSible buSineSS of ruSSiA.the experience of beSt compAnieS

A SpeciAl project of publiShing houSe riAlAnD the newSpAper ekonomikA i VremyA

DiStributeD Among the memberS of chAmberS of commerce AnD inDuStryof ruSSiAn feDerAtion


Resources

This year, the Murmansk Region was ranked the 4th in the North-Western Federal District (see the table) by its income. In general, the budget of the Murmansk Re-gion was approved for 2009 with

the following indicators: income RUR 33.33 bln, expenditures RUR 35.04 bln. The budget-ary gap is RUR 1.7 bln. It should be noted that in the first half a year of 2009 the budget was adjusted five times: due to the revenues from the federal funds and (largely) due to the reces-sion consequences which upset the routine of the major regional taxpayers ore mining and processing enterprises.

The tax inspectors recorded a decrease of the revenues to the treasury of profit tax and per-sonal income tax. After multiple realignments, the budget grew thin noticeably by April: rev-enues totaled to RUR 29.79 bln, while the expen-ditures RUR 35.17 bln.

A gap has reached its maximum allowable value under the Budgetary Code. However, de-spite such sequester a social focus of the budget persisted. The authorities guaranteed an in-crease of all payouts and allowances to the aided persons, as well as an increase of salaries of gov-ernment institutions employees.

An Anti-Crisis PlanIn spring, the region adopted an anti-crisis program. It includes the sections from various areas of activity. A weekly monitoring of major enterprises and banks becomes one of the lines. As instructed by the Governor, the executive authorities will have to optimize the number of government employees and the expenses for their salaries.

The subordinate unitary enterprises were advised of revising the salaries so that they do not exceed the level prescribed by the budget. In doing so, the authorities promised to the public to strengthen support to enterprises. The banks

are obligated to turn their attention to the re-structuring of debts.

Control over the market prices was high-lighted as one of the key points in the anti-crisis program. In May, by the Governors order the multi-agency commissions for streamlining the expenditure was set up. It included several working parties: one is prescribed to deal with reduction of debts related to the budget pay-ments, the second to work with loss-making enterprises, the third to undertake efforts in legalizing salaries and wages for a growth so that the revenues from a personal income tax increase.

Trying TimeBy the results of the half a year of 2009 the Mur-mansk Region faced a significant drop in the collection of the profit tax. Admittedly, on the other hand, non-repayable receipts from the federal budget have also increased.

The expenditure plan for the first six months was fulfilled with significant savings: by 43.6 %. The payments of social focus and public regula-tory liabilities have also failed to comply with the scheduled figures. The target investment program has suffered the most (21% of the plan). The same situation is with the transfers between the budgets. Expense for the maintenance of the administrative machinery (in total by RUR 40 mio) has reduced.

Thus, the state of the budget became the mir-ror reflection of economy in the region where all

the key figures demonstrated negative dynam-ics for the six months, except investments in the stock and real wages. In September, the region received RUR 1.78 bln from the federal budget and assistance fund to the reforms in the housing and utilities; they were distributed by different items.

Signs of StabilizationIn the second half a year signs of stabilization have showed up. The budget-making of the re-gion for 2010 has begun. It is already clear that expenditure will be maximum optimized in it again.

The primary objective is to raise investments to the region. According to the plans of the re-gional government, one of the main criteria for assessing the performance of the heads of the subordinate administration will be their abili-ties to implement the investment projects.

According to Governor Dmitry Dmitrienko in the crisis period the municipalities should not only efficiently use the arriving subsidies and bailouts but actively identifying additional sources of financing.

We make the budget of 2010 so that despite the crisis it does not lose a social focus but at the same to establish the background for further development after the impact of the crisis on economy begins to decrease, the Governor said to the journalists.

With such attitudes the zero readings of budget-2010 will begin.

For the Murmansk Region, the 2007 financial year happened to be most successful when the prices for commodities and metals on the world market grew at high rates. A lack of finance-related problems allowed then ensuring a good money provision for 2008 as well. But because of the recession, the regions treasury started to experience a certain tension, especially in the fourth quarter of 2008. The situation remains uneasy this year which has already resulted in a budget gap. However, despite all problems in making the budget for the next year, the authorities laid an emphasis not on the current expense but on raising investments to the region.

The Budget: Flexibility and Savings

We make the budget of 2010 so that it is going not to lose a social focus but at the same time establishes the favourable background for further development, when the economics starts to recovers from the diffuculties due to the recession. Dmitry Dmitrienko, Governor of Murmansk Region

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statistics

The fulfillment of the consolidated budgets of nWfD subjects in the i half of 2009

income

Subject RUR, bln

Republic Karelia 11.24

Republic Komi 19.33

Arkhangelsk Region 22.07

Vologda Region 17.56

Kaliningrad Region 15.02

Leningrad Region 28.29

Murmansk Region 19.90

Novgorod Region 10.08

Pskov Region 9.33

St.Petersburg 141.41

Nenetskiy Area 4.27

As per the data of Federal Treasury

expenditures

Subject RUR, bln


Republic Komi 21.06







Pskov Region 8.32

St.Petersburg 130.15

Nenetskiy Area 4.35

As per the data of Federal Treasury

business map of russia

St.Petersburg, Aleksandra Nevskogo ul., 9 Editorial office: (812) 327-0305Sales dept: (812) 327-8234 [email protected]

Regional supplement to the newspaper Ekonomika i Vremya

Already released:

# 1 (2008) pskov and region

# 2 (2008) murmansk region

# 3 (2008) st.petersburg

# 6 (2009) st.petersburg

# 5 (2009) novgorod region

# 4 (2008) Vologda region


Resources

According to the Arctic policy of EU that was designed by the Eu-ropean Commission, 25% of the undiscovered oil and gas field of the world may lie in the Arctic region. Most of these resources

are in the economical areas of Russia and USA.In his speech at the 9th RAO/CIS Offshore In-

ternational Conference and Exhibition, Sergey Donskoy, Deputy Minister of Natural Resources of Russia, was less assertive and said that the reserves of the Russian shelf are not researched enough yet. One can only be confident about the regions of the Barents, Kara, and Okhotsk Seas where the approximate amount of hydrocarbon reserves is determined. All the other resource potential of the Russian shelf is based on predic-tions. The reserves are spread in over 20 biggest oil- and gas-bearing areas and basins in the sea and on the mainland where over 1,000 promis-ing fields have been identified. However, only a few dozen oil and gas fields have been verified.

From an Idea to Oil-wellsIn the last years, Gazprom moved from design-ing concepts to real development of the Russian shelf of the Arctic. For this purpose, in particular,

an oil-derrick platform is being built at OAO Sevmash, which will go to the Prirazlomnoye field. Orders for drilling units for prospected wells of the Shtokman project have been placed with the Zvezdochka company and the Vyborg shipbuilding plant. And this is just the be-ginning. There are bigger challenges ahead, which the international integration will help solve.

At one of the press conferences, Valeriy Gol-ubev, Deputy Chairman of the Executives Com-mittee of Gazprom, told journalists that by 2030, the company is planning to raise the gas reserve increase by 43% through shelf reserves. Invest-ments in the development of Northern deposits will amount to billions of dollars.

Implementation of the first stage of the project started in July 2007. It is expected to pro-duce 23.7 billion cubic meters gas per year and to supply gas to Europe and countries of the Atlan-tic basin including USA.

Work at the Shtokman project has been di-vided into three conventional stages. Foreign companies Total S. A and StatoilHydro ASA have been involved in the implementation of the first stage. According to Yury Komarov, Senior Execu-tive Director of Shtokman Development AG, one TE

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The Arctic:the New Fleet of Russia

Western countries have intensified their activity in the Arctic. Russia is keeping pace with them. Rich in hydrocarbons and having a potential strategic transport value in the future, the Arctic is drawing more and more attention from Moscow. The scale of plans on development and establishment of a new infrastructure in the region is impressive. The region has probably not seen so much industrial expansion since the Soviet times.

of the objectives of the project is organization of cooperation of Russian and foreign contractors.

Transport infrastructureFleet modernization is another challenge for Russia these days. A few years ago, an expert research showed that after 2010, further use of the existing transport system could be a prob-lem. Most of the problems are related to logis-tics primarily, cargo traffic via the Northern Sea Route. There were several problems listed; in particular, the specified lifetime of evapo-rating units (nuclear reactors) of ice-breakers operating on the Northern Sea Route expires in 2008. Overhaul of these units would extend the service time of the icebreakers until 2013. There is no governmental program of new ice-breaker construction, and the commissioning of the 50 Years of Victory ice-breaker in 2007 does not solve the ice traffic problem. The experience shows that building a new ice-breaker from the ini-tial design to trial trips takes 10 years. A care-ful analysis of the ice-breaker fleet development programs and a comparison of their implemen-tation shows that after 2013, the only operat-ing linear nuclear-powered ice-breaker on the Northern Sea Route may be the 50 Years of Victory, which cannot lead the ships in the mouth of the Enisey river to the Dudinka seaport because of its keel depth. Therefore, unless diesel-electric ice-breakers are put into operation by that time, ice escort of ships to Dudinka will cease.

There is a similar situation with ice-class cargo ships suitable for the Northern Sea Route; the existing fleet is old, and its lifetime will ex-pire around 2012. Most of ice-class ships that are suitable for cargo transportation will be out of service in 2009. After that, ship owners will have to invest big amounts in repair or order a new fleet. If this is done on time, the ship tonnage will stay on the current level for about ten more

Shtokman field, May of 2008


Resourcesthat the institute made for Gazprom it is also stated that by 2030, the company will need 34 floating oil-derrick platforms, 27 tankers for liquefied natural gas transportation, and 39 re-search vessels.

The program of Northern natural resource ex ploration will require large amounts of cargo traffic by itself. Development of gas condensate provinces is impossible without it. Meanwhile, it is planned to begin in 20132014. Its reserves are 3.8 trillion cubic meters gas and 37 million tons condensate per year. Therefore, Gazprom alone can generate cargo flows that would in-crease the traffic on the Northern Sea Route drastically.

Infrastructure problems are made worse by the financial difficulties that Gazprom is facing today due to the global economic recession and lower demand for gas.

This makes expect that the plans of the Shtokman field development can be postponed for at least one year, though until now the company has kept saying that the terms would not change. There are plans of building two oil transshipment units and gas liquefaction plants.

However, there are also forecasts that if Gazprom is late with the development of the Shtokman field, the future demand for lique-fied natural gas may exceed the global supply. This largely explains the recent intensification of negotiations with investors.

After 2013, the only operating linear nuclear-powered ice-breaker on the Northern Sea Route may be the 50 Years of Victory, which cannot lead ships in the mouth of the Enisey river to the Dudinka seaport because of its keel depth

years. And the possible growth of cargo traffic will inevitably depend on ice channeling.

The pessimistic conclusion can be made that any new investments in resource develop-ment programs of the Russian North will have to be backed with capital investments in the transport infrastructure. It is not by chance that in the previous years big cargo owners who hope to settle in the Arctic latitudes seriously have started developing their ship-building programs intensively. This has result-ed in extra tonnage on the Northern Sea Route today. However, these days it mainly covers the needs of its owners. Nevertheless, the fu-ture plan is engaging more cargoes from other customers.

The Murmansk Shipping Company is not abandoning the plans of own fleet development either. This company is now a holding com-prising also JSC Northern Shipping Company and JSC Northern River Shipping Lines. Each of them has its own niche in the Arctic, which en-ables all the companies to cover the whole range of transport services related to sea and river transportation.

Gazprom Dictates Cargo TrafficGazprom has its own ambitious plans for de-velopment of the sea component. The Kry-lov Research Institute has drawn a program for sea machinery construction for shelf de-velopment until 2030 by Gazproms order. According to the experts at the institute, over 350 various floating crafts and special facili-ties costing in total more than USD 100 billion need to be built for the gas companys needs within 20 years. Gazprom has underscored that the implementation of this program will depend on the increase of oil and gas produc-tion on the shelf.

At the RAO/CIS Offshore 2009 conference that took place in St.Petersburg recently, it was mentioned that for the development of the Russian shelf within the next 20 years Gazprom would need 58 tankers (USD 9.45 bln), 46 ice-breakers (USD 4.04 bln), and 93 support vessels (USD 961 mio). At the presentation

statistics

Gazprom demand on building of maritime machinery for shelf exploitation, until 2030

Vessels and special facilities index

Number >350

Cost, USD bln >100

Gazprom demand on oil-derrick platforms for shelf exploitation, until 2030

oil-derrick platforms index

Number 55

Cost, USD bln 42.9

Gazprom demand on building the tankers for shelf exploitation, until 2030

Tankers index

Number 58

Cost, USD bln 9.45

Gazprom demand on building the ice-breakers for shelf exploitation, until 2030

ice-breakers index

Number 46

Cost, USD bln 4.04

Source: Presentation of Krylov Research Institute at the conference RAO/CIS Offshore 2009

Subscription index for newspaper ekonomika i Vremyawith supplements Khronika and business map of russia

38524 Phone inquiries: +7 (812) 3270305, 3205485, email: [email protected], www.ev.spb.ru

B a r e n t s e v o S e a

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W h i t e S e a N e c k

K a n d a l a k s h s k i y G u l f

M

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M

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MURMANSK

Lovozero

Revda

Kovdor

Olenegorsk

Monchegorsk

Apatity

Polyarnye Zori

Kolskaya Nuclear Power Plant

Kirovsk

UmbaAlakurtti

Salla

Nikel

Kirkenes

Zapolyarny

Pechenga

Kola

Severomorsk

Polyarny Teriberka

Ostrovnoy

Snezhnogorsk

Zaozersk VidyaevoGadzhievo

Kilpyarv

Lovozerskiy Area

Terskiy Area

Kovdorskiy Area

Kolskiy Area

Pechengskiy Area

Finland

Republic Karelia

Norway

Petrozavodsk

Kandalaksha

Murmashi

Verkhnetulomskiy

Kandalakshskiy Area

Zelenoborskiy

Tumanny

VarzugaPyalitsa

KolskayaSuperdeep

Wellsite

Chapoma

North

ern Po

lar Circ

le

Agriculture specialization

Industry branches

Minerals Autoroutes

Federal highways

Other federal roads

Territorial roads

Dairy and meat industryDeposits of apatite

Mining

Metallurgy

Machine building

Power supply

Production of vehicles

Food processing

Hydroelectric power plants

Fishing base

Legend

Investment projects

Ports

Towns with population above 100,000 people

Towns with population up to 100,000 peopleTowns with population up to 10,000 people

Airport

Airfield

Customs checkpoint

Area border

Country border

Region border

Federal border

Umba

MURMANSK

Apatity

Thermal power plants

18

18Ferrous ore

Titanium, vanadium

Copper-nickel ore

Deposits of gold and metals of platinum group

Deposits of quartz

Tantalum, niobium, zirconium, lithium

Raw materials for ceramics

Administrative territory unitsof Murmansk Region as of January ,

Towns with subordinate territories:Olenegorsk, Monchegorsk, Apatity, Kirovsk, Polyarnye Zori, Kandalaksha

CATE:Severomorsk, Zaozersk, Vidyaevo, Skalisty, Snezhnogorsk, Polyarny, Ostrovnoy

What and Where

Lake Lovozero

Rive

r Vor

onya

River T

uloma

Lake Umbozero

SerebryanskoeWater Reservoir

VerkhnetulomskoeWater Reservoir

Kanaa Bay

Lake Vulliyarv

River Varzuga

Rive

r Suk

hayaRiver Iokanga

Lake Imandra

River

Lotta

River Ponoy

The map illustrates pp. 823, no coordinate grid applied

Murmansk Region


B a r e n t s e v o S e a

Wh

i te

Se a

W h i t e S e a N e c k

K a n d a l a k s h s k i y G u l f

M

M

M

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MURMANSK

Lovozero

Revda

Kovdor

Olenegorsk

Monchegorsk

Apatity

Polyarnye Zori

Kolskaya Nuclear Power Plant

Kirovsk

UmbaAlakurtti

Salla

Nikel

Kirkenes

Zapolyarny

Pechenga

Kola

Severomorsk

Polyarny Teriberka

Ostrovnoy

Snezhnogorsk

Zaozersk VidyaevoGadzhievo

Kilpyarv

Lovozerskiy Area

Terskiy Area

Kovdorskiy Area

Kolskiy Area

Pechengskiy Area

Finland

Republic Karelia

Norway

Petrozavodsk

Kandalaksha

Murmashi

Verkhnetulomskiy

Kandalakshskiy Area

Zelenoborskiy

Tumanny

VarzugaPyalitsa

KolskayaSuperdeep

Wellsite

Chapoma

North

ern Po

lar Circ

le

Agriculture specialization

Industry branches

Minerals Autoroutes

Federal highways

Other federal roads

Territorial roads

Dairy and meat industryDeposits of apatite

Mining

Metallurgy

Machine building

Power supply

Production of vehicles

Food processing

Hydroelectric power plants

Fishing base

Legend

Investment projects

Ports

Towns with population above 100,000 people

Towns with population up to 100,000 peopleTowns with population up to 10,000 people

Airport

Airfield

Customs checkpoint

Area border

Country border

Region border

Federal border

Umba

MURMANSK

Apatity

Thermal power plants

18

18Ferrous ore

Titanium, vanadium

Copper-nickel ore

Deposits of gold and metals of platinum group

Deposits of quartz

Tantalum, niobium, zirconium, lithium

Raw materials for ceramics

Administrative territory unitsof Murmansk Region as of January ,

Towns with subordinate territories:Olenegorsk, Monchegorsk, Apatity, Kirovsk, Polyarnye Zori, Kandalaksha

CATE:Severomorsk, Zaozersk, Vidyaevo, Skalisty, Snezhnogorsk, Polyarny, Ostrovnoy

What and Where

Lake Lovozero

Rive

r Vor

onya

River T

uloma

Lake Umbozero

SerebryanskoeWater Reservoir

VerkhnetulomskoeWater Reservoir

Kanaa Bay

Lake Vulliyarv

River Varzuga

Rive

r Suk

hayaRiver Iokanga

Lake Imandra

River

Lotta

River Ponoy



Resources

According to statistics, in Janu-aryAugust of the current year the Murmansk Region enter-prises increased their catch of fish and production of oth-er seafood up to 436.200 tons

(+9.6 % as compared to the same period of 2008). In general, the index of the industrial produc-tion in the fisheries sector has increased even more by 11.4 %. The same indicators are mostly related to the increased quota for cod, haddock, herring, and mackerel, as well as with the com-mencement of a full-scale capelin catching af-ter the expiry of the moratorium. Production of marketable foodstuffs made of fish (except for canned food) on board the fishing vessels has increased by 7.9 %, output of frozen fish by 13.7 %, ice-cooled fish by 35.2 %, fish fillet (fro-zen) by 35.9 %.

The forecasts for 2010 sound optimistic. A growth in the stock of fish is observed in the fishing areas not only of the Barents Sea but also of the Norwegian and Greenland Seas. Therefore, at the coming 38th session of the Joint Russo-Norwegian Fisheries Commission it is most likely that the quotas for catches of cod, haddock, and capelin may be increased. Therefore, in the capelin season of 2010 the fish-ermen may anticipate to achieve even better yield against 2009.

It is also worth noticing that at the end of the last year, the fisheries sector in Russia was subjected to certain legislative adjustments. In December 2008, the Federal Fishing Act was amended, under which the bareboat char-ter vessels governed by a foreign jurisdiction were not allowed to operate in the RF eco-nomical zone from January 1, 2009. Further-more, since that day the catch quotas are given to Russian vessels only, and as as much as for ten year at once.

The purpose of all such changes is to return the private fishing fleet back under the Russian jurisdiction and establish the favourable envi-ronment for clearer and more transparent operations of the fishing companies specifically on the national, Russian market. In addition, the fish and other seafood imports have dras-tically reduced in Russia in the year of the re-cession (a drop by 70 % for certain sorts of fish). To a great extent, the market has therefore broken free for the expansion of national com-panies.

The fisheries sector is one of few in Russia whose indicators are not going down but going up in the recession year. Fortunately, cod, haddock, and capelin do not depend on the stock figures and are not going so far to migrate away from the northern seas. But catching the fish is a half the way. Russia experiences a serious problem with its processing and transportation. And this is a good chance for investors.

The Fishery:a Good Catchat Financial Storm

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Go Fishing, Everybody ! For 9 months of 2009 elapsed, the investors contributed more than RUR 600 mio in fish farming in Murmansk Region. The major task is to satisfy a significant portion of the Russian demand for fish production in the near two-three years. The Murmansk Region Govern-ment expects that the level of investments will increase in future. The infrastructure is going to emerge that will make it possible to deliver the fish straight to the counters of the Russian foodshops.

A special initiative of the Federal Agency for Fisheries will also promote the fish trade: It is a revival of the network of dedicated fishmon-gers in the Russian cities under the Ocean trade name. The initiative has already been started to be implemented in practice. There are about more than half of a hundred of such fishmon-gers in Russia already. In future, the Ocean chain system (or the like under a local name) should unite about 450 shops throughout the whole country.

Murmansk is one of the first among the cities that have supported this initiative. The project implies the installation of special refrigerator storages that allow for prolonging the date of con sumption for the unprocessed fish. Furthermore, a chain of direct sale of out-put from all fish-processing enterprises of Mur-mansk Region is being arranged, to prevent the losses due to the competition with cheaper im-ported goods that are inevitable under a conven-tional sale system.

Within the framework of programs for the promotion of fisheries industry, a project to launch a fish-processing enterprise at Spitsber-gen has already been elaborated. A tender for designing the fish processing facilities in Bar-entsburg was posted recently in RosRybolovstvo. It is most likely that the Norwegian specialists will be building this project. It is expected that at the end of the year the design documents will be finalized, and the construction will begin in 2010.

Development of the processing productions, retail trade system, purchase of new modern fishing vessels with the advanced facilities all these are the strategic objectives endorsed by the state authorities. For the investors, includ-ing foreign ones, there is a good opportunity now to cover temporary lacunas in the secto-ral process flow just in time.


ResourcesThe Sea NeighboursWith regard to promotion of the fishing busi-ness, Russia relies not only on own efforts but on a mutually beneficial cooperation with the neighbours. The joint Russian-Norwegian Fish-eries Commission (JRNFC) operates successfully with certain outputs. Its objective is to work out the uniform rules for fisheries.

The objectives of the commission also in-clude the settlement of commercial and other conflicts arising from time to time. For exam-ple, in September this year the Norwegian coast authority detained two Russian trawlers. This incident tooks place mainly due to the fact that the rules for fisheries in RF and Norway were uncoordinated.

The international workshop under the as-signment of the 37th session of the Commission delivered its proposals to this end.

The 38th Russian-Norwegian Fisheries Com-mission embarked upon the work at the begin-ning of October 2009. However, the head of the

Norwegian delegation Lisbet Plassa noted that it was still early to speak about any tangible results reached. A lot of discordance have still accumulated for the previous years. And, since the matter of money is involved, the parties are reluctant to come to an agreement.

The comments on this of the representatives of the Barents-Belomor territorial office of Ros-Rybolovstvo are most cautious and elusive: The life will show whether or not the standard rules for fisheries are to be adopted at the 38th ses-sion but the RF is not going to accept a trade-off to the detriment of governmental interests.

Nevertheless, the activity of the commission has already shown that the experts are quite able to reconcile on a number of technical issues. Among other things, the general procedure for estimation of excessive catches has been elabo-rated, although some discrepancies still remain, related to the ratio for recalculating the finished goods back into the raw materials. Regrettably, the Russian proposals on the principles under-lying the joint control over the fishing have not been welcomed yet. It will be exactly the subject to discuss at the current session. The situation with such control in open waters of the Global Ocean near Spitsbergen has also not been dis-cussed yet.

In either event, the fisheries sector, accord-ing to the experts, will demonstrate a steady growth in the near future. Among other things, it relies on the governmental assistance.

Changing conditions of the government control and future ups and downs on the fi-nancial markets will never beat the ace up the sleeve of Murmansk people: the fish, like other foodstuffs, remains the product of the first de-mand. A need for it cannot just disappear.

It means that there always are opportunities for successful business here. The key point is to offer own most efficient and gainful option. And be not late in approaching the market!

statistics

The forecasts for 2010 sound optimistic. A growth in the stock of fish is observed in the fishing areas not only of the Barents Sea but also of the Norwegian and Greenland Seas. The quotas for catches of cod, haddock and capelin may be increased. Therefore, in the capelin season of 2010 the fishermen may anticipate to achieve even better yield against 2009

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fish and other seafood yield in Januaryaugust of 2009

Total, 000 tons 436.2

% of growth as compared

to the same period of 2008 +9.6%

Dynamics of major indexes in the fishery sector in Januaryaugust of 2009

index %

Production index of Fisherie sector +11.4

including:

fish products manufactured on board of vessels +7.9

frozen fish +13.7

ice-cooled fish +35.2

frozen fish fillet +35.9

Source: MurmanStat

fish and other seafood yield of the enterprises of murmansk region

Year 000 tons

2004 528.9

2005 578.8

2006 607.0

2007 550.4

2008 557.2

Source: MurmanStat

indexes of industrial production over murmansk region, % as compared with previous year

Year %

2004 106.2

2005 105.0

2006 102.8

2007 90.5

2008 103.6

Source: MurmanStat

Cost-effectiveness of sold goods, products (works, services), % as compared with previous year

Year %

2005 6.0

2006 8.9

2007 13.4

2008 13.6

Source: MurmanStat

subsidies for aboriginal peoples who deal in fishery in 2009Subsidies from Murmansk regional budget RUR 2 mio

Co-financing of communities no less than 10%

Source: MurmanStat, Government of Murmansk Region, Federal Agency over Fishery


Resources

The main factor for the imple-mentation of the Murmansk Transport Hub Development Project (MTH) is the unique geo-graphical location of the city of Murmansk, a non-freezing port

which is the most deepwater port in Russia. It is able to receive the vessels deadweight up to 300 thousand tons, and furthermore economi-cally independent of other countries as there is no need to pass through their maritime belt.

The other advantages of the hub development feature the proximity of the region to the Eu-ropean and American markets, opportunity to use international transport corridors Northern Sea Route, TransSib and North-South free and undeveloped territories on the western shore of the Kola Gulf fit for construction of new termi-nals, reliable transport links of the Murmansk port with the industrially developed regions of Russia.

These were the reasons for the RF Govern-ment to take a decree dated 08.12.08 Nr.1821-p with the resolution to implement the overall investment project Development of the Mur-mansk Transport Hub and significant budget-ary funds have been allocated. At present the

Transport: Expansion of Opportunities

hub development project is included in the fed-eral earmarked program Development of Trans-port System in Russia (20102015).

The Amount InvolvedAccording to expert opinions the development plans of the Murmansk transport hub will re-quire about USD 7.6 bln.

It will be necessary to invest about RUR 60 bln from the federal budget to this end. These monies will be used to construct the facilities in the federal ownership: berth and hydrau-lic engineering structures, navigation aids. It is anticipated to spend RUR 29 bln more for the arrangement of the railway infrastructure. It can be the money of the Railway Road or the Investment Facility, and also from the investors. However, the final form has not been decided so far.

The remaining amount RUR 160.34 bln will be the investors money. The establishment of the Special economic zone of the port type in the territory of the region will contribute to raising investments. This will allow the inves-tors sparing about 10% of the funds both at the construction stage and at the stage of putting into operation because of exemption from

Murmansk is the most convenient jumping-off place for development of the Arctic with its colossal natural reserves. It has also human and scientific resources, and the main point is its being a non-freezing sea port. Therefore, the implementation of the development project of the Murmansk Transport Hub will be launched in the regions that will increase export-transit capacities of Russia, expand the range of foreign economic ties, and improve the life quality of the residents.

VAT and customs payments for all equipment delivered.

Development PlansUnder the MTH development project the renova-tion of the sea port will be undertaken on both shores of the Kola Gulf. It is anticipated to con-struct the coal and crude oil loading terminals with the cargo turnover of 20 million tons and 35 mln. tons a year respectively on the western shore not yet developed.

Construction of the container terminal is planned on the eastern shore. Coal is mainly handled so far here. The container terminal with the designed capacity of 1 million TEU (equivalent of a 20-foot container) a year will appear instead of the coal berths.

Furthermore, it is envisaged the retargeting of going port facilities to transship general car-goes to ensure the deliveries of raw materials from a number of deposits of the Arctic shelf.

The project also envisages the development of the logistic and warehouse infrastructure, development of the railway transport, further equipping of the water area of the port and the fairway.

The renovations undertaken will permit to in-crease significantly the volumes of cargo trans-shipment. Under the optimistic scenario it is anticipated a growth of the total cargo turnover of the Murmansk sea port up to 144 mio tons by 2020, and under a pessimistic one up to 52 mio tons. Under the intermediate option the cargo turnover will increase four times relative to the present level, i.e. up to 100 mio tons a year.

Additional Freight TrafficThe launch of the projects on the western shore is first of all linked to the beginning of the de-velopment of hydrocarbon reserves of the Arctic shelf.TE

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Murmansk Sea Port


statistics

major achievements of JsC msTp for 8 months of 2009

index Value

Cargo turnover 10.46 mio tons

Turnover surplus against 8 month of 2008 +12%

Daily wagon turnover 1,5001,600

Annual number of vessels handled 550

Annual number of wagons handled 220,000

Development of murmansk Transport Hub until 2015

index Value

Length of new railways 81 km

Cost of enhancing railway access to the port: RUR 28.2 bln

Cost of enhancing road vehicles access to the port RUR 6.9 bln

Growth of tariffs for cargo trans-portation in the 1st half of 2009 (% against the 1th half of 2008)

regions %


Republic Komi 90.1


specifically, Nenetskiy Area 124.2





forecast of cargo turnover of murmansk Transport Hub for 2020

scenario 000 tons

Optimistic 144

Pessimistic 52

Averaged 100

Further on, the cargo traffic of the Murmansk Transport Hub will be growing up for account of carriages of the mining-industrial production of the Murmansk companies. First of all, experts talk about the Kola mining-metallurgical com-pany (MMC) a major company of the Norilsk Nickel Group.

MMC Norilsk Nickel public joint stock com-pany will invest RUR 2.2 bln in the renovation project of metallurgical production on the pro-duction site of Kola MMC public joint stock com-pany in the city of Zapolyarny of the Murmansk Region.

Furthermore, the whole range of not so large ore-mining businesses operates in the Mur-mansk Region which may also provide an addi-tional cargo traffic in the Murmansk Transport Hub in future.

A Growth of VolumesIn the course of the implementation of the project the total local railway carriages at the Murmansk Transport Hub may increase up to 43 mio tons in 2015, and in 2020 up to 66.9 mio tons. Coal in bulk, petroleum products in tanks and container cargoes will make a basic part of such cargo traffic in future.

Total volumes of foreign trade container car-riages of the Murmansk Transport Hub may amount to 2.7 mio tons by 2015, and 10 mio tons by 2020, including a share of import will increase up to 60%.

The volumes of coal transshipment through Murmansk will also significantly grow. They are envisaged to bring to the level of 23 mio tons in 2015 and up to 32.9 mio tons in 2020.

For comparison it was handled 11.1 mio tons in 2008.

A discharge of petroleum products will in-crease up to 9 mio tons in 2015 and 14.2 mio tons in 2020. For example: in 2008 it was 1 mio tons only. Almost 80% of total volume of cargo trans-shipment in the Murmansk hub will fall to coal and petroleum products in the near time.

Strategic ProspectsThe result of the implementation of the overall development project of the Murmansk Trans-port Hub should be: the establishment of equal international competitive opportunities for the Murmansk port that will promote a significant growth of an export transit potential of Russia for account of an increase of export and transit freight traffic in prospect and strengthening of foreign economic ties, and also expansion of the involvement of the Murmansk Region in the international cooperation; integration of transport system of the Murmansk Region in the overall Russian transport system and

assistance to a growth of economic potential of the North-Western region and the Russian Federation, a significant strengthening of the competitive advantages provided by the trans-port system of Russia in general; promotion of business and investment activity in the

Murmansk Region for account of improving the overall investment and business climate; establishment of necessary background for dynamic development of the Murmansk trans-port hub, increase in the development rates of economy, invigoration of innovative activ-ity, raising national and foreign investments and advanced technologies in the development of the economy of the Murmansk Region; es-tablishment and development of modern port facilities for handling export cargoes in the Murmansk port and on the western shore of the Kola Gulf as well as conditions for reno-vation of the port infrastructure for account of raising national and foreign investments; diversification of the oil and coal export system through the Murmansk port, establishment of competitive transport schemes for export of mass commodities cargoes with the use of heavy-tonnage transport vessels deadweight up to 300,000 tons; bringing the transport in-frastructure of the Murmansk Region in line with the current economic conditions and es-tablishment of the background for construc-tion of new port terminals on the western shore of the Kola Gulf; establishment of objective conditions for development of cargo carriages by the Northern Sea Route; creation of new jobs, maintenance and development of the human resources potential of the region, improvement of the life quality of population; getting addi-tional tax revenues to the budgets of all levels.

In the course of the implementation of the Murmansk Transport Hub development project, the optimistic scenario expects a total growth of cargo turnover up to 144 mio tons by 2020, while a pessimistic one up to 52 mio tons.

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The cargo traffic of the Murmansk Transport Hub will be growing up for account of carriages of the mining-industrial production of the Murmansk companies. First of all, experts talk about the Kola mining-metallurgical company (MMC) a major company of the Norilsk Nickel Group

Resources


Resources

Experts call the construction sector of the region a weakness factor of the Murmansk Region. In the 1990s, construction was one of the first industries to face the market realities. Commercialization has,

on the one hand, made the industry more flex-ible and adapted to modern life realities and on the other hand, put a major part of business, fi-nance, and employment relations in the shad-ow. Struggling for lower construction costs, companies decided to save on wages, which is why most of the employees had to change jobs or move to other regions.

Most of the experts hopes for a renaissance of the sector are related to two big investment projects, namely, the development of the Shtok-man gas condensate field and the development of the Murmansk port transport unit.

Cottages NeededAt the moment, the first-hand housing mar-ket in the region is very compact as building volumes have gone down. For many years, the Murmansk Region has been one of the last on the list of Russian regions by residential con-struction.

This year, construction rates went down even more due to the economic recession. In JanuaryAugust 2009, the amount of jobs and services in the industry amounted to 72% compared to the same period in 2008.

In nine months, 13,500 sq.m of new hous-ing were commissioned in the region. These are 18 residential buildings in the cities of Mur-mansk, Kola, Apatity, Kirovsk, Monchegorsk, and Polyarnye Zori, in the towns of Zelenobor-skiy and Umba, and in the villages of Chavanga and Kovda. Of that number, construction of two apartment blocks was funded by the regional budget and of one by the Kola nuclear power plant.

The other new buildings are individual hous-es, namely, 15 private homes with a total area of 2,500 sq.m. For comparison, in the same period

Real Estate:Waiting for a Boost

in 2008, 21 houses were built of which 20 were individual.

Demand for individual housing in the North has been growing in the recent years. In Mur-mansk, there are already three local areas of development of private housing, namely, near the Lights of Murmansk hotel, at the southern exit road near Shabalina street, and in the city at the foot of the bald hill to the south of Ko-operativnaya street. However, it should be said that some of the private construction projects have been suspended this year, and the de-mand for new land plots has shown a decline tendency.

However, in the future, private cottages should also appear near the Pitievye Lakes, ac-cording to the general plan of Murmansk devel-opment that has been adopted this year.

According to the experts, implementation of investment megaprojects is the only way to create solvent demand and establish a need for a firsthand residence market in the region.

The Per-Meter FallPrices on the real estate market in the Murmansk Region have been dropping for nearly a year. Ac-cording to the experts, in late 2008, the dropping demand for apartments was caused by negative expectations of market participants due to the recession in the banking sector and on the stock market. The mortgage shrink by several times has also shown. As a result, housing sales in December 2008 dropped by nearly a third. How-ever, the prices had stayed at the same level for some time.

Large investment projects that will be implemented in the Murmansk Region are already influencing the real estate market and the building sector of the region. Overheated in the recent years, the market started shrinking noticeably as the crisis started. However, builders and developers do not hurry to say goodbye to their projects as they expect a rapid growth of business activity in the near future.

Then the rates of USD and EUR started grow-ing. Considering the change of the USD/RUR rate, the apartment prices in USD in the region dropped by more than 20% as a result. In the rest of Russia, no one noticed this drop at first as the prices had always been calculated in RUR.

Then the RUR prices started dropping too. As a result, by late summer 2009, apartment prices dropped by nearly 30% and with the ac-count of the losses due to the USD strengthen-ing, even 50%.

In September, the average price of realtors was about RUR 32,000 per square meter. How-ever, in private conversations realtors confessed that the vendors would offer a discount of RUR 50,000 to 150,000 per every real property bargain (e.g. an apartment) at the very first attempt to.

However, it should be noted that in the last years there had been a true price boom on the second-hand housing market in the Murmansk Region. The market went red-hot; in accordance with the expert opinion, the apartment prices grew on the wave of expectations of the up-coming prosperity and well-being of the region due to the soon start of the Shtokman field de-velopment.

Meanwhile, the housing in the Murmansk Region is characterized by a high degree of depre-ciation. Due to permanent lack of funding, many apartment buildings have not been renovated for 3040 years. The depreciation of about a half of apartment buildings is 31 to 65%, and of one tenth of buildings, over 65% (which makes the building completely non-repairable).

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In September, the average price of realtors was about RUR 32,000 per sq.m. However, in private conversations realtors confessed that vendors would offer a discount of RUR 50,000 to 150,000 per every real property bargain (e.g. an apartment)

statistics

average prices on the second-hand market (as of may 2009) per sq.m

regions rur 000


Republic Komi 40.8



Vologda Region 39.2





Pskov Region 31.4

St.Petersburg 87.8

Source: RosStat

prices of construction developers (1st half of 2009)

regions %


Republic Komi 97.5



Vologda Region 98.1





Pskov Region 97.7

St.Petersburg 98.5

Source: RosStat

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The Murmansk Region is some-times called the Russian Lap land. Almost all its territory lies in the tundra and forest-tundra areas to the north of the Arctic Circle. This region is interesting for the

people who are tired of the noise and everyday concerns of human civilization; for those who are ready to experience new sensations and to try their will and luck. The trump card of the region is the unique nature allowing for exer-cizing any kind of ecological, adventure, and extremal tourism.

There are enormous opportunities for that. The region counts more than 20,000 rivers and brooks and about 111,500 lakes. In the western and in the central part of the Kola Peninsula, numerous mountain mass is found elevat-ing up to 8001,200 meters above the sea level. There are 4 natural sancturies on the peninsula, 10 game reserves and over 450 monuments of history and culture. Both hunters for the game and for impressions are not going to remain without trophies. And more than that: it is worth remembering that it is the Murmansk Port where the sea voyages to the Arctic and to the North Pole begin.

Tourism Business: Rich Opportunities

The Kola Peninsula The land with no sundown for a half of the year, where it is possible to see the rainbow-coloured glowing of the northern lights. The territory, rich in natural resources. The starting point of the Northern Sea Route. And it is much closer than it seems: a well-organized transport access by land and by air connects it tightly with many cities of Russia and the states of Grand Dame Europe.

The white waters of Kola Peninsula provide for extremal tourism

The tourist products of the area are indeed abundant and versatile. They feature the ski tours and rock-climbing routes and extremal car rallies (Arctic Trophy). And there are also tours by the rivers, lakes, and the White Sea, mineralogical tours to the Khibine Moun-tains, and shooting tours. Educative, ecologi-cal, adventure, historical-ethnographic trips (including those to the coast-dweller settle-ments) the Kola Peninsula is ready to provide the widest opportunities for the people light on their feet.

But it is not only the rich nature that appeals to the guests of the lands with nonsetting sum-mer sun. Business events held in Murmansk and other cities of the region enjoy an ever-growing demand. Last but not least in the list are such memorable events

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