* Data provided by the Institute of Economic Studies, Karelian Research Centre, RAS.
Figure 7.5. The GRP growth index.
From Socio-economical Development .. . (2003).
their derivatives, especially wood, pulp, paper, minerals and mineral products, oil, natural gas, and coal.
In addition, there are large forest industry enterprises as well as smaller wood processing plants operating in Komi, which contribute significantly to the GRP. The relatively high GRP of the Arkhangelsk Oblast is also partly due to oil and gas industry activities taking place within the territory. Furthermore, the Arkhangelsk Oblast also has a large forestry sector, including some of the largest forestry industry plants in Russia (Economic Geography .. ., 1999).
The Republic of Karelia is clearly the poorest region in the White Sea area, with the GRP of about RUR 34 billion in 2001. This is easily understandable since Karelia possesses no oil, gas, or non-ferrous metal reserves.
7.3.2 Inflation
The inflation rate in the Russian Federation, including the White Sea region, was highest in the early 1990s, amounting to hundreds of % per year. Its level decreased significantly by 1997 to reach 8%, but the 1998 default crisis and the ensuing ruble devaluation reactivated the inflation race, causing it to rise to 75%. The consequence was a sharp decrease in the real life per capita income, which only returned to the pre-default level in 2002. At present, inflation dynamics has slowed down, reaching about 15% annually.
7.3.3 Industrial production
As mentioned above, the economy of the White Sea region is based on industry, whose indices are far ahead of all other sectors (Table 7.20). It is of great importance both at the local and national levels, and offers vast potential for national exports. The industrial potential is the greatest in the Vologda Oblast, primarily owing to the largest enterprise in the White Sea region called Severstal , which is also one of the largest non-ferrous metallurgic enterprises in Russia. The industrial growth in
7.3
Table 7.20. Volumes of industrial production, billion rubles (but million rubles for the period 1998-2002).
Table 7.21. Per capita volumes of industrial production, in thousand rubles between 1990 and 1997, in rubles during 1998-1999, and million rubles for the period 2000-2002.
Regions producing with little impact on the White Sea catchment
Vologda Oblast
4.3 1,385 4,353 13,807 16,088 18,700 22,057
40,749
66.6
67.5
80.0
Komi Republic
3.2 989 3,140 8,940 11,402 13,268 15,304
32,996
42.3
55.6
56.6
the three northern regions of the White Sea Basin was slower than it was in the more southern Vologda Oblast and Komi Republic.
The leader in terms of per capita industrial production volumes is the Vologda Oblast, but the Murmansk Oblast is also quite close to this owing to the predomi- nance of urban population and nearly non-existent agriculture (Table 7.21).
The main branches of industry, and their significance for different parts of the White Sea Region, are shown in Table 7.22. As seen, the principal industries are timber and wood processing, pulp-and-paper industries, ferrous and non-ferrous metallurgy, and the power industry.
The industrial production within the White Sea Region accounts for about 3- 4% of the national volume (2.6-3.6% in different oblasts and republics). Industry is best developed in the Murmansk Oblast (mining industries). In financial terms, the industrial output of the Murmansk Oblast in 1997 was estimated at US$ 2.56 billion (1.81 in the Arkhangelsk Oblast, 1.09 in Republic of Karelia) (Economic Geography
.. ., 1999). In 2002, the production volumes expressed in US$ decreased in the Murmansk Oblast by ca 20% (with a significant growth when expressed in RUR), but the ratio of production volumes between the oblasts and republics in the White Sea Basin remained constant.
Table 7.22. Industrial production as partitioned between different branches in 2002 (% of total).
From Socio-economical Development .. . (2003).
Industry, Electric Fuel Ferrous Non-ferrous total power industry industry metallurgy metallurgy
White Sea catchment
Murmansk Oblast 100 20.7 0.1 10.4 26.4
Republic of Karelia 100 14.1 0.0 12.8 5.0
Arkhangelsk Oblast 100 9.7 21.2 0.1 0.3
Regions producing with little impact on the White Sea catchment
Vologda Oblast 100 8.6 0.0 60.0 0.1
Komi Republic 100 12.9 55.5 0.0 0.3
Chemical, Timber, wood Building Engineering, petrochemical processing, pulp materials machine-building industry and paper industry
White Sea catchment
Murmansk Oblast 6.3 15.8 0.3 0.9
Republic of Karelia 5.4 0.0 45.2 3.7
Arkhangelsk Oblast 13.5 0.3 44.5 1.3
Regions producing with little impact on the White Sea catchment
Vologda Oblast 7.5 6.5 7.4 0.8
Komi Republic 1.6 0.7 23.5 1.2
The industrial production data are concisely presented in Figure 7.6 and Tables 7.23-7.27. It is seen that some types of products displayed different tendencies.
The Arkhangelsk Oblast ceased producing chipboard, reduced walling material production 17-fold, and increased plywood and cardboard production. The Republic of Karelia showed a certain rise in cardboard production, no decline in electric power production, and a 13-fold reduction in the production of walling materials. The Murmansk Oblast experienced a rise in steel production, whereas the production of sawn-timber dropped 10-fold. The Komi Republic displayed a four-fold drop in the production of sawn-timber, a 9-fold decline in the production of walling materials, and a 50-fold decrease of steel output. Simultaneously, paper and pulp production has increased. It is noteworthy that cardboard production increased nearly 3-fold. The Vologda Oblast suffered a decline in most industrial branches, with the only rise being in cardboard production.
Table 7.28 amply illustrates the severe economic decline that occurred in the White Sea region and the Russian Federation as a whole. It is clear that the region had experienced a prolonged decline in production, some stabilization in 1997, and a slight decline in the summer of 1998. Later there was fast growth after the rouble
7.3
From Socio-economical Development ... (2003).
Table 7.23. Sawn-timber (in million dense cubic meters).
Regions producing with little impact on the White Sea catchment
Vologda Oblast
446.9 281.6 187.0 168.1 102.6 84.8 88.9
87.9
100.0 109.8 112.0
Komi Republic
355.3 158.7 111.8 109.5 83.6 52.7 50.3
46.8
42.5 47.7 39.5
devaluation, which made Russian products more competitive. In 2001, another decline commenced in some regions (i.e., a growth in costs (salaries, transport, etc.)) became as rapid as the growth of prices.
7.3.4 Agriculture
Agriculture does not play a significant role in the economy of the White Sea region (Figure 7.7). For example, economically it produces just about 4% of the Karelian GRP. Its share in the Karelian labor force is approximately the same. However, despite the official data, the actual importance of agriculture might be much higher, because it sustains a large number of unregistered job positions. Many people with low incomes find subsistence through farming, which is the only way to supplement their official earnings.
In the early 1990s, the agricultural activity in the White Sea regions was based upon cattle breeding and fur farming. Horticulture was less developed. The economic crisis has severely hit agriculture in the White Sea region. Fur farming has almost ceased to exist, while cattle breeding has declined to a fraction of its
7.3
former size. Only horticulture remained stable and even grew in 1994 and 1995. Partially, this has been caused by a change in consumption patterns of the popula- tion: a significant part of the population could no longer afford expensive meat and dairy products, so they switched to cheaper foodstuffs like potatoes and vegetables. Karelian agriculture has also undergone a rapid restructuring in terms of its ownership profile. The share of private farms increased substantially, while that of collective farms appreciably decreased. At the time, while the agricultural output of collective farms was shrinking, the output of farms remained quite stable or even
grew.
The overall economic growth since 1999 has not had much effect on agriculture. The cropland area and cattle numbers kept decreasing, the yield did not grow, and the number of farmers was declining.
7.3.5 Services and trade
Given that the real income of people in the White Sea region steadily declined, it comes as no surprise that the retail trade turnover declined accordingly (Figures 7.8- 7.10). However, the White Sea region experienced a notable growth in shadow- economy trade operations such as unregulated street markets, where anyone could sell goods without being subjected to any form of public control. The share of informal retail outlets in the total turnover increased by 30% by the end of the decade. At the same time, the share of the state and municipal shops declined (in Karelia from 81% in 1990 to 11% in 1999).
The higher incomes of people in the Murmansk Oblast resulted in a higher development of trade. The per capita retail trade turnover in Karelia was growing slower than in other regions, and the Komi Republic retained its leading position (Figure 7.9).
Commercial services are also best developed in the Murmansk Oblast, being least developed in Karelia. (Krom, 2000).
7.3.6 Monetary income
The salaries of employees in the North and adjacent territories, incorporating the White Sea region, are normally higher than in the areas located further south (Table 7.29). Salaries in the Murmansk Oblast are still far higher than they are in other regions (e.g., by two-thirds if compared with Karelia).
Furthermore, the demand is high, both in the country and abroad, for products of industrial enterprises operating in the Murmansk Oblast, giving them a chance to maintain high levels of salaries. The Murmansk Oblast populace have the highest income in the region (Figure 7.11). Figure 7.12 shows the dynamics of mean per capita income the Republic of Karelia, as an example.
Although the absolute size of the populace wages grows, the disposable income decreases because the inflation rate is higher. The heaviest decline occurred in 1992, and then in the 1995-1998 period, when in order to fight inflation the Russian