Economic cooperation in the Barents Region
August 2013
Akvaplan-niva AS Report: 6265
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Front page: International Business Centre in Murmansk, a joint multifunction project planned by North Chamber of Commerce and Industry and Innovation Norway. Image by Rambøll
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Report title
Economic cooperation in the Barents Region
Author(s) Akvaplan-niva report no Rune Rautio, Akvaplan-niva AS 6265 - Alexei Bambulyak, Akvaplan-niva AS Martti Hahl, Barents Center Finland Oy Date 01.08.2013
No. of pages 104+4
Distribution Public
Client Client’s reference Nærings- og Handelsdepartementet 11/4071
Summary
In 2013, the Barents Cooperation is celebrating its 20th Anniversary. In this respect the Norwegian Ministry of Trade and Industry has initiated an overall mapping of the development of Norwegian, Finnish, Swedish and Russian economic cooperation in the Barents Region through the recent 10 years, presenting activities and the direction it seems to have. In our study, we were focusing on activities and results of east-west cross-border business cooperation between Norway, Finland, Sweden and Russia within the Barents Region covering the period from 2003 to 2013. Our overall conclusion is that the future of the Barents business cooperation depends much on the development of the regional economies and regulatory frameworks, continuous public support for elaboration and maintenance of business frameworks and infrastructure as well as steady, active political dialogue on both national and regional levels. More detailed Summary is presented in the Chapter 0 of this report.
Project manager Quality controller
Rune Rautio Salve Dahle
Table of Contents
0 SUMMARY ...... 4
1 PREFACE ...... 9
2 INTRODUCTION ...... 11
3 REGIONAL ECONOMIC AND INVESTMENT POLICIES IN THE RUSSIAN BARENTS REGIONS ...... 13
4 PUBLIC FUNDING OF ECONOMIC CROSS-BORDER PROJECTS IN THE BARENTS REGION ...... 14 4.1 Norway ...... 14 4.1.1 Ministry of Foreign Affairs ...... 15 4.1.2 Norwegian economic projects in Russian parts of the Barents Region – overall figures ...... 15 4.1.3 Kolarctic ENPI ...... 19 4.2 Finland ...... 20 4.2.1 Kolarctic ENPI 2010-2012 ...... 20 4.2.2 Karelia ENPI ...... 21 4.2.3 The Finnish Ministry of Foreign Affairs ...... 21 4.3 Sweden ...... 21 4.3.1 Kolarctic ENPI 2010-2012 ...... 21 4.4 Russia ...... 22 4.4.1 Kolarctic ENPI 2010-2012 ...... 22 4.5 Nopef ...... 22 5 THE EFFECT OF PUBLIC FINANCED ECONOMIC PROJECTS IN THE BARENTS REGION ...... 25
6 IS LACK OF FUNDING AN OBSTACLE? ...... 27
7 CROSS-BORDER INVESTMENTS IN THE BARENTS REGION ...... 29 7.1 Norway ...... 29 7.1.1 Murmansk region ...... 30 7.1.2 Arkhangelsk region ...... 31 7.1.3 Nenets Autonomous District ...... 32 7.2 Finland ...... 32 7.2.1 The Republic of Karelia ...... 32 7.2.2 The Republic of Komi ...... 33 7.2.3 Nenets Autonomous District ...... 33 7.3 Sweden ...... 33 7.3.1 The Republic of Komi ...... 34 7.3.2 The Republic of Karelia ...... 35 7.3.3 Nenets Autonomous District ...... 35 7.3.4 Arkhangelsk region ...... 35 7.3.5. Murmansk region ...... 36 7.4 Russia ...... 37 7.4.1 North Norway ...... 37 7.4.2 North Finland ...... 37
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7.4.3 North Sweden ...... 38 8 ECONOMIC IMPACT OF CROSS-BORDER BUSINESS ...... 39 8.1 Norway ...... 39 8.1.1 Export from North Norway to Russia ...... 40 8.1.2 Import to Russian part of the Barents Region from Norway ...... 42 8.2 Finland ...... 44 8.3 Sweden ...... 50 8.4 Russia ...... 54 8.4.1 The Republic of Komi...... 54 8.4.2 The Republic of Karelia ...... 57 8.4.3 Arkhangelsk region and Nenets Autonomous District ...... 62 8.4.4 Murmansk region ...... 65 8.4.5 The Russian parts of the Barents Region as whole in 2012 ...... 69 9 CHALLENGES ...... 73 9.1 Infrastructure ...... 73 9.2 Transparency and safety of investments ...... 74 9.3 Russian commercial activities ...... 75 9.4 Business in central parts of Russia as options ...... 76 10 THE NEXT STEPS ...... 79
11 BORDER-CROSSING ...... 80 11.1 Scale and development ...... 80 11.2 Economic impact...... 81 12 THE DIRECTION OF BUSINESS COOPERATION IN THE BARENTS REGION ...... 85 12.1 Present development ...... 85 12.2 The future ...... 86 13 ACTIONS TO IMPROVE FRAMEWORK FOR BUSINESS CO-OPERATION ...... 89 13.1 Recommendations ...... 89 14 REFERENCES...... 91 14.1 Oral references ...... 91 14.2 Printed references ...... 93 14.3 Russian laws, resolutions, strategies and programmes ...... 94 14.3.1 Republic of Komi ...... 94 14.3.2 Republic of Karelia ...... 95 14.3.3 Arkhangelsk region ...... 95 14.3.4 Nenets Autonomous District ...... 96 14.3.5 Murmansk region ...... 96 APPENDICES ...... 97 Norwegian companies with active base in Russian Barents regions ...... 97 Murmansk region ...... 97 Arkhangelsk region ...... 97 Finnish companies with active base in Russian Barents regions ...... 98 Republic of Komi ...... 98 Republic of Karelia ...... 98
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Murmansk region ...... 99 Arkhangelsk region ...... 99 Swedish companies with active base in Russian Barents regions ...... 100 Republic of Komi ...... 100 Republic of Karelia ...... 100 Murmansk region ...... 100 Arkhangelsk region ...... 100 Russian companies with active base in Norwegian Barents regions ...... 101 Russian companies with active base in Finnish Barents regions...... 102 Russian companies with active base in Swedish Barents regions ...... 103 Members of Foreign Investment Business Association (FIBA), Murmansk ...... 104
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0 Summary
Sustainable development in the Barents region was stated in the 1993 Kirkenes Declaration as the objective of the work of the Barents Euro-Arctic Council, and economic development and business cooperation have since then always been in focus at the forums of Barents cooperation.
Today, the Barents Euro-Arctic Region includes the counties Finnmark, Troms and Nordland in Norway; Norrbotten and Västerbotten in Sweden; Lapland, Northern Ostrobothnia and Kainuu in Finland; Murmansk and Arkhangelsk regions, Republics of Karelia and Komi, and Nenets Autonomous District in Russia.
During 20-years of the Barents cooperation, there were expectations and several initiatives and efforts in establishing a Barents business platform. Most of the expectations were related to large industrial projects, like huge Shtokman gas or smaller Prirazlomnoye oil fields. Increased economic activity in the Russian North and public support funds of Nordic countries and EU was expected to lead to significantly increased economic cooperation and business establishments, particularly in the Russian part of the Barents Region.
However, we could see that business cooperation, through established and actively present Norwegian, Finnish and Swedish businesses in the Russian part of the Barents Region, has been decreasing by number of enterprises during the recent, especially comparing with the increasing people-to-people cooperation with border crossing in the region. On the other hand, several of the 78 enterprises we have registered as active today are significantly larger than before.
Most of the larger Norwegian, Finnish and Swedish enterprises in the region in terms of investments, turnover and number of employees have established themselves with little or no use of the structures of the Barents Cooperation or the public instruments for grant funding covering the region. These are mostly coming from regions outside the Barents Cooperation, and many of them are active in other parts of Russia as well. For them, the Barents Region is like any other market.
The lack of larger enterprises from the northern parts of Norway, Finland and Sweden is partially to find in the business structures on these regions, which mainly consists of smaller SMEs developed for the local and regional domestic market and therefore are lacking adequate resources for internationalization.
The Norwegian public funding instruments of the Ministry of Foreign Affairs, the Barents Secretariat, Innovation Norway, Kolarctic and counties have spent about 24 million EUR (184 million NOK) financing 476 business development projects, including 171 commercial ones, in the Russian Barents regions during the recent ten years. We have seen certain peaks in projects aimed at business development in different sectors through those years, and joint peaks in fishery & aquaculture, petroleum and transport & logistic projects in 2009.
Finnmark County with 46% of the projects and Murmansk region as target for 54% of all Norwegian projects is reasonable in lead of the Norwegian-Russian Barents economic
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development cooperation, while Karelia, Komi and Nenets areas together got less than 10% of business project financed by Norwegian public instruments. Almost one third of the projects had all the Russian Barents regions as unspecified impact area.
Finnish public funding through Kolarctic and Karelia ENPI that have Murmansk, Arkhangelsk, Nenets and Karelia as target regions amounted to about 200 million EUR during 2004-2012 (including Interreg in 2004-2007). The Finnish Ministry of Foreign Affairs had neighbouring areas in focus, spending about 20 million EUR to projects in St Petersburg, Leningrad, Karelia, and Murmansk regions annually. Nordic Project Fund focused on Moscow and St Petersburg, while only 15% of financed enterprises were located in the Russian Barents regions.
47% of Finnish enterprises with Nopef funding succeeded in establishing business in Russia, while the success rate for Swedish and Norwegian companies was about 20% only. In average, one Nordic enterprise received about 45 thousand EUR support from public funds to establish business in the Russian parts of the Barents Region.
For enterprises that want to invest in Russia, and need more comprehensive financing, there are other options in the Nordic finance market, as Nordic Investment Bank (NIB) and CapMan.
Comparing with Finland and Sweden, Norway has spent comprehensive amounts of money and efforts to establish business cooperation with the Russian Barents regions, spending in average 2.4 million EUR per year to support and promote Norwegian companies and cross- border business cooperation. Sweden and Finland, comparing to Norway, are lacking such national funds addressing Barents business cooperation issues, but having access to EUs project financing schemes.
Establishing business, especially in a foreign country, is not an easy task. However, lack of direct financial or in-kind support from home countries cannot be considered as a reason for relatively small presence and/or low success rate in business development of Nordic countries in the Russian Barents regions. Business in Russia represents several additional challenges for foreign businesses, as it has a different climate.
The Russian parts of the Barents region are export oriented in their foreign trade. Raw materials, as oil, timber, minerals and metals produced in the region are delivered to the Western markets via the Barents Sea, and through the Russian-Finnish border. In return, the regions import equipment and consumer goods. In 2012, the Russian export was worth 6.6 billion EUR, while the import was worth 1.1 billion EUR.
Export to Norway, Finland and Sweden amounted to 330 million EUR - or 5% of the total export from the Russian parts of the Barents Region in 2012. The import was worth 440 million EUR - or 41% share of the regional Russian imports. Murmansk region even imports fish from Norway worth four times the export value.
We should note that Murmansk and Karelia are Russian border regions, and most of goods that are exported from or imported to Russia through the Barents Sea go through customs clearance in the Murmansk port.
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Capital investments in the Russian parts of the Barents Region varied from 0.5 to 5 billion EUR per region per year and were very much related to implementation of big industrial projects. Foreign capital investments were also on different levels, from 15 million EUR in Murmansk region in 2012 to 450 million EUR in Nenets Autonomous District in 2009.
Finnish and Swedish companies actively invested in timber and wood processing industry in Karelia, Arkhangelsk and Komi; in 2012 Finland shared 22% of foreign capital investments in Karelia. In 2011 Finland and Sweden had 18% share of foreign capital investments in Komi.
Among leading foreign investment countries in the Russian parts of the Barents Region during recent years we could see Austria, Great Britain and Germany. Again, peaks in investments were related to implementation of large industrial projects, like development of oil fields or reconstruction of pulp-and-paper plants. Those projects did not use Barents business development support instruments.
Most of Norwegian companies present in the Russian parts of the Barents Region are not competing on the local or national market, but benefit from local expertise or lower labour costs, operating with niche products or serving trade operations. Those companies have not identified barriers forming a "red line", no barriers of structural or legal character, but rather given a general opinion that the system lacked predictability related to security of investments, changing and time consuming formal procedures with permissions and taxes, customs and visa systems, infrastructure, and hidden local business management mechanisms.
Today, there are relatively few commercial investment projects in the Russian parts of the Barents Region, especially comparing to St Petersburg and Moscow. Finnish businesses are well presented in St Petersburg and Leningrad region, while Norwegian companies generally chose Murmansk and Arkhangelsk regions to enter the Russian market.
Central Russian markets comparing to the remote Barents regions have both possibilities and challenges of difference scale. 20 years of the Barents Cooperation created a favourable environment, capacity and personal networks in the regions, where the distance to decision makers is also shorter, especially when we speak about SMEs.
The expensive resources used for economic development and cooperation in the Barents Region certainly contributed in establishing good environment for Norwegian, Finnish and Swedish business activities in the Russian parts of the region. Frameworks for development of Russian business in the opposite directions lack similar strength – so far.
Russia's membership in WTO is to create a more predictable and stable environment for foreign businesses and more transparent procedures, alternatively we may experience more controversial cases, and driving forces for these processes will be outside the Barents Region.
The future of business cooperation in the Barents Region is closely linked to the general economic development – and the political development in Russia and its Northwest regions. Much will be depending on the presence of "economic engines" – large industrial projects, as the Shtokman or Murmansk Transport Hub on the Russian side. The seaway eastwards and the Northern Sea Route development also give interesting opportunities for business cooperation in and through the Barents Region.
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Russian foreign investments in the Barents Region are presently not significant as investment opportunities further south are generally considered as more attractive. Their future could partially relay on better marketing of the regions for foreign investments and subsequent services to follow up investors. Russian SMEs also lack favourable financing services to support cross-border business.
Improvement of Barents business cooperation can be done on different levels and with several steps. To sum up, the recommendations to the member countries of the Barents Cooperation, for further improvement of framework and conditions for successful cross-border business cooperation and investments in the Russian parts of the Barents Region, are as follows:
1. To establish dialogue with the authorities in the Russian regions to create a public service, a "one window", to guide and assist Western companies safely through the different and complex formal process of e.g. establishing enterprises and to do proper reporting in accordance with Russian legislation and regulations;
2. To work together with Russian side to promote business opportunities in the Russian Barents regions; work to improve the regions profile as investment area in Norway, Finland, Sweden and other countries; work to create predictable business environment and secure investment climate, and to improve e.g. Murmansk region's position of the World Bank's ranking "Ease of Doing Business";
3. To strengthen efforts to promote the Norwegian, Finnish and Swedish parts of the Barents Region as business- and investment areas with opportunities for Russian enterprises;
4. Consider expansion and rise of capital base Innovation Norway and Nopef;
5. Public support to more Russian SMB-investments in the Norwegian, Finnish and Swedish parts of the Barents Region will require development of favourable financing instruments designed for this purpose;
6. To maintain and intensify bilateral business cooperation and business frameworks on the regional level, and to involve relevant decision makers on federal level in the processes;
7. To develop transport infrastructure and communication in the Region. Flight connections in transverse directions are needed to reduce travel time in a region with very long distances;
8. The Finnish and Norwegian side should invest in better and – for Finland - more border crossing points in order to facilitate the communication for tourism and business. The Finnish side should work in concert with Sweden and Norway for establishing a border crossing point along with Finnish Russian border with veterinary inspection facilities allowing the import of food products to and from Russia.
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The future of the Barents business cooperation will depend much on the development of the regional economies and regulatory frameworks, continuous public support for elaboration and maintenance of business frameworks and infrastructure as well as steady, active political dialogue on both national and regional levels.
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1 Preface
Norway holds currently the Chair of the Barents Council, and the Ministry of Trade and Industry is responsible for the progress of the Working Group on Economic Cooperation (WGEC).
Development of economic cooperation over the borders in the north is a critical issue for growth in the Barents Region, but so far the experiences have shown us that this is the area of cooperation where the rate of success is lowest.
This year the Barents Cooperation is celebrating its 20th Anniversary. In this respect the Ministry of Trade and Industry has initiated an overall mapping of the development of Norwegian, Finnish, Swedish and Russian economic cooperation in the Barents Region; how it has developed through the last 10 years, present activities and the direction it seems to have.
As the mapping is focusing on activities and results of east-west cross-border business cooperation between Norway, Finland, Sweden and Russia within the Barents Region, the following administrative regions have been covered by the study:
• Norway: Nordland, Troms and Finnmark; • Sweden: Västerbotten and Norrbotten; • Finland: Kainuu, Northern Ostrobothnia and Lapland; • Russia: Murmansk, Arkhangelsk, Nenets, Karelia and Komi.
Crosse border business not involving Russia is not covered by the study, as it is considered as North Calotte Cooperation.
The enterprises covered by the study should operate/have been operating in the Barents Region, but not necessarily have their main office here. As the mapping has showed lack of Russian support structure and funding mechanisms for SMEs aiming at foreign investments, and a low level of actual Russian investments and business activities in the Nordic parts of the Barents Region, the report mainly describes economic cooperation based on funding and investments from the Norway, Finland and Sweden. This is a deviation from the project plan, but based on the actual findings.
We are also giving some estimates regarding the scale and impact of trading business in the Russian parts of the Barents Region, run from abroad, and from the cross-border flows.
The impact of Russian border-crossings and travels abroad in the Barents Region has an increasing economic impact, particularly on Finnish and Norwegian side. Through the work with the report, we therefore chose to make another deviation from the project plan by including this dimension. Promoting trade and commercial cooperation through better transport infrastructure and more efficient border-crossing has been one of the key issues of the formal Barents Cooperation, and the scale and objectives of this traffic represents an important part of the economic cooperation.
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The mapping covers the period 2003-2013, both as Russian economy in 2003 had recovered from the financial crisis in Russia in 1998, with a business framework and climate quite similar with today, and due to the resources available for the study.
The mapping has been conducted during three months, from February to middle of May, 2013. It gives an overview of development, present situation, challenges and opportunities, with some analyses. It is not presenting any in-depth analysis of the economic development in Russia, or comparative economic analysis of the Norwegian, Finnish and Swedish companies operating in the Russian part of the Barents Region and their impact to the Russian economy.
During the work with this report we faced some challenges, which either affected the result of our mapping or delayed the process. The access to good information from Swedish side turned out to be a general problem, partially because Swedish public financing instruments did not have a system which effectively could separate Swedish investments in Russian Barents from the rest of investments in Russia – and also had no capacity to do such manual labor within our short project period, partially because the county authorities and the chambers of commerce in North Sweden often responded very slow despite a number of approaches, and partially because the same institutions turned out to have limited knowledge about Russian cross-border business activities on the Swedish side. Another problem was similar in all the three Nordic countries joining the Barents Cooperation: the national enterprise registers do not record Shareholders or Owners by nationality and address in foreign countries, and can therefore not be used to identify e.g. Russian foreign investments in the Barents Region.
Detailed import/export figures divided on regions in Norway, Finland and Sweden also turned out to be a problem, partially because the national statistic bureaus considered such level as possible to extract sensitive business information, and partially because the customs authorities – having their own data – required long time to compile this information. Also, the customs statistics must be read with caution, as it does not show the final destination of the cargoes, or cargoes are not customs cleared at the border point but at the final destination.
The economic impact of cross-border trade and investments in the Barents Region are also difficult to calculate, both due to the lack of regional statistics, and because many Norwegian, Finnish and Swedish enterprises operating in Russia choose not to show the financial results of their activities there – for different reasons.
A first draft of the mapping report was presented for the BEAC Working Group on Economic Cooperation in Tromsø on 13 May 2013.
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2 Introduction
The development of sustainable cross-border trade and investments has been one of the priorities of the Barents Cooperation since the very beginning, as emphasized in the Kirkenes declaration of 11 January 1993. The countries signing the Kirkenes Declaration
/…/"recognized the importance of increased economic cooperation in the Region in the form of trade, investment, industrial cooperation" and "agreed to explore ways and means to encourage trade and investment and to provide a framework conducive to broader cooperation on a commercial basis at the enterprise level"./…/1
The priority of development of trade, business cooperation and business infrastructure has also been a priority in the long term plans and strategies of the cooperation, both on national and regional level – through the work of the Barents Euro-Arctic Council and the Barents Regional Council. The latter also base its work on long term programs, where priority of good frameworks for business and trade is emphasized.
Within the frame of the formal cooperation, there have been established Working Group on Economic Cooperation with the Forest Sector Task Force, Working Group on Customs Cooperation, Steering Committee for the Barents Euro-Arctic Transport Area; under the Barents Regional Council, there are Working Group on Transport and Logistics and Working Group on Investments and Economic Cooperation; and also there are Joint Working Groups on Energy and on Tourism serving both the national and the regional Councils.
The geographical impact area has always been the Russian part of the Barents Region, which was the very basis for the establishing of the Barents Cooperation. Here the participating countries had focus on development of business cooperation based on available resources and potential, as e.g. fisheries, minerals, wood, petroleum and tourism.
Within the frame of the cooperation, the participating administrative regions have also been putting a lot of efforts and resources into the development of bilateral business cooperation over the borders. Through coordinated work with e.g. business associations and promotion of individual business enterprises, it has created good networks and a more favourable basis for cross-border investments and trade.
There have always been great expectations to the commercial outcome of the Barents Cooperation, particularly within the fields mentioned above. The industrial potential and the regional impact of development of petroleum resources have been considered as particularly interesting, and the plans and processes to develop e.g. the large Shtokman gas field in Russian part of the Barents Sea both drew much attention and mobilized many business enterprises from Norway, Finland and Sweden to Murmansk and Arkhangelsk in 2006-2009.
1 Declaration on Cooperation in the Barents Euro-Arctic Region. Conference of Foreign Ministers in Kirkenes, 11 January 1993.
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Though, the commercial outcome of the cooperation is questionable. Both on national and regional levels there seem to be a general opinion that the cooperation itself has been quite successful – except from the business cooperation.
In 2005 a brief evaluation of the Barents Cooperation, by Erling Fløtten for the Norwegian Ministry of Foreign Affairs,2 gave the same conclusion.
But is it correct that the commercial part of the cooperation has not been a success?
Certainly, there were expected large scale and varied cross-border business activities in the Barents Region, based on its economic potential. But commercial activities float on the gravity of the principles of economy, which is profit. Unlike all other activities in the Barents Cooperation, commercial cooperation can only survive in the long run by generating a surplus on the balance weight between expenses and income. The public might play a role in providing financial support to the process of planning and creating business, but in the end the enterprise must rely on own business idea, own products, own organization and own resources.
Commercial activities must rely on a number of factors in the environment they operate, and in e.g. Russia two of these factors are the Russian business market itself and the environment for foreign investments.
In this overview we take a closer look on the development of Barents businesses and their markets in the Barents regions, the role of the most relevant public financial instruments, challenges and obstacles the enterprises are facing and the present direction of foreign investments.
Through that, we try to show if the economic cooperation in the Barents Region has been a success through the last 10 years – or if the expectations might have been unrealistic.
2 In 2005 Norway held the Chair of the Barents Council.
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3 Regional economic and investment policies in the Russian Barents regions
The main regulatory documents for investment activities in the Russian Barents regions are Federal Russian laws, including the ones "On investment activities in the Russian Federation implemented in form of capital investments" (2011 edit.) and "On foreign investments in the Russian Federation" (2008 edit.); and federal tax benefits established for investment projects, including return of VAT and decrease of tax on profit from 24% to 20%. However, regional parliaments and governments also develop laws and regulations to stimulate investment projects, and elaborate strategies and programmes for socio-economic development in the regions.
Karelia, Komi, Murmansk and Arkhangelsk have regional laws on provision of state support of investment projects on their territories, on tax benefits, and on participation in public- private partnerships. For example, the Republic of Karelia established tax benefits for investors as decreased 13.5% tax on profit paid to the regional budget, and no tax to properties created or purchased for investment project realisation.
Russian Barents regions also elaborated long-term strategies for socio-economic development to 2020 and up to 2030, investment policies, concepts of external economic activities, long- term target programmes, and development forecasts. These documents are more setting strategies goals and directions than define exact actions and budgets. For example, according to the Forecast of socio-economic development of the Murmansk region to 2030, the average annual increase of gross regional product (GRP) in the period of 2011-2030 is expected with 3.9%; increase of capital investments with 5.2%; and trade with 3.3%. As a result, GRP volume in 2030 should be in 2.1 times higher comparing to 2010, while population will decrease to about 10%.
Regional long-term target programmes are built of both administrative activities and investment projects; the latter are most of all invitations for investors to take part in implementation of the projects within public-private partnership agreements. The regional programme on Energy supply and energy efficiency on the territory of the Republic of Komi for 2010-2020 has the overall calculated budget of about 6 billion RUB (150 million EUR), including planned finances from the regional budget for 218 million RUB (5.5 million EUR) or 3.5% of the programme budget, and expected private investments for 5.8 billion RUB (145.5 million EUR) or 96.5% of the overall programme costs.
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4 Public funding of economic cross-border projects in the Barents Region
4.1 Norway
One approach to estimate the development of cross-border business in the Russian Barents regions is the use of public financing tools to stimulate enterprises to enter that market through grants to networking, feasibility studies, business plans, etc.
In Norway, the main institutions/instruments to stimulate cross-border business development in Northwest Russia are the Ministry of Foreign Affairs, Innovation Norway, EU's Kolarctic3 and the Barents Secretariat in Kirkenes. In addition, the county administrations in some respect also plays an active role, and on local level there are a possibility to use municipal business development funds as supplement for initial processes (networking and feasibility studies).4
An overview of the projects financed by these instruments gives key information about the extent of the Norwegian public support to business development in Northwest Russia, type of projects/businesses, where the businesses originates, their geographical impact area(s) in Russia and variations over time. In sum, it gives an overall picture of how Norwegian business with Northwest Russia has been developing, and a good indication about the future direction.
In our mapping, we have looked into all the instruments mentioned above. With the Ministry of Foreign Affairs, these are the "Projects cooperation with Russia" and "Barents 2020", and with Innovation Norway we have processed data from both "The investment fund for Northwest Russia" and "The grants fund for Northwest Russia".
We have also processed data from Innovation Norway in Finnmark, as the county borders to Russia and the branch therefore have been involved in a number of cross-border projects.5
3 The Interreg-program for the Baltic Sea (IIIB) has also been financing projects with partial impact in the Russian parts of the Barents Region through the Northern Maritime Corridor (NMC) Project, later replaced by the Stratmos project. In Norway Rogaland County Authority was lead partner. This project is partially included in this mapping through financial partner contribution by the Barents Secretariat and Finnmark County Authority, registered as projects. 4 A review of how the Norwegian municipal business development funds have been spent since 2008 in all the 88 municipalities in North-Norway showed only three minor projects in the Russian Barents regions - all with municipalities in Finnmark County. 5 Also other offices of Innovation Norway are known to have been involved in financing of projects in the Russian Barents regions, but these seem to be limited.
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4.1.1 Ministry of Foreign Affairs
The Norwegian MFA is the major tool for funding of projects in NW Russia. The ministry is also funding the activities of the Norwegian Barents Secretariat6 and several external programs.
The funding of projects in the High North and Arctic has increased by 70% through the last eight years – from 27 million EUR (207 million NOK) in 2005 to 46 million EUR (353 million NOK) in 2013.
The project cooperation with Russia has grown with nearly 50%, from 12.8 million EUR (98 million NOK) to 18.9 million EUR (145 million NOK), while the Barents 2020 scheme has increased eight times since the start in 2006 – from 1.3 million EUR (10 million NOK) to 10.7 million EUR (82 million NOK).
4.1.2 Norwegian economic projects in Russian parts of the Barents Region – overall figures
4.1.2.1 Financial support
All together, the mentioned Norwegian public funding instruments have spent 24 million EUR (184 million NOK) on business development projects in the Russian parts of the Barents Region in the period 2003-2012. This gives an average of 2.4 million EUR per year. From this amount, 37% - or 8.9 million EUR (68 million NOK) - has been provided for development of individual business enterprises.
The number of project financed is 476, of which 171 (36%) has been commercial.
The average sum provided to each project was 50 000 EUR (387 000 NOK), while the average for commercial projects has been 52 000 EUR (398 000 NOK).7 As project's being financed though these instruments normally require minimum 50% financing from other sources, the total financial spending on these projects must be considered as significantly higher.8
6 2.5-3 million EUR per year. 7 Loans and investments by Innovation Norway Fund are included in the commercial figures. These are long term and with relatively high risk, and therefore included in the financial support figures. Altogether, they represent a 50% share of the commercial projects. 8 The number of grants is not the same as the number of projects, as some projects are being financed over several years, with separate project numbers, while some projects have received financing from several sources.
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Figure 1 - Funding (in thousand NOK) of economic projects in the Russian parts of the Barents Region 2003-2012 by the main Norwegian instruments, divided by year and share of commercial projects. Source: Akvaplan-niva based on projects overviews from the institutions.
4.1.2.2 Business sectors
Divided into business sectors, nearly ¼ of the projects financed by the Norwegian public instruments have been aiming on networking and creation and maintenance of commercial frameworks, general or for particular business segments. The business segment petroleum had 20% of the projects, followed by fishery & aquaculture with 17%. Other industry & construction business and transport & logistics each held 9% of the projects.
Figure 2 - Number of economic projects in the Russian parts of the Barents Region 2003-2012 by the main Norwegian public instruments, divided into business areas. Source: Akvaplan-niva based on project overviews from the finance institutions.
Akvaplan-niva AS, 9296 Tromsø 16 www.akvaplan.niva.no
Looking closer into the major business sectors, the changes of project numbers over time is visualised through the chart below. Looking away from 2003, which was a year with very low funding activity, fishery & aquaculture showed peaks both in 2003, 2005 and 2009, but has since then been dropping.
Petroleum projects peaked in 2007 and 2009, which can be explained with preparations for Shtokman project, but this sector is still attractive for Norwegian companies.
Projects on transport & logistic projects started rising in 2006 and peaked in 2009, but has since then been dropping. As the peak corresponds with the movement of the petroleum projects, it is reasonable to see those sectors in context.
Industry (incl. construction business) seems to correspond with the movement of fishery & aquaculture, while it corresponds with the petroleum projects in 2011. As this sector contains a variety of products, it should have to be separated into sub-areas to obtain basis for a conclusion.
Projects on travel/tourism appears from 2005, and shows peak numbers both in 2008 and 2010, and is the only business area showing upwards numbers in 2012.
Figure 3 - The most active Norwegian business sectors in the Russian parts of the Barents Region 2003-2012, measured by number of financed projects and divided by year. Source: Akvaplan-niva based on project overviews from the institutions.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 17
4.1.2.4 The location of the project owners
Looking into where the project owners with Norwegian funding are located, the data shows that 46% are in Finnmark County, which is reasonable as this is the region closest to the Russian border. 14% are located in Oslo region, while 13.5% are in Troms and 9.5% in Nordland.
The fact that Oslo has more projects than Troms and Nordand is interesting, but must partially be seen in context with MFAs financing of projects for development of business frameworks and networks in cooperation with organizations like Norwegian Labour and Welfare Service (NAV), Confederation of Norwegian Enterprises (NHO), Norwegian-Russian Chamber of Commerce (NRCC) and other, which are located in Oslo. Their geographical impact area is wider than the Russian parts of the Barents Region, as the projects cover the European part of Russia.
More interesting might be Nordland County's share of the business projects; as the county is the most industrialized county in North Norway, and also has the largest population, it could be expected that it was far more involved in business projects in Russian Barents. The explanation might be found in a combination of distance to the border and the fact that Nordland has been having a long lasting and active cooperation with Leningrad oblast, which has drawn commercial attention in direction St Petersburg city.
Figure 4 - Owners of Norwegian public funded economic projects in the Russian parts of the Barents Region; share by percent of number of projects. Source: Akvaplan-niva based on project overviews from the institutions.
Akvaplan-niva AS, 9296 Tromsø 18 www.akvaplan.niva.no
4.1.2.5 Geographical impact in the Russian parts of the Barents Region
Looking at the geographical impact areas of Norwegian business projects in the Russian parts of the Barents Region, 54% of the projects aims fully or partially at Murmansk, while 20% aims for Arkhangelsk.
Only 4% of the projects aimed at Nenets Autonomous District, and less than 2% aimed at the Republic of Karelia. Only two business projects has been aiming at the Republic of Komi, in 2003 and 2007, which might be explained by the large distance and little knowledge about this region in Norway.9
149 projects (31%) had all the Russian parts of the Barents Region as impact area. In this group we find many of the projects on development of networks, frameworks and business infrastructure, as well as markets surveys and other feasibility studies with the aim of looking for suitable partners and locations for developments of a business idea.
Figure 5 - The geographical impact of Norwegian public funded economic projects in the Russian parts of the Barents Region based on number of projects. Source: Akvaplan-niva based on project overviews from the institutions.
4.1.3 Kolarctic ENPI
Since 200310 Norway has contributed with 9.4 million EUR (72 million NOK) to Kolarctic projects11, both of bilateral- and multilateral character. Only 1.2 million EUR12 (13%) has
9 The Republic of Komi joined the Barents Cooperation as the last of the Russian member region in 2002. 10 In 2008, 2009 and 2010 Interreg Kolarctic was not funding any projects due to the restructuring of the program to Kolarctic ENPI (European Neighbourhood and Partnership Instrument). 11 The Republic of Komi in Russian and Kainuu region in Finland are not a part of the Kolarctic ENPI program.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 19
been spent on 19 business projects – of which less than 1/4 of the amount (6 projects) has been support for development of individual enterprises.13
Most of the Kolatrctic projects are co-financed with Finland and/or Sweden.14
Divided by business areas, the projects are widely spread, but with development of commercial frameworks and fishery/aquaculture as peaks.
Geographically, 83% of the projects have either impact in Murmansk area, or they unspecified cover all Russian parts of the Barents Region.15
IR Kolarctic NO 2003 2004 2005 2006 2007 2011 2012 Total 5 758 7 799 10 417 5 056 4 258 17 561 20 983 Russia economic 1 167 1 160 2 802 848 2 058 584 800 Russia commercial 104 - 970 560 480 - -
Table 1 – The Norwegian share of support to Kolarctic projects 2003-2012 in thousand NOK divided by years, with share of support to economic and commercial projects in the Russian parts of the Barents Region. Source: Akvaplan-niva based on projects overviews from the Norwegian Kolarctic Secretariat.
4.2 Finland
4.2.1 Kolarctic ENPI 2010-2012
The Finnish part of the Kolarctic ENPI program has 70 million EUR available, and has co- financed 50 projects. It is concentrating on business cooperation, education, social development, culture, environment and energy, traffic/traffic connections and traffic safety.
The former Interreg program was running from 2004 to 2007 and provided approximately EUR 30 million as funding.
12 1.2 million EUR = 9 million NOK. 13 In general, the rather complicated administrative procedures imposed on the project owner are considered as an obstacle for many small and medium size business enterprises, and one reason why there are relatively few business projects in the Kolarctic program. Lack of environment for multilateral business projects is considered as an other reason. 14 E-mail from the Norwegian Kolarctic-secretariat, 18 April 2013. The figures above show only the Norwegian contribution. 15 The share between Murmansk-projects and projects unspecified covering all the Russian Barents regions is 50- 50.
Akvaplan-niva AS, 9296 Tromsø 20 www.akvaplan.niva.no
4.2.2 Karelia ENPI
The Karelia ENPI program, running from 2011 to 2014, is administered by the Finnish county Northern Ostrobothnia. It has funding 46.4 million EUR.
The program consists of 60 projects divided between six main themes; tourism, forestry, energy, wellbeing, culture and regional development.
The former program period was 2004-2007, with funding 70 million EUR.
The objective of the ENPI projects is to strengthen the cross border cooperation, provide mutual benefit with emphasis on Russia.
4.2.3 The Finnish Ministry of Foreign Affairs
Finnish cooperation with the neighbouring areas is focused on St. Petersburg, Leningrad oblast, the Republic of Karelia and Murmansk region.
Between 1990 and 2012 the Finnish MFA has spent 326 million EUR on this scheme. Annual funding between 2003 and 2010 was 20-25 million EUR.
In 2003-2010 the share of the MFA financing controlled by Northern Finland, estimated to 20% of the total amount, was directed to Murmansk, Arkhangelsk and Vologda regions, while the share from 2010 to 2013 was allocated to Karelia, Komi and Vologda.
In 2011 the Finnish MFA funding was cut to 5-6 million EUR per year.
4.3 Sweden
4.3.1 Kolarctic ENPI 2010-2012
The Swedish part of the Kolarctic ENPI program has 6.4 million EUR available for co- financing of business cooperation, education, social development, culture, environment and energy, traffic/traffic connections and traffic safety. 3 million EUR, or 47%, has been spent by now.
The Swedish national funding of the former Interreg IIIA North program 2000-2006 was 16.4 million EUR. From that amount 12.9 million EUR was used; 3.5 million EUR on Kolarctic and the rest on two other sub-programs.16
Sweden is not participating in Karelia ENPI.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 21
4.4 Russia While the Russian regions in the Barents Cooperation have available instruments to provide public financing for support of SMEs in the domestic market, we have not identified any such instruments to support investments or business development abroad. Russian SMEs aiming at e.g. the markets in the Norwegian, Finnish or Swedish Barents regions are relying on own financial resources, financial support from relevant instruments in the Nordic impact area or to be a part of a Kolarctic ENPI project.
4.4.1 Kolarctic ENPI 2010-2012
In October 2009 Russia decided about their contribution to the financing of Kolarctic ENPI. According to the decision, the Federation will allocate 14 million EUR to the program.17
Figure 6 – Kolarctic areas 2007-2013. Source: www.beac.st
4.5 Nopef
The Nordic Project Fund (Nopef), based in Helsinki, is the presently the best available instrument for Finnish and Swedish enterprises seeking grants to conduct pre-studies with the
17 Newsletter from the International Barents Secretariat.
Akvaplan-niva AS, 9296 Tromsø 22 www.akvaplan.niva.no
aim of establishing or strengthening business in Russia. The fund, which also attracts enterprises from Denmark, Iceland and Faroe Islands, can provide up to 40% of the budgeted cost for the studies. In practice, the average funding has been around 35 000 EUR.
Since 2003, Nopef has allocated total 7.5 million EUR for 220 projects in Russia. Most of them have impact outside the Russian parts of the Barents Region, e.g. in Moscow or St Petersburg. Only 15% of the enterprises who have received grants are located in the Barents Region.
In 2012 there are only two active projects in the Russian parts of the Barents Region, both of them by Norwegian companies.
An estimated 15% of Nopefs projects have been aiming at the markets in the Russian parts of the Barents Region – 70% of them in Murmansk region. 85% of the projects are aiming at other parts of Russian, particularly the regions Moscow, Vologda and St Petersburg.18
Like projects financed by the Norwegian funding mechanisms, the majority of the Nopef projects in the Russian parts of the Barents Region are aiming at the sectors petroleum and fisheries/aquaculture, but Nopef are also financing several projects within the sector wood processing.
Finnish enterprises with Nopef funding generally succeeds well with their plans; 47% of them reports having established business in Russia. The success rate for Swedish and Norwegian companies are significantly lower – only 20%.19
Nopef was evaluated by the Swedish company Aieka in 2009. In the conclusions Nopef got e.g. high score for the rate of completed projects and the project related economic spin-off the grants generated. It was also recommended that the fund e.g. got an increased financial base to be able to meet the present demand, and that fund in the future also should have the ability to take more risk and to increase the financial limit for projects.20
For enterprises that want to invest in Russia, and need more comprehensive financing, there are other options in the Nordic finance market, as e.g. Nordic Investment Bank (NIB) and CapMan.21
18 Roughly 80% of the Norwegian projects with Nopef are aiming at other parts of Russia. This can be explained by the fact that most of the public Norwegian grant instruments are targeting the Russian Barents regions, and that Nopef therefore is a better choice for Norwegian companies looking in other directions. 19 Unlike the Norwegian instruments for project grants, Nopef is internally evaluating each project, defining thems as "realized" or "not realized". Realized projects means that the enterprise has succeeded in establishing a business in Russia. Not realized means that business was not established, but does not nessecarily mean that the project has been a failure as the outcome might have been other forms of business cooperation, e.g. creation of partnership for import/export, where the project owners operates from outside Russia. 20 Nordic Council of Ministers: "Utvärdering av resultat, nytta och framtida roll för Nordiska Projektexportfonden (Nopef)" 21 CapMan acquired Norum funds in 2008.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 23
Figure 7 – Percent share of Nordic enterprises with Nopef funding registered in the Barents Region, 2003-2010. Source Akvaplan-niva based on project overviews from Nopef.
Akvaplan-niva AS, 9296 Tromsø 24 www.akvaplan.niva.no
5 The effect of public financed economic projects in the Barents Region
Neither establishing new business, nor establishing a business in a foreign country, is an easy task. Commercial activities have to obey to the gravity of economics, and long term activities without profit are not acceptable or affordable for most enterprises. The exception might be enterprises doing strategic investments into new markets, and have the will and strength to run unprofitable over a certain time.
Business in Russia represents several additional challenges for foreign businesses, as it is a very different business climate.
Business ideas often end up as just an idea. What sounds like a good idea receives grants for further exploration as a feasibility study or a pre-project, and very often the idea turns out not to be possible to realize – for different reasons. This is the nature of such process – both at home and abroad. It must therefore not be a surprise that many of the feasibility studies conducted in the Russian Barents regions never have been followed up by the establishing of business, even if they might have generated other positive outcomes, as e.g. business networks and cross-border trade.
The relative number not realized business pre-projects in Russian parts of the Barents Region cannot be quantified as there has presently not been made such evaluation of the individual projects by e.g. any of the Norwegian funding instruments. But figures from Nopef's evaluations, combined with surveys of previous investments and mapping of active Nordic companies in the Russian parts of the region, gives us a good indication.
Innovation Norway's Northwest Russia Investment Fund, established in 1996 with 19.6 million EUR (150 million NOK) as financial base, is presently investor in seven active Norwegian companies with total 4.2 million EUR (32 million NOK) in the Russian parts of the Barents Region, of which four have employees in Russia.22
The fund has since 1998 also been investing in another seven companies in Murmansk and Arkhangelsk, which later has been closed down. Here total investments were 2.6 million EUR (20 million NOK).
The potential of the fund has by far been utilized, which is one of the reasons why Innovation Norway Fund was evaluated by Econ Pöyry in 2007. The evaluation of the Northwest Russian Investment Fund remarked e.g. that lack of good, Norwegian investment projects in the Russian parts of the Barents Region, combined with lack of ability to provide regular loans to
22 Barel, Dvina (property), Kirkenes Trading, Murman (realization of an international office centre), Ramboll Enginering (consultancy/engineering), Rupack and Technopark-Nor. See also Appendix 1.
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enterprises, represented as a problem for the utilization of the fund's potential. The size of the fund was also considered as rather small, which made them little attractive for large projects.
Econ Pöyry recommended e.g. to merge the fund with other Innovation Norway investment fund to make it more attractive, increase the financial limit of engagement and to use to fund to provide regular loans in cases where the private market was unable to provide similar services.
For Finland the neighbouring area Interreg, Finnish Foreign Ministry and ENPI programs Kolarctic and Karelia seem to have had no or very little effect on actual business development between the Finnish and Russian Barents areas.
The operatives comments that until 2010 the activities were very much focused on culture and people to people cooperation. From 2010 and onwards the Russian side has taken a more active role in asking for concrete projects with measurable outcome and benefit for their 25% funding. This has now been realized in the Large Scale Projects, which are focusing on improving the main roads crossing the border to Finland.
Between 2003 and 2012 it has been spent 450-500 million EUR on Interreg, ENPI and Ministry of Foreign Affairs funded projects in the Barents Region. The business impact of this amount cannot be verified; the 26 Finnish companies active in the area have not been receiving any of these financial resources, but have established themselves in the area on pure business reasons.
Akvaplan-niva AS, 9296 Tromsø 26 www.akvaplan.niva.no
6 Is lack of funding an obstacle?
Norwegian public funding institutions has spent at least 15 million EUR (116 million NOK) on development of business infrastructure; framework, network and meeting places in Russian Barents the last 10 years. In addition, there has been spent around 9 million EUR (70 million NOK) as direct support to development of individual businesses – around 2.6 million EUR (20 million NOK) by other instruments than Innovation Norway.
With an average of 900 000 EUR per year directly to commercial enterprises, and 1.5 million EUR per year to promote Norwegian business and cross-border business cooperation in the Northwest Russian market, the situation for Norwegian businesses can hardly be considered as very difficult.
Comparing with Finland and Sweden, Norway has spent comprehensive amounts of money and efforts to establish business cooperation in the Russian parts of the Barents Region. While Norwegian businesses can apply to e.g. MFA, the county authorities, the municipal development funds23, the Barents Secretariat and Innovation Norway, their colleagues in Sweden and Finland in reality lack such instruments to address to. But SMEs in all three countries have access to EUs ENPI24 programmes and project funding from Nopef.
There is nothing is this survey that indicated that development of sustainable Norwegian, Finnish or Swedish SME projects in the Russian parts of the Barents Region suffers from lack of funding mechanisms; in most cases public funding requires that company which applies must provide at least 50% of the project cost as equity, which is reasonable as the company should show both financial capability, determination and readiness to take risks when entering into a foreign market.
The mapping has also showed that e.g. the companies active in Russian part of the Barents Region today, with few exceptions, have received little financial support from the public funding mechanisms; they have mostly applied for, and received, support for feasibility studies or pre-projects – and have since then developed their business by utilizing own financial sources.
In 2012 funding of commercial projects in the Russian parts of the Barents Region, by both Norwegian and Finnish public institutions, Nopef and Kolarctic ENPI, was on the lowest level in 10 years or more.
On the other hand, the existing public instruments are presently not capable of offering financing of larger projects, as shown in e.g. the evaluations of Innovation Norway Fund and Nopef, and companies who would have been interested in such financing might have been
23 The funding mechanisms for international projects and the municipal development funds in Norway receive most of the annual amount from the Ministry of Municipal and Regional Development (KRD). Some of the municipalities additionally use parts of the profit from shares in hydro electrical power plants for that purpose. 24 European Neighborhood and Partnership Instrument.
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forced to rely on own resources, which have seized working capital and perhaps slowed down the development of their business in Russian Barents.
For Russian companies the situation is different: there are no public Russian instruments to support SMEs which want to go abroad in e.g. the Norwegian, Finnish or Swedish parts of the Barents Region. In some cases they might have the opportunity to utilize the Russian co- financing of EU's ENPI programmes, but due to the organization and priorities of the programmes, that would be exceptions rather than the rule. Lack of public funding is therefore clearly representing an obstacle Russian companies which lack strong financial base to carry all the cost and risk connected to cross-border investments.
Akvaplan-niva AS, 9296 Tromsø 28 www.akvaplan.niva.no
7 Cross-border investments in the Barents Region
7.1 Norway
In 2006 a mapping of Norwegian enterprises in Northwest Russia was conducted by Ramboll Storvik AS. The survey included both active and inactive (but existing) companies and representative offices, and it included e.g. number of employees.
By this selection 77 companies/representations were registered – 46 of them active commercial enterprises with total 660 employees in the Russian parts of the Barents Region.25 38 enterprises with 610 employees were located in Murmansk, while 6 enterprises with 47-49 employees were located in Arkhangelsk. One enterprise had office both in Murmansk and Arkhangelsk.
A similar mapping of active commercial enterprises conducted by us in April 2013 showed 37 companies with total 1000 employees – 30 with around 945 employees in Murmansk and seven with 55 employees in Arkhangelsk. In addition Statoil is operating in Nenets AD, where the company indirectly has several employees.26
20 (54%) of the enterprises have 1-5 employees, while the three largest have around 200 employees each.
Some results of the mapping:
1. Norwegian business activities with base in the Russian Barents regions, with one exception, only takes place in the regions Murmansk and Arkhangelsk; 2. The number of Norwegian owned, or partially owned, companies with employees in the Russian parts of the Barents Region has decreased with 25% since 2006; 3. The number of employees in the Russian Barents regions has increased with 50% since 2006.
The pattern is larger companies than earlier. It is first and foremost the Norwegian activities in the sectors finance (banking), accommodation and construction in Murmansk which has been having impact on the employment figures.27
Looking into where in Norway the companies in Murmansk/Arkhangelsk come from, 57% are located in North Norway, with quite equal spread between the three counties. 22% are located
25 One Arkhangelsk based company is listed with 165 employees, but our control showed that only 12-14 employees were working in Russia. We have used the latter figure. Further, the 2006 mapping did not include Statoil's operations in Nenets AD. 26 We have not included number of indirect employees in this overview. 27 The construction and engineering company Reinertsen in Russia is in process of further expansion, which includes the development of a new engineering branch with some 100 engineers.
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in East Norway, mainly in or close to Oslo, while the remaining 22% is being shared by West Norway and the two Trøndelag counties.
Figure 8 - Chart showing in which part of Norway companies with employees in the Russian parts of the Barents Region are located. Source: Akvaplan-niva.
7.1.1 Murmansk region
The Norwegian enterprises in Murmansk have varied activities and business segments: banking, travel and accommodation, gasoline stations, fisheries, cement, sales of machinery, fertilizers, business consulting/support, shipping/agenting, engineering, industrial processing etc. The mapping in 2006 shows a similar picture.
The largest Norwegian companies in Murmansk are Park Inn Polyarniye Zori Hotel with some 200 employees, the engineering and construction company Reinertsen with 220 employees and growing, DNB Bank with 190 employees, Statoil Fuel & Retail with 141 employees and BR Electronics with 50 employees.
Figure 9 – Norwegian Ølen Betong AS established a subsidiary Olen Betong LLC in Murmansk in 2007. (Photo © www.olenbetong.ru)
Akvaplan-niva AS, 9296 Tromsø 30 www.akvaplan.niva.no
SIVA is a Norwegian state-owned company that works out and implements innovation concepts for Norwegian companies abroad. In Murmansk SIVA International Management (IM) run the following centres:
• SIVA Industrial Park, providing office services and support to commercial enterprises; • Business Incubator Polar Star/Norwegian Establishment Centre; • Technopark-NOR (logistic centre/industrial park, co-owned with Innovation Norway Fund)
Since 2002, SIVA Industrial Park has provided modern office facilities for rent to 31 Norwegian companies and one Swedish, as well as two from Iceland and two from Switzerland. The majority of the tenants have been Russian, with 82 companies (69%) of total 118.
The peak of Norwegian business activities with base in SIVA Industrial Park was from 2002 to 2005, with 21 tenants. Presently, there are only four foreign companies - two Norwegian, one Swiss and one Swedish.
Technopark-NOR, located 1 km from Murmansk International Airport, presently offers 7174 m2 with existing constructions and other 10 000 m2 ready for development. Presently, the park has two tenants – a Russian custom broker and the Norwegian company Rupack LLC, processing styrofoam packaging.28
In 2011 and 2012, SIVA IM has increased their focus on also bringing Russian investments to Norway; there has been arranged two "Business Safaris", where total 27 Russian companies and institutions have been visiting municipalities in North Norway to get a general overview of business opportunities and investment opportunities, and to meet individual companies.
Most of the participants belonged to the business segments tourism and fisheries, but e.g. shipbuilding/-repairs, mining, construction and transportation were also represented.29
7.1.2 Arkhangelsk region
Arkhangelsk holds a stable number of Norwegian companies, but the activities have been more streamlined in direction shipping and supply for the construction/petroleum industry as half of the present companies have been established after 2006.
The Ministry of Economic Development of Arkhangelsk region states that it is 13 Norwegian enterprises registered in the region, but from our mapping only seven are active today.
28 Rupack OOO is co-owned by Innovation Norway Fund. 29 SIVA: "Survey of activity of SIVA S.F. – SIVA International Management AS in Northwest Russia in 2002- 2012".
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The largest Norwegian enterprises are the vessel designer Nordnorsk Skipskonsult (NSK) with 17 employees and Wilson Crewing Agency Ltd with 18 employees. The latter also generates a large number of Russian sailors in Arkhangelsk region to the Wilson fleet.
7.1.3 Nenets Autonomous District
The largest Norwegian enterprise in the region is Statoil. Statoil has been present in Russia since 1980s. Now, the Company has 30% ownership interest in the Kharyaga oil field located onshore in the Nenets AD. The field is being developed since 1999 under production sharing agreement. The French Total is the field operator with 40% share; other shareholders are Russian Zarubezhneft with 20% and Nenets Oil Company with 10%.30
7.2 Finland
During the last 10 years Finland has been active in all the Russian regions of the Barents Cooperation. Since 2003 Finnish investors has entered at least 69 Russian companies – 52 in the Republic of Karelia, four in the Republic of Komi, seven in Arkhangelsk region and six in Murmansk.
Finnish companies were very active in Murmansk and Karelia between 1991 and 1998. When the Russian rouble collapsed in August 1998, most of the SMEs returned to Finland. Most of those remaining in the market left after the new devaluation of the rouble in 2008.
Forestry and electronics have been among the main Finnish activities in Karelia, while it has been machinery for forestry/timber in Komi, metal processing and timber in Arkhangelsk and varied activities in Murmansk (windows, metal scrap, mining equipment, construction and ecological solutions).
Presently there are 28 active Finnish companies in the Russian parts of the Barents Region – 12 in Karelia, two in Komi31, three in Arkhangelsk32 and 11 in Murmansk. 10 of the Finnish companies have revealed their sales margins, and half of them have presented deficit.
Based on available data, it is not possible to estimate the total number of employees in the Finnish enterprises, but it exceeds the Norwegian figures.
7.2.1 The Republic of Karelia
In Karelia, the Finnish investments peaked between 2003 and 2007, and were estimated to 28- 31% of the republic's external trade balance. Today the share is close to 13%.
30 http://www.statoil.com/en/about/worldwide/russia/pages/kharyaga.aspx 31 Valmet-Komi and Timberjack have withdrawn from Komi. 32 The Ministry of Economic Development of the Arkhangelsk states that it is five Finnish enterprises registered in the region today.
Akvaplan-niva AS, 9296 Tromsø 32 www.akvaplan.niva.no
The Finns have been active in several business areas: forestry, tourism, transport & logistics, construction, energy, retail, electronics and communication.
In Kostomuksha in Karelia, the Finnish companies Electrokos and AEK have total 1100 employees, while three other companies same place have total 40 employees.
7.2.2 The Republic of Komi
In Komi, Finnish companies invested in the company Lespromservice LLC selling and designing forestry machinery, and in joint meat processing factory of Izhma Reindeer Meet LLC.
7.2.3 Nenets Autonomous District
In Nenets AD, Finnish Neste previously invested in JSC Sever TEK (as also in Komi), but in 2005 the company was sold to the Russian oil company Lukoil. In 2010, a Finnish company producing meters for the petroleum industry tried to establish Figure 10 – Meat processing factory of Finnish- themselves in the District, but the activity Russian Izhma Reindeer Group LLC (Photo was shut down after a while. © oleninapremium.ru)
7.3 Sweden
An estimated 10% of Swedish companies active in NW Russia are operating in the Russian parts of the Barents Region. From these 10%, the majority are branch offices of companies with national headquarters in Moscow or St Petersburg.
Like for Finland, Swedish business activities in the Russian parts of the Barents Region peaked before 1998, and have since then gradually been reduced. Karelia is an exception, as Swedish investments started here in 2006, aiming at the forestry sector, and has since then been growing.
We have registered 30 companies in the Russian parts of the Barents Region, which are presently considered as Swedish; seven in Komi, six in Karelia, seven in Arkhangelsk, one in Nenets AD and nine in Murmansk. A closer look into these companies shows some of they are sold out33, and some of them are in fact not Swedish, but Russian owned companies who
33 Alliance Oil (ex. West Siberian Resource), operating in e.g. Nenets AD, is often referred to as a Swedish company, even if it is registered on Bermuda and the head office is in Moscow. Swedish mobile telephone Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 33
are authorized dealers and agents for Swedish manufacturer.34 What remains, seem to be 15 active companies with Swedish direct investments.
The exact number of employees with Swedish enterprises in the Russian parts of the Barents Region is not known, but their business area and activities indicates that it is on level with the Finnish investments, and above the Norwegian figures.
7.3.1 The Republic of Komi
Lundin Petroleum has a 50 percent licence interest in three producing fields in Komi. Production comes from Devonian carbonate reservoirs. Oil is exported via the nearby Transneft pipeline system and about 60-65% is sold domestically. Lundin owns 50% of Recher-Komi and Pechoraneftegaz.35
Sandvik Mining, a subsidiary of the Swedish Sandvik Group, is a global supplier of equipment and tools, service and technical solutions for the mining industry. In Komi, the company has its regional office in Vorkuta.36
FerroNordic Machines AB is present in Komi through their Russian subsidiary Ferronordic Machines LLC. The company is as an authorized dealer and a service company for Volvo Construction Equipment (Volvo CE) with presence in both Syktyvkar and Ukhta.37
The Swedish manufacturers ESAB (welding equipment), Atlas Copco (compressors) and Volvo Truck are in the market in Komi through authorised Russian dealers which they are training. ESAB operates through two dealers in Syktyvkar.
Year 2000 2007 2008 2009 No 1 - 1 1 USD - - 32.5 29.1
Table 2 – Registered Swedish investments in the Republic of Komi 2000-2009 by number and amount in million USD. Source: Finpro Russia.
company Tele2 AB, active in e.g. through subsidiaries in Murmansk and Komi, sold their business Tele 2 Russia to Russian VTB Group in March 2013 because Russian restrictions prevented the company from obtaining licences for 3G and 4G network. 34 E.g. Scania truck in Karelia, Arkhangelsk and Murmansk, Volvo Truck in in Komi, Volvo Penta in Murmansk. These are represented by the Russian companies Petroscan, ArchScan, MurmanScan (Scania) and Shelco (Volvo Penta). ESAB, manufacturer of welding equipment, also has a chain of Russian distributers in all Russian Barents regions; they are listed here as Swedish companies, but only through Russian dealers. 35 www.lundin-petroleum.com/eng/operation_russia.php; www.lundin- petroleum.com/Documents/ar_2012_e.pdf . Pechoraneftegaz is co-owned with Gazpromneft. 36 www.miningandconstruction.sandvik.com/ru 37 http://ferronordic.ru/en/pages/32-regionalnaya-set
Akvaplan-niva AS, 9296 Tromsø 34 www.akvaplan.niva.no
7.3.2 The Republic of Karelia
In the Republic of Karelia, there are presently six registered companies with Swedish investments or other involvement.
IKEA Industry Group is active through their subsidiary Swedwood Karelia LLC. With base in Kostomuksha, the company is logging wood, clear-cutting, manufacturing and distributing wood based furniture. So far, Swedwood has invested 70 million EUR in the region; the company employs 595-650 persons.38
FerroNordic Machines AB is present in Karelia through their Russian subsidiary Ferronordic Machines LLC. The company is as an authorized dealer and a service company for Volvo Construction Equipment (Volvo CE) with presence in both Pitkyaranta and Petrozavodsk.
The Swedish manufacturers ESAB (welding equipment) and Scania (trucks) are in the market in Karelia through authorised Russian dealers which they are training. ESAB operates through two dealers in Petrozavodsk, while Scania operates through the company Figure 11 – Wood processing plant of Swedwood Karelia LLC in Kostomuksha. Petroscan at the same place. Husquarna (domestic machinery) operates through Nadezhda in Kostamuksha and Petrozavodsk.
7.3.3 Nenets Autonomous District
Alliance Oil Company Ltd, until 2009 West Siberian Resources Ltd (originally Vostok Oil Ltd) was founded in 1998 and originally registered in Sweden with e.g. Lundin Oil AB as a major shareholder. Today it is registered in Bermuda and having main office in Moscow, but is often still considered as Swedish as e.g. the General Meeting is being held in Sweden and part of the management is Swedish.39
7.3.4 Arkhangelsk region
The Ministry of Economic Development of Arkhangelsk region states that it is three Swedish enterprises registered in the region, but our mapping shows four active companies.
38 www.gov.karelia.ru/News/2013/03/0305_23_e.html; Press Release from the Ministry of Economic Development of the Republic of Karelia, January 2010. By the end of 2009 Swedwood had 595 employees, and the plan was to have 650 work places. 39 Vostok Oil Ltd, Annual Report Oct 1, 2000 – Sep 30, 2001; www.allianceoilco.com/en
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RusForest AB owns both sawmill "LDK-3" and the plane mill "Infa".
FerroNordic Machines AB has established OOO Ferronordic Machines Arkhangelsk through their Russian subsidiary Ferronordic Machines LLC. The company is as an authorized dealer and a service company for Volvo Construction Equipment (Volvo CE), located in Arkhangelsk, Velsk and Koryazhma.
The Swedish manufacturers ESAB (welding equipment), Scania (trucks) and Husquarna (domestic machinery) are in the market in Arkhangelsk through authorised Russian dealers which they are training. ESAB operates through three local dealers in Arkhangelsk city, Scania operates through the company ArchScan and Husquarna through Sigma same place.
The Swedish bank Nordea is also established in Arkhangelsk with a branch under St. Petersburg.
7.3.5. Murmansk region
In Murmansk, the Swedish-Russian joint-venture Tekko has production facilities for different types and volumes of welding work for the mining industry. It is also a dealer for ESAB. The company is located in Apatity, in southern part of the region.
Sandvik Mining, a subsidiary of the Swedish Sandvik Group, is a global supplier of equipment and tools, service and technical solutions for the mining industry. In Murmansk, the company operates in Monchegorsk and Olenogorsk from its regional office in Kirovsk.40
FerroNordic Machines AB, an authorized dealer and a service company for Volvo Construction Equipment (Volvo CE), is present in Murmansk through their Russian subsidiary Ferronordic Machines LLC.
The Swedish manufacturers ESAB (welding equipment), Atlas Copco (compressors), Volvo Penta (marine engines) and Scania (trucks) are in the market in Murmansk through authorised Russian dealers which they are training. ESAB operates through two dealers in Murmansk city, Atlas Copco operates through Eventus, Husquarna through Spec, Volvo Penta through Shelco and Scania through MurmanScan.
Year 2006 2007 2008 2009 2010 2011 No 7 8 5 7 7 4 USD 15 30 42 31 566 - 9 110
Table 3 – Registered Swedish investments in Murmansk region 2006-2011 by number and amount in thousand USD. Source: Finpro Russia.
40 www.miningandconstruction.sandvik.com/ru
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7.4 Russia
7.4.1 North Norway
A recent mapping of Russian investments in North Norway showed 22 companies, of which 14 were active in 2010. Most of them were in the sector fishery & aquaculture. Their total turnover was 4.3 million EUR and they had total deficit 1.8 million EUR. Eight companies showed equity below 20%.
In 2013 there are still 14 active companies - 12 in Finnmark, one in Troms and one in Nordland). They are small; employing estimated around 30 persons total on annual basis, mainly in the sectors fisheries, aquaculture and tourism. Most of the Russian investors are living in Murmansk, but 1/3 of the companies have owners outside the Russian parts of the Barents Region or outside Russia.41
The seafood processors Arctic Catch AS and Snefjord Kongekrabbe AS, the aquaculture company Kirkenes Charr AS and the trading company Jarus AS shows largest turnover, total 12.5 million EUR in 2011.
7.4.2 North Finland
Despite 600 million EUR of annual and 2.3 billion EUR of accumulated Russian investments in the Finnish economy42, there is no significant impact in the northern part of the country.
In North Finland the Russian investments activities are very low, with around 20 enterprises; most of them are small, single-person business or sole proprietorship. Some of these might be investments by Russian citizens with permanent residence in Finland, and therefore not actual foreign investments.
The reason for this low number of enterprises is that Russian investors find few suitable investment opportunities here, and they therefore look to the bigger and wider markets in South Finland.43
41 Rautio: "Russisk eierskap i nordnorske bedrifter. Oversikt over aktører, aktivitet og økonomi i foretakene" (2012); The Brønnøysund Register Centre; The Russian investors in North Norway are based in e.g. Moscow, London, Zürich, Cyprus, USA and Japan. 42 http://iris.lut.fi/news-highlights/39-the-volume-of-mutual-finnish-russian-investment-is-growing 43 Barents Center Finland Oy.
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7.4.2.1 Kainuu region
In Kainuu region there are five small enterprises with Russian investments; three of them are in the tourism business (cottage rental and services for Russians), while the other two are retail business.
7.4.2.2 Northern Ostrobothnia
In Northern Ostrobothnia, one of the investments is a gasoline station in process of development, while a second is the reconstruction of an old school to a karaoke bar. Another two are service companies ordering, or handling goods ordered by customers in Russia, and delivering the products near the Russian border for pick-up by the Russian customers. The other two companies are in the tourism business.
7.4.2.3 Lapland
In Lapland there are 10 investments – six into accomodations/tourism in Rovaniemi (motel), Muurola (hotel), Apukka (tourist/research station), Kuukiuru and Olerovaara (holiday villages – the last in planning process). Not all of them are active today.
The other investment are into garage, restaurants, photo shop and a company doing mounting of stoves.
7.4.3 North Sweden
In the Swedish parts of the Barents Region our mapping has revealed only one Russian investment:
In 2002 Russian investors bought the sawmill Doroteasåg in Dorotea, approx. 200 km west of Umeå, Västerbotten County. The mill went bankrupt in 2008, but was then bought by one of the previous Russian owners and renamed Maria Dorotea Såg AB. In 2011 it planned to turn 25-30 000 m3 of raw material into timber.44
In Norrbotten (e.g. Luleå, Piteå and Haparanda) there are likely to be some single-person business or sole proprietorship run by Russian citizens with permanent residence in Sweden, but there is no available information indicating enterprises based on investments from Russia.45
44 "Västerbottens-Kuriren", 25 March 2011; www.doroteasag.se 45 Repeated approaches to the county administrations and the regional chambers of commerce did not result in any substantial feedback, and we therefore must conclude that there are no other known Russian investments in
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8 Economic impact of cross-border business
8.1 Norway Many of the Norwegian companies in the Russian parts of the Barents Region do not generate local turnover as they operates as agents/representatives. Those who run commercially in the market are generally not interested in revealing either turnover or profit since such information can expose them for unwanted attention. Therefore, the impact in the Russian economy cannot be estimated without a deeper and more thoroughly study.
Nevertheless, the company Kirkenes Trading AS might serve as a relevant illustration of the economic impact the cross-border business with Russia is having: It is doing business in transport, trading and distribution of pelagic fish from Norway to the Russian market through both their office in Kirkenes, Norway, and through the wholly owned subsidiary Murmansktorgsnabservice in Murmansk. For many years it has been one of top importers of pelagic fish over Port of Murmansk, and even been the No 1 importer of capelin to the Russian market.
Kirkenes Trading AS is having around 13 million EUR (100 million NOK) in sales – ¼ through the Norwegian company and ¾ through the subsidiary in Murmansk. Another eight SMEs in Kirkenes area, all of them are having Russia as an important market, generated total 63 million EURO (483 million NOK) in sales in 2011.46
Maritime sector in Norway also benefits from business with Russia other places in the Norwegian Barents regions as service providers to e.g. Russian vessels in North Norwegian ports, like Båtsfjord, Honningsvåg, Tromsø and Bodø. There is also well-established but not regular cooperation between industrial enterprises, like Petrozavodskmash in Petrozavodsk, who is manufacturing parts for Miras Multimaskin AS, Mo i Rana.47
The main economic impact of Russian-Norwegian cooperation is to find in the export/import trade between Norway and Murmansk/Arkhangelsk. This trade is often based on local agents, coordinators and handlers for the Norwegian companies – small representative offices who are not delivering any impact to the local economy by themselves.
In 2011, business with Norway contributed to 4.2% of the value of exports and imports to Murmansk region, placing Norway as No 4, below Netherlands, USA and China, but above Belgium.48 Compared with Finland in 2012, the export from Murmansk to Norway in was 3.5
the Swedish Barents regions. The subject also seems to have little attention both in North Finland and North Sweden. 46 Bergen Group Kimek AS, Henriksen Shipping AS, Kirkenesterminalen AS, Norway King Crab AS, Pasvikturist AS, Troika Seafood AS, Tschudi Aggregates AS and Villa Arctic. For Kimek 50% of the turnover are Russian customers, for Troika Seafood 80%, Norway King Crab 30% and Villa Arctic around 30%. 47 http://www.gov.karelia.ru/News/2009/10/1022_19_e.html 48 Barents Monitoring, Murmansk region 2011, page 10. Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 39
times the export to Finland, while the Finnish export to Murmansk was 2.75 times the Norwegian export.49
Norcem AS is e.g. exporting different types of cement to Northwest Russia. In 2011, the export to Murmansk was 31 000 tons, and in 2012 it had risen to 53 000 tons. Export to Arkhangelsk started second half of 2011 and reached 10 000 tons first year. In 2012 it had doubled.
The fertilizer giant Yara is annually importing 450 000 tons of apatite concentrate from Kovdor over Murmansk port. It is being shipped to their fertilizer plants in Porsgrunn and Glomfjord, Norway. This represents around 50% of the total output in Murmansk region.
1000 employees with Norwegian owned companies also represent an impact to the local economies of Murmansk and Arkhangelsk, as individual taxes and salaries being spent. In addition comes local supplies to processing activities, office equipment etc.
Russians are also being recruited for jobs abroad by two Norwegian companies in the Russian parts of the Barents Region. Wilson Crewing Agency in Arkhangelsk has recruited around 1100 (80%) of the seafarers employed on General Cargo and Bulk Carrier vessels in the Norwegian Wilson fleet50, while the Bergen Group-owned company Kimek Offshore in Kirkenes has been training and recruiting around 60 Russian welders for jobs on installations in Norway and elsewhere. The employment of more than 1100 persons for jobs in Norwegian companies outside Russia also represents a significant economic impact in Russian Barents, as much of their income is likely to be spent for support of family and/or to cover other financial obligations at home.
The resources spent for development of commercial infrastructure also adds to the local economy as implementation of most of these projects includes local support, travels, seminars, conferences in Russia. This adds a contribution to e.g. local transport, hotels, restaurants and shopping – particularly in Murmansk.
8.1.1 Export from North Norway to Russia In 2012 the total export from the three North Norwegian counties to Russia was worth 3.6 billion NOK (615.5 million USD). The export has grown steadily from 655 million NOK (111 million USD) in 2003, uninterrupted by e.g. the financial crises in Russia in 2008. In 2012 fish and other seafood counted for 80 percent of the export from North Norway to Russia, while average for the last 10 years has been 85 percent. The last three years there has been a growing export of e.g. processed fish, live seafood and smolt to Russia; in 2012 the export of the category "foodstuff and live animal" from Nordland was worth 129 million NOK (21.9 million USD), while the export from Finnmark was worth 118 million NOK (20 million USD).
49 The Russian custom's Northwest Department. 50 www.wilsonship.no/web/wilsonweb.nsf/$all/492551D12A291094C12574A6002E6B31
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Nordland also exports processed goods to Russia; in 2012 it was worth 140 million NOK, but it has varied the last years. In 2008 it peaked with 292 million NOK (49.5 million USD), while it fell to 43 million NOK (7.3 million USD) in 2009. Export of machinery from Nordland to Russia was worth total 177 million NOK (30 million USS) in 2011 and 2012. Troms have no such export, while machinery from Finnmark to Russia has been worth 6-10 million NOK (1-1.7 million USD) annually the last six years.
Figure 12 – Export from North Norway to Russia, 2003-2012, by county, year and value in million NOK. Source: Statistics Norway.
Figure 13 – Export of fish from North Norway to Russia, 2003-2012, by county, year and volume (tons). Source: Statistics Norway.
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8.1.2 Import to Russian part of the Barents Region from Norway The records of North-West Department of the Russian State Federal Customs Service gives detailed information about the export from Norway to the Russian part of the Barents Region, and its value:51
Figure 14 – Import to the Russian parts of the Barents Region from Norway 2010 – 2012 by value in thousand USD, divided by year and region. Source: The North-West Department of the Russian State Federal Customs Service.
The import to the Republic of Komi from Norway is insignificant; in 2012 it was only worth 19 000 USD, or 0.01 percent of the total import to the republic.
Republic of Komi 2012 - Type of goods Import from Norway USD52 % TOTAL 254 228,3 100,00 NORWAY 19,1 0,01 Fish, molluscs and other water species 19,1 0,01
Table 4 – Import to the Republic of Komi from Norway in 2012; goods, value in thousand USD and share of total import for the republic. Source: The North-West Department of the Russian State Federal Customs Service.
51 There was no direct trade between Norway and Nenets Autonomous District in 2012. 52 Russia is using USD as currency in their official international trade statistics. In this chapter we are therefore using USD instead of EUR. The exchange rate USD/RUB as for 15 December each year.
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The import to the Republic of Karelia from Norway was worth only 393 000 USD in 2012, or 0.13 percent of the republic's total import. The main products from Norway were ferrous metals and optical equipment.
Republic of Karelia 2012 - Type of goods Import from Norway USD % TOTAL 294 709,26 100 NORWAY 392,77 0,13 Plastic materials 5,78 0 Rubber and elastic goods 0,02 0 Other textile goods and clothes 10,39 0 Glass 0,05 0 Ferrous metal goods 273,29 0,09 Mechanic instruments 0,47 0 Electrical equipment and instruments 2,04 0 Automotive transport and spare parts 7,84 0 Optical goods 92,9 0,03
Table 5 – Import to the Republic of Karelia from Norway in 2012; goods, value in thousand USD and share of total import for the republic. Source: The North-West Department of the Russian State Federal Customs Service.
The import to Arkhangelsk from Norway in 2012 was worth only 1 million USD, and gave a 0.4 percent share of the regions import. The main products from Norway were ferrous metals and mechanic instruments.
Arkhangelsk region 2012 - Type of goods Import from Norway USD % TOTAL 234 279,90 100,00 NORWAY 1 014,14 0,43 Plastic materials 3,84 0,00 Timber and wooden materials 1,38 0,00 Ferrous metal goods 415,41 0,18 Household instruments from base metals 0,01 0,00 Other goods from base metals 5,19 0,00 Mechanic instruments 565,21 0,24 Electrical equipment and instruments 12,13 0,01 Furniture and interior equipment 10,98 0,00
Table 6 – Import to Arkhangelsk region from Norway in 2012; goods, value in thousand USD and share of total import for the region. Source: The North-West Department of the Russian State Federal Customs Service.
In 2012 the import to Murmansk from Norway was worth nearly 88 million USD - or 14 percent of the region's total import. The main products from Norway were seafood and animal food.
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Murmansk region 2012 - Type of goods Import from Norway USD % TOTAL 634 389,27 100 NORWAY 87 854,07 13,85 Fish, molluscs and other water objects 31 030,17 4,89 Vegetable and animal oil 344 0,05 Different food products 480,15 0,08 Alcohol and alcohol-free drinks 1,98 0 Food waste and animal food 3 4145,7 5,38 Salt; sulphur; soils and stones; plaster materials, chalk and cement 6 189,56 0,98 Crude oil and refined products 0,06 0 Painting materials 3,93 0 Other chemical products 156,32 0,02 Plastic materials 141,83 0,02 Rubber and elastic goods 2,26 0 Timber and wooden materials 80,94 0,01 Paper and carton 0,23 0 Books and newspapers 10,65 0 Wadding, felt 927,78 0,15 Crude oil and refined products 21,83 0 Clothes 29,16 0 Other textile goods 26,81 0 Hats 4,32 0 Ferrous metals 10,31 0 Ferrous metal goods 357,48 0,06 Copper and copper goods 5 0 Aluminium and aluminium goods 26,71 0 Other base metal goods 0,64 0 Mechanic instruments 1 905,04 0,3 Electrical equipment and instruments 1 683,05 0,27 Automotive transport and spare parts 0,18 0 Boats 9 062,01 1,43 Optical goods 248,04 0,04 Furniture and interior equipment 488,9 0,08 Toys and sport goods 469,03 0,07
Table 7 – Import to Murmansk region from Norway in 2012; goods, value in thousand USD and share of total import for the region. Source: The North-West Department of the Russian State Federal Customs Service.
8.2 Finland
Many Finnish enterprises benefits, or are in process of benefitting, from a number of large- scale development projects with Russia in the Barents Region, financed by Northern Dimension Environmental Partnership (NDEP) and Nordic Environment Finance Corporation (NEFCO).
These are projects for modernization of municipal waste water treatment plants and water works, and will require Finnish business services for several years.
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Presently, Finland is assisting with sewage and water treatment in Murmansk, solid waste and sewage treatment in Petrozavodsk and water works in Arkhangelsk, Petrozavodsk and Syktyvkar. In addition, a water/district heating plant in Syktyvkar, Komi is in process of planning.
Including the planned project in Syktyvkar, these projects have received 157 million EUR as loans and grants from NDEP and NEFCO.
In addition, Kainu has realized a few projects directly with the Republic of Karelia, receiving funding from EU and the County of Kainu. E.g. the Kostomuksha biopowerplant/waste gassification plant Biokos, to be conducted 2013-2014, will cost 1.1 million EUR, of which 90% is funded by EU. A second project, funded 80% by EU, is the Barents Link Forum, which helps to open the border crossing traffic point in Vartius as well as the construction of a fiber optic cable connection between Kuhmo and Kostomuksha. Here, the budget is 500 000 EUR.
The records of North-West Department of the Russian State Federal Customs Service gives detailed information about the export from Finland to the Russian part of the Barents Region, and its value:53
Figure 15 – Import to the Russian parts of the Barents Region from Finland 2010 – 2012 by value in thousand USD, divided by year and region. Source: The North-West Department of the Russian State Federal Customs Service.
53 There was no direct trade between Finland and Nenets Autonomous District in 2012.
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In 2012, Komi imported goods worth 21 million USD from Finland. This was 8 percent of the republic's total import. The main export from Finland was non-organic chemistry products and cleaning goods.
Republic of Komi 2012 - Type of goods Import from Finland USD % TOTAL 254 228,3 100,00 FINLAND 21 245,1 8,36 Products of non-organic chemistry 10 187,2 4,01 Organic chemical compounds 107,6 0,04 Painting materials 0,1 0,00 Washing and cleaning goods 5 013,7 1,97 Protein materials 539,3 0,21 Other chemical products 376,0 0,15 Plastic materials 394,0 0,15 Rubber and elastic goods 8,3 0,00 Leather goods 0,2 0,00 Paper and carton 1 755,6 0,69 Special cloth 91,6 0,04 Textile materials 862,4 0,34 Other textile goods 0,1 0,00 Stone and gypsum goods 8,3 0,00 Glass and glass goods 0,5 0,00 Ferrous metals 3,9 0,00 Ferrous metal materials 102,9 0,04 Copper and copper goods 1,2 0,00 Household goods from base metals 0,3 0,00 Other goods from base metals 2,7 0,00 Mechanic instruments 1 649,5 0,65 Electric equipment and instruments 137,1 0,05 Optical goods 2,6 0,00
Table 8 – Import to the Republic of Komi from Finland in 2012; goods, value in thousand USD and share of total import for the region. Source: The North-West Department of the Russian State Federal Customs Service.
The import to Karelia from Finland was worth 49 million USD - or close to 17 percent of the republic's total import in 2012. The export from Finland has a wide variety, but animal food and mechanical/electrical equipment have the highest export values.
Republic of Karelia 2012 - Type of goods Import from Finland USD % TOTAL 294 709,26 100 FINLAND 49 175,43 16,69 Live animals 201,74 0,07 Fish, molluscs and other water species 1 231,39 0,42 Animal origin goods 64,03 0,02 Live plants 2,77 0 Vegetables 203,15 0,07 Sugar 396,35 0,13 Cacao 468,42 0,16 Grain goods 7,43 0
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Republic of Karelia 2012 - Type of goods (cont.) Import from Finland USD % Different food products 61,89 0,02 Alcohol and non-alcohol drinks 2237,1 0,76 Food waste and animal food 10 593,15 3,59 Crude oil and refined products 1 090,69 0,37 Products of non-organic chemistry 137,83 0,05 Fertilisers 8,1 0 Painting materials 7,48 0 Washing and cleaning goods 297,36 0,1 Protein goods 4,19 0 Other chemical products 552,62 0,19 Plastic materials 905,52 0,31 Rubber and elastic goods 188,03 0,06 Timber and wooden materials 78,04 0,03 Cellulose and carton materials 6,71 0 Paper and carton 5 440,96 1,85 Books and newspapers 31,04 0,01 Wadding, felt 0,13 0 Special cloth 3,22 0 Textile materials 578,62 0,2 Textile goods 128,19 0,04 Shoes 158,12 0,05 Stone and gips goods 100,48 0,03 Ceramic goods 55,87 0,02 Glass 1,19 0 Ferrous metals 8,76 0 Ferrous metal goods 640,76 0,22 Copper and copper goods 173,15 0,06 Aluminium and aluminium goods 529,57 0,18 Lead and lead goods 0,96 0 Zink and zink goods 0,73 0 Other base metals 1,44 0 Household instruments from base metals 98,81 0,03 Other goods from base metals 8,41 0 Mechanic instruments 9 972,67 3,38 Electrical equipment and instruments 7 219,55 2,45 Automotive transport and spare parts 711,11 0,24 Boats 4,81 0 Optical goods 776,33 0,26 Furniture and interior goods 1 327,25 0,45 Toys and sport goods 2 387,19 0,81 Different goods ready to use 72,11 0,02
Table 9 – Import to the Republic of Karelia from Finland in 2012; goods, value in thousand USD and share of total import for the region. Source: The North-West Department of the Russian State Federal Customs Service.
The import to Arkhangelsk region from Finland was worth 81.5 million USD - or 35 percent of the region's total import in 2012. The export from Finland has a wide variety, but mechanic instruments dominate strongly by value.
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Arkhangelsk region 2012 - Type of goods Import from Finland USD % TOTAL 234 279,90 100,00 FINLAND 81 558,75 34,81 Alcohol and alcohol-free drinks 12,91 0,01 Products of non-organic chemistry 6 394,86 2,73 Washing and cleaning materials 1 051,14 0,45 Protein materials 177,18 0,08 Plastic materials 168,23 0,07 Rubber and elastic goods 146,10 0,06 Timber and wooden materials 72,57 0,03 Wickerworks 41,80 0,02 Cellulose and carton materials 1 272,52 0,54 Paper and carton 160,27 0,07 Books and newspapers 0,03 0,00 Textile materials 545,81 0,23 Ceramic goods 2,25 0,00 Glass 30,31 0,01 Ferrous metals 0,94 0,00 Ferrous metal goods 957,60 0,41 Copper and copper goods 5,12 0,00 Aluminium and aluminium goods 0,29 0,00 Household instruments from base metals 254,77 0,11 Mechanic instruments 59 984,97 25,60 Electrical equipment and instruments 3 054,07 1,30 Automotive transport and spare parts 336,05 0,14 Optical goods 6 888,98 2,94
Table 10 – Import to Arkhangelsk region from Finland in 2012; goods, value in thousand USD and share of total import for the region. Source: The North-West Department of the Russian State Federal Customs Service.
The import to Murmansk region from Finland was worth 243 million USD - or 38 percent of the region's total import in 2012. Metal goods (copper and nickel) were dominating the export by value.
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Murmansk region 2012 - Type of goods Import from Finland USD % TOTAL 634 389,27 100 FINLAND 243 191,48 38,33 Meat and meat products 1 189,66 0,19 Vegetables 1 668,16 0,26 Sugar 15,17 0 Cacao 110,79 0,02 Grain products 0,13 0 Different food products 3,73 0 Alcohol and alcohol-free drinks 446,68 0,07 Crude oil and refined products 1,33 0 Painting materials 20,72 0 Perfume 6,79 0 Washing and cleaning goods 1,84 0 Protein materials 0,41 0 Other chemical products 8,88 0 Plastic materials 20,98 0 Rubber and elastic goods 38,25 0,01 Timber and wooden materials 82,87 0,01 Books and newspapers 2 715,32 0,43 Textile materials 3,68 0 Other textile goods 22,88 0 Shoes 65,94 0,01 Stone and gypsum goods 0,1 0 Ceramic goods 8,41 0 Glass and glass products 1,15 0 Ferrous metals 527,85 0,08 Ferrous metal goods 2 318,44 0,37 Copper and copper goods 86 704,82 13,67 Nickel and nickel goods 122 035,01 19,24 Aluminium and aluminium goods 1,04 0 Household instruments from base metals 0,48 0 Other base metal goods 0,52 0 Mechanic instruments 12 539,92 1,98 Electrical equipment and instruments 427,37 0,07 Automotive transport and spare parts 12 067,37 1,9 Optical goods 126,29 0,02 Furniture and interior equipment 8,45 0 Different products ready to use 0,05 0
Table 11 – Import to Murmansk region from Finland in 2012; goods, value in thousand USD and share of total import for the region. Source: The North-West Department of the Russian State Federal Customs Service.
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In 2012 the Finnish export to the Russian parts of the Barents Region over its four northern border points was worth 201 million EUR (268 million USD) in 2012. This amount represents e.g. around half of the total value of Finnish export to Karelia and Murmansk combined. Around 73 % of this Finnish export passes the southernmost of these points, at Niirala - Värtsilä (SE of Joensuu), where there is also a railroad connection.
Figure 16 – Value of export (in thousand EUR) from Finland to Russia over the northern border points 2007-2012, divided by border points and year. Source: Finnish Customs.
8.3 Sweden
Before 2008 North Sweden was relatively active in attempts to establish cross-border business with Russian in the Barents Region, e.g. through establishing the Swedish Centre in Murmansk to connect business enterprises in Norrbotten. The centre was later laid down, but its activities continue through Russian-Swedish Council on small and medium business support.54
There is not much border-crossing business between the Russian parts of the Barents Region and the Swedish part of the regional cooperation. Swedish business with Russia has traditionally been running from the south and mainly to other parts of Russia – or to the Russian parts of the Barents Region via Russian country offices in Moscow/St Petersburg.
One of the few Swedish companies active in cross-border activities in the north is Polarica in Haparanda. The company deals in berries and game meat for the European and world markets, and it has been a pioneer in trade with Russia.
54 It operates under Norrbotten Chamber of Commerce.
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MikroMakarna AB in Pajala, which manufactures electronic components, has been active in Murmansk since 1995 to be able to provide competitive prices for their products. The first years they operated their own company Microtech, but from 2004 they established cooperation on manufacturing with ZAO BR Electronics, a Norwegian investment in Murmansk. They are presently in process of moving the production to East Europe after being acquired by Swedish Inission AB in 2012.55
The records of North-West Department of the Russian State Federal Customs Service gives detailed information about the export from Sweden to the Russian part of the Barents Region, and its value:56
Figure 17 – Import to the Russian parts of the Barents Region from Sweden 2010 – 2012 by value in thousand USD, divided by year and region. Source: The North-West Department of the Russian State Federal Customs Service.
55 http://www.inission.com/en/2012/12/mikromakarna-will-be-a-part-of-inission/; Torbjørnsen. 56 There was no direct trade between Sweden and Nenets Autonomous District in 2012.
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The import to Komi from Sweden was worth only 13 million USD - or 5% of the republic's total import in 2012. Paper products had the highest export value.
Republic of Komi 2012 - Type of goods Import from Sweden USD % TOTAL 254 228,3 100,00 SWEDEN 13 334,3 5,25 Products of non-organic chemistry 1 498,6 0,59 Washing and cleaning goods 198,8 0,08 Plastic materials 63,9 0,03 Paper and carton 9 170,3 3,61 Wadding, felt 0,1 0,00 Textile materials 820,8 0,32 Stone and gypsum goods 127,8 0,05 Ferrous metal materials 129,2 0,05 Copper and copper goods 16,3 0,01 Aluminium and aluminium materials 0,4 0,00 Other base metals and goods 42,3 0,02 Household goods from base metals 3,4 0,00 Other goods from base metals 0,1 0,00 Mechanic instruments 1 122,0 0,44 Automotive transport and spare parts 24,7 0,01 Optical goods 115,7 0,05
Table 12 – Import to the Republic of Komi from Sweden in 2012; goods, value in thousand USD and share of total import for the republic. Source: The North-West Department of the Russian State Federal Customs Service.
The import to Karelia from Sweden was worth 18.6 million USD - or 6 percent of the republic's total import in 2012. Paper products had the highest export value.
Republic of Karelia 2012 - Type of goods Import from Sweden USD % TOTAL 294 709,26 100 SWEDEN 18 600,3 6,31 Alcohol and non-alcohol drinks 91,18 0,03 Crude oil and refined products 2,15 0 Protein goods 138,93 0,05 Pyrothecnic goods 914,71 0,31 Other chemical products 0,37 0 Plastic materials 1 749,68 0,59 Rubber and elastic goods 99,11 0,03 Timber and wooden materials 20,13 0,01 Paper and carton 9 294,51 3,15 Chemical fiber 0,47 0 Textile materials 503,66 0,17 Other textile goods and clothes 42,16 0,01 Stone and gypsum goods 17,24 0,01 Ceramic goods 3,42 0 Ferrous metals 132,91 0,05 Ferrous metal goods 279,84 0,09
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Republic of Karelia 2012 - Type of goods (cont.) Import from Sweden USD % Copper and copper goods 7,58 0 Aluminium and aluminium goods 2,13 0 Household instruments from base metals 196,74 0,07 Mechanic instruments 4 735,84 1,61 Electrical equipment and instruments 97,14 0,03 Automotive transport and spare parts 83,49 0,03 Optical goods 182,14 0,06 Furniture and interior goods 3,32 0 Different goods ready to use 1,44 0
Table 13 – Import to the Republic of Karelia from Sweden in 2012; goods, value in thousand USD and share of total import for the republic. Source: The North-West Department of the Russian State Federal Customs Service.
The import to Arkhangelsk region from Sweden was worth only 7 million USD - or 3% of the region's total import in 2012. The type of goods varied, all of them with low value, but mechanic instruments had the highest export value with 1.35%.
Arkhangelsk region 2012 - Type of goods Import from Sweden USD % TOTAL 234 279,90 100,00 SWEDEN 7 570,27 3,23 Alcohol and alcohol-free drinks 8,47 0,00 Crude oil and refined products 0,01 0,00 Products of non-organic chemistry 138,91 0,06 Washing and cleaning materials 583,29 0,25 Protein materials 288,73 0,12 Plastic materials 821,00 0,35 Rubber and elastic goods 3,62 0,00 Timber and wooden materials 0,00 0,00 Paper and carton 2,55 0,00 Textile materials 153,72 0,07 Stone and gypsum goods 2,04 0,00 Ceramic goods 951,60 0,41 Ferrous metals 54,30 0,02 Ferrous metal goods 127,42 0,05 Copper and copper goods 16,84 0,01 Other basic metals 445,94 0,19 Household instruments from base metals 86,33 0,04 Other basic metal goods 6,93 0,00 Mechanic instruments 3 162,10 1,35 Electrical equipment and instruments 118,84 0,05 Automotive transport and spare parts 434,33 0,19 Optical goods 159,74 0,07 Toys and sport goods 3,56 0,00
Table 14 – Import to Arkhangelsk region from Sweden in 2012; goods, value in thousand USD and share of total import for the region. Source: The North-West Department of the Russian State Federal Customs Service.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 53
The import to Murmansk region from Sweden was worth 32 million USD - or 5 percent of the region's total import in 2012. Mechanic instruments had the highest export value with 2.88%.
Murmansk region 2012 - Type of goods Import from Sweden USD % TOTAL 634 389,27 100 SWEDEN 32 184,52 5,07 Sugar 0,66 0 Cacao 8,93 0 Alcohol and alcohol-free drinks 29,33 0 Crude oil and refined products 2,55 0 Organic chemical compounds 3 742,89 0,59 Painting materials 20,82 0 Washing and cleaning goods 2 140,07 0,34 Protein materials 0,11 0 Other chemical products 625,75 0,1 Plastic materials 1,06 0 Rubber and elastic goods 36,69 0,01 Timber and wooden materials 3,8 0 Paper and carton 2,47 0 Clothes 0,52 0 Ferrous metals 5,88 0 Ferrous metal goods 81,47 0,01 Aluminium and aluminium goods 0,45 0 Tin and tin goods 8,53 0 Other base metals 18,9 0 Household instruments from base metals 2,32 0 Mechanic instruments 18 266,61 2,88 Electrical equipment and instruments 1 613,79 0,25 Automotive transport and spare parts 4 815,86 0,76 Optical goods 755,04 0,12
Table 15 – Import to Murmansk region from Sweden in 2012; goods, value in thousand USD and share of total import for the region. Source: The North-West Department of the Russian State Federal Customs Service.
8.4 Russia
8.4.1 The Republic of Komi
8.4.1.1 Investments
In 2011 capital investments (in fixed assets) in the Republic of Komi amounted to approx. 6.5 billion USD (192.7 billion RUB), while in 2010 it was 102.6 billion RUB. The highest investments were made in capital assets in transport & communication, mining operations, manufacturing activities, power & energy resource production and distribution. About 98% of investments are made by own financing by the enterprises themselves.
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In 2011 foreign investments amounted to 345 million USD, including 137million USD as direct investments. 120 million USD (87%) of the direct foreign investments were made in companies doing manufacturing (processing) and mining operations.
In 2010 foreign investments amounted to 683 million USD, including 326 million USD (48%) as direct investments.
Great Britain made 29% of the foreign investments in the Republic of Komi in 2011, while Austria made 20%, Finland 10%, Germany 9% and Sweden 8%. In 2010, about 32% of the investments came from Germany, 24% from Great Britain, 13% from Cyprus, 10% from Austria, 5% from Finland and 4% from Sweden.
Foreign investments in Komi by countries in 2011
18 % 29 % UK 6 % Austria 8 % Finland 9 % 20 % Germany 10 % Sweden Cyprus Other
Figure 18 - Foreign investments in the Republic of Komi by countries in 2011. Source: The Ministry of Economic Development of the Republic of Komi.
By the end of 2011, the amount of foreign capital accumulated by companies in the republic went up 1.4 billion USD.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 55
8.4.1.2 Export to Norway, Finland and Sweden
Figure 19 – Export from the Republic of Komi to Norway, Finland and Sweden 2010 – 2012 by value in thousand USD, divided by year and country. Source: The North-West Department of the Russian State Federal Customs Service.
The export from Komi to Norway is generally very low, in 2012 counting for only 0.04% of the republic's total export, valued less than 1 million USD and only consisting of timber and wooden materials.
Republic of Komi 2012 - Type of goods Export to Norway USD % TOTAL 2 212 167,5 100,00 NORWAY 943,5 0,04 Timber and wooden materials 943,5 0,04
Table 16 – Export from the Republic of Komi to Norway in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
Export from Komi to Finland is also low, only 0.35% of the republics total export in 2012, valued to 7.8 million USD and is dominated by crude oil and refined petroleum products.
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Republic of Komi 2012 - Type of goods Export to Finland USD % TOTAL 2 212 167,5 100,00 FINLAND 7 787,8 0,35 Crude oil and refined products 4 579,5 0,21 Other chemical products 596,3 0,03 Timber and wooden materials 570,9 0,03 Paper and carton 1 982,6 0,09 Mechanic instruments 58,4 0,00
Table 17 – Export from the Republic of Komi to Finland in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
Sweden counted for 0.47% of the export from Komi in 2012. The value of the export was 10 million USD, and it mainly consisted of timber and petroleum products.
Republic of Komi 2012 - Type of goods Export to Sweden USD % TOTAL 2 212 167,5 100,00 SWEDEN 10 339,9 0,47 Vegetables 75,2 0,00 Crude oil and refined products 6 642,8 0,30 Timber and wooden materials 3 621,9 0,16
Table 18 – Export from the Republic of Komi to Sweden in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
8.4.2 The Republic of Karelia
8.4.2.1 Investments
In 2012 capital investments in the Republic of Karelia amounted to approx. 1 billion USD (32.1 billion RUB). In 2011 it was approx. 934 million USD (29.7 billion RUB).
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 57
Capital investments in the Republic of Karelia 1200 1044 1000 936 934
779 800 725 687 622 600 533 mln USD mln 400
200
0 2005 2006 2007 2008 2009 2010 2011 2012
Figure 20 - Capital investments in the Republic of Karelia, 2005-2012. Source: The Ministry of Economic Development of the Republic of Karelia.
In 2012 investments by types of industry (large and medium enterprises) had the following share: energy production & supply 30%, mining 28%, wood processing 24%, metallurgy & machinery production 12% and pulp & paper production 5.5%. Food production and other amounted to 0.5% and 0.6% respectively.
Investments by industrial sectors in the Republic of Karelia in 2012 0,50 % 5,50 % 0,60 % energy mining 11,60 % 30 % wood processing metallurgy 23,60 % pulp-and-paper
28,20 % food production other
Figure 21 - Investments by industrial sectors in the Republic of Karelia in 2012. Source: The Ministry of Economic Development of the Republic of Karelia.
In 2012, investments were formed by 46% by own means of enterprises and 54% by attracted finances from external sources, including bank loans.
Foreign investments in 2012 amounted to 151 million USD – a 2.8 times decrease versus 2011, when foreign investments amounted to 424.3 million USD.
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Most foreign investments in 2012 were in wood processing, having a 67% share. Timber industry shared 9%, while in 2011 the mining industry was in lead with 43%, and wood processing shared 33%. Half of the foreign investments in 2012 came from the Czech Republic and 22% from Finland. In 2011 Austria was in lead, sharing 41% of the foreign investments.
Foreign investments in the Republic of Karelia 450 424,3 400 350 288 300 238,7 250 200 mln USD 157,5 150,6 150 110,5 89 100 50 0 2006 2007 2008 2009 2010 2011 2012
Figure 22 - Foreign investments in the Republic of Karelia, 2006-2012. Source: The Ministry of Economic Development of the Republic of Karelia
Significant amount of foreign investments in 2011 was associated with large-scale reconstruction at Kondopoga JSC (transfer of a heat & power plant from coal and fuel oil to natural gas) and Seguezha Pulp & Paper Mill (a "Polar Barents Region" project – building fuel oil storage). The target of the Main Directions of Investment Policy of the Republic of Karelia for 2011- 2015 is to increase investments in 1.5 times in 2015 versus 2010, to reach 1.5 billion USD (45.3 billion RUB). Foreign trade turnover in 2011 was 2 billion USD (an 11.2% increase versus 2010). Trade with Finland share about 15% of total foreign trade in Karelia.
8.4.2.2 Foreign trade and export to Norway, Finland and Sweden
The Republic of Karelia has 798.3 km long border with Finland (more than 60% of the Russian-Finnish border). Cargo flow through the Karelian part of the border accounts around 7-8 million tons per year; and about 2 million people cross the border annually.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 59
Figure 23 - Foreign trade turnover in the Republic of Karelia, 2004-2011. Source: The Ministry of Economic Development of the Republic of Karelia.
Figure 24 – Export from the Republic of Karelia to Norway, Finland and Sweden 2010 – 2012 by value in thousand USD, divided by year and country. Source: The North-West Department of the Russian State Federal Customs Service.
The export from Karelia to Norway was worth 11 million USD in 2012. It amounted to 0.9% of the export. Norway is mainly buying ore and aluminium from Karelia.
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Republic of Karelia 2012 - type of goods Export to Norway USD % TOTAL 1 209 389,04 100 NORWAY 10 971,66 0,91 Fish, molluscs and other water species 2 097,62 0,17 Ore, slag 4 224,58 0,35 Timber and wooden materials 137,56 0,01 Aluminium and aluminium goods 4 496,81 0,37 Furniture and interior goods 15,1 0
Table 19 – Export from the Republic of Karelia to Norway in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
The export from Karelia to Finland was worth 192 million USD in 2012, giving Finland a 16% share of the republic's export. Finland is mainly buying timber (9.5%) and ore from Karelia.
Republic of Karelia 2012 - type of goods Export to Finland USD % TOTAL 1 209 389,04 100 FINLAND 192 729,83 15,94 Fruits 3 716,49 0,31 Plant materials 26,59 0 Ore, slag 42 208,6 3,49 Crude oil and refined products 55,52 0 Pharmaceutic products 4,95 0 Fertilisers 5,35 0 Pyrothecnic goods 2 888,97 0,24 Other chemical products 1 867,07 0,15 Plastic materials 153,32 0,01 Timber and wooden materials 114 824,71 9,49 Wickerworks 18,32 0 Cellulose and cartong materials 2 791,2 0,23 Paper and carton 10 669,61 0,88 Shoes 550,46 0,05 Stone and gyps goods 8,92 0 Ferrous metals 683,67 0,06 Ferrous metal goods 12,04 0 Aluminium and aluminium goods 1 670,83 0,14 Mechanic instruments 1 519,05 0,13 Electrical equipment and instruments 1 428,83 0,12 Automotive transport and spare parts 439,92 0,04 Optical goods 2 051,1 0,17 Furniture and interior goods 976,39 0,08 Toys and sport goods 4 149,13 0,34 Various other goods 11,96 0
Table 20 – Export from the Republic of Karelia to Finland in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service. Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 61
The export from Karelia to Sweden was worth 5.7 million USD in 2012. It amounted to 0.5% of the total export. There are no dominating export products from Karelia to Sweden.
Republic of Karelia 2012 - type of goods Export to Sweden USD % TOTAL 1 209 389,04 100 SWEDEN 5 681,29 0,47 Fruits 1 975,13 0,16 Plastic materials 42,1 0 Timber and wooden materials 1 982,35 0,16 Paper and carton 34,25 0 Ferrous metals 233,81 0,02 Aluminium and aluminium goods 1 154,06 0,1 Household instruments from base metals 1,26 0 Mechanic instruments 104,84 0,01 Automotive transport and spare parts 151,71 0,01 Furniture and interior goods 1,79 0
Table 21 – Export from the Republic of Karelia to Sweden in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
8.4.3 Arkhangelsk region and Nenets Autonomous District
8.4.3.1 Investments
In 2012 capital investments in Arkhangelsk region (without Nenets Autonomous District) reached approx. 3.1 billion USD (112 billion RUB). In 2011 it was approx. 3 billion USD (94.5 billion RUB).
The largest share of capital investments (37.6%) was in the transport sector, with 42 billion RUB (approx. 1.4 billion USD). In 2012, foreign capital investments in Arkhangelsk region (without Nenets AD) amounted to 221 million USD.
In 2011, the foreign trade turnover of the region (including Nenets AD) was 5 billion USD: export amounted to 4.8 billion USD and import to 184 million USD. In 2010, export trade amounted to 5.6 billion USD and import to 201 million USD.
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Capital investments in Arkhangelsk region 3500 3074 2971 3000
2500 1995 2000 1566
mln USD 1500 1309 1106 1051 1000 831
500
0 2005 2006 2007 2008 2009 2010 2011 2012
Figure 25 - Capital investments in the Arkhangelsk region, 2005-2012. Source: The Ministry of Economic Development of the Arkhangelsk region.
Foreign trade in Arkhangelsk region incl. Nenets (NAO) 7000
6000 201 5000 184 4000 235
3000 mln USD mln 5545 412 4796 2000 4087 386 331 1000 125 2400 1579 1037 1407 0 2005 2006 2007 2008 2009 2010 2011
Export Import
Figure 26 - Foreign trade in Arkhangelsk region incl. Nenets Autonomous District, 2005-2011. Source: The Ministry of Economic Development of Arkhangelsk region.
In 2011, mineral resources trade formed about 73% of the export in Arkhangelsk region, while trade with timber and paper products had a 23% share. In 2010 those shares were about 84% and 13% respectively.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 63
In 2010, foreign capital investments in the region, including Nenets Autonomous District, amounted to 730 million USD (including 537 million USD in Nenets AD). In 2009, investments in Nenets AD amounted to 589 million USD.
8.4.3.2 Foreign trade and export to Norway, Finland and Sweden
Figure 27 – Export from Arkhangelsk region to Norway, Finland and Sweden 2010 – 2012 by value in thousand USD, divided by year and country. Source: The North-West Department of the Russian State Federal Customs Service.
Arkhangelsk is presently only exporting fish to Norway. In 2012 the value was only 482 000 USD, or 0.04 percent of the regions total export.
Arkhangelsk region 2012 - type of goods Export to Norway USD % TOTAL 1 346 312,19 100,00 NORWAY 481,98 0,04 Fish, molluscs and other water species 481,98 0,04
Table 22 – Export from Arkhangelsk region to Norway in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
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In 2012, Finland received goods worth 18 million USD from Arkhangelsk, compared with 104 million USD in 2011. This significant drop was mainly due to reduced export of petroleum products. The export to Finland in 2012 was slightly above 1 percent of the regions export. There are no products dominating the export from Arkhangelsk to Finland.
Arkhangelsk region 2012 - type of goods Export to Finland USD % TOTAL 1 346 312,19 100,00 FINLAND 18 213,73 1,35 Other chemical products 6 326,11 0,47 Rubber and elastic goods 1,30 0,00 Timber and wooden materials 3 656,15 0,27 Cellulose and carton materials 5 981,20 0,44 Paper and carton 1 053,84 0,08 Ferrous metals 5,15 0,00 Ferrous metal goods 42,26 0,00 Copper and copper goods 0,12 0,00 Mechanic instruments 1 147,61 0,09
Table 23 – Export from Arkhangelsk region to Finland in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
Also the export from Arkhangelsk to Sweden is very low; in 2012 it was only worth 3 million USD and had a 0.23% share of the total export from the region.
Arkhangelsk region 2012 - type of goods Export to Sweden USD % TOTAL 1 346 312,19 100,00 SWEDEN 3 148,03 0,23 Crude oil and refined products 1 509,95 0,11 Timber and wooden materials 1 587,18 0,12 Paper and carton 50,90 0,00
Table 24 – Export from Arkhangelsk region to Sweden in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
8.4.4 Murmansk region
8.4.4.1 Investments
In 2012, capital investments in the Murmansk region amounted to 56.9 billion RUB (approx. 1.9 billion USD). In 2011 the figure was 60.3 billion RUB (approx. 1.9 billion USD).
Foreign capital investments in the region in 2012 amounted to about 20 million USD, while the figure in 2011 was about 29 million USD.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 65
8.4.4.2 Foreign trade and export to Norway, Finland and Sweden
In 2012 foreign trade in Murmansk accounted for about 3.2 billion USD; export for 2.5 billion USD and import for 634 million USD. The total export was reduced with 10 % compared with 2011, while export to Norway, Finland and Sweden was reduced with 30 %. The reduced export to these countries was mainly due to lower supply of metals.
First quarter 2013 the total export continued to drop, 13.5 % compared with first quarter 2012. Total export to Norway, Finland and Sweden dropped 4.5%, mainly due to reduced export to Finland (31 %). Export to Norway stayed stable, while export to Sweden raised by 32 %.
Foreign trade in the Murmansk region
4000 3500 3000 562 634 2500 2000 207
mln USD 1500 2773 2516 1000 1867
500
0 2010 2011 2012 Export Import
Figure 28 - Foreign trade in the Murmansk region, 2010-2012. Source: The Ministry of Economic Development of the Murmansk region.
Import in Murmansk region by countries in 2012, mln USD
Finland 12,1 86,5 20 Norway 30,9 243,2 Brasil 32,2 Germany 36,2 Sweden Ireland 85,4 87,9 Japan Spain Others
Figure 29 - Import in million USD to Murmansk region by countries in 2012. Source: The Ministry of Economic Development of the Murmansk region.
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Figure 30 – Export from Murmansk region to Norway, Finland and Sweden 2010 – 2012 by value in thousand USD, divided by year and country. Source: The North-West Department of the Russian State Federal Customs Service.
In 2012 Murmansk exported goods worth 131 million USD – or 5% of the region's total - to Norway. 3 percent is apatite concentrate, while seafood represents only 0.3% of the export.
Murmansk region 2012 - type of goods Export to Norway USD % TOTAL 2 516 078,58 100 NORWAY 130 714,99 5,2 Fish, molluscs and other water objects 7 571,6 0,3 Fruits 276,9 0,01 Salt; sulphur; soils and stones; plaster materials, chalk and 75 893,72 3,02 cement Crude oil and refined products 71,03 0 Plastic materials 33,63 0 Rubber and elastic goods 124,58 0 Leather goods 2,54 0 Timber and wooden materials 529,3 0,02 Paper and carton 1,91 0 Wadding, felt 6,09 0 Crude oil and refined products 7,85 0 Shoes 0,53 0 Hats 0,36 0 Ferrous metals 1 252,14 0,05 Ferrous metal goods 5 945,56 0,24
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 67
Murmansk region 2012 - type of goods (cont.) Export to Norway USD % Aluminium and aluminium goods 34 301,81 1,36 Other base metals 1 222,02 0,05 Mechanic instruments 0,6 0 Electrical equipment and instruments 2 356,37 0,09 Boats 0,22 0 Optical goods 363,64 0,01 Furniture and interior equipment 752,54 0,03 Different products ready to use 0,06 0
Table 25 – Export from Murmansk region to Norway in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
Murmansk also exports electricity to Norway (Finnmark County). This export is not registered with the North-West Department of the Russian State Federal Customs Service. In 2012 the value of this export was 6.6 million USD, and counted for 70% of the value of direct import from Russia to Finnmark.57
In 2012 Murmansk exported goods worth 37 million USD – or 5% of the region's total - to Finland. The export is mainly metals or metal goods.
Murmansk region 2012 - type of goods Export to Finland USD % TOTAL 2 516 078,58 100 FINLAND 37 051,76 1,47 Live plants 120,27 0 Fruits 1 349,13 0,05 Salt and plaster materials 5,53 0 Timber and wooden materials 897,78 0,04 Ferrous metals 0,95 0 Ferrous metal goods 245,84 0,01 Other base metals 34 432,26 1,37
Table 26 – Export from Murmansk region to Finland in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
57 See chapter 8.4.5.2.
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In 2012 Murmansk exported goods worth 19.5 million USD to Sweden. It was 0.8% of the region's total.
Murmansk region 2012 - type of goods Export to Sweden USD % TOTAL 2 516 078,58 100 SWEDEN 19 523,28 0,78 Fruits 433,38 0,02 Timber and wooden materials 14,36 0 Nickel and nickel goods 15 925,02 0,63 Mechanic instruments 643,29 0,03 Electrical equipment and instruments 1660,1 0,07 Optical goods 847,11 0,03
Table 27 – Export from Murmansk region to Sweden in 2012; types of goods, export value in thousand USD and percent share. Source: The North-West Department of the Russian State Federal Customs Service.
8.4.5 The Russian parts of the Barents Region as whole in 2012
According to the data from Russian custom's Northwest Department, foreign trade operations in the Russian parts of the Barents Region, including the Republics of Karelia and Komi, Murmansk and Arkhangelsk regions and Nenets Autonomous District, was beyond 10 billion USD, including export for about 8.7 billion USD and import for 1.4 billion USD.
Foreign trade in the Russian part of the Barents Region in 2012 3500 3000 634 2500 254 2000
1500 234 mln USD mln 2 295 2516 1000 2212 1346 1396 500 1209 0 Karelia Komi Murmansk Arkhangelsk Nenets
Export Import
Figure 31 - Foreign trade in the Russian part of the Barents Region in 2012. Source: The North-West Department of the Russian State Federal Customs Service.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 69
Export and import shares in foreign trade between the Russian regions and Finland, Norway and Sweden are on approximately the same level, despite general export domination in foreign trade in the Russian parts of the Barents Region. In 2012, Russian export to the three countries amounted to about 430 million USD, while import amounted to 575 million USD.
Export from the Russian part of the Barents Region to Norway, Finland and Sweden in 2012 200 187,8 180 160 140 130,7 120 Norway 100 Finland
mln USD mln 80 Sweden 60 37,1 40 19,5 18,2 20 7,4 7,810,4 5,4 0,9 0,5 3,1 0 0 0 0 Karelia Komi Murmansk Arkhangelsk Nenets
Figure 32 - Export from the Russian part of the Barents Region to Norway, Finland and Sweden in 2012 (million USD). Source: The North-West Department of the Russian State Federal Customs Service.
Import to the Russian part of the Barents Region from Norway, Finland and Sweden in 2012 300
243,2 250
200 Norway 150 Finland mln USD mln 100 87,9 81,6 Sweden 64,6 50 32,2 21,5 21,213,3 0,8 0,02 1,00 7,6 0 0 0 0 Karelia Komi Murmansk Arkhangelsk Nenets
Figure 33 - Import from Norway, Finland and Sweden to the Russian part of the Barents Region in 2012 (million USD). Source: The North-West Department of the Russian State Federal Customs Service.
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8.4.5.2 Import to North Norway from Russia
In 2003, the last year of the large scale import of Russian seafood to the industry in North Norway, Nordland and Finnmark imported fish for total 561 million NOK (95.5 million USD) – or 50 percent of the total direct import from Russia to the Norwegian parts of the Barents Region. In addition, Nordland imported chemical products and processed good from Russia for 200 million NOK (34 million USD), while Finnmark imported electric energy worth 55 million NOK (9.4 million USD). From 2004 to present the direct import from Russia to North Norway has been modest, in average worth 260 million NOK (44 million USD) annually. The import to Nordland is lowest in North Norway, and it also varies by products and value: between 2006 and 2009 it was mainly machinery, while raw materials had highest import value in 2011 and 2012. Troms County mainly imports fish from Russia; between 2004 and 2008 the value of imported fish was in average 159 million NOK (27 million USD) per year – or 80 percent of the import from Russia. After 2008 the average value of fish has dropped to 37 percent of the past with 59 million NOK (10 million USD) per year. Troms also imports some raw materials and processed products from Russia. In 2012 this was worth 35 million NOK (6 million USD). Finnmark County mainly imports electric energy from Russia. The average annual value is 62 million NOK (10.5 million USD), or 67 percent of the total direct import from Russia. In 2012 the import of energy was worth 39 million NOK (6.6. million USD).
Figure 34 – Import to North Norway from Russia, 2003-2012, divided by year, county and import value (in million NOK). Source: Statistics Norway.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 71
8.4.5.2 Import to North Finland from Russia
Finnish import from Russia over the border points Vartius and Niirala - Värtsilä in the southern part of the Barents Region was worth 355 million EUR (447 million USD) in 2012. For Niirala, having railroad connection, 10 percent of the import value was petroleum products. This amount is e.g. more than twice the value of registered Russian export to Finland from Karelia in the same period, meaning that much of the goods come from other parts of Russia.
The import over Niirala has varied between 234 million and 294 million EUR the last eight years, while import over Vartius has varied between 88 million and 203 million EUR (2008) during same period. The imports dropped significantly in 2009, following the devaluation of the rouble in 2008. In 2011 Niirala passed the 2008 peak by 20 million EUR, while Vartius still remains much lower than before 2009.
For the northern Finnish borders Kuusamo, Salla and Raja-Jooseppi (Ivalo) connecting to Murmansk region, the import volumes are modest:
Import over Raja-Jooseppi was worth slightly above 1 million EUR in 2011 and 2012.58 Peak was reached in 2005 and 2006, with 14 million and 12 million EUR.
In 2012 import over Salla was worth 1.2 million EUR – a 60 percent reduction from 2011. Import over Kuusamo was worth only 175 000 EUR – 17 percent of the import value in 2011.
Figure 35 - Import to Finland from Russia over the northern border points (in thousand EUR) 2003- 2012. Source: Finnish Customs.59
58 According to Finnish Customs, import over Raja-Jooseppi in 2011 and 2012 was 1.2 million EUR and 1.1 million EUR respectively.
Akvaplan-niva AS, 9296 Tromsø 72 www.akvaplan.niva.no
9 Challenges
Norwegian, Finnish and Swedish companies in the Russian parts of the Barents Region are not always there to compete in the local or national market, but benefits from local expertise or lower Russian labour costs while producing for the Western market, they offer niche products/services with little or no local competition - or they are agents/supervisors who handle vessels or export/import products.
This is likely to change if long planned major industrial projects as Shtokman, Murmansk Transport Hub (MTH), Yamal LNG etc. are being conducted, but they are to a great extent depending on private financing.60
Aiming e.g. to identify common barriers for doing business in the Russian market, our mapping discovered that most companies have experienced problems of some sort when building up their activities in Northwest Russia, but these are often different from company to company, and the significance of these problems also varied.
For Norwegian, Finnish and Swedish businesses in the Russian parts of the Barents Region, there has been improvement during the recent years in areas like e.g. border-crossing procedures and customs procedures. The regional cooperation has also improved both physical infrastructure and framework for commercial cooperation – even if the latter by its nature is difficult to evaluate by numbers.
The Swedish Federation of Business Owners discovered in a recent mapping among Nordic enterprises that lack of information was the most frequently mentioned challenge for Swedish enterprises aiming at the Russian market, while Finnish companies also mentioned this as a major problem – only passed by regulatory frameworks and language barriers. 20 percent of the Norwegian enterprises considered lack of information as a problem; even if they also looked at the regulatory framework in Russia as more important.61
9.1 Infrastructure
Still, the infrastructure is a challenge for all cross-border business in the Barents Region. For e.g. Finnish and Russian enterprises it takes minimum 5-8 hours of travel by any means of transport between Petrozavodsk and any major city in Finland. For Murmansk the time
59 Information for the years 2003-2006 is missing for Kuusamo and Salla; they were administratively under Tornio Customs, where the commodities were declared.
60 For MTH there will be a state-private partnership. 61 Presentation during Barents Industrial Partnership Meeting in Tromsø, 14 May 2013. Approximately 21% of the Swedish and 16% of the Finnish enterprises considered lack of information as a challenge for trade with Russia. The survey did not cover Russian enterprises.
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needed is 6-12 hours, for Arkhangelsk and Syktyvkar it is 12-16 hours. This means two days of travelling back and forth.
It has been suggested to use ENPI and/or ENI projects to support flight connections as this would promote and speed up business cooperation within the Barents Region.
In Finland, it is calculated that a service, round trip three times per week, provided for example between Helsinki-Petrozavodsk or Helsinki-Arkhangelsk or Oulu/Rovaniemi- Murmansk-Tromsø would cost on annual basis as support to the flight operator approximately 600-800 000 EUR depending on the service providers.
Presently, the Russian side is pushing for the ENPI and ENI projects to improving the road connections between Finland and Russia. This will be very useful for the Russian-Finnish trade, but also interesting business for Finnish companies with competence in highway building in harsh, cold, even arctic conditions.
Russia is also cooperating with regional authorities in Norway, Finland and Sweden to develop a joint transport plan for the entire Barents Region, to establish common goals and solutions. There will be particular attention to the creation of common transport corridors.62
9.2 Transparency and safety of investments
Foreign businesses in the Russian parts of the Barents Region are still suffering from lack of transparency and security for investments, which is generally considered as the single-most important common challenge. There have been several cases illustrating this problem, e.g. with the Norwegian companies Gigante and Selfa Arctic:
Gigante suffered from Russian take-over of their pelagic fish company Gigante Murmansk due to "loopholes" in the Russian legislation for share holding companies with Russian partners. Both Gigante and their partner Innovation Norway Fund suffered severe financial losses.63
The Norwegian company Selfa Arctic had a similar experience after buying Solombala yard in Arkhangelsk in 2001.
Gigante's activities in salmon breeding in Pechenga through Gigante Pechenga LLC suffered from e.g. lack of predictability regarding access to the area, which is under control by the Russian Navy, problems with permissions for import of smolt, access for Norwegian transport vessel and their license for use of water - and general lack of predictable legal framework for their operations.64
62 Project "Barents Freeway", to be conducted with assistance from Ramboll and Pöyry. 63 "Avisa Nordland", 2 August 2004: Innovation Norway Fund lost NOK 15 million.. 64 Lack of access to areas is likely to be a general problem for any Western investor in aquaculture projects in NW Russia, where farming takes place in coastal areas. This because these areas are border zones controlled by the navy and the security services, with strict access control.
Akvaplan-niva AS, 9296 Tromsø 74 www.akvaplan.niva.no
The salmon farm in Pechenga was sold to the St. Petersburg based company JSC Baltiyskiy Bereg in 2010.65
9.3 Russian commercial activities
Murmansk has experienced several setbacks as large industrial projects within infrastructure and petroleum, well as much needed modernization and renewal of the housing sector, repeatedly has been postponed. This has hit the local and regional Russian businesses as well as foreign companies which entered the Russian market in mid-2000 with those projects as an aim.
In Karelia Russian and Finnish wood industry experienced similar setbacks with the Russian ban on export of round timber by high export fees a few years ago. It laid down 1500 jobs in Karelia and drove out several Finnish companies. Both sides are presently working hard to restore the business after a Russian liberalization of the export regulations.
SME business is challenging for Russian companies: entrepreneurship is e.g. effectively prevented by high interest rate for loans to SMEs, which range between 20-40%.66
Due to e.g. lack of active support mechanisms; in 2012 two percent of the active Russian population plans to become an entrepreneur. In European Union the figure is 13%, in the Baltic countries approx. 20%, and BRICS countries, with the exception for Russia, approx. 20%. The Russian figure has been on same level since 2002.67
There is also total lack of funding instruments to assist enterprises in creating business abroad, and Russian SME entrepreneurs trying to enter the foreign markets in the Barents Region will often be depending on local partners/co-owners to get access to financing. This is one likely reason why there are few and mainly small Russian investments in the Norwegian, Finnish and Swedish parts of the Barents Region compared with investments by these three countries in opposite direction.
Corruption does not seem to be a general problem among Norwegian, Finnish and Swedish enterprises operating in the Russian Barents regions, but for many Russian SMEs it is a reality that they are facing in their daily operations. This could in fact be a driving force for Russian investments into the more transparent and safe business environment in the three Nordic countries.
65 Gigante Salmon AS: Prosjekt "Gigante Pechenga"; ang. drift av lakseoppdrett i Pechenga fjord i Barentshavet (Bodø, 2010) 66 Barents Center Rovaniemi Oy. 67 Babson College and London Business School of Economics, Global Entrepreneurship Monitoring, Global Reports, 2002, 2009 and 2013.
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A Russian businessman interviewed by a Russian popular economic weekly claimed that besides high taxes for businesses in Russia, they also struggled with bribes and kickbacks. He said that in some industries kickbacks could reach 80%. His answer to this problem was to move his business to Finland.68
Like for Norwegian, Finnish and Swedish businesses in Russia, the Russian businesses entering these three countries would benefit from a system for better public promotion and information regarding legislations, formal procedures etc. during the processes of establishing and starting business.
9.4 Business in central parts of Russia as options
The question about what are the best geographical choices for development of businesses in Northwest Russia has been debated since the establishment of the Barents Euro-Arctic Cooperation. Many have advocated that the cities and markets in the Russian parts of the Barents Region are small and remote, and that the conditions and opportunities are better in the larger cities and distribution hubs, as St Petersburg and Moscow.
These cities are often emphasized as having more favourable and smooth business environment that e.g. Petrozavodsk, Arkhangelsk and Murmansk, and it has been suggested that the geographical limitations for e.g. Innovation Norway's Northwest Russia funds should be repealed, allowing them to operate in wider parts of Russia.
While the number of active Finnish businesses in Russian part of the Barents Region is roughly twenty, the number of active, registered Finnish businesses in St. Petersburg is more than four hundred. The Finns consider St. Petersburg and Leningrad oblast as a domestic market.
Today, there are relatively few sustainable commercial investment projects in the Russian parts of the Barents Region. The full potential of the finance instruments for SMEs are therefore not utilized, as e.g. the 2012 public funding of commercial projects in the region was on the lowest level in 10 years. A debate regarding strengthening of these instruments is therefore welcomed – as there is no commercial reason why internationalization in the Russian market only should happen in the Barents Region.
One of the biggest Finnish investments ever was made by Nokian Tyres Plc in Vsevolozshk, in Leningrad oblast, in 2003. Today they are the absolute market leader in Russia´s replacement tire market. On top of that they have become the biggest consumer goods exporter in the Russian Federation in 2010, 2011 and 2012. The investment was secured by the Leningrad Oblast, the Russian Federation, IFC and EBRD among others. Without these arm strong partners it would never be possible. This kind of approach is also needed in North West of Russia.
68 "Kommersant dengy", 18 February 2013.
Akvaplan-niva AS, 9296 Tromsø 76 www.akvaplan.niva.no
Many enterprises might have a product and a market strategy that makes Moscow and St Petersburg relevant – or more relevant than e.g. Murmansk – if they choose to enter the Russian market. But all the Norwegian enterprises active in Russia today, most of them SMEs, are active in Murmansk and the Russian parts of the Barents Region because this is a suitable area for their own business activities.
Those active in the fish business or provides services for the fishing fleet, must be close to their customers – which are in Murmansk and/or Arkhangelsk, and those who also distributes to Moscow or St Petersburg have already branches or partners there.
Those active in the petroleum business are mainly aiming at offshore projects, and Murmansk and Arkhangelsk represents convenient bases for future field developments in Russian Arctic.
Companies doing industrial processing in Murmansk have chosen to be here instead of the larger cities to benefit from lower production costs and more favourable business climate, while other benefit from highly educated labour, which is not easy to find in Norway, to support their running business operations at home.
One example is the Norwegian electronic manufacturer Barel AS, who established a daughter company in Murmansk in 1999 as moving the most labour intensive part of the production became a matter of survival for the company. Today Barel is doing well, with South Korea as one of the main export markets and having entered the South American market through a daughter company in Brazil. The next approach will be sub-supplies to the global mining- and petroleum market.
Several Norwegian companies in Murmansk, in e.g. retail business, accommodation and shipping, have their main offices in St Petersburg/Moscow and are operating in other parts of Russia as well.
The assumption that many Norwegian, Finnish and Swedish businesses are clustering in the Russian parts of the Barents region from conformity, while they actually would have better business opportunities in more central parts of Russia, therefore seems to be incorrect. Some of them enter the local market from St Petersburg/Moscow, while other enters the Russian market through the Russian parts of the Barents Region.
Besides being a natural choice based on activities for the majority of Norwegian businesses presently active in Russia, Murmansk also provides a favourable environment as 20 years of Barents Cooperation has created a variety of personal networks. Even if not everything goes smooth always, the distance to the Russian decision makers – or those who effectively can advocate a question on behalf of foreign companies – is much shorter here.
The small and more transparent environment is also suitable for businesses that aim for the wider Russian market, as Murmansk is a more controllable "testing ground". Here are also strong regional companies in e.g. the retail and restaurant business, who can represent a smooth beginning for those who want to reach the nationwide chains.
The extensive resources used to create business framework in the Russian parts of the Barents Region, and which are not easy or possible to evaluate by numbers, certainly have played an important role in creating good communication lines. This also makes the political efforts of the member regions still highly relevant; they can still do an important job to promote and
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support business in Russian Barents – if they are willing to allocate proper human and financial resources for the purpose.
Akvaplan-niva AS, 9296 Tromsø 78 www.akvaplan.niva.no
10 The next steps
In general, it seems like the understanding of and adaption to Russian rules and regulations, and how they work in practice, represents the common challenge for foreign businesses in the Russian parts of the Barents Region. This requires that they do their homework well before taking the final step to enter this market, that they have a well-considered business idea and that they are able and ready to allocated sufficient resources in the form of qualified manpower, time and money.
It is always good to keep in mind that in Russia the authority relations and contacts on all levels determine the success or failure of the business – in addition to the normal business requirements. The respective embassies or consulates can also be by involvement important promoters and door openers for business.
To support businesses, there are Norwegian and Finnish consulates and several qualified commercial western consulting companies in the Russian parts of the Barents Region. In addition, the Norwegian government-owned SIVA and the Swedish Norrbotten Chamber of Commerce69 provides business support in Murmansk region, while partially Swedish "Runa" Business Support Bureau is doing the same in Arkhangelsk region.
There are no similar Russian services on public level, despite all the Russian regions are aiming to attract foreign investments. The regions, particularly Murmansk, should therefore be challenged to establish an effective public service to assist and guide foreign companies with investment plans through all the formal and practical procedures required until the company is running.
The 2005 evaluation of the Barents Cooperation by Erling Fløtten pointed in a similar direction when suggesting the development of an information service in Murmansk to serve the establishing of enterprises and those who wish to cooperate over the borders.70
69 NCC operates through Swedish Council on Small and Medium Business Support. 70 Fløtten, page 14.
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11 Border-crossing
11.1 Scale and development
Perhaps is the greater impact of the economic cooperation in Barents Region the spin-offs from daily border crossings for business and leisure – the sort of people-to-people activities which the very foundation of the Barents Cooperation was built on?
The crossing at the Norwegian-Russian border at Storskog (Kirkenes) has increased dramatically – from 107 000 in 2006 to 252 000 in 2012, and from July 2012 to July 2013 the increase was 37%.71 It is expected 330 000 passages in 2013 and 400 000 in 2014. 13% of the travellers in February 2013 were Norwegians having a Border Area Visa72 allowing them to stay 30 km inside Russian territory – which is sufficient for shopping in the nearby towns Nikel and Zapolyarny, where e.g. fuel is a popular product for Norwegians.73
On Finnish side the development is similar: The northern border points Raja-Joosepi (Ivalo) and Salla have had total increase from 123 000 crossings in 2007 to 350 000 in 2012.
From 2007 to 2012 the traffic over these borders increased 160%, from 231 000 to 602 000.
Figure 36 – Development of crossings at the three northernmost border points with Russia in the Barents Region, 2007-2012. Source: The Norwegian police and Barents Center Finland Oy.
71 The newspaper "Finnmarken", 3 August 2013. 72 Introduced 29 May 2012 upon bilateral agreement between Norway and Russia. 73 www.politi.no; The Norwegian Police: "Storskog grensepasseringssted 2011-2014. Rapport fra arbeidsgruppe" (16 March 2011). Only around 5% of the Russian visitors have a border visa, which can be explained by the fact that a regular multi visa do not cost much more than a border area visa - 50 EUR vs. 35 EUR. Many Russians therefore prefer a regular visa, giving them access to all of Schengen.
Akvaplan-niva AS, 9296 Tromsø 80 www.akvaplan.niva.no
In 2012 the Finnish Consulate General's branch office in Petrozavodsk issued 84 884 visas, mostly for 6-12 months, while the office in Murmansk issued 63 488 visas. For Petrozavodsk this was a 15% rise from 2011, while Murmansk increased by 34%.74
The Norwegian Consulate General in Murmansk also had a 15% increase of number of visas 75 issued, from 20 000 to 23 300.
11.2 Economic impact
In 2012, Finnish Lapland was visited by 350 000 Russian tourists, which spent estimated 600- 700 million EUR. They also pent 156 000 nights at various types of accommodations in Lapland, a three times increase since 2005.
The other parts of Finnish Barents Region also have experienced a relative sharp rise in Russian tourism the last eight years, even if the numbers of accommodations are lower than in Lapland. 28 % of the accommodations to foreign tourist visiting North Ostrobothnia in 2012 were sold to Russians, while their share was 16 % in Lapland. In Kainuu Russians are dominating among foreign visitors, buying 62 % of the accommodations.
Figure 37 – Development of Russian visits to the Finnish part of the Barents Region, 2005-2012, by year and number of all types of accommodations. Source: Statistics Finland.
74 Foreign Ministry of Finland: Press Release 2/2013, 10 January 2013. 75 BarentsObserver, 15 January, 2013.
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In 2012 the hotels in Rovaniemi sold 64 000 accommodations to Russian citizens. It was a 26% increase from 2011, and makes Russians a clear number one of the foreign guests (23%) – in numbers twice as many as visitors from Germany, who holds the second place.
Figure 38 - Monthly figures showing Russian visits and tax free shopping in Finland in 2012. Lapland and Helsinki shared 60 000 visitors, while 45 000 were visiting Oulu region. Tax free sales in Rovaniemi were 9.1 million EUR, while Kainuu's turnover was 5.3 million. Source: Barents Center Finland Oy.
The tax free sales in Rovaniemi have also increased significantly in comparison with other Finnish cities – 58% in 2012, and an 81% increase in January 2013 compared with same month last year.
The scale of Russian visitors has a number of other impacts in Rovaniemi, e.g. increase of Russian students in educational institutes, slight increase in the real estate market and increased interest in starting local businesses.76
For Finland as a whole, the Russian incoming tourism, to a great degree a result of Finnish visa policy, is adding 1.1 billion EUR in sales to the Finnish service sector and employing more than 10 000 persons.
76 Rovaniemen kehitys. The Finnish Ministry of Employment and Economy has calculated that each Russian visitors spend in average more than 100 EUR per visit in Finland, while a Russian tourist spends more than 200 EUR.
Akvaplan-niva AS, 9296 Tromsø 82 www.akvaplan.niva.no
So far, the number of Russian tourists to North Norway is limited, compared with Finland; in 2012 Russian tourists stayed 28 000 nights at hotels, cabins or other accommodations in North Norway. Most of them came from large population areas as St Petersburg and Moscow via South Norway, but according to the regional marketing organization Nordnorsk Reiseliv AS there is also a significant number arriving from the Russian part of the Barents Region over the Norwegian-Russian border or via Finland.
Even if the number of Russian tourists staying in North Norway is only nine percent of the number of overnight visitors to the Finnish part of Barents Region, it is a fast growing market; since 2005 the number of Russian visitors to North Norway has increased nearly five times, compared with four times in Norway as whole.77
Figure 39 – Development of Russian visits to North Norway, 2005-2012, by year and number of all types of accommodations. Source: Statistics Norway.
In 2009, Ramboll and the association Kirkenes Business Garden made an estimate of the impact of Russian visits to Kirkenes and services provided to Russian companies. The estimate showed a 33 million EUR (254 million NOK) local turnover with the selected companies – 73% by industry and port related services, 21% by retail sales and 6% on accommodations, restaurants and tourism.78
77 Statistics Norway; Newspaper "Tromsø", 15 March 2011; In 2005 North Norway had 6 493 Russian visitors, while the number had risen to 27 799 in 2012. 78 "Strategisk næringssamarbeid mellom Pechenga og Sør-Varanger", page 19. Since 2009 the border crossing has increased 2,5 times.
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For the impact of travels in the other direction, from Finland/Norway to NW Russia, we are lacking good figures, but presently 10-13% of the Norwegians passing the border to Russia at Storskog has the new Border Area Visa. Many of them are shopping fuel and other retail products in the nearby mining town Nikel.
Russian tourism to the Swedish parts of the Barents Region is also limited; in 2012 the regions had 11 792 Russian visitors at all types of accommodations – 87 % were stays in Norrbotten.
34 % of the tourists staying in Norrbotten in 2012 were foreigners; the Russian share was only 1.4 %. For Västerbotten the figures were 22 % foreigners and Russian share 0.6 %.79
Figure 40 – Development of Russian travels in Swedish part of the Barents Region, 2008-2012, by year and number of all types of accommodations. Source: Statistics Sweden.
In Murmansk the two business hotels Meridian and Park Inn Polyarnie Zori together provided an estimated 82 000 accommodations in 2012 – 20 000 to foreign citizens. At Park Inn 28% of the guests came from abroad, while an estimated 15-20% of the guests at Meridian were foreigners.80
79 Statistics Sweden, Accommodation statistics 2012, Sweden. 80 The two Murmansk hotels both have around 55% coverage. Our calculation is based on actual figures from Park Inn and estimates for Meridian: number of rooms offered 365 days, estimated 55% coverage and 17.5% foreign guests. At Meridian the majority of the foreign guests seem to be from Finland, while 11% of the guests at Park Inn are from Norway. In addition roughly estimated 5% foreigners are staying at other hotels in Murmansk.
Akvaplan-niva AS, 9296 Tromsø 84 www.akvaplan.niva.no
12 The direction of business cooperation in the Barents Region
12.1 Present development
Norwegian business projects in the Russian parts of the Barents Region are mostly concentrated to Murmansk, while Karelia is strongpoint for Finnish companies, and Swedish businesses are operating in all regions. Russian foreign investments in the Barents Region are presently low - in Finland only single-person enterprises with focus mainly on tourism, while the investments in Norway are larger and focused on fisheries and aquaculture.
During the past, the main part of the Norwegian projects in Murmansk has been conducted within the sectors petroleum, fishery/-equipment, industry and transport & logistics, while travel/tourism has been a rising sector through the last years.
The present Norwegian commercial activities in the region are within the same sectors, as well as within retail, service and finance, which represents large numbers of employees.
Finland has been most active within forestry/timber, machinery for the wood sector and electronics in Murmansk and Karelia. In Arkhangelsk it has included metal processing, but more than 50% of the enterprises active in this region has closed their activities during the last years. Combined with the recent change of the Finnish MFA's regional project priorities in NW Russia, away from e.g. Arkhangelsk81, it seems fair to say that there is presently a reduced Finnish interest in commercial cooperation with this region.
45% of the Norwegian business enterprises in the Russian parts of the Barents Region are based in south Norway, outside the Barents Region.
The enterprises generally have been in the market for many years now, having obtained important experience with development and operation of business in Russia, they are financial capable, and they have a long term perspective for their presence.
For Norwegian enterprises Murmansk and Arkhangelsk represents markets for business in e.g. the sectors fishery & aquaculture, petroleum, construction, mining, minerals and transport – which is partially also covered by several Norwegian enterprises not established in Russia, but trading with Russian partners from abroad.82
81 See chapter 4.2.3. 82 The scale of Norwegian trading activities with Russian partners in the Barents Region, where the Norwegian party is operating without any permanent presence in Russia, is not a part of this mapping. This activity is significant, as it e.g. involves purchase of fertilizers and metals and sales of equipment or services to the petroleum industry, fishing fleet, aquaculture, etc.
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Norwegian business in Murmansk is in process of being strengthened through e.g. increased production capacity and more employees with the engineering and construction company Reinertsen and the concrete processor Olen Betong, which both are aiming at the Russian petroleum sector and large scale infrastructure projects in Murmansk region and other parts of the Russian Arctic.
Same time, the company Rupack LLC is in process of starting new business with processing of styrofoam packaging Murmansk, while the maritime transporter Eimskip, having served the Russian market through Murmansk port through many years from base in Norway, is establishing office in Murmansk to expand their activities to include services for the growing mining industry in the region. The Tromsø based J.M. Hansen Maritime AS also reports good progress, recently signing a contract on equipping a Russian trawler being built at a yard in Croatia.
Russian legislation and the way it is being interpreted and practiced by different authorities has also proved unpredictable for Norwegian companies being established and running in Murmansk and Arkhangelsk, particularly for those who have purchased properties necessary for their commercial operations.83
Also Finnish businesses consider the insecurity of the authority decisions, as well as turning over of legal decisions in favour of bigger money and lack of property regulations which would justify investment guarantees/collaterals, as blocking the real investments in Northwest Russia. The continuity of local authority support and cooperation for investments, despite the change of local political decision makers, must be secured.
They also call for the transformation of the banking system to be more transparent and internationally secured; e.g. Letter of Credit implementation has been promised since 1991, but is still lacking.
Russia's membership in WTO might create a more predictable and stable situation, alternatively we might experience more controversial cases of this kind.
Russian foreign investments in the Barents Region are so far very limited – both in number and size. On Finnish side they are concentrated around tourism/service, while the investments in North Norway are concentrated around commercial fishing and aquaculture.
12.2 The future
Petroleum, fish, timber and other raw materials will continue to represent a base for stable and increased trade and cross-border business as e.g. new mineral and petroleum reserves are being discovered and developed in the resource-rich Barents Region.
83 It must be stressed that this does not mean that the problem is always created on the Russian side; there are several examples of e.g. Norwegian businesses that got problems with Russian authorities due to lack of understanding or negligence of Russian legislation or regulations in force.
Akvaplan-niva AS, 9296 Tromsø 86 www.akvaplan.niva.no
Development of resources also requires establishment of efficient transport infrastructure, both to access the deposits for production and to distribute it to the domestic and international markets. This will require large investments into site developments, processing facilities, motorways, railroads, ports, power supply, etc.
Large projects on industrial development and infrastructure also requires significant workforces, specialists and attached service- and supplier industry, which will have an impact on both the local population, housing, creation of new enterprises and development of many of those already there.
The Barents Region is presently facing significant development of the mining industry. In the Russian and Norwegian parts large petroleum resources are also in process of being developed, and the potential for development of aquaculture business is in process of being exploited.
Both Russia and Finland aim for development of better cross-border road infrastructure in the North; development of railroad is also desired and could come as a result of more economic cooperation.
Travel is also a growing sector with impact potential on both sides of the border, while e.g. the food retail market – where Finnish companies are active with Russian supermarket chains – rarely has been an area for Norwegian businesses, despite the fact that there are strong regional chains in Murmansk.84
The future of foreign business in the Russian parts of the Barents Region is closely linked to the economic and political development of Russia and its North-western regions, but also the Arctic policies being developed by e.g. EU and China, global demand for natural resources available here and long term effects of climate change. On a macro level business development also depends much on the ability to cope with different business environment, and the improvement and optimizing of conditions for cross-border investments.
Even if there is always a basis for cross-border business and investments in the Barents Region, much will be depending on the presence of "economic engines" – large industrial projects to boost the economy.
On the Russian side, the realization of the infrastructure project Murmansk Transport Hub and the Shtokman development project with pipelines from the Barents Sea to processing facilities at the coast of the Kola Peninsula would both be such projects – when or if they are being realized. The first would require 3.8 billion USD in investments incl. new railways; while development of the Shtokman gas field as planned would generate 17 billion USD as investments in infrastructure in the region.85
84 E.g. the Evrorus supermarket chain. The Dutch retail chain SPAR is also present in Murmansk and Petrozavodsk. The Norwegian division of the group has been taking part in the process of establishing these branches. 85 BarentsObserver, 29 November 2012; Murmansk regional administration, September 2010. The total investments in the Shtokman project could amount to 44 billion USD.
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Eastern Barents Sea holds significant of undeveloped petroleum resources, and both Norway and Russia will probably develop several fields there in the future. Any practical commercial effect for the supplier industry probably still lies at least five years ahead, while any fields ready for production lay 10-15 years ahead, but any commercial discoveries will create basis for industrial positioning and preparing.86
For Murmansk and Arkhangelsk, it will be of vital interest if commercial discoveries in the Russian part of the Barents Sea will be brought to the Russian shores for processing, or if it is transported in other directions. As this will directly affect the realization of industrial projects on Russian territory, it will have a direct impact on Western enterprises either already established in the Russian parts of the Barents Region, or considering a presence in Russia as a part of their business strategy.
Russian offshore field development in Eastern Barents Sea can effectively be served by both Western and Russian companies from bases in North Norway. Combined with better infrastructure, it is therefore likely that e.g. Kirkenes, a port connected to good infrastructure and with relative short distance to future fields being developed in Eastern Barents Sea, might play an important future role for Russian offshore projects in the area.
On Yamal Peninsula at the Kara Sea, Russia is in process of developing large onshore petroleum fields, which also includes the construction of a new, large port at Sabetta. Both the port and the onshore field development represent an opportunity for commercial enterprises in the Barents Region – both isolated and for future contracts with Russian oil & gas industry.87
The Russian development of the Northern Sea Route (NSR) as an international commercial maritime transport corridor also represents opportunities for cooperation between e.g. Nordic and Russian shipowners/cargo owners, and several Norwegian, Finnish and Swedish vessels have already sailed the route in transit. The transit traffic on NSR is still relatively small, and the Russian legislations and regulations for use of the route are in process of being developed.
It is still uncertain to which extent and how the international traffic on the route will develop, and if it might have impact on business development and -cooperation in the Barents Region, but as a sustainable commercial cooperation the NSR will require regulations, structures and systems for safe navigation, safety of environment and effective logistic solutions. Much of this is already topic for multilateral cooperation through IMO's work to develop and implement a Polar Code.88
86 Exploration drilling in Norwegian part of Former Disputed Area in the Barents Sea (Barents Sea SE) will probably start in 2015. 87 In 2011 the company Tschudi Aggregates AS in Kirkenes had a contract on delivery of 160 000 tons of rocks to cover a gas pipeline crossing Baydaratskaya Bay, west of Yamal. The rocks were shipped from Kirkenes, supplied from the local mining industry. Shipments were repeated on basis of new contracts in 2012, and from July 2013 at least 100 000 additional tons will be shipped to Yamal. 88 http://www.imo.org/mediacentre/hottopics/polar/Pages/default.aspx
Akvaplan-niva AS, 9296 Tromsø 88 www.akvaplan.niva.no
13 Actions to improve framework for business co- operation
In Murmansk, Norwegian Business Association (NBA) and the Foreign Investors Business Association (FIBA) are in process of addressing the regional authorities with the issue of complicated and complex procedures for establishing and running business. The associations want a public service – a "one window" - to guide and assist Western companies in these matters.
The Norwegian-Russian Chamber of Commerce (NRCC) is also working to improve information to enterprises entering the Russian market, e.g. regarding land, legal system, regulations and security for investments.
NRCC is also in progress of working with Russian side to improve the profile of the Russian parts of the Barents Region as investment area for foreign companies. The association is e.g. suggesting that foreign companies actively take part in an effort to improve Murmansk region's position of the World Bank's ranking "Ease of Doing Business".
They also suggests, like Econ in the evaluation of Innovation Norway Fund, that adjustments of the NWR Investment Fund should be considered for e.g. increased risk taking and financial support to potential Norwegian entrepreneurs.
Further, NRCC suggests increased efforts in marketing of business opportunities in the region, both in Norway and abroad.
13.1 Recommendations
As a rounding up of this survey, we have gathered several inputs as recommendations for further improvement of the framework and conditions for successful cross-border business cooperation/investments in Russian part of the Barents Region.
1. To establish dialogue with the authorities in the Russian regions to create a public service, a "one window", to guide and assist Western companies safely through the different and complex formal process of e.g. establishing enterprises and to do proper reporting in accordance with Russian legislation and regulations;
2. To work together with Russian side to promote business opportunities in the Russian Barents regions; work to improve the regions profile as investment area in Norway, Finland, Sweden and other countries; work to create predictable business environment and secure investment climate, and to improve e.g. Murmansk region's position of the World Bank's ranking "Ease of Doing Business";
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 89
3. To strengthen efforts to promote the Norwegian, Finnish and Swedish parts of the Barents Region as business- and investment areas with opportunities for Russian enterprises;
4. Consider expansion and rise of capital base Innovation Norway and Nopef;
5. Public support to more Russian SMB-investments in the Norwegian, Finnish and Swedish parts of the Barents Region will require development of favourable financing instruments designed for this purpose;
6. To maintain and intensify bilateral business cooperation and business frameworks on the regional level, and to involve relevant decision makers on federal level in the processes;
7. To develop transport infrastructure and communication in the Region. Flight connections in transverse directions are needed to reduce travel time in a region with very long distances;
8. The Finnish and Norwegian side should invest in better and – for Finland - more border crossing points in order to facilitate the communication for tourism and business. The Finnish side should work in concert with Sweden and Norway for establishing a border crossing point along with Finnish Russian border with veterinary inspection facilities allowing the import of food products to and from Russia.
The future of the Barents business cooperation will depend much on the development of the regional economies and regulatory frameworks, continuous public support for elaboration and maintenance of business frameworks and infrastructure as well as steady, active political dialogue on both national and regional levels.
Akvaplan-niva AS, 9296 Tromsø 90 www.akvaplan.niva.no
14 References
14.1 Oral references
1. Arnt Albertsen, Managing Director, Polarpor Trading AS, Båtsfjord/Murmansk 2. Thore Amundsen, Manager, Kirkenes Eiendom AS, Kirkenes 3. Dmitriy Bazegskiy, Head of the branch office in Petrozavodsk, Karelia ENPI CBC Programme 4. Atle Berge, Managing Director, ZAO Olen Betong, Murmansk 5. Stephanie Bjøro, Advisor, Ministry of Foreign Affairs, Oslo 6. Bjørn Celius, Director, DnB Monchebank, Murmansk 7. Thorbjørn Dalsøren, Maritim Personell Manager, Wilson Ships Management, Bergen 8. Eivind Dalvang, General Manager, Park Inn Polyarnie Zori Hotel, Murmansk 9. Oddgeir Danielsen, Head of the Northern Dimension Partnership for Transport and Logistics, Helsinki 10. Gunnar Davidsson, Department Manager, Troms County Authority 11. Anna Eilertsen, Senior Adviser, Innovation Norway Fund Management, Oslo 12. Päivi Ekdhal, Coordinator and Manager, ENPI Kolarctic, Lapin Liitto, Rovaniemi 13. Jarle Forbord, Managing Director, Norwegian-Russian Chamber of Commerce, Oslo 14. Maria Glazkova, Operations manager, Yara Murmansk 15. Roman Gokkoev, Project Manager, Special Advisor to the Region Mayor, Northern Ostrobothnia, Oulu 16. Harald Grimm, Managing Director, Maritime Logistics H Grimm AS, Oslo 17. Riina Guseva, General Director, OOO Lappi Service, Murmansk 18. Øyvind Hagen, Senior Adviser External Trade, Statistics Norway, Oslo 19. Jack Haughom, Export Director, Norcem AS, Kjøpsvik 20. Trond Haukanes, Managing Director, Bergen Group Kimek Offshore AS, Kirkenes 21. Svein Hegna, Commercial Manager, Orica Norway AS (ex Dyno Nobel), Lier 22. Anna-Kaisa Heikkinen, former Consul, the Finnish Consulate General, St. Petersburg 23. Joonas Heiskanen, Consul, Finnish Consulate General, St. Petersburg 24. Jaakko Henttonen, Area and Country Manager, Russia and Belorussia, NDEP and EBRD, St. Petersburg 25. Kjell Hjelm, Regional Director, Swedish Federation of Business Owners, Luleå 26. Kristin Høiby, Consul at the Royal Norwegian Consulate General in Murmansk 27. Otto Iversen, Maritime Manager, J.M. Hansen Maritime AS, Tromsø 28. Vidar Jensen, Project Manager, Ministry of Local Government and Regional Development, Oslo 29. Sisko Kaarto, Project Manager and Coordinator 30. Ludmila Kabantseva, Head of the Department for International Relations, Government of the Republic of Komi, Syktyvkar 31. Kjartan Karlsen, Managing Director, Nordnorsk Skipskonsult AS and Dvina AS, Myre 32. Markus Karlsen, International Adviser, Finnmark County Authority, Vadsø 33. Severi Keinälä, Chancellor, Ministry of Employment and the Economy, Helsinki 34. Paavo Keränen, Project Manager and Coordinator, Kainu Region, Joensuu 35. Dmitry Kislov, Deputy Minister, Ministry of Economic Development of the Republic of Karelia Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 91
36. Andrey Kletrov, Specialist, Finpro, St. Petersburg 37. Ulrich Kreuzenbeck, Managing Director, OOO Flait Group, Murmansk 38. Paula Laamanen, the Finnish Ministry of Foreign Affairs, Helsinki 39. Anna-Maria Liukko, the Finnish Consulate in Petrozavodsk 40. Kjell Lorentsen, Managing Director, Gigante Havbruk AS, Bodø 41. Greger Mannsverk, Managing Director, Bergen Group Kimek AS, Kirkenes 42. Michael Miller, Director, Kompakt Construction Co, St. Petersburg 43. Karsten Nestvold, Director, Innovation Norway, Bodø 44. Hans Nordgård, former project manager of Gigante Salmon AS, Bodø 45. Katja Pettersen, Project coordinator, Nordnorsk Reiseliv AS, Alta 46. Evgeniya Popova, Manager, GAC Murmansk 47. Sari Pöyhönen, Commercial and Media Issues, the Finnish Consulate in Murmansk 48. Rune Rafaelsen, Secretary general, the Norwegian Barents Secretariat 49. Jarmo Rajala, Director and Country Manager, Russia, PKC Group LLC, Kempele 50. Mikael Reims, Managing Director, Nopef, Helsinki 51. Marko Ruokangas, Manager and coordinator ENPI Karelia, Northern Ostrobothnia 52. Martti Ruokokoski, Consul, the Finnish Consulate in Murmansk 53. Svein Ruud, Managing Director, Troika Seafood AS, Kirkenes 54. Bjørg Sabbasen, Advisor, Innovation Norway, Vadsø 55. Eija Jussila-Salmi, Manager and International Coordinator, Rovaniemi City Development 56. Jaakko Seppälä, General Director, Ecofoster and EHP-Tekniikka Oy 57. Andrey Shalyov, Honorary Consul, Norway's Honorary Consulate in Arkhangelsk 58. Sergey Shuvalov, SIVA International Management, Trondheim 59. Katerina Smetanina, Project and Communication Director, NRCC, Oslo 60. Jan Martin Saiguchkin Solstad, Kolarctic ENPI Norway, Vadsø 61. Kim Stenersen, Advisor, the Norwegian Barents Secretariat, Kirkenes 62. Bjørn Storvik, Managing Director, Storvik Consult AS, Kirkenes/Murmansk 63. Alexey Subbotin, Head of Foreign Economic Department, Arkhangelsk Chamber of Commerce 64. Kristian Svanes, Advisor, Ministry of Foreign Affairs, Oslo 65. Brede Sæther, Managing Director, Kirkenes Trading AS and Rupack AS, Kirkenes 66. Jørn Sørvig, Head of Planning and Economic Development, Nordland County Authority, Bodø 67. Arve Tannvik, Project Manager, Kirkenes Næringshage, Kirkenes 68. Jørn Tverseth, Project Manager, NRCC, Oslo 69. Erik Welle-Watne, Division Director, Innovation Norway Fund, Oslo 70. Lars Wenaas, Chairman, Wenaas Hotels ASA, Måndalen
Akvaplan-niva AS, 9296 Tromsø 92 www.akvaplan.niva.no
14.2 Printed references
1. Abelsen, Lillian: Barentsregionen – en næringsregion? En studie av regionale strukturer i forhold til et integrert og funksjonelt næringssamarbeid. Hovedfagsoppgave i statsvitenskap, Universitetet i Tromsø, juni 2004. 2. Andersson, Björn: Utvärdering av resultat, nytta och framtida roll för Nordiska Projektexportfonden (Nopef). Aieka AB, september 2009 3. Bambulyak/Rautio/Grigoriev: Development of marine Russian-Norwegian trade facilities in Northern Norway. Prefeasibility study for Maritimt Forum Nord and the Barents Secretariat. Akvaplan-niva AS, report 4673-01, 7 March 2012. 4. Barents Secretariat: Annual reports, 2003-2011. 5. Barents Secretariat: Project catalogues, 2003-2011. 6. Barents Secretariat: The Barents Program 2004-2006. 7. Barents Secretariat: The Barents Program 2009-2013. 8. Barents Secretariat: Social-economic development in the Barents Region, Murmansk region 2011. 9. Bosma/Levie: Global Entrepreneurship Monitor. 2009 Global Report. Babson College and London Business School. 10. Econ Pöyry: Evaluering av fondene for Øst-Europa og Nordvest- Russland. Utarbeidet for Innovasjon Norge. (2007) 11. Finnmark fylkeskommune: Internasjonale strategier 2011-2014. 12. Finnmark fylkeskommune: Regionalt utviklingsprogram 2010-2013. 13. Fløtten, Erling: Barentssamarbeidet – hva så? En kortfattet evaluering som tar for seg utfordringer og videre veivalg. Utarbeidet for Utenriksdepartementet. (2005) 14. Foss, Kjetil/Henningsen, Knut: Strategisk næringssamarbeid mellom Pechenga og Sør- Varanger. Rambøll Barents på oppdrag for Kirkenes Næringshage, 16. mars 2011. 15. Fyodorov, Igor, Governor of Nenets Autonomous District: Report of the Governor of the Nenets Autonomous District on his activities and activities of the Administration of the Nenets Autonomous District for 2012 (2013) 16. Gayzer, Vyacheslav, Governor of the Republic of Komi: Investment Portrait of the Republis of Komi (2012) 17. Gigante Salmon AS: Prosjekt "Gigante Pechenga", ang. drift av lakseoppdrett i Pechenga fjord i Barentshavet. (2010) 18. Government of the Arkhangelsk region: Concept of Foreign Economic Activities of the Arkhangelsk Region to 2015. (2011) 19. Hansen/Aasland/Dybtsyna: Building Neighbourhood. Evaluation of the Barents Secretariat's grant programme. NIBR Report 2008:4 20. Høiby, Kristin/Kreuzenbeck, Ulrich: Den besværlige virkeligheten. Norske bedrifters erfaringer fra næringsvirksomhet i Nordvest-Russland 1990-2010. Sherpa Konsult, 2010. 21. Meld.St. 7 (2011-2012), Nordområdene. Visjon og virkemidler. 22. Ministry of Economic Development of the Murmansk Region: Report on the Results of Socio-Economic Development of the Murmansk Region for 2011 (2012), for 2012 (2013) 23. Ministry of Economic Development of the Republic of Karelia: The Republic of Karelia Investment booklet. (2012) 24. Ministry of Economic Developmentt of the Republic of Komi: Investment Passport of the Republic of Komi (2012) Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 93
25. Morsut, Claudia/Leknes, Einar: Nordland fylkeskommunes internasjonale engasjement. Evaluering, arbeidsnotat IRIS 2012/042. 26. Nordland fylkeskommune: Fylkesplan 2013-2025. 27. Nordland fylkeskommune: Regional plan for internasjonalisering, 2012-2025. 28. Norwegian-Russian Chamber of Commerce (NRCC): Muligheter for norsk næringsliv i Arkhangelsk fylke. 14. januar 2009. 29. Politiet: Storskog grensepasseringssted 2011-2014. Rapport fra en arbeidsgruppe. 16. mars 2011. 30. Rambøll: Organisering av bygg- og anleggsnæringen i Finnmark for oppdrag i Nordvest-Russland. Rapport på oppdrag fra Statoil, 19. april 2010. 31. Rambøll Storvik AS: Prosjektrapport. Kartlegge norske bedriftsetableringer i Nordvest-Russland. Utarbeidet for Barentssekretariatet og Innovasjon Norge Fondsforvaltning. 10. desember 2006. 32. Rautio/Muotka/Jensen: Shtokman og Snøhvit Tog II. Vurdering av muligheter og utfordringer for Finnmark i tilknytning til to store industriutbygginger i nord. Bedriftskompetanse AS, 22. april 2008. 33. Rautio, Rune: Russisk eierskap i nordnorske bedrifter. Oversikt over aktører, aktivitet og økonomi i foretakene. Akvaplan-niva AS, rapport 5731, 28. februar 2012. 34. Reynolds/Bygrave/Autio/Cox/Hay: Global Entrepreneurship Monitor. 2002 Executive Report. Babson College and London Business School. 35. Sigra Group: Potential and prerequisites for the development of an Oil & Gas supply cluster in Arkhangelsk region. Report written for the Barents Oil & Gas Cluster (BOGC), 2012. 36. Strøm Hansen, Ingvild: Effektiv QUANGO for partnerskap i nord? En hypotesegenererende casestudie av Barentssekretariatets rolle. Masteroppgave, Universitetet i Bergen, våren 2011. 37. Svanes, Kristian: Den russiske haldninga til Barentssamarbeidet 2000-2008. Masteroppgave i region og regionalisering, Universitetet i Bergen, våren 2009. 38. Troms fylkeskommune: Fylkesplan 2010-2013. 39. Troms fylkeskommune: Regional utviklingsplan 2010-2013. 40. Weisser-Svendsen, Haakon N.: Trenger Sjtokman Norge eller Norge Sjtokman? En diskursanalyse av petroleumsressurser i nordområdene. Masteroppgave i statsvitenskap, Universitetet i Tromsø, høsten 2007. 41. Xavier/Kelley/Kew/Herrington/Vorderwülbecke: Global Entrepreneurship Monitor. 2012 Global Report. Babson College and London Business School.
14.3 Russian laws, resolutions, strategies and programmes
14.3.1 Republic of Komi
1. Long-term strategy of socio-economic development of the Republic of Komi for the period to 2020. 2. Forecast of socio-economic development of the Republic of Komi for 2013 and for the period to 2015. 3. Concept of investment policy in the Republic of Komi, approved by the Resolution of the Government of the Republic of Komi # 617-r of 31.12.2010.
Akvaplan-niva AS, 9296 Tromsø 94 www.akvaplan.niva.no
4. Programme of prioritised activities for 2011-2015 on realisation of the Concept of investment policy in the Republic of Komi, approved by the Resolution of the Government of the Republic of Komi # 251-r of 29.06.2011. 5. Departmental target programme Increase of investment attractiveness of the Republic of Komi and assistance in intensification of investment activities on the territory of the Republic of Komi (2011-2013), approved by the Order of the Ministry of Economic Development of the Republic of Komi # 409 of 30.12.2010. 6. Regional Law of the Republic of Komi # 112-RZ of 04.10.2010 on participation of the Republic of Komi in public-private partnership. 7. Investment passport of the Republic of Komi, 2012.
14.3.2 Republic of Karelia
1. Main directions of investment policy of the Republic of Karelia to 2011-2015, approved by the Resolution of the Government of the Republic of Karelia # 185r-P of 21.04.2011. 2. Strategy of socio-economic development of the Republic of Karelia to 2020, approved by the Resolution of the Parliament of the Republic of Karelia # 1755-IV ZS of 24.06.2010. 3. Concept of socio-economic development of the Republic of Karelia for the period to 2017, approved by the Resolution of the Government of the Republic of Karelia # 658r-P of 30.10.2012. 4. Regional Law of the Republic of Karelia # 1687-ZRK of 05.03.2013 On State support of investment activities in the Republic of Karelia. 5. Regional Law of the Republic of Karelia # 1568-ZRK of 05.12.2011 On participation of the Republic of Karelia in public-private partnership projects. 6. Regional Law of the Republic of Karelia # 1532-ZRK of 17.10.2011 On Programme of Socio-Economic Development of the Republic of Karelia to 2015. 7. Resolution of the Government of the Republic of Karelia # 117-P of 16.07.2009 On the order of making investment agreement for provision of tax benefits within investment favour regime. 8. Investment passport of the Republic of Karelia, 2012.
14.3.3 Arkhangelsk region
1. Forecast of socio-economic development of the Arkhangelsk region to 2015, approved by the Resolution of the Government of the Arkhangelsk region # 447-rp of 12.10.2012. 2. Concept for development of external economic activities of the Arkhangelsk region to 2015. Approved by the Government of the Arkhangelsk region in 2011. 3. Strategy of socio-economic development of the Arkhangelsk region to 2030. 4. Investment passport of the Arkhangelsk region, 2010. 5. Regional Law of the Arkhangelsk region # 188-15-OZ of 24.09.2010 on state policy of the Arkhangelsk region in the sphere of investment activities.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 95
6. Regional Law of the Arkhangelsk region # 52-4-OZ of 02.03.2009 on tax benefits with implementation of investment activities on the territory of the Arkhangelsk region. 7. Long-term task programme of the Arkhangelsk region "Increase of investment attraction of the Arkhangelsk region for 2011-2013", approved by the Resolution of the Government of the Arkhangelsk region # 321-pp of 19.10.2010. 8. In 2007, Arkhangelsk Regional External-economic Association (AREA) was established on the initiative of the Government of the Arkhangelsk region. (Director of AREA – Sergey Smirnov, Director of Sozvezdiye Association).
14.3.4 Nenets Autonomous District
1. Strategy of socio-economic development of the Nenets Autonomous District to 2030, approved by the Resolution of the Council of Deputies of the Nenets Autonomous District # 134-sd of 22.06.2010. 2. Information on Forecast of socio-economic development of the Nenets Autonomous District for 2013 and for the period to 2015. 3. Resolution of the Administration of the Nenets Autonomous District # 227-p of 15.08.2012 On order of formation and realisation of the Address investment programme of the Nenets Autonomous District.
14.3.5 Murmansk region
1. Strategy of socio-economic development of the Murmansk region to 2020 and for the period to 2025, approved by the Resolution of the Government of the Murmansk region # 383-pp of 26.08.2010. 2. Departmental target programme Development of investment activities in the Murmansk region for 2012-2016, approved by the Order of the Ministry of Economic Development of the Murmansk region # OD-18 of 01.02.2013. 3. Long-term forecast of socio-economic development of the Murmansk region to 2030. 4. Regional Law of the Murmansk region # 1315-01-ZMO of 11.01.2011 on state support of investment activities on the territory of the Murmansk region" 5. Regional Law of the Murmansk region # 1311-01-ZMO of 27.12.2010 on participation of the Murmansk region in public-private partnerships. 6. Regional Law of the Murmansk region # 899-01-ZMO on additions to some legal acts of the Murmansk region to introduce tax benefits with implementation of investment activities on the territory of the Murmansk region. 7. Regional Law of the Murmansk region # 484-01-ZMO of 31.05.2004 on innovations and innovation activities in the Murmansk region. 8. Resolution of the Government of the Murmansk region # 394-PP of 09.08.2011 on the order of provision of subsidies from the regional budget for financial support of international cooperation projects. 9. Resolution of the Governor of the Murmansk region # 56-PG of 04.04.2013 on approval of investment declaration of the Murmansk region.
Akvaplan-niva AS, 9296 Tromsø 96 www.akvaplan.niva.no
Appendices
Norwegian companies with active base in Russian Barents regions
Murmansk region
1. BR Electronics ZAO – processing of electronic components; 2. DnB Monchebank – banking/finance; 3. Eimskip-CTG AS – maritime transport; 4. FLAIT Group – travel/tourism; 5. GAC Murmansk – shipping, logistics and marine services; 6. J.M. Hansen Maritime AS – supplier of maritime electronic equipment; 7. Murmansktorgsnabservice ZAO – fish trading and distribution; 8. Nofi Tromsø AS – supplier of equipment for the fishing fleet; 9. Norcem Heidelberg Cement Group – supplier of cement; 10. Norlense – supplier of equipment for oil spill response; 11. Normar Seafood OOO – equipment for fishing- and aquaculture industry; 12. Northwest 1 AlliansBank – banking/finance; 13. Norwegian Partners Marine - Sales and Engineering Company, maritime; 14. Olen Betong OOO – concrete processing; 15. Park Inn Polyarnie Zori Hotel (Wenaas Group) – hotel/accommodations; 16. Polarpor Trading OOO – vessel repairs, services and equipment; 17. Refa Frøystad Group – supplier of equipment for the fishing fleet; 18. Reinertsen NWR – engineering and construction; 19. Rupack OOO – production of styrofoam packaging; 20. Russcom – business consultancy services; 21. Sevgiprorybflot ZAO (Bergen Group) – supplier of engineering & design; 22. Siva NM - business camp, offices and office services for rent; 23. Statoil Fuel & Retail – retail sales of petroleum products (9 stations); 24. Storvik Consult OOO – business consultancy services; 25. Technopark-NOR - logistic/industrial center, services for rent; 26. Tommen Gram AS – supplier of packaging; 27. Tromsø Consulting Group (TCG) – business consultancy services; 28. Wilhelmsen Ship Service Ltd – products and services to the maritime industry; 29. Wilson Ships Service Ltd – products and services to the maritime industry; 30. Yara Industrial AB – purchase of apatite concentrate.
Arkhangelsk region
1. Det norske Veritas – maritme register; 2. Jotun Paint LCC – supplier of paint; 3. Norcem Heidelberg – supplier of cement; 4. Nordnorsk Skipskonsult – supplier of engineering and ship design 5. Red Star Consulting – business consultancy services; 6. Statoil – production share at Kharyaga oil field, Nenets AD (operated by Total); 7. Wilson Crewing Agency Ltd – maritime crewing; 8. Zvezdochka Engineering (Kværner) – suppliers of engineering & design
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 97
Finnish companies with active base in Russian Barents regions
Republic of Komi
Active companies with Finnish investments:
Name Activity Finnish investor Sales margin (thousand RUB) 2007 2008 2009 2010 2011 Izhma Reindeer Meat Nierova Oy -6 046 -6 413 -7 962 Group OOO processing Lespromservice OOO Forestry Inprom Trade Oy 12 640 19 540 -4 265 -7 993 3 334 machinery
Republic of Karelia
Active companies with Finnish investments and declared figures:
Name Activity Finnish investor Sales margin (thousand RUB) 2007 2008 2009 2010 2011 Setles OOO Forestry Stora Enso Timber -41 315 -76 212 2 165 72 987 56 563 Electrokos OOO Electronics PKC Electronics -7 794 2 067 -15 508 Pinus OOO Forestry Private 392 1 150 1 466 550 AEK OOO Electronics PKC Wiring Sys. -22 938 11 751 -122 024 15 855 20 900
Active companies with Finnish investments, but with no published key figures:
1. FM Timberteam Ltd/ZAO Karlis Prom, forestry and biomass production in Värtsilä; 2. Hub Logistics, transport and logistics, mainly for Metso; 3. Metso Automation Center, in University Technology Park in Petrozavodsk; 4. Stora Enso Impilahti sawmill; 5. Rapala fishing lures manufacturing in Sortavala; 6. Ponsse Forestry machines service point in Pitkyaranta; 7. Saunaset/Vuokatin Puu wooden furniture/decoration in Kostamus; 8. Ecofoster Group, Alhola, Kostamus, measuring equipment.
Akvaplan-niva AS, 9296 Tromsø 98 www.akvaplan.niva.no
Murmansk region
Active companies with Finnish investments:
Name Activity Finnish investor Sales margin (thousand RUB) 2007 2008 2009 2010 2011 Inwido OAO89 Windows Tiivituote Oy90 4 791 2 493 -336 -46 968 -58 136 Petromaks ZAO Metal scrap Kuusakoski Oy 66 332 38 797 -22 662 15 071 EHP-Tekniikka Ecological EHP-Tekniikka 638 -149 -235 311 -1 197 solutions Sever Minerals ZAO Mining Metso Minerals N/A equipment YIT Stroy ZAO Construction YIT N/A
Active Finnish companies, but with no published key figures:
1. Finnish Ahma Engineers is heavily involved in the Murmansk region Mining Industry with engineering and planning; 2. Lemminkäinen, road construction, infrastructure building and housing construction has an official representation; 3. Wärtsilä, ship repair and service dock; 4. Paakkola Conveyors, sales/export of conveyors to North West Russian mining industry; 5. Outotec, mining technology and equipment sales/export to North West Russian mining Industry; 6. Aker Arctic, representation office for ice breaking and arctic ship technology.
Arkhangelsk region
Active companies with Finnish investments:
Name Activity Finnish investor Sales margin (thousand RUB) 2007 2008 2009 2010 2011 Emko Timber Timber Tarko Timber Oy N/A Melkiy IP Wooden Lammin Ikkuna Oy N/A windows Ecofoster Ecological EHP-Tekniikka 638 -149 -235 311 -1 197 solutions
89 Representation office. 90 Tiivituote is owned by Inwido, which in turn is owned by Swedish Ratos.
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 99
Swedish companies with active base in Russian Barents regions
Republic of Komi
1. Ferronordic Machines LLC, Syktyvkar and Ukhta – dealer for Volvo CE; 2. Lundin Petroleum AB – petroleum company; 3. Pechoraneftegaz – petroleum company (owned 50% by Lundin Petroleum AB); 4. Recher-Komi – petroleum company (owned 50% by Lundin Petroleum AB); 5. Sandvik Mining – equipment and service for the mining industry
Republic of Karelia
1. Ferronordic Machines LLC, Petrozavodsk and Pitkyaranta – dealer for Volvo CE; 2. Swedwood Karelia OOO, Kostomuksha – wood/woodworks;
Murmansk region
1. Ferronordic Machines LLC – dealer for Volvo CE; 2. Russian-Swedish Council on small and medium business support (Norrbotten Chamber of Commerce); 3. Sandvik Mining, Kirovsk – equipment and service for the mining industry; 4. Tekko j/v, Apatity – welding work for the mining industry
Arkhangelsk region
1. Ferronordic Machines Arkhangelsk OOO, Arkhangelsk, Velsk and Koryazhma – dealer for Volvo CE; 2. Nordea Bank OJSC - finance; 3. "Runa" Business Support Bureau – marketing consulting 4. RusForest AB – wood processing (sawmill "LDK-3" and the planing mill "Infa");
Akvaplan-niva AS, 9296 Tromsø 100 www.akvaplan.niva.no
Russian companies with active base in Norwegian Barents regions
Finnmark County
1. Arctic Catch AS, Vardø – seafood processing and catching; 2. Arctic Resource Norge AS, Lakselv – consultancy business; 3. Art Trading AS, Kirkenes – seafood; 4. Det Skandinaviske Investeringsselskap AS, Lakselv – investments; 5. Grenseløs AS, Kirkenes – tourism; 6. Ishavsbruket AS, Båtsfjord; seafood; 7. Jarus AS, Kirkenes – seafood; 8. Kirkenes Charr AS, Ropelv v/Kirkenes – aquaculture; 9. Kirkenes Marine Electronic AS, Kirkenes – maritime electronics; 10. Nor-Fish AS, Kirkenes – seafood; 11. Snefjord Kongekrabbe AS, Snefjord in Måsøy – seafood; 12. Vilo AS, Bugøyfjord, Sør-Varanger – tourism/Holiday Village
Troms County
1. Tromsø Consulting Group AS, Tromsø – business consultancy services
Nordland County
1. Murman AS, Bodø - property
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 101
Russian companies with active base in Finnish Barents regions
Kainuu
1. Shoe store; 2. Bridal dress sales and rental; 3. Cottage rental; 4. Cottage rental; 5. Tourism services for Russians
Northern Ostrobothnia
1. Gas station in process of being developed; 2. Intermediary company for purchase and forwarding of goods to Russia; 3. Intermediary company for purchase and forwarding of goods to Russia; 4. Kuusamo: Cabins owned by private Russian investors; 5. Pudasjärvi: An old school is being reconstructed to a karaoke bar; 6. Vuokatti: Cabins owned by private Russian investors
Lappland
1. Kuukiuru Holiday Village, between Kemijärvi and Sodankylä; 2. Ollerovaara: Holiday Village in process of planning; 3. Rovaniemi: Helios Tour Oy – tourist services; 4. Rovaniemi: Konstan autohuolto – garage; 5. Rovaniemi: Mariza restaurants – two restaurants; 6. Rovaniemi: Motelli Rovaniemi – motel; 7. Rovaniemi: Photo shop; 8. Nord Recon – mounting of stoves;
Akvaplan-niva AS, 9296 Tromsø 102 www.akvaplan.niva.no
Russian companies with active base in Swedish Barents regions
Västerbotten
Dorotea: Maria Dorotea Såg AB - sawmill
Economic cooperation in the Barents Region – Draft 010613 Akvaplan-niva AS Report 6265 - 103
Members of Foreign Investment Business Association (FIBA), Murmansk
1. Barents Center Finland Oy 2. Center for High North Logistics (CHNL) 3. JSC DNB Bank 4. Finpro 5. OOO Flait Group 6. GAC Shipping and Logistics Ltd 7. Innovation Norway 8. Kuehne + Nagel LLC 9. Malthus 10. Mannheimer Swartling 11. North-West 1 Alliance bank 12. Panalpina World Transport ZAO 13. Park Inn Polyarnie Zori Hotel 14. OOO Reinertsen NWR 15. SIVA Industrial park in Murmansk 16. OOO Storvik Consult 17. GPS Swedegroup AB 18. Swift Worldwide Resources 19. Technopark-NOR 20. Tekko 21. OOO Wilson Murmansk 22. Ølen Betong
Akvaplan-niva AS, 9296 Tromsø 104 www.akvaplan.niva.no