Economic Development of IMEMO RAS, Moscow, UPMF, Grenoble Slide 1 of 24 Economic Development of Kaliningrad Oblast presentation by Evgeny Vinokurov IMEMO RAS, Moscow, UPMF, Grenoble E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 3 of 24 Kaliningrad: general information territory – 15 100 sq. km (0,1% of the Russian Federation) population – 943 500 (0,6% of the Russian Federation) Exclave of Russia / semi-enclave of the EU part of North West Federal District (total 11 regions in it) nominal GRP in 2002 – appr. USD 1100 mln. E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 4 of 24 Kaliningrad: general information History (the 750th anniversary of Königsberg in 2005) Special Economic Zone (SEZ) regime Federal Task Programme for Kaliningrad Oblast development up to 2010 E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 5 of 24 SEZ regulations Free custom zone – no import taxes no taxes for outflows into Russia, if: - for electronics and household appliances - 15% VA + changing TN code’s 5th digit; - for other goods - 30% VA + changing TN code’s 4th digit (+ extra criteria for automobiles, tractors, etc.) import quotes in 35 groups - meat imports most sensible. Attempt to defend local producer. E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 6 of 24 Shadow economy Input-output matrix (Tatarinov) – 55% from the official economy Household income survey (Fedorov) – real incomes 47% in excess of officials ones Delphi method (Samson, Elisseeva) – 60-95% from the official economy 70% of SE are non-illegal activities E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 7 of 24 Main economic sectors fuel industry machine building food industry agriculture trade and catering E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 8 of 24 Kaliningrad GRP E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 9 of 24 Most dynamic sectors food industry (Russian markets) trade and catering communication transport (European-Russian trade) light industry furniture (SEZ success story) machine building E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 10 of 24 GRP (PPP) PPP comparison Lithuania-Kaliningrad made by I.Samson group (based on 2001 data) PP 95% from Lithuania (not taking into account investments and state budgets) Final estimation – 90% from Lithuania, close to Warminsko-Mazurskie Voevodsvo, 75% from Poland further research needed E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 11 of 24 GRP by sector in 2000 E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 12 of 24 Employment structure in 2000 E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 13 of 24 Industrial production growth E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 14 of 24 Consumer price indices E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 15 of 24 Investment dynamics E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 16 of 24 Foreign investments, tnd. USD Investment boom in Kaliningrad in 1999-2001 was generated by investments from mainland Russia (estimations 5-10 times more than FI). FDI comparisons with neighboring countries are thus incorrect. E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 17 of 24 Trade flows, 2000, mln.USD E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 18 of 24 Foreign exports and imports E.Vinokurov Economic Development of Kaliningrad Oblast

Exports and imports per sector Slide 19 of 24 Exports and imports per sector 1. Return to highest levels reached in 1995-97, 2. Exports of raw and semi-finished goods. 3. Imports of food products (consumption and food processing) as well as machinery for modernizing industries. E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 20 of 24 Main trade partners Export: led by Poland – 27,5% (mainly raw oil), then Germany and Lithuania Import: led by Germany – 25%, then Poland and Lithuania 70-75% of foreign trade is realized the EU and accession countries. 5,8% fall on CIS countries except Russia. E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 21 of 24 Trade with mainland Russia In 2001 outflows grew up to 619 mln. USD (min. estimation) and outweighed exports. Trade flows with mainland Russia grew rapidly and constantly since 1999. E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 23 of 24 EU enlargement and Kaliningrad economy “EU and Kaliningrad” Communication of the Commission (2001): Enlargement will be favourable for Kaliningrad because accession countries will apply Common external tariff Lower import tariffs of new EU members (most important Poland and Lithuania) – present export structure does not let use this advantage; non-tariff barriers remain/increase Little changes on local markets Lower Russian import tariffs may lead to lower price competitiveness of Kaliningrad goods on the Russian markets ( due to lower barriers for CEEC goods and lower costs of production for Russian enterprises) + СAP for accession countries Visa problem Energy problem Cargo transit problem Lower volumes of shuttle trade – especially important for small border towns E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 24 of 24 WTO accession and Kaliningrad economy Specifics: Compatibility of Kaliningrad SEZ regime and WTO regulations in question May lead to abolition of regional quotes on imports No anti-dumping measures against Kaliningrad producers yet – less relevant than for other Russian regions Possible increase in European-Russian trade would render positive effects on the region E.Vinokurov Economic Development of Kaliningrad Oblast

E.Vinokurov Economic Development of Kaliningrad Oblast Slide 24 of 24 People’s perceptions and desires for the future What option suits you the best? 21% - Oblast will have with equal rights with other Russian regions 38% - Oblast will remain Russian region, but it will have a special status 19% - Oblast will remain Russian region, but it will act under its own laws (China – Hongkong model) 5% - Oblast will become independent state 3% - Oblast will be returned to Germany 14% - found it difficult to choose Practically no separatism Wide support for special rights and status E.Vinokurov Economic Development of Kaliningrad Oblast