Konstantin TITOV Person Activity 1997

Activity

1997

1997 was the time when Samara Oblast made a big step forward in its development. This was in 1997 that the region started its economic growth to reach a stable position of importance in the Russian Federation. For the first time in the years of the Russian economic reform there was a rise by 6% in Samara’s gross regional product. Why has Samara’s economy been growing? We already have the major part of the answer. This is the innovative approach Samara’s government applies in managing the region that determines the region’s economic success. The region is managed as a quasi-corporation rather than a quasi-state. All the efforts are focussed on the production of goods for which there is domestic and foreign demand.

Thus, in 1997 several projects were launched to provide local supply of complete units and accessories for the regional automotive industry. AvtoVAZ, Russia’s largest automotive maker, gained the highest level of their annual output and made 748 thousand cars. Its federal and regional tax debts were re-scheduled. This enabled the company, which is one of the major supports of the regional economy, to continue and develop their production and services.

Samara Oblast was the first to change the system of paying child benefits. Since 1997 Samara Oblast has been among the three Russian regions, the other two being Moscow and St. Petersburg, where child benefits are paid in due amount and time. It was also in 1997 that the regional program of compulsory medical insurance was first introduced. The program provided fund allocations for public healthcare and medical service in accordance with standard rates.

The region of Samara is a risk area for farming. Still in 1997 a record harvest of 3 mil tons of grain was gathered. That was enabled by the application of advanced power and irrigation-efficient farming technologies introduced within the scope of a special grain-farming development project.

For several years already Samara Oblast has been rated by the experts among the group of Russian regions that can offer suitable conditions for investment. It was in 1997 that the region saw a rise in the inflow of investments in industry and farming. 1997 continuing foreign investment projects:

• NK-33 air engine project that has been realized in cooperation with Boeing.
• Coca-Cola Bottlers Samara started production and sales in the region.
• Pepsi-Cola bottling factory was put into operation.
• Domestic chocolate makers Rossia started producing several chocolates brands in cooperation with Nestle.
• Joint venture was established by Samara Cable Company and General Motors.
• Cancer detection centre construction project and Samara airport renovation project were implemented in cooperation with Quebec’s companies.

Budget subsidies and other investment grants were provided to investment projects of prior importance for the social and economic development of Samara Oblast. In 1997 Samara Oblast was rated by Moody’s and awarded the highest rating possible for a Russian region. This helped to establish Samara’s international creditworthiness and enabled Samara Oblast Administration to start negotiating Samara’s Eurobond issue for the purpose of financing prospective investment in the region’s economy.

However, one of the most serious problems Samara Oblast is having to solve is the restructuring of defence industry and the rescheduling of public sector debt. Not so long ago the defence industry had accounted for a greater part of the region’s revenues and the region’s prestige. In 1997 most factories in the defence industry were under-loaded or stopped because of a sharp reduction in defence awards.

The problem is too difficult to be solved at the regional level without any effort on the federal government’s part or a possible privatization program. Still the regional administration has been supporting defence industry restructuring by providing grants to feasible projects that envisage cooperation of the public sector with the domestic automotive makers.

The adaptability of Samara’s consumer goods manufacturing sector to the market conditions and, as a consequence, its ability to produce competitive products was hampered by the lack of management knowledge and skills. This caused serious marketing problems and led to a large concentration of wage arrears within the sector. The most important event of the year 1997 was the signing of an Agreement between Samara Oblast and the Russian Federation on the Demarcation of Powers, under which Samara Oblast can manage the federal property located within its territory and finance federal expenditures directly through the territorial board of the Federal Treasury. The demarcation of powers between the federal and the regional legislative bodies ensures concord between federal and regional law. Considerable fiscal and political independence from the central government granted to Samara Oblast by the Agreement enabled the region to achieve economic growth and become no longer reliant on federal subsidies.