2000 A.D.
INSTRUMENT MAKER FALLS VICTIM TO SHADY DEALINGS
PRIVATIZATION HELPS KHIMVOLOKNO
KURSK: TOBACCO FIRM BENEFITS FROM CRISIS
LACK OF ALTERNATIVES HOLDS MONEY-LOSING COOPERATIVE TOGETHER
KURSK: EGG PRODUCER STANDS OUT
KURSK: TOURIST, HEAD HUNTING FIRM FAILS
MOSCOW BIOTECH RESEARCHERS UTILIZE OLD COW-SHED
POOR POLITICAL LEADERSHIP BLOCKS PLAN IMPLEMENTATION
Kursk Oblast's regional development plan is called the "Kursk Oblast Concept for Social and Economic Development, 1997-2005." The plan was developed and widely discussed over the course of six months in 1997, immediately after the election of Aleksandr Rutskoi as the region's governor. Subsequently, the oblast administration adopted it as a guiding document.
Why does the plan cover an eight-year period? Because Rutskoi said at the beginning of his first term that he would be governor for no less than two terms, eight years. He faces reelection next year, and the voters will decide whether he will stay on the job for another four years.
The Kursk Oblast Duma did not officially discuss or adopt the program so it has not been codified in law. In 1998 and 1999 neither the media nor oblast officials mentioned the program. During this period, Rutskoi changed his closest subordinates three times (deputy governors, raion leaders, and sectoral leaders). Additionally, the structure of the Kursk Oblast administration was completely overhauled when Rutskoi introduced a Kursk Oblast Government. The economic situation dramatically changed after the 17 August crisis began. Thus, there are plenty of reasons to forget about this program, especially as elections are approaching..
KURSK: INSTRUMENT MAKER FALLS VICTIM TO SHADY DEALINGS
Kursk's Pribor factory, founded in 1949, makes equipment for the aviation (automatic pilots, navigation systems, firing systems) and medical industries (artificial kidneys).
Through a Russian middle-man, the American firm Nik and Si bought a 16 percent stake in Pribor in 1994. The Kursk Oblast procurator claims that the American firm does not exist at the US address listed in legal documents. Moreover, the director of this firm and the head of its Moscow office are one and the same, Nikolai Volkov. Nik and Si apparently purchased its shares illegally. Firms whose output is more than 30 percent geared to the defense sector must obtain Russian government approval before foreign companies are allowed to participate in the privatization process. Pribor's output is 54 percent defense products, but the government never allowed foreigners to participate.
In March 1995 Kursk procurator Nikolai Tkachev sent a letter expressing his concerns to then First Deputy Prime Minister Oleg Soskovets. The Russian Federation State Property Committee replied that if the procurator doubted the legality of the American firm's participation in Pribor's privatization, than it should file a court case. Ultimately, the local arbitration court declared the American purchase of the 16 percent share illegal.
Now Pribor is producing at a third of the 1994 level and only one third of the original workers remain at the plant. In addition to the problems with the investor, the plant has suffered because the Russian government has not had sufficient funds to invest in the aviation or medical industries during the last five years. Additionally, Pribor does not produce goods that can be sold to other
customers.
PRIVATIZATION HELPS KHIMVOLOKNO
In the 1980s Khimvolokno (http://home.sovtest.ru/~khv) was Europe's largest producer of artificial fibers. Then it had three independent production facilities: Kapron, Lavsan, and a textile factory. During the last five years only the Kapron has functioned, making the fibers that are used in the production of tires. Now it has more orders than it can fill.
In 1998, the factory was only working at 16-17 percent capacity. Now more than half of its production facilities are in use. In the meantime, the Moscow financialindustrial group Neftekhimprom bought a controlling stake and has appointed a new director, Andrei Arefev. The new owner has helped the plant gain access to new sources of raw materials. It has also increased the area in which the factory's products are sold.
Cloth produced in Kursk is now used to make stockings, socks, rugs, lace, and knitted garments at factories in the Black Earth region, Moscow Oblast, and Ukraine. The 36- year-old director told Kurskaya pravda on 15 October that the factory has every chance of becoming profitable.
Some German investors are willing to put up significant sums, but they want to have the backing of a solid guarantor. So far, however, the Kursk governor and legislature are not willing to do this. Another problem the factory faces is that it must support the housing stock and municipal services of a settlement with a population of 40,000 people who earlier worked at the factory or serviced its
needs.
KURSK: TOBACCO FIRM BENEFITS FROM CRISIS
Most of Kursk's industry was privatized in 1992 and 1993. The Kursk Tobacco Factory was also "privatized," but the state retained control of a majority stake. With the state as owner, a new team of young, energetic managers led by General Director Vadim Zakharov took over at the factory. Their first step was to modernize the enterprise so that its products would be more competitive. This process has continued for several years, and in the first half of 1999 alone, the company spent 1.5 million rubles on new equipment. The investment funds come from money the factory has earned, not outside credits.
The economic crisis starting on 17 August 1998 was a major benefit to the factory because it made imported cigarettes too expensive for most consumers to buy. While some former Camel puffers quit smoking altogether, many are now smoking Kursk's Primas. One dollar buys at least 10 packs of the local brand.
The plant purchased its new equipment from the Czech firm Skoda (a subsidiary of Volkswagon). The resulting product is of relatively high quality and reasonably inexpensive. The firm has also begun producing new products, such as filterless cigarettes, which it did not produce before. One of the key ingredients of the Kursk Tobacco Factory's success was its ability to win a contract with the Defense Ministry and the Ministry of Internal Affairs to supply
cigarettes to the Russian forces serving in Chechnya. As a result, the factory began to pay off its tax and wage debts. Salaries have been doubled and the number of workers at the plant has increased 25 percent. During the first half of 1999, the factory increased its output 25 percent in comparison with the first half of 1998. Even more importantly, sales have increased by a factor of 15.
LACK OF ALTERNATIVES HOLDS MONEY-LOSING COOPERATIVE TOGETHER
The Novaya zhizn cooperative of the Tim Raion specializes in growing wheat, barley, oats, and some livestock. In 1999, as in the last seven years, the cooperative lost money. According to Chairman Valentina Pozhidaevaya, of the 3,200 hectares available, only 200 were planted. The harvest was transferred to the oblast produce fund, but by the end of November the farmers had not been paid. For 2000, the cooperative only has enough seed to plant 200 hectares again.
Of the 400 cattle and 1200 calves the cooperative owned in 1992, only 98 cattle remained in 1999. The 14,000 pigs have completely disappeared during the last decade. Only the frame of the former pig sty remains.
The members of the cooperative have not been paid in seven years. The workers survive on the products they sell from the garden plots (milk, meat, potatoes). Why do they remain in the cooperative? Mostly from habit. Also the cooperative can still supply some equipment and fuel. Outside the cooperative it is difficult to obtain credits to work
independently.
The Rus egg-producing agricultural cooperative was the only enterprise in Oboyanskii Raion of Kursk Oblast that made a profit in 1998 and 1999. And its profits are quite large. The enterprise has thrived because it has learned to live on the basis of its own resources. It has also benefited from the leadership of Aleksandr Loktionov, who joined the enterprise after serving as a raionlevel bureaucrat. Loktionov combines a subtle analysis of economic trends with a professional knowledge of his field. He is described as a good organizer with a powerful understanding of human psychology.
Loktionov's decision to work in Rus demonstrates his leadership skills. He moved to the village of Rudavskii, Rus's home, from Oboyani, the raion center where he was born and grew up. This move strongly raised his standing in the eyes of his subordinates.
Almost every other former and current collective farm chairman or state farm director has set up or is currently preparing "an escape route," either building a home in the raion center or Kursk itself, so that they can avoid a life in the countryside. The sly Loktionov probably took this into account when he decided to live in a village. Today Rus is known across Russia.
The most important aspect of the egg business is the quality of the feed given to the chickens. In Kursk Oblast, the feed producers are monopolists, such as the Kurbakinskii Feed Factory in Zheleznogordkii Raion. The feed producers traditionally did not pay much attention to the quality of their product because the poultry farm consumers had no other suppliers. The farms were losing money because of the deceitful activities of the factory. However, Loktionov took action to solve this problem. First, Rus itself added the necessary supplements to the feed it bought locally to improve its quality. Then it began to buy feed in another oblast, from where it now gets 80 percent of its supplies.
The Kursk monopolist is now trying to win Rus back as a customer, promising to improve the quality of its feed. In 1996, Rus's chickens were each producing 160 eggs a year, in 1998, the figure rose to 264. The plant hopes to ultimately achieve a rate of 300.
TOURIST, HEAD HUNTING FIRM FAILS
The husband and wife team of Aleksandr and Irina Vorobev launched their firm Golubaya Ptitsa offering job search and travel services in 1997 with three friends. Aleksandr is a psychologist with a specialization in labor and professional training. He worked for a long time in the Kursk Employment Service and taught psychology at the university. Irina has a degree in language and literature and worked as a translator in the oblast administration. Initially, things went well and they were able to find a niche in both markets. Most of their customers were young people with college educations. However, after the economic crisis of August 1998, middle-income families began to spend less on travel and demand for the tourist agency's services fell off 72 percent. Only the rich continued to seek tourist services, but serving their needs was a different business. With many people out of work and few jobs to be had, the situation also began to stagnate for the employment agency.
Then Irina immigrated to Italy and the business became inactive. Now all that remains
is a site on the Internet, although Aleksandr is ready to start things up again.
MOSCOW BIOTECH RESEARCHERS UTILIZE OLD COW-SHED
One of Kursk's most noteworthy small businesses started in October 1998 in an old cowshed at the edge of the Ponyra village. Mikhail Lymin, a Moscow State University biology professor, founded Biosolyar MGU, taking advantage of favorable conditions offered by the local authorities and a $10,000 loan from the local Kurskprombank.
Using technology developed by the university, the firm produces biologically active food supplements from natural sources. The final product, called SPLAT, gives the adults and children who consume it a comprehensive supply of vitamins and minerals that protect them from a variety of diseases. Researchers believe that these natural sources of vitamins and minerals are much more effective than synthetically produced equivalents.
The Kursk enterprise hopes to soon produce a sufficient supply of the product to begin
large scale production.