The anti-crisis component of regional management: composition and instruments

To date, the Russian Government has established and implements a wide range of anticrisis measures, which is unique to number of forms and areas of governmental influence on the economy, the volumes of used resources.

Experts estimate that the total “cost” of anti-crisis measures about the real sector of economy in October 2008 – December 2009 amounted to 2.1 – 2.5 trilione rubles (figure) .

First ranks measures for access expansion of the real sector to financial resources (1.1 – 1.2 trilione rubles), second - measures for reducing the business load (budget losses – 500 – 700 billion rubles), third – social policy measures related to the stimulation of public demand, support for beginning entrepreneurs – 250 – 300 billion rubles, then – stimulation of domestic demand (180 – 240 billion rubles), and measures for small and medium businesses support (60 – 90 billion rubles).

Besides the activities of federal agencies, crisis situation required also a fast response from regional authorities.

For the Vologda region the problem of anti-crisis actions were very complex. On the eve of the crisis the region showed high rates of economic growth, it was a donor region. The crisis interrupted its progressive development. The greatest blow came in metallurgy. Decrease in demand led to landslide of prices for ferrous metals.

Enterprises of engineering, timber processing complex, glass industry and other industries which have production distribution problems are now in difficult situation.

Both in other regions of Russia and in the Vologda region investment activity has decreased, the implementation of some investment programs are put off until better times. The region Government faced the task to

Anti-crisis policy “costs” estimating in Russia

supporting

I—I Additional resources (billion rubles, the left scale)            Quantity of measures (the right scale)

implement operation measures aimed at protecting the citizens and economy from the crisis shock, to ensure economic viability.

Since October 2008 work on the forming of government anti-crisis plan of action had been begun, and by early 2009 it was transformed into a format of detailed arrangements for providing the sustainable functioning of economy and social field in the region.

Administrative resources are fully set in motion and the system of crisis reaction is formed. The regional inter-ministerial commission with the participation of members from the Legislative Assembly of the region, labor union organizations, law enforcement agencies, representatives of business community work actively. The staff of immediate reaction, sectoral committees on scopes of activity and commissions in the municipalities are operating.

In short terms were made the lists of system- and town-forming organizations having a right to receive the state support for inclusion the companies of the regional significance into the list formed by the Regional Development Ministry of the Russian Federation. The list of system-forming organizations was approved by the Government Commission on Dec. 23, 2008. The list of regional significance companies includes 19 organizations from the Vologda region. Governor’s order from 12.01.2009 № 14-р “On the creation of working group to improve the sustainability of the regional systemforming organizations” is adopted. Monitoring of financial and economic condition in the enterprises of regional importance is realized.

January, 13, 2009, the Governor order № 29 “About creation of the commission for cooperation with Severstal to stabilize the socio-economic situation” was accepted. In accordance with the schedule signed by Severstal and Cherepovetz City Hall June 1, 2009, the objects of social and cultural facilities owned by Severstal are transferred for free use of municipal formation “Cherepovetz” according to the contract № BP 9005. This solution alleviated the situation in the metallurgical industry.

A number of measures to stabilize the activity engineering plants are taken.

With the support of the Government by the order of the Industry and Trade Minister V.B. Khristenko, on 05.05.2009, № 380 the buses “Olympus” of JSC “Vologda Machine-

Building Plant” and trolleybuses “Avanguard” of JSC “Trans-Alfa Elektro” are included into the list of vehicles and municipal vehicles for the purchase by RF subjects. The request from Ministry of Regional Development of Russia on the grant to the Vologda region includes 17 models of buses and one model of trolleybus. The matter of product supply from JSC “VBF”, JSC “Vologda Machine-Building Plant”, “Vologda plant SKDM” for the needs of transport organizations are considered by JSC “State transportation leasing company”.

The regional machine-building enterprises were assisted in solving the problems of uninterrupted supply of heat and power (JSC “Electrotechmash”); debt offsetting for the consumed heat (JSC “VBF”), power outages preventing (Company “Crane-Service Plus”); resuming of power supply and connecting electrical equipment to the networks (Company “Cranes and Components”).

Within the bounds of stabilization of the timber complex are solved such issues as: the provision of additional subsidies from the federal budget in the amount of 61 million rubles for forest roads breaking, the subsidies from the federal budget in interest rates on loans to timber industry organizations of the region to create off-season stocks. To improve the financial state of forestry enterprises is provided rent for use of forest on the actual volume of wood processing with a delay of payments. A number of legal acts in part to establish order and standards of wood processing, non-timber forest resources and to set the rates of fees according to the contract of forest plantations sale for citizens' own needs is enacted. A decision on providing of state guarantees to some forestry enterprises.

Into the state forestry were filed 1987 applications on the allocation of timber for building of individual houses. Citizens wishing to build houses have got the opportunity to purchase 200 cub. m of timber (previously it was 10 standard cub. m). The cost of 200 cub. m of timber provided according to the contract of purchase and sale of forest plantations for their own needs, does not exceed 200 rub. (previously it was from 16 to 20 thous. rub.). From the total number of all applications 927 ones are satisfied, it means that sale contracts are signed with a total volume of 124.8 thous. cub. m of wood. And 400 people who received this form of support, have already mastered their plots. According to applications are extended terms of forest plantations sale contracts.

In the power industry are reduced limits of electricity and thermal energy consumption to organizations financed from the regional budget, taking into account the minimum energy consumption and energy efficiency measures (Decree of the regional government from 24.02.2009 № 334). During the first 9 months of 2009 volumes of electricity consumption decreased by 5.4% as compared with the same period of last year .

Today in order to provide state guarantees for loans guaranteed the suppliers of electricity and the Department of Finance assisted to “Vologdaoblkommunenergo” in obtaining a loan from Sberbank in the amount of 150.0 million rub. against the mortgaged property without the provision of regional guarantees. In addition, Bank “VTB “North-West” decided to granting the loan of 150.0 million without provision of the state regional guarantees to GEO “Vologdaoblkommunenergo”.

The governor of the region and “Mezhregiongaz” signed the amended schedule synchronizing the process of gasification program in the Vologda region according to the Treaty on cooperation between the regional government and “Gazprom”.

For agribusiness important was by the regional government approved Regulations on the allocation from the regional budget subsidies for reimbursement of expenses for purchase of mineral fertilizers. Grants for reimbursement of expenses for purchase of fertilizer are allocated by flax farms (agricultural organizations, re- gardless of their organizational-legal form, the peasant/farmers and individual entrepreneurs), flax organizations involved in the cultivation of flax and its processing.

For monitoring the situation in the consumer market of the region the lists is formed which identifies 11 types of socially important goods and 16 essential commodities, included into the standard market basket.

The decision of the regional government from January 13, 2009 № 8 “About the realization of plan action for the sustainable functioning of economic and social field”, in order to ensure the continued availability of socially important food products and goods of a standard market basket, to the enterprises engaged in food trade were recommended:

– to take measures for timely implementation of the calculations with the food and processing industries;

– for wholesale organizations – to provide a two-month supply of socially important food products of long term storage (salt, cereals, sugar, sunflower oil);

– for retail organizations – to provide the availability in the trade enterprises social goods and essential commodities.

Trading places on the regional retail markets by agricultural producers and enterprises of food and processing industry are provided in accordance with applicable law. The Register of retail markets includes 32 retail market, the total number of trading places is 3,247, the majority of them (63%) is non-food products. The largest number of trading places for the realization of food products is vegetables and fruits (243 seats), meat (187), grocery products selling (89).

To produce the food security of the population and to increase sales of agricultural production the sale of food products is organized through fairs and visiting trade. The bodies of local self-government provided 86 territories for the fairs with the organization of preferential trade places for the sale of agricultural pro- ducts. During the period from December 2008 to December 22, 2009 104 fairs were organized with a total turnover of about 204.1 million rub.

The regional budget provides compensation of expenses for the payment of interest on investment loans and loans to agribusiness, provides grants for the purchase of fuel and lubricants, mineral fertilizers, the development of animal husbandry.

The banking sector is a part of the infrastructure for effective functioning of the real sector in the regional economy. The monitoring results indicate that the region's financial system is stable. Since the beginning of 2009 credit organizations of legal persons granted loans worth over 12 billion rubles, the estimated average rate on loans was 17.94%.

To maintain a stable state in the financial sector of the region and to increase the availability of credit for the public and the real economic sector the government recommended managers of commercial banks to take measures to increase the loan portfolios at least in 2% per month.

The region government prepared a list of over 300 organizations providing a stable functioning of the economy and social sphere of the region and recommended for priority lending by commercial banks.

Special attention is paid to the use of small and medium businesses reserves.

The Vologda region became the first in the selection of the RF subjects to provide in 2009 grants to finance activities carried out with the state support of small business, and got subsidy for grants from the federal budget at the rate of 74.8 million rubles.

Government Resolution from 27.01.2009 № 118 of the long-term target program “Development of small and medium businesses in the Vologda region in 2009 – 2012” is approved. On the implementation of the program in the regional budget is provided an amount of 286.8 million rub., including in 2009 – 65.9 million rub.

The Program increases the access of small and medium enterprises to financial resources and borrowing through:

• ►    subsidies to small and medium-sized businesses to establish their own business (grant support);

• ►    guarantees for obligations based on credit instruments to small and medium businesses;

• ►    subsidies to small and medium-sized businesses for reimbursement of the cost to pay interest on loans borrowed from credit institutions, and leasing payments to leasing companies. On 25.12.2009, 175 applications for grants to offset the interest rate on loans for a total amount of 34.4 million rub. are approved;

• ►    subsidies on a return basis in the form of micro-loans to small and medium enterprise (microfinance). Recipient of the grant is SPKK “Vologda-credit”.

For organizations and individual entrepreneurs engaged in socially important sectors (food processing, textiles, garments, dressing and dyeing of fur, manufacture of folk arts and crafts, housing, tour operators activities) tax rate is 5% (by the Region Law from February 27, 2009 № 1960-RL “On establishing the tax rate on the tax levied in connection with the use of a simplified system of taxation for the year 2009”).

The rental tax rate rent for the rental property located in the regional property, property in order to support small businesses by small business organizations, are decreased by 30%, and the term of repayment of leased premises of 1,500 square meters is increased from 5 to 7 years.

The online “hot line” on the web-site of the Government is available to provide a constructive relationship between governments of all levels with the business community on issues of small business support and the elimination of administrative barriers.

To stabilize the situation on the regional labor market the government takes active measures to support and regulate optimally in the cur- rent labor market. In order to reduce tensions in the region is developed and approved by the region Government decision from January 14, 2009 № 13 the target program “Promotion of employment including activities to promote the employment of individuals under risk of dismissal in 2009” (modified on February 5, 2009 № 182). The Program is approved by the Interdepartmental Working Group on Monitoring of the situation in the labor market of the Russian Government.

The regular “hot line” is organized in order to take additional measures to inform citizens about the situation in the labor market and to communicate efficiently with the population of the region, also in employment centers “hot lines” operate. In the employment center of Cherepovetz from January 19, 2009 works multichannel “hot line” Anticrisis”. All phone numbers are available on the website of the Department of Employment, published in the city and regional newspapers. This information is regularly published in the newspaper “Labor Market”. Through a telephone “hot lines” 5,995 employers and 50,037 people who applied to the bodies of the employment service to find work were consulted. The region bodies of the employment service organized 89 specialized counseling and information kiosks for self-searching of work by citizens.

By the regional governments, municipalities, businesses implemented work to overcome the crisis situation gives some positive results. Some of the major indicators of changes in the socio-economic situation of the region up to 2009 are presented in the table.

But many problems of crisis situation still remain extremely sharp. First of all, this applies to increase of officially registered unemployment, imbalance of receipts and expenditures of the consolidated regional budget, reconstruction in exports of steel products.

To achieve the most effective use of available production and raw material potential of the region is possible through solving of some issues in the priority sectors of the economy

Some major indicators of the integral estimate of current socio-economic situation in the Vologda region

Indicator	Indicator value
Index of industrial production: -    January – August 2009 in % against January – August 2008 -    January – December 2009 in % against January – December 2008	76.6 87.6
Real cash incomes of population: -    January – July 2009 in % against January – July 2008 -    January – December 2009 in % against January – December 2008	83.4 86.6
The share of unprofitable enterprises and organizations, % - July 2009 - December 2009	41.4 22.6
Growth rate of overdue account payable of large and medium-sized enterprises: -    July 2009 in % to July 2008 -    December 2008	134.7 66.4
Growth of own revenues of the consolidated budget: -    January – July 2009 in % against January – July 2008 -    January – December 2009 in % against January –December 2008	60.4 55.2

and social sphere. For this it should reduce the share of primary industries, reduce the proportion of energy and transportation costs in the structure of production costs, adjust technical and technological level of production in accordance with modern requirements, accelerate the process of replacing fixed assets with a high degree of physical and moral deterioration, increase the use of production capacity, product competitiveness and level of intra- and inter-sectoral cooperation development among firms in the region, remove shortages of skilled personnel.

Implementation of anti-crisis measures, according to the choice of instruments, is going on two fronts: resources increasing in certain existing instruments, their “scaling” and the creation of new ones.

In the first direction objective is to maximize the beneficial uses of local competitive advantages of the territory with reference to domestic capacity increasing in the region and its position strengthening in the interregional and international markets.

In the second direction work is to overcome monostructure of the regional economy through diversification.

The forming regional innovation system creates the conditions for launch of new competitive products by enterprises, development of new types of equipment and technologies.

In metallurgy the production of high quality steel sheet for production of car body components hot-rolled with a polymer coating is being developed, equipment for non-contact ultrasonic quality control of metals is designed.

Technologies for rapid construction of residential, municipal, administrative and industrial buildings, production of modern energyefficient building materials and constructions are widely used in building industry; in wood processing are introduced biofuel production, lines for production of profiled timber and vacuum impulse timber drying.

Over the past years the chemical industry made a huge step forward in the technical re-equipment of production and brought it up to world standards. Factories of the Group “FosAgro” – JSC “Cherepovetzky Azot” and JSC “Ammofos” – did not stop launching their production, did not discharge people continuing to produce in the most difficult period. This became possible because production was modernized at the right time. The formation of sulfuric acid manufacture system is finished, the technological pipeline to deliver ammonia from storage is built, other measures led not only to increase production of mineral fertilizers, but also improve their quality are taken.

Support for chemical companies of Chere-povetz in economic crisis contributes to diversify the Vologda economy and get away from its hypertrophied depending on Severstal.

Of couse, in the near future economy of the region cannot fully “get down” from “steel needles”, but it is possible to use the crisis situation in order to partially balance the very strong influence of Severstal’s on region position.

Infrastructure of innovation are established in the region: business incubators in Vologda and Cherepovetz, branches of business incubators in regional centers of Belozersk, Gryazovetz, Sokol, Vozhega, innovation and technology center of VSTU, design and research center JSC “Sukhonsky river concern”; Centre of Technology Transfer of the Institute of Territories’ Socio-Economic Development of RAS; Venture Investments Center “Vo-logodchina”; more than 20 information and consulting centers. Two chambers of commerce and industry, city development agency (Chere-povetz), LLC “Vologda Bureau of Intellectual Property”, Business Club and Club for Business people (Vologda, Cherepovetz), production training centers in the universities are working actively. The coordination of innovation activity is provided by expert scientific council and the Council for Development of scientific and technical potential of the region.

A program of scientific and technical potential development of the Vologda region till 2025 has been developed by the Institute of Territories’ Socio-Economic Development RAS, aimed at ensuring the sustainable growth of scientific and technical potential, its effective use for territories’ socio-economic development and improving the quality of life.