Chain of Finnish industrial villages to be set up in Russian Karelia
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A chain of industrial villages under Finnish ownership is to be set up in Russia near the Finnish border. In the early stages two village communities are to be established to support business activities in the area.
The aim of the villages would be to serve as stepping stones to help small and medium-sized companies enter the Russian market. Larger Finnish companies could use them for subcontracting work, taking advantage of lower labour costs.
The project is being promoted by Northwest Russia Investment Ltd., which was set up last year, and is owned by Finnish lawyer Hannu Krogerus and MP Markku Koski (Centre). NWR Investment hopes to serve as an umbrella organisation for local village companies, in which Russians would have a minority shareholding.
Preparations for the project have progressed the furthest in Petrozavodsk, the capital of Russian Karelia. Plans are to start construction at about the same time in the St. Petersburg area.
Under the proposed timetable, the first two villages are to be operational in 2008. A third would be set up in the Sortavala area, and a fourth possibly in Murmansk.
"It is common knowledge that it is hard for small and medium-sized companies to get on the move in cultural conditions that prevail behind the eastern border. At this stage we are dealing with the bureaucracy of the early stages, then we will build a secure and functioning environment to meet the needs of each user", says Keijo Mutanen, managing director of JOSEK, the regional development company of the Joensuu area in the east of Finland.
Mutanen says that a survey of companies operating mainly in eastern and central parts of Finland reveals that more than 50 are interested in the project.
The largest include the engineering companies John Deere, Metso, Cargotec, and Nokka-Tume. Companies in other fields include Perlos and JMC Finance.
Finnish experiences with industrial villages date back to the 1970s.
Key figures on the Russian side include Russian Karelia’s Governor Sergei Katanadov and Petrozavodsk Mayor Viktor Maslakov, who have acquainted themselves with a fairly fresh model for a village in Outokumpu, which was set up when mining in the area was phased out.
Katanadov also wants to attract educated people to the area to meet the needs of companies. Petrozavodsk, a city of 300,000 inhabitants, also has a university.
In addition to Keijo Mutanen, the board of NWR investment includes a number of influential figures with ties to Eastern Finland and businesses that operate there.
One of those involved is Paavo Pitkänen, a Lieksa resident who recently retired from his post of CEO of the work pension company Varma, and in the initial phases, MP Markku Koski.Mauri Niemi, who has been in the management of the construction companies Haka and Skanska, brings building expertise.
Pitkänen noted that the area east of the border offers companies competitive advantages that are easier to access than China or India.
Pitkänen also notes that these kinds of projects specifically in Russia require a joining of forces to as great an extent as possible, as well as participation by the state.
Promoters of the project hope to raise EUR 6-8 million from the private sector. When enough corporate owners join in, those who initiated the project plan to step down.
"The starting point for something like this must be that the project is economically sound. We are not collecting donations. We want willing participants in an activity comparable to real estate investment", Pitkänen says.
State participation will be needed. For the Russians, state involvement is seen as a sign of credibility. For investors and end-users, it reduces risk.
Indications are that state representatives are taking a positive stand on the matter, but decisions will not be made until the private sector takes the first step.
Public financing should account for about EUR 2 million, which is about one fifth of the whole sum.
Helsingin Sanomat
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| 17.5.2006 - TODAY |
 Chain of Finnish industrial villages to be set up in Russian Karelia
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