KAMCHATKA REGIONAL PROFILE

DECEMBER 1999

SUMMARY
Kamchatka Oblast is a Russian Far East (RFE) territory with an economy based on fishing and related industries. Kamchatka's vast natural resources are underdeveloped. The region depends on imports of fuel, food products and equipment. Kamchatka's natural resources and proximity to the Asia-Pacific region create some opportunities for U.S. exporters despite the low purchasing power of a sparse population. 

GEOGRAPHY

Kamchatka Oblast is a 472,300 square kilometer territory in the RFE washed by the Bering Sea and the Sea of Okhotsk. The regional economy depends on fishing and fish-processing. Fish and seafood are the primary exports and a source of cash to pay for imported food products and fuel. Kamchatka is rich in natural resources, including gold, silver, copper, natural gas, and coal; but lack of infrastructure, remoteness, high energy prices and fuel supply disruptions hinder regional economic development. Kamchatka's substantial timber reserves and lack of technology present an opportunity for U.S. wood processing equipment exporters. 

BEST SALES PROSPECTS

 Fishing vessels; 
 Fish processing equipment;
 Wood processing equipment, especially dry kilns;
 Fuel;
 Food products. 

POPULATION

Kamchatka's population, gradually decreasing, totaled 387,100 people in July 1999. While it has three towns and a number of settlements, more than half live in PK. Many work for seasonal fishing and fish-processing industries.The average salary in June 1999 was USD 156, a 150 percent nominal growth and a 30 percent real decline compared with June 1998. Kamchatka's State Statistics Department estimates that wages constitute over 60 percent of the family income in Kamchatka, versus about 40 percent for an average Russian family. Ten percent of the population earns about one quarter of total income. 

Kamchatka has more passenger cars than Russia on average - 140 vs. 114 vehicles per 1,000 people. The number of automobiles in Kamchatka reached 82,600 vehicles: 66,000 passenger cars, 12,000 trucks and over 4,000 buses. 

FOREIGN TRADE

Kamchatka exports fish (93 percent of the total exports in 1998), machinery (3 percent in 1998, a dramatic drop from 38 percent in 1997), and timber (4 percent). Its major imports are fuel (73 percent), including oil and oil products. Import volume decreased significantly after the financial crisis of 1998; Kamchatka companies had to switch to cheaper imports and domestic products. In addition to established partners in the United States, Canada, Germany, Poland and China, Kamchatka found new ones in Romania and the Czech Republic. 

REGIONAL EXPORTS & IMPORTS (million USD)
Goods 1995 1996 1997 1998 
Export 393.323 447.078 481.669 332.809 
Import 147.065 187.16 376.206 221.447 
Services 
Export 24.823 25.971 19.53 11.604 
Import 37.722 18.036 24.094 60.565 


KAMCHATKA'S MAJOR TRADING PARTNERS
Exports 1998 Imports 1998
United States 63,647 United States 51,905
Japan 123,478 Germany 3,834
South Korea 56,346 Cyprus 16,215
Germany 9,502 South Korea 119,965
China 32,947 Other 29,528
Other 46,889 
Subtotal 285,920 Subtotal 191,919
Total 332,809 Total 221,447


FOOD PRODUCTS

Over half the food products Kamchatka consumes are imported. Kamchatka's food imports in 1998 exceeded USD 23 million, a 41 percent decrease in the dollar value of imports from 1997. Imports of pasta, butter and potato declined by 11, 7.5 and 5.7 times respectively; imports of fresh fruits decreased by 28 percent. Pork and soybean oil were the only imports to increase. 

As a result of the August 1998 financial crisis, there has been growth in the food-processing sector. Fishing canneries increased output 12 times, bakeries and meat processing plants by about 30 percent, and dairy plants by 23 percent. 

KAMCHATKA FOOD IMPORTS

1996 1997 1998
Meat & Poultry 11,188 12,306 10,028
Processed & Canned Meat 7,363 6,087 2,811
Dairy products 1,465 1,215 123
Fruits 5,142 5,142 3,690
Vegetables 1,014 969 361
Wheat & flour 9,072 6,127 1,746
Oil 700 613 341
Other 13,928 7,357 4,052
Total Imports 49,872 39,816 23,152


FISHING INDUSTRY

The fishing industry continues to be the basis for Kamchatka economy. However, its production decreased due to unfavorable fishing conditions and reduced quotas. The fishing industry income rose due to the price increases in international markets. Pollack, salmon and crab are the most important species. Sales of cod and flounder have gone down. 

Many Kamchatka fishing companies have an outdated vessel fleet. U.S. companies that market refurbished fishing vessels and fish-processing equipment may find opportunities in the region. As Russian companies often lack cash to pay up-front, leasing or other flexible financing techniques should be considered. 

TIMBER INDUSTRY

136 wood and wood processing companies operate in Kamchatka. Most lack equipment and sell raw timber to Japan and Korea. Local government officials say that, in general, the industry is not profitable; however, the 1998 ruble devaluation improved the situation. The industry represents an opportunity for U.S. exporters of wood processing equipment. Small-scale and refurbished equipment is marketable in Kamchatka. Furniture manufacturing equipment may also attracts Russian buyers. 

ECO-TOURISM

Eco-tourism could be a promising industry. Hiking and helicopter tours to picturesque volcanoes and geysers, salmon fishing, bird watching tours and river rafting trips attract over 4,000 tourists annually. The number of tourists from the United States has decreased slightly in recent years while the numbers of Japanese and European tourists grew. Local companies have started marketing eco-tours in other regions of Russia.

Most travel agencies in Kamchatka are intermediaries between tourists and one tour operator, Krechet. The latter has exclusive licenses to operate a dozen certified tourist routes. It invests in infrastructure, including the helicopter fleet and tourist cabins with modern utilities and western fixtures. Crechet is a dynamic company with excellent facilities but insufficient marketing. It seeks a partner to promote Kamchatka eco-tours in the United States. 

GOVERNMENT

Current government officials in Kamchatka are Soviet-era political leaders. PK is among a few places in Russia where the main street and the local legislative council have kept their Soviet-style names - "Lenin Street" and "Soviet of People's Deputies". 

The good news is that lately they are no longer waiting for Moscow to provide solutions to Kamchatka's problems, but are willing to seek them. Local officials are likely to express their frustration with the lack of U.S. and foreign investment and are eager to consider any project/deal in their region. 

BANKING

Kamchatka has neither Moscow-based nor large regional banks. Kamchatagroprombank is the largest local bank; it offers electronic wire transfers, letters of credit, and commercial loans. The bank administers a small business loan program under a partnership agreement with the U.S.-Russia Investment Fund (TUSRIF). 

TRAVEL INFORMATION

Aeroflot and its spin-offs serve Petropavlovsk-Kamchatsky (PK) from Moscow, St. Petersburg, Khabarovsk, and Magadan. Reeve Aleutian has two weekly flights to Anchorage, Alaska. Charters from Japan are available during the summer. FESCO freight vessels stop in PK enroute from Seattle to Vladivostok. Many importers use airfreight services.

The major hotels in PK are Petropavlovsk and Oktyabrskaya. Petropavlovsk is a former state-owned hotel. The facilities greatly improved recently as most rooms were renovated and a power generator installed. Electricity and hot water are available around the clock. There is a restaurant and a cafeteria that serve decent food. The music can be too loud in the restaurants after 8 pm. 

The Oktyabrskaya is located two blocks from the local government building and was built to house visiting Communist party and government officials. The receptionists are very friendly and even turn on the hot water if asked - the hotel supplied hot water for two hours twice a day when BISNIS representative stayed there.