Daewoo to lend $500 million toRussian Car Assembler

South Korea's Daewoo will this year lend$500 million to a southern Russian factory assembling its cars from kits. MikhailParamonov, head of the Doninvest financial and industrial group, said the money wouldbolster charter capital at group member, Taganrog Auto Plant in Rostov region. BeforeDoninvest started assembling Daewoos, the plant used to make parts for combine harvesters.

The Taganrog plant has been granted the right to set up a specialbonded warehouse for all the kits it needs, to assemble 96,500 Daewoos a year. The partswill be exempt from tax and duties for seven years, a move crucial to winning theconfidence of the South Koreans, according to Paramonov.

Paramonov said it had taken too long to get all the documents forthe project ready - four-to-five months. But the Taganrog plant is now on schedule to turnout its first Daewoo Assols and Orions in March 1999 and its first Condors in earlysummer.

Doninvest already assembles Nexia and Espero models at anotherplant in Rostov region, Krasny Aksai. The former shipyard is currently putting togetherits last Esperos. It will switch to making the Musso and Orando off-road models by the endof the year.

Krasny Aksai is footing the entire bill to switch its assemblylines to make the larger off-road vehicles, Paramonov said. A final decision on when itwill re-open to make the off-roads will depend on how sales are going for the Daewoos madeat the Taganrog factory.

China to Buy Russian Fighters

China is planning to buy between 20 and 50Sukhoi-30M fighter aircraft from Russia in the near future, according to a high-rankingRussian foreign trade official.

He said that talks on the deal began last year with manyprovisions of the future contract already agreed upon.

Sukhoi designers are working on a modified version of the Su-30MKKfor China, which will differ from the Su-30MKI version designed for India.

It is not yet clear whether the plant in Irkutsk or inKomsomolsk-on-Amur will produce the fighters. According to experts' estimates, the averagebasic price for a Su-30MK is $35 million.

Ministry Says Changes in Store for MAPOComplex

The MAPO Military Industrial Complex (VPK MAPO), famous for itsMiG fighters, is to be restructured, according to the Russian Ministry of Economics. Thecomplex will probably spin off all divisions except the ANPK MiG Aviation Scientific andTechnical Complex, which designs the planes, and the MAPO MiG Moscow Aviation ProductionAssociation, which puts the aircraft together. In other words, engine and avionicsdesigners and manufacturers will probably be removed from VPK MAPO, together with theKamov helicopter designer.

The Ministry said there was talk of consolidating Kamov andRussia's other helicopter designer, the Mil Helicopter Works of Moscow. The planned entryto VPK MAPO by the Myasischev Design Bureau, as decreed by the Russian president, is nowunlikely to take place. VPK MAPO, which recently gained a new general director and chiefdesigner, Nikolai Nikitin, is working on the reorganisation plans in conjunction with theministries of economics and state property.

The complex has 12 divisions concerned mainly with designing andassembling MiG fighters.

Renault's Moscow Venture toTurn Out First Meganes in March

Renault's Moscow joint venture, Avtoframos,will start turning out its first Meganes in late March, under a $420-million project withthe Moscow city government. Vladimir Sablin, deputy head of the Moscow city government'sDepartment for Science and Industrial Policy, said Renault and City Hall were both readyto begin the project.The venture is currently seeking customs incentives under a specialgovernment resolution designed to encourage foreign investment in auto manufacturing,Sablin said. Avtoframos should produce 3,500 Meganes in 1999.

The venture, which was formed under a June 1998 agreement betweenthe two partners, will eventually have the capacity to make 120,000 cars a year. At firstthe Meganes will be assembled from foreign parts but eventually Russian content will be asmuch as 70 to 80 per cent.

Pottinger to Open Farm Machinery JVin Novgorod

Austrian farm machinery maker Pottingerplans to open a manufacturing joint venture in Nizhny Novgorod region. Boris Smetov, theregion's deputy governor, said the new plant at Nizhegorodagro-promtekhsnab, a farm inputprovider, and several Nizhny Novgorod engineering plants, would involve investment ofbetween $10 million and $15 million.

Pottinger in May and June of 1999 will provide the first 15 kitsof haymakers. It will also train staff and provide equipment for their assembly. A totalof 60 to 70 kits will be assembled this year. The venture should be registered by the endof 1999, he said. The machinery will be leased to plant hire facilities in the region -the newly re-established Machinery and Technical Stations, which provide hardware forfarmers. The venture could eventually produce 200-250 units a year.

Russia Raised Output of Pulp andPaper in Jan 1999

Russian mills this January raised output ofpulp and paper by 35.5 per cent and 22.8 per cent respectively - from the same period lastyear - to 110,000 tonnes and 22,000 tonnes.

Boris Masly, the first deputy minister of economics who overseesthe forest-product industry, said the new advances came after mills had weathered thefinancial crisis at the end of 1998.

Russia in 1998 raised output of pulp by 1.5 per cent to 3.21million tonnes and paper by 9.6 per cent to 2.44 million tonnes.

Masly said major new vertically integrated holding companiesperformed best last year. There are now more than 20 such companies in Arkhangelsk,Leningrad and Perm regions and the internal republics of Komi and Karelia. Output in thetimber industries of the areas where they are most developed rose by between 4 per centand 20 per cent.

The fate of the industry now depends on whether mills can makewinter purchases of timber. Forest roads become impassable in the taiga's muddy summersand some saw and pulp mills have recently been left without wood to process when stocksran out.

Masly said the government had set aside 800 million roubles tohelp mills build up stocks in the first quarter of this year. He confidently forecast afurther rise in output if mills were able to buy the timber they need by spring.

Samara Region to Offer 21 pc ofPharma Plant

The Samara Regional Property Fund March 12intends to auction 21.2 per cent of the shares in Farmtek, which produces all forms ofmedicines, cosmetics and medical goods. The Fund said the 13,898 shares would have astarting price of 25 roubles each. Farmtek has charter capital of 51,187 roubles,consisting of 36,343 common and 14,844 preferred 1-rouble shares.

St. Petersburg Firm, Siemens SecureFinnish Turbine Order

Leningrad Metal Factory and German electricengineering giant Siemens late last week signed a $16-million contract to provide a250-megawatt steam turbine for Finnish power company PVO. The St Petersburg firm will get$10 million out of the $16 million and will take a year to build the turbine. LeningradMetal Factory has also agreed to work with engineers from Iran to develop and transferturbine technology and train personnel.

The factory produces gas, steam and hydroelectric turbines. It hascharter capital of 490,296.5 roubles divided into 12,257,390 common shares, each with apar value of 4 kopecks. EMK, a Russian conglomerate, and its affiliates owns 55% of thefactory.

Russia, Italy Close to Deal onYak-130 Trainer Plane

The Russian and Italian governments on May16 will sign an agreement to work together to develop the Yakovlev Yak-130 trainer jet.

Alexander Dondukov, who heads the Yakovlev Design Bureau, saidItaly and Russia would take equal stakes in the project, which was much discussed during arecent visit to Moscow by Italian Prime Minister Massimo D'Alema.

A Russian-Italian government commission will now thrash out theexact details of the agreement. Russia is being represented on the commission by a teamled by Deputy Prime Minister Vadim Gustov.

A prototype of the Yak-30 ended flight tests in Italy thisJanuary. One of its passengers was the head of the Italian air force. He said he was veryimpressed with its performance. Italian flight training centres are expected to takereceipt of their first Yak-130s in 2002. They will be assembled in Italy from Russianparts.

Work, meanwhile, is already underway to prepare facilities tomanufacture the Yaks at Sokol, a plant in Nizhny Novgorod best known for assembling MiGfighters. The first four Yak-130s should have been put together as early as 1999. Now,because of under-financing, the plant will make just one. The plans, however, may berevised by the Italian and Russian engineers working on the project.

The potential world market for the plane could be as big as $10billion. Russia and Italy are expected to split the development costs of $200 million.Each plane will cost between $8 million and $10 million.

Aeromacci, the Italian firm involved in the project, is alsoservicing as Yakovlev's agent. It estimates 1,300 of the trainers could be sold by 2040.

Interfax/The Russia Journal