Investment climate in Russia: Ural region

1
Investment climate in Russia Ural region

• Alexey Kluyev director of the Institute of
  Management and at the Ural State University,
  Russia

2
Sverdlovsk region 

• Population 4.5 mln. Less than 13 of the
  population live in the rural areas.
• Economic advantages and disadvantages. Large
  deposits of iron ore, copper, coal, peat, gold,
  platinum, silver, manganese, nickel, titan,
  vanadium, asbestos, bauxites, precious stones,
  rare-earth elements. Strong defense industry,
  including about 50 plants and research
  institutes. Lack of power sources. Unprofitable
  agriculture.
• Specialization. In terms of production the region
  is the second largest in Russia (after Moscow
  region). Its territory hosts more than 2500
  mining and processing companies.
• Main branches of industry ferrous and
  non-ferrous metallurgy (including production of
  nickel, aluminium and copper) machine building
  and metal processing (including manufacture of
  unique equipment power and transport machine
  building production of chemical, press, lift,
  transport, mining and metallurgical equipment
  electrotechnics and radioelectronics chemical
  production (plastics, chemical reagents and
  paints, pharmaceutical, timber, paper, clothing
  and food production manufacturing construction
  materials and jewelry mining copper and iron
  ores, gold, asbestos, bauxites, peat and coal.
  The region is a monopolist in production of 50
  types of industrial goods.

3
Rating of investment climate in Russian regions
in 2005-2006.

• Maximal potential minimal risk (1A) none
• High potential moderate risk (1B) Saint
  Petersburg, Moscow region, Krasnodar region,
  Moscow, Sverdlovsk region, Khanty-Mansi
  autonomous district.
• Taken form Expert magazine ? 44 (538) of
  November 27, 2006

4
Main factors providing investment
attractiveness of the region

• Stable economic growth, higher than the Russian
  average
• Favorable geographic position on the border
  between Europe and Asia
• Proximity of large markets
• Presence of developed transport infrastructure
  and communication
• Presence of natural resources
• Sustainable industrial complex
• Presence of major holding structures and
  successful functioning of small enterprises
• Developed strategy of regional development
  Development and placement of production assets
  in Sverdlovsk region up to 2015 
• Developed banking sector
• High academic potential and level of education of
  population
• Presence of qualified labor resources.

5
Foreign investments ( mln. of US dollars)
6
Investment structure (countries)
7
Objects of investments

• Ferrous metallurgy
• Non-ferrous metallurgy
• Machine building
• Construction
• Utilities
• Agriculture
• Communications

8
Trade relations between Sverdlovsk region and
Germany in 2000 2006
9
Offices of German companies and their investments

• 72 joint ventures were created with the
  participation og German partners!
• Total investment into capital stock of joint
  ventures with German partners amounts to 119,7
  mln. roubles.
• Representative offices of German companies in
  Sverdlovsk region
• Deutsche Lufthansa
• Phoenix Contact
• Siemens
• Dresdener Bank
• METRO Cash Carry
• etc

10
Potential investment objects

• Ferrous and non-ferrous metallurgy creation of
  new production facilities.
• Development of construction in Sverdlovsk region
  (residential and commercial real estate and
  transport and logistic infrastructure), as well
  as introduction of new facilities on production
  of construction materials and creation of new
  technological centers of mechanical processing.
• Hi-tech production, including informational
  technologies and software.
• Creation of economic and production area Titan
  valley in Sverdlovsk region.
• Development of transport and logistic
  infrastructure, featuring international transport
  and logistic center on cargo handling and modern
  terminal at Koltsovo airport
• More than 1000 investment projects

11
Investment risks

• Unstable federal and regional legislation
• Unjustified interference of authorities into
  economic activities of companies
• Incomplete institutional reform
• Corrupted bureaucracy, high level of crime
• Conflicts with owners and managers of several
  Russian companies not following the norms of
  business ethics in their dealings with foreign
  partners
• Complications in obtaining objective information
  on companies and regions,
• Absence of business transparency.