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What’s the secret behind investment attractiveness?

In the recent 5-7 years Kaluga Region became synonymous with investment success. New production facilities are being opened here each year, automotive and pharmaceutical majors come to the region, two new airports and international schools are to open in Kaluga Region. Why suddenly investors became so fascinated with Kaluga? Ilya Veselov (left photo), Director General of the Agency for Regional Development of Kaluga Region, shares the secrets behind this success.

— Mr.Veselov, Kaluga Region demonstrates high development rates, and investors continue to come to the region. Why?

— Kaluga Region has built a reputation of a reliable business partner. Such a reputation makes many companies view it as either an entry point to the Russian market, or as a good place to expand its business in Russia. Apart from that, we strive to adapt our proposals to business and investors in line with changing requirements and  market conditions. Currently many Russian regions compete for investors. That’s why we try not to be left behind, and offer new development areas.

— What makes Kaluga Region so attractive for investors?

— It is quite interesting that our analysis showed that tax benefits and preferences are not the decisive factor from the investors’ point of view. Investors appreciate comfortable business environment, as when entering the Russian market they are mostly concerned about lack of transparency, which is manifested through bureaucratic barriers hampering interaction with local authorities.

Kaluga Region Government and, first of all, the Governor, managed to create a transparent system, i.e. investors always know whom they should turn to. A number of development institutions was established in Kaluga Region, which completely takes care of dealing with the authorities. Investors do not have to visit numerous territorial department of various federal agencies, as representatives of Kaluga Region Development Corporation and the Agency for Regional Development can do that. And all relevant procedures are absolutely transparent for the investors.

— You lead a very interesting, and, I would say, even unique institution established by Kaluga Region Government – the Agency for Regional Development of Kaluga Region. What are its specific objectives?

— The Agency for Regional Development was established back in 2000, and it evolved significantly during these years.  It has been actively engaged in investor support since 2007-2008. Initially we provided consulting services associated with project technical support, namely, related to construction permits receipt, development of engineering infrastructure, etc. Today these functions are performed by Kaluga Region Development Corporation, which was established in 2007. Its objective is the following: to take a greenfield site and turn it into an industrial park, simultaneously helping investors to speed up the process of their production facilities construction. That’s why we show record-breaking results in terms of major plants construction timing. For instance, Samsung plant was built in just 9 months.

The list of the Agency’s key functions includes Kaluga Region image shaping and promotion with the target audience being potential Russian and foreign investors. Today we focus on attracting foreign SMEs to Kaluga Region, however this is a very complicated process – the smaller the company, the more vulnerable it is to various risks and the greater is its dependence on the market conditions. We hold various events, work in close cooperation with mass media, help our companies to participate in exhibitions to sell their products abroad and find new markets. This year Hannover hosted a major Russian exhibition, and a number of Kaluga companies took part in it. It is worth mentioning that these were traditional Kaluga Region companies, which were established prior to 2000. The exhibition was a success, and we plan to continue working along this path.   

The development of the Center for Private-Public Partnership is still another promising area. The Center is engaged in development of relevant documents and regulatory framework for projects implementation. These are mostly social projects based on concession concept, like the only “cultural” concession in Russian – the Goncharov’s Mansion in Polotnyanyi Zavod.

We also monitor the development of Kaluga Region municipalities. There are 24 municipalities and 2 urban municipalities in Kaluga Region. If we look at the region map, we will immediately notice that industry develops mostly in the northern territories, which are closer to Moscow. We are concerned with such an unbalanced development, and our objective is to kick start industrialization of the southern territories. The first step in this direction was the establishment of Lyudinovo Special Economic Zone.

The creation of the Center for Agro Industrial Complex Development is an entirely new area for us. We are just in the early stages of this project, but it is already clear that the center will provide integrated support to investors in the agro industrial complex.

— Could you name other companies you want to see operating in the region?

— We have created Kaluga Region development strategies till 2020 and 2030, and we clearly see what we want. First of all, we strive to continue developing the automotive cluster. Currently it comprises over 20 companies, but this is not the limit. Volkswagen is to build an engine plant by 2015, Volvo started the construction of a cab plant. Therefore, we will get a strong rationale for attracting auto component manufacturers. Apart from that, local companies become integrated into the production chain.

Furthermore, in addition to manufacturers, we want to get innovative technologies. That’s why  we do our best to develop science-intensive industries, such as pharmaceutics. Obninsk has a solid educational foundation and production basis for such a development – a nuclear medicine center, R&D institutions, universities. This foundation was built back in the Soviet times. For this reason we have established a technology park there to promote science-intensive production facilities construction and  establishment of collective use centers.

We also plan to implement a major project in Vorsino industrial park within the framework of agro industrial complex development. This project provides for production and processing of agricultural  products. We hope that farms and food industry will be developing in parallel, and the project has every chance to be a success, as Moscow, a huge market, is located nearby.

— Could it be that the inflow of external investors will negatively impact local SMEs?

— And why could it happen?

— Just because investors enjoy support and get preferences. What about small and medium businesses, which do not have the investor status?

— It is true that we provide support only to investor, but this means that we do not discriminate between Russian and foreign investors. They get equal support. Previously we were reproached by Russian business, who claimed that we provided benefits to foreign companies. But we always  explained that the same rules applied to everyone: make investments, engage in re-engineering and modernization, introduce quality control standards and systems, purchase new equipment, and apply for tax benefits and support. We are ready to support any companies making investment. But it is not viable to provide any benefits for nothing!

— What is your secret? Why Kaluga Region is so successful, while other regions having the same climatic conditions and located on major federal highways fail?

— There is no secret behind our success. Everything depends on the governor: if the governor truly supports development initiatives, is really interested and involved in the process, the success is eminent. All the people supporting business are target motivated. Investors get direct access to the governor, and the governor is personally interested in further growth. You should act, not simply complain – that’s all.

And by the way many regions are quite successful – for instance, Nizhny Novgorod, Ulyanovsk, Yekaterinburg, Belgorod, Kaliningrad... Naturally, we are proud of our success, but we always keep in mind that it is just the beginning of a long way.

By Larisa Porshneva

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