Collaboration between the authorities and businesses leads Yaroslavl Region to sustainable growth

As a business publication, we are more interested in economic issues. In this regard, how would characterize the general economic situation in your region today?

The economic situation in the Yaroslavl Region is excellent and, more importantly, is the fact that it is very stable. For example, the increase in the region’s industrial production last year was about 11%. This is almost twice the average national figure and it shows very good dynamics in the region’s economic development. I must specially note here that there are some very positive changes in our economy. During the financial crunch, some companies either had to slow down their modernization programs and economic efficiency boosting processes or reduce their staffs, as financial crises also have ‘a cleansing function’ as well. But today, these companies have achieved a qualitatively new level of performance. 

They might have become smaller in terms of size, manpower or production capacity, but today they are now totally new enterprises, from the point of view of efficiency and recoupment from injected investments. This is why today we are very positive in the region. However, we do not compare the volumes of industrial production before, during and after the financial crisis. In my opinion, it is not correct to compare production outputs in such totally different economic conditions. However, if someone wants to do, he can make such comparisons, but, in my opinion, the most important thing is the nature of the changes that have taken place, in other words, the volumes, quality and types of goods or services that are now being produced by the companies that had successfully gone through the crisis.

Economic crises are not only a tragedy, but also an opportunity to reassess business approaches, mobilize internals resources to exit from a difficult situation, etc. In this regard, what lessons did the region learn from this last crisis?

In Russia, there have been, at least, three financial crises in the post-perestroika period, all of which had given our local companies the unique opportunity of substituting imported goods with domestic products. The main question has been always whether or not we can adequately and fully make use of this chance. In my opinion, the latest crisis once again gave our companies this unique opportunity which they used properly. Here, one needs to really understand the specific feature of our region’s economy, and that is the fact that we don’t produce the so-called consumer goods. We are mainly involved in the production of machinery for various industrial sectors, for example, the production of machinery and components for the Russian gas and oil industry. For instance, when constructing huge platforms for oil drilling and processing, there is a need to protect them from the negative influences of the hostile environment with special antirust coatings. And, if prior to the crisis, Russian gas and oil companies used mostly foreign coating materials, they were, however, forced during the economic crunch to pay due attention to the domestic analogs, which are not worse in quality, but are much cheaper than their foreign equivalents. 

“The last crisis forced us to create more comfortable conditions for businesses in 2009-2010, and consequently, today, our legislation in the business sphere is of the best in the country.”

This competitive edge in price gave the Russian companies, including those in our region, the excellent chance to ‘conquer’ this market. Besides, the crisis has also enabled several companies to undergo drastic restructuring or modernization of their production facilities and comprehensive optimization of all their resources, including manpower. As a rule, it is always difficult to undertake such measures in ‘good times’ because the risk of stopping companies’ operations, but during crises, when things are already at their worst, such dangers usually do not exist.

Your region is in Russia’s so-called ‘Golden Ring,’ famous at home and abroad for its unique tourist attractions. In this regard, how would you assess the region’s tourism potential today?

The tourist potential of our region is huge and with much space for further development. I need to note here that the flow of tourist traffic into our region has risen by, at least, 30-40% in recent years, thanks mostly due to a boost in internal tourism. An important stimulus for further growth of internal tourism in our region came from the celebration of the Millennium Foundation Anniversary of Yaroslavl in 2010. Today, generally speaking, it is tourists from other Russian cities that come to our region, rather than foreigners. This is also another consequence of the crisis, as Europe and several other parts of the globe are still facing economic crisis, and consequently, this has a negative influence on the situation on the foreign tourist market, notably, the prices of tour packages, etc.

According to experts, Yaroslavl Region is among Russia’s most economically developed provinces. What is being done today to further strengthen its economic might?

Regarding economic development, experts have identified two factor groups, the so-called “hard” and “soft.” The hard factors include such issues as the geographical location of our region, its climate and other natural features that we cannot change, while the features that we can change and influence belong to the soft factors group. However, though we cannot change our geographical position, we can improve its accessibility. In this case, we are putting our focus on the region’s transport infrastructure, where we intend to direct the financial resources from the recently restored Road Fund. For this purpose, we have divided our region into several zones. Of course, crises always help us to look at various issues in a different way, but from the point of view of economy, we can only influence and change the soft factors. In this case, the last crisis forced us to create more comfortable conditions for business much faster in 2009-2010, and consequently, today, our legislation in the business sphere is one of the best in Russia. In particular, the concessional taxation law was improved.

I would like to specifically note here that we don’t view tax benefits as the main factor for attracting investors into our economy because such policy will devastate our budget. Instead, we’ve chosen another route, for example, we have prolonged the terms of tax benefits, more clearly set out the conditions and terms for such beneficial taxation, such as when the rules go into effect and when they stop. For example, the minimum period is seven years, while the maximum is nine years. But the main thing is that all these changes – the ‘new rules’ of the game, taxation benefits and other investment privileges, etc. — have been formalized legally, and therefore, are not dependant on the individual officials in the regional government, who are there today and might not be there tomorrow. Besides, investors have at their disposal a distinct and simple model of cooperation with appropriate officials via a special Work Group, consisting of relevant departments on the government level. This group efficiently solves all the problems that traditionally arise in the course of execution of investment projects in the region.

With all above-stated factors in mind, how would you briefly describe the prevailing investment climate in your region today?

Briefly, I would describe our region as a very comfortable place — here, I would like to stress the word ‘comfortable’ — for living and doing business. One can do his best in attracting investors, building lots of factories, but if the local population’s life worsens in the process, for instance, the residents start suffering from air pollution, bad transportation conditions, etc., such investors and their businesses will also suffer, because it will be impossible for them to function normally in an unfriendly environment. Indeed, our economic policy is directed, first of all, at defending the interests of our people. Besides, the unique feature of our economic team is that almost all of us came from business backgrounds, which means that we are aware of businesses’ needs and always try our best to satisfy them. The businessmen working in our region can confirm this. This is we have a balanced approach to investment policy in our region as to be able to do everything on time and smoothly for both the authorities and businesses, and according to the established plans and laws.

In this way, we don’t run ahead of time. It is not enough to launch powerful publicity campaigns, as being done in some regions, as it is more important for strategic investors for a region to have a clear, long-term program for regional development, which will clearly spell out what will be located where, what kind of people will be investors’ neighbors today, tomorrow, in a year’s time or in five years’ time. Also equally important is the availability of clear water, clean air and other modern facilities in such places. All this, I repeat, is much more important to strategic investors. This is why I can say that we conduct a conservative economic policy in our region, which includes a thorough selection process for investors, because we don’t allow all types of businesses in our region.

During the crisis, some governments had to save cash-starved companies, including private ones. What is the region’s plan, if any, to exit from such firms and under what conditions?

To summarize, the regional government did not make use of state funds to save private companies during the crisis. Indeed, during the economic meltdown, our state support was mainly limited to restructuring tax debts of cash-starved companies by giving them so-called ‘tax holidays.’ In other words, we were ‘loyal’ to them, from the point of view of tax collections, and the tax breaks afforded them was, in fact, tantamount to providing them with interest-free state loans. However, as in every rule, there were some exceptions, and these mainly concerned housing and public utilities companies that manage boilers and heating systems in our region. We don’t plan to exit these companies because of their social importance. Quite the contrary, we are looking for ways to further increase investment flows into such companies via construction of new modern boilers and heating systems in the region.