Main page / Society /

Yaroslavl Region exemplifies ideal partnership between government and businesses

Author: Inga Friedelhaus Section: Society

Issue: April 2012, Vol.7, No.4

Tags: Yaroslavl Region

print-friendly version

Modern Yaroslavl Region is one of the most dynamically growing and economically developed areas in Russia, occupying top positions in key parameters of social and economic development in the Central Federal District, the home to the lion’s share of the country’s industrial might.

The region’s advantage stems from a balanced structure of its economy and the presence of the so-called ‘economic stabilizing industries’ such as oil processing, petrochemicals, machinery manufacturing, paint-and-varnish industries, etc. The region is historically positioned as an important transportation and distribution hub and trade zone in the northeastern of the European part of Russia. In terms of strategic perspective, the region is striving to become the regional center of the Upper Volga area.

The region’s three-year budget, adopted last December, envisages further enhancement of the region’s economic potential that will enable it achieve a budget surplus by 2014. According to the Regional Parliament’s press department, the budget for 2012 comprises incomes of 39.35bln rubles and expenditures of 43.48bln rubles, putting the deficit at just 4.13bln rubles or 9.5% of expenditures. In the long-term development scenario, the budget for 2013 anticipates revenue of 42.25bln rubles and expenditures of 42.41bln rubles, putting the deficit at 146.75mlm rubles, while the budget for 2014 envisages revenues of 46.74bln rubles, while expenditures will peg at 46,54bln rubles, which translates into a budget surplus of 198.50mln rubles.

Speaking at the Economic Council of Yaroslavl Region, one of the central events organized within the framework of the Region’s Industry Day, Governor Sergei Vakhrukov stated that the region’s GDP totaled 300bln rubles in 2011, up from 252.83bln rubles in 2010. “This is a huge achievement, the exact target that we had sought to attain. The region’s industry accounted for over 30% of this figure. Most enterprises in this sector boast new technologies, products and reductions in production costs.”

“The region’s main advantage stems from a balanced structure of its economy and the presence of so-called ‘economic stabilizing industries such as oil processing, machinery production sectors, etc.”

The governor specifically underlined his team’s clear understanding of the region’s development strategy. “Today, we have created a positive image for our region. Investors have highly rated the region’s economic climate. And, we are ready to continue to provide the necessary support for businesses in the future,” he added. “It is also important that the region’s achievements have been recognized at the federal level. This year, we are in the top six Russian regions in terms of dynamics of economic development on the basis of three main parameters: increase in regional GDP, increase capital investments and increase income tax.”

The governor also noted the fact that special tax benefits have been put in place in the region for priority investment projects and the program aimed at the reduction of administrative pressure, streamlining of business inspections and provision of easy accesses to financial credit. Also, a new cluster-structured format has been created in the regional economy. “All these measures are beginning to yield a significant synergistic effect. Therefore, I believe that the business climate in our region will even become much better.”

The head of the region also specifically noted the adoption of tax incentives for priority investment projects and programs aimed at reducing the administrative burden, streamlining inspections of businesses, provision of access to credit and adoption of a cluster development structure for the regional economy. “All these measures have already started to have a significant synergistic effect in the economy. Therefore, I believe that the business climate in our region will be become much more favorable.”

The beginning of the region’s economic success story

Today, the Yaroslavl Region is one of the most industrialized areas in Russia. The region’s economic success started in the early 1990, when the regional administration focused on activation of foreign trade and inter-regional policy. As a result, the products of Yaroslavl Region-based companies are supplied to several other Russian regions and over 100 countries worldwide today.

According to Rosstat’s data, the region today has about 6,000 large- and medium-sized business entities. Of thise, almost about 1,400 enterprises are engaged in industrial production, while another 300 businesses have federal significance and are leaders in their respective industries. The region’s main economic industries include machinery

building, oil processing, chemical, petrochemicals, wood-processing, food industries, etc. Major companies in the region include the Yaroslavl Engine Plant (diesel engines), Rybinsk Engines Plant (aviation engines), Rybinsk Instrument Making Factory and Yaroslavl Tire Plant, which accounts for one-seventh of Russia’s annual tire production output.

Besides, companies in the region also manufacture electric engines, food industry equipment, printing equipment, woodwork machinery, fuel pumps, photographic paper, building materials, etc. The energy industry is represented by the Uglich and Rybinsk hydroelectric power plants on the Volga River. It must be noted here that industrial goods account for about 50% of the regional GDP, which is much higher than the national average value that is about 38%.

Today, the regional government has a raft of international trade agreements with a number of foreign countries such as Belarus, Vietnam, Germany, Uzbekistan, Ukraine, Montenegro, Estonia, etc. The region’s staple export products include machine building and petrochemical industry products, whilst its main imported products include machine building products, chemical industry products, consumer goods, etc. According to the regional statistical data, companies in this region export their industrial products to over 70 countries and import products from about 60 countries. Its largest trade turnovers are with Ukraine, Germany, Poland, Kazakhstan and China, which are the region’s biggest trade partners in terms of the volumes of purchased goods and services. The countries outside the former Soviet Union top the importers ratings, whist Ukraine is the runaway leader among the CIS countries.

Sectorwise, the largest share of the region’s total volume of exports comes from machine-building products (48.8%), followed by chemical industry products (40.1%). The imported products mostly comprise machine-building products (54.7%), which are required for the manufacture of other goods and equipment, such as car manufacturing, chemical industry products (11.5%), food (11.8%) and metals and metal goods (10.1%).

Investment policy farsightedness – key to the region’s sterling success

The attraction of direct investments to the Yaroslavl Region’s ecconomy is one of the key aspects of the prgram, ‘Strategy for Social and Economic Development of the Region,’ tasked with laying down the relevant conditions to satisfy all modern business requirements in the region. This strategy, amongst others, envisages the attraction of investments into the region’s car components, engine building, pharmaceutics, petrochemical industry clusters, etc. Other goals of the strategy include the development of building and constrcution materials, creation of the inter-regional customs and logistics complex in the region, etc. For example, the amount of declared investments from the residents of the pharmaceutical cluster exceeded 10.5bln rubles in 2011. Other industrial clusters can also boast of similar or even more ambitious achievements in the sphere of attracting stattegic investment capital.

Thus, according to the governor, today over 50 new investment projects, with a total price of several tens of billion rubles, are being implemented in the region, a fact that reflects the overall positive tendencies in the development of the region’s economy. “The total volume of capital investments injected into companies was over 42bln rubles in January-September 2011, which overshot the results of 2010 by 17%. Besides, according to the economic performance results for 2011, the region’s revenue exceeded 30bln rubles,” he adde. “We’ve good potential for further growth of our revenues, a fact which is confirmed by the growth forecasts, where the revenue in 2012 will increase to 35.3bln rubles, 40bln rubles in 2013 and 44.6bln rubles by 2014.

“The region’s three-year budget, adopted last year, envisages further enhancement of the region’s economic potential that will enable it achieve a budget surplus by 2014.”

Thus, commenting on the region’s investment policies, Deputy Governor Igor Elfimov, who oversees the economic issues in the regional government, noted that the latest crisis made the authorities accelerate their work on creating even more comfortable conditions for entrepreneurship, a reality that has turned the business legislations into one of the best in the country. “But the most important thing is that all the changes, such as adoption of the ‘new rules of the game,’ tax benefits and other investment privileges, are fixed in laws, and therefore, do not depend on the personalities of the regional officials that are working in the adminstration today and might be gone tomorrow.”

All these positive trends and efforts turned the region into a default industrial haven for the world’s leading strategic investors. These include the brewing concern Baltic Beverages Holding, the owner of the local Yarpivo brewing company, tobacco concern Altadis, the owner of the Yaroslavl factory, The Balkan Star, American firm, DuPont, a co-investor in the DuPont Russian Paints joint venture. Other investors include the American company, Eastman Kodak Co., a manufacturer of colour photographic paper and photo chemicals, Japan’s Komatsu, the assembler of excavators, French company Snecma, which jointly with the Saturn, makes new aviation engines for the Russian SuperJet aircraft family, German company Metro Group, which owns the Metro Cash&Carry retail and wholesale hypermarket and REAL retail hypermarket. Also in the region are the Luxemburg-based Astron Buildings, the manufacturer of buildings from light metal structures, the Danish company, Velux, the manufacturer of mansard dormer windows and Inpark Group, which owns and manages its subsidiary, the Pereslavsky Technopark, in the region.

Another major growth driver in the economy is the availability of a modern, well-developed transportation system, with Russian and international significance, which comprises the railway, automobile, water and air communication routes to different regions, including the northern and eastern parts of the country. One of the key parts of this transportation system is the regional international airport, Tunoshna, which is capable of serving large fuselage passenger and cargo aircraft, such as Boeing 757 and Il-96 planes.

Besides, the airport also serves regular flights the Dexter air taxi company on the Moscow-Yaroslavl route. The airport’s facilities and potential enable it to relieve the overloaded Moscow air hub, as it helps transport cargo deliveries from the neighbouring regions, such as Vologda, Kostroma, Ivanovo and Tver to other destinations within Russia without passing the capital. The status of a ‘major transportation gate’ constitutes one of the region’s key competitive advantages most adjacent regions, and consequently, it is one of the leading economy growth drivers, including tourism, in the region.

Tourist potential Russia’s ‘Florence’

Yaroslavl Region is one of the most famous cultural and historical centers of Russia, which is a part of the world-renowned ‘Golden Ring,’ a cluster of tourist routes across ancient Russian cities that have been able to preserve their unique historical and cultural monuments till modern times.

It is precisely for its abundance of unique objects of cultural, historical, and architectural heritage and other landmarks of high touristic value as well as unique mix of diverse architectural styles that Yaroslavl Region is often called ‘Florence of Northern Russia.’

In addition, the regional government is doing everything possible not only preserve these historical treasures, but also to increase them, disbursing lots of financial resources for this purpose. For example, within the framework of the ‘Regional Special Program for the Development of Tourism and Recreation in 2011-14’ about 2.23bln rubles will be disbursed to the municipal and city’s districts to implement their tourism development programs.

All these unique features have won universal acclaim, as indicated by the inclusion of the historical center of the city of Yaroslavl into the UNESCO World Heritage List in 2005. This fact, together with national celebration of the 1000th Foundation Anniversary of the city in 2010, which was organized on a grand scale, has put the entire region to a new level on the global tourist routes map.

Therefore, it is not surprising that tourists from all over the world frequently come to the region to see the numerous churches and monasteries, masterpieces of architecture from Yaroslavl’s ‘Golden Age.’ For example, Yaroslavl Region, according to 2011’s results, was the first in Russia in terms of the number of attracted tourists per capita, topping the traditional leaders of Moscow and St. Petersburg. Also, the inflow of tourists to the region grew between 2010 and 2011 by one-third to 1.8mln tourists, ahead of the other regions in Russia’s Central Federal District.

The opinion of a strategic investor

Alok Kumar, the CEO of Inpark Group, which owns and manages the Pereslavsky Technopark in the region, highly rated the efficiency of the investment policies being implemented by the regional administration’s economic team. “The positive approach to resolving investment matters, such as the development of clusters, etc., has already impacted greatly on the development of the region’s economy, where such industries as pharmaceuticals, biotechnologies, tourism, automobile components, power industry are booming.”

All these positive trends, the strategic investor noted, have contributed to the fact that today the region boasts one of the highest industrial growth rates in Russia and occupies 4th/5th place in terms of the volume of attracted direct foreign investments per capita in the country. Therefore, it is not surprising that last year the rating agency, Fitch Ratings, raised the region’s long-term rating in foreign and national currencies, from the level ‘BB-’ to ‘BB,’ as well as its long-term national scale rating from ‘A+ (Rus)’ to ‘AA- (Rus)’.