An economic forum in Krasnodar Krai highlights the region’s economic potential

The investment potential of Krasnodar Krai was in the spotlight at the second international economic forum, Kuban-2003, in Sochi on Oct. 9-12

Under the slogan "Krasnodar Krai as Russia’s investment window on the world," the forum presented more than 250 investment projects in the Krasnodar region, with a total value of $5.5 billion.

Experts say that Krasnodar Krai’s economic activities for 2002 paint a picture of rapid growth. The region is still the leader in the Southern Federal District for foreign-trade volume.

According to official statistics, Krasnodar Krai’s foreign-trade turnover rose 31 percent, or $465.7 million, and to $2.1 billion. The region finished the year with a positive trade balance of $106.9 million.

Krasnodar Krai, blessed with a mild climate, fertile black-earth soil and well-developed ports, is a region with immense agricultural, industrial, tourism and scientific-technical potential, local and national experts boast.

And both Russian and foreign experts agree that the region has high investment potential. One of Krasnodar Krai’s key advantages is its direct access to international waters through its eight ports, three international airports and one of the best road networks in Russia.

The region also has excellent agricultural potential. After a recent working visit to the region, President Vladimir Putin said that agriculture had been one of the main subjects of discussion at his meetings there.

"Krasnodar Krai is our breadbasket," he said. "This is well-known, and I know that the people there are proud of this."

The region’s mild climate also makes it is ideal for development of tourism and leisure activities, experts say.

"All these factors, along with the excellent raw-materials base for the processing industries and the advantageous geopolitical location, mean that we have all the necessary conditions for successful investment projects that will bring profits to investors who take a realistic look at the opportunities we offer," said Pavel Maleyev, head of investor relations at regional telecom Southern Communications Co. "This region is comparable in size to a European country and could offer highly effective placements for billions of dollars of investment," he said.

A good beginning

The Kuban-2003 forum signaled the region’s increased visibility as an investment prospect. High-level participants from government ministries, foreign embassies, leading Russian and foreign companies, banks and consulting firms attended the event.

Participants were told of Krasnodar Krai’s economic-development program for 2003-08, a plan that envisages higher growth rates than that for the country as a whole. Gross regional product is set to increase two-and-a-half-fold, real incomes should rise 60 percent, investment volume is to more than double, and labor productivity will double or triple, depending on the sector. The program also calls for the creation of more than 100,000 jobs.

The plan includes more than 300 investment projects for a value of more than $5 billion. It places particular focus on the region’s transport system. Krasnodar Krai is set to eventually become one of the main transit regions, not just for Russia, but for the whole of Europe, local officials say.

Currently, the region’s ports process more than 100 million tons of freight a year, with major growth expected in the near- to medium-term. To manage that increase, officials say, modernization of freight terminals, construction of new terminals and development of the transport infrastructure will take place.

Relations with investors are clearly improving. Following the first investment forum in 2002, eight agreements for a total of $30 million were signed

Officials here were particularly hopeful about plans to build a new port on the Taman Peninsula that will be larger than the one in Tuapse. In addition, there are plans to build a motorway to Sochi to make a shorter and safer route to Russia’s southernmost resort town.

Relations with investors are improving, officials say. Following the first investment forum in 2002, eight agreements for a total of $30 million were signed. This year, 36 agreements totaling $4.6 billion have been signed. Of this, $500 million will be invested in the region’s economy over 2004, while the rest will come over the next 10-15 years as part of long-term programs.

These projects include the construction of a transport hub in the southern part of the Tsemesskaya Bay that will encompass port facilities, as well as rail and road links across the Markotkhsky range, a number of resort projects and energy- and agricultural-sector projects.

Officials were most pleased that the forum received the support of the federal authorities and that, from now on, this major economic event in the region’s life will take place under Russian government patronage.

"Through these projects, a number of towns and cities will stop being dependent on budget money, the region’s budget will get new revenue and people will get new jobs," says Maleyev. "This is why the regional authorities are so keen to attract investors and organize mutually beneficial co-operation with them."

The market players

Companies working in the region include Germany’s Knauf, American Philip Morris, major Russian oil pipeline KTK, Wimm-Bill-Dann, Nestle, Rusagro, Baltimor and Ochakovo.

French foodstuffs producer Bonduelle, which has been on the Russian market for eight years, decided last October to open its first Russian subsidiary in Krasnodar Krai. Christophe Bonduelle, the company’s general director, says that, aside from the agricultural potential, support from the regional authorities and a qualified labor force played a role in the choice.

Krasnodar Gov. Alexander Tkachyov met last year with a delegation from Bonduelle. Their talks led to a joint program spread over several years and providing for investments of more than 30 million euros in the region’s economy. As part of the program, Bonduelle will build a vegetable processing and canning plant in the region to produce more than 60 tons of ready to use products a year.

All of the planned investment projects in the region have the support of the federal, regional and local authorities, officials say.

The region’s administration says that it is open for cooperation with Russian and foreign partners. Support comes in three main forms – administrative, financial and legislative.

Administrative support aims at speeding up the various administrative procedures projects must go through, while financial support will see that the region’s budget gets allocated about $300 million annually to help implement them.

Legislative support will entail tax breaks for investors. The region’s assembly has passed a law offering tax incentives for Russian and foreign companies that will remain in force until an investment project is paid off. Banks and leasing companies taking part in financing projects are also being offered tax incentives.

Tourism – a mainstay of the economy

With its warm sea, healthy climate, mineral-water sources and healing mud baths, Krasnodar Krai has long since been popular as a resort region. Russia’s main seaside resorts – Sochi, Anapa, Gelendzhik, Tuapse and Yeisk – are all here.

The region is home to more than 1,300 health and resort centers that can accommodate a total of 220,000 people. The sanatoria have equipment and facilities for treating all the main types of diseases.

This year, nearly 6 million people visited the region’s sanatoriums and resorts through organized tours, and there is also a huge number of people who holiday in the region on their own.

Unlike elsewhere in Russia, the tourist season in Krasnodar Krai does not end with the approach of winter, as resorts and sanatoria are open year-round.

Krasnodar Krai is the only region in Russia to have tourism-sector tax revenue as a separate item in its budget.