Whatever the political situation between Moscow and Washington, Russian regional governors are keen to increase business ties between their regions and the US. In December, a delegation of corporate executives and Russian politicians, led by the governors of Nizhny Novgorod, Mordovia and the Jewish Autonomous regions, visited the US capital to tout the attractions of their respective regions, urge US companies to invest in them and lobby the US government to strengthen business connections.
The delegation gathered to receive the American-Russian Chamber of Commerce & Industry’s Golden Galaxy Awards at the National Press Club. The awards honour individuals and corporations that have successfully promoted trade and investment between the US and Russia and the Commonwealth of Independent States (CIS). Members of the delegation used the opportunity to promote FDI opportunities in Russia.
Addressing the gathering, Helen Teplitskaia, president of the American-Russian Chamber of Commerce & Industry based in Chicago, said that companies that were given the Golden Galaxy Awards realised a growth rate of more than 400% per year.
But she said: “Most Americans are clueless about what Russia has to offer,” especially Russia’s hinterlands. “There are incredible opportunities in the regions of Russia beyond the major cities of Moscow and St Petersburg. Salaries are still lower in these regions, and education is as good as anywhere else in Russia.”
Sergei Vdovin, minister of economy and deputy chairman of the government of the Republic of Mordovia, emphasised the investment potential of his state with its population of 900,000. “The advantage of my region is its workforce,” he said.
Mr Vdovin said that laws pertaining to FDI had changed and tax incentives had been added to offer preferential treatment for companies investing in Mordovia. “We are trying to use these to a maximum. We have also made changes in our legal and economic development policies, making Mordovia one of the leading states for economic development in Russia.”
Mr Vdovin said that Mordovia was located at the crossroads of the most important routes from the centre to the Ural region, Siberia, the Volga region, Kazakhstan and middle Asia and offered key logistics advantages. The republic had made the development of highways a priority over the past several years and had renovated its aviation systems and airport. The state was also rapidly developing its telecoms systems.
The improvements extended to leisure and tourism, he said. “We have realised that what most put business people off Mordovia was our bad service industry. Today, we offer these services and, in fact, have recently built the best tennis courts in the Russian Federation, along with soccer fields.”
As a result, in the past three years capital investment in Mordovia had doubled, said Mr Vdovin. “Still, these investments only represent $35m. And we do not have any American companies – most of the foreign investors that partner our industries come from Japan, the Netherlands and other European nations. Unfortunately, Americans do not partner much.”
One of the larger companies operating in Mordovia is Saransk Brewing Co, whose parent company, SUN Interbrew, is best known for its signature beers Stella Artois and Beck’s. SUN Interbrew is the second largest brewer in both Russia and the Ukraine. It is a strategic partnership between Leuven, Belgium-headquartered InBev (the number one global brewer) and the SUN Group.
“A foreign investor took a hand in launching the CJSC Saransk Brewing Co back in 1993,” said Mr Vdovin. Largely thanks to those funds, SUN Interbrew had turned the brewery into the largest malt factory in Europe and one of the few enterprises producing malt in Russia. Not surprisingly, SUN Interbrew was attracted to the Mordovia agribusiness sector, which specialised in the production of grain (wheat, rye, millet, buckwheat), potatoes, sugar beet and vegetables, and cattle breeding, he said.
Unlike other regions of Russia, Mordovia has no rich deposits of natural resources to fall back on. But it offers 10 different kinds of building materials, such as phosphorites, mineral dyes and brown iron ore (limonite). Some parts of the Moksha, Vad and Sura rivers contain deposits of unique stained oak – peat which is economically valued. And a vast deposit of diatomite amounting to 6.6 million cubic meters has been discovered in the republic. The development and processing of these could lead to the production of modern materials used for heat insulation, filters and refinery units, as well as for refining gas, gasoline and other petroleum products, said Mr Vdovin.
Quite different from Mordovia is Nizhny Novgorod, a city rich in history and culture located in the west of Russia, between the Tver region and St Petersburg. “The region is wealthy in agriculture, industrial manufacturing, mining and oil production,” Gennady Khodyrev, Nizhny Novgorod’s governor, told the awards gathering.
With a strong energy base, the region had attracted companies developing chemical, petrochemical and fuel capabilities, he said. The economy supported many industrial sectors, such as construction material and glass manufacturing; wood-pulp and paper production; food processing; medical and pharmaceutical research; and textiles. It also boasted a thriving tourist trade centred on exquisite folk and decorative art.
Nizhny Novgorod is also Europe’s largest manufacturer of solid wheels for railway cars, locomotives and underground trains, and is world renowned for its natural sciences and technology research centres, including nuclear physics and radio electronics, power engineering, and biomedical technologies. The region is a transportation hub, with an international airport, railway cargo terminals and numerous large river ports.
Mr Khodyrev said that the local government made the investment climate easy by offering tax exemptions to foreign companies that wanted to invest in the region. “That’s why around 50% of overall output in the region comes from the companies with foreign capital,” he said.
The Saratov Aviation Plant in Saratov, in the western oblast of Saratovskaya, has business partners in Europe and the US. General director Alexander Ermishin said that in 1992, the plant had 15,000 employees and owned a large amount of worker housing, several collective farms and health-care facilities. Today, it is Russia’s leading aircraft and aircraft parts manufacturer. It also repairs and provides technical servicing, manufactures special equipment, and modernises aircrafts.
Oleg Uspensky, general director of the Scientific Research Institute Atoll in Dubna, a town in the Moscow region, told the audience that his company offered 38,000m2 of technological incubator space. “These are modelled after those in the US.” Boeing already had a presence there and was working with the Russian Aerospace Industry to develop a partnership in the aerospace and information technology sectors, he said.
Developments that have come out of the institute to date include Aqua, a sonar sea-bottom system for surface and underwater monitoring, and Dolphin-1, a rapidly-installed sonar alarm system for detecting intrusion on vessels.
Part of the reason for presenting the Golden Galaxy Awards in Washington was to give representatives of such companies, and of the regions in which they operate, a chance to meet US government representatives to improve ties between the two countries.
Congressman Curt Weldon, honourary co-chairman of the American-Russian Chamber of Commerce & Industry who spoke at the event, stressed the importance of this relationship: “We have a common agenda and that is to weed out terrorism.” A strong Russia-US relationship was particularly important, given Russia’s strategic location near Iran and North Korea, he said.