Forum number one

The Sochi Investment Forum
Москва, 20.08.2012
«Expert: invest in Russia » №2 (2)
The international investment forum in Sochi can be considered as a business card of the Krasnodar Territory for Russian and foreign investors. According to Krasnodar Territory Governor Alexander Tkachev, the forum is an indicator of the Kuban economy: investment projects presented by the area in Sochi demonstrate the most relevant trends of its development

Photo by ITAR-TASS

Last year, the Krasnodar Territory broke another record in attracting equity investments: RUB 676.2 billion growing at the rate of 108.1% as compared to 2010. Among the Russian Federation constituent territories, Kuban is ranking third in terms of investments in the regional economy lagging behind Tyumen Region and Moscow only; and among the regions of Russia’s South, the Krasnodar Territory is a sole leader of the investment process. According to the Russian Federation Ministry of Economic Development, the 2011 results show that the Territory ranked second in the rating of Russia’s most attractive areas for investors; Kuban has a 1A ranking (maximum potential— minimum risk) in the rating of investment appeal of areas maintained by Expert RA agency.  

Last March, Alexander Tkachev, uninterruptedly governing the Krasnodar Territory during the last decade, was re-appointed to serve for another governing term of office. The main objective to be achieved by Mr. Tkachev in the years to come is to maintain the economic and investment growth rate achieved during the last five years as a result of building the 2014 Sochi Winter Olympic Games facilities. For this purpose, Kuban will have to continue diversifying its regional economy by focusing on the rapid development of industries, tourism, and new agricultural sectors. The Sochi international investment forum is an important basis for achievement of the said purpose. During its relatively brief history, the forum has transformed from a small regional event in which only 70 investment projects participated in 2002 into one of the most important international investment platforms of Russia. It is in Sochi that the most important projects of the Krasnodar Territory have been presented for the last few years; therefore, the forum has been the key business event of the year for the area since long ago.

Hypermarket of investments

— Last year, the Sochi investment forum marked its tenth anniversary. How would you assess contribution of this event to the economy of the Krasnodar Territory during the last few years?

— You know, those times are similar to the present days to some extent. A new investor continues to be worth its weight in gold, and businesses learn to trust again: we were simply unknown back then; but today, we live in the post-crisis period and anticipate unconsciously the new crisis. However, a good offer has always been valuable on the market. This concerns the Sochi forum as well. Ten years ago, we created a product without parallel in the country. It was a kind of a supermarket, in which every investor could find what it needed: in one place and with quality guarantee. We were aware that the area would have no future without an inflow of investments. We started to develop the image of the area and create appropriate conditions for businesses; on the other hand, we started to build our image from the forum. It was made from fractions. 

And here we have the result: the leading rating agencies, experts of the Russian Ministry of Economic Development, business publishing houses have emphasized the investment climate of the Territory for years. For example, the area has held the first positions according to the Forbes rating for several years. And the Sochi forum is one of the milestones of our system of investment handling. Last year, sixty Russian regions participated in the forum. This was the first record. More than 1,700 projects were presented: this was the second record of the jubilee forum. However, I would like to emphasize that we are not after quantitative indicators. It is not so important how many participants will come; it is more important to know how many real agreements will be signed and how much real money will come to the economy.

— What are the most important investment projects of the area that were presented for the first time at the Sochi forum?

— You are unlikely to remember that the Krasnodar Territory signed just eight agreements at the first forum. And last year the number grew to 295! Over one thousand contracts worth more than RUB 1.5 trillion have been signed just within a decade. Those figures are impressive, aren’t they? Therefore, the statement that the economy of the South grows with the Sochi forum is the exact wording. The largest and the most important projects for the last few years have originated from here. Following conclusion of agreements at the forum, companies such as Nestle, KNAUFF, and Bonduel built their factories here. Sea ports in Tuapse and Novorossiysk started to be reconstructed. The first electrical steelworks in the South of Russia was built in Abinsk; an entire cluster of advanced wood processing and furniture production is created in the Apsheronsk District. Our new projects will be implemented in various fields: agriculture, industry, resort places, the Sochi Olympic Games and Formula-1, the 2018 World Football Championship, and many others.

— In what area was the Sochi forum organization changing? How does forum respond to the unstable macroeconomic situation?

— We are trying to follow the world’s standards of organizing economic forums. For this reason, the 2010— 2011 forums were held in the cluster format. This means that the entire portfolio of the investment offers of the Territory (in total, over 1,500 projects) were broken down into four fields: agriculture and consumption, resort and residential property, industries, transport and infrastructure. I think that this is the most efficient approach in economy management: it permits to use the potential of territories to the maximum extent. It is not incidentally that the cluster development is part of the Krasnodar Territory’s strategy. During its development, we took into account the key points of the regional economic growth and the investment mechanisms of their future development.

Rush hour for power engineers

— Recently, you have mentioned several times that the Territory places stake on industrialization. This can be also proved by projects presented at the forum by the area. Does it mean that the traditional agricultural sector for the area moves to the background or becomes less interesting for investors?

— Making food products will never move to the background. They are demanded and, accordingly, their prices will continue growing around the world. However, agriculture cannot compete with industries in terms of return per unit of the surface area, per ruble invested, and per worker. But every year, agricultural investment projects are launched in the Krasnodar Territory weighing hundreds of millions and even billions rubles. For example, a milk and meat mega project with the full cycle is built in the Pavlovovskaya District and is worth about RUB 3 billion. In the Belorechensk District, a coffee factory has been operating since 2010 and a canning factory construction is about to be completed. Last year, a modern rice processing complex was launched in the Abinsk District. Almost all of these projects originate from the Sochi forum. And efficiency of agricultural projects is proved by the results achieved. Last year, the Krasnodar Territory broke its own record: it harvested almost nine million tons of grains, excluding rice, corns, and other basic plants. Only bread. The yield was the best for the entire history: nearly 57.5 hundredweights of wheat per hectare. Quality is steadily growing as well: food wheat totals over 80%. So, agricultural business will always hold the firs position for Kuban. But at the same time, we have five or six basic sectors forming the modern developed economy. They include industries, resorts, construction, transport and power engineering complexes. For the last couple of years, we have placed stake on diversification of the entire economy, and the crisis 2009 year showed how important and how dangerous keeping all the eggs in one basket is.

— One of the important topics at the last year jubilee forum associated with the industrial emphasis in the economy of the Territory was development of power engineering. From this perspective, the Krasnodar Territory is an example of how the developing regional economy depends on the possibilities of the power engineering system.

— This is indeed so. Many things have been built in the area for the last few years; the resort field has been growing; industries and small businesses have been developing. Therefore, electricity consumption has been growing at the record rates for Russia: by 7% annually. And when it comes to large cities such as Krasnodar or Sochi, consumption is growing even faster. We have a problem at hand. This is why a large-scale program of the power engineering system development has been launched in the area. The amount totaling about RUB 70 billion is invested in it annually. These are huge funds invested by the local and federal budgets, power engineering and network companies, and their results can already be seen now. The acute problem of unreliable electricity supply from the Black Seaside near Anapa has been resolved. The power engineering sector, the second problematic field in the area, has been actively developing in Krasnodar. And the Sochi area of work is naturally the largest one.

— Are power assets here built according to the schedule?

— Of course, they are. I would like to emphasize that, on the whole, we owe such large-scale investments in the program of reconstruction of the local power system to the Olympic project. Six generation assets with the capacity of over one thousand megawatts will be built under programs of development of Sochi as a ski resort and construction of Olympic facilities. Construction of the Jubginskaya TPP is included in the program of building Olympic facilities as well. During the games, it will guarantee reliable electricity supply in case of peak loads and, first and foremost, will ensure normal lighting of the vast mountain areas of the seaside. In addition, our area is a pioneer in promotion of investment projects relating to development of renewable sources of energy. Installation of several wind parks on the Black and Azov seaside is actively designed at the moment. Unfortunately, the lacking law on alternative energy is a real obstacle in this field.

Business warming in resort places

— Development of resort places is one of the key topics to be discussed at the Sochi forum. Last year, you said that Kuban would receive up to twenty million tourists annually. But what is more important: targeting the number of tourists or quality of rest in resort places of the Krasnodar Territory?

— Ten years ago, we received two to three million tourists and we all thought that this number could not be surpassed. But today more than 12 million tourists visit Kuban annually, and this number is not surprising any longer. If we consistently develop our resort places, build modern hotels, modernize the infrastructure, expand the range of tourist services, and improve recreation quality, the figure of twenty million tourists annually will be quite realistic for the area. Please note that this figure is not pulled out of a hat: this is the result of serious research done by specialists. The recreation potential of the seaside and mountain territories of Kuban is quite high and is far from being used at 100%. Here is an example: we have recently placed stake on tourism development on the Azov seaside. Huge opportunities are dug into sand here in the truest sense of the word, and they have not practically been realized. In the Temriuk District, only one fifth of two hundred kilometers of beaches is currently used! And even they are not appropriately equipped. However, Taman has both a unique climate or nature and a rich thousand-year long history and culture. The Azov seaside must become a mecca for tourists. In addition, one might not know that Azov is a lifejacket for all those suffering from allergy thanks to combination of the sea and steppe climate.

— Of course, it is extremely important that prices of tourist services correspond to the level of services and that the latter be appropriate. However, no resort place will be able to function and develop without a massive flow of tourists: economic laws in Turkey, Croatia, or Spain are the same. As the saying goes, no water flows under the lying stone. This is why we actively promote both traditional seaside rest and its alternative types: business, wine, events, and green tourism.  

Travel business is a kind of a theater where the audience has be always kept surprised. At present, for example, Ataman, a unique outdoor museum reconstituting the life of a Cossack village as it was two hundred years ago is very popular. You can see huts, smith shops, market, celebrations with traditional dances, trick riding there: everything that was important for Cossacks two centuries ago. All those that visited the museum have enjoyed Ataman’s colors and originality. But there must be a lot of such assets.

— Do you think that creation of special tourist and recreational economic areas will give some growth points to the Territory?

— Of course, it will! I will go even further: this will be the renaissance of the resort field. Creation of special economic areas makes it possible to force development of the sector. These are serious preferences for businesses: investors can profit from the infrastructure built by the Government, plus customs and fiscal benefits.

Today there is one such area in the Apsheronsk District. It will help emerge an ultramodern resort place of Lagonaki, which has already been renamed into the “tourist Skolkovo” to the point. The amount of investments will total RUB 12 billion. About RUB 9 billion of this sum will be invested in developing the infrastructure. This is a unique project and the territory is not less unique thanks to its beauty. But at the moment, there is no normal road here. For this reason, first and foremost, we start construction of the major highway from Krasnodar to Apsheronsk and design a mountain resort cluster that will be able to compete with the Krasnaya Polyana resort in the future. Modern cable ways and ski slopes, as well as hotels and entertainment complexes will be built in the mountains. This means that the Apsheronsk District currently receiving 200 thousand tourists a year will receive at least one million people in the near future. Many inhabitants of the district and the area will be employed and tax payments will flow to the local budget. And all of these investments will primarily improve the living standards of Kuban residents. 

— What are the largest tourism projects that have already been successfully implemented as a result of the Sochi forum?

— These are dozens of modern hotels and healthcare complexes. Children and adults have enjoyed the new seaquarium in Sochi for three years in a row; the Polar Star recreation center in Gelenjik has been reconstructed into a five-star hotel; a beautiful Sea Gardens apart-complex has been built. The five-star Gamma hotel has been built in the Tuapse District. A multifunctional High Shore complex is being built in Anapa. We do not forget about the Azov seaside: a new dolphinarium was opened in the village of Golubitskaya in July last year. And this is only the first phase of the large-scale project of the resort infrastructure development worth RUB 1.5 billion. A seaquarium, cafeterias, restaurants, amusement arcades, and other recreational facilities for adults and children will appear in the village in the years to come.

Krasnodar

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«Expert: invest in Russia »
№2 (2) 20 августа 2012
A unique chance for escape
Содержание:
North Caucasian Federal District
The Sochi Investment Forum
Economic Results 2011
South Russia
Investments in the North-West
Investments in action
The labor market
Investment appeal Rating of Russian regions
Republic of Sakha (Yakutia)
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