Leningrad Region: Focus on Middle-Level Investments

The intensive flow of investment activity in the Leningrad Region results, to a certain degree, from its geographic location, as well as from the right focus chosen in this field. That's what Leningrad Region Vice-Governor Dmitry Yalov thinks.

– Dmitry, what priorities can be defined in the investment strategy of Leningrad Region today? Did strategic partner relations of the region change in any way, considering the economic turbulence which we've been seeing for the last year?
– Of course, the situation in foreign policy and economy made many regions revise their development strategies and economic forecasts. Leningrad Region was one of them. In the current circumstances, we can't hope to implement major investment projects with the support of the federal budget or monopoly companies. I have to emphasize, that a few years ago we made a fundamental decision to focus on middle-level investments.  It is great pleasure to list some of the high-tech companies, working in the region, such as Siemens Gas Turbine Technologies, 5Micron Engineering, Muller Candle Russia, NanoTechMed Plus, which were opened during the last year.
The intensive flow of investment activity in the Leningrad Region, which we have seen in recent years, results, to a certain degree, from its geographic location. Most of these investments were made in joint infrastructure projects of the Russian Federation with its major foreign and Russian partners. These are Nord Stream, Baltnefteprovod, the port in Ust-Luga and railways modernization. After these projects were completed, the volume of investments naturally decreased.

– There are now 11 cluster initiatives in the region, including 5 with high priority. Could you please share the latest news about the most actively developed clusters?
– We see the petrochemical industry as one of top-priorities for the economy. This results from both the geographical location of the region and availability of major oil and gas pipelines of Russia. Gigantic companies of the industry also work here – Kirishinefteorgsintez and IG Phosphorit. These factors in total guarantee successful implementation of investment projects in our region.
Recently some new projects were launched in the region: Baltic NLG for OAO Gazprom, construction of a terminal for production and transshipment of liquefied natural gas for JSC Cryogas and the Baltic Carbamide Plant for ICT Group. The investment effect form implementing these projects will be observed in 2016-2017. As they will be concentrated around the Ust-Luga port, it will help to diversify the channels for raw materials shipping.
As for the automotive industry, the market situation requires new business strategies from manufacturers.  On the other hand, government support is essential for them in the current economic conditions, so we elaborated a number of measures to provide it. These are partial subsidies of some costs for car manufacturers, working in the Leningrad Region, and the legislative proposal for tax remissions of 50% of the tax rate on the assets of organization.
New participants regularly join the innovative cluster of medical and pharmaceutical industry and radiation technologies, which today numbers around 120 manufacturers and 40 research organizations of Leningrad Region and St. Petersburg.
We are actively working on creation of one of the sectors of the Gatchina Nanopark cluster. This project is implemented by the regional government and supported by OJSC RUSNANO.
Another cluster project is Kapitolovo Life Science Park in Vsevolozhsk district, where pharmaceutical and biotechnological companies will take up an area of 50 ha. A few pharmaceutical companies already work in Kapitolovo, which should play a positive role in launching new industrial factories in that cluster.

– Does investors' attitude towards the areas, which were traditionally considered to be depressed, change in any way?
– It is an open secret that the most popular among investors to locate manufacturing facilities are the areas within the 50-km zone around St. Petersburg. But this does not mean that locations outside this zone are not attractive. For example, when the decision was made to suspend manufacturing at the Volkhov Aluminum Smelter, investors from Israel, Omen High Pressure Die Casting, offered to launch aluminum automotive details production at this site.
At the same time, we try to increase attractiveness of remote areas for business. According to amendments in regional legislation regarding government support of investments in three eastern districts (Boksitogorsk, Lodeynoe Pole and Podporozhye), the investment threshold for provision of regional tax remissions was reduced to 50 mln rubles. A state-run industrial park construction project is now being launched in Pikalevo: ready manufacturing buildings will be provided in this area, which is over 9 ha. We expect consumer goods, food processing and construction materials manufacturers to start working there. The industrial park will be able to host its first residents in the middle of 2016.

– What effect do you expect from the opening of the regional subcontracting center?
– The idea of this center was offered by Alexander Drozdenko, the head of the region, in good time. While prices for imported components are growing and these products are substituted by those manufactured by developing Russian companies, the subcontracting center must facilitate cooperation between regional businesses.
This project is implemented by the Leningrad Regional Chamber of Commerce and Industry. They are now developing a website to provide online help for businesses. It will be further integrated with other regional and international subcontracting systems.
I should emphasize: this center will work not only for big companies, but for small and medium enterprises as well. It will accumulate information about orders of major manufacturers, so that small companies can become their suppliers.

– What did the region present at the economic and investment forums and exhibitions? Were there any perspective contacts established?
– In our presentations both in Russia and abroad, we demonstrate the growth opportunities of the radiopharmaceutical and shipbuilding clusters, the automotive sector and our activities aimed to support these industries.
This June, while visiting Turkey, we saw great interest in partnership opportunities from foreign companies. The Economic Development Agency of Leningrad Region is active on different forums' contacts exchanges, we constantly collaborate with commercial consulates of Russia abroad, international financial and development institutions. And it all pays off. Today the Agency supports more than 100 investment projects with investment amounts from 300 mln to 5.5 bln rubles. A third of these projects is implemented with foreign capital.
We are now preparing for participation in the international investment forum in Sochi, where we are going to present our initiatives in the areas of industrial system development, public-private partnership and strategic planning. In October, our delegation will visit South Korea where we also plan to find reliable partners for Leningrad Region.