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24.05.2013 22:22:00

Open for business (Rustem Khamitov article in a special report for Bashkortostan Euromoney magazine)

A wealth of natural resources, a strategic location and advanced technological know-how make Bashkortostan a natural venue for business. An introduction by Rustem Khamitov, President of the Republic of Bashkortostan.

The republic of Bashkortostan is one of the advanced industrial regions of the Russian Federation and that speaks for itself. We are in the top five of large Russian regions in terms of industrial output and agricultural production, and in spite of the effects of global crisis the Republic has manifested very positive dynamics of development.

The reason for that is that our economy is very diversified. Inevitably the predominant share of input belongs to oil extraction, oil processing and the wider petrochemical sector, but other branches of the economy are also operating efficiently. Machine building and tools engineering are developing, chemical companies are advancing well, and we are actively cooperating with large businesses in the sphere of copper and zinc extraction and processing. Even the agricultural sector is showing positive progress, despite adverse climactic conditions in recent years.

Our region is also characterized by a very low debt burden and we are in the top five Russian regions in terms of credit ratings from international agencies. We are keen to show that our Republic is very stable, that it possesses sustainable development prospects, that we are open to businesses and that we support businesses that want to develop their operations in Bashkortostan.

In pole position

Bashkortostan’s location is a key factor in its industrial development, both historically and for the future. We are situated in the centre of a major industrial zone that encompasses the Volga and Ural regions, a territory that is home to almost one-third of the Russian population. It is a huge market with huge potential, and our well-developed infrastructure and accessibility give us a crucial competitive advantage.

Even during the Soviet era, Bashkortostan was one of the core industrial regions of Russia and the Republic has for many years occupied a prominent position on the economic map of the country. Our task is to build on this traditional strength, which has in the past and will in future ensure that Bashkortostan is able to maintain its economic stability even in the face of external turmoil.

What is more, new opportunities are constantly arising. The new international highway from Europe to western China will pass through Bashkortostan and our position midway between the two will offer the potential to export our goods to both east and west. Local businesses are already working on projects to leverage this advantage by exporting agricultural and other products to China, and the new highway will also strengthen our historic ties to Kazakhstan.

Economic diversification

The petrochemical industry is vital to the future of Bashkortostan but its potential has not yet been fully realized, so development of this sector is our main priority. In May, Ufa will host the third annual Bolshaya Khimiya (Big Chemistry) forum, an international event initiated by the government of the Republic that brings together leaders in the field from both Russia and abroad. Meanwhile, regional corporate giants such as Bashneft, Gazprom Neftekhim Salavat and Bashkhim are already working on large scale projects in the region and planning further investment.

Over the next five to seven years, we expect the total volume of investment in the petrochemical sector to reach $10 billion, with the emphasis on high value-added production. The Republic itself produces 15 million tonnes of oil per year and we also have the connectivity to import raw materials from the north of Russia and Kazakhstan for processing in Bashkortostan.

We have all the necessary components for the development of a sophisticated petrochemical complex in terms of expertise, research and development facilities, and specialist universities. We have the capability to realise these ambitions and, more importantly, we have the will to do so.

Looking beyond petrochemicals, we also working on leveraging our significant competence in machine building and tools engineering. The Republic is already home to leading manufacturers of oil and gas servicing equipment, helicopters, aircraft engines and passenger buses, and there is huge scope for further investment in the sector.

Bashkortostan’s natural resources also extend well beyond its hydrocarbon and mineral wealth. The Republic is one of the top five agricultural producers in the Russian Federation and the national leader in terms of milk production. Meanwhile, extensive and relatively undeveloped forest regions offer significant potential for timber processing and associated industries.

Our beautiful landscapes are another valuable resource and we are actively encouraging the development of Bashkortostan’s tourism industry. Reliable snow cover and accessible slopes make the Republic a natural centre for downhill skiing, and we are also looking to promote the renewal and expansion of our well regarded spa and resort sector.

Supporting investment

All of these industries offer extensive scope for investment. Foreign and local investors are equally important for us and we are working to attract both. Clearly at present, however, external companies have the advantage in terms of efficiency, cost of production and quality of goods, which makes them key to our goal of modernizing Bashkortostan’s economy and achieving higher standards of living for our citizens.

We have passed regional legislation that allows us to offer very significant benefits to investors, from tax breaks to assistance with documentation for new projects. These measures are rapidly establishing the Republic’s image as a reliable partner, helped by our hands-on approach to dealing with investors.

In all cases, we do our best to meet the needs of investors coming to Bashkortostan. We are prepared to invest heavily in both time and resources to ensure that businesses find a positive atmosphere for development in the Republic, whether that takes the form of establishing an industrial park or free economic zone, or simply smoothing the process of procurement.

I personally meet with foreign investors, both large and small, and personally guarantee that they will find conducive conditions for investment, predictability of terms of cooperation and a positive working attitude in Bashkortostan. Our recent success in attracting sizeable investment projects in industries such as machine building, timber processing and petrochemicals is proof that investors greatly appreciate the honesty of our interaction with them and have confidence in the credibility of the regional government.

We have also forged strong links with local companies and enjoy the support of the Republic’s business community. We have been working hard for the past three years to improve the environment for business in Bashkortostan and our local partners confirm that we have already made significant progress towards our goals.

In addition, we are taking steps to ensure that investors from within and outside the Republic find the same level of support at both regional and municipal level. We are actively promoting a culture of open-mindedness towards and positive engagement with private sector investors throughout the various tiers of administration.

Small is beautiful

It goes without saying that small and medium-sized enterprises (SMEs) are very important for any economy and developing this sector is a priority for us in Bashkortostan. We have a unique opportunity here to nurture smaller companies that can work in synergy with our leading industrial firms in sectors such as petrochemicals and metallurgy.

Our task in government is to both encourage large scale producers to establish cooperation with SMEs and help smaller firms find opportunities for collaboration with their bigger counterparts. We want to see larger companies surrounded by hundreds or even thousands of SMEs that use their products as the raw material for the manufacture of high value-added goods such as plastics. We are currently working to facilitate the development of industrial parks in the vicinity of key producers, via a number of initiatives including the investment of state funds.

Bashkortostan is already home to a large number of successful SMEs but there is still work to be done to achieve western levels of entrepreneurship in the Republic. Establishing positive and sustainable interaction between large and small scale business is a complex managerial task but one that is crucial to the modernization of our economy.

Another top priority for the government is the development of Bashkortostan’s human capital. The Republic is already home to some of Russia’s most advanced universities, which between them address all of the region’s needs in terms of industrial production and the agricultural complex, and we are working to develop these institutions further to ensure that our most talented high-school graduates remain in the Republic.

A warm welcome

If further proof were needed of both Republic’s national importance and the hard work already undertaken by the government and people of Bashkortostan, it has been provided by the selection of our capital, Ufa, as host for the BRICS and Shanghai Cooperation Organization summits in 2015.

These events will not only demonstrate that the Republic’s infrastructure is capable of coping with the demands of large delegations from diverse countries but also provide an invaluable opportunity for us to promote Bashkortostan in terms of the global economy and global business.

Making guests feel at home is a key part of Bashkortostan’s traditional culture and we look forward both to extending a warm welcome to our established partners such as India, China and Kazakhstan and to establishing links with new markets in other growth regions.

(Original article)

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