Amur Region: Benefits for investments

Oleg KOZHEMYAKO, Governor, Amur Region:

"The Amur Region is one of the largest subjects of the Federation in the South of the Far East. A considerable advantage of the region is its geographical position giving opportunities for creating close economic relations not only of interregional importance with Far East Federal subjects, but also international production cooperation with its neighbor China and Asian-Pacific countries.

Large transport corridors, Trans-Siberian Railroad, Baikal-Amur Road, federal highways Chita-Khabarovsk “Amur” and “Lena” connecting Far Eastern Regions with Siberia and the European part of Russia having access to Europe and the Northern Sea Route, go through the Region.

2011 became a breakthrough year for Priamurye under some social and economic performances laying basis for further regional development. It became a year of intensive economic development and raising of living standards: industrial production and construction growth, investments and population income have increased. On the whole, industrial production rate in the Amur Region went up to 118.0% and mineral resources mining index increased up to 138.5%. New facilities for gold processing were put into operation; power sector of economy continues to develop. Machine-building enterprises got a shot in the arm. However, we understand that we are only in the beginning of the road.

It is known that economy development directly depends on the volume of equity investments. Our Region has really encouraging perspectives in that area! Pace of investment growth is 137% (106% for the RF), the Region ranks 9th in Russia for the volume of investments in per capita terms.

The Regional Government has developed the Strategy for social and economic development of the Amur Region for the period of up to 2025. It is aimed at life quality improvement based on the stable and continuous economy growth. As a result of complex transformations we expect enhancement of competitiveness in the Region’s fight for resources (labour, investment and other). Formation of a favourable investment climate and positive Region’s image supporting attraction of investments into sustainable production growth for stable social and economic development and competitive growth of the Region are the most important tools in effective strategy implementation. The Region has adopted a long-term special purpose program “Establishment of a Favorable Investment Climate in the Amur Region”, which is basically is complex action plan for creation of best conditions for doing business. We are continuously moving along this road and are willing to cooperate with Russian and foreign investors".

A present view at the Priamurye economy, an estimation of the regional strategic potential, its export possibilities and proximity to the sales markets allow to see the regional economy structure differently, supported not only by traditional activities, but also by development of highly-technological types of production involving high level of extracted minerals processing, tourism and space industry. To develop new industries and evolve the existing ones the region has all necessary conditions for investment attraction.

Certain competitive advantages allow for diversification of the Amur Region economy. Proximity to the largest, skyrocketing Asia-Pacific Region market keen on development of integration with the Russian Far East, as well as central position of the Oblast in the regional transportation system and international transport corridors are among the above. The Region has production facilities, necessary engineering infrastructure and available generating capacity. In addition, the richest mineral resources base is located in the Region, favorable natural and climatic conditions support development of agriculture.

All the above competitive advantages are supported by programs for development of the Region and priority industries and by Regional Government actions aimed at creation of a favorable investment climate. State guarantees of the Amur Region, tax benefits and holidays, deferred taxes and tax payments by installments are provided to potential investors by the Regional Government. It is planned to establish zones of priority development providing the possibility of an investment tax credit.

The Amur Region has already improved its investment performances having moved in 2011 from 65th to 53rd rating position as to its investment risk and is at group 3B: “inconsiderable potential - moderate risk”. Last year RUB 123 billion were invested into the regional economy and social area, 60% of which were drawn by infrastructural projects.

Advanced processing in the focus

Priamurye is rich in natural resources. Within the last few years the Amur Region became a leader in gold production not only in the Far East, but all over Russia. However, similar to the majority of the Far Eastern territories mining industry of the Region was focused only at a primary processing and export of mineral concentrates. The Project “Formation of a Mining and Smelting Cluster in Priamurye” will change the situation radically: the Region will move from the raw-material - intensive economy to advanced processing of raw materials and manufacturing of products with high value added.

The mining and smelting cluster formation project is implemented in two neighbouring regions, the Amur and Jewish Autonomous Regions, and includes construction of metal enterprises complex united by advanced processing of the iron ore, transportation and energy infrastructure, having also nationwide importance. Group of companies PETROPAVLOVSK is a project investor. Its total value is estimated as RUB 107 billion, more than 14 billion have been already invested

Development of Kuranakh titanic iron ore deposit and production of the titanic iron concentrate, the primary product for titanium production, has been started in the Amur Region within the mining and smelting cluster formation project. As of today project capital expenditures amounted to RUB 8.5 billion. Garinsky Ore Mining and Processing Enterprise to be constructed on the basis of an iron ore deposit in Mazanovsky District of the Amur Region will be the other part of the Cluster. The products manufactured at the Enterprise will be delivered to Kimkano-Sutarsky Factory (Jewish Autonomous Region) for advanced processing and in the future it will be shipped to Dalnevostochny Metal Plant for production of reduced iron. Investments for construction of Garinsky Ore Mining and Processing Enterprise will amount to RUB 10.7 billion, its commissioning is scheduled for 2015.

Dalnevostochny Metal Plant will be the first one in Russia deploying the innovative metallizing process IТmk3 developed by the Japanese company Cobe Steel during the last decade. It will produce direct-reduce iron or granulated iron, i.e. the most competitive material for electrometallurgical steel production.

The cluster infrastructure development involves for construction of a railway sector Shimanovskaya - Gar, which will connect the cluster enterprises into one transport network, thus giving the opportunity to deliver the product of Garinsky Ore Mining and Processing Enterprise to Kimkano-Sutarsky Factory for advanced processing and then to Dalnevostochny Metal Plant. In addition, the railroad construction will allow exploration of vast territories located between Baikal-Amur Railway and Trans-Siberian Line.

Soya Cluster

The Amur Region Government is planning to move from the raw-material -intensive orientation also in the traditional Priamurye industry, agriculture. The Government initiated creation of a unified production and processing complex for growing and processing of grains and oil-yielding crops, fodder production and cattle breeding, formation of a soya cluster. Field project life is scheduled by 2016. The Project is estimated at RUB 21.8 billion.

It is planned to construct an oil-extracting factory of 300 k tons capacity to process soya beans, additional elevators of total storage capacity up to 100 k tons, various cattle breeding complexes, as well as construction of melioration systems and roads. Foreign investors are also invited to participate in the Project. In addition to regional benefits they will be leased out agricultural land plots in the central part of the Region.

Two Clusters as One Agglomeration

Based on two clusters, a tourist and recreation one “Road to Asia” and an industrial production complex “Kanikurgan”, in the immediate vicinity of the regional center “Amur Agglomeration BLAGOVESCHENSK 2025” is created.

The idea of the above project appeared on the basis of the geographically beneficial position of two near-border cities, Russian Blagoveschensk and Chinese Heihe, and availability of the largest Russian-Chinese passenger border-crossing point between them. The Project provides for increasing of a tourist flow at this point up to one million people. This aims at construction of tourist objects within “Golden Mile” and “Small Holland” projects including erection of an exhibition center, water park, ice palace, trans-border cable way across the Amur River, parks “Cretasious Period” and “Space Odysseus”, etc.

RUB 16 billion of state funds, some part of which will come from the Federal Budget, is provided only for preparation of the infrastructure for the tourist and recreation cluster “Road to Asia”. Another RUB 24 billion will be required for creation of an associated infrastructure. The majority of these funds, about 60%, is expected from the Fund for Development of the Far East and Baikal Region. Project implementation period is 2013 through 2025. By 2025 as per the tourist flows the project will reach its maximum target.

“Kanikurgan” industrial production complex provides for development of highly technological processing industries and formation of a basic Far Eastern transport and logistics center by establishment of a regional economic preferences zone. The planned transport t and logistics center will tie the Northern Sea Route, railroads of the Sakha (Yakutia) Republic and Trans-Siberian Railroad into a single international transport corridor with the Chinese railway system. Thus, a land alternative to the existing international sea transport corridor Europe - Asia will be established. It will have some competitive positions as to reduction of cargo delivery time and minimization of transshipment operations at their way.

The investment volume required for preparation of “Kanikurgan” zone infrastructure and for transportation and logistics complex is estimated at RUB 2.6 billion and at RUB 16 billion, respectively. Resources of the Fund for Development of the Far East and Baikal Region are also expected to be raised for the above infrastructure project.

The energy sector will be complemented by a new thermal power station

Construction of Erkovetsk thermal power station within the large scale export of electrical power from Russia to China will be performed on the basis of Erkovetsk brown coal field. In addition to the above station of 3,600 MW capacity, it is expected to build and commission in the RF electrical generation units of 10,800 MW aggregate capacity and DC/AC network in Russia and China. These projects will provide by 2020 for stage-by-stage growth of electrical power export to China up to 60 billion kW per annum.

Eastern Launch Site

The project of Construction of Vostochny Launch Site provides for creation by 2018 of a space complex in the Amur Region to ensure for processing and launching of long-range space vehicles, transport cargo and piloted spaceships of new generation, of perspective programs on investigation and exploration of celestial bodies and for international cooperation in that area. The investment volume into the project totals RUB 460 billion. As per experts’ estimation, that particularly project will become a growth point of the Russian Far East.

The Amur Region Management arranged for supporting investment plans with regulatory and legal framework. Last year a long-term special purpose program “Establishment of a Favorable Investment Climate in the Amur Region for the period up to 2013” was determined; regional laws On Local Zones of Economic Preferences in the Amur Region and On State and Private Partnership in the Amur Region were adopted.

Among other current tasks for this year the regional Government sees foundation of an agency on investment attraction acting on the basis of “one window” and performing functions on development, “packing” and support of investment projects, maintaining relations with state institutions of development and federal bodies. Establishment of a regional investment fund is one of the regional Government’s priorities. In addition, preparation of cluster development program, formation of territory development and economic preferences zones with specific business conditions for investors including the foreign ones will be continued. And for sure implementation of investment projects.

Government of the Amur RegionMinistry of economic developmentTel: (4262) 232-102E-mail: departament@kvest.amurobl.ruwww.amurobl.ru

Nadezhda VORONTSOVA