Financial Times: SCO AND BRICS INTERNATIONAL SUMMITS WILL TAKE PLACE IN BASHKORTOSTAN

Ufa will become a platform for an international summit of the Shanghai Cooperation Organization (SCO) and meeting of Heads of State of BRICS countries in summer 2015.

The place, as a venue of the strategically important forums for Russian Federation, was not chosen at random: Ufa, the capital of the Republic of Bashkortostan, stands among ten most successful cities of Russia according to investment attractiveness rating, “Financial Times” writes.

Republic of Bashkortostan: development priorities

Bashkortostan, one of the most developed regions of Russia, plays a significant role in Russia's relations with the West and the East, due to its geopolitical location between the Urals and the Volga region, being at the crossroads of Europe and Asia.

In July, 2010 the former top manager of JSC RusHydro, technocrat Rustem Khamitov was appointed to the position of the Head of the Republic of Bashkortostan. Together, with his accomplices, he radically changed the management approach of the Republic of Bashkortostan and as a matter of fact “re opened” it for both Russian and foreign investors.

Republican priorities were reviewed, especially in business life. Oil has always been and still remains the main wealth of the republic. Since the discovery of oil in 1930s, Bashkortostan was one of the extensive centers of oil production and processing in the former Soviet Union. Nowadays, the republic continues to produce fuel for spaceships, whereas in Russia, the brand "Bashkir fuel" is associated with the product of the highest quality.

Rustem Khamitov has set the task: "diverge from oil dependency" by changing the development vector and specialization of the regional economy.

The leadership of Bashkortostan determined the most promising areas for further development as high-tech industries and the deep processing of copper, zinc, gold, iron ore and other minerals. Petrochemicals, power engineering, IT-technology, production of medical equipment and medical drugs, agricultural complex are the industries in which the Republic plans to become a Russian leader in the next 5-7 years.

The investment potential

At the end of 2011, Bashkortostan showed a sharp increase of the investments into the economy and acquired the leading position in the rating lists of Russian regions, attractive to further investments.

In 2011 the Republic of Bashkortostan was on the 13th place among the best regions for business according to the Forbes ranking. Moreover, Ufa - the capital of Bashkortostan - is on the 2nd place among Forbes "Best cities for doing business-2012" rating.

The portfolio of 59 main investment projects, which are among the priority of the republic’s projects is estimated at the rate of more than 360 billion rubles and currently implemented in almost all sectors of the republican economy. Basic stock capital investments increased over the past year from 153 to 185 billion rubles. The economic growth rate of 9.2 per cent is twice as high as that of Russian average index.

The expected volume of investments in 2012 is about 240-250 billion rubles. The growth rate of Gross Regional Product is anticipated to exceed 5 per cent. The positive dynamics was highly estimated by international rating agencies. For example, Standard and Poor’s awarded Bashkortostan with the long-term rating “BB+”, with a positive outlook, which is the next position after Moscow, St. Petersburg, Yamal-Nenets and Khanty-Mansiysk national regions. Moody’s rates Bashkortostan right below Moscow and St. Petersburg, giving it ‘BaI” positive rating.

Analytical specialists argue that implemented dramatic changes in the regional investment policy helped the republic to gain a new level of trust from investors. It is due not only to the conditions that were created for the investors over the past 2 years, but also due to the effort of the team of the leaders who are oriented on the completion of their goals. The team developed support system of investment projects and issued a number of republican law acts, adoption of which provided favorable conditions for investors. Moreover, negotiations with Latin American countries made it possible for the Ministry of Economic Development of the Republic of Bashkortostan to become a member of The National Committee of promoting economic co-operation with the counties of Latin America. Chamber of Commerce and Industry of the Republic of Bashkortostan developed connections with the markets of Vietnam, South-Eastern Asia, and countries of the Arab world.

Legislative base for the investors in Bashkortostan consists of 9 special laws of the republic. There is a special commission in the republic for promoting projects supported by the state; the post of Ombudsman for entrepreneurs was established to protect business.

“We try to create comfortable conditions for all parties of the market. We do not subdivide businessmen up into categories. They are all the same and good for us. And the facilities will be given to all those who develop the production on the republic’s territory”, - accents Rustem Khamitov.

Today Bashkortostan is making one more act to increase the effectiveness of its economy. It forms the conditions for cluster development. If you look at the investment map of the republic, the logics of the region’s government that tries to attract investors to its municipalities and municipal districts becomes clear: new manufactures appear in places where investors can save money on raw materials and on logistics, where they can use the facilities of existing infrastructure, accumulated human resources, science-technical and production potential.

Unique combination of producing sources which the republic owns due to the Soviet period, allows speaking about the development potential of the range of territorially-branch innovative clusters, in particular, of the petro-chemistry, industrial machinery, small aircraft, cattle-breeding, tourism, etc. The republic tries to develop radio-electronic market that was thought to be lost for the Russian economy. Today in this market there are only 2 per cent of domestic products and 98 per cent of the products are American, Japanese and Chinese. The republic creates a cluster on producing communication equipment for establishing local and global nets. With the help of leading science institutes of the country the Centre of precision mechanical engineering is being established to produce unique components for machinery factories of the whole world. Nanotechnological sector also develops rapidly in the region.

To create innovative enterprises of «middle class» in Bashkortostan a range of techno-parks is built up: industrial park for petrochemical production of high conversion in Salavat; techno-park «ChimTerra» in Blagoveschensk on the basis of JSC Polief that is the only one in Russia producing terepthalic acid; Bashkir «mini-Skolkovo» in hydropower sphere in Ufa – the park of high-tech machinery construction, supporting small-scale business.

They are also looking for the investors to found modern transport routes in Bashkortostan. They want to construct a cargo river port and a large logistics center to transport cargos from the North to the South of Russia, then to the Black sea ports and then to Iran, Turkey and European countries. Part of the international high-speed highway «Europe – Western China» will cross the territory of the republic and will connect west part of Russia with its southern borders, with Kazakhstan and further with China. The Bashkir part of the highway will be constructed on terms of private-public partnership. It will cost $3 billion and it will literally blow up the economy of the adjacent territories – they will be found in epicenter of the most modern trade routes connecting West and East.

Owning unique nature-recreational resources, the republic expects increasing the number of tourists in its picturesque national parks and resorts. The resort potential of the region has already caused huge interest of, for example, Saudi Arabia. Bashkortostan and Saudi Arabia have signed a cooperation agreement.

The French holding Alstom is already implementing its projects. It constructs in Ufa manufacture producing high-tech equipment for small hydro power plants (investment at the first stage is 400 million), and together with RusHydro they construct a hydro power plant of 400 MW (500 million). Austrian Lasselsberger, Swedish IKEA, Italian Barbieri&Tarozzi, German Witzenmann, South-Korean SanTek have already opened their factories and trade centers. Ufa airport will be reconstructed and the Business Aviation Center will be constructed with the help of Austrian designers (investment amount – about $320 million). European bank for reconstruction and development, Raiffeisenbank, HSBC, Deutsche Bank help to finance serious projects which the republic works on under credit agreements.

Today the Republic of Bashkortostan has trade relationships with more than 95 countries of the world. Export from the region in 2011 increased by 50 per cent – up to $12.6 billion. Bashkir companies negotiate developing of the oil-producing and processing market of Algeria, seed and meat supplying to Bangladesh and other countries.

The republic intends to use the preparation period for the international forums of SCO and BRICS as the opportunity to acquire new investors. Bashkortostan is already connected with every country of these blocks: in Neftekamsk the company Marcopolo from Brasil and JSC KamAZ produce buses for Commonwealth of Independent States (former Soviet Republics); Chinese and Indian investors negotiate the acquisition of big shares of Bashneft; JSC UMPO starts manufacturing process management for the license production of the aircraft HJT-36 for the company HAL in India.

By the way, the foreign investors are very much impressed by the president of Bashkortostan who gives them his private contact numbers to solve arising issues quicker.

«In 2012-2014 years we hope to keep the rate of economic growth higher than average in Russia», says Rustem Khamitov, who is heading regional preparation committee for SCO and BRICS summits. «Bashkortostan does not possess such bargaining chips as nearness to Sochi, financial flows from Moscow or Siberian oil deposits. Instead our advantages are geographical location, «the bridge» between Europe and Asia, mineral resources, high-quality production and high-qualified personnel, developed infrastructure, abundance of electric energy and preferential conditions for investors. Our nature is often compared with Switzerland, the place where everything is in harmony: good climate, transparent bank system and developed tourism. So we should do our best to become as harmonious and well-balanced as they are».