WHY IT MAKES SENSE TO INVEST
IN THE KRASNODAR TERRITORY
The Krasnodar Territory (the southernmost Russian region) is a bridge between Europe and Asia.
The three international transport corridors passing through it provide the shortest land, water and air routes between the countries of Europe, the Mediterranean, the Middle East and Central Asia.
Highly skilled and competitive manpower.
A wide range of skills.
Considerable economic potential.
Steady positive GRP dynamics driven by growing goods and services production in the main sectors of the economy.
More than sixty types of mineral, from oil and gas to building materials.
1.5 million hectares of forests, mainly of valuable species.
Fertile agricultural land supporting the full spectrum of moderate-belt crops and some subtropical ones.
The region is the leading agricultural producer in Russia.
A well-developed transport infrastructure.
The region has three international airports, 8 seaports, and Southern Russia’s biggest railway hub, which is also one of the biggest in the whole country. The region has the best roads anywhere in Russia.
Unique recreation resources support development of virtually all types of tourist and recreation industry.
All Russia’s main seaside resorts are concentrated in the region, along its 1161 Km. coastline. Favourable investment climate.
The Krasnodar Territory is among the top ten Russian investment regions.
Fitch Ratings - (London-Moscow) has awarded the Krasnodar Territory long-term BB ratings in foreign and national currencies and a short-term B rating in foreign currency. The Krasnodar Territory has the national long-term AA- rating. The long-term rating forecast is “Stable”.
Standard & Poor’s has revised its rating forecast for the Krasnodar Territory from “Stable” to “Positive”. Moody’s Investors Service Ltd has awarded the Krasnodar Territory a Ba1 issuer rating on the international scale in national currency. The rating forecast is stable. By the same token, the rating agency Moody’s Interfax, in which Moody’s has the controlling stake, has awarded the territory an Aa1.ru rating on the national scale.
Rapidly developing financial sector
The territory traditionally attracts banking structures and is one of the top ten Russian regions in terms of banking penetration.
INVESTMENT LEGISLATION IN THE REGION
Investment laws in the region are among the most progressive in the country. The legal regulations protect and guarantee the rights of investors and the regional laws ensure government support for investors. The region has passed a law On Government Stimulation of Investment Activities in the Krasnodar Territory.
The regional budget earmarks large amounts of money for that purpose every year.
The following are the main forms of government support for investors envisaged under the regional laws:
- regional tax benefits. Today this means that investors and leasing organisations are exempt from paying property tax for up to 3 years; profit tax is 4 percentage points less and residents of special economic zones enjoy a transport tax holiday of up to 5 years;
- the Krasnodar Territory’s government guarantees investment projects awarded by tender;
- subsidies (compensation) out of the regional budget for part of the interest on loans from lending institutions and corporate bond coupons;
- easy terms for use of land during design and exploration work and construction (a 0.5% reduction coefficient is applied to land rent for investors).
Government support is available to investors who invest their own and borrowed money in projects that have gained the approval of the Territory’s Administration. There is no discrimination here between domestic and foreign investors in terms of government support.
The region has a simplified procedure for both Russian and foreign investors starting up a business.
The Krasnodar Territory was one of the first in Russia to introduce a “one-stop” system of investment project support. The regional and municipal officials take investment projects through all the government agencies during both the construction and the operation periods. Investors receive all the approval documents required within 1-3 months.
Since 2007, the region has had a new investment management system: it has a single regional investment network embracing its districts and cities. Reform and development committees provide project support in every municipality.
INVESTMENT ACTIVITIES
The Krasnodar Territory has a high investment potential and is among the top Russian regions with the best investment climate. In terms of investments attracted, the Kuban area is in sixth place in Russia (3.1%) and in first place in the Southern Federal District (accounting for 34.5% of total investments in the District).
In the period 2001-2006, investments totalled 574 billion roubles, including 148.8 billion roubles in 2006, an increase of 115% on 2005 (the biggest growth in the last six years).
The bulk of investments (40%) go into development of transport and communications, as well as manufacturing (primarily production of building materials and foodstuffs), wholesale and retail trade.
Over the last six years, foreign investments have amounted to almost $2.4 billion, putting the region in 13th place in the country in these terms. Most investments have gone into the production of foodstuffs, transport and communications, wholesale and retail trade and the social sphere.
The Krasnodar Territory has a very high standing in the world business community: Standard & Poor’s has awarded it a B+ Positive international credit rating. The Territory is among the seven Russian regions with the lowest investment risks and ranks second among Russian regions in terms of law making in the investment sphere.
The result is that big Russian and foreign companies are implementing numerous investment projects in various spheres, which is having a positive impact on import substitution and production of fuel and energy. Many of the technologies that are imported on to the territory under these projects are unique.
All told, more than 800 enterprises from 70 countries invest here. They include such big names as Knauf, Phillip Morris, Chevron, Nestlé, Tetra-Pak, Radisson, Klaas, Bonduelle, Metro and others.
The Krasnodar Territory is a leading Russian region in terms of investment appeal. The rating agency Standard & Poor’s raised the region’s credit rating in 2007 to BB- Positive. The major Russian rating agency Expert put the Krasnodar Territory in second place among Russian regions in terms of investment climate in 2006-2007.
For several years, the Krasnodar Territory has been the leader among the regions of the Southern Federal District in terms of investment volumes attracted. In 2007, more than 200 billion roubles was invested in fixed assets in the region’s economy, with the bulk of that sum consisting of enterprise funds, borrowing and contributions by the population.
The competitive advantages of the territory, the stable political climate and the system of government support in place since 1999 have quickened the interest in the region on the part of foreign investors and businessmen. Investments in fixed assets have doubled over the last three years. The biggest investments went into the development of transport and communications, agriculture, the food industry, real estate, trade, public health and social services.
In 2007, about 12 billion roubles in foreign investments flowed into the economy of the Krasnodar Territory. Investments are coming from the US, Britain, France, Cyprus, Kazakhstan, Germany, etc. The main spheres of foreign capital investment are transport and communications (10%), manufacturing (16%), wholesale and retail trade; repair of motor vehicles, motor cycles, household appliances, etc.
The over 900 foreign-invested enterprises registered in the region include OAO Phillip Morris Kuban, ZAO Caspian Pipeline Consortium –R, OOO Nestle-Kuban, OOO Bondouelle Kuban-OOO Cargil-Yug, OOO Klaas, OAO Kubansky Gips-Knauf, ZAO Tetra-Pak-Kuban, Radisson SAS Lazurnaya, Metro Cash and Carry, Secab and many others, the Auchan retail network (France), the Leroy Merlin retail network (France) (construction is under way of a 17800 sq m retail centre in Krasnodar, where more than 300,000 types of building and finishing material will be on sale). The company Prokon Energisystme GmbH (Germany) is building a rapeseed oil plant in the Mostovsky District at an estimated cost of 244 million roubles.
