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New Investment Products to Become Growth Drivers for Kaluga Region Districts

Anna Trofimova, Deputy Director General, Agency for Regional Development of Kaluga Region  

 

There are 12 industrial parks and two special economic zones in Kaluga Region. What is the occupancy factor of these areas?

The occupancy factor differs. The oldest industrial parks of the region, namely Grabtsevo, Vorsino, Rosva and Kaluga-Yug, have the occupancy rate of over 80%. These industrial parks are the largest certified sites with developed infrastructure in Russia.   Global companies, such as  Volkswagen, Volvo, Continental, FuyaoGlass, Peugeot-Citroen-Mitsubishi, and many others have built their production facilities there. Sixty seven plants out of  ninety nine production facilities commissioned since 2006 have been built in industrial parks. It is easy for a company to start implementing its project at any of these twelve sites.   Residents get a site with all required engineering and transport infrastructure. The average occupation factor for Kaluga Region industrial parks is about 50%.

More and more companies become residents of Kaluga special economic zone as well. Its first site located in Lyudinovo is almost fully occupied. Today we strive to attract residents to the second site of the special economic zone in Borovsk. Its specific features offer apparent advantages for the development of hi-tech companies capable of creating products with high added value.    Over twenty companies are to become residents of the site in the next five years. Currently fourteen companies operate at both sites of Kaluga special economic zone. Over thirty companies hold negotiations on projects to be implemented there.

How the projects are to be implemented? Which infrastructure-related opportunities Kaluga Region offers to investors today?  

We perfectly understand that the attraction of investments is very similar to operations I highly competitive market. However, in my opinion, competition is the key factor, which makes us move forward. It gives regions new development opportunities, while investors get new better conditions for their business’ development.  Kaluga Region, for instance, constantly improves its offers to business. Today we are capable of offering a truly wide range of infrastructure products to investors.  Apart from industrial parks and special economic zones we also have priority social and economic development areas in single-industry towns. Furthermore, such towns offer infrastructure opportunities for development of certain production facilities.  

While previously industrial parks and SEZ were intended primarily for large and medium industrial businesses, today we have developed a separate proposals’ package for small companies, namely brownfields and the lease of built-to-suit premises. 

Priority social and economic development area is a relatively new territory development mechanism for Kaluga Region. Could you tell us about it in more detail?

There are three reasons behind the priority social and economic development area concept creation in Kaluga Region, including the existing experience in operating industrial parks and special economic zones, which proved their efficiency, the demand on behalf of SMEs and the necessity to eliminate development imbalances between different parts of Kaluga Region.  The very concept of a priority social and economic development area provides for the use of a special legislative framework for business. The laws offer certain tax breaks and benefits as well as administrative preferences for investors.    

Priority social and economic development areas are being established quite extensively both in Russia in general and in Kaluga Region in particular.  In our case we strive to establish such areas in towns and cities where certain risks associated with social and economic situation exists.  According to federal classification such towns belong to Single Industry Town, Class II. There are two cities in Kaluga Region included in the list of Russian Single Industry Towns, Sosensky and Kondrovo.   

Last year a priority social and economic development area was established in Sosensky pursuant to a decree of the Russian Government.  Another priority social and economic development area is to be established in Kondrovo in the near future. A plan for Kondrovo development was presented and approved in Skolkovo in October 2017.  Kondrovo economic growth is to be based on local labor resources improvement and creation of new high-paying jobs. The list of the most promising business areas includes automotive components’, grating’s, LEDs’ manufacturing, as well as polymers’ processing. Apart from that, Kondrovo project may be of interest for creative community and private investors specializing in small-scale projects.  Currently roadmaps are being created for the following projects: reconstruction of a cross-country motorcycle race track to host all-Russia competitions, opening of loft premises in a building of KBK plant, etc.   

Thus Priority social and economic development area establishment is to attract investors, promote SMEs’ development, create  new jobs, which, in its turn, will ensure higher living standards for the residents.

So, is a priority social and economic development area a mechanism for integrated development of single-industry city’s economy through attraction of investors? Could you give us an insight on how it works taking the existing Sosensky area as an example?  

The creation of a priority social and economic development area in Sosensky has become one of the most  efficient mechanisms for the city economy integrated development. We started from assessment of Sosensky from the potential investor’s point of view. That was the first step in the territory development project. We found out that the city has highly qualified labor resources (engineering and radio electronics) and well-developed infrastructure.  Apart from those advantages priority social and economic development area’s residents are to benefit from tax and insurance preferences  (property tax and corporate income tax) while implementing new investment projects. Thus, more advantageous conditions for business in the priority social and economic development area and availability of qualified personnel will help investors compensate the costs caused by the fact that the city is located at a large distance from economically developed northern part of Kaluga Region. Калужской области.

All legislative acts required for submission of applications by investors interested in conclusion of an agreement to carry out business activities in Sosensky and in becoming the area’s residents have already been prepared.  

Apart from benefits I have already mentioned potential investors may be interested in starting business in Sosensky industrial park having all relevant engineering infrastructure.  It is also a part of the priority social and economic development area.

Today we actively search for investors and hold negotiations with potential priority social and economic development area’s residents. The companies belong to IT and engineering sectors.   

Kondrovo and Sosensky are to be developed through the priority social and economic development area’s mechanism. There are 24 districts in Kaluga Region. How does the Agency for Regional Development of Kaluga Region interact with local authorities to attract investors to these territories?

There ae sites of Kaluga special economic zone in Lyudinovo and Borovsk. The distance between the cities and, thus, the sites, is 200 km. Nevertheless, each site has its own advantages, more and more residents come to both sites.  Obninsk is famous as a city attracting innovations. It has all necessary prerequisites for innovative business development. Balabanovo, Zhukov and Maloyaroslavets have been developing rapidly for many years as these cities are conveniently located not far from Moscow. There are industrial parks in Babynino, Duminichi and Meschovsk districts.   

However, we are aware of the existing imbalance between Kaluga Region districts in terms of their development. Northern and central areas enjoy more intensive development. One of our agency’s objective is to eliminate the imbalance. That is why we strive to ensure diversification offering sited in underdeveloped areas. We closely cooperate with local authorities, render maximum assistance to them and use available competences to identify sites with good investment potential. Our experts visited sites virtually in all district of the region. They selected the most promising sites in terms of transport availability, topography, etc.

Our database currently contains over 150 greenfield sites in all districts of the region. Companies building their production facilities there are to get tax benefits similar to those offered to industrial parks residents, and receive full free support of the project, provided they meet certain criteria.  A separate large preference package is offered to residents participating in Large-Scale Investment Project.  It is a relatively new and rather efficient mechanism to stimulate investment activities in Kaluga Region municipalities.

As you can see our primary objective is to meet the requirements of various categories of investors while supporting the development of Kaluga Region districts. It is obvious not all districts are capable of attracting major industrial investors. That is why certain diversity is required. Such territories may host tourism, recreation and agriculture projects.  

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