Government of the Arkhangelsk region. Arkhangelsk region. Economic and investment potential

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1 Arkhangelsk region Economic and investment potential Arkhangelsk 2010

2 Arkhangelsk region Arkhangelsk region is situated in the North of the European part of Russia. Its coast is washed by the waters of the seas of the Arctic Ocean. The territory of the region is 410,7 thousand square kilometers or 2,5 % of the territory of Russian Federation. The region includes Nenets autonomous district. The population of the region is 1,2 million or 0,8% of the population of Russia. The level of urbanization is 74 % and it coincides with the middle Russian index. The density of population is 3,0 persons per 1 square kilometer, and it is three times less than the average rate of Russia. The able-bodied population comprises 64,3 % of the regional population. The administrative centre of the region is the city of Arkhangelsk. The largest cities of the region are Severodvinsk, Kotlas, Novodvinsk, Koryazhma. The economic development of Arkhangelsk region is generally based on enterprises of timber industry, machine-building, mineral resources, transport, fish complexes, agriculture and construction industry.

3 Transport Infrastructure At present the Arkhangelsk region is a strategic centre of transport logistics in the North, where automobile, railway, river, sea and aviation routes meet together. The Arkhangelsk region is also the main Russian gateway to the space: every year dozens of space satellites are launched to the Earth's orbit from the space launching site Plesetsk. Strategic importance for the Russian State let confidently forecast successful future for the regional transport logistics, which is also connected with the development of new huge oil, gas and other mineral resources fields on the Arctic shelf. Arkhangelsk is an oldest commercial sea port in Russia. It is the first northern gateway of the country to Europe, Siberia and the Arctic. Today JSC «Arkhangelsk Commercial Sea port» is: - a multifunctional commercial harbour for transshipment of general cargo, including pulp, cardboard, metals, sawn timber; containers, heavy equipment and bulk cargo; - an all-year-round navigation harbour, where ice conditions are practically the same as in the Gulf of Finland; - a powerful infrastructure, which is capable to handle up to 4.5 mln. tones of cargo annually; - the gateway to the Arctic. This is the place where the Northern Sea Route starts, which is the shortest way for delivering cargo as compared to the traditional routes from Europe to the markets of the South-Eastern Asia; - a principal base for the oil and gas developments on the Arctic shelf, first of all those in the Barents and in the Kara Seas; - a big and up-to-date container terminal.

4 Vacant capacities at the Northern Railway are a strategic reserve allowing to increase considerably volumes of deliveries to the North within a very short period of time. According to data provided by experts at the Ministry of Transport session in Arkhangelsk in summer 2009, today vacant capacities of the Northern Railway allow to pass about 3 dozens of extra trains per day. JSC «Nord Avia Regional Airlines» is a daughter company of JSC «Aeroflot- Russian Airlines» which has 80-year-old experience of deliveries in the North. The base airports are in Moscow, Arkhangelsk, Murmansk, St.-Petersburg, and Naryan-Mar. JSC «Nord Avia Regional Airlines» has a modern stock of aircrafts. Besides, «2nd Arkhangelsk United Air Group» is based in Arkhangelsk. It operates helicopters and can perform complicated works for transportation of outsized cargo in different climatic conditions: from Africa to the Polar Circle.

5 Perspective investment projects in transport and logistics complex «Deep-sea harbour Severny in the Arkhangelsk sea port» Project goal: to construct a new deep-sea harbour to the North of Arkhangelsk with a direct and independent access to the World Ocean, to meet the demands of Russian and foreign shippers for extra harbour facilities. Location north-eastern part of the Dry Sea bay in the Dvina gulf. Brief project description: The project provides the construction of a modern deep-sea cargo harbour of the sea port which will admit vessels of up to 100 thousand tones deadweight for handling about 30 mln. tones of cargo per year. Implementation period 5 years. Total volume of capital investments about 30 bln. rub. The project will be realized on the basis of private and public partnership. Social and economic effect: The construction of a new deep-sea harbour in the port will make it possible to provide: - independent departure of large vessels to any foreign harbour of the world; - intensification of the economic activity in the northeastern region of the European part of Russia; - solutions for many challenges related to the oil and gas developments on the Arctic shelf, operation of production units, development of coastal shipping; - establishment of industrial facilities for the processing of hydrocarbons in the North of Russia; - significant improvement of the investment attraction of the Arkhangelsk Region; - development of industrial, innovation, technical, living, entertaining, cultural and

6 service facilities near the harbour; new work places in the Arkhangelsk Region; - extra taxes to the federal budget about 400 mln. rub., to the regional budget about 800 mln. rub., to the local budget about 280 mln. rub. The project has been considered and approved by the Federal Agency «Rosmorrechflot» in the Ministry of Transport of the Russian Federation. There is a positive resolution from the FSU «Directorate of State Contracting Authority for Marine Transport Development Programs». The Ministry of Regional Development of the Russian Federation has included the project in the Conception of long-term social and economic development of the Russian Federation: «to provide, among other things, operation of the Northern Sea Route and involve huge mineral and natural resources of the northern Russian areas».

7 Investment project «Belkomur» The development of the deep-sea harbour in the Arkhangelsk sea port is in close connection with the implementation of the Belkomur project (the White Sea Komi Republic the Urals), i.e. construction of the railroad Solikamsk Gajny Syktyvkar Arkhangelsk (1155 km long). Belkomur project is included in the «Strategy of the Railroad Development of Russia up to 2030», which is approved by the RF Government on June 17, 2008 and will be implemented on the basis of private and public partnership. Project goal: - to get rid of infrastructural dead ends, to provide access to the mineral resources which are not in use at present,

8 - to make a new short transit route connecting the Urals and Siberia with the northern Russian harbours. - Total length of the railroad 1252 km - Total cost of the railroad construction 118 bln. rub. - Total private investments in the related local projects on the territories of three regions more than 442 bln. rub. - Period of project realization years On August 7, 2009 Belkomur project was approved by the Investment Commission for selection of projects claiming to get budgetary allocations from the Investment Fund of the Russian Federation. Belkomur project and the Deep-sea harbour «Severny» in the Arkhangelsk sea port are included in the «Integrated program for industrial and infrastructural development of the Komi Republic, the Perm Krai and the Arkhangelsk Region». The Memorandum about joint implementation of the program was signed in June 2007 by the Heads of participating regions. However the project is especially relevant for shippers only if it is implemented simultaneously with the construction of the new deep-sea harbour in the Arkhangelsk sea port, thus providing the best transshipment and logistic scheme (the shortest railroad, cheap and efficient modern harbour giving convenient access to the Northern Atlantic) aimed at the development of relations between the Russian Federation and its business partners in the European Union, Northern and Southern America, Central and South-eastern Asia. Basic advantages of the Belkomur railroad construction are: - A shorter route for cargo delivery from the Urals to the Arkhangelsk and Murmansk harbours - A solution for the problem of dead-end railroad junctions on the territories of three regions of the Russian Federation - Involvement of unreachable natural resources in the economic life, development of uncultivated areas.

9 Machine-Building Complex Arkhangelsk region has a developed machine-building complex with a great potential which creates attracting conditions for investments. The main engine of regional machine-building is shipbuilding enterprises. JSC PO Sevmash is the largest shipbuilding complex in Russia. At present it is the only shipyard in Russia where nuclear submarines are built. Foundation year: 1939 Number of employees: The yard performs the following works: - construction of submarines and surface ships and vessels with nuclear power installations - construction of vessels, pontoons, barges, and other floating facilities of different classes and functions - construction of oil and gas offshore ice-resistant jack-up platforms - design, manufacturing and testing of the equipment for production, transportation and processing of oil and gas.

10 JSC SC Zvezdochka is a leading Russian shipyard specialized in repairing and re-equipping of submarines, surface vessels and ships of any class and function. In recent years the yard has mastered construction of vessels, fishing trawlers, jack-up drilling rigs for oil and gas production on the Russian Arctic shelf. Foundation year: 1954 Number of employees: The yard performs the following works: - repairing and upgrading of nuclear submarines and surface vessels; - manufacturing of marine equipment and facilities for oil and gas production; - civil shipbuilding; - manufacturing of industrial and technological products for mechanical engineering, metallurgical, oil and gas, and other industries; - Utilization of nuclear submarines and surface ships; - Manufacturing of propellers; - Faceting of diamonds, manufacturing of jewelry.

11 Timber-Industrial Complex Arkhangelsk region is one of the leading timber-industrial regions in Russia. Total area of forest land is 29.1 mln. hectares, including commercial forests 21.6 mln. hectares (74%). Arkhangelsk region ranks second in the North-western Federal District of the Russian Federation in terms of timber reserves. Total reserves of forest forming species are 2.5 bln. cubic meters, including old-growth and overmature forests 1.7 bln. cubic meters (65,3 %), coniferous forest s 2.1 bln. cubic meters. Timber reserves available for commercial use and processing are 1.8 bln. cubic meters. Coniferous trees in reserves 83.0 % (of which fir-trees are 70 %), soft-wooded broadleaved 17%. Annual allowable calculated cutting area in the region is 22 mln. cubic meters, including coniferous forest s 16.7 mln. cubic meters. Maximum possible volume of harvesting, with tending of forest, is 5.3 mln. cubic meters. Vast timber reserves make possible to develop manufacturing of fiberboards and furniture, as well as construction of wooden houses, manufacturing of different things of wood and wood wastes, including alternative fuels. Key regional timber-industrial enterprises are: Pulp-and-Paper Mills: Filial of JSC Ilim Group in Koryazhma (Kotlas PPM) JSC Arkhangelsk PPM JSC Solombala PPM

12 Large Wood-working Factories: JSC Timber Plant 25 JSC Onega Wood-working Plant JSC Solombala Wood-working Plant JSC Timber Plant 3 JSC Timber Plant 2 JSC Arkhangelsk Wood-working Plant 3 JSC Arkhangelsk Plywood Manufacturing Plant The priority Investment Projects for Development of Forests in the Arkhangelsk Region are: - Upgrade of manufacturing facilities for production of cardboard and white paper (Filial of JSC Ilim Group in Koryazhma). Volume of investments: 9900 mln. rubles; - Renovation of manufacturing facilities for production of cardboard at JSC Arkhangelsk PPM. Volume of investments: mln. rubles; - Upgrade of wood-working facilities owned by Solombalales Holding and establishment of objects of forest infrastructure. Volume of investments: 2718 mln. rubles; - Construction a wood-working plant in Arkhangelsk with production capacity 95 thousand cubic meters of laminated veneer lumber and planed elements for carcass house-building per year ( KharviSeverLes ltd.) Volume of investments: mln. rubles; - Establishment of a wood-working complex on the basis of Ustjyansky Forestry Enterprise. Volume of investments: 800 mln. r ubles; - Establishment of manufacture of oriented strand boards (OSB). Volume of investments: 7158,4 mln. rubles.

13 Construction Complex Regional construction complex is presented by construction, installation and specialized organizations, which are capable to provide whole range of construction and repair works, companies producing construction materials, engineering and survey organizations. The potential of the construction complex in the Arkhangelsk region is rather high. Construction companies have qualified personnel, high-capacity machines and equipment and can construct facilities of any complexity level: from multi-storey blocks of flats and industrial buildings to complex out-of-class bridges and hydro technical structures. Engineering organizations employ highly qualified s p e c i a l i s t s w h o u s e a d v a n c e d technologies for design and up-to-date materials for construction. There are factories in the region producing construction structures and materials. They manufacture whole range of steel and reinforced concrete structures for industrial and civil construction, supplying sufficient amount of them for all the regional construction projects. Their production capacities allow increasing the volume of manufactured construction materials more than three times. The region has considerable mineral and raw material resources which make it possible to develop long-term strategic planning within this industrial sector.

14 Mineral Resources Complex The development of the mineral resources complex is firstly connected with such minerals as diamonds, bauxites, various building materials and underground waters. The largest diamond-field area in Europe is explored in the Arkhangelsk region (18% of reserves of Russian Federation). This is implication for development of faceting manufacture. On the territory of the region there are possibilities for developing of basalt extraction (reserves near 4,6 bln. tones), and also manufacture of crushed chippings and paving tiles. On the territory of the region there are deposits of limestones, which are convenient for organization of cement plant with production capacity of more than 1,8 mln. tones. There are also clay deposits which give opportunity for creation of brick manufacture.

15 Potential for Offshore Development Arkhangelsk region has a potential for develop oil-and-gas fields on the shelf of the Arctic seas, including the greatest gas distillate deposit Shtokman. The Arkhangelsk region can offer the following: - Local companies can be involved as suppliers of materials, goods and services. - ing of Distribution centre and integrated logistic base for the project development can be located on the territory of the region. Background: well-developed infrastructure of the Arkhangelsk sea port, vacant production sites, reserves in energy supplying capacity and upcoming gasification, proximity to the large industrial centers of the country. - Shipyards of Severodvinsk with their potential can construct offshore and subsea facilities: drilling rigs, supplier vessels on the turn-key basis, specialized oil and gas equipment. In cooperation with foreign partners these

16 plants can manufacture templates, manifolds, subsea completion equipment, etc. - Mobilization of local construction companies for participation in projects can be used. - Local qualified personnel and p o t e n t i a l o f e d u c a t i o n a l establishments can be used to train oil and gas specialists for the project. At present regional companies are already involved in servicing huge oil and gas projects in the Arctic and S i b e r i a, a n d A r k h a n g e l s k transportation hub is a largest transshipment base for such supplies.

17 Agriculture There are possibilities in the Arkhangelsk region for development of agriculture especially dairy farming and milk production. Ecologically clean potatoes, various types of vegetable crops are grown on the territory of the Arkhangelsk region on the open ground and also in hothouses. Meat and milk cattle breeding, production of eggs and poultry are developed in the region. Available outlet to the White Sea gives an opportunity for access to fish resources. Annual catch of fish made by regional enterprises is more than 100 thousand tones. The Arkhangelsk region has a great potential for future increasing of fishing and it also has Fishing sector a base for fish processing.

18 Investment Climate The Government has assumed some measures to increase investment attraction of the region. 1.The regional law «On state policy in the sphere of the investment activity» has been adopted. This law will establish uniform standards and rules for organization of investment activity in the region. It is the basis of investment legislation of the region. 2.The regional law «On tax benefits for investment activity on the territory of the Arkhangelsk region» has been adopted. According to this law, new companies registrated on the territory in the form of legal entities are given corporate income tax benefits for that part of the tax, which goes to the regional budget, and property tax benefits in case of implementation of large investment projects. At present amendments simplifying the procedure of providing facilities to big investors are worked out and will be introduced in regional Assembly of deputies. 3.The Procedure of support of investment projects, implementing and planning for implementation on the territory of Arkhangelsk region has been adopted. It establishes uniform universal procedure of investors' and applicants' support with cooperation with executive authority within implementation or preparation for implementation of investment projects. 4. Committee of investment policy under the Governor of Arkhangelsk region has been created and functions today. It is created for solving any problems of investors with which they meet during implementation of investment projects. 5.The investment portal ( has been created in Internet and it functions today. It is created to provide investors with online access to information about investment propos which are perspective for implementation of projects. itions and production areas

19 Personnel Resources Arkhangelsk region has competitive labor resources which are trained in the region, and also a well-developed system for training professionals for different industries and specialities. Most of the specialists are trained by 5 largest federal higher educational establishments. Two of the institutions are technical: Arkhangelsk State Technical University (ASTU) and SEVMASHVTUZ, which is a branch of the St.-Petersburg Marine Technical University. These institutions educate modern personnel for the most significant regional industrial sectors mechanical engineering, shipbuilding, timber-industrial complex, construction and oil and gas industries. There is an Oil and Gas Institute in the structure of ASTU. Its graduates work at oil and gas fields in Russia and outside it. Pomor State University named after M.V. Lomonosov is a large classical university, research, scientific, educational and innovation complex which is highly evaluated in Russia and abroad. It provides high-quality education and trains qualified professionals of international level. The University is a multifunctional centre of education, science and culture in the Northern Europe, Russia and the Arkhangelsk region. There are 44 specialities in the University. Northern State Medical University (NSMU) over the last decade has been a leader uniting medical educational establishments from 5 regions in the north-west of Russia (Vologda, Petrozavodsk, Syktyvkar, Yaroslavl, and Arkhangelsk regions) to find solutions for challenges related to the quality of medical education. There are 9 different institutions in the structure of the University, including Polar Medicine R&D and Maritime Medicine R&D. Leading professors and scientists from NSMU

20 are well-known in the scientific community all over the world. Russian Distance-Learning Finance and Economics Institute (Arkhangelsk branch) is a largest state specialized distance-learning higher educational establishment which is a recognized leader in the sphere of in-service training of specialists for the following financial and economic fields: Finances and Loans, Accounting and Audit, Company's Management, etc. Huge number of highly qualified professionals has been trained in the Arkhangelsk branch. According to the Decree of the President of the Russian Federation in 2009 the Northern (Arctic) Federal University has been established in Arkhangelsk. This University is to be the center of development and production of advanced technology and training personnel who has modern core competence firstly for the most competitive economic sectors of northern territories of Russia. The Strategy of the Northern (Arctic) Federal University directs to: - Implementation of transfer to professional education, meeting requirements of innovation economic development. - Innovation, scientific, educational and personnel supply of balanced solving problems of economics, nature and society of European North and Artic area of Russia, and also problems of sustainable development for present and future generations, and problems of improvement of life quality of population. - Improvement of effectiveness of fundamental studies, increase of commercialization of applied developments, growth of intellectual potential of the northern region. - Development of international cooperation in the sphere of professional education and organization of scientific researches and increase of international competitiveness.

21 Tourist and Recreational Potential The Arkhangelsk region is unique in its tourist and recreational potential and takes leading positions in Russia in terms of the number of historical and cultural monuments. Historical and cultural complex of the Solovetsky archipelago, which is a UNESCO monument uniting about 200 monuments from the 3rd century to the present days, is rightly considered to be the region's trademark. Special attention should be paid to the wooden architecture monuments which have made the Russian North as a peak of the Russian wooden architecture. Considerable resources for cultural tourism are museum collections (more than exhibits), folklore, rites, music art of Pomors. The key role in developing eco-tourism is played by the national park Kenozersky and Pinega wildlife reserve pieces of the untouched relic Russia. Four active monasteries attract those people who are keen on religious tourism: the Solovetsky Spaso-Preobrazhensky (Transfiguration) Stauropegial Monastery (the 15th century), the Antoniyevo-Siysky (Antony of Siya) Monastery (the 16th century) in the Kholmogory district, Artemy-Verkola Monastery (the 17th century) in the village of Verkola in the Pinega district, Sursky Ioanno-Bogoslovsky (St.

22 John the Theologian's) Nuns' Convent (the 19th century) in the village of Sura in the Pinega district. The Arkhangelsk region has numerous mineral springs and therapeutic muds. Annually about 30 thousand people undergo treatment at the regional therapeutic resorts. For those who are fond of extreme tourism the Arkhangelsk region can offer water routes, excursions to the Pinega caves (approx. 350), the most famous of them (Konstantinovskaya and Golubinsky gap) are natural monuments of global significance, and also a natural monument Kiy Island. The Arkhangelsk region is ready for cooperation and for propositions. In case of any question, please, contact the Section of investment policy and external economic activity of Ministry of economic development of Arkhangelsk region. Tel.: , , , Fax: dunaev@dvinaland.ru,