The governor, Oleg Chirkunov, is particularly keen to attract investment in agriculture and wood processing industries to utilise the region’s rich soil and forestry resources and has promoted the region to potential investors in Moscow and Brussels. “Our timber is inexpensive”, he told the members of the Association of European Businesses in Russia.

“But you have to build your own roads to get it to a processing plant, river port or railhead.” The local government understands the investor’s need to know about the legal and administrative environment for business, procedures for implementing investment projects, and the relevant mechanisms for getting state support.

The financial and economic priorities of the Perm Region are stated in its Strategy for the Socio-Economic Development, which was published in 2003. This document emphasises economic development as the key to raising living standards in the area, and stresses inward investment as the main driver.

The investment environment is described in detail in a document entitled Concerning Foreign Investments in the Region of Perm.

This covers individual privileges within the total approved budget, financial support from the Regional budget, participation of the Regional Administration in the investment process by means of governmental support of foreign investors (and national commercial organizations in receipt of foreign investments), and investment guarantees.

Foreign investors are offered the following privileges: reduced tax rates, investment-tax credit, and financial support from the Regional budget.

The main focus of land policy is to encourage business owners to buy land with a view to encouraging fully-fledged land market. In order to achieve this, prices in the Perm Region are among the lowest in the whole country, averaging less than half the national market average.

The Perm Region is attractive for investment for a variety of reasons. Amongst them are local political stability, a State policy of non-interference with private economic activity, and the financial independence of the Region from the Moscow. (The Region is a nett contributor to the Federal Budget.) Other factors are the developed transport infrastructure, the scientific and technical potential of former defense companies with their skilled human resources, and the unique natural resource base of the area.

The Regional administration intends to maintain a favourable investment climate by building-up a network of regional investment banks (as a rule, affiliates of large banks), investment funds and insurance companies.

Other major points on which the Regional Administration is focusing: the development of foreign trade of the Regional companies, integration of Regional companies into the global economic environment, increasing the effectiveness of state property management, and promoting a positive
image of the area as an appropriate base for innovative businesses.

Specific industrial sectors on which local economic priorities will be focussed are: oil and energy, machine building, woodworking, the pulp and paper industries, transport, telecommunications and tourism.

Some examples of successful cooperation between foreign companies and Perm businesses are listed below: The branch of the Sun Interbrew Company (UK), OAO Sun Interbrew in Perm City, is the largest brewing company in the Urals.

In 1995, the Stockhausen Gmbh (Germany), a part of the “Degussa” concern, a world leader in production of chemicals for special purposes, joined the company Moskva-Schtockhausen, Perm, for the production of modern flocculants of “Praestol” type.

Starting in 1997, the Tonutti Company (Italy) was the first Italian company to produce agricultural machinery in Russia. It joined with a number of companies of Perm so that today the Tonutti Company has business alliances with more than forty regional firms.

Since 1998, United Technologies (USA), Permskiy Motorny ZavodCompany and Aviadvigatel Company have been carrying out an investment program aimed at developing aero-engine PS-90A. A total of US$53.6 million has been invested in the development of this project.

Since 1998, Nestle, one the world’s largest food producers, has been a majority stockholder of the Kamskaya Confectionary Company. In 2001, Nestle diversified its activities in the region and founded the Cereal Partners Company, specializing in production of breakfast cereal brands, including Nestle Fitness, Nesquik, Kosmostars, Corn Flakes and others.

Since 2000, the Kama Crystal Company with the L.I.D. Company (Israel) have been working on applying modern technologies to diamond processing. A total of US$ 27.0 million has been invested in this technology.

In 2003, a joint venture with the largest German investor in the Russian building and construction industry, the Knauf Company, to produce gypsum-carton and gypsum-fiber products was launched. More than US$ 40.0 million has been invested in development of the Knauf-Kungur Company.

One of the leading insurance companies of the Kama River area, Ural-AIL Company, has been created jointly with the New York Trade Exchange Ltd. Ural-AIL Company has been successfully operating in Russia for more than eight years.

From left to right: Governor of the Perm Krai,Oleg Chirkunov visited The EC in Brussels and made a presentation on Perm’s investment opportunities. Here Andris Piebalgs, EC Energy Commissioner, with Oleg Chirkunov, Vladimir Chizhov, Head of the Russian Mission to the EC and Andrey Klimov, Co-Chairman of the EU/Russia Parliamentary Cooperation Committee