investment guide to the republic of...

Investment Guide to the Republic of BashkortostanUfa 2017

MINISTRY OF ECONOMIC DEVELOPMENT

OF THE REPUBLIC OF BASHKORTOSTAN

Introduction by Rustem Khamitov, Head of the Republic of Bashkortostan 3

Greetings from Dmitriy Chaban, Managing Partner of Deloitte Ufa 4

Address by Oleg Golov, General Director of the Development CorporationoftheRepublicofBashkortostan 5

GeneralinformationabouttheRepublicofBashkortostan 6

SevenreasonsfordoingbusinessintheRepublicofBashkortostan 8

Top-prioritysectorsfordevelopment 16

Government support initiatives for investors 20

Fostering innovation 27

Developmentinstitutions 32

Summary of statistics on the economic position of the Republic of Bashkortostan 36

Contacts 38

Dear Friends,

Welcome to the Investment Guide to the Republic of Bashkortostan!Bashkortostanisamongtheleadingand dynamicallydevelopingregionsofRussia.Itslocationat the intersectionofmaintrafficarteries,abundantresourcepotential, well-developed industry and infrastructure, as well as highlyskilledlaborforce,attractinvestorstoourregion.

In terms of total investment to subjects of the Russian Federation, Bashkortostantodayremainsinthetopten.Acomfortablebusinessenvironmenthasbeencreatedinourregion.Wehaveundertakenmassiveworktoimprovetheinvestmentclimatein termsofthedevelopmentoflocallegislation,and to ensurethatinvestorsreceivetopqualityservice.Apartfromthe traditionalmeasuresoffinancialsupport,therearealsospecialincentivesinplaceinBashkortostan.Landplotsareleasedoutto investorswithout tenders, while costs of building infrastructure are reimbursed.Wehavecreatedapledgefundthatprovidescollateralsecurityuponreceiptofinvestmentloans.

Federal mechanisms of investment activity development areusedextensively.ThereiseffectivecooperationwithVnesheconombankandtheMonocityDevelopmentFundaimedatdiversifyingthe economyofthesingle-industryregionsof the republic,as well asincreasingtheinvestmentinflowsto them.One significanteventof2016wasthecreationofsocialandeconomicdevelopmentareasinsuchmonocitiesasBelebeyandKumertau,whereadditionalbusinesssupporttoolsareused.

We are interested in developing cooperation in order to implement themostambitiousandlarge-scaleprojectsintherepublic.We guaranteeinvestorsanoptimalbusinessenvironmentand promptsolutionstoallemergingissues.Wearereadyfor dialogueandthecreationofmutuallyprofitablepartnerships.

Bestregards,Rustem KhamitovHeadoftheRepublicofBashkortostan

Introduction by Rustem Khamitov, Head of the Republic of Bashkortostan

Investment Guide to the Republic of Bashkortostan

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Greetings from Dmitriy Chaban, Managing Partner of Deloitte Ufa

Dear Colleagues,

We are pleased to present the fourth issue of the Investment GuidetotheRepublicofBashkortostanpreparedbyDeloitteCIS jointly with the Ministry of Economic Development of the Republicof BashkortostanandtheDevelopmentCorporationof the RepublicofBashkortostan.Thisguidecontains informationontheregion’scompetitiveadvantages,priorityareas for investment,measuresofgovernmentfinancialandnon-financialsupport,andinnovationactivityintherepublic.

Forthethirdyearinarow,theRepublicofBashkortostanhas actedastheorganizerofaninternationalsmallbusinessforumforSCOandBRICScountries,whererepresentativesof large businesses and the expert community, together with the headsoftherespectivegovernmentagenciesand regionalauthoritiesof the SCOandBRICScountries,discuss prospects and strategies forsmallbusinesses.

We support the initiatives of the government of the Republic ofBashkortostanandtheDevelopmentCorporationoftheRepublicofBashkortostanaimedatimprovingtheregionalinvestmentclimate.Wehaveapositiveoutlookontheprospectsof our cooperation in terms of supporting investment projects anddevelopingtheregionaleconomyingeneral.

WeareconfidentthattheInvestmentGuidetotheRepublicof Bashkortostanwillbeausefulsourceofinformationfor investorsandforallthosewhoseesignificantpotentialin the regionforthecompletionoftheirprojects.

Yours sincerely,Dmitriy ChabanManaging Partner,Deloitte Ufa


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Dear Friends and Partners,

On behalf of the Development Corporation of the Republicof Bashkortostan,Iampleasedtowelcomeyouto the Investment GuidetotheRepublicofBashkortostan!

Our team supports investment projects in the Republic of Bashkortostanatallimplementationstages:fromthe conceptdevelopmentstagetothecommissioningof facilities.Our specialists’expertiseallowsustostartworkingon an investmentprojectatanystageandcompletealltasksefficiently.Wearereadytoprovidecomprehensivesupportto all investorsseekingtodeveloptheirbusinessin the RepublicofBashkortostan.Wewouldbepleasedto cooperatewith you ona long-termbasis.Iamconfidentthatthe Republic of Bashkortostanwillopennewhorizonsforyou!

Bestregards,Oleg GolovGeneral Director,DevelopmentCorporationoftheRepublicofBashkortostan

Address by Oleg Golov, General Director of the Development Corporation of the Republic of Bashkortostan

Contacts:

AO Delopment Corporation of the Republic of Bashkortostan110 Pushkin StreetUfa 450057 Republic of Bashkortostan Tel.: +7 (347) 280 82 32Fax: +7 (347) 280 82 49 Еmail: [email protected]


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St. Petersburg

Minsk Kaliningrad

Helsinki

StockholmOslo

Copenhagen

London

Rome

Zagreb

Kiev

Kishinev

Ankara

Sofia

MadridLisbon

Paris

Dublin

Berlin Warsaw

BratislavaVienna

Ljubljana Bern

Riga

Tallinn

Bucharest

Moscow

Voronezh

Arkhangelsk

Murmansk

Perm

Naryan-Mar

Volgograd

Samara

Rostov-on-Don

Kazan

General information about the Republic of Bashkortostan

Capital: UfaPopulationofUfa:1.1millionRankamongRussia’scitieswith a population of over 1 million peoplecities:11th

Totalarea:143,000sq.km,(0.8percentof the total area of Russia)

Population of the Republic of Bashkortostan: 4.07millionpeopleProportion of urbanpopulation61.91percentPopulationdensity:28.4peopleper sq. km

Time zone: 2 hours ahead of Moscow

Official languages: Russian andBashkir

Ethnic composition:more than 100 ethnicities.The predominantethnic groups are Russians(36.1percent),Bashkirs(29.5percent)andTatars(25.4percent).

Climate: continental, with warm, humid summers and moderatewinters.Average temperature:–15°СinJanuary+18°СinJuly


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Moscow

Voronezh

Ufa

Arkhangelsk

Chelyabinsk

Tyumen

Salekhard

Surgut

EkaterinburgPerm

VolgogradRostov-on-Don

Kazan

Republic of Tatarstan

Perm Territory

Sverdlovsk Region

Chelyabinsk RegionUfa

Beloretsk

Meleuz

Kumertau

Sibay

Baymak

Sterlitamak

The Republic of Bashkortostan

Bizhbulyak

Tuymazy

Dyurtyuli

Neftekamsk

Karaidel

Lemez-Tamak

Maloyaz

Salavat

Zilair

Akjar

Orenburg Region


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Seven reasons for doing business in the Republic of Bashkortostan

1Favorable location TheRepublicofBashkortostanliesat the intersectionofEuropeandAsia,at the crossingofthemostimportantwaterways,rail, pipelines and highways that connect

the EuropeanpartofRussiawiththeUrals,SiberiaandCentralAsia.Thefollowingtransportationandlogisticsfactorscreatefavorable conditions for the import and export of raw materials, fueland finishedgoods,andforthedevelopmentofeconomicties with othercountries:

• The Trans-Siberian railway, passing through the territory of the republic, connects the central part of Russia with Siberia, theFarEastandthecountriesofCentralAsia.

• Therepublichasaccesstofiveseas(Caspian,Azov,Black,BalticandWhite)viatheBelaya,Kama,andVolgarivers.

• TheM5UralandM7Volgahighways,aswellasP-240Ufa—Orenburg road connect Ufa with many industrial centersofRussiaandtheCIScountries.

• Ufainternationalairportwithatotalcapacityof800passengersperhourservesRussianandinternationalflights.RunwaysaresuitableforlargecargoandpassengeraircraftsincludingBoeing747andBoeing777.TheflighttimetoMoscowisapproximatelytwohours.


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Orenburg 370 km

Orsk 640 km

Ekaterinburg 550 km

Perm 520 km

Kazan 525 km

Samara 460 km

Moscow 1,355 km

UfaChelyabinsk 420 km

Motorways

Railways

Pipelines

Western Europe-Western China International Transit Corridor


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Map of mineral and other natural resources

Ufa

Amzya Yanaul

Neftekamsk

Blagoveshchensk

Mesyagutovo

Chekmagush

Chishmy

Iglino

Oktyabrsky

Nizhnetroitsky

Davlekanovo

Arkhangelskoye

Pribelsky

Krasnousolsky

Sterlitamak

Inzer

Beloretsk

Meleuz

Tirlyansky

Verkhniy Avzyan

Kumertau

Uchaly

Salavat

Ermolaevo

Raevsky

Kirghiz-Miyaki

Belebey

Ishimbay

Priyutovo

Kananikolskoye

Isyangulovo Baymak

Sibay

Kudeyevsky

Tuymazy

Verkhneyarkeevo

Dyurtyuli Krasny KlyuchBirsk

Ferrous metallurgy

Mechanical engineering

Oil refining

Gas processing

Chemical industry

Petrochemical industry

Timber and wood processing

Construction materials

Glass industry

Consumer products

Food industry

Brown coal

Oil

Natural gas

Iron ore

Copper ore

Sodium salt

Limestone

Plaster stone


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2Rich raw materials base and land resourcesTheterritoryoftheRepublicofBashkortostanis rich in minerals, with more than 60 types of mineralsintotal.Thereareabout3,500 mineral deposits in the republic, including 250oilfields.

Intermsofnaturalresources,Bashkortostanisamongthe leading regionsinRussia:

• Largestproducerofrocksalt

• Second-largest oilrefiner

• Ninth-largest oil producer

ThelandareaoftheRepublicofBashkortostanisover14 million hectares.Therearegrayforestsoils(along the rightbankoftheBelayaRiver,belowthe mouthofthe SimRiver),soddy-podzolicsoils(northernpartof Bashkortostan),blacksoils(ontheleftbankoftheBelayaRiverandintheBashkirTrans-UralsRegion),andmountainsoils.

3Tourism attractiveness Rich hydrological resources, diverse and unique floraandfauna,attractivenaturallandscapes,natural areas of preferential protection and areas with a conservation status, historical, cultural

and naturalmonumentsofnationalandinternationalimportanceprovide investors with broad opportunities to develop tourism and recreationalactivitiesintheregion.

TheRepublicofBashkortostanisoneoftheleadingRussianregions for health and medical tourism, as well as a major centerformountainsportsandskiing(OlympicPark,Abzakovo,Ak-Yort,ArskyKamen,Assy-Tau,Kandry-Kul,Kush-Tau,Metallurg-Magnitogorsk,Mratkino,PavlovskyPark,etc).

There are about 300 solutional caves, 600 rivers, 800lakes,mountain ranges, 3nationalparks,morethan3,000 historical, art, cultural and archaeological monuments, more than 30 sanatorium-resortcenters(ZelenayaRoscha,Krasnousolski,Yumatovo,Yakty-Kul,Yangan-Tau,Talkas,Assy,Tanyp,Yubileyniy,Karagai,Ai,etc.)withintheterritoryoftherepublic.

Reasonsfortourismattractiveness:

• Picturesque natural scenery

• Culturalheritage(LakeKandrykul,Shulgan-Tashnaturereserve andKapovacave,whicharepartoftheBashkirUral biospherereserve)

• Well-developed transportation infrastructure

There is a wide range of accommodation options, including internationalhotelchains,presentintheregion(Sheraton,Holiday Inn,HiltonGardenInn,Iremel,Hamptonby HiltonUfa,Azimut,Bashkiria,Tan,AMAKSHotels&Resorts,President Hotel, etc.).

4High scientific and technological potentialThehighereducationalsysteminBashkortostanis one of the most developed in the Russian Federation.Thereareabout25 multidisciplinary

institutions including Ufa State Petroleum Technological University (themainhighereducationinstitution),UfaStateAviationTechnicalUniversity,BashkirStateUniversity,BashkirStateMedicalUniversity,M.AkmullahBashkirStatePedagogicalUniversity(the leadinghighereducationinstitutioninthehumanities,specializingintheadvancementoftheRussianlanguagein the SCO countries)inBashkortostan.

There are 74researchanddevelopmentinstitutesintherepublic.Thescientificpersonnelnumbersmorethaneightthousandpeople,approximatelyhalfofwhomareresearchers.Morethan60 percentofBashkirscientistsarespecialistsinengineeringsciences.Newtechnologiesthatweredevelopedbyresearchinstitutesand centersoftherepublicoverthepastyearsarebeingusedin thepetroleum,refiningandpetrochemicalindustries,aswellas inmedicine,engineeringandagriculture.

Ufa Science Center of the Russian Academy of Science and technoparksestablishedwiththesupportoftherepublic’suniversitiesplayanimportantroleinscientificandtechnicaldevelopment.Theseinstitutionsspecializeinsuchfieldsas oil and gas,chemicals,IT,ecologyandgeodesy.


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5High industrial potentialTheRepublicofBashkortostan’sindustrialproductionincludes mining, manufacturing, production and distributionof electricity, gas and water.

The manufacturing sector accounts for 80 percent of industrial production.TherepublicisRussia’sleadingcrudeoilrefiner.Machine-building complexes account for about 10 percent.

Bashkortostanisthelargestproducerofthefollowingindustrial productsintheRussianFederation:

• Sodiumcarbonate:No.1 producer

• Thermallypolishedglass:No.1 producer

• Polymericmaterialsforfloor,wallandceilingfinishing:No.1 producer

• Mobileconcretepumps:No.1 producer

• Cementmixers:No.1 producer

6Well-developed financial infrastructureThereisawell-developedlocalbankingnetworkin theRepublicofBashkortostan:

• 74 bankinginstitutions,five of them areregional

• 17 branchesofbankinginstitutionsfromotherregions

TheRepublicofBashkortostan’sbanksarethe second-largest issuers of debit cards in the Volga Federal District and the seventh-largestinthecountry.Intermsofaccesstobankingservices, it occupies seventh place amongtheRussianregions.

Thetotalamountofissuedloansasoftheendof2016:

• Individuals:RUB177.1 billion

• Legalentitiesandindividualentrepreneurs:RUB457.0 billion

7Effective system of comprehensive investment supportTheRepublicofBashkortostanenjoysa high credit ratingandisamongtheleastriskyregionsin the RussianFederationforinvestment.

According to the long-term rating of the republic by Fitch Ratings, it is in the top ten Russian regions with the highest investment potential.

Bytheendof2016,Bashkortostanfounditselfamongthe top ten regionsofRussiaintermsofinvestmentsinfixedcapital.

AccordingtoExpert-RA’s2016investmentattractivenessrating,theRepublicofBashkortostanbelongstothegroupofRussianregionswithaveragepotentialandmoderaterisk.Accordingto thisrating,therepublictakestoppositionsinthenomination“MinimalEconomicRisks”.Itranks17th among the regionswith minimaleconomicrisksand11th among the region with the maximum investmentpotential.

Since2015theRepublicofBashkortostanhasbeenimplementingasystemofbestpracticesbasedontheNationalRatingof the InvestmentClimateintheRegionsoftheRussianFederation,elaborated on by the Agency for Strategic Initiatives to Promote NewProjects.In2016therepublicranked20th in the rating among allregionsoftheRussianFederation(in2015—40thplace).

TheDevelopmentCorporationoftheRepublicofBashkortostanprovides services supporting public-private partnerships (hereinafter,PPP)andinvestmentprojectsintheframeof concession agreements with the participation oftheRepublicofBashkortostan.Bytheendof2016,theRepublicofBashkortostanrankedseventh among the regions of Russia in the public-private partnerships development rating; it rose byfourpointsfromthepreviousyear.


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Year 2012 2013 2014 2015 2016

Placement in the rating of PPP development in the regions* 51 16 11 11 7

*According to the data of the association of PPP participants “Public-Private Partnerships Development Center”

MajorspheresofPPP/concessiondevelopmentare:

• Transportation infrastructure, including public transportation;

• Publicutilitiesinfrastructure(possibleonlyunderaconcessionagreement);

• Healthcare;

• Education, culture, sports, tourism;

• Social welfare of the population;

• And ecological infrastructure in terms of solid waste treatment, utilization,neutralizationanddisposal.

TheRepublicofBashkortostanguaranteesallinvestorsthe protectionoftheirrightsincarryingoutinvestmentactivities, aswellaspublicityforthediscussionofinvestmentprojects,regardlessoftheformofproperty.

Inordertoenhancetheefficiencyofimplementinginvestmentprojects,thegovernmentoftheRepublicofBashkortostanhas adoptedaregulationfortheadministrationofinvestmentprojectsontheterritoryofBashkortostanundertheonestopprinciple.Theregulationoutlinesaprocedureforinteractionbetween the investment entities, government agencies of the RepublicofBashkortostan,andtheDevelopmentCorporationoftheRepublicofBashkortostan,whichisthedesignatedinstitutionontheimplementationofinvestmentprojects.

Over a short period, the republic managed to create one of the mostefficiententrepreneurshipsupportsystemsinRussia.There are three business incubators for investors in addition to the BusinessSupportCenter,theRegionalIntegrationCenteroftheRepublicofBashkortostan,The CenterforInnovationintheSocialSphereoftheRepublicof Bashkortostan,seventechnoparks,nineindustrialparks,threetechnologytransfercenters,the VentureFundoftheRepublicofBashkortostan,twenty-two innovation enterprises under higher education and scientificinstitutions,threecommonusecenters,two prototypingcentersandtheRegionalEngineeringCenter of the Republic of Bashkortostan.

Providers of information in the sphere of gas distribution are PAOGazpromGazoraspredelenieUfaandOOOGazpromMezhregiongazUfa.

Providers of information in the electric power industry include local grid operators responsible for connections to110-35kWpowergrids,OOOBashkirenergo,MUP Chyshmyenergoservis,the SibaybranchoftheUchalinskyMiningandProcessingPlant,OOO Energoengineering,ZAOElectroset,OOO Bashkirskaya SetevayaKompaniya,OOO Energostroyservice, and OOO Gazprom Energo.


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Information about free capacities and connection points to gas-distribution and power grids is available on the Investment Portal oftheRepublicofBashkortostan:http://map.bashkortostan.ru/. ThewebsiteoftheDevelopmentCorporationofthe Republicof Bashkortostanishttp://kr-rb.ru/.Itcontainsdataon the Republic ofBashkortostan’svacantinvestmentsitesand informationoninvestmentproposals.

Actions to improve the business climate in the Republic of Bashkortostanarecarriedoutinaccordancewith the principles ofprojectmanagement.

The Public Council on the Improvement of the Investment Climate undertheHeadoftheRepublicofBashkortostanwas establishedinordertoencourageinvestmentactivityand attractinvestmentstotheeconomyofthe region,as well as to implementthe operationalstandardof governmentagenciesoftheRepublicof Bashkortostanaimed at improving the investmentclimate.

TheProjectOfficewasestablishedinordertoimmediatelysolve theproblemsandissuesofthebusinesscommunityarisingin thecourseofinvestmentandentrepreneurialactivities,as wellasto realizemeasuresontheimplementationofthebest mechanisms for the creation of a favorable business environment.Furthermore,theProjectOfficecarriesoutactivitieswithinthe scopeoftheRepublicofBashkortostan’sparticipationin the NationalRatingof theInvestmentClimate in the Regions of theRussianFederation.

Theworkisperformedaspartoftheactionplanfor the realizationoftherepublic’spotential,whichallowsitto occupya high placein theNationalRatingoftheInvestmentClimate in the Regions of theRussianFederation.

Asoftoday:1. Thetermsofissuingconstructionpermitsis90days.2. Thetermsofstatecadastralrecordsonkeepingrealestate

intherepublicis70days.3. Thetermsofstateregistrationofrightsontheapplications

oflegalentitiesissevenbusinessdays.Theperiodfor the consideration of applications for state registration of rights submitted in electronic form is reduced to one or two businessdays.

4. Theaveragetimeforconnectiontoapowergridis43days(includingthecompletionofthreeprocedures).

5. Smallandmedium-sizedenterprises(hereinafter,SMEs)positivelyassess: – Statefinancialsupportinitiatives – Investment infrastructure objects – Thequalityofroadnetworksandtelecommunicationsservices – The availability of real estate required for business and lease procedures


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Top-priority sectors for development

Extraction and processing of natural resourcesTheRepublicofBashkortostanisoneof the oldestoil-producingregions

in the country,accountingforthree percentofRussia’stotaloilproduction,includinggascondensate.Amongthe Russianregions,it is rankedninthby productionvolumes and second by primary crude oil processing.

Bashkortostanisthemainproduceroflightoilproductsin the country:1/8ofallpetroland1/9ofalldieselfuelin Russia is madehere.

TheoilconversionratioinBashkortostanstandsat86.1 percent compared to the Russian average of 79.2 percent.

Increasing the oil conversion ratio, improving the quality of fuel producedandensuringtheenvironmentalsafetyof productionprocessesarethekeygrowthareasforthisindustry.

Chemical and petrochemical industryRussia’slargestmanufacturingcomplexproducing organicandnon-organicchemicalproductsis locatedinBashkortostan.

Intermsofchemicalsproduction,Bashkortostanisoneof the leadingproducersinthefollowingcategories:

• No. 1 producerofsodiumcarbonateandbenzol

• No. 2 producer of plastics in primary forms, ethylene, xylene, and synthetic rubbers

• No. 3 producer of caustic soda and sulfur

Thefinechemicalindustryisthemaingrowthareaforthissector.


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Woodworking industryBashkortostanisrichinforestresources:

• 5.7 million hectares(or40percentofthetotalarea)arecoveredbyforests.

• 760.3 millioncubicmetersofgrowingforeststock;birch,oak,mapleandconifertreesareprevalentinregionalforests.

• 69.2 percentpercentofthetotalvolumeofwoodstocklistedintheforestsisclassifiedasexploitable.

TherepublicishometoRussia’slargestlimetreeareas;limes have thelargestnectarcapacityforbeekeeping.

Advanced timber processing and the creation of new enterprisesforprocessinglow-gradewoodandtimberwaste are among the keygrowthareasfortheindustry.

Transportation and logisticsTransportation is a highly developed sector of the regionaleconomy,whichplaysakeyroledue toBashkortostan'sgeographiclocation.

WorkonupgradingUfaInternationalAirport'sinfrastructurewas completedin2015.Anewinternationalterminalwasbuilt,boostingthecapacityfrom200to800peopleperhour.Duetotheopening of a second runway, the airport can now accommodate wide-bodyaircrafts.Theupdatedairterminalwasthewinnerof“BestAirportof 2016”(category:internationalairport,upto4millionpassengersannually),andwasawardedfirstprizeintheAirGatewayof Russia nationalaward.

TheRepublicofBashkortostanhasthelongestroadnetworkof all theregionsintheVolgaFederalDistrict.


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Agricultural sectorBashkortostanisalargeregion withawell-developedagriculturalindustry.

The region is among the seven largest agricultural producers in Russia.TherepublicisaleadingRussianregionasmaybeseenfromthefollowingkeyagriculturalproductionindicators:

• Largest cattle population

• Second-largest milkproducer

• Second-largest horse population

• Seventh-largest producer of cattle and poultry for slaughter (onaliveweightbasis)

Therepublic'sfarmlandtotals7.1 million hectares, or three percent ofRussia'sagriculturalland.Cultivatedlandaccountsfor 3.6 million hectares, and 1.6 million people, or over 38 percent of Bashkortostan'spopulation,liveinthecountryside.

Bashkortostan’skeyagriculturalproductsincludegrain,sugarbeet,oilseeds,vegetables,fodder,andmeatanddairyproducts.

Key areas of development for this sector:

• The use of new technologies in grain farming, the improvement of the fodder base structure and the production of oil seeds;

• Projectsinanimalhusbandry:stockbreeding,artificialinsemination, pig farming and aviculture, production of balanced feedstuffs;

• Construction of plants to store and process horticultural produce andpotatoes,aswellastoproducecannedfood;

• Manufacturing products with medicinal and preventive properties,aswellasbabyfood.


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Internal tourismIn terms of the value of tourism services, the republicrankssecond in the Volga Federal District, and seventhintheRussianFederation.

In terms of the value of services provided by hotels and othertypesofaccommodation,Bashkortostanranksfirst in the Volga Federal Districtandfifthcountrywide.

In terms of the value of spa and sanatory services, the republicranksfirst in the Volga Federal district, and sixth in the Russian Federation.

Key development areas for this sector:

• Ecotourismandextremetourism(horsebackriding,trekking, snowmobiledriving,rafting)

• Additional development of more traditional recreational and healthactivitiesandwintersports

• Investment in the hospitality business and health care

Mechanical engineeringBashkortostanremainstheonlyproducerof concretepumpsin thecountryandisoneof the leadingproducersoftransitconcretemixers(88.6 percentshareinRussia),trucktrailers

(47 percent share),andcabincruisers(41.4 percentshare).BashkortostanisRussia’sthird-largest producer of cistern trailers foroilproducts,water and otherliquids(14.7 percent) and is one ofthetopfourbusmanufacturers(2.1 percent).Therepublicis Russia’s second-largest producerof chainblocksandhoists.


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1. Government support initiatives for investment activities in the form of capital investments1.1. Tax incentivesCorporate income tax reliefThetaxratehasbeenreducinggraduallyby4.5percentfor the period from 2017-2020 and starting from 2021 it will be reducedby3.5percent(inimplementingpriorityinvestmentprojects for the period of 10 years depending on the amount ofinvestments):

• FromRUB100milliontoRUB300millioninclusive—for1year

• FromRUB300milliontoRUB700millioninclusive—for2years

• FromRUB700milliontoRUB1.5billioninclusive—for3years

• FromRUB1.5billiontoRUB2billioninclusive—for4years

• FromRUB2billiontoRUB5billioninclusive—for5years

• OverRUB5billion—for10years

• FromRUB10milliontoRUB700millioninclusive—forthreetax periods to investors implementing priority investment projectsinthemunicipalitiesoftheRepublicofBashkortostanincluded in the comprehensive programs of social and economic developmentoftherepublic’smunicipalities,approvedby the governmentoftheRepublicofBashkortostan.

Corporate property tax reliefExemptionfrompropertytaxinamountof2.2percentincaseof the implementationofpriorityinvestmentprojectsfor the periodof10yearsdependingontheamountof the investment.

1.2. CollateralPropertyownedbytheRepublicofBashkortostanis providedasa pledgetosecuretheobligationsof investors to banking institutionsandotherdebtors.

1.3. Preferential lease of land plotsLandplotsownedbytheRepublicofBashkortostanor its municipalitiesaswellaslandplotswithoutthe delineationof statepropertyrightsareprovidedfor leasewithouttenderingincaseoftheimplementationof large-scale investment projects included in the list of priority investment projects of the Republic of Bashkortostan.

Termsoflandplotprovision:availablefinancingsourcesforaninvestmentprojectofatleast50percentofitsvalueandcompliancewithoneofthefollowingcriteria:

• The investment project provides for the construction of facilities oranindustrialparkthatwillincreasethenumberofjobopportunities in the municipality where they are located

– Atleast50jobswithinamunicipalitywithapopulationof up to 20 thousand people

– At least 100 jobs within a municipality with population from 20 thousand to 100 thousand people

– Atleast150jobswithinamunicipality(excludingUfacity)with a population of more than 100 thousand people

– Atleast250jobsontheterritoryoftheCityofUfaUrbanDistrictoftheRepublicofBashkortostan

• The investment project intends to construct facilities oranindustrialparkthatwillincreasetheannualrevenues

Government support initiatives for investors


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from taxes to the consolidated budget of the Republic ofBashkortostanbyatleastRUB25million,includingthetaxpaymentsbytheresidentsoftheindustrialparkoftheRepublicofBashkortostan

• The investment project intends to construct individual residential buildingsorapartmentblocks,forwhichtheownershiporsocial rent contracts will be transferred to people who lost their housing as a result of an emergency

2. Government support initiatives for investors implementing projects in non-diversified municipalities2.1. Support initiatives provided on the territories of priority social and economic development Thelistofnon-diversifiedmunicipalitiesoftheRussianFederationincludessixmonocitiesoftheRepublicofBashkortostan.

• ThefirstcategoryincludesBelebeyandKumertau;

• ThesecondcategoryincludesNeftekamskandBeloretsk;

• ThethirdcategoryincludesUchalyandBlagoveschensk.

On29December2016thegovernmentoftheRussianFederation signed resolutions on the creation of territoriesof prioritysocialandeconomicdevelopment(hereinafter, TPSED) in Kumertau and Belebey.

WithrespecttotheTPSED,FederallawNo.473-FZ“On the TerritoriesofPrioritySocialandEconomicDevelopment of theRussianFederation”asof29December2014setsupa specificlegalregimeforentrepreneurialactivities,which provides taxandotherpreferencestoinvestors.

Creation of the territories of priority social and economic development

Blagoveshchensk

Uchaly

Beloretsk

Neftekamsk

Belebey

Kumertau

Monocities of the

Request preparation

1-st category

2-nd category

3-rd category

TPSED are created


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2.2. Benefits for TPSED residents

Benefit type Standard TPSED Benefit term

Corporate income tax:

Federal budget 3% 0% First5years

Regional budget* 17%5% First5years

10% Following5years

Corporate property tax* 2,2% 0%

10 years

Insurance contributions by employers: 30%ofpayroll 7.6%ofpayroll

Pension Fund 22% 6%

Social Security Fund 2,9% 1,5%

Obligatory Medical Insurance Fund 5,1% 0,1%

Land tax** 0,3%–1,5%*** 0%**

Reduction factor for mineral extraction tax calculation

None

0 First 2 years

0,2-1 Fromthe3rd to 10th year it proportionatelyincreasesevery two years(by0.2)

* Relevant laws of the Republic of Bashkortostan are adopted by the National Assembly (Kurultai) of the Republic of Bashkortostan on 22 February 2017** Set by the municipality*** Depending on the purpose


22

2.3. Support initiatives by the Monocity Development Fund (hereinafter, the Fund)Support initiatives by the Monocity Development Fund

1Construction (reconstruction) of infrastructure facilities

Fund — up to 95 percent of investments

Budget—from5 percent of investments

Conditions of investment project implementation:

• ThefundallocatesRUB400,000to800,000for thecreationofonejob

• One ruble invested by the fund requires the attraction of three rubles from outward investments

2Loan to implement an investment project

FromRUB100 million to 1 billion

5 percent per annum

Up to 8 years

Activities on the creation of favorable living conditions for the populationarecarriedoutatthefederallevelalongwith financialmechanismstosupportmonocities.In particular, the priorityprogram“ComprehensiveDevelopmentof Monocities”,providingtheimprovementof the monocities environment, has beenimplemented.

3. Government support initiatives for investors implementing projects in the framework of public-private partnerships As part of public-private partnerships development, workintherepublicisperformedinthreeareas:

• Regulatory support of PPPs

• Institutional environment development

• Implementation and information-methodological support of PPP projects

A PPP management system has been created in the republic.TheMinistryofEconomicDevelopmentof theRepublicof Bashkortostanistheauthorizedbodyfor PPPmechanismsadministration.SectoralexecutiveauthoritiesoftheRepublicof Bashkortostanareresponsiblefor thedevelopmentof concessionagreementsand the consideration ofproposalsfrom entitiesintendingto conclude such agreements on relevant areasofactivity.

The Development Corporation of the Republic of BashkortostanisinchargeofPPPinvestmentprojectssupport in the Republic of Bashkortostan.

Themainfinancialinstrumentforthepreparationand implementationofPPPprojectsistheInvestmentFund of the RepublicofBashkortostan.


23

Law No. 386-z of the Republic of Bashkortostan

“On the participation of the Republic of Bashkortostan in public-private

partnerships projects”

The procedure for inter-agency interaction in terms of the consideration

of proposals from entities intending to conclude concession agreements

Resolution No.56 of the Government of the Republic of Bashkortostan

of 21 February 2017

The procedure for inter-agency interaction of EA of RB* in the course of the compilation

and approval of the list of objects that are objects of concession agreements


of 21 February 2017

The procedure for inter-agency interaction

in terms of the preparation and implementation of PPP projects

in the Republic of BashkortostanResolution No.336

of the Government of the Republic of Bashkortostan of 16 August 2017

Regulation on the Interagency Commission responsible

for the preparation and implementation of investment projects under PPPs


of 23 March 2017

Authorizedbodiesforthedevelopmentofconcessionagreements — Sectoral executive authorities

of the Republic of Bashkortostan

AuthorizedbodyforPPPmechanisms administration — Ministry of Economic Development


The procedure for inter-agency interaction of EA of RB* in terms of the preparation

and implementation of concession projects initiated by EA of RB*


of 21 February 2017

Investment project support — AO Development Corporation


* EA of RB — executive authorities of the Republic of Bashkortostan


24

Potential areas of PPP mechanisms application in Bashkortostan are:

• Social services

• Healthcare

• Tourism

• Transportation

• Utility services

4. Government programs for financial support to SMEs in the Republic of Bashkortostan 4.1. As part of the government program for agricultural development and agricultural produce, material and food market regulation for 2013-2020, subsidies are granted to:

• Partially reimburse the expenses for purchasing elite seeds;

• Partially reimburse the expenses for uprooting old, non-producing gardens and land rehabilitation;

• Partially reimburse the expenses for planting and handling perennial fruit and berry plants;

• Partially reimburse the interest rates on short-term loans granted forthedevelopmentofcropfarming,processingand sellingof cropproducts;

• Partially reimburse the interest rates on investment loans granted for the development of crop farming, modernizationand developmentofcropfarmingmarket infrastructure and logistics;

• Partially reimburse the insurance premium costs paid by crop producersunderagriculturalinsurance contracts;

• Support crop producers;

• Supportlivestockbreeding;

• Supportmilkcattlebreeding;

• Selland/orshipeachkilogramofself-processedmilk;

• Partially reimburse the expenses for increasing breeding sheep andgoatstock;

• Partially reimburse the expenses for increasing breeding reindeer,deerandhorsestock;

• Supporteconomicallyimportantregionallivestockbreeding programs;

• Partially reimburse the interest rates on short-term loansgranted forthedevelopmentoflivestockbreeding,processing andsellingoflivestockproducts;

• Partially reimburse the interest rates on investment loansgrantedforthedevelopmentoflivestockbreeding,modernizationanddevelopmentoflivestockmarketinfrastructure and logistics;

• Partially reimburse the insurance premium costs paid by livestock producersunderagriculturalinsurance contracts;

• Support meat cattle breeding;

• Partially reimburse the interest rates on investment loans grantedfortheconstructionandmodernizationofmeatcattle breedingfacilities;

• Support farming newcomers;

• Develop family cattle farms;


25

• Partially reimburse the interest rates on long-term, medium-term andshort-termloansgrantedtosmallbusinesses;

• Obtain government grants to agricultural consumer cooperatives for the development of material and technical facilities;

• Partially reimburse the interest rates on short-term loans granted forthedevelopmentofmilkcattlebreeding;

• Partially reimburse the interest rates on investment loansgrantedfortheconstructionandmodernizationof milk cattle breedingfacilities;

• Partially reimburse the interest rates on short-term loans granted fortheprocessingofcropandlivestockproducts;

• Andtodevelopandmodernizegreenhousefacilitiesandpurchaseequipmentforgovernmentsubsidingpurposes.

https://agriculture.bashkortostan.ru/The Ministry of Agriculture of the Republic of Bashkortostan

4.2. As part of the government program to develop and support the SMEs in the Republic of Bashkortostan, subsidies are granted to:

• Partially reimburse the expenses incurred by the SMEs in connectionwiththeacquisitionofcommodity(work,service)production facilities and equipment;

• Partially reimburse the education and training expenses incurred bytheSMEs(training,refreshertraining,andprofessionalimprovement);

• Partially reimburse the expenses incurred by social businesses;

• Partially reimburse the expenses incurred by the SMEs for the participation in international and interregional exhibitions and congresses;

• Perform research and development activities;

• Partially reimburse the expenses incurred by the SMEs for the establishment and/or development of child day care centers and other similar childcare facilities;

• Partially reimburse the expenses incurred by infrastructure developmentorganizationsfortheimplementationofSMEsupportprojectsintheRepublicofBashkortostan;

• Cover guarantee costs of the guarantee fund;

• Leasefixedassets;

• andtoobtainmicroloans.

https://biznestur.bashkortostan.ru/activity/18221/State Committee for Entrepreneurship and Tourism of the Republic of Bashkortostan


26

Ufa

Neftekamsk

Blagoveschensk

Belebey

BeloretskUchaly

Sterlitamak

Salavat

Meleuz

KumertauSibay

Sterlitamak District

Iglino District

GlavBashStroyUfa District

Chishmy District Davlekanovo

Zubovo

34

2

2Technology parks, industrial parks, clusters and territories of priority social and economic development (TPSED) in the Republic of Bashkortostan

Fostering innovation

Existing industrial parks (brownfield)

Territories of priority social and economic development (TPSED)

Projected industrial parks (greenfield)

Technology parks

Clusters

Existing industrial parks (greenfield)

number, if more than one4


27

Industrial parks

Existing industrial parks

Name Year of establishment Number of residents Total area

Prikamye Industrial Park Neftekamsk 2010 19 100 ha

Construction materials of Bashkortostan Industrial Park

Agidel 2010 9 223.88ha

Salavat Industrial Park

Salavat 2011 3 14.5ha

ChemTerra Industrial Park

Blagoveschensk 2012 1 27545sq.m

Ufimsky Industrial Park

Ufa District 2013 9 298.5ha

First Urals Industrial Park

Sibay 2014 3 13.6ha

Promcenter Industrial Park

Ufa 2014 16 58600sq.m

GlavBashStroy Industrial Park

Ufa District 2014 3 56.9ha

Zubovo Industrial Park

Ufa District 2015 - 37.3ha

Veles Industrial Park

Sterlitamak 2015 24 8.3ha 17898.7sq.m

BashInvest Industrial Park

Ufa 2016 - 10646sq.m


28

Projected industrial parks

Name Location Total area

Industrial Park in Salavat The site is located at the south-westernboundary of Salavat, cadastralunit02:59:060202

29ha

Vorotynovsky Industrial Park

The site is located close to Kumertau, cadastral numbers:02:00:000000:1680and02:60:00:000000:1681

219ha

Industrial Park in Chishmy District

Thesiteislocated20kmfrom Ufa on the territory of ChishmyDistrict

60ha

Industrial Park in Iglino District

n/a 8ha

Davlekanovo Industrial Park

The site is located in Davlekanovo(north-west of thecity)

626.2ha

Industrial Park in Sterlitamak District

The site is located at the boundaryofthecityof Sterlitamak.Adjacentto borders of the site are AO BashkirSodiumCompanyandNovo-SterlitamakskayaPower Plant

207.96ha

Production of construction materials

Agricultural industry

Universal

Advanced woodworking

Low-tonnage chemistry and polymer processing

Woodworking

Manufacturing

Production of petrochemicals

Heavy machinery and metalworking

Concept under development

Concept developed


29

Territories of priority social and economic development (TPSED)

Monocity Current status

Existing TPSED Kumertau ResolutiononcreationofTPSEDinBelebeyandKumertaumonocitieswas signedbytheRussianGovernmenton29December2016

Belebey ResolutiononcreationofTPSEDinBelebeyandKumertaumonocitieswas signedbytheRussianGovernmenton29December2016

Projected TPSED Uchaly Application in progress

Blagoveschensk Application in progress

Beloretsk Application in progress

Neftekamsk Application in progress

Technology parks

Management Company

Research and technology parkofGUPOiland PetrochemicalRefiningInstituteof the Republicof Bashkortostan

http://www.inhp.ru/ Ufa GUPOilandPetrochemicalRefiningInstituteof the Republic ofBashkortostan

NPAAviationTechnologyPark http://technopark-at.ru/ Ufa NPAAviationTechnologyParkMembersoftheAssociation:PAOUMPO,FGBOUVOUGATU,AOUfaAvia-Gaz,AOBETO,OOOAviaPromLeasing

EcolineTechnologyPark http://ecoline-rb.ru/ Meleuz OOO Ecoline

MedtekhnikaTechnologyPark http://www.ormed.ru/ Ufa OOO Research and Development Enterprise Orbita

Ufa Aviation Institute Self-Sustaining Creative Center TechnologyPark

http://rosoil.ru/ Ufa OOO Ufa Aviation Institute Self-Sustaining Creative Center

BashkiriaTechnologyPark [email protected] Meleuz ZAOMeleuzMilkCanningPlant

InmashTechnologyPark http://inmash.org/ Sterlitamak OOO KIT STAR


30

Clusters

Innovative infrastructure facilities

Radioelectronic Cluster https://cpt-rek.bashkortostan.ru/

Ufa Center for creating production prototypes for radioelectronic equipment:LaboratoryforonlinetechnologyandroboticsCommunicationnetworktestinglaboratoryLaboratoryforprotectioncoveringandradioelectronicstestingProject development laboratory Radioelectronics design and modelling laboratory LaboratoryforcreatingproductionprototypesformicroelectronicsTraining classPilot and experimental production

Low-TonnagePetroleumChemistry Cluster

[email protected] Ufa Center for creating production prototypes for petrochemicals:Spectrochemical analysisElement analysis of non-organic and organic petrochemical products Chromatographic research methodsThermal research methodsX-ray research methodsCloud designing

BiotechnologyCluster [email protected] Ufa Regional engineering center: Fungi unitUnitforproductrecoveryandpurificationSpore unit NormalmicrofloraunitPathogenic unit Finalproductunit(mixingandpacking)


31

Development Corporation of the Republic of Bashkortostan

AODevelopmentCorporationoftheRepublicofBashkortostanwas establishedin2010.Thecorporationsupportsinvestorsin opening and running their businesses in the Republic of Bashkortostan.Itprovidesinformationontheinvestmentpotentialoftherepublic,offersready-to-usebusinesssolutions,examinesbusinessplansandfinancialmodelsrequiredfor obtainingborrowings,facilitatesgovernmentsupport,and selectssitesbestsuitedforproductionpurposes.

The objective of the Corporation is to improvetheefficiencyofstatepolicy with regard to the establishment and implementationofpriorityinvestment projects in the Republic of Bashkortostan.

Step 1. Develop the strategy of the project1. Provideone-stopshopsupporttoinvestmentprojects,

including PPPs2. Conductmarketresearchtofulfillthebusinesspotential

of investors3. Provideinformationon:

– Infrastructure and raw material potential of the republic – Measures of government support for businesses – Taxbenefits

4. Assistinselectingtheoptimalstrategytoenterthemarket5. Facilitatethesearchandselectionofrawmaterials

for manufacturingthefinalproduct6. Selectmanufacturersandserviceproviders7. Facilitatecommunicationwithpublicinstitutions

and governmentalbodiestopreparetherequireddocumentation for the project

8. Developthebusinessplanandfinancialmodelto raise financing

Development institutions


32

Step 2. Select investment sites 1. Selectanoptimalsiteforrunningabusiness2. Arrangevisitstoindustrialsites3. Executealandplotlease/saleagreement Step 3. Build up the business1. Provideadvisoryserviceson:

– Tax and legal regulations – Projectfinancing – Government support – Staffing

2. Providesupportforinvestmentprojectsatallstages;facilitate communicationwiththerespectivepublicauthorities

3. Assistinsettingupanewlegalentity4. Superviseconstructionworks5. Providetechnicalandconstructionsupervisoryservices

to streamlinetheinvestmentstageoftheprojectand optimizeconstructioncosts(obtainrequiredpermission,communicatewith regulatory authorities, commission facilities, provide supportatallstagesofconstructionworks,reviewthe compliancewiththeinitialprojectconcept,optimizeand controlcosts,searchforalternativeconstructionsolutions)

Step 4. Provide support to the investor 1. Providefullprojectimplementationsupportintherepublic2. Provideinformationalsupportonthefurtherdevelopment

of businessintheregion3. Facilitateparticipationinallkindsofregional,national,

federal andinternationalbusinesseventsheldintherepublic

Contacts:

AO Development Corporation of the Republic of Bashkortostan110 Pushkin StreetUfa 450057Republic of BashkortostanTel.: +7 (347) 280 82 32Fax: +7 (347) 280 82 49Email: [email protected]


33

AO Regional Fund

The objective of the fund is to support priorityinvestmentprojects.

Theworkundertakenbythefundincludes:

• Managing the state investment resources oftheRepublicofBashkortostan;

• Investingincompaniesthatcreatenewworkplacesintherepublicandmakeproductsusingnewtechnologyor provide innovative services;

• Financing investment projects by issuing loans, leasing out equipment,andmakingportfolioanddirectinvestments.

Thefundinvestsinthefollowingindustries:constructionand the manufactureofconstructionmaterials,airtransportation,agricultureandengineering.Thefund’sinvestment portfolio includes gas, engineering, non-ferrous metaland telecommunicationscompanies.Specialpurposeenergy and nanotechnologyprojectsarealsoconsidered.

Contacts:

AO Regional Fund3B Karl Marx StreetUfa 450008 Republic of BashkortostanTel.: +7 (347) 276 12 19Fax: +7 (347) 276 12 19Email: [email protected]


34

35


Summary of statistics on the economic position of the Republic of Bashkortostan

Investment in fixed assets from all sources

Agricultural production index

Industrial production index

Consumer price index (December)

283.5317.8

360.9

550.0

275.0

0.0

110,0

70,0

30,0

RUB bln

%

2014 2015 2016

112.2 110.9

104.9

115.0

110.5

105.0

100.0

%

2014 2015 2016

103.1100.9 100.8

150

100

50

0

%

2014 2015 2016

105.0

102.5

100.0

%

2014 2015 2016

103.9

102.6

101.3

* Data provided by the Federal State Statistics Service for the Republic of Bashkortostan


36

MineralProducts 76%

Chemicalsandrubber 10%

Machinery 8%

Metalsandmetalware 3%

Timber and paper products 1%

Other 2%

Netherlands 13.8%

Kazakhstan 13.8%

Slovakia 6%

Belarus 5.3%

Latvia 5%

China 4.6%

Italy 4.6%

Other 46.9%

Machinery 48.9%

Chemicals andrubber 27.6%

Metals andmetalware 10.2%

Food products and commodities 3.9%

Othergoods 9.4%

Export commodity structure

Key countries of demand

Import commodity structure

Key countries of supply

China 15.6%

USA 14.7%

Kazakhstan 13%

Italy 11.3%

Belarus 5.4%

Germany 5.1%

Japan 4.1%

Other 30.8%

*Data for 2016 provided by the Volga Customs Department


37

Government of the Republic of Bashkortostan46TukaevStreetUfa450101RepublicofBashkortostanTel.:+7(347)2502401Email:[email protected]

Ministry of Economic Development of the Republic of Bashkortostan46TukaevStreetUfa450101RepublicofBashkortostanTel.:+7(347)2808306Email:[email protected]

AO Development Corporation of the Republic of Bashkortostan 110PushkinStreetUfa450057RepublicofBashkortostanTel.:+7(347)2808232Fax:+7(347)2808249Email:[email protected]

Minister of Economic Development of the Republic of BashkortostanSergey Vladimirovich NovikovTel.:+7(347)2808306Еmail:[email protected]

General Director of the Development Corporation of the Republic of BashkortostanOleg Evgenyevich GolovTel.:+7(347)2808232Email:[email protected]

Deputy Minister of Economic Development of the Republic of BashkortostanTatyana Valeryevna ShtolTel.:+7(347)2808604Email:[email protected]

Deputy Minister of Economic Development of the Republic of BashkortostanGulnara Nailevna ShafikovaTel.:+7(347)2808710Email:[email protected]

Head of the Investment Department of the Ministry of Economic Development of the Republic of BashkortostanAyrat Salavatovich FahretdinovTel.:+7(347)2800839Email:[email protected]

Head of the Project Support Department of the Development Corporation of the Republic of Bashkortostan Igor Vladimirovich SmolyaginTel.:+7(347)2808232Email:[email protected]

Contacts


38

Deloitte CIS5LesnayaStreetMoscow125047Tel.:+7(495)7870600Fax:+7(495)7870601

Deloitte Ufa20 Karl Marx StreetUfa450077Tel.:+7(347)2267292Fax:+7(347)2267293Email:[email protected]

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