tatarstan service industry & tourism (dec 2013)

Service Industry in Tatarstan: Current State and Future Prospects December 2013

Why Tatarstan? Tatarstan in different...

Good governance

Low costs

The best business

environment

•  Good governance •  Low corrupCon and red tape •  Skilled and affordable labor •  Low costs •  ExcepConal living condiCons •  Outstanding business environment

Business Environment Benchmarking: Tatarstan versus Moscow and Saint Petersburg

Methodology •  Ernst & Young survey

comparing 10 Russian regions based on World Bank methodology

•  Businessmen assessed to what extent the given criteria pose an obstacle to doing business

•  Used scale is from 0 to 4 where 0 means no obstacle and 4 stands for very serious, harmful obstacle

Indicators •  Infrastructure – Electric Power Supply •  Custom Rules and Regulation of Import and

Export •  Dealing with Authorities: State Inspections •  Dealing with Authorities: Obtaining of Official

Certificates •  Tax Rates •  Corruption •  Security Situation •  Shadow Economy •  Judicial System •  Access to Financing •  Labor Law •  Insufficient Qualification of Workforce •  Transport

Source: Ernst & Young. Измерение условий ведения бизнеса в российских регионах, 2011 February.

Infrastructure – Electric Power Supply

1.7

3

0.6

0 0.5 1 1.5 2 2.5 3 3.5

Saint Petersburg

Moscow

Tatarstan

Scale 0 -‐ 4 where 0 = no obstacle at all, 4 = serious obstacle


Custom Rules and Regulation of Import and Export

0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2

Saint Petersburg

Moscow

Tatarstan



Dealing with Authorities: State Inspections

0 0.5 1 1.5 2 2.5

Saint Petersburg

Moscow

Tatarstan



Dealing with Authorities: Obtaining of Official Certificates

0 0.5 1 1.5 2 2.5

Saint Petersburg

Moscow

Tatarstan



Tax Rates

0 0.5 1 1.5 2 2.5 3

Saint Petersburg

Moscow

Tatarstan



Corruption

0 0.5 1 1.5 2 2.5 3

Saint Petersburg

Moscow

Tatarstan



Security Situation

0 0.5 1 1.5 2 2.5 3

Saint Petersburg

Moscow

Tatarstan



Shadow Economy

1.85 1.9 1.95 2 2.05 2.1 2.15 2.2 2.25 2.3 2.35

Saint Petersburg

Moscow

Tatarstan



Judicial System

0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6

Saint Petersburg

Moscow

Tatarstan



Access to Financing

0 0.5 1 1.5 2 2.5 3

Saint Petersburg

Moscow

Tatarstan



Labor Law

0 0.2 0.4 0.6 0.8 1 1.2 1.4

Saint Petersburg

Moscow

Tatarstan


Source: Ernst & Young. Измерение условий ведения бизнеса в

российских регионах, 2011 February.

Insufficient Qualification of Workforce

0 0.5 1 1.5 2 2.5 3

Saint Petersbrug

Moscow

Tatarstan



Transport

0 0.5 1 1.5 2 2.5 3 3.5

Saint Petersburg

Moscow

Tatarstan


Source: Ernst & Young. Измерение условий ведения бизнеса в

российских регионах, 2011 February.

Yandex: Kazan is Russia’s least congested city

Source: Yandex.ru, hip://company.yandex.ru/researches/reports/2013/city_jams/city_jams_2013.xml

Doing Business in Russia 2012 Benchmarks 30 Russian cities 4 areas of regulation •  Starting a business •  Dealing with construction permits •  Getting electricity •  Registering property These indicators were selected because they cover areas of local jurisdiction or practice. Measures the impact of the indicators from the perspective of domestic small and medium-size enterprises.

Top 10

Ulyanovsk

Saransk

Vladikavkaz

Rostov-‐on-‐Don

Kazan

Kaluga

Stavropol

Yaroslav

Surgut

Irkutsk Source: Doing Business in Russia 2012, hip://www.doingbusiness.org/reports/subnaConal-‐reports/russia

Ease of starting a business

1.7

21

9

2.1

30

9

2.1

17

7

0

5

10

15

20

25

30

35

Cost (% of income per capita)

Time (days) Procedure (number)

Kazan

Moscow

Saint Petersburg

Source: Doing Business in Russia 2012, hip://www.doingbusiness.org/reports/subnaConal-‐reports/russia

Ease of dealing with construction permits

40

223

32

172

392

47 51

361

18 0 50

100 150 200 250 300 350 400 450


Time (days) Procedures (number)

Kazan

Moscow

Saint Petersburg


Ease of getting electricity

930

186 9

1852

281

10

1080

238

9 0

200 400 600 800

1000 1200 1400 1600 1800 2000



Kazan

Moscow

Saint Petersburg


Ease of registering property

0.2

33

3 0.2

43

5 0.2

44

5

0 5 10 15 20 25 30 35 40 45 50

Cost (% of property value)


Kazan

Moscow

Saint Petersburg


Average Wages (2013, in rubles)

21,200

50,400

33,500 27,000

18,900

39,300

29,900

21,300

0

10,000

20,000

30,000

40,000

50,000

60,000

Kazan Moscow Saint Petersburg

Russia

average wage

median wage

Source: РИА Рейтинг, hip://riaraCng.ru/regions_study/20131029/610592758.html and Ministry of the Economic Development of the Russian FederaCon.

Education Local Government Spending on Education (2012)

•  40bn rubles •  22% of Tatarstan Expenditures

Number of University Students per 10,000 people

Tatarstan 526

Moscow 886

Saint Petersburg 809

Source: Federal State StaCsCcs Service and Ministry of EducaCon and Science of the Republic of Tatarstan.

Kazan Federal University •  Founded in 1804; the second

oldest university in Russia •  Parnership relation with more

than 80 universities fom about 30 countries

•  Listed among top 10 institutions of higher education in Russia

•  Over 47,000 students, who follow 300 degree programs – the main education center in Volga region

Tatarstan– Safe location where innovation thrives

Source: Federal State StaCsCcs Service.

•  One of the most prosperous and innovative regions in Russia

•  Tatarstan has effectively coped with the crisis given to its sound and sustainable business environment

•  Safe and laid-back environment provides exceptional conditions for living and working

•  Short distances and absence of traffic congestions facilitate regional transport

208

491

312

Kazan Moscow St Petersburg

Murders or a@empted murders (2011)

Innovative Economy


Output of innovaIte goods, services and operaIons (millions

rubles)

195,968 158,892 131,899

Share of innovaIve output in economic

turnover 15% 4% 9%

Expenditures on technological

innovaIon (millions rubles)

44,166 171,476 38,290

Share of organizaIon engaged in innovaIon 18.1% 18.6% 18.9%

Source: Federal State StaCsCcs Service, 2011.

Affordable prices for office rental & purchase

•  Office rental rates are 11 times lower than in Moscow and 5 times lower than in Saint Petersburg

•  Kazan is also one of the cheapest place among the millionniki cities

•  Spectacular increase of office space supply since 2000 Source: Jones Lang LaSalle. Oбзор рынка коммерческой

недвижимости, 2013 and Jones Lang LaSalle. Feasibility Study.

Kazan versus “Millionniki” cities

Source: Jones Lang LaSalle. Feasibility Study.

Kazan – one of the lowest office rent prices among the millionniki cities

Rental Rates Comparison

410

4500

2000

0

1000

2000

3000

4000

5000


USD/year for m2

Kazan

Moscow

Saint Petersburg

Source: Jones Lang LaSalle. Oбзор рынка коммерческой недвижимости, 2013 and Jones Lang LaSalle. Feasibility Study and Jones Lang LaSalle. Feasibility Study.

Comparing the highest rates available

Selling Prices

69,803

63,242 61,487

65,370

56,000 58,000 60,000 62,000 64,000 66,000 68,000 70,000 72,000

2009 2010 2011 2012

Selling prices (Class B) RUB per sq.m (excluding VAT)

•  There are no Class A offices for sale. •  Purchasing price is sCll lower to pre-‐crisis levels.

Source: Jones Lang LaSalle. Feasibility Study.

Kazan Office Market

•  Current supply volume of speculaCve office stock is esCmated at 132,000 sq m of Class A , B and C.

•  Class C offices consist of: -‐  mulCfuncConal complexes -‐  redeveloped buildings -‐  offices on ground floor of

residenCal buildings

16%

33% 51%

Type of Office

Class A

Class B

Class C

Source: Jones Lang LaSalle. Oбзор рынка коммерческой недвижимости, 2013 and Jones Lang LaSalle. Feasibility Study.

Profile of Tenants •  Majority of quality offices (Classes A, B) are

rented or bought by federal or international companies

•  Local companies prefer to rent Class C offices •  More than half of space is leased to smaller

tenants who occupied less then 100 sq m

The largest tenants in Kazan

Area (sq.m)

GE Money Bank 4,000

PwC 1,800

BTA -‐ KAZAN 2,200

VimpelCom 1,200

Lebedyansky 600

36%

42%

22%

Type of Company

Local

Federal

InternaConal

53% 26%

21%

Size of Offices

< 100 sq.m

100 -‐ 300 sq.m

> 300 sq.m Source: Jones Lang LaSalle. Oбзор рынка коммерческой недвижимости, 2013 and Jones Lang LaSalle. Feasibility Study.

Supply of Office Space •  Total amount of modern speculaCve office premises is about 64,000 sq.m. •  Almost 67% of the modern office stock in Kazan is Class B •  Most A Class offices were built a�er 2006 •  There are 113 sq. m per 1,000 individuals


Major Office Buildings in Kazan Name Class Developer Leasable office area (sq. m)

Korston A Korston Kazan 11,140

Suvar Plaza A Suvar Estate 11,000

BC BULAK A Bulak Investment 6,500

Park Pobedy A n/a 2,800

BC TATARIA B Benk 10,740

Business Park Idea B Idea Capital 10,300

Paraviia B n/a 6,200

RELITA B n/a 5,700

BC PUSHKIN B n/a 4,260

BC IBRAGIMOVSKIY B Eifel 2,600

Ruslan-‐office B Astor 2,100


Major Foreign Tenants in Kazan Name Sector Country of Origin

GE Money Bank financial services United Kingdom

PwC consulCng United Kingdom

DHL logisCcs Germany

Sanyo electronics Japan

Credit Europe Bank financial services Netherlands

Siemens engineering and electronics Germany

Lu�hansa airlines Germany

AIG insurance company USA

Ernst&Young consulCng United Kingdom

Schneider Electric electricity distribuCon and management France

Cushman & Wakefield Real estate services USA

Major Russian and Local Companies in Kazan

Name Sector Property Status

Sberbank financial services owner

TAIF various owner

Transne�’ oil & gas owner

MTS telecommunicaCons tenant

Beeline telecommunicaCons tenant

Megafon telecommunicaCons tenant

Alfa Bank financial services tenant

VTB financial services tenant

Sogaz insurance company tenant

Soglasie insurance company tenant

Major Russian and Local Companies in Kazan – Part 2

Name Sector Property Status

MDM Bank financial services tenant

Kit Finance financial services tenant

Rosbank financial services tenant

Russkiy Standart financial services tenant

TGT oil & gas tenant

Alfastrakhovanie insurance company tenant

Nasta insurance company tenant

Rosgosstrakh insurance company tenant

Rosno insurance company tenant

Ingosstrakh insurance company tenant

Success Stories: Credit Europe Bank and PwC

In Tatarstan since 2002. In Tatarstan since 2007.

VISION TRANSFORMATION

“A Transformation - Kazan International Business Hub Gateway To Russia”

ECONOMIC DRIVERS & DEVELOPMENT PRECINCT

Central

Business

Precinct

CBP is envisage to be the next commercial hub

after Kazan City Center. With the master plan in

place, it will create a catalytic impact to

businesses and provide an international business

platform for the MNC’s within the region.

Special Economic

Zone Precinct

A major catalytic precinct for attracting clean-

technology-oriented industry, investment and

research to Kazan ensuring that the local business

community is benefited along the way.

Metropolitan

Park

Precinct

By preserving the existing river corridor and

vegetation, the metropolitan park is designed to

provide a platform for social integration for

Kazan region, cultural experience and

environmental sustainability.

Knowledge &

Education

Precinct

A visionary precinct that will transform Tatarstan

into one of Russia’s premier destinations for

education, research and related industry over

the next 10 years. These activities shall allow a

platform to retain and nurture talents.

Central Business Precinct A Vibrant Aerotropolis where Great Businesses Converge


QUICK FACTS Precinct Area: 225.07 ha Developable Area: 146 ha (65%) Gross Density (FAR) : 3.55 Estimated GFA: 5.3 M sq.m. Estimated Dwelling Units: 10,000 Estimated Population: 39,000 Transient Population: 15,000 Population Density: 175 / ha Building Height: 8 – 40 levels

Regional Shopping Mall

Business Park District Park

Central Commercial Core

Convention & Exhibition Centre

Transit Oriented Neighborhood

Transit Hotel Aero Express Station

KNOWLEDGE & EDUCATION PRECINCT The Best of Kazan Talent Pool


QUICK FACTS Precinct Area: 228.11 ha Developable Area: 158 ha (75%) Gross Density (FAR): 3.0 Estimated GFA: 4.8 M sq.m. Estimated Dwelling Units: 13,800 Estimated Population: 56,600 Transient Population: 11,000 Population density: 270 / ha Building Height: 4 – 18 storey

Purpose Built Office

Town Center

Natural Preservation

Campus

Transit Oriented Neighborhood

Business Park

Neighborhood

Science Park

Hospitality School

METROPOLITAN PARK PRECINCT Experience Nature in an Urban area

QUICK FACTS Precinct Area: 35.85 ha Components: Parkland and park amenities, Religious facilities, Arts & Cultural Facilities, Green Infrastructure

Natural Trail

Cultural Complex

Plaza

METROPOLITAN PARK

KSC SUSTAINABILITY GLOBAL POSITIONING

.

Location, Country

Bedzed, London

Kronsberg, Hannover

Dongtan, China

KLIFD, Kuala Lumpur

Songdo, Incheon

KAZAN SMART CITY Russia

Masdar, Abu Dhabi

Status Established Established Progressive Planning + Design Progressive Planning + Design Progressive

Size

1.7 Hectares 82 houses

160 hectares 3,000 houses

8,600 hectares 50,000 houses

30 hectares 600 hectares 598.30 hectares 600 hectares 50,000 houses

Type Housing development

Township Township Urban Development Mixed Use

Urban Development Mixed Use

Urban Development Mixed Use

Township

Transport

No use of fossil fuels Green Transport – pedestrian & cycling

Green Transport – pedestrian, cycling, zero GHG emission transit

Green Transport – pedestrian, cycling, zero GHG emission transit

100% of the site is within 800m from transit stations

26km Bicycle lanes Electric Car charging stations

Bicycle Lanes 250 walking distance fr Transit Public Transport – Rail and Bus

Car Free City Zero carbon emission

Waste Waste recycled

Reduce household waste by 50%:

80% solid waste recycled

70% of waste is diverted from landfill

Waste collected by vaccum, 100% incinerator

Waste collected by central system

Zero Waste

Energy 100% renewable energy use

Reduce household energy consumption by 60-80%

Reduce energy consumption by 66%

40% reduction in carbon emmision

30% reduction in carbon emission PV and Wind Power

Reduce energy consumption by 60%

Waste to Energy Solar panels for renewable energy source

Water Reduce treated potable water demand by 50%

Rainwater Harvesting & Recycled water

Water consumption down by 43%

Potable water consumption reduced by 40%

Waste water recycling

Waste water recyling for irrigation

80% recycled water (desalinated water)

Neighourhood Size NA

500m walking catchment



Smart + Connected 250m to 400m Walking Neighbourhood


I D E A L G O O D B E S T

Golden Opportunity is Here Right Now

Outperform your Moscow-‐

based CompeCtors

Set Up Headquarters or Branch In

Kazan

Capitalize on Low Costs, Talent, and LocaCon

Global Trends in Tourism

Number ofInternaConal

Tourist

2012 1,035 million

2030 1,800 million

Market Share of Emerging Countries

2012 47%

2030 57%

Experienced travellers are looking for new desCnaCons, and developing countries could offer airacCve alternaCves

demand is increasingly orientated towards new types of experiences – parCcularly cultural and environmental.

Increase of demand of medical tourism (aging of populaCon)

Source: UNWTO Tourism Highlights, 2013 and UNCTAD, PromoCng Foreign Investment in Tourism, 2010.

Russia – Highest Increase of Inbound Tourism Amongst the Main Tourist Destinations

Country Arrivals (in millions) 2012 Change (%) in regard to 2011

1. France 83 1.8

2. United States 67 6.8

3. China 57.7 0.3

4. Spain 57.7 2.7

5. Italy 46.4 0.5

6. Turkey 35.7 3.0

7. Germany 30.4 7.3

8. United Kingdom 29.3 -‐ 0.1

9. Russian FederaIon 25.7 13.4

10. Malaysia 25 1.3

Source: World Tourism OrganizaCon (UNWTO)

9th Most Favorite DesInaIon for InternaIonal Tourists

Tourist Arrivals to Tatarstan

2012 1.480

2011 1.277

2010 1.113

2009 977

2008 908

2007 896

2006 732

2005 638

Growth from 2011 to 2012 16% Growth from 2005 132%

Type of Tourism

Number (thousands) %

All 1.480 100%

RecreaConal 611 41%

Business 553 38%

Medical 134 9%

Other 182 12%

Source: Ministry of Youth Affairs, Sports and Tourism of the Republic of Tatarstan.

Development of Tourism in Tatarstan by Segments

0

100

200

300

400

500

600

700

2005 2006 2007 2008 2009 2010 2011 2012

Business

RecreaConal

Medical (in thousands)


Hotels

•  Passenger flow doubled 2008-2013, 20% per annum growth

•  2 terminals - 3rd to be added in 5 years

•  Over 2 bln rub. invested in renovation

•  Capacity: 3.2 mln à by 2025: 5 mln

•  Cargo capacity untapped: ~ 5k tons(2012) –  3 k tons outgoing / 1.8 k incoming

Kazan International Airport – a rising star

752 676 959

1227 1487 1578

2008 2009 2010 2011 2012 2013*

Kazan International Airport Passenger Flow (thousands)

*2013 figure Jan-Oct.

Kazan International Airport Growth

*2013 figure Jan-Oct.

Dynamique of passenger flow in the OJSC

“Kazan international airport”

2008-2012 During 2000 – 2012 number of pax at Kazan international airport has been constantly increasing at the During 2000 – 2012 number of pax at Kazan international airport has been constantly increasing at the

average for more than 38% per year. At the period of the maximal increase in 2012 the airport serviced more average for more than 38% per year. At the period of the maximal increase in 2012 the airport serviced more

than 1 486 837 pax., at the same time increase was 21% in comparison with 2011 when the passenger flow than 1 486 837 pax., at the same time increase was 21% in comparison with 2011 when the passenger flow

was fixed at the rate of 1 226 800 pax. Increase is related to growth of demand for air transportation on was fixed at the rate of 1 226 800 pax. Increase is related to growth of demand for air transportation on

domestic and international directions. Main part of air transportation in Kazan falls on business trips and domestic and international directions. Main part of air transportation in Kazan falls on business trips and

touristic sphere. touristic sphere.

2000

г.

2001

г.

2002

г.

2003

г.

2004

г.

2005

г.

2006

г.

2007

г.

2008

г.

2009

г.

2010

г.

2011

г.

2012

г.

0

200

400

600

800

1000

1200

1400

1600

211,6 207,8 215,5 238,7309,9

393,6445,7

616,4

751,5

675,7

958,5

1226,8

1486,9

Airlines

•  Russian Railways constructing new high-speed train Moscow-Kazan-Alabuga, further to Siberia

•  Kazan-Moscow cut from 14 hrs to 3.5 hrs

•  Investment: 855 bln rub

•  Completion date: 2018

Moscow – Kazan by rail in 3.5 hours

Kazan River Port

Connected to Moscow, Saint Petersburg, the White Sea, the Caspian Sea and the Black Sea. 10 cruise companies registered in Tatarstan. Sails to Moscow, Saint Petersburg, Yelabuga, Samara, Nizhniy Novgorod, Cheboksary, Volgograd, Yaroslavl, Astrakhan, Tolyatti, Perm, Rostov-on-Don.

Year 2008 2009 2010 2011 2012 2013

Passengers (thousands) 139 114 133 105 71 115


tatarstan service industry & tourism (dec 2013)

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