tatarstan usat 4 pages.qxd 19/5/10 18:23 página 5 finance … · 2014-03-12 · tatarstan...

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On March 25, one of the mosteconomically developed regionsof the Russian Federation cele-brated one of the most impor-tant events in its political history.Rustam Minnikhanov was of-ficially inaugurated as the newPresident of Tatarstan, replac-ing the incumbent MintimerShaimiev who had served as therepublic’s dedicated leader foralmost 19 years.

During a meeting on Janu-ary 22 he had requested withRussian President DmitryMedvedev, Shaimiev said itwas time for him to step downas leader of one of Russia’slargest and most prosperousregions when his currentmandate ended in March.Tatarstan’s first president al-so added that he supportedMedvedev’s call in his state-of-the-nation address on No-vember 12 for a youngergeneration to take up themantle of political leadershipin Russia.

Shaimiev congratulated Min-nikhanov after being sworn inas the republic’s new president,saying that the “life experience,workability, competence [and]personal qualities of RustamMinnikhanov are undoubtedfor the successful activity of ourPresident for the benefit of peo-ple living in Tatarstan and theRussian Federation.” He alsoadded that Tatarstan’s enormousscientific, technical, industrial,agricultural and human poten-tial today makes it one of themost reliable regions in Russia.

The smooth handover ofpower has enabled PresidentMinnikhanov to hit the groundrunning. The republic’s formerprime minister has an accom-plished political background.He worked hard to prepareKazan for its 1,000th anniver-sary in 2005; the capital bene-fited from a massive facelift and

a revamped historical center forthe celebrations. He also threwhis full support behind the city’ssuccessful bid to host the 2013World Student Games, knownas the Universiade, and the mas-sive infrastructure developmentprogram that accompanied it.

In May, Minnikhanov metwith Russia’s Prime MinisterVladimir Putin. The Russianfederal budget has allocated al-most 27 billion rubles ($90 mil-lion) in 2009-2010 for theUniversiade preparations, therest being raised by regional andprivate investments. During hisvisit to Kazan, Putin praised theprogress being made: “All dead-lines are met, and this is very im-portant. Work is well organized.”

Tatarstan is known in theRussian Federation for gettingthings done. It defends its in-terests with characteristicaplomb, including languagerights. Indeed in the power shar-ing agreement with the Krem-

lin there is a clause stating thatTatarstan’s president must knowthe Tatar language.

Some argue the republic’s ef-ficiency is tied to centuries ofgood neighborhood policies inan ethnically mixed turf. Afterall, the fortress in Kazan, thecapital, houses both a mosqueand a Christian Orthodoxcathedral.

International rating agencieslike Standard & Poor’s think theforthright policymaking has todo with adroit management.Last July, S&P gave Tatarstan apositive rating that “reflects therepublic’s economic growth andcontinuously good financial per-formance,” according to S&P’scredit analyst Irina Pilman.

During his May meetingwith Putin, President Min-nikhanov said that in 1Q 2010“industrial production andGRP [gross regional product]increased by 8% and 6.5% re-spectively.”

The underlying motor foreconomic activity continues tobe oil and gas. Tatarstan has ap-proximately 0.9 billion tons ofoil reserves, according to officialgovernment sources. Averageoutput is 32 million tons peryear. The largest deposits arefound in the southeast andnortheast. Together with nat-ural gas, coal and bitumen, theseresources have fueled the in-dustrial takeoff.

Tatarstan is part of the VolgaFederal District (VFD) andheavily industrialized sinceWWII. FDI has been channeledto everything from avionics sup-pliers to the heavy truck plantsof Kamaz. In fact, every secondtruck built in the Russian Fed-eration is made by Kamaz. In-dustrial and high-tech parksnow dot the smaller towns alongthe Volga. The network of SMEsproduces rubber, tires, poly-ethylene, compressors, cars,trucks and helicopters.

FINANCE Page 02

PRUDENT POLICIESAND HIGH GROWTH

POTENTIAL

COMMERCE Page 04

FURS, CHOPPERSAND MIGHTY

TRUCKS

KAZAN Page 03

THE ‘THIRD CAPITALOF RUSSIA’ HAS A

LOT TO OFFER

OIL & GAS Page 04

THE RUSSIANFEDERATION’S STAR

PERFORMER

Thursday, May 27, 2010

TATARSTANThis supplement to USA TODAY was produced by United World Ltd.: Suite 131 - 388 Second Avenue - New York, NY 10010 - Tel: 212 286 8117 - Email: [email protected] - www.unitedworld-usa.com

A new president took the helm of one of the most economicallydeveloped republics of Russia in March, and aims to build on the progressmade in the past two decades that has established Tatarstan as a potentpowerhouse at the heart of the largest industrial region of the Federation

An oil-rich republicand model of tolerance

This report is available at

www.unitedworld-usa.com

In Tatarstan, Muslims,Orthodox Christians andRoman Catholics havelong mixed and respectedeach other’s traditions

Television crews regularly usethe distinctive Kul-SharifMosque as a backdrop for newsfrom the Tatar capital. Its bluedome and white minarets canalso be found on dozens ofpostcards hawked at souvenirshops on Bauman Street, thedowntown district. And yet,placing the mosque inside theKremlin was an audaciousmove.

Settled by Volga Bulgars inthe early medieval period andlater taken over by Tatar-Mon-gols during the invasions of theGolden Horde, the archeo-logical evidence points to thepresence of early Finnic tribesand traders from as far as Per-sia. As a Volga River traderoute, whoever was overlord ofthe Kremlin citadel com-manded over immense wealth.As a khanate, the Kremlinsought an early competitiveadvantage by espousing Islam.

The capture of Kazan byIvan the Terrible in 1552 putan end to the khanate’s ad-ministrative structure, as wellas its religious affiliation. Rus-sians supplanted Tatars in lo-cal government and churcheswent up inside the Kremlin.The five-domed Annuncia-tion Cathedral dates to this pe-riod of the mid-16th century.Ethnic Tatars were resettled inoutside districts.

In 2005, Kazan celebrated1,000 years of history. Amidmuch fanfare, an Ottoman-style mosque was built on theedge of the medieval fortifica-tion grounds, earlier declareda UNESCO World HeritageSite. The Kremlin, or Kirmanin Tatar, is now an example ofpeaceful religious coexistence.

The only asymmetry in thewhole complex is the leaningtower of Soyembika, namedafter the last Tatar princess. Ittoo is a city icon.

Kazan’s modern downtownis still a patchwork of culturesthat have clustered aroundtheir shrines. The area aroundKazansky Posad is tradition-ally Russian, while the area be-tween the Bolaq Canal and theVolga River is traditionallyTatar. Mosques such as Nu-rullah, Soltan, Bornay andApanay line the streets of theTatar neighborhoods, whilethe city center is lined withchurches like Nikolskaya andBlagoveschenskaya. It is as if re-ligious difference had simplycoalesced architecturally.

Still, what may have causeddiscord anywhere else is a mat-ter of fact in Kazan. Its dual re-ligious status is centuries oldand time-tested. Today, thecity’s population is composedof ethnic Tatars (52%), Rus-sians (43%) and other ancientVolga nationalities such as theChuvash. Germans, Jews, As-syrians, Ukrainians and Polesmake up another 2.5%. Ac-cording to the city adminis-tration, a third of all registeredmarriages are ethnically mixed.

For Ilsur Metshin, Mayor ofKazan, the harmony betweenIslam and Eastern Orthodoxycould be a Tatar hallmark. “Wehave the largest mosque in Eu-rope, beautiful Orthodoxchurches, one of the mostrevered 16th century icons forEastern Orthodoxy – Our La-dy of Kazan – returned toTatarstan in time for the city’smillennium celebrations. Andthat is only a small list of po-tential attractions,” says Met-shin, for whom developing thetourist sector is a priority. Manyother historic cities with com-peting religious systems can-not say the same.

The Kul-Sharif Mosque became an instant city icon when it opened in 2005

CULTURAL HARMONY

Peaceful religiouscoexistence

Rustam Minnikhanov (left) took over as President of Tatarstan on March 25 after Mintimer Shaimiev (right) stepped down

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Distributed by USA TODAYThursday, May 27, 201022 TATARSTAN


It is a healthy sign that the glob-al financial crisis did not lead toa systemic run on Russia’s banks.Instead, the Kremlin adopted alevelheaded strategy of bank re-capitalization, such as the injec-tion in February 2009 of $40billion of tier 1 and tier 2 capital.

Russia’s reliance on commod-ity exports makes it particularlyvulnerable to boom and bust cy-cles of global commodity prices.In 2009 the Federation was theworld’s largest exporter of naturalgas, the second largest exporterof oil, and the third largest ex-porter of steel and primary alu-minum, as well as other heavyindustries that are dependent onthe Russian domestic market.

Therefore, the Russian econ-omy was hit hard by the recentglobal economic crisis as oilprices tumbled and foreign cred-it dried up. In late 2008, the cen-tral bank of the world’s largestenergy producer spent one-third

of its $600 billion internationalreserves – the world’s third largest– to slow the devaluation of theruble.

Igor Shuvalov, the deputyprime minister, announced thatthe Kremlin was ready to let GDPcontract in 2009 to maintain ahigh level of official internation-al reserves. He also pointed outthat several percentage pointsof GDP would be used to bolsterbanks and cover future losses.The key was to shore up balancesheets with injections of tier 1capital to deal with an increaseof 8-12% in non-performingloans (NPLs). All of which wasin the name of liquidity.

In the end, GDP in Russiashrank 7.9% last year, which wasthe biggest decline since the col-lapse of the Soviet Union in 1991.Also, the Russian ruble slidagainst a basket of currencies.But it was far from the freefall ob-served in 1998, when it lost more

than half of its value against theU.S. dollar. Over the past year, theruble declined 5.69%, against thedollar. Now that balance sheetsare being sanitized and their ex-posure to risk contained, liquid-ity should begin to flow again tofactories and individuals.

Prime Minister Vladimir Putinsaid in April that Russia’s reces-sion “is over” after 3 trillion rubles($100 billion) in stimulus spend-ing left the economy “confidentlyshowing signs of recovery.”

In May, Russia’s EconomyMinister Elvira Nabiullina an-nounced that GDP rose 2.9% inthe first quarter of this year, af-ter contracting 3.8% in the lastthree months of 2009.

Russia is poised for the world’s“biggest bounce,” Bank of Amer-ica Merrill Lynch declared inApril, and estimated output maygrow 7% in 2010 as companiesrebuild stocks and stimulusspending supports demand.

Recapitalization of the bank-ing sector is not restricted tostate-owned Sberbank, by farRussia’s largest financial institu-tion. In the Republic of Tatarstan,profits at smaller regional bankswith heavy exposure to the oiland gas sector have also beenunder pressure.

The banking sector inTatarstan consists of the NationalBank, which is part of the feder-al banking system, and a groupof 25 commercial banks. The re-public also boasts a non-bankcredit institution. Thanks to ninesolid years of high commodityprices, Tatar banks have beenawash in cash. These days, Kazanis second only to Moscow interms of the number of banks.

Despite the global financialcrisis, banking analysts are con-fident that lack of exposure totoxic assets will reinforce theircommitment to keep healthybalance sheets.

According to Anatoly Ak-sakov, president of the Associa-tion of Regional Banks of Russia,high oil prices shielded regionalbanks in places like Tatarstan.That is changing, with bankinginstitutions taking a more cau-tious approach to short-termcredits and higher interest rates.

Aksakov also sees risk in thesheer number of banks inTatarstan, where cities with morethan 1 million people can haveup to 30 different banks offeringa full range of services to corpo-rate and retail customers.

“It has turned into a kind ofnatural selection scenario inwhich persistently strong play-ers will survive,” says Aksakov.

The outcome will be decidedby the largest institutions withhealthy balance sheets, as op-posed to smaller players withhigh numbers of NPLs. Some,like AK BARS Bank, may opt togrow their market share throughmergers and acquisitions.

In finance, crisis means opportunityThe economy is ‘confidently showingsigns of recovery’ after major effortsto bolster the finance sector pay off

Driven by the growth of in-dustrial and agricultural pro-duction, as well as a steadyincrease in real income,Tatarstan’s financial sectorhas established itself as aleader in the Russian Feder-ation – second only toMoscow in thenumber of bigbanks, and rank-ing fourth in termsof the total num-ber of lending in-stitutions. In 2007alone, Tatarstan’sbanking assets in-creased by nearlyhalf, amounting to156.08 billionrubles ($4.38 bil-lion.) Bank lend-ing also continuesto grow. Last year,the banks’ loans portfolio in-creased to 112.56 billionrubles, 19.46 billion of thatbeing loans to individuals.

In this positive scenario,Tatarstan has raised the in-terest of banks from Moscowand further afield. Against thetrend in other Russian re-gions, local banks are actual-ly growing faster thannewcomers and are branch-ing out into other regions.Their success is illustrated bythe fact that they have a 72%

share of the banking networkin Tatarstan, whereas localbanks in the Volga FederalDistrict as a whole have onlya 27% share.

One such case is AK BARSBank, the leading financial in-stitution in the Republic of

Tatarstan and oneof Russia’s largestbanks. AK BARSBank has fostereda growing assetportfolio and con-tinues to postgrowing retail de-posits and assets.AK BARS Bankhad assets of 228.8billion rubles onApril 1 of this year,up from 206.9 bil-lion rubles on July1, 2009, while re-

tail deposits increased to 27.5billion rubles on July 1, 2009,from 22.8 billion rubles at theend of 2008.

A universal bank with morethan 100 financial products, itsactivities include corporateand retail banking, crediting,deposits and securities amongothers, serving approximate-ly 44,000 business clients and2 million individual cus-tomers. As Robert Min-negaliev, chairman of AKBARS Bank’s management

board, explains, “The mainpriority of AK BARS Bank asa subject of the Tatarstaneconomy is to provide all pos-sible assistance to the eco-nomic development of therepublic as part of the inte-gral economic space of theRussian Federation.” So far,the bank has proven its com-mitment by positioning itselfas Russia’s leader in SME fi-nancing, an area that is con-sidered a priority to boostTatarstan’s economic devel-opment.

However, the bank’s visionfor continued growth is notlimited to these confines. InSeptember 2006, the board de-vised ‘the concept of corpo-rate business development’,which determined the mainprinciples of product devel-opment and a tactical approachto client segmentation for theperiod ending in 2010. “Wepay attention to diversification.It would not be sensible to fo-cus excessively on big business,or small and medium business,or retail. The level of arrears ismuch higher in banks focusingon consumer credit, and thoseinvesting only in big businesshave a high risk of losing theirbusiness. Our approach im-plies stability and develop-ment,” says Minnegaliev.

The success of the bank’sapproach is evident. AKBARS Bank’s branch networknow consists of more than300 outlets (42 branches, 133sub-branches, 140 stand-alone cash desks and 8 oper-ational offices), located withinthe Republic of Tatarstan andmore than 24 economicallydeveloped regions in Russia,including Moscow, St. Pe-tersburg, Novgorod, Samara,Sverdlovsk, Chelyabinsk andOmsk.

When it comes to seekingfinance, the bank has a headstart. “Investors consider us asrepresenting the republic andthe financial structure ofTatarstan,” says Minnegaliev.

Taking advantage of this,AK BARS Bank has consis-tently exceeded its own ex-pectations in obtaining loanson the international market.In September 2007 the bankentered into a $100 millionsyndicated loan, furtheradding to its successful trackrecord in this area. The cred-it arrangers were the Bank ofTokyo-Mitsubishi UFJ Ltd.and Calyon. Other creditorsincluded partner banks andbanks from the Middle Eastinterested in establishing in-ternational relations with AKBARS. One of the main areasin which the money raised wasinvested was to further expandthe bank at home and abroad.

Another crucial factor be-hind the bank’s successful in-ternational endeavors isrelated to the Russian bank-ing sector’s relatively smallsize, as evidenced by the lowproportion of bank assetscompared to GDP – which asof the first quarter of 2006stood at 53%. In many devel-oping countries, this propor-tion exceeds 100%. Indeveloped economies, therate is often several hundredpercent of GDP.

“The Russian banking sec-tor has high growth potentialand is considered by manyanalysts as one of the mostpromising in the world,” saysMinnegaliev.

ROBERT MINNEGALIEV,Chairman of theManagement Board of AK BARS Bank

The corporate headquarters of AK BARS Bank in Tatarstan are the base for an ambitious and wide-ranging international strategy

AK BARS Bank is seen as representativeof Tatarstan, an office it now takes onto theinternational stage with pride

Tatarstan’s bank

Lack of exposure to toxic assets, cleaned balance sheets, and $100 billion instimulus spending have helped carry the country through the economic crisis

ACCORDING TOBANK OF AMERICAMERRILL LYNCH,RUSSIA IS ON THEBRINK OF THEWORLD’S ‘BIGGESTBOUNCE’ AS ITEMERGES FROMRECESSION WITH2.9% GROWTH INGDP FOR 1Q 2010


Distributed by USA TODAY Thursday, May 27, 2010 33TATARSTAN

The arrival of aworld-class tenoron a private jet canmake instant head-lines anywhere inthe world. Butwhen Jose Car-reras, the Catalanopera singer, land-ed at Kazan Inter-national Airport(KZN) in June2008, it was seen asa crowning eventfor the city’s post-millennial celebrations.Tatarstan is no musical back-water, after all. And with its oilwealth, it is every bit the eco-nomic actor.

Carreras, it turns out, gavea single concert at the cityopera before ushering off tohis presidential suite at theShalyapin Palace Hotel. Butthe media buzz surroundingthe celebrity rubbed off on thecity’s airport and its recent re-modeling job. In 2005, Kazancelebrated 1,000 years of cityhistory with large-scale infra-structure upgrades that in-cluded lounge renovation atKZN.

“The role played by the air-port for the celebration ofKazan’s millennium needs tobe mentioned. We built a newbusiness terminal for the event.At the time, we weren’t able toundertake a complete renova-tion of existing Terminal 1, butthe government is already con-sidering our proposal. Afterall, the airport is an essentiallink for the economy of the re-

public and it’s truethat it constitutesone’s first impres-sion of Tatarstan,”says the formerKZN general di-rector PetrTrubaev.

First launchedby Soviet authori-ties in 1979, the air-port replaced anearlier runway inthe city center thatcould no longer

handle passenger volume. Thenew airstrip 15 miles south-east of the city was a sign thatthings were ramping up forthe local economy. The mile-stone was when the Interna-tional Air TransportAssociation (IATA) gave KZNthe right to operate interna-tional flights. Thompson in-stalled a new traffic

management system and anew fuel plant was added.

KKaazzaann--FFrraannkkffuurrtt iinn ssiixx hhoouurrssToday, international desti-

nations from the Tatar capitalinclude Thessaloniki (Greece),Larnaca (Cyprus) and Antalya(Turkey). Lufthansa has beenflying into Kazan from Frank-furt for more than ten yearsnow. The flight takes little morethan six hours. KZN has re-sponded by modernizing itsrefueling systems. The airportis now simply referred to asKZN or MAK, its Russianacronym.

Policymakers here recog-nize that economic develop-ment depends largely on theintegration of transportationhubs like KZN with European-wide networks. The Tatar gov-ernment has so far agreed tofurther upgrades at the airportin Kazan. There is a lot to bedone, according to Trubaev,even though the runway has all

the basic elements in place. “KZN can accept all types of

aircraft, with the exception ofthe A380. Two years ago, welanded and refueled the world’slargest aircraft, the AN-225Mariya, an over-tonnage uni-versal transportation plane.Still, it’s very important to em-bark on things like gate repairs,the reconstruction of Termi-nal 1 and the construction ofa new airport hotel,” saysTrubaev. He is convinced thatany remodeling needs to be ofthe highest quality.

114466%% ggrroowwtthh iinn ffoorreeiiggnn aarrrriivvaallssMore than 47 million Rus-

sians traveled by air in 2007,according to the Federation’sstatistics office. At KZN, therewere 127,500 arrivals, includ-ing 48,000 foreign visitors. Thisrepresented a growth of 137%and 146% respectively over2006, according to the airport’spublic information office. Forforeign operators, landing anddeparture charges for inter-national routes are competi-tive at $9.6 per ton. So are therates for aircraft parkingcharges and commercial ser-vices.

“We’ve seen a sharp increasein passenger traffic, especial-ly in international f lows.Tatarstan is suddenly of greatinterest to foreign investors.That is why further investmentis needed,” says Trubaev. For-eign companies are present toadvise local authorities on howto turn KZN into a world-classfacility. “We are aiming for Eu-ropean airport standards,” saysTrubaev. “Only the best com-panies and professionals will

be hired – and always on thebasis of tenders.” Predictionsbased on 1Q results suggestthat KZN could see more than1 million passengers in 2010.

CCaattcchh--uupp ppootteennttiiaallMeanwhile, freight trans-

portation at KZN has in-creased 66% over 2006, a signthat manufactured goods arealso finding new marketsthrough the network of re-gional airports east ofMoscow. Trubaev points tothe growing competitionamong neighboring airportsin Samara and Ufa, similar toKazan in terms of the localindustrial base and oil pro-duction.

“There is a great deal ofcatch-up potential,” saysTrubaev. Following the Mil-lennium celebrations, wordof mouth has turned Kazaninto a magnet for weekendgetaways for Muscovites. Thecultural events have also at-tracted middle-class visitorsfrom nearby Perm, Kirov andIzhevsk. Kazan is the host cityfor the upcoming World Uni-versiade in 2013, a sportsevent that will lead to furtherinfrastructure surprises.

“Russian tourists began ar-ranging three-day trips by busand have been using KZN asan entry point, as well as foraccommodation. We’re get-ting involved in these newflows and will be stepping upour role,” says Trubaev. Theremay be less glamour in asporting event and weekendtrips than in a celebrity ar-rival. But at KZN, it all trans-lates into an economic takeoff.

PETR TRUBAEV, Former General Director ofKazan Airport

Resource-richrepublic withglobal appealOne of the most economicallydeveloped subjects of the RussianFederation, Tatarstan is attractingglobal interest for business and leisure

Once a Tatar fortress, the republic’s magnificent Kremlin overlooks the Kazanka River in the center of the nation’s historic capital city, Kazan

Kazan, the ‘Third Capital of Russia’, has great tourism potential and word ofmouth has turned Kazan into a magnet for weekend getaways for Muscovites

InbriefTen reasons to visitKazan■ Kazan is one of the mostancient and beautiful cities in theheart of the Volga River Valleywith a rich and unique 1,000-year-old history.

■ Visit the Kazan Kremlin, aUNESCO historic heritage site, andadmire the beauty of St. Peterand Paul’s Cathedral and the KulShariff mosque.

■ See the famous Kazan VirginIcon that was returned fromRome in 2004 by Pope JeanPaul II.

■ Wander round the Old Tatardistrict, and find the woodenhouses where prosperous Tatarfamilies used to live.

■ Take a boat trip on the VolgaRiver or enjoy a cruise fromKazan to Moscow or St.Petersburg.

■ Get acquainted with theEastern flavor of Tatar food andtaste authentic, national dishes,such as chak-chak, belisch andechpochmack.

■ Take part in Tatar festivalssuch as Sabantui, with folkgames, pole climbing, sack races,tug-of-war, weightlifting, water-carrying races and grain-sackfighting.

■ Visit the International NurievBallet Festival and theInternational Shalyapin OperaFestival.

■ Go to the Raifskiy Monastery,see the unique island-town ofSviyazhsk on the Volga, and theancient town Bolgar, the so-called‘Northern Mecca’.

■ Enjoy an activity holiday withwalking and bicycle tours; ridingtours; culinary tours; voyagesalong the Volga; and winter tours,which feature skiing andsnowboarding.

For more information about“where Europe meets Asia” visitwww.gokazan.com

Historical Kazan: ‘the most efficientway to enter Russian markets’Kazan is a textbook example of industrial restructuring with huge value-added potentialOn a bright winter day, the airin Kazan can be so crisp thatevery detail stands out in sharpdefinition. It has to do with thelight quality at 55°47’N, as wellas the presence of a large bodyof frozen water at the conflu-ence of the Volga and Kazan-ka rivers. But lately, the clarityis also indicative of trans-parency at the city hall.

Ilsur Metshin was firstcalled to Kazan because of hissuccessful economic trans-formation in Nizhnekamsk,an industrial center east of theTatar capital. By the end of2010, investment there couldreach €5.5 billion ($6.7 billion)as a result of hiscan-do attitude. Inhis new position asMayor of Kazan,Metshin is thecity ’s staunchestadvocate.

“Our team inKazan is young.Some of its mem-bers, like the deputyfinance director,have been educatedat the LondonSchool of Economics (LSE),” hesays. Metshin has come to relyon the innovative skills of hisstaff to plot the municipality’s fu-ture. It consists of aligning localcompetitive advantages withthose of Tatarstan as a whole.

The Republic of Tatarstanproduces approximately 32million tons of crude oil peryear. Petrochemicals and au-tomotive plants are part of asecond wave of industrializa-tion, leading in turn to job cre-ation and a sense of economicbonanza. According to Met-shin, the strategy may seemself-evident today. But only fiveyears ago it was considered toosanguine.

“We’re trying to make the citytransparent and understand-able, not only for the citizens ofKazan, but also for domestic

and foreign investors. We’rekeen to let people know thatKazan is a forward-looking city.Young generations should buildupon our current success to cre-ate a better future for the Tatarcapital,” says Metshin.

AA mmaaggnneettiicc cciittyyAs cities in Russia go, there are

few differences betweenMoscow and St. Petersburg, atleast in terms of economic pro-motion and quality of life. Butthe differences between regionalcenters can be abysmal. Kazan(pop. 1.2 million, according tothe 2000 census) is technicallyRussia’s third-largest city and

thus in the upperleague. It is busybuilding new publicspaces and hiringprestigious archi-tectural firms in Eu-rope and NorthAmerica.

“We’re workingwith urban designspecialists like theL o n d o n - b a s e dAtkins Architec-tural Design Studio.

We want to give Kazan a mod-ern overhaul while retaining itsunique historic flair. At the sametime, we want to highlight ourexcellence in higher education,history, culture and sports,” saysMetshin.

Compared to other cities inthe regions of the Russian Fed-eration, Kazan is a textbookcase in industrial restructuring.Its value-added potential is hugegiven its strategic location andthe access to waterways, rail-roads and airports. Such hasbeen the municipality’s success,that the mayor now faces a de-mographic challenge.

“We’ve created many newjobs. But now the question iswho will work at these newcompanies over the next 30-50years?” he asks. The answermay lie in neighboring regions

of the Volga River valley, suchas industrial Samara to thesouth. Young people have be-gun to migrate to Kazan be-cause of its competitiveadvantages, including qualityof life issues. “We have advan-tages that turn us into a mag-netic city,” says Metshin.

Add to that the Kazan Krem-lin, declared a UNESCO WorldHeritage Site in 2000, as well asthe magnificent theaters andpremier soccer clubs, and all thepieces come together for Met-shin. Kazan is finally beginningto position itself as the capitalof a republic growing at 7.2%per year, a feat few cities canboast of west of the Urals.

“Over the next 10 years, we’dlike to see our population growto 1.5 million, thanks largely toour educational programs. Thelong-term goal is to become ametropolis of 2 million,” saysMetshin.

AAnn aattttrraaccttiioonn ttoo sscciieenncceeKazan State University,

founded in 1804 by czarist de-

cree, has hoisted the city outof post-Soviet anonymity. Theemphasis on education hereis largely science-oriented. Fa-mous university alumni in-clude the 19th centuryphysicist and mathematicianNikolai Lobachevsky, fatherof non-Euclidean geometry.

Kazan State Technical Uni-versity, established in 1932,has helped consolidate thecity’s image as a center of me-chanical engineering.

Today, research labs inTatar colleges and universi-ties are in the ivy league ofRussia’s aeronautics sector, aswell as engine design, spaceand computer science.

“The universities play a fun-damental role in the devel-opment of Kazan. Based onoutstanding partnershipswith industry, we are alsoknown for our School ofChemistry and School ofMedicine. We have madelinks to our future by way ofthese educational centers,”says the mayor.

TThhee wwaayy ttoo rreeggiioonnaall mmaarrkkeettssIt may not be able to com-

pete with Moscow in terms offlashy entertainment. ButKazan is closer to the industrialheartland of the Volga RiverValley than any of its com-petitors. This is the largest portin the Volga and the investors’door to regional markets.

Aside from political stabili-ty and interethnic peace, Met-shin stresses the ease andtransparency of doing businessin Tatarstan. That is why themayor thinks more than 150large and medium-sized enter-prises have chosen Kazan.About 20% of industrial outputhere is exported abroad, in-cluding the locally producedhelicopters.

“This is the shortest and mostefficient way to enter the Russ-ian market,” says Metshin. “Theadvantage here in Kazan is thatwe are highly conscious of theterm ‘partnership’. It is part ofthe responsibility and ac-countability generated whenwe work together with others.”

ILSUR METSHIN,Mayor of Kazan

Declared a World Heritage Site in 2000, Kazan’s Kremlin includes the Spasskaya Tower (above) and the Kul-Sharif Mosque



Distributed by USA TODAYThursday, May 27, 201044 TATARSTANThe federation’s star performer In 2009, Fitch put Tatarstan’slong-term ratings in foreignand national currency at BBB-and its short-term rating inforeign currency at F3. Fitch’sstable forecast was also rein-forced by another interna-tional rating agency, Standard& Poor’s. For many, Tatarstanhas been a star performersince the reemergence of Rus-sia in 2000. According to Ex-pert RA, another ratingagency, it has taken third placein terms of the efficiency of itsadministration—not a badshowing in a country of 83federal districts.

Credit ratings may be thefirst thing foreign investorshear when they consider Rus-

sia’s regional economies. Afterall, Tatarstan (pop. 3.8 million)used to be an out-of-the-waydestination for FDI, at leastuntil the oil and gas boomjump-started the local econ-omy. Today, it not only boastsa healthily diversified eco-nomic base; it also vies fortop-of-the-league rankings inforeign investment fromcountries as far as Luxem-bourg and the U.S.

The Republic of Tatarstanis part of the Volga FederalDistrict (VFD), a chain of high-ly industrialized economiesalong the mighty Volga River.This is Russia’s manufacturingheartland where cars, trucks,helicopters and machinery

are produced. Industry hereis increasingly export-drivenas strategic partnerships areestablished and knowledgetransfer improves productquality.

Thanks to its low invest-ment risk, Tatarstan has alsoprofited from the lending ac-tivities of more than 25 com-mercial banks. Together withthe larger players in the Russ-ian Federation, they are incharge of allocating resourcesto a growing network of sup-pliers and SMEs.

Political stability and a high-ly energetic regional govern-ment have maintained growthof 6.8% in the last five years,according to the Ministry of

Industry and Trade. The Fed-eral Statistical Service,GosKomStat, puts the totalamount of foreign investmentat $1.67 billion for 2007 alone,an increase of 3.5% over theprevious year. FDI accountedfor a whopping one-quarter ofthat figure.

Its natural competitors areother VFD economies furthersouth, including the regionsof Samara and Orenburg.Both have used record oil rev-

enue to filter money into in-dustrial projects. Govern-ment figures show that theVFD received a total of $5.97billion in inflows of FDI for2007, with Tatarstan takingsecond place. The FDI break-down by sector as of that yearwas 58% for construction, 29%for manufacturing, 4.4% formining and 3.2% for real es-tate activities.

Solid infrastructure is oneof Tatarstan’s main competi-

tive advantages. The region-al administration has built in-dustrial and manufacturingdistricts around former large-scale factories to attract SMEactivity. This clustering poli-cy has led to industrial parks,as well as successful partner-ships with European firms. By2012, regional authorities ex-pect innovative clusters likeKhimGrad, a technologypark, to employ 10,000 high-ly skilled workers.

On the roads of CIS countries,it is a common sight to see a 32-year old KAMAZ truck purringalong. Quite a feat really, con-sidering the driving conditionsin this part of the world. Thosewho haven’t had the pleasure ofthis sight, however, may recallthe image of one of these heavy-duty vehicles plowing its waythrough sand dunes in the Paris-Dakkar rally—the Tatarstan-built trucks are seven-timewinners of the grueling off-roadrally World Cup.

KAMAZ emerged out of theneed to improve freight trans-port at the end of the 1960s ina country that occupied one-sixth of the planet. At the time,3 billion tons of annual cargowere being transported by train,an inefficient system at best.The five-ton truck that did ex-

ist burnt 50 liters of gasoline ona 100-km run, and wasn’t ca-pable of long-distance routes.Both civil and military trans-port problems had reached acrisis point, and a comprehen-sive solution for national trans-port safety was called for.

Director GeneralSergey Kogogincomments, “Totackle this, the gov-ernment pursuedtwo objectives: rais-ing the load capaci-ty of trucks and theirconversion to dieselfuel. The first step inthis direction wasthe establishment ofKAMAZ.”

The KAMAZ fac-tory was conceived as a worldfirst, an ‘unsinkable aircraft car-rier’; a super factory in size, pro-duction capacity and sheerindustrial strength. The KA-MAZ truck was designed to bean unmatched leader in move-ment on difficult terrain, durableand easy to maintain.

The rest is history. Since itassembled its first truck in1976, KAMAZ has beenplaying a leading role in theglobal automobile industry.Among the top ten manu-facturers of heavy-duty ve-hicles in the world and eighth

in the productionof diesel engines,KAMAZ, eight-time winner ofBest Russian Ex-porter, is a legendin its own time.

Over the past 32years, it has as-sembled over 1.8million heavy-du-ty trucks and 2.5million engines.

Today, it pro-duces more than 30 truckmodels (with more than 400modified versions) as well asbuses, trailers, castings, forg-ings and more. An extensiveservice network currentlyserves more than 600,000KAMAZ vehicles in Russiaand CIS countries.

Perhaps the last greatindustrial legacy of theSoviet era, KAMAZ is asuper strength producerof the likes you don’t seeanymore

SERGEY KOGOGIN, Director General of KAMAZ

KAMAZ

An ‘unsinkable aircraft carrier’

Igor Sikorsky, born in Kiev, iscredited with the design of thefirst rotary wing aircraft in 1942.His configuration of a single mainrotor with a tail rotor, to coun-teract the torque produced by themain wing, became standard he-licopter design. But it wasn’t un-til the latter half of the 20thcentury that the industry trulytook off.

In Kazan, the first helicopterplant dates to 1933 when awood processing facility wasreadapted for aircraft design.The Kazan Helicopter Plant(KHP) began building planesin 1941. Its first helicopter mod-el was launched 10 years later.Today, the plant is the largestproducer of medium-sized he-licopters, which are exportedto more than 80 countries.

“Kazan has always been acompetitive location for high-end manufacturing because somuch of Russian industry is con-centrated along the cities of theVolga River,” says Vadim Ligay,the general director.

Versatility is at the core of pro-ducers like KHP. FollowingWWII, the plant reoriented itsassembly lines toward agricul-tural combines. The joint ex-pertise in aircraft and agriculturalmachinery turned it into an in-dustrial innovator. In 1997, KHPwas certified as a civil helicopterproducer and the companyfound a market niche in aver-age-load aircraft.

Today, the brand name at KHPis the Mi-17 series, now consid-ered the most widely used aver-age-load helicopter in the world.In the last five years, the company

has carried out an aggressivestandardization program to pen-etrate new markets. Its top rangeof helicopters is now equippedwith digital avionics developedby U.S.-based Honeywell.

“The company’s managementis deeply committed to mod-ernization. We invest the bulk of

our profits into the developmentof new designs and technolo-gies. These investments and ef-forts have allowed us to remaincompetitive in the market andto steadily increase our orders,”says Ligay.

KHP has its own experimen-tal design bureau in Kazan, butit has also brought onboard re-searchers from the Central Aero-

Hydrodynamics Institute. Ac-cording to Ligay, synergies be-tween the other Kazan-basedaeronautics firms have given theTatar industry an upward lift.Local companies include KAPOGorbunov, a leading aircraft pro-ducer, and KMPO, an airplaneengine manufacturer.

“This clustering of industrieshas boosted the quality of re-search and educational institu-tions in the Republic of Tatarstan.Aviation here can also lean on thedense network of regional fac-tories. We purchase up to 60%of our components from man-ufacturers within a 500-1,000kilometer radius,” says Ligay.

In the pipeline is a new gen-eration of ANSAT helicopters,sporting the engines of Pratt &Whitney. During their experi-mental development, the Cana-dian engineering firm developedthe 207K engine to match theweight and size of the ANSATmodels.

With a staff of 7,000, KHP nowexpects orders to rise to $300million, solidifying its position asTatarstan’s largest exporter.

From the producers of the world’s most widely-used mid-range helicopter comesHoneywell’s digital avionics, and the ability to penetrate a whole lot of new markets

KAZAN HELICOPTERS PLANT

Kazan lifts Tartarstan’saviation cluster higher In the Middle Ages, trade in

martens, beavers and foxes grewalong the banks of the VolgaRiver. Russia soon became theworld supplier of fur pelts toWestern Europe. Deep in theTatar woodlands, the fur trap-pers could scarcely imagine itwould eventually turn into afull-fledged industry.

In 1928, a group of craftsmenin Kazan decided to band to-gether to process all types offurs, from silver fox to black-coated karakul sheep, and theycalled their enterprise the TatarUnion of Yamashev. From 1940-1945, the company employed8,000 people and supplied 8 mil-lion pelts to Soviet troops. At thetime, it was Kazan’s largest com-pany in terms of revenue.

Later rechristenedas Melita,the company came to be knownas the largest sheepskin proces-sor in the world. In the 1980s,it redirected its peltry productsto consumer markets. About50% of its sales are still domes-tic, mainly due to Russia’s harshwinters. But these days, Melitaalso plies its dressed skins atrunways in Frankfurt and Mi-lan. At Italy’s MiFur exhibitionin 2007, its luxury line washailed as revolutionary.

According to general direc-

tor Rais Gumerov, Melita is oneof only a handful of furriers thatcombines processing and tai-loring. Stabilizing agents sup-plied by Henkel, BASF andStockhausen have allowed it todevelop new applications forcasual wear, including its trade-mark Mutton, a sanitizedsheepskin. About 95% of thechemical dyes are sourced inthe U.S.

Style has outpaced manyof its competitors. But Meli-ta has thrived because it hasstar designers onboard, in-cluding Irina Krutikova. TheMoscow-based designer hasdeveloped a wide range ofgarments, from prêt-a-porterto super-luxury collections.

“What we do is absolutelyunique. We have rabbit furs thatare being processed with alu-minum, for example. We’re al-so starting to work with silver.For us at Melita, it’s just the be-ginning,” says Gumerov.

Since 1928, Melita hasbeen processing the finestfurs. Today, it is one ofthe world’s onlyprocessor tailors

MELITA

Silver and aluminum, and the finest furs

The Mi-17 series is the most popular average-load helicopter in the world

Melita’s designs range from prêt-a-porter to fashion runway collections

Solid infrastructure is one of Tatarstan’s main competitive advantages

Oil and gas jump-started what is today a healthy anddiversified economy that continues to pull in FDI

‘WE INVEST THE BULKOF OUR PROFITS INTOTHE DEVELOPMENTOF NEW DESIGNSAND TECHNOLOGIES;THESE EFFORTSALLOW US TO STAYCOMPETITIVE ANDINCREASE ORDERS’



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