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Overview of Kemerovo region foreign trade and investments in 2003 Prepared
by Mark Shulgov, BISNIS representative for Tomsk, Kemerovo and Irkutsk
regions July
2004 Topics: Main indices of Kuzbass foreign trade; Countries-partners in foreign trade; Region's industrial specialization; Basic import/export positions; Concept of industrial cooperation; Official support of foreign investments and attracting advanced technologies; Foreign investments in Kuzbass; Opportunities and instruments for entering the market or establishing collaboration with Kuzbass enterprises. Foreign economic relations play an important role in Kemerovo region’s economy. Kemerovo region (Kuzbass) is an export-oriented territory, where almost 70% of its industrial products are brought to the external market. In
2003, Kemerovo
foreign
trade turnover made up USD 2.82 billion and demonstrated a 46.7%
growth compared to the turnover in 2002, where exports constituted USD
2.65 billion (49.3% growth) and imports made up approximately 6% of
the foreign trade turnover. Kemerovo
region foreign trade turnover, million USD:
In 2003, Ukraine, Turkey, South Korea, China, Cyprus, Great Britain, Kazakhstan, Finland, Philippines and Japan were Kemerovo’s main export trade partners; together they made up 61.6% of the region's exports. There are three principal commodities that make up the region's exports: fuel-energy products such as coal, coke and semi-coke (50.9%), metals and metal products such as bars, profiles, rolled metal, cast iron, ferroalloys (42.8%), and chemical products such as heterocycle compounds, nitrogen fertilizers, inorganic products (5.5%). Trade with Kazakhstan, Germany, Ukraine, Poland, China, USA, Austria and Czech Republic makes up 90% of Kuzbass imports. The commodity structure of imports includes chemical products (38.7%), machinery, equipment and means of transport (35.8%), metal products (2.4%) and fuel products (6.2%). Trade turnover between Kuzbass and the United States is not great but demonstrates a tendency for growth. For example, in 2002 trade turnover increased from USD 7 million in 2002 to USD 13.5 in 2003. This increase was mostly caused by a sharp rise in ferroalloys and cast iron exports from Kuzbass. The list of products imported from the US is much broader and includes mining and drilling equipment, construction machinery, pumps and filter equipment, valves, electric and combustion engines, transmissions, spare parts, tires, and measuring equipment. About
430
enterprises from
Kuzbass participated in foreign trade with 77 countries
in 2003.
Large
companies that also participant in foreign trade such as
Western-Siberian Metallurgical Factory JSC, Novokuznetsk Aluminum
Factory JSC, Azot ("Nitrogen") JSC, Kuznetsk Metallurgical
Plant-Rails Ltd, Kuznetsk Metallurgical Plant-Steel Ltd, Kuznetsk
Ferroalloys JSC, Finance and Transportation Directorate JSC, and
several
coal-mining enterprises,
provided more than 73% of exports
in
the region,
and the
imports
structure
is mostly stipulated by the
technological
needs of
larger
Kuzbass enterprises. Traditionally
an essential part of Russian economy, Kuzbass has also become more
integrated into the world economy. The regional administration’s
foreign economic policy is based on the Conception of Foreign Economic
Activities law, developed and ratified in 1999 under Governor Aman
Tuleev's initiative. The Conception sets the priorities in working
with various countries and regions, outlines further promotion of
Kuzbass’ industrial products on foreign and domestic markets, and
officially declares the policy of supporting foreign investments and
advanced technologies inflow. Many important steps are presently being
made to promote the economic, scientific, educational and cultural
potential of the region. In its economic relations with other regions of the Russian Federation and CIS, Kuzbass actively reestablishes and broadens contacts established from the Soviet era and adheres to industrial cooperation with enterprises belonging to various industries within the CIS. At present, CIS countries remain very important trade partners of Kuzbass. The closest economic relations are maintained with Kazakhstan, Ukraine, Kygystan, Uzbekistan and Belarus. Reason lies in the long tradition of industrial cooperation established during the Soviet Union. For Ukraine, a main trading partner of Kemerovo region during Soviet times, trade with CIS countries constitutes 58% of its exports. Since 2003 was officially declared as the year of Kazakh Republic in Russia, several official delegations from Kazakhstan visited Kemerovo region; business forums, exhibitions and presentations of Kazakh products were held and such promotion probably contributed considerably to the growth of trade turnover with Kazakhstan in 2003. The share of Kazakhstan in Kuzbass' external trade with CIS reached 38% in (28% of exports and as much as 79% of imports). Belarus is actively trading with Kuzbass and actively develops joint production. BelAZ (Byelorussian Automotive Factory) has recently established a service and maintenance center for heavy mine trucks manufactured in Byelorussia. BelAZ also participates in joint exploitation of "Belorusskiy" coal open pit mine and hence regularly supplies Kuzbass coal to Byelorussia. By mid-2004 Kuzbass had entered into 23 multilateral collaboration agreements with the regions of Russia, NIS and foreign countries. Exhibitions, visits and economic missions of Kuzbass companies in the regions of Russian Federation often lead to establishing long-term economic relations and industrial cooperation with enterprises not only in the adjacent regions like Tomsk, Novosibirsk, Omsk regions, Altai and Krasnoyarskiy Krai, but with distant territories as well. As an example, in 2002 the construction of a coal loading terminal "Ust'-Luga" was started in St.-Petersburg (4,000 km away) and RosTerminalUgol' JSC was established in order to facilitate deliveries of Kuzbass coal to Europe. Coal mining is one of the cornerstones of Kuzbass economy, and its coking coal is globally considered unique by its quality. Business delegations and diplomats from Great Britain, Germany, USA, Italy, South Korea, Netherlands, India, Singapore also visited the region in 2003. At present Kuzbass is actively developing trade relations with Mongolia, China, India, Poland, Slovakia. In February 2003, the official visit and presentation of Kuzbass industry took place in China, while representatives of large Chinese companies visited Kuzbass. Consequently, trade turnover between Kuzbass and China increased considerably to almost 3.6 times the number of imports from China. Abundance
in natural resources, well-developed transportation and industrial
infrastructure, qualified workforce, and remarkable political
stability in the region endows the region with high economic
competitiveness and growing business attractiveness.
At present foreign companies actively explore business opportunities
in Kuzbass. For
example,
British company Dosco opened a service center to provide technical
maintenance to British
mining equipment utilized in Kuzbass. German Tiffenbach
and
GmbH together with Yurga Machinery Plant are close to starting joint
production of mining machinery for Kuzbass coal-mining enterprises.
Representative offices of several other German, Greece, Turkish and
Spanish companies were already established. Almost 300 companies with
foreign capital are functioning in Kuzbass at the moment, and even
though
most of them are engaged in simple trade
activities, the
largest
projects were launched in such fields as coal mining (Investugol' Ltd,
Sputnik coal cleaning factory JSC), telecommunications (Kemerovo
Mobile Svyaz' JSC, Rikt JSC), mining equipment manufacturing and
maintenance (Aikhoff Sibir' Ltd, Sib-Damel'-Novomag Ltd),
and
food industry (Sibir' Impex Ltd). Reviewing the 2003 results, foreign debt capital in Kemerovo’s economy exceeded USD 39 million, and compared with 2000 the volume of foreign investments increased more than eight times. In the total volume of foreign capital, direct investments constituted 10% (around USD 4 million). It is important to mention that this index has augmented more than 13 times compared to 2002. One can conclude that these numbers attest to the confidence in the region’s economic stability foreign companies experience when investing in Kemerovo region. Foreign companies entering in the region introduce new technologies, management techniques and links to international markets, all of which are in high demand in Kuzbass. One
of the top priorities in the region's external trade policy lies in
attracting modern foreign technologies to
Kuzbass in an effort to search for strategic investors and creating
a
positive image of the region abroad. Collaboration
proposals
from western
companies receive
official welcome on behalf of the regional
authorities.
The optimal outline of international collaboration, as seen by the
state power in Kemerovo region, is contingent upon imports of
sophisticated components and joint manufacturing of final
products
in Kuzbass. Sustainable economic growth of Kuzbass’ economy accompanied by the process of technical reconstruction and re-equipment provide broad opportunities for US investors and exporters. Approximately 6.4 billion rubles (220 million USD) of direct investments were allocated in 2003 to technical reconstruction and expansion of production in metallurgy, chemistry, machine building, transportation and communication of Kuzbass. Several examples can illustrate the scope of that process. Novokuznetsk Metallurgical Plant in the near future will spend more than USD 60,000,000 for technical reconstruction, from which about 30 million is set aside for the purchase of new equipment. Severstalresource JSC, controlling a large part of Kuzbass coal mining, recently signed an agreement with regional authorities. Under its terms USD 40 million will be invested in the construction of a coal-cleaning plant, reconstruction of old mines, and purchase of equipment. Also, principal technological equipment will be supplied by the US company Cetco (USA) for USD 20 million. Evrazruda JSC, one of the main suppliers of raw materials to Siberian metallurgical complex, is going to invest USD 400 million into Siberian enterprises within the next 10 years. In 2004, approximately USD 5 million will have been spent for the purchase of new equipment for mining enterprises. International exhibitions and economic forums held in Kemerovo region are probably the best instrument of establishing business relations with Kuzbass companies or entering the market. Regularly held large specialized exhibitions like "Russian Coal and Mining," "Transport and Road Building," "Architecture and construction," "Kuzbass Business Forum" and many others can provide US companies with a good opportunity to expose their products and establish direct contacts. A
detailed description of the industrial potential and business
opportunities in Kuzbass, as well as calendars of international fairs
and exhibitions held in Kemerovo region in 2004, are published on the
corresponding BISNIS web-page http://www.bisnis.doc.gov/bisnis/country/siberia.cfm,
in the section entitled "Kemerovo." Useful contacts: Administration
of Kemerovo region, http://www.kemerovo.su
Mr.
Yuriy Kim, Deputy Governor for Economy and Finance Mr.
Anatoliy Neustroev, Head of Foreign Economic Relations Department Mr.
Igor Korobetskiy, Head of Investment and Technical Policy Department, Kuzbass Chamber of Commerce and Industry Expo-Sibir,
Exhibition Company JSC,
http://www.exposib.ru
Kuzbass Fair, Exhibition Company JSC,
http://www.kuzbass-fair.ru
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