Prepared by Alexander Gordienko BISNIS Representative Nizhny Novgorod, Russia May 1999

Geographical Position

The Saratov Region is located in the South-East of the East European Plain. It is a part of the Lower Volga Valley. The Saratov region occupies a territory of 101,200 sq. km. Its population is 2,721,400 people. The Saratov region has 38 administrative areas (rayons). The administrative center (capital) of the region is Saratov with a population of approximately 900,000 residents. It is located 452 miles South-East of Moscow. In the Soviet era Saratov was closed to foreign travelers and visitors due to the high share of the military industrial complex in the regional economy. It was opened in 1993. Other large cities include Balakovo (207,000 inhabitants), Engels (185,000 inhabitants ) and Balashov (100,000 inhabitants). Approximately 85.6 percent of residents are Russians, 3.8 percent are Ukrainians, 2 percent are Tatars, 0.6 percent are Germans. The prevalent religion is Orthodox Christianity.

Political Status and Branches of Power

The Saratov Region is a territory under the jurisdiction of the Russian Federation. The head of the executive branch of power is the Governor who also holds the position of the Chairman of the Regional Government (Prime-Minister). The Governor nominates Ministers who are approved by the Regional Duma. The Saratov Regional (Oblast) Duma represents the legislative power.

Natural Resources

Oil and gas are the most significant natural assets of the region. The oil and gas production have been developed since 1944. Over this period of time over 67 million MT of oil, 2 million MT of gas condensate and 110 billion cubic m have been produced regionally. In total, oil deposits are estimated at 500 million MT, 43.1 percent of which are extractable. Projected reserves of gas condensate are 164 million MT, 56.2 percent of which are extractable. At present, the majority of oil and gas fields are located in the central and southern parts of the Saratov Region. It also has substantial deposits of such building materials as sand, clay, limestone, dolomites and chalk.

Industry

In 1995 the Saratov Region ranked 23^rd in Russia in terms of overall industrial production. The percentage of industry in the gross regional product is 22 percent. The key industrial centers are Saratov, Balakovo, Engels and Balashov. The oil/gas and energy generation sectors account for 37.3 percent of the regional industrial output. The average oil production is 1 million MT annually. Almost the entire quantity of crude oil is processed in the Saratov Oil Refinery. Other important industrial sectors include machine-building (17.5 percent of industrial output) and production of chemicals/petrochemicals (13.9 percent). Companies which operate in the machine-building sector specialize in manufacturing commercial electronics with dual applications (navigation systems and controls for aviation, merchant ships and the Navy, telecommunications and radar equipment, measuring instruments), diesel generators, aircraft, machine-tools (tooth-cutting, tooth-planing machines) and equipment for the energy, chemical and oil industry sectors.

The Saratov Aircraft Plant is a manufacturer of various modifications of YAK-42 aircraft for commercial and training purposes.

The Saratov Trolley-Bus Plant is a major supplier of trolley-buses in Russia. It also exports them to Europe, Asia and Latin America.

The Saratov Bearing Plant – 3 specializes in producing a broad line of roller bearings.

LITIY-ELEMENT is the only Russian supplier of lithium batteries. These are employed, for example, in small-sized measuring instruments, computers and cardiac implants.

The regional chemical sector accounts for 16 percent of the industrial output. Rubber products made by BALAKOVOREZINOTEKHNIKA are widely applied in such Russian automobiles as VAZ and KAMAZ. The Saratov Region is the largest Russian producer of chemical filaments and fibers. Local chemical companies also produce acrylic acid, methyl acrylate, phenol, sulphuric acid and fertilizers.

The building sector employs approximately 88,000 workers. There are 35 factories which fabricate reinforced concrete products. In addition, the region has 5 brickyards which produce silicate (white) bricks and 56 brickyards which make ceramic bricks.

Light industry is represented by companies which make fabrics, footgear, clothing and knitwear.

Agribusiness

In 1995 the Saratov region ranked 9^th nationwide in terms of total agricultural production. Its agribusiness accounts for approximately 15 percent of the regional gross product. Agricultural land amounts to 8.5 million hectares or makes up 84 percent of overall land resources. Over 20 percent of the workforce is employed in agribusiness. The Saratov region is one of the leading Russian producers of winter wheat. It also specializes in dairy and beef cattle breeding.

Energy

The energy system consists of the Balakovo Nuclear Power Plant (4,000 MWt), Saratov Hydro-Electric Plant (1,360 MWt) and a few thermal electric plants which are located in Saratov, Engels and Balakovo. In total, all power plants generate 6,862 MWt. The Balakovo Nuclear Power Plant and the Saratov Hydro-Electric Plant alone produce ¼ of the power in the Volga Valley and 3 percent of energy throughout the country.

Transportation

The Saratov Region is connected to other Russian regions via road, rail, river and air. Almost 90 percent of freight and 40 percent of passengers are carried by rail. Railroads total 2,326 km. The most important rail lines run from Syzran to Ilovlya, from Moscow to Saratov, from Povorino to Penza, from Guriev to Kinel and from Saratov to Uralsk.

The Saratov Region is crossed by the Volga river. Saratov is one of the largest river ports on the Volga. Waterways provides access from Saratov to Moscow, West Urals, the Black Sea, the Baltic Coast and the White Sea.

The network of roads equals 9,647 km, including the two busiest ones – Ulianovsk – Syzran – Saratov and Saratov – Uralsk.

The region has an airport for domestic flights. The local air carrier is Saratov Airlines. Flights to many Russian cities and CIS countries have dramatically been reduced in the past few years as a result of the difficult financial situation of regional Russian air carriers and the decline of the number of air travellers.

Travel from Moscow

There are 4 direct trains from Moscow to Saratov. They depart from the Paveletsky train station in Moscow daily or on even/odd days of the week, depending upon the train. Trains cover the distance of 856 km within 17 hours on average.

Three direct flights are available from Moscow (Sheremetovo-1 and Domodedovo Airports) to Saratov. The on-board time is 1 hour 30 minutes.

Telecommunications

Local telecommunications providers offer groundline telephone, mobile, paging and Internet/e-mail services. The largest telecommunications operator is SARATOVELEKTROSVYAZ.

Foreign Trade

As of January 1, 1998 the foreign trade turnover for 1997 amounted to US$640 million, including US$302 million of imports.

Principal foreign trade partners are companies from the USA, Great Britain, Italy, Holland, Turkey and Germany. Moreover, the region has also been actively re-establishing economic and trade relations with Macedonia, Bulgaria, Hungary, Slovakia and Poland.

The most exportable products are electronic devices, electrical equipment, vehicles, crude oil, oil products, mineral fertilizers, chemicals/petrochemicals. Imports include high-technology machinery, medical equipment, non-organic chemicals, metals, plastic wares, paper, and foods. Large exporting companies are KREKING, BALAKOVO FIBERS, IRGIZ, and SARATOVSTEKLO.

In 1998 over 80 companies with foreign capital involved were operating in the Saratov Region. The majority of them have German partners. A joint venture with BOSCH was set up to manufacture auto spark plugs. A joint venture with HENKEL specializes in producing detergents. Large-scaled investment projects under way include the modernization of the oil-processing company KREKING involving U.S. and Spanish companies, the modernization of the Saratov Tobacco Factory with the British-American Tobacco Corporation, a joint venture between the U.S. corporation GRACE and the Kalininsk Rubber Products Plant, and the construction of a furniture factory in Balakovo with the French company SERIBO. In addition, the Saratov Aircraft Plant is negotiating with the American corporation CASE regarding the possibility of assembling harvesters in its facility.

Guarantees, Incentives and Tax Breaks for Investors

In the past three years the Saratov Regional Duma in conjunction with the Regional Government adopted a number of laws to stimulate and guarantee private investments in the Saratov Region – On Guarantees of Private Investments in the Saratov Region (1997), On Stimulation of Investment Activities in the Saratov Region (1997), On Land (1997), On Development of Leasing Business. Under these laws investors are entitled to exemptions from taxes on profit, property and vehicles paid to the local treasury for 3 years. Furthermore, under the law On Land, land for investment projects may be provided on lease (for up to 49 years) or may be bought by individuals or commercial entities (including foreign ones).

Hotel Accommodations

Seven hotels are available for travelers in Saratov. Not a single hotel is certified internationally or managed by a Western company. It is advisable for U.S. businesspeople to stay at the 16- store Slovakia hotel that is located in the central part of the city on the bank of the Volga. The hotel has two restaurants, a bar and a small store. Domestic and international calls may be made directly. There is a taxi-cab stand next to the entrance. Typically, it takes 40 minutes to get from the hotel to the airport and 15 minutes to the train station.

Key Contacts

Ministry of Foreign Affairs and Foreign Economic Relations Government of the Saratov Region Maxim Albertovich Fateev, First Deputy Minister Tel: 7-8452-24-13-76, Fax: 7-8452-24-27-63

Ministry of Economics, Investment Policy and Interregional Relations Government of the Saratov Region Sergey Alexeyevich Shuvalov, Minister Tel: 7-8452-72-30-88, Fax: 7-8452-72-32-00

Saratov Regional Chamber of Commerce and Industry Russia, Saratov, 410600, ul. Bolshaya Kazachya 30 Vladimir Vladimirovich Davydov, President Tel: 7-8452-24-76-10, Fax: 7-8452-24-72-31 E-mail: chamber@ivcci.saratov.su

Slovakia Hotel Russia, 410002, Saratov, ul. Lermontova 30 Tel: 7-8452-26-76-18, Fax: 7-8452-26-46-92.

Saratov Aircraft Plant Russia, 410015, pl. Ordjonikidze 1 Tel: 7-8452-44-39-02, 44-81-01, Fax: 7-8452-44-36-07

Saratov Roller Bearing Plant Russia, Saratov, pr. Entuziastov 64a Tel: 7-8452-42-18-52, 49-27-77

NITRON (chemical fibers, methyl acrylate, phenol) Russia, Saratov, pl. Sovetsko-Chekhoslovatskoy Druzhby Tel: 7-8452-42-64-06, 42-04-25

SARATOVSTEKLO (glass for residential and commercial buildings, automotive industry) Russia, 410041, ul. Lomonosova 1 Tel: 7-8452-19-43-56, 12-45-35