REGIONAL OVERVIEW: TVER OBLAST
GEOGRAPHIC LOCATION, NATURAL RESOURCES AND INFRASTRUCTURE
Tver Oblast, populated by 1.6 million people, covers 84,100
square kilometers and is the largest region in Central Russia.
Although its moderate-continental climate and landscape are
typical for the Central Russia, Tver Oblast does have its unique
characteristics. It is very rich with forests and water: over 800
rivers cross the Oblast including the beginning of the Volga
River, and 1,769 lakes attract tourists and fishermen. The oblast
is the natural source of fresh water for Central Russia and the
city of Moscow. Tver mineral resources include gravel,
construction and silicate sands, fireproof, ceramic and kaolin
clay, limestone, sapropel, mineral water, and brown coal. Tver
Oblast possesses significant reserves of peat (approximately 2
billion metric tons) mainly used as an energy source. (A regional
program ADevelopment of the Peat Industry in the Tver Region for
1997-2000@ is a local administration priority).
Tver is an important transportation hub. The location of Tver
Oblast is excellent in terms of access to the two largest
metropolitan areas in Russia. The city of Tver is located one-third
of the way between Moscow and St. Petersburg (167 kilometers from
Moscow). The road linking the cities has traditionally been well-maintained
and heavily used for cargo transportation. Proximity to Moscow
and St. Petersburg and quality of the road ease access to the two
large consumer markets for goods made in Tver and vice versa. The
Moscow-St. Petersburg automobile route is also popular with
tourists traveling for a short vacation to the cities. The Moscow-Riga
highway connects Tver with the Baltic States and Finland.
Tverskoy Port is the largest port on upper Volga. It is equipped
with cargo decks and is fitted to serve river-sea ships. There is
an international airport in Tver, and the city is close to
Sheremetyevo International Airport in Moscow.
The international ASurgut-Polotsk@ oil pipeline and two major gas
pipelines cross Tver Oblast. The oblast is covered by Moscow
telecommunications service providers of GSM 800 standard. There
are five locally-based banks in Tver Oblast as well as offices of
Moscow banks. Tveruniversalbank was rated 57th in the list of 200
Russian banks with largest capital.
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INVESTMENT CLIMATE
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The Tver Oblast Government is active in searching for
opportunities to attract foreign investors. The governor has
formed a Governor=s Office for External Economy and Investments
that is headed by Edward O. Chovushyan. Mr. Chovushyan launched a
glossy periodic publication AInvest-100 International Investment
Magazine@ that discusses investment opportunities in the oblast,
publishes interviews with Tver business people, and highlights
local legislation. The Office for External Economy and
Investments is in the process of organizing an International
Forum of Technology Brokers AInvestment and Technologies/ Tver-99@
that aims to bring together representatives of local and foreign
companies, potential investors, and Russian and foreign
government officials. FES International, Inc., a Californian-based
company, is assisting the Tver Oblast Administration in the
organization of the event. FES International is an official
representative of Tver Oblast in matters related to humanitarian
aid and economic assistance.
The Tver Oblast Law on ATax Privileges to Investors in Tver
Oblast@ is also supportive of foreign investors in region. The
profits tax is reduced by 50% for those companies investing in
renovation, modernization or creation of new production
facilities in Tver Oblast. The profits tax reduction is
applicable starting from the date when the first expenditure is
made and until the investment is paid back. Although the initial
tax reduction period is written to be maximum three years,
investment in projects included in the Economic Development
Program of Tver Oblast can prolong it up to 10 years. Leasing
companies are exempt from paying 90% of profits tax to the
regional budget during the first three years and 50% during the
two consequent years.
Some potentially strong Russian companies need to be restructured
and prepared to receive investment. In Tver Oblast, two programs
are operating whose goal is to help local enterprises adjust and
become more competitive in a market economy. Specialists of the
German Government=s TRANSFORM program are consulting for Tver
enterprises in the glass, machine building, and wood processing
industries, while TACIS, a European Union program, targets
improving professional management at medium and large enterprises.
By 1998, 37 companies with foreign investment had been registered
in Tver Oblast. Mostly European companies are present in the
oblast through established joint ventures, such as two Russian-Bulgarian
ventures and a Russian-Italian enterprise. German companies are
very active in selling technologies for manufacturing
construction materials and equipment to Tver companies (mainly
assembling poly-vinil-chlorid windows, reinforced doors, etc.).
The German construction company Tver-Osnabryuk, which united 20
enterpreneurs who collectively invested over 1 million DM, built
the three star hotel Osnabryuk (accommodates 42 people). Canadian
companies are also investing into construction of private houses
and assembly of construction parts in the oblast.
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FOREIGN TRADE
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In 1998, the foreign trade turnover for Tver Oblast was $186.8
million, a 23.6% decrease compared to 1997. Exports from Tver
totaled $80 million of which 21% came from machine-building
industry, 14% from forestry and wood-processing, and 6% from
light industry. Of total exports, 30% went to the other NIS
countries.
Among imported goods, machine building products, food stuffs,
consumer goods, goods from plastic, and wood-processing and paper
products prevailed. Germany, Ukraine, Korea, Sweden, Italy,
Turkey, Uzbekistan were Tver=s main foreign suppliers.
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INDUSTRY SECTORS
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Industry in Tver Oblast is represented by the following sectors:
electric energy (44% of the total regional production), machine
building (22%), food processing (11%), light industry (6%), and
wood processing (5%). The other 12% includes printing and
publishing, chemical, glassware and earthenware, and construction.
In accordance with the federal program AEconomic and Social
Development of Tver Oblast in 1998-2005@, sectors deemed vital
for regional development include energy, transport, wood
processing, agribusiness (flax breeding), construction and
tourism, and sectors with great social implication. First Deputy
Governor Victor Opekunov emphasized that such industries as flax
breeding and forestry and wood processing need major
restructuring and investments to become profitable.
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ENERGY
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Kalininskaya Atomic Electric Plant is the leading enterprise in
the energy sector. Kalininskaya has two energy blocks with total
power capacity of 2,000 MW. The AKonakovskaya Hydro Electric
Plant and a number of thermo-electric plants also supply energy
for Tver and surrounding areas. (Over two thirds of energy
produced in Tver Oblast is supplied to other regions).
As the energy costs continue to grow and resource-wasteful habits
of Russians remain, one of the primary goals of the local
government is to promote energy-saving technologies. An American
grant for $1million was received to install such technologies in
one of the city districts for monitoring of heat, gas, and
electricity consumption.
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MACHINE BUILDING
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Into the 1990=s, machine building and metal processing
enterprises in Tver Oblast were among Russia=s leading
manufacturers of passenger train cars, one-dipper excavators,
tower cranes, fire-prevention equipment, metal-cutting machinery
for the aviation industry, and steel frames. Among the 10 largest
machine-building enterprises in the oblast are Tver Train Cars
Building Plant, Tsentrosvar, Tver Excavator Plant, Kimrskaya
Savma, Bezhetskselmash. Mainly due to Russia=s general economic
situation, their output has fallen in recent years. Companies
have to search for new products, customers and equipment to stay
afloat. As larger plants would need prohibitive amounts of new
investment for overhaul, smaller companies that are often rising
on the facilities of a larger plant and becoming more competitive.
For example, open joint stock company Rhythm was founded in 1991
on the premises of a train car building factory. Rhythm produces
break fittings for railway transport and has become the leading
manufacturer in Russia in this sector. It is flexible and up-to-date
, it invests in research and upgrades its products, certifying
and patenting them. Analogue producers in the NIS also purchase
fittings produced by Rhythm for the use in their own production.
Adjusting to market-dictated changes in the industry, Rhythm is
interested in joint development of technologies for production of
break fittings for railway transport and renovation of its
equipment. Rhythm=s investment plans require an estimated $1,000,000.
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AGRIBUSINESS
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Agribusiness in Tver Oblast is mainly concentrated in two sectors:
flax breeding and dairy and meat processing. Both sectors occupy
over two million hectares of Tver land.
Tver Oblast used to produce up to 40% of all flax in Russia.
Despite the abundance of textile plants (there are 35 textiles
factories), not all flax is processed locally, and the majority
of the local mills work with resources purchased elsewhere.
Factories such as IstKozh, Vagzhanov Spinning and Weaving Mill,
Vyshnevolotsky Textiles, Vyshnevolotsky Flax Mill, Tabloka,
Proletarsky Avangard, and others produce cotton, wool and silk
fabrics, and man-made leather. Various cotton and flax mills were
heavily involved in tolling and continue to assemble cloths for
export using imported resources. One of the reasons for using
imported materials is lack of equipment for processing flax and
making high quality, soft fabrics from it. New, contemporary
technologies are needed.
In accordance with the federal program ADevelopment of the Flax
Industry in Russia in 1996-2000@, Tver Oblast Government proposed
to supplant exports of yarn and semi-finished goods with exports
of ready-made goods. Also, as imported cotton from Turkey and
Uzbekistan has become expensive, replacing it with flax at the
local enterprises would revive the local industry. Steps are
being taken towards making the technological cycle of breeding,
processing, and manufacturing of flax complete. In fact, Tver
Oblast was the first to form a Aflax@ consortium that included
enterprises involved in breeding, processing, and machine
building, as well as scientific and trading organizations.
Markets for various flax goods are being studied. Local tax
breaks to textiles enterprises will facilitate the industry=s
development. Thus, overhaul of the Tver Fabric and Garment
Factory was granted privileges under the regional law AOn Tax
Privileges to Investors in Tver Oblast.@
The oblast hosts 38 dairies and 11 meat-processing plants. Their
production continues to increase. However, in 1998, 61% of the
total regional agricultural output came from households. Private
farms provide for 42% of regional animal produce (meat comprises
39%, and milk B 45%) and 74% of vegetables.
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WOOD PROCESSING
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The timber and wood processing industry holds great potential for
regional industrial development. Forest covers 53.3% of the
oblast territory (5.1 million hectares) and consists of 70%
coniferous and 30% deciduous trees. Presently, only 30% of viable
woodcutting area is utilized, leaving a quarter of the oblast=s
standing trees Aover-ripe@.
There are 27 large forestry farms in the oblast and 23 saw mills
producing lumber, sawing materials, veneer, paper, cardboard, and
furniture (the total number of such enterprises including small
firms is approximately 400). Most local wood is exported as
timber and lumber. The main buyers of timber are Hungary, Germany,
Slovakia, the United States, Finland, Sweden, and the NIS. Lumber
was exported to 22 countries including Austria, Bulgaria, Great
Britain, Hungary, Germany, the Netherlands, and Finland. Veneer
is also exported to the above mentioned countries.
Exports of virtually unprocessed wood reflect the typical
situation in Russia=s forest sector in general, which is
characterized by scarce working capital, lack of experience in
conducting business in a market economy and uncoordinated actions
of local market participants which also depresses export prices.
Furthermore, export prices as well as export volumes to the U.S.
and Canada could be raised if the wood were kiln-dried properly.
Some local exporting companies are taking steps towards gaining a
better market. Upon request of an export company in Tver Oblast,
Tver company Stromgeomash (please see BISNIS ASearch for Partners@
leads) has constructed a kiln-drier that allows reduction of the
wood moisture to 20%. (For more information on the forestry
sector in Russia please contact FCS Moscow Commercial Specialist
Sergey Minko at sergey.minko@mail.doc.gov)
The local industry overall is limited to the lower value-added
end of the production cycle, with exports of timber prevailing
and weakly established processing of recycled paper products.
Despite this general trend, corrugated cardboard manufacturer
Kamenskoe OAO Paper and Cardboard Plant of Kuvshinovo does
process recycled paper for production of corrugated cardboard. 50%
of the manufactured cardboard is assembled at the plant into
boxes, and the rest sold to other plants (including a former
ASearch for Partners@ participant, the company Gotek from Kursk).
Kamenskoe also produces cellulose and manufacturers paper,
polygraph goods, and packaging materials. Kamenskoe OAO Paper and
Cardboard Plant seeks $4million investment for expanding
production of corrugated cardboard and boxes and renovation of
certain equipment.
Kamenskoe is one of the largest Tver enterprises in the wood-processing
sector. Others are Oleninsky Lespromkhoz (which manufactures
sawing timber and is currently implementing a joint project for
drying facilities together with an Italian company); and state
enterprise Maksatikhinsky Lespromkhoz #1, which is in the process
of launching production of sawing timber using U.S.-made
equipment.
The opportunities for foreign investment in this sector are
concentrated in pre-export wood processing and supply of various
wood processing equipment.
Wood processing is closely related to such sectors as
construction and furniture manufacturing. Both sectors are
developing in Tver Oblast and are market-oriented. For example,
Tver Furniture Factory (although it is restructuring and
currently operating under an external manager) received $1.2
million investment to upgrade production and produce a more
diverse assortment of higher quality furniture.
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CONSTRUCTION
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Mr. Zimenkov, the director of Tver-based company Betiz, which has
20-years of experience, said in his interview to the AInvest-100@
magazine that the construction industry is Athe industry that
will boost the Russian economy@ as it unites efforts of several
other sectors. Wood processing, chemical, textiles, and glass
making industry sectors could all benefit from extensive housing
construction. On the other hand, a weak construction sector poses
problems for the same range of supplier industries. As the
construction rate has recently slowed down, wood-processing
enterprises have experienced a drop in demand for wood and sawn-timber
materials.
Major construction materials plants are currently experiencing
difficulties. Their old technologies are often behind the market
curve (such as, for example, in popular plastic window frames,
window packages, etc.). Significant investments would be needed
to overhaul large production facilities. Thus, smaller
construction companies are appearing and successfully competing
in implementing new technologies.
There is a strong potential for the sector=s development,
primarily in the private housing construction. The city of Tver
has a unique abundance of downtown houses. Houses of one to four
floors are randomly built closely together. According to Mr.
Chovushyan, new technology has been developed jointly with a
German company that would allow adding top floors without the
need to temporarily relocate the inhabitants. It has been
estimated that construction costs per square meter would be
significantly lower than the market price. Construction of hotels,
such as the Osnabryuk, in the city or at tourist sites such as
Seliger Lake, also present investment opportunities to American
companies.
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TOURISM
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On June 24, 1999, the Russian newspaper Kommersant-Daily
published ratings of the most popular vacation and tourism sites
in Russia. Tver=s spas and sanatoriums were ranked 6th after
Moscow Oblast, Sochi, Anapa, Crimea (although now a part of
Ukraine, Crimea is traditionally considered as a domestic
vacation site), and Mineral Waters.
Rich with beautiful and traditionally Russian flora and fauna,
Tver Oblast is advantageously located on the crossroads of major
automobile, train, and river ways. The oblast is also famous for
its unique historical monuments, ancient monasteries, convents
and temples; 14 towns are considered Aurban monuments@
representing 18-20th century lifestyle. The combination of sights
to see, nature, easy access, and proximity to Moscow and St.
Petersburg make Tver a popular weekend destination as well as an
attraction for fishermen and hunters.
As service and quality living conditions are becoming
increasingly important to Russian tourists, tourism
infrastructure needs to be significantly improved to attract more
tourists. A post-crisis windfall occurred when the ruble was
devalued, prompting many Russian tourists to save on travel and
Ago domestic.@ Thus, the inflow of tourists to Tvers Seliger Lake,
the most famous lake in Central Russia, increased by 15 times
compared to the mid-1990s. To support the interest in domestic
tourism, Tver oblast and United Nations experts launched a
program of development that calls for construction of two- and
three-star hotels around the lake. The Regional Administration
supported construction of the Osnabryuk hotel, financed and
implemented by Tver-Osnabryuk company.
AUTHOR: OLGA ANANINA, BISNIS REPRESENTATIVE, MOSCOW
APPROVING OFFICER: MATTHEW EDWARDS, COMMERCIAL OFFICER, US &
FOREIGN COMMERCIAL SERVICE (FCS), US EMBASSY MOSCOW
INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE
AND U.S.
DEPARTMENT OF STATE, 1999. ALL RIGHTS RESERVED OUTSIDE OF THE
UNITED
STATES.