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Industry is the Foundation of Social and Economic Development Page 4

INTERVIEW EXPERT OPINION TRANSPORT & LOGISTICS 32. Clusters Create a New 20. Labor productivity and CLUSTER sustainable employment Production Culture. 46. Infrastructure for Export Growth A. Sotnikov, AIRCO A. Mosalev, FCC 22 Lean production is beneficial, Ermakov, CLPC EXPORT-ORIENTEDNESS FIGURES AND FACTS 48. VMK Invest — Focus on Export 8. Industrial Complex Structure Growth INITIATIVES 50. VESTA: Our Goal is Constant 26. NLMK-Kaluga – NLMK-Kaluga – Improvement RATINGS pilot project of production system 10. Industry. Key Indicators FOREIGN TRADE COOPERATION DIVERSIFICATION TECHNOLOGIES 52. Main Trade Partners of the 30. Clusters Region 12. Kraftway: heading for confidence, innovations and sustainability PHARMACEUTICAL CLUSTER PREFERENCES 38. NIARMEDIC: 30 Years in Service CONVERSION 54. Measures of State Support for of Innovations Manufacturing Industry 14. KADVI – enterprise of Military- Industrial Complex with strategy 58. SME Success Depends on of diversification into non-defense AUTOCLUSTER Experience and Support of Region products 40. Continental Kaluga Is Ready Administration 16. KEMZ masters new types of to Respond Quickly to Economy products Changes SITES 60. Infrastructure for Industry EXPERIENCE COMPOSITE CLUSTER Development 18. Innotechmet: we outrun similar 42. Technology OSIE — a foreign equipment by the majority of Flagship of Composite Production parameters Development 24. Participants of national project 44. MYS: Innovation Technologies of Labor Productivity Machine Industry

PUBLISHED BY THE AGENCY FOR REGIONAL DEVELOPMENT OF KALUGA REGION SINCE 2010 PUBLICATION OF THE MINISTRY Editor Design ADVERTISING FOR ECONOMIC DEVELOPMENT Tatiana Antipova Rodion Nedorezov Elena Bochenkova +7 (910) 609-74-21, +7 (910) 606-00-50, +7 (910) 915-00-58, OF KALUGA REGION [email protected] rodion-nedorezov@ [email protected] All rights to information, photo materials and the logo of Kaluga yandex.ru Region belong to the Agency for Regional Development of Texts Kaluga Region: Andrew Bolshakov Alina Abramova 41 bldg.2 Dzerzhinskogo St., Kaluga, 248001 Russia +7 (915) 890-03-14, +7 (910) 606-91-93, Tel.: +7 (4842) 27-99-90, 27-99-91, arrko.ru [email protected] [email protected] 4 Interview Interview 5

in Kaluga Region. Currently, more focused efforts to support them. economic development in than 60% of industrial products For the past year, the output at the region. A year ago, the are manufactured by plants that plants of the defence industry President of the Russian have been built and upgraded amounted to RUR 55 bln – this Federation announced top in the region in the recent 13 is 7% in the total industrial priorities of the country years. Production facilities of the production of the region. Power development for the next five branches, which are traditional equipment manufactured in years. Which objectives of the Vladimir POPOV, region’s industrial complex are Deputy Governor in line with these priorities of Kaluga Region and what will be main focus In 2018, Kaluga Region reported areas of the industrial policy? Higher labor productivity 104.5% growth of its industrial in basic industries, better Industry has competitiveness and entry into production. This year, we observe foreign markets – these are been and remains strategic development goals of the growth at the level of 107%. the industrial complex set by the President. It should be noted the foundation that they fully correlate with our strategic vision. of social and In 2018, Kaluga Region reported for the region, also operate in a Kaluga has been exported and 104.5% growth of its industrial economic stable manner: power machinery successfully used in almost 40 production. This year, we observe engineering, rolling-stock countries of the world. Many the growth at the level of 107%. development manufacturing, and military types of manufactured railway This means that our industrial industry. The government takes machinery and locomotives are complex has a strong basis and of Kaluga Region operated both in the Russian a large potential for successful Federation and abroad. achievement of the national You can see that the industrial priorities. NLMK-Kaluga Vladimir, the branch structure absolutely new for Kaluga complex of the region is Implementation of the Higher is the winner of of the regional industry has Region. For example, car-making. rather diversified and focused Labor Productivity and the award “Labor considerably changed in recent For a short period of time, our on the development of hi- Employment Support national Productivity: years. Please tell how this region managed to grab over tech industries. The average project is focused on increasing Russian Industry process is going on and what 11% of the Russian automotive annual trends in the industrial productivity indicators at Russian Leaders – 2018”. is the basis of the industrial production – this is the 3rd place production index is fixed at 106% production facilities to the level complex today? among the regions. The share starting from 2012. Since 2006, of the developed countries. of car-making in the industrial the production in the region grew Today in the Russian industry, The mechanical engineering production of the region by more than 3 times. In the figures of output per employee in complex has been and remains continuously grows. Having recent years, Kaluga Region has various branches are 5-10-fold the basis of industrial growth started from 1% in 2007, it been the leader among Russian lower than those in the western in Kaluga Region. Today, it is accounts for above 35% now. regions in terms of volumes countries. Having analyzed in represented by both production The pharmaceutical industry of processing productions per detail the production facilities facilities traditional for the develops right in front of capita. operating in the Kaluga Region, region and new plants built by our eyes. We open the most The key indicator demonstrating we came to a conclusion that investors. The metallurgy and advanced production facilities better competitiveness of our the output per employee at new metal processing, food industry, of the region. Today, we already industry is higher exports and production facilities exceeds production of construction produce over 150 medicines, increased number of exporters. the average regional level by materials, and pharmaceuticals and additional 25 products are For 2017, Kaluga Region was more than twice. So, we have play a major role. Currently, being developed. We are steadily among TOP3 best regions in the someone to look up to. Many these are the branches ensuring working to get a significant share Exporters of the Year federal our production facilities are the growth of gross product of in the Russian pharmaceutical contest, and in the last year the leaders in their branches and our industry and development market. exports grew by almost 11%. Kaluga plants of international of the scientific area in many The IT industry, radiology An increase in exports is also companies are leaders in their respects. medicine, chemical industry reported for non-CIS countries global production systems Certainly, with commissioning of are actively developing, the that is another confirmation – Volkswagen, Continental, large industrial facilities, since production of computers, of our manufacturers’ high L’Oreal, Volvo, NLMK and 2006 there are as many as 108 electronic and optical equipment, competitiveness. others. They all enthusiastically plants, the region’s industrial home appliances and TV sets Volkswagen Group Kaluga Plant – the winner of share their knowledge and complex have changed. For the grows. Even today, 100% of all Transformer of the Year – the world’s best Volkswagen This means that the industry experience in improvement years of active investments, Samsung TV sets and monitors plant in terms of efficiency indicators. has been and remains the of the production culture, as branches appeared, which were sold in Russia are manufactured foundation of social and higher labor productivity is the 6 Interview Interview 7

cornerstone of the production culture. have to do this work at 109 plants for the regional economy by 2024. It exporters is at a rather high level. improvement programs (CCIPs). Trade of the Russian Federation will The active project implementation of the region by 2024. I would add is important that the participation in In this connection, we can say that Companies, which successfully pass prepare a unified list of manufacturers stage was started in last December. that efforts to improve production this project enables companies of the the processes of labor productivity the qualification selection, will be with which CCIP implementation The region created a regional center processes can be taken both using region to renew from inside without increase and export growth are provided with access to low-interest agreements will be signed. In addition, of lean production competencies. own resources and engaging external significant financial costs. If changes interconnected. In the current year, funding mechanisms. I would like to such contracts will become an Production facilities were selected advisors. Since this year, the key require considerable investments, conditions of governmental support note that CCIPs are a central element additional advantage for companies to benefit from other support initiatives.

Our key resource and a unique advantage are clever, hardworking and talented people.

You have said that the national priorities almost fully correlate with the social and economic development strategy of Kaluga Region through 2030. Implementing its principles, the region has already managed to achieve success in many areas: increased industrial production, higher salary, investments’ boost, and export buildup. It seems that Kaluga Region has inexhaustible resources and unlimited opportunities?

Actually, Kaluga Region has no resources that provide raw material regions with a high economic status. Our key resource and a unique advantage are clever, hardworking and talented people. Everything that VOLVO VOSTOK has been created here is a result of is the leader their daily thorough work. in Russia Today, our key task is to make Kaluga among foreign Region a territory where you want manufacturers of to live and work. It’s no coincidence heavy trucks. that both the social and economic development area and all its priorities are grouped around people. which demonstrated their activity target support is provided by experts companies participating in the project to exporters change. Now, it is very of the International Cooperation and and wished to move to a totally of the federal and regional centers can use a low-interest loan of the important to help manufacturers Exportation national project. In my new level of management, ensure of competencies. Our objective as Industry Development Fund with an to understand all new rules. For opinion, the launch of this support a stable growth of productivity and governmental authorities is to involve interest of 1% per annum. The next example, since April 1 the regional program is a good basis for a long- competitiveness. The pioneers were as many companies as possible in strategic development area is to Ministry for Economic Development term growth of competitive products’ OJSC Kaluga Turbine Plant and the processes of changes to ensure increase exports. I’d first say that, selects manufacturers implementing manufacturing. After the qualification JSC Kalugaputmash. Totally, we a 5% productivity increase in general as a rule, the labor productivity of corporate competitiveness selection, the Ministry of Industry and 8 Figures and Facts Figures and Facts 9

Industrial Complex Structure SHARE OF PROCESSING PRODUCTIONS IN GRP 2015 32.2%

2016 37% 2.8% 2.5% Production of automotive vehicles 3.1% 3.3% Production of food products 2017 39.9% >40% 3.6% Production of computers, electronic and optical of GRP are produced by the products 2018 41% (estimate) industrial sector 4.1% 35.6% Metallurgical production Production of other non-metallic mineral products 7.1% Production of finished metal products

Production of medicines and materials used for medical 9.9% purposes growth of GRP for the recent Production of coke and oil products 5 years RUR 435.3 Production of other vehicles and equipment bln 9% (estimate) RUR 417.1 Production of rubber and plastic products RUR 373.4 bln Other RUR 339.8 bln 11.6% bln 16.4% RUR 326.5 bln 3,616 ≈300 108 production facilities operating large and medium industrial facilities operating in Kaluga Region production facilities since 2006 + RUR 33 + RUR13.3 + RUR 32.5 + RUR 44.8 + RUR 18.2 bln bln bln bln bln (estimate) 18% 1.4% 4.6% 0.5% 4.1% 0.5% 2014 2015 2016 2017 2018

1,009,400 54,408 2005 2010 2018 people – population of Kaluga Region jobs will be created under the investment agreements signed 550,000 REGISTERED UNEMPLOYMENT LEVEL 80.6% 94.9% 95.4% economically active population 110,000 0.5% 1.1% Processing Production and distribution of electricity, Mining of mineral people working at industrial facilities Kaluga Region Russian Federation Industry gas and water resources 10 Ratings Ratings 11

INDUSTRY LABOR PRODUCTIVITY Industry. Key indicators 2014 RUR 4.1 million/person

2018 RUR 7.6 million/person +85% for 5 years

VOLUME OF SHIPPED PRODUCTS OF PROCESSING INDUSTRY, PER CAPITA (Q1 2019)

ST ST RD 1 PLACE 1 PLACE 3 PLACE 200,0 179.1 in the Central Federal in the Central Federal in the Central Federal 180,0 District, 1st in the Russian District, 10th in the District, 27th in the 160,0 148.3 Federation Russian Federation Russian Federation 140,0 120,0 for processing industry for the output of for average monthly 97.0 production per capita industrial products per salary 100,0 93.5 capita 80,0 69.7 71.3 57.8 60,0 44.2 53.4 50.9 40,0 33.4 20,0 RUR 37,735 RUR 44,712 0,0 average monthly salary average monthly salary in Kaluga Region in the industry Kaluga region Bryansk region Vladimir region Lipetsk region Moscow region Orel region Ryazan region Smolensk region Tver region Tula region Moscow city

INDUSTRIAL PRODUCTION GROWTH, 2019 Total processing Including production facilities Investors’ produc- SMEs tion facilities 127.6% 124.3% 118.7% Number of industrial 2,856 91 2,560 facilities production of transport production of medicines production of food vehicles and equipment and medical products products Industrial output, RUR bln 798.5 488.5 45.2

Share in the total industrial 100 61.2 5.7 output of the region, % 113.3% 109.9% 3-fold Produced per 1 employee, 8.5 20.2 2.6 RUR mln production of production of rubber and production of coke automotive vehicles plastic products and oil products Average headcount, persons 93,422 24,282 17,216

Average monthly salary of 46,522 62,586 30,591 employees, RUR 12 Technologies Technologies 13

control. Today, motherboards and final monitoring of production processes is Kraftway: heading for confidence, products are manufactured at domestic performed on a regular basis, a special plant in Obninsk. program is adopted to mitigate industrial waste, the innovations and sustainability Kraftway production facility was company plans to abandon using commissioned in Obninsk in 2007. environment-hazardous materials More than USD 30 mln was invested in its production processes, primary Today, issues of ensuring information security of in its construction and modernization. processing of industrial waste is carried The plant can be compared for a good out. critically important automated systems, data storage reason with the best plants of the and infrastructural facilities are instrumental for all state global leaders in hi-tech industrial Today, the plant manufactures a authorities. The number of incidents is steadily growing: production. wide range of trusted computers and cyberterrorism, new generation viruses, and attacks Currently, all production capacities of telecom equipment: from tablets and on control systems of critically important facilities, Kraftway are consolidated in Obninsk: PCs to powerful servers, data storage destruction of digital databases, data stealing, destruction here 3 assembly lines operate, a line to systems and switches. They are all manufacture printed boards, assembly based on uniform hardware/software and encryption. section for complex server systems, secure platform developed by Kraftway. section for special tests and studies. Unique specifics of the products Production process at the plant is manufactured by Obninsk plant is the highly automated, and a combination use of components capable to ensure of stack and conveyor technologies continuous monitoring and protection provides additional flexibility to against malicious effect throughout production process. Big potential for entire lifecycle of the product. further extension of production planned Among the most important at the design stage will allow, upon developments of the last years: new necessity, to increase the output in a generation of protected motherboards, short time frame. high-speed trusted router, new generation of data storage systems,

following can be cited: • Equipping of more than 600 healthcare facilities in Moscow Region with information terminals for self-service medical appointments; • Supply of trusted components for deployment of automated system of tele-healthcare consultancies at perinatal centers in Russian regions; • Integrated automation of fountain complexes at VDNKh; Kraftway is one of the major Russian companies High dependence on imported software and • Creating system of CCTV, information hardware existing now in Russia results in collection and processing for the operating in the market since 1993. The higher vulnerability of IT systems of national facilities of Gormost FSUE; company develops and manufactures trusted enterprises and state authorities in a strained Trusted DSS • Updated video replay system for All- platforms with integrated data protection political and economic situation, with the buildup Russia short track competition. of new information threats. Development of In 2018 the company completed all equipment, creates hardware and software computer systems, telecom channels based on procedures necessary for obtaining systems on their basis tailored to customer’s domestic hardware and software will enhance Commissioning of the new complex information kiosks, trusted video conclusion on Russian origin of wide level of protection for the national information allowed integrating educational and cameras for CCTV systems and range of products manufactured at its needs, and also implements infrastructural systems. scientific potential of Obninsk with hardware peripherals. Obninsk plant under its brand. solutions. Major state and commercial investments of Russian business in The status of Kraftway as a Russian Development of own innovative structures are the strategic customers of the The use of the concept of trusted platform real sector of economy. It gave extra technological leader is confirmed not technologies, further localization of suggested by Kraftway may successfully momentum to the development of the only by development of innovative production processes and sustainability company. prevent information threats and ensure reliable entire Kaluga Region. products and their serial manufacturing, were and remain strategic vectors of operation of the systems. This concept is based The company is focused on improving but also by its extensive experience in Kraftway development for the next on the development of circuit design solutions of production processes, wide implementing infrastructural projects. years. and manufacturing of motherboards in Russia, implementation of electronic document Acting as an infrastructure integrator, creation of source codes for microcode software control and partial transition of the company successfully builds for key elements (BIOS for motherboards and management function from human to complex systems. firmware for all microcontrollers), specialized computer. Its list of successfully implemented software for data collection and processing and Kraftway also pays much attention projects is constantly growing. also systems for infrastructure monitoring and to sustainability: environmental Among its recent landmark projects the Trusted router 14 Conversion Conversion 15

KADVI plant is one of the first external environment. the latest developments created by KADVI – enterprise of Military-Industrial Kaluga enterprises, which Computer-aided design and engineering our engineering center is a completely implemented modern methods of solutions implemented in our new innovative gas turbine engine work organization: automation engineering services already enabled for new non-defense equipment. Complex with strategy of diversification of management, production, us to substantially reduce timeframe of Now, our engines can work not only technology and financial processes. new projects’ development, to ensure on traditional fuels, but also, on gas. into non-defense products Does this enabled higher digital interface with production sites. Specifically this goal was formulated

Yuri Alexandrovich, creation of KADVI plant enabled our country to achieve new level in manufacturing defense products. It was certainly an innovative project for that time. How the plant is developing today?

Indeed, construction of KADVI plant in 1966 was a major innovative project on a national scale implemented upon initiative of the Government. Kaluzhsky Dvigatel plant was the first one to master manufacturing of gas turbine engines and power units for onshore use. Before that, small capacity gas turbine engines were manufactured exclusively for aviation. Thanks to KADVI plant and new production technologies, major defense enterprises began to use small capacity gas turbine engines, which created new generation equipment with unique technical possibilities. Among them, T-80 tank can be mentioned as the most known and landmark equipment using gas turbine engine, as well as anti-aircraft missile systems for the national air defense. Today, manufacturing of military equipment remains the most important element of our work. PAO Kaluzhsky Dvigatel is in the list of strategic enterprises productivity? Did you manage to It allows us creating high-quality by the President and was included of military-industrial complex; it has a honorary name optimize financial component? products tailored for customer needs. in strategic program of industrial ‘Labor Glory of Kaluga Region’. The plant not only It is important that we already get development of the Russian Federation. manufactures small capacity gas turbine engines, Main requirements for modern significant economic effect from the Today, we proceed to a new stage of but also ensures overhaul of GTD-1250 and power production, irrespective of its scale, implementation of such systems. its implementation: we launch our new mono blocks. We manufacture autonomous power mean production flexibility, ability to In combination with implemented gas turbine engine to the market. The Yuri LEYKOVSKY, supply units for gas turbine engines, components and promptly react to changes related modernization program, in particular, stage of new product market promotion Director General, units upon orders of enterprises from various sectors. to customers and market in general, purchase of NC-machines, optimization always requires serious efforts. We PAO Kaluzhsky Dvigatel Additionally, we manufacture wide range of gardening rational use of all types of resources. of labor resources and growth of have already hold negotiations with equipment up to 9 h.p. capacity and accessories Digitalization and solving tasks of production volume, it certainly provided enterprises from various sectors, which PAO Kaluzhsky Dvigatel (KADVI) has been for them. We also opened new line of business; it automation are certainly efficient positive dynamic in labor productivity. showed interest in the new product. provides for modernization and repairs of metal-cutting tools to respond to modern market And definitely, we value very much that The Russian Railways, representatives operating since 1966. This is a diversified equipment under orders of specific customers. challenges. It should be noted that for the new technologies attracted young of oil and energy, oil and gas production enterprise specialized in manufacturing KADVI this topic is not a novelty. We personnel to our plant. industry, truck-making and shipbuilding of small-capacity gas turbine engines for began to implement digital algorithms are interested in this product. onshore power units of various purposes. in management already in 2005. Even Not every enterprise can boast of Undoubtedly, in some years, the sector for our plant with big history and full production cycle. Moreover, of production and use of gas-based The plant specializes in manufacturing mature processes, it took a lot of KADVI Plant has its own engineering equipment will be fast-growing because products within the framework of the state efforts, resources and time to launch center and a design center of high demand from various industries defense order: overhaul of gas turbine digital data exchange throughout the developing new science-based throughout the big territory of Russia, engines, manufacturing of components entire production loop. For that, we technologies. Please, tell about the including territories with harsh weather purchased necessary hardware and most interesting developments for conditions. The market generates new and units for aircraft construction, car software; we installed fiber optic lines non-defense sector? requests, and KADVI Plant keeps up manufacturing industry, Russian Railways, between our remote sites, buildings with the times. oil and gas production industry, consumer and warehouses. We performed large High scientific and engineering scope of work related to the creation potential serving as a basis for goods and gardening equipment; it also of safe storage systems for databases, production from the very beginning, provides maintenance and delivery services training of skills to work in digital high-precision equipment, highly- under orders placed by enterprises. environment. qualified personnel, availability, as you Today, generation, storage, analysis mentioned, of full production cycle, and exchange of big volumes of these are fundamentals of the plant data takes place not only within the operations, which enable us to solve enterprise, but also helps some of our key tasks and deliver new scientific services to operatively interact with and engineering developments. One of 16 Conversion Conversion 17

MODERNIZATION OF PRODUCTION Today, digital technologies are implemented in KEMZ masters new types SYSTEM practically all areas of KEMZ operations: production, Further stable development of the plant business processes, marketing and customer relations. of products directly depends on its competitive ability In addition to the range of applied systems, digital at the market of non-defense products. manufacturing includes use of technologies of modeling Mastering of new products required revision and design both for products and articles themselves of standard management system based CONVERSION on vertical hierarchy structure. Project- and for production processes throughout the entire based management is considered by KEMZ lifecycle. The President of the Russian Federation set a as optimum method for planning and task to achieve share of hi-tech non-defense and management of implementation of non- dual-purpose products at the plants of the military defense projects. This method is oriented industrial complex (MIC) at least of 30% by 2025 to satisfaction of the needs of non-defense and of 50% by 2030. Further development of market within the frame of existing time, Russian economy and national defense capability budget and resource limits. KEMZ managed and security depends on successful diversification to master timely and successfully main METAL DETECTING ARCHES of the MIC. Experts are unanimous in saying that methods and tools of the modern production it is also important to keep existing capacities organization. Metal detecting arches of the MIC enterprises in the process of such manufactured by KEMZ are diversification. designed to ensure public security Implementing the diversification tasks set by the at places of mass gathering. Metal ● Since 2013 1C MES (Manufacturing President and the Governor of Kaluga Region, detecting arches are equipped KEMZ Plant actively masters new types of Execution System) has been implemented in the company. It enables to plan production with video cameras with the face products. The enterprise is interested in higher recognition system based on volume of output of hi-tech non-defense products. of products and semi-products within the shop up to a level of work center taking one of the fastest and the most Among 2019 projects, product range of LED lamps accurate algorithms worldwide from Kaluga Electromechanical Plant (KEMZ) was for different purpose may be mentioned, as well as into account shifts, load and availability of equipment and resources. NtechLab Company. The efficiency established in 1917 on the basis of repair intellectual proprietary mechatronics system and of this solution was proved on many metal detecting arches. The plant has its own test occasions when ensuring public shops for cable and telephone equipment. The base; therefore, all products undergo the entire ● New stage in the development of ‘digital manufacturing’ consists in implementing 1C security at the events of various enterprise lived through different stages in its set of mandatory tests, including mechanical, scale, up to international ones: development and finally became the founder electrical and lighting-related tests. PDM (PLM). Implementation of this system substantially accelerated preparation for a number of convicted criminals of instrument-manufacturing sector in Kaluga. manufacturing, preliminary computation of were apprehended with use of this Today, the plant develops and manufactures prices, launching of items into production system during FIFA 2018 World Football Cup. communication equipment and consumer goods. cycle and further support of final products. The plant has modern process equipment enabling it to manufacture products meeting modern requirements.

INTELLECTUAL MECHATRONICS SYSTEM

Innovative product of non-defense mechatronics system are purchased use consists of control block and by major customers: OAO synchronous motor. These motor may Shcherbinsky Lift-Making Plant, OOO be designed for general or special RusLift, OOO UAZ, AO Avtoelectronika, purposes. Intellectual mechatronics PAO AVTOVAZ, GC Elikor, OOO VEZA, systems are already used in lift NPP TEC, AO IEMX Kupol, PAO NPO equipment, car-making industry, Strela. KEMZ PLANT USED THE EXISTING STATE for special-purpose equipment, in SUPPORT MEASURES FOR ITS CONVERSION industrial and household ventilation, in robotics sector and in oil & gas PROGRAMS: LED LAMPS industry. In the near future, intellectual KEMZ Plant developed and proceeded for serial mechatronics system from production of its own product range of LED KEMZ will be used for unmanned lamps of various purposes: from modern office aircraft systems. The intellectual models to street lamps and fire- and vibration- 01 02 03 resistant industrial lamps. Today, the wide Subsidized loan from the Use of resources provided by leading Interaction with small & medium product range allows to the plant entering the Industrial Development national research centers: Tomsk businesses, attracting finances open non-defense market and successfully Fund Polytechnic University and Novosibirsk from the Fund of Small Businesses compete with leading domestic and foreign State University Promotion in Scientific and manufacturers of LED lamps. Engineering Sector. 18 Experience Experience 19

Does Innotechmet plan to expand Innotechmet: we outrun similar geography of its sales? The potential of the market expansion is immense. Today the share of imported foreign equipment by the majority products similar to what we manufacture is practically equal to 100%. According to of parameters data from the Federal Customs Service, analogue products for RUR 5 bln were imported to Russia last year. Therefore, we are, certainly, oriented to the Russian OOO PO Innotechmet renders market. Though, we have plans to develop services in precision high-tech metal export to European countries and the processing, design and manufacturing countries of the Eurasian Economic Union. I am sure that our target of production of complex body elements made volume – 10,000 items/year (or, if take of hard-to-cut alloys, including product range – 270 types of products) are stainless and heat-resistant steels, quite achievable. Also, by the end of this for a number of sectors of the Russian year, we plan to create our own ware- house for final products. industry. The Company successfully implements In 2017, within the frame of bilateral dedicated to work. the environment. At the earlier stage, we the project to create production Russia-Japan relations, specialists Kaizen tools, or otherwise, principles of thought that large space would be more center, which will develop and of Japanese companies performed lean production include not only organiza- useful. Japanese colleagues demonstrat- implement in serial production wide technical audit of Russian enterprises tion of process chain, but also improve- ed to us that in fact it results in unneces- with further implementation of kaizen ment of work culture at a production site. sary relocations. Today, we applied these range of import-replacing tool-making system at production sites. What was When we hire people, some 90% of recommendations to all sites of produc- products at the level of the best efficiency of this project for Innotech- applicants fail to complete 3-month tion process. Our management team, our global manufacturers. met? Did you manage to increase labor probation period, because smoke breaks, process engineers are actively involved productivity? and sitting on chairs in working time are in solving these issues: they digitalize prohibited. A worker must work at his obtained data and make their input for We were one of 12 companies, selected machine-tool four hours before and after improvements. by Japanese specialists for the technical lunch time. We manufacture critical parts Igor DZHIKAEV, Please, tell us about the most promising projects of your audit. At the time, I visited Japan on for aircraft, missiles, and we should be Active implementation of lean pro- Director General company. What is main competitive advantage of your prod- several occasions, I knew their principles morally responsible, not allow negligence, duction is intended within the frame OOO PO Innotechmet ucts? Where are they used? of work and understood that Japanese because any defect may result in a failure of Labor Productivity national project, colleagues have something to suggest for of equipment and catastrophes. Although, which, one can say, segregated from For almost 10 years, we work for the national military industrial us. This is why I agreed to take part in the we strictly observe 8-hour working day. kaizen system. To what extent, in your complex (MIC) within the frame of state defense order. We man- project. In a seven-day period, auditors This regulation has never been violated. opinion, enterprises should master ufacture various types of components, units for space equipment reviewed our production organization; Failure to observe work culture always new principles of production organi- and missiles using our metal processing equipment. Since 2014 they helped us to modernize and expedite affects quality of products, their value and zation? we are oriented to diversification and we began partial switching production processes, reduce production competitive ability. This is why we eagerly to non-defense products. Today we started serial production of chain and optimize working environment. began to implement and develop kaizen The implementation of lean production equipment for tool-making sector. Our company manufactures Many things were new for us. They helped system. is certainly an important and requisite a wide range of servo-controlled tool blocks for any process- to eliminate unnecessary relocations of task. Experienced people with detailed ing equipment of machine-tool fleet in Russia. We are the only workers, cut the time spent on operations. Did you manage to extend kaizen tools knowledge of business are needed for its company in Russia to manufacture such products. The Ministry of Sometimes, we managed to achieve 50% to the entire production process? successful implementation. In this regard, Industry and Trade of the Russian Federation included our prod- reduction. These changes resulted in availability of arrangements with compe- ucts in the critical segment of the Russian industry, because of the higher labor productivity. Yes, after the audit, we began to use tent specialists and exchange of practical level of localization. We borrowed methods to ensure quality of recommended methods not only at the experience are very much important. In May, our company took part in the international exhibition personnel from our Japanese colleagues. experimental site, but also applied them I would go as far as saying that today we ‘Metal Processing 2019’ for the first time. Representatives of Everything is made in our company to for every employee, we studied the chain are one of the model companies in Russia, foreign and Russian machine-building enterprises, metal works, ensure that the working time is fully of all production operations; we optimized as far as implementation of kaizen practic- and companies manufacturing different equipment take part in this es is concerned. Surely, partners visit our exhibition. This is one of the most important events in the sector company; they see how we work. But the of mechanical engineering. Our products were equally interesting process of exchange of best practices is for professionals in the industry and for representatives of govern- Kaizen is the Japanese system of continuous improvement of quality, not yet smoothly progressing. I hope that ment structures. technologies, processes, corporate culture, labor productivity, when programs would be adopted at the Innotechmet obtained its competences while working in the MIC; state level, which stimulate implementa- we developed and launched into production complex body parts reliability, leadership and other aspects of company activities. As tion of lean production, the situation will made of hard-to-cut alloys. Today we use the same metals and opposed to Western approach of improvement through innovations, change. I am confident that those, who technologies to manufacture non-defense products. The result is the main focus of kaizen is oriented at continuous improvement want to keep up with the time, who want very decent, both by operational parameters and by anti-vibration of company operations through higher quality of personnel and to manufacture products competitive at properties. We outrun foreign analogues by majority of param- the global level, understand that all this eters; we also win by the cost of final products and deadlines of initiatives of employees. is possible only with modern approach to their supply. production organization. 20 Expert opinion Expert opinion 21

Labor productivity and sustainable employment

National project Labor enterprises will receive federal state is not prepared to pay for the time, What are its tasks? There are the following support Productivity and Sustainable support. during which employees uselessly moved measures offered within the frame of the Employment is one of the most It should be said that enterprises throughout the territory of enterprise, The Federal Center of Competences national project: individual consultancies important in the context of began to receive such targeted or for the rent of warehouse, where (FCC) is the operator of National Project from experts in production systems at industrial development. What support already in late 2017, within unsold or defective products have been Labor Productivity and Sustainable specific enterprise participating in the main tasks will be solved in the the frame of priority program. By stored for years. It should be noted that Employment; its role is to provide national project, training programs and process of its implementation? early 2019, we significantly simplified currently all these expenses are included targeted support for enterprises and soft-term financing. access to the state support, and in production costs of the product. When ‘one-stop shop’, through which the Industrial consultants will be present at The President of the Russian today 158 enterprises in 36 regions we provide targeted support, our purpose state support can be obtained. The FCC the participating enterprise practically Federation has set rather ambitious became recipients of federal is to help enterprises understand, where is responsible for achieving the target – all the time within first six months from task in his May presidential decree assistance, including enterprises they lose resources; suggest a set of increase of labor productivity by 30% in three years of participation period. They – to become one of five major from Kaluga Region. measures to exclude such losses. 2024 at 10,000 enterprises in Russia. create pilot model site and perform global economies. By 2024, labor Lean production – it is always quality- We have highly competent experts training of employees, who will replicate productivity should increase at Please tell about the concept oriented approach. Defective products, specializing in production systems; the experience in the future at other medium and major enterprises of Lean Production. Why an expenses for their manufacturing and they worked in leading Russian and sites and will develop the culture of in base non-resource sectors of emphasis is made specifically on further rework are wasted resources. international companies. It should be lean production. Interactive production economy at least by 5% every this aspect? Therefore, one of the principles of lean noted that, when the national project training sites created in the regions year. It is a very high bar. Today, production is ‘Quality at the Source’. started, there were only 2,000 such or process factories under the FCC only China demonstrates such The main thing in the concept of It means that an employee should not specialists in Russia. One of the FCC standards will help to master in practice Alexander MOSALEV, dynamics worldwide. The national Lean Production is the maximum accept, manufacture and further transfer tasks within the project frame is to train tools and methods of lean production. Expert of Federal Center project transformed from priority satisfaction of the needs of ultimate defective products. Tools and methods 23,000 specialists in production systems Among financial measures of state of Competences in Labor program will allow increasing labor customer. All production and office of lean production are universal; this by 2024. support dedicated for participating Productivity (FCC) productivity at the accelerated rate. processes are aligned to meet this is why an emphasis is made on it. Its Additionally, the FCC should form enterprises, targeted loan from the The national project is divided in goal. Japanese Toyota Corporation implementation means exclusion of sustained interest of the business Industrial development Fund (up to RUR several milestones and has three demonstrated, how advantageous losses, higher quality and maximum community for the issues of labor 300 mln, 1% annual interest for 5 years) main parts. First one is Systemic such approach can be. It allowed it orientation on consumer. We constantly productivity, create environment for can be mentioned. Opinion from the FCC Measures. They mean creating of promptly becoming a major global speak about competitive ability, but further development of continuous experts is mandatory for receiving such comfortable environment at the car maker from a regional company. under market conditions one can hardly improvement culture at Russian soft-term financing. The opinion should state level enabling increase of All processes in the concept of Lean imagine a company, for which it has no enterprises. state that relevant production system labor productivity. Second one is Production are assessed from the importance. is created at the enterprise, and existing Sustainable Employment. Actions point of the value for consumer. What tools of support are planned reserves and resources are used in are included to train and, if needed Actions, which consume resources, Special operator - Federal Center of within the frame of the national appropriate manner. ensure employment of employees but not involved in product creation, Competences- was created in order to project? from the enterprises participating in are determined as losses, and should implement the project in the regions. the national project. And third one is be eliminated whether practical. For Targeted Support to Increase Labor example, expenses for development Productivity at Enterprises. In order of vivid design or formulation, which to achieve the target under this will extend service life of the product, part of the project, 10,000 Russian are not questionable. But consumer

ANO Federal Center of MAIN TASKS OF THE FCC: Competences in Labor Productivity (FCC) was 1 2 3 created on 18.12.2017 by Planning of project tasks Selection of enterprises Support for participating decision of the Presidium and implementation for participation in enterprises in achieving of the Presidential follow-up projects project targets Council for Strategic Development and 4 5 Priority Projects. Appraisal of compliance Representation of project between the results of at state authorities, enterprises and criteria of public entities and financial aid allocation business sector 22 Expert opinion Expert opinion 23

Lean production is beneficial

In December 2018, Kaluga Region stepped into the second they develop action plan for targeted aspects, marketing, sales, procurement, will take part in the program. It is implementation phase of Labor Productivity project. The changes. Integration of other enterprises production, office processes, R&D and also important that today in Russia, project is managed by the Regional Center of Competences is expected in June and in December, service. according to different sources, at least (RCC) (Lean Production Center). Please, tell in more detail when results of pilot projects will be another 15,000 entities implement about your work with project participants. summed up. I can say that we are happy When can one see results from the these methods independently. Among with the existing dynamics. implementation of the program? them, there are state authorities, Together with specialists of the Federal Center of Competences Also, our task is to motivate all project schools, polyclinics, which benefit (FCC), we, as the Regional Center of Competences (RCC), participants so that already during One can see first results from pilot from lean improvements and raise actively work with enterprises operating in Kaluga Region. Our pilot project stage top managers of the project already after three-six months of their competitive ability. This is why role is to select participants using criteria set by the FCC, we companies were involved in the changes, its implementation. It directly depends participation companies have all chances conclude agreements with enterprises on behalf of the region; and after its completion be able to on the level of involvement of CEO to get excellent results. we organize training of project team, which is created at the participate in improvement of production, and on the time of decision-making But we should wait more for significant, beginning of the project at each enterprise. The most important office and management processes, and for the project within the company. If radical results. The matter is that lean thing that we perform preparation and implementation of therefore ensure implementation of lean we speak in general about the region, production thinking, reasoned approach pilot project in improvement of production flow at a specific production tools and development of faster management thinking is ensured to the management of available production site. After preliminary preparation of the enterprise, production systems of their companies. within the Labor Productivity Program resources should be first embedded two active stages of deployment take place – these are goal- Head of Lean Production Center has thanks to massive involvement of all in the heads of managers of medium setting/planning and the stage of implementation of decisions. completed certification and obtained key enterprises using lean production and major enterprises. It is important Duration of each stage is 3 months. Our specialists are present permit for independent work with methods. For example, in Europe, it not to manage waves of current at the enterprise almost all the time: 80% of time - at the enterprises, which will start already from took 25-30 years for getting used to orders, but be able to calculate, how planning stage and 20% - at the implementation stage. Upon June this year. these methods, since late 80ies. Our rationally resources are used, be able to results of this work, the enterprises receives pilot project for program is planned until the end of manufacture high-quality products with the selected product developed under the guidance of the Are there any obstacles arising Alexei ERMAKOV, RCC expert, which should demonstrate effect of increased Head of Lean during the implementation of lean Production Center, labor productivity, and also reduction of existing production production? GAU KO Agency for Business losses: time losses for production (LT – lead time), overstock Development of materials and work in progress, unnecessary relocations of Unfortunately, yes. Upon implementation personnel and materials, unnecessary waiting time, reduction of any innovations, resistance arises. of defective products etc. The result of such work is the lower Despite the fact that lean production production costs and justified solutions regarding further tools are easily adapted to the existing Lean Production Center is the development of production system. The experience gained management and production practices, operator supporting industrial during the implementation of pilot project may and should managers change their work methods enterprises of Kaluga Region, be replicated to other production sites, to development and and thinking unwillingly and with which implement programs aiming modification of new and existing types of products, and also to suspicions. But, when they see first improvement projects for office and commercial processes and successful results of pilot project, to increase labor productivity. The logistics. majority of progressively-minded Regional Center of Competences managers take side of lean production (RCC) was created in 2017 How the project is implemented in Kaluga Region? concept and practices. It should be noted within the frame of national that lean practices are industry-specific; project National Project Labor We selected some 15 enterprises for 1.5-year perspective. Part therefore, for the majority of managers of them only at the preparation stage for the project. The FCC vivid samples from their industries are Productivity and Sustainable experts directly work with first enterprises, and we act as co- needed. When there are real examples Employment. In 2019, experts trainers. This is a big joint work of project team consisting of FCC of success in their industry, enterprises from federal and regional centers and RCC experts and also managers of Kaluga Turbine Plant and adopt lean production tools far faster will be able to provide targeted Kaluga Plant of Railway Equipment and Hydraulic Actuators. and more eagerly. Directors and top managers of the both companies visited Those managers achieve radical support for 28 enterprises of model plant Kovrov Mechanical Works in Vladimir Region. They improvements, who independently Kaluga Region. saw, how productivity may be increased without significant take interest in higher productivity costs. Then, they created a task force at their plants, which and lean technologies, because they 2024, and some enterprises participate lower production costs for itself, and at underwent relevant training. At the first stage the task forces understand that reduce expenses, in it and get support for 3 years. The the same time providing more customer studied production process, developed maps of current and cut production costs is beneficial. practice of implementation of lean satisfaction. If it made on regular basis, target statuses and planned optimization project. Today, at the Also, you raise competitive ability of production programs shows that the if lean production is a principle, then a second stage, project teams of the plants implement step-by- your company. Such self-motivated companies interested in improvements lean eco system of positive management step project measures aiming to increase planned output and to managers implement improvements, achieve serious growth and dynamics in thinking is created, and this is a improve production process. withdrawing from comfort zone all development of their production systems distinctive feature of the most efficient In April 2019, Telemetrya and Agrisovgas joined the program. lines of their activities, all parts of the within one or several years. companies worldwide. They have been already completed their zero stage, and now corporate business cycle: commercial Now, 10,000 enterprises nation-wide 24 Experience Experience 25

Participants of Labor Productivity AO KALUGAPUTMASH national project AO Kaluga Plant of Railway Equipment and Hydraulic Actuators (Holding Sinara – Transportnye Machiny, STM), was established in November 1874. OAO KTZ The enterprise manufactures railway equipment for repairs, construction and operation of railroads. The equipment OAO Kaluga Turbine Plant is the major is exported to India, Pakistan, Cuba, CIS Russian and CIS enterprise developing and Baltic countries. and manufacturing steam turbines, turbo actuators and turbo-generating units of small and medium capacity for power Within the framework of the national technology process was adjusted. As a resources in the development of the project implementation employees of the result of optimization, time of searching enterprise: “Thanks to the project, facilities of various sectors. plant underwent training and internship necessary tools and parts was minimized manufacturing of four track cranes UC under guidance of FCC experts. Shop of and labor productivity increased. 25/25 per month is real already in 2019. track cranes and mechanized platforms According to Valery Savchenkov, Additionally, Kalugaputmash will be able was selected as a model site for Director General of Kalugaputmash, to substantially increase the production implementation of lean production. participation in the implementation culture”. New logistics chain was developed for of the national project will allow the pilot site to supply components, increasing labor productivity by 30% storage systems were aligned and over three years and invest released KEY CUSTOMERS: >3,000 To 42 countries 1.17 в GC Rosatom and its affiliated companies Items of power equipment Steam turbines made by RUR mln/person PAO Silovye Machiny were delivered to customers KTZ are exported Labor productivity upon PAO Gazprom and its over 70 years of the company affiliated companies NPO TELEMETRYA operations results of 2018 NPO Telemetrya (GC Pandora) develops and

Kaluga Turbine Plant OAO joined the labor productivity manufactures antitheft alarm (car alarms and increase project in December 2018. An assembly shop immobilizers), car service devices and telemetry was selected as a pilot model site for the project. In six months significant improvements were made in complexes. Today, main products of the company are terms of production process optimization and efficiency increase. The plant starts implementation of a new Pandora alarms and Pandect immobilizers. stage of the project providing for introduction of lean production principles in other shops and in relations with subcontractors and suppliers. The enterprise plans to increase its Andrey Petrunin, President of GC Pando- earnings from RUR 1.480 bln to ra: “We are the only ones in Russia, who has RUR 1.924 bln without big investments IATF 16949 international quality certificate, RESULTS OF RE-ORGANIZED PRODUCTION PROCESS in three years through the introduction which enables us to manufacture electron- of lean production tools. It will become ics for global car manufacturers. Each our • 2 internal trainers are certified in the following activities: possible thanks to labor productivity product, if not the best one worldwide, then — Implementation of 5S in production increased from RUR 4.2 to RUR 5.5 per one of the best. The program of the company — Implementation of improvement projects person per year. Process flow, where development is based on new ideas and new — Basics of lean production Pandora LED 520W street lamps was developments. Within the frame of federal • Some 100 employees were trained by internal trainers selected as a pilot site. Improvements will project we will be able to optimize and to allow increasing stability and speed of improve production processes; we will get order execution. understandable methodology, which can be used at further stages”. 26 Initiatives Initiatives 27

NLMK-Kaluga — pilot project NLMK-Kaluga became a pilot site to implement Production System in the NLMK Group. Each employee can develop and of production system submit proposal aiming to optimize equipment operation, lower energy consumption, enhance quality and reduce production costs, improve and increase labor productivity. Submission of such initiatives is very popular among NLMK-Kaluga (Rolled Steel Division, employees, because it is the simplest way to implement ideas of production improvements. If the implementation of Russia, NLMK Group) is a new-generation an idea brings positive economic effect, then an extra bonus steelmaking plant, one of the major rolled is paid to its author. steel manufacturers for construction In 2018, 744 employees of the enterprise submitted their initiatives. This is by 3.5% higher rate as compared with purposes in Central Russia. NLMK-Kaluga 2017. In total, 1,383 initiatives were submitted aiming to enhance production efficiency. Economic effect from the project is based on a concept of mini-mill – implementation of ideas amounted to more than RUR 627 mln – by 74% more than in 2017. Bonuses at the amount of complex of electric furnace steelmaking and RUR 18.4 mln were awarded to the employees of NLMK- rolling mill located close to raw materials Kaluga for their submitted and implemented initiatives. Rolling-mill shop of NLMK-Kaluga was the most active one and main customers. in submitting and implementing ideas.

384 initiatives have been already submitted in 1Q 2019, Official ceremony of the plant opening took 358 of them have been implemented. Victor Ivahnuk, operator of continuous-casting machine, became author place in July 2013. Production capacities of and implementer of the biggest number of initiatives (47 submitted and 45 implemented) for the second year in a row. NLMK-Kaluga in steel and rolled steel are His initiative to reduce cutting width of continuous-casting machine became one of his the most significant ideas in 1.5 mln tons of steel and 0.9 mln tons of 2018. rolled steel per year.

At the end of each quarter, results are summed up at NLMK-Kaluga, and employees are selected, who were the most involved in the process of improvements. Victor Ivahnuk, Bronze and silver statuses are awarded to foremen operator of and shop supervisors, which reflect the level of continuous- involvement of their personnel in in the process of casting machine, idea generation. The award of status depends on NLMK-Kaluga points gained pro rata number of initiatives submitted by their personnel, and also pro rata technical and economic effect from system implementation. This year, gold statuses were awarded for the first time; they are awarded to those, to whom three “We readjusted our what I see around. Initiatives silver statuses have been already awarded. So, in equipment, determined are the improvements, on 2019, Sergey Levochkin, Head of Electrotechnical optimum height of gas which we are all oriented. Laboratory, obtained gold status. 100% of employees cutter and installed nozzle We understand that it is at his site actively use tools of the Production of smaller diameter on it. necessary to go ahead, and System. It allowed reducing cutting not to stay still. It enables width, and finally allowed us to be the best. Points to saving more than RUR 6 be improved and issues to mln and more than 200 tons be solved have been already of CC workpiece per year. I determined at our site. The do not aspire to become a initiatives help us to solve leader; this is simple desire these issues”. to improve something from 28 Initiatives Business 29

“Development of a production of an initiative is a source of system to a great extent new competences and personal depends on support and fulfillment. An employee, who Industrial cleaning — commitment of manager. He suggests interesting ideas, should serve as example to engages his colleagues in the an indispensable service his subordinates, personally implementation process. They discuss and provide assistance actively join in and make their own i n p r o m o t i o n o f i n t e r e s t i n g i d e a s . input in the form of their initiatives. We place information on initiatives The most important thing is “Industrial cleaning”. The term may look and trace down their progress that the employees understand not familiar, but it only means well-known at our visualization board. We necessity of all changes at the cleaning of production premises. Great collectively discuss submitted plant; they are deeply interested attention is paid at modern enterprises initiative in order to exchange and they are set on further active to cleanliness of premises irrespective opinions and experience; and we progress in this direction”. of what products the enterprise make an emphasis on safe labor Sergey Levochkin, manufactures. It may be alimentary conditions at workplace. It is not products, car spare parts, chemicals or Head of Electrotechnical Laboratory, only material motivation here. construction materials. Cleanliness is NLMK-Kaluga Promotion and implementation needed everywhere. During manufacturing process, an enterprise can hardly avoid dust and contaminants, which may results in allergy reactions and other diseases, reduce lifecycle of equipment. It is evident, that it not beneficial neither to employees, Every year, NLMK-Kaluga sets records at the level of the best world practices nor to their employer. Certainly, any company tries to maintain by volumes of its output and duration of serial casting. Seven million tons of cleanliness and order. But, it is not always steel were casted in 2019. possible to draw upon own resources, when production premises need cleaning. — Work sites: apparatuses, equipment, grass, sweep and wash sidewalks. We Not every enterprise can afford expensive machine tools; collect and remove waste. We should equipment for professional cleaning, — Equipment: conveyors, production lines, separately mention full-scale cleaning purchase specialized chemicals and obtain cooling equipment; at the enterprises of food industry. We necessary approvals for employees, for — Storage, attic, basement premises; know, on what attention should be paid. example, permit documents for work at — Reception areas, stairs; The reputation of food production and height. Additionally, in the process of — Utilities: ventilation, heating, water even the health of consumers depend industrial cleaning it is necessary to follow supply, air conditioners, sewage; on how qualitatively the cleaning will Sergey Shalyaev, procedures specified by documents and — Cloakrooms, rest-rooms, canteens, be made. Cleaning 911 Company uses Director General, norms set by GOST, SNiPs and SanPin. kitchens, lavatories, shower rooms. only specialized chemicals, which suit for cleaning of food production premises. NLMK-Kaluga Over more than ten years of operations, Our cooperation our company Cleaning 911 managed Generally, our cooperation with customers Often, the companies, which ordered to gain a reputation at the market of “Implementation of Production culture of the Company. It provides begins from full-scale cleaning of one-time full-scale cleaning from us, when professional cleaning. We grew to a System at NLMK-Kaluga was a set of management technologies, production premises. This is the most they see for themselves the professional major professional network from a small a success: employees began to which not only exclude losses, but labor-consuming type of work. Then, our results, become our permanent partners. openly speak about the problems also develops strong behavioral company. Our specialists work in six cities specialists perform periodical cleaning We are proud of our work, which the best and suggest ideas to resolve them. culture. Proper goal-setting, (Kaluga, Smolensk, Bryansk, Moscow, Tula in order to maintain order, which is far advertising for us. Only over one year the number of feedback, and team-building – and Pskov). They mastered more than 50 easier. We clean premises from all types Today, in a modern world, especially in submitted initiatives increased these skills are sought after at types of cleaning services. of contaminants, including those, which production sector, a manager of company nine-fold, and their economic a l l c o r p o r a t e m a n a g e m e n t l e v e l s . result from production specifics. The of any level constantly faces challenges, e ff e c t e x c e e d e d h a l f b i l l i o n R u b l e s . The Production System helps not What helped Cleaning 911 to become purpose of full-scale cleaning is to return various commitments and arrangements. Today, NLMK Production System only to unlock the potential of one of the leaders at the market premises to their initial state. We do the If you want that cleanliness at your covers all main Russian sites. The the Company, but also personal of cleaning services for industrial following for that: enterprise and clean equipment not project came out production only potential of each of us”. enterprises? — We clean all surfaces from the floor to become an extra pain for you, you can put and now it includes labor safety, One of the factors is the extensive the ceiling; this burden on Cleaning 911 Company. repairs, energy, logistics and experience that we accumulated in the — We remove old stains; For you, industrial cleaning is a necessity, principal and accessory processes. development of tailored solutions – unique — We remove dust and soil in hard-to- which enhances quality of all production The NLMK Production System for each specific facility and specific reach places at any height; processes, for us, industrial cleaning is a structurally changes processes and situation. We learn fast specifics of — We think through cleaning technology job, in which we are really good. enterprise, we assess the scale of future so that expensive equipment is not cleaning, and, the most important thing, damaged and deadlines are met; we assess specifics of contaminants. Then, — We organize high-quality cleaning of Cleaning 911 – beneficial terms, real professionals begin to work. large space. prices. Phone: 8 (800) 234-2-911

What we can clean? The work that our specialists perform — Premises after any repair work; depends on the season. — External structures, external lighting, In winter: we remove snow and clean walls, stained-glass windows, windows; paths from ice; in summer – we mow 30 Diversification Diversification 31

Clusters

Cluster of composite Cluster of information and ceramic technologies and communications technologies Cluster principle of industrial development is a key element in social and economic strategy of Kaluga Region. Such approach helps to resolve issues related to provision of personnel, logistics. Suppliers, sales markets; it provides opportunity to cooperate with major Development of production of composite materials Implementation of digital technologies in all aspects of life international companies, to develop at an accelerated rate and reach new level of competitive ability. More than 10 clusters are now actively developing in Kaluga Region. — 22 participants – industrial enterprises, scientific — 131 participants – developers, providers, manufacturers, institutions, educational institutions research and education block — 11 partner enterprises — Projects: IT-school, IT-lyceum, Yandex-Lyceum, IT-campus, — > 400 innovation developments transferred to production Smart City, Distance Learning System, Northern Agglomeration Digitalization etc.

Automotive Pharmaceutical, and automotive biotechnology components cluster and biomedicine cluster

Top 3 of Russian automotive manufacturers The only in Russia Silver Certificate, CLUSTER EXCELLENCE Education Tourism and recreation (ESCA) cluster cluster — 3 OEMs-manufacturers — 28 manufacturers of automotive components — 64 enterprises and entities — 12,000 jobs => 10% of persons employed in — 10 full-cycle factories complying with GMP standards 100% training of personnel Top 10 among Russian regions by the rate of tourism industrial production — > 70% - share of innovation companies for the needs of economy development — More than 11% of cars and trucks — 158 names of finished pharmaceutical products (FPP) manufactured in Russia — Modern educational centers — 4,000 historical and cultural landmarks — 80 professions and lines of training — 130 unique tourist itineraries — Dual educational system — 20 travel operators for domestic tourism — International school – Cambridge International School, IB — 64% - growth of tourist flow over last five years Standards

Alessandro ZANELLI, CEO, Nestle Ukraine Transportation Agro-industrial and Moldova and logistics cluster cluster

“Today, 85% of raw materials for Forwarding services, direct access to international 1st place in Russia by the rate of milk Cluster for production transportation corridors production growth our plant come from local suppliers. and processing of food products We believe that in addition to other 2 MLC Freight Village RU. — 750 farms advantages, work in a cluster allow us — FreightVillage VORSINO – major distribution hub in the — 45 enterprises of food and The cluster was created in December 2018 upon Central Russia, supporting point of One Belt, One Road processing industry enhancing effectiveness of efforts in initiative of the management of Nestle Purina Project — 128 milking robots in 36 pharms localizing raw materials and optimizing PetCare. Appropriate memorandum was signed — FreightVillage ROSVA – inter-regional logistics complex — 10% growth of gross agricultural between the Government of Kaluga Region and supply chain”. — Kaluga International Airport – 11 directions production in 2018 Nestle. 32 Interview Interview 33

This year, we expect that two more Clusters form pharmaceutical plants of Sphera-Pharm and Pharmsyntez companies will be commissioned, Novamedica plant is new production culture under construction, and Mirpharm company began its construction project. 15-16 pharmaceutical plants of the region will manufacture Kaluga Region is one of the first Russian pharma products in the coming 3-4 regions, which developed strategy of social years. Cluster, which also has evident and economic development. It happened 10 prospects, is the cluster of composite years ago. The strategy defines priorities materials and ceramic. It was created in of the regional development until 2030. In 2014. Now, there are 22 enterprises in the industrial context it means creation and it; they manufacture products for more development of clusters. 10 industrial clusters than RUR 12 bln per year. The unique began to operate in the region over these feature of this composite cluster is that years. Please, tell about the most promising is the only one in Russia, which created clusters. its own scientific and technical council. Every year, positions of agro-industrial Indeed, de-facto, more than 10 industrial clusters cluster become stronger. The main are now actively developing in the region, but projects within the sector aim to de-jure, only 6 of them are formalized. For ensure food safety of the region and 10 GMP-compliant industrial enterprises operate example, automotive cluster, being a driver of the creation of high-tech production in Kaluga Region industrial development of the region, has not yet sites in the agricultural sector. Milk been legally formalized. I hope that before the segment is significantly robotized in end of this year it will be included in the register the region; program ‘100 robotized off? Are there specific examples cooperation; and this is one of key of industrial clusters of the Russian Ministry of farms’ is successfully implemented; of increased productivity, birth of competences in modern world ensuring Industry and Trade. From our part, we provided project of wheat deep processing – new competences, and entry to new success in developing innovation maximum possible support. Pharmaceutics, ‘Rosva Biotechnological Complex’ is markets? technologies. Formation of clusters biotechnology and biomedicine is formalized and progressing; agricultural enterprises requires large numbers of new highly- now uses all available measures of state support. use modern automated technologies I previously told you about increased qualified specialists. This is why all Anatoly SOTNIKOV, In 2013 it obtained status of pilot innovation in various segments of agro-industrial export associated with development clusters, especially information and Director General, AO Agency for cluster of the RF by the Russian Government production. of transportation and logistics cluster. communications cluster actively develop Innovative Development – Center of Decree and three years ago it was included in Favorable location of the region, high Automotive cluster demonstrated their educational projects. For example, Cluster Development of Kaluga Region the clusters of priority project of the Russian activity of regional economy ensured unique example of industrial such training centers as Samsung IT Minister for Economic Development ‘Development efficient development of transportation development under cluster principle. School, Yandex- Lyceum, IT-Lyceum of of innovation clusters – leaders of world-level and logistics cluster. Today, few regions 10 years ago, the input of automotive Astral Company etc. were created with investment attractiveness’. In total, there are 11 have equal possibilities to optimize industry in the GRP was measured in assistance of key companies from the such clusters. When we defended this project, we logistics processes. We created multi- one-digit per cents. Today, we see a information and communications cluster. mentioned among targets to be achieved before modal complexes of Freight Village fantastic leap, when its share in the So, issues related to personnel training 2020 a target of annual production volume at the format. Today, Freight Village Kaluga GRP nears 40%. One can hardly find are solved within the cluster. level of RUR 50 bln, development of competences is the biggest and the most modern an analogue to this precedent. Today, Location of Russian and foreign related to production of finished pharmaceutical distribution hub in Central Russia. enterprises-participants of the cluster companies at the same cluster site products (FPP) and radio pharma products, In 2016, Kaluga Region became part manufacture practically all main resulted in a situation, when production creation of medical industry and nuclear medicine. of global project ‘One Belt, One Road’. components needed for the automotive culture, approaches to higher labor AO Agency for Innovative Development – Now, I can say that fundamentally we achieved the Railway itinerary allows delivering goods industry; they manufacture engines, productivity of highly-effective brand Center of Cluster Development of Kaluga targets already by late 2018. Upon results of the from Asian and Far-Eastern countries oils, tires, glass, electronics – these are companies expand to local Kaluga Region was created in November 2010 in year, annual production volume in pharmaceutical to the center of Russia within less than all new competences, which were born companies. It stimulates increase of cluster amounted to RUR 51.7 bln; more than 3,000 order to create conditions for development 14 days. For reference, delivery by sea before our eyes. labor productivity at the enterprises highly-productive jobs were created at the cluster Both manufacturing of FPP and traditional for the economy of Kaluga and promotion of innovations, formation takes at least 50 days. Geography of enterprises. Creation of each cluster is attributed itineraries is constantly expanding. We pharmaceutical substances is Region. of new sources of growth, development of to specific reasons. For example, development of started from one direction; today goods developing in pharmaceutical high-tech sectors of economy and territorial automotive cluster is attributed to the necessity of are shipped from 9 Chinese ports, cities cluster. For example, Bion Company Please, tell us about the most deep localization of car manufacturing; today, level clusters. of Japan, Mongolia, India, Latvia and manufactures substances for Bayer — significant projects of production of such localization for some models reached 70%. Belarus. Thanks to participation in ‘One world leader in pharmaceutical industry. interaction between participants of The task of our agency, being an operator in Belt, One Road’ project, over last five This is a true evidence of high production industrial clusters. forming regional clusters, is to identify, what years, volumes of export supplies from level. sectors have the biggest potential of growth, the territory of Kaluga Region increased Key purpose that was assigned We can see efficient interaction and to create clusters around them. This is the almost 9-fold. upon creation of information and within the frame of pharmaceutical principle, be which pharma cluster was created. Other clusters also have excellent communications cluster was to cluster. There, outsourcing is actively I.e., an infrastructure to attract investments and to prospects of development; it allows develop interaction between regional IT developing, when major pharmaceutical develop innovations was created around Obninsk, being optimistic about future companies with possibility to form sort companies use small and medium which has significant intellectual potential. Today, development of the regional industry. of consortia capable to participate in enterprises for production of already 10 GMP-compliant industrial enterprises major projects. pharmaceutical products. operate in the district; they manufacture about 160 Can we say that cluster format Today, the cluster is a leader by number For example, Hemofarm, after buying names of FPP. of industrial development pays of joint projects and development of license to manufacture certain FPP from 34 Interview Interview 35

to the needs of businesses. It helped, allowed storing and ensuring fast process for example, to reduce transportation of customs clearance of pharmaceutical costs for supplies of components. All substances for our production needs. these synergetic effects enable our From the point of direct benefits enterprises to be more competitive cluster participants obtain substantial and more successful both at the state support and provision of human domestic and at the global markets. resources. Our agency as a center of cluster development through programs of What preferences are provided, SME support has rather large resources when a company joins cluster? for holding workshops and round tables, which allow resolving main issues related Formation of clusters provides to the development of new competences powerful synergetic effect; it allows for employees working at the enterprises successful promotion of interest of the clusters. of cluster enterprises, achieve Today, we perform work to include improvements in regional and federal several our clusters in the register of regulatory base. Joint activities the Russian Ministry of Industry and in personnel training stimulate Trade, where in the past years direct development of universities and support existed for inter-cluster projects. educational institutions. Currently, the Ministry re-organizes this Within each cluster a joint support, but a Governmental Decree is Information and communications cluster actively development strategy is formed, prepared related to the development of develops its educational projects which allows to understand inter-cluster projects. The support from industry-specific trends at regional the Russian Government will consist and national scale. There is a in subsidizing the entire volume of tax number of projects, which work augmentation from the implementation of new world level. As a result, we will get export potential become more achievable simultaneously for all cluster projects, thus allowing filling the gaps in opportunities for import substitution, within the frame of cluster development. Enterprises of automotive cluster manufacture practically all main components because localization of industry-specific Emphasis specifically on the development needed for the automotive industry participants; in particular, a number vertical production chains of the clusters. of common problems were identified If this project is implemented, we will production capacities within clusters of industrial and innovation clusters some time ago in pharmaceutical be able to obtain new preferences for creates vertical production chains. In the is made in the documents defining cluster – these are waste processing investors. aggregate it allows reducing production main industry-specific priorities. This OHFC, maintained manufacturing of that Porsche Company has decided and necessity to create ‘cold chain’ costs and increase labor productivity is a long-term policy, which will create at the enterprises of such chains. further additional opportunities for the these FPP at the Obninsk plant. to place its plant in Kaluga Region in the transportation, storage and What is further development scenario Consequently, products of such clusters development of our region. Cooperation project between – here, there is a large market of customs clearance of pharmaceutical for regional clusters in the context of become competitive both at national and OOO Nearmedic Pharma and OOO industrial manufacturers of composite substances. All these problems priority directions of 2024 industrial world scale. Hemofarm (STADA) is a unique one materials, for example ONPP were resolved within two years – an policy? not only for the Russian Federation, Technologya. There are a lot more investor came and constructed a The goals set by national projects and but also worldwide. This cooperation of such examples. The cluster policy plant to process pharmaceutical and The formation of clusters allows related to the development of new project has almost 5-year history. of the region attracts new investors, medical waste; and within the frame bringing production to a qualitatively industrial policy, labor productivity and Yet at design stage of the plant, OOO because the Government of the region of Freight Village Project of logistics Nearmedic began manufacturing created infrastructure of fast response cluster warehouses were built, which of products on contractual basis at Hemofarm production site in Kaluga Region. It allowed increasing production volume almost three-fold ADVANTAGES OF CLUSTER event before the commissioning of the plant. Additionally, the personnel of POLICY: Nearmedic underwent training at the Hemofarm production site. Last year, Palladio, an Italian company, opened its plant to optimization of costs increasing competitive development of utility, development manufacture packaging for for creation of ability of all enterprises transport and social of small and medium pharmaceutical products. Today, many infrastructure infrastructure enterprises enterprises of the pharmaceutical cluster purchase their packaging from it. Also, a plant to manufacture glass for pharmaceutical industry is now under construction at the territory of attraction of expansion of research, creation the region. investments technical and production of new jobs Within the frame of composite cooperation cluster Porsche French Company has built a vertical production chain related to manufacturing of carbon fiber. It is used to create composite The enterprises of the pharmaceutical cluster manufacture diversification growth of innovation improving materials by enterprises participating about 160 final pharmaceutical products of industrial potential of vocational training in the cluster. It is not by accident complex system ESTABLISHED IN MORE TOTAL VOLUME OF INVESTMENTS DENMARK IN THAN IN THE RUSSIAN PLANT EXCEEDS Novo Nordisk EMPLOYEES Novo Nordisk WORK IN ALL REGIONS OF THE RUSSIAN FEDERATION Novo Nordisk is a global healthcare company with more Russian than 95 years of innovation and leadership in diabetes RUR 8 BLN care. This heritage has given us capabilities that also enable us to help people defeat other serious chronic plant diseases: obesity, haemophilia and growth disorders. We try to take initiative in each of these therapy areas, driving BRANCHES MANUFACTURER Pharmaceutical plant to produce modern insulins, built change to the better with inflexible faith in that is possible. from scratch, was opened in 2015. Plans to build the plant IF were discussed with Lars Sørensen, CEO of Novo Nordisk, at ALMOST See more details at novonordisk.ru the state level. The project was supported by Russian authorities: Dmitry Medvedev (2010) and Vladimir Putin R&D CENTERS HALF OF Innovative medicine (2011) during their official visits to Denmark. CHINA, DENMARK, USA, Our principal task consists in discovery and development GREAT BRITAIN INSULIN of innovation biopharmaceutical products and making The Novo Nordisk high-tech plant in Kaluga manufactures them affordable for patients worldwide. In 2018, Novo modern insulins having no analogues in Russia on full-cycle Nordisk Company invested 13.2% of its sales in research production basis: final aseptic pharmaceutical products in and development, about 25,000 persons took part in PRODUCTS MANUFACTURING cartridges with use of original substance manufactured at 127 clinical trials at approximately 4,800 clinical centers the plant in Denmark. Assembly and packing of Flexpen® ARE SUPPLIED worldwide. Our portfolio of products includes new gener- OF FINAL DIABETES ASEPTIC pre-filled injection pens. Pre-filled injection pens, for which ation of insulins and analogues of glucagon-like PHARMACEUTICAL 89% of insulin analogues1,2 accounted for in Russia, are the peptide-1 (GLP-1), and new methods to treat obesity, PRODUCTS 1,2 to 170+ haemophilia and other diseases. most common type of insulin injection worldwide . The IN CARTRIDGES Novo Nordisk plant in Kaluga is the only one in Russia COUNTRIES Principle of ‘triple result’ SINCE 2018 manufacturing complete portfolio of modern insulins. In order to continue helping people, our business should grow and be profitable, but we should achieve it in Novo Nordisk plant is an example of successful investments of the Company into localization and modernization of responsible manner. We call such approach a ‘triple ALL result’. It means that Novo Nordisk tries to take into pharmaceutical industry of the Russian Federation. The MORE MODERN account financial, social and environmental consequenc- production complies with GMP standards, corporate THAN INSULINS , , es of each decision in the process of its operations. Our standards and Russian legislation in pharmaceutical MANUFACTURED environmental strategy ‘Circular for Zero’ sets ambitious production; advanced solutions are used at the plant as far PERSONS WITH DIABETES USE INSULIN AT THE PLANT tasks for our Company: zero impact on environment by as energy efficiency and environment protection are MANUFACTURED BY NOVO NORDISK HAVE NO 2030. concerned. More than RUR 8 bln were invested in the ANALOGUES IN RUSSIA development of production site; about 300 jobs were creat- Actions driving change ed; total surface of the plant is 13,000 m2. Manufacturing of vital medicines is a big responsibility; though, it is not enough to defeat serious chronic diseas- Today, Novo Nordisk is a Russian manufacturer fully-com- es. This is why we work in collaboration with organiza- pliant with goals of production localization defined by OBESITY , tions of patients, with politics, medical specialists and non-government organizations in order to increase Pharma-2020 Strategy and developed Pharma-2030 PERSONS awareness, improve prevention, assist in early diagnostics Program; it develops production for the benefit of Russian and increase affordability of medical assistance. patients. WORK IN THE • Cities Changing Diabetes™ COMPANY It is a partnership program aiming to include diabetes topic in cities in the agenda. The project falls beyond the scope of standard healthcare system and means integrat- ed cooperation at the level of public-private partnership, including business, city authorities, healthcare institu- ANNUAL TURNOVER HAEMOPHILIA tions, public entities and scientific community. ASSEMBLY 15 BLN EURO • International Diabetes Day, International AND PACKING Haemophilia Day and International Obesity Day OF FLEXPEN® , Each year, in collaboration with international and SHAREHOLDERS national patients’ organizations, Novo Nordisk holds a INJECTION PENS number of awareness events aiming to improve life of people with these chronic diseases and also to dissemi- nation of knowledge on their prevention and treatment. • Independent International Diabetes Fund and Novo Nordisk Haemophilia Fund were created in order to PRODUCTION increase affordability of diabetes and haemophilia GROWTH DISORDERS ALGERIA, BRAZIL, treatment in least developed countries. OOO Novo Nordisk CHINA, DENMARK, 15, Krylatskay St., office 41 Moscow, 121614, Russia RUSSIA, FRANCE, Phone: +7 (495) 956-11-32 JAPAN, USA 38 Pharmaceutical cluster Pharmaceutical cluster 39

NEARMEDIC: 30 years in the service of innovations

INNOVATIVE ACHIEVEMENTS PRODUCTION IN KALUGA REGION Nearmedic has been implementing its own scientific developments over Since 2015, the company has been 30 years. In late 1980s the Company manufacturing anti-viral Cagocel was the first one to raise the issue medicine at Nearmedic Pharma full-cycle of chlamydiosis in the country and plant in Kaluga Region. The capacities developed test system identifying the of the plant allow manufacturing of 80 infection using molecules, which allow mln packages per year. The product is determining presence of bacteria in supplied to pharmaceutical markets of aby material. On the basis of molecular Russia, Belarus, Kazakhstan, Georgia, and genetic studies, the Company also Armenia, Moldavia and Mongolia. In the produced diagnostics test systems and near future, production of much sought- the Ministry of Defense of the Russian content in saliva is prepared for reactants to identify mycoplasmosis, after anti-tuberculous medicine will be Federation. implementation at Nearmedic Pharma ureaplasmosis, herpes virus infection, opened. The opening of this production facility will plant. The product is designed for use syphilis and viral hepatitis. In November 2018, the Company allow reducing dependence of the state in civil and military sectors – for pre- launched first Russian production facility on imported test-systems by 50% and shift and pre-trip testing, for testing at In 1996, in collaboration with Murex to manufacture reactants for genetic changing the odds in favor of domestic narcological dispensaries and hospitals, Biotech, one of the first in Russia GMP- person’s identification and establishment companies. The plant is certified under for performing tests at workplaces, and complying production sites was created. of filiation. The products are aiming to ISO 18385 International Standard, which also at the places of road accidents. It allowed manufacturing of a number of ensure national security and designed for in addition to GMP includes specific Advanced technologies of Nearmedic diagnostics products, which then were use by forensic science laboratories of the requirements for manufacturing products allow promotion to the market of test included in the centralized purchases Russian Ministry of Healthcare, by expert for forensic analysis. systems for simultaneous identification of of the Ministry of Healthcare of the laboratories of the Ministry of Internal Also, a project to manufacture test maximum number of psychoactive drugs. Russian Federation. Affairs, the Investigative Committee and systems determining narcotic drug

Today, there are several dozens of unique medicine projects at different research stages in the portfolio of Nearmedic.

Nearmedic is a company with 30-year STATE SUPPORT experience in epidemiology, immunology Significant number of Nearmedic systemic and molecular microbiology. Since its projects is implemented thanks to state foundation by a group of scientists from support, within the frame of Pharma 2020 the N.F.Gamaleya Research Institute, the State Program and programs of Industrial company's activities are focused on the Development Fund. Measures to support domestic pharmaceutics are critical for development and introduction in medical the industry under strained economic practice of innovative medicines defying conditions and external pressure. infection diseases. Today, Nearmedic specialists work in the segment of regenerative healthcare, developing modern methods of activation of Programs of the Russian Ministry biological processes aiming to reinstate of Industry and Trade in fact revive damaged tissues and organs. pharmaceutical industry, and gradually pull it out of situation of dependence on imported products; they form fresh approach to Russian developments both within the country and abroad. 40 Autotomotive Cluster Автокластер 41

Continental Kaluga Is Ready to Respond Quickly to Economy Changes

Continental Kaluga LLC has started mass production in Kaluga Region in October 2013. The plant manufactures winter and summer tyres for passenger cars and light trucks. More than 200 tyre types labelled “Made in Kaluga Region” are now supplied to the Russian market, to Europe, Asia and North America countries. Within the territory of the tyre plant, a ContiTech division is located, which manufactures air conditioning systems and steering control system. plant buys a few tons of raw rubber China or Republic of Korea, Vorsino support of Continental Research and to manufacture tyres. It is hard to hub will be able in the future to Development Center in Hannover calculate what part of the material become an optimal variant of end (Germany) allow us to manufacture Georgy ROTOV, will be included into tyres for the product delivery using railway. tyres at a quick pace, in a quality Chief Executive Officer of Continental Kaluga LLC internal market, what part – for export manner and in accordance with one and what part will be rejected as Tell us about factors supporting customer requirements. defective. Kaluga plant’s high production For us, this reward is an important Prior to this year, we have exported efficiency as compared to other indicator of customer loyalty, high products to Continental distribution enterprises of the Group? labor productivity and readiness to Following the results of the Last year, we have produced and Continental is the leading centers only through the intermediary respond quickly to economy changes. financial year, can it be said sold a planned volume of tyres. automotive component exporter company – Continental Tyres RUS Last year’s results were marked for that Continental Kaluga In 2018, we have also invested of Kaluga Region. It is a LLC. Among other things, we have us by the important event — for the has confirmed the yearly additional funds in production significant breakthrough taking raised the issue at Autoevolution second year in a row, Continental forecast despite the market section upgrade, have purchased into account initial enterprise event in 2017. Then, Continental plant in Kaluga was awarded with situation? Tell us about new machines for tyre assembly orientation towards the experts were invited to Russian Export the internal company reward in manufacturing development and studding, have expanded internal market. How the export Center JSC for consultations in the the “Best Plant” category based directions. Whether intellectual and upgraded assembly lines. potential is being developed? course of the project development. on quality characteristics among technologies are implemented, A part of equipment is a unique Whether are you feeling the It is good that those changes have all company plants manufacturing productive capacities are one: for example, new generation state support of export? come into force as early as 2018. passenger car and light truck tyres. expanded and innovation of studding machines allows Now, we are exporting our products It means that our team has so potential is grown at the Kaluga to use various types of spikes Yes, more than 200 tyre names directly to end buyers without any efficiently built processes it allows to plant? to simultaneously stud a tyre. labelled “Made in Kaluga Region” intermediaries. It has allowed to manufacture products of the highest The machine has the improved are now supplied to 22 countries reduce document flow by a factor of quality with minimal waste quantity, stud feeding system: a special in Europe, Asia and North America two and to add a sales margin for the thrifty attitude to energy resources, chamber does not allow defective apart from the local market. benefit of the plant. effective consumption of raw or wrongly positioned studs to If we talk about the state support materials and supplies, and complying find their way to a tyre. Studs of exporters, then one may Does the logistics system of Kaluga with labor safety requirements themselves are covered with an note a successful example of Region facilitate the development while doing so. The key success adhesive compound to securely incoming VAT separate accounting of export projects? factor is qualified professionals, fix them in a tyre tread. All of cancellation in 2018. In the past, who have become real experts of this was an important step an exporter company was obliged With the provision of Kaluga customs tyre production in the five years of towards launch preparation of to maintain a separate accounting terminal, transport infrastructure for enterprise operation. When training IceContact 3 – a new winter tyre of incoming VAT in accordance overland shipment using trucks is an the personnel, we are receiving help model with rubber-coated studs. with the Tax Code of the undisputable advantage for export from the system of the company’s Among flagship models, we are Russian Federation. To that end, activities in any western direction local and international programs, also manufacturing in Russia incoming VAT should have been or towards EEC (Eurasian Economic knowledge network exchange within EcoContact tyres using innovative separated into internal market Community) countries. the Group. Up-to-date equipment, rubber mix Green Chili and premium and export, which is problematic As to the East, for example, export to high level of production automation, tyres PremiumContact 6. tor production. Let us assume, a 42 Composite Cluster Composite Cluster 43

Technology OSIE — a Flagship of SCIENCE-INTENSIVE PRODUCTS FOR CIVIL Composite Production Development INDUSTRIES

RAILROAD INDUSTRY AEROSPACE INDUSTRY

High-strength glazing of driver’s cabins The authorial research team of the enterprise has received Award of Government of the Russian Federation in Science and Engineering as of 2018 for development of a new type of aircraft glazing based on monolithic polycarbonate and its manufacturing process.

CFRP (carbon fiber-reinforced plastic) structures of tail assembly of MS-21 passenger aircraft Composite cabin of RA-3 A.G. Romashin Obninsk Scientific railbus (in cooperation with Polyot-Service LLC) Industrial Enterprise (OSIE) 53 60 “Technology” is a Russian competency spacecraft partner companies Made of PCM center in the area of science- (polymeric composite with Technology OSIE in more than 20 countries (USA, intensive, high-technology product material) sound- components were China, Israel, Latvia, Lithuania, Composite cabin absorbing panels of manufacturing from non-metallic launched into orbit Italy, Poland, Austria, Czech of 2TE25KM, SaM-146 aero-engine materials for aircraft, space-rocket, Republic, Germany, Switzerland, TEMG1 for Sukhoi Superjet transport industry. It is a part of Norway, Denmark, United diesel-electric 100 aircraft (Snecma, Kingdom, France, Belgium, Rostec State Corporation. It has locomotives France) Luxembourg, Moldova, Belarus, (in cooperation status of State Scientific Center of the Ukraine, Macedonia, Vietnam, with MYS CJSC) Russian Federation beginning from >1,400 Kazakhstan, Uzbekistan) 1994. patients

ANCHOR ENTERPRISE The enterprise is implementing more >1,000 for composite material and ceramics cluster than 20 measures to introduce a lean KEY ACTIVITY AREAS: advance of Kaluga Region manufacturing system. developments (АКОТЕХ) applied researches and innovative developments in the area of creation The focal areas are automation and broad R&D products for Proton of new materials, unique designs, personnel involvement into improvement launch vehicles: Technology OSIE is one of the Russian leaders technologies and manufacturing of process. In 2018, the company has become — nose cone shells products from polymeric composite, of import substitution. The R&D product of the enterprise, thanks to which production of all-new a finalist of OEE Award for a development — wiring ducts of rocket ceramic and glasslike materials for space, ceramic, radiotransparent radomes for high-speed in the area of automated management stages and booster aircraft, overland and water transport, aircrafts was organized in Russia, has received a system. electric power industries. Prioritet-2018 award. 44 Composite Cluster Composite Cluster 45

MYS: Innovation Technologies Projects of MYS CJSC of Machine Industry — Fairings of electric locomotive EP2K — Interior of control cabins of electric locomotives EP2K, TEP70BS, TEP70U — Control panels of locomotive 3TE25K2M — Fiberglass components for ventilator units — Blower motors for railway transport

Production Cooperation with LDLP JSC

MYS CJSC has been supplied component Starting from 1997, MYS CJSC has been parts for Lyudinovo Diesel Locomotive developed and manufactured serial products Plant (LDLP) JSC for more than 10 made from composite materials (fiberglass) years. During this period, more than 500 and metal for the Russian market. manufactured diesel locomotives were supplied with fan impellers.

The company actively The focus area is upgrades existing railway production of accessory equipment: nodes, equipment for rolling — Since 2016, the two companies have been implemented the impellers, etc. Innovation stock: operator cabin joint project to develop and to manufacture cabins technologies of MYS modules, fairings of MYS CJSC COOPERATES CLOSELY WITH TRANSPORT of main-line diesel locomotive TG16M designed for operation within Sakhalin railway. CJSC allow to increase electric locomotives ENGINEERING COMPANIES, WHICH ARE LEADERS AT THE operational life of rolling (face part), interior of RUSSIAN MARKET: stock and ensure entry operator cabins and into a market with eagerly passenger carriages. The TransMashHolding CJSC, sought import substitution second line of business Komven Ventilator Plant CJSC (Moscow), — In 2018, two joint projects were started to develop and to proposals. The quality is production of non- Kolomna Plant OJSC, manufacture cabins of locomotive TEMG1 propelled by management system of metallic components and VNIKTI OJSC (Kolomna), liquefied natural gas and commissioned by Gaspromtrans LLC the company is certified elements of transport Bryansk Machinery Plant MC (Management Company) CJSC, and locomotive TEM10 designed for operation within to ISO 9001:2008. Patents ventilation systems: lobes, Lyudinovo Diesel Locomotive Plant OJSC, production enterprises of the Russian Federation. Upon are taken out for all assembled ventilation Sinara Transport Machines (Yekaterinburg), implementation of the projects in 2019, those diesel Novocherkassk Electrtic Locomotive Plant LLC, process solutions. units, air duct elements, locomotives will pass certification tests. Ussuriysk Locomotive Repair Plant, etc. sound-attenuating and airflow direction systems. 46 Logistics Cluster Logistics Cluster 47

Infrastructure for Export Growth

Kotka Helsinki Saint Petersburg RUS SIA Yekaterinburg Moscow Riga Nizhny Novgorod Novosibirsk Klaipeda Vorsino Krasnoyarsk Rosva Chita Hamburg Warsaw Ozinki Irkutsk Rotterdam Brest Zabaykalsk PROJECTS Malashevichi Naushki Manzhouli Antwerp Duisburg Khabarovsk Aktobe

KAZAKHSTAN Dostyk Shenyang China-Europe-China transit Alashankou MONGOLIA Altynkol Zamyn-Üüd routes Vladivostok Almaty Nakhodka Novorossiysk Ürümqi Russia-China export Digital Beijing Yingkou Container Tianjin Dalian Terminal: – integration of railway • Projects are being implemented Incheon Yokohama and terminal processes under the auspices of Shilong Qingdao – automation of terminal operation Russian Export Center JSC in CHI NA Beginning from April of 2018, RailCargo freight company Kobe – expansion of electronic document cooperation with RR (Russian Zhengzhou has provided a unique opportunity to transport export Chengdu Shanghai workflow Railways) Logistics JSC and cargoes using special fares. The price of container Suzhou freight shipping through the railway route: Freight Transportcontainer PJSC Chongqing Village Vorsino terminal — Chengdu terminal (PRC) is • Freight Village Vorsino is an Ningbo anchor point of the Belt and Road equal to USD 1,550 per 40HQ container. Changsha Initiative Guangzhou

Shenzhen

BELT AND ROAD INITIATIVE FREIGHT VILLAGE VORSINO REGULAR ROUTES OF FREIGHT VILLAGE VORSINO Smart RAILWAY TERMINAL • 2016 — project start • the first Russian multimodal transport and Logistics: — arrangement of regional • optimal terms in relation to time and cost of logistics hub of freight village format Import: • Urumchi (PRC) train network using Moscow cargo delivery from Asia to Europe • it is included into the master development • Dalian (PRC) • Riga (Latvia) Transport Hub system • 12-14 days — time of cargo delivery from plan of Moscow Railway Hub, as well as into • Shilong (PRC) • Brest (Belarus) — arrangement of trains to the China the terminal list used for distribution of freight • Yingkou (PRC) • Ust-Luga (Russia) capital, container unstuffing • > 40 000 containers have arrived to Freight traffic flow from Moscow • Suzhou (PRC) • Saint Petersburg (Russia) in batches and distribution Village Vorsino railway terminal from the day • services of container and customs terminals, • Guangzhou (PRC) through the city using light- of the route opening industrial and warehousing property • Chengdu (PRC) Export: duty trucks • total area of the hub is 600 hectares • Tianjin (PRC) • Chengdu (PRC) • Ulan Hub (PRC) • Hanoi (Vietnam) 48 Export Orientation Export Orientation 49

expenditures for section transporting to external markets. It will give us a VMK Invest — significant competitive advantage. For example, average cost of section Focus on Export Growth delivery for 2000 km to Western Europe is €85-100 per ton, and, in many cases, more favorable shipping cost is the decisive factor for contract conclusion. Growth of non-resource exports is a leading trend of industrial policy of both the region What are the reasons, thanks to and country as a whole. How relevant is it for which a high productivity level your company? is achieved? Do you implement methods of labor productivity In my opinion, focus on increase of high- improvement at the place of technology product export is the most important production? trend, which is actively supported now by federal and regional authorities. VMK Invest We have formed our enterprise LLC manufactures aluminum sections, which in accordance with up-to-date are included into the high-technology product management principles and have list for priority growth areas of RF Economic focused on high productivity of quality Development Ministry. It has to be said that products from the very beginning. currently the internal market of that industry Does your company have enough standards, as well as requirements Nowadays, VMK manufactures segment is growing not so fast as we would like. competency and productive capacity specification of our customers, and that products using only 2 press lines, In order for our company to grow successfully to support export activities? frequently exceeds general norms. and, nevertheless, ranks 6th or 7th on in the future, export in the current situation is the Russian market among extrusion almost the sole real opportunity to take (idle) On the one hand, productive capacity to What measures of state exports companies by output of aluminum equipment into use and to increase output manufacture aluminum sections at the support do you consider the most sections. When performing productivity volume. This is why we are currently emphasizing Russian market significantly exceeds effectual? diagnostics, we orient itself at Western creation of competitive goods. I am sure, such real demand, on the other hand, we European colleagues, compare our key points should be prioritized by all domestic are operating under the conditions of Exporters need permanent financing figures with BENCHMARK — indicators enterprises, which are trying to integrate into the clear-cut demand seasonality. The of circulating capital. For that end, accepted to evaluate industry segment Vladimir SHERSHNEV, world economy system. Therefore, I think, the seasonality is related to the fact that they need access to so called “cheap state. We also cooperate closely with Chief Executive Officer start of the state program for support of export- building industry is the main consumer money”. Standard payment terms in Western European companies and try to of VMK Invest LLC oriented manufacturing, creation of conditions for of our products in Russia. Although, Europe — 90 days delay. With that use best industry practice at the place export growth are very important for the company. we are actively expanding supply to in mind, RF Government Regulation, of production. Our export market is Western Europe, where other industries, for now the tendency which assumes reimbursement of a Within the national project “Labor competition is very high. In order to be present is remaining unchanged, when we part of bank interest rate, is looking Productivity and Employment Support”, there, we should be better than existing players are operating with only 50% machine most promising. I hope, it will really be our company was visited by experts by a substantial margin: in the first instance, utilization in the first quarter of a year. implemented in practice. of Federal and Regional Competency we have to ensure perfect quality and reliable In other words, we do not have issues The second important aspect for us Centers. The experts have pointed out delivery; in the second instance, we have to offer a with productive capacity, we are ready is subsidization of a part of transport high level of plant processes and have competitive price. to cooperate with new customers. expenses. This is the program to recommended further self-sustained European Union protects its manufacturers However, everything depends on support manufacturers of high- development without participation of setting 7.5% import tariff. Taking into account external factors influencing demand technology products. According to that external consultants. adjustability. program, we can expect reimbursement VMK Invest LLC is a modern contemporary pricing specifics, it becomes burdensome for our company. Therefore, As to competencies, we are trying up to 80%of really incurred extrusion plant founded in 2007. extension of the state support measures is seen to comply with traditions rooted in This is a full-scale manufacturing as very desirable and pertinent for us. soviet aluminum metallurgy, for which facility divided into four areas: aluminum always was “winged metal” casting shop, press line based and domestic methods of its industrial production were developed with on 18MN pressing machine, the express aim of aircraft industry. press line based on 28MN However, we are combining traditions pressing machine and packaging with contemporary foreign innovations. workshop. Thanks to its own This includes equipment, raw materials and, of course, effective management, foundry production, VMK Invest which has undergone ISO audit under LLC can guarantee quality of the control of experts from German TÜV. metal, from which sections are The qualified team is working at made. Nowadays, more than 150 the plant; we are in a possession of partners are customers of the experience of the both schools. We are proud to say that sections, company. which we are producing in Kaluga, fully comply with requirements of European 50 Export Orientation Export Orientation 51

VESTA: Our Goal is Constant Improvement

Vesta products are used by enterprises of various formats, both small and large production facilities in Russia and abroad. Tell us about sales geography. Do you plan to expand your export potential?

Vesta Firm LLC is operating in two directions — machine industry and production of corrugated cardboard. Also, we are providing to our partners a range of services to repair equipment and to recover mechanical parts, we are performing milling, boring, turning, welding and gear-cutting work. We are manufacturing corrugated packaging for all manufactured products are subject especially successful partners, various industries: food, building, farming, to recycling and do not harm nature having production management pharmaceutical, chemical, automotive, etc. and human health. Food products can different from domestic practices? Besides Kaluga Region, we are supplying be transported inside our corrugated products to Moscow, Tula, Bryansk, Smolensk, packaging absolutely safely. Raw A dozen of renown world brands is Voronezh, Tver, Leningrad and Samara waste of our production can also among our partners. Cooperation with Regions, Republic of Tatarstan, Belarus. Using be recycled and transformed into them allows us to improve quality our packaging, our partners send their goods cardboard. management system and to adopt to Europe, USA and Latin America countries. Having implemented new technologies, their management experience, various The second direction of the company operation we have achieved better figures in technologies, ongoing personnel Andrey VASILEV, is machine industry, namely production of utilization of fresh and secondary raw training methods. Chief Executive Officer equipment for corrugated cardboard industry. materials. Those figures are on the Each of those enterprises performs of Vesta Firm LLC Here, we have good perspectives to expand same level with European enterprises, regular audit of production and quality our export potential. Currently, equipment for which it is important to create management system. It allows us manufactured by us is being successfully sustainable production in order not to to become better. We borrow many operated at Belarus, Moldova, Ukraine, jeopardize nature integrity. decisions from them, not reinventing a Uzbekistan and Kazakhstan enterprises. We wheel and obtaining the result faster. plan to extend our assortment and sales Have you arranged cooperation geography further. ties with enterprises of industrial clusters or other industrial plants of What courses of development are adopted Kaluga Region? for company’s promising projects? As to cooperation, we have one good The most promising projects of our company rule: everything that can be bought are related to increase of logistics and (raw materials, component parts and production process automation, equipment services) in Kaluga Region, we purchase Vesta Firm LLC has been operating in the upgrade, expansion of product spectrum. here rather than elsewhere. Currently, we have fine-tuned corrugated cardboard market since 1990. A separate development vector is enterprise digitalization, which aim is to increase relationships not only with enterprises Using up-to-date equipment, the company production by 50% in the next 3 years of new industrial clusters but also manufactures four-valve cardboard boxes, and to enhance labor productivity no less with enterprises, which have multiyear fashioned boxes, non-standard corrugated than 40%. We are actively moving in that successful history of operation within cardboard and self-folding corrugated direction in order to be adapted to reality of the region. Such approach allows to minimize logistics expenditures, to packaging with up to 4 color printing. contemporary “digital world” and to retain our competitiveness on the market. increase reliability of our production High quality raw materials are used for and to create good partner production. Company’s products have Sustainable production is one of the relationships. On the other hand, those repeatedly won awards at all-Russian leading trends of manufacturing these enterprises become buyers of our packaging competitions (Golden Medal days, how are things going with ecology in products, and it facilitates growth of your company? all cooperation participants and Kaluga “Packaging — Russian Star”, Golden Region as a whole. Medal “Mister Cardboard”). Our production is ecologically-clean, because Do you implement experience of 52 Foreign Trade Cooperation Foreign Trade Cooperation 53

Main Trade Partners Sweden of the 4.1% Region Netherlands MoscowRUSSIA 3.8% Kaluga

Poland Belarus Germany 3.3% 3% 17.1%

Slovakia 5.7% Czech Republic 4.2%

Republic of Korea Japan Export China 3.1% 4.7% 15.9% 170% by 8.7 times export growth for the growth of export with countries last 5 years of the far abroad for 5 years

Thailand 2.8% EXPORT GROWTH 1328.1 RATE: 1058.8 EXPORT COMMODITY STRUCTURE: 922.3 707.8 626.8 717.1 9.8% 2.6% 501.4 36.3% 3.6% 399.1 Metals and articles Food commodities 103.4 177.0 made therefrom and raw materials 18.9% Engineering Other products commodities

2014 2015 2016 2017 9 months of Mineral commodities, 2018 inter alia, TET Export volume, Inter alia, with countries of the far mln US dollars abroad, mln US dollars Timber and cellulose and 28.8% paper products 54 Preferential Advantages Preferential Advantages 55

Measures of State Support for AT REGIONAL LEVEL:

Manufacturing Industry TAX EXEMPTIONS FOR CORPORATE INCOME TAX:

Register of Regional SPECIAL INVESTMENT CONTRACT Investment Investment (SPIC) (UP TO 2025) Projects Projects (RIPs) (up to 2028 inclusively)

Capital Capital Federal Regional investment: from investment: 50 SPIC SPIC 100 mln roubles – mln roubles – Capital Capital within 3 years within 3 years; investment: at investment: at 500 mln roubles – least 750 mln least 300 mln within 5 years roubles roubles

FB (federal budget) FB – 0% FB – 0% FB – 2%* – 2%* (2%* reduction) (2%* reduction) RB (regional budget) RB – 13.5% RB – 10% – 13.5% RB – 13.5% (4.5% reduction) (8% reduction) (4.5% reduction) (4.5% reduction)

Up to 4 taxation No more than For SPIC validity For 7 years, but no periods 100% of capital period, but no later more than 50% of investment than 2025 inclusively capital investment amount amount AT FEDERAL LEVEL: * In 2017-2024, FB tax rate is equal to 3%, RB tax rate – 17%. facilitate facilitate facilitate receipt enterprises to conclusion of federal tax receive support of special exemptions 01 02 03 TAX EXEMPTIONS FOR CORPORATE PROPERTY TAX: within RF state investment by enterprises programs, Federal contract (SPIC) investing in Regional Target Programs, by Kaluga Region implementation Register of Regional Federal SPIC PDF (production enterprises of investment Investment Investment SPIC development fund) projects Projects Projects (RIPs) programs

Full tax exemption in relation to property created and/or INDUSTRIAL DEVELOPMENT FUND: purchased as the result of investment project implementation 0% within the first three years of project implementation. from 20 to 100 mln programs TOTAL INVESTMENT AMOUNT WITHIN THE FIRST EXEMPTION 8 of fund raising THREE YEARS OF PROJECT IMPLEMENTATION PERIOD

for 5 years from 100 to 300 mln roubles inclusively 1 year • Development projects • Leasing projects from 300 to 500 mln roubles inclusively 2 years provision of concessional loans to • Machine-tool • Drug labelling industrial enterprises manufacture • Productivity above 500 mln roubles 3 years • Component parts • Digitalization of above 500 mln roubles 5 years • Defense conversion industry (for pharmaceutical manufacturers) 56 Preferential Advantages Рубрика 57

Measures of State Support for Manufacturing Industry

REGISTER OF PP&E UPDATE AND UPGRADE PROGRAMS

CAPITAL INVESTMENT AMOUNT FROM 5 MLN ROUBLES.

Inclusion of enterprise’s pp&e update and upgrade program into Register of PP&E Update and Upgrade Programs.

MEASURES WITHIN PP&E UPDATE AND UPGRADE PROGRAM:

• Purchase of new equipment, creation of new equipment, reconstruction, retrofitting, modernization and/or refitting of existing production facilities, as well as upgrade of fixed property.

Corporate income tax – investment tax deduction (ITD):

Indicator Corporate property tax

Upgraded movable and fixed property with relative weight of Newly-created upgrade cost in object depreciated value: Exempt property (perchased) movable property from 51% to 75% from 25% to 50% Above 76% inclusively inclusively

Reduced tax rate Reduced tax rate Exemption type FULL EXEMPTION 0.5% 1.1%

Investor’s capital investment amount from 5 to 100 mln roubles from 100 to 300 mln roubles above 300 mln roubles within a program inclusively inclusively (mln roubles)

Quantity of consecutive 1 2 3 grace tax periods

Justification s. 5 Article 3 of Kaluga Region Law №263-RL as of 10.11.2003 58 Preferential Advantages Preferential Advantages 59

Our company as a SME entity marmalades, souffle sweetmeat – we taking into account excellent access to SME Success Depends on has received help from Business have large assortment. All those international transport corridors created Development Agency (BDA). Having products are manufactured under in Kaluga Region. So far, it is beneficial taken part at appropriate time in one of “Kaluga Sweets” brand. for large companies only, which export Experience and Support of the projects supported by BDA, we were Certainly, Kaluga Region is particularly products by entire railway trains. I able to receive concessional lending renown by its developed heavy industry, know, Kaluga Region Government is Region Administration under low interest rate. BDA has Export and, in my opinion, food industry now making some steps to tune export Development Center operating under is present not so widely, therefore railway shipping operations for small it. Because of the fact that we intent to authorities help in its growth. Meanwhile, enterprises. Last year, I have taken part advance in that direction, I am currently Why did you choose Kaluga Region among all undergoing training in the Center. Also, Russian regions to deploy your business? BDA helps us to arrange tradeshows in foreign countries. Particularly, they Frequently visiting Kaluga Region, I have seen are currently helping us to organize our how quickly business grew there. I was in many product exhibition in Shanghai: we will places in Russia and abroad, therefore I can make exhibit our products within the combined comparisons. I was surprised to see how such large exhibition stand of Kaluga Region. quantity of all types of production facilities have I can tell from experience that, within arisen so quickly within the small territory. Having the period of 1.5 year, our enterprise studied the information, I discovered that system in Kaluga Region has achieved figures, of small and medium-sized entrepreneurship (SME) which were achieved in another region support is well developed here. at the previous production facility only Opening my business in Kaluga Region, I have in 3-4 years. In my opinion, company’s received help from all levels of authorities: from success here is related not only to municipal to regional. Everyone was interested that accumulated experience but to regional such small business as mine has come to fruition state support as well. In Kaluga Region, here rather than elsewhere. All emerging barriers I have many opportunities to settle were eliminated in record-breaking time. Colleagues various kinds of issues: I can receive any from other regions could not simply believe it. In consultation in development institutions other regions, you can spend months and years trying without hindrance and free of charge, to solve organizational issues, which are resolved if necessary, I can directly address here within one-three days. I have never encountered to representatives of authority. For such desire to meet the needs of business. In Kaluga example, having addressed to municipal situation with sales markets remains in the meeting of entrepreneurs with Region, you receive maximum result while employing officials, we have received help to bring relatively problematic. This trend Freight Village Kaluga management and minimal resources and time limits. utility lines relatively quickly. Having covers all Russia — retailers (large deputy governor Vladimir Popov. The We are also trying to solve existing issues with taken part at appropriate time in one retail chains) dictate terms, which are agenda was focused on the proposal Viktor ZHELNAKOV, regulatory bodies. Their work reduces motivation for of the projects supported by BDA, inconvenient for business. For example, concerning combination of small batches Chief Executive Officer further business growth, and regulatory body tools we were able to receive concessional 40-day payment delay, goods return in destined for China. However, although of Yablochko LLC can frequently be used by competing companies. lending under low interest rate. Also, large quantities. Nevertheless, we try to the authorities accommodate requests In Kaluga Region, you have to give proper respect regional institutions help us to arrange overcome all obstacles. Even today, the and arrange such projects, very small to region chief, who tries to create an adequate tradeshows in foreign countries. company supplies “Kaluga Marshmallow” number of companies have indicated algorithm of interaction between regulatory bodies Particularly, they are currently helping to a variety of cities in European part of their willingness to participate for the and business to reduce load on SME. It is possible, I us to organize our product exhibition in Russia, Siberia and Urals. last half-year. It is surprising that having would not have deployed my business here, if there Shanghai: we will exhibit our products as We are making first steps in exports such state support conditions Kaluga was no such colossal support from authorities in the a part of the combined exhibition stand development. I already noted, that I entrepreneurs use them so inactively. region. of Kaluga Region. am undergoing training in the regional I hope, the regional exporter union, Export Development Center. However, we which is being created under the aegis What specific state support has your enterprise Tell us about your products and plant have started on our own participating in of regional Ministry of Agriculture, will Yablochko LLC is a young company received in Kaluga Region? capacity, sales markets. Is there a exhibitions in China and exporting small allow to change the situation. with contemporary approach to chance “Kaluga Marshmallow” will batches. China market is very unique. technology implementation and become a regional brand, such as In order to export food products, it is Do you plan to expand production production organizing. It has been “Kaluga Dough”? necessary to adapt them by flavor profile, capacity? prepackaging. To ensure successful operating in Kaluga Region since Yablochko LLC manufactures various promotion of a product at the Celestial The potential to increase production 2017. Using Kaluga Sweets brand, types of “Kaluga Marshmallow”, which Empire market, it is necessary to present capacity was already laid at the the company manufactures 9 types of has very specific – and unique – flavor. a large assortment, out of which two production start. So far, we are using fruit marshmallow and other products Marshmallow recipe was developed or three positions may be selected. approximately 40% of our capacity. At purposefully and, I think, gourmets were Regardless, China market is huge and we this stage, it is very good indicator for us. on its production facility made from already able to feel the difference. Our are interested in its “capture”. natural raw materials — souffle products are in demand and, hopefully, The most optimal routes of cargo sweetmeat, marmalade, fruit leather. taste associations of Kaluga Region will delivery to China are railway and To manufacture the products, it be related to our marshmallow in the automobile transport. So far, we are uses raw materials from Kaluga and near future. Anyways, many delegations using the second type and paying of Kaluga Region take our company about 100 roubles per 1 kg of cargo. neighboring regions. The company also products to their travels even today. As to railway transportation, it is supplies its products to China. Also. We are producing confitures, more expensive for us as SME, even 60 Sites Sites 61

Infrastructure for Industry 2 Kaluga SEZ Sites Development

1,024 ha 15 total area residents

% – customs duties 12 7,539.8 ha >100 – transportation tax industrial total area residents – land tax parks – property tax – VAT

Greenfields Brownfields Build-to-Suit Gi TAJYU, founder of ORAC NV — fully prepared — ready-for-use — construction of company: sites for industrial industrial space production space FOR THE FOLLOWING TYPES OF ECONOMIC ACTIVITY: FOR ALL OTHER TYPES OF ECONOMIC ACTIVITY: construction according to customer “Russian market is 0 requirements strategically important and promising for us. Income tax: Income tax: We expand the pool of Russian business partners. Our company 0% from 1st to 5th tax period 5 % from 1st to 10th tax Machine and is open for new period 1 equipment production 3% from 6th to 9th tax period ideas, which will be 9 % from 11th to 15th tax implemented in Russia. period What we were able 5% from 10th to 11th tax to do here, in Vorsino period 13.5 % from 16th tax period to industrial park, is Wood processing SEZ existence termination gas supply electricity water supply sewage facilities impressive. Particularly, 2 and wood product 8% from 12th to 13th tax commissioning time is manufacturing period impressive”. 10% from 14th to 15th tax RESIDENT GETS: Production of period 3 automobile parts, personal manager sites connected to utility access to customs and accessories and 13.5% from 16th tax period to 01to accompany project 02lines 03logistics terminals engines SEZ existence termination 62 Sites Sites 63

Infrastructure for Industry Development

140 150 greenfields brownfields of various land areas within municipalities within the territory of existing Kaluga of Kaluga Region Region enterprises

Fabrizio CELLINO, Andrey CHURAEV, Anna KIZINA, Denis GUZILOV, Chief Executive Officer Chief Executive Officer of Bosco authorized person for construction of facility to Chief Executive Officer of SMK LLC (Cellino S.r.l.): Manufactories LLC: manufacture medical products based on collagen, of Trusted Products LLC: BioPHARMHOLDING LLC: “In 2014, Cellino S.r.l. have decided to localize “In December of 2016, Bosco has concluded “When we had to choose a site in production in Kaluga. Regional Development an investment cooperation agreement with “To increase volumes and to expand Collost product line, Kaluga Region to organize production of Agency of Kaluga Region (RDA KR), which Kaluga Region. In the course of building site in 2017, the company management has made a decision to Greek yogurt, we have used the help of accompanied the project implementation, preparing for plant deployment within Kaluga- create a new, full-cycle, high-tech manufacturing facility Regional Development Agency. Together has proposed several brownfield variants for South industrial park, we have for a long time in Kaluga Region. Site selection process was hampered with Agency’s professionals, we have deployment, among which free areas of Kaluga selected premises to organize trial production. by the requirement to have a sanitary zone around the inspected several deployment sites — it Engine PJSC were chosen. Site readiness level has The point is, it is very important to take into facility, however, I would like to thank specialists of has to be said that selection is really conformed to all our requirements and the ribbon- account a lot of parameters for sewing flow Regional Development Agency of Kaluga Region, who large in the region. In the basis of project cutting ceremony of the first SMK LLC production operation: light, temperature conditions, ability have rendered us invaluable assistance. A brownfield in implementation period and available initial facility has happened as early as 2015. Automatic to arrange optimally logistics flows, etc. In our Mosalsk has become the most convenient variant for us. investment amount, decision was made to robot welding line, unparalleled anywhere in the opinion, we have found the correct solution, Two years later, we are preparing to commission the first purchase a brownfield within the territory world and designed to assemble aluminum fuel having deployed trial production at rented Russian workshop to process hides and derma of animal of former Iznoski milk processing plant. tanks, was set into operation. In July of 2018, we areas of Oka industrial park. In the near future, origin to manufacture medical products. At the same We have performed capital repairs and have upgraded the line and it have attracted new we will move to the already built plant within time, work is in progress to construct “clean premises” premises upgrade at the plant. Together investments. That same year, we have started the industrial park, however, we would like of D/C/B/A classes according to GMP standards. Ongoing with our foreign process engineer, we have negotiations with Volvo Group concerning supply of to see a new sewing production is operating accompanying by the Agency and municipal authorities arranged the whole production technology. our products, such as air tanks for trucks, as well at our place using already formed and tuned facilitates accelerated brownfield redevelopment and Currently, we are actively promoting as tippers made using Gervasi technology – know- production capacity. In response, we are ready creation of new jobs.” sales.” how, which was purchased by Cellino company in to have partner cooperation with production Europe, for Kaluga plant of the Group.” facility.”

Beginning from 2001, BioPHARMHOLDING LLC Trusted Products LLC manufactures is developing and producing COLLOST™ medical products based on Greek yogurt product based on original technology designed to under Venn’s brand at the milk Founded in 1950, Cellino S.r.l. is one of Bosco Manufactories manufactures create native, unreconstructed collagen of I type processing plant in Iznoski district the largest European manufacturers clothing of worldwide renowned Bosco with high biocompatibility. The product is used of Kaluga Region. Within 2019, of truck components, as well as di Сiliegi brand. The first Russian plant in various medical areas and is merchandised Trusted Products LLC plans to component parts for large-size of the company is being built in Kaluga within the territory of the Russian Federation achieve product output up to 4 ton building and farming machines. Region. Growth strategy of Bosco and in other CIS countries. In 2020, new products per day with a subsequent output Manufactories assumes entry into created using patented new technologies will increase. markets of CIS and EU countries. supplement COLLOST™ product line. 64 Business and Ethics Business and Ethics 65

L’Oréal: Corporate Social Responsibility

L’Oréal is the world cosmetics BEAUTY FOR A BETTER LIFE Region institutions, who have mastered leader and is a synonym of beauty, hairdresser profession. Female graduates In 2009, L'Oréal Group Fund has initiated have received beginner course certificate quality, excellence and innovative and started international program and L’Oréal diploma. Over the course scientific achievements in 150 “Beauty for a Better Life” basing on the of project existence, 195 students have countries of the world for more firm conviction that beauty can deliver completed training in hairstyling rooms. than 100 years. The company goal specific social benefits. The program The rooms are equipped with workplaces, mission is to help vulnerable segments which have armchairs and mirrors, is to provide the right to beauty for of the population to gain self-confidence installed washers and hair driers, as everyone, the mission — to make and to ensure social integration using well as everything required for full-scale beauty affordable. After all, beauty hairdressing, makeup and self-care theoretical and practical training using gives us self-confidence. trainings. technologies and products of Matrix In Russia, joint project of L’Oréal and professional brand. The rich history of L’Oréal in charitable endowment “Who If Not Me?” In 2014, a new specialization was opened Russia already includes more than was started in Kaluga Region in 2010. 6 in the scope of “Beauty for a Better Life” SUSTAINABLE DEVELOPMENT COMMITMENT hairstyling rooms and 4 nail shops were program – nail shop training. The first 25 successful years. Nowadays, Me?” is being successfully implemented L’Oréal is present in Russia in L’Oréal plant in Vorsino complies significantly and to reach zero for more than 9 years helping pupils all distribution channels: beauty with the highest standards of waste disposal at landfills. The of orphanages to enter into adulthood salons, apothecaries, own quality, safety and environmental new production space of the The program mission is to help vulnerable with necessary communicative skills, as boutiques, supermarkets. L’Oréal protection. Being a socially plant, commissioned in 2017, well as unique professional knowledge, and ecologically responsible was certified according to the segments of the population to gain self- which will surely help them in the future. is represented in Russia by 26 company, L’Oréal is actively world most rigorous certification Youngsters not only receive new abilities international brands, it is the working in order to reduce system for sustainable and confidence and to ensure social integration for development and self-fulfillment, leader of cosmetics market*. environmental impact, inter alia, energy-efficient building but also a real chance to try hand in a September 23, 2010, there was the increases efficiency of production construction LEED v.4 and has using trainings. new job and become beauty industry processes, takes measures to received certificate LEED v4 of professionals. official opening of the first L’Oréal increase energy efficiency and Platinum level. Thus, L’Oreal Group plant within the territory of to improve thermal insulation plant in Vorsino has become the opened in social childcare institutions room has been opened in Azarovo orphan the Russian Federation. The plant of buildings. In September of world first production facility, of Kaluga Region within the scope of asylum. In 2016, the second room was THERE IS ACTIVITY FOR EVERYONE is located within Vorsino industrial 2017, solar panels were installed which received LEED v4 Platinum “Beauty for a Better Life” program from opened in Kaluga orphan boarding school within the plant territory, they certificate. The special emphasis 2010 to 2017. No.5 for hearing-impaired and late-deaf park in Kaluga Region and it In 2019, L’Oréal commemorates 10th generate up to 10% of the total in the plant expansion project In 2010, the first hairstyling room has children, and in 2017 – in Kirov orphan manufactures haircare products anniversary of corporate day of social energy consumed by the plant was placed on implementation begun to operate in Obninsk orphan boarding school and Kaluga school for responsibility. Each year within the last (shampoos, after shampoo per year. Implementing L’Oréal of up-to-date, highly-efficient boarding school Hope. In June of 2012, children with limited health abilities 10 years, L'Oréal employees around the products), hair dyes, as well as sustainable development water treatment technologies, there was the first hairstyling exam for “Harmony”. Joint project of L’Oréal world dedicate one business day to bring skin-care products under L’Oréal program “Sharing Beauty with which have allowed to upgrade 9 female students from three Kaluga and charitable endowment “Who If Not All” (it envisages measures the local treatment facility and their qualifications and energy in aid of Paris and Garnier brands. up to 2020), the plant was to ensure 95% recirculation of non-governmental and environmental able to reduce CO2 emission sewage water. organizations. In June of this year, employees of L’Oreal plant in Vorsino together with charitable endowment Who If Not Me? will visit Orientir social rehabilitation center in KEY INDICATORS OF L’ORÉAL GROUP: Important contribution into the growth Balabanovo, where they will organize a of Kaluga Region economy quest for children. The plant employees st will also paint benches and plant trees 1 € 26.9 bln Selection of Kaluga Region for the plant construction was in Obninsk orphan boarding school Hope. based on the fact that the regional economic development cosmetics Group — turnover in 2018 They will visit Veteran Club organizing a in the world policy creates optimal conditions for the project concert and giving gifts, and will arrange implementation. Kaluga Region is a recognized industrial sports festival in Trust rehabilitation center and has an ideal geographical location to supply the center for children and teenagers with 150 86,000 central part of Russia. Expansion of L’Oréal plant in Vorsino disabilities. On that day, a bench made Countries of the Employees around the world has helped to increase employment level in Kaluga Region. from recycled materials will be installed world L’Oréal continues to employ specialists of the region and to in Obninsk public park, and a river bank develop partner relationships with local suppliers. In May of within the territory of Vorsino industrial 505 2019, L’Oréal plant was awarded three times at the Regional park will be cleaned. patents registered in 2018 Prize Ceremony “Employer of the Year – 2018”.

*Source: L'Oréal based on Euromonitor International 2018 data 66 Agreements Событийный туризм 67

St. Petersburg International Economic Forum 2019

30 17 RUR 17 bln business meetings agreements total investment amount according to agreements

NEW RESIDENT OF KALUGA SEZ

Kaluga Region has signed agreement with Sy Tszefu, chairman of the board of Harbin Electric Corporation (HEC), concerning construction of a plant to manufacture boilers, steam turbines and turbine- generators for 200, 300, 500 and 800 MW generator units of thermal stations within the territory of Lyudinovo site of Kaluga SEZ. The size of the land plot is about 22 hectares. Planned investment amount is 10 bln roubles. HEC is one of the largest power station equipment manufacturers in China. The company manufactures more than 3 thousand different products for oil refining, chemical industry, machine industry, metallurgy, nuclear energetics and defense industry.

RSPIC WAS SIGNED BETWEEN KALUGA REGION AND NESTLE RUSSIA

The Region Government and Nestle have signed the second Regional Special Investment Contract (RSPIC). It is planned to invest 4.3 bln roubles in expansion and upgrade of production capacity of Nestle Purina Pet Care plant (Vorsino industrial park). At the contract signing ceremony, Marcial Rollan, head of Nestle in Russia and Eurasia, has told the following: “We highly appreciate support, which is being given by Kaluga Region Government to Nestle, and confirm our commitment to further business development in that region.” ALEAN HIGH QUALITY TRANSLATIONS Office 409, 48/8, Plekhanova St. Kaluga Center FROM FOREIGN LANGUAGES Tel.: +7(4842) 79-05-05 for Professional www.proftranslate.ru Translation PERSONAL MANAGER