2007 vol. I # 2 RegIonal ProfIles ekaterinburg and The region’s innova- tion attractiveness is sverdlovsk region complimented by over 100 R&D institutes p. 23 Second ranking region in Russia in terms of industrial production p. 30 210,000 higher education students studying in the region p. 49 One of Russia’s richest regions in terms of natural resources p. 57 Key transport and logistics center of Russia p. 91 Ten new high rise office towers put InnoVaTIons In HeaVY into service in 2006 p. 131 InDUsTrIal TeCHnologIes Contact info: [email protected]; www.intel.ru CLICK HERE FOR MORE INFORMATION Marchmont’s comprehensive coverage of commercial real estate differed between cities in the Russia’s regions, their economies and po- European part of Russia and cities in Siberia, or com- tential investment opportunities doesn’t pare the number of freesheet newspapers in Rostov- end with the back page of this journal – na-Donu and Tomsk, this would take just a few clicks. we cover all of these topics and more on Blogs written by our directors, economists and region- our bi-lingual website (www.marchmont- al editors, highlighting interesting stories or events at capital.com), every day. which they attend or speak, are also something we are looking to begin. We cover business and investment news on Russia, international investment trends and You’ll find us at www.marchmontcapital.com a growing number of Russian regions, every day, covering everything from international mergers to local construction projects. We work with different news providers who are on the ground in each region. Our goal is to become the site of choice for investment-re- lated news on Russian regions, covering key regional capitals, every day and in two lan- guages. Moreover, members of our site can download every journal we publish in PDF format. Soon, each journal will be readable and searchable directly in your web browser. All our corporate sponsors and media and business association partners are represent- ed online and you’ll find information on how your company too can join us as a regional, national or sectoral sponsor in our journal. We also have a banner exchange program to help our site and those of our partners bene- fit from mutual traffic flows. Yet all of this represents just the tip of the ice- berg. We are currently working on implement- ing paid subscriber services whereby premi- um members will be able to not only read and download our journals but also search them, access sector-by-sector in-depth reviews written by our professional economists, and generate custom reports which can be saved or distributed among colleagues. So for ex- ample if you wanted to see how prices for A message from MARCHMONT Capital Partners A Land of Wealth and Creativity Welcome to the second Regional Profile of our Marchmont Investment Guide to Russia, dedicated to the capital of the Sverdlovsk region, Ekaterinburg. While the first covered Ni- zhny Novgorod, we look now to Ekaterinburg and the Sverdlovsk region, one of Russia’s richest in rare minerals, iron ore, gold, copper, nickel, oil, gas and precious and semi-pre- cious stones. But its natural resources prowess does not come at the expense of intellectu- al potential; local people have long proved inventive and enterprising both in the extrac- tion and creative application of these resources. One of our goals is to explore the region’s economy and introduce you to those bidding to make their region one of Russia’s richest and most creative. With the third highest per- capita income in Russia, Sverdlovsk is not only a key ferrous and non-ferrous metallurgic region, it is a general industrial heavyweight where much of Russia’s industrial hardware is produced. Ekaterinburg’s mix of natural resources, skilled workforce, industrial potential and relatively remote location has long made it a defence and production research center – Kendrick White the legacy from which its strong educational and scientific base, capable of creating and Managing Principal, commercializing world-class technology, has risen. The region has shown too its ability MARCHMONT to adapt to current global business trends and standards; steps taken by regional officials Capital Partners, LLC to help commercialize local technology projects by establishing business incubators and technoparks is a case in point. Surprisingly to some, the region has become one of Russia’s top IT producers with hun- dreds of firms and entrepreneurs working on advanced software and systems. These are in constant demand by local and national firms, keen to upgrade and prepare for the domestic and global competition that Russia’s entry into the WTO will entail. The innovative and hi-tech climate is supported by a comprehensive university system – with three separate MBA programs, – which combined includes over 210,000 students, producing over 35,000 specialist graduates each year. This, with the local rise of venture capital investment, is the foundation on which a new generation of entrepreneurs will flourish. I first visited Ekaterinburg in 2004 as a guest speaker at the local Elite Club of Corpo- rate Conduct. I spoke on western corporate governance and how local firms could secure expansion capital and foreign partnerships. I have since visited more than a dozen times and always come away impressed by the ingenuity and initiative of local entrepreneurs. “Communism failed, so let’s embrace capitalism and, when we’ve mastered it, expand our businesses not only in Russia and Europe but also establish international market share” - that is their take. Now they want more than to just sell raw materials; they strive for the new, such as lighter and harder steel and other innovative building material products. They are increas- ingly gaining the skills needed to turn these resources into new products, for new uses, and which can be marketed internationally. At Marchmont we see investment into the commercialization of new technology and the innovative maximization of the country’s natural resources to be the next big thing in Russia - and in both respects Ekaterinburg and the Sverdlovsk region might be considered the end of the rainbow. I have always looked at Russia as being about more than just Moscow and St Petersburg, and the economic renaissance of cities like Ekaterinburg demonstrates why. It’s my hope that in publishing this journal others will arrive at this view. MarCHMonT Investment guide to russia 2007, vol. I, #2 7 License № 0041800229/01 TO GET THE CARS FROM START TO FINISH YOU NEEN FORMULA ONETM DRIVERS. TO GET THEM FROM FINISH TO START YOU NEED ALFREDO ROSSI AND HIS TEAM. As the ocial logistics partner for Formula One,TM DHL moves over 30 cars and thousands of spare parts to every overseas track on the circuit. To meet this enormous challenge, Alfredo Rossi and his team cover 70,000 km across four continents. It’s one more example of the dedication we deliver to all our clients, no matter what their business. At DHL, we race, you win. www.dhl.ru >> ALFREDO ROSSI >> DHL MOTORSPORTS OPERATIONSOPERATIONS MANAGERMANAGER From the Editors The Birth of Wonder I remember from my childhood many wondrous tales of ancient craftsmen whose hands could turn precious stones into stone flowers of striking beauty. One particular legend told of a ‘wonder stone’ which lay somewhere in the Urals Mountains and a local craftsmen who spent his days in his modest wooden hut, longing for some noble and great task. Eventu- ally the stone’s magic, so the story went, brought them together. Only later in life did I realise the poignant symbolic messages often concealed within these tales. Even in today’s hi-tech era one thing remains unchanged, namely that wonder is born where natural resources and human talent come face to face – and the Urals is a prominent example of that. The Urals is a region with an abundance not only of natural resources but also of people notable for their energy, entrepreneurship and professionalism. These are the people ca- pable of realizing the full potential of the region by giving birth to a range of projects, products and ideas which have the power to make our lives more convenient, safe and fulfilled. They, and the region they hail from, deserve appropriate reward and recognition alexander Blagov for these feats. executive Director in Publishing So let’s wish them good luck, whatever they’re busy with. If this Regional Profile goes MARCHMONT some way to increasing awareness of them and their work, and even lead to outside interest Capital Partners, LLC and investment into their projects, it will have been worthwhile. Progressive Individuality At the beginning of the eighteenth century Peter the Great set out to combine European techno- logical achievements with Russian keen wittedness and entrepreneurial ability. The result was both original and at times incomprehensible, depending on your point of view. It led to a process of business cross-pollenation between European and Russian business. As a result of this encouragement, it was entirely possible to see a bearded Russian merchant, clad in traditional tussore poddyovka overcoat and living under “Domostroy” law, opening branches of his family business both in Europe and the US. He would sell products made at Urals factories but produced, ironically, buy engineers invited to his region from the west, form the very countries he was expanding into. Our entrepreneur would welcome new ideas and experiences but would not for a second deny his roots or national identity. In his book about life in Nizhny Uglovsk factories, Mamin-Sibiryak highlights the point where European and Russian mentalities meet. He recalls a factory co-run by a Russian and hereditary Kerzhak, Kirilo Ryazanov, and a European engineer named Brenner.