The Tver Oblast The following article was written by Olga Ananina, BISNIS representative in Moscow, and is available via the United States Department of Commerce Business Information Service for the Newly Independent States (BISNIS) Web Site at http://www.bisnis.doc.gov/bisnis/country/9909tver.htm. Reprinted with permission. Geographic Location, Natural Resources and Infrastructure Tver Oblast, populated by 1.6 million people, covers 84,100 square kilometers and is the largest region in Central Russia. Although its moderate-continental climate and landscape are typical for the Central Russia, Tver Oblast does have its unique characteristics. It is very rich with forests and water: over 800 rivers cross the Oblast including the beginning of the Volga River, and 1,769 lakes attract tourists and fishermen. The oblast is the natural source of fresh water for Central Russia and the city of Moscow. Tver mineral resources include gravel, construction and silicate sands, fireproof, ceramic and kaolin clay, limestone, sapropel, mineral water, and brown coal. Tver Oblast possesses significant reserves of peat (approximately 2 billion metric tons) mainly used as an energy source. (A regional program "Development of the Peat Industry in the Tver Region for 1997-2000" is a local administration priority). Tver is an important transportation hub. The location of Tver Oblast is excellent in terms of access to the two largest metropolitan areas in Russia. The city of Tver is located one-third of the way between Moscow and St. Petersburg (167 kilometers from Moscow). The road linking the cities has traditionally been well-maintained and heavily used for cargo transportation. Proximity to Moscow and St. Petersburg and quality of the road ease access to the two large consumer markets for goods made in Tver and vice versa. The Moscow-St. Petersburg automobile route is also popular with tourists traveling for a short vacation to the cities. The Moscow-Riga highway connects Tver with the Baltic States and Finland. Tverskoy Port is the largest port on upper Volga. It is equipped with cargo decks and is fitted to serve river-sea ships. There is an international airport in Tver, and the city is close to Sheremetyevo International Airport in Moscow. The international "Surgut-Polotsk" oil pipeline and two major gas pipelines cross Tver Oblast. The oblast is covered by Moscow telecommunications service providers of GSM 800 standard. There are five locally-based banks in Tver Oblast as well as offices of Moscow banks. Tveruniversalbank was rated 57th in the list of 200 Russian banks with largest capital.   Investment Climate The Tver Oblast Government is active in searching for opportunities to attract foreign investors. The governor has formed a Governor's Office for External Economy and Investments that is headed by Edward O. Chovushyan. Mr. Chovushyan launched a glossy periodic publication "Invest-100 International Investment Magazine" that discusses investment opportunities in the oblast, publishes interviews with Tver business people, and highlights local legislation. The Office for External Economy and Investments is in the process of organizing an International Forum of Technology Brokers "Investment and Technologies/Tver-99" that aims to bring together representatives of local and foreign companies, potential investors, and Russian and foreign government officials. FES International, Inc., a Californian-based company, is assisting the Tver Oblast Administration in the organization of the event. FES International is an official representative of Tver Oblast in matters related to humanitarian aid and economic assistance. The Tver Oblast Law on "Tax Privileges to Investors in Tver Oblast" is also supportive of foreign investors in region. The profits tax is reduced by 50% for those companies investing in renovation, modernization or creation of new production facilities in Tver Oblast. The profits tax reduction is applicable starting from the date when the first expenditure is made and until the investment is paid back. Although the initial tax reduction period is written to be maximum three years, investment in projects included in the Economic Development Program of Tver Oblast can prolong it up to 10 years. Leasing companies are exempt from paying 90% of profits tax to the regional budget during the first three years and 50% during the two consequent years. Some potentially strong Russian companies need to be restructured and prepared to receive investment. In Tver Oblast, two programs are operating whose goal is to help local enterprises adjust and become more competitive in a market economy. Specialists of the German Government's TRANSFORM program are consulting for Tver enterprises in the glass, machine building, and wood processing industries, while TACIS, a European Union program, targets improving professional management at medium and large enterprises. By 1998, 37 companies with foreign investment had been registered in Tver Oblast. Mostly European companies are present in the oblast through established joint ventures, such as two Russian-Bulgarian ventures and a Russian-Italian enterprise. German companies are very active in selling technologies for manufacturing construction materials and equipment to Tver companies (mainly assembling poly-vinil-chlorid windows, reinforced doors, etc.). The German construction company Tver-Osnabryuk, which united 20 entrepreneurs who collectively invested over 1 million DM, built the three star hotel Osnabryuk (accommodates 42 people). Canadian companies are also investing into construction of private houses and assembly of construction parts in the oblast.   Foreign Trade In 1998, the foreign trade turnover for Tver Oblast was $186.8 million, a 23.6% decrease compared to 1997. Exports from Tver totaled $80 million of which 21% came from machine-building industry, 14% from forestry and wood-processing, and 6% from light industry. Of total exports, 30% went to the other NIS countries. Among imported goods, machine building products, food stuffs, consumer goods, goods from plastic, and wood-processing and paper products prevailed. Germany, Ukraine, Korea, Sweden, Italy, Turkey, Uzbekistan were Tver's main foreign suppliers.   Industry Sectors Industry in Tver Oblast is represented by the following sectors: electric energy (44% of the total regional production), machine building (22%), food processing (11%), light industry (6%), and wood processing (5%). The other 12% includes printing and publishing, chemical, glassware and earthenware, and construction. In accordance with the federal program "Economic and Social Development of Tver Oblast in 1998-2005", sectors deemed vital for regional development include energy, transport, wood processing, agribusiness (flax breeding), construction and tourism, and sectors with great social implication. First Deputy Governor Victor Opekunov emphasized that such industries as flax breeding and forestry and wood processing need major restructuring and investments to become profitable.   Energy Kalininskaya Atomic Electric Plant is the leading enterprise in the energy sector. Kalininskaya has two energy blocks with total power capacity of 2,000 MW. The Konakovskaya Hydro Electric Plant and a number of thermo-electric plants also supply energy for Tver and surrounding areas. (Over two thirds of energy produced in Tver Oblast is supplied to other regions). As the energy costs continue to grow and resource-wasteful habits of Russians remain, one of the primary goals of the local government is to promote energy-saving technologies. An American grant for $1 million was received to install such technologies in one of the city districts for monitoring of heat, gas, and electricity consumption.   Machine Building Into the 1990's, machine building and metal processing enterprises in Tver Oblast were among Russia's leading manufacturers of passenger train cars, one-dipper excavators, tower cranes, fire-prevention equipment, metal-cutting machinery for the aviation industry, and steel frames. Among the 10 largest machine-building enterprises in the oblast are Tver Train Cars Building Plant, Tsentrosvar, Tver Excavator Plant, Kimrskaya Savma, Bezhetskselmash. Mainly due to Russia's general economic situation, their output has fallen in recent years. Companies have to search for new products, customers and equipment to stay afloat. As larger plants would need prohibitive amounts of new investment for overhaul, smaller companies that are often rising on the facilities of a larger plant and becoming more competitive. For example, open joint stock company Rhythm was founded in 1991 on the premises of a train car building factory. Rhythm produces break fittings for railway transport and has become the leading manufacturer in Russia in this sector. It is flexible and up-to-date , it invests in research and upgrades its products, certifying and patenting them. Analogue producers in the NIS also purchase fittings produced by Rhythm for the use in their own production. Adjusting to market-dictated changes in the industry, Rhythm is interested in joint development of technologies for production of break fittings for railway transport and renovation of its equipment. Rhythm's investment plans require an estimated $1,000,000.   Agribusiness Agribusiness in Tver Oblast is mainly concentrated in two sectors: flax breeding and dairy and meat processing. Both sectors occupy over two million hectares of Tver land. Tver Oblast used to produce up to 40% of all flax in Russia. Despite the abundance of textile plants (there are 35 textiles factories), not all flax is processed locally, and the majority of the local mills work with resources purchased elsewhere. Factories such as IstKozh, Vagzhanov Spinning and Weaving Mill, Vyshnevolotsky Textiles, Vyshnevolotsky Flax Mill, Tabloka, Proletarsky Avangard, and others produce cotton, wool and silk fabrics, and man-made leather. Various cotton and flax mills were heavily involved in tolling and continue to assemble cloths for export using imported resources. One of the reasons for using imported materials is lack of equipment for processing flax and making high quality, soft fabrics from it. New, contemporary technologies are needed. In accordance with the federal program "Development of the Flax Industry in Russia in 1996-2000," Tver Oblast Government proposed to supplant exports of yarn and semi-finished goods with exports of ready-made goods. Also, as imported cotton from Turkey and Uzbekistan has become expensive, replacing it with flax at the local enterprises would revive the local industry. Steps are being taken towards making the technological cycle of breeding, processing, and manufacturing of flax complete. In fact, Tver Oblast was the first to form a "flax" consortium that included enterprises involved in breeding, processing, and machine building, as well as scientific and trading organizations. Markets for various flax goods are being studied. Local tax breaks to textiles enterprises will facilitate the industry's development. Thus, overhaul of the Tver Fabric and Garment Factory was granted privileges under the regional law "On Tax Privileges to Investors in Tver Oblast." The oblast hosts 38 dairies and 11 meat-processing plants. Their production continues to increase. However, in 1998, 61% of the total regional agricultural output came from households. Private farms provide for 42% of regional animal produce (meat comprises 39%, and milk B 45%) and 74% of vegetables.   Wood Processing The timber and wood processing industry holds great potential for regional industrial development. Forest covers 53% of the oblast territory (5.1 million hectares) and consists of 70% coniferous and 30% deciduous trees. Presently, only 30% of viable woodcutting area is utilized, leaving a quarter of the oblast's standing trees "over-ripe." There are 27 large forestry farms in the oblast and 23 saw mills producing lumber, sawing materials, veneer, paper, cardboard, and furniture (the total number of such enterprises including small firms is approximately 400). Most local wood is exported as timber and lumber. The main buyers of timber are Hungary, Germany, Slovakia, the United States, Finland, Sweden, and the NIS. Lumber was exported to 22 countries including Austria, Bulgaria, Great Britain, Hungary, Germany, the Netherlands, and Finland. Veneer is also exported to the above mentioned countries. Exports of virtually unprocessed wood reflect the typical situation in Russia's forest sector in general, which is characterized by scarce working capital, lack of experience in conducting business in a market economy and uncoordinated actions of local market participants which also depresses export prices. Furthermore, export prices as well as export volumes to the U.S. and Canada could be raised if the wood were kiln-dried properly. Some local exporting companies are taking steps towards gaining a better market. Upon request of an export company in Tver Oblast, Tver company Stromgeomash has constructed a kiln-drier that allows reduction of the wood moisture to 20%. The local industry overall is limited to the lower value-added end of the production cycle, with exports of timber prevailing and weakly established processing of recycled paper products. Despite this general trend, corrugated cardboard manufacturer Kamenskoe OAO Paper and Cardboard Plant of Kuvshinovo does process recycled paper for production of corrugated cardboard. 50% of the manufactured cardboard is assembled at the plant into boxes, and the rest sold to other plants. Kamenskoe also produces cellulose and manufacturers paper, polygraph goods, and packaging materials. Kamenskoe OAO Paper and Cardboard Plant seeks $4 million investment for expanding production of corrugated cardboard and boxes and renovation of certain equipment. Kamenskoe is one of the largest Tver enterprises in the wood-processing sector. Others are Oleninsky Lespromkhoz (which manufactures sawing timber and is currently implementing a joint project for drying facilities together with an Italian company); and state enterprise Maksatikhinsky Lespromkhoz #1, which is in the process of launching production of sawing timber using U.S.-made equipment. The opportunities for foreign investment in this sector are concentrated in pre-export wood processing and supply of various wood processing equipment. Wood processing is closely related to such sectors as construction and furniture manufacturing. Both sectors are developing in Tver Oblast and are market-oriented. For example, Tver Furniture Factory (although it is restructuring and currently operating under an external manager) received $1.2 million investment to upgrade production and produce a more diverse assortment of higher quality furniture.   Construction Mr. Zimenkov, the director of Tver-based company Betiz, which has 20-years of experience, said in his interview to the "Invest-100" magazine that the construction industry is "the industry that will boost the Russian economy" as it unites efforts of several other sectors. Wood processing, chemical, textiles, and glass making industry sectors could all benefit from extensive housing construction. On the other hand, a weak construction sector poses problems for the same range of supplier industries. As the construction rate has recently slowed down, wood-processing enterprises have experienced a drop in demand for wood and sawn-timber materials. Major construction materials plants are currently experiencing difficulties. Their old technologies are often behind the market curve (such as, for example, in popular plastic window frames, window packages, etc.). Significant investments would be needed to overhaul large production facilities. Thus, smaller construction companies are appearing and successfully competing in implementing new technologies. There is a strong potential for the sector's development, primarily in the private housing construction. The city of Tver has a unique abundance of downtown houses. Houses of one to four floors are randomly built closely together. According to Mr. Chovushyan, new technology has been developed jointly with a German company that would allow adding top floors without the need to temporarily relocate the inhabitants. It has been estimated that construction costs per square meter would be significantly lower than the market price. Construction of hotels, such as the Osnabryuk, in the city or at tourist sites such as Seliger Lake, also present investment opportunities to American companies.   Tourism On June 24, 1999, the Russian newspaper Kommersant-Daily published ratings of the most popular vacation and tourism sites in Russia. Tver's spas and sanatoriums were ranked 6th after Moscow Oblast, Sochi, Anapa, Crimea (although now a part of Ukraine, Crimea is traditionally considered as a domestic vacation site), and Mineral Waters. Rich with beautiful and traditionally Russian flora and fauna, Tver Oblast is advantageously located on the crossroads of major automobile, train, and river ways. The oblast is also famous for its unique historical monuments, ancient monasteries, convents and temples; 14 towns are considered "urban monuments" representing 18-20th century lifestyle. The combination of sights to see, nature, easy access, and proximity to Moscow and St. Petersburg make Tver a popular weekend destination as well as an attraction for fishermen and hunters. As service and quality living conditions are becoming increasingly important to Russian tourists, tourism infrastructure needs to be significantly improved to attract more tourists. A post-crisis windfall occurred when the ruble was devalued, prompting many Russian tourists to save on travel and "go domestic." Thus, the inflow of tourists to Tver's Seliger Lake, the most famous lake in Central Russia, increased by 15 times compared to the mid-1990s. To support the interest in domestic tourism, Tver oblast and United Nations experts launched a program of development that calls for construction of two- and three-star hotels around the lake. The Regional Administration supported construction of the Osnabryuk hotel, financed and implemented by Tver-Osnabryuk company.   Contact Infromation for Tver Oblast:   Platov, Vladimir Ignatievich, Governor of Tver Oblast 170000, Tver, Sovetskaya St., 44   Opekunov, Viktor, First Deputy Governor for Tver Oblast 170000, Tver, Sovetskaya St., 44 Tel.: 7-(0822) 33-05-13 Fax: 7-(0822) 42-55-08 Chovushyan, Edward Olegovich, Head of the Governor=s Office for External Economy and Investments 170000, Tver, Sovetskaya St., 44 Tel.: 7-(0822) 33-37-95 Fax: 7-(0822) 42-55-08 FES International, Inc. Voytek Bukowski Senior Executive, International Division 2120 Auto Centre Drive Glendora, CA 91740 Tel: (909) 592-9801 Fax: (909) 592-9982 E-mail: sales@desintl.com; Vbukowski@yahoo.com Web Address: www.fesintl.com Chesalov, Yuriy Alexandrovich, General Director Stromgeomash, Promzona Lazurnaya, 35 Tver, Russia 170017 Tel: 7-(0822) 33-76-75 Fax: 7-(0822) 42-71-54 Vrassky, Konstantin Georgievich, General Director Chernetsov, Pavel Ivanovich, Deputy Director for Marketing, contact for U.S. companies Russia 170003, Tver 45 B, Sankt-Peterburgskoe Shosse Tel: (7-0822) 55-91-91; 55-91-16 Fax: (7-0822) 55-02-13 Orlov, Boris Ivanovich, General Director Senatorov, Ivan Vasilievich, Assistant to General Director on Investment Issues Kamenskoe OAO Paper and Cardboard Plant 172110 Tver Oblast, Kuvshinovo, Oktyabrskaya St., 5 Tel: 7-(08257) 4-44-56; 3-29-46 Fax: 7-(08257) 4-44-56.r   Olga Ananina is BISNIS Representative, Moscow Approving Officer. Matthew Edwards is Commercial Officer, U.S. and Foreign Commercial Service(FCS), U.S. Embassy, Moscow. The Russian-American Chamber of Commerce® is a nonprofit, nonpartisan organization acting to promote American business interests in the Russian marketplace. The Russian-American Chamber of Commerce® Last Updated: November 27, 2001. Copyright the Russian-American Chamber of Commerce® 1995-2003. All rights reserved.