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The bridge across Lena - the flagship project of Yakutia

The general director of the Investment Development Agency of Yakutia Aleksey Zagorenko told in an interview to EastRussia about the work to raise the level of investment attractiveness of Yakutia and the most important projects capable of opening the world's coldest region to the world business

- Alexey Sergeevich, in April it will be three years since the Yakutia Investment Development Agency exists. Tell us about the most important, what results are you proud of?

The bridge across Lena - the flagship project of Yakutia
- I consider the creation of a team to be my key achievement. We tried to immediately gather professionals in the team, interest them and keep them. Now the agency employs highly qualified specialists in their fields: development of financial models, business plans, oriental studies, congress and exhibition events, implementation of projects in the field of PPP and full comprehensive support of a potential investor on the principle of "one window".

The first significant external event was the creation of the investment portal investyakutia.com with an interactive map. According to the requirements of the regional investment standard, the same for the country, it had to be done before the end of 2013; we managed to solve this problem in two months. In 2014, it was recognized as the best in the Russian Federation along with the portal of the Primorsky Territory.

Our agency is a specialized organization for supporting investment projects and providing services to investors in the "one window" mode. In 2013, we developed the necessary regulatory framework and in March 2014 launched a subdivision for the provision of services both directly on the basis of the Agency and through the MFC “My Documents”. This practice was subsequently included in the best practices in Russia.

Throughout 2014, we have been actively involved in the movement to form the investment image and brand of Yakutia, have participated in international investment forums in the United Arab Emirates, Japan and China.

In 2015, the Agency has already participated as a co-organizer and organizer of this kind of outdoor events. The apotheosis of this work was the participation of the republic's delegation in the Eastern Economic Forum. The responsibilities of the Agency, which was the organizer of the participation of the delegation of Yakutia, included the development of the delegation's business program and logistic scheme, overseeing the cultural program and organizing an official reception on behalf of the head of Yakutia and ALROSA - in other words, the work was done "from" and "to".

At the II Russian-Chinese EXPO, as part of the presentation of the regions of the Russian Federation, the Agency presented to the business community of China a strategically important investment project to create a bridge over the Lena River in the Yakutsk region.

We established work to improve investment activity in the localities, began to provide business services for local start-up entrepreneurs: the development of business plans, their expertise, marketing research. We help small businesses go from idea to funding. For example, in 2015 we developed 25 business plans, 10 of them received funding.

- What amounts are we talking about?

- Three large enough for small businesses - 60 million, 60 million and 120 million rubles, the rest are 5 million rubles each. Some projects of local entrepreneurs were financed by large companies: PJSC ALROSA, PJSC Railways of Yakutia.

For example, recently a shop for shock freezing of vegetables was launched in the Khangalassky region - this project was financed by the Yakutia Venture Company. A number of projects received funds from the Small Business Support Fund of the Republic of Sakha (Yakutia).

- Please provide other figures that convey the agency's performance.

- In 2015, 17 projects of public-private partnership were launched and we can really be proud of this. These are 28 objects, of which 16 are kindergartens in the regions of the republic and 12 objects in the city of Yakutsk: schools, kindergartens, cultural objects.

The total amount of investments exceeded RUB 11 billion. If we talk about kindergartens in the republic - 3,6 billion rubles, urban facilities - 7,5 billion rubles. Thus, in three years the agency was able to cover all areas of investment - from small to largest.

- There is the South Yakutia Development Corporation, in December 2015 the Yakutia Development Corporation was established. There is the Republican Investment Company OJSC and the Investment Development Agency, which you manage. You mentioned a venture company. Are there any fundamental differences between these institutions?

- A complex of investment-conducting infrastructure has been created in the republic, where each institution occupies its own niche and performs only its inherent function, which is in demand by the market - business and investors. At the same time, the government did not go in a roundabout way and, having considered the available experience, used the best practices developed both in the world and in the Russian Federation.

A business incubator, a technopark, a priority development area is an elevator through which entrepreneurs can comfortably enter a business. They receive maximum support, rental benefits, taxes, which allows the business to grow and strengthen.

The Yakutia Development Corporation implements specific investment projects: it co-finances them, creates an industrial infrastructure and works as a management company.

The Investment Development Agency provides non-financial services with the aim of creating a unified communication corridor for an investor entering the region for the first time, establishing a link between the investment infrastructure of Yakutia and him. Someone needs small funding - from 1 to 5 million rubles - we send to the Entrepreneurship Support Fund, to whom larger funds - we introduce the Venture Company, and so on. We help meet the individual needs of all investment projects, from the smallest to the largest.

Depending on the wishes of enterprises and investors applying to the Agency, we offer services ranging from the development of business plans to assistance in the selection of land plots. Foreign investors need more detailed help: explain and tell how business is conducted in Russia, what benefits exist, what legislative acts they should take into account. We help to comfortably enter the territory of Yakutia and start a business here.

- If we evaluate from the point of view of investment attractiveness, what will the first five projects of the republic look like?

- Our flagship project, which is now well known, is the construction of a bridge over the Lena River. This project can significantly improve the investment attractiveness of Yakutia and significantly enrich the portfolio of those who can implement it in our unique conditions. It is not for nothing that world-class companies create their proving grounds in Yakutia, test their products for durability: car tires, cars. If they can withstand our extreme temperatures, they can be considered to withstand any conditions at all.

The next most attractive projects relate to gas and oil refining. You know that in the republic we have oil and gas, but at the same time we import most of the fuel and lubricants from outside, and the transport component of costs is very high. The Yakutsk oil refinery in the city of Aldan with a capacity of 2 million tons is a very promising project worth up to $ 2 billion. The project was initiated by OJSC NK Tuymaada-Neft.

There is a search for a strategic investor for the implementation of the second stage of the Yakutsk gas processing plant. The initiator of the project is the state-owned company Sakhatransneftegaz. We also have a project to create a plant for the liquefaction of natural gas in Nizhny Bestyakh, it is proposed by the private company Sakhametan.

An interesting agricultural object is year-round greenhouses, initiated by Almazergienbank. The agency accompanied the project on the basis of an agreement with the bank, we helped to form a financial model, created presentations in different languages, accompanied the bank's delegation on a road show in Japan. As a result, we recently held successful negotiations with the Japanese corporation Hokkaido on the construction of a year-round greenhouse in Yakutsk.

- How do you work in the light of the current economic situation - which areas are in priority, and which of them is better to wait for better times?

- I would not say that some projects need to be postponed. We are absolutely open to suggesting all projects. I can note that there are concerns about currency risks, now investors are paying more attention to this, but all risks can be hedged. It is no secret that the Russian Federation uses swaps in rubles and yuan, financing can be provided in rubles, thus minimizing currency risks. For every minus, you can always find an adequate plus, the question is how much it will cost.

- In Yakutia, projects are planned related to the extraction of minerals and aimed at import substitution. For example, there is a tin deposit, the reserves of which could fully meet the country's needs. What's new?

- This is a project of OJSC Yanolovo, a subsidiary of the Republican Investment Company. At the moment, a financial model, presentation has been prepared, the project is waiting for its investor. The work under the license agreement is proceeding according to the schedule, the necessary funding has been allocated. In order to launch large-scale production, appropriate investments will be needed: we assume that at least 3 tons should be mined, otherwise it makes no sense. In this case, investments there are large enough and a strategic investor is needed.

- The leadership of Yakutia announced that by 2018 a High-Tech Park will be built in Yakutsk. What is the latest information?

- The Yakutia Development Corporation is engaged in IT-Park, negotiations with a potential investor - the Merlion company - are being successfully carried on. The Hi-Tech Park is one of the facilities dedicated to 100 Anniversary Yakutia, we hope it will be implemented in the near future.

- The construction of kindergartens and schools in the capital of the republic, planned jointly by the International Bank for Reconstruction and Development, according to the head of Yakutia, Yegor Borisov, has been frozen for an indefinite period. Are you managing to attract other partners to this project?

- It is implemented through a public-private partnership. As I said earlier, last year in Yakutia, PPP projects began to build 16 kindergartens and 12 more educational and cultural facilities in Yakutsk. This year we plan to launch construction projects 4-5 schools and 4 kindergartens in the districts of the republic, but more specific figures can be said after negotiations with investors. Most likely the objects of education will be represented by one lot. There is a so-called "long list" from which exactly those objects will be selected that the investor is ready to finance.

- And who is he - an investor in kindergartens and schools?

- For those projects that have already been contracted on the territory of the republic, private partners are working: various republican construction companies, financing partly at their own expense, partly at the expense of loans from Almazergienbank OJSC. The tender for objects in Yakutsk was won by OJSC Gazenergomontazh, they also finance partly themselves, partly with the involvement of credit funds.

- What is the interest of these investors, what do they get as a result of public-private partnership?

- PPP projects are similar to life cycle projects: they not only build, but also operate these facilities, i.e. enterprises are guaranteed additional income for a number of years. For Yakut companies, this is a completely new phenomenon, they do not always understand that we essentially offer them not only to conduct the construction business as before, but also additional income.

This is beneficial for us as well. When compared with a government contract, where construction is simply carried out at the expense of the budget, enterprises have no incentive to build efficiently. They handed over the object, waited out the warranty period, and that's it. And under PPP projects, companies are obliged to operate buildings for a certain period of time, but all repair work, if required, must be carried out at their own expense. Therefore, they have a great incentive to build efficiently, so as not to correct later. As a result, we get a quality product.

- Already next month, the ice crossing over the Lena River will be closed and difficulties will begin with the delivery of goods and products to Yakutsk. How is the issue of building a bridge being solved - perhaps the most acute one for local residents?

- In 2013, design and estimate documentation for the construction of a bridge was developed, in 2014 a competition was held, according to which the federal agency Rosavtodor determined the winner. An agreement with him was not concluded for various reasons, including geopolitical ones. The funding structure is quite large: the size of the capital grant from the federal budget amounted to 40 billion rubles, and only 6 billion should have been found by the concessionaire.

Last year, the government of Yakutia turned to the federal authorities with an initiative to attract foreign investors to the project. The financing structure has undergone a change: the investor was asked to build at his own expense, and the return on investment from the budget will be delayed for a longer period (after 2020). Having enlisted the support of the federal authorities, the republic started promoting this project and looking for investors.

We presented it at Russian and foreign events and received a warm response from both private corporations and state ones. At this stage, we have identified several leaders. There is a private corporation that is preparing to sign a memorandum of understanding with Rosavtodor, and two global world corporations with significant experience in the construction of infrastructure facilities. Both companies have a high status in China - if compared with Russian corporations, not lower than Gazprom.

The first is the state-owned Chinese corporation Sinohydro, a subsidiary of China Power Investment Corp. The second is called Bureau 18, a subsidiary of China Railway Company. We hope to reach the home stretch with these companies by the end of the year. There are several options for how the selection will take place: either through a competitive procedure, or, if only one company remains, within the framework of a private initiative; legislation also provides for such a procedure.

- At the Eastern Economic Forum, many cooperation agreements were concluded, the volume of planned investments reached 1,3 trillion rubles. According to your observations, what percentage usually comes to embodiment in reality?

- When the agency was created, I got the impression that only a small number of foreign investors knew about Yakutia, who in one way or another already had the experience of coming to the region or heard about it from their friends. Many did not even know that it was part of the Russian Federation. Over the past three years, we have been working on the recognition of the Yakutia brand in order to bring the republic closer to its neighbors - the countries of the Asia-Pacific region. Our Minister of Economics came up with a new slogan "Yakutia - NEAR", that is, "North East Asia Region - North-East Asian Region", which also translates as "Yakutia is close."

Since any relationship begins with an acquaintance, the first thing we do is sign a memorandum of intent with the interested company, but it does not yet guarantee that the investor 100 percent will be included in the project. The document serves as the beginning of work for us, and for them it becomes the basis for learning more about the project. Not everyone goes through the "valley of death", someone goes further, others lose interest. Approximately 30% of agreements reach the stage of agreements implementation.

In general, the process of making an investment decision is a little longer than usual. A foreigner, in order to enter the business of another country, needs to cross some barriers, including psychological ones. Of course, everyone is reinsured, they strive to get as much information as possible from different sources, to come once or twice, to establish informal relations, which is very important for trust.

But, as you can see, there is a movement, companies come to Yakutsk after meeting at international events. The agency, as a "one window", provides them with all the information necessary for making management decisions, organizes meetings with Russian, Yakut partners, so that foreigners receive professional information firsthand.

I think we now need to launch a flagship project, such as a bridge across the Lena River, which would show everyone that it is possible to work in Yakutia. A favorable investment climate has been created, there is competition for "tasty" projects, we are waiting for good signals and go ahead!
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