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00:23 | Aug 13 | 2011

Investment Climate in the Sakha Republic

Yakutia is one of the most attractive regions of the Russian Federation for investors. Independent experts determined the investment climate in the Republic as very favourable and that draws more and more volunteers to invest in different fields with each passing day. 

Thanks to the policy of the Government of the Sakha Republic aimed at improving the investment climate, the international rating agency Fitch Ratings changed its outlook for the long-term ratings of the Republic from “stable” to “positive” and confirmed their level at “BB” in 2010. A similar forecast for Yakutia was also revised by the agency Standard & Poor’s: it also changed its wording from “stable” to “positive” and affirmed the long-term credit rating at “BB-“ and the national scale rating at a “ruAA-“.

This level of ratings fully reflects the characteristics of the region which economy is focused on mining and is subject to risks associated with the volatility of primary markets. Harsh sub arctic climate, geographic remoteness and the need for further development of transport infrastructure define the high current and capital expenses which are difficult to cut.

The investment attractiveness of the Sakha Republic is determined by combination of the following key factors: the presence of considerable reserves of raw materials and energy resources, stable positive dynamics of basic macroeconomic indicators, political stability and favourable geographical position – close to the fastest growing consumer markets of Asia Pacific and a convenient logistic scheme of air passenger and cargo traffic between the countries of Southeast Asia and USA. A unique tourist potential is also an undoubtful advantage of the region.

The creation of stable investment climate in the region has become one of the main tasks of the Government of the Republic. The Government’s priorities are to diversify the economy and attract investment to the top sectors of the economy, among which are oil and gas sectors (including not only production but also processing), production of a number of metal ores and coal, construction materials, processing of agricultural products and timber industry.

Increasing the investment attractiveness is associated with overcoming infrastructural constraints. In accordance with the Scheme of Complex Development of Productive Forces, Transport and Energy of the Republic till 2020 a railway to Yakutsk will be built. The future prospects are to make the way to the border of the Magadan region, to create a year-round network of federal and republican roads with the largest logistics hub in Yakutsk as well as to modernize the river fleet. It is planned to link the power lines of the central, western and southern parts of the Republic and to build efficient power plants. As a result of these plans, the weighted average cost of delivery of one ton of conventional cargo to Yakutia will be reduced by half and the electricity tariffs will be equal to the Russian average level by 2020.

Improving the investment climate in the Republic has already had a positive effect on the dynamics of growth of investments – strategic investments were made by the largest Russian companies. For example, the construction of a pipeline system “Eastern Siberia – the Pacific Ocean” is performed by Transneft, ALROSA arranges underground mines for diamond recovery and Surgutneftegas is running the Talakanskoye OGCF.

The influx of Russian and foreign capital helps to stimulate business activity in the domestic market and the competitiveness of Russian goods on the world market. During 2009 the Republic’s economy received almost $1118 billion from abroad, which is 67.8% higher than earnings for 2008. 98.9% of the total income was invested in the mining of diamonds, metal ores as well as in coal mining and enrichment, 0.2% was invested in the manufacturing activity.

Traditionally, the bulk of foreign investment goes to the Republic in the form of various credits. The main investors of Russia in general and Yakutia in particular are the countries of the European Union. In addition, the Republic has a long experience in foreign economic cooperation with Japan and India in the diamond cutting industry, and with Japan and South Korea – in coal mining. Luxembourg, Cyprus and India are leaders among the investor countries in terms of accumulated capital in the Republic. Yakutia is second after the Sakhalin Region in the total volume of foreign investment coming into the regions of the Far East Federal District.

The improvement of the investment climate provides opportunities for industrial development and practical application of innovation, creates massive demand for innovative technologies and products. In turn, the innovations make the industry competitive and create conditions for its growth.

The main directions of innovative reforms in Yakutia are related to the implementation of investment projects as per the Scheme of Complex Development of Productive Forces, Transport and Energy of the Sakha Republic till 2020 which provisions siting of new industrial plants in the region, using advanced innovative technologies in mining, transportation and processing of hydrocarbon raw materials, energy and transport, as well as the establishment of processing industries, development of telecommunications and information technology.

The introduction of innovations is necessary for the development and economic diversification, sustainable economic growth, high levels of productivity and further improvement of the investment climate of Yakutia.

Minister of Federative Affairs and External Relations of the Sakha Republic Valery Maximov