Moscow offers Tatarstan to ‘give birth’ to ‘a twin brother’ of Innokam in the zone of Kama

Cluster of Kama: 460bn rubles of investments by 2020

The forum took place in the IT-park, which is symbolic because the development of Kama Industrial Zone (it includes the territories of Elabuzhsky, Zainsky, Mendeleyevsky, Nizhnekamsky and Tukayevsky Districts, including Naberezhnye Chelny) presupposes a formation of two, a machine-building and IT, clusters at once.

Before the beginning of the plenary session, the potential investors, residents of the clusters and members of the forum with the participation of Artyom Zdunov, the Ministry of Economy of the Republic of Tatarstan, and Nail Magdeyev, the mayor of the city, were showed a video about advantages of the cluster of Kama at least four times. It was said that the territory accounted for a quarter of the Gross Regional Product of the republic, 42% of synthetic rubbers and 54% polymers produced in Russia, a third of the production of heavy goods vehicles and a half of the production of tyres. Moreover, the productions are interconnected with each other that, as it is well known, gives a synergetic effect. The impressing figures of investments for these 5 years were demonstrated as well: by 2020 in Nizhnekamskneftekhim are 100bn rubles, Ammonia – 50bn (the indicator of initial investments in 2015), in Taneco – 172,2bn and in TAIF-NK – 70bn rubles (the investments for 2016). KAMAZ plans to invest 44,9bn rubles by 2020 while Ford-Sollers – 29,7bn. Consequently, the investments in the cluster for 5 years will make a minimum of 460bn (for instance, according to the catalogue of all investments of the republic, in 2015 the total amount of investments will be equal to 428,986bn rubles).

The potential investors and residents of the cluster of the forum were showed a video about advantages of the cluster of Kama at least four times

It is curious that the video-makers slightly noted the achievements in the cluster of Kama for 4 years… making the cluster at least one year older. It should be noted that Innovative Territorial and Industrial Cluster of Kama (Innokam later on) was created in Naberezhnye Chelny in 2012. Initially, it consisted of Daimler, Ford, Taneco, KAMAZ, TAIF-NK and Tatneft. The Centre of Cluster Development of Small and Medium Entities of Entrepreneurship of Kama was created last year with the support of the Ministry of Economy of the Republic of Tatarstan with the intention of 'implementing instruments of cluster approach'. And, finally, the machine-building cluster and IT-cluster of Kama Economic Zone were created in 2014 in the 'strategic session', which was also held in the IT-park, within the scope of the Centre of Cluster Development of Small and Medium Entities of Entrepreneurship of Kama. In 2015 the work on the formation of two new sectoral clusters: a woodworking (furniture cluster) and a cluster of polymer products manufactures. But this cluster formally didn't have a concept: it was presented to Rustam Minnikhanov with the participation of Vladimir Mau, the rector of the Russian Presidential Academy of National Economy and Public Administration, this summer. The President noted the industrial zone of Kama was 'the main growth point of the region'.

'We, Ministry of Economy of Tatarstan, just needed to approach the goal area and score a goal!'

The Presidium consisted of Irek Gumerov, the deputy director general of KAMAZ CJSC, Andrey Shpilenko, the moderator-director of the Association of Clusters and Technological Parks, and Sergey Bogoslovsky, the deputy head of the directorate of Russian Railways PJSC in the subsidiary in Samara. Unhappy Bogoslovsky came to the forum first but didn't utter a word during the session. Shpilenko, instead, spoke for the five people trying to wake the sleepy speakers up; it felt he had an idea. It was obvious that he came here with the intention of lobbying that idea. Having remembered last year's strategic session in November, Artyom Zdunov stated that the ideas expressed during that session about necessity of integration of efforts, to register and attract the federal financing were realized for a year:

'We, Ministry of Economy of Tatarstan, needed just to approach the goal area and score a goal! The main ideas and passes already existed before you (Editor's Note: and addressed to the audience). The projects of our enterprises that the federal government wants to see for financing, are already present in the set of requests, which will show Moscow in January or February.

Zdunov assured the local businessmen that all business projects, including machine-building, will be continued

What is more, Zdunov assured the local businessmen that all business projects, including machine-building, will be continued. In addition, the Small and Medium Business Project will start earlier, in February or in March, not in summer. Instead, Zdunov asked the business for the support in the form of 'projects'.

'We have a good team with Magdeyev. We will do the best in order to have your projects supported [at level of federal and regional governments]. I see the result of the forum in new business plans and set of documents that you can present for financing,' Zdunov declared hoping for the projects.

Advertising the cluster, Nail Magdeyev, stated that due to the programme of the Territory of Priority Development, the zone of Kama will be 'one of the most prospective sites for business development in the country' very soon. He insinuated that 'although machine-building is the basic sector of every country and will remain its position', it seems that the situation is fine with the diversification of the economy too. 'More than 50,000 workers in small and medium businesses are more than the employees of KAMAZ and its offshoots. And we account for over 30%, which is one of the highest shares of small and medium businesses in GRP.'

The Ministry cared about creation of new industrial clusters

According to the functionaries, while Innokam is gathering speed, Andrey Shpilenko offered another possible driver of growth – creation of the industrial cluster under new conditions of the Ministry of Industry and Trade of Russia. In Shpilenko's view, this new instrument will be in demand of SMB. Nevertheless, for a while, the necessity of the new type of clusters is not clear because at present there are about 400 clusters in Russia with the support of the federal and republican entities, according to Shpilenko. The number of cluster development centres is 27; they supervise over 70 clusters out of 400. As for the industrial clusters, they are 125 in 56 regions of Russia (26 of them innovative territorial clusters like Innokam), in which over 1,900 companies are engaged. The Central Federal District (the 33^rd cluster) and Volga Federal District (the 29^th cluster) are the leaders. Tatarstan, by the way, is responsible for fuel and energy industrial cluster.

Andrey Shpilenko offered another possible driver of growth – creation of the industrial cluster under new conditions of the Ministry of Industry and Trade of Russia

Differences of the new industrial clusters from the active ones

However, Shpilenko is convinced industrial clusters are prospective as well as the territorial innovative ones. These clusters appeared in the 'Development of Industrial Infrastructure' subprogramme of the government of the Russian Federation. The benefit for the business is following: according to the cluster programme, there are planned subsidies for the participants for compensation of a part of the expenses during the realization of common projects on import substitution. But the requirements for the industrial clusters are different. To start with, only industrial enterprises can be participants of the cluster. Secondly, in the composition (not as a participant) there must be at least one university or specialized secondary college and, at least, one finance and credit institution (bank). Thirdly, more than 50% of one participant's products of the cluster are used in the production of the other, and more than one enterprise produces the end product. The main difference is that the producers only, not districts of Russia, can initiate the project. The authority would like to encourage the initiative from below. On the other side, more or less understanding how difficult it is to start a separate business, they will need some help of the regional authority in directing the creation of the industrial cluster, in Tatarstan in particular. An attractive bonus is that the federal subsidies will be channeled directly to the participants of the projects. But the main initiator of the project will have to spend more than 30% of its cost first in order to get these subsidies. Shpilenko expressed his hope that the decision about 'creation of one cluster more in Tatarstan, not the by the leads from above,' will be made at the forum by the representatives of SMB. Then he offered the representatives of the authority of Tatarstan to comment the federal initiative.

Index of industrial production of the Republic of Tatarstan for 10 months in 2015 is 93,7% and the indicator of KAMAZ is 63%

Sergey Churbanov, the deputy head of the department of the machine-building complex of the Ministry of Industry and Trade, answered that the creation of the machine-building, medical (based on Medical Instrument Factory of Kazan) and organic silicon (based on Silicon Synthetic Rubber Factory of Kazan) clusters are the top lines of the industrial cluster. The work on the machine-building cluster is carried out along with the Centre of Cluster Development of Kama. The functionary pointed out that these directions will be reflected in the law on industrial politics of the Republic of Tatarstan.

KAMAZ produced only 20,700 heavy goods vehicles in total, while Ford-Sollers in Chelny and Alabuga, in turn, produced about 31,000 cars. Photo: Maksim Platonov

In the economy, while some clusters are created and the industrial ones are on paper, things are not fine. So, the volume of industrial production of the Republic of Tatarstan, according to Churbanov, for 10 months in 2015 made 1,5 trillion rubles, the index of industrial production is 99,6%. Four types of activity account for 68% of the volume of the industrial production of the republic: petroleum extraction – 24,6%, petroleum products manufacturing – 19,6%, chemical production – 13,8% and production of transport vehicles and equipment. The cluster of Kama whose goal is to raise the current share in GRP equal to 23,8% depends on the latter activities.

For the period of 10 months, the products of the enterprises of the machine-building complex, including defence industry, have been sold for 292bn rubles. The index of the industrial production made 93,7% (for 10 months it decreased by almost 7%). In KAMAZ, the volume of the production amounted to 54,7bn rubles and its index is 63% (it dropped by 37%). KAMAZ produced 20,700 heavy goods vehicles. Ford-Sollers in Chelny and Alabuga, in turn, manufactured about 31,000 cars. For 10 months, ElAZ (Yelabuga Automobile Plant) earned 2,6bn rubles.

Tatarstan received about 27bn rubles for new investment projects from the Ministry of Industry and Trade of the Russian Federation

Churbanov also proudly told that within the scope of the competitive selection of investment projects, which for the first time was organized by the Ministry of Industry and Trade, 7 out of 62 projects-winners 'are realized in Tatarstan'. It should be specified that the federal centre made a decision to include 68 projects to the list that will be realized by 61 companies: the total amount of investments of the selected projects in the fixed capital will be equal to 125nb rubles. Most projects belong to chemical complex (15) and metallurgy (11). Tatarstan entered the top five regions with the most number of winners but conceded to Volgograd Oblast whose 9 projects were selected. According to Churbanov, every winner will get a subsidy of 1,62bn rubles. In other words, the economy of the Republic of Tatarstan will have 11,34bn rubles. This year Tatarstan is represented by 12 companies, one of them is from Chelny – Kama Crystal Technology, which produces synthetic sapphire. This company along with ElAZ had a positive opinion of the Ministry of Industry and Trade of the Russian Federation on the programme of subsidization of expenses on R&D. There were signed agreements on an anti-crisis programme concerning credit subsidization for working capital financing with 13 companies of the Republic of Tatarstan. Churbanov informed that the sum of subsidies is over 239m rubles, that is to say, the republic will have over 3bn rubles more. Two enterprises of Tatarstan were granted concessional loans at 11,5%, so Generating Company obtained 11,1nb rubles for 9 years for the construction of two energy blocks of CHP-1 of Kazan. And within the scope of import substitution, 500 and 700 million rubles agreements on a special purpose loan were signed by Industrial Development Fund with Interskol-Alabuga CJSC (production of modern electric equipment) and SafPet PJSC (production of polyethylene terephthalate and terephthalic acid) respectively.

Gumerov insinuated that KAMAZ produces electric buses besides lorries, and the clients' reaction to them was positive and asked Zdunov to support the project. Photo: kpfu.ru

How Irek Gumerov from KAMAZ asked for money from Artyom Zdunov for electric buses

Irek Gumerov, the deputy director general of KAMAZ PJSC, noted that for all years of work (not formally) of the cluster KAMAZ 'managed to grow the number of suppliers in the region that had not existed': 'Today, for instance, there are some enterprises, which belong to our suppliers who produce composite details.' At present KAMAZ is elaborating new cars that will be produced in 2018-2019. Gumerov insinuated that KAMAZ produces electric buses besides lorries, and the clients' reaction to them was positive:

'We observe that the buses are in demand, and we want to intensify their production. In addition, we would like… to ask …a kind of help. I would like to ask Artyom Zdunov… to support the project more intensively,' he awkwardly pronounced his request in confusion. 'Though there is some support, but the budget is, unfortunately, sequestrated.'

'How much does 'intensively' mean? What is the price of the intensity?' Zdunov queerly asked Gumerov again.

'Well… 70 million. Today after the discussion 12 million rubles remained. It is simply not the right price for this project. It was symbolical: the kid was gradually spewed along with water [budget sequestration]…

'Advanced and smart top manager immediately solved for himself several problems,' Shpilenko said ironically. 'First of all, he set goals and addressed to the Minister for their solution… I have a counter-question: if within the scope of the forum the enterprises of SMB make a decision on the appropriateness of creation of an industrial cluster, is your enterprise ready to support them? [It became obvious that Shpilenko visited the forum in order to lobby these clusters].'

'We will support all initiatives that give an impetus to the business! We do it with the cluster and without it! So, Master Industrial Park of Kama was created on the initiative of the Republic of Tatarstan gave a strong impetus to our suppliers. Undoubtedly, we will support you!' Gumerov expressed his willingness probably without paying attention to the fact that KAMAZ will have cough up 30% of the cost of creation of the industrial cluster. And due to 37% of slump in industrial production of KAMAZ, the company might not have enough money to create the cluster, especially because KAMAZ has to ask the authority of the Republic of Tatarstan for co-financing of the project of electric buses).'

Zdunov commented that the cluster is linked with the efficiency indicators and presupposes an increase of tax return from the projects located on its territory and amount of investments

In 2016-2018, Naberezhnye Chelny will have a financial impact of the cluster of Kama

Should they think about the organization of the new industrial cluster if the administration of the city and republic suffers from a headache because of Innokam that has opened recently? Is Innokam effective? Does it already bring dividends to the budget of the republic? After the plenary session the correspondent of Realnoe Vremya'addressed these questions to Artyom Zdunov, the Ministry of Economy of the Republic of Tatarstan, and Nail Magdeyev, the mayor of the city.

Mr. Zdunov, how long will we wait for the real return of the cluster of Kama? I mean the purely financial return for the budget of the Republic of Tatarstan if we think that the cluster is a certain business plan…

'We are not waiting for it! The cluster is linked with the efficiency indicators. Its creation already presupposes a creation of working places and some tax payment. Consequently, the cluster is an increase of tax return from the projects located on its territory and amounts of investments. This is why we are not waiting for anything. We speak about growth only. And the main effect in the machine-building sector, if you know, is a fast return of invested funds. And we already compared these tax indicators and figures on working places with data of this and next years, and within the next 1-3 years, the taxes will go to the municipal budget in particular.'

According to him, the 'return' will be reflected in whether the diversification in the economy of Chelny is finally high: when the economy does not depend on KAMAZ, 'then we can say they the return is high. We do not count the return in value terms only…'

In how many years do expect this high diversification?

'The development of the economy of the city presupposes it by 2020, firstly, we will have left the 'red zone of monotowns' and got rid of the dependence. And today Magdeyev mentioned the figures of the quantity of SMBs and their workers, which exceed the number of workers in KAMAZ. And it all has been happening during last years!'

As a good owner, I need to pay attention to everything, moreover, if it can additionally provide the city with working places. The administration of the city pays much attention to the machine-building sector as it did and will do

We asked Magdeyev, the mayor of the city, whether the authority of the city and business should make efforts constructing one industrial cluster more if there is Innokam. The mayor of the city didn't answer the question directly but gave to understand that the executive committee of the city would look into the industrial clusters:

'As a good owner, I need to pay attention to everything, moreover, if it can additionally provide the city with working places. The authority of the city pays much attention to the machine-building sector as it did and will do.'

'Do not forget that when we sign agreements with the federal centre, many of them has a tripartite character or, more precisely, the unit of the federation, a ministry or municipality that expends funds. The head of the city is also responsible, he or she assumes responsibilities and, respectively, has an opportunity to realize projects. We all work together here,' said Artyom Zdunov supporting the mayor in our opinion.'