Tatarstan tempts investors as the Silicon Valley of Russia

Tatarstan is one of the most favourable regions for investment in Russia, with the ambition to become its “Silicon Valley”.

Tatarstan is a republic within Russia with its own government, established in 1920. Recently, it has been on a strong development path in a bid to attact foreign investors.

A number of high tech projects are underway to reach its ambition goals, such as the construction of two satellite cities, Smart City Kazan and Innopolis. These are set to make Tatarstan a regional hub for technology and innovation.

Drivers for this development include the 27th World University Summer Games, which will take place in Tatarstan’s capital Kazan next summer, as well as the World Aquatics Championships coming up in 2015. These events will require new investments in infrastructure and the services industry.

There are also a number of “priority industries” in the region, including chemicals, machinery, construction and agriculture, on which the local government is focusing attention.

Linar Yakupov, chief executive of the Tatarstan Investment Development Agency (TIDA), says Tatarstan is “one the most industrialised regions in Russia” with a high growth potential.

Tatarstan’s government realises the need to attract foreign capital into the region, and so makes it easy for foreigners to invest.

One of the key incentives is the special economic zone set up in the area in 2005, tagged Alabuga.

The area includes a free customs zone regime allowing to import modern high-tech equipment to the territory without paying import duty and value added tax (VAT). There are also various other tax incentives, such as a low corporate tax of 2% and no transport, land or property taxesf for foreign business.

Anna Stupnytska, a macro economist in the global macro and markets research group at Goldman Sachs Asset Management, sees the region as a growth market, rather than a developing market. This means that it is on track for more sustainable long term growth.

She names political stability in the republic, human capital, technology and the attractive microeconomic environment in Tatarstan as key indicators of its success.

Russia’s membership in the World Trade Organisation is set to make Tatarstan even stronger as an investment centre, as new regulations make trade with the county simpler for other WTO members. Stupnytska expects it to lead to improved transparency, competition and consumption.

Tatarstan’s President Rustam Minnikhanov admitted improvement waw still needed on many levels, including a stronger push to eliminate corruption. Inflation is also an issue for Tatarstan, as for any other quickly growing economy, he said.

However, speaking at an investment conference in London last week, Minnikhanov offered a guarantee that investors would not lose the money they invest in the region and vowed to continue working on improvements to the investment climate.

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