|                                                                                                                                                             |  | REGIONAL CORNER: NOVGOROD, RUSSIA                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsPublicationsSourcesof FinanceLeadsand EventsExchangeRatesState ExportsOtherSources** |  | November 1997By Laurel HendersonAmong Russia's regions, Novgorod oblast shows promise and potential for U.S. businesses. The
oblast, which spans 55,300 square kilometers and is situated at one of the main transportation
crossroads that connects Moscow, St. Petersburg, and the Baltic States, has abundant forest and
other natural resources as well as significant heavy industry. The local administration,
spearheaded by a governor with a reformist reputation, has been taking measures to encourage
privatization and foreign investment by implementing legislation to ease and encourage growth. 
In addition, the U.S. Government has identified Novgorod as a pilot site for its Regional
Investment Initiative under the Gore-Chernomyrdin Commission.  More and more foreign
companies are being drawn to the region, but U.S. activity remains relatively low.Forestry and Natural Resources
Timber, primarily deciduous, covers 70 percent of Novgorod's territory, and timber products are
a leading industry in the oblast.  The region is currently producing far below its early 1990s peak
of 4 million cubic meters per year and its estimated capacity of up to 12 million cubic meters per
year.  Local officials seek ecologically clean technology to develop the forestry industry, and
report that with the use of advanced harvesting and processing techniques, the region could be a
major supplier of veneer, matches, furniture, and pulp for export. The oblast also has significant
reserves of various construction materials, peat, and fish.Industry  and Agriculture
Mechanical engineering and metalworking, timber-related production, chemical products, and
construction materials are among Novgorod's important industrial sectors. The region has several
specialized industries, including electronics and instrumentation, and power generation. Local
chemical production -- particularly of ammonia, nitrogen and phosphate fertilizers, and plastic and
synthetic resins -- is important to Northwest Russia's overall economy. Novgorod also produces
small amounts of non-food consumer goods, primarily color TVs and furniture, as well as linen
and knitwear.Novgorod has extremely low agricultural yields. Livestock farming and a recovering poultry
industry prevail over cultivation of crops, mainly due to shortages of farm machinery and
equipment.  Flax-growing is gaining importance, as demonstrated by the administration's flax
industry initiative to develop high-yield crops and boost the flax-related textile industry.Transportation and Logistics
Novgorod city, the administrative center of the oblast, is at a major Russian highway crossroads
between Moscow and St. Petersburg and is also a link on the railway that connects these major
Russian cities with Finland.  The Volkov, Msta, and Lovat Rivers connect the oblast to the
waterway system that runs throughout Northwest Russia. Novgorod has its own river port, but
due to ice and freezing temperatures, the port is only operational six months a year.Trade and Investment
The Novgorod administration has privatized 80 percent of state-owned enterprises and is taking
steps to encourage and facilitate investment from abroad by creating incentives at a regional level. 
 One example is the region's law exempting companies with foreign capital from local and
regional taxes during the payback period of investment.  Profit-based assessments using
international accounting standards  --  not the sales-based system used by Russia's federal
government -- are used to determine tax holidays.  The oblast government is playing an active role
in supporting viable investment projects.Foreign companies, mostly European, are attracted to the region's central location, its progressive
administration, and reasonably reliable utility and communication systems.  The United Kingdom,
Germany, and Scandinavian countries are Novgorod's primary trading partners. U.S. products
imported into Novgorod include soft drinks and appliances.  Examples of foreign investment in
Novgorod include a packing facility opened by Danish chewing gum company Dunsk
Tyggegummi A/S in 1996, and a chocolate factory opened by the U.K.'s Cadbury-Schweppes
in Chudovo, 30 miles north of Novgorod city. Industry sectors currently seeking investment
include chemical fertilizers, wood processing, telecommunications, and construction.For
more information on Novgorod, please see BISNIS Online at
http://www.mac.doc.gov/bisnis/country/regions.html#Northern.Laurel Henderson works for BISNIS in Washington, D.C.This report is provided courtesy of the Business Information Service for the Newly
Independent States (BISNIS)