**URALS****=****DYNAMIC CAPITAL ENTICES INVESTORS**

 

by YelenaZheberlayeva

 

Straddling theborder between Europe and Asia, Yekaterinburg is the capital city of SverdlovskOblast and plays the role of capital to the entire Urals region. A receptivebusiness climate and strategic location, combined with the presence of a U.S.Consulate General and numerous foreign companies, makes Yekaterinburg one ofRussia=s most promising regions for foreigninvestment and trade. 

 

Yekaterinburg isamong the top four most populous cities in Russia with over 1.5 millionwell-educated residents. Named for Peter the Great=s second wife, Catherine I, Yekaterinburg hasmaintained its historical importance as the center of Russia=s industrial heartland.   

 

Today, Yekaterinburgis well known both as a center of heavy industry and steel production and as amajor transportation hub. Its primary industries include ferrous and nonferrousmetallurgy, chemicals, timber, pulp, and paper. Sverdlovsk Oblast produces themajority of Russia=sbauxite, titanium, and vanadium, and a quarter of its iron. Long an importanttrading area for goods from Europe, Central Asia, and Siberia, Yekaterinburgalso has a reputation as a center of higher learning and research, housing over18 institutes and numerous research facilities linked to industrial production.Politically, Sverdlovsk Oblast has produced some of Russia=s most prominent politicians, including BorisYeltsin, Russia=s first president, and Eduard Rossel, itsfirst elected governor.  

 

**Economic and PoliticalClimate**

Yekaterinburg andSverdlovsk have worked hard to implement reforms in both the economic andpolitical spheres, and economic reform appears to have achieved irreversiblemomentum. The majority of the Oblast=s industries have been privatized. Currently, over three-quarters ofretail sales and industrial output is produced by private enterprises.Sverdlovsk Oblast has the largest GDP in the Urals and is one of the fewadministrative regions in Russia that is currently a net contributor to the federalbudget.  

 

Since the federalgovernment in Moscow granted permission to Sverdlovsk oblast to negotiate itsown foreign economic relations, the region enjoys a great deal of localautonomy and has been aggressive about pursuing foreign    investment. SverdlovskOblast=s independence allows it a greater range offreedom to negotiate directly with foreign companies interested in investing ordeveloping relationships locally. Moreover, the Oblast=s history of economic and political reformbode well for future development in the region. 

 

**Trade Potential**

Russia=s financial crisis has not left Yekaterinburgand Sverdlovsk Oblast unmarred and, much like the rest of Russia, emphasis isnow being placed on local production over more costly imports. One of the bestbets for exporting to the Urals region is food processing equipment as manyfirms are now purchasing new equipment to upgrade facilities and meet newdemand for locally produced food products. Many of Yekaterinburg=s food processing facilities, such as **KonfiChocolate Factory**, **Myasomoltorg Ice Cream Plant**, **MyasokombinatMeat Packing Plant**, and **Patra Brewery** have remained stable and arelikely to grow in the near future. 

 

Opportunities alsoexist for sales of price competitive Western products in a variety of othersectors including telecommunications, safety and security systems, medicine,and construction materials. The United States leads in trade relations withSverdlovsk Oblast. The Netherlands, Kazakhstan, Germany, and the United Kingdomround out the region=s topfive trading partners. 

 

**InvestmentPotential**

Sverdlovsk Oblast=s major attractions for foreign investors areits wealth of mineral resources and its highly qualified and low-cost workforce. Currently, approximately 138 foreign companies have branch offices inYekaterinburg. The modest expatriate community is also drawn from the U.S.Consulate General, a British Consulate, and a Hungarian Trade Representativeoffice. Yekaterinburg is by far the most cosmopolitan city in the Urals, with directinternational flights to many European and Asian capitals. 

 

Sverdlovsk Oblast=s favorable investment climate has resultedin its leading the Urals in attracting foreign investment, with $52 million and689 joint ventures in 1998. The top foreign investors are the United States,the United Kingdom, and Germany. The United States is Sverdlovsk Oblast=s number one investor with $114 million incumulative investment and 79 joint ventures. 

 

Over 70 foreignfirms have opened representative offices in Yekaterinburg, including **DHL**,**Ford**, **IBM**, and **Procter & Gamble**. **Coca-Cola** and **Pepsi**both opened bottling plants in 1998, and **MediaOne Group** has formed ajoint venture, **UralWestCom**, which has become Yekaterinburg=s leader in cellular phone sales and service.**Lufthansa** has a regional presence in the Urals as well, offering flightsthree times a week between Frankfurt and Yekaterinburg.

 

One promising sectorin Yekaterinburg is building materials; U.S.-Russian joint venture **Denek**isalready capitalizing on this market. Another sector that offers opportunitiesfor rapid growth is telecommunications. U.S. **MediaOne** Group has invested$1.4 million in the region since 1995. According to UralWestCom publicrelations manager Mariya Kuznetsova, AWe have reduced costs to our customers in order not to lose a singleclient. Our company continues to invest in order to broaden its network in theUrals.@

 

Sverdlovsk Oblasthas a foreign investment support center and a website that profiles over 200local companies (www.midural.ru/ek.en/). The oblast= Business Assistance Center, formed in 1992,can assist foreign companies in finding local partners(www.csp.mplik.ru/english/bac.html). The Yekaterinburg government has its owninvestment support center, opened in 1998.        

 

*For moreinformation about Yekaterinburg, visit **BISNIS Online** atwww.bisnis.doc.gov/bisnis/country/990525ur.htm.*

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*YelenaZheberlayeva represents **BISNIS** and is co-located with the U.S. ConsulateGeneral in Yekaterinburg.*