Tatarstan: A unique republic, A unique investment opportunity
What investors say about investing in Tatarstan
Tatarstan: supporting innovative start-ups
Tatarstan in the capital markets
Tatar banks expand with help of western capital
Taking Tatarstan’s petrochemical resources into the future
Tatarstan’s new Special Economic Zone Alabuga
Tatarstan’s thousands of years of culture
Kazan: home to some of the best sports facilities in Russia
The Park House is the fifth-largest shopping mall to open in Kazan in the last 18 months. Kazan now has more square metres of shopping centre per capita than Moscow. It even has more than London. It is proof, if any were needed, that Russia’s consumer boom is in no way just confined to Moscow.
Ilsur Metshin, the young and dynamic mayor of Kazan, says: “We’re a city renowned for its history and culture, but we’re also a strong economic centre, and I see the most growth in the consumer sector.”
Incomes in Kazan rose 20% last year, which is 8% higher than the Russian average. A lot of that has been going into personal deposits, which more than doubled last year, but the consumer feel-good factor has also translated into a boom in retail loans, with local banks like Ak Bars and Spurt Bank enjoying growth levels of over 50% for products such as mortgages and automobile loans. As a result, purchases of new automobiles were up 20% last year.
The consumer lending boom is attracting Moscow banks into the region too. Russian Standard Bank, the leading Russian bank in consumer lending, set up several branches in the Republic recently. In fact, the bank is not such an outsider – its founder, billionaire entrepreneur Roustam Tariko, comes from Tatarstan.
Tariko says: “We’re seeing particularly strong growth in prosperous regions like Tatarstan, where I grew up. This is the consumer era in Russia, the era of the product. Russians don’t want average products anymore. They are aspirational. They want to dream, to buy the best.”
Foreign investors have also been attracted into the Tatarstan consumer market. IKEA, for example, which is the biggest foreign investor in Russia in the consumer sector, has opened a MEGA shopping mall in Kazan, which is IKEA’s first investment in Russia outside of Moscow and St Petersburg.
Per Kaufman, general director of IKEA for Russia and Ukraine, says: “Kazan is a big city with a population over a million, and it’s one of the most prosperous regional cities. We’ve invested around $350 million into MEGA, the biggest shopping centre in Kazan, and helped attract a further $100 million or so from the other stores who have set up in the venture.”
He says: “We’ve had very good contact with the mayor’s office, which helped make dealing with the red tape a lot easier. When you’re setting up a 120,000 square metre project, it’s important that the local administration supports us. Usually they do, in fact, because ordinary people want our products, so it’s politically popular to support us.”
Kaufman says the success of the Kazan stores, which are enjoying double-digit growth, “point to the growth of a middle class in Tatarstan, as in the rest of Russia”.
Marc Holtzman, vice-chairman of ABN Amro, agrees. He says: “The most amazing thing is the middle class that has emerged here. Just look at the enormous gyms that have sprung up here, like Planet Fitness, for example.” An increasing number of ordinary Kazanites, particularly young working women, can afford the $200 monthly membership fee of high-class gyms like Planet Fitness.
Kazan’s restaurants, bars and hotels are enjoying the growth from this middle class – 216 new hotels and restaurants opened in 2005 alone, including the major new hotels the Korston Hotel and the Suleiman Palace hotel. Major international hotels are also in discussions with the city to set up local branches. And major restaurants and bars from Moscow are also setting up new sites in Kazan, such as Tinkoff, the fashionable beer restaurants.
The consumer boom is also helping food and drink sectors, and here too foreign investors are making multi-million-dollar investments. For example, the LSE-listed Efes Breweries International bought local brewery Krasni Vostok in February 2006 for $390 million.
The acquisition gives Efes local beer brands such as Gold Beer and Ak bars, as well as the Kazan brewery, which is the second-biggest brewery in Europe, with a production capacity of 760 million litres a year. Mehmet Kochak, general director of the Kazan brewery, says: “In the first quarter of 2007 we sold 100% more of local brands than were sold last year.”
Kochak, who comes from Turkey, says he feels very at home in Tatarstan – the Tatar language is in fact very close to Turkish, and more than 200 other Turkish companies invest here.
Kochak’s been impressed with the investor friendliness of the Republic: “Efes is operating five different plants around Russia, and Kazan is certainly one of the best places we’ve invested. I don’t think Tatarstan is yet getting the FDI it deserves.”
The workers at the brewery seem satisfied to be working for a foreign-owned company. One worker says: “The number of people working here did go down, but for those of us who remained, salaries went up. And standards went up as well, such as hygiene standards and quality control.”
Another investor attracted by the local consumer boom is ARC International, one of the biggest global producers of glassware. The senior management of ARC International met with the regional government of Tatarstan on one of its many trips abroad to seek foreign investment, and signed an agreement to build a €80 million factory in Tatarstan.
The region has also seen a boom in electronics, PCs and software, and here too, foreign investors are being attracted into the market. Microsoft, for example, has opened an office in Kazan and is working closely with the regional government.
Olga Dergunova, regional chairwoman of Microsoft for Russia and the CIS, says: “What attracted Microsoft about Tatarstan was the government had a clear and coherent IT policy, and it went about executing it.”
Dergunova points to the regional government’s policy of ‘Electronic Tatarstan’, whereby all schools were be connected to the internet five years ago. She also applauds the government’s setting up of techno-parks to support the emergence of local IT companies. She says: “Tatarstan was one of the first Russian regions to do that, and we’re now seeing strong local companies emerging in PC assembly, such as ICL KPO.”
Linar Latypov, first deputy minister of trade and foreign economic cooperation, says: “The biggest techno-park in Russia is in Tatarstan. We wanted to emulate the cluster model of development used in places like Colorado. In fact, we used the experience of Marc Holtzman, vice-chairman of ABN Amro, who earlier in his career was secretary of innovation for the state of Colorado. Since then, we’ve seen a whole generation of IT SMEs grow up.”
Some SMEs in the consumer sector have found it hard to compete as investors come in from Moscow or abroad. However, others have prospered, and started to expand, such as Domo, the Kazan-based electronics retailer, which has managed to attract financing from the rouble bond market, and is now one of the biggest retailers in Russia.
SME owners say it has certainly become easier for them to find credit from banks. Oleg Tuntsev, for example, is the owner of the Bravo chocolate company, based in Kazan. He says: “We started in 1999 with a loan of $5,000 from KMB and eight staff making five tonnes of chocolate a month. Now we have more than 200 people working for us, and we make 200 tonnes of chocolate and $500,000 profit per year.”
Tuntsev adds: “When we started, it was very difficult to find anyone to lend to us. Now, we’re constantly called by banks for lending, leasing, any kind of financial service we might want.”
Other SMEs have found niches where being smaller is actually an advantage. Maksim Andreev is general director of the Kazan publishing firm, Logos, which does a lot of “vanity publishing”, and also works with several regional ministries on publications. He says the publishing sector favours smaller firms such as Logos: “The technology is changing all the time, so we’re small enough to be able to update quickly.” He recently raised a $200,000 leasing loan from KMB with which to buy two large new printers.
Mayor Metshin says: “It’s a law of the market that outside competitors come in and the market becomes more competitive. If that means local competitors find it too competitive, then they need to find a new niche in the market.”
