Russia’s Ekaterinburg: Driving large-scale regional development in Europe’s eastern outpost

Posted by Blogactiv Team on 10/01/13

By Evgeny Kuivashev, Governor of Sverdlovsk Region, Russia

Few analysts would argue that the current economic crisis requires greater investment in regions and cities. Moreover, regional development policies can contribute to national performance, not only interms of economic growth, but also as part of a broader development agenda. Given that by 2030,every 6 out of 10 people will live in an urban area, with this figure increasing to 7 out of 10 people by 2050, regional investments are seen as the drivers of progress at a national scale guaranteeing the solidarity of economic and social cohesion.

The current global economic crisis remains a major challenge for Europe and its diverse regions.According to Eurostat, regional GDP has dropped sharply throughout the European Union with Ireland, the United Kingdom and Sweden being the most affected. 2013 will be a critical year as we look to the EU to boost regional investment in the hopes of generating economic growth and job creation.

I take a strong interest in how European policy-makers and business leaders are looking for solutions to meet the current challenges facing our shared economies. I hope European decision makers regard Russia and some of its cities as models for regional growth.

Look at the city of Ekaterinburg for example, founded in 1723 by the Russian reformer Peter the Great as a manufacturing town. Throughout the centuries, the city – situated on the border of Europe and Asia at the base of the Ural Mountains – has remained one of the major industrial centres of modern Russia.

The global economy has shifted and Ekaterinburg has successfully adapted. Over the past 15 years,the city has succeeded in diversifying its manufacturing-based economy by moving from traditional industrial production to specialising in science and technology. Famous for its mining industries and machinery production, Ekaterinburg has become an important centre of knowledge and innovation,boasting 20 academic research centres and 45 institutions of higher education. This shift has led toa rise in GDP of the surrounding region from 20.7 billion roubles (500 million euros) in 2009 to 34.3 billion roubles (840 million euros) in 2012.

A strong industrial foundation has enabled the city to become a cluster for innovative engineering and to turn pioneering research into ready-for-market products and services. One of the recent examples is the Titanium Valley Special Economic Zone which has been set up close to Ekaterinburg,at a cost of 16 billion roubles (400 million euros) for the realization of the first stage of the project, to attract foreign investment and expertise. Currently, sites are being prepared for the Titanium Valley’s first residents, among which the VSMPO-AVISMA Corporation, the world’s largest titanium producer,is a prominent example. By 2016, more than 50 hi-tech foreign enterprises are expected to set up their facilities at the Titanium Valley including global technology leaders such as Boeing, Rolls Royce and Goodrich.

Russia’s freshly adopted laws greatly incentivise foreign investment in the region, such as income tax reduction for newly established enterprises for the first 5 years (from 18% down to 13.5%) and a guaranteed investment in the region by the Russian government of 8 billion roubles (196 million euros) each year. We see a lot of similar examples in Europe. Most recently, the President of the European Parliament, Martin Schulz, called for special economic zones to be set up in Greece to boost the country’s economic growth.

Due to Ekaterinburg’s long-term growth goals and innovative prowess, it will come as no surprise that it is bidding to host the World Expo in 2020, with the theme “The Global Mind”.Recently in Brussels, European and Russian leaders met at the 30th EU-Russia Summit to assess results of our cooperation so far and to discuss common global challenges and ways to boost economic growth of the two partners. Times are tough, but smart, strategic investments in skills and technology at a regional level will greatly contribute to a sustainable, knowledge-based economy that with benefit everyone – both in Russia and the EU.

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