Sustainable Integrated Territorial Development

Annual Report 2013
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# Sustainable Integrated Territorial Development

An essential prerequisite for successful development of the regional economy is an integrated approach to territorial development based on the analysis of social and economic situation in the region, the investment opportunities and workforce capacity, the level and prospects of developing economic relations with neighbour regions.

By 2013, Vnesheconombank signed cooperation agreements with 59 constituent entities of the Russian Federation. During the reporting period, the Bank concluded agreements on cooperation with Kaliningrad, Leningrad, Kirov, Ivanovo Regions and Republic of Bashkortostan.

Pursuant to the agreements the Bank develops the programs of financial and non-financial measures of regional support over the mid-term horizon – plans of joint measures by the VEB Group organizations and public authorities of the Russian Federation constituent entities for integrated territorial development. In 2013, the respective plans were signed with the Administration of Primorsk Territory, the Governments of Astrakhan and Rostov Regions.

In the reporting year, Vnesheconombank continued forming a database of potentially worthwhile investment projects to be implemented in the Russian Federation constituent entities in the mid-term perspective. By year-end 2013, a database of 491 investment projects was created, including projects in single-industry towns.

## Activities in Kaluga Region

Vnesheconombank’s cooperation with Kaluga region – the Bank’s pilot project on integrated territorial development – is a good illustration of the efficient planning approach to the development of territories.

As at 01.01.2014, the amount of loans granted by Vnesheconombank for investment projects in Kaluga Region totaled RUB 25.7 bn (01.01.2013 – RUB 17.7 bn).

Vnesheconombank co-finances a project on developing the industrial park infrastructure (forming automobile and automotive component cluster), projects on construction of a pharmaceutical and a cement plant.

In the reporting year, Vnesheconombank made a decision to finance a project on creating a combined transport and logistics hub in Kaluga Region.

Besides, in 2013 the Administration of Kaluga Region signed an agreement with Vnesheconombank’s subsidiary – LLC VEB Capital – intended for financing of long-term projects in transport, energy, housing and public utilities, as well as social infrastructure. Alongside that, the agreement stipulates a system of support for enterprises in dire financial condition.

## Activities in North-Caucasian Federal District

The reporting year witnessed the Bank’s continued efforts to support projects in North-Caucasian Federal District (NCFD).

As at 01.01.2014, the portfolio of loans granted by Vnesheconombank within the framework of financing 6 investment projects in NCFD amounted to RUB 18.9 bn (01.01.2013 – RUB 14.7 bn).

A pivotal role in developing North-Caucasian Federal District is played by Vnesheconombank’s subsidiary – OJSC North Caucasus Development Corporation (NCDC or the Corporation) - established to promote major regional projects. The Corporation’s activities also include equity investments in project operators and consultative assistance to project initiators.

In 2013, Vnesheconombank increased NCDC’s authorized capital from RUB 3.6 bn to RUB 7.6 bn.

Over the period under review, the amount of funds allocated by the Corporation for investment projects in NCFD increased more than 2.5-fold and as at 01.01.2014 totaled RUB 6.89 bn (01.01.2013 - RUB 2.7 bn). At year-end 2013, NCDC was co-financing 7 projects approximating to RUB 30.4 bn. The projects are expected to create more than 2000 new jobs and ensure above RUB 1.8 bn worth of annual tax receipts.

The year 2013 saw the launch of a plant to produce Aliumar aluminum slugs (within the framework of a project on creating the National Aerosol Cluster), the reception of tourists by Arkhyz tourist and recreational centre, the opening of a new high-mountain eco-hotel built under the project named “Developing the Adventure and Eco-tourism in NCFD. North-Caucasian Mountain Club”. The Corporation was one of the major financiers of the above projects.

Construction of Kazbek innovative technopark started in Chechen Republic. The technopark will combine interrelated production facilities engaged in manufacturing state-of-the-art construction materials for residential and public buildings.

Furthermore, in 2013 the Concept of an Integrated Program for Developing the Caucasus Mineral Waters Region up to 2025 was developed in cooperation with NCDC.

Vnesheconombank’s Representative Office in Pyatigorsk actively assists Vnesheconombank and its subsidiaries in selecting projects to be implemented in NCFD. In 2013, the Representative Office forwarded for scrutiny by Vnesheconombank’s subsidiaries 17 projects totaling RUB 17.5 bn.

## Activities in Far Eastern Federal District and Baikal Region

For Vnesheconombank, one of priority business lines is enhancing the attractiveness of the Far East and Baikal Region and removing infrastructure constraints to realizing the region’s considerable economic potential.

At the beginning of the reporting period, Vnesheconombank was co-financing 8 investment projects delivered in Far Eastern Federal District (FEFD). As at 01.01.2013, the amount of credits extended for project delivery totaled RUB 43.7 bn.

By the end of 2013, Vnesheconombank was engaged in financing as many as 10 investment projects in FEFD, with the Bank’s commitment increased up to RUB 50.3 bn.

In order to procure and arrange financing of investment projects in the region, Vnesheconombank has established a subsidiary – OJSC Far East and Baikal Region Development Fund (the Fund).

In 2013, the Fund’s authorized capital increased by RUB 15 bn (up to RUB 15.5 bn) due to a targeted subsidy granted to Vnesheconombank. The above resources are earmarked for priority investment projects on developing industry, transport and energy infrastructure in Far East and Baikal Region.

As at 01.01.2014, the Fund conducted a complex expert evaluation of infrastructure projects for the construction of Nizhneleninskoe-Tongjiang railway border crossing across the Amur River (mining and smelting cluster in Priamurye) and development of Vladivostok international airport, as well as an investment project on creating a fishing cluster on Shikotan (Kuril Islands) on the basis of CJSC Ostrovnoy Fish Works.

The Fund is also scrutinizing investment projects in which it may be involved as a project initiator/developer.

Vnesheconombank’s Representative Office in Khabarovsk actively participates in identifying and selecting regional projects aiming to involve Vnesheconombank and its subsidiaries in project delivery. At the end of 2013, the Representative Office was scrutinizing 12 investment projects totaling about RUB 102.7 bn.

In 2013, the Plan of Joint Actions by the VEB Group and Administration of Primorsk Territory stipulating integrated territorial development of Primorsk Territory for the period 2013-2018 (the Plan) was approved. The Plan includes 11 investment projects in Far Eastern Federal District and Baikal Region for the total amount of RUB 273.3 bn. Vnesheconombank will co-finance 8 projects totaling RUB 218.3 bn.

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