Q What type of investment are you trying to attract in terms of sectors and priorities?
A We are targeting direct as opposed to portfolio investment. Given the restrictions on space, we are not seeking large energy projects. St Petersburg’s growth rate currently exceeds the Russian average and we expect this trend to continue and accelerate. So investors should be looking at sectors such as machine manufacturing, high-tech projects, shipbuilding, food processing and the automotive industry.
Q What do you see as St Petersburg’s advantages as an investment centre compared with the Leningrad Oblast region that surrounds the city?
A We can offer a highly educated and skilled workforce, given the city’s many centres of higher education and technical colleges. With almost zero unemployment, human resources are at a premium. But skilled workers are available. Our objective is to attract capital by creating a friendly and transparent legal framework for investors. To this end, we are working hard to simplify our investment legislation.
Q Can you give some details of how the investment process works and what improvements you have in mind?
A Investors are attracted by our political and economic stability, as well as the city’s geographical location and proximity to European markets. The city provides all investors, foreign and domestic, with equal access to our resources.
All privatisations and sales of city property are conducted through an open auction process. The same applies to construction permits for commercial or residential property. The approval time depends on the nature of each project, but we believe the system offers a reasonable timeframe.
This year, we enacted a new law on tax benefits for strategic investors in industry, and we are working on improved public-private partnership (PPP) legislation that is due to come into force in 2007.
Q There has been some criticism of the city’s infrastructure, specifically power supplies. What is being done to improve the system?
A St Petersburg is only 300 years old, a young city by European standards, but until recently our infrastructure was largely neglected. The mainly coal-fired boilers for domestic use and plumbing systems are obsolete. So are many of the buildings. We are undertaking a regeneration programme to update the heating and sewage systems. Gazprom is installing a gas-fired network and the results have so far been successful.
We are building a new rubbish disposal system in the city’s south-west district with Danish partners under the new PPP regulations. And we have already started building a $500m electricity plant in the city, which will be Russia’s first private sector electricity generating facility.
The goal is to achieve a dramatic improvement in the city’s quality of life, including better urban transport and essentials, such as the water supply. We also have plans to upgrade the international airport.
Q The airport ties in with the subject of tourism. What efforts are being made to boost this sector?
A St Petersburg ranks among the top 10 tourist destinations in Europe. Last year, we approved a tourism promotion plan in conjunction with Boston Consulting Group, with the aim of reaching fifth place in Europe by number of visitors in the next five years. The programme seeks to add 10,000 beds by 2010, bringing the total to 28,000.
We are upgrading the airport and port facilities. We have begun enlarging the port to enable it to accommodate large, modern cruise ships. There has been a dramatic upswing in the number of tourists arriving by sea, but St Petersburg is not a cruise ship port. Construction of a sea passenger terminal is under way and the first ships should arrive by 2009.
Q What is being done to improve transport links with the city, always a key factor in investment decisions?
A The main project under way in this area is the eight-lane, high-speed Western Diameter road, part of which will be Russia’s first toll motorway. This 30-mile road network will provide a rapid link from the port to the federal highways of Russia. This is especially important for companies processing container traffic, most of which is taken to Russian markets by road.
