Our experience
What makes the Samara region unique? Enhancing direct investments in Russia
Russia’s 85 regions have started to blend together in the minds of both Russian and foreign investors. Recognising this, the government of the Samara region wanted to identify and promote its top qualities for growth.
Following the success of FDI attraction in the Udmurtia region, PwC helped analyse the Samara region’s investment opportunities to develop a path to economic growth.
Client:
Ministry of Economic Development of the Samara region
Our role:
PwC analysed more than 100 manufacturing industry segments and identified 20 investment opportunities where the Samara region could engage investors. PwC conducted a series of interviews with prospective investors that resulted in investment projects in the region.
Country:
Russia
Setting the scene
A vibrant investment climate helps build economic potential and growth. In Russia, a competitive investment climate has led to aggressive competition among regional authorities to secure investor buy-in.
Different regions have different approaches to encouraging foreign investment. Many regions have established special economic zones with preferential tax regimes, taken measures to provide investors with various types of support and developed one-stop-shop investor support frameworks. These measures helped to create a favourable investment climate in many regions, but also added a new challenge. All regions have started to look the same to the investor.
There are 85 regions in Russia. How can they differentiate themselves?
The Samara Regional Government asked this question. Instead of sending the same standard email to major Russian and foreign companies that yield low conversion rates, they wanted to incorporate more appealing methods to develop investor relations.
In order to create investment growth, the region needed to understand its competitive advantages. The government engaged PwC to help determine which industries might be expected to enjoy growth in investment activity as well as highlight the Samara region’s industry-specific competitive advantages compared to other Russian regions.
How we helped
For more than eight months, PwC and the Samara Regional Government searched for growth points that had the potential to attract investors to the region. The project included three key stages:
screening and short-listing high-potential industries
carrying out in-depth marketing research of these high-potential markets and analysis of the region’s assets that could be utilised as part of investment projects
and testing the investment opportunities we identified with potential investors.
Based on findings from the initial screening of more than 100 industries, we identified over 20 new investment opportunities for the region, such as potential new manufacturing facilities.
PwC conducted marketing research on each potential project and developed an investment opportunity card. The card includes a description of the market triggers for each investment project, the resources available in the region and a long list of potential investors. We then defined the potential for growth in product demand, the import-substitution potential for goods imported from abroad or from other Russian regions, and the export-growth potential for external markets. In addition, the PwC team analysed the region’s investment sites and its competitive advantages as a location for setting up new production facilities, compared to other regions.
To get a sense of how these projects would perform on the market, PwC conducted a series of interviews with prospective investors. Based on the findings, we prepared an investor’s list of the expectations that companies have and the requirements on implementing investment projects.
PwC Russia leveraged expertise across the global PwC network, including China, Germany, Japan, South Korea and the US, to reach out to potential investors and confirm their interest in investing in Russia. Our global presence helped analyse different local investment contexts. PwC Germany also supported the Samara Regional Government officials during their visit to Germany by arranging their participation in several conferences and organising meetings with potential investors.
Earlier this year, we sat together with government and ministry officials and expert organisations such as PwC, and worked hard to identify priority investment areas for the region. I would like to highlight that having an impartial, outside perspective on the region’s potential strengths has been crucial in broadening our horizons. This practical exercise has enabled us to secure a solid investor. The project is at the development stage and the investor is currently recruiting people for a large site that we will be jointly launching in the region.
Impact and potential
The Samara region in Russia wanted to stand out amongst its competitors to drive economic growth. Their project with PwC helped stimulate investments and new jobs.
PwC supported the implementation of a USD 20 million capital investment project. Based on the analysis, we prepared recommendations on how to further engage with potential investors and on what areas the Samara Regional Government should prioritise for development.
Subsequent government efforts focused on these priority areas are expected to increase investment inflows to the region, enhance the time/effort ratio and reallocate some freed-up time to other regional development initiatives. Developing manufacturing facilities that are new to the region will help to drive the region’s economy, which has traditionally been focused on large automotive and chemical production enterprises, towards a more diversified economy that is resilient to economic fluctuations.
