Kursk Region

General information on Kursk Region

Kursk region is a well-developed and still environmentally friendly industrial and agricultural region of Russia’s Central federal district with moderately continental climate, located in the forest-steppe zone, a relatively favorable climatic environment for efficient agricultural production.

The region has an area of 30 thousand square kilometers (0.2% of Russia’s total area). With a population of 1,119.6 thousand people as of January 1, 2016, Kursk region has 753.8 thousand urban residents, 365.8 thousand country people.

Russian people account for 96% of the total population; Kursk region is home to 44 nationalities, with almost all religious confessions represented.

Kursk region currently has 355 municipal entities, including 28 municipal districts, 27 urban settlements, 295 rural settlements, 5 cities and towns (Kursk, Zheleznogorsk, Kurchatov, Lgov, Shchigry. Since March 1, 1994, Kursk has been consisting of 3 administrative districts: Zheleznodorozhny, Seymsky and Central.

The region has well-developed transport infrastructure. A number of highways and a rail network link it to Moscow, St. Petersburg and other cities of Russia, industrially developed centers of Ukraine and South Caucasus.

Air services are provided to passengers at the terminals of Kursk airport qualifying as an international air harbor.

Kursk region is pierced by 6 gas trunklines and 2 oil trunklines 2. At the start of 2016, the gas infrastructure penetration level in the region as a whole was 93.7 % (89.8 % in rural areas).

Being unique in volume and diversity, the region’s natural resources are enough to cover the local demand, some of the raw materials can even be supplied to other regions.

Almost all known minerals known to the world occur in Kursk region. Kursk Magnetic Anomaly, the world’s largest iron ore deposit, provides Russian and foreign ferrous steelmakers with raw materials.

The mineral resources of Kursk region include titanium, zirconium, phosphorites, peat, chalk-stone, molding sand, high-melting clays and loams, and that’s not nearly a full list of local subsoil riches.

Kursk region is a region with appreciable industrial potential.

The local industry has 15 branches. The biggest contributors to the overall economic performance are electric power, mineral production, mechanical engineering, metalworking, food and food processing industries.

The region maintains a high level of energy security. The biggest energy producer, the Kursk nuclear power plant, with a design capacity of 4,000 MW, annually produces 29 billion kWh of electricity and supplies electricity to most of the regions in Russia’s Central federal district. Construction of the replacement plant (NPP-2) has started.

The first two power units of the Kursk NPP-2 will be put into operation simultaneously with the decommissioning of power units 1 and 2 of the existing nuclear power plant in 2022 and 2023, respectively.

The main player in Kursk region’s ferrous metallurgy sector Mikhailovsky GOK, a leading producer of iron ore concentrate, sinter ore and pellets which develops the Mikhailovskoye iron ore deposit. Its annual of production output reaches approximately 18 million tonnes of iron ore and 10 million tonnes of pellets. With today’s rate of production, the ore reserves exceeding 10 billion tonnes suffice for at least 300 years.

The leading machine-building companies produce a wide range of high technology products: storage batteries, mobile power plants, generators, geology-prospecting and oilfield equipment, radio-measuring devices, bearings, low-voltage units, medical devices, etc.

The chemical and petrochemical industry supplies rubber and plastic items, chemical threads and fibers, paints and varnishes, polymer-based products.

Kursk region also produces modern pharmaceuticals and medical equipment.

The light industry delivers knitted and sewn items, footwear and leather products to the market.

Companies specialized in the timber, woodworking, pulp and paper industry manufacture fiberboard, furniture, wooden engineering structures, print packaging made of cardboard and single-face laminate, as well as flexible packaging materials.

The local food and food-processing industry comprises sugar plants, milk processing factories, animal feed mills, distilleries, as well as meat, bakery plants and a confectionery factory.

Kursk region has a fast-paced construction complex including about 1,500 businesses and organizations, their products meeting all modern requirements.

The agricultural sector contributes essentially to the regional economy. The main wealth of Kursk region is the Black Earth Belt, one of the main sources of economic development for the region. Black earth soil accounts for about 80% of the local farmland.

The plant growing industry is mainly focused on the production of grain and forage crops, sugar beet, potatoes. Under favorable weather conditions, the farmland of Kursk region annually yields 4 million tonnes of grain and as much sugar beet.

In 2015, Kursk region produced 3.6 million tonnes of grain with an average crop yield of 34.0 dt/ha; in 2016, total grain crop in the region is projected at ca. 4.0 million tonnes.

Last year’s sugar beet production amounted to 3.4 million tonnes, the crop yield reaching 352 dt/ha; in 2016, farm producers expect to harvest 4.0 million tonnes of sugar beet.

In 2015, local production of oilseeds reached 537 thousand tonnes increasing by 27 thousand tonnes against the 2014 level; this year’s crop is projected at over than 500,000 tonnes.

Animal farming in the region specializes in dairy and beef cattle as well as pig-breeding. 84 production sites (72 for meat, 12 for milk) have been built in Kursk region in recent years.

30 major retail chains contribute to the dynamic development of the consumer market.

Kursk region possesses modern supermarkets and hypermarkets kitted out with state-of-the-art equipment and employing full process cycles from production to sales, improves trading in markets.

Kursk products are in demand both in Russia and abroad.

According to the customs statistics, businesses and organizations registered in Kursk region were engaged in trade with 78 countries of the world in 2015.

At the end of 2015, the foreign trade turnover of Kursk region amounted to USD 746.4 million, including: exports worth USD 326.0 million, import worth USD 420.4 million.

The breakdown of exports from Kursk region is as follows: iron ores and concentrates (25.9%), food (25.2%), chemical products (19.4%), metals and metal products (11.4%), mechanical engineering products (9.7%), textiles, textile products and footwear (7.4%), wood and wood products (0.5%), rawhides (0.4%) and other products (0.1%).

Exports from Kursk region to the CIS are dominated by supplies to Ukraine (USD 56.6 million), Azerbaijan USD 6.5 million), Turkmenistan (USD 4.5 million).

Last year, the economic entities of Kursk region supplied products worth USD 246.9 million to non-CIS countries, including exports to in China (USD 64.1 million), Poland (USD 22.7 million), Germany (USD 20.7 million), Latvia (USD 21.4 million), Singapore (USD 13.0 million), Italy (USD 11.6 million), Romania (USD 8.2 million).

The local mature network of financial institutions covers all districts of the region. The local independent commercial Bank Kurskprombank and the branches of Russia’s leading commercial banks are capable of providing the whole range of services required to finance investment programs and projects, including those implemented in partnership with foreign banking institutions.

Kursk region has developed a multifunctional system of 23 higher education institutions, the backbone of which is the local state universities: Kursk State University, Southwest State University, Kursk State Agricultural Academy, Kursk State Medical University.

One of the key elements of Kursk region’s investment appeal is its tourism potential.

Pilgrimage tourism is one of the main businesses for local travelling companies. Domes of 282 operating temples and 7 monasteries overlook Kursk region.

The Kursk Korennaya Hermitage is widely known far beyond the borders of Kursk region. It is here that the Kursk Korennaya “Znamenie” of the Virgin miracle-working icon which played a significant role in the history of Kursk region was discovered in 1295. A monastery was built here in the 16th century.

Over the past three centuries, in the ninth Friday after Easter, the Kursk Korennaya “Znamenie” icon is carried in a solemn religious procession from Kursk to the place of its discovery in Svoboda place.

Kursk region has more than 4,000 cultural heritage assets, including monuments of archaeology, architecture and arts, about 400 military glory monuments.

The region also contains the Central Black Earth State Natural Park n.a. Prof. Alekhin, a repository of natural resources included in the UNESCO global system of biosphere reserves in 1979 and awarded a Council of Europe diploma in 1998. With an area of 5,287.4 ha, the park has preserved several species of relict plants which scientists call “living fossils.”

Twenty kilometers away from the ancient town of Rylsk, there is a unique monument of culture and architecture, the Maryino estate once belonging to Baryatinsky princes.

The tourism infrastructure of the region includes more than 30 hotels, 27 children’s recreation camps, 18 sanatoria, recreation centers and health resorts, as well as catering establishments, leisure and entertainment facilities.

Investment potential of Kursk region

Benefiting from its economic power, Kursk region creates favorable conditions for the development of businesses and attraction of investment. Local capital investment exceeded RUB 71.5 billion in 2013, reached RUB 73.7 in 2014, RUB 70.4 billion in 2015.

The regional government is committed to offering investors most comfortable conditions for doing business.

Fitch Ratings international rating agency assigned a ‘BB+’ foreign and local currency long-term issuer default rating (IDR), a ‘B’ short-term foreign currency IDR and an ‘AA(rus)’ national long-term rating in 2012, affirming them in 2013, 2014 and 2015.

The affirmation is an evidence of stability in the regional economy, sound budget performance and low risks for local investors.

According to a research study by RAEX (Expert RA) rating agency published in December 2015, Kursk region ranks 36th among Russian regions in terms of investment potential, 5th in the level of investment risk. It should be noted that the region is steadily improving its investment risk performance (13th position in 2013, 9th in 2014). Kursk region falls under the ‘Reduced potential – minimal risk’ category.

The region took the 19th position in the national ranking of investment climate in Russia’s federal subjects among the 76 regions participating in the full-scale implementation of the national investment climate ranking project.

The government guarantees all investors equality and stability of their rights.

The law “On investment activity in Kursk region” which is currently in force and being constantly refined guarantees security of investments and stability of doing business during the project implementation period and provides for various state support measures. Investors operating in the most favored treatment mode are entitled to a corporate property tax relief.

The law of Kursk region provides for the following state support vehicles for investors:
most favored treatment mode;
corporate property tax relief;
reduction in the profits tax payable to the regional budget for certain groups of taxpayers;
investment tax credits;
provision, on a competitive basis, of the following benefits:
a) subsidies to partially reimburse expenses for the payment of interest on loans which the investor takes out from credit institutions;
b) subsidies to partially reimburse the lessee for expenses related to lease payments for the lease purchased equipment on the terms of subsequent equipment purchase for investment project implementation purposes, or to partially reimburse for expenses related to interest on the loans which the investor takes out from credit institutions to pay for the lease of equipment on subsequent equipment purchase terms for investment project implementation purposes;
c) state guarantees for investment projects provided at the expense of the regional budget, according to the list of to-be-provided state guarantees approved by Kursk region’s law on the regional budget for the related financial year;
d) preferential terms of use for the state property of Kursk region;
e) securing investors’ obligations to credit institutions by providing assets and property rights of Kursk region as collateral on loans taken out for implementing investment projects, including lease payments for the lease purchased equipment on the terms of subsequent equipment purchase for investment project implementation purposes;
f) budgetary allocations from the Investment Fund of Kursk region to co-finance capital investments in state and/or municipal assets required for the operation of the investor’s production facilities.

Investors implementing projects in Kursk region are entitled to only one state support vehicle per investment project, excluding the investment projects aimed at achieving the goals and objectives of the “Agriculture Development and Regulation of agricultural, raw material and food products markets in Kursk region” state program, top priority investment projects with capital investments exceeding RUB 2 billion and investment projects implemented in industrial parks.

The legislation provides for a reduction in the profits tax payable to the regional budget from 18 to 13.5 percent for investors implementing projects for the creation of new enterprises in the manufacturing sector.

The government of Kursk region provides subsidies to investors at the expense of the regional budget to partially reimburse their expenses for the payment of interest on loans taken out from credit institutions for investment project implementation purposes. In 2011-2015, the amount of such subsidies from the regional budget reached RUB 66.4 million.

The region has developed a regional investment strategy to 2025.

Further efforts aimed at ensuring a favorable investment climate, creating conditions for attracting investment are governed by sub-program 1 “Creating favorable conditions for investments in the economy of Kursk region” of the state program “Development of economy and external relations of Kursk region.”

JSC Investment Attraction Agency of Kursk region assists investors by handling issues related to land registration and negotiation of connections to electricity, gas, water supply networks with resource providers.

One of the main short-term priorities for the regional government is to create sites with complete infrastructure to later provide land plots within them to investors intending to implement investment projects.

A number of industrial sites are selected in Kursky, Solntsevsky, Ponerovsky districts for the creation of industrial parks.

From the viewpoint of proximity to the regional capital, the site in Shchetinskoye, Kursky district, has the highest appeal for potential investors offering them the biggest opportunities. The site has already been granted the industrial park status.

The industrial park is located in the northeastern part of Kursky district, 5 kilometers away from Kursk city.

Phase 1 of the project (2015) has an area of 102 ha, with prospects of adding 80 ha and more (ca. 400 ha by 2020).

The industrial park borders on the Kursk-Shchigry-Kastornoye regional highway, with an opportunity to directly access the M2 Crimea federal highway (less than 15 km away) and the A144 Kursk-Voronezh-Saratov interregional highway (less than 10 km away); besides, the site borders on the Kursk-Kastornoye-Voronezh railway (no more than 6 km to the Kursk freight terminal); the Kursk international airport is also relatively close to the site.

Engineering and utility lines will be created for future industrial park residents: a transformer substation (with a total capacity of 15 MW), a gas distribution station (with a capacity of up to 2,500 cubic meters per hour), water supply and discharge networks (with a capacity of approximately 100 cubic meters per hour). Given the availability of highly qualified specialists, the industrial park is expected to specialize in the following segments:
mechanical engineering, assembly lines;
construction and finishing material producers;
FMCG producers;
other manufacturing facilities.

Special attention will be given to small and medium-sized businesses which will be allowed to locate their production capacities at the industrial park on favorable terms.

Besides, cooperation with a number of leading providers of related services to the park residents (cleaning, security, logistics, certification, customs clearance, etc.) is currently in negotiations.

At the moment, JSC Investment Attraction Agency of Kursk region handles the industrial park development and investor location issues.