Yaroslavl Province may not have natural resources, but it has plenty of resources for potential investors. An Expert correspondent visited the province to find out what’s in it for the province and its inhabitants.

In Expert RA’s rating of the attractiveness of Russian regions to investors for 2002-2003, Yaroslavl Province moved to first place in terms of investment risk (minimal in Yaroslavl Province) and attractive investment legislation. Only because the overall investment potential here is not the greatest did Yaroslavl rank only 33^rd.
That is to say, there is no oil in Yaroslavl Province, no metals and diamonds. There isn’t even much lumber. However, Yaroslavl residents see Yarpivo Beers, Balkan Star Tobacco, and the Saturn Engine Plant as their oil wells. This potential is what the province hopes to “mine.” “God gave our region few natural resources,” many locals say. “We’ve got nothing. Unfortunately.” But after a moment, they add: “Or fortunately. By the way, it’s a moot question…” Thus, the region is pursuing its own investment policy. This policy’s main feature is its flexibility and the variety of support given to investors.
The List of Priority Investment Project in Yaroslavl Province includes about three dozen large- and medium-sized investment projects and more than sixty public facilities and programs every year. Work with investors is organized so that they can take advantage of any of the forms of provincial support at any stage. Say, when an idea comes to an investor, he is provided with information and organizational guidance. During project implementation, big businesses are given guarantees and securities from the province, while small and medium businesses can receive targeted subsidies to repay interest on bank loans. At the product launch stage, the enterprise is exempt from all tax payments to the provincial and local governments. Finally, to expand the market, increase production, and accelerate business development, businesses are granted budget subsidies from the district where it is located.
The provincial administration proves very efficient in carrying out these many tasks. In 2003, it received four rubles of additional revenue to the budget and extra-budgetary funds per ruble of concessions granted to investors. Investors responded to the same ruble of support with eleven rubles of invested funds.

As they say, everything began with the governor, Anatoli Lisitsyn. In the early nineties, when chaos prevailed and no one really understood what to do, the pragmatic Lisitsyn invited Yegor Gaidar and his team to consult the province. They recommended creating a policy to attract investment to existing enterprises and to set up new companies. The Yaroslavl Administration listened. Thus, for example, in 1994, a Department of Investments and Investment Policy was established and later united with others to form the Department of Economic Development, Investment, and International Cooperation, or EDIIC. The mission of the new department was first to attract investors and then to keep them as comfortable as possible. “The province keeps its promises to investors and honors its agreements unquestioningly,” stated Vice-Governor Sazonov. “Anatoli Ivanovich Lisitsyn has not committed a single breach of financial obligations during his tenure in office despite the fact that there were very hard times when other governors were following what they saw as the easy and safe path of default. Yaroslavl Province has always paid its debts.”
The provincial administration decided to make state services available to consumers and to give up financing small business investment projects directly from the provincial budget. “In the past, entrepreneurs would come to officials and request money, which had been preliminarily earmarked for financing projects, and the officials would make the decision on investment,” Sazonov told Expert. “Often, their decisions were wrong. Part of the money would go missing, and efficiency was low.”
In addition, the governor has long wondered why no one is surprised when the state gives money to the desperately poor. For example, the chairman of a collective farm that hasn’t seen a harvest in 70 years comes and begs for money to buy diesel and seeds. No one says a word and he gets what he wants. Those handing out the money know in 99 cases out of 100 this doesn’t help the farm or the country.
The province decided it should support the strong, those who create jobs, pay taxes, and promote the economy.
The province has very simple criteria for distinguishing the weak from the strong: new jobs, new production, and high-tech services (communications and the internet). An entrepreneur must also prove that a project is feasible. Proof is also simple: if a bank will give them a loan, entrepreneurs are trusted. If not, well, sorry, but something is wrong.
At the same time, the Vice-Governor cleaned up the laws and bylaws of Yaroslavl Province removing extraneous regulations, or as he himself put it, “all the crud.” Now, an entrepreneur is not required to submit documents certifying that his business is not undergoing bankruptcy or documents about the company’s taxes. If an official needs this information, that’s the official’s problem. Entrepreneurs only need to submit a charter and a business plan.
To find out what particular documents are required, you don’t need to go to the administration. Simply visit the EDIIC site, one of the few truly user-friendly sites at Runet, unique among regional administration sites. It contains everything you ever wanted to know about the region’s investment policy: regulatory legislation, working procedures, a list of provincial programs, loan regulations, a list of investment projects, information about grants and so on. This information is completely open the public. The administration seems to be saying, “If you want to set up a business in Yaroslavl Province, just ask.”

While small business can develop via loans, the situation is more difficult with big business, especially if it has already passed two classical stages: development using its own resources and developing via attraction of investment tax credits.
In Yaroslavl Province, as in many regions of Russia, quite a few enterprises are reaching the bond issue stage. The provincial administration intends to compensate companies for part of the interest on bonds and is currently drafting a finance program jointly with the interregional department of the Federal Securities Commission of the Central Federal District.
Officials plan to earmark compensation funds in the budget, but this is not charity. In essence, it’s a kind of loan extended to a company. Bonds are issued to renew assets, and after the purchase of new equipment, property values rise, so the money will return to the budget via property taxes. Companies will also renew their equipment and increase their product range and market share. Basically, everybody will benefit in the end, just as they will from the Law on Fostering Economic Development passed in 2001.

“Isn’t it possible that the Law on Fostering Economic Development could be used to shift revenue from other regions to yours?” we asked Sazonov. He replied with frightening directness: “Of course. If companies want to register with us and get business development subsidies, we’ll welcome them.” He advised those who are dissatisfied to look through the law on the site of EDIIC and remember that they, too, would have to give subsidies to local companies. If they are not prepared to do so, money will move to Yaroslavl…
Money is on the move. People come, register, get subsidies, and later say, “Listen, we want to invest somewhere in your region. We feel comfortable here, and you benefit, too.” Those coming to the province from elsewhere often give back not only the money they received in subsidies, but also interest in the form of taxes on profits. Naturally, the policy pursued by the Yaroslavl administration is making officials in other regions very nervous.

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