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Industry has been and remains the foundation of social and economic development of Kaluga Region

Vladimir POPOV, Deputy Governor of Kaluga Region

Vladimir, the branch structureof the regional industry hasconsiderably changed in recentyears. Please tell how thisprocess is going on and whatis the basis of the industrialcomplex today?

The mechanical engineering complex has been and remains the basis of industrial growth in Kaluga Region. Today, it is represented by both production facilities traditional for the region and new plants built by investors. The metallurgy and metal processing, food industry, production of construction materials, and pharmaceuticals play a major role. Currently, these are the branches ensuring the growth of gross product of our industry and development of the scientific area in many respects. Certainly, with commissioning of large industrial facilities, since 2006 there are as many as 112 plants, the region’s industrial complex have changed.

For the years of active investments, branches appeared, which were absolutely new for Kaluga Region. For example, car-making. For a short period of time, our region managed to grab over 11% of the Russian automotive production – this is the 3rd place among the regions. The share of car-making in the industrial production of the region continuously grows. Having started from 1% in 2007, it accounts for above 35% now. The pharmaceutical industry develops right in front of our eyes. We open the most advanced production facilities of the region. Today, we already produce over 150 medicines, and additional 25 products are being developed. We are steadily working to get a significant share in the Russian pharmaceutical market. The IT industry, radiology medicine, chemical industry are actively developing, the production of computers, electronic and optical equipment, home appliances and TV sets grows. Even today, 100% of all Samsung TV sets and monitors sold in Russia are manufactured in Kaluga Region. Currently, more than 60% of industrial products are manufactured by plants that have been built and upgraded in the region in the recent 13 years.

Production facilities of the branches, which are traditional for the region, also operate in a stable manner: power machinery engineering, rolling-stock manufacturing, and military industry. The government takes focused efforts to support them. For the past year, the output at plants of the defence industry amounted to RUR 55 bln – this is 7% in the total industrial production of the region. Power equipment manufactured in Kaluga has been exported and successfully used in almost 40 countries of the world. Many types of manufactured railway machinery and locomotives are operated both in the Russian Federation and abroad. You can see that the industrial complex of the region is rather diversified and focused on the development of hitech industries. The average annual trends in the industrial production index is fixed at 106% starting from 2012. Since 2006, the production in the region grew by more than 3 times. In the recent years, Kaluga Region has been the leader among Russian regions in terms of volumes of processing productions per capita. The key indicator demonstrating better competitiveness of our industry is higher exports and increased number of exporters. For 2017, Kaluga Region was among TOP3 best regions in the Exporters of the Year federal contest, and in the last year the exports grew by almost 11%. An increase in exports is also reported for non-CIS countries that is another confirmation of our manufacturers’ high competitiveness.

This means that the industry has been and remains the foundation of social and economic development in the region. A year ago, the President of the Russian Federation announced top priorities of the country development for the next five years. Which objectives of the region’s industrial complex are in line with these priorities and what will be main focus areas of the industrial policy?

Higher labor productivity in basic industries, better competitiveness and entry into foreign markets – these are strategic development goals of the industrial complex set by the President. It should be noted that they fully correlate with our strategic vision. In 2018, Kaluga Region reported 104.5% growth of its industrial production. This year, we observe the growth at the level of 107%. This means that our industrial complex has a strong basis and a large potential for successful achievement of the national priorities. Implementation of the Higher Labor Productivity and Employment Support national project is focused on increasing productivity indicators at Russian production facilities to the level of the developed countries. Today in the Russian industry, figures of output per employee in various branches are 5-10-fold lower than those in the western countries. Having analyzed in detail the production facilities operating in the Kaluga Region, we came to a conclusion that the output per employee at new production facilities exceeds the average regional level by more than twice. So, we have someone to look up to. Many our production facilities are leaders in their branches and Kaluga plants of international companies are leaders in their global production systems – Volkswagen, Continental, L’Oreal, Volvo, NLMK and others. They all enthusiastically share their knowledge and experience in improvement of the production culture, as higher labor productivity is the​ cornerstone of the production culture.

The active project implementation stage was started in last December. The region created a regional center of lean production competencies. Production facilities were selected which demonstrated their activity and wished to move to a totally new level of management, ensure a stable growth of productivity and competitiveness. The pioneers were OJSC Kaluga Turbine Plant and JSC Kalugaputmash. Totally, we have to do this work at 109 plants of the region by 2024. I would add that efforts to improve production processes can be taken both using own resources and engaging external advisors. Since this year, the key target support is provided by experts of the federal and regional centers of competencies. Our objective as governmental authorities is to involve as many companies as possible in the processes of changes to ensure a 5% productivity increase in general for the regional economy by 2024. It is important that the participation in this project enables companies of the region to renew from inside without significant financial costs. If changes require considerable investments, companies participating in the project can use a low-interest loan of the Industry Development Fund with an interest of 1% per annum. The next strategic development area is to increase exports. I’d first say that, as a rule, the labor productivity of exporters is at a rather high level.

In this connection, we can say that the processes of labor productivity increase and export growth are interconnected. In the current year, conditions of governmental support to exporters change. Now, it is very important to help manufacturers to understand all new rules. For example, since April 1 the regional Ministry for Economic Development selects manufacturers implementing corporate competitiveness improvement programs (CCIPs). Companies, which successfully pass the qualification selection, will be provided with access to low-interest funding mechanisms. I would like to note that CCIPs are a central element of the International Cooperation and Exportation national project. In my opinion, the launch of this support program is a good basis for a longterm growth of competitive products’ manufacturing. After the qualification selection, the Ministry of Industry and Trade of the Russian Federation will prepare a unified list of manufacturers with which CCIP implementation agreements will be signed. In addition, such contracts will become an additional advantage for companies to benefit from other support initiatives. 

You have said that the national priorities almost fully correlate with the social and economic development strategy of Kaluga Region through 2030. Implementing its principles, the region has already managed to achieve success in many areas: increased industrial production, higher salary, investments’ boost, and export buildup. It seems that Kaluga Region has inexhaustible resources and unlimited opportunities?

Actually, Kaluga Region has no resources that provide raw material regions with a high economic status. Our key resource and a unique advantage are clever, hardworking and talented people. Everything that has been created here is a result of their daily thorough work. Today, our key task is to make Kaluga Region a territory where you want to live and work. It’s no coincidence that both the social and economic development area and all its priorities are grouped around people. 

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