Siberia is finally beginning to cast off its image as a political purgatory, where post-Revolution intelligentsia and other dissidents were sent to reconsider heretic views on Communist doctrine or to die in pain and suffering under freezing temperatures.

Today’s Siberia is a vast expanse of land endowed with human and natural resources, housing several of the nation’s top educational institutions, scientific research facilities and industrial complexes. Krasnoyarsk Krai — the "gem of Russian Siberia," as its leaders call it - is at the head of the program to transform Siberia’s image and reality.

The region, which covers 13.6 percent of Russian territory, is endowed like no other in the country and is economically self-sufficient, leaders say. "Unfortunately, this region’s huge economic potential has yet to be fully realized," Krasnoyarsk Krai Governor Alexander Khloponin said.

In his October 2002 inauguration speech, Khloponin called on the region’s political and business elite to let the era of political conflicts fade into oblivion.

Khloponin was referring to high political tension that accompanied his victory in a tightly fought election against Alexander Uss, the regional parliament speaker. President Vladimir Putin was forced to dabble into the fray after regional electoral commission officials refused to endorse results. And, the election itself was called earlier than constitutionally required following the sudden death of former governor Alexander Lebed in an air crash the previous April.

"We need an era of political peace and social stability," he said. "And, I plan to personally justify the hopes placed on my candidacy by the citizens of this region, because I want my era of governorship to be remembered by the people as a bright and happy page in the life of Krasnoyarsk Krai," Khloponin said.

The governor said he plans to harness the region’s enormous resources – human and natural, including its favorable geographic location – to boost its economic potential.

The programs were reflected in the governor’s address to local and foreign investors at a meeting organized by the American Chamber of Commerce at the Moscow Marriott Grand Hotel in March. Khloponin highlighted the region’s achievements as his stewardship, its yet-to-be-solved problems and plans for solutions as well as ambitious programs for the future.

"These are in-line with programs presented during my gubernatorial election campaign in 2002, when we promised to foster an economic breakthrough that is commensurate with the region’s human and natural resources," he said.

Khloponin said he plans to attain a three-fold increase in industrial output, a 65 percent increase in volume of residential real estate, a three-fold increase in production output in small- and medium-sized (SMEs) enterprises and a 70-80 percent increase in production of natural resource-extracting companies by 2010.

The exact foundation date of today’s Krasnoyarsk Krai as a territory is unknown, but its birthday as a modern political and administrative entity within the Soviet Union dates to Dec. 7, 1934. It has since developed into a sprawling territory – the largest region in Russia with a gross area of about 2.3 billion square kilometers – or about four times the size of France.

The capital is Krasnoyarsk, founded in 1628 as a fortified castle on both banks of the Yenisei River. The city, some 3,955 kilometers from Moscow, is one of the largest industrial and cultural centers in Siberia and the third largest city in terms of population and economic potential after Novosibirsk and Omsk. It is also a large transportation hub in Siberia, with two major airports – Yemelyanovo and Cheremshanka – as well as the Moscow-Vladivostok highway and the Trans-Siberian Railway, expected to link Europe with Asia when completed in the not-too-distant future.

"This geographically vantage point has been instrumental to the development of the city – right from its date of foundation," Khloponin said.

Regional officials said that, although the region has made much progress in the past few years, several problems demanding urgent solutions remain.

"Things were a lot worse a couple of years ago, and the plans to change the ugly state of affairs in the region started about two years ago immediately after the 2002 election, when the new administration set out to find solutions to the region’s huge problems that had transcended all sectors of the society," Khloponin said.

"Politically, the regional administration’s executive and legislative arms were at loggerheads, while on the economic front, the regional budget was running a huge deficit – causing delays in payments of salaries, pensions and other social security handouts – which in some cities, were even completely unpaid for years. Socially, these problems generated a restive atmosphere in the region."

To solve the problems, the new administration set up a three-tier plan. The first level was the creation of an anti-crisis management team – an expression that reflects the new governor’s educational and entrepreneurial backgrounds, having been CEO in several Russian major companies, including Norilsk Nickel, the nation’s largest producer of nickel and other non-ferrous metals.

This team went to work on harmonizing the political and social atmosphere, optimization of the regional budget, building working relationships with the central government and owners of major companies in the region, the governor said.

The second stage – termed choosing priorities in economic policies – saw the evaluation of the regional economic potential – both within the context of national and global economies and an approval of a program on strategic socio-economic development of the region until 2010, he noted.

"Thereafter, the focus was turned to choosing the optimal instruments for realizing provisions of the program and reform policies needed to boost economic growth in the region," he said.

The third stage, build intensive investments into the region, generated an economic growth that was higher than the national average – leading to a palpable increase in standard of living and a three-fold increase in regional GDP due to diversification of the industrial sector, increase in added value and more effective use of the strategic geographic location of the region, Khloponin noted.

As a former banker and CEO, Khloponin spoke on measures being put in place to create a functioning and business-friendly environment with concrete, easily understandable provisions to attract investors and to protect their capital. He said the regional administration has undertaken several measures aimed at "de-bureaucraticizing" business processes.

Khloponin also spoke of plans to reduce the tax burden on business and provide other incentives for investors.

"One of these laws will, depending on the gross volume of invested capital – give investment-taxation privileges through concessions on profit and property taxes," he noted.

"The second, adopted in 2003, provides large investors with a series of concessions in commensuration with the volume of the invested capital," he added. "The third, the 2004 budget law, provides for subsidization of parts of interest rates from the regional government’s coffers – based on tender – for small- and medium-sized enterprises that are investing in production developments in the region," he said.

However, the cream of the crop of the administration’s investment-boosting programs is the creation of Krasnoyarsk Regional Development Corporation (KRDC), which Khloponin has called "one more potent instrument for stimulating investment." Khloponin plans to funnel $35 million from his government and about $80 million from the private sector into the KRDC’s charter capital. "Therefore, the major aim of creating this corporation is to create more comfortable conditions and help existing and potential investors in executing their projects in the region. These steps are to help generate a 10-20 time-fold increase of the regional budget’s resources through attraction of private investments into the corporation charter capital in general, and in a specific project, in particular."

The governor said the KRDC is the first attempt in Russia to create a classical fund for regional development tailored along positive international best practices. It will be modeled along similar programs in the United States, China and Scandinavian countries, he said. "We expect the corporation to have the same effect as it has had on the economies of those regions where it boosted development and led to a multiple increase in regional growth and volumes of investments, he added.

Several top leaders of corporate Russia – such as Basic Element, Norilsk Nickel, MDM Group, Unified Energy Systems, and financial institutions, including Vneshtorgbank, Transkreditbank and Rosbank – have already expressed interest in the KRDC, he added.

Priorities for participants include increasing the regional economy’s share of added value, explorative searches for new sites of untapped mineral resources and the creation of transportation and energy infrastructure for their utilization, Khloponin said.

According to the governor’s office, companies’ cumulative profits in the region in 2003 stood at 57.6 billion rubles, up by 67 percent.

"At the same time, cumulative losses of companies decreased by as much as 27 percent, while the total number of unprofitable companies decreased by 11.5 percent," a regional report said. The volume of industrial production jumped 4.1 percent, retail turnover figures increased by 5.1 percent, the volume of machine-building and metal works jumped 34.7 percent, oil sector by 8.8 percent, ferrous metallurgy by 6 percent, and investment inflow increased by 16.4 percent to 27.5 billion rubles (about $1 billion), the bulletin read.

Krasnoyarsk Krai was listed as one of Russia’s most dynamically developing regions in 2002-2003 and came in third – after St. Petersburg and Moscow – in Expert’s November 2003 rating of Russian regions with the best functioning management apparatus. The rating was based on risk level and volume of investment attracted by one government official in 2002-2003.

And it was tenth, up four spots, in terms of investment risk – compiled by looking at the legislative, political, economic, financial, social, criminal and ecological issues – in Russian regions, seventh in terms of volume of investments attracted by one government official and 14th out of 89 regions in terms of improvement in the investment climate.

The region also received a thumbs-up from Nils Sehested, Coca-Cola regional manager for Siberia and the Far East. Sehested told TRJ that the infrastructure needed for the company’s operations is in place in the region. "We are pleased with the huge development, which has taken place in the Krai over the past years. We are also very satisfied with the company’s investment in the region," he said.

Sehested noted that his company does not face any obstacles when shipping products within the region. "We have depots in all major cities in the region and our goods flow from city to city without problems," he added.

AmCham President Andrew Somers attributed most of these positive developments to Khloponin.

"As an investment banker in the early 1990s, and later CEO of Norilsk Nickel, Governor Khloponin did a tremendous job in investment into intellectual capital – first by rationalizing and then upgrading Norilsk Nickel for attracting significant investments into mining operations," he said. "Norilsk Nickel also recently bought a mining operation in the United States."