Russian Forestry and Wood Supply Operations Analysis

82 DEVELOPMENT DEVELOPMENT (at various times up to 50 people) and train staff. It is personnel education and training that is our main task because skilled personnel are not available on the labor market. We also use the services of recruitment agencies with a view to selecting our operating staff. Why Tatarstan? If we will look from the perspective of raw material supply, Tatarstan - is not a heavily forested region. Also the biggest consumers of KASTAMONU products are located in Moscow and St-Petersburg, which are quite far from Tatarstan. Which begs a further question: is Tatarstan able to consume all the volumes produced by the factory? If not, how and where do you sell? How do logistics influence sales policy? The production site has not been chosen at random: the decision to invest in a new venture in Tatarstan was taken in view of the close cultural and historical ties of this Russian republic with Turkey, as well as due to the logistical advantages owing to the geographical location of the region. Within a radius of 1,000 kilometers from the SEZ "Alabuga" there are leading consumers of wood products: furniture factories and manufacturers of interior doors. A well-developed transport infrastructure allows the direct export of products to near-abroad countries. As of today, we can ensure the delivery of products using virtually all types of transport: dry cargo sea containers, rail cars and gondolas and delivery trucks. As for the source of raw materials for our production in Tatarstan, for the first stage of our KASTAMONU plant in "Alabuga" 1 million m³ of wood per year will be needed. For the project to be competitive and the production economically sound, it is beneficial for us to get the raw materials within a radius of 200-300 km from the plant: that is from Tatarstan, Udmurtia and the Kirov Region. Today, the planned cutting area in Tatarstan is 2.2-2.3 million m³ of wood per year. Only around 30% of it has been reclaimed. In addition, it should be understood that with the advent of large-scale KASTAMONU wood-working production in the region, reforestation will intensify. This will have a positive impact on the ecology of the Republic of Tatarstan. Did you evaluate the capacity of your sales on the Russian market related to the decrease in imports caused by the devaluation of Russian currency in relation to the EUR or USD? What potential do you see for your company in this matter? The situation on the market is developing in such a way that it is becoming increasingly difficult for European and Chinese producers to compete with us in terms of price and quality. We simply have to take advantage of such favorable market conditions. In particular, having carefully studied the current wood-working products market situation, we have decided to increase the MDF production capacity of the plant in "Alabuga" by another 450 thousand m³. With a view to implementing this project we are currently negotiating with all stakeholders. The Russian MDF market is actively developing. The aggregate production capacity of the enterprises of the industry is about 2 million m3 per year. The market volume is estimated at 2.4 million m³ per year. What is the strategy of KASTAMONU in the Russian market? What advice can you give to foreign companies who would like to operate in Russia? To foreign companies that are going to work in Russia, I would advise preparing for its climate and the cultural specifics which are reflected, in particular, in the way business is done in Russia. How was the decision to invest taken? Who was the initiator? What effort did the Russian government to attract you as investors? What conditions or preferences were the federal or regional government ready to give or gave you to draw your attention to investment opportunities in Russia? Or did the initiative to invest come entirely from your side? A free economic zone, in this respect, is a great help from the federal and regional authorities in Russia. Here, favorable infrastructural and economic conditions are created for the establishment and development of business. In particular, a flexible system of taxation for the residents of the special economic zone has been provided. Besides, the government of the Republic of Tatarstan has helped us to overcome a large number of bureaucratic barriers. With their help, we have opened a lot of doors. A major role has been also played by the government bodies in Tatarstan in the successful launching of our investment project. Some time ago KASTAMONU announced plans for 2017-2018. According to these plans you are planning to construct an OSB factory with a capacity of 500 thousand m³. On one hand the devaluation of Russian currency makes investments in Russia much cheaper and attractive. On the other hand imported machinery for product manufacturing becomes twice as expensive. Do these macroeconomic changes cause any adjustment of your investment plans in Russia? We have already modified our expansion policy, for example, it is planned to increase MDF production up to 925 thousand m³. in 2016, and to produce gloss MDF boards, EvoGloss. Furthermore within the period 2017-2018 we will look at starting OSB production. We would like to stress the point, that these plans for the future are still only the plans, and they might be modified because of the situation. Does the KASTAMONU company plan to open other factories in other regions of Russia besides Tatarstan? What regions are you considering? Why these regions? What do you plan to produce there? When do you plan to start construction of the facilities? In particular, there was information about the construction of a factory in Kaluga Oblast. In an interview Mr. Haluk Yildiz mentioned the purchase of land in Krasnodar near a metal works. What do you plan to do there? Why did he elaborate on its proximity to a metal works? Do you plan some joint operation? I can speak only about the construction works of the plant in the Kaluga Oblast. As for the other projects in the Russian Federation, there is no official information. In addition to Tatarstan, we have been considering two other regions of Russia where we plan to invest. In the Kaluga Region, the project of building a wood processing plant in the SEZ "Lyudinovo" will be comparable with the company's facility at "Alabuga". The scale of new production will be similar to the one in Tatarstan. These production indicators will allow the group of KASTAMONU companies to be among the four world leaders in the industry. The project is to start in 2016. In addition, our company has business interests in the Krasnodar Region where land for our investment projects has already been purchased. It is also worth taking into account the fact that the KASTAMONU company is part of the international holding HAYAT. Investment projects of the holding HAYAT are not limited to the construction of Europe's largest KASTAMONU wood-working facility and an enterprise for producing HAYAT KIMYA consumer goods in the SEZ Alabuga. At present, the HAYAT holding has also been implementing an ambitious housing project. We are referring to the construction in Naberezhnye Chelny of the multifunctional residential complex, SUNRISE CITY. This project began to be implemented in parallel with the construction of the KASTAMONU plant. The construction of the residential complex is a new project not only to Tatarstan, but also to Russia. In terms of its infrastructure and construction concept, this complex will have no analogues in the region. This complex will have everything: a shopping center, garages and parking, a medical center and a fitness club, swimming pool and cinema. We are creating a small world, a city within a city. The individual who lives here will be able to access all necessary services without leaving the complex. It is really the first project of such a type. The interview was conducted by Mikhail DMITRIEV #4 (2011) RUSSIAN FORESTRY kastamonu FLOORPAN. INH HYSTER3.0 FORTERE HYTER RUSSIAN #6 (2015) 83 FORESTRY