Omsk Oblast

The Omsk Oblast is located in Western Siberia. It is bounded by Kazakhstan on the south, the Tyumen Oblast on the west and north and Novosibirsk and Tomsk Oblast on the east. Its territory stretches from north to south for 600 kilometers and from east to west for 300 kilometers and occupies the area of about 140,000 square kilometers. It is roughly larger than the state of Iowa. The distance from Omsk to Moscow is 2,555 km. Average January temperatures range about -19 centigrade while average July temperatures are about +18 centigrade, but sometimes reach as high as +40 centigrade.

2,176,000 people live on the territory of the Omsk Oblast, 67 percent of which is urban, including slightly over 1 million living in the City of Omsk. The most densely populated are the southern districts while the northern part of the region is sparsely populated and is the most economically depressed area. The average population age is 35 years.

Omsk ranked fifth by volumes of industrial output in the former Soviet Union. The military industry comprises one third of its industrial potential. Today Omsk companies offer products with good reputation: rockets of light class, a number of civil and special satellites, engines for widely-known MIG-29, SU-24 military airplanes, AN-74 civil multi-purpose planes, modern tank T-80U, means of special communications of the latest generation. Siberian defense companies are open for international cooperation.

As much as 70-80 percent of machinery assets in engineering are still concentrated in the defense sector. Some of the largest defense industry companies are the Polet Production Association (PO Polet), Transport Engineering Plant Production Association (PO Zavod transportnogo mashinostroeniya), OAO Siberian Cryogenic Equipment (Sibkriotekhnika), Omsk Baranov Engine-Building Production Association (OMP im. P.I. Baranova), Siberian Devices and Systems Production Association (PO Sibirskie pribory i sistemy), OAO Relero, Irtysh Production Association (PO Irtysh), OAO Omsk Hydraulic Drive (Omskgidroprivod), and OAO Omsk Assembly Plant (Omsky agregatny zavod).

The local Transmash Production Association (PA), which among other military hardware makes multiple modifications of T-80U battle tank, has not been receiving domestic (Russian) state orders for about five years and has been able to survive only due to export orders. As part of its conversion program Transmash launched "Belarus" multipurpose tractor production in 1994 and also assembles "Kirovets" combine harvesters. Besides, there are dozens of enterprises in the region that are partially converted to civil production. To further spur conversion efforts the local Administration has launched the SibVPKneftegas-2000 interregional target program, which plans to redirect former military capacities for production of competitive oil and gas equipment.

Leaders in the aerospace industry in Omsk are Baranov Engine Building Production Association, manufacturing engines for Sukhoi aircrafts and transmissions for Moskvich passenger cars, as well as Polyot Production Association, one of the biggest aerospace manufacturing enterprises in Russia, producing light class Kosmos rocket-carriers, satellite systems developed in cooperation with NASA and other Western research centers, civil aircraft for medium-range flights. Within its defense conversion program it produces oil drilling equipment and a wide range of consumer goods.

The Omsk Oblast has relatively scarce natural resources. Oil resources in the region have not been actively developed and are estimated at 150 million tons. The development of the Tevriz gas condensate field is at its initial stage. The region counts with 287 deposits of peat, only 28 of which are industrially feasible. The development of rich zirconium-ilmenite lodes near the town of Tara that exceed 160 million cubic meters may start soon. Zirconium and titanium are widely used in alloys for ferrous and non-ferrous metallurgy, nuclear power engineering, military and medical equipment, ceramics, glass and chemical industry. Locally produced mineral water is quite successful in regional markets and is exported to Central Asia. Forests cover 59,143 square kilometers or 52% of the total region's territory and contain about 570 million cubic meters of commercial timber.

Thanks to the Trans-Siberian and Mid-Siberian railways Omsk is an important rail junction for Western Siberia. The major water route from South to North is the navigable Irtysh River. Shipments totaled 2 million tons last year. The Tyumen-Omsk section of the Trans-Siberian highway is being repaired and upgraded. A new international terminal at Omsk-Fyodorovka airport is about 80 percent complete. Three oil pipelines along with the railways are an important addition to the region's petroleum products' distribution and export network.

The region ranks 19th among the 89 administrative territories of Russia in industrial production while the City of Omsk ranks 4th among industrially developed cities of Russia after Moscow, Saint-Petersburg and Yekaterinburg and accounts for more than 90 percent of the oblast's total industrial output. The leading industrial sectors include defense, oil refining and petrochemicals, light and food industry, forestry and woodworking.

The Omsk Oblast is Russia's largest hub of oil refining and petrochemical industry. The oil sector is represented by Omsk Refinery (one of the biggest in Europe) and Omsknefteprodukt product transportation and sales company, both Sibneft's subsidiaries, that are the most important taxpayers in the region.

For the last few years the refinery was in the middle of a feud between regional and city authorities as a result of which in 1998 the company's corporate flight to the region's district tax shelter was orchestrated. The petrochemical sector's main players are Omskshina JSC Russia's 4th biggest tire producer in 1998, Omsky Kauchuk (synthetic rubber), Omskkhimprom JSC (plastics), and Omsktechuglerod JSC (carbon black).

The oblast is a leading agricultural producer of livestock and grain. It produces beef, pork, mutton, chicken meat, and dairy products. The local production makes one fifth of the milk and grains produced in Western Siberia. Omsky Bacon JSC is Russia's and probably Europe's biggest pigbreeder and pigmeat producer. Omsklikyorvodka as well as 'Rosar' and 'Osha' breweries and soft drink producers take the lead in vodka, wine, beer and soft drinks.

International trade is one of the most dynamic sectors of the local economy. The share of exports in the local GDP increased from 4% (1991) up to 23% (1998). The ratio of export (69,7%) and import (30,3%) is stable. The major trading partners of the region are: Kazakhstan (28,4%), Spain (19,8%), UK (8,2%), Uzbekistan (6,8%), Germany (6,7%). The share of the NIS countries is 40,8% of the total foreign trade. Interregional cooperation is quite active. The Omsk Oblast Administration has signed more than 100 trade agreements with Russian and other NIS regions.

Exports include: products of fuel-energy complex ­ 63%; food products and raw materials ­ 14%; oil and chemical products ­ 15%; engineering products & services ­ 4,5%; wood ­ 0,5%. Imports consist of products of fuel-energy complex ­ 23%; food products ­ 30%; engineering products & services ­ 28%; garments, footwear ­ 1%.

Omsk region has passed a number of laws and regulatory acts on investments, including one on state support for investment projects and a law designed to protect shareholders' rights. The law on state support covers allocation of budgeted funds, tax breaks, tax investment credit and guarantees. According to it, investors are exempt from all taxes, except income tax, payable to the regional and local budgets during the recoupment period, and from 50% of applicable taxes during the next 2 years.

The Oblast is one of the few Russian territories where direct investment reportedly increased in 1999. In the second half of 1999 Omsk was part of an elite group of regions that received significant foreign investments including Moscow, Saint-Petersburg, the Moscow region, the Leningrad region, and the Island of Sakhalin.

For the first half of 1999 the volume of direct investments in the Omsk economy reportedly amounted to $181,5 million. Total accumulated foreign investment in the oblast reached $480 million by January 1, 1999. Interbrew (Belgium), a world brewery giant, took advantage of the 1998 financial crisis and in 1999 decided to increase its share in the local ROSAR brewery. Matador-Omskshina, a Slovak-Russian joint venture launched in 1996, is a proven success. Starting with just 176 thousand tires in 1996 the JV has reached the production level of 800 thousand tires last year. "Siberian-Scandinavian Bus Company" was set up in 1998 as a joint venture with "Volvo Bus" to assemble Volvo buses, with further plans to develop local production of spare parts. It is another example of successful development, given the fact that Volvo Bus reportedly has only one other similar assembly facility outside Sweden. In our meeting with its general director, he emphasized that the venture started with minimal investment but very high quality standards on assembling and parts from the very first bus. To better assess resulting quality and marketing prospects, the company organized a 1,200 km long motor run which brought over a hundred new orders.

Currently there are 42 large and medium-sized companies with foreign capital operating in the region. In 1998 the growth of their production and services was 59,1% while for local industrial enterprises this figure was 48,6%.

However, it is major oil company Sibneft, not foreign entities, which has played the key role in the region's most important recent acquisitions, several of which could be classified as "hostile takeovers." According to several press reports Sibneft, through its close ties with the local administration, achieved a number of takeovers. Omsky Bacon was one of the first to surrender. SG Trans followed and reportedly, currently plants like Omsky Kauchuk, Omskkhimprom and Omsktechuglerod are being eyed by Sibneft.