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					                                  UDMURT REPUBLIC
                                          www.udmurt.ru

Location, Area and Borders
Population
Administrative Division
Transport
Some Facts from the History of the Udmurt Statehood
State Power
Climate and Natural Resources
Economy
       Industry
       Agriculture
       Foreign Economic Activities
       Investment Prospects
       Small Business Support
       Innovation Development
Educational and Scientific Potential
Sports
Cultural Life

Location, Area and Borders
The Udmurt Republic is a full subject of the Russian Federation, formed on the national state
principle. Udmurtia is a part of the Volga (Privolzhsky) Federal District and the Ural economic
region.

The capital of the Udmurt Republic, Izhevsk, located 1129 km away from Moscow, 1904 km away
from Saint-Petersburg, and 800 km away from Yekaterinburg.

Udmurtia covers an area of 42.1 thousand square kilometers, i.e. .25 per cent of the total area of the
Russian Federation, it is larger in area than Belgium or Netherlands, or Switzerland.

The Udmurt Republic is bordered by the Kirov Oblast in the northwest, the Perm Krai in the east,
the Republic of Bashkortostan in the southeast, and the Republic of Tatarstan in the south and
southwest.

Population
According to Udmurtstat data, the population of the Udmurt Republic was 1528.5 thousand people
as of January 2009. About 70 per cent live in cities and urban-type settlements. According to the
2002 All-Russian census report, representatives of over 130 ethnic groups live in Udmurtia. The
Udmurts are the indigenous people of the republic. The total number of the Udmurts in the world is
about 640,000, with two thirds living in Udmurtia. The largest ethnic groups are the Russians (60
per cent), Udmurts (almost 30 per sent), Tatars (about 7 per cent), Ukrainians, and Mari. There are a
number of areas in the republic populated mostly by Tatar, Mari, Chuvash and Besermyan ethnic
groups; the latter have been officially recognized as a native minority people.
                                                   2

Udmurtia is one of the most polyethnic and multiconfessional regions in Russia. Over centuries
various cultures have vigorously interacted enriching each other, and Christianity, Islam and
paganism have always existed in Udmurtia side by side.

The Russian and Udmurt languages are the state languages of the Udmurt Republic. The law
secures the right for the preservation and development of the languages and cultures of all ethnic
groups.

In a rather complicated socio-economic and ethno-political situation characteristic of Russia in
general in the late XX-early XXI centuries, the Udmurt Republic has proved a comparatively stable
region. Today it is one of the most trouble-free regions in the Russian Federation as far as the nature
and state of inter-ethnic relations are concerned.

Administrative Division
Administrative and territorial division of Udmurtia is determined by the current Constitution of the
Udmurt Republic. According to the Constitution, Udmurtia comprises five republican cities and 25
districts.

The capital of the Udmurt Republic is the city of Izhevsk founded in 1760. Today Izhevsk is a
major economic, industrial, scientific, cultural, transportation, political and administrative center. It
is located in the central part of the republic and covers an area of over 310 square kilometers. 611
thousand people (about 40 per cent of the republic‘s population), live in Izhevsk.

The city of Glazov (population 97 thousand) is located in the northern part of Udmurtia. The status
of a city was granted to it by Catherine the Great in 1780. In the early years of the Soviet power
Glazov was the capital of the Votskaya Autonomous Oblast, then this status was passed to Izhevsk.

Sarapul (population 98.8 thousand) is another old city located on the right bank of the Kama River.
One may call it the Suzdal of Udmurtia, for it boasts numerous historic monuments—buildings built
by professional architects and ordinary citizens.

Votkinsk (population 96.9 thousand), like many other old cities in the Ural, was built around a
factory that originally produced anchors, river and sea boats, steam engines and boilers. Votkinsk is
the birthplace of the great Russian composer Pyotr Ilyich Tchaikovsky.

Mozhga (population 49.7 thousand) is a cultural center in the southwestern part of Udmurtia. In the
past it used to be a small town with a glass factory.

Kambarka (population over 12 thousand) is the youngest city in Udmurtia (with a status of a district
city). Founded as a workers‘ settlement next to one of Demidov‘s iron foundries, today Kambarka
is a river port.

Transport
The largest transportation companies operating in Udmurtia:

      OAO Udmurtavtotrans
      OAO Izhevsk Passenger Motor Transport Industrial Association
      OAO Izhevsk Section of the Gorky Rail Carrier – OAO Russian Railways Branch
      OAO Port of Kambarka
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    OAO Sarapul River Port
    OAO Izhavia

Transportation enterprises aim their activities at expanding traffic volumes and improving the
quality of services that they offer.

Railway Transport

Railway transport in the Udmurt Republic is represented by the Izhevsk and Kirov sections of the
Gorky rail carrier, a branch of the OAO Russian Railways, and by the Perm section of the
Sverdlovsk Rail Carrier. In the Udmurt Republic rail carriers move more cargo than any other kind
of transport.

As required by the state railway traffic safety program (for the period till 2010), new equipment,
technologies and management-information systems have been introduced in Udmurtia.

In order to ensure stable operation of railroad enterprises and improve the quality of services
provided to passengers, another program is being implemented: the Program of joint actions of the
Gorky Rail Carrier (a branch of the OAO Russian Railways) and the Government of the Udmurt
Republic in 2006-2009 for the implementation of Joint Agreement on coordinated actions and
cooperation in the sphere of railway transport.

Within the framework of this program the 2nd stage of the Izhevsk railway station is undergoing
renovation, as well as the railway station in the city of Glazov.

Motor Transport
Automobiles transport a significant portion of passengers and cargoes.

In 2008 general purpose motor transport moved over 2 million tons of cargoes and 145 million
passengers, with freight turnover of 208.5 million ton-kilometers and passenger turnover of 1062
million passenger-kilometers.

Transportation of passengers via suburban, intercity and interregional roads is performed by the
OAO Udmurtavtotrans, OAO IPOPAT and OAO Bus Stations of Udmurtia. The latter operates
three bus terminals, 28 bus stations and 10 ticket offices. There are 76 intercity and 333 suburban
and 14 inter-regional lines in Udmurtia.

The use of an ASA automated system developed and implemented by the OAO Bus Stations of
Udmurtia permits to swiftly obtain data from all bus terminals and stations in Udmurtia and
consolidate it into a unified informational structure, prepare consolidated balance sheets, form a
unified bus schedule and improve ticket sales.

The OAO Udmurtavtotrans has been successfully implementing a program for the creation of an
electronic payment system. Discount tickets for schoolchildren and students will become electronic,
too. A unified transport card is going to be implemented soon for executing cashless payments both
within cities and on suburban lines.

Answering people‘s demands for passenger transportation services, optimization of bus networks is
being performed, new bus routes are being introduced.
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Agreements on passenger transportation with the republics of Tatarstan and Bashkortostan, the
Chuvash Republic, and with Orenburg, Kirov, Samara oblasts and the Perm Krai help improve
inter-regional transportation of passengers and cargoes, and expand the range of services.

Air Transport

Air transport in the Udmurt Republic is represented by the OAO Izhavia enterprise. Its airport is of
the ―B‖ class, with a 2500-km bituminous concrete runway that meets ICAO Category I criteria.
The enterprise operates Yak-42, Tu-134, An-24 and An-26 aircraft. Today the OAO Izhavia has 11
airplanes.

Water Transport

The total length of navigable waterways within Udmurtia is 180 km.

River ports operated by the OAO ―Sarapul River Port‖ and the OAO ―Kambarka River Port‖
transport cargoes and passengers, produce non-metallic construction materials, perform cargo
handling operations, provide vessel repair services. Non-metallic construction materials are
supplied to consumers in the Udmurt Republic, the Republic of Tatarstan, the Republic
Bashkortostan, the Chuvash Republic, the Nizhny Novgorod Oblast and other regions in the
Russian Federation.

In 2008 over 1384 thousand tons of cargo and 87.5 thousand passengers were transported via rivers.

Some Facts from the History of the Udmurt Statehood
The 1st All-Russian Congress of Udmurts convened in June 1918. The delegates expressed the urge
of the Udmurt people towards a national rebirth and formulated the means to this end: self-
determination, establishment of Udmurtia as an administrative-territorial entity, equality of nations,
a rise in the cultural level of the Udmurt people and their ethnic self-awareness.

On November 4, 1920 the Soviet of People‘s Commissars decreed the establishment of the Votskaya
Autonomous Oblast, with the city of Glazov as its capital.

In late 1921 the Oblast Executive Committee made a decision to move the capital to Izhevsk.

In 1932 the oblast was renamed Udmurt Autonomous Oblast in accordance with the self-
designation of its indigenous people.

In 1934 the oblast was transformed into the Udmurt Autonomous Soviet Socialist Republic.

In the pre-war years the autonomous entity of the Udmurts was a part of various administrative
entities, the republic became a full member of the Russian Federation only in 1936.

In 1937 the first Constitution of Udmurtia was adopted, and the Supreme Soviet of the Udmurt
Autonomous Soviet Socialist Republic was elected.

On September 20, 1990 the Declaration of the State Sovereignty of Udmurtia was adopted at the
3rd (special) session of the Supreme Council of the 12th convocation. This document has been a
basis for the development and adoption of the Constitution of the Udmurt Republic, for signing
Federal and Inter-Republican agreements, and for improving the republic‘s legal system.
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Since 1991 Udmurtia has been known as the Udmurt Republic.

On November 4, 1993 and April 26, 1994 the Supreme Council authorized the adoption of the state
symbols, the State Flag and State Emblem of the Udmurt Republic.

The current Constitution of the Udmurt Republic was adopted on December 7, 1994.

The first ever presidential elections in the Udmurt Republic were held in 2000.

State Power

President

The President of the Udmurt Republic is the highest official in Udmurtia, he is the guarantor of the
Constitution of the Udmurt Republic and of human and civil rights and freedoms, and ensures law
and order in the republic. The President represents the Udmurt Republic in its relations with the
federal state government bodies, bodies of state government of Russian Federation subjects, local
self-government bodies, and in international relations. He signs treaties and agreements on behalf of
the Udmurt Republic. The President heads the continuing supreme body of executive power of
Udmurtia, the Government of the Udmurt Republic, and appoints its chairman with the concurrence
of the State Council.

The first ever presidential election in the Udmurt Republic was held on October 15, 2000.

In 2004 Alexander Volkov was re-elected President of the Udmurt Republic.

On February 20, 2009, on the proposal of the President of the Russian Federation Dmitry
Medvedev, at a special session of the State Council of the Udmurt Republic, Alexander Volkov was
vested with presidential power by a majority of votes.

Government

The Government of the Udmurt Republic is the continuing supreme executive body of state
government in the Udmurt Republic. It ensures the obeyance of the Constitution, federal laws and
other enactments of the Russian Federation, and of the Constitution, federal laws and other
enactments of the Udmurt Republic on the territory of Udmurtia. Also, the Government develops
and implements measures to ensure comprehensive socio-economic development of the republic,
operation of judicial and law-enforcement bodies and the realization of the interior policy,
participates in the implementation of a uniform state policy in the spheres of finance, science,
education, health, social security and ecology, promotes the development of local self-government
in the Udmurt Republic. The structure of the Government of the Udmurt Republic and procedures
for its operation are defined by the legislation of the Udmurt Republic.

The Government enjoys the right of legislative initiative in the State Council of the Udmurt
Republic.

The President of the Udmurt Republic heads the Government of the Udmurt Republic, and appoints
its chairman with the concurrence of the State Council. The Chairman of the Government of the
Udmurt Republic organizes its work and is responsible to the President of the Udmurt Republic for
the Government‘s activities. Whenever the President of the Udmurt Republic can not perform his
duties, they are temporarily performed by the Chairman of the Government.
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State Council

The State Council of the Udmurt Republic is a representative and supervisory body of state
government of the Udmurt Republic. It is the only continuing supreme legislative body of state
government in the Udmurt Republic.

Its deputies are elected for a 5-year term, as stipulated by the Constitution of the Udmurt Republic.
The latest elections to the State Council were held in December 2007 under a mixed election
system.

Climate and Natural Resources
Udmurtia lies in the eastern part of the Russian Plain, in the European Pre-Urals, and in the Kama-
Vyatka interfluve. The republic is located in mid-northern latitudes, far from seas and oceans, and
has a temperate continental climate with cold snowy winters and warm summers. The coldest
month is January with an average temperature of minus 14-15 degrees Celsius, an average July (the
warmest month) temperature is 17.5-19 degrees above zero.

Udmurtia‘s main natural resources are timber and oil. 113 oil fields have been discovered in the
republic. 96 per cent of Udmurt oil is exported to other Russian regions and abroad. Annual oil
production is at the level of 7-8 million tons.

46 per cent of Udmurtia‘s area is covered with woods, half of them are coniferous forests.
Calculated felling rate regarding major harvest is over 2.8 million cubic meters. The Udmurt
Republic has peat and nitromethane deposits, construction materials (silica sand, clay, limestone), it
is rich in mineral water springs and therapeutic muds.
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Economy
The economy of the Udmurt Republic is highly diversified. The leading branches are oil
production, iron-and-steel industry, machine building and metal processing, timber and wood
processing industries. These branches possess a huge potential for establishing mutually beneficial
cooperation.

Gross regional product (estimate) of the Udmurt Republic in 2008 amounted to 241.9 billion rubles.
The annual evolution of the GRP in 2002-2008 was characterized by 3.2% growth (average), in
comparable prices. The biggest growth of the GRP, 7.3%, was observed in 2003. Over six years the
GRP of the Udmurt Republic grew 3.1 times, in basis prices.

                                     Gross Regional Product of the Udmurt Republic, 2002-2008




The main portion of the gross regional product, 82 per cent, is formed in manufacturing industries,
agriculture, construction, transportation and telecommunications, and trade.

                                               Gross Regional Product Structure, in basis prices

    Trade and Public         Other
       Catering              17.8%
        11.2%



                                                                                  Manufacturing
                                                                                   Industries
                                                                                     48.4%



   Transportation and
                                                Agriculture
   Telecommunications
                                                  7.8%
          8.4%               Construction
                                6.4%
                                                  8

Industry

Machine Building and Metal-Processing Industries

Machine building and metal-fabricating industries have formed Udmurtia‘s industrial basis
throughout its history and remain its priority industries. These industries date back to 1807 when
Russian Emperor Alexander I decreed that an arms factory be created in Izhevsk. Today the
republic‘s machine-building enterprises are engaged in the resolution of a most important task of
increasing competitiveness on the global market. In order to assist local enterprises in the resolution
of this task the Republican Target Program ―Development of Machine Building and Metal
Processing in the Udmurt Republic in 2006-2010‖ is being implemented in Udmurtia.

Major Machine Building and Metal-Processing Sub Industries

Firearms production

Firearms production in Udmurtia is represented by the Izhevsk Firearms Plant (an Izhmash group
company) and the Izhevsk Mechanical Plant. Izhevsk enterprises produce over 95 per cent of small
arms exported from Russia and 75 percent of sporting and hunting firearms. They offer a wide
range of civilian and service weapons: assault rifles, sniper rifles, submachine guns, bolt-action and
semi-automatic carbines, semi-automatic smooth-bore carbines, hunting and sporting shotguns,
rifles and combination guns, service and sporting handguns, air rifles and pistols, and decorated
arms.

Automotive Industry

The IzhAvto company is one of the leading automobile producers in Russia. Since August 2005 it
has assembled KIA Spectra cars under a KIA Motors Corporation license. The Sarapul Electric
Generator Plant and the Izhevsk Motozavod ―Aksion-Holding‖ produce automotive electrical
equipment. The Sarapul Radio Plant-Holding plant produces various car audio systems.

Aviation and Space Equipment

The Izhevsk Motozavod ―Aksion-Holding‖ company produces command and instrument systems
designed for spacecraft control, small-sized telemetry stations, and antennas for space docking
systems. The Sarapul Electric Generator Plant is a major producer of electrical products for aircraft.
The plant‘s principal products are on-board electric power generation systems, electric network
control and protection systems, on-board lighting systems for all types of Russian airplanes and
helicopters. The Izhevsk Radio Plant specializes in space telemetry, satellite communications and
navigation systems.

Industry Equipment Production

The Votkinsky Zavod factory has traditionally produced metal-cutting machine tools as its most
popular products. Besides, the enterprise produces transportation and refrigeration units, equipment
for oil, gas and mining industries, consumer goods. The Sarapul Electric Generator Plant produces
self-powered welding units, generators, pumps, dough mixers, electric-powered carts. The Reduktor
plant is a leading producer of reduction gears for machine-building industries and the oil extraction
industry. The Oskon factory produces equipment for food and dairy industries. The Glazov
Khimmash plant produces metal frameworks for construction, containers, heat exchangers and
dryers, equipment for pulp and paper and food industries. The Kupol Izhevsk Electromechanical
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Factory produces oil extraction equipment, HVAC systems, equipment for wood processing,
distilleries and public catering enterprises. The Aksion-Holding Izhevsk Motozavod produces
energy-saving equipment and agricultural machines. The Izhneftemash plant produces equipment
for oil extraction and oil well maintenance. The Izhevsk Pilot Mechanical Plant factory specializes
in the production of rods with special surface finishing; it produces the whole range of shafts for the
oil extraction industry. The NITI Progress produces equipment for the oil extraction and tire
industries, electron beam welding and non-standard welding equipment. The Izstanko company
produces lathes. The Kambarka Gas Equipment factory manufactures heat, gas and water supply
equipment.

Instrument Making, Electronic Components and Materials Production

The Elekond company is one of Russia‘s major producers and suppliers of aluminum, columbic and
tantalum capacitors to the Russian market and CIS and Baltic countries. The Kupol Izhevsk
electromechanical plant produces analytical gas chromatographs and microelectronics materials.
The Izhevsk Radiozavod plant specializes in the production of railroad automation and
communications, and power saving systems, equipment for the fuel and energy industry, etc. The
Izhevsk Motozavod ―Aksion-Holding‖ specializes in the production of circuit boards, combined
circuit boards, as well as complex instruments, elevator control stations, etc. The Izhevsk
Mechanical Plant produces microelectronics products for special-purpose and medical devices and
household appliances.

Weapons and Military Equipment Production

Defense enterprises constitute a significant part of Udmurtia‘s industry.

The Votkinsky Zavod factory produces Topol and Bulava ICBMs. The Kupol Izhevsk
electromechanical plant produces air defense missile systems. The Izhevsk Motozavod ―Aksion-
Holding‖ produces instruments and control systems for missile complexes, communications and
control equipment, special-purpose computers, and electronic collimator sights. The Sarapul
Radiozavod-Holding plant produces new generation military communications products.

Medical Equipment and Materials
The Sarapul Radiozavod-Holding plant produces the Oskon electromagnetic therapy units and other
medical equipment. The Izhevsk Mechanical Plant produces pacemakers. The RESTER
pharmaceutical enterprise produces infusion solutions. The Izhevsk Motozavod ―Aksion-Holding‖
produces a wide range of medical appliances, e.g. intensive care complexes, neonatal tables,
defibrillators, cardiographs, etc. The Akustmash scientific-production association produces
equipment for EPS therapy.

Nanoindustry
Nanoindustry R&D activities in the Udmurt Republic are carried out by the Kupol Izhevsk
electromechanical plant, the Institute of Applied Mechanics of the Ural Branch of the Russian
Academy of Sciences, and the NIIMT company.

The Regional Nanoindustry Center has been established in Udmurtia jointly by the Engineering and
Technology Center of the Udmurt Republic, the Nanoindustry concern, the Kupol Izhevsk
electromechanical plant, the Metallurgical Research and Development Institute (NIIMT), the
Elekond company, the Nort research and production association, the Izhevsk State Technical
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University, the Institute of Applied Mechanics of the Ural Branch of the Russian Academy of
Sciences, the Udmurt Scientific Center with the Ural Branch of the Russian Academy of Sciences,
and the Training Center of the Udmurt Chamber of Commerce.

Metallurgy
Metallurgy accounts for 10 per cent of industrial production in the Udmurt Republic.

The Izhstal factory is primarily engaged in the production and sales of ferrous metallurgy products
– forged, pressed and cast pieces. The Chepetsky Mechanical Plant is the largest Russian producer
of zirconium alloy products, normal and depleted uranium, metallic calcium and its compounds. In
accordance with the International Thermonuclear Experimental Reactor project that Russia is a
participant of, superconductor production has been established at the plant. The Metallurgical
Research and Development Institute, possessing the status of a central technology organization,
specializes in the development and implementation of advanced processes and equipment in steel
production, rolling, casting and forging, and in powder metallurgy. The Balezinsky Casting and
Mechanical Plant specializes in furnace casting.

Timber Industry and Wood Processing
Today the republic‘s timber industry development is aimed primarily at increasing the share of
advanced wood processing basing on the implementation of new technologies. The Republican
Target Program ―Forestry and Timber Industry Development in the Udmurt Republic in 2009-
2013‖ is being implemented in the Udmurt Republic.

The Uvadrev-Holding company is the largest timber and wood processing enterprise in the Udmurt
Republic; it is a leading producer of wood chipboard and laminated wood chipboard. The Red Star
enterprise produces most products for children (furniture, stationary and toys). The Izhmebel
company is the largest producer of furniture in the Volga-Vyatka and Ural economic regions. It
produces various models of upholstered, cabinet, kitchen, bedroom, children‘s and office furniture,
and mirrors. The Glazov Furniture Factory specializes in furniture made of laminated chipboard.
The SPUTNIK enterprise produces, along with other products, corrugated paperboard and
packaging materials.

Light Industry

Today the light industry is actively developing in the Udmurt Republic. The Republican Target
Program ―Textile and Light Industries Development in the Udmurt Republic in 2004-2010‖ is being
implemented. Enterprises are obtaining up-to-date equipment; the quality of their products is
improving.

The Sakton enterprise has produced knitted outerwear for 60 years. Its products are intended mainly
for women (jumpers, jackets, blouses, suits, dresses, skirts, trousers, etc.).

The Sharkan-Trikotazh enterprise produces mostly knitted products.

Chemical Industry

Over recent years the chemical industry has been one of the fastest-growing industries in the
Udmurt Republic. Over the 2004-2008 period its output increased 2.1 times.
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The Izhevsk Plastics Plant is a major processor of polymeric raw materials, the only producer of
physically joined polyethylene foam and cevilen foam (known as IsolonTM ) products.

The Ergon company specializes in the processing of polyurethane and polyurethane foam for the
automotive and machine-building industries.

The LUCH enterprise specializes in polymer processing, it produces and sells a wide range of
plastic products, including leak-proof packaging materials and large containers, and household
items.

Glass Industry
Fakel and Svet are the principal glass-factories in Udmurtia.

Oil Production
In the Udmurt Republic oil is produced by two large companies – Udmurtneft and Belkamneft, and
ten smaller companies, Ryabovskoe, Reshetnikovskaya oil company, Selena, Chepetskoe, Futek,
Oil and Energy Resources company, Soyuzneftestroy, Elabuganeft, Mushakneft, and UNPP
NIPIneft.

In 2008 oil production in the Udmurt Republic amounted to 10.4 million tons, 97.8 per cent of this
amount produced by the Udmurtneft and Belkamneft companies. Udmurneft, one of the two largest
oil companies in the Udmurt Republic, currently develops 24 oil fields located on the territory of 13
administrative districts.

The Belkamneft company develops 41 oil fields located on the territory of 13 administrative
districts.

In 2008 four new oil fields and 77 oil wells were put into production.

                           Largest Enterprises in the Udmurt Republic

          Company                              Principal Products                     Location
Izhmash                           Machine-tools, metal-cutting tools, sporting         Izhevsk
                                  and hunting rifles and shotguns
Izhstal                           Iron and steel industry products, forged,            Izhevsk
                                  stamped and cast pieces
Izhavto                           Automobiles and spare parts                          Izhevsk
Izhevsk Mechanical Plant          Arms and other special-purpose products              Izhevsk
                                  (production and maintenance), service and
                                  civilian weapons repair, self-defense
                                  products
Kupol                             Special-purpose machinery, oil equipment             Izhevsk
Axion-Holding Izhevsk             Communication backbone, land                         Izhevsk
Motozavod                         communication stations, medical equipment,
                                  consumer goods
                                                12

          Company                             Principal Products                     Location
Izhevsk Radio Plant              Digital communications systems for rural             Izhevsk
                                 areas, radio relay communications systems,
                                 satellite communications equipment,
                                 railroad safety equipment
Udmurtneft                       Oil Production                                       Izhevsk
Belkamneft                       Oil Production                                       Izhevsk
Udmurtenergo                     Electric Power Transmission                          Izhevsk
Izhevsk Plastics Plant           Polyethylene foam goods, plastic goods               Izhevsk
Sakton                           Knitted goods                                        Izhevsk
Chepetsky Mechanical Plant       Equipment for nuclear power and non-                 Glazov
                                 ferrous metallurgy plants
Glazov Distillery                Alcoholic Beverages                                  Glazov
Sarapul Distillery               Alcoholic Beverages                                  Sarapul
Sarapul Electric Generator       Motors                                               Sarapul
Plant
Votkinsky Zavod                  Special-purpose machinery (production and           Votkinsk
                                 maintenance), consumer goods, oil and gas
                                 equipment
Red Star                         Children‘s furniture, stationery goods               Mozhga
Svet                             Glass vessels                                        Mozhga
Uvadrev-Holding                  Wood chipboard and laminated wood                     Uva
                                 chipboard

Agriculture
Crop Farming
Sod-podzol soils prevail in the Udmurt Republic. Agricultural land occupies 1.9 million hectares, of
which 1.4 million hectares are arable.

Grain crops, potatoes, vegetables (grown both outdoors and under cover), fiber flax and fodder
crops are the chief crops cultivated in the republic.

Grain production is very important for the republic‘s economy. However, due to the fact that
Udmurtia is located in the area of risk farming, crop capacity and yields of grain are unstable.

Total grain production, thousand tons

                                2004 2005 2006 2007 2008

                                490.3 569.7 567.5 556.4 646.1

Fiber flax has traditionally been cultivated in Udmurtia since ancient times. Today, of the 25 flax-
cultivating regions in the Russian Federation Udmurtia holds the first place in the crop area, the
republic is a leader in crop capacity and volumes of flax production in the Volga Federal District.
The flax industry in the Udmurt Republic is characterized by a wide integration of agricultural
organizations with local factories that results in a complete production cycle, from growing fiber
flax to its industrial processing.
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Livestock Farming

Livestock farming is the principal sphere of agricultural activities in the Udmurt Republic; it
contributes about 60 per cent to overall agricultural production and 85 per cent to agricultural
receipts. The state of livestock farming defines the level of the efficiency of the agricultural
complex in general.

Traditional branches of livestock farming are developed in the Udmurt Republic: cattle, pig and bird
farming. The contribution of sheep farming, fishery, horse farming, fur farming and bee-farming to
the total amount of livestock produced in Udmurtia is insignificant.

The black spotted cow is the principal breed of cattle raised in the Udmurt Republic. It occupies a
leading place among other breeds (70 %) by the number of cows and their productivity.

There are 11 pig raising complexes and specialized enterprises in the republic, where thoroughbred
pigs are raised: Large White, Duroc, Urzhum, Landrace, Yorkshire. A new breed producing larger
meat yield and called Tuklinskaya was developed in Udmurtia. Also, Udmurt agriculturalists
developed a new early-maturing breed of sheep called Sovetskaya, of the mutton-and-wool variety.

Much attention is paid to the development of poultry farming as birds are early maturing animals,
five poultry farms specialize in egg production, and one in broiler production.

Udmurtia‘s relief, soil and climate provide good conditions for developing a diversified agriculture
and fully satisfying its needs in staple foodstuffs.

Food and Food Processing Industries
There are 11 large milk production enterprises, 7 meat packing plants, 10 food processing factories,
9 large bakeries and 5 grain processing enterprises in the republic.

Dairy factories produce whole milk and low-fat products, cheese, butter, imitation milk products,
condensed and dry milk, buttermilk and ice cream. Over recent years they have mastered
production of cultured dairy foods enriched with bifid bacteria, bio-yogurts with varying content of
fat, and other products with therapeutic qualities.

The assortment of meat products is constantly expanding. Udmurt enterprises offer new types of
premium class sausages, raw smoked sausages and delicacies.

Food-processing enterprises provide the population of the Udmurt Republic with a wide range of
high-quality food products, such as confectionery, macaroni foods and bread, vinegar, mayonnaise,
yeast, bear, mineral water and soft drinks, mustard, etc.

Today one can boldly assert that Udmurt enterprises have the potential for operating on
international markets, as their products meet the criteria of nutritious and health food.

Foreign Economic Activities

Foreign Trade

In 2008 foreign trade turnover of the Udmurt Republic amounted to USD 907.2 million, decreasing
by 13.8 per cent as compared with 2007.
                                               14

Balance of trade deficit in 2008 amounted to USD 183.8 million.
                                                          15

                                        Foreign Trade in the Udmurt Republic in 2004-2008, USD mln


                                                       Foreign Trade Turnover
             Year
                                      Total                      Export                        Import

             2004                    348.9*                       256.4*                         92.5
             2005                     614.5                       405.5                         209.0
             2006                    1056.4                       791.4                         265.0
             2007                    1052.1                       339.8                         712.3
             2008                     907.2                       361.7                         545.5

* Since 1.1.2004 sales of the major part of oil extracted in the Udmurt Republic are not classified as export in official
statistical data.

Trade turnover with the CIS countries in 2008 decreased by USD 34.4 million (21 per cent) as
compared to 2007 and amounted to USD 129.7 million. Trade turnover with the CIS countries in
2008 accounted for 14.3 per cent of the total foreign trade turnover of the Udmurt Republic.

The foreign trade turnover with the far abroad countries in 2008 decreased by USD 110.4 million
(12.4 per cent) to USD 777.4 million. Trade turnover with the far abroad countries in 2008
accounted for 85.7 per cent of the total foreign trade turnover of the Udmurt Republic.

Exports from the Udmurt Republic

Exports in 2008 grew by 6.5 per cent amounting to USD 361.7 million, due to an increase in sales
of machine-building products.

Exports to the CIS countries amounted to USD 107 million (7.2 per cent increase). Exports to the
CIS countries accounted for 29.6 per cent of total exports from the Udmurt Republic.

Exports to the far abroad countries amounted to USD 254.7 million (6.2 increase). Exports to the far
abroad countries accounted for 70.4 per cent of total exports from the Udmurt Republic.

Machines, weapons and ammunition, metals and metal products constitute a significant part of
exports from the Udmurt Republic. Primary export products are oil extraction equipment, machine
tools, electronic units, integrated railroad locomotive safety equipment and parts, radios, plain and
alloy steel bars.
                                               16

                       Commodity Composition of Exports from the Udmurt Republic in 2008




Imports into the Udmurt Republic

Imports in 2008 shrank by 23.4 per cent amounting to USD 545.5 million.

Imports from the CIS countries decreased by USD 41.6 million (64.7 per cent) to USD 22.7 million.
Imports from the CIS countries in 2008 accounted for 4.2 per cent of total imports into the Udmurt
Republic.

Imports from the far abroad countries decreased by 19.3 per cent to USD 522.8 million. Imports
from the far abroad countries accounted for 95.8 per cent of total imports. In terms of value,
Udmurtia imported 23 times more from the far abroad countries than from the CIS countries.

Primary imported goods are machines, metals and metal products, and petrochemicals.

                        Commodity Composition of Imports into the Udmurt Republic in 2008
                                                 17




Principal Trade Partners of the Udmurt Republic

In 2008 the Udmurt Republic maintained trade and economic ties with 83 countries, the CIS
countries accounting for 14.3 per cent of the overall foreign trade turnover of the Udmurt Republic,
and the countries of the far abroad for 85.7 per cent.

In 2008 the principal trade partners presented in the table below accounted for over 75.5 per cent of
the total foreign trade turnover of the Udmurt Republic.


                                                      Foreign Trade Turnover
                                Country
                                                            (mln USD)
                    South Korea                                356.7
                    China                                      83.1
                    Iran                                       60.0
                    Kazakhstan                                 53.3
                    Germany                                    51.8
                    Ukraine                                    47.0
                    Venezuela                                  32.9

                              Principal Exporters from the Udmurt Republic in 2008, USD mln
                                               18


                    Iran                                            59.9

             Kazakhstan                                      39.8

                Ukraine                                  38.8

               Venezuela                              32.9

                    USA                        24.1

                Belgium                        23.5

               Germany                        22.8

                  Libya                       21.7

              Azerbaijan               14.4

                  China           10.7

             Netherlands       6.7

                 Cyprus        6.7

                  Other                                             59.7



Biggest exporters from Udmurtia are Iran—16.6%, Kazakhstan—11%, Ukraine—10.7%,
Venezuela—9.1%, the USA—6.7%, Belgium—6.5%, Germany—6.3%, Libya—6%, Azerbaijan—
4%, the Netherlands—1.9%, and Cyprus—1.9%.

                           Principal Importers into the Udmurt Republic in 2008, USD mln


          Republic of Korea                                                356.5

                     China               72.4

                  Germany         29

                      Italy     16.1

               Kazakhstan       13.5

                      USA      8.2

                   Ukraine     8.2

                     Other           41.6
                                              19

Biggest importers into Udmurtia are the Republic of Korea (65.4%), China (13.3%), Germany
(5.3%), Italy (3%), Kazakhstan (2.5%), and the USA (1.5%).

Export offers of Udmurt enterprises

Industrial Enterprises

Izhmash

    Sporting and hunting weapons. Projected volume 107 thousand pcs.
    Design and production of military products, including small arms, cannon-launched guided
     projectiles, aircraft guns, and checkout equipment.

Izhevsk Radio Plant

    Railway automation, traffic safety and communication systems.
    Space and aviation electronic radio equipment.
    Power saving equipment designed for heat production/supply systems and communal
     services.
    Personal navigational equipment (multisystem receivers, car navigators, moving objects
     surveillance systems).

Chepetsky Mechanical Plant

    Calcium metal, alloys based on calcium aluminum and calcium magnesium alloys. Projected
     yearly volume 1000 to 3000 tons.
    Depleted metallic uranium products designed for biological protection against sources of
     ionizing radiation. Projected yearly volume 15 tons.

IzhAvto

    Izh-27175 cars

Akustmash

    Massage equipment. Projected volume 100 to 1000 pcs (depending on the order)

Aksion

    Electrocardiographs. Projected volume 1000 pcs.
    Defibrillator/monitor for intensive care units and electropulse therapy of acute and chronic
     cardiac rhythm disturbance. Projected volume 2000 pcs.
    Light therapy units for icterus neonatorum treatment. Projected volume 600 pcs.
    Vacuum massagers. Projected volume 200 pcs.
    Electric meat-grinders. Projected volume 10 thousand pcs.
    Electric juicing machines. Projected volume 5 thousand pcs.
    Electric footware dryers. Projected volume 1 thousand pcs.

Teploeffect

    Plate heat exchangers. Projected volume 200 pcs
    Domestic heating plants. Projected volume 20 units
                                                20

NPP Gorizont

    Oil well injection technology development (primarily by means of horizontal boreholes),
     engineering support of drilling operations; design, production and implementation of novel
     technical means for above technologies.

Tekhnovek

Oil and gas complex products:

    Stop valves (globe valves, hose valves, ball valves).
    Wellhead fittings (pressure valves, well-control equipment, pump rod valves and electrically
     driven centrifugal pump valves).
    Pressure manifold comb units.
    Drill pipe fittings (box- and slip-type).
    Filtration manifolds.
    Insulating tubing joint assemblies.
    Flow measuring units.
    Prospecting equipment (lubricators, well dewaxing units).
    Oil production units (casing heads, valves, throttle valves, gate valves, etc).

Progress-stankoinstrument

Designs, produces and supplies high-precision linear dimension and location tolerance control
devices, machine-tool linear bearings, nonstandard equipment for closed cavity leakage control and
for machining parameter reading.

Izhneftemash

Oil and gas production equipment for well drilling, oil field construction and well maintenance, and
oil production.

NITI Progress

Welding technologies and equipment, service equipment for oil production, tire production
equipment, nonstandard equipment.

Construction Enterprises

HPO ―NORT‖

      Fire-retardant wood impregnation materials. Projected volume 500 tons.
      Single flame retardant varnish. Projected volume 100 tons.
      Antiseptic wood-treatment solution. Projected volume 1000 tons.
      Water dispersion acrylic paints. Projected volume 200 tons.
      Water dispersion acrylic varnish. Projected volume 200 tons.
      Fireproof doors. Projected volume 10 thousand pcs.

Belaya Stena

Decoration finishing materials (façade, interior, Venetian plaster, etc.). Projected monthly volume
100 tons.
                                               21

ALTAIR

Ceramic bricks. Projected monthly volume 500 thousand pcs (20 gondola cars).

Food Industry Enterprises

Kez Cheese Enterprise

    Cheese. Projected yearly volume 10 thousand tons. Product markets on proposal.
    Casein, industrial. Projected yearly volume 500 tons.

Mozhga Cheese Enterprise

Cheese. Projected yearly volume 10 thousand tons.

Uvamoloko, Glazovmoloko and Votkinsk-moloko milk enterprises

Dried milk. Projected yearly volume 3 thousand tons.

Glazov and Sarapul vodka producers

     Taiga vodka. Projected volume 15 thousand decalitres.
     Kalashnikov vodka. Projected volume 50 thousand decalitres.
Silver Springs mineral water producer

    Mineral water-based nonalcoholic carbonated beverage. Projected volume 100,000
     decalitres.
    Natural sulfate-hydrocarbonate sodium mineral table water. Projected volume 100,000
     decalitres.
    Nonalcoholic health-imroving juice beverage. Projected volume 200,000 decalitres.

Wood

Udmurtles Company

      Pulpwood, coniferous, desiduous (spruce, pine, fir). Projected monthly volume 500 m3.
      Plywood blocks (birch). Projected monthly volume 1000 m3.
      Bold timber, confierous (spruce, pine). Projected monthly volume 2000 m3.
      Bold timber, desiduous (birch, aspen). Projected monthly volume 3000 m3.

International Cooperation
In April 2008 the Udmurt Republic hosted a delegation of the Danish Embassy headed by Per
Carlsen, Ambassador Extraordinary and Plenipotentiary of the Kingdom of Denmark. The Danish
delegation took part in a Russian-Danish conference on heat supply and energy saving.

In 2008 Walter Schmidt, Ambassador Extraordinary and Plenipotentiary of the Federal Republic of
Germany participated in the opening ceremony at the Russian-German joint venture for the
production of dialytic solutions at the ZAO Rester in Izhevsk.

The Udmurt Republic maintains contacts with British and American Consulate Generals in
Yekaterinburg. In March 2009 the US Consul General in Yekaterinburg Timothy Sendaski visited
                                                 22

Udmurtia in order to familiarize himself with the socio-economic situation in the republic and
prospects for the development of its industrial potential, including the automobile industry.

From 8 to 10 February, 2009 Izhevsk hosted a delegation that included representatives of the
Japanese Center in Nizhny Novgorod and the Nomura Research Center. A seminar was organized
for representatives of local small and medium enterprises, a meeting with the Deputy Chairman of
the Government of the Udmurt Republic-Minister of Economy was held.

On February 11, 2009 negotiations were held in Izhevsk between the leaders of Udmurtia‘s
agricultural sector and the president of the Agrotecnica S.R.L. company (Italy) on deliveries of
milking and milk processing equipment for dairy farms and equipment for the production of fodder
to be used by Udmurt farmers.

On March 19, 2009 the Austrian trade and economy mission held a meeting in Izhevsk. Over 100
Udmurt enterprises discussed the prospects for a mutually beneficial cooperation with
representatives of Austrian companies.

On April 19-20, 2009 a delegation of the French-Russian LINKWEST company visited the Udmurt
Republic. One of the company‘s spheres of activity is development, engineering, implementation,
ideology creation and support of cluster structures employed in various spheres. Philippe Geffroy, a
co-founder of the French-Russian LINKWEST company, and Bertrand Tisselin, a representative of
French-Belgian INERGY/Automotive systems concern conducted negotiations with Izhevsk State
Technical University representatives. They agreed to promote cooperation on the creation and
development of cluster structures in the region.

In April 2009 representatives of a Finnish concern visited Udmurt milk processing factories
operating under the guidance of the KOMOS-GROUP company. They discussed the prospects for
the production of sterilized milk under the Valio brand-name. Raul Lönnström, Vice-President of
the Valio company, visited the OAO MK Sarapul-moloko company and a farm belonging to the
OOO Prikamye company.

On May 26-29, 2009 the X Anniversary International Specialized Exhibition titled XXI Century
City was held in Izhevsk. 155 enterprises from 14 Russian regions, and a German and a Latvian
enterprises took part in the exhibition. The exhibition presented products from 13 countries: Russia,
Bulgaria, Germany, Italy, China, Norway, Portugal, the USA, Finland, France, Czechia, Sweden
and Japan.

On June 10-11, 2009 г. the Environment, Natural Resources and Disaster Recovery Commission of
the Parliamentary Assembly formed within the framework of the Russia-Belarus Union worked in
Izhevsk.

On June 17-24 a delegation of experts in the sphere of social work with teen-agers and young
people (Naples, Italy) visited Udmurtia. The visit was organized within the framework of the
Program of International Exchanges in the Sphere of State Youth Policy between the Russian
Federation and the Italian Republic for the year of 2009 and the republican target program ―Youth
of Udmurtia‖ (2009-2013). The delegation met with representatives of the Ministry for Youth
Affairs of the Udmurt Republic, the Izhevsk city administration, the Directorate for the
Management of the Activities of District Officers and Juvenile Police Units of the Ministry of the
Interior of the Udmurt Republic.

Also, the Udmurt Republic regualarly participates in exhibitions and presentations held abroad. In
January 2008 a delegation of the Udmurt Republic took part in the Green Week—2008
International Agro-Industrial Forum held in Berlin, Germany. In November 2008 a delegation of
                                                 23

the Udmurt Republic participated in the Russian National Exhibition in India within the framework
of the Privolzhsky Federal District economic mission.

International Relations
Promotion of Finno-Ugric exchanges is a major part of Udmurtia‘s international activities. Local
ethnic-cultural public organizations supported by Udmurt authorities are actively expanding
contacts with non-governmental unions of Finno-Ugric peoples, such as the Advisory Committee of
Finno-Ugric Peoples, the M.A.Castrén Society, the Hungarian National Organization of the Finno-
Ugric World Congress, the Fenno-Ugria Foundation (Estonia), and the MAFUN youth association
of Finno-Ugric peoples.

Udmurt song and dance groups regularly participate in international festivals held in Hungary,
Finland and Estonia.

Since 1998, as part of the Russian-Italian Cultural Cooperation Program, the State Symphony
Orchestra of the Udmurt Republic has been a constant participant of international competitions and
concerts in various Italian cities.

Since 2008 Izhevsk has participated in the Intercultural Cities EC program aimed at the promotion
of tolerancy. The program encompasses about 70 cities in Great Britain, Ukraine, Poland, Germany
and other countries.

Competitions in Pyotr Tchaikovsky‘s native land have become a good tradition. They are:
P.I.Tchaikovsky, Citizen of the World international competition of children‘s drawings,
Tchaikovsky‘s Native Land and Young Talents in Tchaikovsky‘s Native Land international
competitions of young musicians. Gifted children from all parts of Russia and near- and far abroad
countries participate in these competitions.

The annual International Festival of Circus Art is another popular event held in Izhevsk.

Izhevk, the capital of Udmurtia, maintains sister-city relations with a number of cities: Yambol
(Bulgaria), Tata bánya (Hungary), Lusaka (Zambia), Xinning (China), Bêdzin (Poland), Córdova
(Argentina), Marakay (Venezuela).

Five international cultural centers function in Izhevsk: the Center of Indian Culture, the Center of
the Spanish Language and Culture, the Latin American center, the Center of American Studies, the
French Resource Center. The centers organize regular exhibitions, festivals, and meetings as part of
their work. Embassies of respective countries actively participate in the expansion of the centers‘
activities.

International links of Udmurt institutes of higher education play a special part in the development of
Udmurtia‘s cooperation with foreign countries. They maintain partnership relations with colleges
and universities in the CIS, European, East Asian, North American and South American countries.

104 foreign students and post-graduate students study in Udmurtia. 59 people represent the near
abroad: Kazakhstan, Azerbaijan, Armenia and Ukraine; 45 are students from far abroad countries:
Venezuela, Iran, Syria, and Vietnam. 57 students study at the Izhevsk State Technical University,
34 in the Udmurt State University, and 13 people are students of the Izhevsk State Medical
Academy.

The Udmurt Republic actively participates in the implementation of bilateral projects on youth
social work within the framework on intergovernmental agreements with Germany and Italy.
                                                      24

Investment Prospects
Investing in the Udmurt Republic means efficient investment of money in a region with a stable
political situation, a high scientific and creative potential, and advantageous conditions for
attracting investments by Russian and foreign companies.

The Udmurt Republic is an attractive region for investors due to the following factors:

   1. The region has long been characterized by political stability.

   2. Udmurtia lies close to major industrial centers of the Urals.

   3. The republic has abundant natural resources: rich oil fields, forests, and a well-developed
      agro-industrial complex.

   4. The Udmurt Republic possesses an up-to-date transport infrastructure linked with major air,
      railway, automobile and river thoroughfares.

   5. A powerful manufacturing, metallurgical and machine-building complex has been
      developed in the Udmurt Republic.

   6. The republic possessed a well-developed financial infrastructure, offers extensive crediting
      and leasing opportunities.

   7. Regional, district and municipal authorities provide economic privileges and support for
      investors.

   8. The Udmurt Republic possesses a high engineering and research potential with its
      institutions of higher technical education and research centers ranking among the leading
      ones in Russia.

   9. Over recent years the Udmurt economy has grown steadily.

   10. The level of life in the republic is decent.

International rating agencies have repeatedly confirmed the region‘s attractiveness and its high
economic potential:

     The Moody‘s Interfax Rating Agency assigned the Udmurt Republic the Aa1.ru credit rating
      that testifies of Udmurtia‘s high creditability.

     The Moody‘s Investor Service assigned to the Udmurt Republic the Ba1 foreign and
      domestic currency debt rating, assessing its outlook as stable.

A steady economic growth in the republic and creation of favorable conditions for attracting
investment have helped consolidate the positive dynamics of capital investments.

From 2005 to 2008 capital investment amounted to over 150 billion rubles, including 49.9 billion in
2008 (112% of the 2007 amount).
                                                25

                                                                               Capital Investment




In the 1st quarter of 2009 capital investment amounted to 7959.2 million rubles. The bulk of the
investment went into manufacturing industries, mining, transport and telecommunications, and
agriculture. 44 per cent of the investment was made into construction of residential buildings and
industrial structures, 40 per cent was spent on machines, equipment and vehicles procurement.

In 2008 USD 78.4 million was invested in the Udmurt Republic from abroad, 38.1 million by Italy,
and 31.8 by Cyprus. The Udmurt economy received USD 29.8 million as direct foreign investment.

In the 1st quarter of 2009 foreign investment in Udmurtia amounted to USD 60.6 million, including
USD 47.7 million in direct investments.

As of April 1, 2009 the total sum of accumulated foreign investments in the Udmurt Republic
amounted to USD 227.4 million, including USD 100.9 million in direct investments. Foreign
investment went primarily into metallurgy (22 per cent), real estate operations (24.7 per cent), and
the development and reconstruction of oil and gas production enterprises (20.4 per cent).

The majority of accumulated investment came from Cyprus (USD 98.4 million), Italy (USD 50
million), Luxemburg (USD 32.1 million), and France (USD 17.7 million).

Investment Legislation

The Government of the Udmurt Republic pursues an active state investment policy. A legislation
basis has been established in Udmurtia for promoting investment activities; target programs have
been launched to support a number of priority industries such as machine-building and metal
processing, textile and light industries, timber industry, investment and innovation activities, and
small business.

Since 2006 investment activities in Udmurtia have been governed by the Law of the Udmurt
Republic No.26-РЗ dated June 22, 2006 ―On State Support of Investment Activities in the Udmurt
Republic‖. Under this law the Government provides to investors:

1) Profit tax and property tax deductions;

2) Subsidies from the budget of the Udmurt Republic to partly reimburse interest on credits
provided by commercial banks for investment purposes;
                                                26

3) Deferments, payments by installments, tax credits, investment tax credit for the payment of taxes
and other compulsory payments into the budget of the Udmurt Republic;

4) State guarantees;

5) Informational and organizational support.

The principal forms of state support provided to potential investors are profit and property tax
deductions and partial reimbursement of interest on commercial credits taken for the
implementation of investment projects and leasing.

In accordance with the Law of the Udmurt Republic No.8-РЗ dated March 5, 2003 ―On Tax
Privileges Associated with Investment Activities‖, the Law of the Udmurt Republic No.55-РЗ dated
November 27, 2003 ―On the Organization‘s Property Tax in the Udmurt Republic‖, and the Decree
of the Government of the Udmurt Republic No.126 dated August 22, 2005 ―On the Approval of
Regulations on the Competition of Investment Projects Presented by Organizations for the Right to
Obtain Profit and Property Tax Deductions‖ investors can compete to obtain a 4.5% profit tax
deduction and 2.2% property tax deduction.

As stipulated by the Decree of the Government of the Udmurt Republic No.193 dated December 17,
2007 ―On the Approval of Regulations on the Procedure of Granting to Industrial Enterprises in the
Udmurt Republic from the Budget of the Udmurt Republic for the Implementation of Investment
Projects Subsidies for a Partial Reimbursement of Interest Rate on Credits and Leasing Payment
Expenditures.‖

Since 2007 the Republican Target Program ―Creating Favorable Conditions for Investment
Attraction to the Udmurt Republic in 2007-2009‖ has been implemented in the Udmurt Republic.

As part of the Republican Target Program an interactive Internet site has been established
(www.udminvest.ru). The site is devoted to investment activities in the Udmurt Republic, it
provides information on investment projects, news concerning training seminars for businessmen
and officials and larger-scale events such as investment forums.

In 2007 and 2008 the Government of the Udmurt Republic held investment forums. Their
participants included representatives of local enterprises, businessmen, researchers, Udmurt
Republic and Russian Federation officials, and representatives of over 60 commercial banks and
investment companies. The forum‘s program included exhibitions that presented the investment
potential of the Udmurt Republic and assisted potential customers and investors in holding
negotiations and signing contracts with enterprises.

In November 2009 the Government of the Udmurt Republic plans to hold another large-scale event:
the New Tools for Attracting Investments conference.

Small Business Support

Small business is one of the most important sectors of Udmurtia‘s economy. Today one third of the
republic‘s economically active population is employed in this sector of the economy.

The number of small business enterprises in the Udmurt Republic has been steadily growing: 7.78
thousand in 2004, 8.24 thousand in 2005, 10.59 thousand in 2006, 13.24 thousand in 2007. In 2008,
after changes were introduced into the methodology of small business classification, the number of
small enterprises amounted to 23.495 thousand (including 14813 micro-enterprises employing up to
15 people).
                                                27

Besides small enterprises, the small business sector includes over 40 thousand entrepreneurs
operating without establishing a legal person, and farming enterprises employing over 51 thousand
employees.

The state policy of small business support and development is implemented in accordance with
regulatory legal acts and republican target programs of small business support.

Under a program designed to help small enterprises principal elements of the necessary
infrastructure have been established in the Udmurt Republic. They make up a network consisting of
over 30 specialized organizations providing services to small business entities: the Udmurt State
Foundation for Small Business Support, municipal foundations, the Republican Business Incubator,
the Udmurtia Techno Park, the Udmurt Leasing Company, the Republican Center for Assistance to
Foreign Economic Activities, the Udmurtia-Moscow Interregional Marketing Center, and the
Republican Center for Assistance to Entrepreneurship and Insurance Market Development, and
other organizations.

In 2008 the Udmurt State Foundation for Small Business Support provided financing for 507 small
business projects for the total amount of 475.6 million rubles. Also, in 2008 under the loan
guarantee program 98 projects of small business entities received support for the sum of 180.7
million rubles, which allowed to obtain 360.4 million rubles in commercial banks.

In 2008 under the republican target program for small business support 34 small business entities
obtained 2 million rubles in subsidies for a partial recovery of expenditures under contracts of
guarantee.

Since 2005 the Udmurt Republic has participated and won in competitions held by the Ministry for
Economic Development of Russia in order to select subjects of the Russian Federation whose
budgets are granted subsidies for small business support. In 2008 the Udmurt Republic won the
right for a 45 million rubles federal subsidy.

In just four years for the implementation of activities of the Republican Target Program, on co-
financing terms, the Udmurt Republic obtained 165.697 million rubles from the federal budget.
This money was used to reconstruct and build business incubators in the cities of Izhevsk and
Glazov.

The Council for Small Business Support headed by the President of the Udmurt Republic operates
with the Government of the Udmurt Republic. The Council includes representatives of government
bodies, public associations, enterprises and small businesses. At the Council sessions its members
review major issues of small business development at the republican and municipal levels,
state/municipal property privatization issues, tax legislation, etc.

Small business support coordinating and advisory councils and boards have been established with
almost all municipalities. Over 20 of them have adopted municipal programs aimed at small
business support. At the municipal level there are seven small business support municipal
foundations, an information-and-consultancy center, a business incubator in the city of Glazov, etc.

The League of Public Associations of Entrepreneurs in the Udmurt Republic unites representatives
of public associations and protects their interests.

In June 2008 the winners of the ―Best Entrepreneur of the Year—2007‖ competition were awarded
in the Residence of the President of the Udmurt Republic. The competition was 11th in a row and
attracted a record-breaking number of contenders: 350 entrepreneurs competed for the Shundy-
Mumy (Mother Sun) golden statuette. 31 winners in 18 nominations received this award.
                                               28

Present State and Prospects for Small and Medium Business Development in the Udmurt
Republic

Current legislation adopted in order to stimulate small and medium business development in the
Udmurt Republic and promote the formation of support infrastructure for small and medium
entrepreneurship subjects:

    Law of the Udmurt Republic No. 34-РЗ of October 8, 2008 ―On Small and Medium
     Business Development in the Udmurt Republic‖,

    Decree of the President of the Udmurt Republic No. 138 of September 2, 2008 ―On
     Measures to Support Small and Medium Businesses on the Territories of Municipalities in
     the Udmurt Republic‖,

    Law of the Udmurt Republic No. 48-РЗ of November 28, 2008 ―On the Introduction of
     Changes into the Law of the Udmurt Republic ‗On the Use of a License-Based Simplified
     Taxation System in the Udmurt Republic‘‖,

    Law of the Udmurt Republic No. 56-РЗ of December 24, 2008 ―On Determining Limits for
     the Area of Leasehold Property and Credit Terms During the Realization by Small and
     Medium Business Subjects of Their Preferential Right to Purchase the Leasehold Property‖,

    The Republican Target Program of Small and Medium Business Development in the
     Udmurt Republic in 2009—2013 was adopted by a Decree of the State Council of the
     Udmurt Republic No. 194-IV of November 25, 2008 ―On the Republican Target Program of
     Small and Medium Business in the Udmurt Republic in 2009-2013‖.

The participation of the Udmurt Republic in federal competitions organized by the Ministry for
Economic Development of the Russian Federation has been a significant result over the last four
years.

The Izhevsk business incubator started its work in December 2006, its branch office was opened in
Glazov in September 2007 to promote small business development in the northern districts of the
republic.

In 2008 the Udmurt Republic presented a bid and was named a winner in a competition held by the
Ministry for Economic Development of the Russian Federation to select the subjects of the Russian
Federation whose budgets are granted subsidies for carrying out activities aimed at small business
support. As a result of the competition the Udmurt Republic won the right to obtain a federal
subsidy for co-financing of the following activities in the support of small businesses:

    Organization of a competition of municipalities of the Udmurt Republic for the financing of
     most efficient programs of small business support and infrastructure development projects,

    Financing of projects presented by small business subjects by means of providing loans.
     Providing means of production to small business subjects using leasing mechanisms.
     Implementation of a guarantee scheme development project.

In 2008 the Udmurt State Foundation for Small Business Support provided financing to 507 small
business subjects.

In 2008 the implementation of the Credit Guarantee Program was continued. As per the Decree of
the Government of the Udmurt Republic No. 1026-р of November 10, 2008 ―On the
                                                 29

Implementation of the Program of Providing Credit Guarantees to Small Business Subjects‖ an
additional asset contribution was made by the Udmurt Government to the Udmurt State Foundation
for Small Business Support to finance the Credit Guarantee Program.

The implementation of the Credit Guarantee Program helps create (preserve) jobs and increase tax
revenues, as well as significantly reduce risks present in crediting operations performed by
commercial banks and small business subjects.

In 2008 the Ministry of the Economy of the Udmurt Republic provided subsidies to 34 small
business subjects for the reimbursement of their expenditures associated with payments related to
contracts of guarantee. Enterprises that obtained financing in 2008 created 1.8 thousand jobs and
preserved over 6 thousand.

In the process of the realization of annually financed activities under republican target programs of
small business support and development a small business support infrastructure has been created
with active elements as follows:

    Udmurt State Foundation for Small Business Support,

    Municipal foundations for small business support in the cities of Izhevsk, Glazov and
     Votkinsk, and in the Yakshur-Bodya, Uva and Igra districts,

    Socio-business centers in the cities of Sarapul and Mozhga,

    Udmurt Leasing Company,

    State Institution of the Udmurt Republic ―Republican Business Incubator‖,

    Regional science and technology park ―Udmurtia‖,

    Republican Center for Business and Insurance Market Development Support in the Udmurt
     Republic,

    Republican Center for Foreign Economic Activity Support,

    Non-commercial partnership ―Zavyalovsky Business Development Center‖,

    A number of other organizations.

The following public organizations protect entrepreneurs‘ interests in the Udmurt Republic:

    Public organization ―Union of Mozhga City Entrepreneurs‖,

    Public organization ―Union of Votkinsk City Entrepreneurs‖,

    Independent trade union of entrepreneurs and employees of entities of various forms of
     property ―Edinstvo‖ (―Unity‖),

    Non-commercial partnership ―Izhevsk Business Club‖,

    Women‘s public organization ―IRIS‖,

    A number of other organizations.
                                                 30

Public organizations actively participate in seminars, conferences and meetings devoted to small
business problems, they take part in the work of working groups preparing normative legal
documents.

Council for Small Business Support with the Government of the Udmurt Republic headed by the
President of the Udmurt Republic is an extremely important tool for organizing cooperation of state
authorities and public associations of entrepreneurs in the Udmurt Republic.

It has become a good tradition to hold annual republican conferences of small business
representatives whose resolutions are dispatched to federal, regional and municipal authorities.

The Ministry of the Economy of the Udmurt Republic has constantly monitored the implementation
of the Decree of the President of the Udmurt Republic ―On Measures to Support Small and Medium
Businesses on the Territories of Municipalities in the Udmurt Republic‖.

Small business support programs are being implemented in 25 municipalities of the Udmurt
Republic, in 24 municipalities the Small Business Development section has been included into
programs of socio-economic development of municipalities in the Udmurt Republic.

Every year, on April 2, the Udmurt Republic celebrates the Day of the Entrepreneur of the Udmurt
Republic.

Today small business plays an important role in determining economic growth rate, the structure
and quality of the Gross Regional Product, employment, budget revenues and the resolution of
social problems in the Udmurt Republic.

Small business is a sector of entrepreneurship that employs most people in the republic, it serves as
a launch pad for medium business, besides, for the majority of the populace it presents the only
chance to realize their entrepreneurial potential.

According to official statistical data, the process of the creation of new enterprises in the Udmurt
Republic became more intensive in recent years.

The structural composition of small business by the types of economic activities shows that most
enterprises are engaged in wholesale and retail sales, car, motorcycle, household and personal use
items repairs; real estate operations, leasing and services, in manufacturing and construction.

Wholesale and retail enterprises make up the largest portion of small business enterprises. This
sphere is attractive to entrepreneurs, first and foremost, due to the fast payback and a stable
consumer demand. 20.2 per cent of small business enterprises are engaged in manufacturing and
construction.

In 2008 the number of small enterprises grew actively in the spheres of economic activities
associated with financial and real estate operations, leasing and services.

Small Business Development

Every year the Government of the Udmurt Republic increases the amount of finance allocated for
financing activities aimed at small business support and development. In 2007 it provided over 750
million rubles in financial support and granted guarantees and warranties to small business
enterprises for the amount of over 220 million rubles.
                                                         31

Within a program designed to help small enterprises principal elements of the required
infrastructure have been established in the Udmurt Republic. They make a network consisting of 24
specialized organizations: the Udmurt State Foundation for Small Business Support, municipal
foundations, the Republican Business Incubator, the Udmurtia Techno Park, the Udmurt Leasing
Company, the Republican Center for Assistance to Foreign Economic Activities, the Udmurtia-
Moscow Interregional Marketing Center, and the Republican Center for Assistance to
Entrepreneurship and Insurance Market Development, and other organizations.

Small business is promoted at the municipal level as well. In 2007 programs (plans) aimed at
supporting small business were adopted in 24 municipalities. A network of entrepreneurs‘ public
associations is being developed.

The Republican Business Incubator was established in the city of Izhevsk. In 2007 reconstruction of
a building for the Glazov business incubator was completed. The incubator will create conditions
for the development of producing and food processing enterprises in the northern part of the
Udmurt Republic.

For the last three years the Udmurt Republic has participated in federal competitions organized by
the Ministry for Economic Development of the Russian Federation in support of small business. As
a result, the republic obtained significant financing (80 million rubles).

After the adoption of the Federal Law ―On Small and Medium Entrepreneurship‖ the development
of the Republican target program of state support and development of small and medium
entrepreneurship in the Udmurt Republic in 2009-2013 began.

                    Principal Indicators of Small Business Development in the Udmurt Republic

                     Indicator                                2004     2005     2006     2007      2008
Small business enterprises, thousand                          7.78     8.24     10.59    13.24     16.82

Small business enterprises turnover, million rubles in        25,305   30,771   45,537   65,077   128,547
respective year prices
Small business enterprises‘ capital investment,                702      674     1072     3508      4558
million rubles

In recent years small business in the Udmurt Republic obtained an impetus for development, it has
constantly increased its contribution to budget revenues, realization of social programs and
increasing employment.

Innovation Development

For four years now the Udmurt Republic has implemented the republican target program
―Innovation Activities Development in the Udmurt Republic in 2005-2009‖ that includes the
formation of an integrated innovation infrastructure. The principal elements of this infrastructure
are the ANO ―Innovation and Technology Center of the Udmurt Republic‖ providing informational,
patenting/legal, consultancy and organizational support to innovative enterprises and the ANO
―Regional Center for the Nanoindustry of the Udmurt Republic‖ which combines the efforts of
scientists and industry experts for the creation of favorable conditions for the development of
nanotechnologies in the Udmurt Republic and production of competitive products on their basis.
                                                  32

The Republican Business Incubator in Izhevsk assists businessmen in the realization of innovation
projects from concept to implementation. Its branch in the city of Glazov was established with the
support of the Government of the Udmurt republic.

Six technology transfer centers operate in leading higher educational and scientific institutions of
the Udmurt Republic, their mission being the organization of an efficient application of know-how
in production.

The mission of the Scientific Council with the President of the Udmurt Republic is to coordinate
scientific innovation activities.

In 2005-2007, 15 winners in annual republican competitions of innovation projects received
preferential credits from the budget of the Udmurt Republic for the total amount of 34 million
rubles. New forms of state support of innovative activities have emerged, such as providing
subsidies for research and patenting activities.

Every year all-republican competitions, such as the Students‘ Ten Best Innovative Ideas
competition and the competition for research and development support, are held in order to discover
the most promising innovative ideas and economically efficient innovative projects.

In order to attract private investment for the financing of innovation projects innovation sessions are
held, a catalogue of innovative projects of the Udmurt Republic is published. Training seminars
aimed at training of staff for innovative activities are regularly held for both authors of innovative
projects and regional experts in the selection and review of innovative projects. Measures are taken
to develop the patenting sphere in order to protect the republic‘s innovators‘ intellectual property.

Over four years of the implementation of the republican target program the amount of sales of
innovation products made at local enterprises (including innovation-related work and services)
amounted to 18.4 billion rubles.

                              Innovation product shipments in the Udmurt Republic in 2005-2008

                       Mln rubles
                                                                              6637.5
                       7000
                                                              4978.27
                       6000
                                                3534.26
                       5000
                                 3235.43
                       4000
                       3000
                       2000
                       1000
                          0
                                    2005         2006           2007           2008

Republican authorities also support expositions of innovatively active enterprises at international
and all-Russian exhibitions. In 2008 at the VIII Moscow International Innovation and Investment
Salon two innovation projects presented by Udmurt enterprises were awarded gold medals, one
project received a special diploma.

In June 2008 the Udmurt Republic was presented at the 1st Russian forum ―Russian Capital to
Russian Innovations‖ and the VI Business Angels and Innovators Fair in the city of Cheboksary.
Udmurt projects presented in the Basis Innovative Clusters of the Volga Region and Innovations to
Every Home and Social Innovatics sections received three diplomas and were noted by the
organizers of the exhibition.
                                                  33

Special attention is paid in the Udmurt Republic to the development of the Nanoindustry.
Innovative designs by Udmurtia‘s enterprises in the sphere of nanotechnology have found
recognition at Russian and international exhibitions, such as the IV Specialized Exhibition of
Nanotechnologies and Nanomaterials ―NTMEX-2007‖ and the 1st Nanotechnology International
Forum held in Moscow. The Udmurt Republic Regional Center for Nanoindustry, with the
Government of the Udmurt Republic‘s support, is working on the presentation of the region‘s
innovarive projects in the Russian Nanotechnology Corporation state corporation.

Educational and Scientific Potential

Higher Education

In the Udmurt Republic five state institutes of higher education train highly qualified professionals
in over 100 specialties, with the total number of students exceeding 66 thousand. The institutes are
staffed with 2.4 lecturers, over 1.1 thousand of them have academic degrees and ranks.

   Udmurt State University (УдГУ)
   Izhevsk State Technical University (ИжГТУ)
   Izhevsk State Medical Academy (ИГМА)
   Izhevsk State Agricultural Academy (ИжГСХА)
   Glazov State Pedagogical Institute (ГГПИ)

Besides, 25 branches of leading Russian universities, academies and institutes operate in Udmurtia,
plus a number of non-state institutes of higher education, the International East-European
University being the largest of the latter (МВЕУ).

Institutes of higher education in the Udmurt Republic maintain extensive international relations
cooperating, on a contractual basis, with universities in Belarus, Great Britain, Hungary, Germany,
Spain, China, Slovakia, the USA, Finland, Czechia and other countries. They actively participate in
international programs such as TEMPUS/TACIS, INTAS, COPERNICUS, etc.

Science
Today a number of research institutes are functioning in Udmurtia. The Udmurt Science Center
established with the Ural Branch of the Russian Academy of Sciences in 1991 plays an important
role in the development of the republic‘s scientific potential. The Center unites research institutions
located on the territory of the Udmurt Republic, including the Institute of Physics and Technology,
the Institute of Applied Mechanics, and the Udmurt Institute of History, Philology and Literature.
Just recently one more research institution appeared in the Udmurt Republic: the Udmurt Branch of
the Institute of Philosophy and Law of the Ural Branch of the Russian Academy of Science.

In general, Udmurt scientists are engaged in research in the following areas: solid-state physics,
material science, physics and mechanics, socio-economic problems of the region‘s development,
history, ethnography, archeology, literature of peoples living in Udmurtia, etc. The work of Udmurt
scientists has been marked by State Prizes and other awards. Udmurtia‘s research institutions
greatly contribute to the training of highly qualified personnel for various industries.
                                                  34

Sports
Udmurtia is rightfully considered a leading sports center in the Ural and Volga regions. Udmurt
skiers and biathletes are famous around the world: Galina Kulakova, four times Olympic champion
and nine times world champion; Tamara Tikhonova, two times Olympic champion and two times
world champion (cross-country skiing); Valery Medvedtsev, Olympic champion; five times world
champion Aleksey Kobelev; three times world champion Ivan Tcherezov (biathlon), and many
others. Their successes are a result of their coaches‘ systematic efforts. It is no coincidence that in
2008 the Biathlon Olympic Reserve School and a sports complex named after Galina Kulakova for
training new generations of skiers were established, the Izhevsk biathlon complex is going to
undergo a major reconstruction.

There are a number of other world-famous Udmurt athletes: Aleksey Chizhov, international grand
master in international checkers and nine times world champion; German Skurygin, world
champion in walking; Svetlana Bubenkova, two times world champion and Olympics participant
(bicycle); Maria Feklistova, three times European champion and 2000 Olympics medal winner
(target shooting).

Udmurt bicyclists, swimmers, track-and-field athletes, motorcycle and automobile racers have
successfully participated in all-Russian and international competitions. Soccer, volleyball, ice
hockey, handball and basketball are very popular in Udmurtia.

Because of the successes of Udmurt athletes, numerous all-Russian sports federations have often
selected Izhevsk as a venue for holding regional and all-Russian tournaments. Every year the capital
of the Udmurt Republic hosts over 600 competitions at district, city, republican, all-Russian and
international levels. For over 50 years now Peace Relay Race (track-and-field) and Ring Bicycle
Race have been held in Udmurtia, the Gold Puck (ice hockey) and Leather Ball (soccer) children‘s
tournaments are quite popular. Every year thousands of athletes represent Udmurtia in Cross-
Country Race of Nations and Russia‘s Ski-Track all-Russian competitions.

It has become a good tradition in the Udmurt Republic to hold winter and summer sports
competitions of athletes living in villages. In August 2006 Izhevsk hosted the 6th All-Russian
Summer Rural Sports Games; Vladimir Putin participated in the opening ceremony.

Cultural Life
Today there are 37 (including branches) museums in Udmurtia, the most significant being the
Kuzebai Gerd National Museum, the State Tchaikovsky Museum Estate in the city of Votkinsk, the
Museum of Mid-Kama Region History and Culture in the city of Sarapul, and the Idnakar Culture
Preserve in the city of Glazov. In November 2004 the Kalashnikov Museum and Exhibition
Complex in Izhevsk opened its doors to visitors.

В республике действуют профессиональные театры - Национальный театр Удмуртской
Республики, Русский драматический театр им. В.Г. Короленко, Государственный театр
кукол, Сарапульский городской драматический театр, Театр музыкальной комедии в г.
Воткинске.

There are a number of professional theaters in the Udmurt Republic: the National Theater of the
Udmurt Republic, the V.G.Korolenko State Russian Drama Theater, the State Puppet Theater, the
Sarapul Municipal Drama Theater, the Musical Comedy Theater in the city of Votkinsk.
                                                 35

Music in Udmurtia is represented by the Udmurt Republic State Opera and Ballet Theater, the
Udmurtia State Television and Radio Company Academic Choir, the Italmas State Academic Song
and Dance Ensemble, the Aikai Udmurt State Folk Song Theater, the Tanok State Song, Music and
Dance Ensemble, The Ministry of Culture of the Udmurt Republic Symphony Orchestra,
Chipchirgan, Ekton Korka folk and ethnic music ensembles, etc. They have successfully
represented the art of Udmurtia at numerous festivals held abroad: in the USA, France, Italy,
Finland, Hungary, Sweden, Switzerland, Mongolia, etc.

Since 1958, every late April, the Udmurt Republic has held a traditional musical festival dedicated
to Tchaikovsky‘s birthday. In 2006 the first festival of creative children was held in Udmurtia, the
birthplace of the great composer.

In 2003 the construction of the Izhevsk Circus was completed. Russian and foreign circus groups
have constantly performed in Izhevsk, in 2008 and 2009 the 1st and 2nd International Festivals of
Circus Art were held at the Izhevsk Circus.

In 2008 the Izhevsk Zoo was opened.

The Udmurt Republic is one of Russia‘s most beautiful regions. Called ―a land of springs‖, it offers
a rare combination of opportunities for hunting, fishing, hiking and horse-riding trips, sports,
recreation and treatment in local spas. Udmurtia‘s guests can enjoy local cuisine, folk art and the
traditional hospitality of the Udmurt people.

The originality of Udmurtia‘s past and present is reflected in the republic‘s holidays and events that
are, so to speak, its trademarks:

   Late April—Tchaikovsky Musical Festival
   Mid-June—ethnic holidays: Gerber (Udmurt), Sabantuy (Tatar), Semyk (Mari)
   June 12—Izhevsk Day
   November 4—The Day of the Statehood of the Udmurt Republic
   December—Izhevsk Rifle international biathlon competition

				
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