Great Britain and the Urals - a "modern" way of collaborating

19.06.2012 — Analysis

For a long time the relationship between Russia and Great Britain has evolved amidst a diplomatic clash between Moscow and London. However, in late 2011 a thaw was felt at the highest levels. In a landmark step, the two sides signed a partnership declaration that proclaimed an era of modernization in Russian-British cooperation. James McGuire, the British consul general in Ekaterinburg, explained to RusBusinessNews how this new edict has been reflected in the business dialog between the two countries.

- Mr. McGuire, modernization at the highest level is the primary benchmark for Russian-British collaboration, but the relationship between the Urals and the United Kingdom has remained at the starting point for a long time. So, in the Middle Urals the two sides are actively discussing a project to update the supply of machine tools...

- The Urals area of Russia, including Sverdlovsk region, has a legacy of being the heartland of Russian industrial might. It contains a significant proportion of heavy engineering and manufacturing, however much of this manufacturing is in need of updating in technologies and modernisation. That is why the region government is developing a Machine-Tool Refurbishment Programme to 2015. The British Manufacturing Technologies Association (MTA) has been invited to take part as well. The Consulate initiated the Machine-Tool Refurbishment Need Survey, which was funded by the UK Government and carried out in close collaboration with the Sverdlovsk Regional Government, as well as Sverdlovsk Regional Unions of Industrialists and Entrepreneurs, Machine Builders and Defence Industries. Now the research has been completed and we hope to identify further areas for cooperation, which might include the creation of joint ventures, as well as localization of the British machine-tool production to the Sverdlovsk region.

- Efforts to modernize are always accompanied by environmental issues. How is cooperation evolving in this area?

- We see example of cooperation in this area as well. Ecological Innovations - Way to Success forum took place in November, 2011 in Ekaterinburg, and I applaud the organisers the Chelyabinsk World Trade Centre, and the Government of Sverdlovsk region. At the forum, British experts shared the experience of low-carbon and carbon-free technologies in construction sector.

Let me give you some other examples of cooperation. In low carbon construction companies such as Arup provide innovative engineering expertise to structures from opera theatres to 21st century stadia, and innovative architects like Buro Happold, designers of the Sochi stadium, who are committed to design that makes the best use of the natural environment.

The global market value of low carbon environmental goods and services is over £3.2 trillion and is expected to grow again by half by 2015, and the British market alone is worth £112 billion. The fastest growing areas in United Kingdom are carbon finance, wind power generation and solar power market - increasing 7.9%, 6.5 % and 6 %, respectively in 2010. New sources of energy are also developing in the Urals, and UK is prepared to assist in this process.

- The ten-year British-Russian Nuclear Cities program ended in Russia in February of 2012 - what was the outcome of that program?

The Closed Nuclear Centres Programme (CNCP) was not limited only to Russia. With the total value worth £40 million, CNCP has been also implemented in relevant nuclear establishments in other FSU (former Soviet Union) countries - Armenia, Belarus, Georgia, Kazakhstan, Ukraine and Uzbekistan.

Main activity stemming from this important project has included a grant scheme launched in 2004 to provide start-up funding to Ozersk businesses, and a "Business Development Agency - Ozersk" established in 2007 to raise investment in local businesses raising over RUR 180 million in 14 projects, half of which was provided by the UK Government Department of Energy and Climate Change.

By 2010, the CNCP Programme had created over 1,300 jobs through over one hundred projects at nuclear institutes and in closed nuclear cities in the FSU.

- Closed Administrative-Territorial Entities are still cities that were built around a single industry, and there are about 335 of those in Russia. No other country in the world has so many "monotowns" that are dependent on a single sector of the economy. At one time British experts had to apply themselves seriously to the task of restructuring these types of cities in Great Britain. Has this experience been embraced in Russia?

- Conversion of monotowns is a difficult but important objective, and the UK government has always been ready to assist develop wider cooperation between relevant and interested UK companies and monotowns. For example in late 1990's and early 2000s there was a TACIS project to assist the Urals mono-towns: Asha (Chelyabinsk region) and Shadrinsk (Kurgan region) to diversify their local economy. The project implementer was UK Company IMC Consulting Ltd. The UK specialists worked to assist local governments to identify areas for SME development and jobs creation. Among recommended business areas were down-hill skiing tourism, agriculture and local craftsmanship.

- From looking at these cities' current development, many of the British recommendations have been put into practice...

- As one could expect. Conversion of monotowns is feasible, but we all understand the structural difficulties involved. Clearly responsibility for development must lie with the Russian Government but we would be interesting in exploring ideas of joint collaboration and projects in this area.

- The global economy is currently undergoing another round of crisis. How will relations between the Urals and Great Britain develop under such turbulent conditions?

- Any crisis effects trade and investment relations. During crisis most companies have to think of how to survive. They reduce costs, lay-off personnel and postpone their investment decisions until better times.

But I don't think that economic crisis has undermined Great Britain's position as one of the leading investors in the Russian economy - the 2nd largest in the EU. In the Tyumen region, an example of a successful investment project is TNK-BP; in the South Urals - the REXAM plant that produces aluminum cans, in Perm - the Russian-British company John Crane-Iskra, which supplies gas seals and spare parts for compressors; and in the Sverdlovsk region - Eurasia Mining, which is developing deposits near Karpinsk. The British company Tensar International Ltd., a world-leading provider of technology-based solutions for soil reinforcement and ground stabilisation, is taking part in the Ural Industrial - Ural Polar project. The company's know-how can not only help to extend the life of transport infrastructure, but also to reduce its construction costs. I am delighted to see this product already applied to challenging construction projects across Russia, including Sochi Olympic developments.

In addition, UK is willing to expand cooperation in such sectors as engineering for end user industries such as automotive and aerospace, infrastructure and construction development. UK business finds financial and legal services and the consumer market to be just as interesting. Great Britain can also offer furniture, china such as Wedgwood, famous British cheese, and Scottish whisky.

- Many foreign investors are attracted to the arctic region with its gas deposits...

- In general there are a number of companies, from the large multi-national to the small technology driven university spin-off, who are interested in commercial opportunities arising from the development of resources in the arctic region. We at the British Consulate-general Ekaterinburg, and British Embassy Moscow, through the UK government's trade department UK Trade & Investment, are committed to bringing Russian and British industry together to work on these fascinating and challenging projects. To that end we hope to organise a number of trade delegations to areas such as Yamal and Tyumen in the next few years, as well as invite key representatives of major Russian companies to the UK to explore the possibilities for better cooperation

- The Higher Education Statistics Agency claims that the number of foreign students studying at British universities has risen 32% in the last five years. According to the British Council, approximately 3,500 of those students are Russian.

- The UK has an outstanding reputation for excellence in education and skills. UK education and skills exports are worth over £14 billion pounds annually. In 2009/10, over 400,000 international students studied at UK universities and colleges. We do not hold exact figures as to how many of international students in the UK are from the Urals region, however, we know a lot of local business people that send their children to the UK to study, so this is a very common practise here.
But you can get access to the British-style education right here in the Urals. The London School has just opened in Ekaterinburg in October 2011 and recruited its first students. British International School is working in Tyumen since 2008 teaching international and Russian pupils according to the national curriculum of England and Wales.

- Mr. McGuire, before being posted in Ekaterinburg you worked in Guangzhou. Is the business environment in the Urals much different from that of China?

- Yes there are many synergies between Ekaterinburg and Guangzhou. Both are the third placed cities in huge countries, both come from areas with a reputation for strong manufacturing, both are externally focussed to the world of international trade and investment. As much as I mention the similarities above, they have structurally different economies. South China is a resource consumer, manufacturing on a broad and massive scale primarily for export. The Urals is a significant energy producer with an industry geared to increasing this production and focussed on heavy engineering, aerospace and defence especially and, with some significant exemptions, usually geared to a domestic or CIS market.

The interview was prepared by Valentina Mazharova