Feb 2010, Russia&India Report by RBTH

Russia India

...Marching towards a common future

In focus:

Pharmaceutical market: on an upswing The sector looks to the future with more private funding and state support P.04-05

BUSINESS REPORT PHOTOXPRESS

BANGALORE ● MUMBAI ● NEW DELHI ● Wednesday, February 10, 2010

A Report from The Economic Times In association with Rossiyskaya Gazeta

Who'll rule the world by 2050?

KAMAZ comes to India One of the largest truck manufacturers in Europe and leader in the cargo vehicle market in Russia and the CIS countries, KAMAZ Inc, in March launches production in India.Last spring, KAMAZ Inc. and theVectra Group entered into a joint venture agreement to manufacture the KAMAZ range of trucks for the Indian market. The production of these trucks will take place in Hosur (Tamil Nadu), near Bangalore. KAMAZ Inc. manufactures a wide range of cargo vehicles, including tractors, side-board trucks, and tippers. Some trucks produced under the Vectra-KAMAZ joint venture will be targeted at the Indian armed forces, while some will be exported to other countries.

Russia will become Europe's leading economy by 2020, outstripping Germany, according to a recent report by PricewaterhouseCoopers. PwC’s London-based head of macroeconomics, John Hawksworth, said that by 2050, the world's largest economies will be China,the United States,India, Brazil and Russia. In his interview with RIR,John Hawksworth explained that his company considered grow-

ing energy prices as a key factor in Russia’s success in the short run, but also relied on the high level of education and effectiveness of the Russian workforce. On the other hand, an aging population and unequal distribution of wealth remain a challenge. India, by the mid-century, will become a global power, one the world’s ‘big three’. READ THE INTERVIEW ON PAGE 6

Kamaz trucks are respected globally for their reliability. This January, the Russian Kamaz-Master Team won the prestigious 2010 Dakar Rally for the ninth time.

READ MORE ON PAGE 3

ERIC VARGIOLU _DPPI/ITAR-TASS

Investment measures urged Russian President Dmitry Medvedev urged the government to work out measures to attract investment into Russia as the global economy continues to recover from recession. The president, in particular, proposed to lift quotas on the hire of skilled foreign specialists, to provide a mechanism of timely VAT refund in capital construction and the export of products other than raw materials, and ease customs clearance for engineer-

ing and hi-tech companies. Medvedev said last year's statistics of foreign investment were disquieting. "Overall, capital investment in the Russian economy decreased 17 pc in real terms. Amid a general decline in foreign direct investment in the global economy last year, investment into Russia decreased 41 pc, which is sad," he told a meeting on the country's investment environment. RIA Novosti

Infrastructure The 2014 Winter Olympics will be held in Russia

The 2010 Winter Olympics in Vancouver, Canada are about to begin. Aside from a sporting interest — many in Russia will be interested to see how Vancouver handles the organisation of this mammoth event. It will be Russia’s turn to host these Olympics four years from now, so the achievements of the Vancouver organisers will serve as a valuable lesson. VLADISLAV KUZMICHEV RIR

H 10 MARC

Russia has chosen a highly unlikely city to hold its winter Olympics: Sochi,a resort on the Black Sea. The weather there is not at all like the traditional idea of a Russian winter. Sochi is in the subtropics, and even in January, it doesn’t always snow. However, what makes this resort unique is that only 25 or 35 miles away, you find young mountains with plenty of snow that melts only in early summer.The organisers of the Sochi

Olympics plan to build the necessary sites so that in the relatively warm part of the city, competitions will take place in covered stadiums,while all the open-air disciplines will be held in the mountains. This will be the first time that Russia will host the Winter Olympics; the Soviet Union hosted the 1980 Summer Games in Moscow. The head of the IOC Coordination Commission for the Sochi 2014 Olympics, Jean-Claude

Killy,said the games' construction costs would be comparable to Vancouver and Turin Winter Olympics. Initial estimates of the games construction costs were around $12 bn, but officials reduced the projections sharply last year, claiming they had found significant ways to economise. In July, Deputy Prime Minister Dmitry Kozak estimated the total cost at $6.25 bn. CONTINUED ON PAGE 3

ALEXEY KUDENKO_RIA NOVOSTI

From Vancouver Olympics to Sochi

The logo for the 2014 Winter Olympics, which features a web address – Sochi2014.ru – was unveiled last December in Moscow.

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In brief

IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_FEBRUARY 10_2010

Aviation Russian 5th generation fighter to rival the US Raptor

Sukhoi's stealth fighter tested

www.sukhoi.org/eng Sukhoi Company website www.atomstroyexport.com Russia's Atomstroyexport website government.ru/eng Government of Russia website

Govt to provide $1 bn to cover export risks The Russian government plans to set up the Export Credit and Investment Insurance Agency with 30 bn roubles ($1 bn) of initial capital in order to support export activity. It will be established as a 100 pc subsidiary of state-controlled Vneshekonombank.

Russia's prototype fifthgeneration fighter, a joint venture with India, successfully completed its maiden flight in late January. The plane, provisionally called T-50, is the country's first fighter jet based on the stealth technology.

ELENA KUKOL ROSSIYSKAYA GAZETA

Pilots should begin training on the T-50 at a facility in Lipetsk as soon as 2013, Prime Minister Vladimir Putin told at a government meeting. Mass production should begin in 2015. “It’s a remarkable event,”Putin said, while acknowledging that the fighter, and particularly its engine, still needed work.“I am personally following it.” Deputy Prime Minister Sergei Ivanov, who oversees the military-industrial complex in the government, praised the jet as “unique”during the meeting. The plane took off from a test range at the production facility in the far eastern city of Komsomolsk-on-Amur and flew for 47 minutes, piloted by Sergei Bogdan, Sukhoi said in a statement.

The need to create such a body has been debated for nearly 15 years. Its job will be to provide coverage to exporters and their lenders in order to stimulate Russian exports. The first contracts are expected to be completed already in 2010. Meanwhile, Russia, Belarus and Kazakhstan will be working towards creating a common economic zone. This task has been given to a new government commission for economic development and integration. Before the end of 2012, Russia and its partners should sign a series of agreements for coordinating macroeconomic, competition and migration policies, terms of access to the services market, of capital flows and basic technical regulations.

WWW.SUKHOI.ORG

ALEX ANISHYUK THE MOSCOW TIMES

Russian fifth-generation T-50 PAK FA fighter jet during its maiden flight

“We’ve conducted an initial evaluation of the aircraft controllability, engine performance and primary systems operation. The aircraft had retracted and extracted the landing gear.The aircraft performed excellently at all flight-test points scheduled,”pilot Sergei Bogdan said in the statement.

“It is easy and comfortable to pilot.” Sukhoi won a tender to build the T-50 in 2002, replacing similar projects to build a fifthgeneration jet fighter that had been discussed since the late 1980s.The jet will have a speed of 2,000 kilometers per hour and a range of upto 5,500 kil-

RUSLAN KRIVOBOK_RIA NOVOSTI

Way cleared for reactors in Haripur

The Indian Government has approved plans for a nuclear power plant to be built jointly with Russia in Haripur. According to minister of state for environment

and forests, Jairam Ramesh, a study completed by the environmental board of the Department of Atomic Energy showed that construction and operation of

the proposed facility will have no damaging impact on the environment.This is one of the three sites where Russia plans to build upto 20 generation units. Under joint agreements on nuclear energy, six units will be constructed in Kudankulam in Tamil Nadu and from four to six - in Haripur inWest Bengal.“India is determined to grow its nuclear sector and it is good that India will continue doing this together with Russia. Our task is to meet the partner’s expectations and deliver top quality solutions,” says Nikolai Ponomarev-Stepnoi, vice president of the Kurchatov Institute. www.polit.ru

ometers, according to Sukhoi. “This is a great success of both Russian science and design school. This achievement rests upon a cooperation team comprised of more than a hundred of our suppliers and strategic partners,”Sukhoi chief Mikhail Pogosyan said in the statement.

These are ambitious plans, but according to Andrei Slepnev, Deputy Minister of Economic Development, the main proposal will be drafted this year. Another important aspect is WTO negotiations. According to Slepnev, there are two main sets of issue involved: Russian accession to the WTO and matters related to the Customs Union. Formally, each country will join WTO independently, but there are requirements that overlap with the Customs Union framework and have to be harmonised, explains Slepnev. On major systemic issues, each Union state will speak individually with members of the world trade club, yet keep in mind the objective of creating a common economic zone and associated issues such as access to the services market and agricultural subsidies.The Russian Ministry of Economic Development has also initiated the process to join the Organization for Economic Cooperation and Development (OECD). As the OECD accession rules stipulate WTO membership as a prerequisite, it has been agreed that Russia will negotiate with OECD and WTO concurrently.

Russia switching to e-workflow At the end of 2009, the Russian Communications Ministry launched its e-government project, opening a single portal for government services. This website will become instrumental in obtaining various certificates and documents, avoiding long lines and red tape. As Russian bloggers joke,a more fitting name for the new website designed to solve the problem of bureaucratic red tape would be “Bureaucracy.Net”: in Russian, “net”means“no”.According to Communications Minister Igor Shchegolev, the idea is to save time and effort for those who apply for services.“Roughly,

there are at least 360 mn applications for state services annually. The introduction of this portal will reduce the number of applications by at least one fifth. Our portal will give people more free time and positive emotions. It will truly be a people’s site,” the minister is convinced. Even pensioners use the new site, Shchegolev says:“The electronic portal arouses great interest among elderly people who can go online with the help of their more advanced grandchildren or by taking a special course.”His ministry, he added, is going to introduce electronic services in a consistent and di-

versified way. Soon, he hopes, electronic government services will also become accessible from mobile phones and digital television.“We have the necessary technology; we will now see how to introduce it,”he added. As soon as in 2011, applicants will be able to track the processing of their requests for government services, the minister promises:“In a year’s time, users will be able to track the movement of applications, and see what decision was made, upto the final information on where and when the document can be received.” Alexandra Prokopenko.

To read full versions of the articles on this page and to find more news, go to www.rbth.ru

Global Russia business calendar

and Ukraine, and in response to an overwhelming number of requests from our regular attendees, the Forum will address the key issues that industry players are facing in the pharmaceutical markets of Russia, Ukraine, Kazakhstan, Belarus, Uzbekistan, Georgia, Armenia, and Azerbaijan. www.adamsmithconferences.com

industry, from both key international and Russian companies.

9th Annual Russian Retail Forum March 23-25, Moscow

www.adamsmithconferences.com

What do today’s retail leaders see as the key challenges for the Russian retail sector? The Forum will give you an opportunity to hear from the leading domestic and international retail players who will analyse all the latest trends and developments and debate the burning issues in today’s retail industry.

Th 3-rd Annual Summit Digital TV Russia March 22-23, Holiday Inn Suschevsky, Moscow As a digital switchover progresses in Russia, the

The 1st International CIS Pharmaceutical Forum February 15-17, 18-19, Marriott Royal Aurora Hotel, Moscow Based on the success of our annual pharmaceutical conferences dedicated to Russia

The 13th annual Russian Automotive Forum government plans to spend 122.5 bn roubles March 16-18, Moscow ($4 bn) by 2015. In one of the major projects, Russia's car market has a proven potential for automakers worldwide. This is the only event regularly attended by the decision makers of all the leading players in the Russian automotive

it leads the way to new investment areas and strategic partnerships. As key decisions on digital transition are still being made, there is a wealth of opportunities to tap into the vast Russian market.

www.marcusevans.com

Find more in the Global Calendar at www.rbth.ru

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www.kamaz.ru/en KAMAZ Group of Companies www.kamazmaster.ru KAMAZ-MASTER team website - see photo and video sochi2014.com 2014 Sochi Olympics website

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Companies

IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_FEBRUARY 10_2010

Auto industry Russian trucks to be assembled near Bangalore

On the right path: KAMAZ comes to India KAMAZ corporation, Russia’s biggest maker of trucks, will launch production under its own brand in India soon. Over time, KAMAZ may localise the production of spare parts and may help Daimler AG, its German shareholder and strategic partner, to break into the promising Indian market.

market and simultaneously launching production is a successful move. “KAMAZ has chosen the best strategy in the current situation: to step up its activities in the external mar-

ket,”says Sergei Udalov, deputy director of the Avtostat analytical agency.“First, the company has long been working in developing markets. Second, KAMAZ trucks are competitive in India for a number of reasons: conditions there are in some ways as rough as in Russia and the trucks are rugged; their design is relatively simple, which makes maintenance easy and also very important; the price is attractive. One should also bear in mind the huge capacity of the Indian market. Thus, entering that market can help the plant reduce its total costs through economies of scale. Besides, production of auto components is a booming industry in India and localisation of production would cut the cost of the end product. This will enable KAMAZ to compete with global brands on price.” Some experts note that the initial target of 5000 trucks is not a very impressive figure. On the other hand, it remains to be seen whether KAMAZ products will immediately make inroads on the companies which have been present in India for some years. There may be other snags in store: the crisis is still on and it is hard to predict the demand for trucks in the Indian market in the coming years. However, by opening its own plant in India, KAMAZ may solve yet another problem, i.e. launching its German shareholder and strategic partner, Daimler AG, in the Indian market, something it has been trying unsuccessfully to do on its own. KAMAZ and Daimler have two joint enterprises that assemble and sell trucks in Russia.“The joint product of the two companies may combine the reliability of KAMAZ and the comfort of a MercedesBenz, which will make the trucks much more competitive,” says Oleg Datskiv, director of Autodealer.ru.

From the airport to the mountain cluster where the Olympic sites are now being built, including what will reportedly be one of the best ski resorts in the world, a new combined car-and-rail highway is being blazed. It will be 25 miles long and run through 6 tunnel complexes. Meanwhile, prices in the city are gradually decreasing. The cost of a plane ticket to Sochi, for example, has gone down since low-cost airlines entered the market. The cost of food is being driven

down by two means — the city is planning to build its first hypermarket and has organised weekend market places that are rent-free for producers of goods provided they keep their prices below a fixed limit. The development program also includes the training of all Olympic personnel, the adaptation of pedestrian zones, lifts and hills and even sprucing up buildings in the part of the city where the athletes and other guests will spend time during the Sochi Winter Olympic Games.

KAMAZ and the IndianVectra Group signed an agreement to form a joint venture to manufacture KAMAZ trucks for the Indian market last spring. On behalf of KAMAZ, the agreement was signed by Sergei Kogogin, general director and on behalf of Vectra Group by the company’s president, R.K. Rishi. Initially, the enterprise was to be launched in late 2009, but the event was postponed for a number of reasons. The Indian assembly facility is planned to be operational by the end of the first quarter of 2010, according to the KAMAZ public relations department. The plant will be located in the city of Hosur (Tamil Nadu), 40 km outside Bangalore. The amount of investment by both sides will be announced when the assembly plant opens. Initially, the joint enterprise will produce 5000 trucks a year.The models and types of trucks and the sequence in which their assembly will be launched will depend on local demand and economic feasibility, a spokesman for the Russian plant said. Usually, the most popular stock models are the first to be introduced: for example,trucks based on the chassis of the KAMAZ53229 and -53228 and -53215 family, modernised KAMAZ65115 trucks, a family of heavy trucks including dump trucks on the KAMAZ-6520 chassis and tractor-trailer rigs. The Indian market is one of the largest in Asia, allowing for a

GRIGORY SOBCHENKO_KOMMERSANT

NIKITA AFANASYEV RIR

KAMAZ trucks design is relatively simple, which makes maintenance easy; and the price will be attractive.

RIR Dossier: KAMAZ facts KAMAZ, the Kama Automobile Plant, is the largest producer of large trucks, tractors, diesel engines and components in Russia and the CIS. Located in Naberezhnye Chelny (Tatarstan, Russia), it is one of the ten leading producers of heavy trucks in the world and the eighth largest producer of diesel engines. Construction of the auto giant began in 1969; in 1976 the first truck rolled off the main assembly line. The economic reforms of the late 1980s-early 1990s resulted in a restructuring; in 1990, the government decided to create JSC KAMAZ using assets of the restructured company. By 2003, KAMAZ produced over 1.7 mn trucks and 2.3 mn

engines. In 2004, a number of agreements were signed with the German partner Zahnrad Fabrik for the production of gearboxes. In 2006, a general agreement was signed with another German producer, Durr Systems Engineering, for cooperation in technical development; and a joint venture with US company Cummins was established to produce engines. In December 2008, German concern Daimler AG acquired a 10 pc stake in JSC KAMAZ; and in November 2009, KAMAZ and Daimler AG signed agreements for the creation of two joint ventures – FUSO KAMAZ Trucks Rus and Mercedes-Benz Trucks Vostok – to produce heavy trucks.

very wide range of models. Another plus of the Indian market for KAMAZ is the near total absence of Chinese manufacturers with their inexpensive models. Because India has left-hand

traffic, the KAMAZ trucks will be right-hand drive and the Indian plant will be the first to produce right-hand drive KAMAZ trucks commercially. India will become the sixth

From Vancouver to Sochi CONTINUED FROM PAGE 1

Russia’s intention in 2014 is not only to host a major international sporting event, but to turn Sochi into one of the world’s most popular yearround resorts. As a Sochi official remarked recently, while many Olympic cities build temporary sites that are taken down as soon as the games are over, Sochi in-

tends to build for the long run. Besides the Olympic sites, which are already under construction, Sochi is building purification and bio-waste recycling plants; installing optical fiber lines, cable and aerial lines of power transmission, and underwater gas mains; it's even building and rebuilding power stations. “Sochi has long been in need of fundamental changes,” said

Anatoly Pakhomov, who was elected mayor last April.“Our aim is to make the city hospitable for its citizens and comfortable for guests, adapted for people of limited means, a city with a predominantly healthy lifestyle. The city’s logistics have long needed improving. Today, even skeptics see the striking changes that have taken place in Sochi in the last year and are ready to help de-

country where KAMAZ trucks are assembled. Similar enterprises already operate in Vietnam, Kazakhstan, Iran, North Korea and Pakistan. Entering a new automobile market,the KAMAZ marketing team is using a time-tested scheme. At the first stage, dealership contracts are signed with local firms for the sale and maintenance of the trucks as well as for the supply and sale of parts. Partners are selected from among large successful companies with good reputations who have their own subdealership networks and want to expand their sales and services to the whole country or region. Such firms usually do not confine themselves to sales and service, develop their own assembly and produce components. In India, KAMAZ’ partner will beVectra Group, a corporation that unites 18 companies doing various kinds of business in the markets of India, Eastern Europe and other regions. Analysts believe that for KAMAZ, going into the Indian

velop the city and its suburbs.” Even a superficial view is enough to see how much the city has changed for the better. Thanks to the construction of several highways circumventing the city, the center is no longer congested. In March, the Sochi Airport will inaugurate its new terminal. “There isn’t one health-care facility that hasn’t been rebuilt,” said Pakhomov.“Also, 70 pc of the city’s residential buildings will be repaired by the time of the 2014 Olympics.”

RIR Dossier KAMAZ is a supplier of the Russian Defense Ministry, which is proof of one of its main competitive advantages: the trucks are very reliable. In 2007, the multipurpose armored vehicle KAMAZ-43 269 Vystrel (APV97) was named the best in its class at the arms exhibition IDEX-2007. Back in 1993, the UN supplied 30 KAMAZ trucks for Yugoslavia where they acquitted themselves as more reliable than well-known Western brands. Since 2002, more than 500 KAMAZ trucks were delivered to Afghanistan through various UN organisations such as the International Food Programme, UNDP, UNOPS and IAPSO.

Industry

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RUSSIA INDIA REPORT IN ASSOCIATION WITH ROSSIYSKAYA GAZETA, RUSSIA THE ECONOMIC TIMES WEDNESDAY_FEBRUARY 10_2010

www.dsm.ru/en Find analytic reviews of the Russian pharmaceutical market www.pharmaceuticalsinsight.com The latest trends on Russian and global pharmaceuticals markets

Growth The government wants to boost the domestic market

2009 was a good year for the Russian pharmaceutical industry: it was in crisis-plagued 2009 that the Development Strategy for the industry was actively debated; moreover, President Dmitry Medvedev called the development of medical technology and pharma industry as one of Russia’s five priority areas for modernisation. OLGA KOLTUNOVA RIR

The government has yet to adopt a development strategy for the industry, but its prime objective is clear: to revitalise Russia’s pharmaceutical industry, in cooperation with global giants. “Russia’s pharmaceutical market ranks 10-12th globally in terms of size. It is a very big market, and it is highly interesting. Russia’s pharmaceutical consumption equals America’s,”Dr László Pocsaji, General Director of EGIS Pharmaceuticals (Hungary) in Russia estimates. “In value terms, however, Russia’s current consumption is far behindWest European levels. In other words, Russians buy inexpensive drugs. However, the market is growing steadily in value terms, too.” According to DSM Group,an industry consulting firm, Russia’s pharmaceutical market (including parapharmaceuticals) reached some $17 bn, or 3.9 bn units, in 2009, up 22 pc from 2008 in rouble terms but down 6 pc in dollar terms as well as down 6 pc in unit terms.

Indo-Russian co-operation in the pharmaceutical industry will surge, an expert believes The Indian pharmaceutical market is quickly becoming number one in the world. India can offer lower R&D costs without compromising quality for the full cycle process, which is 60 pc cheaper compared to the United States. Russia is willing to work together with India in the pharmaceutical sector, including on the development of new medications, said Russian President Dmitry Medvedev at a press conference after negotiations with Dr.Manmohan Singh. “We are ready to discuss these projects and set up new companies to produce drugs. The Russian pharmaceutical market is growing and Indian drug manufacturers have a good share of this market, represented by well-regarded brands. Development of the drug industry has been given top priority on the government agenda as

a programme coordinated personally by the president of Russia,” said Medvedev. Sergei Sobyanin, deputy prime minister, has invited Indian pharmaceutical companies to establish joint ventures and build production facilities in Russia. He said that the Russian government has adopted a strategy for developing the pharmaceutical industry and the presence of big companies would be important for Russia to deploy local production. If Russia joins this major global trend quickly and efficiently, it will open another strategic opportunity to get off the oil-andgas hook and build a diversified economy driven by high addedvalue sectors.

Meanwhile,before the crisis,the Russian market was showing remarkable growth of 25-30 pc a year. In 2008, the national pharmaceutical market added 27 pc, DSM Group estimated. High pre-crisis growth rates are largely due to rising personal incomes, with demand growing for vitamins and supplements; the share of more expensive imported drugs rose as well. Russia’s pharmaceutical market

differs fromWest European and American markets in one material respect: in Russia,there is no medical insurance to cover the cost of drugs. In general, the Russian market can be divided into three segments: the retail pharmacy market, the hospital market and the state programme that provides free essential medicactions.The retail pharmacy segment constitutes a significant portion of the

Vyacheslav Yefimov, Director Finance and Investment Department, Incor Alliance Law Office

overall market. During the crisis, pharmaceutical products jumped in price, reflecting the rouble’s decline against the US dollar. Not only imported drugs rose in price, but also domestic medicines produced with the help of foreign equipment and based on imported materials. “On the whole, domestically produced drugs account for upto 70 pc of the market in volume terms (in units), while imported drugs constitute 30 pc; in value terms, however, it is the contrary,”Dr Pocsaji explains. The reason is simple: most Russian drugs are cheaper. Many domestic manufacturers focus on very simple pharmaceuticals, such as iodine or inexpensive nasal drips.“Though innovative Russian blockbusters including Arbidol, Amixin, Phenotropil and others are also available in drugstores, the country’s pharmaceutical industry has much more in store. Many drugs were developed in the Soviet era for defense sector needs.Reanimated or declassified products make up 90 pc of all Russian innovations today,”said David MelikGuseinov,Director of Marketing at Pharmexpert Market Research Centre. Yet, the Russian market is largely dominated by generic products while the percentage of original drugs, Russian or imported, remains rather low. Pfizer, one the largest pharmaceutical companies, ranks tenth in the Russian market; although, some analysts don’t include it in the top ten. How-

EVGENY DUDIN_KOMMERSANT

The pharma market: on an upswing

The Russian pharma market has grown by more than 20 pc in 2009

ever, Pfizer focuses on the development of original drugs, blockbusters which are not competitive in Russia because of their high price.The average value of a packaged unit of medication purchased in the US is about $50, compared to a mere $2 in Russia, DSM Group calculated. According to Pharmexpert, some 1,500 manufacturers are represented on the Russian market, including the top five of Sanofi-Aventis (3.86 pc in value terms), F. Hoffmann–La Roche Ltd (3.1 pc), Berlin-Chemie (2.8 pc), Janssen-Cilag (2.8 pc) and Novartis Pharma AG (2.68 pc) – all leading global producers. The disproportionate ratio of domestic and imported medicines was one of the main drivers for the Development Strat-

Swiss drug maker Novartis sees big potential in Russia

Pharma-2020 programme will boost market

Novartis is eyeing Russia as the next big opportunity in emerging markets, after placing a major bet on China, its chairman said at Davos World Economic Forum in Switzerland. Daniel Vasella said Russia's science base and large population made it an exciting prospect for investment in marketing infrastructure, drug production and research and development. "The potential, I believe, is substantial," he said. "We will only

"Although overall economic instability in Russia and the rest of the world has affected growth of the pharmaceutical market, still it remains quite promising and attractive to investors. More and more Western companies have been announcing plans to build plants in Russia recently, said Goran Zidisic, Vice President of Hemofarm AD in Russia and the CIS. "The adoption of the Pharma-2020 programme is playing

do these investments once we have a fair understanding of the risks … it is an aspiration to do it within two or three years." Right now, China is at the top of the target list for Novartis. It has an annual growth rate for pharmaceutical sales of more than 20 pc, fueled by a growing middle class. Novartis unveiled plans last November to invest $1 bn in China. "I would like to do something similar in Russia be-

cause it has a lot of talent and great history of science but unfortunately has lost, to some degree in some areas, the edge. I think it can regain it," he said. The Russian government has now made the pharmaceutical sector a priority industry for development, which Vasella said could be an additional incentive for investment. First published in The Moscow Times

a part, too. We believe that it will push Russia’s pharmaceutical industry to new technological and economic levels. As for my company, the Russia market is a priority. For Hemofarm, the opening of a plant meant expansion of its presence on the global market, creation of a powerful logistics centre, the opportunity for additional contract manufacturing and quick reaction to market requirements."

egy for the Pharmaceutical Industry through 2020, which is designed to bring the proportion to 50:50 in value terms.The Russian government is expected to finance the production of innovative drugs. The strategy also implies the acquisition of licenses for foreign products and production of generic drugs. In addition, leading international producers will be able to manufacture their products in Russia on a larger scale. Foreign producers gained access to the Russian market in the 1990s and some of them have initiated production in Russia, including Krka, Hemofarm, Servier Pharmaceuticals and Gedeon Richter Ltd. “I can say for certain that most foreign companies are interested in the development of Russia’s pharmaceutical industry; it was recently announced that international companies are prepared to invest some €1 bn in Russia,”Dr. Pocsaji confirmed. Other companies with Russian production projects include Polpharma (Akrihin plant),Actavis (ZiO-Zdorovje), Stada (Nizhpharm, Makiz-Pharma) and Sanofi-Aventis (Bioton Vostok). Among manufacturers planning to start production in Russia are Teva, Novartis (Sandoz), Pfizer, Novo Nordisk, AEC PARTNERS, Wyeth Pharmaceuticals and AstraZeneca. CONTINUED ON PAGE 5

editor.india@rg.ru

en.rian.ru/business RIA Novosti newswire rt.com/Business/2010-01-08/domestic-producerslook-more.html Watch video report on farma industry www.rbcnews.com English-language business news

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Most popular drug categories Analgesics – 5.5 pc Antimicrobial drugs for systemic use – 5.1 pc Anti-inflammatory and antirheumatic drugs – 4.4 pc Vitamins – 4.4 pc Immunomodulators – 3.9 pc Hormones – 3.8 pc Drugs affecting the renin-angiotensin system – 3.7 pc Cough and cold medications – 3.3 pc Nasal drugs – 3.2 pc

“Localisation of production in Russia brings foreign companies closer to the market. Such projects are also important in terms of reputation: Western companies want to act as social partners with the Russian government not just in word, but in action. Another important fac-

tor encouraging localisation decisions is the Russian government’s policy of offering state purchasing preferences to Russian producers and foreigners with production in Russia. Such preferences form an essential part of the Pharma 2020 programme, aimed at ensuring high-quality manufacturing of all important medications in

Russia,”explainsVladislav Kochetkov, an analyst at the Russian investment company Finam.The gradual recovery of pharmaceutical sales could also boost investment in the Russian pharmaceutical market.“Currently, there are more forecasts than forecasters on the market, meaning that one analyst makes several fore-

Drug price regulation: boon or bane? Tighter requirements for mandatory registration of producer prices of lifesaving and essential medicines were recently introduced in Russia. Producers are required to report their product prices regularly. It's still unclear how the market will be affected, an expert says. VITALY DIANOV CAPITAL LEGAL SERVICES

A list of lifesaving and essential medicines,approved by the government on Dec. 30, 2009, includes more than 5,000 medicines produced by foreign and Russian manufacturers (for instance,ampicillin,tevanat,tamiflu and trivorin).The list is mostly made up of generic medicines produced by both, foreign and Russian manufactures, while nongeneric, brand-name medi-

cines constitute the rest. Medicines produced by foreign manufactures constitute about 30 pc of the list. Registered prices may be reconsidered once a year.The methods for determining the maximum prices of lifesaving and essential medicines differ depending on whether the medicines are generic or original, whether they have equivalents on sale in Russia and whether the price was registered within six months of the medicines being imported into Russia. The purpose of the new system of price control for medicines is to fix the wholesale and retail sale prices as high as possible. It is hard to predict at the moment whether the new system will be beneficial or harmful to the Russian pharmaceutical market. If the maximum retail

margins for“foreign”medicines are set too low, it may lead to a situation where Russian distributors and drugstores will not be able to cover the costs of operating and expanding their businesses. This could lead to a reduction in the volume of medicines purchased from foreign manufactures. Most foreign medicine manufacturers bring these medicines to the Russian market through Russian subsidiaries. Further distribution to drug stores and medical facilities is operated by Russian distributors, which places significant pressure on subsidiaries of foreign companies to accept very low markups on import prices.The situation is worse for Russian subsidiaries of foreign manufactures because of exchange rate fluctuations. As a result,Russian sales subsidiaries

An Indian focus on Russian drugs Ramana Motupalli describes the pitfalls and benefits of selling pharmaceuticals to RIR. India can help Russia achieve self reliance in the production of important medicines. DATTAN NAIR RIR

Can you briefly analyse the situation of the Russian pharmaceutical market? The Russian pharma industry Arbidol – 1.3 pc is going through both - chalEssentiale N – 0.9 pc lenging and interesting times Viagra – 0.9 pc owing to the developments in Actovegin – 0.9 pc macroeconomic and regulatory Linex – 0.8 pc environment. The market, post Mezim-Forte – 0.6 pc significant decline in 2008-09, Jarina – 0.6 pc has shown signs of recovery in Heptral – 0.6 pc the last quarter of 2009.The volConcor – 0.5 pc umes in certain categories have (2009, Percentage of total shown an increase, however, the sales in retail pharmacies) price realisation across the disSOURCE: REMEDIUM GROUP tribution chain continues to remain under pressure.The manufacturers are gearing up to adcasts. We expect the market to just to new guidelines in areas grow by 8-12 in dollar terms,” of marketing, regulatory, adverprojects Dr Pocsaji. tisement and distribution that According to BMI Research, are under discussion in state Russia’s pharmaceutical market Duma. will reach $50.9 bn by 2018, growing by an average of 11.28 How do Indian pharmaceutical pc a year.“In this respect, Russia companies perceive this marremains one of the most attrac- ket? tive markets over the long term,” Russia continues to be a focus agrees Kochetkov. market for major Indian pharmaceutical companies. Many Indian companies are developing products specifically for this market and working on providing latest products not only from India, but also sourcing them from Europe and other may become unprofitable, caus- parts of the globe. Top compaing issues with Russian tax au- nies have also increased their thorities. The subsidiaries may investments in team develophave to subsidise the sale of list- ment and strengthening of dised medicines from funds derived tribution. from the sale of other medicines. What are the problems and chalForeign medicine manufactur- lenges for foreign business in this ers may protect their interests by particular market? (a) transferring expenses in- One key challenge for overseas curred in marketing and promo- business in Russia is the availtion of medicines from their Rus- ability of relevant skills and exsian sales subsidiary to the for- perienced manpower. eign manufacturer; (b) starting to manufacture medicines in What are the prospects of this Russia, either themselves or market? through a Russian partner; or (c) R u s s i a i s o n e o f t h e t o p ceasing delivery of medicines to "pharmerging" markets in the certain countries where the med- world with a expected CAGR of icines from the list are registered 15 pc over the next few years. for prices lower in comparison The growth in this market is with other countries.Eventually, mainly driven by the increase in these steps would influence the per capita consumption of maximum sale price to be regis- pharmaceuticals. Also, the intered in Russia. creased focus of the govern-

Most popular drugs in Russia

CONTINUED FROM PAGE 4

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Ramana Motupalli, Region Head, Russia and CIS, Dr. Reddy’s Laboratories Ltd.

ment to provide free medicines (DLO) for identified therapeutic areas and category of invalid patients will drive the growth of the market. Last year, the government released the 2020 document that mainly focuses on increasing the self reliance of Russia in manufacturing pharmaceuticals, driving the industry towards innovative technology and medicine. Indian companies can contribute to Russia’s 2020 vision by: (a) ensuring the availability of quality products at affordable prices; (b) tying up with local companies towards local manufacturing; (c) setting manufacturing base in Russia to increase production of essential drugs. How different is this market from the Indian Market? The Indian industry is driven by domestic production and is export led whereas the Russian industry relies on imports.The regulatory requirements and patent laws in Russia do not allow companies to launch a range of products compared to the number of products one may launch in India. We have also observed a difference in prescription attitudes; some drugs which are blockbusters in the US and India have failed to demonstrate any impressive sales in Russia. Unlike India, the OTC market in Russia accounts for approx 50 pc of total pharmaceutical market. The Russian market is dominated by a few large distributors whereas India has a very fragmented distribution system. Other differences are: higher cost of operations and territorial spread that spans two continents, which bring in intrinsic complexities.

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Funds that top the table

A promising start to a new decade

Russia’s equity markets are amongst the most volatile in the world. Its legal system is malleable and its economy too addicted to oil. That’s the conventional wisdom. So, it must come as a shock to discover that Russia-dedicated equity funds crowd out all other funds to take the top four slots as best performing funds in the world over the last decade, according to equity rating agency Morningstar.

The past decade has been a roller-coaster ride for the Russian economy. From the depths of its 1998 financial crisis, to the credit-fed boom of 2007 to the seeming meltdown of the economy just a year ago to its still seemingly unbelievable rebound as we start the new year, one learns to expect the unexpected when it comes to Russia. MARTIN GILMAN ECONOMIST

The key has been and will continue to be government policy. And for all the criticism that can be heaped on the authorities who could have done more or could have acted sooner, they do deserve some credit for reasonably good economic management. It didn’t have to turn out as well as it has. In the run-up to the crisis, Russia, relative to spendthrift countries like Spain, Ireland or Ukraine, was running huge budget surpluses — thus, withdrawing stimulus that would have otherwise amplified the private sector’s euphoria with a veritable explosion of aggregate demand. It also saved the oil windfall for the most part so that it had a comfortable cushion to soften the blow when the global crisis erupted in late 2008.Other countries like Bulgaria, Hungary and Serbia that had no choice but to turn to the International Monetary Fund for support surely wished that they had Russia’s self-insured financial mat-

PHOTOXPRESS

Opinion Russia is well poised for recovery and can display impressive performance among the emerging market economies over the coming years

Martin Gilman, former senior representative of the International Monetary Fund in Russia.

tress to help survive the crisis. Moreover, once the crisis emanating from the United States hit Russia, the policy response was adequate. Although too much public money was no doubt wasted on undeserving corporate bailouts,the brave decision was to devalue the ruble. This was not inevitable nor politically palatable.The ministeps to depreciate the currency took courage in view of both public opinion and powerful vested interests that owed considerable foreign currency denominated debt. The cushion of reserves meant that Russia had the luxury to soften the blow through a gradual adjustment that allowed time for worried residents and companies to switch into dollars and preserve their nest eggs or repay debt. At the outset of the new decade, Russia’s economy is bouncing

back. Even after what was spent to soften the impact of the devaluation, the country still has roughly $450 bn in reserves — the third highest in the world after China and Japan. The RTS rose by almost 129 pc last year, more than markets in Brazil or China. The inflation rate fell to 8.8 pc, the lowest since the emergence of Russia as an independent country in 1992. Despite the additional emergency crisis spending and revenue decline, the budget deficit was maintained at an estimated 6 pc of GDP, which was financed without borrowing by drawing on the oil stabilisation fund.And after its initial plunge in the first quarter of 2009, real GDP and industrial production have subsequently grown on a month-on-month basis.Yearon-year numbers will soon turn positive, and GDP is likely to grow by 5 pc or more in 2010. Such results did not happen of their own accord.Whatever the faults of the Russian government in many areas,its handling of macroeconomic policy has been laudable. Monetary and fiscal policies have been executed with alacrity, at least relative to many others. The outcome is that Russia is well poised to recover even in the context of a feeble global economy and should be able to display impressive performance among the emerging market economies over the next couple of years. Of course, Russia is a country richly endowed with

natural resources, but so are Venezuela and Nigeria. Indeed, the critical point is that Russia — perhaps having learned the hard way about the folly of unmanageable debt in 1998 — has avoided the pitfall of debt that has engulfed countries from the United States to

Despite initial plunge in the first quarter of 2009, Russian GDP is likely to grow by 5 pc or more in 2010. the UAE in a colossal balance sheet crisis. Highly indebted countries could face years of stagnation while paying down their debt burdens. For Russia, as one of the larger, low-debt, resource-rich emerging market countries, its time may be at hand.Whether this opportunity is seized or squandered will depend on two key el-

ements: government policy and the external environment. As in the past, Russia — unlike China — is too small to have a major impact on the global economy.Oil prices may well not remain in the current $80 per barrel range, and the dollar is subject to contradictory pressures as are the global markets in which Russia is enmeshed. Whatever it is, the external situation will be a given. So the real issue is whether government policy can continue its reasonable job in riding herd on the crisis and confront what may lie ahead. Prospects are promising.With interest rates set to decline further and money supply and deposit growth in banks continuing to recover, banks are likely to start expanding credit in a “normal” economy where real interest rates are positive for the first time in years.

First published in The Moscow Times

RTS index dynamics for the last 6 months

SOURCE: WWW.RTS.RU

Forcast Russia has potential to be the largest economy in Europe

By 2050, US, China, India will lead the world PricewaterhouseCoopers recently suggested that in the coming years, a new group of emerging economies will come to replace the traditional leading industrial powers, with an E-7 group (China, Russia, India, Brazil, Mexico, Indonesia and Turkey). John Hawksworth, head of macroeconomics, PricewaterhouseCoopers LLP, offered his views to RIR. ARTEM ZAGORODNOV RIR

PwC predicted that Russia would become Europe’s largest economyby2020.Whataretheunderlying assumptions of this forecast? I’d like to emphasise that in terms of purchasing power parity ,which is different than looking at market exchange rates,

Russia’s GDP is already the second largest in Europe. Russia’s economy has overtaken those of the UK and France over the last few years,and it has only to overcome Germany to move into first place in Europe.Germany’s economic growth, especially given its ageing population,is projected to be quite modest.So over the next ten years, Russia should be able to grow faster than Germany because of its potential to catch up from a lower starting position.The price of natural resources should also remain relatively high because of demand from India and China – this in turn should also support Russia’s growth. By 2020, Russia is projected to overtake Germany based on GDP at PPPs. However, while abundant natural resources are an advantage in

the short- to mid-term, in the longer term they could pose a problem, since they may lead to rent-seeking behaviour. After 2020, there could therefore be a slowdown in the Russian economy, as its working age population shrinks and its catch-up potential is used up. It may therefore fall back to averageWestern European growth rates. Russia’s economic success will then depend on the growth of the knowledge-based sectors, since it can’t compete with countries like China or Vietnam in low cost manufacturing.The country will have to utilise its comparative advantage over other emerging economies: a high level of education among the general population – particularly in areas such as mathematics and science. Innovations and technological

growth are the real challenge if investment is to increase in the long run in areas other than natural resources; if this doesn’t happen, Russia might be outpaced by more dynamic economies such as Brazil, India and China. If Russia becomes the largest economy in Europe, and Brazil in SouthAmerica,whowilldominate in Asia – India or China? China is a much larger economy than India at the moment, and this won’t change over the next 20 years. India has strong IT, engineering and offshoring hubs, but not a large manufacturing sector. It also has a low average level of education – particularly female literacy rates in rural regions – even though elite education is strong.

However,looking forward,India has a younger, faster growing population. China’s population will age rapidly because of the one-child policy. Beyond 2020, India therefore has stronger potential for economic growth than China if it can address these issues. India will eventually also have a larger population than China,but a lower GDP per capita – probably even in 2050.Both countries are likely to become economically and geopolitically more significant in Asia than,for example,Japan.By the mid-century, the world’s ‘big three’ economic nations will be the US, China and India. If European countries work together as some kind of economic bloc – maybe including Russia in the long run – then they could also become a major player.

BEN ARIS RIR

And this is not an one-off either. The best performing fund on the planet over the last ten years was Prosperity Capital Management’s flagship Quest fund that returned a heart stopping 3,604 pc - twice as much as its closest rival, Swedish-based East Capital’s Russia fund. Prosperity’s Cub and Property fund also take the number two and three slot returning 1,828 pc and 1,604 pc respectively. East Capital’s Russia fund is the only fund available directly to retail investors and comes in 4th with 1,564 pc. And leading Russian investment bank UralSib’s First Fund is 10th with returns of 1,125 pc over the decade just ended. Emerging markets are consistently outperforming the developed world. Over the last decade, the MSCI index of all emerging markets had returned 102 pc by New Year’s day this year, while Russia’s leading RTS index returned a hefty 724 pc over the same period. “Negative returns, in almost all otherWestern stock markets, over the last decade challenge the widely-held assumption that 'advanced' countries will keep getting richer,”says Liam Halligan, head of strategy at Prosperity, which has $3.1 bn under management.“Yet, the stand-out success of the 'noughties' has been the Russian stock market. Much maligned, the Russian market is given a wide berth by the vast majority of international investors.Yet, it has an annual gain of 23.3 pc since December 1999 - including last year’s dip.” So what is in store for this year? Roland Nash,head of research at Renaissance Capital says that investors only need to ask themselves one key question:“is this going to be one of Russia’s good years or a bad one?”While Russian share prices won't repeat 2009’s spectacular performance again, the consensus amongst Russia-watchers is that the country is clearly in for one of its good years. Most Russia-based investment banks are predicting the RTS index will again be one of the best performing in the world and should rise from about 1400 at the start of this year to 1900-2000 by Christmas.

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www.glonass-ianc.rsa.ru Russian Space Agency's English language GLONASS site www.ecp.ru/en Find more information about the Zelenogorsk Electrochemical Plant

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Technologies

Space Russia weighs options to commercialise its navigation system across the globe

Russia is ready to offer India and several other countries a commercial navigation service based on its GLONASS satellite system. According to official sources, the system will come on line and begin generating cash in late 2010. ALEXANDRA PROKOPENKO ITAR-TASS , SPECIALLY FOR RIR

In February 2010, Navigation Information Systems (NIS), the Russian federal satellite navigation operator, will approve a development strategy before choosing partners to help manufacture navigation equipment. Among other things, the strategy envisages acquisition of leading mass-market navigation service companies, both in Russia and abroad.The NIS will follow up by offering GLONASS service on the global markets in the Asia Pacific region and Latin America. For advancing its ambitious agenda, the GLONASS operator plans to raise nearly $100 mn in loans in 2010 fromVneshekonombank, a major state-con-

trolled bank, as well as through investment from its parent company, JSFC Sistema, a Russian investment conglomerate owning stakes in telecom,energy and many other sectors.“The investments will serve our main objective to commercialise GLONASS and give impetus to the navigation market,”says Alexander Gurko,director general of the NIS.“We plan to acquire new assets starting in the first quarter of 2010, both in Russia and internationally.” According to Gurko, the GLONASS operator is planning to position itself on international markets.“Our target markets are in South-East Asia, India and the Middle East as well as

Central and South America. In 2010, our international expansion will be moderate, but we will continue to establish a stronger foothold in these markets. In India, we can draw on Sistema’s experience and with the global shortage of components slowing down the Galileo project in the EU and Beidou in China, it will be easier for us to enter the global arena.” In spite of the system's strategic role, Russia is open to creating joint ventures with foreign companies for manufacturing navigation receivers. According to Sergei Ivanov, Deputy Prime Minister in charge of the GLONASS programme, Russia and the EU are discuss-

The goal: 24 GLONASS satellites by year end Three new Glonass-M satellites were launched on December 14, 2009, bringing existing constellation to 22 satellites with positioning accuracy of seven meters. As soon as all the 24 satellites are up and running by

the end of 2010, GLONASS will be able to offer a similar level of performance as GPS. The capability to receive GPS and potentially Galileo signals will give the Russian navigation equipment a serious advantage.

KONSTANTIN ZAVRAZHIN_RG

GLONASS will soon rival GPS

Last December, Russia launched three new Glonass-M satellites, bringing existing constellation to 22.

ing compatibility and interoperability between GLONASS and Galileo. He notes that the objective is to make sure that "in the future, consumers could seamlessly access three systems: GPS, Galileo and GLONASS". If the project is successful, experts believe that the GLONASS-Galileo combination will basically shut the door to international success for China’s Beidou system. Russia has signed over a dozen international agreements in the field of satellite navigation, some of which stipulate GLONASS as the share system that will be used by both contractual parties. At the beginning of 2010, Rus-

Russian Government made it clear that it has no plans to prop GLONASS expansion with public funds. Already this year, GLONASS will begin nudging out the USdeveloped GPS from some segments of the Russian market. According to Ivanov, the government is taking steps to stimulate domestic demand; it issued a resolution to set up the federal operator of satellite and navigation services and is working on a technical regulation bill, which will mandate preinstallation of GLONASS receivers in state-owned transport vehicles, aircraft, vessels and railcar.

sian research and development centre Navis announced rollout of a new chipset capable of handling GLONASS,GPS and Galileo signals.The designers are in the process of completing the pilot batch of new receivers that will be subsequently integrated into navigation equipment.Mass production is scheduled to start in June 2010. It is still unclear, though, where those multi-format chipsets will be manufactured since Russia lacks sufficient production capacity and resources to ensure the appropriate level of quality. On the international scale,GLONASS will have to rely solely on its commercial success as the

Energy Closed Siberian town may hold key to energy crisis

Can nuclear power be renewed?

ARTEM ZAGORODNOV RIR

Michael McMurphy, CEO of French multinational Areva, led a delegation to the opening of the first commercial facility for the conversion and storage of depleted uranium in Russia last December. The new object was unveiled in Zelenogrosk, Siberia. This was the first time the French company had exported its technology to another country. The Zelenogorsk Electrochemical Plant was built mid-1950s as a facitilty for enriching uranium at the dawn of the nuclear age. Once uranium is mined out of the ground, it undergoes a

“cleaning” process in several stages that results in its transformation to a gaseous state. This gas is then transported to facilities like the plant in Zelenogorsk, where it is enriched by separation into U-235 and U-238 elements. Zelenogorsk’s technology is unique in that it uses a centrifuge spinning at 1,500 rotations per second to separate U-235 from U-238. At the end of the process, U-235 remains at the center of the centrifuge – and is eventually converted into a liquid and shipped to nuclear power plants across the world – while U-238 stays at the edge. Avera CEO Michael McMurphy presented Zelenogorsk with its own facility for converting into liquid and storing the U-238 that is left over from the enrichment process. “The U-238 is considered a strategic resource and we used to hold it in our own containers. Part of the U-238 we’d use in our own enrichment cycle, and part

of it, we’d send to other plants,” Director Sergei Filimonov explained.“Our technology will allow the U-238 to be stored en masse safely for extended periods of time.When economic and technological opportunities dictate, it could be used for a vari-

ety of purposes in the future,” added McMurphy. Therein lies the key to sustainable energy.“The Beloyarsk nuclear power plant in Russia’s Ural Mountains region is the only one in the world that uses a fast-neutron reactor and could

be run entirely on U-238,”explained a plant’s specialist. “What’s unique about U-238 is that is has the potential to be run in an entirely closed cycle. The plant could be powered exclusively by what it releases at the end of the enrichment process.

NIKOLAY KOROLEV

The city of Zelenogorsk, hidden between the green hills of the Krasnoyarsk Krai in central Siberia – doesn’t strike visitors as a global leader in renewable technologies. Yet, international specialists hope that it will become a critical juncture in developing sustainable energy.

New facilities for containing U-238 - which could be the key to renewable nuclear energy - in Zelenogorsk.

Therefore, we’d have a source of eternal energy,”he added. Apart from astronomical costs, problems persist with metal corrosion: strong enough materials have not been invented yet. The high levels of radiation would not make it a place for human habitation. This has not prevented international specialists from taking interest.“China has shown the greatest curiosity,”the plant's representative explained. “There’s currently an additional nuclear reactor under construction at Beloyarsk. They want to buy it.Along with our own institutes, the Chinese are among the highest investors in R&D in this direction,”he added. In an attempt to diversify the economy away from raw materials, nuclear technologies have been given prominence in a recently adopted state modernisation program. 110 bn rubles have been allocated for creating a new generation of more efficient and environmentally sound nuclear technologies, like the reactor in Beloyarsk. “Our main goal is to realise our competitive advantage in this hightech sector,”Vladimir Putin stressed at a government session in January.

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www.daviscup.com/teams Nikolay Davydenko at Davis Cup en.wikipedia.org/wiki/Nikolay_Davydenko Find more information about Nikolay Davydenko

Sport Russian tennis player Nikolai Davydenko: There are no hopeless situations in tennis or in life

Serving up a success story ALEXANDER ERASTOV RIR

At the end of last year, Davydenko won the 2009 ATP World Tour Finals, defeating three top international players. Consolidating his success, he went on to win the ATP World Tour in Doha in January 2010, again beating Roger Federer and Rafael Nadal. The 28-year Nikolai is certainly talented, but he has a reputation as a hard worker. Without any special physical advantages, he achieved remarkable results, thanks to his incredible work ethic. It is for this reason that he was dubbed Iron Davy, Super Bison, Soviet Lunar Rover and even Hauler on the Volga.The last nickname, as the others, has its reason: Nikolai lived inVolgograd, on the great Volga river. The unique fate of Nikolai Davydenko differentiates him from many of his colleagues in the Association of Tennis Professionals (ATP). He was born in 1981 in the Ukrainian coal mining town of Severodonetsk. When he was 11,his elder brother Eduard took him to Volgograd, where Eduard was working as a tennis coach. Eduard was and remains the main tennis authority for Nikolai, his coach since childhood who led him to many victories. Nikolai is still registered as resident in Volgograd, though he lives in Dusseldorf, Germany. The history of his passports is interesting, too: the first he received in Ukraine, the second – in Russia, in Volgograd. The

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third passport could have been a German one: having worked inVolgograd for three years and marrying there, Eduard moved to Germany and took his young brother with him. There, in the small town of Salmtal, not far from Trier, Nikolai rose to prominence as a young and promising player. Both brothers applied for German citizenship, but – luckily for Russia – their request was rejected. By that time, Nikolai was spotted by Shamil Tarpishchev, President of the Russian Tennis Federation, who invited him to play for the Russian national team. Nikolai remembers that when his brother began to coach him, he had to forget all he learned in his youth sports school, start-

‘If you want to win, you need an action plan’ You achieved remarkable results in your career. How were you able to achieve so much? If you are a professional in your area, you have to seek new heights. The results come from efficient training, a well-regulated and scheduled life and extreme self-organisation and concentration. How do you achieve such incredible self-control and concentration on the tennis court as to easily beat Nadal, Federer ? My brother and I, we don’t share our secrets. If you want to win, you need an action plan and confidence that you can achieve your objective.You have to remember, there are no hopeless situations in tennis or in life. Lady Luck will smile upon you,but you have to be ready for her, too.

"Tired of training? Then try a coal mine,” Davydenko's brother and coach Eduard would say, smiling ing from scratch, both in terms of skills and physical strength. As a teenager, Nikolai was not very fit and to strengthen his muscles, Eduard told him to imitate a tennis racket swing, holding dumbbells instead of a racket. Nikolai was an obedient student, overcoming difficulties and pain and thus, shaping his body and spirit. When in good humour, the brothers readily talk about their childhood in the Ukrainian mining town. Nikolai used to complain half-jokingly to his brother:“I am tired of that, the same from morning to night, only training and competitions.”“Tired? Then try a coal mine,” Eduard would answer, smiling. Davydenko won the 2009 ATP World Tour Finals last year in London, beating all the four 2009 Grand Slam winners, including Rafael Nadal (Spain), Robin Soderling (Sweden), Roger Federer (Switzerland),

DMITRY KOROTAEV_EPSILON

One of the world’s top tennis players, Nikolai Davydenko prefers to live in Germany, train in Thailand and relax in the Maldives. And – he has no doubts about it – to compete for Russia. In March, he will lead Russia’s national team in the Davis Cup match against India, at the Luzhniki Olympic Complex in Moscow.

Extreme self-organisation and concentration are main causes of Davydenko's success

and Juan Martin Del Potro (Argentina). Nikolai became the first Russian player to win the World Finals. Previously, the greatest achievement of our athletes was to qualify for the Finals twice. Having won, Davydenko became the world’s sixth seeded player. Finalist Juan Martin Del Potro, almost dead from fatigue after two sets against Nikolai (3:6, 4:6), admitted at a news conference: “This tournament has a great champion in Nikolai. He

worked hard to beat every player this week. He's very fast. He played like PlayStation - he ran everywhere. He played much better than me, and that's it.” Nikolai himself was sitting in a news room, studying the prize.“Here are the names of Pete Sampras, Roger Federer, and now my name, too,” he read.After his triumph, Nikolai flew to Munich with his wife Irina, going further to the Maldives. Finally, a vacation, time to fish.

It seems sometimes that your schedule is a product of a thorough mathematical analysis: you get maximum results with minimum cost. Is it so indeed?

I'm very lucky to have a great coach, who knows perfectly my physical and playing condition, in what tournaments I can do my best and where I can just play training matches without thinking about scores. The schedule itself can change depending on injuries, illness or other circumstances. But, to sit at my computer and calculate where to play and where not to, I never do that. Nikolai,youliveinGermany.Were you offered to compete for other countries, for a consideration? Indeed, Davis Cup and Fed Cup winners don’t get any material rewards... Yes,there were many such offers, but I love my motherland and I amproudtobeRussia’sNo.1tennis player. Don’t worry, I won’t defect, I promise. If we play for Russia, we do it to support our country’s prestige, not for any material interests.

Based on the interview from Argumenty and Facty

RIR Dossier Nikolai Davydenko is a professional tennis player, active since 1999. He has won 20 singles tournaments, including three Kremlin Cup tournaments, three Masters Series shields (Paris in 2006, Miami in 2008, Shanghai in 2009) and the 2009 ATP

World Tour Finals in London; he is also a Davis Cup winner. In November 2006, Davydenko was ranked third on the ATP table – his all-time best; currently, he is sixth. Davydenko’s career winnings total $13,425,349 (as of 18 January 2010).

Davydenko is keen to play against India The Russian-Indian match in the first round of the Davis Cup tournament is scheduled for March 5-7 in Moscow. The last Russian-Indian match, in 1986, was lost by the Russian team. “I am interested in facing In-

dian players. I remember how difficult it was for me and Igor Andreyev to beat the pair of Mahesh Bhupathi and Jonas Bjorkman at the Kremlin Cup Final. I also remember the Chennai tournament, though I got injured there,” Davydenko said.

This issue has been conceptualised by INTERNATIONAL MEDIA MARKETING, RESPONSE adqueries@ timesgroup.com Co-ordinator: • Feature Mehernosh Gotla (mehernosh.gotla@ timesgroup.com)