Today Yakutia is the largest region of Russia. The republic is able to cover its costs without tangible financial support from Moscow. It is not accidental that Yakutia is called a diamond state: diamond cutting is a local core industry, which yields finished products with a high added value.

Diamond-cutting industry in digits

  • The industry accounts for approximately 2% in the regional industry structure.

  • Twelve diamond-cutting companies were operating in Yakutia in 2014.

  • The total cost of diamonds produced in 2014 stood at $167 million, demonstrating 17% year-on-year growth.

  • Revenue from diamond sales reached $236 million in 2014. In all, 116,000 carats of product were sold.

  • Approximately 50% of diamonds are exported.

  • China, Japan, the United States, Israel and the EU countries are major buyers.

Prospects of diamond-cutting industry in Republic of Sakha (Yakutia) amid crisis

Investments Analysis and Research Economic Situation Crisis Diamond Yakutia

The diamond-cutting industry is predominantly export-oriented, so devaluation of the ruble has had a positive effect on investment attractiveness of the industry and the region as a whole. By the way, a similar situation is being observed in industrially-developed Poland. The Polish people always welcome devaluation of the zloty because it causes a rise in exports and revenue of their enterprises.

A proof is the successful operation of joint ventures involving Japanese, Indian and Chinese capital. Israel and Asia Pacific countries also have a keen interest in diamond-cutting business.

Experts predict that the activity of export-oriented enterprises of Yakutia will remain at the pre-crisis level despite numerous negative trends in the Russian economy. The ongoing legal reform is assisting in the development of industries and the attraction of investments. For instance, the Federal Law on Industrial Policy of the Russian Federation provides substantial tax benefits for industrial enterprises. Federal and local authorities are actively cooperating in the liberalization of export duties and VAT.

Future of Yakutian diamond-mining industry

Modern industrial parks focused on diamonds and jewelry will appear in the territory of the republic in the upcoming years. A boost to world-class development of the industrial sector is a primary objective of local and federal authorities. EPL Diamond, the leader of the republic’s jewelry and diamond-cutting industry, is the main initiator of industrial parks.

Investments Analysis and Research Economic Situation Crisis Diamond Yakutia

Four enterprises affiliated to Alrosa Group are mining diamonds in the territory. This industry is highly essential to the republican economy and is steadily exhibiting superb profitability levels.

Diamond-mining industry in figures

Investments Analysis and Research Economic Situation Crisis Diamond Yakutia

  • Diamond mines ship approximately 38% of the republic’s industrial products.

  • About 20% of workforce employed in manufacturing sectors mine diamonds.

  • Diamond mines provide 76% of revenue among profitable industries.

  • Over 20% of taxes paid to the local budget come from this most profitable industry of the Republic of Sakha.

The diamond-mining industry develops under a special program designed by Alrosa specialists. This is a long-term document: action plan stages are set out for the period until 2023 and coordinated with the Russian president.

Alrosa plans to increase diamond mining to 36-37 million carats by 2016 and to maintain an equal output in a later period. The goal can be achieved through the expansion of existent mining facilities and the creation of new ones.

Yakutia as advanced development territory (ADT)

The formation of advanced development territories in Eastern Siberia is a part of strategic plans of the Russian government. Non-resource export-oriented businesses will be entitled to preferential rates of insurance contributions. New enterprises will enjoy five-year property, land and revenue tax breaks. The operation of advanced development territories is regulated by a separate federal law which envisages the creation of a special economic zone in addition to tax benefits. Once the zone is set up, production equipment, finished products and raw materials will be imported to and exported from the region without such impediments as taxes and customs duties.

The Republic of Yakutia is productively cooperating with national authorities in the acceleration of economic growth in the region. The most prominent and promising advanced development territory project is Kangalassy industrial park to be created within the administrative borders of Yakutsk city district. The project will provide a universal platform for industrial production in a number of most popular areas.

The size of business and the specific features of an enterprise operating within an advanced development territory are not restricted by Russian laws, which is highly attractive to companies of any scope. It is a unique feature of the Kangalassy project that most residents of the prospective advanced development territory are small investment ventures. The companies specialize in production of polyethylene pipes, paint, composite, insulation and building materials. China’s Sunyang Chemical products (bricks, building blocks, scraps melting) and Lithuania’s Vakaro Rasa, a manufacturer of continuous burning boilers, are listed among foreign investors. The number of enterprises wishing to become residents of the future industrial park has been growing day after day.

Advanced development territories in short- and medium-term future

Approximate investment in Kangalassy project may amount to 1.310 billion rubles, including 1.119 billion rubles contributed by private businesses. The advanced development territory can generate about 2 billion rubles for the local budget and over 9.3 billion rubles in added value from its anchor projects. It is planned to create 350 jobs at the initial stage.

Investments Analysis and Research Economic Situation Crisis Diamond Yakutia

The industrial park project, which is unprecedentedly extensive for Yakutia, will significantly improve the investment attractiveness of the region. Kangalassy will bring the republic to a new developmental stage based on productive cooperation between local and federal authorities and businesses experienced in launching modern high-tech enterprises.