The Power of the Far East

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What is offered to residents of the advanced development territories and the Free Port.

EXTENSION OF BENEFITS

This year, the Eastern Economic Forum not only let investors have new meetings and contacts, but also gave them new promises to improve the situation near the Eastern Gate of Russia. Benefits to residents of the advanced development territories (ADTs) and the Free Port of Vladivostok (FPV) will be extended for a period of up to 10 years. The list of directives issued following the EEF 2017 has already been approved by the president.

Investors were guaranteed the stability of legal regime and tax conditions for a decade, provided they acquired the status of ADT or FPV residents. Those who acquired such a status and opened a new production by December 31, 2025, would be entitled to pension tax and social insurance rates discounts in case of temporary disability and in connection with maternity, and lower health insurance rates. In such a case, no limitation on the time elapsed since the establishment of the corresponding ADT or the entry into force of the law on the establishment of the free port of Vladivostok would be applicable.

Previously, these discounts were applicable within three years of the establishment of an ADT or the FPV. If the issue were not faced, the insurance rate discount would be no longer available in the first three advanced development territories, Nadezhdinskaya, Khabarovsk and Komsomolsk, by June 2018, and throughout the entire FPV territory by October 2018.

Yuri Trutnev, The Plenipotentiary of the President of the Russian Federation in the Far Eastern Federal District, Vice Prime Minister of the Government of the Russian Federation 

“We were worried that three years after the establishment of a territory with a special economic regime we would have to tell investors that they were required to pay full rates going forward. It would have been a difficult situation for the business community.”

WHAT’S NEXT?

The authorities are not going to stop on this. According to Trutnev, the process will be continuous. At the EEF 2017, the President of the Russian Federation emphasized that in order to be competitive and attractive for investments, it is necessary “to constantly move forward, to analyze the practice of the leading countries in attracting capital, to offer better conditions.” He said that investors in the Far East can be given Russian citizenship under a simplified scheme.

Whether foreign investors need Russian citizenship is a big question. However, the fact that the neighboring countries of the Asia-Pacific region are constantly developing new regulatory mechanisms and amending laws to bring in “big money” is forcing Russia to be on its toes.

WHAT HAVE WE ACHIEVED SO FAR?

ANYONE CAN SEE 

At present everybody can follow the construction of the ADT and FPV infrastructure and facilities online. Video monitoring of the construction work was organized by the Far East Development Corporation (FEDC). Monitoring allows residents to follow the construction of infrastructure facilities and enables inspectors to keep track of the implementation of their investment projects. According to the Corporation CEO Denis Tikhonov, “everyone has the opportunity to see what is happening in the Far East, it is really possible.

What has the FEDC achieved since the beginning of the implementation of the federal law on the advanced development territories and the free port of Vladivostok?

All the projects of ADT and FPV residents have been the Far East. The system also includes the information on 14 projects which have received a federal subsidy for the construction of external infrastructure facilities. “Brand-new projects are being constantly added to the system; as soon as the agreement with a new resident is signed, the corresponding project is entered into the support system,” says Leonid Petukhov, General Director of the Far East Agency for attracting investments and supporting exports.

 

SECTORAL DISTRIBUTION OF INVESTMENTS IN THE FAR EAST,% 

  • 50 — production
  • 10 — transport and logistics
  • 8 — extraction of minerals
  • 6 — agriculture
  • 6 — fisheries
  • 6 — aquaculture
  • 6 — tourism
  • 8 — other

Source: Russian Federation Ministry for the Development of the Far East 

 

As previously stated by the Minister of the Russian Federation for the Development of the Far East, Alexander Galushka, the implementation of projects in the Far East will be monitored at the “highest level”. According to him, the working computers of the minister himself and the Vice-Premier Yury Trutnev “will display a daily summary of all applications received from investors with a description of the problems that they face.” In Russia, such a system exists only in the Far East, and its mobile version is expected to arrive by the end of the year.

SUPPORT TOOLS

888 APPLICATIONS(386 IN THE ADTS AND 502 IN THE FPV)

2,7 TRILLION RUBLES EXPECTED IN INVESTMENT

102 000 JOBS

490 AGREEMENTS FOR THE IMPLEMENTATION OF INVESTMENT PROJECTS ALREADY SIGNED

Thanks mostly to the unique support tools that do not yet exist in other regions of the country, the Far East managed to make a breakthrough in the last couple years.

All this was the result of the painstaking work of the development institutions, the regional and federal authorities, and most importantly, their individual approach to large investors and willingness to change the rules of the game overnight if it promised to benefit the Far Eastern District. Investors get help in building infrastructure; country days are arranged for Chinese or Korean investors, and they are issued with electronic visas. The support mechanisms are constantly expanding. Thus, it is expected that by the end of the year the Free Port regime will be extended to the international airports of Khabarovsk (Novy) and Petropavlovsk-Kamchatsky (Elizovo), as well as to the Soviet-Havana municipal district. In addition, by 2018 a single tax will be introduced for FPV residents. Both bills are currently in the government and will soon be submitted to the State Duma. And by February 1, 2018, the government is to review the application of legislative acts that will provide for the implementation of measures for the development and systematization of the Far Eastern regions. So as early as next year the region may again surprise the investors in a good way unless the government loses its focus on it.

The outflow of the population from the Far Eastern Federal District has practically ceased, investments in fixed assets in the Far East increased by 20% over the last six months alone. For three years, the growth rate of industrial production in the Far East has been ahead of the average growth rate for the Russian Federation, i.e. 8.6%, and the gross regional product has grown by 4.2%. According to Yuri Trutnev, the multiplier is already 1 to 20, “one ruble in budget funds to 20 rubles in private funds.” No other region of the country can boast such indicators.

Author: Elena Berezina 

 

 

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