Key Advantages of Investing in Russia
• Dynamic Economic Growth
• One of the Largest Consumer Markets
• World-Renowned Human Capital
• Vast Natural Resources
• Unique Geographic Position
• Technologically Advanced Economy
• Attractive Taxation System
• Extensive Government Support
• Stable Social and Political System
Russia is the world’s largest country in terms of territory, with a consumer market of over 140 million people, vast natural resources, a highly educated workforce, and technologically advanced research and production capabilities. Russia has tremendous growth potential. Investment opportunities exist in every region and in every sector of Russia’s economy, with a wide array of government institutions, instruments and investment programs, as well as strong support for investors at all levels — federal, regional and municipal.
Special economic zones in Russia
Today special economic zones (SEZ) are one of the most effective instruments of attracting investment to Russia.
Now there are 28 special economic zones of 4 different types:
– 6 Industrial and production zones (in Republic of Tatarstan, Lipetsk, Samara, Sverdlovsk, Pskov and Kaluga regions);
– 5 Technology and innovation zones (in Moscow, Saint-Petersburg, Tomsk, Dubna (Moscow region) and Republic of Tatarstan);
– 14 Tourist and recreational zones (in Republic of Altai, Republic of Buryatia, Altai Territory, Stavropol Territory, Primorsky Territory, Irkutsk region, also there is cluster in the Krasnodar Territory, Republic of Ingushetia, Republic of Dagestan, Republic of North Ossetia-Alania, Republic of Adygeya, Kabardino-Balkar Republic, Karachi-Cherkess Republic and Chechen Republic);
– 3 Port zones (in Ulyanovsk, Murmansk regions and Khabarovsk Territory).
SEZ in Russia are located in the most developed regions. There are hi-technology enterprises, scientific and research laboratories in the zones. By December 2013 there were 338 residents in the special economic zones, including leading foreign companies from 24 countries, among them there are the major transnational companies: Ford, Yokohama, 3M, Air Liquide, Rockwool, Hayat, Novartis, etc. The total volume of scheduled investments is more than US $12 billion.
Residents of technology and innovation zones obtained 350 industrial patents. The world’s largest companies, such as Boeing, Airbus, Apple are among the consumers of SEZ residents products, and such companies as Phillips, Samsung, IBM, etc. are their partners. The SEZ residents’ products are in demand, and this indicates the high potential of SEZ as a tool to support innovative companies, through which residents compete successfully in the global market.
Currently we are working on building technological cooperation between companies and on clusters creation. For example, the largest cluster in the country is creating now in SEZ “Toliatti”. It will provide a full cycle of cars production, including the production of engines and other high-tech components, presented by leading companies from Germany and Japan.
Besides, there is cluster on production of automobile tires in SEZ in Lipetsk region. There is a complete set of production from polymer additives to metal cord (Yokohama, Lanxess, Bekaert).
Aviation cluster is now creating within the port SEZ “Ulyanovsk”, which provides establishment, repair and servicing aircraft equipment. “Ulyanovsk” residents represented by such well-known companies as “Volga-Dnepr”, FLTechnics, Viking, AAR and others. There is also an application of “Rostekhnologii” and “Bombardier” joint project implementation on small aircrafts production in SEZ «Ulyanovsk”.
From 2005 the “industrial assembly” regime was established in Russia to attract investment from foreign automakers. “Industrial assembly” means gradual localization of automotive vehicles and components production in Russia with different benefits and preferences. However, in accordance with the commitments made by the Russian Federation during the WTO accession, further development of this regime became impossible. Thus, the mechanism of the SEZ is currently the only existing mechanism for attracting foreign investors, which allows potential investors to use preferential government support.
The benefits of special economic zones can reduce the expenses of the investor up to 30%.
Special economic zones provide special condition of doing business for the residents which is guaranteed by the Government of the Russian Federation:
1. Tax preferences:
Income tax: for the SEZ residents tax rate is 0-13.5% instead of 20%;
The residents of technology and innovation and tourist and recreational special economic zones which are combined into cluster are exempt from income tax;
Property and transport tax exemption for 10-15 years;
At the federal level investors are exempt from land tax for 5-10 years.
2. Investors receive modern transport, social, customs and other infrastructure for business development created at the expense of state budget;
3. Special custom regime – is a regime of free customs area which means that investors in the special economic zones’ territory don’t have to pay customs duty and value-added tax for foreign goods and it is also forbidden to use prohibitions and restrictions of economic character;
4. Reduced administrative barriers (the system “single window” simplifies the interaction with regulatory authorities). Single window means that investor give all documents to one special agency and this agency assist in agreement procedures that reduce the time on initial stage of the investment project.
5. Access to the qualified personnel resources.
6. There is simplified migration regime for highly qualified foreign staff, involved in the special economic zone.
The process of obtaining the status of a SEZ resident is legally transparent and easy for an investor and consists of 4 major steps:
1. Company registration and business-plan making;
2. Handing in an application to the Ministry of economic development of the Russian Federation;
3. Application acceptance by the Expert committee;
4. Signing triangular agreement between investor, Ministry of Economic Development and SEZ management company.
Any company or individual entrepreneur, legally registered in the boundaries of the special economic zone can become the resident of SEZ.
Now we are attracting professional management company for operating in special economic zones in order to improve its efficiency. These companies have different guarantees from the Government and they are free of real estate tax for 10 years.
We already have experience in attracting foreign company to manage special economic zone. An agreement to manage a special economic zone “Monglino” in Pskov region was signed between the Singaporean company “Jurong” and the management company of JSC “SEZ” Moglino” in Singapore on December 20, 2012.
Russian SEZ have approved themselves successful in the international arena. SEZ “Alabuga ” in the Republic of Tatarstan was included in the “Foreign Direct Investment” magazine global rating of “Free Economic Zones 2012/2013”, and took 40th place (this rating takes into account more than 600 zones in 120 countries).
Thus, special economic zones have already shown its effectiveness, especially in terms of attracting foreign direct investment.
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