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Russian tourism, port Special Ecomonic Zones work ineffectively

December 17, 2013, 15:51 UTC+3 MOSCOW
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MOSCOW, December 17. /ITAR-TASS/. Russia’s tourism and port special economic zones (SEZ) work ineffectively, only the industrial and technology development SEZ are relatively efficient, according to a conclusion made by auditors of the RF Accounts Chamber that have made an inspection of the use of state funds allocated for the creation and development of special economic zones.

Assessing the effectiveness of the functioning of SEZ according to specific types, the Accounts Chamber says that only the activity of the industrial production and technology development SEZ can be recognised conventionally effective. The chamber also stresses the need to improve their operation in certain spheres, including with the aim of attracting more residents, auditing of the fulfilment by the residents of the conditions of the agreements on operations, correction of the potential residents’ business plans regarding the assessment of financial stability, analysis of the reasons for a slowdown in the infrastructure building pace.

As for the activity of the tourism-recreational and port zones, the audit suggests that it is currently ineffective.

“From the five tourism-recreational zones under review, only four are functioning. The activity indicators of the SEZ in the Altai Krai are medium, and of the other SEZ - low. Of the three created port SEZ, only one is functioning - in the Ulyanovsk region and for the audit period has rather low activity indicators,” Accounts Chamber auditor Aleksander Zhdankov said.

Auditors of the Accounts Chamber point to the low quality of planning, in particular, overstating the volumes of contribution to the registered capital of the JSC Special Economic Zones, the annual failure to fulfil the investment plans, delay in the adjustment of the list of the planned for construction SEZ infrastructure facilities.

As a result, this has created considerable unused surplus balances, amounting as of January 1, 2013, to 35 billion roubles (~$1.065 billion, one dollar costs 32.86 roubles) or almost 40 percent of the allocated state funds, of which 22.6 billion roubles are free funds that have not been entered in contracts.

The audit has also shown that the financial standing of a number of management companies over the past two years has been worsening, the cost for the maintenance of built facilities are growing. Profits from the use of the SEZ facilities received by management companies compensate only 40 percent of the costs.

“The growth of income of management companies is limited by the preferential rates of rental charges for the residents, partial load of the capacities of existing facilities within some SEZ. At the same time, neither the Economic Development Ministry nor the JSC Special Economic Zones make management decisions in this situation,” Zhdankov said.

He added that the inspection has revealed facts of ineffective and improper use of the registered capital funds of the JSC Special Economic Zones. Thus, 93 million roubles have been used in the SEZ in the Krasnodar Krai and Kaliningrad region that are rather closed, as well as in the Krasnoyarsk Krai SEZ that eventually was not created. Funds worth 23.6 million roubles for the development of the SEZ concept in the Primorsky Krai have been misused. However, this document has nothing to do with the infrastructure building, but is factually a result of marketing research.

The chamber also said that as of January 1, 2013, a total of 323 residents were registered in the SEZ. The volume of investment made by the residents in 2012 increased to 70 billion roubles (18 percent of the declared volume). Residents of the technology development SEZ registered the rights to 336 intellectual property items, 53 innovations have been implemented. The total amount of tax privileges and customs preferences received by the residents exceeded 6.5 billion roubles. The budget received in taxes eight billion roubles (from the industrial production and technology development SEZ). Economic efficiency of the SEZ is assessed at 80 kopecks per one rouble of invested state funds, mainly owing to investment of the SEZ residents in the Republic of Tatarstan and in the Lipetsk region.

The inspection results suggest that the SEZ management system can be recognised as relatively efficient and that it is necessary to improve it in certain spheres, in particular, finalising the legal framework, tightening of control over the activity of management companies and spending of funds contributed to their registered capitals, as well as determining the strategy of activity aimed at ensuring investment attractiveness of the SEZ,” Aleksander Zhdankov concluded.

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