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Advanced Special Economic Zones (ASEZ)

September 07, 14:05 UTC+3
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Key conclusions

ASEZ improves regions’ investment appeal

“The main tasks of ASEZ are precisely to create comfortable conditions for an investor and provide the regions with a competitive advantage to attract investors. <…> The Inaglinsky Mining and Concentration Plant and The Denisovsky Mining and Concentration Plant are anchor investors of the South Yakutia ASEZ. They represent 3,000 jobs and about 28 bln [rubles] of investments for the time being,” said Valery Tsivilev, Member of the Board of Directors, MC Kolmar.

“People will be assured once we will talk about the benefits of the ASEZ [Advanced Special Economic Zones], financial breaks, taxation reductions and labor... we see the benefits of them now. We generate revenues. Our taxes will be low. We are not paying the mineral extraction tax for a number of years. But the main thing that was done is greater confidence in our investors. Our shareholders have funded all of the developments to date. <…> As an investor, as a foreign investor in Russia, we had a very good experience in this ASEZ. We are looking for good things in the future,” said Peter Balka, Interim Chief Executive Officer, Tigers Realm Coal Ltd.

“Kolmar companies significantly accelerated carrying out its investment projects thanks to its participation in ASEZ,” Valery Tsivilev noted.

“The land plot issue poses a challenge to any Russian investment project. We have a vast country but when we are talking about a project to be plotted out on land, we always find out that no tracts of land are available. In my opinion, the main advantage that there is such an institution now that promptly provides a land plot for such projects,” said Anatoly Kim, General Director, Gazprom Gazenergoset Helium.

Challenges

Hurdles in developing infrastructure for free customs zone

“Despite the fact that everything runs so smoothly, numerous other issues definitely arise in connection with implementation of the ASEZ system. <…> One such issue we have already discussed with the commission from the Far East Development Ministry and raised during the talks on the Vladivostok Free Port pertains to the free customs zone arrangement. <…> For example, our case is that our production facilities are on two sites, which are located 25 km away from each other. The sites’ total perimeter borderline area is over 120 km. In other words, fulfilling the current requirement by the customs service to develop infrastructure on such territory, such as constructing entries there, and so forth is actually an unreal task,” Valery Tsivilev said.

Business visa obstacles

“One more challenge is related to the department of the Federal Migration Service and pertains to obtaining a business visa. The plant and equipment are complex and the supplier is from abroad. A team arrives just for installation and startup work. At present, business visas are issued for three months, while the period for assembling the equipment is over 6 months. <…> What can be said about the quality of a plant that is assembled by different people?” Valery Tsivilev said.

Flawed tax legislation

“Since we have just begun work by laying out the blueprints and started on construction, all of us cannot be together, particularly the nerve center and engineers dealing with development and design of the company. We cannot be present on the worksite. On the contrary, the ASEZ law and the internal revenue code in particular say that such a company is not entitled to have branches and separate units. I must have 5-6 individuals in a regional center in order to accumulate all the information,” noted Vitaly Misyutinsky, General Director, Dalnevostochny Grafit.

Solutions

Government support

“We are waiting for the introduction of a VAT refund guarantee mechanism by the Far East Development Corporation. This regulation is under development and we hope it will be approved shortly. It would provide enormous assistance in closing out cash gaps that arise when cooperating with the Federal Tax Service,” said Denis Gros, General Director, Parus Industrial Park.

“Subsidizing interest rates on loans is among the proposals we put forward but has not yet been implemented. This is similarly to programs carried out by the Ministry of Economic Development or the Ministry of Industry and Trade, for example. This is a hot issue. We believe it is a vital concern because such mechanisms exist and are used for industrial parks and producers in different branches. I believe it is appropriate to consider this matter, taking into account the degree of support the government provides to the Far East,” Denis Gros added.

Creating business-government dialogue mechanisms

“We will definitely support setting up such a new establishment as an association…or an initiative group of residents collecting wide-ranging issues that arise at present,” said Andrey Fedotovsky, Director of the ASEZ and Free Port of Vladivostok Department, Ministry for the Development of the Russian Far East.

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