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Far East's investment climate rating above average in Russia — agency

October 31, 2017, 10:13 UTC+3 MOSCOW

The Far East is different from regions of Russia's European part in many aspects

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MOSCOW, October 31. /TASS/. Regions of the Russian Far East apply maximum effort to promote at the national rating of investment climate from the Agency for Strategic Initiatives (ASI), and their indicators are growing bigger than average indicators across the country. This process favors also from development of business institutes and the system of roadmaps. However, the rating does not consider certain unique features of the Far East's development.

After a working trip to the Far Eastern Federal District on September 5-8, 2017, Russia's President Vladimir Putin ordered the government to offer measures which eventually would raise the Far Eastern regions' investment attraction and would bring the regions to the leading positions the ASI rating.

Regional heads, federal and local experts told TASS what measures the Far Eastern regions are undertaking to improve the ASI rating standing, and explained what problems they are facing.

Regions are working hard

The Far East’s regional average index has been growing thus demonstrating the efforts the regions are applying to raise the investment climate there. Roadmaps, including those offered with assistance from ASI, business development institutes improve their positions, ASI’s Director for Development of Regions Igor Kustarin said.

"The average national rating’s integrated index of the Far Eastern regions grew more than ratings in other parts of the country. This proves that the Far Eastern regions apply much effort to improve the investment climate. The growth leaders are two regions - Khabarovsk and Amur. They have effective roadmaps to improve the investment climate and they succeed in implementing them," he said.

ASI is ready to assist regions in improving their investment climates, for example, he continued, a year earlier, the agency’s experts participated in putting together roadmaps in the Krabarovsk Territory and the Amur region, and this year Sakhalin has asked the agency for assistance.

"As for directions for improvement, in the Far East it is what in the methods we are calling as "business institutes": the quality of legislation, which protects rights of investors, mechanisms of support for the investment activities, the level of corruption, the number of inspections, and development of the public-private partnership," he said.

Working for results

The work on the region’s rating has already offered better conditions for investors.

"We have true results: in more than half (57.8%) of municipal districts authorities issue necessary documents on using land plots within 20 days, against 30 days in the past - this is possible now as the service is available in the electronic form," Khabarovsk Territory’s Governor Vyacheslav Shport said.

A year earlier, he said, in partnership with the business community, experts, federal authorities and the region worked on improving the Territory’s positions in the ASI national rating. The region took the 40th position, thus having got higher by 33 lines.

Head of the Sakha Republic (Yakutia) Egor Borisov agrees with the colleague the ASI’s target models point to the actions to be undertaken for good results: to make easier for businesses receiving the building permissions, registration of property on sites and of real estate, cadastral registration, quicker access to gas and electricity lines.

The unique Far East

Experts say the rating does not reflect absolutely correctly the situation in the Far East, as it ignores some of its unique development features, such as late development of this part of the country, the specific mentality and the weak integration into the economy of the country’s European part and of the Asia-Pacific Region.

"The Far East in many aspects is different from regions of the Russian Federation’s European part. The differences, which are evident, from the local mentality and to the specifics of building industrial facilities - they anyway prove it necessary to have a differentiated approach to the Russian East’s investment climate. Economically, the Far Eastern districts are only slightly integrated into the European part of the country, they do not cooperate fully in the District and do not get integrated sufficiently into the economic space of the Asia-Pacific Region (APR)," Deputy Director of the expert-analytical center of the Far Eastern Federal University Dmitry Shelest told TASS.

It is necessary to analyze additionally the federal district’s economy processes, he continued. It is necessary to have parameters which would consider how the Federal District’s regions participate in the economies of the Far East and APR. Another parameter, which could be used additionally in the rating, is cutting the subsidies’ share in local budgets.

"Clearly, term of investments in infrastructure projects is long, but even if a region in future could become financially independent from Moscow, then anyway budget subsidies should be cut, and thus would reduce debts of the regional budgets," Shelest said.

The North is speaking

The directions, included in the ASI national rating of the investment climate, quite well characterize state of the investment climate, but reflect only little the existing "base" for the regional social and economic development, Secretary of the Novy Mir (new world) Arctic project at the Far East Federal University Vadim Kuzin told TASS.

"The factor of inherited development (also - path dependence) influences and will continue influencing," he said. "In order to eliminate this drawback, it seems logical to include another direction, which could be called ‘regional social-economic environment’."

At the same time, he continued, the parameters should be representative throughout the country. Russia is a northern country, he said, and this should be reflected in the rating, for example, in calculating a region’s heating expenses per one resident.

Chukotka’s authorities share this opinion, saying some of the rating’s parameters do not reflect the true situation in the region.

"The region is well known to have low population, the dispersion is high, the region has vast territories, under-developed roads for objective reasons and, consequently, high production expenses, which are not comparable with the production costs in the central regions of Russia," Chukotka’s department of finance, economy and property said. "Thus, in 2017, the region was rated by eight parameters, where 5 <…> require changes in the methods."

According to the authorities, the parameters, which should be changed, are construction licensing, access to electricity lines, share of roads answering existing requirements, and the investors’ evaluation of investment infrastructure objects.

In late July, the region presented its suggestions to the ASI appeal commission.

ASI rating

Since 2014, the Agency for Strategic Initiatives works together with leading business associations to assess the quality of investment climate in regions throughout the country.

The rating is used to evaluate efforts of regional authorities, identify best practices in investor relations and introduce these practices in other regions.

A pilot rating test, conducted in 2014, covered 21 Russian regions and involved about 14,000 business representatives. In 2017, all Russian regions participated in the rating, and 51 of them have demonstrated a general growth of the integral parameter year-on-year.

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