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Russia’s Far East to enjoy unprecedented benefits

October 16, 2014, 20:09 UTC+3 Alexandrova Lyudmila
© ITAR-TASS/Yuri Smityuk

MOSCOW, October 16. /TASS/. The Russian government has agreed to grant unprecedented benefits to the country’s Far Eastern regions. Its special bill on fast-tracked development territories is expected to draw multi-billion investments and serve as an engine of its development, the authorities hope. In the meantime, local businesses foresee such risks as tighter competition and an influx of foreign workers. Yet experts believe that the idea of creating outpacing development territories has far more pros than cons.

Prime Minister Dmitry Medvedev has submitted a bill entitled “On Outpacing Social and Economic Development in the Far East and in Individual Territories of Russia” to the State Duma. In such areas the tax burden will be far easier to bear and administrative and customs hurdles, far lower than in other parts of Russia. The companies involved in major investment projects will be able to draw migrants without asking for quotas or permissions from the Federal Migration Service.

Far East Affairs Minister Aleksandr Galushka says the bill incorporates two fundamental components: comprehensive deregulation and heavy tax incentives. “We expect that the outpacing development territories will attract more than 600 billion roubles of direct investments and more than 37,000 new high-tech jobs, which will prove a major factor for an influx of the population,” he said.

The Far East - an area incorporating nine constituent territories of Russia - has a population of about 6.3 million (or about 5% of the country’s overall population) and takes up about 36% of the country’s territory. In 1991 through 2010 the region’s population shrank by 1.8 million (22%). Now the government hopes that ten years after the creation of fast development territories the population will grow by one million.

Of the more than 400 areas nominated for the status of fast development ones fourteen have been selected so far, including a research cluster on Russky Island, a petrochemical plant near Nakhodka and the diamond and jewellery cluster Diamond Valley in Yakutia.

The local authorities are very enthusiastic about the government’s plans. The Far East is at the threshold of a historical event, the mayor of Yakutsk, Aisen Nikolayev, said on Wednesday. “I am certain that the implementation of the law on fast development areas will soon make one and all speak talk about a Far Eastern miracle,” he declared.

Many take the idea of fast-tracked development areas with a pinch of salt. Business people in the Far East fear that the measure will fail to give the regional development the expected boost, because it ignores the interests of small and medium businesses, the secretary of Russia’s Civic Chamber, Aleksandr Brechalov, has said.

The chief executive officer of the open limited liability construction investment company Stroiinvest, Vitaly Gumenyuk, suspects that certain crucial resources, already scarce these days, may become utterly unavailable to small and medium businesses. Specifically he referred to human resources, access to sea ports, railways, vacant plots of land and infrastructure facilities.

“At this point the pros of creating fast-tracked development areas outnumber the cons: the promised benefits look impressive enough and authorization procedures have been eased drastically,” the head of the regional economies chair at the Higher School of Economics, Aleksey Skopin, has told TASS.

The expert believes it is very clear that these measures are addressed first and foremost to the Asian investors and not Russian businesses. “Attempts to draw investors from Asia were made on many occasions in the past, but the absence of tangible benefits proved a hindrance each time. Now the proposed bill contains very specific promises.”

True, the Chinese will be making investments only if they count on their own workforce, and not Russian. In that case they will know in advance how much it will cost and how it can be used. Skopin believes that a choice will have to be made anyway. “Either we shall take a dog-in-the-manger’s attitude and keep trying to develop the Far East entirely on our own even despite the shortage of resources, or we shall agree to let China have its stake in the Far East to get in return an economic and political partner with major business interests in Russia,” he said.

Among other strategic investors Russia may count on in the Far East Skopin mentioned North Korea and South Korea. The former may provide cheap labour resources, and the latter - modern technologies. Also, there are Japan and Singapore.


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