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Dmitry Medvedev offers to create offshore zones in Far East

March 22, 2013, 11:34 UTC+3

It was announced at a government session that over 10 trillion roubles will be channeled into the state program for the development of the Far East and the Baikal region

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Russian Prime Minister Dmitry Medvedev offered on Thursday to revive domestic offshore zones in the Far East. It was announced at a government session that over 10 trillion roubles will be channeled into the state program for the development of the Far East and the Baikal region.

At a congress of the Russian Union of Industrialists and Entrepreneurs on Thursday, Medvedev unexpectedly brought up the issue of Cyprus that was not on the official agenda, and made an incredible offer to entrepreneurs, the Kommersant daily writes. “Discussing with the cabinet ministers the most popular at the moment issue of Cyprus, I said that if we are being driven away everywhere, it is time to get back to the issue of creating our own offshore zones in Russia,” the prime minister announced. The audience reacted with a storm of applause. Medvedev announced that he wanted to revive domestic offshore zones in the Far East.

The Russian authorities confess inability to stop the degradation of the Russian Far East, the Nezavisimaya Gazeta daily writes citing Medvedev’s statement that no institution functions normally for the development of that region. In view of the crisis in Cyprus, the prime minister made an offer to think about creating an offshore zone in Sakhalin or on the Kuril Islands. However, on condition that the whole Russian business does not rush there.

“If passions are running so high there, maybe we should think of creating a kind of zone of our own in the Far East. He have a lot of good places there – Sakhalin, the Kuril Islands,” Medvedev said. He believes this could help return to Russia the money that is not only in Cyprus but also on the British Virgin Islands (BVI) and in other offshore zones.

Independent experts see a rational kernel in the idea of a Kuril offshore zone, but believe it will be difficult to realize it. Besides, there are no guarantees that the creation of an offshore zone on the Kuril Islands or in Sakhalin will at least pay off. Moreover, it is unlikely that the Kuril offshore will improve the economy of the whole Far Eastern region.

“To organize an efficient offshore zone several conditions are needed – developed infrastructure, closeness to world economic centers, developed legislation, qualified personnel and comfortable climate. Sakhalin and all the more the Kuril Islands practically cannot offer all these conditions. Yes, a specific reservation of foreign gas- and oilmen successfully functions on Sakhalin. But it is unclear whether this infrastructure can be used for a new offshore zone, the director of a regional program of the Independent Institute for Social Policy, Nataliya Zubarevich, wonders.

The Moskovsky Komsomolets reminds the readers that it is not for the first time that the Russian authorities are trying to keep the fleeing money on its territory. But their attempt fails even in a milder option – special economic zones. According to the Audit Chamber, expenditures on Russian special economic zones reached 115.4 billion roubles by July 1, 2012, but only 6,700 jobs have been created there. At the present moment only one non-standard offshore zone is functioning in Russia – the Kaliningrad Region. The most visible result outside the region is an inflow of second-hand foreign-made cars from Germany, which were imported by the Russian enclave region on preferential terms and from there went to other Russian regions.

The idea of Medvedev is unexpected for several reasons, the Vedomosti writes. It is at variance with the global trend towards de-offshorization of the economy, the trend Russia has also joined of late upon instructions by President Vladimir Putin. This idea also disregards a sad experience of offshore zones of the 1990s – in Kalmykia, Ingushetia, which failed to trigger the development of the regions, and were only solving tasks of tax optimization.

The idea also puts in question six-year-long attempts to build an international financial centre in Moscow.

The president at the moment is trying to nationalize the elite in every way – making it live, educate the children and keep the money inside the country. So the prime minister now offers to give a national offshore zone to the nationalized elite.

The money goes to Cyprus and to other offshore zones not only and not just because of a preferential tax regime, but mostly because of the developed institutions – property rights protection, independent court (British law), financial infrastructure, legal service, immunity of personal data and so on, the newspaper stresses.

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