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Russia’s Regions: An Investor’s View

May 29, 18:09 UTC+3
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Attracting investments to the economy is among the top priorities of the Russian authorities both at the federal and regional levels. To this end, special economic zones, advanced development territories, business accelerators are set up, mechanisms to liaise with business are established, etc. The investment climate in Russia is really improving, but not universally yet.

The Russian economy should develop based on an active investment policy – this is the goal pursued by the country’s authorities.

  • Most countries, whose economy is growing at a rate within 4–5% per year, have a share of investment in fixed assets at 30% of GDP; in China it exceeds 45%.
  • In Russia, this indicator is not yet consistent with the goal of investment development: according to the Federal State Statistics Service, in 2016 it stood at 20.4% of GDP. Over the last ten years, it has not increased.

In recent years, investments in the Russian economy have been declining: in 2016, the drop was 0.9%, in 2015 – 10.1%.

To reverse the situation, the government has recently created a number of tools to attract investments, also foreign ones. These include:

  • A Special Investment Contract, which guarantees investors a period of up to ten years on fixed tax and other terms, has been introduced.
  • A law on Advanced socio-economic Development Territories (ADT), which gives their residents a number of tax, customs and other benefits, is in place. These territories are already being established in the Far East and in one-company towns.
  • Other special conditions are being created for the development of the Far East: free port mechanisms, the Far East Development Fund, etc. are already in place.

The investment climate in the country is being closely monitored. Back in 2012, Vladimir Putin signed a decree on the long-term economic policy, setting a target to improve Russia’s position in the World Bank’s Doing Business index, specifically, to rise from the 120th line in 2011 to the 20th in 2018. In 2017, Russia took the 40th spot on the ranking. To that end:

  • The Agency for Strategic Initiatives (ASI) is designing and implementing roadmaps to simplify, accelerate and reduce the cost of business procedures in the context of the National Entrepreneurial Initiative.
  • Since 2015, ASI has been issuing National Rating of Investment Climate in the Russian Federation to assess authorities’ efforts focused on creating a comfortable business environment and identifying best practices.
  • The Russian Direct Investment Fund launched INVEST IN RUSSIA, the Centre for Investment Promotion, summarising information on opportunities in the regions, promoting projects and searching for international investors.
  • Starting the end of 2015, the SPIEF holds Regions of Russia: New Areas of Growth off-site sessions dedicated to attracting investment to the constituent entities of Russia. These sessions have already been held in Moscow, Nizhny Novgorod, Yekaterinburg, Krasnodar, Tula, Yaroslavl and Ufa.
  • Civil servants responsible for the investment climate in the regions undergo special trainings. In 2016, officials from 36 regions took a targeted training at the Russian Presidential Academy of National Economy and Public Service.

In previous years, Tatarstan, Belgorod and Kaluga regions led the National Rating of Investment Climate. They succeeded by creating special economic zones, technology parks, business accelerators, by introducing incentives for investors and developing infrastructure.

Today, Tatarstan raises around USD 2 million of direct investment per day. In 2016, the region’s investment inflows totalled RUB 642.5 billion, while the Belgorod and Kaluga regions managed to raise RUB 143.8 billion and RUB 80 billion, respectively.

Targeted models of easier doing business, selected by the government based on best practices, are expected to help lagging regions. These regions should draw up their roadmaps set to improve the investment climate on their basis.

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