Translated material
Manual control
The President decided to explain to the regions how to attract investment
The main task of the Russian province at the new stage of the country's development should be to determine investment strategies , primarily at the level of large economic regions, President Vladimir Putin said yesterday in Ufa at a meeting of the State Council dedicated to attracting investment to the regions. According to him, this is an opportunity to reach a qualitatively new level of growth. “In modern conditions, it is investments that can significantly increase the volume of gross regional product and significantly replenish local budgets. And for most Russian territories this is a real opportunity to strengthen competitive advantages,” the president said.At the same time, the president himself outlined so many obstacles on the way of investors to the Russian outback that it is even scary to invite them there, ranging from the sluggishness of officials to the machinations of competitors who deliberately spread rumors about the difficulties of working in Russia.
“Underdeveloped infrastructure, the inability to combine the efforts of the regions and the center, concentrating resources on key areas, abuse and corruption, the lack of practical application, and sometimes even the necessary legal framework - all this hinders the development of the country, does not make it possible to respond in a timely and prompt manner to what is happening on world markets,” Mr. Putin said.
At first glance, the investment growth figures cannot but rejoice. According to the head of state, in just eight months of this year, investments in fixed capital increased by almost a quarter, while foreign direct investment increased by one and a half times.
“Foreign investments in the non-financial sector increased by $28.6 billion in 2006, and in the first half of 2007 - already $24.6 billion - this is one and a half times more than in the previous year,” - - said Vladimir Putin. “This is not bad, it would seem not bad, but compared to other developing markets it is still extremely small,” the president emphasized. He showed the meeting participants a comparative table of investment volumes in Eastern European countries. “Here is the table, it’s embarrassing to look at,” said the president. - The volume of the Russian economy, and take the volume of the Hungarian economy - comparable figures. Poland is ahead of us."
“The current growth of domestic and foreign capital investment is only a kind of compensation for past, underinvested periods of Russia’s development. In general, there are still very few large and long-term investment projects,” the president believes.
The first obvious reason is related to the lack of sites. “Many promising proposals are in jeopardy due to a shortage of energy capacity, due to the poor quality of the road network and logistics, engineering and telecommunications,” the president admitted. The region’s task is to “provide the investor with a site with infrastructure prepared, as they say, on a turnkey basis.” The federal center is ready to take on co-financing of the social sphere, because simultaneously with the launch of large-scale production, the need for schools and roads arises.
Another problem is the length of bureaucratic approvals. Calling the Governor of St. Petersburg Valentina Matvienko as a witness, the president shared his personal experience. “She knows how much time has passed since we started talking about some projects of this kind in St. Petersburg. Year, yes, did you agree? One and a half? And this is with my direct participation, what if I don’t do manual control?” - the president asked a rhetorical question.
Vladimir Putin gave this example. The list of departmental approvals for some projects applying for funds from the investment fund exceeds 20 signatures. In addition, assessment procedures vary greatly between ministries. One thing they have in common is that they are all “still opaque to investors.”
“We still cannot begin the Federal Target Program “Far East”, a program to prepare Vladivostok for hosting the APEC Forum in 2012 precisely because of these problems,” Primorye Governor Sergei Darkin gave an example from his “personal” life. “Our documents have been in Rosexpertiza for approval for four months; we cannot begin construction of roads or bridges,” he added.
Against this background, it’s even strange to talk about the successes of the Russian authorities, but they exist. “The success of the domestic economy and the general improvement of the investment climate are opening up new prospects for investment in Russia. Potential investors need to be systematically and consistently informed about these opportunities,” Mr. Putin said. “Companies from a number of countries warn against investing in Russia and are afraid of non-market methods of doing business and non-commercial risks. And often this is, of course, done for competitive reasons,” he noted.
However, not everyone, as it turned out, is happy with foreign investors. “Still, for the good purpose of attracting investment, we should not completely ignore the security problem,” said First Deputy Prime Minister Sergei Ivanov. “I hope that by the end of this year the State Duma will adopt a law on the procedure for foreign investments in Russia in commercial organizations of strategic importance.” It should be recalled that the bill, adopted in the first reading, limits the access of foreigners to organizations of 39 types of activities, in particular in the production of weapons, as well as military, aviation and special equipment, nuclear materials, construction of nuclear facilities and space activities. The restrictions will also affect industries whose share in GDP is 2-3%. In the field of the fuel and energy complex and subsoil use, restrictions are provided only for strategic deposits.
But it turns out that foreigners also need to be invited into non-strategic sectors with caution. Foreign capital should be attracted to the Russian economy subject to the use of Russian resources and personnel, Mr. Ivanov believes. According to him, Russia has enough of its own investors, including in the construction of roads.
Minister of Regional Development Dmitry Kozak proposed encouraging “production leaders.” According to him, “a system of moral incentives is needed for regions that have achieved high levels of socio-economic development, and a system of material incentives is needed for those regions that demonstrate high dynamics of economic development and potential in relation to themselves.”
Krasnodar Governor Alexander Tkachev made an even more interesting proposal. The owner of the third Russian region in terms of investment attractiveness after the two capitals proposed giving the constituent entities of the federation the right to determine their own benefits for investors, including foreign ones. “We consider it necessary to amend the law on special economic zones to allow the creation of free economic zones at the regional level so that benefits are provided to investors,” he said.
The President recalled that the region has such a right. “The regional regional taxes are meager, this is nothing,” objected Mr. Tkachev, eager to manage cash flows. “Are you asking that the regions be given the right to dispose of federal taxes? Can you imagine what will happen? - Vladimir Putin asked him.
Deputy Prime Minister Alexei Kudrin, who was right there, explained what would happen. If tax incentives are introduced in a certain zone in the country, enterprises operating in it and supplying products, including to the domestic market, will have a competitive advantage over others. “Tax benefits are not the main advantage for such zones,” Mr. Kudrin said. “In the first place is the creation of administrative conditions, prepared infrastructure, organizational preparation, including the conditions for a “one-stop shop” for obtaining a construction permit.”
The investment fund became a separate topic of discussion. Moreover, opinions on how it should develop turned out to be diametrically opposed. The president himself proposed simplifying the project evaluation system. Valentina Matvienko came up with a more revolutionary proposal - to rewrite the law. “Unfortunately, the law on concessions and the investment fund practically does not work. The investment fund has not yet been disclosed, and if changes are not made, it is unlikely to be opened in the near future, and in practice, the regions in the form in which they (development institutions - Ed. ) exist cannot use them,” she said, proposing that the Ministry of Economic Development create a working group involving the regions. Sergei Ivanov, in turn, suggested not to pull the Ministry of Economic Development. The main role in identifying large investment projects should remain with the Ministry of Economic Development and Trade, he believes. “Today there were proposals to create some kind of body, agency. I believe that the MEDT should remain the main role here. Maybe something should be rebooted internally, but still the MEDT must determine large investment projects, because it is in control of the situation, and for those projects that are already operating, investors came to the MEDT. There the project was born, there it was developed and approved and brought to life,” said Sergei Ivanov.