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Unlocking the Economic Potential of Russia’s Far East

Unlocking the Economic Potential of Russia’s Far East

A panel session devoted to the Far Eastern economy took place on the 2nd day of the St. Petersburg International Economic Forum. The participants spoke about economic progress of the region, the amount of investment and the most significant projects.

Minister for the Development of the Russian Far East Alexander Galushka reported that the volume of investments attracted to the region had exceeded RUR 1 trillion, with RUR 12 of private investments per every RUR 1 from the budget. This resulted in 230 projects, with 16 plants to be started as early as in 2016 already.

40% of the total investments go to industrial production sectors. Mr. Galushka called the city of Komsomolsk-on-Amur “a point of growth and industrialization”. Aircrafts of the 5th generation are produced there, and there is a branch of PJSC Sukhoi Company in the city. Another USD 1 billion is going to be invested in Komsomolsk-on-Amur in the development of culture and social environment in accordance with a special plan of the Government.

Another 20% of the Far-Eastern investments go to agriculture. In particular, a Russo-Chinese Agricultural Fund has been set up, 49% of which is owned by Chinese partners, and 51% – by the Far East Development Fund. Investments of the Fund amount to USD 10 billion. The first portfolio consisting of ten projects is expected to get support worth RUR 13 billion.

The next 20% of investments in new Far-Eastern projects go to transport and logistics, while resources get as little as below 10%. Tourism is another actively developing segment: a gambling zone will be opened in Primorye in 2017, a modern ski resort is being built.

Mr. Galushka stated that 22.5% of the RUR 1 trillion investments are foreign. Investors get a ready-made infrastructure and land, as well as bureaucratic preferences. The Far East and Baikal Region Development Fund acts as a “one stop assistant” for investors. Mr. Galushka also said that 24-hour operation was to be set up in the Vladivostok Free Port in October with a single control body and electronic cargo declaration system. On top of that, investors have the following preferences: they pay insurance contributions at 7.6% instead 30% for 10 years, pay no profit, land or property taxes in the first 5 years and half of the rate for another 5 years. Investors are exempt from import duty and import VAT on spare parts.

The topic was continued by Alexey Chekunkov, Chief Executive Officer of the Far East and Baikal Region Development Fund. He reminded of ample natural resources – the region is rich in fish, forest, gold and copper. The South of Primorye constitutes a “Pacific gate of the country”. The region separates the actively developing North-East China from critical marine routes, so transport tunnels are being built via the Far East for Asian partners. The Far East supplies pure food and clean water to China. Mr. Chekunkov also mentioned tourism as an area for medium-sized business development.

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