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'There are party places that would surprise many of my European and American colleagues'

'Go East' for great investment opportunities, say premier and finance minister

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17 October 2012


'We are seriously concerned with encouraging investors to come to us in Siberia', Russian Finance Minister Siluanov said. Picture: Bratsk aluminium smelter, by RUSAL

Finance Minister Anton Siluanov told an International Monetary Fund session that special economic zones for timber and fish processing are under strong consideration in areas bordering China. 

'We are considering the establishment of similar economic zones in areas next to Chinese territories - in order to set up manufacturing, especially of timber and fish, to attract investors with easy taxation measures,' he said.  

'We are seriously concerned with encouraging investors to come to us in Siberia and the Far East. The government's task is to consolidate labour resources and establish a production base.'

A special State Council meeting would be held on developing the east of Russia, and - echoing President Vladimir Putin's remarks at the APEC summit in Vladivostok - he said one plan is giving 'preference' to greenfield development, namely 'those producers that will start from scratch on the territory of the Far East'.

Taxes, including regional, local and property, could be waived during the initial years of such a scheme, he said. 

'At the Finance Ministry we are compiling proposals on how to release these investors from paying profit tax,' he said.

Invest in Siberia

A monument to oil in the middle of Tyumen, dubbed 'Russia's Texas'.Picture: The Siberian Times

Prime Minister Dmirty Medvedev also spoke out about the prospect of major initiatives in the east of the country. 

'I must tell you frankly that we plan to put major emphasis on the development of our Far Eastern regions - which should not in any way affect our European partners and projects - with a focus on building transport networks and plants and certainly on a number of local social issues as well,' he told the 26th meeting of the Foreign Investment Advisory Council. 

'Therefore, I am inviting anyone who is interested in investing in Russia's Far East to join these projects'.

Invest in Siberia

Rich natural resources and some of the best scientific centres in the world. Technopark in Akademgorodok, Novosibirsk. Picture: The Siberian Times 

Medvedev spoke on a similar theme at an earlier session on the development of transport and energy infrastructure in the Far East and the Baikal region.

The Far East accounts for one third of our territory, it is not only a unique area that boasts great natural wealth, but it is also an enormous and, unfortunately, poorly developed region, which is very important from an economic point of view,' he said. 

'There is a range of organisational decisions, including the establishment of the Ministry for the Development of the Russian Far East, that should define the priorities of this territory. But everybody understands that the efforts of the government alone are not enough to resolve the problems in this sphere. Given the problems in the global economy and the constraints on the federal budget, we just do not have enough money.

'Therefore, state investments are aimed at encouraging private investments. I believe that everybody understands this. It is also very important to attract institutional investors that are capable of providing large-scale investments with, if possible, low-interest and long-term loans. 

'We should outline long-standing investment priorities and apply the methods of project financing. Financial projections should be based on international figures reflecting expenses in similar conditions. This is important for us especially given our strong tendency to inflate financial projections and address tasks using the most economically inefficient methods.'

He stressed for 'additional capitalisation' from the Fund for the Development of the Far East and Baikal Region, established in 2011 by Vnesheconombank, to enable major infrastructure projects.

'For the time being the fund's registered capital is quite modest - 500 million roubles,' Medvedev said. 

'The development of the fund should be complete with relevant liabilities. I would like to hear proposals to this effect from the ministry and Vnesheconombank.'

Invest in Siberia

Invest in Siberia

'The regions must work to become more attractive', Russian PM Medvedev said. Pictured above, Krasnoyarsk Railway station and, below, Omsk city centre.  Pictures: The Siberian Times

In tsarist times and through the Soviet period the lessons were that 'implementation of large-scale projects in this sphere and the development of distant territories where people do not want to go (and, to be perfectly frank, tent to leave) has always been bolstered by incentives'.

But regional authorities 'can offer only profit tax and property tax incentives', Medvedev said. 

'Let's analyse the possibility of giving tax breaks to enterprises being established in the Far East and the Baikal region. The issue is complicated, but without such benefits it will be impossible to resolve these tasks even by creating development institutions, further capitalisation of funds, supporting monopolies and others means. 

'This should involve expanding of the list of tax privileges, extending their duration and making more active use of existing opportunities.

'And finally, we should establish which projects can be implemented in the near term - in 2013 - and what should be done for their implementation.'

The prime minister urged far-flung regions to make themselves more attractive to foreign investors.

'Investors are usually attracted to more comfortable regions, including those with well-established and advanced infrastructure. It's understandable. I remember when I was still in business in the 1990s: foreign businessmen would only come to Moscow and St Petersburg. 

'Other cities did not exist for them and I had to explain to them that they could have looked further. They would ask me simple questions like 'Are there adequate hotels?', 'Are there airports?', 'What about banks?' It was hard to answer those questions. 

'The situation is different now, but the gap is still wide, and some places have good prospects but quite low investment profiles. I understand that this issue is not for investors, both Russian and foreign, but for us to resolve. 

'The regions must work hard to become more attractive. We have drafted recommendations for regional executive bodies on how to improve the business climate. 

'We will test the scheme in 13 regions and then promote it in all others. The personal motivation of regional leaders - legal motivation, of course - is vital. Their success must be evaluated based on improvements in the investment climate, and key performance indicators or KPI must be determined based on the opinions of businessmen. I hope it will help'.

Comments (7)

Kremlin is dancing round this.....they know they've got to do it, and Siberia/Far East is key to future, but they not yet biting bullet on this. They always say, we're going to....but never quite get there. If that changes this will be a huge story.
Robert, Japan
19/10/2012 00:34
Great adventure....sounds like the Wild East.....
Richie, Essex
26/10/2012 00:28
@ Philip UK: what would make you go to Siberia (unless you've already been to?); and why are you reading The Siberian Times if you think that its still thousands of miles for Siberia to go till it becomes 'normal'?
Tania, Siberia
19/10/2012 20:44
love pictures of Omsk and Krasnoyarsk... well and in fact of Tyumen as well
Jane, Edinburgh
30/10/2012 00:48
I agree with you Kate. Its just that in the West, Siberia is about as easy to sell as the Antarctic as an adventure/investment destination. In fact the Antarctic is easier as it has no prior inhabitants or history. In the West, Siberia is a large Gulag, frozen and fatal. In the West, why go to Siberia when 'easier' destinations beckon? Even Moscow is only now just becoming 'easier to think about visiting'. Psychologically all of Russia is still a hard sell. In the UK, foolishly and inexplicably languages are merely an optional part of the curriculum and Russian is out of sight. In the UK WW2 (anti-German) and the Cold War (anti-Soviet therefore Russian) attitudes still colour everything. In the UK we're still arguing shall it be the US Special Relationship or the EU Fraught Relationship? Russia is gas supply cut offs and authoritarian Putin. Moreover the previous Russian tendancy to 'dictate terms' left a bad taste here.

No, I'm afraid Siberia still has a very long way to go here to become 'normal'.
Philip, /UK
19/10/2012 17:35
Well said Philip. But then again with all the things you've mentioned the place itself wouldnt need any advertisement. By that time it will be already full with businessman. Now is the time to be there. And many already are.
Kate, Russia
19/10/2012 00:37
First transportation; high speed railways, airports that can handle the most modern passenger and cargo planes. Good communications (telephone, IT) infrastructure.
Second good accomodation, first class all the way. Excellent working conditions and living conditions for fsmilies, so scvhools, universities, hospitals, decent affordable health care.
Third no corruption, reduce red tape, fast track administrative procedures. Government incentives and guarantees.
Fourth Sell Siberia, advertise it as a good alternative for adventurous people. Marketing Siberia is key, but with the above you've got to have something to market.
Siberia has to become 'the Great Adventure of the 21stC'.
Philip, /UK
18/10/2012 16:45

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