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Ivanov A.I., Kuznetsov A.P.

 

Kolomna Institute (branch) of Moscow State University of Mechanical Engineering (MAMI), Russia

 

Russian investment policy at present

 

Russia with its vast domestic market, significant scientific and technical potential, substantial resource base, including land, forest and water resources, mineral resources and rich soil, favorable climatic conditions, is able to carry out economic activities in virtually every sector of the economy. So, potentially Russia is one of the leading countries to attract foreign investment.

A sound state investment policy is necessary to solve the problem of attracting investments into the country. An investment policy is a set of economic decisions that determine the source, size, structure, main areas of investment, measures to focus on the most important areas of economic development and effective use. In other words, an investment policy of a state is aimed at finding sources of investment and determining rational areas of its use.

The main objective of the state investment policy is creating an enabling environment conducive to attracting and more efficient using of investment resources.

The investment policy should be focused at identifying the feasibility of investment volumes for each time period and their structure, choosing priorities and increasing the efficiency of investment.

The Federal Law «On Investment Activity Carried Out in the Russian Federation in the Form of Capital Investments» defines two main principles of state regulation of investment activity: the creation of an enabling environment for investment and direct state involvement in investment activity.

According to a survey of British auditing and consulting firm Ernst & Young «EY’s attractiveness survey – Europe 2014. Back in the game» Russia is ranked third after the USA and China in the list of investment attractiveness, leaving behind the UK, France, Germany, Singapore and Brazil. However, in the current geopolitical and economic situation, when the Russian relations with the NATO and the European Union are full of misunderstanding, tension and confrontation, and our country is perceived in the first place not as a partner, but as a potential threat, a strategic priority for Russia is expanding mutually beneficial cooperation with the Asia-Pacific region.

Speaking at the Business Summit Forum «Asia-Pacific Economic Cooperation», President of the Russian Federation Vladimir Putin said that Russia as part of the Asia-Pacific region is required to use the competitive advantages provided by this rapidly growing center of economy, technology and innovation. A key role in this process is assigned to the Far Eastern Federal District.

In order to increase the investment attractiveness of the Russian Far East the government is going to create in the region a territory of rapid socio-economic development, which is to give to its residents a series of preferential conditions for doing business, namely:

¾              special conditions of land use;

¾              preferential rents;

¾              tax benefits and insurance payments;

¾              reduced tax rate on corporate profits. Zero rate of tax is paid to the federal budget (instead of the standard 2%) for a period of 5 years from the first tax period after the acquisition of a resident status on the territory of rapid development. The reduced rate of tax is paid to the budgets of federal sub-entities of Russia (instead of the standard 18%), namely, the rate does not exceed 5% for the first 5 years, and then at least 10% for the next 5 years;

¾              establishment of a discount factor to the tax rate on mining for 10 years;

¾              reduced rates of insurance premiums for employers-residents of the territory of rapid development (7.6% instead of the standard 30%);

¾              special mode of state and municipal control (supervision);

¾              preferential connection to the infrastructure;

¾              use of the customs procedure of a customs-free zone;

¾              application of technical and sanitary regulations of the most developed countries used by the Organization for Economic Co-operation and Development (OECD);

¾              use of accelerated depreciation pertaining to their objects of depreciable property (by a factor of 2);

¾              simplified procedure for attracting qualified foreign personnel.

The Strategy of socio-economic development of the Far East and the Baikal region until 2025 envisages investments in the development of the region of more than 3.5 trillion rubles. Minister for the Development of the Russian Far East Alexander Galushka said that territories of rapid development give to the Far East about 2.5 trillion rubles of private investment.

Leading foreign companies interested in investing in the Russian Federation, have expressed their attitude to the creation of the Far East territories of rapid development.

In the Russian office of the British auditing and consulting company Ernst & Young believe that the creation of such territories is one of the most effective measures to attract capital. The company expects Far Eastern territories of rapid development will be able to win the competition in similar areas against China and Korea.

The representatives of one of the largest investment companies in Japan Mitsui & Co suppose that the adoption of the law on the territories of rapid development is a necessary step to attract additional investments in the Russian Far East. Business achievements and accomplishments of well-known global foreign companies in the Far East will be the next step in developing and strengthening the image, as well as attracting other foreign companies in the region.

The American innovation and manufacturing company 3M says that the arrival of foreign investors in Russia in the first place prevents the perception of Russia as a country with only two cities (Moscow and St. Petersburg).  3M believes that a foreign investor should be able to estimate the effectiveness of decision-makers from the government as part of the project implementation.

The adoption of the federal law on territories of rapid development is to create a basis for further steps towards the goal of developing the Far East as a national priority for the entire XXI century.

Increasing the investment attractiveness of the Far East will help the development of infrastructure, which in the coming years is to attract substantial resources. The region has planned to build roads and large logistics centers, which also includes a modernization of the Baikal-Amur Mainline and the Trans-Siberian Railway, which will form the basis of the transcontinental railway, connecting Europe and Asia. In addition, it is planned to further develop the Northern Sea Route, which will provide a safe and cost-effective movement of goods between the Asia-Pacific countries and Russia. It’s very topical in the complicated political situation of western sanctions against Russia.

 

References:

1.                 Mankiw, N.G., Taylor, M.P. (2013), Economics. Trans. from Eng. 2nd ed. [Ekonomiks. Per. s angl. 2-e izd.], Piter, St. Petersburg, 656 p.

2.                 Ponomareva, E.S., Kriventsova, L.A., Tomilov, P.S. (2012), World Economy & International Economic Relations [Mirovaya ekonomika i mezhdunarodnye ekonomicheskie otnosheniya], YuNITI-DANA, Moscow, 287 p.

3.                 The Federal Law No 39-FZ of 25.02.1999 (ed. of 28.12.2013) «On Investment Activity Carried Out in the Russian Federation in the Form of Capital Investments» [Federal'nyi zakon ot 25.02.1999 No 39-FZ (red. ot 28.12.2013) «Ob investitsionnoi deyatel'nosti v Rossiiskoi Federatsii, osushchestvlyaemoi v forme kapital'nykh vlozhenii»], available at: http://www.consultant.ru/document/cons_doc_LAW_156882/ (accessed 23 December 2014)

4.                 The Ministry for the Development of the Russian Far East [Ministerstvo Rossiiskoi Federatsii po razvitiyu Dal'nego Vostoka], available at: http://minvostokrazvitia.ru (accessed 23 December 2014)

5.                 Zhuravleva, G.P. (2014), Economic theory. Macroeconomics-1-2. Metaekonomika. Business transformation. 3rd ed. [Ekonomicheskaya teoriya. Makroekonomika-1-2. Metaekonomika. Ekonomika transformatsii. 3-e izd.], «Dashkov i », Moscow, 920 p.