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Expert article 904 Baltic Rim Economies, 21.12.2011 Quarterly Review 5�2011 Special Economic Zones in Russia – new trends By Stanislav Tkachenko and Dmitry Tkachenko Special economic zones (SEZ) play special role in implementation of Russian Government’s vision on how national economy should be reformed and modernized. Internal dynamics of their development is rather positive in recent four years. Since the end of 2009, there are seven new SEZ in several Russian regions and of different types of them. In general, there are 24 SEZ in Russian Federation today: 4 SEZ of industrial and production type, 4 SEZ of technological and innovation type, 13 SEZ with a specialization in tourism as well as 3 SEZ in sea-ports and logistics. Among newly established SEZ there is highly advertized by Russian Prime-Minister “The Titanium Valley” in Sverdlovsk region, “Togliatti” SEZ in Samara region, which should save so called “monocity” from consequences of growing unemployment and even social unrest, and Murmansk Sea-Port SEZ with specialization in logistics. Following indicators demonstrates SEZ development in Russian Federation in recent years: Number of residents registered Investment announced, billion RUR Number of jobs created by SEZ Volume of sales of products and services, billion RUR 2007 2008 2009 2010 2011 (January -June) 50 141 207 267 288 34,237 90,839 144,864 219,900 n.a. 699 3709 3919 5234 n.a. 1,310 10,963 20,800 31,400 Source: The Chamber of Audits of Russian Federation, 2011 Despite of very optimistic statistics on SEZs, it should be taken with cautious since all indicators, presented in the table above, are nominal ones and describe intentions rather than real achievements of SEZs administrations and Russian government. For example, statistics on residents of SEZs who actually started their projects is not available as well as volume of real investments and jobs, provided due to fulfillment of these projects. That’s why representation of available statistics on SEZs is quite poor. The growing skepticism on effectiveness of the whole SEZ’s project and utilization of money from Russian federal budget let the Chamber of Audit of Russian Federation to start investigation of activities of SEZs in 2010-2011 and in previous periods. We may sum up results of the investigation by following: � In 2005-2011 Russian budget devoted RUR 87,7 billion for implementing SEZs-related projects. Only RUR 46,3 billion, or 53 %, has been spent in reality, n.a. 64 other budget money has been secured at the accounts of the governmental Vnesheconombank (VEB). In April 2011 there were about RUR 40 billion (i.e. € 1 billion) of deposits of the Joint-Share Company “Special Economic Zones” at the VEB accounts. SEZ in Saint-Petersburg at the end of 2010 has received from the JSC “SEZ” only $55 million of $440 million, which has been approved by Russian Budget for its development. � Only 58 of 396 infrastructural projects has been completed up to the Chamber of Audit investigation (15% of planned). � Only 206 of 288 residents of SEZs have started their projects in SEZs, and their real investments has reached the level of RUR 36,2 billion. � Economic efficiency of budget resources in industrial zones, is about 1,9 ruble per 1 ruble of budgetary investments; in the case of technological and innovation SEZs the figure is even less impressive – RUR 0,3 per RUR 1 of budget money. Analysis of the 2011 Chamber of Audit investigation lead us to conclusion that at this moment the whole project of SEZs faces serious structural and institutional problems, which Russian Government don’t know how to deal with. We have to mention here slow construction of infrastructure for SEZs by regional authorities, bureaucratic inefficiency, red-tape, lack of Russian managers with practical skills. The most problematic sector is nowadays the tourist and recreational SEZs. These zones are located mostly in areas with very poor transport infrastructure and are hardly accessible both for businesses to invest and tourists to travel. The only exception is the tourist special economic zone in Kaliningrad, but it faces another difficulty due to the fact that it is located in national nature reserve (The Kuronian Spit). Construction and development in such areas are restricted by many environmental as well as bureaucratic regulations. That’s why prospects for business success of tourist SEZ in Kaliningrad are rather bleak today. Poor infrastructure and lack of free land prevent development activities in another ambitious Kaliningrad project – Special gambling zone near the Yantarny settlement. Despite of obvious difficulties, related to SEZs’ establishment , their legal regime, effectiveness of investments, etc, Russian Government continue to put emphasis on them as very important driving mechanisms of Russian economy’s modernization. In March 2011 the Prime-Minister Vladimir Putin has announced that in existing SEZs period of activities, which includes special legal status and tax exemptions, should be prolonged from 20 years nowadays to 35-40 year in the near future. Today there are several drafts of Federal Laws discussed by Russian governmental officials and law-makers in the State Duma and the Council of Federation. They include removal of restrictions for residents of SEZs for non-profile forms of activities, i.e. ability to lease their premises to other residents, to provide food for company’s employees, etc. Russian Government is intending to simplify the registration � Pan-European Institute � To receive a free copy please register at www.tse.fi/pei �
Expert article 904 Baltic Rim Economies, 21.12.2011 Quarterly Review 5�2011 process for residents of technological and innovation type of SEZs as well as utilize mechanism of liberalization of tax regime to attract more residents into existing zones. Summing up our overview of the current state of SEZs genesis, we should conclude that despite of serious problems, Special Economic Zones are very significant engines of modernization of national economy both at the federal and regional levels of economic governance. That’s why Russian authorities will continue putting political and financial resources in their development to avoid resource curse . But it is almost impossible for them to get any longlasting positive results from such efforts without further reforms of state corporations, liberalization of economic practices, establishment competitive institutions in domestic economy and demonopolization of its sensitive sectors. Russian membership in WTO is crucial step on the way and successful special economic zones will move this liberal trend even further. 65 Stanislav Tkachenko Dr., Director of Diplomatic Studies Programme Saint-Petersburg State University Russia Dmitry Tkachenko School of Economics Saint-Petersburg State University Russia � Pan-European Institute � To receive a free copy please register at www.tse.fi/pei �
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