Vladimir Potapov

A

s German Gref, the Minister of Economic Development and Trade of the Russian Federation, announced, special economic zones will emerge in Russia already next year. There will be from 4 to 10 such zones at the beginning. The expected effect is estimated by the Russian authorities as quite high: the establishment of even one such a zone, in the opinion of the Government, will make it possible to attract over $300 million in foreign investments year-on-year, to create up to 14,000 new jobs and provide $35 million in annual tax proceeds to the federal budget.
By the data of the Ministry of Economic Development and Trade, there are about 400 free trade zones in the world today, about the same number of engineering and innovation zones as well as 300 industrial and production zones and 100 service zones. So, how what will Russian "special" zones differ from the "free" ones? Practically, there will be no difference. By the way, the original version of the draft law mentioned the conventional notion. However, the subsequent change of the term had not as much notional as psychological motivation. In the 1990s Russia made several attempts to establish free economic zones, when in 2000 the President used his right of veto to prohibit them. The most interesting thing is that nobody, including officials from the Ministry îf Economic Development, does not know exactly how many such zones were there. No business was done there and they deserved the reputation of "black holes" of the economy, where budget funds disappeared and profits were hidden.
The approach of initiators of the SEZ project is more fundamental. There is an understanding that the matter is not only profitable but it is expensive as well. As the analysis of practicing free economic zones in developing countries shows, as a rule, each $1 of foreign investments costs the State $4 of its own investments. The arrangement of 1 sq. km of a special territory requires from $20 million to $70 million, while attracting private investors to establishing an infrastructure has failed so far.
However, Russia can find funds taking into count the unabated inflow of petrodollars. The main thing is to prepare an optimal number of areas that is adequate to investors’ demand so as to avoid inefficient investments and competition between SEZ’s
The decision has been taken to limit the types of zones in Russia to two: the industrial and production as well as engineering and innovation ones. Zones designed for developing and introducing products of scientific activity will be established on a territory of no more than 2 sq. km. No limitations in investments are supposed to be there.
Industrial and production zones will be located in free areas of up to 10 sq. km, where there were no enterprises before. Not all industries will get an access there. A possible advance list of those not permitted includes the raw material business, the defense military business, production of tobacco and alcoholic beverages. There is a necessary investment condition: a participating company should invest in a specific project no less than 10 million euros, including no less than 1 million euros in the fist year of activity.
Enterprises located in special economic zones will enjoy benefits with respect to taxes on profit and property, duty-free export and import shipments of goods. However, privileges do not end up with only a free customs and lightened tax regime. As Olga Kuznetsova, an official from the Working Center of Economic Reforms with the Government of the Russian Federation believes, one of the main reasons prompted to create SEZ was to find an alternative to the bureaucratized Russian economy. Since, despite all efforts, the excessive influence of bureaucrats throughout the country does not lessen, it would be make more sense, for the beginning, to reach this goal at least in limited areas of the territory.
Anti-bureaucratic motif becomes clear from the main rules of enterprises’ activity in SEZ. There is a simplified order of coordinating project documentation that limits terms of giving out permits by 30 or 60 days. The complete cancellation of licensing is not ruled out. A number of check-ups by controlling bodies is limited: they are allowed to visit an enterprise only all together and not longer than for two weeks. If during a check-up no violations are found, then, controllers will have no access to this enterprise for a year.
However, these limitations do not spread to the tax control. On the contrary, in this case, as analysts explain, providing tax privileges makes it necessary to follow closely their use. Registration as a resident of SEZ gives the right to do business within this territory only. If a businessman wants to spread his entrepreneurship beyond its borders, he should pass through the registration procedure again but this time on common terms and, naturally, without any privileges.
The new law on SEZ provides investors with a number of guarantees. The so-called stabilization provision says that after the start of the project’s implementation conditions of investor’s activity should not get worsened. Federal authorities take upon themselves an obligation not to liquidate a special economic zone before the established business term of its activity expires. The ultimate terms of SEZ’s existence is 20 years.
The world experience shows that there are fundamental differences between free economic zones in industrially developed and developing countries. In the first case this is an instrument to further stimulate development of economically depressed regions, where internal sources of investments are mainly used. On the contrary, in developing countries free economic zones are the most promising and successful territories, kind of a bait for foreign capitals, which helps raise the level of investment attractiveness of the country as a whole.
In these conditions Russia is again a special case. Having enough of its own financial resources, it is experiencing a shortage of attractive investment projects. Like most countries, Russia, of course, is interested in foreign investments but it is to stop the fleeing of the country by its own capital abroad is of no less important.
Putting forward a program of establishing SEZ, the Government of the Russian Federation absolutely does not consider them a panacea from problems of the national economy. As Russian specialists believe, no more than 30 to 40 free economic zones are effectively working among 1,200 of them that are existing in the world. The rest have not brought desirable results. Even China is no exception in this case, although, due to quite understandable reasons, nobody is apt to reveal the truth about the real state of affairs with free economic zones.