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Increasing the investment appeal of the Far East

5 September 2019
Повышение инвестиционной привлекательности регионов Дальнего Востока


The Far East sees an upsurge of business

“In the first half of this year, a long-term negative economic trend finally reversed. <...> This year, for the first time we see the GDP grow by almost 5%, industrial production grew by 2.5%. <...> Unemployment decreased by 1%,” Alexander Osipov, Acting Governor of Trans-Baikal Territory.

“The Republic of Sakha (Yakutia) and Kamchatka Region have already made it to top 30 regions best for entrepreneurship, <...> 9 out of 11 regions demonstrated an improved dynamics of most national rating indicators, there are 45 of them,” Svetlana Chupsheva, General Director, Agency for Strategic Initiatives to Promote New Projects.

“Many regions have improved their performance in absolute numbers but lagged in relative numbers, which suggests that competition is on the rise,” Andrey Sharonov, President, Moscow School of Management SKOLKOVO.


Imperfect legislation and high administrative pressure

“In the Far East regions, <...> 53% of entrepreneurs report heavy administrative pressure from regional and municipal administrations, less than 20% report on federal authorities, <...> 42% of entrepreneurs complain of courts of general jurisdiction, <...> 55% – of power supply organizations,” Svetlana Chupsheva, General Director, Agency for Strategic Initiatives to Promote New Projects.

“There are significantly fewer inspections. <...> But the routine and unscheduled audits have been conveniently replaced with unofficial inspections. <...> Prosecutor’s office has no control over these,” Boris Titov, Presidential Commissioner of the Russian Federation for the Protection of Entrepreneurs’ Rights.

“Often, administrative pressure is directly related to the gaps in the existing legislation. For example, foreign labour legislation has huge loopholes. Today, the immigrant workforce can be brought to the region without a quota under the guise of skilled international specialists. It is a major issue for the border regions,” Vasily Orlov, Governor of the Amur Region.

“The Republic of Buryatia is the most overregulated region in environmental legislation. <...> The number of inspections grew significantly. About 30% of small business in tourism shut down just this year alone. <...> A venue may cost RUB 100 thousand and be ready in a month. An audit will cost RUB 300 thousand and takes two months – environmental audit of literally everything,” Alexei Tsydenov, Head of the Republic of Buryatia.

Tax increase due to transition to cadastral valuation

“Several regions of the Far East are switching to cadastral valuation and relevant taxation. In Primorye, the cadastral valuation grew 2–10 times. <...> Real estate owners are under serious risk, their survival is jeopardized,” Alexander Kalinin, President, All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses OPORA RUSSIA.

“What does business do? It takes an independent assessment and goes to court. They even slam the old evaluations,” Alexander Levintal, Governor of the Jewish Autonomous Region.

Shortage of human resources

“The Far Eastern small and medium enterprises turnover grew by 5.2%. But on the other hand, the number of employees in SMEs decreased by 3.7%. That is 40 thousand people. <...> The personnel issue is becoming the most acute,” Alexander Kalinin, President, All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses OPORA RUSSIA.

“The number of people graduating from internationally recognized professional training courses is half of the Russian average,” Robert Urazov, Chief Executive Officer, Agency for the Development of Professional Communities and Skilled Workers (WorldSkills Russia).

“We can train quickly and efficiently. But what do we have? There is no place for them on the labour market,” Petr Shchedrovitskiy, Member of the Management Board, North-West Foundation Centre for Strategic Research.

Lack of funding

“Our financial sector density is very low; we should have established institutions years ago. Lack of funding has a big impact on any development plans,” Alexander Osipov, Acting Governor of Trans-Baikal Territory.

“An unbalanced budget impedes the achievement many objectives,” Alexander Levintal, Governor of the Jewish Autonomous Region.


Consistent dialogue between the state and business

“The new format of dialogue with business is an unambiguous growth prerequisite. <...> We had fully re-established the coordination council for entrepreneurship: before it was 30% business and 70% state officials. Now we have 92% of small business representatives,” Aysen Nikolaev, Head of Sakha Republic (Yakutia).

“Success lies in the communication between business and regulatory bodies. This year we have created a very effective “Boiling Point”,” Vasily Orlov, Governor of Amur Region.

“Several projects are worth mentioning, but the most significant one is the ‘Regulatory Guillotine’. The business should be directly involved. <...> Business should not be designated, but rather consolidate its position,” Alexander Shokhin, President, Russian Union of Industrialists and Entrepreneurs (RSPP).

Optimization of regulation

“One of the solutions: if the audit data is not entered into the Unified Register of Inspections, its results shall be deemed invalid. <...> The second solution is to analyse and summarize the identified and confirmed violations. In turn, the regulatory authorities have already agreed to outline a step-by-step procedure to prevent major violations,” Alexander Braverman, General Director, Chairman of the Board, Russian Small and Medium Business Corporation.

“It is necessary to ensure a smooth transition from a fixed tax on potential gross income to the patent taxation system. <...> Unless it is done, we are to face a surge of social tensions and small business dropping off the radar,” Alexander Kalinin, President, All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses OPORA RUSSIA.

“One window investment decision-making: investors see a full set of projects offered in the district, and <...> decide in favour of an investment team,” Igor Shchegolev, Presidential Plenipotentiary Envoy to the Central Federal District.

“Moving on to ASEZ and Vladivostok Free Port, all those receiving benefits, <...> if you don’t pay taxes, getting top margin, you should raise wages. The analytics show nothing like this happening,” Sergey Furgal, Governor of Khabarovsk Territory.

State financial support

“We have kept direct measures of financial support for business. <...> Firstly, we are talking about business on the ground floor setting up its operations. Such support is essential for them. The demand for micro financing remains high,” Vladimir Ilyukhin, Governor of Kamchatka Territory.

Identifying jobs in demand in cooperation between the state, business and educational institutions

“Within three months, we are to prepare a long-term jobs outlook for each region considering the objectives of the national projects, especially in terms of the infrastructure development,” Andrei Belousov, Aide to the President of the Russian Federation.

“And we are creating a single window to the Far Eastern Federal University for all investors of the Far East. <...> This year, 1,500 students have already completed internships at enterprises,” Nikita Anisimov, Rector, Far Eastern Federal University (FEFU).

“The peculiarity of Chukotka is such that it does not imply a dynamic population growth of the region. It partly results in human resource imbalance. At the same time, we have major investment projects in the region. <...> Over the past few years more than 3,000 jobs emerged. With all the companies in the region, there is a basic agreement that all Chukotka people, including the indigenous peoples, shall be employed,” Roman Kopin, Governor of Chukotka Autonomous Area.

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