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National Jurisdiction and Trust in International Relations as a Guarantor of Inward Investment

3 September 2021
Национальная юрисдикция и доверие в международных отношениях как гарант привлечения инвестиций



The role of the office of the Prosecutor General of the Russian Federation is to protect the interests of businesses and investors


“It is very important that the prosecutor is involved. Reviewing all the rules – particularly with regard to producers and entrepreneurs – is a major bureaucratic undertaking. They have been developed over a long period since the time of the Soviet Union. An important role of the prosecutor is to protect the rights and interests of people doing business,” Vladimir Gruzdev, Chairman of the Board, Association of Lawyers of Russia.


“Prosecutors are interested in direct and open dialogue with entrepreneurs. In order to achieve this, we have developed numerous communication channels, which all work excellently. Entrepreneurs themselves should show a responsible, respectful attitude towards laws and the interests of the state and society. This is vital for mutual respect. The key word here is trust: our trust in you – entrepreneurs and investors – and similarly, the trust of investors and entrepreneurs in the state, oversight bodies, and the prosecutor in particular,” Igor Krasnov, Prosecutor General of the Russian Federation.




Red tape and pressure on entrepreneurs


“There is a problem with regard to administrative pressure, unfortunately. Of the 11 regions in the Far Eastern Federal District, only two are among the top 30 in Russia’s administrative pressure index, i.e., they are characterized by low levels of pressure. In the Far Eastern Federal District, the Federal Service for Supervision of Natural Resources; the Federal Service for Environmental, Technological and Nuclear Supervision; EMERCOM of Russia; the Federal Service for Supervision of Transport; and the Federal Service for Labour and Employment all exerted more control over entrepreneurs than the Russian average. The number of inspections that took place in the first half of this year alone is almost comparable to the total number of inspections in the whole of 2020. This is a worrying sign,” Boris Titov, Presidential Commissioner of the Russian Federation for the Protection of Entrepreneurs’ Rights.


“Our officials are sometimes unaware of issues in the region which are worrying entrepreneurs. For the second year, an important aspect of the work done by prosecutors is to oversee compliance with the moratorium on planning and conducting inspections of small businesses. In the Far East alone, almost 25,000 businesses were spared from superfluous attention from oversight bodies as a result of the timely waiving of these inspections,” Igor Krasnov, Prosecutor General of the Russian Federation.


“The number of inspections under the management system for the first six months of this year grew by 48%. A lot of issues are to do with international logistics and customs clearance. There is also the issue of how entry points operate. We have been allocated public funds to ensure that the Primorye-1 and Primorye-2 entry points open in 20232024. However, entrepreneurs are worried that this will not be done, because work is not actively under way,” Alexander Kalinin, President, OPORA RUSSIA All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses.


Machinations in advanced special economic zones

“The ASEZ system offers unparalleled conditions for attracting investment, and today investment is coming to the Far East. However, some issues affecting the region’s attractiveness to investors have not been addressed. These are to do with salaries at ASEZs. The reduced rate does not apply to all jobs, but only to those which are new and were created to execute an ASEZ activity agreement. As a result, a readjustment is now under way, i.e., a new rate is being applied to old jobs retrospectively,” Boris Titov, Presidential Commissioner of the Russian Federation for the Protection of Entrepreneurs’ Rights.


“We audited the ASEZs, and shared our findings with the prosecutor. The issue here is that the same investors move from one ASEZ to another. And ASEZs offer tax breaks. The total value of tax breaks in Russia amount to more than RUB 7 trillion. The government offers them, and then hopes that as a result jobs will be created, salaries will increase, and social issues will be addressed. In terms of development institutions, we conducted an audit, and found that RUB 9 billion was spent on them. However, they remain extremely ineffectual, and are undergoing a complete restructuring,” Svetlana Orlova, Auditor, Accounts Chamber of the Russian Federation.




Greater digitalization of sectors working with businesses and investors


“We have anticorruption legislation ready for possible implementation by the Central Bank for the digital rouble. It is my hope that soon everything will become digital, because that will make it easier to monitor and view earmarked money, and to use public funds in a targeted way – something which we are always talking about,” Igor Krasnov, Prosecutor General of the Russian Federation.


“A systemic approach is needed. From our point of view, this means applying digital technology – digitalization. These new technologies could help make the legal system more transparent, and also make regulatory control and oversight more effective. At the same time, they would make it easier for businesses to do their reporting,” Alexander Liberov, President, Siemens in Russia.


Reducing the number of inspections and applying more lenient punishments for infringements


“Our position is that we want fines for small businesses to be at the same level as those for sole traders, and hope to have support on this matter. It’s all completely transparent. If you are on the register, your fine will be the same as if you were a sole trader. That would equate to an 80% reduction in fines for small businesses. That would cause people not to be apprehensive of incurring a ruinous fine for making a mistake,” Alexander Kalinin, President, OPORA RUSSIA All-Russian Non-Governmental Organization of Small and Medium‑Sized Businesses.


“We have made an agreement with the prosecutor’s office, and are constantly monitoring the introduction of laws. Today, there is a new control and oversight system. We are maintaining a new inspection register. It is our hope that the number of inspections will not grow,” Boris Titov, Presidential Commissioner of the Russian Federation for the Protection of Entrepreneurs’ Rights.


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