Dmitry Golosov: Our development institution is probably one of the leading in Russia, if not the best one

22 October 2018
Dmitry Golosov, Deputy General Director of JSC “Special Economic Zones”, revealed “Expert” magazine the reasons of the residents’ number increase in SEZs and why regional administrations have to specify additional requirements to them.

— Special Economic Zones have existed since 2005. How would you estimate them?

— I personally consider, that the project of special economic zones is a very successful one. There are already more than 700 residents operating in SEZ, including 100 foreign companies. The volume of announced investments exceeds 900 bln. Roubles, Moreover, the flow of investors is increasing every day. The growing success and the efficiency of SEZ are also confirmed by our European colleagues. This year already 7 Russian SEZs are recognized as the best zones in Europe by the fDi rating compiled by the Financial Times.

— What is the reason, to your mind?

— First of all it is the result of competent SEZ management, accumulated experience and the desire to develop the project both at the federal and regional levels. It is already time to talk about significant advantages of the reform on the transfer of authority to manage the development of zones to the regional level, giving the regional authorities of the Russian Federation more responsibility, which allowed to reduce highly the timing of decision-making on the issues of development and approval of investors' projects.

— Which SEZs are the most successful?

— Actually there are no unsuccessful SEZs. The main thing is the desire of regional administration to develop SEZ. For example, when the administration of the Kaluga region decided to develop a new site of Kaluga SEZ new investors appeared there at once. I even attracted some of them there. It turned out that there are a lot of companies with ready business plans, business models who are ready to become SEZ residents. At the same time SEZ in Vladivostok which was closed last year became irrelevant because of the creation of the Free port of Vladivostok in 2015 which has been developing taking into account all the needs and requirements of the region and regional investors.

SEZ will not work without the local administration interest. Dubna SEZ is another example. Last year Dubna SEZ topped the rating of the most attractive Russian SEZ. The huge advantage of this SEZ is its proximity to Moscow, the proximity to water transport system and the most important is the desire of the Moscow region and the head company of Dubna SEZ to develop this zone and to make it the best.

The same I can say about other industrial SEZ. For example, Alabuga SEZ and Lipetsk SEZ are absolute leaders. But they were created among the first ones. Togliatti SEZ and SEZ in the Sverdlovsk region are also actively developing . The same progress is in the recently created SEZ in Astrakhan and Tula. When there is interest of the local administration, SEZ efficiency and attractiveness increase by 300-400 percent.

However, there are still some investors who are not ready to choose SEZ because of the negative information about SEZ in 2011-2013 including information about SEZ inefficiency and difficulties in doing business in SEZ. Those who ventured at that time, now feel themselves very comfortable. We have a few residents who chose us and then changed their minds. Basically, those who were interested remained in our SEZs.

— Why it suddenly became interesting?

— The regions of Russia, where the SEZ are located, were given the opportunity to work independently with zones and deal with their development taking into consideration the needs of the region and regional investors. Previously, in fact, the entire development and arrangement of the SEZ was handled at the federal level according to pre-approved plans, which, in turn, sometimes could not correlate with the plans and needs of the region that had changed by the time of implementation

Moreover, one can not ignore the fact that in 2005–2014 at least three economic crises occurred. As a result, a significant number of investors had financial difficulties, and they could not continue the implementation of their projects, they just had to leave. Later when new investors came, they had different requirements, they needed other capacities, land plots and conditions. Generally, since that time there has been a global review of the conduct of all business in our country, and we had to adapt to it.

The region in this regard is more mobile and flexible, it understands better what business needs right now. The transfer of authority to manage the development of zones to the regions should have resolved these issues and made the SEZ as efficient as possible.

— Is the number of regions wishing to create SEZ is growing now?

— I will give you a simple example. Last year we had 588 residents and now they are more than 700. during only 2018 more than 70 companies became SEZ residents, 10 large-scale productions have been launched and the same quantity is planned to be launched till the end of this year. For example, now there is almost a hundred applications in Dubna SEZ. Approximately the same situation is in other SEZs. Companies are sharing now their positive experience in SEZ. There are a lot of companies are wishing to work in SEZ now. The regions even have to specify additional requirements to investors.

It turns out that our development institution is probably one of the leading in Russia, if not the best one. No one except us gives almost free land plots in addition to tax preferences and other benefits. Moreover we don’t have connection fee to the engineering networks and an investor can get any amount that he needs. Otherwise these are huge costs and they can reach up to 30-50 percent of the project cost.

I think that we have already proved that SEZs are not only efficient but also very attractive for serious investors. We have factories of the companies with investments of more than 10 billion rubles, worldwide famous foreign investors are coming not only for the Russian market, but also for export. One investor decided to close the existing factory in Malaysia and set up a plant in Lipetsk because it is more profitable and convenient to work in the Lipetsk region.

When the efficiency of SEZ was proved and the moratorium on their opening was lifted, many regions surely wanted to create a special economic zone on their territories.

At the moment, we are aware of readiness to create SEZ at least in 8 regions. This is in spite of the fact that financing of the SEZ infrastructure creation is supposed mainly at the expense of regional budgets.

— Why did this moratorium exist?

— The thing was that the project was ineffective. We had to prove the opposite. In my opinion, we successfully did it. Probably the surest version is industrial zones. In second place are innovative zones. We have only one port zone left, we will look at it in the future, because it is too early to say anything now, although it is very interesting for investors.

Touristic SEZs is a very special case. It is a social project and it is impossible to expect returns from them in the nearest 3-5 years. Although, we have progress. For example, the project “Arkhyz” at the Northern Caucasus was started from scratch and now it is a proven resort. In winter, despite the fact that new ski slopes and cable cars are constantly being built, it is almost impossible to buy a ski pass and find a place where to stay because the development of the resort has passed the dead point when neither investors nor tourists wanted to go there. Now tourists from all over the country go there, and investors do not manage to provide them with everything they need, starting with hotels and ending with places to eat. But this is another story. Talking about Arkhyz, there was a support from the Karachay-Cherkessia region itself, that provided transport accessibility and, together with the North Caucasus Institute, the RANEPA, taught the local population to work at the resort.

One of the reasons why our zones in Altai are not so popular for a very long time is because of expensive flights and poor transport accessibility. Once again I would like to underline, this is a social project, and it needs to be developed purposefully, specifically, each resort, each region, starting with local authorities, the Ministry of Tourism, the Ministry of Sports, and so on, depending on the direction of the resort. Furthermore, these decisions must be made absolutely on other levels. In general, the requirement of economic efficiency, which should be achieved in each special economic zone, should not be applied to touristic SEZs. It is a social project and tourist attraction point.

— Do the sanctions somehow affect the flow of foreign residents?

— It depends. Currently many foreign companies are opening production facilities here just not to lose both the Russian and CIS markets. However sometimes there is an opposite situation. Because of the sanctions there is no possibility to import parts and components so further production is also impossible. Unfortunately, in this regard, the activities of the companies are forced to be suspended until the analogues are found, and so on.

— How do you work with residents?

— JSC “Special Economic Zones” holds information events, presentations and seminars for investors, very often together with our partners who are connected with our activities. We prove that doing business in SEZ is as efficiently as possible.

We also have a lot of agreements with different funds and institutes within the framework of which our partners promote SEZs.

In September, we held negotiations with the World Free Zones Organization (WFZO) (the head office situated in Dubai) and already have become the member of this organization. In the framework of cooperation with them, JSC “Special Economic Zones” will get access to their bases of investors as well as WFZO will assist us in attracting companies to Russia.

Moreover, we have concluded a partnership agreement with Center of financial and credit support, the founder of which is the public organization “Business Russia”. Together we have developed the online platform which provides investors with the most comfortable access to the financial instruments of state and credit support. The unique portfolio of financial assistance has been created for both residents and potential investors.

Each region has a separate advertising policy to attract residents, which is quite fruitful, but sometimes this or that SEZ is not suitable for the investor according to certain criteria. Then the company requests us to help them to choose a site in accordance with its requirements.

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