Focus on South Korea (Issue 2, 2019)

“ART DE LEX BUSINESS DAYS IN SEOUL” TO BE HELD IN SOUTH KOREA

On 23-26 September 2019, at the InterContinental Seoul COEX Hotel, ART DE LEX will host ART DE LEX Business Days in Seoul. Lawyers from ART DE LEX will hold a series of roundtables on current legal issues for foreign investors and businesses operating in the Russian Federation.
They will examine the most problematic issues in antitrust regulation, international economic compliance, bankruptcy and restructuring, litigation and arbitration disputes, as well as issues related to real estate and construction. More information on the program of the event is available at _____.

BUSINESS PROGRAM FOR THE 2019 EASTERN ECONOMIC FORUM- IS PUBLISHED

On 4-6 September 2019, the Fifth Eastern Economic Forum (EEF-2019) will be held in Vladivostok. The organizers plan to take stock of the work accomplished since the 2015 Forum, as well as to discuss the prospects for further economic development and improving living standards in the Russian Far East.

The EEF-2019 program will be divided into 4 blocks:

I. “New Solutions for Accelerating Economic Growth” will examine important issues such as: improving preferential regimes, in particular, the advanced special economic zones (ASEZ) and the Free Port of Vladivostok (FPV); and improvement of the forestry, aquaculture, fisheries and agriculture of the Far East. In addition, the development of the resource base of the Far East and the Arctic, as well as the further development of the Far Eastern Hectare Program, will be subjects for discussion.

II. “Improving the Business Environment” will consider issues including: improving national jurisdiction and protecting investors' rights; increasing the level of financial accessibility of the Far East; and further revealing and unleashing the potential of the tourism market in the Far Eastern Federal District (FEFD) by developing its transport infrastructure.

III. “The Far East and Asia Pacific: Fostering Collaboration” will look at economic and other interactions among Russia and the Asia-Pacific countries, including: scientific and technical cooperation with the Asia-Pacific countries; the participation of the Russian Far East in the global chains of added value; the digital transformation of international trade; and the prospects for cooperation on among countries on environmental issues.

IV. “New Solutions for Improving the Quality of Life” will consider: issues of biological safety that threaten the Asia-Pacific region; new mechanisms for supporting private investment in the social sphere, housing, and public utilities and urban infrastructure; development of healthcare in the Russian Far East, specifically the creation of the International Medical Cluster in Vladivostok; and increasing the availability of medical care in remote areas.

As at the previous Forums, the EEF-2019 will include inter-state business dialogues, in which representatives of countries attending the Forum will discuss cooperation in entrepreneurship. According to the EEF-2019 program, the following international meetings are planned: "Russia - China"; "Russia - Japan"; "Russia - India"; "Russia - ASEAN"; "Russia - Republic of Korea"; and "Russia – Europe."

In addition, the program will include a conference on “The Common Economic Space from the Pacific to the Atlantic Ocean,” with presentations of the investment potential of the regions of the Far East and the opening ceremony for new enterprises located there.

The executive Secretary of the EEF-2019 Organizing Committee, Presidential Advisor Anton Kobyakov, noted that the EEF has become a leading international platform where global issues of the global economy, integration processes in the Asia-Pacific region, and the development of new industries and technologies are discussed.
All of these contribute to economic, technological, social development, and support the improvement of the quality of life in the Russian Far East.

AGREEMENT WATER EXPORTS TO SOUTH KOREA FROM TRANS-BAIKAL TO BE SIGNED AT EEF-2019

The Far East Investment and Export Agency (FEIEA) plans to enter into up to five agreements with South Korean investors as part of the 2019 Eastern Economic Forum, two of which are to be implemented in Trans-Baikal. One of the agreements would be to supply drinking water from Trans-Baikal to the Republic of Korea. That creation of the plant will require about USD 10 - 15 Mln. The output will be approximately 500 million liters of water per year. Construction is scheduled to begin in 2020, and the well will be drilled near Lake Baikal, but not in the nature conservation zone.

The FEIEA also plans to present a unified investment strategy for all regions of the Far East during EEF-2019. The strategy will take into account the specifics of each of the regions and, at the same time, will become a convenient tool for research by potential investors in the common investment space.

FEIEA representatives draw the attention of potential investors to agency’s readiness to provide individualized support for investment projects, as well to coordinate of the work of regional agencies in the joint implementation of investment projects in multiple regions.

FIFTEEN SERVICES FOR INVESTORS TO BE PRESENTED AT EEF-2019

The Ministry for the Development of the Russian Far East will present fifteen new services for investors at the Fifth Eastern Economic Forum. These include, among others: the selection of optimal measures of state support, such as assistance in obtaining a plot of water for marine culture; getting an affordable loan for small and medium-sized businesses; and obtaining an electronic visa to the Far East.

The Ministry will also present the results of a new economic policy, with plans and an extended vision for the development of the Far East in 2025–2035. These include new initiatives, such as a digital service for forest resources and an inventory of agricultural land in the FEFD.

NEW LAW PROTECTS TAX PREFERENCES FOR ASEZ AND FPV RESIDENTS AGAINST EXCHANGE RATE FLUCTUATIONS

President Vladimir Putin has signed Federal Law No. 210 of 26 July 26 2019, On Amends to Part Two of the Tax Code of the Russian Federation and Certain Legislative Acts of the Russian Federation, which specifies the procedure for the provision of tax preferences to ASEZ and FPV residents.

Under the current Russian Tax Code, profits tax preferences are provided to ASEZ and FPV residents only if the income from their activities makes up at least 90% of all income considered when determining the tax base for the profits tax. At the same time, due to significant fluctuations in exchange rates, taxpayers may generate extraordinary income, resulting the loss of these preferences.

The new law excludes positive exchange rate differences from the calculation of the share of 90% of the income received from activities in an advanced special economic zone or the Free Port of Vladivostok. These amendments should contribute to increasing the number of ASEZ and FPV residents and should attract additional investment into the development of the Russian Far East and the Russian national economy.

INVESTORS WILL BUILD A RESORT CITY IN THE REPUBLIC OF BURYATIA

On 3 August 2019, the Head of the Republic of Buryatia Alexei Tsydenov met with representatives of South Korean companies. During the meeting, the most discussed project was the plan to construct an international resort city in Buryatia, in which the Korean company GEO GROUP intends to invest USD 50 Mln.

A land plot of 280 hectares has already been submitted to a Korean investor for design purposes. It is expected that in 2020 the company will receive a building permit, and in 2024 the resort complex will be put in operation. GEO GROUP plans to build several hotels in the complex, a health and rehabilitation center, outdoor recreation areas, as well as department stores, business centers, and conference rooms.

Other participants of the meeting also made some suggestions. The Korean trucking company, Sungin Group, after visiting the Ulan-Ude Aviation Plant, intends to order twelve Mi-171-A2 multifunctional helicopters. Korean investors also are considering options for building alternative power plants in the region.

Alex Mishenin, Deputy Prime Minister of the Republic of Buryatia for Economic Development, noted that projects to construct a bus assembly plant and plants to produce medical equipment are also being discussed now.

11.05 TRILLION RUBLES BUDGETED FOR THE NATIONAL DEVELOPMENT PROGRAM OF THE FAR EASTERN FEDERAL DISTRICT

The Ministry for the Development of the Russian Far East has submitted the National Program for the Development of the Far East (National Program) through 2025, with prospective extensions until 2035, for consideration by the Government of Russia.

The press service of the Ministry reports that the total cost of the National Program will be 11.05 trillion rubles. About RUB 8.4 Trln is expected from extrabudgetary sources, and almost RUB 260 Bln from the consolidated budgets of the constituent entities of the Russian Federation. In addition, according to preliminary estimates, off-budget funds will invest another RUB 90 Bln. However, these funding amounts have not received final approval yet.

The National Program through 2025 will be approved in September. According to the Ministry for the Development of the Russian Far East, it will help accelerate economic growth in the Far Eastern regions, stop the outflow of the population, and overcome the problem of staff shortages.

FIVE ORGANIZATIONS JOIN FORCES TO PROMOTE INVESTMENT IN THE RUSSIAN FAR EAST

On 6 June 2019, at the St. Petersburg International Economic Forum, five entities with interests in investment and development agreed to work together to finance innovative high-tech projects in the Russian Far East: the Roscongress Foundation; the RK-Investments Foundation; RUSNANO JSC; the Far East Development Fund JSC (FEDF); and the MC Far East High Technology Fund LLC (FEHTF).

The agreement provides for the accession of the Roscongress Foundation and the RK-Investments Foundation to FEHTF, which was formed to finance high-tech and innovative projects in the Far East. FEHTF was established in 2018 on behalf of President Vladimir Putin. It currently has RUB 5 Bln and has set RUB 10 Bln rubles as its goal.

According to the agreement, RK-Investments will organize investments and will search for foreign investors to join FEHTF as a contributor. In addition, RK-Investments will assume responsibility for the search and selection of projects in areas such as investments in technology transfer from abroad; production of new high value-added products; and innovative startup projects and infrastructure projects.

NINTH FAR EASTERN RUSSIAN-KOREAN FORUM HELD IN VLADIVOSTOK

On 5 June 2019, the Ninth Far East Russian-Korean Forum was held with the support of the Administration of Primorsky Territory and Far East Investment and Export Agency.
The main purpose of the event was to discuss possible options for the implementation of Russian-Korean “nine bridges” of cooperation in trade and investment.

Residents of the Free Port of Vladivostok and the advanced special economic zones, as well as experts in various sectors of the economy – agriculture, industrial production, the fishing industry and aquaculture, transport and logistics –participated in the Forum. They discussed further cooperation between Russia and the Republic of Korea in these areas.

The Russian side presented a package of proposals that provides for the establishment of fish processing enterprises, the development of tourism, as well as the construction of a port in Slavyanka for grain export, the production of which is rapidly increasing in the Primorsky Territory. They also discussed the implementation of investment projects in the territories of priority development and the Free Port of Vladivostok.