Focus on South Korea (Issue 1, 2017)
The Russian Far East attracts Korean investors
Summing up 2016, the Minister for Development of the Russian Far East, Alexander Galushka, has pointed to how a visa-free regime between the Republic of Korea and Russia has increased the potential for cooperation between the two countries.
Agreements and memoranda on cooperation between Russia and South Korea, signed in the framework of the Eastern Economic Forum 2016, address a wide range of areas for cooperation: industry and commerce; health and medical services; the development of the fishery industry; and aerospace. These support the implementation of investment projects in the Far Eastern Federal District (FEFD) by Korean companies. For example, the Far East Development Corporation received three applications from Korean investors who intend to take advantage of the favorable conditions offered to investors in territories of advancing socio-economic development (TASEDs) and the Free Port of Vladivostok.
In the Khabarovsk TASED, investors from South Korea plan to establish a factory to produce PVC cling wrap and wicket packages for automatic and semi-automatic machines, with an investment of RUB 777.7 million.
In the Free Port of Vladivostok, Korean entrepreneurs are planning to invest RUB 16.8 million to build a plant to produce polyurethane items and household goods. They also plan to invest more than RUB 1.8 billion to develop an electronic fare payment system in Vladivostok.
Two more territories of advancing socio-economic development in the Far East
The Government Commission on the Socio-economic Development of the Russian Far East and the Baikal region has approved the establishment of the fourteenth and fifteenth TASEDs – Southern Yakutia and Nikolaevsk. The new TASEDs will be created in the Republic of Sakha in the Neryungrinsky District and in the city of Nikolaevsk-on-Amur in the Khabarovsk Krai. An expansion of the boundaries of the Komsomolsk TASED was also approved.
Special regional legal regimes for entrepreneurial activity will be introduced to create favorable conditions for investments and rapid socio-economic development. According to the Federal Minister for the Development of the Russian Far East, Alexander Galushka, the new TASEDs will boost the industrial development of the regions, as well as the creation of modern industries and new skilled jobs.
Thus, the major industrial center of South Yakutia will become a TASED. Seven mining, transport, logistics, and industrial projects will be implemented, with private investment totaling RUB 24.7 billion.
New power lines in the Nikolaevsky municipal district will be built to support infrastructure in the new TASEDs by delivering a stable supply of electricity to the population and business entities.
Nine other companies, with total investment of more than RUB 3 billion, are ready to become residents of the new TASEDs. Their planned projects involve fish processing and ship repair.
A tourist-recreational cluster is planned for the expanded Komsomolsk TASED. It will increase the total length of ski slopes to 60 kilometers, and is expected to attract up to 240 thousand visitors.
The Supervisory Board of the Free Port of Vladivostok approves 35 investment projects
At a recent meeting, the Supervisory Board VI of the Free Port of Vladivostok discussed possible new investment projects, ways to attract investors, and the creation of a public council. The Board approved 35 investment projects, including:
• A terminal in the Vanino seaport for the transshipment of liquefied petroleum gases;
• A coal transshipment terminal at Cape Burny in the Khabarovsk Krai;
• A fish logistics and processing center, OOO South Terminal, in Korsakov;
• The RUB 600 million hotel, OOO New house;
• the OOO Pavlin ethnic village, which is a cultural and tourist center
The total private investment in these projects will amount to more than RUB 94 billion.
Special lending program for small and medium-sized businesses begins in the Far East
A new program, Affordable Credit for Small and Medium-Sized Enterprises, has begun in three regions in the Russian Far East. Implementing an agreement signed after the Far East Economic Forum in 2016, the Far East and Baikal Regional Development Fund (the Fund) and Sberbank Russia are supporting the first phase. The total amount of the first three approved loans was RUB 190 million, of which the Fund provided RUB 70 million.
Sberbank disburses the loans through its offices in nine regions of the Far East to eligible companies registered there. Because of the Fund’s participation, Sberbank can keep the minimum spread of the interest rates for the program at 9.9% to 12.5% per annum for current operations. The rate for loans for investment purposes is 13.5% per annum. Credit terms extend from three to ten years. This flexibility in loan structuring will raise the overall level of credit availability by reducing the load on regular payments.
The Federation Council approves proposed amendments to the Federal Law On Electric Power Industry
The Federation Council has approved a bill to amend the Federal Law On Electric Power Industry and has sent it to President Vladimir Putin for signing. The law aims to create conditions for an accelerated development of the Far East by reducing electricity rates to closer to the average for the Russian Federation.
Undeveloped energy infrastructure and high energy costs have limited the development of the Far Eastern territories and the competitiveness of its businesses. In most regions of the Far East, the electricity rates are significantly higher than the average for Russia. To avoid extremely high prices for electricity, the State subsidizes the rates in these regions. In an address to the Federal Assembly in 2015, President Putin charged the legislators to equalize electricity tariffs in the Far Eastern regions to the national average.
The Federation Council Committee on Economic Policy and the Energy Working Group plan to monitor the implementation of the law on a permanent basis. Under the recent amendments, the government will create a mechanism to monitor progress in the moderation of prices and tariffs in the retail electricity market in the areas of the Far East.
Simplified visa procedure for the Free Port of Vladivostok
The Government Commission on Legislative Activities has approved a draft law to simplify visa procedures in the Free Port of Vladivostok. If the draft law is enacted, foreign citizens arriving in the Free Port of Vladivostok would be able to obtain a multiple-entry visa under the simplified scheme. The visa would be valid for eight visits, each visit not to exceed eight days.
A foreign citizen would complete an electronic form on a website of the Ministry of Foreign Affair not less than four days before the proposed date of entry. The applicant would be able to track on-line the progress of the application and would receive the approval by electronic mail.
Upon arriving in Vladivostok, the foreign citizen would simply produce identification to the Border Agency staff officer, who would confirm the visa in a special database and stamp the visitor’s passport.
Solutions to remove barriers to the development of aquaculture in the Russian Far East
On 13 December 2016, the Government Commission responsible for the agricultural sector and the sustainable development of rural areas examined issues in the technological development of agriculture and the accelerated development of aquaculture in the Russian Far East.
According to experts, the potential for aquaculture production in the Far East is 1 million tons per year; but less than 1% of that potential is realized because of the existing legal and administrative barriers. To eliminate these obstacles, the Minister for Development of the Russian Far East, Alexander Galushka, introduced the following initiatives:
• Eliminate the need for special commissions and time-consuming procedures by creating an official geographic information system, which transparently defines a fish breeding areas and displays information about any limitations or prohibitions on the use of those waters for aquaculture;
• Allow the introduction of aquaculture in waters designed for fishing;
• Enable aquaculture enterprises to obtain land without bidding for the construction of aquaculture infrastructure;
• Create mechanisms of state support of agricultural insurance of aquaculture; and
• Amend the Federal Forest Code on the use of forests for aquaculture to eliminate obstacles to the development of fish-breeding areas in specially protected natural areas.
Dates for the Eastern Economic Forum 2017
The third Eastern Economic Forum will be held on 6-7 September 2017 on the campus of the Far Eastern Federal University on Russky island in Vladivostok. This will be immediately after the ninth BRICS summit.
Over the past two years, the Forum has established itself as a major international communication platform, focused on the priority development of the Russian Far East and its integration with the economies of the Asia-Pacific region. The 2017 Forum will display and examine the dynamics of Far Eastern development in 2017, the first results of the New Economic Policy, and the tools to create economic incentives for the macro-region.