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21 Jan, 2010 08:05

Special economic zones key for economic modernization

Russian President Dmitry Medvedev says he'll make it even easier to do business in the country's special economic zones, which have continued to develop despite the financial crisis.

Levelling the playing field and waiting for the harvest. The idea of special economic zones is new to Russia but, according to the government, it's already bearing fruit. With about 170 residents, the 13 low-tax zones are seen as Russia's best hope for modernizing the economy, says President Dmitry Medvedev.

“We welcome the presence of foreign investors here in the special economic zone in the Lipetsk region which is an encouragement to other investors. It’s also a good signal that even in times of crisis, investment happens, and can yield profit.”

A decade ago, the town of Lipetsk was one of the most polluted cites in Russia. Home to one of the world's largest steel producers, NLMK, the city had to rely on the smelter for everything – from jobs to taxes.

But now there is an alternative. Set up in 2006, the special economic zone has attracted 17 companies to the region, Governer of the Lipetsk region, Oleg Korolev says.

“The amount of investment capital has reached about $2 billion. But the territory designated for investors is already full. So we need to double it or even more.”

The Belgian producer of wire products, Bekaert, is one of the latest additions. The company has invested over 18 million Euro in its Lipetsk facility, despite the global economic crisis.

Metin Caliskan, manager of the plant, says that hard economic times can be used for growth in the future.

“There is economic crisis in global but we would like to take advantage (of the situation) to install a plant in there. We really trusted Russian markets, that’s why we want to be ready when the economic crisis is over.”

Residents are free from most local and federal taxes for five years and enjoy a low rent. In return they had to invest at least 10 million Euro of their own money. But that’s been cut this year to three million Euro.

Just a few years ago, the fields depicted in the models of a planned industrial estate were overgrown with weeds but now they are nurturing Russia's hopes for investments and modernization. With billions of dollars invested into special economic zones, Russian authorities are definitely hoping to reap even more than they sow.