"Although the domestic shipbuilding sector continues to boast a high technical, personnel and export potential, the current conditions are inadequate for its effective performance. It is currently unable to manufacture ships ready for immediate operation," the Minister said.
He underlined that additional incentives must be urgently introduced to stimulate domestic shipbuilders. "Primarily, effective measures are required to let Russian shipbuilders manufacture ships on turn-key basis instead of building ship hulls that are to be subsequently fitted out at foreign shipyards, as things stand now," Viktor Khristenko pointed out.
According to him, introduction of such incentives could let Russia not only expand its domestic transport shipbuilding market but also, given the growing world demand in this area, successfully compete in the international markets. "This is particularly true, given the current overload of orders at Japanese, South Korean, Chinese and Croatian shipyards up to 2007-2008. In this situation, it is vital to bear in mind that no restrictions are imposed on a vessel build at a Russian shipyard with regard to its involvement in world trade," the Minister said.
Annually, Russian companies place $0.8 - 1 billion worth of shipbuilding orders abroad, Khristenko said.
"This spells out direct losses for Russia's federal budget," he stressed.
Khristenko explained that, to a large extent, the current situation results from the fact that as compared with the international funding standards for shipbuilding projects Russian shipyards have to operate in very unfavourable economic conditions. For example, borrowed funds account for up to 80 percent of a vessel's cost across the globe, with the credit's interest rate and maturity averaging 8 percent and 10 years respectively. In addition to that, the state frequently subsides national shipyards, offers the latter various benefits and awards payment reliefs.
"In Russia, however, borrowed funds account for only 30-40 percent of a vessel's cost, with the credit's interest rate and maturity averaging 15 percent or more and 2-3 years respectively. In other words, the current lending conditions and tax rates lead to a substantial 25-30 percent increase in price of ships build at Russian shipyards for domestic customers," the Minister stressed.
In Khristenko's opinion, to ensure stable progress of the Russian shipbuilding sector, it is necessary to create favourable economic conditions for its operation commensurate with those provided for its competitors abroad in terms of lending, taxation and customs policy.
