MOSCOW. (By Yelena Yankina, RIA Novosti) -- The Lipetsk Region is among the winners of the Russian Economic Development and Trade Ministry's open contest for building industrial zones.
All in all, sites for two industrial zones and four innovation zones have been chosen.
Lipetsk is a regional center, located 508 km to the south of Moscow. A major industrial area of Central Russia, the city has a high resource potential and stands out for its scientific, technical, and industrial achievements. Industry accounts for more than 70% of tax revenues in the budget. These are some of the reasons why it has been chosen to become an industrial zone.
Five industries - ferrous metallurgy, machine building and metalworking, food industry, electric power engineering, and construction materials industry - have made the biggest contribution to the industrial advance of the region in recent years.
The region has recently stepped up its international activities. It is involved in contractual economic cooperation with many foreign countries.
The Lipetsk Region imports products of machine-building and petrochemical industries, food and products for its production, and metals. Geographically, the Region imports the bulk of commodities from Austria, Hungary, Germany, Italy and the Netherlands. Main export items are ferrous metals and their products. But in the last few years, machines and equipment have been taking over leading positions.
The Lipetsk Region ranks 15th in Russia in economic performance (cost of finished products). In the estimate of the RA Expert rating agency, the Region has a favorable investment climate, and ranks 22nd in investment risks among 89 regions of Russia.
The infrastructure of all six special economic zones will be funded from federal and regional budgets. The 2006 federal budgets allocated about $300 million for this purpose. Deputy Prime Minister Alexander Zhukov said that the plan is to spend about $690 million to this end by 2008.
The industrial zone, which has been named Kazinka by its location, needs substantial investment at once. The funding will come both from Russian and foreign residents. The investment required for the infrastructure of the industrial zone in the Lipetsk Region is estimated at $62 million, of which 42% will come from the federal budget. The government expects the construction of all required infrastructure to be completed by 2007.
By law, a resident of an industrial zone must put no less than 10 million Euros into the project. The first million will have to be spent in the first year. For this reason only major companies will be able to build big production capacities. Medium and small-sized companies will unite into associations.
Here is a list of powerful foreign companies, which have already volunteered to be the main residents of the zone:
-- Italian VERNIGLASS (glassware) and INDESIT COMPANI (washing machines);
-- Swedish Electrolux (washing machines);
-- Dutch Akzo Nobel (pharmaceuticals, coatings and chemicals);
-- German Bosch und Siemens Hausgerate (car spare parts, household appliances, security systems, and industrial equipment);
-- Finnish Sisu Diesel (engines), and others.
Yury Zhdanov, head of the Federal Agency for Management of Special Economic Zones, says that the residents of the special economic zones could bring down their overall production costs by 30%. In industrial zones it is possible to reduce costs by 5%-7% by lowering administrative barriers and taking other measures.
As in other industrial zones, there will be accelerated procedures for reimbursement of R&D expenses; a 30% restriction on transferring losses to subsequent taxation periods is lifted; rapid depreciation of fixed assets is introduced.
At federal level, residents of the special economic zones will not pay taxes on property and land in the first five years. They will have a free customs zone, where foreign goods are imported, and domestic products exported without any duties. These easy terms will be valid in special economic zones for 20 years, and will not be affected by Russia's entry into WTO.
Household appliances have been produced in the Lipetsk Region before, but now their production will be upgraded to a new level. Modern appliances, and up to 80% of spare parts for them will be manufactured here. The capacities of the Lipetsk Metallurgical Plant will be used for this purpose on a full scale.
Yury Zhdanov said that in the near future they will analyze the requirement in the construction of housing for residents and non-residents, new transportation routes, engineering networks, a medical center, sports and cultural facilities.
One of the priorities is the building of an international airport complex of the world-class level using federal money. Experts are now considering a possibility for building in the Kazinka special economic zone an institute for training specialists for similar zones throughout the country.
The Ministry of Economic Development and Trade expects 19 businesses to be established in the Kazinka zone between 2006 and 2008. More than 50 residents are expected to work in the zone by the year 2012. Most of the projects will be repaid in three years. In Zhdanov's estimate, the overall investment in Lipetsk may approach one billion dollars, of which more than a quarter will be invested before 2008. In two years the volume of production will reach about $500 million, and by 2012 -- more than $1.3 billion. The federal budget will receive $200 million in additional taxes from the functioning of the zone during 2006-2008, and about $2.8 billion by the end of 2025.
One of the main tasks of industrial zones is to create new jobs. About 6,000 jobs will be created in the Kazinka zone by 2008, and about 13,000 jobs by 2025. In addition, the formation of the new special economic zone will allow the Lipetsk Region to upgrade its machine building, diversify its economy, and reduce budget dependence on ferrous metallurgy.
