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    KHRISTENKO REGARDS SPECIAL ECONOMIC ZONES AS AN INSTRUMENT FOR DEVELOPING THE RUSSIAN ECONOMY

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    MOSCOW, February 26 (RIA Novosti) - Special economic zones must become a real instrument for the development of the Russian economy, the acting prime minister, Victor Khristenko, said addressing a Cabinet of Ministers' session on Thursday.

    The cabinet discussed the draft law "On the Creation of a Legal Foundation for the Functioning of Equipment Promotion and Production Zones."

    "The draft law is intended to remove the concerns that have arisen as a result of the negative experience in the use of such zones in the Russian Federation," specified Mr. Khristenko.

    He said that different countries use special economic zones "as an instrument of innovation development."

    The draft law developed by the Ministry of Economic Development and Trade notes that at the beginning of the 1990s, 11 Russian regions were designated as free entrepreneurship zones. They were given federal tax breaks.

    However, the lack of control and guarantees to the investors resulted in large-scale schemes to minimize taxes, not in the mass inflow of investments.

    "No single Russian zone can really be included in the category of special economic zones that existing in the world right now, because these zones do not meet the present-day international requirements," the draft law says.

    Presently, according to different data, there are 500-1,500 special economic zones in the world.

    However, the creation of special economic zones will increase Russia's exports by 20%, forecasts the draft federal law on special economic zones. Deputy Minister of Economic Development Arkady Dvorkovich will deliver a report on this topic on Thursday.

    The concept provides for the creation of 10-15 industrial-production zones in Russia with 30-50 newly created enterprises staffed by 70,000-100,000 people with an average wage of 18,000 rubles a month ($1 is approximately 29 rubles).

    Seven to ten equipment promotion zones with 7,000-15,000 workers with an average wage of more than 20,000 rubles are also planned.

    According to the estimates of the Ministry of Economic Development and Trade, the creation of special economic zones "will produce a social and economic effect in the first three years of their existence."

    "A newly created job in a special economic zone will support approximately four dependants and will employ three people in other sectors of the economy," the ministry's materials say.

    "Special economic zones are being created to ensure diversification of production and state support of innovation activity through the development of the processing industry and high-tech production, commercialization of scientific projects that are competitive on the Russian market and on world markets," the draft law says.

    The developers of special economic zones believe that the zones will make it possible to lower the administrative and bureaucratic load on entrepreneurs and will create the necessary infrastructure for the development of business.

    Under this draft law, the applications for the creation of special economic zones will be selected on a contest basis. The decision on the creation of a concrete zone will be made by the government with the approval of federal and local government bodies.

    An authorized federal body with will govern the zones, and a concrete zone will be run by the directorate which represents a territorial division of the authorized federal body.

    The draft law provides for a number of tax and customs advantages for the companies working in a special economic zone. The territory will have a free customs zone regime. It envisages the organizations' exemption from regional and local property and income taxes.

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