• 2015 June 22

    Investors to adopt the ‘Lotus’ position

    Special industrial and economic zone of Astrakhan, known as ‘Lotus’, is to start functioning by late 2016. The interest to do business there has been expressed by manufacturers of marine facilities, shipbuilding, fish processing and other companies from China, the Netherlands, Germany, France, Norway, Cyprus, Iran etc. Investors are attracted with unprecedented privileges combined with the possible access to state orders under import replacement programmes.

    Special industrial and economic zone of Astrakhan (Lotus SIEZ) is being established in the Narimanovsky District of the Astrakhan Region. It will cover 9.8 square kilometers. Total investments are estimated at $461 mln including $419 mln for the construction of infrastructure facilities.

    SIEZ residents will be provided with sound privileges like free power network connection. For In Moscow it costs $700,000 per 1 MW, in Astrakhan - $200,000 per 1 MW. All the plots of SIEZ have been duly prepared for registration of lend-lease or ownership which reduces the procedure by 3 to 6 months. This will also cost several times less as compared with the average market prices. For example, lease of 10 hectares in SIEZ will cost $6,120 per year against the market price of $1.12 mln. The residents will also enjoy preferential taxation – profit tax is only 2% against 20% outside SIEZ, property tax – 0% for a 10-year period, land tax - 0% for a 5-year period from the registration of property right, transport tax - 0% for a 10-year period from vehicle registration.

    Moreover, SIEZ residents do not fall under tax legislation diminishing their position. Accelerated depreciation is possible (coefficient - 2). Total savings due to tax privileges will reportedly make 15% for SIEZ residents.

    Foreign goods placed and used within SIEZ are exempt from customs dues and VAT. This privilege also covers goods going outside the Customs Union.

    The residents will also enjoy state services under one stop principle.

    As Sergei Milushkin, Director General of Special Economic Zone Lotus PJSC, told IAA PortNews at the St. Petersburg International Economic Forum (SPIEF-2015), SIEZ residents would start operations by late 2016 - early 2017. According to him, general designer will be selected in autumn 2015, fencing will be built in quarter II-III’2016 following which the duty-free zone regime will be established. SIEZ residents will be able start building their facilities in QIV’16.

    The list of companies interested in participation includes the manufacturer of dredging equipment IHS Merwede (the Netherlands), manufacturer of yachts and small-size vessels, fish processing company from China, manufacturers of shipbuilding facilities from Germany, France, Turkey, Norway, Cuprus, etc.

    Elaboration of preliminary agreements with potential investors is underway.

    Besides, SIEZ residents including foreign companies will be probably allowed to enter the market of state orders in shipbuilding and the orders of United Shipbuilding Corporation (USC). 

    The status of SIEZ goods is interesting for fish processing companies from China as it is difficult for them to enter the market of Russia. Being SIES residents they can deliver equipment without payment of VAT or taxes, deliver raw fish from China and process it. The product entering the market is considered to be Russian and is not subject to duties as its processing depth exceeds 50%.

    Negotiations are being held with Gazprom and LUKOIL which are also interested in production of marine equipment for the development of Caspian fields. 

    Sergei Milushkin has illustrated the attractiveness of SIEZ using the example of investors going to assemble modules for Iranian refineries.  Components are to be delivered to SIEZ for assembling and further exports outside the Customs Union (to Iran). Thus the investor will obtain all the above privileges.

    Of course, SIEZ is supposed to attract Russian companies, mostly shipyards and design bureaus, through establishment of a shipbuilding cluster. 

    Generally speaking, Russia is looking for ways of economy diversification and import replacement amid a deep economic crisis and western sanctions. The mechanism of free economic zones is ideal for that purpose and RF President Vladimir Putin emphasized the significance of Free Port projects at SPIEF-2015. Actually, special economic zones could not to bring a breakthrough effect in Russia so far. Time will tell whether they would be modified accordingly.

    Vitaly Chernov