Return of the SEZ

By bne IntelliNews March 1, 2006

Ben Aris in Moscow -

Putin is hoping to repeat China's success with special economic zones (SEZ) to kick start the economies of several regions.

The first stab at setting up special economic zones (SEZ) under former President Boris Yeltsin was a complete disaster, after criminal groups and companies alike hijacked them and turned them into tax black holes. This time around the Kremlin is going to closely supervise companies registering in the first half dozen of these zones and ensure the companies claiming tax benefits are actually making something they intend to sell.

The first six SEZ are due to be registered between July and December this year, according to Economic Development and Trade Minister German Gref.

Four target new technologies and are located in Zelenograd just outside Moscow; Dubna, in the Moscow Region; St. Petersburg; and in the Siberian city of Tomsk. A second pair of SEZ promoting industry is being established in the Lipetsk Region and in Yelabuga in Tatarstan. The process of building the infrastructure to support these zones is supposed to be in place by 2010.

"If Russia wants to become the intellectual laboratory of the world, we need to develop this instrument," Gref told a Duma meeting in February.

The ink on the technological and industrial SEZ law had barely dried when the government started talking about more. A round of technology parks is planned for Nizhny Novgorod, Obninsk, Tyumen, Kazan and Novosibirsk. The Federal Agency for SEZ, established last year, is already drawing up proposals to create tourism and port zones, which could be approved by the middle of this year. Despite its rich cultural history, the impressive imperial grandeur of St Petersburg and the “Golden Ring” cities that encircle Moscow, Russia attracts a paltry 2 million visitors a year, almost all from the other countries of the CIS.

Boeing said in January it intends to register a design bureau in Dubna, obliging it to invest €10 million, but exempting it from all tax payments to the local budgets for five years. Likewise, German carmaker Volkswagen said it may start to manufacture car components in Zelenograd. °¥

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