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Residents are cautious
How to read reports on foreign investments in the Far East
The Far East accounts for 26% of all foreign direct investment attracted by Russia last year, Yuri Trutnev, vice premier and presidential envoy to the Far Eastern Federal District, said in an interview with RBC. At the same time, only 4,2% of the country's population live in the region, Trutnev stressed. At the same time, experts point out that foreign investors are facing difficulties in the region and it is not worth drawing a situation exclusively in rainbow colors.
Direct foreign investment in Russia in 2017 amounted to $ 20-25 billion, said the head of the Ministry of Economic Development Maxim Oreshkin. The minister stressed that this figure has been reached from a very low base. "We had less than $ 20 billion foreign direct investment in 2015 year, 2016 almost collapsed, in 2017, such investments amounted to about $ 20-25 billion," he said at a forum in Davos.
According to the Central Bank, by the second quarter of 2017, the balance of foreign direct investment across Russia totaled $ 12,49 billion, of this figure in the Central Federal District there was $ 8,3 billion, in the Far East - $ 2,3 billion, and in a number of districts (North- Caucasian) there was a net outflow of investments, and in many regions their inflow was insignificant.
A quarter of all foreign investments attracted by Russia fell to the Far East, but in fact it is not a "breakthrough" of 2017. The same share (23%) was observed in 2014 year, and in 2016 it was even larger (31%). However, in 2011 the share of the Far East was only 2%. But then, before the sanctions, and the total amount of investments were different (in 2011 year - $ 55 billion for the whole of Russia). Since then, in the first place, sanctions have begun, and the volume of investment has fallen. Secondly, obviously, the "turn to the East" announced by the Russian authorities has worked, since since 2011, not only the share of the Far East in the total volume of investments attracted by the Russian Federation has grown, but also the absolute figure (in 2001 it was $ 0,95 billion ).
SAKHALIN STEPS AHEAD
However, when analyzing the distribution of investment in the constituent entities of the Federation, it turns out that one Sakhalin region - $ 2,1 billion - provided a huge share of the success of the DFO. Magadan Oblast showed a net outflow, other regions - a small increase or, as the Jewish Autonomous Region, zeros for all positions (received - seized - balance).
How did Sakhalin alone ensure the dynamics of attracting investments to the whole district?
Investments came, in fact, in one "bush" of projects. "Basically, these funds are invested in large international oil and gas projects" Sakhalin-1 "and" Sakhalin-2 ", - said in the fall in an interview with the regional minister of economic development of the Sakhalin region Aleksey Belik. - Among investors are ExxonMobil, ONGC, Sodeco, Shell, Mitsui and Mitsubishi. The development of hydrocarbon fields is carried out on the basis of production sharing agreements. "
Interesting statistics come from the Jewish Autonomous Region. Minvostokrazvitiya puts the region as an example: according to the results of ten months of 2017, the growth of industrial production was 45,7% - this is an absolute record for all subjects of the Russian Federation. The reasons for the extremely low base and launch of the only enterprise - the Kimkano-Sutarsky GOK (the project of Petropavlovsk-Ferrous Metallurgy Company), is said in the bulletin on the current trends in the Russian economy, produced by the Analytical Center under the Government of the Russian Federation. The company reports on technical cooperation with China National Electric Engineering Corporation, but the project itself has managed without foreign investment.
The largest investor, whose attention would be enough for the development of the Russian Far East, is that China is "within walking distance". China invests $ 2 trillion in the next 15 years, said Deputy Director of the Center for Development Studies under the State Council of the People's Republic of China, Wang Yiming, in December. In 2016 year (for the last year statistics are not yet available), China's foreign investment reached $ 170 billion. The volume of accumulated direct investment from China to Russia is $ 8 billion, the December report of the Center for Integration Studies of the Eurasian Development Bank said. Most of the money was attracted to the privatization of Rosneft.
The head of Minvostokrazvitiya Alexander Galushka estimated the investments of China in 15% of all (not only foreign) investments in the Far Eastern Federal District. It is difficult to operate with this figure; not all regions publish fairly complete statistics in the country profile, and where it is published, the figures are not impressive (for example, Khabarovsk region attracted $ 26 million direct investments from China in 2017, according to the regional authorities). One gets the impression that China Far East as an object of direct investment is not very interesting yet. If the share of all APR countries in direct investment in the Russian Federation is 43% (data for 2016 year), then the Far East accounts for only 1%.
"Turn to the East" is taken from the President's Address to the Federal Assembly of 2013. The creation of tools and development institutions - the territories for advanced development (TOR), the free port of Vladivostok, the Far East Development Fund, etc., has begun.
Regions of the Far East do not yet fall into the top 20 rating of the investment attractiveness of the Agency for Strategic Initiatives (ASI). Underdeveloped infrastructure, difficulties in providing electricity and gas to the projects, insufficient number of projects themselves, "packaged" by understandable investors rules, are the factors that the leaders of the DFO regions explain low positions in the rating.
"The profit tax should be no more than 11%, as in the Republic of Korea, insurance premiums - no more than 10%, as in Japan. Terms for obtaining a building permit - no more than 26 days, as in the US, and customs procedures - as in Singapore ", - described the conditions for attracting investors Alexander Galushka.
It seems so, for example, that for residents of the TOP, insurance premiums are 7,5%, but details are important. Investors complain that the tax benefits are included "not in time": for example, the exemption may not be present at the most critical stages of the company's development, when it is already operating, but profits are not yet available. Regional authorities urge large investors to resolve such issues with them in a manual mode.
The fact that manual mode, unfortunately, prevails, Yuri Trutnev said in an interview with RBC: 15-20% of the TOP sites are inefficient, Trutnev does not rule out that the TOR regime itself can be liquidated.
"The lack of foreign investment is due to the lack of projects that would have a clear, transparent structure. Interest is limited to risks (mostly perceived, not real), related to international sanctions, as well as to the Russian judicial system. In the mining and exploration industries, mining legislation is perceived as overly regulated and archaic (which is typical of many other industries), which makes investors doubt the reliability of long-term ownership of licenses for prospecting and evaluation of deposits, and exploration and mining, "says Peter Balka, Chief Executive Officer of Tigers Realm Coal. The top manager knows what he says: his company is active in the region, the management is carried out with the assistance of shareholders from Australia and Asia, as well as with the support of Russian investment funds, including the Russian Direct Investment Fund.
Director of the Center for Social Innovations Yuri Kolomeitsev says that he has observed the same picture many times: investors are pestering the thresholds of departments, no one really knows what to do with them, and they are leaving home. This problem almost the same words in 2005 year, described the then Minister of Economic Development German Gref during his Far Eastern tour. In the Far East, much is changing, but it's not yet possible to just drop the uniform algorithm for working with investors from the regions, as well as to develop it on the ground.