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In the offshore in Russian there are no queues

How to create new financial regimes in the Far East

In the summer of 2018, a decision was made to create a financial center and a special administrative district (SAR) - in fact a financial offshore - on Russky Island. At the fourth session of the Eastern Economic Forum, invited experts, with the assistance of the head of the Ministry of Economy, Maxim Oreshkin, representatives of the investor support system and the Central Bank, tried to figure out what benefits the SAR would bring to the Far East. EastRussia followed the way the discussion developed.

In the offshore in Russian there are no queues
Photo: shutterstock.com
OFFSHORE, BUT FOR WHO?

The most important question to the CAP, the moderator of the discussion, TASS editor-in-chief Maxim Filimonov formulated already in his opening remarks. After listing the numerous other preferential regimes operating in Russia, including the priority development territories and the free port of Vladivostok, he asked the Minister of Economic Development of Russia Maxim Oreshkin: why were the CAPs created and how widespread this zone would be - “will it become another zone the name of one oligarch, one company or a group of companies? " In August, we recall that one of the "daughters" of En + Oleg Deripaska, which fell under US sanctions this year, announced the possibility of re-registration in the SAR, but this will be done in the Far East or in Kaliningrad, En + did not specify. 

The Minister explained that the SAR gives all companies operating in foreign jurisdictions the possibility of redoxation - a transfer with preservation of the tax regime and relationships with banks - which they had previously been deprived of. At the same time, the order of transfer fully complies with international norms. Until now, it was possible to transfer business from offshore to Russia, but first shut it down, which caused serious costs to the owners.

“This is the first stage in the development of special administrative regions here, on Russky Island, and in the Kaliningrad Region, on Oktyabrsky Island. The first task is to make a convenient regime for transferring a foreign company under Russian jurisdiction, to simplify everything as much as possible,” said Maxim Oreshkin. According to him, having created convenient legislation, the authorities intend to tackle the second stage of CAP implementation - the issues of technological regulation, administration, and supervision. "The combination of the CAP with the tax regimes that exist in the Far East and Kaliningrad should produce a mixture that is very favorable for the growth of economic activity," Maxim Oreshkin is sure. 

At the same time, there are still very few people who want to re-register in the SAR in the Far East, Maxim Oreshkin admitted. According to him, there is no talk of En +, but the authorities are working "with one of the groups in the Far East, in Vladivostok, so that it becomes the first resident here." "This is a story where re-registration does not involve high transaction costs and it is quite easy to do it," he explained, without naming the company. “Today we have already received one application and are working to ensure that there is a positive decision on it,” confirmed Denis Tikhonov, General Director of the Far East Development Corporation. 

"Now it is important to practice and get re-registered." When this regime becomes more understandable, we will see a much larger number of companies that want to do this, on the one hand, on the one hand, and on the other hand, we will understand where to adjust the regulation in order , so that it works efficiently and conveniently, "said Maxim Oreshkin. 

FINANCIAL CENTER OF FIVE COMPONENTS

The authorities expect that on the island of Russian will not just earn ATS, but that it will turn into a financial hub that works with the most advanced technologies, says Deputy Minister of Territorial Development Alexander Krutikov. Investors "need access to quality financial services and qualified project consulting services, which in the Far East simply does not exist," the official said. 

According to him, a package of five measures regarding the financial market in the Far East is currently at the stage of approval by the Russian government and the Central Bank. First, the region should become open to foreign credit organizations, which could establish branches here without the right to attract funds from citizens. Secondly, a multi-currency platform for a digital financial asset exchange, an investment court and an independent financial regulator should be created here. A specialized court for investors, says Yegorov Puginsky Afanasiev & Partners Counselor Elena Avakyan, could be formed at the expense of "persons with vast experience and a name in the field of investment law, investment technologies" - people who are not interested in civil service in itself, but for whom such a judicial body could become "the crown of the career of a professional lawyer." 

"Today, together with the Bank of Russia, we are already working on formalizing these decisions. How do we start? We will introduce special packages of support measures, tax incentives for our Russian credit institutions," says Alexander Krutikov. Support measures will apply to new banks coming to work in the Far East, banks developing new businesses, as well as to non-banking sector organizations directly related to the financing of investment projects. According to Alexander Krutikov, the corresponding amendments to the regulations will be made within the next six months. 

Foreign banks are already interested in the possibility of opening their branches in the Far East, which would give more opportunities for financing, confirms Gao Yang, President, JSCB Bank of China. “I wanted to make my proposal. In order to attract more financial institutions, especially foreign ones, to Vladivostok, due to the time difference with Moscow and other regions of Russia, it is necessary to create a branch of the currency exchange and introduce special operating regimes for foreign financial institutions. I think these questions will be considered by regulators and ministers, but we, as a financial institution, are ready to make our proposals, "he says. 

NEW INSTRUMENTS OR CONSERVATIVE APPROACHES?

The director general of the Far East Development and Baikal Region Development Fund (Aleksey Chekunkov) believes that the competitive advantage of Russky Island as a financial center can be the ability to apply "new progressive financial instruments." "To compete with Hong Kong for the opportunity to place shares or the opportunity to hold an IPO not only to the Russian, but also to the Moscow Stock Exchange is difficult - we are not London or New York. It's easier to compete for new technologies - they just appeared," he says. Such technology could be a blockade and associated crypto-currencies. "New technologies, new financial solutions must be grounded, it is necessary to experiment, but to regulate already in fact, do not be afraid to touch a new one and risk getting a new promising industry," he said.

"The corporation is aimed at cooperation with companies that will work with us," confirms Denis Tikhonov, "We will study international experience so that residents receive all the services they receive in other jurisdictions." And another interesting feature that also of course, it is important for us that the investments that come to the SAR are of practical importance and could be of use both for the Russian Island and for the Far East in general and for the Russian Federation Ana ". In his opinion, the residents of the UAR could receive the status of residents of the Free Port of Vladivostok with the appropriate benefits and invest in infrastructure and development. 

Meanwhile, the Bank of Russia continues to adhere to conservative positions. Ivan Semagin, Deputy Director of the Department for Strategic Development of the Financial Market of the Central Bank of the Russian Federation, notes that "from the point of view of providing financial institutions in the Far East, everything is not so bad." “There are a sufficient number of banks, foreign subsidiaries and representative offices, insurance companies, auditing consulting companies, and so on. Given the impact of technology on the financial industry, there is a global trend towards the fact that the number of financial intermediaries is decreasing, the services themselves are becoming extraterritorial. the unprecedentedly low population density, questions about the quality of developed projects, a low level of knowledge about the possibilities of the financial market and, as a consequence, low activity both on the part of the state and corporate issuers, is another matter, "says the representative of the Central Bank.

"The Bank of Russia is ready to actively participate in the development of the financial market in the Far East, including in the creation of a regional financial center. We are ready to experiment. Mechanisms for this have been created. And, of course, not to the detriment of consumers of financial services. Joint work of the authorities, the Bank of Russia and the business community will help solve this difficult task, "he says. However, for example, the issue of allowing foreign banks to open branches in the Far East "requires deep study," the representative of the Central Bank of the Russian Federation believes: "this contradicts the issues of joining the WTO, and the quota for foreign participation of foreign banks' subsidiaries has not been selected so far, and the problem that will be solved by allowing foreign credit organizations to enter the Russian Federation is not entirely clear. "

"My experience shows that one of the key drivers of regional development is the development of infrastructure," he says.-Now the budget is a significant source of investment in infrastructure, in our view, one of the key problems is the lack of a link between the market and the demand for infrastructure It would be great if development institutes in our country created a mechanism that would help to obtain the necessary ratings for companies that invest in infrastructure, which would protect the den of institutional investors, on the other hand - to realize those large projects that would become drivers of economic development in the region. "
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