New Economic Zone Gets Money And Mixed Reaction
A new special economic zone, which local government officials say will help double high-tech production in the city, has been viewed with skepticism by local experts.
Jan 30, 2006
On Jan. 18 the federal government signed an agreement with St. Petersburg’s government to introduce a special economic zone in Noidorf area (30 hectares) and in Novo-Orlovsky park area (130 hectares).
"The special economic zone will create an attractive climate for investment and business, providing additional jobs, investment and tax revenue, contributing to the development of the high-tech industry and increasing city competitiveness," Vladimir Blank, chairman of the committee for economic development, industrial policy and trade, said Tuesday at a meeting with the St. Petersburg Union of Industrial Companies and Entrepreneurs.
Blank indicated 12 percent unified social tax concession and the simplification of export and import procedures as the main advantages of the zone. City laws also allow four percent profit tax concession and 1.1 percent property tax concession.
City officials have already agreed that Finnish company Technopolis Oyj will invest 220 million euros into techno-park at Noidorf. According to Blank, high-tech companies comprise 30 percent of the city’s industrial production. He called for the doubling of this figure.
But experts disagreed over the likely appeal of the project to investors.
According to Viktor Naumov, head of intellectual property and IT protection group at DLA Piper’s St. Petersburg office, as well as the concessions, implemented on both a regional and federal level, companies benefit from the very fact of being located in the techno-park, where "all services are significantly cheaper. "
"All this combined makes it economically very interesting," Naumov said.
"The zone’s location is very convenient for foreigners. It is near the university. After the ring road is completed, Noidorf will be easy to reach. It will be within 20 minutes from the airport," he added.
A number of foreign companies, leading software developers, which so far are not represented in the region, are interested in the project, Naumov said.
However, he warned, "those companies who had already acquired property in the city and invested into infrastructure would not move their assets."
"One special economic zone cannot solve all the sector’s problems. It would be more reasonable to support the whole industry," Naumov said.
President of software developers association RUSSOFT Valentin Makarov saw the zone’s proximity to the port and other lines of communication as an advantage for high-tech producers involved in assembling.
"The main benefit is the simplification of import duty. For companies importing expensive components and equipment it is more important than all the other tariffs combined," he said.
However, he continued, "a favorable customs regime would not really help software developers. State management of the zone almost guarantees that it will not become an IT park able to attract business."
"I do not see any reason why large software developers would come to such zones. They could rent offices in the city," Makarov said.
In relation to IT firms he regarded the unified social tax concession as insignificant when set against higher spending on logistics, transportation of personnel and loss of comfort.
Makarov said that the industry needs tax concessions for all exporters of high-tech products and services, which is lobbied at the moment by the ministry for IT and communications.
Companies also need IT parks that provide the total range of services for innovative business: a small company incubator, educational center, investment funds and presence of consulting firms, Makarov said.
Investment into the zone’s infrastructure is estimated at about $53.6 million for the next five years with half of the costs to be financed by the federal budget.
Companies will be able to register in the zone from March of this year, while land is available for residents to rent, with the opportunity of buying it outright after 20 years.
"The special economic zone will create an attractive climate for investment and business, providing additional jobs, investment and tax revenue, contributing to the development of the high-tech industry and increasing city competitiveness," Vladimir Blank, chairman of the committee for economic development, industrial policy and trade, said Tuesday at a meeting with the St. Petersburg Union of Industrial Companies and Entrepreneurs.
Blank indicated 12 percent unified social tax concession and the simplification of export and import procedures as the main advantages of the zone. City laws also allow four percent profit tax concession and 1.1 percent property tax concession.
City officials have already agreed that Finnish company Technopolis Oyj will invest 220 million euros into techno-park at Noidorf. According to Blank, high-tech companies comprise 30 percent of the city’s industrial production. He called for the doubling of this figure.
But experts disagreed over the likely appeal of the project to investors.
According to Viktor Naumov, head of intellectual property and IT protection group at DLA Piper’s St. Petersburg office, as well as the concessions, implemented on both a regional and federal level, companies benefit from the very fact of being located in the techno-park, where "all services are significantly cheaper. "
"All this combined makes it economically very interesting," Naumov said.
"The zone’s location is very convenient for foreigners. It is near the university. After the ring road is completed, Noidorf will be easy to reach. It will be within 20 minutes from the airport," he added.
A number of foreign companies, leading software developers, which so far are not represented in the region, are interested in the project, Naumov said.
However, he warned, "those companies who had already acquired property in the city and invested into infrastructure would not move their assets."
"One special economic zone cannot solve all the sector’s problems. It would be more reasonable to support the whole industry," Naumov said.
President of software developers association RUSSOFT Valentin Makarov saw the zone’s proximity to the port and other lines of communication as an advantage for high-tech producers involved in assembling.
"The main benefit is the simplification of import duty. For companies importing expensive components and equipment it is more important than all the other tariffs combined," he said.
However, he continued, "a favorable customs regime would not really help software developers. State management of the zone almost guarantees that it will not become an IT park able to attract business."
"I do not see any reason why large software developers would come to such zones. They could rent offices in the city," Makarov said.
In relation to IT firms he regarded the unified social tax concession as insignificant when set against higher spending on logistics, transportation of personnel and loss of comfort.
Makarov said that the industry needs tax concessions for all exporters of high-tech products and services, which is lobbied at the moment by the ministry for IT and communications.
Companies also need IT parks that provide the total range of services for innovative business: a small company incubator, educational center, investment funds and presence of consulting firms, Makarov said.
Investment into the zone’s infrastructure is estimated at about $53.6 million for the next five years with half of the costs to be financed by the federal budget.
Companies will be able to register in the zone from March of this year, while land is available for residents to rent, with the opportunity of buying it outright after 20 years.