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The first applications for concluding Investment Protection and Promotion Agreements (IPPAs) allow for the creation of jobs, whose number is equal to the population of a whole city. This was announced by Russian First Deputy Prime Minister Andrei Belousov at the meeting of the Presidium of the working group on advancing the implementation of new investment projects.
Russian First Deputy Minister of Economic Development Andrei Ivanov stated that as of now the Ministry of Economic Development has received applications for 15 projects worth 850 billion roubles. These projects are in all sectors of the economy, including public transport, machine manufacturing, agriculture, mineral extraction. According to the official, the implementation of such projects will presumably create more than 35,000 jobs.
‘Consider this figure. Together with the families, this is, in fact, more than 100,000 people. This is a whole city. What is behind this figure is a substantial number of real people and their family members who will be provided with a job’, Andrei Belousov said. In this regard, he commented on the statement that IPPA is allegedly about the state subsidizing such projects which are bound to be implemented. ‘I can see two mistakes here. Firstly, nothing is subsidized, except for new infrastructure creation’, the Russian First Deputy Prime Minister emphasized. Secondly, according to the official, the cost reimbursement, which is supposed to be made within such projects, is primarily a share of future taxes which will be paid from the operation of the investment project. ‘If there is no project, there are no taxes from the project’, he added.
Andrei Belousov also pointed out that the large-scale projects life cycle has long construction, investment and operation periods. ‘In a high-risk environment it is vital to find a way to reduce the cost of the projects. Without reduction a number of projects discussed earlier today turn out to be unprofitable or low-profit ones with an extremely long project payback period’, the official remarked. ‘Therefore, the stabilization clause is what the majority of projects in question need’.
The Russian First Deputy Prime Minister also placed emphasis on the opportunities which one of the projects aimed at the creation of a logistics center opens up for small and medium-sized enterprises. He added that small businesses have been heavily hit by the crisis this year. ‘It is important to create more opportunities for small businesses to enter the market. We understand that the main way which exists today is the digital platform, the market place. However, it is not enough just to create an in-house digital platform. At least two more components are required. One of them is the faster payment system. Goods should not be only offered, they should be paid after they are delivered to the customer. Secondly, since the goods should be delivered to the customer, a logistics system is to be built’, Andrei Belousov stated. The logistics center to be built will be able to operate within the country and for export. The official promised that this kind of projects will be supported by the Government.
‘The law relating to IPPA has been developed in a very effective way, a well-organized mechanism has been put first, all remarks from the business community have been taken into account. Having consulted with international banks, project assessors, rating agencies, we have found out that projects under IPPA tend to be rated 15-20 % higher’, Chairman of the Board of Directors, ESN Group, Grigory Berezkin said commenting on the interest in IPPA.
‘The development of modern agriculture requires significant investment. The mechanism of IPPA will make it possible to provide predictable environment for implementing projects for investors and obtain the desired results. Businesses get new opportunities for effective development, regions experience a multiplier effect, new jobs and new tax revenue’, President of Miratorg Agribusiness Holding Victor Linnik noted.
Among the projects on which the procedure of concluding IPPA has started:
- Project on complex urban transport development in Ekaterinburg, Volgograd, Saratov, Tver and Nizhny Novgorod (Investors: Transmashholding Group, Movista Group, LLC; the project worth 241 billion roubles);
- Project on a multi-modal transport corridor ‘Vostochnie zernovie vorota’ in Primorye Territory (Investor: Sea Port in the Bay of Troitsy, LLC; the project worth more than 20 billion roubles);
- Project on converting the oil terminal in the Amur Region into a methanol plant (Investor: Technoleasing, JSC, ESN Group; the project worth 49 billion roubles);
- Project of the Centre for omnichannel trade provision in the Republic of Tatarstan (Investor: Wildberries; the project worth 5.04 billion roubles);
- Project of the Centre for storing and processing agricultural produce and producing culinary products in the Moscow Region (Investor: Trio-Invest, LLC (Miratorg Holding); the project worth 10 billion roubles);
- Project on expanding the production complex of ready-to-eat meat products and meals in the Kaliningrad Region (Investor: Miratorg West, LLC (Miratorg Holding); the project worth 4.9 billion roubles);
- Project on constructing a solvent-extraction plant in the Orel Region (Investor: Miratorg Kursk, LLC (Miratorg Holding); the project worth 3.6 billion roubles);
- Project of the universal trading terminal "Ust-Luga" in the Leningrad Region (Investor: Novotrans Aktiv, LLC (Novotrans Group); the project worth 46 billion roubles);
- Project on constructing the complex ‘Ammonia and carbamide’ in the Novgorod Region (Investor: Akron, PJSC; the project worth 133.7 billion roubles);
- Project on developing Talitskiy Field, Verkhnekamskoye Deposit of potassium and magnesium salts in the Perm Territory (Investor: Akron, PJSC; the project worth 141.4 billion roubles);
- Project on developing dairy farming and processing milk in the Tver Region (Investor: Rumelko-Agro, LLC; the project worth 18 billion roubles).
It is worth mentioning that 42 draft applications totalling 2.034 trillion roubles had been received by the Investment Development Agency at the investors’ own initiative before the entire legal framework was established.
As previously reported, the Federal Law №69-FZ of 1 April 2020 concerning investments protection and promotion and related amendments to the Tax and Budget Code are aimed at creating stable environment for implementing investment projects through the stabilization clause mechanism. Also, the legal acts are intended to lift infrastructure restrictions by means of investors’ related costs recovery on transport, energy, utility, social and digital infrastructure in the taxes paid.