25 October 2016
Vladimir Miklushevsky says attracting foreign investments to the free port of Vladivostok is one of his major tasks. Photo: EJ Insight
Vladimir Miklushevsky says attracting foreign investments to the free port of Vladivostok is one of his major tasks. Photo: EJ Insight

Russia pins big hopes on free port, economic zones in Far East

Russia, which is among the top two exporters of crude oil and dry natural gas in the world, aims to diversify its economy by utilizing the Vladivostok free port area and 12 so-called advanced social-economic zones in the nation’s Far East region.

“The free port of Vladivostok is providing a full range of custom services and tax benefits for foreign investors,” Vladimir Miklushevsky, governor of Primorsky Krai, which is informally known as Primorye, said in a media briefing in Vladivostok.

Investors can avail themselves of a lot of opportunities and make money, while also contributing to the local economy, he said.

“Our mission is to turn Vladivostok into the Pacific capital of Russia,” Miklushevsky said, adding that the city in the Russian Far East is ready for a large volume of tourists, students and entrepreneurs. 

Vladivostok is the administrative center of the Primorsky Krai province, which borders China and North Korea.

“We are looking forward to the opening of the Chinese market; for example, for the export of pork meat from Primorsky Krai to China,” the governor said. 

The Primorye government can do a lot to enhance cross-border flows in people and cargo, Miklushevsky said.

Free port

In March 2015, Russian President Vladimir Putin announced that Vladivostok, which has been Russia’s main naval base since 1860, and surrounding districts are to be given the status of a free port.

The facility would comprise a seaport, airport zone, an industrial zone, a scientific zone and a tourist-recreational zone, which includes gaming facilities.

The free port and advanced special economic zones will help the Russian Far East region become a new showcase for foreign investors, Putin said.

The free port regime, which will target global trade businesses, will last for 70 years with strictly defined boundaries and facilitated customs.

According to Far East Development Corp., which manages the free port and economic zones in the area, the program will cover a total of 28,400 square kilometers and a population of 1.4 million.

Residents of the free port, who can invest at least 5 million rubles (US$75,900) in three years can enjoy zero profit tax, land tax and property tax within the first five years and 12 percent profit tax for the next five years.

Residents of 12 advanced special economic zones, which target domestic markets with no strictly defined boundaries, can enjoy similar tax benefits with minimum investment of just 500,000 rubles.

In June, a Russian ministry said a previously announced proposal for 8-day single entry visa scheme for tourists who arrive at the international airport and sea passenger terminal of Vladivostok may kick off from October.

Chinese investors

The free port has so far received 104 investment applications, of which 52 have been approved involving total investment of US$1.6 billion, said Denis Tikhonov, Director General, Far East Development Corp.

Among those that made their way into the area are Chinese firms engaged in businesses such as logistics, building materials and food production.

The 12 advanced special economic zones have received 164 investment applications, 66 of which have been approved with a total investment of US$5.6 billion, according to Tikhonov.

The free port and the special economic zones have helped create more than 34,000 jobs, he said, noting that businesses were drawn to the area due to the low land cost and attractive tax environment and simplified rules.

A depreciated Russian currency will also help exporters maximize their profits, Tikhonov said.

Last month, the Ministry for the Development of the Russian Far East said Chinese investments in the area accounted for 15 percent of the overall foreign investment in the region.

The growing interest of Chinese investors followed an improvement in Sino-Russian relations.

China’s foreign ministry said recently that the leaders of Russia and China will hold a bilateral meeting on the sidelines of a G20 Summit scheduled to take place in Hangzhou in early September

Private industrial park

In March, Aviapolis Yankovsky LLC, a Russian private industrial park operator, announced that it plans to build a mega warehouse and logistics park in Primorsky Krai province.

The facility, which will cover gross floor area of 680,000 square meters, is expected to be completed by 2025.

Konstantin Bogdanenko, general director at Aviapolis Yankovsky, said 95 percent of the park’s warehouse space is already booked, pointing to the high demand for warehouse and office space from the free port’s residents.

The park will continue to expand and provide more space for tenants, he said.

This is the second of a three-part series that will serve as a curtain-raiser for the second Eastern Economic Forum summit, which will take place on Sept 2-3 in Vladivostok. [Chinese version中文版]

[1] Russia’s Far East to boost agricultural ties with China

[3] Vladivostok: from naval base to tourist and cultural mecca

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Primorsky Krai (highlighted) connects to North Korea and China and is close to Japan. Photo: Google

Denis Tikhonov says Far East Development Corp. will help arrange foreign investors to start their operations in the free port of Vladivostok and the economic zones in Russian Far East. Photo: EJ Insight

The seaport in the free port is trying to improve its efficiency and shorten the handling time for a container from six days to four days. Photo: EJ Insight

Konstantin Bogdanenko (inset) says demand for warehouse and office space in the free port is rising. Photo: EJ Insight

Chief reporter at EJ Insight

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