Work of Nizhny Novgorod regional Government for improvement of investment and business climate Government of Nizhny Novgorod Region provides maximum support for realization of investment projects in the region. That is why there are major players in their markets represented in Nizhny Novgorod Region, moreover the number of companies that start production, open logistic complexes, shopping malls, hotels etc. in the region is steadily increasing. Work with potential investors in the region is organized according to “one stop shop” principal. Nowadays all investment projects are publicly discussed at the Investment Council at the head of the Governor of Nizhny Novgorod Region. The Council is formed by the Governor, heads of Government’s departments, federal authorities and their area branches, as well as mayors of large municipalities and chief executives of major local companies. As a result of such discussions, the Council decides, whether it is possible or impossible to realize the project, for what reason and on what conditions. All benefits received by an investor are secured by a special regional law. In case of introducing new taxes and duties in Nizhny Novgorod Region or increasing current rates, an investor continues working according to the terms dated the moment of signing an agreement and until the full realization of the project. Measures of state support are various; they cover all investor’s interests and minimize his risks. Principals and terms of providing state support are stated in the Law of Nizhny Novgorod Region dated 31.12.2004 № 180 “About state support of investment activities in Nizhny Novgorod Region”. According to this document there are financial and non-financial benefits granted to investment projects. The process of granting benefits is called “Assignment of status - priority investment project of Nizhny Novgorod Region”. Financial Benefits 1. Tax benefits Tax benefits in Nizhny Novgorod Region are afforded in the part of taxes that form regional consolidated budget; they are profit tax and property tax (in the part that goes to the regional budget). A reduction in the rate of profit tax payable to the regional consolidated budget, depends on the ratio of sales generated by an implemented investment project to company’s total sales. Investor property produced, purchased, or used to implement a priority investment project and listed in the quarterly index of the Ministry of Investment Policy is exempt from taxation. 2. Deliverance from rent payment Investors realizing investment projects in Nizhny Novgorod region can be delivered from paying a rent (during the duration of an investment agreement) for land plots in the part payable to the regional consolidated budget. 3. Compensation of a loan interest Investors taking loans to realize investment projects have a chance to take a refund for an interest rate. A part of the interest paid for bank loans is refunded by the regional budget on the terms stipulated in an investment agreement and a loan agreement between a bank and an investor, provided a strictly intended use of funds borrowed to implement a priority investment project, through a transfer to the investor of budgetary funds amounting to a half of the interest accrued pursuant to the loan agreement, but not more that a half of the interest accrued at the RF Central Bank discount rate in force at the date of entering the borrowed funds to investor’s loan account. The total sum of benefits granted to an investor cannot exceed the sum of investments in the project. Non-financial benefits 1. Placement of a regional order on a competitive basis; 2. Backing/forwarding petitions and applications to federal authorities for their assistance to investors implementing investment projects; 3. Disseminating positive information on the investor; 4. Assistance in setting up business infrastructure. Should a foreign investor enquire about realization of the project, he is mentored by a specialist from the Ministry of Investment Policy of Nizhny Novgorod region with the knowledge of a foreign language, who fully assists the project from finding a land plot to helping with documents to enter Russia. Annually Government of Nizhny Novgorod Region runs a contest for projects compliance with criteria of priority investment projects. Criteria for Priority Investment Projects The majority of projects pretend to obtain financial benefits, which certainly affects interests of the regional budget. Taking it into account the Government in line with the Legislative assembly of Nizhny Novgorod Region have formed criteria that an investment project should answer in order to get a state support: 1. Investments over 100 mln rubles; 2. Project realization in one of subsidized areas of Nizhny Novgorod Region. It is also important for a project pretending to obtain a priority status to comply with “Strategy for the development of the region by 2020” in the field of branch priorities. Investment policy of Nizhny Novgorod Region specifies the following branch priorities: First group – machine building, science-educational complex and new economy, information technologies, food industry, radio electronics and instrument engineering, chemical-pharmaceutical industry; Second group – iron industry, fuel industry, aircraft engineering, chemical and petrochemical industry, tourism; Third group – construction materials industry, medical industry, pulp and paper complex and paper industry, light industry, shipbuilding, agriculture; The main criterion for a priority investment project is the presence of a positive effect gained from its realization, which is evaluated by: - economic effectiveness in accordance with a project business-plan; - budget effectiveness calculated as a sum of planned taxes to pay minus state benefits offered to an investor (tax and other benefits, loan interest refund); - social effectiveness (offering new work places; improvement of working conditions, HR structure, healthcare, living conditions; provision of certain goods; time management etc.). Additional criteria for a priority investment project are: - absolute amount of invested or engaged money; - speed of project return-on-investments period (projects with 5 or fewer years return-on-investments period are favoured); - project support by a municipal body, on which territory the investment project is realized. Process of acquiring a status - priority investment project of Nizhny Novgorod Region The process of considering an application and assigning a project a status priority investment project can be divided into several steps: 1. Preparation of documents necessary for participation in a contest for projects compliance with criteria of priority investment projects; 2. Acquiring preliminary conclusions from field-specific bodies, project (application) discussion at the Investment Council, signing an investment agreement; 3. Preparation of a branch conclusion regarding expediency / inexpediency of assigning a status - priority investment project; 4. Running a complex economic expertise of the project for identifying its social and economic value for Nizhny Novgorod Region, sufficiency of investments, real opportunity for realization of the project. 5. Considering the documents at the Investment Council and making a decision. 6. Preparation and signing a Government Order about assigning a project status priority investment project of Nizhny Novgorod Region. In case of declining a project, the Ministry of Investment policy gives an investor grounds containing reasons for refusal. Five years work of a new system lets make a decisive conclusion – strategy routed to create comfortable for an investor environment for full realization of competitive advantages of Nizhny Novgorod Region (vantage geographic location, wealthy consumer market, skilled labour market, vigorous industrial complex: machine building, chemistry, military-industrial complex and well-developed researchand-development sector) has proved its effectiveness. It is also worth mentioning that the Investment Policy of Nizhny Novgorod Region has been recognized by experts as one of the most effective in Russia. Investment Potential of Nizhny Novgorod Region Nowadays a set of large-scale investment projects is being realized in various spheres in Nizhny Novgorod Region. In order to provide the most comfortable conditions for their realization so called industrial parks are established in the region. Placing the project on the territory of industrial parks lets their residents form land plots of necessary size and configuration, use all utility lines that are bound to the land plot borders. Companies are given an opportunity to purchase land plots for cadastre price whereas absence of managerial companies in industrial parks helps investors save a substantial part of investment budget. 1. Parks for realization of industrial projects: Industrial Parks “Dzerzhinsk-Vostochny” and “Bor-Centralny” Industrial Park “Dzerzhinsk-Vostochny” comprises a territory of 400 ha and is intended for placing industrial companies. Industrial Park “Bor-Centralny” comprises a territory of 79 ha also intended for industrial companies. These places are chosen with account of needs of potential residents in logistic infrastructure. “Dzerzhinsk-Vostochny” is situated less that one kilometer from the federal highway “M7” (“Volga”, Nizhny Novgorod – Moscow), the distance from Moscow is 350 km, within 3 km there is a railway. There is a regional road “Nizhny Novgorod – Shakhunya - Kirov” near industrial park “Bor-Centralny” as well as a railroad. Location of the parks near large towns – Dzerzhinsk and Bor lets companies use qualified local human resources and host specialists sent on business trips. Engineering and road infrastructure is led to the borders of the land plots by the region. By now three foreign companies have already made a decision to host their companies on the territory of industrial park “Dzerzhinsk-Vostochny” and purchased land plots, they are: “Danfoss” Denmark, “A. Raymond Rus” France, “Lanxess” Germany. Foreign companies that decided to host their companies on the territory of industrial park “Bor-Centralny”: “Vesuvius Volga” Belgium, “Schott Pharmaceutical Packaging” Germany. 2. Parks for realization of projects in the sphere of Information Technologies: IT-park “Ankudinovka” and Technopark “System-Sarov” A programme for the development of technoparks in Russia is supported by the state and Nizhny Novgorod Region is one of the priority regions for establishing federal technoparks. IT-park “Ankudinovka” will be located on the territory of 74.5 ha. As part of the IT-Park there is a business incubator with engineering-laboratory premises, offices and social-business complex with a congress-centre. The IT-park is build from scratch and it gives an opportunity to project buildings and constructions taking into account demands of potential residents. The IT-park is build near science, research-and-development and project organizations; the majority of universities are located within a shot distance; the ITpark territory is situated near the historic part of Nizhny Novgorod with the Kremlin, where there are Government of Nizhny Novgorod Region and city administration. IT-park “Ankudinovka” consists of several zones: business, recreational, shopping and entertainment, there are also living houses and social buildings. IT-park “Ankudinovka” branches are: information and communication technologies, bio and medical technologies, engineering, machine building, electronics, chemical technologies and development of new materials. Based on state-private partnership principal Technopark “System-Sarov” has been developed for realization and commercialization of innovative potential of Russian Federal Nuclear Centre in civil sector. The main work areas of this scienceengineering cluster are energy effectiveness and safety, nuclear, space, telecommunication, information and supercomputer technologies. Now there work over 20 Russian and overseas companies in the technopark with the area 50 ha. Starting from 2007, 1953 investment projects were approved in the region with investment volume 1.2 trillion rubles. 66 projects were granted status - priority investment project, the full list of projects is available on the Ministry of Investment Policy website http://www.mininvest.ru/statesupport/invest_project_list. The following investment projects with overseas capital were realized in Nizhny Novgorod Region: US Intel with the Intel A/O research centre constructed in Sarov; Swedish IKEA with the IKEA MOS emporium in Kstovo district; German-Italian Freudenberg Politex with a new nonwovens factory; Finnish North Oy Ab (Arzamix, OOO) with a new a plant to produce dry pack mortars; German Bericap manufacturing plastic bottle stoppers; German-Japanese Trosifol producing polyvinylbutyral (PVB) films; German Wella/Procter&Gamble with the Kapella cosmetics production facility; German Knauf with the Knauf Gips Dzerzhinsk building materials factory; Holland Heineken with the Volga brewery re-equipment; Spanish Gallina Blanca with the Europe Foods bouillon cube production facility; US Coca-Cola with the installation of an ice tea production line at HBC Eurasia; 2nd stage of glassware manufacturing operations set up by Russian-Turkish Posuda in Bor; German Knorr-Bremse with the Knorr-Bremse Rus auto parts manufacturing site; French Onduline roofing production works; German Flaig+Hommel GmbH with the production of fixing elements for machine building plants; Joint Japanese-Russian company T.RAD Co, Ltd with the production of car radiators and head-exchange units; German Schott Pharmaceutical Packaging OOO (subsidiary of Schott AG) to build a pharmaceutical glass packaging factory; German Libherr with the production of aviacomponents and building machinery. The following investment projects are scheduled for implementation: RusVinil OOO (SIBUR Holding and Belgian-German Solvin) to construct a PVC production facility (planned launch in 2013); French Saint-Gobain Stroitelnaya Productsiya Rus to mine the Gomzovo gypsum and gypsum plaster deposit and build a gypsum board factory (planned launch in 2013); German Josef Rettenmaier Russland Produktions GmbH to build a factory producing cellulose-based auxiliaries (planned launch in 2011); Danish Danfoss to build a heat-supply equipment manufacturing works (planned launch in 2013); French A. Raymond Rus to set up plastic fastener manufacturing operations (planned launch in 2013); German Lanxess to build a factory producing additives for rubber industry (planned launch in 2011-2012); A. S. y Palitra OOO (Russian-German A.S. Creation Tapeten) to construct a wallpaper factory (planned launch in 2012); Belgian Vesuvius Volga to build a refractory manufacturing plant (planned launch in 2013); French Air Liquid to build a cryogenic system of air splitting (planned launch in 2013); German Lugas GmBH to build a complex producing metal constructions shaped in bars and bales at the Balakhninsky Metallurgichesky Zavod mill 320/150 (planned launch in 2013); German-Italian Freudenberg Politex to enlarge a nonwovens factory, third stage (planned launch in 2012); French Valeo to produce safety systems / windscreen wiper systems for automobile industry (planned launch in 2011); French Onduline roofing production works (planned launch in 2012); Belgian Unilin flooring to produce floor covers (planned launch in 2011). Participation of these internationally known companies suggests that the Region’s environment ensures security and predictability.