of direct long-term foreign investments in development of real economy
sector is one of major tasks for industrial production growth in
the North-West of Russia. In particular, concrete measures of investments
attraction into SMEs sector, especially Medium enterprises, are
of high importance.
For the last 4 years influx of foreign investments in St. Petersburg
comes in progressive rate (in 3.5 times greater) comparing to other
regions of Russia. Perhaps these investments, as practice shows,
are attracted by world-known corporations (Coca Cola, Pepsi, Ford,
Caterpillar, Nokia) for establishing of large enterprises.
are promoted rather slowly into SMEs sector. At the same time statistic
data shows high dynamics of activity in SMEs sector.
At present time St. Petersburg possesses:
- 90.000 companies
of small and medium business
- Euro 3,1
billion turn over capital
- 625.000 people
- Annual growth
14% - 2003 compared to 2002
- 25% - share
in gross domestic product produced in the whole North-West region
activity of medium foreign capital is explained usually by uncertainty
of investors in stability of legislative working conditions in Russia.
Middle-sized investor would like to see acting system of guarantees
of foreign capital investment protection from political risks and
expropriation of property.
At the same
time openness and availability of information about conditions of
enterprises interested in investments is needed. Guarantees of reliability
of such information are also very important.
Legitimate guarantees and preferences created for UN organizations
How UNIDO NWICPC
can downplay risks of FI into SME and what value added it may provide
to partners in St. Petersburg and abroad?
investments into St.Petersburg and North-West Russia SME, UNIDO
NWICPC enjoys legislation, which is granted to UN Development Program
by the Federal regulation. To enter privileges, foreign investor
assumes a title of a donor and enters into contractual relations
Cash flow of
investment project goes through UNDP accounts, which guaranties
allocation of foreseen investments and eliminate risk of fraud and
wrong doing. When delivery of capital goods is envisaged, the Russian
Law on International Technical Assistance of 1999 provides exemption
from customs duties and taxes. Exemptions on the social tax, exposed
on expert's wages (35, 6% in Russia) are also applied.
risk for investors enjoying UN support
investor (named "donor" according to the UN terminology)
entrusts the finance to UN system and not to Russian Banks. The
financial mechanism, created for UN in Russia guarantees the protection
of means from the internal inflation inside the country and expropriation.
as well as financial means under UN jurisdiction is the subject
to immunity of international organizations. Therefore the equipment
supplied to Russia by an investor under UN support is protected
from diverse commercial as well as political risks.
- Clarity of
the budget. Financial accounting in the UN system is clear and
authentic. Thus the investor is always informed how the finance
is being utilized and how it is working in the relevant project.
Moreover, as a rule, the investor is structuring the budget himself
and is controlling the purpose of the utilization.
provided by UN. Imported equipment, components, materials for
the project are not imposed with Import Tax (5% - 15%) and VAT
(18%) according to Russian Legislation. Furthermore the equipment
imported and transferred to the balance is not imposed with Property
Tax (2%) during the first two years after it is delivered. Exemptions
on the social tax, exposed on expert's wages (35,6% in Russia)
are also applied.
- A security
greater of the property. Additional measures can be taken to minimize
risks of loss of the equipment acquired and delivered by the investor
in Russia. Recipient of the equipment signs the contract with
UN, in accordance to which the property remains under UN legislation
during the initial period of the enterprise operation (first 3
- 4 years). The present measure is justified especially during
the formation period of a new enterprise.
Procedure (main stages)
and work on the investment project, a working group with participation
of the investor (donor), consultant and the member of UN Representation.
group is preparing the project of the budget and is planning
the work on its utilization in the interests of the company-recipient
of the investment (technical support).
- Donor (investor) is signing the a standard agreement with
UN Representation (cost-sharing agreement) and consequently
is transferring the funds to the UN account outside of the territory
is singing a contract "equipment / work implementation
grant" together with the company-recipient of technical
support (which is practically appointed by the investor).
group is preparing contracts and documents for purchase and
delivery of equipment (that has been identified by the investor)
to Russia. Consequently it organizes equipment delivery to Russia.
of the company-recipient of the technical support obtains the
equipment at the customs. Whereby benefits on imposed custom
fees and VAT are applied.
and the company-recipient of the technical support sign the
transfer and acceptance of the equipment, in order to place
assign it to the balance of a new enterprise. (Otherwise an
agreement on equipment preservation under the jurisdiction of
UN during the initial period of business formation from 3 to
group under the management of investor forms the UN national
expert team from the staff of the company-recipient of the technical
support. Thereupon the UN benefit on the social tax (35,6%)
is applied and the investor economizes the finance.
with the project working group the investor organizes the work
on arranging the business, controls the utilization of the project
budget, is adapting the purchased equipment for correct implementation
of the duties planned and aims the enterprise to achieve the
of the investor in combination with the program support of UN Representation
in Russia as well as with the assistance of an experienced consultant
(North-Western International Cleaner Production Centre) allows achieving
the aim. Therefore to attract investment into the necessary sector
of the business, choose experienced staff, utilize existing benefits
and considerably minimize risks of capital loss and expropriation
are looking forward to cooperation
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