Russian leadership OKs plan for economic zones

Special economic zones will be created in Russia to encourage foreign investment, Arkady Dvorkovich, deputy minister of economic development and trade, told reporters after a cabinet meeting Thursday. He said the cabinet approved a draft law, 'On the Creation of the Legal Bases for the Functioning of Zones for Advanced Technology and Industry.' Dvorkovich said: 'Special economic zones are to be one of the most important instruments of Russian investment policy.' The basic features of the plan, he said, are a simplification of the legal situation for foreign investors and tax breaks to be accorded them by regional authorities. Investors also will get certain privileges on real and other property: they will be allowed to buy land and obtain approval for construction in a streamlined way.

Dvorkovich said some 10 regions have already asked to become part of this program, largely regions in Russia's south-Krasnodar Territory, the Volga Region and Tatarstan as well as the Far East and Northwest Regions. 'Expected total investments are expected to run into the billions of dollars merely from the first stage of the program,' the deputy minister said.

The Finance and Tax Ministries have opposed the creation of economic zones, contending that they would become a mechanism for avoiding taxes. As Dvorkovich explained it, the danger will largely be avoided by the proposed law's limiting tax breaks to specific investment projects and not giving them to the regions as such. 'The tax break will not be applicable to any other undertaking,' he said. The first economic zones may appear as early as 2005.