The Russian Prosecutor General's Office conducted an audit of special economic zones, which shows "numerous violations of the law" in the activities of the federal and regional authorities, JSC 'Special Economic Zones' and other companies which manage zones.
A spokesman of the supervisory authority said that the audit results were presented to the president.
According to the Prosecutor General's Office, the state has allocated 179 billion rubles from budgets of all the levels to create 33 special economic zones, investments by the residents reached 177 billion rubles. These funds are on deposit. At the same time, wages in managing companies does not depend on the results achieved. The amount of the premium of JSC 'SEZ' employees in 2015 reached 180 million rubles. But a unified strategy for its development hasn't been created, the infrastructure isn't expanding and no work is being carried out to attract investment, RBC reports.
As a result, "the reasons were found" to close ten zones without residents - the SEZs in the Primorsky and Khabarovsk Territories, the Murmansk region, as well as seven special economic zones belonging to the tourism cluster of the North Caucasus.
According to Kommersant, on May 27, the Russian President Vladimir Putin instructed the government to prepare a unified operation strategy for the SEZ, carry out the optimization of public investment and mechanisms of their transfer under regions control. In addition, it ordered to suspend the creation of new SEZs and closure of inefficient SEZs. The order was made following the inspections carried out by the Prosecutor General's Office and the Accounts Chamber, as well as the report on the Special Economic Zone's work made by the head of the Control and Audit Office of the President's administration, Konstantin Chuichenko.
Inspections of SEZs were held after Putin's meeting with activists of the Popular Front, which are part of the Ministry of Economic Development's working group on SEZs. According to the head of the 'For Fair procurement' project, Anastasia Mutalenko, several zones were mentioned in the report of the activists, for example, the 'Soveitskaya Gavan' in theKhabarovsk Territory and the 'Gates of Baikal' in the Irkutsk region. "80% of SEZs are completely ineffective. In general, the tourist SEZs are the weakest," Mutalenko noted.
According to the federal law 'On special economic zones in the Russian Federation', the decision to close the SEZ is taken by the government. It is not yet clear which areas will be closed, two sources in the government said.
The official representative of JSC 'SEZ' confirmed that the Accounts Chamber and the Prosecutor General's Office carried out inspections, but advised to contact the Ministry of Economic Development to get information about what areas can be closed. The representative of the Ministry said that the ministry "was only instructed to develop common approaches to the SEZ" and that the Ministry of Economic Development is working on the improvement of the SEZ.
The Chairman of the Board of the National Currency Association (NCA), Dmitry Piskulov, speaking with a correspondent of Vestnik Kavkaza, noted that special economic zones, created for the economic development of lagging regions, are used by companies as domestic offshore zones due to preferential tax and registration regimes.
According to him, the transfer of the SEZ management to the regional level won't solve the problem. "The inability to attract investments or failure of their involvement will continue after its transfer to the regions. The fact is that the creation of preferential business climate depends on the macro-economic and foreign policy factors. Many of the regions which have received special economic zones, are not really interesting for investors. At the same time, interesting Russian territories are invested either way," Dmitry Piskulov expects.
"It requires the influx of free labor, proximity to the capital and resources markets, availability of infrastructure and housing. Besides, there are other methods to develop the region – support the development of production, convince companies of the need to work there, or conduct targeted economic support of enterprises in these regions," he listed.
At the same time, he cited China as an example of positive development of SEZs. "The western investments rushed there, because the Chinese market has provided the opportunity for western corporations to save on production costs. Those zones became mass industrial clusters due to the proximity to sea ports, as well as the lack of administrative barriers," he said.
An associate professor of Stock Markets and Financial Engineering of RANEPA, Vasiliy Yakimkin, in turn, noted that the decision of the Russian leadership was due to the fact that the SEZ did not meet expectations as an economic project. "It has a lot of references, for example, 10 years without paying main taxes, but has not generated any return. Apparently, the government reviewed and predicted future developments, so, upon seeing that it won't be able to reach the targets, decided to close many zones," he said.
According to him, introduction of regional control will have two sides. "On the one hand, it may come down to preferences in the presence of competitors in other regions, on the other hand, an impetus for further development is possible. In general, granting regions with such benefits as cancellation of the bulk of federal taxes won't change much. Of course, the regions know better how to develop zones, however, the federal center is able to see the key trends and tendencies. I think it requires cluster management, both the federal and regional, when the powers are delineated in the image and likeness of Western SEZs, for example, in the United States," Vasiliy Yakimkin expects.
Also, the removal of administrative barriers and low lending rates would also help the development of SEZs. "It is known that they reduce interest rate up to 4% for the processing industry in some areas. If the profitability in the manufacturing sector is 7-8%, rarely 11%, the interest rate should be no higher than 4%. There's also need to establish transparent tax rules and create equal conditions for everyone," the expert stressed.
