The economic zones represent a new pattern of public-private partnership, receiving presidential approval in January 2005 during a conference in Novosibirsk on IT industry development issues.
Maksim Bystrov, deputy head of the Federal Agency for Special Economic Zones Management within the Economic Development Ministry, has described these special areas as major growth centers that can show investors how well Russia's economy can perform when unrestrained by various hurdles.
Currently, there are three different types of special economic zones. The Law on Special Economic Zones adopted in July 2005 introduced the notion of industrial and technology implementation areas. The amendments made to this law in July 2006 also introduced tourism and recreation zones. The legislation on special economic zones will see further development, with the Russian parliament Duma expected to consider more amendments that will introduce special port areas.
Every time new special economic zones are introduced the initial competition is among the Russian regions. Once a zone has been located, businesses move in and competition starts among companies. Currently, there is no rush of businesses to the special zones, according to Bystrov. However, since the number of places available is limited, the special economic areas will eventually run out of space.
"So far the residents selection process has not been restricted by space availability. However, this will inevitable change as more residents move in," Bystrov said.
The list of activities prohibited in special economic zones includes mineral resources and fossil fuel production and refining. The exception is mineral water production in tourism and recreation zones. Other things not allowed include production of excisable goods with the exception of cars and car spare parts. The zones are created for 20 years and each has a strictly defined area. For industrial zones it is 20 square kilometers, while for technology implementation zones the limit is 3 square kilometers.
A special agreement is signed between a resident business and the state to define the sort of economic activity in which the business will be engaged. The agreement also fixes the volume of investment the resident is obliged to make. The volume cannot be lower than '10 million (US$13 million) of which '1 million must be invested in the first year of the resident's operation in the special economic zone.
There are currently four technology implementation zones. The residents are mostly IT companies. The businesses based in the Zelenograd Zone will specialize in microelectronics. Two residents -- the Zelenogradski Innovation Technology Center and AlfaChip -- are currently registered in this zone. Siemens and Mikron will probably set up there. The special economic zone in Dubna in the Moscow Region will host companies that specialize in information technology and nuclear physics. Currently based there are Luxoft Dubna and the Dubna Sistema Managing Company that specializes in plasma technology and implements nanotechnology in new materials production. The Boeing Co. and ProgressTech can be potentially set up in Dubna.
The other technology zones are in Saint Petersburg and in Tomsk. The former will host enterprises of the equipment engineering, telecom and biotechnology industries. Transas is set up there. Potential future businesses could be Alcatel SA, Cisco Systems Inc., Motorola Inc., the A.F. Joffe Institute of Physics and the Kozitski Plant. The special economic zone in Tomsk will host petrochemical industry enterprises.
Residents at the special economic zones will be granted customs and tax preferences. The zones' official authorities will handle issues related to communications with governmental bodies and officials. Businesses in the zones will enjoy tax breaks.
The technology implementation zones will introduce a uniform social tax lower than the country average, as well as accelerated depreciation of assets. The residents will not pay customs duties when importing equipment and spare parts for that will be used for business purposes in the special zones. They will have to pay customs duties when exporting finished goods to Russia's customs area.