The Strategic Council for Investment In New Industries is a panel of experts, first formed by the Russian Ministry of Trade & Industry in March 2014. The first sitting of the Council took place on July 9, 2014 within the context of the INNOPROM-2014 International Industrial Trade Fair. The Council's third meeting is to take place at INNOPROM-2015.
The principle function of the Council is the preparation of proposals for Russian Federal governmental authorities aimed at boosting the investment appeal of new kinds of industry, and cutting the red tape which hinders the growth of the industrial sector.
The members of the Council include Russian and foreign industrialists, leaders of technology corporations, heads of investment and venture capital groups, and development organizations. The Chairman of this group of experts is the Russian Minister for Trade & Industry, Mr Denis Manturov.
During the meeting of the Strategic Council for Investment in New Industries, which took place on February 17, 2015 in Moscow Technopolis, Mr Denis Manturov, Minister for Industry & Trade, specified the core of realization of the program of Import Substitution in industry and went on to outline the priorities of Russian governmental policy in this area. The aim is not to isolate real sector of economy - but instead to create sustainable added value within Russia.
“Import Substitution means creating sustainable added value for Russia, not skulking off into isolation” said Mr. Denis Manturov, the Russian Minister for Trade & Industry. “The only exception is a tiny number of industries connected with national security. For example, Russia cannot permit the vagaries of some western corporation or other to lay down the terms for the delivery, or non-delivery, of vital components. Moreover, we are also concerned that such foreign industrial production as cannot yet be produced competitively in Russia should be at least relocated to Russian-located production facilities.”
The Ministry of Trade & Industry has prepared proposals for specific measures for Governmental support for producers of industrial items which have no current equivalents being produced within Russia, including by consortia.
In order to level the playing field and benefit from State support, there are a number of criteria for such consortia. These include having a joint initiative between consumer and producer; organizational preparedness for setting large-scale integrated projects; provable projected market demand, or a confirmed manufacturing order; the prospect of cloning the project in other industrial spheres; willingness to co-finance projects which seek State funding; a commitment to localization of projects which deploy overseas technology; and a commitment to producing products on the basis of confirmed sales figures.
Applicants who are able to comply with these requirements may apply for funding from the Fund for Industry Development to go ahead with projects for Import Replacement and prior-to-bank projects, and additionally in the case of pre-investment financing. They have the opportunity to participate in special investment contracts, including the possibility of public-private partnerships.
They may also be entitled to benefit from a privileged taxation scheme, which could include tax credits for the amounts of capital investment set off against taxation payments; tax holidays on income taxes and property taxes for new manufacturing enterprises, accelerated write-off rates for the depreciation of equipment, and reduced rates for insurance payments.
“The Government has taken the responsibility not to change the terms of the taxation breaks for at least the next 3-4 years. We don't refuse to do so, but we intend to the reform the tax system in such a way that it stimulates and motivates business growth”, commented Mr Manturov, the Trade & Industry Minister.
The Ministry of Trade & Industry has already rolled-out plans for Import Substitution in eighteen different areas of industry. If these plans go ahead, they would lead to reductions in imports in even delicately-balanced industries such as production-line industry – from the current 88% imports to 40% by the year 2020. If the range of measures aimed at Import Substitution by having foreign manufacturers establish their operations within Russia goes ahead, it will need 159 billion rubles of government finance – but this would be counter-balanced by a rise in state income of up to 2,156 billion rubles over the twenty-year period envisaged by the initiative.
New members of the Strategic Committee for Investment in New Industries for its second sitting included the Head of the Moscow Associated Chambers of Commerce for Germany, Herr Michael Harms; Mr Tim Koenig, the CEO of 3M Russia; the Head of Strategic Marketing for KUKA Roboter GmbH, Herr Andreas Bauer; the President of Siemens for Russia, Herr Dietrich Möller; and the president of Eaton for Europe, the Middle East & Africa, Mr Curt McMahon, among others.
Presentations were given by the Ministry of Trade & Industry Department Director for Strategic Development, Mr Vasily Osmanov; by a board member of the European Business Association, and VP of ABB in Russia, Mr Michael Akim; by Mr Dmitry Peskov, the head of the Young Professionals group and Director of the Agency for Strategic Initiatives to Promote New Projects ANCO; by the Director of the Fund for Internet Initiative Developments, Mr Kirill Varlamov; and by Mr Evgeny Kuznetsov, board member and Deputy General Director, and Project Office Director of Russian Venture Company OJSC.
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