Russian Territories of Outrunning Development in Mono-Cities: Current and Prospective Opportunities for Foreign Investment into Manufacturing

Abstract

The paper describes a new form of investment attraction recently introduced in Russia—territories of outrunning socio-economic development (TOSEDs). These initiatives provide tax and other benefits to 20 territories in the Far East and to 90 cities in which a considerable number of jobs are concentrated in a single factory (mono-cities). Using secondary sources and interviews, we present the initial legislation for TOSEDs, the evolution of the initial legislation, and the functioning of TOSED residents. We also identify several opportunities for foreign investors who have installed or intend to install their new manufacturing facilities in TOSEDs.

Keywords:

• Foreign direct investment
• free economic zones
• industrial parks
• manufacturing
• Russia

Acknowledgments

We wish to thank Alexey Vostrikov, Director of the “Industrial park AvtoVAZ” and Elena Katkova, Head of Administrative support group of “Industrial park AvtoVAZ” for valuable information they provided during the preparation of our paper.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The first modern SEZ was in Shannon Airport in Clare, Ireland.

2 We present the currently valid definition, which was amended by Federal Law 254 and signed by the President of Russia on July 26, 2019.

3 The list of permitted economic activities is presented in decrees on TOSED according to the Russian classificatory of types of economic activities (OK029-2014, Edition 2).

4 The italics are ours.

5 Federal Law 473-2014 was amended nine times from 2015 to 2019.

6 This figure differs from that presented in (Kuznetsov and Kuznetsova 2019) (197 residents) as the authors accounted for the residents of industrial SEZs at the beginning of 2018 while we present the statistics for the beginning of 2020.

7 The formal opening ceremony of the factory was attended by the governor of Samara Oblast, who indicated the importance of that particular investment project to the region (see Gurkov and Kokorina 2017).

8 One resident left the Industrial Park and also gave up the residency in TOSED.

9 In 2019, AvtoVAZ sold 362,365 cars and increased its share in the Russian car market from 20% to 21% (VA Volzhski avtostroitel’, 1 (43), January 22nd, 2020, 3). A sign of the recovery was the purchase on the 9th of December 2019 for an undisclosed amount of the stake of GM (50% of shares) in a joint venture GM-AvtoVAZ producing light off-road vehicles under the brand of Chevy-NIVA (Izvestia, December 9th, 2019).

Additional information

Funding

This work was supported by Basic Research Program at the National Research University – Higher School of Economics (HSE).