Russian Far East Records Significant Foreign Direct Investment Increases

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Khabarovsk City, the Russian Far East

Op/Ed by Chris Devonshire-Ellis 

The Russian Far East, an area of North-East Asia covering 6.2 million sq.km (2,400,000 sq mi), now accounts for 32% of all Foreign Direct Investment into Russia, according to Russian Deputy Prime Minister Yuri Trutnev. Special economic zoning and concessions have stoked investor interest in the region.

“When we started working on the development of the Far East in 2013, the share of foreign direct investment was just two percent. Today it accounts for 32 percent, which is a 16-fold increase,” Trutnev told Rossiya 24 TV yesterday. “The volume of investments has already exceeded 1.3 trillion rubles (US$17.6 billion).”

Trutnev added that the amount of foreign private investment in the Far East is expected to grow to five trillion rubles (over US$67 billion).

The region includes the Far Eastern Federal District, extending from Lake Baikal to the Pacific Ocean, and shares land borders with China, Mongolia and North Korea, and maritime borders with Japan and the United States. AIthough large, it is sparsely populated with about 6 million residents, 75% of whom are concentrated in eleven main regional cities.

More than 100 billion rubles (US$1.3 billion) of budget funds are being invested within the framework of a program for the Russian Far East social development, and more than 1,000 social facilities are under construction. Some 18 priority development territories, as well as the Vladivostok Free Port, have been created under the Far East’s development program. Hundreds of foreign companies have already obtained resident status.

The priority development territories in the Russian Far East provide the country’s citizens as well as foreigners with tax and customs concessions. In 2017, Russia lifted Far East visa requirements for 18 countries to boost tourism and develop the area.

Part of the Far East is in the Russian Arctic, which has recently been designated as a Free Trade Zone and includes significant incentives for foreign investors in the form of free land use rights, tax breaks and other financial benefits. We discussed this in the article Why Foreign Investors Should Be Looking To The Russian Arctic For Opportunities.

The primary regional city, Vladivostok is close to China, connected by Road, Rail and Air to Beijing, Shanghai, and Hong Kong as well as by Air and Sea to destinations in nearby Japan and South Korea. It is an international Port, with increasing development as a gateway to the Arctic and the processing trade between these countries and Europe using the Northern Sea Passage. The region’s top trading partners are China, South Korea, Belgium, the UK and the United States. We discussed the development of Vladivostok as a major regional East Asian Port in the article Vladivostok and Russian Far East Being Developed As Significant North-East Asian Resource and Trade Hub.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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