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The Right For Global Recognition, Page 2

Comprehensive Approach. Together with the Committee on Culture and other Administration divisions, we have made a transfer to comprehen-sive international cooperation pro-grams that use the historical and cul-tural potential of the city as well as its business development potential. Such programs have been developed and are currently under way in collabora-tion with Great Britain, the Nether-lands, Switzerland, the Ukraine, Belarus; programs with China, Japan and France are being developed.

The crisis of August, 1998, had a serious influence on St. Peters-burg's foreign trade and led to a sharp decrease in the volumes of imports and exports. How has the structure of foreign trade changed in comparison with the pre-crisis period? Can any positivie tenden-cies in the development of foreign economic and trade links be observed?

The structure of external trade has, essentially, not changed in comparison with the pre-crisis period.

As before, about 50% of exports are for machinebuilding products (shipbuilding and energy machine building), fol-lowed by metallurgy (metals, alloys and finished goods made of these materials) wood-processing products and the products of the fuel and energy sectors.

The largest growths have taken place in machine building (30%) and wood processing (60%).

The main countries importing St. Pe-tersburg produce are China (17.3%), Belgium (13.4%) and the USA (12.9%).

The bulk of imports consist of food products (44%) and machine-building products (23%). Germany (16.6%), Finland (8.6%) and the USA (7.1%) are amongst the leading exporters to St. Petersburg.

In the sphere of foreign trade, the fol-lowing main tendencies can be observed: a stable growth in the vol-ume of foreign trade (for the most part due to the growth in exports), a stabilization of the volume of imports at around 60-70% of the level for the same period last year, with a certain tendency towards growth.

Among the main tasks set for the Committee on External Relations is encouraging the investment process in St. Petersburg and establishing deep relations between the Administration and foreign companies, or, as it is known in the West, Public-Private Partnership. How successfully do you carry out these tasks in this city? What is the current pic-ture of the investment process in St. Petersburg?

Attracting investments and the devel-opment of investment infrastructure in St. Petersburg remain a major direction in the work of the City Government. The reason why is clear. Increased investments facilitate the solution of many other problems faced by the city, such as rendering support to producers, creating new jobs, extending the taxation base, and, as a result, the revenues of the city budget.

Foreign businessmen working in the city greatly value the measures that have been taken to improve the investment climate by the city author-ities. Of special value seems to be the creation of the Council for Promoting Investments at the Governor's Office. The USA Board of Trade Councilor, Deputy Chairman of the Committee for Economic and Technical Coope-ration of the Gore-Putin Committee, lan Kalitsky has described this as «a great idea, very effective for attracting investors». Surely, many foreign politi-cians, businessmen and experts, as well as the investors who have already come to the Petersburg market, share this opinion.

The Council for Promoting Invest-ments was set up in March of 1997 as a permanent public relations agency. It incorporates staff whose practical work provides for the investment process: officials of the city Admi-nistration, Federal agencies working in St. Petersburg, and associations and unions of employers. The Council's priority objective is to establish an efficient direct link between the busi-ness community and the city Admi-nistration. In the course of the

Council's work it has become clear that the inost important issues are those of creating an efficient legal environment for investment activities, developing the investment infrastruc-ture (i.e. an effective pattern of work with investors) and creating condi-tions for the efficient use of invest-ment money and effective payback.

The Governor of St. Petersburg sees setting up the Council for Promoting Investments as an act of great politi-cal importance. Vladimir Yakovlev believes that it is impossible to dis-cuss the burning issues of the city's economic life or to take decisions about them without the participa-tion of those who work directly in economics and finance. The Council's main achievement is the trust vested in it by foreign investors.

We are proud that the business com-munity directly participated, for the first time in Russia, in working out a set of city laws that support invest-ments. That set of laws will protect and guarantee the rights of investors, it facilitates the creation of a compre-hensive database of investment pro-jects throughout the city, and provides for business safety New amendments have been introduced into the city law «On Tax Benefits». They radically reduce the tax burden borne by legal entities founded with City Govern-ment participation, and by foreign investors wherever international agreements between St. Petersburg and foreign Governments are applica-ble. A package of laws giving addition-al benefits to foreign investors was adopted in July 1998 (including the Law on State Support of Investments, the Law on Amendments in the Law on iax nencnis, me Law on me umcr of Acquiring Property Rights).

Experts consider the new legal frame-work to be the most efficient in Russhi. The city Administration is currently working on two additional draft laws: one details who can become an investor and how to do it, while the other defines the mechanism for get-ting benefits. Local tax benefits will be provided for those who invest at leasi 5 million US dollars in the city econo-my The duration of the benefits will be defined in the agreement between the investor and the Administration. and will be close to the project payback time.

The city also provides investors with financial guaranties. The 1998 bud get was the first to allocate 1.2 billion rubles towards providing guaranties from the Committee for Finance to cover part of the credits granted to the private and state-run industrial enterprises of the city Rent benefits are also granted to investment pro-jects carried out in municipally owned entities and direct invest-ments are made from the city budget into the infrastructure of those com-panies that the city considers priority investment projects, with investors subject to favorable taxation rules since the beginning of the project.During the August 1998 crisis the Administration took steps to alleviate the problems of investors working in the construction market of St. Peters-burg. For the period August 15 -December 31 1998 the share of their payments intended for the develop-ment of the city infrastructure were calculated on the basis of the dollar/ruble rate as set by the Central bank of Russia on August 15 1998, i.e. ?US 1 = 8.67 rubles, meaning that investors paid only half their due to the city budget.

Providing for safe entrepreneurial activities is becoming a major priori-ty This mainly relates to economic and information security. The Com-mittee for Information Support to Commercial Security which includes representatives from St. Petersburg's law enforcement bodies, the tax police and the Department of Admi-nistrative Agencies held tender com-petitions, resulting in selecting 10 companies providing information security in the market. The Council will develop databases that will help to bring to shed light on the activities of unscrupulous businessmen.

The Council revealed the necessity for a radical simplification of the invest-ment attraction procedure. Jointly with business community representa-tives it is now developing proposals on the improvement of the process of getting investment approvals at Federal and municipal levels.

Support of investment in export-ori-ented industries has become another sphere of collaborative work. «Expert» magazine reports that the investment rating of St. Petersburg rose from 12th position among the Subjects of the Russian Federation in 1996 to 4th in 1997 and took 1st place in 1998 in the «minimal investment risk» and «the best minimal risk/maximal invest-ment potential factor» categories.

In 1998 the amount of ruble invest-ment in the city totaled over 100 mil-lion dollars (total investment equaled 400 million dollars), which is compa-rable with other cities that have simi-lar populations (of all the cities of the world the maximum foreign invest-ment was recorded in Shanghai and during the last three years it equaled about 10 billion dollars a year).

The results for 1999 have significant-ly surpassed these record indicators. The total volume of foreign invest-ment grew by 72% (while the growth in foreign currency investment was over 110%).

In total, for the 1998-1999 period, the volume of foreign investment grew three times over in comparison with 1997, proving that a suitable investment climate has been created in St. Petersburg.

A more or less clear pattern of invest-ment distribution among industries could be seen in 1996-1999. This peri-od witnessed a stable and even growth of investment in production, which remains the most attractive industry for investment. Investments in trans-portation and telecommunication grew in 1997, leveling out in 1998 and in 1999. A similar tendency could be seen in trade and catering. In 1999, however, a serious growth has been observed in this sector.

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