Transcript Document

Financial Support
of Regional Development
in Russia
Alexander Kovalevskiy
Astana, May 2011
CHANNELS FOR FUNDING REGIONAL ACTIVITIES
Intergovernmental grants
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Equalization grants (dotations)
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Balancing grants (dotations)
Conditional subsidies
Till 2008– Fund for Regional Development
Federal “goal-oriented” programs
Federal investment program
National Projects
Sectoral Programs
PPP mechanisms
Special projects
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Direct financial support: legal background
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Direct public investment into property of other
gov’t levels is forbidden
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Financial support of investment from higherlevel budgets can only come as a subsidy –
Budget Code, Art. 79
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Direct federal subsidies to municipalities are
not possible
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Conditional subsidies
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Subsidy - conditional, matching grant
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Decision of RF President or RF Government–
allocation of subsidies in Federal Investment
Program managed by the Ministry of Economy, the
Ministry of Regional Development and sectoral
ministries
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No competitive procedures and formal criteria
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Fund for Regional Development (till 2008)
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Federal goal-oriented program “Closing the gaps in social and
economic development among Russian Regions”
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Evaluation of social and economic development of Russian
regions (large number of indicators)
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Contest of regional applications (evaluation of efficiency of
investment projects offered for federal co-financing)
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Sum of grant is proportional to a) population and b) variation in
level of social and economic development
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Federal ‘goal-oriented’ programs
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FGP aim at development of selected (as a rule,
‘specific’ regions) –Chechnya, Ingushetiya, South of
Russia, Kaliningrad oblast, Far East and East Baikal
Region, Kurily Islands
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FGP are managed by Ministry of Regional
Development
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FGP are inter-agency programs – a large number of
federal ministries and agencies are involved in their
implementation
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No competitive procedures and formal criteria
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National projects and Sectoral Programmes
Investments into regional infrastructure
 Purchase of equipment for public service
providers
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Examples:
National Project “Education” – purchase of school buses
for regions after closing of small rural schools. Criteria for
grants allocations (e.g., number of students in closed
small rural schools) were developed
Program “Modernization of Health” – equipment for
hospitals.
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PPP Mechanisms
State Institutes for Development
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As a rule, IfDs are non-for-profit organizations.
They are not concerned with maximization of
profits. Rather they fund projects that may have
important social effect.
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The projects aim to support the development of the
infrastructure and the human capital, new initiatives
and budding technologies.
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State Institutes for Development
Requirements for obtaining IfD funding
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Co-financing of
business
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Value for money
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Consequent
«privatization»
The willingness of business to invest
(together with the state) is a criteria of a
project’s efficiency; so the budget
resources will not be wasted funding
the inefficient projects.
Funding of the selected projects with the
clear outcomes instead of “support” of
an enterprise
As a project is successfully launched, IfD
will aim to fully «privatize» it. This is a
good stimulus for the project’s
successful development.
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State Institutes for Development
IfDs Activities
SC
Vnesheconombank
SC
Rostechno
-logii
JSC
Russian
venture
Company
JSC
Rosinfocominvest
JSC
JSC
“Special
Rosagroeconomic
leasing
zones”
Agriculture
Industry
Woodworking
Economical infrastructure
Telecommunications
Environment
Energy sector and energy
saving
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State Institutes for Development
RF Investment Fund (infrastructure development)
SC Rosnanotech (nanotechnologies)
SC Foundation for assistance in reform of Housing
and Utilities Sector
JSC Agency for mortgage
JSC Rosselkhozbank (agriculture)
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MOST VISIBLE PPP MECHANISMS
Special economic zones
Investment fund
Vnesheconombank
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SPESIAL ECONOMIC ZONES
Initially – competition of regions organized by Ministry of Economy.
Starting 2009, SEZs can be created without competitive procedures
State support of SEZ
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Tax and customs
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Tax reliefs on profit tax, corporate property tax, land tax, transportation
tax
Protection from unfavorable legislative changes
Reduced rent rates
Reliefs in accounting
Free customs zone regime (no custom duties and VAT for imported
goods)
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Lower administrative barriers
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SEZ could not cover more than part of one municipality
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SEZ CREATION PROCESS
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SEZ creation
 (Competition)
 Gov’t regulation
 Agreement among the federation, the region and the municipality
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Funding
 Funding needs and property rights are described in the agreement
 Funding needs are evaluated in the application
 JSC “OEZ” is managing company
 JSC “OEZ” and its subsidiaries build infrastructure
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SEZ management
 SEZ is managed by federal authorities (MinEc)
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SEZ - current situation
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24 SEZ
4 Industrial
4 innovative
13 recreational
3 ports
About USD 1,5 bln of state investments (USD 0,5 bln
invested to industrial SEZ, USD 0,9 bln – innovative
SEZ, USD 0,1 bln – recreational SEZ)
About USD 7 bln – investments of business
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INVESTMENT FUND
Investment project
Commercial part
industry, housing, utilities,
mining, tourism, agriculture,
private infrastructure
Infrastructural part
Transportation
Utilities
Energy
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INVESTMENT FUND
Investment fund
100% – Х%
Commercial
part
Infrastructure
Region and/or
municipality Х%
No less
than 50% of
total costs
For most regions Х is in 20-30% range
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Investment Fund – Selection of Projects
Competitive selection of regional projects (contest)
Economic efficiency
Real GRP
Financial efficiency
NPV>0,
IRR>WACC
Budget efficiency
Discounted tax
revenues > public
investment
Social effects
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‘STRONG’ INVESTMENT PROJECTS
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Strong concept
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Regional factor
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Good idea
Strong investors
Relevant to urgent federal issues
Support of authorities
Serious regional issues involved
Quality of application
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Financial model and formal issues
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SC Vnesheconombank
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Vnesheconombank :
Funding of business projects if guarantees by RF
subjects’ governments are issued
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Period of implementation – about 5 years, investment
cost is not less than RUR 2 bln. Vnesheconombank
share can not be higher than 85%. The PPP projects
have high priority.
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Now VEB tries to consolidate small project at the
municipal level into inter-municipal (regional) projects.
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Special projects
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Sochi-2014, FIFA World Cup 2018
Example: Preparing to World Cup 2018, FIFA
requirements
Federal Government– investment to road
infrastructure (roads, airports, bridges etc.)
Regions and municipalities – investment to utilities
and sport infrastructure
Business – investment to hotels, restaurants etc.
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Special projects
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Huge federal investments to infrastructure
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APEC 2012
Gambling zones
Closing of gambling industry around the country
4 Gambling zone in border regions
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Single industry towns’ support program
There are more than 330
single industry or single enterprise towns in Russia
Most of them were affected by Global financial crisis
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Single industry towns’ support program is managed by
Minregion
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Towns should develop so called complex investment plan (CIP)
and complex modernization plan.
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Federal co-financing to investment depends on evaluation of
plans
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Recommendation on CIPS’ development are available, but
there ate no formal criteria of evaluation
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THANK YOU!
Contacts:
[email protected]
http://www.budget-solution.ru/
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