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Business & investments

Ladies and Gentlemen!

Today, ensuring socioeconomic well-being of every citizen and the state is only possible with the active use of modern scientific - technological advances, extensive enhancement of innovative activity, and development of regional infrastructure under public - private partnership.

The Sakha Republic (Yakutia) is one of the fastest growing federal subjects and has a significant influence on the development of the Russian Far East. Its vast territory rich in natural resources, presence of major export-oriented companies, favorable geographical position and proximity of the Asia-Pacific markets, as well as a unique tourist potential create preconditions for becoming a strategic outpost of Russia in the Far East.
The republic faces big strategic plans - the implementation of the comprehensive development scheme till 2020. The region has concentrated large-scale investment projects which are of great socioeconomic importance to the eastern part of Russia. The construction of the railway "Berkakit-Tommot-Yakutsk” is being completed;the first line of the “Eastern Siberia-Pacific Ocean" oil pipeline has been constructed; the republic continues to implement the country\\\'s largest project "Integrated Development of Southern Yakutia"; the creation of Yakutia gas production center was initiated in accordance with the Eastern Gas Program.

These and other projects will form a modern competitive economy based on innovative solutions and advanced industrial base, which ultimately will create the conditions for a new quality of life. The strategic goal is to overcome system-based infrastructure constraints, to create favorable environment to attract investments and skilled workers, creating comfortable living conditions in the region.

We look forward to further successful cooperation of science, government and business to jointly tackle major issues of socioeconomic development in general, creating an effective platform for cooperation between federal and regional authorities, Russian and foreign investors to discuss the issues of infrastructure development and implementation of promising investment projects throughout the Far East.
Creating a favorable and stable investment climate in the region is one of the main objectives of the Government of the Sakha Republic (Yakutia). The priorities of the republic’s authorities are to diversify and attract investment in the priority economy sectors: oil and gas industry, including production and processing of oil and gas, metal ores and coal mining, construction materials production, processing of agricultural products and timber industry.

I am confident that joint efforts of the Government, business and society can transform the global challenges and constraints into new opportunities for sustainable development of the Far East as the key sector that strengthens the geopolitical position of Russia in the international community.

I wish all participants and guests of the international conference fruitful and constructive work, interesting initiatives and success!


President of 
the Sakha Republic (Yakutia)
Yegor Borisov

 


 
«…The Sakha Republic (Yakutia) is the largest constituent entity of the Russian Federation and one of its richest depositories of resources. Naturally, sustainable and dynamic development of Yakutia is of key importance for both the Far Eastern District and Russia on whole...»

(Vladimir Putin, President of the Russian Federation

 
  
 
«… Nowadays the solution of numerous long-term tasks depends on development of the Russian Far East. And these tasks are of crucial importance for our country».

(Dmitry Medvedev, Chairman of the Russian Federation Government)

 


 
«Our republic has everything to create a better life – abundant natural resources, long-term strategic action plans, sustainable social development, positive natural increase pattern, high educational level of the population, relatively young and economically proactive labor force …»

(Yegor Borisov, President of the Sakha Republic (Yakutia))
 

 

Yakutia in Figures

Yakutia lies in the north-eastern part of Asia stretching 2,000 km north-south and 2,500 km east-west. 
The area of 3,102 thousand square kilometers covers one fifth of the total area of Russia and is equal to 2/3 of Western Europe’s territory. Over 40% of Yakutia lies beyond the Arctic Circle. 
 

It spans three time zones (UTC +9, +10, +11). 
Yakutsk, the capital of the republic, is 8,468 km away from Moscow. 
Yakutia has borders with seven entities of the Russian Federation: 
on the west — Krasnoyarsk Krai, 
on the south-west and south — Irkutsk Oblast and Amur Oblast, Zabaikalsky Krai, 
on the south-east — Khabarovsk Krai, 
on the east — Magadan Oblast and Chukotka Autonomous District.
 

The state authority is executed by President, the State Assembly (Il Tyumen), the Constitution and Supreme Courts. 
The supreme legislative body is the State Assembly (Il Tyumen).
The supreme executive body is Government of the Sakha Republic (Yakutia).
The highest executive official and head of the Sakha Republic (Yakutia) is President of the Sakha Republic (Yakutia). 
As of January 1, 2011, there are 445 municipal units, including 34 municipal regions, 2 urban districts and 409 urban and rural settlements.
According to the interim data of the All-Russian 2010 Census, the population of the republic makes 958,3 thousand people, including urban population making 64.1% and rural population – 35.8%. The republic is home to 126 nationalities, including the Yakuts – 45.5%; Russians – 41.2%; Ukrainians – 3.6%; Evenks – 1.9%; and Evens- 1.2%. The population density in the republic makes 0.3 people per sq.km. 
Yakutia enjoys the variety of natural conditions: its continental climate shows up in the air temperature fluctuation range reaching 100 degrees Centigrade. The republic is home to the pole of Cold of the northern hemisphere, with the lowest temperature registered at 71.2 degrees C. 
 

Social and Economic Situation

Natural resources
Almost the entire territory of Yakutia is situated in the permafrost area. 72% of the republic’s territory is covered by taiga, the rest – by forest-tundra, tundra, and the Arctic desert. Forests cover 47% of the territory, making up 11% of all-Russia reserves.
Yakutia has preserved many places of pristine nature. This unparalleled environment is home for rare animal and bird species.
There are over 700 thousand rivers, which exceed 10 km, flowing in the republic, with 314 of them being over 100 km long. The Kolyma, Indigirka and the Lena River\\\'s major tributaries – Olyokma, Aldan and Vilyui – surpass almost all the European rivers, including the Rhine and Elba, by their length and water volume. 
 

The Lena River, the republic\\\'s major waterway, is among the ten greatest rivers of the world. There are over 800 thousand lakes with water surface exceeding 1 ha each. The waters are abundant in rich fish resources – over 90 species. 
The Sakha Republic (Yakutia) ranks first in the Russian Federation by total reserves of natural resources. Its raw material potential is estimated at RUR 78.4 trillion.

Economy structure
The economy is based on export-oriented industry connected with development of abundant natural resources. GRP is also influenced by construction, commerce, transport and communications, agriculture, and social services.
 

Industrial production mostly depends on non-ferrous metallurgy (mining of diamonds and gold), as well as fuel and energy complex (coal mining, oil and gas extraction). They account for over 70% in the total volume of Yakutia’s own production.

Major economic parameters trend
Over the period from 2005 to 2010, the socioeconomic situation in the republic was marked by the real growth of major macroeconomic parameters: gross regional product (116.2% in 2010 against 2005 level), transport cargo turnover (102.9%), commodity circulation (132.5%), fee-based services rendered to the population (129.3%).

The following agricultural industries remain traditional for people in the Sakha Republic (Yakutia): beef and milk cattle breeding, droving horse-breeding for meat, reindeer herding, and farming. The republic has the largest cattle stock in the Far East. In the northern areas people practice hunting, trapping, fishery, and fur farming. Due to the large share of rural population in the republic (35.8%), the government takes numerous measures to support agriculture.

Investments into fixed capital
The period 2005-2010 witnessed implementation of several large-scale investment projects of great significance for Yakutia and the entire Russia, as well.

The Sakha Republic (Yakutia) is introducing production of innovative products. In September 2010, there was launched a basalt materials plant in the town of Pokrovsk. 
In the city of Yakutsk, there is a project on launching a facility assembling and producing light diode equipment. It will be first welcomed by the northern regions of the republic. In near future, the plant\\\'s production will be supplied to the Russian Far East, as well.

Population revenues and labor forces
The republic is solving urgent social tasks. The real revenues of the population rose by 1,2 within the 2005 — 2010 period.

In 2010 economically productive population amounted to 490.8 thousand people, with 447.4 thousand people employed in the economy. 
Education employs about 19% of the total number of labor force, mining of natural resources – 10%, medical care – 10%, transport and communications – 9%, power engineering and housing sector – 7%, construction – 6%, processing – 4%, agriculture – 3%. The average age of the employed is 39.6. The majority of employees (26,7%) have higher professional education; vocational education – 26.5%, and secondary education – 23.6%.

Major indicators of the Sakha Republic‘s socioeconomic development by 2030 (according to the innovative scenario):
GRP growth per capita at parity of the purchasing power up to USD 48 thousand (90% to the level of OECD countries);
real GRP growth in 2011-2030 by 3 times, including in 2011-2020 – 1,9, in 2021-2030 – 1,6;
increase of the average expected life expectancy to 73,3 years;
growth of actual disposable income of population by 4 times compared with 2010;
reduction of the population poverty to 6,3%.
reduction of general unemployment level to 3,5% to EAP, level of registered unemployment to 3% to EAP;
growth of provision of 1 citizen of the republic with total usable housing to 34,05 sq.m.;
reduction of hazardous dwelling share to 2,03%;
gas supply coverage of 76% of the republic’s population;
increase of the share of population having acess to centralized water supply and disposal to 69%;
elimination of hazardous schools by 2030;
fully meeting the demand for preschool institutions for the children aged 3-6 by 2030;
double reduction of the share of hazardous healthcare buildings;
bringing year-round transport accessibility to 73% of the area. Growth of transport mobility of the population by 3 times;
completion by 2014 of transfer to rendering public services electronically;
increase of Internet use density to 85 people per 100 people.
 

Investment climate

By the Russian President commission, the Sakha Republic (Yakutia) has developed the Scheme of integrated development of labor forces, transport and power industry in the Sakha Republic (Yakutia) till the year 2020. The scheme outlines strategic priorities and directions aimed at effective use of unique raw material potential of the republic.
All the major investment projects are included into the Strategy of social and economic development of the Russian Far East and Baikal area till the year 2025. 
In the long-term (within the innovative scenario in 2011 – 2030) RUR 5,5 trillion of investment will be attracted to the fixed capital in the prices of the respected years.
Creation of favorable and sustainable investment climate in the region is one of the main tasks of the Sakha Government. The Program of forming a favorable investement climate in the Sakha Republic (Yakutia) is implemented; it is aimed at improving the regulatory legal base in the field of investment activity, creating and development of investment infrastructure, reduction of administrative barriers, formation of new mechanisms to attract investments, formation of favorable conditions to diversify production and promotion of innovative technologies to the market.

Due to the sustainable socioeconomic development, international rating agencies increase the credit rating of the republic regularly. In October 2010 Fitch Ratings confirmed long-term ratings of the Sakha Republic (Yakutia) in foreign and national currency at “BB” level, with the short-term rating of the region on foreign currency at “B”. Also, the agency confirmed the republic’s long-term national rating “AA-(rus)” level. The forecast for all long-term ratings is amended to “Positive”. 
In May 2011 Standard and Poor’s International Rating Agency confirmed the republic’s credit rating at “BB-/Positive/ruAA-”. 
The Sakha Republic (Yakutia) is one of the leaders of the Russian Federation by both the number of investment projects to be implemented on its territory and the volume of investments. 
 

Priorities include enhancement of transport and power infrastructure of the republic, hydro and heat generation of power for exploitation of natural resources in the economy. 
In accordance with the Scheme of intergarted development of labor forces, transport and power industry in the Sakha Republic (Yakutia) till the year 2020, the republic is constructing a railway to the city of Yakutsk with a bridge across the Lena River; in future it is expected to reach the border with Magadan Oblast. 
The republic is creating all-year-round network of federal and republic’s motorways with the major logistic hub in the city of Yakutsk; it is also modernizing the airplane and river fleet. There is a plan to connect central, western and southern parts of the republic by power transmission lines, to construct economical power stations. 
As a result of these changes in infrastructure, by the year 2020 weight-average cost of bringing one ton of cargo to the regions of the republic would halve and the power tariffs would equal with the average all-Russian level.

In accordance with order of the Russian Government of 10 March 2009 No. 302-r, there started implementation of the first stage on designing documentation for “Integrated Development of Southern Yakutia” investment project. Since the launch of the project, it has received for preparatory and pre-project works RUR 24,2 billion, including RUR 16.5 billion of private investments, RUR 7.25 billion – from the Investment Fund of the Russian Federation. The project includes the following sites: Kankun hydropower station (OAO “RusHydro”, OAO “Yuzhno-Yakutsky GEK”), Yakutsk Center for gas production (OAO “Gazprom”), Elkonsky mining and smelting plant (OAO “Atomredmetzoloto”, ZAO “Elkonsky GMK”), Inaglinsky coal complex (OOO “Kolmar”, ZAO “Yakutskie ugli – new technologies”), Tarynakh and Tayozhny GOKs (mining and processing plants) (OAO “GMK “Timir”), Seligdar mining and chemical plants (OAO “ALROSA Investment Group”), 270 km of railways, 150 km of motorways, 1,200 km of power transmission lines and 7 substations. The project creates conditions for attracting investments into Southern and Western Yakutia, for realization of projects in related industries. Besides, in Southern Yakutia OAO “Mechel” will develop Elga cola deposit with balance reserves at 2.1 billion tons.

A similar cluster approach is applied to a number of other megaprojects:
“Integrated development of Tomponsky mining industrial region”. With the use of private investments, this project includes development of Nezhdaninskoe gold deposit, Verkhne-Menkechenskoe silver and polymetals deposit, as well as construction of Dzhebariki-Khaya heat power station, 3 power lines and 2 substations.

“Integrated development of Western Yakutia”.This comprehensive investment project includes development of oil and gas fields; construction of pipelines; construction of underground diamond mines; building Vilyui motorway; building motorways and power transmission lines connecting Yakutia with Irkutsk Oblast. 
The Eastern Gas Program of the Russian Federation Government includes development of Chayanda-Khabarovsk-Vladivostok and launching the development of Yakutia gas center with the development of Chayanda-Botuobinskaya group of gas fields.

Legislation regulating investment activity in the Sakha Republic (Yakutia)
Federal normative acts:
1. Federal Law of 25 February, 1999 No. 39-‘« “On investment activity in the Russian Federation, performed in the form of capital investments”;
2. Federal Law of 21 July, 2005 No. 115-‘« “On concession agreements”; 
3. Federal Law of 22 July, 2005 No. 116-‘« “On special economic zones in the Russian Federation”;
4. Federal Law of 9 July, 1999 No. 160-‘« “On foreign investments in the Russian Federation”;
5. Federal Law of 29 April, 2008 No. 57-‘« “On procedure of foreign investments into economic entities of strategic importance for defense and national security”; 
6. Federal Law of 29 October, 1998 No. 164-‘« “On financial rent (leasing)”;
7. Federal Law of 30 December, 1995 No. 225-‘« “On agreements about production division”;
8. Federal Law of 30 December, 2004 No. 210-‘« “On tariff regulation in communal service institutions”;
9. Federal Law of 14 April 1995, No. 41-‘« “On state regulation of tariffs for electric and heat power in the Russian Federation”;

The Republic’s normative acts: 
1. The Sakha Republic (Yakutia) Law of 30 May, 2006 347-« No. 709-III “On investment activity in the Sakha Republic (Yakutia); amendments to the Law are to be approved before the end of 2011. 
2. The Sakha Republic (Yakutia) Law of 22 December, 1992 No. 1270-XII “On foreign investments in the Sakha Republic (Yakutia); amendments to the Law are to be approved before the end of 2011.
3. The Sakha Republic (Yakutia) Law of 10 July, 2003 No. 48-« No. 97-III “On taxation policy in the Sakha Republic (Yakutia);
4. Draft Law of the Sakha Republic (Yakutia) “On Public-Private Partnership in the Sakha Republic (Yakutia) is to be approved before the end of 2011”; 
5. Program on creating a favorable investment climate in the Sakha Republic (Yakutia) approved by the Resolution of the Sakha Republic Government of July 1, 2011 No. 286. 
6. Resolution of the Sakha Republic Government of 26 April, 2007 No. 171 “On adopting a procedure of approving investment programs of regulated organizations”; 
7. Resolution of the Sakha Republic Government of 30 June, 2005 No. 404 «”On procedure and terms of forming the united registrar of capital investment objects in the Sakha Republic (Yakutia)”;
8. Resolution of the Sakha Republic Government of 30 June, 2005 No. 403 “On establishing criteria for long-term termination of financing investment projects from the state budget of the Sakha Republic (Yakutia)”.

Tax incentives

One of the forms of investment activity state regulation is to establish favorable conditions by providing tax incentives. 
In compliance with the Law of the Sakha Republic (Yakutia) “On investment activity in the Sakha Republic (Yakutia)”, the subjects of investment activity may seek the following tax incentives: 
- on the income tax of the organizations in the form of reduction by four percentage points of the rate of income tax to be paid to the state budget of the Sakha Republic (Yakutia);
- on the property tax of the organizations in terms of the property newly created, purchased or reconstructed (upgraded) to implement an investment project, and (or) in terms of the property provided for temporary ownership or use in compliance with the financial leasing agreement, and (or) in terms of the property purchased in compliance with the financial leasing agreement;
- on transport tax in relation to vehicles used to implement an investment project.

The incentives can be provided for five years from the start of an investemt project implementation.
In order to stimulate and modernize water supply and draining, the tax benefit has been established for enterprises dealing with withdrawal, treatment and distribution of water and investing capital for these goals. 
In order to stimulate investment activity of oil producing enterprises, the republic has lowered the income tax going to the regional budget from 18% to 13.5%, on condition that the capital is invested for development of natural resources.

In order to ensure timely supply of the Far North and other territories with limited access with necessary resources during the navigation period, and to improve financial situation at water transport enterprises,operating sea-river type vessels, the abovementioned enterprises pay lower income tax at the rate of 13.5% and are exempted from corporate property tax.
Due to seasonal nature of their activity, water transport enterprises are exempted from paying the property tax on their property which is conserved or idle; forestry and timber industry enterprises – on their property which is conserved.

Also, enterprises generating electric power with diesel stations in the north are exempted from the property tax if this activity earns over 70% of the total revenues from production (works, services) sale. 
In order to support local manufacturing in terms of basic production assets, food industry enterprises pay the benefit property tax at 1.1% rate. 
Airports with property worth more than RUR 300 million are also exempted from the property tax. This benefit is aimed at modernizing and reconstructing airport facilities, better working conditions and labor safety. 
To support airworthiness of aircarfts, air transport enterprises which perform 50% and more of socially important passenger traffic and are enlisted as such by the Sakha Government, are exempted from paying the property tax.

To prevent higher tariffs for heat energy, there is a tax benefit on property of utilities and communal services organizations receiving subsidies from the budget to compensate losses; besides, enterprises in this sphere enjoy a benefit on the transport tax in relation to their special vehicles. 
Like it is granted by the federal legislation, there is a benefit for motorways of public use, both republic’s and municipal. 
Given high costs of agriculture, enterprises producing and processing agricultural products are granted some benefits on regional taxes. 
To support small businesses using the simplified taxation system with taxation target being “revenues and expenses”, the tax rate has been lowered from 15% to 10%, the simplified patent-based taxation system has been introduced for private entrepereneurs.

Financial infrastructure

The banking system of the republic is represented by 22 credit institutions, including 4 independent banks, 18 branches of banks of other regions.

Assets of credit institutions of the republic in 2010 totaled RUR 109.3 billion and increased the level of 2009 by 8.6%.

In the insurance market there are 2 republican insurance companies: OAO RIC “Sterkh", and OAO GSMK "Sakhamedstrakh", 11 branches of insurance companies of other regions of Russia.

The branch network of the RIC "Sterkh" and OAO GSMK "Sakhamedstrakh" covers all regions of the republic. Additionally, the regional insurance company came to the inter-regional level, opening branches of the RIC "Sterkh" in Khabarovsk and GSMK "Sakhamedstrakh" in Magadan.

There are 7 organizations with 20 licenses for professional activity in the securities market.

OAO "Republican Specialized Registrar “Yakutsk Fund Center "(YFC) is one of the oldest independent Russian registrars at the federal level in the Far East, carrying out activities in keeping the register of holders of securities since 1993. Its license was issued by the Federal Financial Markets Service of Russia for an indefinite term. YFC is a member of a self-regulatory organization of securities market participants - the Professional Association of Registrars, Transfer Agents, Depositories (PARTAD) since 1995.

OAO "Yakut Depository Center" (YDC) was established on January 26, 1996. Activities: brokerage, management of securities depository activities. YDC is a member of a self-regulatory organization "National Securities Market Association" (NSMA).

Entrepreneurship 
There are 47 thousand small and medium-sized business entities, including 5.1 thousand small and medium-sized enterprises and 41.8 thousand registered individual entrepreneurs.

According to expert estimation (including salaried employees of individual entrepreneurs), the share of employment in small and medium enterprises in the total employment in the economy is 40%.

The turnover of small businesses in 2010 increased by a quarter and is RUR 80.7 billion and the turnover of medium-sized enterprises almost doubled and exceeded RUR 19.2 billion million.

Financial support for entrepreneurs is facilitated through the relevant federal, republican and municipal programs of the funds of entrepreneurship support and development.

Businesses can partly recover expenses incurred during the entire production cycle, including cadastral work and promotion of manufactured products to domestic and foreign markets. Particular attention is given to innovative small companies and companies involved in the modernization of production and its export.

State support areas in high demand are the following: grants, microfinancing, suretyship, property support, educational programs.