Sergei Nekhayev, Vice-Governor of Primorje: “Visa free regime will turn Vladivostok into a tourist hub”
Bright idea of the Ministry for the Development of the Russian Far East to introduce visa free regime for foreign citizens as a part of porto-franco programme was announced in Vladivostok a week ago. Sergei Nekhayev, Vice-Governor of Primorje, talks IAA PortNews through the project details.
— Mr. Nekhayev, the Ministry for the Development of the Russian Far East has brought up for the discussion three bills on the free port. As it was announced, the regional authorities are to forward their proposals on the project within a 10-day period. What do the regional authorities think about the bills?
— The Ministry for the Development of the Russian Far has elaborated three correlated bills concerning the creation of a free port in Vladivostok. They are the draft laws related to the port itself and to the required amendments into the federal legislation and into the Tax Code. Actually, amendments are to be introduced into more than 20 federal laws. It is an enormous work. The law is quite complicated. Our colleagues in the Ministry should be highly appreciated for their elaboration of the bills within such a short period of time. Big job has been done taking into consideration that the idea to grant a free-port status to Vladivostok was expressed by RF President Vladimir Putin hardly more than three months ago.
It is difficult to overestimate the significance of the free port bill for both the Primorsk Territory and for the entire Far East. The economic and social effect from its implementation will also be felt by those who live in the East Siberia and Transbaikalia.
Major sectors the development of which is to be boosted by the free port status are the logistics, ship repair, bunkering, manufacturing, production of goods for export and phasing out of import, agriculture, tourism, construction, innovation and research, etc. The effect will be a combination of the results from the development of basic sectors of economy in the region, balanced development of transport infrastructure and deeper integration of Russian economy into the Asia-Pacific Region.
— Are the Ministry’s projects elaborated in details and are they economically viable? What is the meaning of the proposals from the regional authorities? How will they be considered?
— It is too early to speak about specific social and economic results. Exact estimations of the free port effect on the economy of Primorje and the Far East will be available after the development of documents regulating the law implementation mechanism. The law will provide not only for simplification of customs procedures or visa regime for foreign citizens staying in the free port territory. It also means the changes in the town development, tax and labour codes, introduction of amendments into the legal framework regulating economic activities in different business areas.
Expansion of the free port regime to the territory including both the agglomeration (Vladivostok, Artyem, Nadezhdinsky and Shkotovsky districts) and other territories (Partizansky, and Khasansky districts, Nakhodka, Bolshoi Kamen, Zarubino, Posiet) will let considerably increase the aggregate economic effect. The effect is to be even stronger if the free port regime also covers checkpoints of land and air routes. We want to correlate the draft law with the existing international transport corridors Primorye-1 and Primorye-2 and with the potential of the transport hub at international airport Knevichi.
— What is the further procedure for passing the bill?
— The bill will undergo a detailed elaboration through the public hearing to be held by the Far East Development Ministry together the regional Administration, deputies of the Legislative Assembly, representatives of the interested commercial companies, ports, scientific community, experts. The Territory Governor Vladimir Miklushevsky has set us a task to carry out a comprehensive expert assessment of the bills. According to him, the opinions of all stakeholders are to be taken into consideration.
Under the roadmap, the bill is to be included into the autumn session of the State Duma work by summer. …We hope in December the State Duma will pass the bill and it will be signed by the President. This will let us apply the law as early as from 2016.
— What are the possible residents of the free port?
— The criteria for selecting the residents will be discussed at the public hearings. They can include the logistic companies, companies focused on tourism and recreational sector as well as industry. Specialization of the territory include into the free port zone is not limited so far. The current bill specifies several types of territories – port, industry and innovation & research territories.
— Does the bill provide for changing the federal and regional tax allocation systems? What is to contribute to the regional budget? Which socially significant programmes will be fed through the ‘superprofit’?
— It does basically. But, I would repeat, we will discuss it. Such an ambitious law is a very complicated process. Of course, certain tax and legal regime will be determined which is to facilitate the creation of new export and import focused firms. This, in its turn, will create an environment for the expansion of the tax base. As for the distribution of revenues, it is a prerogative right of the Governor and the deputies according to the established legal procedures. Final result of this project is to ensure the environment for the economic development and this is to be reflected by the growth of the Gross Regional Product of both the Primorsk Territory and the entire Far East region.
— The free port territory is supposed to include 7 territories of Primorje. Does it foresee the creation of an upgraded infrastructure or additional administrative control? For example, will this territory be fenced?
— First of all, it means modernization and port infrastructure development. The form of management is to be discussed publicly. It will be a management company or other structure to run the territory – this issue brought up for discussions and proposals. Of course, there will be no fencing in the form you mean. I would rather speak about selective mechanisms for regulation of tax, customs and visa regimes.
— The visa-free period is supposed to be 72 hours long (or extended to 7 days and more). What examples inspire this decision? What economic effect is expected? What category of foreigners will it cover (businessmen, tourists)?
— The right for a 72-hour visa-free stay of citizens coming by any transport to the free port territory is quite a revolutionary norm. The more so as now we speak about the visa-free stay not only in Vladivostok but also in other territories covered by the law.
Besides, many regional experts call for expansion of this period up to 10 days and it is quite reasonable as a potential investor will not be able to hold enough business meetings during a 72-hour period.
The idea was announced by the Far East Development Ministry but initially it was brought up by our Ministry of Tourism which called for allowing the tourists coming to Russia via the airport of Vladivostok enter it and stay without visas for 72 hours. The draft law has already passed the first reading at the State Duma. If Vladivostok turns into a transport hub we will be able to attract large tourist flows to the region. By the way, almost 1.5 bln people live within a radius of 3,000 km around Vladivostok.
— Does the proposed regime cover export and import of goods?
— It does. The free port territory is to see the development of duty-free wholesale of goods produced by Russia and foreign manufacturers. Besides, there are provisions for the expansion of the eased tax regime to partial processing of import goods coming to the free port territory. Local manufacturer are to have the access to technological chains of such processing.
— How is the visa-free project associated with the development of tourism, culture and service sector, which existing and planned programmes are to boost this sphere development (especially as it sees a continuous declining)?
— I can’t agree with the opinion that tourism Primorje is declining. Starting from the year of 2012 we see a considerable increase of domestic and incoming tourist flows. On the other hand, tourist companies focused on outbound tourism do not meet the growing demand and cannot ensure the quality expected by the tourists.
Today we should provide tourists with a high quality product so that potential tourists would like to return here again and again. Thanks to APEC summit held in Vladivostok the city now has a basic infrastructure for event and business tourism – bridges, opera and ballet theater, Fetisov Arena, Vladivostok forts, Russkiy island with FEFU campus. An oceanarium, a renovated circus and the Hermitage branch are to appear soon. One more growth point of the inbound tourism is the integrated entertainment zone Primorje. I think, participation of Melco and Naga, global leaders of the entertainment industry, ensure the success of this project.
Summer and autumn period in Vladivostok is full of events – various festivals and concerts. Tourist companies just have to make a comprehensive tourist product with a high level of service around all the sights and events. It is to include catering, accommodation, logistics and security. Of course, it is a different scope of work but the economic effect is also different. Each ruble coming from tourism means at least 8-10 rubles for related sectors. Besides Vladivostok, we will talk about the development of tourist products in other municipal entities. There is a background needed for that. For example, eco-tourism is quite a promising sphere.
Interviewed by Evgeny Pankratyev, staff reporter of IAA PortNews in Vladivostok.