Chinese settle down on Kama River: Haier agrees to construct washing machine factory in Tatarstan

Whether Timur Shagivaleyev will be able to attract Sergey Kogogin’s client from the Celestial Kingdom

Chinese settle down on Kama River: Haier agrees to construct washing machine factory in Tatarstan Photo: chelny-biz.ru

As Realnoe Vremya found out, the bigger domestic appliance producer of China – Haier – finally settles down in Tatarstan. The Haier international office in Qingdao agreed to construct the second factory in the republic – it is a washing machine factory. But Haier has not chosen the place of its residence: Alabuga SEZ can win the future production over having taken it from Master Kama Industrial Park where Haier fridges are already assembled.

Haier agreed to open the second factory in Tatarstan

Realnoe Vremya's correspondent knew about the upcoming and soon appearance of the second ''baby'' of Haier in Tatarstan during the 6 th United Russian – Communist Party of China Russian-Chinese forum where the administration of Qingdao was among governors of the five biggest provinces of PRC.

The Haier headquarters is located there. This is why the negotiations on the opening of the second factory, which was announced as early as 2016, developed during business meetings in the Tatarstan Investment Development Agency (TIDA).

In a rapid-fire interview to Realnoe Vremya, director of TIDA Taliya Minullina told the international office of Haier agreed to construct the washing machine factory in Tatarstan. According to her, a working meeting on the expansion of Haier's presence in the republic is featured for 1 June in Kazan when the road map of the new construction is to be defined. Haier representatives confirmed this information on 24 March. They said a new juridical person will be registered in June, the very factory will have a full cycle washing machine production. The volume of investments has not been defined yet.

Taliya Minullina told the international office of Haier agreed to construct the washing machine factory in Tatarstan. According to her, a working meeting on the expansion of Haier's presence in the republic is featured for 1 June in Kazan when the road map of the new construction is to be defined. Photo: Oleg Tikhonov

7 years to win Haier's trust

Haier state transnational corporation is the first Chinese investor who has directly invested in the economy of Tatarstan. In April 2016, the company opened the first fridge factory in Russia with a capacity of 250,000 fridges a year and became a resident of Master Kama Industrial Park (KIP) in Naberezhnye Chelny. According to TIDA, the volume of investments was $55m.

''The volume of investments is not big, of course,'' Taliya Minullina noted. ''But not the $55m but the fact that they bring their suppliers and partners here is important, of course,'' she expressed hope for better cooperation with the Celestial Kingdom. This is why the regional authorities were happy about the decision to construct the second factory because Chinese are quite tough negotiators.

''After approval of the decision, the factory was built within 16 months,'' she told. In some respect, they resemble Russians who prepare slowly but go fast. They decided to build the second factory one year after the launch of the first one.

The arrival of Haier caused an acute and painful reaction of Pozis – a Tatarstan fridge maker. Its director Radik Khasanov offendedly emphasised the media that the Chinese producer will use tax preferences, while he will still have to pay the treasure as usual, which creates unequal economic conditions. Indeed, after Chelny became a priority development area in January 2016, Haier got a bunch of tax concessions: during the first year, the company pays 5% of income tax instead of a standard 20% rate, land and property taxes were reset, insurance payments to social funds were reduced threefold. A very low rent payment – 93 rubles for 1 square metres of production sites while the standard rate is 106 rubles for 1 square metres – was another presidential present.

As Rental Department of Master KIP told, nowadays Haier Electrical Appliances RUS rented 23,300 square metres until 2047. In May last year, Haier director to Russia and CIS countries Sun Zhenhua promised to open the second fridge assembly line, which has been done.

A very low rent payment – 93 rubles for 1 square metres of production – was another presidential present. Photo: prav.tatarstan.ru

Between Chelny and Yelabuga

However, Master, which became a platform for Haier's entrance to Russia, is unlikely to capitalise the next tranche of the Chinese investments. As Realnoe Vremya found out, the company is choosing between two federal tax regimes provided by Master KIP and Alabuga SEZ. Haier representatives confirmed the information.

''We are not having direct negotiations with Haier on signing of a rental agreement,'' commercial director of Master KIP Marsel Nurlygayanov said. ''They know about our possibilities well.''

According to him, the head company is completing the renovation of the stopped production sector of KAMAZ Engine Factory with a capacity of 170,000 square metres. It will be ready in July this year, so this site can be considered as a fallback for the Chinese company if the negotiations with Alabuga fail.

Launch moment: customs privileges

The latter has an important trump card – tax privileges. The law on SEZ adopted in 1996 allows importers to bring spare parts from Europe and China without customs duties and fees, VAD and then bring ready products made of foreign spare parts without duties. Considering that Chinese appliances consist of 80% of foreign parts, it becomes very profitable.

''We are ready to confirm the interest of Alabuga SEZ in such a big and famous resident as Haier and ready to help in accomplishing the project on our site,'' director of Department of Corporate Affairs of Alabuga SEZ Mikhail Mironov. According to him, the company is ready to provide the resident with both land for construction of its own enterprise and ready production sites for rental. But Alabuga SEZ doesn't comment the fact of negotiations. ''We are not able to comment the negotiations with potential investors. Information about the project will be published as soon as it reaches the special economic zone's expert council,'' Mironov emphasised.

The final decision on location of the second factory in Tatarstan will be made during the visit of the executives of the Chinese corporation to Russia. Photo: prav.tatarstan.ru

However, the final decision on location of the second factory in Tatarstan will be made during the visit of the executives of the Chinese corporation to Russia,'' Realnoe Vremya was told by the Haier representatives.

''Now domestic appliance market is becoming more marginal. This is why the foreign investor is trying to reduce costs,'' representatives of the Association of Trading Companies and Manufacturers of Electrical Household and Computer Equipment Anton Guskov explains. ''Unfortunately, the majority of spare parts comes from abroad. This is why any economy on spare part supplies becomes an important advantage.''

By Luiza Ignatieva