“We would like every investor could finance, for example, the construction of a road”
The new initiative of the ministry of economic development of Russia should help to collect more taxes from the PSEDA residents to the city budget
The residents of the PSEDA in Naberezhnye Chelny have already collected 3,5 billion rubles of taxes, but the city received only 90 million of them. For this reason, the authorities are waiting for the implementation of the new initiative of the ministry of economic development of Russia — TIF, according to which the residents will direct most of the taxes to local budgets. The correspondent of Realnoe Vremya find out with what productions China, Italia or the US may enter of are entering Naberezhnye Chelny, how the recruitment of new residents has stalled due to the cancellation of health insurance benefits, and why the automotive city cannot be compared to a third world country where the civilized countries “dump” their “dirty” productions.
3,5bn collected, 90m received
The number of single-industry towns in Russia today — 319, 89 of them received the status of PSEDA, which employs 385 residents (companies), 14% of them, or 85 companies — in five PSEDAs of Tatarstan. 70% of all residents are in Naberezhnye Chelny. The share of residents of the PSEDA (the territory of advanced social and economic development — a preferential zone for businesses) in Naberezhnye Chelny today — 7% of all shipped products of the city — the products worth 5 billion rubles were shipped only in the first quarter, Eldar Timergaliev, the deputy head of the Executive Committee of Naberezhnye Chelny, supervising the local PSEDA, told Realnoe Vremya.
In total, 3,5 billion rubles have been collected since the inception of the PSEDA in all budgets, but the city itself received only 90 million rubles in taxes. The residents received benefits of 1 billion rubles, so the “budget efficiency is positive”. 6,300 jobs have been created, 4,028 of them are occupied by the residents of Naberezhnye Chelny, with an average salary of 40,000 rubles (in the city the average salary is 37,000 rubles). By the end of the year, 13 enterprises are planning to open production facilities, 15 residents have come since the beginning of the year. 70% of all 40 residents of Naberezhnye Chelny are small businesses, which the city authorities are trying to rely on.
Nevertheless, the best economic performance belongs to large companies, including Chinese Haier and local Tatelektromash. These are the main economic results of the state's attempt to diversify the economy of the motor city, which still depends on the situation of KAMAZ.
Who are always eagerly awaited in Naberezhnye Chelny’s PSEDA
Timergaliev separately highlighted opened this year Zias Machinery Povolzhye PLC (production of mounted systems), Cemmarket Kama PLC (a subsidiary of Evrobeton Group), KAMA Research and Production Enterprise (production of compensators), Kama-Trade Tatarstan (metal-working centre for EPS metal refining). In August, the opening of the industrial park of Chinese Haier for the production of washing machines is expected with the participation of Tatarstan President Rustam Minnikhanov. The founder of the Chinese corporation Zhang Ruimin, who is giving lectures in Kazan on the business model of his company, is also attending the opening. The business model should seem interesting to Tatarstan businessmen, Timergaliyev believes that thanks to its implementation on American General Electric, bought by Haier, the demand has increased by 30% in a year.
In addition to Haier, this year they are also expecting Khimresurs company, “the strategic resident”, which will produce epoxy resin, today purchased abroad, and the new production of sports equipment by the company Zaryad (50% of which has already been purchased by the subsidiary of Rosatom GC — UMATEX), Khimresurs can also supply epoxy resin to it. Fourth, the production of automotive components of the Italian company Koenig Modulo Ru is expected to open in Naberezhnye Chelny: the Italians will concentrate all their production facilities existing in the Russian Federation in the automotive city. And finally, the food production of Sergey Akulchev — Choko Ray PLC.
In the future, the PSEDA may be extended with the large American company InEnTec engaged in the production of plants for waste processing in a closed-loop system without emissions, with a 90 per cent localization in Naberezhnye Chelny. The company representatives have already taken part in the meeting with the leadership of Tatneftekhiminvestholding and the president of the Republic of Tatarstan. Initially, the Americans planned to open the production in India and Vietnam, now they are looking at Tatarstan and Naberezhnye Chelny. The authorities of the city recognize that the majority of residents are subsidiaries of the already existing companies: it is easier to open new ones for the latter, and it is difficult and even impossible for newcomers to start from scratch satisfying all the conditions for PSEDA. Usually, Timergaliev said, new production facilities are opened by former “resellers” who previously purchased goods abroad and resold in Russia, but then, in order to expand, they decide to start their own production.
How to collect more taxes from residents to the city budget
Timergaliyev also commented on the small amount of taxes that the city receives, from the personal income tax — 90 million rubles. First, he noted, the city, in addition to taxes, receives more jobs, and second, develops production and new competencies at the local level. Nevertheless, the “tax issue” depresses the Naberezhnye Chelny authorities:
“We would like each resident and each investor opening productions in the PSEDA understood that this money in a normal, commensurate part goes to the local budget, so that they were more flexible and could finance, for example, the construction of a road to a new enterprise or to invest in social infrastructure,” he admitted.
Naberezhnye Chelny hopes for a new initiative of the ministry of economic development of the Russian Federation, whose head, Maksim Oreshkin, at a recent meeting of single-industry towns in Togliatti spoke about the formation of the new tool — TIF (even the definition is unknown yet, to say nothing of the parameters of the programme), under which a significant part of the residents of TIF will come to local budgets. Naberezhnye Chelny will definitely apply for this programme, said the deputy head of the executive committee.
Why the motor city is not a “third world country”
We asked Timergaliev whether it turns out that as a result the motor city is turning into “a country of the third world” where the companies locate their productions, pollute the environment, but give almost no money in the form of taxes and the benefit is received by businessmen from neighbouring regions and countries. He believes it not to be so, and “it is necessary to think strategically”.
“It’s wrong to talk like that! Of course, we need to attract companies that do not harm our environment. But we can’t create our own brands without the formation of high-quality suppliers of components. What is the advantage of Haier? It is a global brand with very high-quality requirements. Russian companies have to buy new equipment to become its supplier and produce goods of twice the quality. As a result, we have formed a chain of quality suppliers of components. And this is the basis and foundation so that we can create our own brands in the future — “made in Naberezhnye Chelny”,” says Eduard Timergaliev.
He reminded that Germany before the Second World War was also “like China today” by the quality of production, the best goods were considered the goods produced in England. Now “made in Germany” is an indicator of a quality brand. Everyone looks up to Germany in an attempt to diversify the economy of a single-industry town: according to Timergaliev, it took more than 30 years for the Ruhr to fully diversify.
The Influx of residents has stalled due to the cancellation of insurance benefits
The PSEDA has its own problems so far: since the beginning of the year insurance benefits to residents have been cancelled — in Naberezhnye Chelny they hope that it is “temporarily”. Now Naberezhnye Chelny is waiting for changes in the Tax Code of the Russian Federation to return benefits to the territory of the PSEDA for at least 5 years, Deputy of the State Duma of the Russian Federation Alfiya Kogogina is going to lobby for the interests of single-industry towns on this topic.
At the same time, new companies will have to pay insurance payments with the salary of 40,000 rubles immediately, no matter whether the production has already been built and launched or not: while income tax will have to be paid when the profit only appears (unfortunately, there is no information about how many residents have already reached the break-even point so far).
As a result, the management of the PSEDA is now forced to work with only five companies, and only two of them are ready to invest 100 million rubles in production and start working without insurance benefits: it is a business for the production of gas equipment and a company from Sverdlovsk Oblast (glass industry) with a turnover of 6 billion rubles, which is also interested in the production in Naberezhnye Chelny, despite the lack of insurance benefits. Three more companies — potential residents will wait for insurance benefits.