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The city is ready to accept investments
Recent changes in the St.Petersburg investment climate inspire hopes that the city is going to become an attractive object for investments. This process is, of course, dependent on the efficiency of St.Petersburg authorities in their creation and application of the effective investment policy implementation mechanism. A part of the measures required have been already worked out within the framework of the city economy development and stabilization programme and cover the time period up to the year 2000. Some other measures are already in effect, whereas still other ones are to be legally approved of in the near future. A law has been adopted to reduce the tax rate on industrial enterprise profits by 20% percent. One of the lowest profit tax rates in Russia is being established here for stock exchanges, brokerage houses, banks and insurance companies, taxes for highway users and vehicle purchases have been reduced from 10% to 2%. The simultaneous creation of such investment insurance funds as a guarantee fund, a mortgage fund and that of initial financing has also started. The state investment company (SIC) has been organized and is going to search for funds to be invested into highly profitable projects in the light and textile industries. Such free economic zones as “Pushkinskaya”, “Northern Shipyard”, “Harbour”, “Polustrovo” having already paid out $1.6 million in the excess of taxes remitted before privelege regime introduction, are still being strengthened. All the above caused changes in the 1996 investment flow. The changes are connected with the growth of investments in the production sphere and, unfortunately, reduction of social sphere investments . Out of the whole volume of investments amounting to 11 billion rubles foreign investments make up 9% , which are mainly directed to the food and tobacco industries, transport, power industry, trade and dining food industry. In spite of the complex economic situation, no outflow of foreign investments from St.Petersburg is observed. Of course, the whole volume of foreign investments is not very high for such a big city. But potential opportunities and evident trends being considered, we can expect entrepreneurial and financial circles both from both East and West to be more interested in St.Petersburg in the near future. Nowadays over 2500 joint ventures have been registered in St.Petersburg (with only 150 being from the C.I.S.) and there are apparent changes in the investment structure as well which testify to the fact that investors become more and more daring in placing their capital, with USA, Germany and Finland leading in this process. Looking at the nearest future of the city and predicting further investment growth and economy development, one should take into account the geopolitical status of St.Petersburg in the world system of economic links. This status brings about beneficial opportunities for creating a major trade-transport centre on the banks of the Neva, and its becoming the main link between the European Union and Russia. Even nowadays EU is responsible for 35% of Russia’s turnover including 32.8% of exports and 38.5% of imports. However, the EU-Russia partnership and co-operation agreement ratified at the end of 1996 provides favourable conditions for further trade development. Besides that St.Petersburg may become one of the key points in the transport corridor from Scandinavia to the Black and Mediterranian Seas. On the other hand, there is much evidence testifying to the trade volume growth between the West and South-Eastern Asia, that is going to cause a certain influence on the infrastructure of St.Petersburg. An additional opportunity thus emerges for developing a number of transport and cargo handling services in the city. Of course, there are also fairly good prospects in other branches of the city economy in which there are specific developments and projects to be provided with priority investments in 1997. In industry it concerns the reconstruction and modernization of separate production facilities as well as the broadening of competitive ones. In the fuel industry the main attention is paid to the creation of a petrol station system with a developed infrastructure, in the power industry — to the modernization of thermo-electric plants, in the trade and dining food industry investments will be directed for the expansion of wholesale trade, warehouses, customs terminals, as well as for the construction of a major trade centre. Foreign investments will be of crucial significance in the realization of building reconstruction projects in the city centre. As for the general investment climate in St.Petersburg in 1997, the growth of the off-budget finance sources is expected, with the latter amounting to 83% of the whole volume. Foreign investments are going to grow at a faster rate, credit share growth is also expected, with long-term credits being involved as well. If stabilization trends in the economy are preserved — and there is much evidence that they do exist — then the whole investment volume may double and amount to 400 million dollars, that is 15-17% of the whole investment volume to the city economy. We consider this level as quite realistic and believe it to be essential for the economic recovery of the city.
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