09.03.2006
Foreign Investment Volume in St. Petersburg in 2005 Grew 43.9% Against 2004

“Last year’s foreign investment volume in the economy of St. Petersburg amounted to US$ 1.417 bln. Against 2004, the foreign investment flow grew 43.9%. FDI grew 2.2 YOY. We are happy with the fact that business has voted for St. Petersburg with rubles, dollars, yens. At the same time, the share of FDI in manufacturing companies’ fixed assets is growing significantly,” said Vladimir Blank, chair, St. Petersburg Committee for Economic Development, Industrial Policy and Trade (CEDIPT).

Manufacturing industry is leading in attracting foreign capital with 67% of the total foreign investment volume. The most attractive for foreign investors are machine building and metal processing as well as food industry. The largest investments come to St. Petersburg from the U.S. (19.4%), Cyprus (15.1%), Finland (10.5%), the Netherlands (9.4%), Mexico (9%), UK (8.3%), Sweden (8.1%), a. o. CIS countries invested US$ 2.9 mln. in St. Petersburg, 2.1 mln. of which came from Ukraine with 99.2% invested in machine building and metal processing.

“The Government of St. Petersburg considers the investment figures as a proof of the fair rating by Expert RA rating agency that recently rated the city high in three nominations,” Blank said.

The city’s growing investment attractiveness has been proven by leading international rating agencies for the last two years. Russia’s biggest independent rating agency Expert RA recently rated our city high in three nominations. In the principal nomination “The least investment risk in 2004-5”, St. Petersburg was rated first (as a comparison, Moscow was the 9th). In the additional nominations “The best financial situation” and “The best social climate”, St. Petersburg was rated third and first correspondingly. According to Blank, that indicates that St. Petersburg Government’s efforts have become visible at both national and international levels. “For the city, it means that investors are more and more willing to build their businesses, to invest their money in St. Petersburg,” Blank said. He stressed that it also means more money for the city budget and residents.

Standard & Poor’s has reviewed St. Petersburg’s rating trend forecast into “Positive” due to growing income and capital expenditures. St. Petersburg ratings level is supported by low debt level, high financial figures with budget profit after capital expenditures and growing income, economy growth and professional experience in debt management. Debt structure has also improved as compared with late 90’s and is now less subjected to currency risks. The city’s well-tuned debt management system is one of the best in Russia and Central and Eastern Europe.

To individually accompany industrial investment projects and reduce the approval time, a city-owned enterprise “City Industrial Investment Agency” has been established. 155 would-be investors turned to the agency in 2005, 47 agreements with potential investors were made.

Among the successful projects of new industrial enterprises, there were Elcoteq having launched a factory to manufacture electronics equipment, and Pepsi Bottling Group with new warehouse facilities.

In 2005 St. Petersburg was among the winners of the federal competition to create a high-tech special economic zone (SEZ). The St. Petersburg SEZ will be located on two sites: Neudorf (ca. 30 ha) and Novo-Orlovsky Park (ca. 170 ha). The SEZ will provide additional investment flow, high-tech industry development, more jobs and more budget influx. It will also add to St. Petersburg’s competitiveness. The SEZ has been designed specifically for high-tech industry. According to the Russian legislation, the SEZ is created for the term of 20 years. Key aspects of the SEZ’s investment attractiveness are tax incentives, complete infrastructure development of the territory, special customs regime. It is positive and strategically important that as a result of high-tech enterprises coming in the SEZ the city will get about 15 thousand new jobs. St. Petersburg will soon adopt new legislation granting city tax exempts to SEZ residents, including land, property and transport taxes. The SEZ residents will also be granted profit tax exempt in its St. Petersburg part of 4% (thus making the tax rate 13.5%).

In 2005 the City Government was conducting an active investment policy. As a result, over 10 memorandums and investment agreements were signed with such companies as Shanghai Industrial Investment Company, Severstal, Toyota, Technopolis, Gazprom, Rautaruukki, Alcan Packaging, Bosch Siemens, for the total investment amounting to over US$ 2.5 bln.

The most important is that St. Petersburg Government is increasing capital investment and financing of the infrastructure needed to establish and develop industrial zones and territories, build and reconstruct municipal objects, and create favorable investment environment. In 2006 the City Government more than trebles capital investments and those into the city infrastructure totaling RUR 26.8 bln. comparing with RUR 8.454 bln. in 2003.“Such giants as Toyota, Elcoteq, Severstal, Bosch, Russky Standart, Pepsi, Knauf, Alcan having come to the city to launch their investment projects in the last two years are the best proof of St. Petersburg Government’s righteous investment policy,” Blank said.

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