Inefficient Special Economic Zones Will Be Closed

The RF Ministry of Economic Development is ordered to consider the issue of closing down inefficient special economic zones (SEZ).

Also, it was instructed to suspend the process of establishing new SEZ until development and introduction at the legislative level of unified approaches to establishment and operation of such zones with identified disadvantages taken into account.

The inspection of SEZ management companies carried out by the Accounts Chamber in 2014–2015 established facts which point to inefficiency of special economic zones. It is to be noted that in the past 10 years Rb 185bn was allocated out of the federal and regional budgets on development of special economic zones. At the same time, only 18,000 jobs were created in the territory of special economic zones (instead of the expected 25,000 jobs).

As a result of ineffective administrative decisions, budget funds allocated for establishment of some SEZ exceeded by far the actual needs. As of 1 January 2016, the volume of federal funds unutilized by management companies amounted to Rb 24.8bn. It is to be noted that management companies used to be active in placing temporary available cash funds in the 2006-2015 period and received the aggregate interest income of Rb 29.3bn.

The Accounts Chamber’s inspection identified the low level of substantiation of allocation of budget investments. Also, it was established that in the past few years the financial position of a number of management companies was getting worse, expenditures on maintenance of completed projects increased while sources of funding were not determined.

It is to be noted that special economic zones were relatively efficient in Elabuga, Lipetsk, St. Petersburg, Zelenograd, Dubna and Tomsk. In other SEZ, there is a lack of residents. In 50% of SEZ (16 out of 33 as of 1 January 2016), long-term development plans were not approved. Commissioning of infrastructure projects usually falls behind the schedule.

Revision of the approach to special economic zones is long overdue. On the one side, they do not always proceed from competitive advantages of one or another territory, while, on the other side, SEZ have to compete with regional investment projects established by constituent entities of the Russian Federation, territories of advanced development, as well as industrial parks and technological clusters. Most probably, some of SEZ are to be closed down and other mechanisms of territory development should be considered.

Andrei Korytin, Junior Researcher, RANEPA