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Bait for business
Will concessional lending help attract investment to the Far East?
Another measure to attract investments in the implementation of new projects by the residents of the Far Eastern Development Territories and the Free Port of Vladivostok (SPV) will shortly be a preferential, and at the present time, a fantastically low (up to 1% per annum) bank rate on loans. The corresponding draft government decree has already been prepared by the Ministry of Regional Development. Despite obvious advantages for potential investors, the document leaves a number of questions - for example, it is not clear how the exact banking rate will be calculated in each particular case, and whether the investor will be able to abandon it in case its size does not suit it. How to get this privilege, whether it will be a decisive measure for making investment decisions, and what other factors need to be taken into account, EastRussia found out.
A new measure to attract investments in the Far Eastern Federal District may be the emergence of a preferential bank rate. Reduction in loans up to 1% per annum will occur in case of adoption of the resolution on subsidizing banks, prepared by the Ministry of Regional Development.
According to the draft document, subsidies will be provided to financial organizations for reimbursement of incomes received by them for loans granted at a reduced rate to legal entities and individual entrepreneurs for the implementation of investment projects in the Far Eastern Federal District. In other words, the state is ready to compensate banks for losses related to the lowering of the bank rate on the loan.
To get a loan at a reduced rate in rubles, dollars or yuan, it is necessary for Russian or foreign investors to meet a number of conditions, namely, the proposed project should be completely new and located on the territory of the Far Eastern Federal District, and the investor should be a resident of the TOP, on behalf of an investment project selected in accordance with a special methodology.
The investor must submit an application, which should include a business plan and financial and economic model of the investment project, developed or updated not earlier than 6 months before the day of its submission, in Minskostokrazvitiya. Further, the Ministry will review applications and conduct an auction among authorized banks from the list approved by the Central Bank of Russia. The winner will be a financial institution that offered the lowest rate on a loan agreement.
But in order for the bank to receive a subsidy, this agreement, like the project for which it issues a loan, should be exclusively new for it. For other purposes, including the restructuring of existing loan agreements previously issued for investment projects, the subsidy does not apply.
"Banks that provide such loans will receive a federal subsidy as early as this year. Thus, we will be able to solve one of the main problems that are of greatest concern to Far Eastern investors - the inaccessibility and high cost of borrowed financial resources, "said the head of the Minsk region Alexander Galushka, speaking at the final Collegium of the Ministry of Russia for the Development of the Far East.
The size of the subsidy will be established on the basis of the difference between the ceiling level of the minimum interest rate under the loan agreement and the "preferential interest rate" equal to 1% per year. At the same time, if the minimum interest rate on loans in US dollars and RMB should not exceed 5% per annum, then for a loan in rubles it is calculated depending on the terms of lending in accordance with the RF Government Decree of 20.07.2016 No. 702 "On the application of basic indicators when calculating interest rate subsidization parameters ".
STIMULUS FOR INVESTORS
The possibility to receive a loan under 1% per annum can become one of the effective instruments for attracting investors to the Far East, the press service of the Ministry of Economic Development says, quoting Rostislav Goldstein, a member of the Federation Council of the Russian Federation. In his opinion, the more favorable the conditions for lending, the larger the project that the entrepreneur plans to implement in the Far Eastern Federal District. "Along with the existing preferences, preferential treatment, such cheap borrowed funds for business can become a decisive factor for investing in the territories of the Far East," says Rostislav Goldstein.
One of the new measures to support investors in the Far East was the introduction of a ten-year moratorium providing for the stability of the legal and tax conditions for carrying out activities for residents of the TOP and SPV, who received this status and opened new production before 31 December 2025. From 30% to 7,6%, they have lowered the tariffs of insurance premiums for compulsory pension, social insurance, in case of temporary incapacity for work and in connection with maternity, for compulsory medical insurance, and a minimum amount of investment has been established. At the same time, restrictions on the terms that have elapsed since the creation of the corresponding TOR or the entry into force of the law on the SST will not be taken into account, - the instruction given to the Government of Russia by President Vladimir Putin says.
The government was also instructed to work out the issue of further simplifying the procedure for granting Russian citizenship to foreign investors who carried out an investment of $ 10 million or more on the territory of the Far Eastern Federal District.
Recall that in addition to the reduction of the Unified Social Tax (insurance contributions to the FIU, FSS, MHIF) for residents of TOP and SPV, preferential tax treatment for profits and property (0% for the first 5 years), there is exemption from land tax and the possibility of applying customs free customs zone procedures.
ON BREAST RATE
Currently, residents of the TOP and SPV can also get preferential financing, but completely at other bank rates. In particular, representatives of small and medium-sized businesses in the Far East can use the services of JSC "Russian Bank for Support of Small and Medium-Sized Enterprises", which has developed for them a special program for obtaining a loan in the amount of 3 to 25 million rubles for up to three years to replenish working capital, or in the amount of 3 to 500 million rubles for investment purposes for a period of up to seven years. The lending rate for financing current activities will be 9,6% for medium-sized businesses and 10,6% for small businesses, and for a loan for investment purposes - 8,9% and 9,9%, respectively.
The Development Fund for the Far East and the Baikal Region (FRDV) also provides loans to small and medium-sized businesses, offering loans to replenish working capital (up to three years with a maximum interest rate of 12,5% per annum) and loans for investments (up to 10 years with a maximum rate of 13,5 % per annum). Under the program "Affordable Credit for SMEs" in 2017, the fund planned to finance up to one thousand projects for a total of up to 10 billion rubles.
To the initiators of investment projects, the fund offers loans under 5% per annum, and on these terms as of June 2017 supported 14 investment projects with a total value of 209 billion rubles. Among them: the project for the construction of the Inaglinsky Coal Mining Company Kolmar, the construction of the second stage of the plant for deep processing of soybeans in TOSER Belogorsk, Amuragrocenter LLC, and the development of the Khabarovsk Airport, OOO KOMAKS Management Company. Representatives of these companies told EastRussia, what they think about the forthcoming new preferential treatment.
- The discount rate at 5% will significantly reduce the average cost of borrowed financing for the implementation of the Inaglinsky project and will improve the economy of this project. In addition, the support of the FRDF is an additional guarantee of the reliability of our company for existing and potential partners of the company. And the introduction of a rate of 1% per annum will contribute to improving the investment climate in the Far East and will give an additional impetus to the development of new investment projects in the region, "said Artem Levin, CEO of Colmar LLC.
At the same time, in his opinion, the preferential rate is not the only factor determining the appearance of a new project and its cost.
"One of the key problems is the need to build infrastructure for the implementation of projects, so the preferential rate will allow sending funds that will be released when paying preferential interest to finance the required infrastructure," said Artem Levin.
Vasily Omelyash, first deputy general director of Amuragrocenter, agrees.
- First of all, TORs themselves should be ready for such projects infrastructurally: electricity, roads and other communications should be brought to the place where the project is planned. If money is given and there are no infrastructures, some projects may appear, but it will not become a mass phenomenon, - Vasily Omelyash considers.
In his opinion, taking a loan for 1% will, of course, be profitable, but the benefit will be not only this.
- The banks, as well as the bank's clients, have a great experience of working together. I think in this case the situation will be simpler and will work easier, because the fund has more stringent requirements for escorting transactions than that of banks, "said Vasily Omelyash.
At the same time, one of the most important problems on the way to the appearance of the project is the availability and high cost of borrowed financial resources, according to LLC "UK COMAX".
- The mechanism, which really allows an investor to get an opportunity to use cheap credit funds, can become a breakthrough in attracting investments to the Far East. So, of course, the lower the rate, the more profitable, both for business and for the consumer, "the company representative told EastRussia.
However, in contrast to the investment of FRDF with a fixed rate of 5%, the draft resolution has its own "dark spots".
For example, it remains unclear whether the entrepreneur who initially calculated the financial soundness of his project can refuse to conclude an agreement with the bank after the auction, if the final preferential rate will not suit him. It is also impossible to predict which bank rate the loan will be received by an entrepreneur in each particular case, because no one knows how much banks will be ready to lower rates when they bargain with each other during the auction. Perhaps, these conditions should be laid in the decree itself - for example, there should be indicated the bank margin. Otherwise, the entrepreneur risks getting a "surprise" and will be forced to solve the problem of repaying the loan at a rate that he did not expect at all.