Investments

Investment policy of Lipetsk Region is focused on creation of favourable investment climate, stimulation of private capital raising, improvement of social and economic situation in the region, increasing of Administration’s credibility in the eyes of population and investors.

Lipetsk Region investment attractiveness highlights:

• Favourable geographical location in the center of the European part of Russia
• Railway and automobile lines of Federal significance
• Progressive regional government ready to assist the investors
• Appropriate forms, terms and procedure of state support rendered to investors
• Highly-developed industries including enterprises with foreign shares
• Experience of cooperation with investors and awareness of their interests
• 120% annual average rate of investment growth during the past 5 years
• Developed banking infrastructure
• Highly-qualified operating and administrative staff

Investment climate of the region can be characterised by:

• Stable positive dynamics of investment into capital stock
• Considerable foreign investment inflows in the economy of the region
• Implementation of major investment projects, including those involving foreign capital
• Progressive investment legislation involving a wide range of forms of state support
• High investment attractiveness ratings of Lipetsk Region in comparison to other Russian regions

Top-priority investment trends

Industry is of top-priority for investment attraction, with ferrous metallurgy being the leading industrial branch. Special Economic Zones (SEZs) have been established to enhance development of the regional industrial production:

• Federal SEZ - Lipetsk industrial SEZ with 17 registered residents (January, 1 2010 estimate).
• Regional Special Economic Zones: 4 industrial SEZs, 2 tourist SEZs and 1 agrarian SEZ, with 23 participants registered on their territories.

Lipetsk Industrial Special Economic Zone is one of the most successful projects of the recent years focused on diversification of economy. Top-priority trends of development: machine-building, metalworking, electric machine-building, power plant industry, production of constructional materials.

By the moment, RUR 7.5 bln of investment have been absorbed by the residents of Lipetsk industrial SEZ; 1,400 jobs have been created. In the long view, there is a plan to attract 50 more residents till 2025, which would increase investment volume to RUR 150 bln and create 14,000 new jobs.

Residents of Lipetsk SEZ - the companies with RUR 55.6 bln of declared volume of investment and potential creation of over 4,500 new jobs - are 8 Russian and a number of foreign companies:

Italian companies:

• SEST-LUVE Ltd. – producer of refrigerator evaporators and condensers for trade organizations. Project implementation needs investment of RUR 360 mln and creation of 70 jobs
• Mondial Group Srl Ltd. – producer of commercial and industrial facilities. The volume of declared investment – RUR 763 mln, project involves creation of 206 jobs
• ALU-PRO Ltd. – producer of aluminium shapes with the use of hi-tech equipment. The volume of declared investment – RUR 370 mln, project involves creation of 40 jobs
• Fenzi Ltd. – producer of high-quality glassware sealers with the use of eco-friendly innovative technologies. The volume of declared investment – RUR 550 mln, project involves creation of 50 jobs
• Japanese company Yokohama R.P.Z. Ltd. – producer of automobile tyres. The volume of declared investment – RUR 11.8 bln, project involves creation of 1,328 jobs
• Belgic company Bekart-Lipetsk Ltd. – producer of steel wire cord and bead wire for tyre industry. The volume of declared investment – RUR 3.8 bln, project involves creation of 250 jobs.

Regional special economic zones

The project was launched in 2006 in view to attract investment for development of municipal formations and the region in general. The priorities of the project are as follows: allocation of enterprises dealing with metalworking, construction, food and food processing, automobile production, agriculture and tourism. The total area of regional SEZ makes over 180,000 ha. The planned volume of investments makes about RUR 250 bln, project involves creation of 38,000 jobs.

On the territory of Terbuny industrial SEZ there is Terbuny potter brick-making plant designed to produce 40 mln pieces of ceramic brick a year. Investment projects which involve manufacturing of steel structures, antibiotic and anticancer preparations, construction of sugar mill and cheese-making plant are being currently implemented (joint Russian-French project).

On the territory of Chaplyginskaya industrial SEZ locking accessories plant of Hawle Industriewerke Ltd. (Austria) is now being constructed. As declared by the plant officials, volume of investment required for project implementation will make EUR 7 mln.

On the territory of Dankov industrial SEZ potential residents consider construction of elevator, starch-and-treacle making plant and animal feed mill, recycled paper plant, construction of brick-making plant, enterprise producing cladding stones, paving slabs, kerb stones, construction of grain storage and transportation complex, construction of oil-refinery which is an innovative project for Lipetsk Region.

On the territory of Astapovo agrarian SEZ, a pork production project of Cherkizovo Group is being successfully implemented. Animal production units are located all over the district. Budgets of local settlements have increased significantly due to income tax and land fees receipts. Stimet Ltd - metal structures and insulator producing plant manufacturing several types of products: sandwich panels, plastic windows, insulators - is another participant of the Astapovo SEZ.

The total area of Yelets tourist SEZ makes 764 ha. SEZ participants plan to develop the housing district with its own school and nursery school, reconstruct Petrovsky Park, build a hotel complex and a motel for roadside service.

Zadonshchina tourist SEZ offers favourable environmental conditions, ecologically clean forest and water resources, high cultural, historical and archaeological potential. The project involves construction of 100 to 300 rooms hotels, restaurants, cafes, health centres, tennis courts, a filling station and parking areas with car service center, reconstruction of the existing touristic facilities. The registered participants consider creation of all-weather sports-and-recreation complex, construction of a hotel complex and a cottage village.

The ‘white’ cluster

An industrial cluster for manufacturing household appliances is currently being formed in the region on the basis of CJSC Indesit International, the company with 100% of foreign capital. In April 2004, Indesit washing machines producing plant was put into operation in Lipetsk, its capacity now being 1 mln pieces a year. The main market outlets for commodities manufactured at the local plant are Russia (78% of sales), the CIS and Baltic states (22%). ‘White’ cluster also comprises several small and medium-size companies located in Lipetsk and other Russian regions, which manufacture accessories for "white appliances" and supply them for Indesit International operations.

In October 2005, Indesit Company launched the Center for Household Appliances Logistics, the first in Russia and the largest in Europe. Logistics Center, sited in Lipetsk on the 55-ha territory, is designed to store and distribute Indesit Company output (3 mln. pieces a year) over the CIS.

Indesit is also considering the feasibility of setting up cook-stoves production in Lipetsk Region.

State support

The terms and procedure of rendering state support to those investing in the economy of Lipetsk Region have been specified by the Law ‘On promotion of investment in the economy of Lipetsk Region.’

The companies and organizations can get state support in various forms:

• Property tax and income tax exemptions
• State guarantees of Lipetsk regional government to enterprises and organizations that attract credit resources meant for capital investment

Certain categories of claimants are exempted of taxation, according to the regional Law ‘On corporate property tax in Lipetsk Region’:

• The winners of investment projects contest are exempted from the property tax according to the regional Law ‘On promotion of investment in the economy of Lipetsk Region’
• Organizations are exempted from the property tax imposed for the property being on the balance sheet of regional SEZ. Tax exemption is valid for 5 years since the property has been registered. Corporate property subjected to reconstruction, expansion or reequipment, as well as manufactured or purchased in result of investment projects is non-taxable.

According to the regional Law ‘On application of lower rate of corporate income tax payable to the budget’, tax rate decreased by 4 percentage points is stipulated for the winners of investment projects contests and residents of federal and regional SEZ.

The regional target program ‘On Industrial Development of Lipetsk Region in 2009 – 2011’ involves subsidies for industrial enterprises to recover certain expenses connected with:

• interest payments on credit agreements concluded in order to purchase and install equipment, carry out building and assembly work and commissioning in a manner prescribed by Administration of the region
• interest payments on credit agreements concluded in order to elaborate and introduce innovations into production
• development, introduction and certification of quality management systems meeting international standards
• rent of space at the exhibitions and fairs held in Moscow, Russian regions and abroad

The regional target program ‘Development of small and medium-size business in Lipetsk Region in 2009 – 2012’ involves subsidies for the subjects of small business meant for partial recovery of expenses concerning interest payments on credit use given by credit institutions, and certain part of leasing payments concerning leasing operations meant for implementation of top-priority investment projects.

The regional target program ‘On development of agriculture and regulation of markets of agricultural products, raw materials and foodstuff in Lipetsk Region in 2009 – 2012’ envisages subsidies for the enterprises of regional agro-industrial complex meant for partial reimbursement of expenses concerning interest payment on investment credits given by Russian credit institutions, and loans given by agricultural credit consumers’ cooperative.

Pledge fund of Lipetsk Region assists the subjects of investment activity with credit redemption. The administration of the region grants state guarantees for attraction of credit resources for enterprises and organizations carrying out investment projects in Lipetsk Region.

Investment rating of Lipetsk Region

In 2009, the international rating agency “Fitch Ratings” confirmed long-term ratings for Lipetsk Region in national and foreign currency at “BB” level and short-term rating of the region in foreign currency at “B” level. The agency confirmed national long-term rating of the region at “AA-(rus)”. All long-term ratings of the region have stable outlook.

“Expert RA” rating for 2008-2009 showed high degree of investment attractiveness of the region and minimal risk level. Lipetsk Region has maintained its place in Top 10 Russia’s regions with favourable investment climate for the 5th year in a row. It leads in the nomination “Stably low investment risk in 2003 – 2008” and ranks second in “High-efficiency of public management” nomination, and third in “Best social climate” nomination.