Investments

Kaliningrad Region sees stable increase in the volume of investment inflows, as the region offers a wide variety of investment opportunities for Russian and foreign investors. Representatives of more than 70 countries are being currently involved in the regional investment projects.

Investment highlights

Specific business environment stipulated by the Special Economic Zone (SEZ) Act:

• SEZ residents are exempted from the income tax and the property tax for the first 6 years of their business operations. During the next 6 year period residents pay 50% of these taxes.
• Companies registered in Kaliningrad Region (except SEZ residents) have the right to import and use the imported goods within the region without any custom duties and tax paying
• SEZ residents have a guarantee against adverse legislative changes – normative legal acts, enacted after the start of project funding and imposing facilitated tax burden or prohibitions/restrictions on investing, can not be applied to SEZ residents for 25 years.
• For entry to the Kaliningrad region of foreign citizens, representatives of the residents, investors and persons invited to discuss opportunities for cooperation in the Special Economic Zone, the Russian Federation Government establishes a simplified visa application procedure - visa can be issued directly at the state border crossing of the Russian Federation when entering Kaliningrad Region.

Proximity to European markets
Kaliningrad Region has common borders with two EU states - the Republic of Lithuania (northern and eastern border) and Poland (southern border). This aspect of the Kaliningrad Region geography affects dynamics of the region′s foreign trade turnover, which has grown tenfold since 1999.

Access to the Baltic and Atlantic sea routes
Kaliningrad port is the only Russian ice-free sea port on the Baltic Sea. Its wharfs are designed for Ro-Ro vessels and passenger vessels, train ferries, container and general cargo shipping. The port renders custom duties, frontier duties and all other essential procedures.

Strong tourist and recreational potential
Mild climate and beautiful natural landscapes, well-developed tourist infrastructure and unique natural resources of  "The Amber Province" attract numerous visitors from Russia and abroad. The tourist flow has grown by 10-12% annually for the last few years. Initiatives for development of a Gambling Zone in the seaside resort area and a Tourist & Recreation Special Economic Zone in Curonian Spit (included in UNESCO World Heritage List) will promote further growth of tourist attraction of the region.

The growing potential of transport system
The volume of freight turnover in the region′s port and railway system has been growing steadily, reaching 15.6 million and 19.4 million tons respectively in 2007. A certain number of infrastructure projects (air, railroad, sea and river transport) will get funding to continue development of region transit potential, under the Federal Target Program.

Support to investors by the regional government 
The open door policy implemented by the regional authorities aims to support and develop business, expand interregional and international contacts and create favorable investment climate.

Stable environment for long-term decision making
The priorities of regional economic development are set out in corresponding program documents, thus contributing to creation of stable conditions necessary for long-term forecasting and justification of investment decisions.

Investment priorities

Contacts between public and private business tend to develop more active lately. Partnership between the government and business structures is now viewed as institutional and organizational alliance between the state and private companies, banks, international financial organizations and other institutions, ordered to implement significant projects.
 

The following projects are identified as priorities for public-private partnership (PPP) in Kaliningrad Region for 2010:

• Reconstruction of water supply system and environment protection in Kaliningrad
• Development of water supply and waste water treatment systems in municipalities on the Baltic Sea coast

The projects objective is to render proper service of water supply and waste water management to local population, meeting requirements of the Convention on the Baltic Sea protection (HELCOM) on the territory of Kaliningrad Region.

A project on foundation of Kaliningrad Innovation and Investment Technopark has been launched within the framework of the National Program “Establishment of Hi-Tech Technoparks in the Russian Federation” approved by Decree of the RF Government No 328-p dating 10/03/2006.

The project involves realization of PPP mechanism and creation of modern social, business and innovative infrastructure for practical application and commercialization of R&D.

The Concept of Industry Development of Kaliningrad Region envisages establishing several industrial zones in different municipalities. The Gurievsk Industrial Zone near Poddubnoye settlement of the Gurievsk municipality is a pilot project. It has been planned to create utility infrastructure ordered to supply almost 40 newly built processing plants on 229 hectares of the land owned by the region.

Examples of successful investment projects:

Roskon, Ltd. – next-generation Fish-cannery Complex

In January 2008, Roskon company finished construction of a hi-tech Fish-cannery Complex in the town of Pionersky (Kaliningrad Region). The Complex specializes in high-tech production of oceanic fish cans. Monthly rated production capacity makes 8 million cans. Three manufacturing lines are involved in production of the assortment unique for Russian market.

Considerable volume of project investments (over 500 million rubles) allowed Roskon, Ltd. to obtain the status of a resident of the Special Economic Zone, which provided preferable taxation treatment for the first few years of the company’s operations.

Favorable geographic location played the key role in making a decision to build the complex: accessibility of an ice-free port, proximity to a motor-road and railway which ensures reliable and timely delivery of primary materials and end products.

Due to its high social importance, the project was supported by municipal authorities who actively contributed to all the stages of its implementation. Today Roskon, Ltd. is a successfully operating production company that provides dozens of jobs for local people plus additional tax proceeds to the budget.

Kaliningrad-Domizil

Kaliningrad-Domizil company was founded in 2001. The main objective of the company is to purchase, repair and reconstruct property and manage the subsequent leasing to Russian and foreign businessmen, diplomats, representatives of both public and private organizations as well as individuals.

Together with the positively developing Russian legislation on purchase of real estate in Russia, including that executed by foreign investors, the company’s housing has increasingly grown. Successful marketing of objects became possible to the great extent due to active leadership of the city and region of Kaliningrad in development of the region as a Special Economic Zone.

In 2001-2009, Kaliningrad-Domizil company evolved into the largest and most competent Kaliningrad company specializing in the rent of high class residential property.

Produkty Pitania - one of Russia’s major manufacturers of frozen ready-to-cook foods

Produkty Pitania company was founded in 1994. In 1998 the company launched construction of its production facilities in the city of Kaliningrad. Construction of the plant became the first experience of foreign investor of such a level acting in Kaliningrad Region, which signaled an economic revival in the region, additional impetus in solving the infrastructure problems and creation of new jobs. The company handled transport and engineering infrastructure problems through additional investment in building refrigeration warehouses and traffic interchange to enable continuous cargo flow throughout Russia.

Today, after 10 years of active and successful development, the company is a large manufacturing complex with the total area of 56,000 sq. m., including workshops, distribution centre, refrigerators, warehouses and administrative buildings. Capacity of plant production facilities makes 13,000 tons a month. Manufacturing lines are represented by such famous companies as Convenience Food Systems, Stein, FrigoScandia Equipment, Dominioni.

At present, Produkty Pitania is one of the major employers and investors in Kaliningrad Region, engaging 1,100 people, 900 of whom are employed directly in manufacturing.

DSV Transport

DSV Transport is a well-known company, competent in logistics and transportation services. At present, the company is implementing a large-scale investment project in Kaliningrad on construction and operation of a parking lot for international freight vehicles with warehousing areas for storage of industrial commodities.

In April 2008, DSV Transport became a SEZ resident. As of today, the total amount of investments under the project has amounted to RUR 500 million, which exceeds investment intentions originally declared in business plan by RUR 140 million. 25% out of this amount refers to investment in infrastructural objects, which has made it possible to handle all the infrastructure problems (roads, water supply, wastewater treatment, power supply, heat supply). The project site 17 hectares in area will be developed in three stages, with 7.5 hectares to be developed in stage 1. Stage 2 will involve development of another 3.5 hectares with construction of motel, fuelling station and parking area for third parties′ international road transport. In stage 3, warehousing facilities for storage of various types of commodities, including customs temporary storage warehouse, will be constructed on 6 hectares of land. The RF Association of International Road Carriers (ASMAP) is under consideration as a potential partner and co-investor for stages 2 and 3, with other solid proposals available as well. The implementation is likely to start up in autumn 2009 - spring 2010, the exact date depending on development of the global economic situation.

The official opening ceremony of the construction site took place on June 20, 2008. At the end of construction, Kaliningrad will obtain the first Class A modern warehousing complex of common use, where clients will be offered a certain range of services at the highest level meeting international standards.

Investment attractiveness of the region
According to estimation of "Expert RA" (one of the leading rating agencies), investment rating of the Region is 3B1, which stands for low potential, moderate investment risk level. The region takes the 5th place in investment risk index and the 30th place in investment potential in investment rating indices. The lowest investment risk is that of social character. The most significant investment potential is infrastructural one.