Communique of the 22nd Session of the Foreign Investment Advisory Council in Russia

(Moscow, 20 October 2008)

The Twenty-Second Session of the Foreign Investment Advisory Council was held in Moscow on 20 October 2008.

In his address, Russian Prime Minister Vladimir Putin noted that the Foreign Investment Advisory Council session was being held at a difficult time for the world economy. And this made it all the more important, the Chairman of the Russian Government stressed, that attendees, major international investors on the Advisory Council, looking realistically at the world investment market, maintain and develop their business in Russia and continue an active dialogue with the Russian Government to further improve the investment climate and business conditions for entrepreneurs.

The attendees noted that the Russian economy has been developing at a rapid pace for quite some time. Russian GDP growth in 2007 was higher than initially forecasted and amounted to 108.1%. In 2007, Russia was ranked 7th in the world in terms of GDP by purchasing power parity (more than USD 1,900 billion), behind only USA, China, Japan, India, Germany, and Great Britain. The Russian economy has a substantial margin of safety as well as mechanisms in place for overcoming the world financial crisis with minimum losses.

On the whole, Russia is maintaining a quite favorable economic situation for long-term investments. Measures are being taken to stimulate investment processes. Foreign investors taking part in the session appreciate the Russian Government’s steady commitment to improve business conditions, and they have a high opinion of the efforts being made to ensure sustainable economic development and stabilize the financial market.

FIAC member companies were actively involved in formulating proposals with respect to draft laws and regulatory acts that determine business conditions.

The year 2008 has seen the completion and passage of the Law "Concerning the Procedure for Foreign Investments in Enterprises of Strategic Importance for National Defense and State Security", establishing a legal framework and mechanisms for foreign investors acquiring interests in such enterprises.

Amendments to the Law "Concerning Concession Agreements" have been passed, and the Statute "Concerning the Investment Fund of the Russian Federation" has been amended to improve investment conditions based on principles of public-private partnership.

A draft law has been prepared amending the federal laws "Concerning Banks and Banking Activities" and "Concerning the Central Bank of the Russian Federation – the Bank of Russia" to improve the conditions for risk management and banking supervision on a consolidated basis.

The Statute "Concerning the Insurance Reserves of Non-State Pension Funds" has been approved.

A draft government decree has been prepared "Concerning Application of Import Customs Duties on Auto Parts Imported for Assemblies".

A conception for the draft law on amendments to the Customs Code of the Russian Federation and the Administrative Offense Code of the Russian Federation has been prepared as related to introducing the institution of authorized consignees.

A federal draft law has been prepared on accession to the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto Convention), as amended by the 1999 Brussels Protocol.

A government regulation "Concerning the Plan of Measures for Conversion to Electronic Documents for Accounting, Tax and Financial Purposes" has been drafted and is currently being approved.

The draft law "Concerning Amendments to the Federal Law ‘Concerning Archiving in the Russian Federation’ Introducing Procedures for Storing Electronic Documents" has been submitted for consideration by the Russian Government.

FIAC members have taken a number of measures to improve Russia’s image abroad. A new report on Russia’s attractiveness for investors, based on interviews with the heads of fifty-one international corporations, has been presented. The chief executives of companies on the Foreign Investment Advisory Council were involved in the Twelfth International Economic Forum in St. Petersburg and a campaign has been launched to ensure that the Russian economy is covered with objectivity in the foreign mass media. Special attention was devoted to preparing Russia Beyond the Headlines supplements to The Washington Post, The Daily Telegraph, presenting comments of the chief executives of FIAC member companies on the state of the Russian economy and a positive image of Russia.

A survey of company executives illustrating the positive dynamics of Russia’s investment climate was presented at a roundtable on "Corporate Governance in Russia as Seen by Foreign Investors" at the Twelfth International Economic Forum in St. Petersburg.

A brochure has been put out describing the achievements and successful development of foreign business in Russia. At the International Investment Forum Sochi-2008, FIAC members assisted in holding a roundtable on "The Russian Brand" designed to give potential investors a positive image of Russia.

Russia is increasingly becoming a full-fledged player on the international labor market, thus guaranteeing the basic rights and liberties of foreign nationals.

The Russian Government has approved the "Conception for Labor Market Measures in 2008-2010" providing for listing, based on the employers' estimated demand, jobs for which there is a shortage of candidates not subject to quotas for foreign nationals. Russian Ministry of Health and Social Development approved a list of jobs for qualified specialists to which annual work-permit quotas for foreign nationals do not apply. In order to further improve business conditions, those taking part in the session will concentrate their efforts on the following priority tasks.

  1. State Regulation of the Russian Economy
    • prepare proposals to improve both the methodology of drafting technical regulations and the work of expert commissions for assessing the changes made in the legal acts and norm-related documents with the participation of the business community
    • complete the elaboration and approval of the draft norm-related documents on the formation of a legislative base for expanding the exchange of electronic documents in the sphere of tax accounting, bookkeeping and financial reporting, give electronic archives a legal status and engage investor companies in consultations and the implementation of a pilot project prior to introducing the electronic document flow system in the whole country
  2. Tax and Accounting
    • consider clarifying the provisions of the Russian Tax Code concerning the application of thin capitalization rules
    • consider making amendments to current law in order to resolve the problem of expense write-offs by construction companies that are building auxiliary engineering and other infrastructure to be transferred to specialized state organizations or local government bodies after construction is completed
  3. Financial Institutions and Capital Markets
    • expand investment declaration of non-state pension funds taking into account the necessity to minimize risks and reduce fund portfolios volatility
    • speed up the consideration and adoption of the amendments to the federal laws "Concerning Insolvency (Bankruptcy)" and "Concerning the Insolvency (Bankruptcy) of Credit Organizations" in relation to the introduction of the liquidation netting mechanism
    • speed up the preparation of proposals to improve the procedure for the enforced collection of a pledge and its sale apart from public tender, and to permit the pledge of monetary resources
    • speed up the procedure for reviewing the draft law amending the federal laws "Concerning banks and banking activities" and "Concerning the Central Bank of the Russian Federation – the Bank of Russia" to improve the conditions for risk management and banking supervision on a consolidated basis
  4. Industry, Construction and High Technology
    • finish work in preparing the normative acts to the law "Concerning the Procedure for Foreign Investments in Business Companies Which Are Strategically Important to the Country’s Defense and Security"
    • engage in monitoring implementation of the fourth part of Russia's Civil Code pertaining to regulating legal relationship in the area of intellectual property protection
    • if necessary, develop proposals to improve legislation
  5. Food and Agriculture
    • carry on optimizing import customs duties on farm produce and semi-finished products for the food industry, as well as on equipment for the food industry that is not produced in Russia
    • carry on improving the legislation and mechanisms related to veterinary and phytosanitary control
  6. Natural Resources
    • continue efforts to improve applicable laws in order to minimize risks for foreign investors in connection with possible denial or termination of licenses for mineral mining
    • continue efforts to improve the taxation system applicable to major projects in locations difficult to access and on the continental shelf of Russia
  7. Customs Procedures
    • consider the possibility of accession to special supplements to the International Convention on the Simplification and Harmonization of Customs Procedures dated 18 May 1973 as amended by the 1999 Brussels Protocol (Kyoto convention), taking into account the conventions on the simplification of customs procedures for companies involved in foreign economic activities
  8. Public-Private Partnerships in Transportation
    • prepare proposals to further develop the mechanisms of state support of the institute of public-private partnership
    • prepare proposals to improve cooperation between the regional authorities and foreign investors in arranging work and attracting investors in the preparation and implementation of the regional projects for the development of transportation
    • consider amendments to the legislation concerning withdrawal and titling of land for the construction of stretched-line units (roads), and improvement of land registration, titling and withdrawal procedures
  9. Image of Russia
    • launch Invest in Russia web portal to communicate relevant economic information to target audience – CEOs of global corporations, various countries' government representatives, international institutions and organizations
    • involve in key Russian forums, as well as global investment and economic events in line wit the concept of a road-show headed by the government leaders; create a pool of editors and heads of the leading international media editions and holdings in order to meet with member of the Russian government on a regular basis to ensure objective perception of Russia worldwide
    • continue surveying opinions of foreign company CEOs
    • The participants in the session favorably assess the efforts made by the heads and specialists of the member-companies of the Foreign Investment Advisory Council in Russia and by the federal government bodies in improving the conditions of business activity and are certain that cooperation will continue to develop in this respect