FIAC

Communique on the 21th Session of the Foreign Investment Advisory Council

(Moscow, October 15, 2007)

The 21st Session of the Foreign Investment Advisory Council was held in Moscow on October 15, 2007.

Addressing the session, Chairman of the Government of the Russian Federation V.A. Zubkov accentuated the importance of an effective dialog between the Government and foreign entrepreneurs in creating favorable and stable conditions for attracting foreign capital into Russia.

The parties have observed that a favorable macroeconomic situation continues to exist in Russia. GDP is estimated to increase by 7.3%, and the industrial production index, by 6% in 2007. Investments in fixed capital are expected to increase by 18.2%. The consumer demand is growing, while the real income of the public at large is increasing.

Russia has consolidated its position as a reliable and respectable partner. As of the beginning of October, the country’s international reserves totaled more than US $425 billion, and the Stabilization Fund amounted to 3,519 billion rubles.

In 2008 and until 2010, GDP is expected to grow by at least 6%, and investments in fixed assets, by roughly 12%. Russia’s share in the world economy will steadily increase.

Foreign investors favorably assess the steps taken by the Russian government to maintain steady economic development and create a favorable investment climate. FIAC members actively participated in the discussion of laws being drafted by the Government of the Russian Federation aimed at creating favorable conditions for entrepreneurial activity.

For instance, amendments to the Federal Law “Concerning Technical Regulation” were adopted last year to simplify the procedure of agreeing the draft official responses of the Government of the Russian Federation to the technical regulations worked out by entrepreneurial organizations on their own initiative; amendments to the Federal Law “Concerning the Legal Status of Foreign Citizens in the Russian Federation” have been drafted to exempt employees of the representative offices of legal entities from the need to receive a work permit if the staff is of the size agreed on when they were accredited.

Amendments to Article 59 of Part One of the Tax Code of the Russian Federation have been drafted to approve the procedure for considering the debts concerning client payments in bankrupt banks and recognizing them as bad debts, and subsequently writing them off.

The drafting the amendments to the Federal Laws “Concerning the Electronic Signature", “Concerning Investments to Finance the Cumulative Part of the Retirement Pension in the Russian Federation” and “Concerning Subsurface Resources” is nearing completion.

The draft federal law “Concerning the Procedure for Making Foreign Investments in Commercial Organizations Which Are Strategically Important to the National Security of the Russian Federation” was supported by FIAC members and approved by the State Duma in the first reading.

To improve the investment conditions further, participants in the FIAC session suggest that an effort should be made to settle the following pressing issues.

State Regulation:

preparing proposals to accelerate the reform of the technical regulation and involve representatives of the business community in the development of draft technical regulations and their public discussion and review and in the work of expert commissions for assessing amendments to regulatory legal acts of the Russian Federation and to the draft normative documents of the federal government bodies in the technical regulation sphere;
stepping up work in creating a legislative base for a greater exchange of electronic tax, accounting and finance documents and for giving a legal status to electronic archives;
analyzing foreign experience and preparing proposals to improve measures to counteract the illegal distribution and sale of certain types of goods;
analyzing the practice of applying the legislation of the Russian Federation concerning mandatory product certification and preparing proposals to improve the system of mandatory confirmation of the products' conformity to the established requirements and on eliminating excessive barriers for their circulation;
analyzing the enforcement of legislation of the Russian Federation concerning the legal status of foreign citizens in the Russian Federation regarding simplification of the procedure of employment in the Russian Federation of staff that are employed by representative offices and branches of foreign legal entities, and preparing proposals concerning expediency of its further enhancement;
continuing determining the expediency of making amendments to the Federal Law “Concerning Advertising” regarding the limits to hourly TV advertising;
determining the status and conditions of destroying defect automobile components that are the subject of agreements on industrial car assembly between the Ministry for Economic Development and Trade of the Russian Federation and Russian legal entities for the purposes of Decree of the Government of the Russian Federation No. 166 dated March 29, 2005, as automobile components having for customs purposes the status of goods issued to free circulation in the territory of the Russian Federation.

Tax and Accounting

accelerating the review of amendments to Article 59 of the Tax Code of the Russian Federation that provide legal basis with regard to recognizing arrears and debts of organizations that have been liquidated as at the date of the decision being passed to recognize such amounts as bad debts and to write them off;
analyzing the practice of using “negative invoices” in other countries and preparing proposals to use it in Russia.

Financial Institutions and Capital Markets

preparing proposals to exempt from the unified social tax non-state pension insurance or voluntary pension insurance payments (contributions) made to the benefit of the employees at the expense of the employer;
reviewing the issue of making amendments to the legislation of the Russian Federation determining requirements on establishing insurance reserves by non-state pension funds;
accelerating the drafting of the amendments to the Federal Laws “Concerning Insolvency (Bankruptcy)” and “Concerning Insolvency (Bankruptcy) of Credit Organizations” in relation to the introduction of the liquidation netting;
accelerating the drafting of the amendments to the Federal Laws “Concerning Banks and Banking Activity” and “Concerning the Central Bank of the Russian Federation (Bank of Russia)” in relation to the improvement of conditions of managing bank risks (information exchange) and bank supervision on consolidated basis;
preparing proposals on implementing the system of tax regulations for derivatives and other financial instruments;
preparing proposals concerning working out a comprehensive approach in relation to improving the legislation of the Russian Federation concerning pledges.

Industry, Construction and High Tech

ensuring the adoption of the federal law on foreign investments in commercial organizations which are strategically important to the national security of the Russian Federation;
completing the elaboration of drafts laws on patent agents and on the transfer of know-how.

Food and Agriculture

continuing work on abolishing or reducing rates of import customs duties on farm produce and semi-finished products for the food industry that do not grow and are not produced in sufficient quantities in the Russian Federation;
continuing work on abolishing or reducing on a regular basis rates of import customs duties on certain types of technological equipment for the food industry, that are not produced in the Russian Federation, at the suggestion of foreign investors;
continuing work on improving the legislation of the Russian Federation and enabling mechanism related to veterinary and phytosanitary control in the Russian Federation.

Natural Resources

ensuring an exchange of information with foreign investors for the purposes of creating stable and predictable conditions when developing natural resources and stimulating investments to the Russian sector of nature and resources including remote areas and the continental shelf.

Customs Procedures

continuing work on introducing amendments to the legislation of the Russian Federation intended to introduce the institute of authorized consignees and to unify it with international conventions.

Public-Private Partnership in Transportation

preparing proposed for amending the Federal Law “Concerning Concession Agreements” with regard to the interests of investors and lenders for implementation of transport projects;
preparing proposals for amending the Statute “Concerning the Investment Fund of the Russian Federation” with a view to making greater use of the financial resources to prepare and implement transport public-private partnership projects;
preparing proposals for enhancement of the framework of state support of transport public-private partnership projects;
preparing proposals for development of logistic lefts and participation of foreign investors in the reconstruction of sea, river and airports.

Image of Russia

ensuring the preparation and implementation of the program for improving the investment image of Russia.
The participants in the session have favorably assessed the efforts made by the chief executives and specialists of the FIAC member-companies and by the officials and specialists of the federal executive authorities to improve the conditions for entrepreneurial activity and have expressed their confidence that cooperation will continue to develop successfully.