Sverdlovsk region has developed turnkey solutions for investors eyeing the timber sector17 May/ 2017
Logging and woodworking subsectors are identified as priority investment areas in Sverdlovsk Region. The Executive Director of the Development Corporation of Middle Ural Mr. Georgy Gemedzhiyev explained how the Region is supporting investors.
- Why is the Region focusing so much on attracting investors to the timber sector and supporting them?
The approach of the Development Corporation of Middle Ural is based on the competitive advantages of the area - Sverdlovsk Region boasting ample raw material resources and a strategic geographical location beneficial from the sales prospective. Besides, the timber sector of Russia has a great potential in general. In 2016 the volume of manufacturing of the main product types have increased comparing to 2015 and 2014, particularly for plywood (more than 65% of growth) and the OSB manufacturing. Export has been increasing as well. For example, 2016 export of the sawn wood has grown in 13% comparing to 2015, the plywood export has grown in 11%. Revenue growth proved that the situation has been stabilizing in the timber sector; the companies working in it have been taking advantage of the ruble devaluation. Products manufactured in Russia became more competitive both on domestic and international markets.
- Thus, has this sector become more appealing for investors?
Absolutely! China is becoming the largest investor into the timber sector of Russia and Sverdlovsk Region, in particular, while being the largest importer of the Russian wood. Currently China is not only importing more than half of all Russian raw wood but also dynamically investing into the woodworking projects on the territory of Russia. This is a good trend because it is important for us to develop timber processing inside the country. Today we are motivating investors to create facilities for deep processing of wood. The Development Corporation of Middle Ural is preparing proposals for the International investors to develop various segments of production chain.
- What kind of projects within the timber sector of Sverdlovsk Region could be profitable for investors to develop?
We have identified several segments of production chain where the market players will have competitive advantages if they localize the manufacturing in Sverdlovsk Region. Primary these segments include OSB, MDF and chipboard production. We can offer a company working in any of the mentioned segments a tailor-made turnkey solution - if an investor decides to set up a manufacturing in Sverdlovsk Region, he will be provided a forest plot to fully satisfy the requirements in wood. We assist investors in obtaining forest plots for their projects without bidding and at 50% reduced leasing rate. Apart from these, we normally compile for the investor a company database including the raw material supplier as well as the potential partners and buyer; we also offer him a range of manufacturing facilities equipped with all the necessary infrastructure. Moreover, we assist the investors to receive the State support such as tax benefits and other financial preferences.
Speaking about other potentially successful segments - a plywood manufacturing could become a profitable one. We also consider projects in development of quick build frame structure buildings and modular houses as well as the manufacturing of furniture.
Sverdlovsk Region boasting ample opportunities to develop a full woodworking production cycle with secured sustainable demand for all types of products. Highly qualified human resources for the industry are supplied by nearby Timber Technical Academy. Well-developed transport infrastructure allows to deliver raw materials and ready made products virtually everywhere. Sverdlovsk Region is a powerful hub connecting Europe and Asia boasting the railways network ranked among three most developed ones in Russia.
- What kind of tax benefits the investors of timber industry of Sverdlovsk Region could apply for?
There is an opportunity to sign the Special Investment Contract (SPIC) for projects starting from 300 million rubles. Also we assist companies to acquire the Status of the Priority Investment Project in forest harvesting - permitting to reduce the Income tax to 13,5% and to waive the Property tax completely. Besides, a business could apply for other privileges and various measures of support available on the territories with the special economic regime.
- What kind of industrial facilities are available for setting up a woodworking manufacturing in Sverdlovsk Region?
Specialized industrial facilities equipped with necessary infrastructure along with a preferential tax regime could help to cut the costs of entering the Russian market significantly. There are a Special Economic Zone “Titanium Valley” and the Bogoslovsky Industrial Park, located in the area of the Advanced Development Territory “Krasnoturinsk”.
Today the Government of Sverdlovsk Region is offering the investors of woodworking projects the forest plots within 100 km around the Bogoslovsky Park. The residents of the Industrial Park enjoy the Income tax reduced to 5% (instead of regular 20% rate across Russia), zero Property and Land taxes and the insurance contributions to the Payroll Fund reduced from 30% to 7,6%.
The Development Corporation of Middle Ural is proactively assisting business to better understand local legislation, find suitable facility to set up manufacturing and to receive the State support for the projects.
More information can be found on official site of the Development Corporation of Middle Ural