Points of attraction

This year in July the Law On Measures of State Support for Establishing and Developing Industrial Parks in the Leningrad Region was adopted. It aims to support developers and management companies. Noting the positive character of the new law, the experts talk about the need for measures to encourage filling of parks.

In accordance with the law, organizations dealing with development of industrial parks can receive state support such as tax benefits and reduced ground rate. These benefits are the same as those for investors in the region: corporate tax rate is reduced to 13.5% and wealth tax rate – to 0%. Tax benefits will be granted for 4 years, at that, an organization can choose 4 year period within 6 years after receiving industrial park status.
The law will come into effect on 1st January 2015.

Not from the budget funds

The adoption of the law has been expected for a long time. Alexander Drozdenko, the Leningrad region Governor, has repeatedly expressed the view that the government's efforts should be focused on the provision of tax incentives rather than on direct injections of budgetary investments, as it is done in the Kaluga region, for example.
"Regional law on measures of state support for industrial parks is one of the laws adopted to support business that we have planned to adopt since the time when the new government was formed in 2012. It is aimed at the creation of zones of effective taxation of those companies that will invest in the Leningrad region. The law is quite flexible and takes into account both actively developing areas of the region, as well as depressive ones”, Alexander Drozdenko notes. “We place stake on providing tax incentives. Return on investment period is very long. Budget funding is planned for only three industrial parks which are being established."
The adopted law provides the introduction of preferential treatment for potential investors in the construction of industrial parks. Experts say the main drawback of the law is the absence of benefits for future residents of the industrial parks.
"The adoption of a new law is unlikely to result in the large-scale development of industrial parks in the region. It influences potential residents rather indirectly, only due to the greater financial stability of management companies", Maria Khomich, Executive Director at TellusGroup, says.
"Private parks in the Leningrad region are unlikely to operate with the cost of land as a competitive advantage even after the adoption of this law,” Svetlana Berezina, Associate Director, Consulting department at Colliers International, notes. “At the same time, the region has a lot of other competitive advantages – the very good access to transportation and logistics sites, the proximity to markets, and the access to the ports."
According to Dmitry Yalov, Vice-Governor of the Leningrad region, the provisions of this regulatory document encourages major investors to invest directly in infrastructure of the future industrial parks – to build roads, to lay utilities and so on. The most important that the law defines the status of industrial park with a clear definition of object’s criteria. In the opinion of the Vice-Governor the additional benefits for the residents of industrial parks are not necessary, since another regulatory document to support investors in the region has already been enacted – Law № 113-oz “On State Support for Organizations Investing on the Territory of the Leningrad region and on Related Legislative Amendments”. The investors placing their production facilities in industrial parks, as well as in areas not designed as a park, can take advantage of this law.

The heart of the matter

The new law eliminated the gaps in the legislation relating to the definition of the industrial park. It defines the concept of "industrial park" and other basic concepts (the management company (MC), the objects of the property complex, the activities of MC, etc.). However, the document does not delimit activities for MC and developers.
This is achieved by the reference to the basic requirement for MC – the presence of development program of an industrial park; the main requirement for this program is the creation of infrastructure and of real estate located within the park’s area. In conformity with the law MC status and the program’s implementation allow to take advantage of state-support measures, as well as to motivate the tenant of the land not only to create objects of the property complex, but to also manage them by providing reduced wealth tax rates.
In addition, one of the criteria for obtaining the status of an industrial park is the land’s area. It should be not less than 10 ha, and for the eastern regions – Podporozhsky, Lodeinopolsky and Boksitogorsky ones – 3 ha.

Opinion:

Dmitry Yalov, Vice-Governor of the Leningrad region
- Given the lack of completed industrial sites in the region, such law is definitely needed. Proposed support measures such as tax exemptions and reduced rental rates will catalyze organizations to create industrial parks with dedicated infrastructure in the region.

Mikhail Tyunin, Head of Industrial, warehouse and land department at Knight Frank
What's good: finally we have a legal definition of "industrial park". Naturally, the development of the legal framework will hasten the development of the parks themselves. What used to be called simply "a territory" is now called“ a park”. A moot point is whether there are enough of these measures to support the industry. Tax exemptions and reduced rental rates are positive incentives; however, the law is aimed at the development of management companies, while the little attention is devoted to the attraction of residents.

Maksim Sobolev, Real estate development director at YIT Lentek
- It is important that the law introduces industrial parks in the legislative field of the Leningrad region, and already just for the sake of this fact this law was worth adopting. The stipulated benefits will help to improve a little the economy of the projects.
New mechanisms that could help to attract long money into the project would catalyze the development of industrial parks. Project payback period is more than 10 years. Involvement of pension money in public private partnership projects of industrial parks construction could stimulate the industry. The industry problem now is that there are no parks. As it were, there are parks, but they are half-full. Thus, we need special measures to stimulate the filling of existing parks.

Maria Khomich, Executive Director at TellusGroup
- The law contains a list of requirements for industrial parks and for the companies managing them; it also defines the procedure and conditions for granting the status of the industrial park. In this regard, the law is worked up more carefully than the previous similar law enacted in 2011.
The law is most interesting in terms of providing wealth tax incentives, mainly to management companies that own not only the infrastructure, but also the objects of capital construction in the industrial park. Moreover, due to the short period of granting tariff preferences (four years), the objects of the property complex of the park should be in the final stages of construction at the time of obtaining the status of the park.

Information:

Opening of the first two state parks in the Leningrad region is planned for 2016. Northwest Nanotechnology Center (nanopark) will be opened in the city of Gatchina; another industrial park "Pikalevo" will be opened in the namesake city.
It is assumed that the nanopark will have 37 residents with the total number of 1.5 thousand of high-performance workplaces. In "Pikalevo" 21 residents will create more than 300 jobs.
According to the Association of Industrial Parks (AIP), today Leningrad region is the leader among all regions of the Russian Federation in terms of the amount of industrial parks already created or being at various stages of development.