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Investment Message 
of the Novgorod Region Governor A. S. Nikitin

Dear colleagues,

I am pleased to greet you at the ordinary end-of-year meeting of the Novgorod Regional Governor's Council on Investment Climate Improvement under the Novgorod Region Governor.

Today’s meeting is held in an extended format. We tried to bring together a maximum number of concerned business representatives and particularly – business associations. This is due to the fact that today we would like to “synchronise watches” with business community, to review what went right this year, and what aspects, just the other way round, hampered enhancement of business environment in the region. My Investment Message for the year 2019 will be devoted to the said issues. Dear colleagues, today I’d like to discuss with you the priorities and plans of the Government of the region in this respect. Your suggestions would be appreciated.

It’s worth mentioning that to date we have succeeded in accomplishing quite a number of tasks outlined in the Investment Message for the year 2018 and managed to achieve concrete results.

The government authorities were challenged to provide a greater choice of investment platforms with infrastructure, to develop the territories and ensure conditions for implementation of investment projects.

Last year there was a tenfold reduction in the threshold for projects to be recognized as strategic and high-priority. Moreover, we offered the investors the opportunity to select from a wide range of benefit options, and evoked a wide response – the number of the applicants seeking benefits in 2018 doubled as compared to 2017.

Yesterday support was expressed by the Regional Duma in favour of my proposal to further ease the requirements for investment projects implemented within the region.
The adopted regional law stipulates making amendments in investment legislation with regard to changes in the criteria for categorizing the investment projects as strategic, high-priority, etc. for the purpose of providing tax incentives. The peculiarity of the proposed mechanism lies in the fact that it is a real tool for development of the sparsely populated areas. Previously only a 1.5 bln rubles investment project was classified as a strategic project eligible for benefits for a period of 7 years. Now, the status of a strategic project may be assigned to any 80 mln rubles project within the territory of districts with a population of less than 5,000 inhabitants, such as Volotovsky, Marevsky, Poddorsky. In the field of agriculture and dairy farming this provision holds true for 50 and 30 mln rubles projects, respectively.

Certain preferences are stipulated for the projects in single-industry towns and the projects with the share of intangible assets in the project cost – at least 25 %.
Together with the colleagues from the investment block we have analyzed best practices of other constituent entities of the Russian Federation. It is no exaggeration to say that at present we boast one of the most flexible systems of benefit provision to real investors.

I believe that our next step in this direction shall be the development of mechanisms of further investment inducement, for example, in the course of implementation of investment projects in the tourism industry, and also provision of the information on the new tools of business support to business community. These are the key priorities of the Ministry of the Investment Policy and of the Development Agency of the Novgorod Region. Apart from that, the said authorities together with the Ministry for Industry and Trade shall also bear in mind that we must take full advantage of the possibilities of all federal institutions for the purpose of formation of the regional investment infrastructure. As an example – making use of the possibilities of the Fund for development of single-industry towns in terms of infrastructure construction in Uglovka and Borovichi.
The relevant applications are in the final stages of consideration. We have also approved the concepts on the basis of which these single-industry towns may obtain approximately 800 mln rubles for removal of infrastructural limitations as early as next year.

We are aware of the fact that quite a number of federal institutions currently offer new project support tools (Fund for development of single-industry towns, Vnesheconombank), and we can’t allow ourselves to be lagging behind in terms of making requests for such tools.

Yet another crucial area of work – formation of a range of high-quality investment platforms. At present, from over 400 previously listed platforms through the process of cautious selection we have singled out around 40 high-priority platforms, which are of particular interest for prospective investors and are primarily offered for the purpose of investment projects implementation. As a general rule, such platforms boast well-developed infrastructure or guarantee prompt connection to networks.
We are not talking about statics: work aimed at selection of particular private and municipal platforms is carried out with the use of the point-based ranking system on an ongoing basis. For example, at this very moment 6 new platforms in Veliky Novgorod, Novgorod and Parfino districts were added to the evaluation procedure. I deem it necessary to continue this work in 2019.

Last year we concluded that creation of the priority social and economic development areas in the single-industry towns of the region was necessary. The first area of this kind has already been created in Uglovka, Okulovsky district. The Ministry of Economic Development of the Russian Federation has registered the first resident. In the near future there will be registered 4 more residents with the projects amounting to about 540 mln rubles, stipulating creation of approximately 100 working places. The status of the resident of priority social and economic development area ensures considerable tax exemptions both at the regional and at the federal level. It’s a guarantee of attracting investments and creating new vacancies for the region.
I hope that the PSEDA will appear in Borovichi in the near future. An application for its creation was sent to the Ministry of Economic Development and Trade in May and was approved by the committee. The relevant draft decree is being considered by the Government of the Russian Federation. The projects of prospective residents of Borovichi PSEDA will make it possible to create around 1,000 working places and attract investments of about 3 bln rubles.

Apart from that, the Ministry of the Investment Policy was assigned to prepare and send to the Ministry of Economic Development of the Russian Federation in quarter I of the year 2019 an application for creation of the industrial production special economic zone, which will be located in separate areas in Veliky Novgorod, Novgorod and Chudovsky districts. As a result of its creation we hope to attract approximately 25 bln rubles in investments and to create around 1,000 working places.

As I see it, the Ministry of the Investment Policy and the Development Agency of the Novgorod Region shall work together to draw the greatest possible advantage from the PSEDA and SEZ: it important not only to create these territories but also to attract high class residents on an ongoing basis.

In 2018 there will be completed 9 investment projects with cumulative investment amount around 10 bln rubles.

In 2019 completion of 17 investment projects with the total investment volume of around 12 bln rubles and stipulating creation of over 1,100 working places is expected. These projects are represented on the slide.

Generally speaking, the year 2018 is characterized with increased investment activity. As a result of completion of M-11 highway construction, on the one hand, we observe reduced budget investments, on the other hand, we see greater private investments (around 30 bln of private investments according to the results for 9 months of 2018). The investors are really interested in the region.

Therefore, the objective of the Ministry of the Investment Policy of the Novgorod Region and the Development Agency of the Novgorod Region for the year 2019 is to attract private investments in the region’s economy at least at the level of 2018.

This year we have completely updated the normative base stipulating the procedure for creation of such infrastructure facilities as industrial park, technology park, business incubator, and we have already launched the first objects.

I would like to comment on the technology park and business incubator.
Opening of GARO technology park is scheduled for the next week. It is located on the premises of the former GARO plant in Veliky Novgorod. At present the technology park comprises 1,500 m2 of production space available for the residents, with the possibility of subsequent expansion to 5,000 m2.

By creating such infrastructure within the production space of former enterprises, we, among other things, solve the problem of renovation of such facilities.

Opening of “Х10” business incubator is also scheduled for the next week in Veliky Novgorod. It is the first in the region universal launch platform for own business start-up and development. The first residents of this infrastructure facility deal with manufacture of floristics accessories.

In 2019 we need to create yet another business incubator and an industrial park in Veliky Novgorod, to launch a technology park in Staraya Russa. It is understood that we have to make use of the possibilities of the Ministry of Economic Development of the Russian Federation and together with private investors to file applications for participation in the contest for attracting federal funds for the development of such infrastructure.

In 2018 there was formed a comprehensive system of support of small and medium entrepreneurship uniting various infrastructure organizations into a single system. Based on the credit institutions there were created 4 services centres in Veliky Novgorod, Staraya Russa, Borovichi. This is where such services are needed most by the businessmen.

Novgorod Fund for Small Business Support became an agent of SME Corporation and SME Bank.

Judging from the results of the previous period, we anticipate an increase of around 10 % in SME financing.

In 2018 on the basis of the Fund for Business Support there was created the Novgorod Fund for Creative Economy Development. The Fund will provide support to the projects in the field of creative industries, such as architecture, design, PR, fashion.

Apart from the above mentioned technology park and the business incubator, the Center for Youth Innovation Creativity “Sintez” became operational. The enterprise was established at the production site of one of the small business owners and allows young people (mostly students of technical colleges) to master practical skills with the use of modern equipment.

In the coming year the region will witness launching of the Industrial Development Fund. For this purpose we plan to allocate funds in the 2019 budget in the amount of at least 20 mln rubles. The programs of the Industrial Development Fund will enable the Novgorod enterprises to get access to concessional loan financing necessary for launching the production of unique domestic goods, and also analogues of innovative international developments. The Industrial Development Fund provides loans at 1–5 % interest per annum for a period of 7 years. Such loans enhance direct investment flows into the real sector of the economy.

In 2019 the Novgorod Region will obtain 6 times more funds from the federal budget as compared to 2018 (around 266 mln rubles) to implement the developed by us regional component of the national project aimed at SME development, which has been approved by the Ministry of Economic Development of the Russian Federation. This will make it possible to enhance support for existing and start-up entrepreneurs, exporters and export-oriented companies, to increase the number of the persons involved in entrepreneurial activities.
Apart from that, I instruct the Ministry of the Investment Policy to create next year within the frame of “My Business” franchise a unified platform – Business Cooperation Centre – to establish business support infrastructure “under one roof” and accelerate implementation of entrepreneurial projects.

Apart from benefits for investment projects, on January 1, 2019 the Regional Duma at our initiative made the terms of taxation more loyal for those SME who performed certain activities and applied patent taxation system.

I propose that the financial and economic block of the Government consider in 2019 the possibility of applying stimulus moves for socially important types of business activity (educational services, social servicing of citizens), and also review the possibilities provided to us by the Tax Code of the Russian Federation in terms of small business support.

In 2018 the following projects in tourism industry were initiated:

a project on the formation of the information space on the tourism potential of the region, including promotion of the regional tourism service “Novgorod Rus Visiting Card”, launching of the official tourism informational Internet portal Novgorod.travel, organization of exhibitions devoted to tourism potential of the Novgorod Region in Nizhny Novgorod, Moscow, Moscow and St. Petersburg airports (audience – around 11 mln persons), development and promotion of tourism and export brand of the Novgorod Region;
a project on informing passengers about recreation and entertainment in the Novgorod Region (magazines “Aeroflot”, “Sapsan”, “Better by Train”, “Travel Industry in North-West”, video content on flights and on the trains “Sapsan”), audience – over 13 mln people;

presentation of the Novgorod Region at specialized tourist exhibitions (5 exhibitions, audience – over 500,000 people);

creation of the navigation system covering cultural and tourist sites (installation of 73 signs of tourist navigation);

a project on creation of regional tourist support services (by the end of the year – establishment of 3 visitor centres, in early 2019 – completion of establishment of 1 visitor centre on М-10 highway);

project aimed at cooperation with Russian Railways in terms of creation of new tourism logistics;

promotion of newsworthy events in the Novgorod Region (support of 6 festivals, commencement of the historical reconstruction project “Ryurik city”).

I instruct the Ministry of Investment Policy of Novgorod Region to perform the following acts in 2019:

to develop the mechanisms of support of the investment projects implemented in tourism industry;

to organize participation of children’s groups in implementation of the federal project on the development of children’s tourism “My Russia”;

together with Valday National Park to continue implementation of the project “Great Valday Trail”, historical reconstruction project “Ryurik city”;

to ensure installation of 1 visitor centre on М-11 highway in the Novgorod Region;

to continue the work on the development of tourist navigation in the Novgorod Region;

to organize exhibitions devoted to tourism potential of the Novgorod Region in the parks of culture and recreation, in the streets and alleys of Moscow.

Last year I gave instructions to develop a strategy of social and economic development of the region for the coming 5 years.

The Strategy has been developed. The following 12 focus areas have been singled out:
Economic growth;
Modern transportation system;
Food security;
Accommodation and urban environment;
Ecology and natural resources;
Digital economy;
State administration (local initiatives);
Civil society.

In order to ensure continuity of social and economic policy there has been determined a “future image” of the region and there have been formed 4 vectors of development, which are deemed to be strategic region development priorities by 2025:

“Region – Industrial Export Centre”;
“Region – University”;
“Region – Centre of National History and Identity”;
“Region – Ecological Oasis, Recreation and Wellness Centre”.

At present the draft strategy is at the stage of discussing with the public, business associations, municipalities.

The Ministry of the Investment Policy in quarter I of 2019 shall obtain approval from the federal ministries with regard to the draft strategy, while the government authorities of the region shall commence its integration into government programs, sectorial program documents. I propose that municipal districts and the municipality develop municipal strategic planning documents based on the Strategy by the end of 2019.

We need more contemporary production sites with high labor efficiency and respectable salaries. This means that we need a good business environment. The objective for the year 2018 stipulated improvement of the investment climate in the National Rating at least by 10 positions. We managed to cope with this task as we were ranked 24 positions higher (ranking position 29 as compared to position 53 in 2017). For this purpose we made target models tougher, and worked transparently with the business community.

A well-known magazine made a publication the other day. In this publication experts evaluated the efforts of the Novgorod region aimed at lowering investment risks, and ranked the Novgorod region among 30 top regions with an attractive business environment.

Taking into account the criteria similar to those stipulated by National rating, with due regard for the business feedback, we have also started evaluation and work in municipal districts. Following the results of 2017, the first three rating positions were given to Novgorod, Okulovsky and Krestetsky municipal districts. I wish to emphasize once again that the said rating was made primarily based on the estimate given by our entrepreneurs. Next year they will obtain a supplementary grant in the amount of 10 mln rubles. In 2019 rating shall be followed by the development of additional incentives for the districts.

The government authorities of the region have conducted analysis of the obligations under agreements between the Government of the region and municipal districts affecting the distribution of inter-budget transfers in terms of their validity. With the help of evaluation of the obligations under the agreements we also observe the “sensitive points” and “growth points” of particular territories.

It is necessary to improve the criteria of agreements by means of application of an individual approach to the districts depending on the specific nature of their development.
Agreements shall include the obligations directly aimed at creation of facilities of social, transport and engineering infrastructure in municipalities. The system of incentives of municipal areas shall be also upgraded depending on fulfillment of obligations.

We see real interest in cooperation within the frame of business communities on the part of the entrepreneurs. Every single day throughout the year we have supported collaboration, and, as a result, have carried out quite a number of actions. We discuss major decisions with business communities. Among other things, it applies to the issues of changes in the investment laws and the Strategy of region development.

We observe advancement of the organizations. In particular, within the territory of the Novgorod Region there appeared a regional Authorized representative of the Expert Advisory Board dealing with selection of investment projects within the frame of “Business Russia”. Institutions of “Opora Russia” are ready to implement significant education projects in municipal districts. We see the efforts aimed at involvement of all and any business associations in the work of community councils at the public authorities.

In 2019 we are ready to support the work with the initiatives of business communities and to work out particular solutions to the problems pointed out by the associations:
implementation of investment projects within the borders of the territory of historic cities;
the need to improve the mechanisms of provision of items of immovable property in state and municipal ownership to small business entities;
support of initiatives aimed at involvement of business communities in combating shadow economy, promotion of entrepreneurship, especially in municipal districts.

Colleagues, national project “Small and Medium Entrepreneurship and Support of Individual Entrepreneurial Initiative” stipulates taking a great number of activities involving business. It reflects the focus areas related to the development of business support infrastructure. I hope that the year 2019 will be no less active in terms of implementation of our joint plans to modernize the economy of the Novgorod Region.