06.05.07

Foreign investors dislike the same things that the Russian government has been contemplating for years. At the regular meeting of a working group of the Advisory Council on Foreign Investments (ACFI) they explained that they are looking forward to the laws giving foreigners access into strategic industry sectors, as well as for the law on subsoil resources and a reform of the pension system.

A question of the necessity of the law on foreigners’ access into strategic industry sectors has been raised at ACFI several times. On January 31, 2007 the government considered a draft law allowing private foreign investors to purchase controlling shares in companies of strategic industry sectors. It was expected that ministers of RF in a month’s time would solve all the disagreements on the subject; unfortunately, however, it did not happen.

The Ministry of Economical Development and the FSB do not agree on the list of strategic industries. The FSB insists on including into the listing a number of activities, but the MED disagrees based on the fact that it goes against WTO norms. There are approximately 30 controversial industries.

The situation with Subsoil Law is even worse. The legislation on the management of subsoil resources has not been changed since 2004. Enactment of a new law has been put off for an uncertain period of time; officials would like to confine themselves to amendments of the existing law. These amendments will limit foreign involvement in exploration and development of strategic subsoil deposits. Representatives of foreign companies point out that, if these amendments are to be accepted, the rights of developers cannot be terminated all at once but need to allow a time period to correct their mistakes, to provide a more defined way of settling disputes, and stability of licensing conditions.

Several hindrances exist for private capital entering into the pension system as well. According to foreign experts, unified social tax (UST) on employer payments into pension funds should be cancelled. Private citizens also should be dismissed from paying tax either when contributing to the pension fund or upon receiving the pension. Amendments should be made in regards to forming insurance reserves by NPF and transforming them into commercial organizations.

The Ministry of Economical Development is expecting any day now proposals on reformation of pension system from Ministry of Public Health and Social Development. At the same time, in the context with new presidential initiatives, administrative departments will need to develop new measures for stimulating pension accruals.

Foreigners also requested to postpone coming into force amendments for the advertisement law which will shorten advertising time from 12 minutes right now to 9 minutes per hour starting January 1, 2008. Federal Antimonopoly Service considered the request economically inadvisable.

They also voiced a complaint regarding the work of tax inspections and reimbursements of exports VAT.

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