Will it be ever possible in Russia?

It has long been no secret that Russian shipbuilding industry has low competition capacity. It is required to carry out modernization of shipyards, as well as reduce their wasteful expenditures. There is almost no chance to do it without amending the current legislation – technical re-equipment of enterprises would lead to a sharp increase in deductions on net worth taxes, and import of foreign equipment - from customs duties and VAT. Nevertheless, by March 2010 it is planned to prepare for the introduction to the State Duma the legislation "On measures to support the shipbuilding and shipping in Russia”, the Ministry of Transport, Ministry of Industry and Trade and the United Shipbuilding Corporation (USC) are working on.

Zones for shipyards

The preparation of this legislation was discussed on Feb. 18, 2010 at the working meeting of Vladimir Putin, the Prime Minister of Russia and Roman Trotsenko, the President of the USC. As the head of state corporation informed the head of government, by March 2010 the legislation will be prepared for introduction to the State Duma. Currently it is on interdepartmental harmonization, which, according to opinion of Roman Trotsenko, is "not an easy process". The Ministry of Finance that is not interested in reduction of tax revenues does not seem to like the preferences granted to shipbuilding companies.

The truth is that the legislation provides for the establishment of specialized shipbuilding areas (that is a new concept differing somewhat from the concept of special economic zones), which will have a special tax and customs regimes. This will allow to establish good economic environment conditions between Russia and it’s competitors, China and Korea. At the present moment a number of shipyards is under construction in Russia, which designed for large-tonnage shipbuilding. However, this measure does not lead to changes for the worse or withdrawal of any of the revenues from the tax base, because no relevant contracts have been concluded yet.

If we talk about ships of a small tonnage – here we also face the losing of domestic shipyards to the foreign competitors. The shipowners are not currently interested in placing orders at the Russian shipyards due to their lack of competitiveness, as well as the need for state industry support. You may read more detailed review in the section" Relevant Topic" from February, 9 of 2010, where Ivailo Getsovo, the representative of a private shipping company "Safinat”, shared this information in his interview with "PortNews” IAA.

As Roman Trotsenko explained in his turn, "let's take construction of ice-class tankers as an example. Only on taxes we lose $ 100 million. That is difficult for us to be competitive. Our aim is to develop this direction through the shipbuilding area.

 Viktor Olersky, the Deputy of Minister of Transport, reported in his exclusive interview with "PortNews" IAA, that shipbuilding enterprises are to be exempted from property tax, otherwise, their modernization will be complicated. Besides the Ministry of Transport suggests to reduce the Unified Social Tax for employees of civil shipbuilding enterprises (as in agriculture), if these companies are registered in the shipbuilding areas. It is also recommended to zero out the duty and VAT on imported components and equipment for ships and shipbuilding enterprises. "We will try to convince their colleagues from other departments that the proposed initiatives for the development of shipping and shipbuilding are very important", Victor Olersky added. Full interview with Victor Olerski you may read in analytical publication of "PortNews" IAA "The Port Service. Bunker market. Annual Report - 2009 " from 1 March 2010.”

Pursuing high money

In addition to improvement of the legislation, Russian shipbuilding industry needs "big money". First of all it refers to companies, expecting orders. According to the President of USC, the program of support for the leasing scheme in the shipbuilding industry has already begun to bear fruit. "The leasing program started to function. This year, we face the first case when the credits were allocated under the lease. The most active bank is Vnesheconombank (Bank for development and foreign economic affairs), which has already credited about 4 billion rubles of shipbuilding contracts through its company "Vnesheconombank-leasing",- Roman Trotsenko reported to Vladimir Putin.

According to his opinion, this measure proved to be the most effective. "It is very simple, easy to control. The state allocates money to USC, which with the assistance of state agent bank has already credited shipbuilding contracts provided that the vessels are built in the territory of Russia, Russian equipment makes up 60%, and the ships carry Russian flag, "-  the head of state corporations mentioned. 

According to him, in 2010 the volume of state support for a lease will reach 2.7 billion rubles."We believe that the main task is not only to increase the volume, but to prolong it, in this case it will be a program for $ 3 billion rubles intended for 10 years. So we could start collecting a package of orders "- Roman Trotsenko suggested to the Prime Minister.

 

At the current moment the formula of leasing program is as follows: the shipowner gives one ruble, USC gives one ruble at a soft lease and the bank gives one ruble. Now this program is supported by Sberbank and VTB, but so far the most active position belongs to Vnesheconombank. 

Besides, the program for compensation of two-thirds of lending rates for shipbuilding, which the head of the USC requested to extend for the future, is also valid. 

Thus, if the process of adopting amendments to the legislation does not drag on due to interdepartmental harmonization, and program of state industry support gives an opportunity to shipbuilders to estimate their power for a few years ahead, Russia will have all chances to demonstrate the "economic miracle of shipbuilding." Otherwise, this industry will remain the source of income only for foreigners.  

a