RD/TPR/681
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UNOFFICIAL ROOM DOCUMENT[1]
Trade Policy Review of the Russian Federation (28 and 30 september 2016)Replies to advance written questions
Organe d'examen des politiques commerciales
DOCUMENT DE SÉANCE NON OFFICIEL1
examen des politiques commerciales de la fédération de Russie (28et30septembre2016)Réponses aux questions écrites communiquées à l'avance
Órgano de Examen de las Políticas Comerciales
DOCUMENTO DE SALA NO OFICIAL1
examen de las políticas Comerciales de la federaciÓn de rusia (28y30deseptiembre de 2016)Respuestas a las preguntas presentadas anticipamente por escrito
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CONTENTS
QUESTIONS FROM CHINA 2
QUESTIONS FROM CHINA
Part I. Questions based on Report by the Secretariat (WT/TPR/S/345)
Page 8, Para 2
The Russian authorities are taking steps to improve corporate governance and privatize SOEs in order to increase overall productivity, competition and efficiency.
Question 1:
Will those measures have positive impact on foreign workers working in Russia? Will those measures facilitate foreign employees to get work Visa in the future?
Question 2:
Please provide more details on the measures and specific schedule to improve corporate governance.
Answers to 1 and 2.
From 2011 to present, the Ministry of Economic Development of Russia together with the Federal Agency for State Property Management (Rosimuschestvo), the Government Expert Council of the Russian Federationand sectoral federal executive authorities have carried out the systematic work aimed at the development of mechanisms, the improvement of quality, the development and the introduction of unified approaches and standards in the field of corporate governance in companies with the state participation (JSC).
The results of the work are the following:
· the introduction of the Institute of professional directors (PD) to JSC,
· the development and implementation of the Corporate Governance Code to the parts of JSC,
· the development and implementation of strategies and long-term development programmes, key indicators of the effectiveness of activities of JSC,
· the development and implementation of programmes for the realization of non-core assets,
· the development and implementation of other internal documents of JSC, aimed at the improvement of the quality and the effectiveness of corporate governance in state companies allowing potential investors to evaluate from their side the assets offered to privatization.
Concerning the attraction of PD to JSCit should be noted a positive dynamics regarding the increase of their presence in the management bodies of JSC compared to the reduction on the number of state companies that are in federal ownership.
In the framework of the implementation of the Corporate Governance Code, the particular attention is paid to the shareholders rights and to the equality of conditions for shareholders in exercising of their rights. Companies actively refine their internal documents and regulations regarding this issue. This measure contributes to the protection of interests of shareholders including foreign investors.
In relation to the development and implementation of programmes of sale of non-core assets of JSC it should be noted that despite the implementation of non-core assets of JSC starting from 2011, the similar work in respect of subsidiaries of state companies is required from 2017. The implementation of non-core assets helps to attract financial resources for the execution of long-term development programme of JSC.
For the purpose of the development of HR potential, the work on the introduction of professional standards for employees is under way in JSC that will be mandatory qualification requirements necessary for the employee to perform a specific job function.
Besides, the structure of the annual report of a company that provides more detailed information about the activity of JSCto a potential investor has been refined during 2015.
Also, noteworthy is the increase in dividend payments which is a positive signal to foreign investors.
It should be separately noted that such above-mentioned measures on corporate governance do not touch upon questions related to obtaining visa.
Question3:
Does Russia allow foreign enterprises to participate in the privatization of SOEs? If so, are there any limitations or investment protection measures for foreign enterprises?
Answer
The participation of foreign persons in the privatization of the state property is not prohibited by the legislation of the Russian Federation on privatization, and it is determined only based on the interest of foreign persons in the particular investments. At the same time, the relations connected with the implementation of investments by the foreign investors or a group of persons in the form of the acquisition of shares (stakes) constituting the charter capital of the economic societies having strategic importance for the ensuring of the defence of the country and the security of the state are regulated by law
Page 8, Para 4
Incentives provided under the industrial policy take many forms, including direct grants to infrastructure, tax breaks, and preferences in government procurement contracts.
Question 4:
Please provide details on incentive measures for the service industry and trade in services involved in this industrial policy.
Answer:
Industrial policy as provided for by the Federal Law No. 488-FZ of December 31, 2014 "On the industrial policy in the Russian Federation" has the following purposes:
1) creation and development of modern industrial infrastructure, infrastructure of the facilitation of activities in the industrial sector;
2) creation of competitive environment for activities in the industrial sector;
3) encouragement of the subjects of activity in the industrial sector to implement the results of the intellectual activity and production of innovative industrial products;
4) encouragement of the subjects of activity in the industrial sector to utilize the material, financial, labour and natural resources efficiently and effectively, to provide for the increase in labour productivity, introduction of import-substitutable, resource-saving and ecologically safe technologies;
5) increase in high value-added output;
6) support for technological modernization of the subjects of activity in the industrial sector, modernization of the basic production assets;
7) reduction of the risk of the technogenic emergency situations on the facilities of industrial infrastructure;
8) ensuring technological independence of the national economy.
There are no specific incentive measures for the service industry and trade in services envisaged by the mentioned industrial policy.
Page 8, Para5
The Russian authorities acknowledge the need to accelerate economic reforms and aim at enhancing competition in goods and services markets, improving property rights, and revamping transport and telecommunications infrastructure to improve the business climate and boost investment.
Question 5:
What measures have been or will be taken by Russian authorities to promote the development of the service industry and export of services?
Answer:
Regulations related to the improvement of business climate in the Russian Federation do not provide for separate conditions in respect of goods and services. Detailed information on the latest measures introduced in the Russian Federation with the purpose to improve foreign investment environment is described in Russia's answer to question 18 of China.
Page9, Para 9
In addition, the EEC is working on developing the basis for a single window mechanism including streamlining and harmonizing customs formalities. A unified information platform, Seaport Portal, is being implemented as an electronic single window for handling and customs processing of cargo at Russian seaports.
Question 6:
What impact will the single window mechanism have on the problem that Russian custom clearance formalities for automobile import follow different standards and vary from person to person?
Answer
The implementation of single window mechanism will not affect the application of regular customs control measures based on customs risk management. The actual system of risk control management is to identify low risk foreign trade participants under general customs control and to reduce considerably the administrative pressure on such category of participants focusing more on the customs control after the release of goods.Clearance formalities will depend on various elements. Traders which supply parts for car assembly on the basis of long term contracts may be subject to different formalities as compared to one-time importers.
Page 9, Para 9
Foreign investment, technology transfer, and innovation are considered by the Russian authorities as critical to the economic modernization of the country. In this context, high-tech parks, industrial clusters and special economic zones (SEZs) are being promoted through special tax and infrastructure incentives, available to both local and foreign investors. Some investment privileges are also granted in the context of the Auto Investment Programme and agreements concluded under this programme. The Russian Federation has confirmed that it will eliminate the WTO-inconsistent measures applied under the Auto Investment Programme by 1 July 2018.
Question 7:
What promotion effects have been achieved by the Auto Investment Programme and its sub-agreements?
Answer
The promotion effects of the Auto Investment Programme are positive. The implementation of the programme ensures the inflow of foreign capital into the automotive industry of the Russian Federation, establishment of new modern manufacturing facilities, adoption of new technologies. For more vivid illustration of the positive effects it should be noted that the world leading automotive corporations established their manufacturing facilities in the territory of the Russian Federation.
What investment privileges are granted? What are the WTO-inconsistent measures included in Auto Investment Programme?
Answer
Auto Investment Programme and investment regime are described in para. 1072 – 1085 of the Report of the Working Party on the Accession of the Russian Federation to the World Trade Organization. The Russian Federation would like to note that the investment measures applied under the Auto Investment Programme cannot be considered as WTO-inconsistent because, as it follows from para. 1090 of the Report, the WTO Members agreed on the period (until 1 July 2018) in which these measure can be applied.
Question 8:
Has Russia put on its agenda elimination of relevant incentive measures? Are there any similar preferential policies for the import of parts by auto corporations not using a certain proportion of local products?
Answer
As for incentive measures provided by the Auto Investment Programme, they are to be eliminated by 1 July 2018, as it is provided for in para. 1090 of the Report of the Working Party on the Accession of the Russian Federation to the World Trade Organization.
Except for the Auto Investment Programme the Russian Federation does not provide any policies in automotive sector which requires using a certain proportion of local products.
Page 9, Para13
The Russian Federation has ten regional trade agreements in force encompassing 12 partners: Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyz Republic, Republic of Moldova, Serbia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan. In 2014, merchandise trade (exports and imports) with RTA partners accounted for 12.2% of the Russian Federation's total trade. In the EAEU customs union, there are no tariffs or other border measures on trade among members of the EAEU. At end-June 2015, EAEU members were providing preferential access to 103 developing countries and 48 least developed countries. About 24% of all tariff lines are covered by the GSP scheme. For these tariff lines, developing countries qualify for a 25% discount on the MFN rate and least-developed countries qualify for duty-free access.
Question 9:
What tariff regulations do various countries concluding the RTAs have on auto commodities?
Answer
Treaty on the Free Trade Area between members of the Commonwealth of Independent States (FTA CIS) stipulates that Members don't apply customs duties on vehicles and its parts, originating within FTA CIS. There are no tariffs on trade on auto commodities among Russia and Azerbaijan, Georgia, Tajikistan, Turkmenistan and Uzbekistan. Passenger cars and tractors are subject to the duties at MFN rates when imported from Serbia.
Page 10, Para 17
The Russian Federation has not harmonized VAT and excise tax regimes with the other EAEU partners. While intra-EAEU trade is duty-free, and hence outside customs control, it remains subject to VAT and excise taxes. In the Russian Federation, excise taxes are identical for imports and domestically-produced goods and may be levied on specific, ad valorem or compound bases, depending on the good. Excise taxes are levied on beer, wine and spirits; tobacco and tobacco products; petroleum products; and motor vehicles. Typically, the rates are revised annually. VAT is applied at a standard rate of 18% although a reduced rate of 10% applies to certain items, including basic foodstuffs. Some supplies, including exports, are zero-rated and are thus eligible for VAT refund on inputs, while VAT exemptions apply for social assistance and economic development objectives.
Question 10:
Are there any plans to reduce the franchise tax for automobile products?
Answer
The Russian Federation does not have any plans to change VAT or excise taxes. The Russian Federation does not have any franchise tax in its tax system.
Page 10, Para 20
At the federal level, the state corporation Vnesheconombank (VEB) is involved in export support both directly and through its specialized subsidiaries, including Eximbank of Russia, the Export Insurance Agency of Russia, and the Russian Export Centre. The latter was set up in 2015 as a single window for financial and non-financial support to Russian exporters. A former VEB subsidiary, the Russian Direct Investment Fund, may also make equity investments in medium-sized, non-energy companies with export potential. According to the authorities, these entities do not follow uniform directives on minimum Russian content and sectoral or geographical priorities in export support.
Question11:
What kinds of export support are provided by Vnesheconombank (VEB) directly or through its specialized subsidiaries? What policies are involved? Is investment supported as well?
Answer
The main export facilities provided by VEB, EXIAR and the Eximbank of Russia are described in Table 3.22 of the Report of the Secretariat.
The Russian Export Center JSC provides non-financial support to the Russian companies that are looking forward to export.
Page 10, Para20
In the Russian Federation, legal and institutional reforms intended to boost exports have largely been framed by the Support for Exports and Access to Foreign Markets road map and the Government programme on Development of Foreign Economic Activity (2013-2018), which had been devised as part of a broader initiative to modernize the Russian economy and to improve the investment climate.
Question 12:
What specific measures for supporting service export or affecting service import are included in the Support for Exports and Access to Foreign Markets road map and the Government programme on Development of Foreign Economic Activity (2013-2018)?