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January 2007

Kari Liuhto
KALININGRAD, AN ATRACTIVE LOCATION FOR EU INVESTORS
Electronic Publications of
PanEuropean Institute, 1/2007

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A summary

1) Instead of establishing the ‘Guichet unique’ dealing only with the EU investors, one should support the organisation of a counter dealing with all foreign investors, since there might arise legal obstacles (e.g. Russia’s probable WTO membership) to treat foreign investors differently. The EU companies would in any case benefit the most from the desk as three quarters of the foreign investment in the Kaliningrad region arrive already at the moment from the Union. The EU should invest in training of the desk personnel, and even fund a EU liason officer to serve exclusively the EU investors to get the desired outcome out of the ‘Guichet’.

2) Even more important than supporting the formation of the counter for foreign investors is to build the image of the region, and hence, I strongly propose the establishment of the Foreign Investment, Trade and Tourism Agency under the regional administration of Kaliningrad. This agency could, for instance, provide a monthly investment review for the EU investors. The agency should also create the foreign investment website, offering basic information on the regional economy, the summary of the core business legislation, and new investment projects and proposals. The agency would greatly benefit from closer cooperation with similar agencies around the Baltic Sea region.

3) The foundation of a European Information Centre in Kaliningrad can be highly recommended since the knowledge on the EU and the business opportunities provided by the Single Market is still relatively limited in Kaliningrad. I suggest that the European Information Centre would be placed under the Kaliningrad Chamber of Commerce. The Centre should design innovative ways to promote the exports of the Kaliningrad firms. For example, one could consider the creation of a virtual fair of the Kaliningrad exporters, presenting the products of the main exporters and their contact information at the chamber’s website.

4) The Institute for European Studies should be founded within the Immanuel Kant State University of Russia with a recommendation to cooperate closely with the Kaliningrad branch of the Academy of the National Economy under the Government of the Russian Federation (under construction). This institute should act as an independent think tank of the EU affairs in the region. According to the EURussia common spaces, the Institute for European Studies is to be established under the Moscow State Institute of International Relations (MGIMO) in Moscow later this year. In my opinion, the Kaliningrad region also deserves such a European Institute – perhaps more than Moscow.

5) If the Kaliningrad European Business Club is to be founded, the Foreign Investors Association would be a natural core of the Kaliningrad European Business Club, if a new club is needed. If the new club is established, it should enhance dialogue between the main foreign firms, local enterprises and the regional administration. The Kaliningrad European Business Club could also act as Kaliningrad’s united business
voice towards Brussels and Moscow. If the new club is not founded, the Foreign Investors Association should be supported.

6) The twinning is one of the most effective ways to transfer managerial knowhow to the Kaliningrad region and to promote the region’s investment opportunities abroad. Therefore, the twinning of the Kaliningrad Chamber of Commerce is highly recommendable. In addition to the twinning, one should support the idea of the Kaliningrad Chamber of Commerce to intensify its cooperation with the Baltic Sea Chambers of Commerce Association.

7) The Kaliningrad region should not offer any additional tax incentives for foreign investors. The new SEZ law, which came into force in April 2006, gives already enough tax incentives to run business in the region. However, the Kaliningrad administration should allocate free of charge a special expert service, ‘an
administrative godfather’, to all major foreign investors planning to invest more than USD 5 million in the region.

To conclude, the Kaliningrad region has not so far succeeded in attracting foreign investment. Even if Kaliningrad’s performance in attracting foreign investment is very modest, one may argue that the region possesses a lot of unused investment and tourism potential. I believe that with the actions presented above, Kaliningrad could become significantly more attractive investment location in the eyes of real foreign investors. More importantly, most of the aforementioned actions do not require substantial financial allocation but rather reorganisation of the existing actors in the Kaliningrad region. The EU’s technical and managerial aid in this reorganisation task would be needed, as finally, the EU companies benefit the most from the aforementioned development actions.

Download the publication in PDF format.


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