vlad.tribnet.com / Issue #163 / Business / Reading article...

Nikolai Fyodorov works in the shadow of his predecessor.

He was appointed head of Nakhodka’s Free Economic Zone in January, but the name of former Chairman Sergei Dudnik still adorns information packets, web sites, brochures, and name plates.

Leaving a legacy as a well-connected public relations man, Dudnik took the spotlight with him when he was elected to head the Krai Duma. He now meets with high-ranking American officials and scolds Duma deputies during rowdy sessions. His staff have hinted he may make a bid for governor next year.

In the meantime, Fyodorov is saddled with a project that continues to bear the brunt of federal foot-dragging over legal and tax reform, he says.

The zone, established in 1991, comprises 4,500 square km of land, with a federally funded budget of $25 million. It has direct links to the Trans-Siberian Railway, and covers the city of Nakhodka and its four ports – through which pass 30 percent of Russia’s cargo trade worldwide. At its inception, the zone was touted as an irresistible tax haven on the verge of a market boom, that would transform the city into another Hong Kong.

But the zone offers tax breaks only on the krai level, and most of those are for profits invested back into its infrastructure. Dudnik’s publicity campaigns were based on potential – seven years after it was first established, there’s still very little that’s free about the Free Economic Zone.

“We are fully dependent on all the processes that go on [at the federal level] in Russia,” Fyodorov said. “All the problems we now face are common problems for our country.”

So Fyodorov will continue developing projects that make the Economic Zone a profitable place to invest based on its existing advantages, not on its tax breaks. These projects include sealing contracts on a power plant, enhancing infrastructure like roads and sewage systems, and insuring a reliable source of water.

“The policy of the zone administration has not changed,” he said. “We have to develop infrastructure and create conditions for investment to be profitable and safe.”

Before taking over the post, Fyodorov served as its deputy director under Dudnik. He graduated from the Leningrad Polytechnical University with a degree in mechanical engineering and then worked in Nakhodka’s Commercial Port, where he became chief engineer in 1988.

His engineering expertise lends to a focus on transportation. A believer in the Trans-Siberian Railway’s potential, Fyodorov thinks that a key to the zone’s success is bringing the line back into full operation. Since the fall of communism, the Trans-Siberian has been plagued by high tariffs, delays, and crime. Fyodorov will sit on a committee led by First Deputy Prime Minister Boris Nemtsov to increase the line’s attractiveness and secure federal support for that project.

He will also oversee the construction of two industrial parks. The United States is planning to build a park, and South Korea drafted an agreement for its park last year, though it has not been signed.

According to the zone’s information department, the Korean techno-park will offer space for 100 to 150 enterprises producing goods worth $1billion annually, including $700 million for export. Projects already approved include agricultural tools and machinery for farms and household electronics, assembled from parts delivered from Korea.

But Korean Consul General Choi En Sam admitted that these are not projects that will show immediate progress.

“In my opinion this all takes a long time,” he said. “It will be impossible to finish the park in one or two years because of Russian financial problems.”

With such overpowering obstacles, Fyodorov knows that his job won’t include negotiating advantages for the zone. That’s for his storied predecessor.

As leader of the Krai Duma, Dudnik has claimed he wants to develop Russia’s role in the Pacific Rim. The Duma, he said in a February press conference, would also try to pass a number of laws “providing a minimum legislative base for the increase in investment in and by businesses in the krai.”

With over 80 percent of Russia’s trade with the Pacific Rim passing through Nakhodka’s ports, the zone will play a major role in Dudnik’s plans, Fyodorov said.

“As a member of the Federation Council and as Chairman of the Krai Duma, he has more opportunity to more actively participate in legislative initiatives in this field,” Fyodorov said. “[Dudnik] sees that the zone is one mechanism for development in the entire region. And of course he will use that advantage.”