The complex of the First Investment Bank, reminescent of the famous Crimean palaces, can now be considered the Crimea's representation for Kyiv.
The draft law of Ukraine On the Greater Yalta Free Economic Zone has been introduced, amended, and lobbied at all levels here. The draft is supported by the Russian government, but the Yalta city council has mixed feelings.
Perhaps, this was one of the possible reasons for issuing well-known presidential Yalta decree. However, this goes as far as politics and The Day correspondent agreed with People's Deputy Ihor Franchuk (son of the Crimean Prime Minister) and the chairman of board of the First Investment Bank Borys Sobolev that their conversation will only about economics.
Borys Sobolev: So far Ukraine has received about two billion dollars of direct foreign investments, which is the smallest amount of money per capita for any European country. At the same time there is a decreasing tendency for Southeast Asia and we have to take advantage of it. The Crimea traditionally receives money from the central all-Ukrainian budget. This is insufficient and another way should be found to increase Crimean income. Ihor Franchuk's and my supporters in Simferopol believe the Crimean population should be given a chance to earn money, support the necessary administration and make obligatory deductions to the state budget themselves. This is the model of the future federalized system for the state budget. A zone with a special economic regime might become a place attractive to foreign investors. This will not take much expense: creation of special customs points along with forming an administration and executive committee.
In cooperation with the Crimean government, we intend to conduct a number of presentations in order to let everyone know that there is a place in Europe, where you can invest your money and get quick returns. We hope, that New Russians (Ukrainians, etc) along with foreigners who fly to spent their money in United Arab Emirates will move here. There will be duty free stores, but there will neither cultural nor language barriers.
The Day: Is the Crimea ready for such changes, judging from political and economic point of view?
Ihor Franchuk: People who live in the CIS states still think of the Crimea as a major resort area. But not many of them realize how complicated the economic situation here is. The Crimean Parliament tries to pass the single channel budget system and deduct only fixed amount of fees to the state budget. However, this is close to impossible, because the local budget figures are not supported by income. This is why Ukraine is forced to finance the Crimean republic. What we are trying to do is establish competetive conditions, attractive for serious investors and create new jobs. Then, only 2 to 2.5 million people spend their annual vacation in Crimea, compared to 6 million in the past. This not only because the Soviet Union broke apart, but because the newly established countries try to fill their own resorts. Political complications and the difficult economic situation scare not only vacationers but investors also. In order to have them come to us, we need not only stability but also information and huge advertising campaign.
The Day: Will the democratic rights of the people be secured in the free economic zone? I mean the recent scandal of a presidential decree assigning its acting head.
I.F.: In no way may the people’s rights be violated. Regular laws will be valid on the territory of the free economic zone just as on the rest of the state's territory. Many people are worried, that the zone will be governed by the joint stock company. But they should understand that in any case government will retain 70% of the authorized fund. Besides we will not force people do anything, they themselves should initiate the process to establish the free zone. Many Yalta dwellers suffer from being unable to make money. A free economic zone is for them a dream come true, and I hope they will support its creation. And we shall help them by passing new laws, developing its economic base and creating its administration by mastering the governing mechanism. The laws will not be eliminated there and relations between local self-government and the administration will be regulated by the Constitution.
But the main thing is that there will be a special economic regime for taxation and budgetary cooperation, which will enable suppliers to decrease the cost of the services granted here. People will be able to buy things without paying VAT when shopping in Crimea. This measure should bring back the money now regulary spent in Cyprus, Greece, or Turkey. The zone will boost development of the banking system, soon it will be able to offer all kinds of services just like any European bank. The banking tax here should be reduced though, down to 10% for instance. This will also boost the insurance business development.
We are sure that initiation of the free economic zone will be profitable for every Crimean dweller and all Ukrainian citizens.
The Day: How much will the pre-investment infrastructure cost the state budget?
B.S.: Not much at all. I have already mentioned the customs control points. That's all. We can train the staff through TACIS programs. The current disorderly privatization should be suspended here and clear international tenders should be launched, attracting real money that will soon start bringing dividends. Not much money will be taken from the budget and it will not suffer much loss. Presently there is no income but too much expense. The difference is financed by the budget, which is a direct road to bankruptcy. We'd better stay away from that.
The Day: This circle on your map includes a large area of land and sea. Does it show the borders of the zone?
I.F.: The zone's territory has not been yet defined. We are trying to create a centralized governing system, without local, town, etc. administrations, since they do not add much volume anyway.
The Day: Why is the First Investment Bank in charge of creating the zone?
B.S.: Our experts have spent much time attracting foreign investments to Ukraine. This team followed me from the Ministry of Finance and the Ministry of External Trade Relations. Our work is viewed as a success.
The Day: Who will elect people to govern the zone?
B.S.: I think people, living in the local towns, the Crimean government, and Ukrainian government should do it together.
I.F.: I think the elected Yalta mayor should also head the free economic zone and chair the Oversight Council, constituted by representatives of all branches of the executive authority. These people should be professionals, economists, able to estimate, what the zone's creation will lead to. The zone is about economics only, not politics. I think the temporary administration should be given three years probation and then its work should be analyzed and corrections made. Then the law should be passed, stating that the free economic zone regime will be valid for 99 years. This will secure stability and private property rights.
B.S.: I have interviewed a person who might chair the Oversight Council. Unfortunately, I cannot make his name public until the contract is signed. However, he is known the world over and his participation in the project may add much to the project: there is much money behind him.
The Day: I was not satisfied with your answer regarding possible influence of the President's Yalta decree. And moreover, the crime level is high in the Crimea. What will you do to prevent criminals from setting their own rules for the zone?
I.F.: I would not be so negative on estimating the situation in Yalta, things are not that bad as they tell us. The Russian mass media try to prevent people vacationing in the Crimea. The crime level is not the highest in here. The Crimea is only in sixteenth or seventeenth place in the list and the presidential decree eliminating immunity of local councils' deputies may secure the needed guarantees.
Borys Sobolev (left photo). Ihor Franchuk (right photo).








