Alabuga

Yelabuga Automobile Plant

In the 1980s, the right bank of the Kama river was a promising industrial centre. In the vicinity of Naberezhnye Chelny, the auto road and railways communications were established; KamAZ was showing new industrial capacities; the Plant of Transport Electrical Equipment and the Cardboard and Paper combine enterprise and the Nizhnekamsk hydroelectric station were launched. In 1984, the Council of Ministers of the USSR decided to build a Kamsky Tractor Plant (KamTZ) in the Yelabuga area, including a universal tractors plant, along with an engine plant, a fueling equipment, a turbocharger, a foundry and forging and a machine tool producing plants.

Nikolay Bekh, the director of the "KamAZ" foundry plant, headed the Directorate of the future plant. The general plan of "KamTZ" was prepared under his supervision. The project, commissioned by the Ministry of Tractor and Agricultural Machinery of the USSR, was designed by "Giprotractorselkhozmash" from Kharkiv; its main contractor was the production association "Kamgesenergostroy". The first cubic meter of concrete was laid in the foundation of the future plant on 12 October 1984, and the next year the construction of apartment houses, factory buildings, boiler station, treatment facilities and the road from the highway Kazan - Naberezhnye Chelny highway to the plant site were launched. By 1988, six buildings of the plant were installed, a combined heat power plant was built, 90 kilometres of high-pressure gas pipeline from Udmurtia were laid, and four samples of an experimental tractor were put up, but Mikhail Gorbachev doubted the expediency of a huge tractor production. In July 1988, the Council of Ministers decided to reorganize KamTZ into the Yelabuga Automobile Plant (YelAZ), which was subordinated to the Ministry of the Automobile Industry by order of 9 August 1988.

It was planned to launch a mass production of city cars, "Oka" in particular, on the YelAZ site in 1989–1995. The plant also negotiated the creation of a joint venture with Fiat for the production of Fiat Panda and the jointly developed "A93" model, but the Italian company delayed the signing of the contract, waiting for the political crisis resolution on which the project financing depended. Because of a lack of funds, the launch of YelAZ was postponed from 1991 to 1992. In November 1991, Gorbachev put the plant to the jurisdiction of the Republic of Tatarstan and, thanks to the support of the President of Tatarstan, Mintimer Shaimiev, the enterprise managed to avoid closure after the collapse of the Soviet Union. The main subdivision of YelAZ in the 1990s was the machine tool producing factory, which was launched in 1992 and supplied large car manufacturing factories and oil refineries. When in 1997 it reached the breakeven point, about one thousand people worked on a territory of 100 thousand sq meters. The republican authorities also revived the idea of car production and in late 1995 reached crucial agreements with the concern of General Motors. In early 1996, a joint venture "YelAZ-General Motors" was established with $250 million of authorised capital, 25% of which belonged to US investors, the rest — in equal shares to Tatarstan and Russia. The Chevrolet Blazer SUVs, produced in Brazil, were assembled at the YelAZ-General Motors sites, and ElAZ directly dealt with third-party orders for tools, machine tools and spare parts, and together with the French company produced beet harvesters.

The first 120 Chevrolets left the assembly line in March 1997, and by the end of 1998, it was planned to open a production complex of a joint venture in the 601st building of the industrial site and to increase car production to 50 thousand per year. The Yelabuga — Kazan — Moscow — St. Petersburg dealer network began to work, and to reduce the car selling price, the government of the Republic of Tatarstan reduced the property tax rate for "YelAZ-General Motors". However, the financing of the tripartite project was slipping: for example, in mid-1997, journalists pointed out that only 20 million roubles (3.456 mln US Dollars) instead of 120 (20.74 mln US Dollars) were delivered from the Republican budget, while the Russian Federation provided only 1.7 million (0.294 mln US Dollars). After that, the existing mechanism of the project funding was abolished by order of the Russian president on 8 July 1997.

Free economic zone

In order to attract funding and to overcome unemployment in Yelabuga, the republican government turned to the widespread practice in Russia of the 1990s of creating free economic zones designed to stimulate the regional economy through tax breaks and the attraction of foreign capital. The Law of the Republic of Tatarstan "On Free Economic Zone «Alabuga»" was adopted on 22 April 1998, by 33 votes of deputies of the State Council of the Republic of Tatarstan; one deputy voted against it. The FEZ regulations were developed together with the Customs Committee of the Russian Federation, the Ministry of Finance of the Russian Federation, and the State Committee for Property Management of the Republic of Tatarstan. The FEZ residents were exempt from all tax payments, except for unified social tax and personal income tax. Despite the fact that in 2001 the American company left the joint venture "ElAZ — General Motors", the FEZ continued its work. By 2003, 13 companies were located in the FEZ, including the "Skantat" joint venture with Volvo, which produces buses on the KamAZ chassis; the Minski Traktarny Zavod tractor production; the meat-processing plant "Modul", the car chemicals production "D Plast-Eftek; the manufacturer of special machinery on the cargo chassis "AutoMaster"; a factory of office furniture and trade equipment "ElTons"; the manufacturer of building components "DSK KMK" and the joint venture for the heaters production "Delonghi — ZASS «Alabuga»".

The law "On Free Economic Zone «Alabuga»" contained some fundamental differences from federal legislation related to the industrial and production specificity of the site and the desire of the Tatarstan authorities to avoid the use of FEZ for tax evasion. The republican prosecutor's office considered that these differences contained violations of the Civil Code that restrict citizens' rights to engage in entrepreneurial activities, and protested the law during the discussion of the amendments in September 2001. Deputies of the State Council of Tatarstan appealed to the economic expediency of "Alabuga", but the prosecutor's office was not satisfied with these arguments and demanded that Supreme Court of Tatarstan regards the law as contradicting the federal legislation. The Supreme Court of Tatarstan refused to do it, and the Tatarstan prosecutor's office appealed against the decision in the Supreme Court of the Russian Federation. Despite the absence of a direct ban on the creation of free economic zones with special economic regimes in the federal legislation, the Supreme Court of Russia took the side of the prosecutor's office, and qualified the creation of FEZ to be beyond the powers of the Tatarstan State Council and on 21 March 2003, abolished the law "On free economic zone «Alabuga»". On 23 April 2003, the State Council officially terminated the law on the territory of the republic.

Directorate of investment programs

To fulfil the obligations to provide tax benefits and implement investment projects for the residents of the free economic zone, the Government of Tatarstan established the "Directorate of investment programs on the territory of the industrial site «Alabuga»", which fully complied with federal legislation. The Directorate became the legal successor of the free economic zone, and the former territory of the FEZ was transferred to its management. In 2004, four production projects with 3 million dollars of investment were launched on the site.

Special economic zone

The Tatarstan project attracted the attention of the Ministry of Economic Development of the Russian Federation during the work on the new law regulating free economic zones. Representatives of the Directorate of investment programs were invited to the working group for drafting the bill, and after the adoption of the law "On special economic zones" in July–August 2005, Herman Gref visited Yelabuga. The project of the special economic zone in Yelabuga became one of the winners of the competition for the creation of the first two SEZs. On 21 December 2005, the Government of the Russian Federation issued Resolution No. 784 "On the establishment of a special economic zone of industrial type on the territory of the Yelabuga district of the Republic of Tatarstan". The tripartite agreement, signed on 18 January 2006 between the Ministry of Economic Development and Trade of the Russian Federation, the Government of the Republic of Tatarstan and the administration of Yelabuga municipal district, obliged the Russian Federation and the Republic of Tatarstan to jointly finance the engineering, transport and social infrastructure of the SEZ. The open joint-stock company "Special economic zone of industrial and production type «Alabuga»" (JSC "SEZ IPT «Alabuga»") was established on 24 July 2006. JSC "Special Economic Zones", completely owned by the Russian Federation and the Ministry land and property relations of the Republic of Tatarstan, became its shareholder. The Grand opening of SEZ Alabuga was held on 20 November 2007. It was attended by the President of Tatarstan Mintimer Shaimiev, the head of the Federal Agency for Management of Special Economic Zones Mikhail Mishustin, the Minister of Economic Development and Trade Elvira Nabiullina, the Deputy Minister of Industry and Energy Denis Manturov and the Deputy Prime Minister Sergei Ivanov.