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Saint Petersburg is a city and a federal subject of Russia located on the NevaRiver at the head of the Gulf of Finland on the Baltic Sea. It is the second largest city in Russia after Moscow. It has a population of five million inhabitants, as in September 2012. It’s a major European cultural center and it is also an important Russian port on the Baltic Sea. It consists of the UNESCO world Heritage site. Saint Petersburg is a home to The Hermitage, which is among the largest art museums in the world. It’s a location to large number of international corporations, banks, foreign consulates and other businesses.
Saint Petersburg is one of the major trade getaways, industrial and financial center of Russia. The city specializes in production of oil and gas trade, aerospace industry, radio and electronics, shipbuilding yards, software and computers, heavy machinery and transport, machine building, such as tanks and many other military equipment, mining manufacture of instruments, ferrous and non- ferrous metallurgy, i.e. production of aluminum alloys, pharmaceuticals, chemicals, publishing and printing, medical equipment, wholesale and retail, food and catering, textile and apparel industries, and a lot of other businesses.
St Petersburg is considered to be a very attractive city for investment among foreign countries. As in 2005, many countries intended to have investment in Saint Petersburg. These countries include Belarus with 15.8 percent, Switzerland with 14.7 percent, Germany with 10.1 percent, Cyprus with 10.1 percent, and lastly Great Britain with 9.5 percent. United States investments in this city accounted for 3 percent of the total investment volume. Foreign investment of Saint Petersburg economy in the non- financial sector was equal to $1.1billion. Ninety five percent of this foreign investment is for manufacturing. These services elevate the city to the status of financial center.
The financial development of St Petersburg benefits not only the local community but also the international one. About nine hundred and twenty medium- sized organizations and major organizations with foreign capital operate in this city. This creates the employment opportunities for at least two hundred and five thousand, three hundred people. Going by the huge number of people, employed in the city, there is a clear indication that it is one of Russian economic hubs.
Financial center refers to a city or to an urban center, which consists of a heavy concentration of financial institutions that offer a highly- developed communicational and commercial infrastructure with large quantity of international and local trading operations. New York, London and Tokyo are among the top financial centers of the world. Offshore financial center refers to a small, low-tax authority that specializes in providing the commercial and corporate commercial benefits to non-residents in the form of offshore companies. These financial centers play a vital role in the international financial system. It facilitates the accessibility of credit and encourages the competition in local banking institutions. It results in a boost of major economies that, after all, support the creating and growth of employment opportunities.
Financial centers are usually located in countries, cities or states with favorable for business conditions, i.e. with low taxes and other business- related features, which make them attractive for investment locations. Policies of financial market contribute to employment and investment, and also to effective functioning of markets and government policies in other states and countries. They play a vital role in economic development. It has been reached through facilitation of improvement in the profitability of businesses in other locations.
Then, who are the principal participants in a financial center? Financial centers exist to make sure they pull together the sides of capital raising and risk management transactions. Complex transactions of merit execution in a global financial center involve large corporations that determine raising funds and are protected from financial risks. These transactions benefit large investment firms that are looking for risk management.
Saint Petersburg growth as a financial center has led to the development of infrastructure in the city. It especially concerns the automotive infrastructure. Some of the biggest automotive manufacturers brought the branches into the city. Some of them include: Magna, Hyundai, Grupo Antolin. There is also a tremendous development of the industrial sector in Saint Petersburg. The leading industries are machine – building and metal working. This accounts for 42 percent production volume in the city. The others leading industries are food and textile ones. There is also a colossal development in the high speed rail development. By means of that the capital city of Russia, Moscow, and the city of Saint Petersburg are linked. To continue providing better transportation system, Russian government plans to introduce ultra high speed rails that can reach a speed up to 350kph.
Another important growth in the city is the development of retail sector. Large companies are eager to open stores in Saint PetersburgCity. H & M is one of the largest corporations, which has recently opened two large retail stores in the city. Health Care sector is not left behind. Large corporate have spent a huge some of money to improve the health care system of the town. These are Royal Philips Electronics and Russian Electron. They have unveiled a multibillion investment to develop medical equipment in Saint Petersburg.
The city of Saint Petersburg is far much ahead as compared with other regions of the north-west federal region, basing on the indices of economic and social development. The city has made serious advancement in the improvement of laws, and it has strengthened its position as one of the largest financial centers in the European Baltic region. It owes to the strengthening of industrial structure, development of complex transport system and culture.
The strong economy of Saint Petersburg has massively contributed to its development as a financial center. The average annual growth rate is about 8.0% since 1990. The GDP per capita has exceeded $60000 by 2012. So it is among the highest GDPs in the world. The geographical location of Saint Petersburg favors the rapid growth. St Petersburg has got a highly- developed financial infrastructure. It is a home to more than 2000 financial institutions, as in July 2012. The city harbors a broad range of financial institutions, which include insurance companies and large number of market Services.
Saint Petersburg has a very strong and responsive regulatory tax environment. It has a rigidly structured and comprehensive regulatory framework. There are few bureaucratic barriers for setting up financial institutions in Saint Petersburg. Any incoming fund managers and private banks have the ability to choose a licensing or regulatory regime, appropriate to their needs and client base. The central bank of Russia serves as the regulator with specialized unit, promoting the financial sector. The city enjoys advantages that favor its development as a financial center. In the first place, it is situated in a region, which has been quickening its pace in wealth accumulation. In the second place, the tax compliant status is easier. The city has also limited external political pressures.
The success of financial center depends on several factors. Being a financial center, Saint Petersburg has these building blocks. The factors are listed below:
- Fair and open financial market.
- Easy and free flow of convertible and capital currency.
- Availability of skilled workforce, i.e. flexible labor laws.
- Use of worldwide spoken language.
- Transparent, fair and efficient legal and regulatory regime.
- Fair tax regime.
- Best implementation of best practices and international standards.
- Fairly low cost of doing business.
- Reliable and appropriate physical infrastructure of high quality.
- Stable economic and political environment.
The distinct illustration of these factors is described below.
Easy and free flow of convertible and capital currency
Saint Petersburg strategic location and currency allows international and domestic investors to convert domestic currency into the currency of their choice. This has facilitated the attraction and provision of deep and liquid market for the large volume of financial flows. Saint Petersburg is open to international direct and investment portfolio characteristic. This provides a widely available means for long term foreign investors to develop exposure to the world economy while improving the availability of capital equity in regional markets. This has facilitated the creating and deepening of liquidity in Saint Petersburg and also has improved its standards of corporate governance. The city is characterized by policies, which attract direct investment. It has increased productivity, boosted economic growth and provided employment, and created a vibrant innovative economy.
Fair and open financial market
World- class financial center provides a platform, in which domestic and foreign investors compete on an equal footing. Discrimination rules discriminating against or otherwise limits the ability of foreign participants to operate or compete substantially in the market. A global financial center faces an increasing number of viable alternatives and, therefore, global financial intermediaries and investors build long-term commitment in markets and provide for these policies. Being a world- class financial center, Saint Petersburg has opened the financial practices, cutting edge technology, and efficient financial sector. These favorable policies attract investors to the city. It has strengthened institutional capacity and regulation of high quality, and supervision transparency, which investors and intermediaries in world- class market opt for.
Use of worldwide spoken language
English is a global language. Saint Petersburg population uses English as a second language. Since English is a worldwide spoken business language, financial firms find it easy to establish businesses in the city and also to export labor to the city.
Availability of skilled workforce, i.e. flexible labor laws
Saint Petersburg is known for its skilled labor availability. This labor is in range of hiring needs of financial centers. The availability of large number of skilled and educated workforce is the key to the development and survival of Saint Petersburg. These experts are the fundamental drivers of the performance and competitiveness of the financial service industry. According to a survey, undertaken by the corporation of London, it was revealed that availability of skilled labor is the most important factor for a financial center. The city boasts of skilled personnel in mathematics, economics and information technology. The labor laws, associated with Saint Petersburg, are flexible. These laws permit flexible hiring and dismissal of workers.
Fair tax regime
Saint Petersburg has a sound and fair tax regime that is fairly implemented. It generates finances that are used to support public services to achieve vital public objectives. The city tax regime is characterized by:
- Balance between the taxpayer and the City’s administration.
- Framework of procedures, which includes auditing, collecting and organizing the tax. This incorporates the emerging market oriented tax system.
- It is designed in such a way that both the current economies and further economic transition can be accommodated.
For future development of Saint Petersburg the World Bank has initiated a project, i.e. the Saint Petersburg Economic Development loan, which objects to supporting the city in its effort to fasten the implementation of major elements of the strategic plan. This will enhance Saint Petersburg’s prospects for sustainable economic growth. The loan will:
- Improve the business climate in the city through creation of new private sector.
- Strengthen the city’s financial management.
- Enable the city to maintain its status as the Russian one.