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Russia: Ford Determined To Begin Auto Production

St Petersburg, 24 June 1998 (RFE/RL) -- Russia's Deputy Prime Minister Boris Nemtsov says Ford Motor Company is likely to start building its first factory in Russia in October.

Nemtsov made the comment Friday in St Petersburg - just one week after the U.S. car maker said it was reconsidering the project. But, Ford officials were also upbeat after meeting Nemtsov in the Leningrad region.

"I am confident we can overcome existing obstacles in the next couple of months," Len Meany, Ford's associate director in Europe for new markets told RFE/RL. "Nemtsov was extremely helpful, and our meeting with him has resolved some significant concerns we had," said Meany.

The city of Vsevolozhsk in the Leningrad region, which surrounds St Petersburg, is Ford's top choice to locate the $150-million plant. The actual site would be on the territory of the near-bankrupt, state-owned engine factory, Russky Diezel. In fact, the Ford plant would officially be a joint-venture with the Economics Ministry, which owns Russky Diezel.

In January, Ford had said that it hoped to make a decision on the project by June, but, now it is saying that a decision might be made by October.

"The federal government has done everything to expedite this project, and, if all goes well, then construction on the factory can begin in October," Nemtsov told reporters. "I hope that soon Russians will be riding Russian Fords. Maybe by 2001."

Meany said that the current financial crisis is barely influencing Ford's plans. "Of course, the financial crisis in always in the back of our minds, but Ford is thinking over its plans very carefully, because we want to be in Russia for the long-term, and we want to get it right from the beginning," added Meany.

The planned factory would come within the framework of the Presidential decree on investments in the car sector, Nemtsov said, referring to a presidential decree this year, under which any car manufacturing joint-venture worth at least $250 million, and, with at least $25 million worth of foreign investment, can be granted tax breaks for a five-year period.

Taking into account the existing infrastructure being handed over to Ford by the federal Economics Ministry and others, the plant could be readily made to fit the decree's parameters.

Were Ford to qualify for the federal tax break, it could be augmented by tax breaks already granted under the region's investment law. That law exempts large investors from regional taxes - such as profit, property, and road taxes - until those firms begin receiving returns on their investments. All federal taxes, however, still have to be paid. The local tax breaks have helped the Leningrad region attract direct foreign investment.

"The Leningrad region now has the best law on investment and this is why companies are coming here," the region's governor, Vadim Gustev told RFE/RL. "The financial crisis is not a problem because serious businessmen who come here are looking decades into the future, and not just thinking about today."

Most notable among foreign ventures in the region are an already operational $25 million Assi Domain plant, Philip Morris's current construction of a $337 million plant, and Caterpillar's building of a $50 million plant.