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. Last Updated: 07/27/2016

Tobacco Plant Flies Flag for Investors

ST. PETERSBURG -- In an encouraging sign that foreign investment is still alive and kicking in Russia, U.S.-affiliated company Cres-Neva has completed its first test production run at its tobacco-cutting plant near St. Petersburg.

The company's investment of $15 million comes after Russia recently announced a 40 percent drop in its foreign investment in the first quarter of this year as compared with the same period last year.

Claiming a "solid demand" for the plant's tobacco-cutting product, the plant's general director, Mark Kehaya, said that commercial production at the factory, located in the town of Lomonosov some 100 kilometers west of St. Petersburg, will most likely begin in August.

The company, a subsidiary of the Standard Commercial Tobacco Co., expects to boost production to an annual capacity of 20,000 tons by employing 100 people to work in three shifts around the clock, Kehaya said.

The company's interest in the Leningrad region began in earnest in January 1998. After a year of exporting tobacco stems to Russia, the company picked the Ireland-sized district that surrounds, but does not include, St. Petersburg as a potential spot to open operations.

Targeting Russian cigarette makers and considering exporting its product to former Soviet republics, it signed an agreement with the regional government seven months later.

About 500 foreign companies are currently investing in the Leningrad region, leading to a significant growth in the region's economy this year, Sergei Naryshkin, head of the region's committee on external economic relations, said.

The region boasts an expected $350 million in foreign investment this year, up from last year's $290 million.

Heading the investor list is Phillip Morris, with $330 million invested in a plant scheduled to begin operation by the end of 1999.

Acting regional Governor Valery Serdyukov, present at the production test of his region's new investors, said he will preserve the investor-friendly laws "that foreign investors today very actively pursue," he said.

The laws, created during the popular former Governor Vadim Gustov's administration, give massive tax breaks to foreign companies wishing to court the region bordering the European Union and Estonia.

Companies investing more than $1.03 million in the region receive a full tax break from the regional portion of profit tax, road users tax and asset tax until their initial investment is recovered.