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21 April '17

Plenary Session of the YIEF-2017: NATION: THE ECONOMY OF RUSSIA. DEVELOPMENT STRATEGY

Plenary Session of the YIEF-2017: NATION: THE ECONOMY OF RUSSIA. DEVELOPMENT STRATEGY

At the opening of the Plenary Session a message of greetings from Russian President Vladimir Putin to the participants in the III Yalta International Economic Forum was read out by Sergey Kiriyenko, First Deputy Chief of Staff of the Presidential Executive Office. In his speech he said that previous forums attracted a lively interest among Russian and foreign entrepreneurs and saw the signing of a massive package of agreements which are being successfully implemented. Sergey Kiriyenko also expressed confidence that this year’s Forum would also be fruitful, would initiate new promising projects in the sphere of the economy, agriculture, culture, tourism and the environment.

Dmitry Kozak, Deputy Prime Minister of the Russian Federation, noted that the Yalta International Economic Forum has acquitted itself as an effective venue for dialogue between business, investors and government. “Today the Forum offers comfortable conditions for dialogue on topical issues of Crimea’s development,” the Deputy Prime Minister said. “The government must be impartial and predictable and should promptly remove infrastructure constraints. All the institutions should be understandable and effective.” Mr Kozak stated that a huge amount of work had been done over the past three years to integrate Crimea into Russian jurisdiction and priority tasks of overcoming the consequences of transport, water and energy blockade of the peninsula have been solved. A 767.5 billion rouble federal targeted investment programme is underway.

The speaker stressed the need to work simultaneously on all levels of government to create a favorable investment climate. “Our dialogue today must be translated into deeds and projects,” Mr Kozak said.

Boris Titov, Presidential Commissioner for Entrepreneurs’ Rights and Cochairman of the Delovaya Rossiya All-Russia Public Organisation, said that a medium-term economic development strategy has been worked out and was submitted to President Putin a month ago.

The business ombudsman said: “According to the business community, the main problems are: lack of a development strategy for the country (a long-term vision) and all the issues connected with production costs which are deteriorating steadily. That in turn makes business less effective and upsets the balance between high risks and steadily falling incomes.”

In the speaker’s opinion, there needs to be a new soft and stimulating monetary policy to ensure economic growth and development. He believes credit should be accessible to entrepreneurs; it is also necessary to introduce special financial instruments, including project financing, but Russia’s Central Bank is loath to take on the risks.

In agriculture, the business ombudsman went on, the government’s active policy has resulted in growth. Stimulating mortgage loans by setting the rate at 5% may double the indicators of the building sector.

In the tax and tariff spheres, Boris Titov said, the load on business should be eased. “According to our calculations, all the tariffs are overcharged 29%. They have to be frozen for two years before being adjusted in accordance with well-grounded calculations,” the speaker said. In his opinion, judiciary reform and reducing administrative pressure on business are also pressing issues.

Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs, is sure that “there are many elements of uncertainty today in the national economic development strategy. It is necessary to identify rational elements in all the draft development strategies and bring them together within a common and coherent strategy.” Today, the speaker went on, lack of predictability of the load imposed by the system of taxes and quasi-tax charges” is a headache for business.

“A year back we developed a special methodology,” said Alexander Shokhin, “to take account of all the tax and non-tax factors. A limit load on business should be set in line with the calculations made according to this methodology.” He proposed creating a register of non-tax payments that should be introduced only through amendments to federal legislation.

The issues of cadaster evaluation of land and property are of concern to all the regions and businesses, Mr Shokhin believes. Unwarranted property taxes are a serious brake on business development.

Another problem to which Mr Shokhin drew attention was institutional reforms. Without them it is impossible to ensure growth and effective development of the Russian economy. In his opinion, the supervisory and monitoring functions of the state are in need of a rethink: as of today there are 541 permission mechanisms, with only a small part of the norms established under law. In conclusion Mr Shokin said: “It is necessary to make financial and credit resources more accessible to entrepreneurs and perhaps facilitate public offering of the shares of medium-sized enterprises and companies.”

Andrey Nazarov, Cochairman of the Delovaya Rossiya All-Russia Public Organisation and Deputy Chairman of the Yalta International Economic Forum Organizing Committee, addressed the issue of improving the legal environment. “As Deputy of the State Duma I was directly involved in and initiated many amendments to the Criminal Code, the Co-chairman of Delovaya Rossiya said. “More than 600 amendments were introduced to 300 articles of the Criminal Code and 10 articles of the Criminal Procedural Code. Arbitrary actions of control and supervisory bodies are almost a thing of the past. “The rules of the game form the foundation of growth. That foundation still needs to be strengthened. Then the population which has 22 trillion roubles in savings accounts will trust its state,” the speaker said.

According to experts, more than 1.5 trillion USD are transferred offshore every year, of which 10% is Russian money. More than 20 million of the country’s citizens work in the “grey zone” because conducting business is not comfortable and secure enough.

Construction can be the driver of economic development, Mr Nazarov believes. “The sector contributes 1% to the country’s GDP growth. Mortgage loans at 5–7% would treble the amount of investments and the contribution to the Russian economy,” the speaker said.

According to Andrey Nazarov, rehabilitation of the banking system cost the Russian Central Bank 1.1 trillion roubles, of which an estimated 0.5 trillion has been ineffective.

Alexander Kalinin, President of the President of the All-Russian Non-Governmental Organization of Small and Medium-Sized Businesses Opora Rossii, said that a stable sector of small and medium-sized businesses has emerged in Russia in the last 20 years. “There are more than 5 million enterprises, but 95% of them are micro-businesses and there is nothing to stimulate these businesses to evolve into medium-sized ones,” Mr Kaliniln noted.

Capitalisation of our companies is times less than elsewhere in the world, according to Alexander Kalinin. Development calls for investments, including foreign direct investments. The federal budget may well keep the deficit down to 3.0% and there is no need to push it further down. The speaker believes that “bank loans are very expensive at 12–15%. The money is there, but nobody wants to borrow it. The Central Bank should cut its rate to 5%”.

According to experts the country’s citizens have more than 22 trillion roubles in savings. In Crimea about 120 billion roubles are kept in banks and 40 billion roubles have been issued in the form of loans, in other words, money has not reached Crimea’s economy.

Opora Rossii has developed its own programme of the country’s economic development. “We note that technological processes in the country are in need of streamlining to avoid unnecessary costs. In the USSR there was a programme of scientific labor organisation. We need to create a committee to enhance labor productivity. The enterprises that register labor productivity growth should have their credit rates and taxes, including VAT, reduced,” Alexander Kalinlin said.

Vladimir Dmitriev, Vice President of the Chamber of Commerce and Industry, said that the Chamber has formulated proposals for the country’s economic development strategy. Foreign investments are critical. “According to Ernst and Young Russia, in 2015 we topped the rating of foreign direct investments,” the speaker said.

Mr Dmitriev said that we were losing out in terms of effective spending of government money. “Perhaps state financing should be effected through development institutions and should be repayable. Public-private partnership has so far been ineffective, with the exception of the law on concessions. It is possible to use the “earmarked money” mechanism, the Vice President of the Chamber of Commerce and Industry noted. He believes that all the interested structures and associations should come together to draft a development strategy for the Russian economy.

Mikhail Men, Minister of Construction, Housing and Utilities of the Russian Federation, noted that the construction industry contributes about 11% of Russia’s GDP and can be the driver of the country’s economy.

The Minister said that in 2016 285,000 square meters of housing was built in Crimea, an increase of 13% on 2015. The growth in the first quarter of this year reached 26%. In 2015 the people of Crimea took out 1.1 trillion roubles worth of mortgage loans, and the figure increased to 1.5 trillion in 2016. Growth in January–March 2017 has already amounted to 25%. The minister stressed that legislation on shred equity construction is being finalised. New changes to Law 214-FZ would increase the authorised capital of construction companies and create a State Compensation Fund modeled on the Deposit Insurance Agency (ASV).

The minister believes it is necessary to bring in private money into the housing and utilities sector and to use long-term tariff regulation and concession agreements. “These measures may reduce losses in the housing and utilities sector by an estimated 10–30%,” the speaker said.

Sergey Aksyonov, the Head of the Republic of Crimea, stressed that education was a critical area without which the country’s development strategy cannot be implemented. “Without professionally trained personnel we will achieve nothing. Modernisation of the education system should result in educated, highly qualified and patriotically-minded people joining the civil service, business and all the other spheres. If an official possesses these three qualities, success will be assured. Only such people can implement the projects my colleagues have proposed, the head of Crimea said.