MIL OSI Translation. Region: Russian Federation –
In an interview with the Financial Times, Minister of Economic Development of Russia Maxim Reshetnikov spoke about the potential for expanding the work of foreign business in the Russian Federation, the degree of protection of the Russian economy from external risks, as well as the formation of long-term damper mechanisms to prevent the transfer of fluctuations in world prices to the domestic market and support producers in the country …
FT: Can the Russian economy do without an influx of foreign investment, how much is Russia dependent on foreign investment?
M. Reshetnikov: I am not ready to confirm any reduction in the number of foreign participants, this is a question for the organizers of the forum. We have very intensive contacts with business representatives, European business in the first place. We held several meetings, in general, all companies confirm the continuation of the implementation of investment projects, everyone is very interested in the changes that will take place in the Russian economy. That is, they see the prospect, show interest, and are ready to invest. From our side, what we see in the same special economic zones – all projects for the past year, despite all the restrictions, continued to be implemented, enterprises are being put into operation. The business that operates in the country – both Russian and foreign – feels absolutely normal and confident. We do not notice any of these negative sentiments here.
FT: Have investors already stopped paying attention to the new sanctions imposed on Russia?
M. Reshetnikov: There is some pressure, but it exists primarily in the financial markets. We see this in the fact that the ruble exchange rate is slightly weakened relative to fundamental values, we understand that there is some kind of volatility and nervousness. As for a business that really invests, builds enterprises, develops development centers here, is engaged in trade or rendering services – everything is in order here.
FT: That is, there is no such thing on the part of the German or French business, when they say that they would very much like to invest, but are afraid? This intimidating effect?
M. Reshetnikov: There is no such effect. Of course, there is a certain pressure, but it is expressed in the fact that not all cooperation, which would be beneficial to our countries, is realized due to restrictions – we believe they are unfair. But nevertheless, the space for interaction and for maneuver remains large and this interaction is going on.
FT: Can you say in general that Russia is becoming less vulnerable to this pressure?
M. Reshetnikov: It seems to me that in aggregate it is a fact that the Russian economy is generally becoming less vulnerable to external fluctuations, but this does not mean that it is generally invulnerable. Of course, we feel all the fluctuations of various kinds in world markets and sanctions, but it is obvious that the Russian economy has a large margin of stability, and this margin has grown in recent years.
FT: What is the first thing?
M. Reshetnikov: Due to economic growth, the complication of the structure of the economy, its diversification, due to the fact that we do more ourselves. We have a basic set of essential technologies, we are actively digitalizing, investing in our own science, education, healthcare. We have invested a lot in infrastructure in recent years. This infrastructure is in demand, it pays for itself and provides new opportunities for doing business due to the fact that we actively use the territory of our country, including the Far East, Siberia, the Central part, due to the fact that we realize the transit potential and build ports within the framework of the combined infrastructure, due to the fact that we are actively developing cities and megalopolises, tourism is developing. In all these areas, there is a progressive development. This does not mean that we have already done everything that needs to be done, there is still potential for what needs to be done. But one cannot deny the tremendous progress that the country has achieved over the past 15-20 years.
FT: It can be said, judging by the conversations that took place on the first day of the forum, in the part concerning the Russian economy, that the pandemic in its most acute phase has already ended?
M. Reshetnikov: It is obvious that we have returned to the trajectory of growth, moreover, recovery growth. Now there is a recovery growth, but we perfectly understand that it will then transform into normal growth. The government has been preoccupied with two tracks throughout the last year. The first is to support citizens, small businesses and the economy on behalf of the President. To help the business as painlessly as possible (as far as possible) to survive all these restrictions, pandemic and so on. And in parallel with this, we were engaged in just structural changes that will allow our economy to grow faster.
FT: Will these changes and support be with us for a long time?
M. Reshetnikov: In all these elements there are systemic things, and there are temporary, anti-crisis things. Anti-crisis programs are still working, but they are coming to an end. If we talk about price issues, then we moved away from administrative regulation, which actually existed for a very limited period and was considered as a completely temporary measure. Now economic mechanisms are working, there is subsidizing for the production of products. There are issues of establishing flexible export duties, which are dampers designed to reduce the impact of world prices on our economy. These economic measures are also divided into temporary ones (it is obvious that subsidizing the production of products is a temporary measure), and as soon as the external situation allows, prices stabilize, we will get out of this. But as for the damper mechanism, this is a permanent long-term mechanism that will remain and which, on the one hand, will prevent this transfer of price fluctuations (namely fluctuations, this does not mean that it completely isolates), their peaks to our market, on the other sides – will provide the necessary resources for producers to invest in our agro-industrial sector – this is one of the points of our growth – and will allow us to further deepen processing: move from grain to livestock, dairy production, and so on, that is, to move to complicate the structure of the economy, creating new value chains.
FT: Do you think the problem with food prices, which escalated towards the end of last year, has largely been resolved?
M. Reshetnikov: The issue of world inflation, as you understand, is on the agenda, and it is impossible to say that Russia is unique here and only we are faced with an increase in world prices for the same food. Many countries have faced this and different countries will respond in different ways. We have developed this mechanism of long-term dampers for ourselves and, in principle, we see that it works.
Another point is that all this requires agreement, including within the framework of the Eurasian Economic Union for the long term, since we have common markets. To say that world food prices have stabilized and reached their peaks – I think we both understand that no one will give such a guarantee now. The volatility is great, there is more than enough speculative money in commodity markets. Therefore, any reports about “harvest prospects”, as we say, often cause a hypertrophied reaction and may be a reason for the opening of the next rally for certain types of products. Therefore, we look very carefully and, if necessary, constantly take measures in foreign trade in order, I emphasize once again, on the one hand, to support our exports, because it is very important for us to support further exports, and we are one of the most open economies in general in the world. in terms of the ratio of foreign trade turnover and GDP, and on the other hand, to protect our population, our consumers from these price peaks.
FT: The Russian Prime Minister recently said that it is necessary to fight the greed of individual producers, which has led to these price hikes. I spoke with many business representatives, including those from the food industry, and this phrase about greed hurt them a little. Do you think this was the case? Was the greed of producers harming the Russian consumer?
M. Reshetnikov: The authorities urge not to use short-term market fluctuations in order to take advantage of the situation at the expense of the population and consumers, try to create cartels or a monopoly conspiracy, or something else to make money. Hardly anyone can call the money earned from cartels or monopoly honest. In this part, we have antimonopoly legislation, the Federal Antimonopoly Service, which monitors this, and in this regard, any abuse is unacceptable, especially at such a time.
On the other hand, business is chasing profit, and this is absolutely normal. It is very important that the business has no doubts that its willingness to invest, its honest work and playing by the rules will be rewarded. It is rewarded, first of all, by the market, if the business does everything right. Now we are witnessing the peaks of the conjuncture and understand how high the profit of business in certain sectors of the economy, as a rule, of large business. And we are all very concerned about where this profit will be directed. Whether it will be invested in the country, in the same companies or in other companies, it is important how the business behaves.
That is, this is a question to our taxation system and to what extent it [corresponds] in a situation of extremely high peaks for a number of commodities, to what extent society perceives the current level of taxation as fair. This is directly tied to where the business will continue to channel these funds.
But I must say that we have already gone through this kind of discussion when there were peaks in oil prices. And this has seriously changed our tax legislation. Therefore, of course, as a result, some amendments to tax legislation are possible, but all this requires predictability. It is very important that the business understands this and does not feel cheated. And hardly anyone from business will now say that they were based on all these peaks that happened in 2020.
FT: If we abstract from specific measures, are the authorities now expecting from business to make business more socially oriented? Those. shared profits, invested in the country?
M. Reshetnikov: Indeed, this is a taxation issue, because in the end, it is at the expense of taxpayers that we finance all social programs, which have been significantly increased over the past year, simply multiplied. These are both national projects and social payments announced by the President.
FT: That is. business must understand its role. How can this be done in practice? Only through new tax mechanisms?
M. Reshetnikov: The President has clearly stated that our tax mechanisms should stimulate business to invest. In other words, if you invest all the profits earned, even if they are very high, and so on, take capital and invest in new production, hotels, factories, development centers, research centers – this is one story. If you withdraw profit on dividends, which is also normal in principle, and we are interested in the development of the stock market, but, nevertheless, dividends are, as a rule, consumption, then it may well be that there should be a different level of taxation so that we stimulated investment.
FT: Now, at the same time, businesses have concerns, they feel insufficiently protected, for a week there was such a survey at RBC: 80% of entrepreneurs believe that they can become victims of unreasonable criminal prosecution, and even 20% of prosecutors agreed with them. Can the authorities do more to make companies feel more secure? Because when they hear such words as greed in their address, it seems to me, naturally, that they start to be afraid.
M. Reshetnikov: It should be noted here that at the heart of any fears of business is the fear that they will be approached and presented with some demands that they either did not know about, or are excessive and deliberately impracticable, or there will be some kind of unprotected legal procedure or their legal system will not keep you from doing so. The government has carried out a major regulatory reform called the “Regulatory Guillotine”. More than ten thousand old normative acts, including Soviet ones, have been canceled, replaced by new, understandable, updated unified integrated system of acts – in total, about 480 of them have been adopted. remove from there everything that is superfluous, impracticable, unreal, and so on. And this work was carried out in a short time and deep enough. At the ministerial level, we literally sat down and dealt with the most important cases for business. For example, we sat with colleagues, with the Minister of Natural Resources, and took it apart. Businesses have complained that in some cases they must discharge cleaner water than what they take from the reservoir. That is, they were taken away and, in fact, are working as water treatment plants – such were the requirements. And we found the necessary compromises in order to protect environmental interests and at the same time reduce the burden on business. And we found such compromises on very many points. This does not mean that the work is 100% done. No, we still have our “homework” for this year. We put aside some of the most difficult questions, it took time to find this balance. We will continue to finish it.
The second point is that a major reform of the control and supervisory activities of all procedures is underway, so that the task of controllers is not to go and issue fines, but to warn and explain. There should be clear and understandable “check marks” for the check, so that the business understands how they will be checked.
Moreover, we introduced a moratorium on inspections for micro, small and medium-sized businesses last year. This year it was extended for small and micro businesses. And in general, so far, at least, we see that nothing terrible has happened. This means that we go to check where there are no particular risks. Let’s reconsider this new risk-oriented approach, stop going with checks where nothing happens, but we will really look where there are really problematic situations. Therefore, this system works, and we expect that by doing so we will significantly reduce the level of risks in the economy and increase security.
FT: What is your inflation forecast now?
M. Reshetnikov: We believe that it will be, perhaps, slightly higher than our forecast, we will update it in July. But at the same time, this is an understandable risk, we understand how to handle it, we are attentive to it.
The past crisis has taught us a lot. First of all, the implementation of large large support programs for people and small businesses. In the overwhelming majority, we helped small and medium-sized businesses. And the restoration of employment that we are now seeing, the restoration of jobs, is largely due to these large programs implemented by the state. Of course, such a softening of the budget and monetary policy was unprecedented for our country. Therefore, the pace of recovery is now significantly higher than what we expected. This does not mean that we will now run and correct the numbers, because the covid is with us. Unfortunately, the situation does not allow us to completely relax. Nevertheless, we are recovering in terms of economic dynamics. And the main thing is that this year we were engaged not only in anti-crisis programs, although this took a lot of energy and was under the control of the President, but we also dealt with systemic issues of low-carbon development, hydrogen, electric transport, digitalization, and infrastructure development. Now we are preparing new projects for investment from the NWF funds. Investment legislation has been modernized, a “grandfather’s clause” has been introduced. We have had many positive and noticeable changes, which, as we expect, will “play” in the next 2-3 years and will give additional rates of economic growth.
EDITOR’S NOTE: This article is a translation. Apologies should the grammar and / or sentence structure not be perfect.