Vnesheconombank Chairman Vladimir Dmitriev’s Interview to TV Channel Russia 24
TV Channel Russia 24
Host Anna Shnider
HOST: We continue discussing presidential candidates’ election programs. We are talking about Vladimir Putin’s latest article devoted to economic issues. Vnesheconombank Chairman Vladimir Dmitriev is in our studio now, good afternoon Vladimir Alexandrovich. Thank you for coming.
Vladimir DMITRIEV, Vnesheconombank’s Chairman: Good afternoon.
HOST: This is an election article. There are a lot of general remarks and few specifics in it. One of the most important things is that Putin said that we should change our criminal legislation and refer economic crimes to arbitration courts. To what extent did business anticipate such a proposal?
Vladimir DMITRIEV: We have discussed this theme repeatedly at business forums and in dialogues between representatives of business and authorities. It is extremely topical and the fact that it appeared in the election article is of crucial importance and relevance to the business community. I believe that we have created necessary conditions in Russia for settling economic disputes by arbitration courts.
HOST: In this context it could be a matter of economic amnesty for people who were convicted of economic crimes?
Vladimir DMITRIEV: I wouldn’t like to comment on this concept in broad terms… Our legislation keeps up with common sense and the need to increasingly influence the investment environment and offer better opportunities for doing business in our country. In this sense, there is a sound logic in granting amnesty for a number of economic crimes.
HOST: In his article Putin writes that state should mainly rely on a presumption of business fairness and honesty. At today’s international forum he said that maybe we should introduce the post of business ombudsman. What would you say has been the weakest point in the relations between the state and business in the past years and have you seen any answers in this article about how to address this problem?
Vladimir DMITRIEV: In my opinion there are enough answers about how to address this problem in the article you mentioned. I think that this line of activity is really important for both the government and business as well as for relations between business and authorities. I wouldn’t like to talk in great detail about this kind of problems. We face them every day and everywhere. The most important things in the article and in the policy pursued by the Government and the Russian President are measures for upgrading our legislation, improving business climate as well as a continuing dialogue between authorities and business, other forms of communication, informing authorities about the needs of business. All these efforts are aimed at improving investment climate in our country.
HOST: Putin says that the state’s share in the economy should diminish in the course of time and he proposes to undertake another privatization by 2016. What are the most attractive assets for business today?
Vladimir DMITRIEV: A list of businesses to be privatized has been made public. It includes above all businesses with the state participation, that is, companies and banks. As far as foreign investors are concerned they are of course interested in the industrial sector that has good prospects for growth and in banking system’s capitalization. To my mind risks associated with the banking system are assessed pretty adequately. This is evidenced by yesterday’s successful placement of 5-year Eurobonds worth $1.5 billion by Sberbank.
We are also closing a transaction today on placing our bonds on international capital markets. From my point of view companies operating in the infrastructure sector enjoy good prospects. I am telling you this not as an outsider but as a person working directly with foreign investors through our subsidiary – the Russian Direct Investment Fund. We have good prospects for engaging foreign investors.
HOST: Do you agree with the opinion of some economists that in the coming years sales of state corporations’ assets are disadvantageous for the state, with a second wave of the global economic crisis looming?
Vladimir DMITRIEV: To my mind, it’s important here to balance the state’s interests in generating budget revenues on the one hand and ensuring efficient governance on the other hand. Privatization for the sake of privatization does not always result in increased budget revenues. In the current economic situation when many assets are underestimated it may not make sense to put them on the market and engage foreign investors in order to simply declare that we have a favorable investment climate and investors are coming to our country. So, ongoing discussions demonstrate that we should undertake privatization only when it is advantageous from all points of view.
HOST: Putin talks much about innovations and places special emphasis on developing university and research centers. What should the state do in the near future to encourage innovations and investments in the development of academic research centers?
Vladimir DMITRIEV: In my opinion the article articulates clearly basic lines of government policy on supporting innovation activities undertaken by Russian higher education institutions. The article focuses on tax exemptions, administrative measures for encouraging business activity and commercializing scientific developments. In this respect a lot is already being done. Here we mean the technological university at Skolkovo. Skolkovo itself is also a very serious breakthrough investment and innovation project in our country. I am also telling you this not as an outsider but as the Head of the Bank which is a shareholder in a non- profit partnership with Skolkovo and an initiator of establishing the Skolkovo Innovation Foundation. The Foundation is designed to commercialize innovation activities at Skolkovo.
In this respect, I think that both Russian banks and special institutions set up to support small and medium-sized enterprises in the innovation sector can play a very important role. We are enjoying the state’s support and I believe we are moving in the right direction.
HOST: Do you thing that long money will appear in Russia in the coming years?
Vladimir DMITRIEV: We already have long money now. The main thing is to put the money to good use. Here I mean pension savings funds. Vladimir Putin mentioned them in his article. The funds are not always used to finance specific economic projects. I’m telling you this as the Head of the Bank for Development which is also the state management company. We are responsible for managing more than 1.3 trillion rubles in pension funded portion funds included in our extended investment portfolio. Only a small part of these funds are used to finance the economy. These funds are invested either in bonds guaranteed by the state or in corporate bonds of first-class borrowers. I believe we can increase these financial resources manyfold if the state is ready to grant guarantees for innovation projects which carry increased risks. I don’t think that it makes sense to grant guarantees for the construction of a cement plant that is a project that can be paid back. If it can’t be paid back there is no sense for a bank financing it. But if we talk about funding major projects of national significance in the innovation sector, these projects must be guaranteed by the state and pension savings funds might be invested in them.
HOST: Does this mean that the government is likely to take some concrete steps in the coming months?
Vladimir DMITRIEV: I think that in this respect right decisions have been made. Lately, I have participated in the meetings conducted by the Prime Minister in Kemerovo and Tikhvin. The other day we were in Tambov. Everywhere we discussed an issue of raising long money inside the country. For example, the Finance Ministry planned to float 10-year bonds worth 30-40 billion rubles; but there was an oversubscription in the amount of 160 billion rubles. This demonstrates that we have long money in our country. So, it has to be used. I can’t help giving you official figures on the use of the National Wealth Fund and the National Reserve Fund. The Reserve Fund’s yield for the last year was 1.5% and the National Wealth Fund’s yield was 2.5%. The highest yield was shown by the money of the National Wealth Fund placed on Vnesheconombank’s deposits at an interest rate of 6.5%. It must be borne in mind that we extended these deposits in the form of subordinated credits to Russia banks which were to use these funds under the agreements signed for funding the Russian economy. So, we can use the National Wealth Fund within, of course, reasonable limits and without opening the Pandora box for funding long-term projects.
HOST: A widely discussed issue is a tax on luxury that Putin offered to introduce. How do you feel about it? Discussions are mainly focusing on who is supposed to determine what luxury really means and on how to determine it.
Vladimir DMITRIEV: I find it difficult to answer your last question about a definition of luxury. In this respect there are expert opinions and international practices and I don’t think that we’ll have to invent the wheel. This measure might be efficient of course if it is administered in the right way and here I mean without any exceptions and exemptions from legislation. But in terms of social justice it’s up to the government to equalize budget revenues between high-paid and low-paid people. We have a huge income gap in Russia. The income gap between the poorest 10% and the richest 10% is gigantic and sometimes it is higher than in countries with developing economies.
HOST: Aren’t we going to get stuck on the very same global problem that Putin also mentioned, that is, systemic corruption?
Vladimir DMITRIEV: I’d like to say it once more that we’ll be able to change legislation, in particular tax legislation and address other problems through proper administration and flawlessly functioning law enforcement system.
HOST: Vladimir Alexandrovich, thank you very much for your comments.
Vladimir DMITRIEV: Thank you.
Vnesheconombank Chairman Vladimir Dmitriev’s Interview to TV Channel Russia 24
TV Channel Russia 24
HOST: Vnesheconombank’s loan portfolio is to increase to 850-900 billion rubles by 2016. Vnesheconombank Chairman Vladimir Dmitriev told our TV channel about it. He also told us about the state corporation’s plans for a shorter term and difficulties in raising foreign investments for Russia.
CORR.: Good evening Vladimir Alexandrovich. Thank you for agreeing to give an interview. My first question is of course about VEB’s activity. A couple of years ago they talked about VEB as an instrument for overcoming the crisis and now VEB is increasingly viewed as a Bank responsible for developing the Russian economy. How do you operate and invest in the current complicated conditions.
Vladimir DMITRIEV, Vnesheconombank Chairman: I’d like to highlight here two things: Vnesheconombank’s influence on the economy is determined not only by encouraging investments but to a greater extent by raising funds and distributing them through credit products in the interests of advancing investment activity in our country. VEB is doing a lot in this respect, our mid-term program up to 2016 provides for increasing our loan portfolio up to 850-900 million rubles. And VEB’s and its Group’s impact on the economy is to amount to about 2% of Gross Domestic Product. This is a significant figure. In its credit and investment policy the Bank focuses on supporting those sectors that are in line with the economic policy’s priorities: innovations, modernization, energy saving and new technologies.
CORR.: Is that true that you will simply be a borrower on capital markets largely abroad and then you will be distributing these funds among Russian borrowers or are you going to have a more intricate scheme?
Vladimir DMITRIEV: Not necessarily abroad. We have to take into account currency risks when conducting transactions. But if companies give high priority to manufacturing goods for exports, they prefer to have their funds in foreign currency. We are sure to raise funds abroad and on capital and financial markets but we also attach much importance to improving our domestic markets and boosting our borrowings on the Russian market.
CORR.: You’ve voiced your plans up to the year 2016. But what are you planning to do in 2012?
Vladimir DMITRIEV: We’d like to carry on with the projects which are at an advanced stage of consideration at Vnesheconombank. Our priorities remain the same – they include infrastructure, new technologies, raising investments both through VEB and through our subsidiary institutions. We believe that we are not taking full advantage of VEB’s potential as a state management company because we have more than a trillion and 300 billion rubles and 900 billion of them are invested in government bonds and as little as 10 percent – in corporate debt instruments. We have to rectify this situation. There is no doubt that most pension savings funds, given their good profitability, and we can achieve it in fact should benefit the economy and help to address social tasks. Our priorities in terms of industry and some economic sectors remain unchanged. We are going as before to give high priority to supporting small and medium-sized enterprises. This is a very topical issue here in Davos. In our opinion, this is one of the most important lines of activity for the Bank for Development.
CORR: What tasks are assigned to various institutions of VEB Group?
Vladimir DMITRIEV: There is no doubt that VEB itself as I’ve already mentioned will focus on those lines of activities that are set forth by the law and the Memorandum on our Financial Policies. This document by the way is periodically changed and supplemented with new priorities determined by the state. Our commercial banks must be capitalized and they should develop sustainably demonstrating increased assets, increased loan portfolios and increased profits in the long run. Our goal is to prepare them for privatization when required prerequisites emerge. But it’s not a matter of the most immediate future. We pin great hopes on the Russian Investment Fund and the Export Credit and Investment Insurance Agency. Although these institutions were launched last year, the Agency has already concluded three contracts to support Russian exporters in Vietnam, India and China, here I mean projects that are being implemented in these countries. Today, we have discussed our further prospects for cooperating with foreign agencies in jointly promoting Russian high technology products such as for example Sukhoi Superjet 100. The Russian Direct Investment Fund has already enough projects attractive for foreign investors. And I think that three transactions can be closed in the first quarter of this year. We pin high hopes on VEB-Capital too. Our subsidiary banks in Ukraine and Belarus deliver a strong performance and are among the largest five or six banks in these countries. They should do their best to enhance integration trends and develop cooperation between Russian and these countries’ companies. So, we have serious plans with regard to all Vnesheconombank’s lines of activity and have high expectations.
CORR.: To what extent does the capital outflow from Russia give you a hard time? Doesn’t it spoil the mood of foreign investors and creditors?
Vladimir DMITRIEV: Undoubtedly, statistics on the capital outflow and the insufficient capital inflow are perceived negatively by investors. In general, investors are pretty sensitive to external environment, signals and changes of partners. Having got used to their counter parts they find it difficult to get used to new Russian partners. So, they are interested in stability, they are interested in proper changes. And they are pretty sensitive to pessimistic and even apocalyptical signals coming from Russia and from Russians living abroad even against the backdrop of favorable macroeconomic conditions and pretty stable economic situation. Investors are particularly sensitive to signals voiced by Russian representatives they consider competent. In fact, I believe that there’s nothing bad in what is happening – we are going through the situation similar to that of in Europe and other countries. We are growing up, our economy is getting more powerful, we are forming a middle class with quite other priorities and we should reckon with it without throwing a scare of a threat hanging over Russia’s political, economic and social system.
CORR.: Vladimir Alexandrovich thank you very much for your answers.