Vnesheconombank Chairman V.A. Dmitriev’s Interview to TV Channel Russia 24 (Vladivostok – the APEC Business Summit)

8 september 2012 года

TV Channel Russia 24,
08.09.2012, 06:43

HOST: Good morning Vladimir Alexandrovich. Thank you for finding time for us. Vladimir Alexandrovich, can we already sum up the results of the APEC Business Summit, how did Vnesheconombank benefit from it?

Vladimir DMITRIEV: Vnesheconombank’s Chairman: It’s too early to sum up the results at the moment as we’ll have business meetings and sign a whole number of agreements but in general, preliminary…

HOST: Do you already know what agreements you are supposed to sign?

Vladimir DMITRIEV: We know what we are going to sign, we know our partners and moreover we know what we have already signed and done. When I say “we” I mean Vnesheconombank Group. Perhaps, we have been represented so strongly for the first time and here I mean institutions that have been set up quite recently and that have been operating as VEB’s subsidiaries for several years. These are the SME Bank, the Russian Direct Investment Fund, the Export Insurance Agency of Russia and the Far East and the Baikal Region Development Fund. All these institutions are taking an active part in the APEC Summit, they sign agreements and meet their partners. It’s a good thing that Vnesheconombank and its subsidiaries are in demand in terms of cooperation with foreign partners.

HOST: Can you specify the agreements? Can you name the key ones, your partners, values of agreements?

Vladimir DMITRIEV: It’s important that we have signed agreements with specific partners who are ready to invest in this region and these agreements or memorandums are filled with real substance. I mean yesterday’s agreement with Summa Capital on the construction of a large terminal in the Far East to transship grain crops and soybean products with a capacity of 10 million tons per year which we are going to achieve together with them by 2017. These are significant investments of about 8 billion rubles. We signed an agreement with the Primorsky Territory. It provides for Vnesheconombank to support major investment projects including those in agriculture. This sector is underestimated but in general, has excellent prospects for development. We are going to sign an agreement with our Malaysian partners on providing support for small and medium-sized enterprises and on exchanging best practices in this sector and a whole number of other agreements directly related to Vnesheconombank and its subsidiaries. The Russian Direct Investment Fund has for the first time made public the first projects in which monetary resouces of the Russian Direct Investment Fund and he Fund set up together with the china Investment Corporation are to be invested (a project in the timber processing industry).

HOST: Vladimir Alexandrovich, how is VEB represented in the APEC and what are specifics of the Bank’s operation in this region?

Vladimir DMITRIEV: In my opinion, the region itself and Russia’s territory related to this region – our Far East are in great need of development institutions’ support. Relying on our cooperation with such regional development institutions as the China State Development Bank, the Asian Development Bank and development institutions in specific APEC countries, we look to a significant inflow of investments in the Russian Far Eastern region. And the agreement and specific projects I have already mentioned are very important for the region’s investment climate. Here I mean the Russian Direct Investment Fund and the China Investment Corporation that signed an agreement on providing support for SMEs.

HOST: The Far East is in great need of new infrastructure and transport infrastructure. And this will require long money which is in short supply in Russia and which VEB has. Is there a chance that some pension money will be used to build infrastructure and fund these projects?

Vladimir DMITRIEV: Undoubtedly, this is one of significant sources of long and pretty inexpensive money. We call for changing our investment declaration and a number of legislative regulations for a great amount of pension savings funds under the management of Vnesheconombank as a state managing company to be used for supporting and developing infrastructure in the region and implementing infrastructure projects. Here I above all mean an issuance of infrastructure bonds. In this respect, we have launched a whole number of initiatives. Fortunately, they were supported by the Pension Fund and the Finance Ministry. We hope that both at a legislative level and at a level of government regulatory documents our proposals would be backed and we’ll b e able to fund infrastructure in Russia as a whole and in the Far Eastern region in particular in great amounts.

HOST: What amounts do you have in mind? It’s quite clear that we can’t channel all pension funds to the Far East.

Vladimir DMITRIEV: There is no doubt about it but on the other hand we are responsible for managing funds worth more than1.5 trillion rubles. Out of them perhaps only 20 percent was used to fund projects in the real economy. So, we can’t say that these sums are sufficient to work for the development of the real economy and with profitability above inflation at that. We believe that several hundreds of billions of rubles might be in fact used to fund the development of several sectors of real economy and above all infrastructure. I think that the first projects will result from cooperation between Vnesheconombank and the Russian Railways.

HOST: How do you size up the Bank’s business activity in the Far East and its potential for developing programs to support small and medium-sized enterprises?

Vladimir DMITRIEV: WE must admit that business activity leaves much to be desired. And it is not because business is passive, it’s because in such remote regions with the infrastructure we know all about and environment conditions, business looks to the state for help. And it goes without saying that Russian business and the more so foreign one is ready to implement projects in the real economy in the Far Eastern region provided that the state shares risks typical of such regions with it on an equal basis. And in this respect, a proactive approach of the state and institutions created by it is of overriding importance. Here I mean the Investment Fund, Vnesheconombank with its subsidiaries and the Far East and the Baikal Region Development Fund which are supposed to effectively operate and effectively demonstrate that the state is ready to incur risks and share risks with investors and make strenuous efforts to support entrepreneurial and investment initiatives in these regions. To my mind, a pretty comfortable situation for investors is developing now and the current APEC Summit testifies to it. Yesterday we held a serious and informal meeting initiated by our President with business circles. The meeting’s participants showed their interest in making investments in this region. But at the same time, they made it clear that foreign business and foreign investors were ready to invest in this region and take risks together with the Russian state and institutions created to form a favorable investment climate.

HOST: And now just a few words Vladimir Alexandrovich. Do you plan in the near future to improve credit terms for your partners?

Vladimir DMITRIEV: It is extremely interesting question as it is addressed to Vnesheconombank as a development institution. I have already mentioned it several times and I’m ready to say it once more that credit terms and conditions for Vnesheconombank’s borrowers are directly linked to market conditions because market is our main if not the only  source of funding our transactions. If market conditions change for the better or worse credit terms and conditions will change too. As opposed to many other development institutions, for example, in Germany all borrowings from the German Bank for Development are guaranteed by the state or, for example, the Brazil Development Bank is funded through using pension funds at preferential rates we rely on the market alone. And although some are tempted to regard us sometimes as a quasi-budgetary source of funding if not free but at least quite inexpensive the situation for our borrowers looks different. Therefore, we are going to change credit terms depending on the market conditions both in Russia and abroad.

HOST: We’ll hope that market conditions will be favorable for your borrowers. Thank you for your interview. I wish you every success.

Vladimir DMITRIDEV: Thank you.


In Order to Expand Russia’s Presence in APEC Markets We Need to Develop our Country’s Asian Part

28 august 2012 года

Vnesheconombank Chairman Vladimir Dmitriev told Interfax about how VEB would be represented at the APEC 2012 Summit and what sort of agreement they planned to conclude

Moscow. August 28. INTERFAX.RU – Vnesheconombank acts as one of the APEC 2012 Summit’s organizers. The Summit is to be held in September in Vladivostok. On the threshold of the Summit Interfax asked VEB Chairman Vladimir Dmitriev several questions.

- How is VEB represented in the APEC space and what are the Bank’s further plans?

- VEB is implementing a whole range of projects with our partners from APEC countries. I believe that the Summit will become an important stage in expanding such cooperation.

At present, VEB is involved in implementing 17 investment projects with the participation of financial institutions and companies from APEC countries (Japan, China, South Korea, the US) whose total value exceeds $11 billion.

VEB’s objective as a bank for development is to boost Russia’s economy competitive edge, diversify it and encourage investment activity. We give high priority above all to implementing projects in Russia. These projects are aimed at developing infrastructure, innovations, special economic zones and environmental protection.

VEB has a high international standing, many development institutions from APEC member countries are our partners.

One of new mechanisms for co-investing is the Russian Direct Investment Fund (the RDIF) – VEB’s subsidiary. The Fund is designed to implement major investment projects together with foreign investors including those from APEC countries.

Last October, the RDIF and the China Investment Corporation (a sovereign welfare fund) with assets worth $410 billion) signed a memorandum of intent to establish a Russian-Chinese Investment Fund. The Fund is being established to make direct investments primarily on Russia’s territory and encourage economic development of constituent entities including regions of the Far East and the Baikal Territory. The Fund’s capital is to amount to $3-4 billion.

The recently established Agency – EXIAR gives high priority to the Asia-Pacific region. Even now, the region’s countries account for a significant share of total insurance obligations assumed by the Agency, and two of the first EXIAR’s transactions to insure the supply of Russian-made products were conducted with APEC member countries, that is, China and Vietnam.

- Russia’s role in APEC markets hasn’t been so far in line with its potential. What should be done to reverse the situation?

- A key factor in expanding Russia’s presence in APEC countries is an economic development of our country’s Asian part, above all, the Far East, the Baikal Territory and entire Siberia. Development of Siberian and Far Eastern transport-logistics infrastructure would help to increase Russia’s trade turnover with the APEC and raise additional foreign investments.

The region has a huge potential for creating clusters of economic development: substantial mineral resources, a large variety of bio resources, highly qualified personnel, the tourist and recreational potential. At the same time, despite its huge potential a task of this macro region’s development has not been accomplished. There are several objective obstacles: extreme nature and climate conditions, remoteness and poor accessibility of territories, non-developed infrastructure, multi-sectoral nature of industrial production, specific conditions of farming and sparse population settlement. Traditional nature management of Northern indigenous peoples is the basis of their life and their lifestyle.

VEB takes an active part in the development of territories. Even now, the total value of projects in which the Bank participates on the territory of the Far East Federal District exceeds 93 billion rubles and the amount of VEB’s investments is more than 57 billion rubles. The Bank implements projects in transport infrastructure, aircraft construction, petrochemical industry, timber processing and tourism.

To address main objectives of the macro region’s development we create a specialized development institution – OJSC the Far East and the Baikal Region Development Fund. As of today, the Fund has performed work on analyzing and systematizing investment initiatives of all 12 regions and made a preliminary list of investment projects.

By 2015, VEB’s loan portfolio with regard to projects with the Fund’s participation might grow to 70 billion rubles and this will result in forming and supporting projects by the Bank for a total amount of more than 350 billion rubles.

Territorial-production complexes are the only type of investment projects that can ensure development through using non-budgetary sources. In order to implement this approach we need appropriate political decisions.

It’s important to avoid a one-sided approach when high priority is given to the export of resources. We focus on projects aimed at creating export-oriented production facilities with a high level of processing and a significant proportion of value added. In the future, such production facilities might receive support from the Export Insurance Agency of Russia (EXIAR).

- Might the APEC become an instrument for transforming the region’s countries’ growing economic role into a political one?

- Since its inception the APEC has regarded itself as a free “aggregate of economies” rather than a politically well-consolidated group. This means that the organization gives high priority to economic rather than political issues. The organization’s long-term objective is to deepen intraregional relations through eliminating obstacles in trade-investment and technological interaction. Successful economic development and integration of APEC countries is sure to increase their influence on the world’s economic agenda. This is a natural process and there is no need to speed it up.

In terms of its geographical coverage and presidential format an APEC summit is the most representative and unparalleled business forum in the Asia-Pacific region where the world’s experts hold a multilateral dialogue and cooperate on key issues of trade, investments, economic and technical cooperation as we’ll on topical world problems and challenges.

Despite a mosaic nature of the APEC as an organization comprised of countries with incompatible levels of economic development and political systems it is a pretty homogeneous institution in terms of interests and development vector. Regionalization acts as a common denominator implying that high priority is given to intraregional cooperation and integration and to creating zones of free trade. This guarantees a strong consensus of opinion within the establishment of APEC member countries on key issues of intraregional trade and investment interaction as well as the world’s economic agenda. An APEC business summit has factually become a mechanism for drawing up regional rules on carrying on trade and undertaking investment activity and for formulating unified principles of doing business binding to all countries.

From the outset, one of APEC’s operating principles was to reach consensus through consultations. Success stories of neighbors act as powerful incentives.

- What agreements does Vnesheconombank Group plan to conclude in the course of the APEC 2012 Business Summit?

- On September 7, we plan to conclude an agreement with the Primorsky Territory Administration. This agreement provides for long-term cooperation in investment activity. We are to cooperate with the region in making arrangements for financing investment projects including those on PPP terms, work out schemes for their financing, participate in preparing project opinions and in raising funds to provide support for small and medium-sized enterprises. Currently VEB is already funding three investment projects in the region for an amount of 12.7 billion rubles (Vnesheconombank’s participation share is 7.6 billion rubles).

Moreover, our subsidiary bank – SME Bank plans to sign a memorandum of understanding with SME Bank Malaysia and with the Indonesian SME Development Ministry.


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