Vnesheconombank Chairman Vladimir Dmitriev’s Interview to the TV Channel Russia 24
Vnesheconombank’s Conference “Sustainable Growth through Long-Term Investments” is taking place in Moscow. The Conference’s main theme will also top the agenda of a forthcoming G20 summit. My colleague Maria Efremova is present at the conference today. Hullo Maria! I’m giving the floor to you.
CORR: Hullo Kseniya. Today’s key theme is funding long-term investments. Vnesheconombank Chairman Vladimir Dmitriev is ready to answer our questions. Vladimir Alexandrovich, Good afternoon. Vnesheconombank is supposed to start participating in implementing major infrastructure projects. How much money in your opinion will be needed to fund these projects?
Vladimir DMITRIEV, Vnesheconombank Chairman: We are already actively involved in funding infrastructure projects and here I mean not only major projects being implemented by RZHD and the Federal Grid Company (FGC) but also projects in housing and communal services infrastructure, telecommunications and other economic sectors that form infrastructure. They include the construction of airports and toll motorways where we cooperate closely both with Russian and foreign financing institutions. As far as projects that are to be funded through using pension funds are concerned we intend to invest about 100-200 billion rubles by way of purchasing bonds to be issued by such companies as RZHD and FGC.
CORR: Vladimir Alexandrovich, some say that not only infrastructure projects are appropriate for long-term money. And what other alternative instruments are in your opinion also available?
Vladimir DMITRIEV: If we are talking about instruments and sources of funding long-term investments there is no doubt that pension money is not sufficient and we should involve both private investments and funds owned by the state and here I mean the National Wealth Fund. This issue is hotly debated now and we suggest that Vnesheconombank should act as an operator of the National Wealth Fund’s financial resources which could be used to fund various projects in the Russian economy. As far as private investments are concerned, I would like to highlight the Russian Direct Investment Fund which is now together with its partners and direct investment funds, private and sovereign funds creating appropriate infrastructure to make investments in the Russian economy. It has already closed transactions for a total amount of 2 billion dollars and reached a desired proportion between Russian money and raised foreign investments, which is now 1 to 5. This is a good indicator. And funds raised from private investors and sovereign funds are used to finance economic sectors attractive for foreign investors. They include medicine, public health care, the stock market, the timber processing industry, telecommunications and a number of other sectors of our economy.
CORR: The Conference’s participants are from many various countries. What Russian instruments and projects are they interested in?
Vladimir DMITRIEV: It’s important to keep in mind that as rule private investors seek to invest in reliable and highly profitable projects. But sometimes it’s not easy to achieve a combination of reliability and high profitability. So, we offer to share risks and co-invest Russian and foreign money in those projects that might be attractive for foreign investors and that are very important in terms of developing our economic sectors such as infrastructure and also those related to our growing middle class as well as public health care, medicine, the retail sector and a whole number of other sectors. By the way, social infrastructure is of interest too. And here I mean construction of pre-school child care institutions, fitness centers where a whole number of Russian investors are ready to cooperate with Vnesheconombank and regional authorities to invest their financial resources on a long-term basis.
CORR: And what can you say about projects that Vnesheconombank is implementing with other countries?
Vladimir DMITRIEV: So far, we have been working pretty successfully on a bilateral basis cooperating closely with national development banks and international financing institutions. For example, our cooperation with Germany’s development bank resulted in establishing several investment funds. Quite recently we have signed a declaration on establishing another investment fund. And we hope that his fund will amount to at least 500 billion dollars and will be used to provide support for Russian small and medium-sized enterprises. So, as opposed to our previous practices we are going not only to extend credits to small and medium-sized enterprises through our subsidiary bank but also invest funds of Russian and international investors in small and medium-sized enterprises to increase their capitalization and make them more attractive for financing institutions. I would also like to stress our cooperation with the World Bank and the European Bank for Reconstruction and Development. Together with the World Bank we set up a long-term investment fund to make investments in Russian regional banks and we put in place a similar scheme with the European Bank for Reconstruction and Development. This example shows clearly that Russia is open for foreign investments and that there are sectors in the Russian economy that are attractive for foreign investors.
CORR: And my last question is about a BRICS bank. Is it being established?
Vladimir DMITRIEV: I’m not the right person for this question. But as there is an interbank consortium within BRICS, which is comprised of national development banks, we and our partners from BRICS believe that it’s better not to establish a new institution but to additionally capitalize national development banks for them to raise financial resources from capital markets and participate jointly in implementing projects that are of interest for BRICS member countries.
Vnesheconombank Chairman Vladimir Dmitriev’s Interview to the TV Channel Russia 24
HOST: Good afternoon.
Vladimir DMITRIEV, Vnesheconombank Chairman: Good afternoon.
HOST: I’m glad to greet you again at the Petersburg International Economic Forum. Vnesheconombank always comes to this Forum for real projects and real agreements. And I hope this time you have as many projects and agreements as usual
Vladimir DMIRIEV: You’re absolutely right. Actually, we view the Forum as a place and as an opportunity to sum up certain results of our work and at the same time look ahead among other things by way of signing agreements. We have already signed some agreements and we’ll also sign agreements today and tomorrow.
We’ve already signed an agreement with the Russian Railways. It provides for our joint efforts to promote RZHD to third countries’ markets. Naturally, we’ll use here a whole range of Vnesheconombank’s and its subsidiaries’ capabilities. These include funding and insurance through extending insurance policies to our export insurance agency; this is also the Direct Investment Fund which is also in a position to operate on third countries’ markets.
A quadruple agreement has just been signed by Vnesheconombank, the Administration of the Primorsky Territory, Changi Airport International and the Far East and the Baikal Region Development Fund. The agreement provides for Changi Airport International to increase passenger flow and boost the Vladivostok airport complex’s investment appeal.
We are also planning to sign a very specific agreement. Here I mean development of Yamal’s oil fields – the Yamal LNG project on the construction of a natural gas liquefaction plant. NOVATEK acts as an investor together with French company Total. The agreement will provide for offering financial services to Sovcomflot and Yamal LNG on manufacturing and leasing enhanced ice class vessels to transport liquefied natural gas to third countries’ markets.
Some agreements are basically memorandums of intentions or agreements on cooperation I’d like to single out agreements with the Leningrad region, the Kirov region and the Republic of Tatarstan. They provide for the comprehensive development of territories and Vnesheconombank’s participation in various investment projects in these regions.
HOST: Are you going to present the Development Award as part of this Forum?
Vladimir Dmitriev: Yes, we are, after a plenary session tomorrow. We made an arrangement for presenting this award with Head of the Presidential Administration Sergei Ivanov. A decision on the Development Award was taken last year and during the year we worked on announcing it and receiving applications. To this end, we set up Vnesheconombank’s Expert Council which evaluated applications objectively in four nominations: The Best Project in Industrial Sectors, the Best Infrastructure Project, the Best Project of Small and Medium-Sized Enterprises and the Best Project on the Comprehensive Development of Territories. For good reasons I won’t name the names of the winners. But I assure you these are the best projects in these nominations.
HOST: What do you mean by the best investment project? Is it the largest project, the most socially significant one or the most reliable one?
-In our case we evaluate a project not in terms of its size but in terms of its structure, investors’ and local authorities’ participation in it and raising investments from Vnesheconombank and foreign countries. Parameters include a whole number of key indicators of a project’s success.
HOST: Vladimir Alexandrovich if we regard the number and sizes of agreements concluded every year as part of the Petersburg forums as some sort of indicator for the state of economy, what does it show at the moment? Today, German Gref described investment climate as an incomprehensible beast about which nobody knows anything. What can you say about the current investment climate and about how it is changing?
Vladimir DMITRIEV: In this respect, I remember discussions that were held two years ago when a decision on establishing a Russian Direct Investment Fund was being taken. Many experts including well-known specialists tried to convince us that it made no sense to establish such a fund because the investment climate was unfavorable and all the efforts to set up investment funds in Russia together with foreign investment funds and investment banks had been a failure. They believed that our efforts wouldn’t be doomed to success.
A year and a half operation of the Russian Direct Investment Fund showed that foreign direct investment funds as well as sovereign funds are ready to make investments in efficient projects in Russia. And this means that we have such projects in our country. And we have them not only in Central or European part of Russia but also in the Far East. And a good evidence of this is not only the establishment of a Russian-Chinese Investment Fund but also the first transactions with its participation. The fact is that a whole number of regions are flagships in raising investments. Here I can cite Tatarstan, the Ulyanovsk region and the Kaluga region. And we are happy that Vnesheconombank is operating quite actively in the successful regions.
HOST: What can you tell us about events accompanying the investment environment? Here I mean for example reports about forthcoming ruble devaluation. What effects will it have? Might it help domestic producers by improving their export capabilities? Will it encourage economic growth, which is a matter of serious concern now?
Vladimir DMITRIEV: The talk about devaluation is taking place against the backdrop of Russian exporters’ old-time complaints that if you restrain the ruble you restrain Russia’s export potential. But we are not talking about some sort mandatory, compulsory devaluation but about the Central Bank’s commitment to greater liberalization and market fluctuations of the ruble exchange rate without a constraining influence of the Central Bank. And this is not a purely Russian phenomenon. Freeing the ruble exchange rate and its controlled devaluation will play into the hands of Russian exporters and not only those operating in the raw materials sector but also those that can compete on the world’s markets taking advantage of pricing policy. It is important that this free or controlled devaluation should not result in increased inflation rate and other circumstances that in total might have more serious implications on the country’s economy than stimulating export potential.
HOST: And now my last question. There will be a meeting of development institutions of the Group of Twenty. What do you expect of this Forum?
Vladimir DMITRIEV: I’d like to say a few words about the preparatory work done before this coming meeting. This work was carried out by national and regional development institutions, such our partners as Germany’s Bank for Development, the China State Development Bank, our friends from Italy and France, our partners from the European Bank for Reconstruction and Development and the Asia-Pacific region. We all arrived at a consensus that we can develop both national economies and regional projects only by way of combining development institutions’ global efforts.
Last year, we got together in Luxemburg where we were received by the European Investment Bank. I should say that by that time both the Long-Term Investors Club and the International Development Finance Club were already in place. We offered to hold regular meetings of development institutions as part of the Group of Twenty and invite international financing institutions to attend these meeting in order to work out a common policy and make concerted efforts to develop economies of our countries.
We’ll hold a meeting of leading Development Institutions of the Group of Twenty and financing institutions this July in parallel with a meeting of Group of Twenty finance ministers in a situation when Russia chairs the Group of Twenty and a role of development institutions in the global economy is substantially increasing and everybody is now aware that long-term investments are guarantees for suitable growth. We agreed upon a draft declaration with our Finance Ministry. Our financial officials believe that it is in line with the agenda to be discussed by Group of Twenty finance ministers. So, we’ll be able to help our governments’ to promote sustainable development of our economies.
HOST: I wish you every success. Thank you for your interview.
Vladimir Dmitriev: Thank you.