Petr Fradkov: Medium-Sized business should become a driver of export growth
Author: Ilya Kopelevich
This year a Russian Export Center (REC) has been established to support Russian exports. Petr Fradkov who is the son of the Foreign Intelligence Service Head and the Former Premier Mikhail Fradkov became its head. How will REC operate and does the ruble devaluation have an effect on exports?
Photo: Denis Vyshinsky/TASS
Director General of the Russian Export Center Petr Fradkov told Business FM Editor-in Chief Ilya Kopelevich about goals and operational mechanisms of the Center. The Russian Export Center (REC) aims to increase the number of exporters through among other things providing support for medium-sized enterprises, subsidizing interest rates for exporters and exports insurance. He also told him what companies could count on the state’s support and how the devaluation had influenced the country’s export market.
The Russian Export Center was set up among other things as a response to the crisis and an attempt to assist the real economy in promoting exports. What are in your opinion the main forms of this support and what are the Center’s capabilities?
Petr Fradkov: The Russian Export Center is an attempt to consolidate all the export support instruments the state has at its disposal at the moment including financial support measures. Efficient financial support measures have been in place for a long time and they include export credit support, which we are to provide through Roseximbank - a special bank that has been operating for rather a long time. For many years, it was the agent for the government in providing guarantee support including a credit guarantees. We are capitalizing this instrument now.
By capitalizing you mean that you are increasing its authorized capital and expanding its loan portfolio?
Petr Fradkov: Yes, of course we are. On the one hand, we are capitalizing it – this year and in 2016, we allocate for budgetary expenditures in the amount of 10 billion rubles for each year, on the other hand it is a specific instrument related to subsidizing interest rates. This year has become a pilot one as part of implementing a new export support strategy within the WTO. We are using a mechanism for subsidizing interest rates to reduce it to a level that is acceptable in terms of competitive interest rates. I hope that the next year won’t be an exception. We are making efforts now to carry on this program next year. Roseximbank is already providing support for exports in the amount of billions of rubles. Export credit insurance is an efficient and important instrument too. EXIAR – the Export Insurance Agency of Russia is responsible for it. This is a new mechanism in Russia but it is well known in the world. We close export risks and foreign economic activity risks.
Are these risks just commercial or some special risks?
Petr Fradkov: These are certainly special risks.
Let’s assume that we would like to supply Superjet aircraft to some country and this country, for example, imposes sanctions, so the supply is cancelled.
Petr Fradkov: You’re absolutely right.
That is to say, these are not commercial risks.
Petr Fradkov: These are not commercial risks. We can insure commercial risks but those related to various particular circumstances
For example, a change in the currency exchange rate.
Petr Fradkov: Or expropriation of property or a ban on the export of currency from a country and this also happens, or a reluctance of our counterparty or our exporter’s counterparty to fulfill its obligations and its full protection in its homeland. We close all these risks. Now it’s much more comfortable for exporters to engage in foreign economic activity because we can insure those risks that they fail to understand.
Today, very large state-owned or private companies account for a lion’s share of exports. Probably they don’t need the state’s support so badly. I don’t know if chemical exports are on the rise in our country but I believe that Uralkali and PhosAgro can do without your support - they have their own huge potential. Is there any criterion for determining which company should be provided with the state’s support?
Petr Fradkov: Of course, we have such criteria. They are rather explicitly defined in our regulatory framework because we proceed from the premise that our limited financial resources should be used in the most efficient way.
Are there any limitations in terms of a company’s size?
Petr Fradkov: Sizes are important but we didn’t make any limitations on sizes for various reasons because at a given period of time we have to support a project be it a small or a large one because of its economic feasibility or for some other reasons. We don’t have any limitations here. We simply have corporate limits of responsibility.
It’s already a matter of examining a specific project and I’m now talking about a system of priorities.
Petr Fradkov: We can deal with anything. But our system is designed to focus on middle-sized enterprises because they must be drivers of increasing exports both in terms of its absolute size and in terms of its diversification. The number of new exporters is a very important indicator for us because our aim is to increase absolute volumes of non-raw materials exports, as our task is to cultivate companies that could supply products for exports.
We have a very large segment of exports - chemical industry - very close to raw materials sector. If this sector and for example the Toyota concern, which will produce RAV4 in Russia, will turn to the Bank to support their exports. Why don’t we use these capacities to supply their products for exports, as demand is limited in Russia now? There are automobiles – high value-added products and there are mineral fertilizers, which are not already raw materials but very close to them.
Petr Fradkov: It’s a very good question. Formally, we are not allowed to directly deal with raw materials.
But mineral fertilizers are not considered to be raw materials, are they?
Petr Fradkov: I agree, but if there are value-added products and they are not considered to be raw materials in their pure form, we can deal with them. And we can deal with chemical products because they might vary a lot. Many chemical products are the products with rather high added value.
Sometimes this added value is huge.
Petr Fradkov: You are absolutely right but formally these products are not raw materials.
Metals are not raw materials either because they are not metal ores.
Petr Fradkov: Metals are not raw materials because they are products with a certain level of added value. With all other things being equal, we focus on products with a higher level of processing.
Even in the absence of equal conditions, given lesser cost effectiveness you shouldn’t take initiative and try to provide support.
Petr Fradkov: I couldn’t agree more. But we make decisions on the basis of a current situation. If our insurance capacity or lending resource allow us at a certain time to support products with a lesser level of processing and it is very important, given Russia’s contracting market, we just make our analysis and if we see that we can support exports with lesser added value without affecting high-tech exports – what’s wrong with it?
Your operational procedures are important for business. Is REC going to provide credit, insurance and non-financial support for export contracts on the basis of common standards? Or will decisions be taken not only by you but also in consultation with VEB, the government on the basis of some social, political factors?
Petr Fradkov: Of course, we are not living in a vacuum and we have to take into account both the current economic conditions and the current top priority tasks set by the government. Our main principle is transparency, that is, transparency of procedures, transparency of our activity. So, we want our potential customers, our partners to understand our operational procedures and above all our decision-making logic. Therefore, we are in favor of business procedure. This is going to be an explicitly defined, easy-to- understand procedure. And it will differ a bit depending on financial stability, a scale of risks that we assume: we should be well aware of our capabilities so as not to assume obligations we are not able to fulfill. As far as non-financial support measures are concerned, we apply here a different approach – we assume a kind of lobbyist obligations. We assume responsibilities for consulting, promoting products in foreign markets, rendering assistance in defending intellectual property rights, settling disputes over limited access of Russian products to markets in international arbitrations. Logistics issues are also very important because often companies do not understand and know well how to take advantage of our infrastructure. Our partners should be fully aware what they could count on, how much time they need and what steps we have to make, if something has gone wrong, and why it has gone wrong. That is why we are in favor of transparency and a strict observance of procedures.
You use a mechanism for subsidizing interest rates. A subsidized interest rate is not exactly a market instrument but at least you can’t steal it. But although under certain conditions you can at least invest money for profit.
Petr Fradkov: We pay much attention to it. If desired you can devise any fraudulent scheme. At the start of our conversation, I referred to WTO procedures because here we do not try to reinvent the wheel. The whole world, industrialized countries devised a mechanism for state support for exports long ago. This mechanism in in place. It is a very clear-cut specific mechanism. Russia joined the WTO and assumed some obligations. How can the state support exports? I mentioned some instruments for example permitted forms of subsidies. They must also be transparent. At any moment, information could be made available to colleagues, specifically, to WTO members.
And to competitors on the market too because everybody should know why some enjoyed the state’s support and the others didn’t.
Petr Fradkov: You are quite right. The entire exports support system in the countries that signed WTO’s basic documents is a system where the countries must compete on the international, global market not for the cost of resources but for the quality of products. Thus, through a complicated system of formulas and settlement mechanisms, cost of resources should be brought to approximately one level. If you don’t do it it’s your problem but if you want to subsidize your exports you should follow generally accepted rules and then we can talk about free competition on the foreign market. Of course, there is a million of peculiarities, there are always exceptions, there are always those who fail to follow rules strictly but they are fined for this reason. Both exports insurance mechanism and mechanism for subsidizing the importer’s interest rates are fully permitted types of state support in the world and we all use them without any limitations.
Interest rate subsidizing is a main instrument for exports support. Could a credit be extended by any bank? Will the Russian Export Center and Roseximbank be simply responsible for granting compensation?
Petr Fradkov: This is not the case now but maybe in the future Roseximbank will be responsible for distributing such subsidies to commercial banks. But this will be the second stage. But so far, we have only two banks that have the right according to the relevant regulatory documents to subsidize their own interest rates – Roseximbank and VEB. They are some kind of development institutions, which have their own function. They are not competing with commercial banks with regard to other matters so there are no conflicting interests here.
Do you believe that it is the best way to use only one channel to subsidize interest rates? Or it would be better to have a reliable, trustworthy bank from the first ten banks whose customer is an export company and this commercial bank can extend credits to it at a certain interest rate and you as an export support institution will subsidize a part of it and the bank and you will be responsible for exercising control.
Petr Fradkov: In my opinion, this should be widespread practice for the banks that would like to support and fund exports. This is my conviction, it’s not new, I have often voiced it at all possible places. Exports will only benefit from it: the more interested financial institutions the larger the competitive environment, the fiercer the fight for the exporter and the better the services the exporter can receive. Our task is not to support a bank but to support our producer and create another banking instrument. I think it will be a good thing. But we should move forward step by step because we didn’t have such an instrument two years ago in our country, and for example we didn’t have an export insurance instrument three years ago.
Is there a long waiting list for subsidies?
Petr Fradkov: Yes, there is. The waiting list is pretty long but at the same time we can see that our financial resources are limited. We take a practical view of the situation, which is not bright, given budget constraints, so we take an objective view of our and the budget’s capabilities and we introduce certain criteria. And we introduce them publicly discussing them with our management to ensure maximum Russia’s participation share and to yield maximum effect from the budgetary ruble invested and spent.
How long does it take on average to review a request? I think one can get a refusal quickly?
Petr Fradkov: One can get a refusal very quickly. In terms of formal criteria it’s a matter of several days - just a superficial analysis.
If the door is set ajar, how long could it last?
Petr Fradkov: If the door is set ajar, everything depends on a project. It does not depend on us alone because here we deal with a government expenditure item, we agree upon this issue with line ministries.
This a very large-scale procedure.
Petr Fradkov: We have learnt to do it pretty quickly and it takes several days in ministries. It’s not only a matter of subsidy – we have to examine a project and it might take up to a month.
A month is not a long period.
Petr Fradkov: As I don’t want to be accused of being arrogant, here I mean a complete set of materials needed to analyze a transaction as a whole.
Without any correction.
Petr Fradkov: Yes.
In conclusion, could you size up in general the state of our exports? Unfortunately, we haven’t seen the effect of the devaluation in exports figures which we counted on in a serious way. In what sectors could we start seeing it in the most immediate future?
Petr Fradkov: I wouldn’t say that a devaluation effect is a panacea because it varies a lot depending on a specific sector. If we mean sectors with lesser added value this effect is without any doubt greater. And if we mean complex structured sectors those with high added value and the more so, sectors where the import component is used – a devaluation effect is lesser. I wouldn’t regard a devaluation effect as of paramount importance. It is a very important process at the moment and we should use this opportunity as a sort of boost for accelerating a bit. But it’s not a systemic phenomenon. As far as exports are concerned in general, figures differ. As a result of the devaluation, imports of course fell in terms of cost parameters. We are fully aware of it because in our country, many contracts are made in foreign currency and here we have peculiarities related to payments. In terms of physical volumes, exports are on the rise. Together with our colleagues from the Economic Development Ministry, we are thinking of how to address this problem because we have difficulty making calculations. Roughly speaking, we count rails together with microchips. In this respect, we can see an increase in physical volumes of exports and this is important too. And in terms of cost parameters, the most advanced technologies are growing faster than all other exports. I’d like to сite an example related to rail carriage manufacturing. If it were not for exports, the situation in the rail carriage manufacturing would be a lot more difficult.
Did you manage to start exporting rail carriages? At the start of the year, we told a lot about shutting down plants. Transportation companies didn’t want to be forced to buy those rail carriages under the conditions of reduced transportations and then we forgot this issue. Did you manage to start exporting rail carriages?
Petr Fradkov: Now about two thirds of Russian-made rail carriages are exported. This is being done through using instruments of Vnesheconombank and the Russian Export Center. If it hadn’t happened, the situation would be quite different. But globally, exports became lesser. At the same time, exports of rail carriages increased dramatically.
If this is the case, if they function, it’s a great contribution.
Petr Fradkov: This is pretty good evidence that exports support is a very important line of activity that allows us to keep production afloat. Of course, there always emerge issues of quality and competitiveness but these issues should be addressed in parallel. We are trying to start operating in motorway industry and agricultural sector.
Demand in transport mechanical engineering has diminished dramatically. So, we need companies especially international ones that produce here for the market.
Petr Fradkov: We are active in working with a whole list of auto producers in this country – both purely national ones and companies – international brands with a high degree of localization, we work both separately and we also work out a road map related to and non-financial measures, regulatory framework in order to draw up routes of exporting Russian-made automobiles to foreign markets. This is already happening and the Russian Export Center has already provided dozens of billions of rubles. Maybe this is a priority now. And in my opinion, this is also our trask.
Andrei Klepach: the Russian economy is able to start growing at a rate of 4%
TV CHANNEL RUSSIA 24,
CORR: Good afternoon Andrei Nikolaevich.
Andrei KLEPACH, Vnesheconombank Deputy Chairman, good afternoon.
CORR: All over the world, economic growth is slowing down. What should major financing institutions fear and where should they invest?
Andrei KLEPACH: The world is different – in fact, economic growth is slowing down in China but estimates vary here, for example, some expect its economy to grow at a rate of about 6-7 percent. Economic growth is slowing down in Brazil, which is also going through the economic slump. But as a whole according to estimates by the International Monetary Fund and the Organization for Cooperation economic growth is somewhat accelerating at a rate of 3.8-3.9 percent this year, it was three percent earlier and now many expect a growth of 3.8-3.9 percent. But countries behave differently. Such drivers of economic growth as China are slowing down but Indonesia and India are accelerating. In the long run, after 2016 both Russia’s and Brazil’s economy will start to grow. Europe is reviving a little, Americans are expecting about the same growth rates of 2.5 percent as now.
CORR: In this connection, is Vnesheconombank changing its strategy in its capacity of a major financing institution?
Andrei KLEPACH: We are responding not only to how growth rates are changing in the world but also to current challenges and needs of the Russian economy and therefore VEB is determined to build up its loan portfolio, investments and participation in capital of its subsidiaries. Moreover, now that lending growth rates have slowed down significantly in our country, VEB hasn’t slowed down so far and VEB’s share in the credits extended to non-financial companies last year and now has increased by 6.5-6.7 percent as compared to the loan portfolio in the economy as a whole. And VEB’s specific feature is that it focuses on investment lending and that’s why its share in long-term credits is also on the rise and now it exceeds 13 percent. So, we are a limiting factor countering investment slump and in terms of investments VEB’s role is great.
CORR: Are you going to change your strategy for 2016, are you going to increase lending or are you worried that credits might not be repaid in the current economic situation? It’s clear that things are not as good as you would like them to be.
Andrei KLEPACH: There’s always something wrong with our economy. There is a word combination American rollercoaster and in America they have Russian rollercoaster. In fact, a part of loan portfolio is restructured, payment periods are changed and interest rates are reconsidered. To a greater extent than other commercial banks, VEB either retained effective interest rates or increased them to a lesser extent thus giving rise to a problem – by raising funds from the market and receiving refinancing from the Central Bank through REPO transactions we often work at a loss as opposed to commercial banks if we deal with the projects needed by the state that must be continued. So, here VEB has to operate in a somewhat different as opposed to a commercially oriented bank. And we have to keep on funding infrastructure projects, projects associated with operating facilities built in Sochi, new projects as well as minerals production projects.
CORR: The Central Bank of Russia jointly with the World Bank announced that they would develop a new model of Russia’s pension system. What sort of model might it be, what can pensioners hope for?
Andrei KLEPACH: Pensioners should expect stable reliable pensions and investments if we mean investing pension savings. It’s hard to foresee what proposals the Central Bank and the World Bank would develop but above all the Government is responsible for pension reform and certain decisions have been made in this respect. There are several problematic aspects associated with a funded portion of pensions. Now a decision has been made to freeze it for a period of one year once more and use these funds to finance the deficit of the Pension Fund. Nevertheless, there is a question, how will citizens manage funds already saved? There are private pension funds and there is a state managing company – Vnesheconombank, which is also responsible for investing a significant part of pension savings. So, Vnesheconombank is competing here with other institutions in which people place much confidence. So, I hope that in 2016 we’ll be able to develop a new model of a stable pension system to avoid making temporary decisions.
CORR: Do you believe that the fact that the Finance Ministry has frozen the funded portion of pensions means that the Finance Ministry has exhausted all other possibilities to solve the problem of budget deficit?
Andrei KLEPACH: I wouldn’t say that. There is always a range of solutions but each solution has its pluses and minuses and if we don’t use pension savings we will have to cut down expenditures and it is almost impossible under the current conditions because this is 300 hundred billion or to run a huge budget deficit and borrow on the domestic market or use financial resources of the Reserve Fund to a greater extent. But as the budget does not provide for increasing domestic debt it would be wrong to spend financial resources of the Reserve Fund intensively. Nevertheless, I believe there is a possibility and a niche for borrowing more actively on the domestic market and for pursuing a more active debt policy. By the world’s standards our debt is not large - it’s a bit more than 12 percent of GDP. But it’s clear that it’s not cheap, we don’t have cheap credits but there is a possibility for increasing our domestic debt.
CORR: How will a freeze on pension savings affect investments in the country?
Andrei KLEPACH: I think that in the short term, it won't have any influence on investments because funds that go through private pension funds are not essentially used for making investments. It’s more important here that both business and the financial system are in need of rules and we have made temporary decisions for the third year in a row. In this case the Government said it and I hope that during 2016 this pause will be used to factually develop a stable model of pension reform.
CORR: What is in your opinion the most plausible scenario of Russia’s economic development and will our severe dependence on oil prices persist and as a whole is the fall in oil prices a plus or a minus in the current situation?
Andrei KLEPACH: I don’t think that low oil prices are good for us because an almost 50 percent fall in oil prices reduced Russia’s export income by about 150 billion dollars and this factor had a negative impact on Russia’s economic growth. Maybe, business and the Government are more worried by GDP than ordinary people, nevertheless, everybody was hurt because people’s real incomes and wages decreased, this year real wages will decrease by more than 9 percent. Nevertheless, besides oil prices, there are other things that play a crucial role for the Russian economy, for example, our ability to upgrade our economy, make investments more effective and boost productivity. And here there is much room for maneuver . In order to create a sustainable economy it’s not enough for us to simply boost efficiency and productivity, we have to carry out serious structural economic reforms. Above all, we should encourage sustainable domestic demand and those economic factors that work for the domestic market. Although industrial output is falling this year, our food sector has operated successfully so far. I think that next year, given import substitution and a good resource base created but our domestic agriculture, it has good opportunities for growth and in the longer term a potential for exports. We can export flour and we export it as well as our candies to say nothing of vodka and other drinks. Our export and agriculture potential is great, for example, we can see record amounts of grain exports. But some time from now our animal production in which large investments have been made in the past years could enter the world’s markets. But it won’t be easy for us to do it we need to receive certificates, we need to invest in logistics but there is a potential for increasing exports. Moreover, we have started to substantially increase supplies to China during the current and the past year. Chinese people believe that our food stuffs are better and in any case they are healthier.
VEB has also started to make its projections. We expect our economy to grow even faster than government’s forecast of 0.7 percent, we expect economic growth to be from 0.7 to 1 percent of GDP growth. Even now, our smelting, oil and gas industries are increasing their exports. We believe that exports of our mechanical engineering products might also increase. In terms of exports, VEB plays a special role because the Russian Export Support Center is its pet project and VEB’s important responsibility and significant financial resource are allocated to fund the Center. So, we believe that as a result of this activity we’ll be able to increase exports of mechanical engineering products and not only defense-oriented products but also civil-oriented ones. Secondly, our economic reserves have dropped significantly but our assumption is that they will start to recover. As far as consumer demand is concerned, it will continue to stagnate and even fall slightly but I would like to say that we haven’t hit the bottom yet. As far as investments are concerned we proceed from the premise that there is a potential for increased investments in the next year. In our estimates, this year investments have decreased by about11 percent but next year investments might grow somewhere 0.6 percent and maybe about a zero. Private investments might recover as well. It’s very important for us to return to the dynamics that was seen in the Russian economy in the 2000s. If we want to get back to an issue of competition, we talked about at the start of our conversation, we should assume that if the world’s economy grows 3.6 and further on -3.8, 3.9, we should achieve these growth rates to retain our role in the world and it’s not only a matter of national economic sovereignty, it’s also a matter of narrowing the gap between us and industrialized countries and it concerns everybody, each family. Our main task is to achieve an economic growth rate of about 4 percent and we can accomplish it because there is a potential for increasing consumer and especially investment demand. But to make this happen people and above all business should be determined to invest above all in Russia. The capital outflow is now lower than it was expected earlier. At the start of the year, some expected capital outflow to be more than 100 billion, others – about 90 billion, our Bank’s forecast was 87-90 billion, now capital outflow is likely to be about 60-65 billion. Nevertheless, this is a huge amount, this money is fleeing Russia and we should get back to an economic development model when amounts of capital outflow are not significant and when at some point in the mid-term capital starts to flow into the country, despite sanctions, despite Russian capital flight.
CORR: Andrei Nikolaevich thank you for your interview.
Andrei KLEPACH: Thank you for your questions and I wish our economy every success.
Moscow, October 5, 2015
Vnesheconombank (VEB) reported that it would extend a credit worth 14.6 billion rubles to pharma company R-Pharm. A credit agreement was signed at the International Investment Form in Sochi on October 2, in the presence of Prime Minister Dmitry Medvedev. According to VEB, funds are to be used for the construction of a pharm-substances plant in Rostov the Great and the second stage of the finished pharmaceutical products plant in Yaroslavl. Moreover, a part of the credit is to be used to complete R&D work on seven original medications of R-Pharm, the state corporation reported.
According to VEB, investments in all projects of R-Pharm amount to 19.7 billion rubles. Out of them, 5 billion rubles are to be invested by the by company; VEB Chairman Vladimir Dmitriev was cited by TASS as saying. 9 billion rubles out of the credit amount are to be invested in research and development, he said.
VEB does not disclose the terms of extending the credit. R-Pharm’s representative declined to comment.
Who will get the money?
R-Pharm is involved in developing, manufacturing and distributing pharmaceuticals. The company is owned by its Board Chairman Alexei Repik. It has three functioning plants in Russia, with one plant being under construction. There are three subsidiaries in Turkey (a plant is also under construction here), and a plant bought from Pfizer in Germany. In 2014, CJSC R-Pharm’s earnings amounted to 55.9 billion rubles and its net profit was 7.7 billion rubles (data by SPARK-Interfax).
An issue of opening a credit line for R-Pharm to fund these projects was discussed at a meeting of VEB’s Supervisory Board (Dmitry Medvedev heads it) on September 24, as it follows from the transcript at the Government site. Providing support for R-Pharm’s projects will be highly instrumental in developing our own pharmaceutical sector in Russia, creating high-tech production facilities, new jobs and of course saturating the market, explained Mr. Medvedev at the time. “The money is provided as part of project finance, the Government site said.
In August of 2015, R-Pharm already received 500 million rubles worth of credit from the Industry Development Fund of the Industry and Trade Ministry for manufacturing substances in the Yaroslavl region to treat cancerous and bone tissue diseases. The company invested 548.7 million rubles in this project; scheduled expenses including the credit from the Industry Development Fund are another 740.5 million rubles. Production of two types of substances are to start in 2017 and 2021, the company’s Director General Vasily Ignatjev told Vedomosti earlier. A bio-analogue is to be manufactured on the basis of one of them and an original medication - on the basis of the second one, he also said at the time.
Such significant investments are propitiate to R-Pharm’s scale of business, believes Director of the Center for Social Economy David Melik-Guseinov. The company is dynamically developing and is entering the international market, so it needs funds for a large-scale integrated full-cycle production facility, explains the expert. R-Pharm synthesizes molecules for manufacturing high-margin original medications, knows DSM Group Director General Sergei Shulyak.
Klepach: factual dynamics of GDP is lower than a potential one
Sochi, October 3, 2015
SOCHI, October 3. /TASS/. Factual dynamics of Russian GDP is a lot lower than a potential one and economic potential is diminishing. This is an opinion voiced by VEB Deputy Chairman Andrei Klepach in the course of the International Investment Forum in Sochi.
“Factual dynamics of GDP is lower than a potential one. As a result of what is happening now our potential GDP is dwindling, that is, conditions for a future economic growth are deteriorating”, he said.
Mr. Klepach believes that in order to change the situation for the better we need to loosen monetary policy. “A more difficult question is how to do it. It is one of dilemmas and not only of the Russian Central Bank but also of others. In my opinion, to soften the policy head-on by way of reducing interest rates sharply in all directions would be wrong”, he said.
Such a step won’t result in easing credits to enterprises and in bringing about economic recovery but in a strengthened currency exchange rate. “Then we can start raising a question of toughening a regime of currency operations, introducing currency control, so a long chain of problems will follow”, continued Klepach.
In his opinion, the Russian Central Bank should go along a path of using non-traditional instruments for supporting investments and small-sized enterprises. He added that they were being used but not in sufficient volume.
VEB accounts for 364 billion rubles in import substitution projects
Moscow, October 3, 2015
MOSCOW, Oct 3 – RIA Novosti. Vnesheconombank approved participation in 26 investment projects contributing to import substitution in the amount of more than 500 billion rubles, with VEB accounting for 364 billion rubles, RIA Novosti reported at the state corporation’s press office.
“As of today, VEB has approved participation in 26 investment projects contributing to import substitution in the amount of more than 500 billion rubles, with VEB accounting for 364 billion rubles. Out of all import-substitution projects agro-industrial complex accounts for 213 billion rubles, with VEB accounting for 167.3 billion rubles”, they explained to the agency at the state corporation. Projects in aviation industry, engine-building as well as in smelting industry, electronics, chemistry, medical equipment manufacturing and pharmaceutical industry account for a significant proportion of the Bank’s loan portfolio.
At an expert examination stage, VEB is examining 15 import-substitution projects in the total amount of 164 billion rubles, with VEB’s expected participation share being 122 billion rubles. Projects in the new sectors in the list of import-substitution projects now include projects in the defense – industrial and rocket and space complex, they added at VEB’s press office.
Prime Minister Dmitry Medvedev conducted a session of the Governmental Commission for Import Substitution in Sochi on Saturday. Its participants stressed domestic developments and products should be created in import-substitution sectors such as aviation industry, agriculture, radio electronics and mechanical engineering.
“It’s very important that for the first time we managed to link two concepts, namely, import substitution and export orientation. It is very important that import-substitution projects should have at the same time export potential”, VEB First Deputy Chairman Petr Fradkov said to RIA Novosti after the session of the Commission.
“An export-oriented project a priori means that we deal with quality, competitive and marketable products”, he said. The main thing is that import-substitution products should be of top quality”, Fradkov stressed.