The meeting focused on VEB.RF’s results 2019, current operations and ambitious plans to participate in building a modern urban economy.
Putin: Igor Ivanovich, VEB is more than an ordinary bank, it is primarily a development institution. I know that VEB’s state of affairs was rather complicated when you took the chairmanship, and you channelled your efforts into improving its operational status, though we cannot underestimate VEB’s former achievements.
Therefore I have two questions. First: what is Vnesheconombank’s current state of affairs? And second: how are you carrying out the major mission of this institution and what is your involvement in national projects?
Shuvalov: Dear Vladimir Vladimirovich! We have carried out your order for ensuring VEB.RF’s financial stability. At year-end 2019, with the support of the Russian Government and in collaboration with the Federal Assembly, we made sure, through amendments to the budget legislation, that VEB.RF’s capital adequacy ratio according to the International Financial Reporting Standards (IFRS) is such that we are able not only to repay the external debt incurred earlier, but also to actively participate in the national development agenda defined by the Presidential Decrees in May 2018.
We have enough liquidity in our accounts, consequently, we keep the bank’s balance healthy. We are confident that we will be able not only to finance the projects selected in 2019, but also more actively support the Government’s efforts to achieve the national development goals.
Which projects were approved in 2019? First, I must tell you that we have fully reorganised our methods of work and we do not compete against the major credit institutions of the Russian Federation, not any more.
We have built and developed partnership relations with largest commercial banks - Sberbank, VTB, Gazprombank - and co-participate in the so called project financing factory (PFF). This is a special form of syndication. Despite the fact that we use classic syndication model as well, in 2019 we approved ten major projects to be financed through the PFF.
VEB.RF’s total commitments exceed 300 billion roubles. The total value of projects to be financed through the PFF equals to 787 billion roubles, including not only VEB.RF’s commitments, but also funds allocated by investors and commercial banks.
According to our business model, we shall support commercial banks’ lending with no less than 300 billion roubles. In total, should we stick to the plan, we will invest about three trillion roubles for five years, with the total amount of lending provided in cooperation with commercial banks reaching about ten trillion roubles. These are substantial funds.
The projects include natural gas conversion, the leasing of LNG carriers that are already produced and will be produced at Zvezda shipyard. This is one of the major projects under your control. We also finance the delivery of jets to Aeroflot and the highway rehabilitation (a section of the Central Ring Road and other federal routes).
Notably, we should not be a sole lender. We will operate on a sole lender basis under a special resolution of the President and the Government on projects of nationwide significance. Admittedly, a project risk level is very high for commercial institutions, and they are unwilling to incur such risk at the first phase of project implementation.
We can observe that when the project is well under way, commercial lending becomes possible and commercial banks suggest that we should withdraw from the project and offer to buy the loan. We have made several such transactions, one of which is very successful. It’s the construction of a new terminal at Sheremetyevo Airport financed by VEB. When the terminal started operating, Sberbank expressed considerable interest to the project and we withdrew from it having charged a fee.
Now it’s time to focus on national development goals. VEB is not a single player. According to the new federal law on bank for development, VEB operates in close coordination with RSMB Corporation (small and medium business), Russian Export Center (export support) and DOM.RF (modern urban development). In this context, we are present in all project committees of the Government.
I hope that at this stage we can focus on urban development. We are entrusted by the Government to launch a training programme for manager teams from hundred towns excluding Moscow and St. Petersburg in order to delegate new challenging tasks to municipalities.
At the federal level, these are large and major projects worth more than ten trillion roubles. For our part we would like to focus, together with municipal and regional institutions, on ensuring that each specific household benefit from these national projects and people’s life changes for the better, becomes safer and more comfortable.
We offer the best consumption patterns. In this context, Moscow has set a certain trend in current urban development, and we believe that it can be followed by every town, even the smallest one.
VEB.RF Issues First 20 Billion Roubles of Surety Bonds in Favour of Sberbank and VTB to Guarantee SME Lending
State Development Corporation VEB.RF issued first surety bonds worth 20 billion roubles each in favour of Sberbank and VTB Bank.
In total, VEB.RF plans to issue surety bonds totalling 100 billion roubles in favour of Russian systemically important banks and SME Bank. The surety bonds are to secure SME’s obligations to repay zero-rate loans allocated for wage payment.
“Now it is critically important to offer timely support to small businesses. The programme should involve entrepreneurs with the aggregate headcount of about 1.5 million. We are capable to flexibly meet the needs of the Russian economy and tackle the tasks entrusted to us by the government. All development institutions and commercial banks should operate as one team to implement the support agenda. VEB.RF is currently implementing the necessary corporate decisions. We have developed and are using certain financial instruments including the guarantee programme. This allows us to create new products which will be highly demanded in the crisis environment,” VEB.RF’s Chairman Igor Shuvalov said.
The decision on expanding SME access to preferential loans and granting zero-rate loans for wage payment to SME employees has been adopted by the Russian Government.
VEB.RF and Doctor Nearby Offer Free Telemedicine Support to Russian Citizens
State Development Corporation VEB.RF and Doctor Nearby telemedicine service announce the launch of a federal project aimed at providing free telemedicine support to all Russian nationals. From today onward, citizens of the Russian Federation can obtain remote medical advice not only from therapists, pediatricians and general practitioners, but also from key specialty doctors. The advisory services will include a wide range of issues relating to different medical problems and will extend beyond preventing the spread of coronavirus. The project uses the medical, technology and manufacturing capabilities of Doctor Nearby, is organizationally and financially backed by VEB.RF and is aimed at improving the accessibility of medical care during the pandemic.
The difficult epidemiological situation impedes the provision of ongoing medical assistance to the most vulnerable groups of population: patients with chronic diseases, older people and families with young children. The project for providing remote medical assistance launched by VEB.RF and Doctor Nearby is designed to ensure interaction between Russian nationals and key medical specialists and provide online professional support to the population, which should be a priority under the current circumstances.
VEB.RF Chairman Igor Shuvalov: “Now, when it is absolutely necessary to follow lockdown to keep others safe, remote medical services are much in demand. VEB.RF as one of development institutions sees improving access to telemedicine as one of its major tasks. We closely cooperate with our partner, Doctor Nearby. As of today, Doctor Nearby’s qualified staff can offer free online advice for all Russian residents not only about coronavirus symptoms and treatment, but also about other diseases. We hope that easily accessible telemedicine services will help to preserve the health of our citizens.”
Remote medical advice is provided through a mobile app, website and dedicated telephone channel. Patients can get help from therapists and pediatricians twenty-four seven and from specialty doctors only by previous appointment. Russian nationals will have access to free telemedicine at least during a month, with an option to prolong the services depending on the epidemiological situation in the country.
Healthcare development projects are high on VEB.RF’s investment agenda. Telemedicine services help to improve the accessibility of quality medical care to people, and online video consulting is particularly essential nowadays upon the introduction of mandatory social distancing amid coronavirus threat. For that reason, in December 2019 Doctor Nearby and VEB Ventures, VEB.RF’s specialized subsidiary, signed an agreement on main terms of financing.
Today VEB.RF and Doctor Nearby launch a joint social project aiming to reduce the speed of coronavirus spreading in Russia. Due to worsening epidemiological situation the authorities introduce new measures obliging people to observe lockdown. The national health service gives major focus to effective infection control during the pandemic. Our goal is to help doctors, who are on the front line of combating the disease, by providing them with convenient instruments of interaction with patients and fulfilling our commitments to organize free online medical support for Russian people. The devoted efforts are meant to help people to avoid health risks during the pandemic. It is very important to support people needing medical services under lockdown restrictions. Under the circumstances, telemedicine will become a convenient and safe instrument for efficient interaction between doctors and patients. We are confident that our project will expand the range of healthcare system opportunities by launching new digital services.
Today, when all borders are shut temporarily, digital interaction channels operating in important areas such as healthcare become critically important for responding to emerging industrial and social challenges.
Denis Shvetsov, General Director of Doctor Nearby:
“For such a large-scale and significant project, we will employ both our capacities and those of our partners. We intend to involve other Moscow and regional clinical networks. Our efforts evoke a widespread response from the professional community. Highly skilled doctors from various regions are eager to assume some important duties and responsibilities to ensure that all patients have appropriate access to medical services. We are ready to train doctors in technologies and online interaction specifics in order to meet the growing demand for medical care from the population. I am confident that this digital interaction between doctors and patients will continue into the future, when the epidemiological situation improves.
This is a very complicated project whose implementation requires the accomplishment of multiple tasks. We have not only involved more doctors in the project but also upgraded our IT-infrastructure. We have been convinced of the readiness of Doctor Nearby’s platform for a significant load increase and we urge people to use the telemedicine service to tackle health issues.
The project is largely due to VEB.RF’s active social policy and strong support.
VEB.RF, National PPP Centre and AECOM Assess the Potential of Encouraging Investment in Infrastructure
VEB.RF, National PPP Centre and AECOM have prepared a research guide “Infrastructure for Sustainable Development. How to Attract Investment in New Quality Projects”. The document analyses the potential for attracting investment in Russian and foreign infrastructure assets and considers instruments and mechanisms for evaluating the quality of infrastructure projects, which are widespread globally.
Numerous research studies confirm that increased investment in infrastructure positively affects the development of the economy and has a multiplying effect. However, there is a profound lack of funding for infrastructure development worldwide. According to the World Bank and Global Infrastructure Hub, the scarcity of funds is estimated at 13 trillion US Dollars for 2021-2040, with Russia’s share accounting for 625 billion US Dollars. For 2020 alone, the global shortage of investment in infrastructure will exceed 500 billion US Dollars. In total, global financing institutions and institutional investors manage global assets exceeding146 trillion US Dollars, with infrastructure assets currently accounting for no more than 5%.
The Russian investment market has a number of features impeding the fulfilment of this task. For example, according to the Bank of Russia, since 2013 annual direct foreign investment in the economy has not exceeded 30 billion US Dollars, whereas prior to sanctions imposition such investment was above 40 billion US Dollars. Project financing, according to ROSINFRA infrastructure project support platform, covers only 3% of infrastructure investment and equity financing is underdeveloped: Debt-to-equity (D/E) ratio, including mezzanine lending and shareholder loans, may be 90/10 per cent. There is almost a complete lack of institutional investors making regular investment in infrastructure development in Russia.
Attracting long-term investment in infrastructure projects should be based on a systemic and transparent approach to investment decision making. Investment activities are governed by the G20 infrastructure agenda based on the Road Map for Infrastructure as an Asset Class adopted in 2018. G20 experts have summarized different approaches to infrastructure development and adopted the principles for quality infrastructure investment covering various aspects of preparing and implementing infrastructure projects.
Alongside the principles for quality infrastructure investment, there are more than 50 global instruments aimed at implementing sustainability approaches and supporting investors in the evaluation of financial, economic, environmental, social, managerial and other aspects of infrastructure projects. Evaluation and certification instruments affect the global market through forming an integrated ecosystem. For example, over eight years of existence the Envision evaluation system has helped to attract 22.5 billion Us Dollars worth of investment for infrastructure development (about 1.5 trillion roubles).
In February 2020 VEB.RF, National PPP Centre and AECOM announced the development of the national system for evaluating and certifying infrastructure projects for compliance with the principles of sustainable development and investment in quality infrastructure.
Moscow-Tatarstan Teleconference Discusses Wildberries Distribution Centre Construction in Zelenodolsk
The Zelenodolsk industrial park in Tatarstan is to house a distribution centre of Russia’s largest online retailer Wildberries. The local utility and transport infrastructure was built with MONOTOWNS.RF’s financial support totalling 930 million roubles. Progress in setting up the large-sized distribution centre was discussed during a teleconference attended by VEB.RF Chairman Igor Shuvalov, Tatarstan President Rustam Minnikhanov, VEB.RF Deputy Chairperson and MONOTOWNS.RF Director General Irina Makieva, and Wildberries CEO Tatyana Bakalchuk.
“It’s important to take an integrated approach to the development of small towns. This project is not only support for entrepreneurship, but also infrastructure development and job creation. When completed, such projects will give urban areas a new quality of life,” VEB.RF Chairman Igor Shuvalov said during the online discussion.
According to Tatarstan President Rustam Minnikhanov, the republic has seven single-industry towns with more than 1 million residents, or a quarter of the economically active population.
“The republic’s key companies representing various economic sectors operate here. The further development of single-industry towns needs support for new investment and infrastructure projects,” he said.
The Tatarstan President added that the region had plans to apply to the Monotowns Development Fund for new projects. These include the Kamskie Polyany transport infrastructure project and Phase 2 of the infrastructure project for the Haier industrial park.
The teleconference also discussed the construction of the Wildberries distribution centre in Zelenodolsk, which started in November 2019. At the first stage, a facility with an area of 50,000 square metres will be launched in the first half of 2020. Overall, the investment project will create over 4,000 jobs.
“Zelenodolsk today is an economically sustainable place. The town sees alternative businesses and new investors coming; the urban environment is changing. We are pleased that the Fund takes part in these changes. There are good prospects for growth in the town; I’m sure we have a lot of joint projects in the years ahead,” VEB.RF Deputy Chairperson and MONOTOWNS.RF Director General Irina Makieva emphasised, adding that Russia’s largest e-commerce retailer Wildberries coming to Zelenodolsk would open the door to new small businesses.
It is worth noting that in addition to logistics functions, the new Wildberries distribution centre will help entrepreneurs to grow their businesses and export their products to other countries. Wildberries became a resident of the Zelenodolsk advanced development zone in December 2019. Currently, the total number of residents is 11. The industrial park already houses 13 companies now.
“We are confident the opening of the centre will enable Tatarstan entrepreneurs, especially small and medium-sized businesses, to expand their product range on Wildberries and consequently increase sales. The number of suppliers from the republic to Wildberries has increased more than threefold to 66 in the last three years, while their turnover has grown more than fivefold,” Wildberries CEO Tatyana Bakalchuk said.