SCO Banks: Regional Economic Recovery Based on Digital Solutions, Trade Cooperation, and Energy
The state of the world economy, lessons learned and ways out of the economic crisis caused by the pandemic were discussed today at the SKOLKOVO Moscow School of Management by representatives of state agencies and member banks of the Interbank Consortium of the Shanghai Cooperation Organization (SCO IBC), which this year is chaired by State Development Corporation VEB.RF. The event has become the first step in implementing the anti-crisis roadmap of the SCO IBC.
Vladimir Mau, economist and Rector of RANEPA, opened the event by giving an analysis of the macroeconomic situation in which the SCO countries are compelled to act.
“Despite the differences in our economies, we face common problems: rising unemployment, falling industrial production, growing budget deficits, closing of export channels, and much more. Cooperation within the SCO should be based on the sustainable development agenda, the digital economy, and expanding cooperation in trade and energy. The volume of trade between the SCO countries is still quite low, and there is potential for growth here,” he said.
According to Vladimir Mau, Russia is doing well from a macroeconomic point of view. “This crisis is not a structural one and does not develop into a banking one. It can rather be compared to the post-war situation, that is, we are dealing with the economic consequences of events that are not economic in nature. A key challenge of post-crisis recovery of the SCO should be human and sustainable economic development within the SCO. The welfare of specific people is much more important than gross growth figures,” Vladimir Mau summed up.
VEB.RF’s Deputy Chairman Daniil Algulyan spoke about the strategy employed by VEB.RF to combat the crisis. “VEB.RF issued guarantees to 15 banks, owing to which about 30 thousand enterprises raised loans at 0%. Also, our guarantees, this time under the employment support programme, provided almost 150 thousand loans to enterprises at 2%. 38 banks have joined this programme.” According to Daniil Algulyan, in a crisis, the interest of commercial banks in cross-border transactions is falling, and it is up to the development institutions to support export-import operations. VEB.RF is actively working in this direction and is doing everything to ensure that trade flows are not affected.
VEB.RF's Deputy Chairman has named the development of infrastructure for payments in national currencies as one of the most effective measures in this direction. “In recent years, we have made great progress in trading in national currencies, and the use of yuan and rouble is growing. The Bank of Russia has developed and is actively implementing the Financial Messaging System (FMS), which our colleagues from the Uzbekistan National Bank will soon join. We are open to any suggestions in this area,” he said.
VEB.RF’s Deputy Chairperson Svetlana Yachevskaya noted that the state corporation plays an important role in the implementation of public anti-crisis measures. “Participation of VEB.RF as an agent in providing subsidies allowed us to provide timely, operational support to systemically important organisations, while VEB.RF’s analytics and monitoring made it possible to make the subsidy mechanism flexible and adapted to the needs of organisations. The mechanism for subsidising the interest rate made it possible to provide 200 billion roubles of preferential loans to organisations to replenish working capital”, VEB.RF’s Deputy Chairperson said. In addition, according to her, VEB.RF and the National PPP Development Centre have launched an anti-crisis programme to assist regions in bringing about PPP projects, which is currently in high demand among regional authorities. The programme has already received circa 270 initiatives for a total amount of 791.4 billion roubles.
Deputy Chairman of the Board of the Kazakhstan Development Bank (KDB) Duman Abubakirov said that the bank's anti-crisis strategy was based on the experience gained in 2008 and 2014-15. The crisis brought many problems: many projects that required foreign specialists onsite have been mothballed. The cost of borrowed capital has increased with high capital intensity of projects. Nevertheless, the Government of Kazakhstan and the KDB managed to save about 25 thousand jobs thanks to the timely measures taken. The bank switched to teleworking, but its performance, according to Duman Abubakirov, did not suffer.
Representative of the China Development Bank (CDB) Pan Dunmei noted that measures to support the economy in their case were concentrated around four key areas. First, countering the negative consequences of the coronavirus, including emergency financing of production and the procurement of protective equipment and medicine. Second, providing assistance to affected businesses. Third, helping companies restart after the pandemic; and fourth, protecting employees who have returned to their jobs. As part of these tasks, in 1H2020, the CDB employed various lending opportunities totalling 1.8 trillion yuan.
The conference was also attended by Director of the Strategic Development and Corporate Policy Department of the Russian Ministry of Industry and Trade Aleksey Uchenov, Director for Strategic Development of the Eurasian Development Bank Tatyana Chernikova, Deputy Head of the Eurasian Affairs Department of the PRC’s Ministry of Commerce Zhang Dong. The meeting was moderated by VEB.RF’s Chief Strategy Officer Aleksey Kechko.
Development banks of the Shanghai Cooperation Organization (SCO) will discuss anti-crisis support measures for national economies as part of the first stage of the Road Map to Overcome the Pandemic’s Consequences for the SCO Economies. The SCO Interbank Consortium (SCO IBC) conference will be held online on 7 August 2020.
Heads of SCO IBC banks, representatives of ministries and leading experts will discuss strategies for overcoming the global economic crisis caused by the coronavirus pandemic. Economists from Russia and the SCO countries will present their analysis of the situation and forecast for the coming months, propose action plans to overcome the crisis, and exchange practical experience on measures to support national economies.
The development institutions of the SCO countries played a crucial role in combating the economic consequences of the pandemic, supporting companies with loans and guarantees, curbing unemployment, and providing reliable support to the governments of the organisation's member countries. Over the past six months, they have accumulated unique experience that can be useful to their colleagues in the SCO IBC in dealing with new challenges, including in the event of a second wave of coronavirus. The conference will be organised by VEB.RF as part of its presidency in the SCO IBC in 2020 and the development of the anti-crisis roadmap.
The conference will be opened by RANEPA Rector Vladimir Mau, who will make a report on the prospects for economic cooperation between the SCO countries in the period of post-pandemic economic recovery. The conference will bring together VEB.RF's top management, representatives of Russian ministries and the Ministry of Commerce of the PRC, Head of the Eurasian Development Bank Nikolai Podguzov and national development institutions of the SCO member states: the Development Bank of Kazakhstan, the State Development Bank of China, National Bank for Foreign Economic Affairs of the Republic of Uzbekistan and others. The Russian Export Centre (part of the VEB.RF Group) and the RSMB Corporation will also report on the results of anti-crisis measures.
The conference will be held on 7 August 2020 at the Glassroom Multimedia Auditorium of the SKOLKOVO Moscow School of Management. The event is scheduled to start at 10:00 a.m. (MSK). The broadcast will be available here.
“VEB.RF, as a development institution, implements measures aimed at stimulating investment and infrastructure development, implementing major investment projects, supporting the constituent entities of the Russian Federation, and also participates in the implementation of anti-crisis measures of the Russian Government. During the lockdown, VEB.RF did not suspend its activities, continued to participate in the implementation of significant projects for the country, and fulfilled its obligations to its partners and customers. VEB.RF’s guarantees have a multiplying effect on the economy and allow companies in the real sector to attract investment on more favourable terms and maturities. As of 1 August 2020, VEB.RF's guarantee portfolio exceeded one trillion roubles. VEB.RF issued guarantees to enterprises in the following sectors: timber industry, chemical industry, mechanical engineering, transport infrastructure, and energy,” VEB.RF’s First Deputy Chairman and Member of the Management Board Nikolai Tsekhomsky said.
According to the Memorandum on the Financial Policy, VEB.RF’s guarantees and sureties also ensure the fulfilment of obligations of companies engaged in foreign economic activity and export contracts. Support and promotion of Russian industrial exports is a priority for VEB.RF. As at 1 August 2020, VEB.RF's export support guarantee portfolio amounted to 458.52 billion roubles.
VEB.RF Introduced City Managers to International Urban Development Experience
The first module of the Master of Public Administration programme has been completed. It was attended by 145 people from 29 cities of Russia. The programme was created on the initiative of VEB.RF, together with experts from the SKOLKOVO Moscow School of Management in partnership with the Strelka Institute of Media, Architecture and Design, National Research University Higher School of Economics and the New Economic School.
The first module of the programme was devoted to the study of global urban development trends, as well as their economic role, approaches to planning and organising projects that qualitatively change the lives of city dwellers.
As part of the module, VEB.RF’s key managers and their partners presented their tools and opportunities for urban development. They also shared their experiences in managing and supporting large-scale projects.
“100 cities, managers from which participate in the programme, including Moscow and Saint Petersburg, account for a half of the Russian population and GDP. Nevertheless, non-capital cities have a huge potential for economic growth too. One of the necessary conditions for this is qualified management teams. It is for them that we, together with our partners, have organised an educational programme, which is designed to give an impetus to improving the quality of life in our cities,” VEB.RF’s Chairman Igor Shuvalov noted.
Several dozen economics and urban development experts gave lectures, including Alexander Mamut, Chairman of the Board of Trustees of the Strelka Institute of Media, Architecture and Design; Ruben Enikolopov, President of the New Economic School; Andrei Sharonov, President of the SKOLKOVO Moscow School of Management; Philipp Rode, Executive Director of LSE Cities (London); Alexei Muratov, Partner of Strelka KB; Greg Clark, Senior Adviser for Future Cities and New Industries at HSBC Bank; and Irina Ilyina, Director of the HSE Centre for Regional Studies.
In the practical part of the module, participants were asked to analyse existing strategies for the development of their cities and conduct an audit of current and planned projects.
Andrei Sharonov, President of the SKOLKOVO Moscow School of Management: “When we conducted an anonymous survey of management teams and asked what qualities would they like to develop and learn, the vast majority in three different groups answered identically: confidence and competence. This is the task for us and our educational partners in all the following modules: to create a programme that would increase the level of competence of managers and, as a result, their self-confidence. And the result of these changes should be real urban transformation projects.”
“A great advantage is that we have the opportunity to talk to our financial partner, VEB.RF, as part of this programme. Moreover, we immediately consider our projects with financing opportunities in mind. We are full of optimism. We have many very healthy ambitions, many interesting ideas. I believe that this is an opportunity for each team, for each city, to find a direction that can change the energy of the city. And the energy of the city is those right initiatives that will be implemented through the involvement of our citizens, our residents, therefore this is the key,” he said.
The first intake of the programme included participants from Armavir, Bratsk, Veliky Novgorod, Vladivostok, Vologda, Voronezh, Dzerzhinsk, Ivanovo, Kazan, Kemerovo, Korolev, Kostroma, Krasnogorsk, Krasnodar, Lipetsk, Makhachkala, Nizhnevartovsk, Nizhny Novgorod, Novorossiysk, Orenburg, Orsk, Perm, Sochi, Sterlitamak, Surgut, Tula, Ulan-Ude, Ussuriysk, Ufa, Khimki, Chelyabinsk, and Yakutsk.
VEB.RF Unites BRICS Financial Institutions to Implement Responsible Investment Principles
State Development Corporation VEB.RF has become a leading BRICS development institution in applying the responsible financing principles. As part of the presidency in the BRICS Interbank Cooperation Mechanism (BRICS ICM), this effort has reached the finish line, VEB.RF Deputy Chairperson and Member of the Management Board Natalya Timakova said during OECD’s online conference on 23 July 2020.
This year, VEB.RF chairs the BRICS ICM, and, according to Natalya Timakova, it is going to bring updated responsible investment guidelines to the organisation, among other things. “We have developed the Responsible Financing Guidelines in close cooperation with the OECD, and these are currently being approved by other BRICS development institutions. By the end of the year, we plan to develop clear criteria for the concept of ‘responsible’ and implement the Guidelines in our work. Moreover, VEB.RF plans to continue this effort beyond its presidency, which expires this year, and to promote the Guidelines both in Russia and abroad,” Natalya Timakova added.
Elena Gushchina stressed that VEB.RF has been and remains a leader in cooperation with the OECD. “OECD’s agenda remains a priority not only for us, but also for Prime Minister Mikhail Mishustin. Regardless of whether Russia is a member of the organisation or not, collaboration between experts will allow us to enrich our activities with the best international practices,” she said.
VEB.RF’s Chief Economist Andrei Klepach outlined in detail the priorities of Russia's BRICS presidency and said that the VEB.RF’s effort on implementing the responsible financing guidelines is closely linked to the application of the concept of sustainable development in general. “Our efforts in this area are closely correlated with the work of the Bank of Russia. We plan to become a leader in sustainable development and responsible business conduct, extending these principles to the entire economy,” he said. Andrei Klepach presented VEB.RF’s progress in creating a national green finance system. Earlier this month, VEB.RF adopted the Russian Green Finance Guidelines and the Russian National Taxonomy for Green Projects.
The seminar brought together VEB.RF’s officers and representatives of all BRICS national development institutions: the Brazilian Development Bank (BNDES), the China Development Bank (CDB), the Development Bank of Southern Africa (DBSA) and EXIM Bank of India. They presented their approaches to responsible business conduct and shared their experiences in implementing sustainable development standards.
The seminar was also attended by experts from the OECD and the International Finance Corporation, who spoke about the existing international standards for responsible financing and the impact of the BRICS Principles on their further development. OECD’s Head of Sector Projects in the Responsible Business Conduct Unit Tyler Gillard stated that the OECD welcomes the development of responsible financing standards in BRICS and the leading role of Russia, represented by VEB.RF in this field, and noted the need for the entire international community to work together on this issue.
Private sector stakeholders, including Wells Fargo, Deutsche Bank and ING, also welcomed the development of responsible financing standards in BRICS, emphasising the importance of such work for international investors.
The participants agreed to continue cooperation on developing responsible financing standards, adopting BRICS Responsible Financing Guidelines in 2020, and developing detailed recommendations for BRICS development institutions on implementing the Guidelines.
The meeting was moderated by Antonina Levashenko, Head of the Russia-OECD Centre RANEPA, and Tyler Gillard, OECD’s Head of Sector Projects in the Responsible Business Conduct Unit.
Note: the BRICS Interbank Cooperation Mechanism (BRICS ICM) was established in 2010 to develop and strengthen economic and investment cooperation between the BRICS countries. The main areas of activity are the development of comprehensive long-term interbank cooperation between partners in order to strengthen trade and economic relations of the BRICS member countries, the support of the implementation of socially significant and regional projects, and the development of procedures for providing financial and banking services for investment projects that contribute to the economic development of the BRICS countries.