Vnesheconombank Chairman V.A. Dmitriev’s Interview to the TV Channel Russia 24

TV Channel Russia 24
OPINION,
21.04.2011, 23:21

HOST: You’ll watch an interview with Vnesheconombank Chairman Vladimir Dmitriev about a Fund of Direct Investments scheduled to be launched as early as this summer and its functions.

Evelina Zakamskaya: Good evening Vladimir Alexandrovich, thank you for finding time for us.

Vladimir DMITRIEV, Chairman of State Corporation ‘Bank for Development and Foreign Economic Affairs (Vnesheconombank)’. Good evening.

Evelina Zakamskaya: There emerged a steady trend in the dialogue between the state authorities and business: the state expects direct investments and increased business activity. What do you think the state and business could do in this respect? And how does Vnesheconombank participate in this sort of activity?

Vladimir DMITRIEV: In our activity we give top priority to boosting Russia’s investment appeal and raising investments. And in our opinion, establishing a Fund of Direct Investments is sure to increase Russia’s investment appeal. The Russian President’s initiative to create this Fund was launched last year and has been given a fresh impetus this year in Dmitry Medvedev’s address in Davos. Eventually, this initiative evolved into an instruction to Vnesheconombank, the Government and the Working Group on Establishing an International Financial Center in Russia and to the International Economic Forum in Saint Petersburg to take all necessary measures for establishing a Fund of Direct Investments. We believe that it’s quite realistic to raise significant funds of both foreign and Russian investor for the Russian economy provided that the state undertakes to share risks with private investors with a minimum proportion of 1:5. This means that for each ruble invested in a project by the Fund, foreign and Russian private business will invest 5 rubles in the economic sectors that are also of great interest for investors that is, the ones of overriding importance in terms of Russia’s modernization and innovative development.

Evelina ZAKAMSKAYA: How would respond to the criticism that the Fund is too small and very small sums are earmarked for it?

Vladimir DMITRIEV: I think that those who are skeptical about this new Fund might not know specifics of this Direct Investments Fund’s operation. The fact is that the state is ready to allocate 10 billion dollars for a period of five years to establish this Fund. And of course projects each of which is worth at least 100-150 million dollars should be prepared properly. And we won’t be able to form the so called pipeline in the near term. The pipeline that suits investors who will be ready to invest significant funds in it. Nevertheless, we hope that we’ll be able to form a Fund worth 2 billion dollars until the year-end. And we’ll start submitting appropriate proposals to consideration by an investment committee of a managing company until the year-end. When I say “we” I mean, above all, the Fund’s managerial staff, a managing company. This is because neither the state nor Vnesheconombank intend to administer this Fund. It should be structured in such a way that investors could be sure that they make decisions on their own. There will be other ways of managing this Fund too. I’ve mentioned an investment committee and we intend to offer an efficient supervisory board and an international expert council for the Fund’s activity to be transparent and understandable for private investors.

Evelina Zakamskaya: You can’t deny the fact that Vnesheconombank has a really unique status. On the one hand VEB acts as an investor and looks for projects in which it can invest money inside the country. On the other hand you raise investments from abroad. For this reason you can size up the situation thoroughly. What can you say?

Vladimir DMITRIEV: You’re right to a great extent. We are responsible for raising credits rather than being an investor. Although in certain cases we act also as an investor and participate in companies’ capital. Our status is really unique. But our unique status is associated with the fact that we are a state-run institution and by law our Supervisory Board is headed by the Prime Minister and it is comprised of vice premiers and ministers of line ministries and it is our Supervisory Board that formulates Vnesheconombank’s policy. And it is pursued in line with the country’s main lines of economic policy. As Vnesheconombank’s partners are foreign and Russian investors we are going to really help them in a very complicated investment environment to select top-priority projects that would suit investors and would be important for the Russian economy. We mean of course projects that would generate high incomes for investors, say, in the amount of 15-20 percent, these incomes are…

Evelina ZAKAMSKAYA: Pretty large

Vladimir DMITRIEV: Pretty large for those investing funds in the emerging markets.

Evelina ZAKAMSKAYA: Today, an issue of the state’s involvement in business is being given increased attention. I’d like to ask you about prospects and potential of public private partnership. Because it’s quite evident now that the state’ presence is a guarantee of stability for investors.

Vladimir DMITRIEV: Public private partnership is not new to us and it is one of our Bank’s main lines of activity. We have discussed this issue with you several times and you know a public private partnership center was established at VEB and in fact this center has become a quasi-federal institution responsible for assisting regional, municipal authorities in structuring, above all, infrastructure projects on the principles of public private partnership. Not long ago we expanded this line of our activity. We established a special fund to support projects implemented on the principles of public private partnership. Under VEB’s Supervisory Board decision VEB is to allocate 2 billion rubles to this end annually and these funds will be used to finance pre-project work, drawing up project and estimate documentation in order to substitute regional and municipal budgets that suffer certain budgetary constraints as well as in order to put together a project and then put it out to tender for potential investors compensating for Vnesheconombank’s expenses through further investments. We have already formed a package of the first projects in some regions. In addition to the abovementioned 2 billion rubles, 900 million rubles were allocated for Moscow for the year 2011. We are incorporated in the working group specially set up under the Moscow Government. On the whole the idea of public private partnership is slowly but rather confidently gaining momentum. We can see large-scale infrastructure projects being implemented on the principles of public private partnership. They include the Moscow-Saint Petersburg motorway project (Section 15-58 km), the Odintsovo bypass project, the Pulkovo airport project and a whole range of other projects. This is an absolutely worthwhile idea. There are numerous examples of projects that are being implemented on PPP principles abroad. 

Evelina ZAKAMSKAYA: Perhaps, venture, innovation projects are perfectly suited for this form of cooperation?

Vladimir DMITRIEV: There is no doubt about it. As far as this line of our activity is concerned, I’d like to mention an agreement on cooperation with state-run and private companies operating in venture and innovation sectors. Last year Vnesheconombank, Rosnano, the Russian Venture Company, the Fund for Supporting Small and Medium-Sized Enterprises in the Innovation Sphere and a whole range of companies signed an agreement on cooperation. Several weeks ago the Skolkovo Foundation became a party to this agreement. Here we went along the same way as we did in supporting infrastructure projects on the principles of public private partnership in the regional and municipal sphere. We are going to submit a proposal to VEB’s Supervisory Board for setting up a special fund that would be responsible for supporting venture projects at pre-project stages. This stage involves preparing necessary documentation and financing drawing up project and estimate documentation in order to secure commercialization of an innovation project at a later stage. These projects are exclusively associated with Skolkovo and we believe that this sort of zero-stage support for private entrepreneurs working in the innovation sector is sure to prove extremely important.

Evelina ZAKAMSKAYA: And now my last question, Vladimir Alexandrovich. Do you believe that it makes sense to establish an International Financial Center in Moscow? It seems that Moscow has no obvious advantages over London or the Hong Kong Stock Exchange. What companies might take interest in us?

Vladimir DMITRIEV: If I didn’t believe in this idea I wouldn’t be one of its enforcers both in our country and abroad. Some of our Bank’s employees are members of the working group on establishing an International Financial Center.  A lot is yet to be done. And here I mean not only transport and social aspects but also financial-economic aspects such as for example establishing a unified depository, unifying stock exchanges, creating a favorable financial-investment climate and etc. And I feel pretty comfortable in this respect because to a great extent things that we are supposed to do to establish an International Financial Center coincide with Vnesheconombank’s top-priority lines of activity.

Evelina ZAKAMSKAYA: Thank you.

Vladimir DMITRIEV: Thank you.