Vnesheconombank’s Chairman V.A. Dmitriev’s Interview to TV Channel Russia-24 (the Petersburg International Economic Forum)

HOST: We continue telling you about the Petersburg Economic Forum’s events and introducing its participants to you. Dmitry Shchugorev is on direct line with the studio. He is ready to introduce his next interviewee.

CORR: Good morning. We continue our discussions at Russia-24’s booth and right now in these morning hours before the start of the Forum’s regular sessions we are welcoming Vnesheconombank Chairman Vladimir Dmitriev.

Good morning, how are you doing on the Forum’s second day?

Vladimir Dmitriev, Vnesheconombank Chairman: I’m fine.

CORR: Did you enter into any agreements and take any principal decisions on the previous day?

Vladimir DMITRIEV: Yes, as always, because a Forum provides us with a unique opportunity not only to meet and discuss numerous current problems but also agrees upon concrete issues. And the current Forum is not an exception. We are close to signing several agreements and some agreements were signed yesterday. We are to formalize a number of agreements today, so we are happy about the results Vnesheconombank achieved at this Forum.

CORR: It must be said that in general the banking sector’s operation would greatly enhance innovation and modernization process that was launched in Russia. Vnesheconombank is known to have signed a number of agreements with state-run companies, non-government organizations on providing support for innovation projects. But the law does not give a definition of innovations. And how should you select appropriate projects in this uncertain situation and how should you support them?

Vladimir DMITRIEV: Things are easier for us because heads of such line ministries as the Economic Development Ministry, the Ministry of Industry and Trade, the Transport Industry are members of our Bank’s Supervisory Board. So, all innovation-oriented projects submitted to our Bank for expert examination are examined by experts in line ministries and it’s up to them to decide whether these projects are innovation ones or not. And on the basis of their recommendations we deal with purely financial aspects of various deals.

But on the other hand, it’s of course important to have a general idea as to what category a specific project falls into. I am aware that this is a very difficult task, but it was not by accident that Vnesheconombank proposed to join efforts of key companies and institutions involved in innovation activities. We have signed agreements with 9 companies including Rusnanotech and the Fund for the Promotion of Small Enterprises in the Science and Technology Sector, the Russian Venture Company and others. Under the signed agreements these companies make decisions as to what projects should be accepted for financing and to what extent they are in line with innovation line of business. And of course Vnesheconombank’s decisions to open financing are of primary importance.

CORR: So, now companies that submit their business plans to Vnesheconombank should prove that their business plans are innovation-oriented?

Vladimir DMITRIEV: Yes, of course, if we mean innovation projects. This is the task that was set before us by Vnesheconombank’s Supervisory Board Chairman Vladimir Putin when he said that a certain quota in Vnesheconombank’s loan portfolio should be allowed for innovation projects.  Even now, 15 percent of our loan portfolio accounts for the innovation sector with its advanced breakthrough technologies.

CORR: We know that or about a year Vnesheconombank has been implementing the program aimed at supporting small and medium-sized enterprises. Am I right?

Vladimir DMITRIEV: The program has been under way for about a year, although it was launched at the last year’s start but actually the money was made available only in August. Here I mean 30 billion rubles we received from the National Wealth Fund. These funds were provided to the Russian Development Bank, our subsidiary bank, on a repayable but interest-free basis. The Russian Development Bank is responsible for implementing the program of supporting small and medium-sized enterprises through extending credits to regional banks, which in their turn provide credit resources to small and medium-sized enterprises. To this end, 40 billion rubles have been already committed, 30 billion rubles of which have already reached their final recipients, that is, small and medium-sized enterprises and we are constantly controlling and monitoring the situation. We are working in 72 constituent entities of the Russian Federation and this year we are going to expand this program to all constituent entities of the Russian Federation. More than 150 regional banks are involved in this project. In our opinion, the program is progressing successfully.

CORR: Vladimir Alexandrovich, its’ quite obvious that after a year and a half it’s too early to talk about any intermediate results and yet I’d like to ask you about intermediate results. Final results will be available years from now.

Vladimir DMITRIEV: If we are talking about small and medium-sized enterprises, the results speak for themselves. This program involves 72 constituent entities of the Russian Federation, the enterprises’ turnover worth 100 billion rubles, 10 billion rubles in taxes, more than 100 thousand workers are employed by small and medium-sized enterprises that enjoy Vnesheconombank’s support through a network of regional banks I mentioned earlier. We hope that by the year-end this program could be brought to 100 billion rubles, which is in line with an obligation we assumed. So, even our intermediate results show that the program is effective in terms of funds availability and a high demand for it.

CORR: I’d like to ask you whether Vnesheconombank is implementing any projects within the BRIC countries: Brazil, Russia, India and China. Have any practical decisions been taken in this respect?

Vladimir DMITRIEV: In fact, we made a proposal to establish a consortium of development banks within the BRIC countries and signed an agreement on cooperation at a BRIC summit in Brazil with the China State Development Bank, Brazilian bank BINDES and the India Eximbank. It’s too early to talk about concrete results; nevertheless, we take advantage of our experience in cooperating with banks of Shanghai Cooperation Organization member countries. It was our initiative to establish an Interbank Consortium. We made the most significant progress on a bilateral basis.  We maintain constant and stable relations with the China State Development Bank. We are active in cooperating with the Kazakhstan Development Bank. As far as interbank cooperation is concerned in the BRIC countries, we are going to place great emphasis on developing bilateral ties. I’ve already mentioned our Chinese colleagues. We have long-time and already formalized relations with the Brazil Development Bank. We are sure to use this bank’s business experience in financing development projects in key industrial sectors. It’s not a secret that the Brazilian aviation industry developed successfully due to the Brazil Development Bank’s support. Now it’s a highly competitive industry on a global scale.

CORR: At present, the Long-Term Investors’ Club is quite a promising institution judging by the recent remarks about it. You’ve been elected to this Club’s Organizing Committee lately. What sort of institution is it? How does it help to enhance the innovation process?

Vladimir DMITRIEV: Nobody should be afraid of our participation in various international institutions. It’s not mere pro-forma participation. We view this sort of participation as an important instrument for raising foreign investments for the Russian economy. By the way, it was our initiative to join this elite institution - the Long-Term Investors’ Club. Among the initiators to establish this Club were also such prestigious institutions as KfW in Germany, and perhaps the largest development bank – the European Investment Bank, Caisse des Depots, one of the oldest financial institutions in France, it is 150 years old. They have a similar institution in Italy too. It is these four key national and international financial institutions that initiated the establishment of the Long-Term Investors’ Club. It incorporates representatives of 10 countries. For the most part, its members are development institutions including our Bank that represents Russia’s interests in this Club. This is the third international banking institution where we work together with the China State Development Bank. The Club’s main objective is for its members to join efforts to finance infrastructure projects, above all, projects in the innovation sector and this is undoubtedly an alternative to raising venture capital that to some extent brought about the global economic and financial crisis. So, this Club’s motto is to invest money in the real economy, in infrastructure projects in those sectors that could be of great interest to international investors.

CORR: We are now talking about long-term investments. Is this a promising line of business? And the most important thing is to what extent our Western partners are willing to make such investments?

Vladimir DMITRIEV: This is a very important and pressing issue because there is a lot of free money on the world financial and capital markets but it’s very important for investors to match their wishes with risks they assume and in this sense, the involvement of state banks, banks with state participation in funding projects, serves as a sort of guarantee to Western investors for the success of projects and repayment of funds.

It was for this reason that we decided to participate in implementing an ambitious but quite a realistic project aimed at building a major recreation and tourism cluster in the Northern Caucasus. The Russian President spoke at a plenary session yesterday and in fact backed this project politically. And this political backing is of great importance to Russian and foreign investors. It was not by accident that German Gref, I and foreign investors participated in the panel discussion. Foreign investors confirmed their intention to financially support this project in their letters of comfort that they gave to Akhmed Belalov. And in their conversations on the sidelines they stressed their intention to participate in the project because they are aware that it is backed by the country’s leaders and that such banks with state participation as Sberbank and Vnesheconombank will participate in the project and this is a serious guarantee for them.

CORR: Akhmed Belalov participated in our live broadcast telling about the prospects for this project. This sounds really fascinating. Thank you for answering our questions.