Vnesheconombank Chairman Vladimir Dmitriev’s Interview to the TV Channel Russia 24

TV Channel Russia 24
19.09.2011, 16:47

HOST: An Investment Forum is underway in Sochi today. Our raod show studio is operating there and my colleague Alexander Kareevsky plays the master in it.

CORR: In fact we are in Sochi now. A plenary session has just finished and we are commenting on it and all other things at the Forum. Our guest today is Vnesheconombank Chairman Vladimir Dmitriev, good afternoon Vladimir Alexandrovich.

Vladimir DMITRIEV, Vnesheconombank Chairman: Good afternoon.

HOST: A plenary session has just finished. A lot has been said about the macroeconomic situation in Russia.In general it isn’t bad. But there are now a lot of problems in Europe, in America, in industrialized countries. There is a threat of recession. How would you as a banker size up the situation? Is everything as terrible as the media says?

Vladimir DMITRIEV, Vnesheconombank Chairman: In fact, the situation you are now talking about is not a creation of media, it is a reality we have to reckon with – a reality we are living in, it’s a reality we went through during the latest crisis that influenced the economic situation in Russia. Nevertheless, I believe that Russia’s safety margin is great both in terms of its gold and foreign currency reserves and in terms of its macroeconomic indicators: it’s budget deficit, and according to the prime minister this year’s budget is most likely to be deficit free, it’s an unprecedentedly low inflation rate, it’s the best among the largest countries, the largest economies debt-to-GDP ratio – less than 10% of foreign debt, in other countries debts are sometimes twice as much as gross national product. All this is pretty optimistic.

HOST: According to Mr. Putin this time we haven’t suffered a double blow, so we are already prepared. You are well aware of the situation in the banking sector. I’ve got the following question: Are our banks better prepared for the situation than they were in 2008; here I mean their financial standing?

Vladimir DMITRIEV: I think that our banks and Russian corporations have learnt serious lessons from the previous crisis. And it should be noted that the state showed serious political will and readiness to provide support for the banking sector and corporations and in this sense the instruments that were used during the crisis, Lord forbid, of course, could be mobilized if the situation worsens. The more so, this summer the state took measures to activate budget auctions – the Central Bank’s potential. And as opposed to 2008-2009 when Russian corporation and banks were hit hard by the crisis on the international markets due to their short-term debt burden, at present these debts have been restructured. And so we can say that our banking system is now better prepared for a serious financial turmoil.

HOST: We’ll hope that there will be no serious crisis. So far, the old crisis might not have ended. But life is going on, although they said at the plenary session that in such times investors prefer to keep a low profile wait for better times. You are not waiting. Your corporation is a development institution. And as far as I know you are now changing your strategy. What do you want, what doesn’t suit you, what prevents you from participating in modernizing the Russian economy? How is the Bank going to look like in the coming years?

Vladimir DMITRIEV: At present, nothing prevents us from participating actively in modernizing the Russian economy, in implementing projects of national significance. These are the goals of our new strategy because the pre-crisis strategy was seriously reviewed as the crisis changed our strategic approaches. But at the moment, we are moving back at a new qualitatively new level to a strategy we failed to implement because of the crisis. So you know we were burdened with the tasks of taking crisis management measures. Now we are focusing on serious, breakthrough projects in terms of investments in infrastructure, in large scale enterprises operating in sectors we give high priority to. And of course we are placing increased emphasis on innovations and modernization. Innovation projects will account for several percent of our loan portfolio. I’ve already said that our traditional lines of activity are to provide support for small and medium-sized enterprises and industrial exports. The more so, an Export Credit and Investment Insurance Agency has been established as our subsidiary institution. All these mechanisms allow us to realize the Bank’s potential set forth in the Law on the Bank for Development and in the Memorandum on our Financial Policies.

HOST: You’ve said recently that VEB will not be funded from the budget. What’s the reason for it? Why is the Bank determined not to be funded by the state?

Vladimir DMTRIEV: In fact, we needed budget sources in order to launch the Bank for Development. And with our own funds worth 30 billion rubles in 2007 when the Bank was being established it was impossible to imagine that we could operate on a large-scale as a development institution. So, in that period we needed budgetary funds. We also needed them during the crisis to take crisis management measures and by the way to fund a whole number of projects. We should keep in mind that lending to the Olympic facilities at lower than market rates was possible through using the capital formed from budgetary funds. We now understand well that given the current budget limitations, when a lot of government socially oriented measures are being taken, we would be ashamed to ask for budgetary funds. The more so, we are operating actively on the market and our credit rating equal to a sovereign one allows us to raise inexpensive and long-term credit resources both in Russian and abroad and this is a main source to fund our credit transactions.

HOST: It is known that because of the crisis VEB became an active participant in the stock market. You’ve already mentioned that you have large stakes of shares and that you’ve sold some of them. Are you going to change your strategy on the stock market? Are you going to sell the remaining assets or purchase more stakes if market conditions worsen? And how would you assess your activity on the stock market?

Vladimir DMITRIEV: Our activity on the stock market will remain unchanged. Our Bank is a traditional stock market participant and in terms of some instruments is a market maker. Our policy and day-to-day activity on the stock market is set forth in our regulations on liquidity management. We have certain limits established by our Supervisory Board. So, there will be no serious changes in our policy and in our approach to various stock market instruments. We are pursuing a pretty conservative policy staying away from speculative trading and risky instruments. We normally or even exclusively deal with debt instruments of serious players – with blue chips and this allows us to manage liquidity and conduct transactions on an break-even basis.

HOST: Let’s come back to the Krasnodar region, to the real economy in general. Your major projects are in the real economy which is often not attractive for a usual investor or it needs a partner like you. To my best knowledge you signed quite a few new agreements at the Forum. Would you tell us about them?

Vladimir DMITRIEV: First of all a few words about the Krasnodar region. Our activity here is above all related to the preparations for the 2014 Olympics. The total value of Olympic projects funded by Vnesheconombank is 150 billion rubles and Vnesheconombank’s participation share is more than 90 billion and even close to 100 billion rubles. This is infrastructure, the Sochi airport, thermal power stations and such Olympic facilities as hotels, the Olympic village, an alpine skiing cluster, ski jumping facilities and etc. And most of our today’s agreements deal with the North Caucasus Federal District. We signed an agreement with RZHD on providing investment consulting services on modernizing a whole range of railway stations. In fact, it’s a part of a huge project we are now implementing with OJSC Russian Railways. We also signed an agreement on investment consulting services on the projects being implemented on the principles of public private partnership with Ingushetia, North Ossetia-Alania, with Kabardino-Balkaria.

HOST: Are there large-scale projects in Chechnya?

Vladimir DMITRIEV: By the way, I was in Chechnya yesterday. We inspected the projects funded by Vnesheconombank. We were very happy about investors’ efficient and rapid performance. We visited Chechen agro holding’s facilities where large-scale poultry, livestock and greenhouse production facilities are being built. We are signing an agreement with the Chechen Republic on funding a large cluster to manufacture construction materials. Today, we are also signing a credit agreement on funding the first startup complex of the Arkhyz alpine resort in Karachaevo-Cherkessia and a whole number of other agreements including the one we have signed today. This is a large credit agreement worth more than 70 billion rubles on creating automobile production plant Ford-Sollers. We had a memorandum but now we have gone beyond specific agreements on funding this project. These are three large production facilities in Vsevolozhsk, Elabuga, Naberezhnye Chelny where 350 thousands automobiles will be manufactures per year with a target level of localization of at least 60% including manufacturing of power units This is a serious, breakthrough project in the automobile industry. Traditionally, a forum in Sochi is a place where we start and in a year’s time inform each other on projects progress .

HOST: Thank you for answering our questions Vladimir  Alexandrovich Good luck to you in your work.

Vladimir DMITRIEV: Thank you.