Vnesheconombank Chairman Vladimir Dmitriev’s Interview to the Grozny Inform News Agency

Vnesheconombank Chairman Vladimir Dmitriev told journalists about projects being implemented in the North Caucasus Federal District (NCFD) specifically in the Chechen Republic

- Vladimir Alexandrovich, Vnesheconombank is actively participating in the Development of the North Caucasus, will you tell us in detail about the Bank’s activity in the region?

- In fact, VEB started to energetically support investment projects being generated in the the North Caucasus Federal District (NCFD). And in order to fulfill the task set by our country’s leadership aimed at raising large-scale investments for this region, the Bank established the North Caucasus Development Corporation. The Corporation’s main objective is to provide consulting assistance to investors for them to be able to make a balanced analysis of the economic situation in various regions, form projects and prepare appropriate documentation. All this is needed by banks to feel confident in funding investment projects. The Corporation started to operate at the end of the last year but it already has a whole number of projects in its portfolio.

We do not limit our activity in the North Caucasus Federal District to the North Caucasus Development Corporation. Vnesheconombank’s Representative Office has been operating for about a year in Pyatigorsk. The Office helped to prepare and submit to consideration by VEB documents on 7 projects with a projected amount of financing being more than 38 billion rubles. The Representative Office is working now on another 45 projects worth more than 226 billion rubles and these projects’ initiators are being provided with consulting and methodological assistance.

Moreover, our Representative Office is included in the working groups responsible for selecting top-priority investment projects on the territory of each region of the District.

Additional effective mechanisms for enhancing VEB’s cooperation with Russian regions are agreements on cooperation. Their subject-matter is to establish strategic partnership, promote long-term and effective cooperation in the investment activity. At present, Vnesheconombank have entered into such agreements with all constituent entities of the NCFD. To build on these agreements we sign protocols on cooperation in supporting public private partnership, small and medium-sized enterprises as well as agreements aimed at implementing specific investment projects in the region.

- What projects in your opinion are the most important in the North Caucasus Federal District?

- As of today, VEB has a number of serious projects in each of Caucasian republics. Out of them I’d like to single out tourist recreational business developing in line with the decisions taken by the country’s leadership. To this end, a special company, namely, the North Caucasus Resorts was established to develop major tourist centers and clusters. We started our work with discussing mountain-climatic and alpine ski resorts. One of our first projects is Arkhyz, which is generated by the Sinara Group. Vnesheconombank started to make arrangements to fund this project even before the crisis and it is now included in the list of projects to be implemented by the North Caucasus Resorts Company. The total amount of investments with regard to all resorts and the alpine ski cluster of the North Caucasus is to be 400 billion rubles plus investments in the coastland of Dagestan where we have unique opportunities to develop tourist and resort business.

In doing all this, we do not forget to develop industrial sector North Caucasus republics and we should develop and support traditional regional sectors such as agro-industrial business, light industry, manufacturing of construction materials in the Caucasus, that is, in the North Caucasus republics and in the Stavropol Territory

Another line of our Bank’s activity deals with projects aimed at supporting small and medium-sized enterprises that are very important in terms of addressing employment issues in the region. Here we are going to operate through our subsidiary SME Bank specializing in funding SMEs. In this respect, I’d like to say that last year the North Caucasus as a whole and the Chechen Republic in particular were leaders among Russian regions in terms of implementing programs of providing support for small and medium-sized enterprises.

As I have already mentioned we have a number of serious projects almost in each of Republics in the North Caucasus Federal District. Now the Chehenagroholding project is being actively implemented in the Chechen Republic. We are also involved in supporting the construction materials manufacturing sector in Kabardino-Balkaria, Dagestan and in Karachaevo-Cherkesia. As I’ve already said we started to implement the Arkhyz project. We are exploring the possibility of forming a large-scale agro-industrial cluster in the Stavropol Territory using the business experience we gained in the Rostov region where the largest Russian turkey meat production facility is being built with our participation. Now we are planning to replicate and expand these projects in other regions, specifically, in the North Caucasus.

- You’ve mentioned the project aimed at building an agro-industrial holding which is not only the first VEB’s large-scale project in the Chechen Republic but also the only large-scale federal investment project in Chechnya. How did the Bank approach the problem of high regional risks?

- While there is a certain regional risk you shouldn’t first overestimate it and second, if you don’t implement investment projects risks do not diminish for this reason. But as we must operate on a break-even basis we take up only break-even projects. And there are such projects in the Chechen Republic. We deem it necessary to support thoroughly prepared projects such as for example the Chechenagroholding project. It is a profitable project and it will create local competences and new jobs (we believe that more than a thousand and a half people will work in this agro-industrial integrated facility). This is the Bank’s most important pilot project whose initiator is the Government of the Chechen Republic. This is a very large production facility - about 20 thousand cattle heads, a poultry farm for 200 thousand birds, a meat processing factory, unique greenhouses operating on thermal springs and a whole number of other production facilities which are badly needed for developing food industry in the region.

We started to deal with this project in 2009 and hoped to receive a state guarantee. But the documentation process was so slow that the project was on the verge of collapse although the construction work had already started and some equipment had been ordered in hope of receiving funds from the Bank. So, in order not to shelve the project for a long time and not to run additional risks and having found out that the project was financially sustainable we found it possible to fund it. We had to use a favorable summer period for performing construction work. If we had failed to do it in May we would have lost a whole year.

As of today, about 2 billion rubles have been invested in the project’s implementation. All the facilities are in an active construction stage and are to be put into operation next year.

We still hope that the decisions on providing support for investment projects in the Chechen Republic and on the whole territory of the North Caucasus Federal District made at the highest government level will be carried out. Specifically, the Russian Government’s Decree on granting first state guarantees worth 42.5 billion rubles to implement 20 projects in the North Caucasus including granting a guarantee for the second stage of the project to build an agro-industrial complex in Chechnya aimed at developing winegrowing. Having entered into the agro-industrial complex construction project in Chechnya and having supported other projects not only in Chechnya but in the North Caucasus Federal district as a whole, Vnesheconombank is giving an example to commercial banks to participate in implementing projects in the region.

- Is there a possibility to implement any other projects besides Chechenagroholding in the Chechen Republic?

- Undoubtedly, it’s not the only project in the Republic. For example, at present, VEB is studying in detail the Veduchi project – an alpine ski complex in the mountains in the South of the Chechen Republic. The Bank is also conducting an expert examination of a project on building the Kazbek major construction materials manufacturing cluster. The North Caucasus Development Corporation will participate in it. The project aims to construct a complex of production facilities to manufacture advanced construction materials: aerated concrete, fiber cement plates, lime, dry construction mixes. This project is needed to provide not only the Chechen Republic but also other constituent entities of the North Caucasus Federal District with quality construction materials, given increasing rates of construction in the region. Moreover, we are cooperating with the Government of the Chechen Republic and the Grozny City Hall in reconstructing the city’s community facilities, which requires significant investments. We are going to offer schemes for investing these projects based on public private partnership. There are a lot of such examples in all other republics of the north Caucasus. I believe that state banks and above all VEB as a bank for development should create a normal investment climate and favorable conditions for raising capital for this region by leading the way in assessing risks adequately and participating in regional projects.

Origin: Official Site of the Head and the Government of the Chechen Republic