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

TV Channel Russia 24
INTERVIEW
02.02.2012, 16:28

Host Anna Shnider

HOST: We continue discussing presidential candidates’ election programs. We are talking about Vladimir Putin’s latest article devoted to economic issues. Vnesheconombank Chairman Vladimir Dmitriev is in our studio now, good afternoon Vladimir Alexandrovich. Thank you for coming.

Vladimir DMITRIEV, Vnesheconombank’s Chairman: Good afternoon.

HOST: This is an election article. There are a lot of general remarks and few specifics in it. One of the most important things is that Putin said that we should change our criminal legislation and refer economic crimes to arbitration courts. To what extent did business anticipate such a proposal?

Vladimir DMITRIEV: We have discussed this theme repeatedly at business forums and in dialogues between representatives of business and authorities. It is extremely topical and the fact that it appeared in the election article is of crucial importance and relevance to the business community. I believe that we have created necessary conditions in Russia for settling economic disputes by arbitration courts.

HOST: In this context it could be a matter of economic amnesty for people who were convicted of economic crimes?

Vladimir DMITRIEV: I wouldn’t like to comment on this concept in broad terms… Our legislation keeps up with common sense and the need to increasingly influence the investment environment and offer better opportunities for doing business in our country. In this sense, there is a sound logic in granting amnesty for a number of economic crimes.

HOST: In his article Putin writes that state should mainly rely on a presumption of business fairness and honesty. At today’s international forum he said that maybe we should introduce the post of business ombudsman. What would you say has been the weakest point in the relations between the state and business in the past years and have you seen any answers in this article about how to address this problem?

Vladimir DMITRIEV: In my opinion there are enough answers about how to address this problem in the article you mentioned. I think that this line of activity is really important for both the government and business as well as for relations between business and authorities. I wouldn’t like to talk in great detail about this kind of problems. We face them every day and everywhere. The most important things in the article and in the policy pursued by the Government and the Russian President are measures for upgrading our legislation, improving business climate as well as a continuing dialogue between authorities and business, other forms of communication, informing authorities about the needs of business. All these efforts are aimed at improving investment climate in our country.

HOST: Putin says that the state’s share in the economy should diminish in the course of time and he proposes to undertake another privatization by 2016. What are the most attractive assets for business today?

Vladimir DMITRIEV: A list of businesses to be privatized has been made public. It includes above all businesses with the state participation, that is, companies and banks. As far as foreign investors are concerned they are of course interested in the industrial sector that has good prospects for growth and in banking system’s capitalization. To my mind risks associated with the banking system are assessed pretty adequately. This is evidenced by yesterday’s successful placement of 5-year Eurobonds worth $1.5 billion by Sberbank.

We are also closing a transaction today on placing our bonds on international capital markets. From my point of view companies operating in the infrastructure sector enjoy good prospects. I am telling you this not as an outsider but as a person working directly with foreign investors through our subsidiary – the Russian Direct Investment Fund. We have good prospects for engaging foreign investors.

HOST: Do you agree with the opinion of some economists that in the coming years sales of state corporations’ assets are disadvantageous for the state, with a second wave of the global economic crisis looming?

Vladimir DMITRIEV: To my mind, it’s important here to balance the state’s interests in generating budget revenues on the one hand and ensuring efficient governance on the other hand. Privatization for the sake of privatization does not always result in increased budget revenues. In the current economic situation when many assets are underestimated it may not make sense to put them on the market and engage foreign investors in order to simply declare that we have a favorable investment climate and investors are coming to our country. So, ongoing discussions demonstrate that we should undertake privatization only when it is advantageous from all points of view.

HOST: Putin talks much about innovations and places special emphasis on developing university and research centers. What should the state do in the near future to encourage innovations and investments in the development of academic research centers?

Vladimir DMITRIEV: In my opinion the article articulates clearly basic lines of government policy on supporting innovation activities undertaken by Russian higher education institutions. The article focuses on tax exemptions, administrative measures for encouraging business activity and commercializing scientific developments. In this respect a lot is already being done. Here we mean the technological university at Skolkovo. Skolkovo itself is also a very serious breakthrough investment and innovation project in our country. I am also telling you this not as an outsider but as the Head of the Bank which is a shareholder in a non- profit partnership with Skolkovo and an initiator of establishing the Skolkovo Innovation Foundation. The Foundation is designed to commercialize innovation activities at Skolkovo.

In this respect, I think that both Russian banks and special institutions set up to support small and medium-sized enterprises in the innovation sector can play a very important role. We are enjoying the state’s support and I believe we are moving in the right direction.

HOST: Do you thing that long money will appear in Russia in the coming years?

Vladimir DMITRIEV: We already have long money now. The main thing is to put the money to good use. Here I mean pension savings funds. Vladimir Putin mentioned them in his article. The funds are not always used to finance specific economic projects. I’m telling you this as the Head of the Bank for Development which is also the state management company. We are responsible for managing more than 1.3 trillion rubles in pension funded portion funds included in our extended investment portfolio. Only a small part of these funds are used to finance the economy. These funds are invested either in bonds guaranteed by the state or in corporate bonds of first-class borrowers. I believe we can increase these financial resources manyfold if the state is ready to grant guarantees for innovation projects which carry increased risks. I don’t think that it makes sense to grant guarantees for the construction of a cement plant that is a project that can be paid back. If it can’t be paid back there is no sense for a bank financing it. But if we talk about funding major projects of national significance in the innovation sector, these projects must be guaranteed by the state and pension savings funds might be invested in them.

HOST: Does this mean that the government is likely to take some concrete steps in the coming months?

Vladimir DMITRIEV: I think that in this respect right decisions have been made. Lately, I have participated in the meetings conducted by the Prime Minister in Kemerovo and Tikhvin. The other day we were in Tambov. Everywhere we discussed an issue of raising long money inside the country. For example, the Finance Ministry planned to float 10-year bonds worth 30-40 billion rubles; but there was an oversubscription in the amount of 160 billion rubles. This demonstrates that we have long money in our country. So, it has to be used. I can’t help giving you official figures on the use of the National Wealth Fund and the National Reserve Fund. The Reserve Fund’s yield for the last year was 1.5% and the National Wealth Fund’s yield was 2.5%. The highest yield was shown by the money of the National Wealth Fund placed on Vnesheconombank’s deposits at an interest rate of 6.5%. It must be borne in mind that we extended these deposits in the form of subordinated credits to Russia banks which were to use these funds under the agreements signed for funding the Russian economy. So, we can use the National Wealth Fund within, of course, reasonable limits and without opening the Pandora box for funding long-term projects.

HOST: A widely discussed issue is a tax on luxury that Putin offered to introduce. How do you feel about it? Discussions are mainly focusing on who is supposed to determine what luxury really means and on how to determine it.

Vladimir DMITRIEV: I find it difficult to answer your last question about a definition of luxury. In this respect there are expert opinions and international practices and I don’t think that we’ll have to invent the wheel. This measure might be efficient of course if it is administered in the right way and here I mean without any exceptions and exemptions from legislation. But in terms of social justice it’s up to the government to equalize budget revenues between high-paid and low-paid people. We have a huge income gap in Russia. The income gap between the poorest 10% and the richest 10% is gigantic and sometimes it is higher than in countries with developing economies.

HOST: Aren’t we going to get stuck on the very same global problem that Putin also mentioned, that is, systemic corruption?

Vladimir DMITRIEV: I’d like to say it once more that we’ll be able to change legislation, in particular tax legislation and address other problems through proper administration and flawlessly functioning law enforcement system.

HOST: Vladimir Alexandrovich, thank you very much for your comments.

Vladimir DMITRIEV: Thank you.