In Order to Expand Russia’s Presence in APEC Markets We Need to Develop our Country’s Asian Part

Vnesheconombank Chairman Vladimir Dmitriev told Interfax about how VEB would be represented at the APEC 2012 Summit and what sort of agreement they planned to conclude

Moscow. August 28. INTERFAX.RU – Vnesheconombank acts as one of the APEC 2012 Summit’s organizers. The Summit is to be held in September in Vladivostok. On the threshold of the Summit Interfax asked VEB Chairman Vladimir Dmitriev several questions.

- How is VEB represented in the APEC space and what are the Bank’s further plans?

- VEB is implementing a whole range of projects with our partners from APEC countries. I believe that the Summit will become an important stage in expanding such cooperation.

At present, VEB is involved in implementing 17 investment projects with the participation of financial institutions and companies from APEC countries (Japan, China, South Korea, the US) whose total value exceeds $11 billion.

VEB’s objective as a bank for development is to boost Russia’s economy competitive edge, diversify it and encourage investment activity. We give high priority above all to implementing projects in Russia. These projects are aimed at developing infrastructure, innovations, special economic zones and environmental protection.

VEB has a high international standing, many development institutions from APEC member countries are our partners.

One of new mechanisms for co-investing is the Russian Direct Investment Fund (the RDIF) – VEB’s subsidiary. The Fund is designed to implement major investment projects together with foreign investors including those from APEC countries.

Last October, the RDIF and the China Investment Corporation (a sovereign welfare fund) with assets worth $410 billion) signed a memorandum of intent to establish a Russian-Chinese Investment Fund. The Fund is being established to make direct investments primarily on Russia’s territory and encourage economic development of constituent entities including regions of the Far East and the Baikal Territory. The Fund’s capital is to amount to $3-4 billion.

The recently established Agency – EXIAR gives high priority to the Asia-Pacific region. Even now, the region’s countries account for a significant share of total insurance obligations assumed by the Agency, and two of the first EXIAR’s transactions to insure the supply of Russian-made products were conducted with APEC member countries, that is, China and Vietnam.

- Russia’s role in APEC markets hasn’t been so far in line with its potential. What should be done to reverse the situation?

- A key factor in expanding Russia’s presence in APEC countries is an economic development of our country’s Asian part, above all, the Far East, the Baikal Territory and entire Siberia. Development of Siberian and Far Eastern transport-logistics infrastructure would help to increase Russia’s trade turnover with the APEC and raise additional foreign investments.

The region has a huge potential for creating clusters of economic development: substantial mineral resources, a large variety of bio resources, highly qualified personnel, the tourist and recreational potential. At the same time, despite its huge potential a task of this macro region’s development has not been accomplished. There are several objective obstacles: extreme nature and climate conditions, remoteness and poor accessibility of territories, non-developed infrastructure, multi-sectoral nature of industrial production, specific conditions of farming and sparse population settlement. Traditional nature management of Northern indigenous peoples is the basis of their life and their lifestyle.

VEB takes an active part in the development of territories. Even now, the total value of projects in which the Bank participates on the territory of the Far East Federal District exceeds 93 billion rubles and the amount of VEB’s investments is more than 57 billion rubles. The Bank implements projects in transport infrastructure, aircraft construction, petrochemical industry, timber processing and tourism.

To address main objectives of the macro region’s development we create a specialized development institution – OJSC the Far East and the Baikal Region Development Fund. As of today, the Fund has performed work on analyzing and systematizing investment initiatives of all 12 regions and made a preliminary list of investment projects.

By 2015, VEB’s loan portfolio with regard to projects with the Fund’s participation might grow to 70 billion rubles and this will result in forming and supporting projects by the Bank for a total amount of more than 350 billion rubles.

Territorial-production complexes are the only type of investment projects that can ensure development through using non-budgetary sources. In order to implement this approach we need appropriate political decisions.

It’s important to avoid a one-sided approach when high priority is given to the export of resources. We focus on projects aimed at creating export-oriented production facilities with a high level of processing and a significant proportion of value added. In the future, such production facilities might receive support from the Export Insurance Agency of Russia (EXIAR).

- Might the APEC become an instrument for transforming the region’s countries’ growing economic role into a political one?

- Since its inception the APEC has regarded itself as a free “aggregate of economies” rather than a politically well-consolidated group. This means that the organization gives high priority to economic rather than political issues. The organization’s long-term objective is to deepen intraregional relations through eliminating obstacles in trade-investment and technological interaction. Successful economic development and integration of APEC countries is sure to increase their influence on the world’s economic agenda. This is a natural process and there is no need to speed it up.

In terms of its geographical coverage and presidential format an APEC summit is the most representative and unparalleled business forum in the Asia-Pacific region where the world’s experts hold a multilateral dialogue and cooperate on key issues of trade, investments, economic and technical cooperation as we’ll on topical world problems and challenges.

Despite a mosaic nature of the APEC as an organization comprised of countries with incompatible levels of economic development and political systems it is a pretty homogeneous institution in terms of interests and development vector. Regionalization acts as a common denominator implying that high priority is given to intraregional cooperation and integration and to creating zones of free trade. This guarantees a strong consensus of opinion within the establishment of APEC member countries on key issues of intraregional trade and investment interaction as well as the world’s economic agenda. An APEC business summit has factually become a mechanism for drawing up regional rules on carrying on trade and undertaking investment activity and for formulating unified principles of doing business binding to all countries.

From the outset, one of APEC’s operating principles was to reach consensus through consultations. Success stories of neighbors act as powerful incentives.

- What agreements does Vnesheconombank Group plan to conclude in the course of the APEC 2012 Business Summit?

- On September 7, we plan to conclude an agreement with the Primorsky Territory Administration. This agreement provides for long-term cooperation in investment activity. We are to cooperate with the region in making arrangements for financing investment projects including those on PPP terms, work out schemes for their financing, participate in preparing project opinions and in raising funds to provide support for small and medium-sized enterprises. Currently VEB is already funding three investment projects in the region for an amount of 12.7 billion rubles (Vnesheconombank’s participation share is 7.6 billion rubles).

Moreover, our subsidiary bank – SME Bank plans to sign a memorandum of understanding with SME Bank Malaysia and with the Indonesian SME Development Ministry.