Exports without risk

RossiiskayaGazeta (RG)
Moscow, April 23, 2014
LidiyaZakharova

The number of financial instruments to support high-technology companies is on the rise.

Since the second half of 2013, Vnesheconombank has significantly increased its financial support for exports. For example, from the start of 2013to March of 2014, VEB has increased export financing by 3.2 times to 160 billion rubles, the amount of its loan portfolio has increased by more than 8.5 times and the guarantee portfolio – by almost three times. The Bank supported export contracts of Russian enterprises in the total amount of 728.3 billion rubles. At present, the Bank is considering several dozens of large and medium export projects, with the Bank’s expected participation share totaling more than 300 billion rubles. The Bank’s plans for 2014 are more ambitious – VEB Group hopes to increase its portfolio of export contracts to a trillion rubles. Director of Vnesheconombank’s Export Financing Department DaniilAlgulyan toldRG how they were going to achieve this goal.

Is a trillion rubles a realistic figure in the current economic situation?

DaniilAlgulyan: Of course, a lot will depend on the general economic situation both in Russia and on foreign markets. But it’s not only a matter of the number of contracts. We are seeking to substantially increase the number of exporters and export transactions being supported. At the same time, export financing geographical coverage is increasing. Nowadays, projects with our assistance are being implemented in 40 countries. Our key regions are CIS, Latin America, South-East Asia and Africa.

Last year, the national Russian industrial exports support system started to operate in full swing: it includes VEB, Roseximbank, the Export Insurance Agency of Russia (EXIAR), VEB-Leasing. Will any additional mechanisms be launched this year? It’s not a secret that demand for export support on the part of business is a lot greater than the state can provide.

DaniilAlgulyan: You’re absolutely right mentioning the export support system. As part of this system, we can offer exporters a whole range of financing instruments: from credits, guarantees, insurance to leasing structures. Being a parent company,VEB performs functions of a coordinator and a single window. VEB Group’s total export support portfolio exceeded 210 billion rubles out of which 160 billion rubles account for export credits (they are extended to foreign buyers of Russian export products) and guarantees extended by VEB itself. As a development institution, VEB participates in funding a number of major investment projects in such top-priority industrial sectors as oil and gas chemistry, smelting industry, construction materials manufacturing, timber processing, transport mechanical engineering, aviation. The portfolio of Russian export-oriented projects is more than 250 billion rubles. Here I mean funding of Russian enterprises whose products are to be exported.

We are actively involved in working on the further institutional development of the export support system and on boosting synergy from its operational components. Here I mean Reximbank, EXIAR, VEB-Leasing,transport mechanical engineering’s foreign subsidiary banks and financial companies. Our main objective is to provide Russian producers with both individual financing solutionsin implementing complex structured projects and with mass batch credit products above all in the SME sector. Now, new joint products of EXIAR and Roseximbankare being developed to support the exports of small and medium-sized enterprises.

Having joined the WTO, Russia refused all measures to financially support exports with the exception of those allowed withinOECD. As a result, in 2013 exporters were left without such type of support as subsidizing of interest rates under targeted credits. Now the process of Russia’s joining OECD has been suspended. Could export support measures be reviewed in this context?

DaniilAlgulyan: There is a whole range of government export financial support measures including certain types of subsidies that do not run counter to Russia’s international commitments and that are successfully used to support Russian exporters. In the last months alone, we have approved more than 20 credits for foreign buyers of Russia’s high-technology products with the use of such instruments. And our task is not a price damping but creating a level playing field for Russian exporters with their foreign competitors in credit financing.

How did sanctions against Russia affect export support? Did you suspend the implementation of any export projects, specifically, in Europe?

DaniilAlgulyan: The deterioration of the international situation did not stop the implementation of export projects we are working on now including those in Europe. But the main markets of Russia’s non-raw materials exports are CIS, Asia, Africa and Latin America.

In what sectors do export contracts predominate (aircraft construction, rocket-space industry, power engineering, mechanical engineering, defense industrial complex)?

DaniilAlgulyan: In the last year, our key export sectors were aircraft construction, mechanical engineering and power engineering. As far as supporting exports of Russian aircraft are concerned,we’ll continue to fund export supplies of SukhoiSuperjet 100 aircraft. We have made a decision to fund the supplies of 26 SukhoiSuperjet -100 aircraft to various airlines in Latin America and South-East Asia. In fact, a national aviation export financing competency center is being established on the basis of VEB. We are working with all segments of non-raw materials market and we can see a huge yet unrealized potential in most of them. We are actively involved in a number of projects in engine building, railway and automotive mechanical engineering and information technologies.

How is VEB going to increase the number of producers-exporters and credit transactions that it will support?

DaniilAlgulyan: Above all, we are trying to significantly boost producers’ awareness of our support system and existing financial instruments. Unfortunately, Russian producers are often unaware of the current export support opportunities. This poses a serious problem for us and shows us that we have to step up our efforts in boosting producers’ information awareness. We should hold workshops, conferences, especially in the regions, and work with mass media. Moreover, we attach much importance to offering consulting services. We are also making strenuous efforts to improve our decision-making processes. We are developing new financial products to adequately respond to Russian exporters’ needs.Over the last months, we have significantly reduced an average time of handling applications and increased the number of transactions being handled and approved. We are pursuing flexible policy with regard to projects we support andwe also fund a wide range of non-raw materials supplies the value of which ranges from several hundred thousand dollars to billions of dollars.

What new products to financially support export transactions in view of Russian exports needs will be developed in the n ear future?

DaniilAlgulyan: We are giving top priority to developing standardized products and financing programs, which will make it possible to significantly boost accessibility and efficiency of export support for Russian producers. As an example, we can give a system of framework agreements with foreign banks on target funding of Russian exports, which we are trying to create now. Such financing structures reduce the time of handling applications substantially.

Under the draft law of the Economic Development Ministry, VEB is to be given the right to extend guarantees for paying taxes for taxpayers.What should be done to exercise the right to extend guarantees for paying VAT?

DaniilAlgulyan: Now, the Russian legislation does not provide for an opportunity for VEB to extend guarantees for refunding compensated VAT in favor of tax authorities and guarantees in favorcustoms agencies. These guarantees are used by Russian taxpayers to reduce time periods to compensate for VAT from the federal budget as well as to secure their obligations on paying customs duties. We have prepared a package of amendments to the federal legislation providing for giving banks the right to issue guarantees for refunding compensated VAT and guarantees in favor of Russian customs agencies. Granting powers to issue such guarantees will make it possible to boost efficiency of the comprehensive export support system, reduce customers’ expenses and help to implement new projects needed for the Russian economy.