Vnesheconombank Deputy Chairman I.V. Makieva’s Interview to Regnum News Agency

In the course of the Petersburg International Economic Forum -2015 Vnesheconombank Deputy Chairman Irina Makievatold about how Russia’s Mono-Cities Development Fund operates.

Corr: Irina Vladimirovna, recently the list of Russia’s mono-cities has undergone some changes; the Government issued a new executive order, the list’s structure changed.Quite how?

Irina Makieva: In accordance with the package of measures for boosting mono-cities’ investment appeal approved by the Russian Prime Minister, the Russian Economic Development Ministry together with the Working Group on Modernizing Mono-Cities under the Governmental Commission on Economic Development and Integration is to review at least once a year the list of Russian mono-cities by upgrading (if necessary) all its categories. Every year the situation changes – some cities improve their situation, the others worsen it. Each year we have to check what sectors are feeling worse than others. For example, the automotive industry is now feeling worse and the aluminum industry is feeling a bit better.The same is done with regard to mono-cities of relevant profiles. Therefore cities with such basic sectors as automotive or mechanical engineering industries replenish the “red zone”. After the latest review of the mono-cities’ list the “red zone” numbers 94 cities (earlier there were 75 cities). 68 cities are ready to move forward cooperating with the Mono-Cities Development Fund.

Corr: Out of 94 cities 68 are ready to move forward. The remaining 26 can be diagnosed for being more dead than alive.

Irina Makieva: No, of course. There are cities that do not want to work. They believe that everything is fine if people can find jobs on their own in the nearest population centers. In the course of our work we saw that there are territories that do not give any proposals for improving their situation. We continue to work with them, monitor the situation, hold videoconferences, trying to understand the situation which is developing there. If we see that a great number of people working at a city-forming enterprises might be laid off , we work with it in a special way. For example, two weeks ago we held a conference devoted to NaberzhnyeChelny. We are working on a proactive basisforecasting a situation 6-8 months in advance – sometimes with cities that are not included in the ”red zone” but where risks are quite high. We start working even if workers have not been given notice of dismissalbut there is a forecast of the negative development of situation.

Corr: Nevertheless, you say that there are cities that do not want to work. What does this mean? As a rule administrations of cities meet representatives of VEB and the Monocities Development Fund with prepared lists of residents and tasks which need the state’s support. It’s quite obvious that they are interested in this support.

Irina Makieva: But before starting a business tripwe work very hard and meticulously, we hold dozens of meetings of our working group in order to find investors because there are territories that do not offer much or they propose business fantasies or business ideas.

For regional businessmen to move from business ideas to business plans we have to perform pretty meticulous, methodical and routine work whichremains invisible. But there are territories that are not ready for this work. For example in the city of Nadvoitsy (the Republic of Karelia) a very grave situation developed. We have been working with them for a year and a half. We find it extremely difficult to find investors. Local business is very passive. They believe that if someone will be the first to come from outside, they will see and might think and decide if they should expand their own business.And we have to work longer and talk more harshly with such cities as Nadvoitsy than with others because it is in thesedifficult, slow starting territories we need to create jobs. We understand this and administrations understand this too, but business does not trust anybody. And we hold not only visiting conferences on such territories but also business forums unseen for such territories in the past. We bring people from the whole country to these territories – the best managers of Tatarstan, Siberia, the best practical experts from across the country. And these businessmen tell them how they started their businesses and how they achieve their goals. Unfortunately, we haven’t achieved tangible results so far. But we’ll go on working until we can persuade people that they should work where they live and do their best.

Corr: And for the time being, these slow starting territories are just waiting for the state to provide them with non-reimbursable money and that would be the endof everything?

Irina Makieva: Territories vary a lot. There are territories that try to work with people, work with local big and medium-sized businesses, and prepare documentation. But there are also territories that adopt a wait-and-see attitude – we’ve got money but it might run short. And we might have to make too much effort. So, we above all support those difficult territories where business seeks to develop and people living in the city want to make changes andan administration makes strenuous efforts to transform a depressive situation into a stable one.

Corr: The list of “redzone”cities is increasing. Has any city you’ve started to work with moved from a “red zone”into a “yellow one”?

Irina Makieva:Not yet. Decisions were made to commit money to several cities but so far tenders are being held for selecting contractorsto build water-pipe lines,boiler stations, sewage treatment facilities. This is a legal procedure making it possible to make projects less expensive. Investment projects are waiting for construction projects to start in order to begin developing facilities at these sites. The first decisions on committing funds have been made with regard to two most problematic cities of the Kemerovo region: Yurga and Anzhero-Sudzhensk. A decision on Kanashwas made two and a half weeks ago, a decision on Krasnoturinsk –was made a week ago. A decision on Kameshkovohasn’t been made yet - documentation and investors are being examined. We are planning to visit another five cities in August-September.

Corr: In one of your interviews, you said you worked with territories in a manual regime and that it would make sense to set up a universal office to process “red zone” projects. Does it mean that cities are often passive?

Irina Makieva: There is no doubt that above all we select cities that have design estimation documentation. Butthere arecities that can be described as scroungersand they believe that if they got in the “red zone” everything should be done for them by someone else. But the Mono-Cities Development Fund is not authorized to work instead of them. An algorithm is as follows: you got in the “red zone”, you developed a comprehensive investment plan. This plan includes a manpower balance sheet, a state of small and medium-sized business, education. This a small and easy to understand document. You develop documentation, you find an investor, you come to our working group. We take two pages from this document and one table which is called manpower balance sheetand itincludes information about possible layoffs at a system-forming enterprise and a potential of investment projects, that is, dynamics of a possible smooth transfer of workers from one enterprise to another without any interruption and a sharp growth in unemployment. We can see all emerging problems from these documents. We ask cities to develop documentation… Andthey respond: And what if you’ll deceive us? We’ll spend money and you won’t support us? We can’t yield to this sort of blackmail. We tell them to have a try. If you do this,we’ll go further with you. The Monocities Development Fund shouldn’t do this work instead of territories, it’s not its responsibility. This a region’s responsibility if it wants to move further it should do something. We can assist in searching for investors, we can enter into companies’ capital, we can help with money, we can help to train managerial teams that will be in charge of business processes on the territory but we won’t work instead of regions.

Corr: You spoke about small and medium-sized enterprises at the Petersburg International economic Forum. Is it true that demand for small and medium-sized enterprises in mono-cities has increased now?

IrinaMakieva:To be more exact, the demand for credit facilities increased. It is associated with the fact that SME Bank Management Board Chairman Sergei Kryukov is a member of the working group on mono-cities, he always travels with us and see this problem from inside. Sometimes SME Bank tackles a problem on a turn-key basis, that is, provides preferential credit facilities to all businessmen of the city on equal terms. Sometimes representatives of small and medium-sized enterprises become residents on the territory of a business park. They come to us and say that banks are ready to extend credits to them at an interest rate of 30 percent. Being aware that cooperation with mono-cities is one of its priorities, SME Bank increases partner banks’ limits and then an interest rate for small and medium-sized enterprises in these cities reduces from 30 to 13 percent and money is provided for a tenure of five years rather than a year. That is, this money becomes long-term and inexpensive and this contributes to the development of small and medium-sized enterprises

As earlier reported by Regnum News Agency, on November 11, 2014, Russian Prime Minister signed an executive order to provide the Monocities Development Fund with a subsidy from the federal budget worth 3 billion rubles and another 26.6 billion rubles are scheduled to be received by the Fund in 2015-2017, this document also specified the rules for providing the Fund with this subsidy which will make it possible to start work as soon as possible.