SCO Banks: Regional Economic Recovery Based on Digital Solutions, Trade Cooperation, and Energy

The state of the world economy, lessons learned and ways out of the economic crisis caused by the pandemic were discussed today at the SKOLKOVO Moscow School of Management by representatives of state agencies and member banks of the Interbank Consortium of the Shanghai Cooperation Organization (SCO IBC), which this year is chaired by State Development Corporation VEB.RF. The event has become the first step in implementing the anti-crisis roadmap of the SCO IBC.

Vladimir Mau, economist and Rector of RANEPA, opened the event by giving an analysis of the macroeconomic situation in which the SCO countries are compelled to act.

“Despite the differences in our economies, we face common problems: rising unemployment, falling industrial production, growing budget deficits, closing of export channels, and much more. Cooperation within the SCO should be based on the sustainable development agenda, the digital economy, and expanding cooperation in trade and energy. The volume of trade between the SCO countries is still quite low, and there is potential for growth here,” he said.

According to Vladimir Mau, Russia is doing well from a macroeconomic point of view. “This crisis is not a structural one and does not develop into a banking one. It can rather be compared to the post-war situation, that is, we are dealing with the economic consequences of events that are not economic in nature. A key challenge of post-crisis recovery of the SCO should be human and sustainable economic development within the SCO. The welfare of specific people is much more important than gross growth figures,” Vladimir Mau summed up.

VEB.RF’s Deputy Chairman Daniil Algulyan spoke about the strategy employed by VEB.RF to combat the crisis. “VEB.RF issued guarantees to 15 banks, owing to which about 30 thousand enterprises raised loans at 0%. Also, our guarantees, this time under the employment support programme, provided almost 150 thousand loans to enterprises at 2%. 38 banks have joined this programme.” According to Daniil Algulyan, in a crisis, the interest of commercial banks in cross-border transactions is falling, and it is up to the development institutions to support export-import operations. VEB.RF is actively working in this direction and is doing everything to ensure that trade flows are not affected.

VEB.RF's Deputy Chairman has named the development of infrastructure for payments in national currencies as one of the most effective measures in this direction. “In recent years, we have made great progress in trading in national currencies, and the use of yuan and rouble is growing. The Bank of Russia has developed and is actively implementing the Financial Messaging System (FMS), which our colleagues from the Uzbekistan National Bank will soon join. We are open to any suggestions in this area,” he said.

VEB.RF’s Deputy Chairperson Svetlana Yachevskaya noted that the state corporation plays an important role in the implementation of public anti-crisis measures. “Participation of VEB.RF as an agent in providing subsidies allowed us to provide timely, operational support to systemically important organisations, while VEB.RF’s analytics and monitoring made it possible to make the subsidy mechanism flexible and adapted to the needs of organisations. The mechanism for subsidising the interest rate made it possible to provide 200 billion roubles of preferential loans to organisations to replenish working capital”, VEB.RF’s Deputy Chairperson said. In addition, according to her, VEB.RF and the National PPP Development Centre have launched an anti-crisis programme to assist regions in bringing about PPP projects, which is currently in high demand among regional authorities. The programme has already received circa 270 initiatives for a total amount of 791.4 billion roubles.

Deputy Chairman of the Board of the Kazakhstan Development Bank (KDB) Duman Abubakirov said that the bank's anti-crisis strategy was based on the experience gained in 2008 and 2014-15. The crisis brought many problems: many projects that required foreign specialists onsite have been mothballed. The cost of borrowed capital has increased with high capital intensity of projects. Nevertheless, the Government of Kazakhstan and the KDB managed to save about 25 thousand jobs thanks to the timely measures taken. The bank switched to teleworking, but its performance, according to Duman Abubakirov, did not suffer.

Representative of the China Development Bank (CDB) Pan Dunmei noted that measures to support the economy in their case were concentrated around four key areas. First, countering the negative consequences of the coronavirus, including emergency financing of production and the procurement of protective equipment and medicine. Second, providing assistance to affected businesses. Third, helping companies restart after the pandemic; and fourth, protecting employees who have returned to their jobs. As part of these tasks, in 1H2020, the CDB employed various lending opportunities totalling 1.8 trillion yuan.

The conference was also attended by Director of the Strategic Development and Corporate Policy Department of the Russian Ministry of Industry and Trade Aleksey Uchenov, Director for Strategic Development of the Eurasian Development Bank Tatyana Chernikova, Deputy Head of the Eurasian Affairs Department of the PRC’s Ministry of Commerce Zhang Dong. The meeting was moderated by VEB.RF’s Chief Strategy Officer Aleksey Kechko.