VEB.RF Helps to Make over RUB1.6tn Worth of Investments in Far East Projects
According to VEB.RF Deputy Chairman Artyom Dovlatov, speaking to the session “How to Invest at the Time of Tight Money” jointly organised by VEB.RF and Sber during the Eastern Economic Forum, development institution mechanisms help to attract investment in the Far East.
According to Artyom Dovlatov, the Far East is a high priority for Russia’s development in the 21st century. It is, however, necessary to additionally incentivise investors to put money into the regions. One of these mechanisms is the concessional financing programme developed by VEB.RF in association with the Ministry for the Development of the Russian Far East and Arctic. To date, this mechanism has provided support for as many as over 40 projects totalling more than 1.6 trillion roubles.
“Priority should be given to the projects that will serve as an engine for investment and attract commercial banks. For example, the construction of power infrastructure makes it possible to create new industrial facilities. And schools and campuses increase the value of potential local housing,” said Artyom Dovlatov.
In addition to concessional financing, VEB.RF participates in carrying out projects in the Far East through the Project Financing Factory mechanism. This method for supporting investment projects makes it possible to arrange financing at interest rates below the market level. The government, represented by VEB.RF, hedges against interest rate risks, thus making projects more attractive to investors.
“More than half of all Project Financing Factory projects are under way in the Far East. At present, ten projects totalling 2.7 trillion roubles have already been approved for the region,” said Ilya Torosov, Russian First Deputy Minister of Economic Development.
Georgy Fotin, CEO, Baimskaya Management Company, noted the importance of VEB.RF mechanisms for implementing major projects in the Far East. With high interest rates, government support mechanisms, such as the Project Financing Factory, make it possible to encourage investment in capital-intensive projects with a long payback period.
“For such heavy, capital-intensive projects with a long investment cycle, the possibility of hedging against interest rate risks and securing funding at adequate rates is, of course, our top priority. Speaking of developing the Far East and the Arctic, which is mainly rather capital intensive, the use and further expansion of Project Financing Factory mechanisms is absolutely high on our list of priorities,” said Georgy Fotin.
“Thank you all for this conversation. I have drawn five main conclusions fr om our discussion,” said Alexander Vedyakhin, First Deputy Chairman of the Executive Board, Sber. “First, we should continue with and, wh ere necessary, extend the current programmes and support measures (publicly funded infrastructure loans, concessional programmes of VEB.RF and the Ministry for the Development of the Russian Far East and Arctic, and so forth), as well as expanding them by obtaining funding from banks. Second, we should correctly prioritise projects within master plans by giving preference to completing construction in progress and supporting profitable projects that will generate additional income for the regions and allow community infrastructure to be created so that investment will continue to grow. Third, Russian regions should be given more opportunity for borrowing from the market under federal supervision and using a variety of long-term bonds or public bonds issued to individuals. These can be digital financial assets with the involvement of banks, businesses, pension funds and individuals. Fourth, loans should be granted special status and allowed to be subject to lower risk-based capital requirements of the central bank and should be able to use other similar mechanisms to reduce interest rates for bank loans within the taxonomy. And fifth, we should use the advanced technological experience of contractors from friendly countries.”
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