On 2 October 2014 the President of the Russian Federation Vladimir Putin took part in the VI Russia Calling! Investment Forum organised by VTB Capital.
The discussion at the Forum is focusing on attracting international investors to the Russian markets and increasing investment in the Russian economy in view of the current international situation and the sanctions imposed against Russia.
VTB Capital, the investment business of VTB Group, has taken part in over 500 deals on debt and share capital markets since its creation in 2008. This helped attract over $200 billion worth of investment in the economy of Russia and the CIS.
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PRESIDENT OF RUSSIA VLADIMIR PUTIN: Good afternoon, ladies and gentlemen, friends,
I am happy to welcome yet again all the participants and guests of the VTB Capital Russia Calling! Investment Forum. Traditionally the event brings together business community representatives from different countries, as well as heads of investment funds and global companies. Many of you are actually working in Russia and you have a good idea of the opportunities and long-term prospects for work in this country. We, naturally, appreciate your determination to have a comprehensive sincere dialogue and to cooperate constructively – regardless of the current political and economic situation.
As you may know, the first forum was held in 2009, when we all experienced the consequences of the global economic crisis. This, however, did not stop us from making joint plans for the future. Many of those plans have been successfully implemented, have turned into business projects because we trust each other and work together as partners. I would like to stress that many serious investors and our country’s partners of long standing continue increasing their investment in various sectors of the Russian economy.
Ladies and gentlemen, we share the principles of the WTO, however, unlike certain founding fathers of this organisation, we have always strived to have Russia develop as an open market economy, and will continue to do so. This strategic course remains unchanged.
We will gradually overcome the challenges facing Russia. External limitations have an adverse effect not only on Russia’s economy, but also on that of the whole world. They only add to our determination to meet our targets in the priority areas of our country’s development, which include economic growth, upgrading the industry and infrastructure, the creation of new jobs and improvement of the quality of life of Russia’s citizens.
True, the conditions have become more complicated, but, as I have already said, this stimulates us to concentrate our resources and choose the best solutions, to achieve our goals in the shortest possible time and to work more efficiently in all areas.
As before, our actions will be based on a responsible and balanced macroeconomic and budget policy. The events of this year have convinced us yet again that the choice we made many years ago is the right one.
Despite the complicated external situation, in the first eight months of the year the federal budget showed a net surplus of over 900 billion rubles, which accounts for 2 percent of the GDP. This is two times more than in the same period last year. At the same time, we adhere to the budget rule and allocate part of the oil and gas revenue to reserve funds, which have grown to exceed 9 percent of Russia’s GDP.
As for inflation, by the end of the year it will be around 7.5-7.6, about 8 percent, which is higher than last year (it was 6.5 percent in 2013). The reason is obvious: the growing prices of certain foods. Incidentally, as you may understand, this is an additional stimulus for us to develop our agriculture. I would like to note here that monetary inflation does not exceed the planned figure of 5 percent.
The Federal Budget for 2015 and the 2016-2017 Budget Plan, which the Government has submitted to the State Duma, envisages a rather limited deficit of 0.5-0.6 percent of the GDP with oil prices averaging $96 a barrel. These are stable basic parameters, which will make it possible to strictly comply with all our budget commitments, including those in the social sphere.
I would like to stress that despite the difficulties, we did not increase the tax burden on businesses. As you may know (we did not conceal these discussions going on among the country’s leaders and within the Government) that we did not follow the path of increasing the tax burden and do not intend to introduce any limitations dealing with hard currency or capital movement. I hope this has already been mentioned today.
True, we are observing significant fluctuations on the currency market. All sorts of comments are being made, but I would like to stress the most important thing here: the fundamental factors that ensure our stability are very strong and reliable. These are a practically deficit-free budget, significant reserves and a strong balance of payments. Thus, the net balance of current operations has turned out higher than we expected.
I would also like to note that the Bank of Russia has enough instruments to maintain financial stability. I would like to add here that the move by the Bank of Russia to a floating exchange rate does not mean there will be no more exchange market interventions. You actually witnessed this only recently.
Besides, we deem it necessary to safeguard ourselves from possible risks in some of the most sensitive areas. We will create an additional safety margin, primarily in the financial sphere.
We have already created mechanisms that make it possible to make payments on the territory of the Russian Federation using plastic cards of the leading payment systems even when Russian banks are disconnected from these systems.
In 2015, we will create a national plastic card system with an infrastructure that will be independent from international systems: a single operations centre and its own payment instruments. It will guarantee the security and confidentiality of payments made by Russian citizens.
Next. We will continue to adhere to the declared course for the expansion and diversification of foreign economic ties. Among our priorities is greater business, trade, investment and technological partnership with Latin America, the Asia-Pacific region and our colleagues within BRICS, including China and India, naturally.
As you may know, during my May visit to Beijing, we signed a big package of Russian-Chinese economic agreements worth tens of billions of dollars. Among them is a 30-year contract for the supply of Russian gas to China.
The creation of the infrastructure necessary for its implementation will become one of the largest construction projects in the world. This is, of course, not only about energy cooperation – we intend to work in other areas as well.
I would like to add that only recently Gazprom made the first trial supply of oil for rubles. Further, we intend to actively use our national currencies in our trade in energy resources and in other foreign economic transactions with both China and other countries. As you may know, corresponding mechanisms have been created within BRICS as well.
We see the use of national currencies as a serious mechanism for reducing risks, creating opportunities for participants in economic activities and, of course, great prospects for promoting regional integration. I would like to remind you that the agreement to set up the Eurasian Union comes into effect on January 1, 2015, which creates a 170-million strong market with a free movement of goods, services and capital. This project can be of noticeable benefit for both national companies and foreign investors.
I would like to remind you, colleagues, that Russia is a member of the WTO, while Kazakhstan and Belarus are not. However, the principles that we are building the Eurasian Union on are in full compliance with the WTO rules and principles. Therefore, I believe it will be easier for our foreign partners to operate on this joint market as well.
We are currently completing the process of Armenia’s accession to the Eurasian Economic Union, and we are actively negotiating with Kyrgyzstan. I am certain that gradually the number of this union’s members will grow. At the same time, we would like the Eurasian Economic Union to establish close ties with other integration structures both in Europe and Asia. Such cooperation would add stability to the global economy. This kind of dialogue is especially important for the European Union, which is our leading trade partner.
Ladies and gentlemen,
Alongside the development of foreign trade, stimulating export, and participating in integration projects we intend to make full use of one of Russia’s competitive edges – its receptive home market. In volume, it ranks sixth in the world. Our goal in the next few years is to make an industrial breakthrough, and to create powerful national processing companies capable of producing competitive goods.
I would like to note that many regions of Russia are already demonstrating good results in developing the processing industry. In some regions, industrial growth rates in the first eight months of the year exceeded 10 percent. Ever more regions of Russia are coming up with interesting and profitable investment projects. This growth reached 11 percent in Kursk and Voronezh regions, 12 percent in Tyumen and Vladimir regions and Perm Territory, 16 percent in Mordovia and Tula Region, and 16.6 in Orenburg Region.
National agriculture and the foods industry have good prospects as well. I am certain that Russia will enhance its status as one of the world grain export leaders, especially given the record crop forecast for this year. We expect Russian entrepreneurs to significantly expand agricultural production in those sectors where we still depend on imports and to strengthen their position on the world market by supplying high value-added agricultural produce.
I would like to separately mention machine building, machine tool and instrument making. The current situation creates a powerful stimulus for intensifying research in all areas where we have excessive technological dependence on our foreign partners. This primarily applies to critical technologies that we import – for now.
Projects in industry and agriculture will get access to loans at a low interest rate by means of project-financing instruments. Many of you here are probably wondering now where these low rates and long-term loans are. I assure you, we are constantly working on it, certain instruments are being proposed, and it is only a matter of their efficient implementation. Project financing that I mentioned can also be one such long-term instrument. The issue is in the projects that should be interesting, promising and efficient.
Besides, in 2015 we will also launch an industrial development fund. To modernize the economy and infrastructure we intend to both use our own financial resources and sources of funding and step up our cooperation with investment funds and banks in other countries. Serious financial institutions are not losing trust in Russia; this is obvious from the work of the Russian Direct Investment Fund: it has already attracted some $15 billion into joint investment projects and platforms.
The draft budget for the next three years envisages recapitalization of the Russian Direct Investment Fund. The Fund’s resources will be replenished in 2016-2017. I would like to say that the Fund has to be recapitalized to the planned level, as this will allow it to expand the range of projects.
We also intend to replenish Vnesheconombank’s resources. Starting this year, we will allocate over 30 billion rubles to its registered capital – the resources have been set aside. To retain the scale of the bank’s participation in the national economy it will have the required volume of liquidity.
Besides, the state is ready to support those sectors and companies that had to deal with the unjustified external sanctions. Among other things, we will assist them in increasing their capital; I am referring mainly to financial institutions now.
Next, we will propose systematic measures to improve the business climate in Russia. Together with the business community we have already made serious amendments to the legal framework at both federal and regional level, removed many barriers and optimised administrative procedures. The assessment given by international institutions confirms our obvious progress here. However, I would like to reiterate that it is not the rating that matters – of principal importance is how comfortable an investor feels in specific regions of the Russian Federation.
I expect that at its autumn and spring sessions the State Duma, the parliament will approve the remaining draft laws within the framework of the national entrepreneurial initiative to improve the business climate. I would like to use this opportunity to ask the deputies to consider the drafts constructively and without delay. Some 30 draft laws of the total 100 are still being drafted by the relevant agencies. In other words, a lot of work is being done, and more remains to be done, but we will deal with this on a regular basis.
The work of regulating and supervisory bodies is becoming more open and transparent. There are still quite a few issues here, however there have been some positive developments. A single federal web portal on business activity inspections is almost ready. Entrepreneurs and society in general will get access to information on what inspection authority initiated an inspection and for what purpose, and, most importantly, will be able to see the results.
I would like to stress that we are working with businesses as partners: not a single decision involving the business community is made without the participation of the leading business unions and organisations of Russia. Besides, the businessmen themselves constantly control the actual implementation of our resolutions. Results of such inspections are made available to the Presidential Executive Office and the Government of the Russian Federation.
A national investment climate rating in Russia’s regions is compiled based on entrepreneurs’ opinions. This helps us find and spread the most efficient methods of creating a favourable business climate and environment. I would like to add that competition between regional management practices would stimulate regions of the Russian Federation to create better conditions for investors. Eventually, this would lead to the dynamic development of the entire country.
Colleagues, we are persistently moving towards our goals, we are sincere in our desire to build a strong, prosperous, free country open to the world at large. I count on our joint efforts towards this end.
Thank you for your attention.