New Investment Policy Mechanisms: Engines of Growth



New Investment Policy Mechanisms: Engines of Growth

New Investment Policy Mechanisms: Engines of Growth

Key conclusions

Russia has hundreds of mechanisms to support entrepreneurs, but only a few of them are efficient

“At a recent meeting in the Ministry of Industry and Trade, Mr. Manturov declared we had – if I remember correctly – 600 mechanisms and institutes to support entrepreneurs. But despite this number, it doesn’t mean they’re all efficient,” Alexander Shokhin, President, Russian Union of Industrialists and Entrepreneurs.

Special investment contracts are to guarantee favourable terms for investors

“We would like to guarantee fixed business terms for the duration of the project for those interested in investing their Russian money in the Russian economy, along with all the necessary conditions for the development of new projects. And for these purposes we in fact drafted the so-called SPIC 2.0 contract (Special Investment Contracts, Ed.),” Andrei Ivanov, Deputy Finance Minister of the Russian Federation

“I’d like to join the chorus of SPIC 2.0 supporters <…> The first advantage is the predictability. The second is fairness and equal access. <…> We saw that in SPIC 2.0 the Ministry of Finance uses a principle, that’s not always easy to read but ultimately fair: the state should co-finance profits of the future projects,” Dmitry Konov, Chairman of the Board of PAO SIBUR Holding.

Entrepreneurs are ready to invest in the Russian economy through state support mechanisms

“We have already set up a relevant project office, which accumulated a portfolio of projects for 8 trillion roubles within a couple of months. Our KPI set by the Presidential Decree is to directly invest about 1.2 trillion roubles into the economy, particularly in sector projects via this tool,” Andrei Ivanov.

International cooperation is a prerequisite for Russian business development

“Cooperation and access to international markets – this is what we need,” Andrey Slepnev, REC’s General Director.

Problems


Lack of information on state support mechanisms

“We know that the state provides a good deal of support to the industry. But in reality, unfortunately, very few in the field know about these measures. Here are some numbers for you: about 80% of entrepreneurs know about the state support, but only 4% use it,” Andrey Turchak, Deputy Speaker of the Federation Council of the Federal Assembly of the Russian Federation.

Bureaucratized state support and reporting procedures

“A complicated procedure for obtaining support and cumbersome reporting. Excessive and unclear criteria for qualifying for support,” Alexander Shokhin.

Underdeveloped infrastructure

“Poor infrastructure is often a bottleneck in the implementation of large-scale industrial projects,” Alexander Shokhin.
Enterprises are not geared towards the international market

“Enterprises do not see themselves as global players. Those who do are surprised to discover exponential growth of revenue, increasing productivity and competitiveness, etc. We simply do not have specialists of international trade. <…> Here I am talking about numerous medium-sized companies that make up our ultimate potential,” Andrey Slepnev.

“We have learned how to export oil/gas, probably petrochemical products, maybe fertilizers, but alas we have no idea how to export highly processed products,” Andrei Vorobyov, Governor of Moscow Region.

Low rates of introduction of new state support measures

“We have been discussing This ‘2.0’ of yours in different shapes and forms for I do not know how long. It means that at some point it stagnated,” Rustam Minnikhanov, Head of the Republic of Tatarstan.

Solutions


Improvement of legislation. Development of public-private partnership

“Completion of the regulatory base for improving development mechanisms would have been the right thing to do. I am primarily talking about special purpose contracts,” Alexander Shokhin.

“We need a real PPP here <…> Other counties did this, and we have no other way but to go hand in hand with business, develop export accelerations,” Andrey Slepnev.

“I see the growth of mobility and infrastructure. I also hear that you are talking about major PPP projects,” Michael Fohrer, Chairman, Bombardier Transportation GmbH

Monitoring and integration of state support measures

“We have an ocean of state support, it just needs to be used it properly and systematically. <…> We finally realized that the economy grows in the regions. <…> We initiated methodical work in the regions in terms of integration enhancement, because our federal resources to reach small and medium-sized businesses are limited,” Denis Manturov, Industry and Trade Minister.

“Comprehensive assessment of development mechanisms and institutions <…> is not only an occasion to clarify the development strategy of an institution, but also an opportunity to identify the so-called best practices and start replicating them,” Alexander Shokhin. “In debating legislation we should consider the impact of a bill to be adopted on already existing business,” Igor Drozdov, Chairman of the Board of the Skolkovo Foundation.

Support of the national business under sanctions pressure

“We must effectively resist the sanctions <…> We should consider prioritizing the projects of the companies under sanctions,” Alexander Shokhin.

Export support

“Proactive global agricultural policy. All support measures should be linked to those enterprises that really develop outwardly into global markets. <…> Last year our export grew by more than 20% and we are keeping up the pace in the first quarter of this year. We have never exported so much machinery outside the CIS,” Andrey Slepnev.

“In my opinion, trade missions should promote export support,” Andrei Vorobyov.

“The international market is the top league. <…> Our Russian market is not that large. What is the situation today? We are actually investing in foreign business, in foreign companies,” Denis Kravchenko, Deputy Chairman of the Committee on Economic Policy, Industry, Innovative Development and Entrepreneurship, State Duma of the Federal Assembly of the Russian Federation.

“The solution to the main issue is <…> current and potential competitiveness in the global market,” Yuri Slyusar, President of PAO UAC. Improvement of payment methods

“What are the restraints on the rate of investments and trade between Russia and China? Political relations are good. <…> The issue lies in the direct Russia–China payment system in roubles and Yuan,” Guiru Cai, President, Association of Chinese Entrepreneurs in Russian Federation; Deputy President, China Chengtong Holdings Group.

Development of digital technologies

“Projects’ digital and export components should be the main criteria for support,” Alexander Shokhin.

“I see a tremendous potential in innovation and digitalization. Digitalization of agriculture, especially in Russia, and Internet technologies in the agro-industrial sector is precisely the foundation for the fourth industrial revolution,” Nenad Popovic, Minister for Innovation and Technological Development of the Republic of Serbia.

“The world turns to path of the engineering 4.0,” Kirill Lipa, Chief Executive Officer of ZAO Transmashholding.

Increase in financing the real sector of the economy

“You know that the State Duma considers the Central Bank’s bill on alternative ways of investment attraction. Naturally, being a party that is represented in all regional parliaments, in all our territories, jointly with local enterprises we plan to stress-test these bills,” Andrey Turchak.

Improving tax policy

“One more issue raised by the regions is the possibility of maintaining the value added tax in the range of 1-2% in the regions, so that they would have an additional motivation to cooperate with the industry and support regional production,” Andrey Turchak.

“We propose to let go of the immediate fiscal goal in partnership with the business. We say that the money earned in this project could and should go into transport, energy and social infrastructure. Draft of the relevant resolution of the Government of the Russian Federation has already been submitted,” Andrei Ivanov.

More detailed information is available on the website of the Roscongress Foundation information and analytical system

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