Transcript:
Question: I’d like to talk about a subject that cuts across many of the meetings. Naturally, there is talk of stimulating the Russian economy. Much attention is being paid to the real economy, but if we do not want to slip into complete recession in September we must fully understand what we must do. Much is being said about natural monopolies and high tariffs. Naturally, the investment climate is mentioned as well, but as Alexei Ulyukayev said today, this is more an expression of desire than a set of specific measures. Maybe there is something really simple that we should do to avoid recession?
Arkady Dvorkovich: Speaking about the short term, this year in particular, we can only take measures that produce instant results in the short run. I’d like to emphasise that everything that concerns the investment climate is not just aspirations or words but absolutely specific actions. The same is true about limiting the appetites and reducing the costs of natural monopolies. All these measures will produce results in the medium term but not instantly, not this year. Some decisions that were made last year are beginning to have an effect now. One example is reducing the costs of connecting to utility grids. These costs have gone down in a number of regions but this cannot stop instantly the general trend towards slower economic growth.
So what can be done? We could reintroduce the programmes that we carried out in 2009, and not because we have the same crisis now as in 2009 but because some tools have proved to be effective. This applies to the auto industry, in particular, subsidised demand for new cars. Most likely we’ll do something similar. We are still discussing the form and the scale this should take. Final decisions will be taken shortly, but we are likely to do this.
In addition, we’ve decided to launch a number of infrastructure projects. The return on them is fairly quick – people will start supplying metal and other building materials, and new jobs will be created in the process of construction. We are completing some major construction projects in Sochi and we have finished those for the APEC summit in the Primorye Territory and for the Student Games in Kazan. Many people were involved in these projects as well as all kinds of construction equipment and a lot of capacity that must now be used somewhere else. We want to use these capacities straight away, starting with the latter half of this year, which could stop the current slowdown.
We are also hoping that agriculture will do much better than it did last year. The forecasts are good for now. I don’t want to sound too optimistic but all experts expect much better results than in the past few years.
Finally, we hope to maintain the growth of lending that has taken shape in the last few months and slowed down only recently. It will support consumer demand and increase production in the consumer sector.
Question: Banks always have a lot of questions. I think one of these key issues will be discussed at the summit tomorrow. As for the infrastructure projects, do you get the impression that the state has not yet started serious planning? Where does it want to invest? For the most part, major corporations chose infrastructure projects that gave them quick and large returns on investment. These were either hubs or port facilities, not roads which have a slow return on investment. It is necessary to do all this, though there are clear difficulties.
Arkady Dvorkovich: The state is doing such planning. We have endorsed a state programme for the development of the transport system to 2020 that includes all major construction projects. Moreover, we have decided to expand it by including projects related to the 2018 World Cup. These host regions need these projects even without the World Cup, but they would have been built somewhat later in this case. Now they will be carried out by 2018. We will significantly speed up construction projects in the next few months of this year and next year. I’m referring both to roads and bridges that do not provide instant returns and more commercially attractive projects, such as the construction of ports and airports. This will also be done and we believe the implementation of these projects will increase the mobility of people and cargoes. This is very important for this country as a whole.
Many experts say that poor logistics impedes our economic growth. Such projects in all types of transport – auto, air or rail – may bring us huge benefits. The most capital-intensive projects involve railways because it is necessary to remove bottlenecks on Tran-Siberian Railway and Baikal-Amur Railway, as well as to build new routes. I’m referring to high-speed railway from Moscow to Kazan, but we are also thinking about the more distant perspective. I think these projects will be useful not only for the transport of passengers but even more so…
Question: …for cargo traffic?
Arkady Dvorkovich: First, for economic growth as a whole; second for freeing up infrastructure for faster shipping and the development of high technology in general. We are planning to use the absolute latest technology in all of these projects in order to minimise not only their immediate costs but total spending on the full life cycle of these or other facilities. This should yield a direct return.
Question: And how do you view the discussion about how the Central Bank usually accuses big business of not creating the best conditions for doing business, high rates and so on and so forth. Today Mr Ulyukayev said that one thing slowing down business development in this difficult period is the lack of ability to reduce costs. This is creating a vicious circle, especially when it comes to natural monopolies. Their costs are a burden for all other companies because they make up for them by increasing prices. What should be done about this? What do you think about this discussion?
Arkady Dvorkovich: This is not a discussion but a statement of the obvious. I think there is enormous potential in reducing costs. This could produce an effect in the next three or four years. I’m referring both to large corporations like Russian Railways, Gazprom and Transneft and smaller companies that are no less important in terms of costs, for instance regional distribution networks. The board of directors and its committees are playing a very big role in the companies in the former group such as Gazprom and Russian Railways, for example. Now we have independent directors who can and must take care of this and encourage their management to reduce costs. Russian Railways is doing a good job in this respect – it is reducing overheads per unit of services by 3%-4% every year. This is a very good figure. Everyone says the potential is much bigger than that – maybe, but this is a real reduction in costs every year. This is a very important fact that cannot be ignored. We can give different assessments of the performance of management, but I think this is progress in any event. This is why Russian Railways is now trusted with large projects.
As for smaller companies, it is very important to compare them with others on the market. This is called benchmarking – the adoption of the best standard as the way to go. This is exactly what we are going to do. We’ll select the best company in terms of the cost-output ratio of services or products and will encourage others to reduce their costs to the same level.
Question: So they are guided by it, correct?
Arkady Dvorkovich: Yes. I think this will produce results. In many cases we’ll have to replace management and we will – those who are not doing a good job will have to quit.
Question: There is an indicator showing that the longer the director of a company works on some major business project, the less profit the company makes every year.
Arkady Dvorkovich: There is an optimum term, I think. There is a period when motivation is growing and a person reaches a kind of plateau in terms of their effectiveness. Later performance gradually declines.
Question: So, the state has noticed this and is working on this?
Arkady Dvorkovich: Absolutely. Everything is clear!
Source: Rossiya 24 television channel
