Excerpts from the transcript:
Maxim Oreshkin: Good afternoon, colleagues,
The Foreign Investment Advisory Council’s annual meeting was held today. It’s an important event where we can discuss issues facing companies that have invested significant amounts of money in the Russian market, and ways of changing regulations to improve the local business environment.
Today’s meeting was held in a generally positive atmosphere given that the Russian economy has begun to recover, and economic growth is underway. Companies can see this in their performance indicators.
An Ernst & Young study revealed an interesting fact, where the number of investment projects in Russia this year has reached an all-time high. We see this from the direct investment dynamics, which reached $14 billion in the first half of 2017. In other words, all numbers are telling us that foreign business is actively coming to Russia again and has a vision of long-term development goals for itself.
Taxation was among the issues that we touched upon today. I will cover several more later on.
FIAC members raised the personal property tax issue (however, the Government has already made all the decisions in this area).
The participants discussed the very interesting question of tax deductions for foreign companies that build infrastructure. This question also concerns many Russian companies. The Government will work in accordance with a new initiative on infrastructure mortgages to reimburse taxes paid by companies that build infrastructure.
Another aspect of infrastructure development concerns a new wave of investments in the electric power industry. The approaches to proposals for Capacity Supply Agreement-2 were discussed. The issue here is about forming a base for sustainable investments in developing the energy sector. There are many foreign companies working in the Russian energy sector, so identifying proper approaches is of critical importance.
We discussed the introduction of electronic veterinary certificates and decided to hold them back for some time to make sure that the process of adding new commodity groups goes unhindered and does not result in erratic supplies.
Promoting exports and making Russian companies part of global production chains that manufacture certain products was discussed separately. Among other things, we discussed food. My ministry will work to help small businesses get certificates recognised by the world's major companies, have them supply products to these companies, and become part of the global market.
Alexander Ivlev (Managing Partner for Russia, Ernst & Young): The Advisory Council has been working in Russia since November 1994. Today, many investors believe this it is indeed one of the most effective tools to establish the right kind of dialogue between international businesses and the governments of different countries.
If we look at the results, we will see an increase in the number of foreign companies that are interested in being represented in the Advisory Council. The fact that 35 senior global executives of major investing companies operating in Russia have joined us today indicates that the council is effective. Out of the 12 instructions issued following the council's meeting last year, nine are already in the process of being deeply studied. We hope that the issues raised by investors will be resolved in the near future. Three issues are still in the works.
This work is effective, and everyone can see it. Foreign companies continue to invest and to work within the Foreign Investment Advisory Council.
Question: This question is for Mr Ivlev. What projects do the FIAC members from among foreign companies plan to start in Russia within the next year or two? What amount of investment in the Russian economy are we talking about?
Alexander Ivlev: I cannot give you exact amounts of foreign investment in Russia. We hope the amount will grow each year, as has been the case lately. Unilever is expanding its presence, as is Cargill. Takeda has begun to localise its production, and plans to launch two types of cancer-fighting products this year. We can see that Nestle and Kinross Gold are expanding their presence in the Russian regions as well. So, the investments keep flowing in.
We can say from the past year that there are very good examples, such as Sanofi that has started production of insulin which will be exported from Russia to Europe, Germany in particular.
Samsung has begun to manufacture household appliances in the town of Kaluga, which are exported to Europe. The Japanese have begun to actively invest in the pharmaceutical sector. In particular, Mitsui has implemented several projects in Russia.
So, the process is underway, and companies continue to invest. We expect the growth of investments to reach the pre-crisis level.
Maxim Oreshkin: I would add to that creating a predictable environment - both from the point of view of macroeconomic policy and dynamics, and regulations as well - is also of critical importance (this was discussed at today’s meeting as well). For example, I talked with investors in Washington recently. They noted that the Russian Government and the Central Bank have made great strides in structural reforms as related to macroeconomic policy, which ensures the predictability of key performance indicators, which is vital when Russian manufacturing capacities are inserted in the global production chain. Stability of the real exchange rate and other indicators are important for these purposes.
We also talked about regulations, taking note, for example, of the new draft law on non-tax payments, which we worked on in recent months. If it gets adopted, it will ensure a stable environment for companies. Clarity, predictability and transparency are the three pillars that will create the necessary environment for drawing in investors. We do see that investments are on the rise. They are this year, and we believe they will continue to grow actively in the years to come.
Question: Mr Oreshkin, did you discuss sanctions?
Maxim Oreshkin: No, we didn’t. These companies are active in Russia, and we discussed economic and business issues today. When we talk about money and effective investments, political hype about sanctions is of secondary importance.