The meeting, held via videoconference, focused on developing healthcare and the pharmaceutical industry, tax and customs legislation, trade, the consumer market and technical regulation, energy, natural resources and the environment.
Mikhail Mishustin: Good afternoon, ladies and gentlemen!
I am happy to welcome you to the meeting of the Foreign Investment Advisory Council.
Despite the coronavirus restrictions, we have decided not to give up the tradition. We are holding our annual meeting as usual, in the middle of autumn, although in the online format. This will allow us to avoid suspending our useful communication during the coronavirus pandemic and fully fits in with the current level of communications and technology development.
Our council has been operating for over a quarter century. It is an effective venue for cooperation between our Government and international business. Discussions at these meetings are always substantive. Today, our meeting is being attended by the deputy prime ministers and ministers concerned. They can answer the questions you are concerned about.
This format of direct communication is useful both for the Government and for leading investors. Owing to our joint efforts, the Russian economy, including your projects, is making headway. This creates favourable conditions for attracting investment in general.
During the past year, the members of the council have carried out many interesting projects in several diverse areas – from the production of filter masks, which is particularly topical during COVID-19, to the construction of an energy centre.
We hope interest in the Russian market will only continue to grow. The Government continues to work to enhance the investment appeal of Russia. We want foreign companies to feel comfortable and derive benefits from developing business in our country.
Like other countries, this year we have faced a new factor, the coronavirus. To reduce its effects, we have adopted many decisions to support our people and the economy as a whole. As a result, we have passed through this difficult period – the first phase anyway – better than many other countries.
According to the Ministry of Economic Development, Russia looked more attractive than many other countries, including Germany, Italy, France, Britain and Spain in terms of GDP dynamics in the second, the most difficult, quarter. In addition, despite a fairly substantial amount of direct and indirect support for the people, we managed to preserve macroeconomic stability. The inflation rate has been a bit over 3 percent since the start of this year.
Economic recovery is taking place quicker than expected. As soon as next year, we expect to restore the GDP to a level of over 3 percent and keep inflation at about 4 percent.
Our confidence rests on the decisions that are part of our national plan of action until the end of the next year. One of them is the creation of a new instrument – agreements on protecting and encouraging investment.
It sets forth tax terms for large investment projects and envisages special support measures.
We also intend to continue implementing the business climate transformation road map. Its purpose is to remove regulatory restrictions for businesses.
The regulatory policy is going through significant changes.
In addition, we are finalising an integrated plan for achieving the national development goals set by the President. This plan is expected to cover the next ten years. It will help us solve the tasks set by the national projects, the state programmes and other strategic documents; it will make investment conditions more attractive, including through support for major private investment projects. It will help us improve the business climate and introduce new financial instruments.
Ladies and gentlemen,
Council meetings usually begin by discussing tax and customs regulations. But this time, I suggest changing the order. I think in the current circumstances, it would be more logical to begin with healthcare issues. New solutions and technologies will help people protect their health and improve the quality of life. It is one of the priority tasks for the Government.
Thank you. Now let’s begin the discussion. I would like to give the floor to EY Global Chairman and CEO Carmine Di Sibio.
Carmine Di Sibio: Thank you Prime Minister Mishustin.
First of all, I would like to welcome you, Prime Minister, as Chairman of the Foreign Investment Advisory Council that we call FIAC.
We hope that we will have a fruitful partnership that will benefit both the Government and international business.
It is especially important for us to work closely together in the face of the pandemic crisis that is confronting the whole world. And our 34th Plenary Session, which is taking place in a videoconferencing format that is new to us all, even though video is not so new anymore to us, is further proof that we are learning to live and work in the “new reality.”
Despite the pandemic and the challenges of operating in the new remote reality, FIAC companies have continued to invest and evolve.
In January 2020, the Kinross Gold Corporation took on a major new investment project for the development of a prospective deposit in the Khabarovsk Region, with investment set to reach 500 million dollars by 2025.
3M Russia has invested 4.5 million dollars in the launch of two lines for the production of filtering half-masks in Volokolamsk in the Moscow Region, which will help meet the growing needs of the Russian market and the markets of other countries of the Eurasian Economic Union.
In early 2020, Henkel completed the construction of a new facility for the manufacture of perfumes and cosmetics in Noginsk, in the Moscow Region, investing over 40 million euro and raising the number of people employed at the enterprise from 150 to almost 700.
In 2020, Takeda began manufacturing the innovative drug Ninlaro for the treatment of multiple myeloma, a rare blood cancer, in Yaroslavl. Total investment amounted to 590 million roubles.
In July 2020, an agreement was signed between AstraZeneca and R-Pharm on the launch of full-cycle production of AstraZeneca’s Covid-19 vaccine.
For the purposes of today’s meeting, EY carried out a survey of major international companies operating in Russia. A total of 62 foreign companies took part in the survey, 49 of which are FIAC companies. Particular attention was paid to key events that occurred in 2020, including the coronavirus pandemic. The participants in the survey were companies averaging over 1 billion dollars in revenue and employing over 3,000 people in Russia.
I would like to share with you some of the key findings of the survey. Number one: International companies have increased investment in Russia despite the pandemic. FIAC companies have invested 185.5 billion dollars over the total period of their operation in the country. The amount of their accumulated investment grew despite the pandemic, the economic downturn and external restrictions. Major foreign businesses are not revising their plans in the face of temporary instability.
Russia’s strategic importance for foreign companies operating here is a key take-away from the study. Ninety four percent of FIAC companies and 92 percent of all respondents named Russia as one of their strategic markets.
Companies plan to retain remote working arrangements and will be investing more in information technologies. Sixty five percent of survey participants said that remote working will remain in place at their companies in the future. Indeed, one in five companies plans to keep more than half of their employees in remote working arrangements. Almost a half (47 percent) of respondents believe that their companies will spend more on information technologies as a result of the pandemic.
Russia’s regulatory environment has numerous strengths, but international companies think that the rules change too often. Fifty percent of survey participants said that constant changes in regulation have an adverse impact on Russia’s investment attractiveness. Foreign investors identify labour relations and taxation as the best-developed areas of Russian legislation. The experiment to allow the use of electronic signatures on employment-related documents was positively received by international businesses, while the introduction of compulsory marking for consumer products is viewed as a controversial development.
International companies have spent over 15 million dollars on supporting victims of the pandemic in Russia. Seventy six percent of the survey participants provided material assistance to medical, public funded, charitable and social organisations to help combat the pandemic. The 20 companies that gave exact figures on the amounts spent on such support gave combined material assistance worth 15.5 million dollars to Russian organisations. Social responsibility and help for local communities are integral to the work of international companies in Russia.
Developing operations in the regions is not yet a major priority, but international businesses have a high opinion of the professionalism of regional administrative teams. The majority of participants in the survey (53 percent) are not planning any regional expansion and only 5 percent of companies said that they planned to open new regional offices. Despite the temporary pause in activity, two thirds of the companies rated the authorities in their key region as “good” or “excellent.”
In general terms, I would like to point out that foreign investors are ready to share their international expertise to help propel the business environment in Russia to a new level. The country has already made significant progress in reducing administrative barriers. Further work in this direction will in time help Russia enter the top league of nations for doing business.
FIAC companies possess a wealth of expertise gathered in dozens of countries that have already addressed the problems that Russia faces today. Access to that expertise is an important asset for any government, and we are happy to continue sharing it. We hope to see the continuation of open dialogue between the Russian Government and international business. I feel certain that today’s meeting will be a productive one, and that next year we will all meet in the traditional format at the same table.
Mikhail Mishustin: Ladies and gentlemen!
I would like to thank you for the interesting discussion once again. Our meeting was very substantial and useful. My deputies and our ministers will attentively analyse all your proposals, and I will give the relevant instructions following the meeting of the Advisory Council.
Under the plan, we hold these events once a year, but of course our cooperation is not limited to this. It has a broader character. I am absolutely certain that as soon as the COVID restrictions are lifted, we will be able to conduct our discussion at this and other venues in the traditional format. I will be very happy to see you personally in Russia, in Moscow.
The Russian Government is always open to a constructive dialogue and new and interesting ideas. We continue making decisions that will enhance interest in investment in Russia, in part, in the context of the agreements on protecting and encouraging investment in Russia, about which you, esteemed members of the council spoke in detail. We are upgrading our legislation and maintaining stable macroeconomic conditions. We are taking our own steps to support the people and the economy.
All of you have a draft communique. I suggest approving it. Looking forward to see you soon in Moscow.
Thank you and good luck.