Transcript of the meeting:
Dmitry Medvedev: Please be seated; I suggest that you take off your jackets, for those who haven't already done so. Hopefully our next forum will take place under more normal conditions. This is my first visit to this event, and I am finding that the audience and the mood are perfect, but the working conditions are completely unsuitable. So, Mr Kozak (Deputy Prime Minister Dmitry Kozak), we are pinning all our hopes on you, since we can no longer do so with Mr Shokhin (Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs).
Dmitry Kozak: Next year we’ll hold it in the Ice Palace.
Dmitry Medvedev: It would be better that way… Nevertheless, let me welcome everyone once again. I see here the cream of our business community. Some of our colleagues have just signed important documents. I won’t speak long because I have covered Russia’s key prospects in the changing and increasingly global world during our recent plenary meeting. I'll say just one thing: we have approved four roadmaps for the national business initiative. Colleagues, I would like you to comment on how topical these roadmaps are, if they are comprehensive or if there are problems regarding certain points (and there obviously are).
Colleagues, I’d like you to comment on these roadmaps. Are they comprehensive or are there problems regarding certain points – and there obviously are, especially in the middle levels of the state machinery where all good initiatives are being stifled. And I’d also like to hear your suggestions on what we should do next. I’ve just spoken about the current situation in the global and domestic economy, and I think you are all familiar with it. It is affecting the work of not only business but also the government. You know that we have formed a fairly complex budget. We will work in any event. We will invent some new ideas, look for more money to make sure that you carry out your projects rather than wait for another peak in the world economy.
There is also the issue of our WTO membership. It’s a plus for some and a minus for others for obvious reasons. Let’s speak about this, too. Let’s start our discussion and give the floor to Mr Nikitin, the General Director of the Strategic Initiatives Agency. Go ahead, please.
Andrei Nikitin: Mr Medvedev, ladies and gentlemen. We have four roadmaps underway, notably on easing procedures for getting construction permits; reducing the length of customs procedures; supporting exports and reducing the time and cost of connecting to power grids.
This process has just begun. We are moving forward on all roadmaps fairly quickly. We have some questions on the roadmap on customs procedures – the working group does not accept the documents that are being issued by customs in the context of this roadmap…
Dmitry Medvedev: I didn’t get it. Who doesn’t accept what? You don’t accept the customs documents or the customs does not accept your papers?
Andrei Nikitin: Mr Medvedev, customs is preparing relevant documents under the roadmap. We, along with the Ministry of Economic Development, have organised oversight of compliance with this roadmap. The Ministry of Economic Development receives the customs documents and prepares its conclusion. Then we discuss it in our agency with business people and the working group that has drafted this roadmap.
Dmitry Medvedev: Okay.
Andrei Nikitin: We have just started working with these roadmaps, and the working group believes that in the first roadmap, the one for the customs, some documents do not correspond to the letter and spirit of the roadmap.
Dmitry Medvedev: Are these documents prepared by the customs?
Andrei Nikitin: Yes, these are the documents prepared by the customs.
Dmitry Medvedev: I’d like to say right away that if you reach a deadlock, let’s meet and see how to get out of it.
Andrei Nikitin: We are now generalising this information, preparing integrated data and I think we’ll submit them in the near future.
Dmitry Medvedev: Okay, go ahead.
Andrei Nikitin: We agreed that in the first stage we would inform the Government together with the Ministry of Economic Development on a monthly basis about our activities. Later on we’ll do this once every three months.
At present, we are dealing with the documents that are being drafted, but by November we’ll probably have network monitoring, making it possible to asses not only the documents as such but also their enforcement in the regions. We are elaborating a system that took shape during crowdsourcing and our cooperation with business associations. We will poll as many business people as we can to find out how they were affected by the implementation of different items of the roadmap. We will also publish this information in real time for prompt decision-making. I’d like to emphasise one important point – we are going to launch the export support roadmap sometime in October. This is the roadmap that interests the business community the most. So jointly with Mr Fradkov (Pyotr Fradkov, Director of the Russian Export Insurance Agency [EXIAR]) we are starting very intensive work. As it turns out, medium-sized businesses are extremely interested in being able to export their innovative products, and we will support this interest by all means.
The following four roadmaps are ready, and we will present these in the near term. This is a roadmap for simplified business registration, as we said earlier, and we along with the Federal Tax Service have achieved an excellent preliminary result. We will be able to significantly reduce this procedure. The roadmap for simplified registration of property – our ranking is not bad there too, and Russia can take the second or the third place in the world, there are no obstacles.
The roadmap for enabling small and medium-sized businesses to sell their products to public-private companies is very important to encourage demand for innovations. This roadmap will not be simple, but it will be interesting. And finally, the roadmap simplifying regulations and special administrative regimes created for businesses. This is a bit more complicated, but hopefully, with the support from the Ministry of Economic Development, we will be able to unveil it in the near future.
This is, briefly, how things stand, Mr Medvedev.
Dmitry Medvedev: Briefly, I’d like to say again that we create these roadmaps not for a couple of games, these roadmaps are not playing cards, these are documents that should function, and if they prove ineffective, then it is a waste of time. I want business representatives to speak on this subject. Naturally, I will give the floor to everybody who wants to speak. To begin, Mr Dmitriyev, the president of the Russian Direct Investment Fund, go ahead please.
Kirill Dmitriyev: Mr Medvedev, colleagues, these roadmaps touch upon very important aspects of investment policy. I’d like to say a few words about the Russian Direct Investment Fund and focus on five measures that in our view will be extremely important for boosting the revenues of the Russian pension system and Russian reserve funds. The Russian Direct Investment Fund was founded a year ago, and it has already produced some initial results and some deals. The China Investment Fund has invested $1 billion, and we have created several new tools. One of these is a pre-IPO fund of a consortium bringing together $5 trillion from investors. They will invest in a pre-IPO of the Russian companies that use Russia’s platform. In this way, we incentivise investors to use Russia’s platform.
Regarding pension reform, there is a lot of discussion about the five steps that in our view will greatly improve the profitability of pension premiums and will make it possible to invest them in Russia. These five steps can be made quite rapidly and in our view they will be rather effective. If pensions are invested with good profitability, the debate on the cumulative part will end. The first step is the new instruments having good profitability and predictability and making it possible to invest in Russia. In our view, there are three such instruments. The first instrument is infrastructure bonds, which can help develop the Far East and the existing corporations. This is an attractive and predictable instrument for investors. The second instrument is index funds, which make it possible to invest not only in a specific corporation but in the whole Russian market, diversifying the portfolio and reducing the cost of issuing, and infrastructure funds.
If we create these instruments rather quickly, then the second step should be to allow a share of pension funds and a share of the National Welfare Fund to be invested in these new instruments. This will produce good profitability and the money will create jobs right here in Russia. The third step is to enable non-state pension funds to invest in stocks as well. For example, the pension fund of Korea is the number one investor on the Korean stock market: it invests in 20% of shares there. Currently, every year in Russia, when non-state funds have profitability below zero, they have to add their money because they think within the category of one year. To create a long-term investor it is necessary to eliminate this restriction.
The fourth and the fifth steps. We believe that it is possible to continue to attract foreign investors to these newly created tools. And the fifth step, to really use the Moscow Exchange as a very important infrastructure component attracting money, and in particular, perhaps adopt a requirement for those making IPOs outside of Russia, that they should make a secondary public offering in Russia; and this will create greater liquidity in the Russian stock market. Thank you.
Dmitry Medvedev: We can even introduce criminal liability for making IPOs outside of Russia, as an idea. To be serious, I’d like to ask you regarding the origins of all your assets and capabilities: are they in good order?
Kirill Dmitriyev: Yes, we are attracting many investors. And indeed, currently we are working on further financing the Russian Direct Investment Fund. We are actively working with leading investors. Currently, we have 53 projects with a total investment on our part of some $11 billion. There are some very interesting projects, there are large institutional funds wishing to invest.
Dmitry Medvedev: Good. Although the institution is in its infancy, it is promising. I’d like to hear a representative of a large company. Let’s start with the largest companies. Mr Miller, go ahead please.
Alexei Miller (Gazprom Board Chairman): Mr Medvedev, fellow guests, I want to touch upon a very pressing issue –taxation in the oil and gas sector. We are conducting a constructive dialogue with the ministries of the Russian Government regarding raising the gas extraction tax rate. But I want to draw your attention to the fact that whatever the final decision on increasing the oil and mineral extraction tax rate — if the tax rate goes up in 2013, Gazprom will be facing a situation where we will not be able to take investment decisions on continued development of the Bovanenkovo field on the Yamal Peninsula. Gazprom will not be able to take a decision on beginning to develop the Chayandinskoye field. Yes, raising the oil, gas and mineral extraction tax rate will increase federal budget receipts, will increase Gazprom payments to the Russian budget, but we should also understand that the rate of the gas extraction tax is a very important factor affecting a specific investment decision on a specific field.
We have just started extraction on the Yamal Peninsula; and you know that in October we are starting extraction on the Bovanenkovo field. Following government instructions, we have taken a decision to accelerate the implementation of the Eastern Gas Programme, considering the growing demand in the Asia-Pacific Region. But before we take investment decisions under the 2013 programme, it is absolutely necessary to resolve the issue on differentiating the mineral extraction tax rate for the Yamal Peninsula, for Eastern Siberia, for the Far East and for the shelf. This issue is an immediate challenge. Otherwise, should the mineral extraction tax rate go up, however much, and should the government fail to differentiate the mineral extraction tax for the Yamal Peninsula, for the Far East, for Eastern Siberia, and for the shelf, we will not be able to invest in new fields in 2013. This, in a very large volume – over 25 billion cubic metres of gas yearly, in our estimate, will already affect Gazprom production in 2014. Therefore, Mr Medvedev, I ask you to issue instructions to the relevant ministries so that they accelerate work on differentiating the mineral extraction tax rate and take the necessary decisions before the end of the year.
Dmitry Medvedev: But this work is being carried out, Mr Miller, according to the reports I get from my colleagues in the Government, from both deputy prime ministers and ministers. They are in direct contact with you. I am aware of the complexity of this problem. Moreover, despite some problems in forming the budget revenue basis, despite the strict financial rule, I have instructed [the ministries] to take a somewhat different position, despite some objections from the Ministry of Finance, as you know.
Yesterday, the initial approaches to the mineral extraction tax were discussed at the Governmental meeting. Colleagues reported on it, and the Minister of Finance reported on it, too. I propose that we continue our work, and also discuss your idea on the possibility of creating tax incentives for specific fields if it is necessary.
