Question: What decisions have been made? Which instruction will be given?
Yury Trutnev: The main topic of today’s meeting was a new vision for the development model of the Far East. This vision is primarily involves creating an export-oriented economy in the regions of the Far East.
What tools are be used to achieve this? First, we plan to create a competitive special economic zone. An analysis of special economic zones has been done. We should acknowledge that our special economic zones are not competitive and they lag behind our neighbours’ special economic zones in a number of indicators. For that reason they’re unlikely to attract investments. As such, we should create a new legal form. We have to set up a new kind of special economic zone that meets the world’s best standards in terms of taxation, transport costs, administrative barriers – all the major characteristics. This is number one.
Second, it is quite clear that we need tools to develop the Far East, to move forward and set up a new kind of economy. To get these tools, the Ministry for the Development of the Russian Far East (Minvostokrazvitia) should be re-formatted. Currently it is a shell ministry which basically lacks real functions. This was discussed today, and the Prime Minister has issued an instruction to prepare the transfer of some functions of other ministries to this ministry regarding issues related to the development of the Far East. These functions include, first of all, those of the Ministry for Regional Development pertaining to the Far East, functions of the Ministry of Economic Development regarding special economic zones, the setting up of special economic zones, and also a number of functions related to implementation of federal targeted programmes in the Far Eastern Federal District.
And finally, in addition to giving the ministry special powers, we think it necessary to create new development institutions aiming at attracting investments and participation in investment projects. Today we have such a institution, the Far East Development Fund, but it is ineffective in its current form both in terms of its structure and the amount of money it has. We have to change both.
Next, we need a developer, that is to say, a company that will prepare the ground for investors with infrastructure, technology parks – setting up the elements of a special economic zone.
These were the major decisions. Besides that, the role of large companies in the development of the Far East was also discussed, and the Prime Minister issued an instruction to convene a special meeting on this issue under his guidance.
We also took a deeper look into the energy-related issues, which are an impediment to growth in most regions of the Far East. They have very high tariffs here, and connecting to the grid is a big problem, as often there is insufficient power capacity.
Finally, the last issue we touched on is countering corruption, since it is quite evident that we shouldn’t expect investment as long as civil servants extort businesses. We are not going to duplicate the work of law enforcement, but we are going to monitor investment projects and we will kick out officials who obstruct them.
Question: Mr Trutnev, how will the VEB daughter company be transformed? In terms of recapitalisation, in terms of organisational structure – will it be transferred to the Minvostokrazvitia?
Yury Trutnev: We are currently considering two possible options – it might be a joint-stock company, or a non-profit organisation. We are going to weigh the positive and negative aspects of both options and make our choice, after which we will propose a model to the leaders of the country and, accordingly, suggest recapitalisation. We know that we are not going to be able to achieve what we want by relying on government funding. We have to make sure that invested money multiplies, that there is leverage to attract 5, 8 or 10 roubles of foreign or domestic investments for each rouble contributed by the government.
Question: Will it separate from VEB?
Yury Trutnev: This was not decided today. This issue wasn’t considered by the Prime Minister or President. But if you want my opinion, I think it should operate outside VEB because it is a separate issue.
Question: And regarding the developer, as you called it…If I’m understanding correctly that this might be tan agency for attracting investment to the region? This idea has been expressed before, but it is not clear if the agency will be set up…
Question: Or is the East development corporation?
Question: And why then do we need a fund for that? Won’t they be doing the same thing?
Yury Trutnev: No, they won’t, because the task of the fund is to give money to projects, whereas the developer’s task is to prepare the ground. Totally different. And this is approximately the way it is in Kaluga. We are not proposing anything new. These practices have been tested globally and in Russia at the leading growth areas. Just like in Kaluga: a budget loan is taken, an organisation is selected, the organisation prepares the site, ensures its infrastructure is in place, sells development plots, returns the money and moves on to the next site. Nothing extraordinarily new.
Question: Have you decided on when such an agency may be set up?
Yury Trutnev: When I spoke about the deadlines today … First of all, before we take the first step on attracting investment, we have a long way to go. The Minvostokrazvitia needs to be given the necessary authority, we have to set up development institutions, we have to create a legal form for special economic zones that will make them attractive. And we have to start preparing those real sites. There is a lot of work, and we can’t drag it out. If we extend the process, then the attention on the problems of the Far East development that currently exists, the focus of the ministries (thanks, in part, to today’s meeting of the Commission) and, let’s be frank, the flooding, our common misfortune, which has also heightened the attention federal bodies... We should not lose all that, and this is why I am giving this ministry half a year to complete this work. We can do it in half a year. Then we’ll deal with practical issues rather than issues like changing the organisational structure and getting legislative support.
Question: The same as RDIF (Russian Direct Investment Fund ) and EXIAR (Export Insurance Agency of Russia)? Because the fund you are referring to looks a little bit like the RDIF, and the Export Support and Investment Attraction Agency looks like EXIAR …
Yury Trutnev: Nothing will be synchronised in any way. We are not targeting investment activity in the country as a whole. No one has ever said such functions should not be competitive. We are simply trying to do better. That’s my first point.
Second, we are trying to work on the territory of the Far East. This is normal, healthy competition, there is nothing bad about it. If half a dozen more funds are set up in Russia, they will be able to attract investments and launch new enterprises – hurray for that! As you know, there are giant funds in the world that deal in general with global issues. We also have to move in that direction. Nobody says that once we have set up one investment fund, discussion closed, everything is fine with us. Nothing of the kind.
Question: Will you please expand on the Far East Ministry. You said the Ministry is going to acquire a number of functions. What was the reaction of the Ministry of Regional Development?
Yury Trutnev: It was a good reaction.
Question: And what will they be doing now?
Yury Trutnev: They will deal with the rest of the Russian Federation. The Far East has a special ministry called the Ministry for the Development of the Russian Far East, and it is this ministry that will deal with the Far East. This is as it should be: there should be no duplication. Once we decided that the Far East has certain unique features, let’s say, that it cannot develop under the rules and legislation that govern the whole of Russia. And when a whole new ministry was set up to create these special conditions, it means the ministry should have complete authority and – this is crucial – complete responsibility, so that in due time there will be an accountable entity and so that no one can say it was the Ministry for the Regional Development that did a poor job on the programmes, or the mayor was not good at setting up the zones, but we did our best but failed. The responsibility should lie where the authority is – in one set of hands.
Question: Will the Ministry relocate to Khabarovsk? There was some talk that it will move to Vladivostok or somewhere else...
Yury Trutnev: The Ministry will be based in Khabarovsk. At any rate, no other options are on the table now. There is a proposal to set up one of the project offices in the Far East, but we have not even discussed which office exactly. As I have said, we expect that - as we see it now - a number of development institutions will operate under the Ministry. I can’t rule out that they will operate not just in Khabarovsk or Vladivostok but also in some other areas. It’s time we have to start addressing the issues of the whole of the Far East. I was in Anadyr the day before yesterday, in Khabarovsk yesterday and today I am in Komsomolsk-on-Amur – this is a typical schedule.
Question: Mr Medvedev said first we had the Caucasus and now we have the Far East, both of which need to be addressed somewhat separately. Many say the Caucasus should be better integrated into Russia, whereas here we see that the economy will be oriented towards the APEC countries. So we have opposite trends. Is there any apprehension that if the reforms succeed, the Far East will be less connected to Moscow than to such countries as Japan and China?
Yury Trutnev: I think this issue should be reviewed not just from the political but also the economic perspective. In terms of politics, the Far East has always been and will be an important part of the Russian Federation. In this sense, it is connected to the centre of Russia, to Moscow, by definition because we are one country with the same laws, the same Constitution, the same President, the same Government etc., it’s just a unified, single territory. But this has never meant that all economic ties should only be between the European part of Russia and the Far East, as manufacturing something in the Far East and shipping it to Moscow, Kaluga, Bryansk is way too far and, frankly speaking, bizarre when you consider that there are a lot of developing countries around here that actually need our products. We just have to learn to produce them with the quality they want – this is what was discussed at today’s meeting, basically. And by the way, when we speak about it, we often think it seems a bit utopian, that it will be hard for us to be competitive. Here, in Komsomolsk-on-Amur, the aviation plant clearly shows that not only can we compete, we can outdo other nations in manufacturing certain aircraft, for example.
Question: So far-eastern crabs have never been seen in Ryazan and never will be either, they will all go to Japan? Or fish? That means people in the European part of the country do not see it and will not see it?
Yury Trutnev: You see, when you think of the Far East, you think primarily about crabs and fish, but I am speaking about export-oriented manufacturing.
As for food products, we have to think about that, I suppose. I personally would be happy for all residents of the Russian Federation to have a chance to eat fresh fish, crabs and seafood from the Far East. But we are talking about somewhat different matters: we are saying “learn how to manufacture quality products,” we are saying “learn to process our timber, our natural resources”… We have a different level in mind, we are not talking about shipping crabs to Japan in the future as we used to. We will have to sort it all out separately: how they ship, what they ship, how the tolls are paid, whether the fishing is within the law. It has been reviewed several times but I will also consider this by all means – with respect to fish, timber, and electricity. We have to look carefully at how all these industries contribute to the interests of the Russian Federation. It’s also important that we develop export-oriented industry to promote the interests of the Russian Federation. If we do that, the Far East will yield surplus value, it will ultimately make people living here happier, and that is important.
