02 September 2015

    Sharks from Wall Street recommend withdrawing capital from emerging markets, including Russia. However, there is more policy than economy in this appeal. A discussion on how better to invest in Russian business will take place during Eastern Economic Forum September 3–5. Plenipotentiary of the President in the Far Eastern Federal District Yuri Trutnev spoke of this to readers of “Gazeta.Ru” in his interview.

    – Is Chinese business and Asian business as a whole showing interest in participation in the Eastern Economic Forum?

    – It is showing great interest. We have had four participants apply for one place, and roughly the same ratio of foreign participants. We are now working individually with each delegation: We are asking to reduce the number.

    – Are you “cutting down” on the foreigners as well?

    – The foreigners too. 1.5 thousand of them applied, whereas the forum can hold only a thousand people. After all, we do not see our objective as simply “to meet and talk”. Actually, our forum is not a venue for talks. The WEF is one of the links in the general chain of efforts to develop the Far East. You know, we have already been working for about two years: we have been dealing with the development of the Far East; we could have already stated a year ago: Let’s hold the forum. Why didn’t we announce it? The reason is very simple: Because we did not have anything to offer to Russian business and Western business. We would not have had anything to say besides the general call of “Welcome to the Far East”. Meanwhile, the territories of priority development (TPD) act have been introduced, and the first nine territories have been created. An investment project support mechanism has been developed. The free port of Vladivostok act has been adopted. The possibility of energy development has been analyzed, and the Far East Development Fund has started work. Therefore, we now understand why we are inviting people and what we mean by that. In addition, the Far East is a chance for the Pacific Rim companies to develop.

    – What countries are interested in the TPD?

    – The representatives of 24 countries are going to take part in the forum. The largest delegations are from China, Japan, Korea, Singapore, and Vietnam. There are a few applications from the USA, and only a few applications from Europe. After all, the logistics do not work: immense distances, massive costs. Well, it does not quite make sense: Why should one move capital there throughout the entire world, and how can one control this business? At the same time, there are a lot of applications from our neighbors. And what neighbors those are! We are really being surrounded by the fast-growing economies of the world. If we can get to this chain – and that is, basically, what we are doing – there are a great many chances to win. Well, I will tell you one simple thing. Recently, I had a meeting with the Chinese agency Xinhua, and they asked me the following question: You know, your economy growth rate is slowing, you are facing a fall, you are facing a recession; why should we invest here? I say wait a second – aren’t you asking the wrong question? I am working on the development of the Far East by the order of the President. We have a 5.6% industrial production volume growth and a 110% investment growth index. Do you consider it to be a recession? They stopped talking.

    – It is easier for you: The population of the entire Far Eastern Federal District is 6 million people; it is approximately half of Moscow.

    – Don’t they need to be taken care of?

    – What kind of business will be represented at the forum?

    – We are selecting big business. After all, our forum is not for everyone: This forum is, mainly, for big companies – that is logistics, engineering, agriculture, construction, and the financial sector. Well, almost an entire section of different types of activity.

    – But instead of refusing, it would, perhaps, be better to pitch one more marquee tent and arrange pavilions.

    – Right, an extra hotel, extra restaurants, extra funds… That is what it implies.

    – And a mobile kitchen with buckwheat porridge…

    – You should not accept quests in the form of a field kitchen with porridge.

    The biggest companies’ executives are coming to our forum from different countries. Of course, they will taste our porridge; it is delicious. But we cannot expect them to come. We have a task – to gather the people who make real financial decisions.

    There is always a number of people at such grand events who come to look and listen. This is also good. But it is better to look and listen on television, via mass media. Now, you will all help us – 660 journalists from all countries are accredited for the forum.

    – What do you expect the approximate value of the contracts signed at the forum to be? 

    – You know, it would be a deceit if I told you that we are gathering people for the first time, that they immediately sit down, open their folders and sign for a billion dollars – an absolutely unreal story. There are 68 agreements on the forecasting list. We will calculate everything based on the results of the forum – both the contracts and the value.

    – Japan and Australia joined the sanctions on Russia. However, the business delegations of these countries will, apparently, be at the forum. What kind of kamikazes are they?

    – The decision to support the sanctions was made by some people in the government of these countries, in Japan or Korea. On the other hand, the whole country did not join the sanctions. I met with businessmen, for instance, in Korea – notably, with big businessmen. They said: We have worked with you, we are working and will work with you. We do not feel, let’s say, any slowdown in terms of the business circles of these countries. And we will do everything possible on our part to meet the expectations of the guests.

    – Will you feed them well, for example?

    – Let’s say that we will give them a small tablet: You press a button on it – and you become a resident of the territory of priority development, straight away online. Or a resident of the free port Vladivostok. Or you press the button and find yourself at the state support of an investment project.

    – With just one button? That reminds me of New Zealand. I was told about the procedure for registration of a new enterprise. It is declarative. You email a notification to the Ministry of Economy: I am going to open such-and-such a business and nobody has a right to check up on you for two years.

    – I know. There is a similar story in Singapore. We will be moving in this direction.

    – But there is a regulatory approval system for registration of an enterprise, and there is no such law in Russia that would…

    – You do not have such law whereas we, in the Far East, have one.

    You press a button, fill out a form, and you will be registered as a member of the TPD.

    After that you start talking only to the TPD administration and nobody else. We have an idea, as such, that a person that works, let’s say, in the TPD or free port Vladivostok does not communicate with any other state bodies. You do not need to run and get a building permit; you do not need to get land, get all the services. The TOR management company goes through the most laborious procedures for you. The motivations of the TOR administration and the business coincide: to set up business as fast as they can and provide products. We have this appropriate construction.

    – When special economic zones were created, bureaucrats harped about growth points and singapores in a particular region as well. Several years passed, and it turned out that it was not working despite any of the benefits. Then we decided to rename SEZ as TPD.

    – You know, you are asking a funny question right now. This is the next question. Let’s say a person is setting up an enterprise; you come to him and say: Listen, why are you setting up an enterprise? They tried before you, but it did not work out. It works out for some people; it does not work out for others. It is always like that in business. When we are talking about the territories of priority development, this is not only and not so much of a shell. This is both a shell and a control system and a team which took it up. I definitely understand how everything will be working. In each territory.

    I remember how special economic zones were being created. We drew these SEZ on paper here, in Moscow. Before signing a decision I held negotiations on every TPD with investors looking them in the eye just like I’m doing now with you.

    I asked questions not only as a public officer. I know what business is. I know how to manage it. Therefore, we understand how to screw it up together. And we, actually, understand that it is not enough to sign the documents in offices. We will have to try to make sure with our own bare hands all of these territories work. That is why we are now carefully selecting people for the Far-East Development Corporation. A lot of things will depend on it. I made a decision to lead the review board of free seaport of Vladivostok.

    – Do you think the governors are interested in these TPD? Some people will not want to provoke competition with business with which they had “warm, friendly relationships,” often family relationships… Perhaps we should add one more point to the criteria of their performance evaluation: How much capital has been raised through the TPD?

    – This is not about dry criteria. We have only nine governors in the Far East. Do you think I know anything about the overall performance of each of them?

    – Easily.

    – I believe so too. You can see all of them; they all understand well that by working together we support each other, but we are watching very closely how they are working, how they are they fulfilling their duties, what teams they have. As a matter of fact, all the governors firstly promised the people that they would help them to live a normal life in the areas under jurisdiction; therefore, they are with us under all circumstances – they have no choice. And, secondly, well, it is unacceptable when we go in one direction and a governor in another one; it is impossible. Everything is fine in this respect; we have a shared vision.

    Frankly speaking, the speed of operation and the overall performance vary. For example, Sakhalin before Oleg Kozhemyako and today’s Sakhalin are two different things in terms of response to our proposals. Back in the day, Sakhalin did not make any proposal in terms of the territories of priority development. Well, Alexander Khoroshavin, apparently, did not have time for that. And now, I have just arrived, and Oleg Kozhemyako tells me: We are preparing two territories of priority development in the Kuril Islands.

    – That is what raises doubt. The region is not rolling in money, to put it mildly, and suddenly two territories of priority development at once. Because we seem to have a popular campaign going on: TPD instead of SEZ.

    – I asked him meticulously how he sees these TPD, and what ideas he wants to put into practice. The governor and I agreed that we would have two territories of priority development in the Kuril Islands by the end of the year. It is very important for us that it lives, that it is not only a piece of land with marked out borders. For us the demand for this ground is important. We do not create the TPD before we make sure the business really needs it. If an investor says: I will build an enterprise there for sure – will you put your signature to confirm that you are accepting these commitments? Will you? Great. One investor is good. But one is not enough to set up the TPD. You need at least 2–3 investors. As a result, it is submitted to the governmental level and a decision is made about creating the TPD. There are nine of them approved.

    – How much money will be invested in the development of the TPD – budgetary funds and private ones?

    – There are about 40 bln rubles of public investment for the next three years since 2015.

    The amount of private investments is around 400 bln rubles. The current multiplier amounts to about 11.6. In other words, one budgetary ruble accounts for 11 rubles of extra-budgetary investments. I think we will raise it.
    Because we invest funds in the TPD infrastructure and incur costs; however, when the infrastructure is created, we will not have to spend the budget, and the number of the participants of the TPD will still grow.

    – Is the Ministry of Finance cutting your budget? Anton Siluanov always wants to “slash” something.

    – Minister Siluanov has attempted to do it once this year. He is not attempting it anymore. Because it, perhaps, does not make sense to waste the President’s time.

    As soon as the Ministry of Finance had such “predatory plans,” I referred to Vladimir Vladimirovich; he commanded to arrange a meeting at his place. He listened to us for ten minutes at the meeting and simply told the Ministry of Finance: Do not cut anything for the Far East. This is, actually, the entire story.

    – What amount of money from the Russian National Wealth Fund will be used for the Far East?

    – There are no funds from the National Wealth Fund. Big companies can request financial support from the government just fine; you know about it, and they are doing it. I will not name them. This is their road, their way. We can in some way support or not support them.

    But we proceed from the fact that our main objective is not to ask for the money from the budget because this is such a bizarre thing, to my mind; our main objective is to structure projects to such a level that it would be profitable to invest in these projects. In this case we will find the money anyway.

    It will be the money of the Far-East Development Fund which, thank goodness, started the work. It will be the money of other funds and banks. It will be the money of the Russian National Wealth Fund. It does not matter; in this case one will be able to invest in it because the return mechanisms will be clear, the earning capacity will be clear, the risks will be clear – everything will be laid out there across the shelves.

    If one talks about such large projects as the transport corridors “Primorye-1” and “Primorye-2,” for example, it requires a lot of money. Hundreds of billions of rubles. It is awkward to ask the government for the money for these projects. We want to build these projects, elaborate them so that we could return the money. And then one can already talk about the sources of financing. One can do it.

    – After all, what projects will you have to suspend? They wanted to build another “Skolkovo” on Russkiy Island.

    – We are not adjusting any of our plans, nor are we rescheduling anything. Neither are we on Russkiy Island. We believe there can be no lack of financial resources; there can be a lack of intelligence.

    Today, all the markets are collapsing; the stock market is collapsing; there is nowhere to invest today. If you make up a good project, you will definitely find the funds for it.

    – Some federal special-purpose programs have already been reduced; some of them have been rejected this year. Now a discussion on the new triennial is about to start, and the costs are likely to be cut.

    – I assure you: We have the opposite situation. I know for sure, but I will not tell you now because this is still our professional secret. I know where else to raise capital for funding of Far-East development projects. We are doing it at the moment. We proceed from the fact that we clearly understand how to increase the flow of money in the territory as we are moving further. First, we began to adjust other federal special-purpose programs. Let’s say we have deliberately changed the rules and procedures of government; we did so in order that our federal special-purpose program agrees with the Ministry for Development of the Russian Far East.

    In other words, we started analyzing each programme to see what it was doing for the Far East. We have discovered a lot of distortions. In a number of ministries, far less money is spent per one inhabitant of the Far East than an inhabitant of the European part of the Russian Federation. The ministers were told to mend the situation. The first reaction of the ministers was as follows: It is impossible. Then Dmitry Anatolievich Medvedev held a couple of meetings on this topic. The process is already underway.

    I will remind you the President emphasized the priority of the development of the Far East not only for us, but for all the Government of the Russian Federation. There is an instruction of the President about the taxes which will come to the state from new projects. Part of these taxes will be sent back to financing of the Far-East Development Fund. Thus, the fund will be spending the money and receiving it back from the projects. And we receive a sort of “perpetual motion machine.” We have no problems with money; everything is good. We just need to move forward – that’s all.

    – Are you afraid of the slashing of budgetary funds?

    – I am. I consider it to be one of the most serious risks. I am absolutely convinced that all transformations, everything that is underway now, everything that is planned is efficient, effective, directed to the interests of the people. And this idea can be easily compromised by the fact that some cheat will steal something somewhere. We understand this risk and are trying to hedge it.

    – When will you start a giveaway of hectares to Russian citizens? The proposal does not look competitive.

    – What are you talking about?! Who thinks it does not look competitive?

    – Those who are not residents of the Far East. Of course, the locals are going to be interested, but people from the midlands are not going to move there on a mass scale. There is no point. We discussed this topic in our editorial office. We have come to the conclusion that if the authority gave away at least 10 ha of land and allowed to hire as many Chinese as needed, the Russian citizens would probably begin to move back there. As landowners or, if you will, as planters. During the Tsarist era there were similar and more profitable programs.

    — I will be completely honest: We do not regard allocation of a hectare of land as a resettlement program. We do not see it as the program that will result in the fact that half the European part of Russia will move to the Far East. Trust me, we are experienced people: If we understand that we want to work for relocation, then this is a more complex program which requires additional tools of financial support. Perhaps it will pass into this plane; perhaps we will work on it if we figure out where to get money for it. We have not thought about it yet.

    But I believe the presence or absence of land is the extent of economic freedom. It is impossible to create anything in life if you do not have land.

    Do you know how much it takes to receive a plot of land in Russia on average? Five to seven years. I do not understand at all how a business manages to progress in this situation. Any project will become obsolete during this time; it will be impossible to take out a loan at a bank. And if it is possible to get a plot of land in the Russian Federation by just pressing a button on a computer, it is really great. These are excellent options for the people. If 600 thousand inhabitants out of 6 mln use the free-hectare program, I will consider it a great success.

    – Will you take this hectare?

    – The more I work on this topic, the more often I have a feeling that I may think of this topic.

    – What will you do if you make this decision?

    – I cannot run a business now. But I will not be in office my whole life. If one takes a hectare in the Kuril Islands and engages in sea culture, it is very cool. We do not have many fish farms there. They earn a large part of the gross product all over the world. The majority of the seafood that is on the table all over the world is from fish farms; it is not wild caught. Our entire water area is free. The quality of the products is crazy. Why not?