Events

 
 
 

Vladimir Putin holds a meeting with Minister of Economic Development Elvira Nabiullina

 
 
 

The meeting focused on investment activity, specifically foreign investment. According to the minister, the 2011 statistical indices “are not bad at all,” with investment in fixed assets increasing 8.3%. Aside from that, the participants discussed Russia’s accession to the WTO and the new opportunities – as well as the apprehensions felt in a number of industries.

Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon, Ms Nabiullina, I would like to talk about investment activity. We discussed this subject not too long ago. Last year’s investment in fixed assets reached nearly 11 trillion roubles, if I am not mistaken.

Elvira Nabiullina: Yes, 10.8.

Vladimir Putin: So 10.8 trillion roubles; how does that compare with 2010? What plans do you have for this year? How is foreign investment faring? How does your ministry estimate last year’s amount? In this connection, of course, let’s talk about our soon-to-come WTO accession: the ball is in our court now and we must take this step. After all, we pursued this as an opportunity for attracting more foreign investment. What forecasts can you make regarding this? This is the first thing.

The second part is also about the WTO. There are certain perils: you and I know this only too well because you together with your colleagues and I travel around this country a lot. The representatives of some industries feel quite justified in their fears regarding WTO accession. But we tell everyone that we have the tools to protect our domestic producers, tools that are envisaged by the WTO rules. Please, let’s discuss these two subjects.

Elvira Nabiullina: In this case, I will begin with investment. The statistics for 2011 look quite good. We expected post-crisis growth to be focused on an increase in investment. According to the latest data by the State Statistics Service, investment in fixed assets last year grew 8.3% to 10.8 trillion roubles in absolute terms. Initially, we expected a smaller growth – the forecast was 6% growth, because the growth rate was small in the first six months of the year, with a decline for several months. But in the second half of the year investment growth increased. It’s positive that for the second year running investment growth has been higher than the economic growth rate. This is evidence of a pro-investment trend.

Vladimir Putin: What is the exact figure? I mean the growth rate?

Elvira Nabiullina: 8.3%.

Vladimir Putin: Is that the growth rate?

Elvira Nabiullina: Yes. The forecast for 2012 was 7.3%, but we may have to review it because of the high growth rate in 2011. I believe that the data for investment by industry are also interesting, that is, where companies invested funds and why. According to surveys, 60% of companies say they invest in modernisation and 30% in production development. Energy efficiency is the driving force in investment at 42% of companies, while 39% said they invest in new production technology, which amounts to a technological renewal. These are good figures indeed.

The statistics service asks every year what hinders companies from increasing investment. We need to know to make our efforts more efficient. The biggest obstacle in 2011 was the lack of company funds, which means that companies hope to increase profits in order to have more funds for investment. Another factor is economic uncertainty and high interest rates. We ranked third the year before last and are fourth now, that is, loan conditions have improved a little.

Considering individual sectors and industries, growth was largely ensured by continued investment in the fuel and energy sectors, which account for about one-third of total investment, 10.8 trillion roubles. Moreover, investment in these sectors has grown 16%.

Investment also continued to grow in agriculture (4.3%) and in processing (6.3%). Investment also increased in education, up 11% and in healthcare, 4%. At the same time, investment in trade, real estate and construction declined. We have analysed these changes in detail. For example, fewer shopping-and-entertainment and retail-and-office space was completed last year, whereas investment in preschools increased: the number of student places has grown 78%.

Funds have also been invested in social projects. A good example is the number of beds at children’s hospitals, which has grown 130%. These are positive organisational changes.

This year we expect an increase in investment in production and manufacturing, where the share of idle production capacity increased when demand fell because of the economic downturn. Statistics show that industrial facilities are now working nearly to full capacity and so companies will need to increase investment if they plan to expand production to meet growing demand. In other words, we expect that following the fuel and energy sectors, investment will also grow in manufacturing.

Considering foreign investment, the inflow of foreign direct investment was larger than in 2010 against the general backdrop of capital flight. In 2011, $52 billion of investment in the Russian economy came from abroad. The figure for 2010 was $43 billion. We have reached 2007’s figures. The figures for 2008 were a record-high, when oil prices were very high and a large share of investment was made in the form of loans. We reported a record figure then, $75 billion. In 2011, it was $52 billion. We expect this [positive] trend to continue.

As for our accession to the WTO, companies point to a decrease in import duties, but there are both positive and negative sides to this. We expect that our accession to the WTO will, first, allow us to increase exports and lift barriers on exports, and second, improve conditions for attracting foreign investment. This is unlikely to happen overnight, but we expect to see this trend within two or three years. But it will also depend on global developments, which influence investors’ assessment of resources and the accompanying risks.

Regarding the second question, you issued instructions in early February to meet with the top executives of companies in different sectors to discuss their concerns over WTO accession. We have held several such discussions and will hold more of them. We have met with representatives of the agricultural, steel, mechanical engineering, farm equipment manufacturing, chemical, petrochemical, pharmaceutical, timber, furniture, textile and garment industries. A total of 165 companies from 47 business associations have attended these meetings. We discussed two issues. The first issue concerned the risks created by a possible increase in imports and a decrease in import duties, and the support measures we could take. The second issue concerned the potential opportunities they see and what the government could do to help get a foothold in foreign markets.

Vladimir Putin: Help in using these opportunities.

Elvira Nabiullina: Yes, use these opportunities, because there has been considerable discrimination against our companies in foreign markets. We can now use the WTO to protect our interests, and we should certainly do it.

Businesses want these [protection] measures to be effective and prompt, because all the requisite measures should be taken by the middle of the year when we plan to ratify this package. The situation differs from industry to industry, and even depending on the type of products in some industries, which is why we have decided to hold in-depth branch meetings, and we will continue to hold them. Our plans include 38 seminars with regional businesses through the end of April.

There are drawbacks in the provision of information and in interpretations. Apart from holding these seminars, we have also agreed to publish concise booklets because only experts can read these reports through to the end now. We will issue interpretation materials by sector jointly with the Agriculture Ministry, because there are many questions regarding agriculture.

The second question concerns the application of WTO mechanisms, as you have pointed out, notably protective and anti-dumping measures. We have thoroughly considered this issue along with the Eurasian Economic Commission, because these functions have been transferred from the national to the supranational level. We have adopted the necessary legislation and now we need to get together with business to streamline management systems to prevent problems and procrastination at the commissions’ meetings.

Vladimir Putin: Yes, we must preclude procrastination. Everything must be done on time.

Elvira Nabiullina: We will do it when dealing with the first business cases.

Vladimir Putin: When do you think this work can be completed in each industry?

Elvira Nabiullina: This month we will hold meetings by industry and regional meetings by the end of April – we plan to visit 38 regions.

Vladimir Putin: Good.

Elvira Nabiullina: There are also some elements regarding state procurement, which we need to consider and approve. You remember that we talked about supporting our companies through the state procurement system.

Vladimir Putin: Yes, to give them preferential treatment.

Elvira Nabiullina: We have drafted an order about such privileges – I think it could become effective within a month – and also outlined a number of other measures. The plan has been approved by the government commission on integration. We are acting by plan and hope that we will lift all of the companies’ concerns, or at least the bulk of them.

Vladimir Putin: This is good.

Адрес страницы в сети интернет: http://archive.government.ru/eng/docs/18418/