Dmitry Medvedev meets with heads of Business Initiative working groups
Dmitry Medvedev: Take your seats, please. Some time ago I agreed with Mr Belousov (Minister of Economic Development Andrei Belousov) that I will meet with working groups that were preparing roadmaps for National Business Initiative projects, and with representatives of the business community and federal departments responsible for the relevant areas. I have endorsed some of these maps, and we are meeting to discuss what to do next. As far as I know, the other five roadmaps are still being drafted – on streamlining the procedures for the registration of companies and the right of ownership, on upgrading regulatory procedures for business, on promoting competition and improving anti-monopoly regulation and on expanding access to purchases of infrastructure monopolies and companies with state participation.
We believe that these roadmaps will also be ready before long. Most important, dialogue with the business community and experts should continue during the search for solutions and their formulation. This is probably the main point, and this is one of the goals of the Open Government. The investment climate also remains one of the most important areas of the government’s work, and our goal is to make sure that its gradual rather than instantaneous improvement should be felt by everyone, including private companies.
Experts stress one particular point – obviously, Russia looks quite confident on many macroeconomic positions, especially today, whereas – and this also common knowledge – in different ratings on the ease of doing business we look very bad. Of course, we can argue about methods and the universality of yardsticks, but in any case we look bad practically on all counts. It doesn’t matter whether we are 120th, 140th or 100th because none of them are any good and reflect the general feeling of both foreign and Russian business people.
We have agreed to change legislation, but it is no less important to change law-enforcement practice. Most analysts agree that our legislation is far from the worst and is up to date in terms of fundamental statutes, such as the Civil Code, as well as laws on the budget and taxation. We plan to reach 20th place by 2018 – I don’t know what will come of this, but I hope very much that we will make a breakthrough by combining our efforts. I want to say once again that the most important thing is that business people, irrespective of the size of their business, see improvements every day.
I have signed three instructions for roadmaps: on customs administration, on export support and on improving access to energy infrastructure. They have been given legal status with precise timeframes and a list of responsible officials and key efficiency indicators, which enable us to determine whether we have achieved the desired results.
In the sphere of customs, by 2015 the number of documents required for crossing the border should be cut from ten to six for imports and from eight to four for exports, which is a considerable difference. In addition, the time required for customs procedures should change and modern technology should be introduced for the declaration and release of goods.
The energy roadmap provides for cutting the time needed for connecting customers to the grid from 281 days to 45 days by 2015 and to 40 days by 2018. The number of connection stages should be reduced from ten to six and to five by 2018, and the cost of this procedure should be cut drastically (we calculate it as percentage of GDP and currently it is nearly 2000% of GDP per capita) to 25% by 2018.
I hope that all this will enable us to increase the number of exporting companies, double the value of non-oil and gas exports and also diversify the structure of this export group.
We have almost finished a rather complex construction roadmap, which is designed to bolster large-scale construction of comfortable housing. Under this roadmap, the time it takes to obtain construction permits should be cut nearly eightfold by 2018. These are impressive figures; if we achieve this goal, I would say that the government’s performance was good, at least in this area. Here is the goal: to cut the time it takes to obtain a construction permit from 423 days to 56 days.
Of course, it is very important to resolve the perennial land issue. It is very difficult to build something in Russia, yet vast areas suitable for construction lie idle, including land plots of ministries and other state agencies. Yesterday I was in the Moscow Region, and I can tell you that there are large plots lying idle there, although the region is actively involved in commercial projects and the cost of land there is the highest in the country. These plots belong to public organisations, ministries, in particular the Defence Ministry, and other agencies. In short, it is a problem which we must resolve as quickly as we can.
Dmitry Medvedev: This is the task that we must resolve as quickly as possible. As far as I am aware, experts support large-scale privatisation of land; certain government agencies believe that land privatisation can be conducted only after its cadastre value had been recalculated and territorial planning documents approved. Both position have merit, but I believe that we should be getting ourselves ready for the privatisation of land plots as well. We have been saying for years that the land is of paramount value for us and that we cannot sell it and that it belongs to future generations. What do we get as a result? Very often, we are left with degraded land and a lack of real opportunities, including in the sphere of housing construction, social infrastructure and addressing problems faced by our people. Therefore, we will need to make a decision.
Five road maps are being prepared, and colleagues will report on the progress. Let's get to work. I hope that the Open Government experts, the ones who are willing to contribute to the task at hand, will join in the work of federal executive bodies. Mr Belousov, what can you tell us about road maps?
Andrei Belousov: I will be really brief, thank you. Mr Medvedev, colleagues, let me first give you the timeline of events: the national business initiative started out in December 2011 at the Delovaya Rossiya convention where Delovaya Rossiya and the Strategic Initiatives Agency were instructed to develop a national business initiative to improve the investment climate. As a matter of fact, this decision was based on two key ideas. First, it must be a system-wide reform and system-wide modernisation of the institutions that determine the entrepreneurial climate in Russia based on best international practices, quantifiable wherever possible, including relevant Doing Business performance ratings. Secondly, this work should be carried out by and overseen by investment climate consumers, if I may put it this way, or businesses themselves.
Accordingly, as Mr Medvedev has already said, the work was carried out in phases. The first four maps covering the most vulnerable points were developed in May and assessed primarily by businesses. They have been approved by the supervisory board and codified in law by the Russian government. The next five maps are now being drafted: property registration, enterprise registration, competition promotion, improving the regulatory environment and improving access of medium-sized businesses to government procurement and purchases by state-owned companies.
I would like to briefly describe the features of the approach dubbed the national business initiative. The first thing that makes it stand out is its concrete project form. All initiatives have been clearly defined as projects with specific goals, quantifiable indicators, target indicators, activities, people in charge, and, most importantly, milestones, i.e. specific events that can accurately gauge whether or not an event had occurred and, accordingly, whether an action had been fulfilled or not. I’d be remiss if I don’t express my great appreciation to Boston Consulting Group, which has not only developed the methodology but is also providing methodological support for this work.
I have already mentioned the second feature, which is that working groups will be the basic mode of operation. It’s a traditional approach, but these working groups will be different in that they will be headed by entrepreneurs. All four major associations – the Russian Union of Industrialists and Entrepreneurs, the Chamber of Industry and Commerce, Opora Russia and, of course, Delovaya Rossiya will be involved in forming working groups. In accordance with the government instruction, working groups must include representatives of federal executive bodies that oversee the work under a particular roadmap and experts. Joint efforts by three main participants (businesses, experts and officials) led by businesses is an innovation that yields results.
The third feature is that, in accordance with the instructions of the prime minister, roadmap benchmarks should and will become key performance indicators of the work performed by heads of relevant federal executive bodies in Russia. This decision should be issued as a presidential executive order. The executive order has a deadline set at September 1. We are about to complete this work and will submit the relevant document to the government within a week.
Finally, the next feature is that the benchmarks have been formed using best international practices. For the most part, we took benchmarks which have to do with reducing the decision-making time, paperwork and costs from Doing Business ratings.
Finally, the last feature is maximum openness and transparency of the process. The process of drafting roadmaps and their implementation requires regular public reporting in the form of roundtable discussions, media coverage and Open Government and expert group meetings.
The last thing I want to mention has to do with what we are about to begin to do and what we are discussing today, the monitoring system. The monitoring will have two levels. The first level is traditional administrative oversight where field-specific departments will submit roadmap-related reports and materials to the Ministry of Economic Development. The Ministry of Economic Development will summarise the data and submit it to the government. The second level is performance oversight to be carried out by working group members and the Strategic Initiatives Agency and business associations. The gist of this control is to evaluate the extent to which government resolutions or rather their implementation achieve the goals set forth in the roadmaps. In other words, we won’t just monitor compliance with some specific indicators or objectives of the roadmaps. The opinion of the business community on this issue will be paramount and will be reflected in the decisions of the working groups.
Mr Medvedev, we’d like to request that initially… The government directive has called for a quarterly report, but we believe reports should be made on a monthly basis before the end of this year because the bulk of instructions are to be fulfilled in 2012. We should actively work on this issue now.
Dmitry Medvedev: Okay, go ahead. Should we change something in our decisions?
Andrei Belousov: No. In today’s protocol we’ll…
Dmitry Medvedev: Or should we just agree? Okay, let’s…
Andrei Belousov: I meant to say that the protocol contains the relevant instructions and to request your support. Thank you.
Dmitry Medvedev: Thank you very much, Mr Belousov. Of course, I will do everything required by the protocol. Now I’d like to address all those present. Please, express your opinion, but keeping in mind that there are many of us and we are all busy, I’d like to ask you to be brief so that others have a chance to have their say as well. Mr Nikitin, let’s start with you. Those want to speak please raise your hand.
Andrei Nikitin (General Secretary of the Strategic Initiatives Agency): I’ll be brief. When we launched this work, we deemed it necessary to consider not only the ratings of the World Bank but also real problems of entrepreneurs, of every private company. Delovaya Rossiya, which represents business people, helped us a lot. It undertook the coordination of the working groups. I think we have largely reflected real problems in the roadmaps.
As Mr Belousov said, the working groups consisted of entrepreneurs. We took into account the opinion of all business associations and used the methods suggested by the Boston Consulting Group.
It is very important to make two points in this respect. We involved about 22,000 people in crowdsourcing. They voiced their proposals on the National Business Initiative on the web and we discussed them with the Open Government. You will recall that we reported to you on this work in spring. I think this was quite an open effort.
Dmitry Medvedev: I’m just curious, Mr Nikitin. Was the outcome of this crowdsourcing ultimately incorporated? After all, it wasn’t just an exercise in new technology…
Andrei Nikitin: There were about 7,000 ideas that were reflected in some 300 proposals. The working groups discussed all of them. In some cases we invited crowdsourcers and they expressed these ideas themselves, and in others we simply reviewed their proposals. I think the heads of the groups will say… Our crowdsourcing site on exports support was particularly active. Mr Fradkov (Director of the Export Credit and Investment Insurance Agency) received the most proposals.
As of today, four roadmaps are ready and five are still being drafted. We’ll soon release another two. I think about 500 people are working on this offline and about 12,000 are involved in regular crowdsourcing online.
I would like to say a few words about future tasks. Initially, federal agencies were somewhat sceptical, thinking that it was just another idea to help win elections. I am pleased to say that this scepticism was replaced by real interest, real work and real cooperation. Thanks are due to the Open Government for joining in this work early on. I believe that we should keep getting the public onboard as much as possible. All of this builds entrepreneurs’ trust in government decisions. It is very important not to lose this trust, and to do so we should use the latest electronic equipment to monitor each violation of the indicators included in the roadmaps. Entrepreneurs who have to spend more time getting their goods cleared by customs or getting connected to a power grid than they were initially told should be able to talk about it publicly (currently available technical equipment allows them to do so). Each such case contributes to the performance oversight mentioned by Mr Belousov. It is likewise important to involve the Open Government in the oversight so that roadmaps don’t become part of departmental or private vested interests. The issue is not only about entrepreneurs, so I believe that we will be able to monitor a broad range of things. How do we go about organising such oversight? Basically, I think it should be a broad-based coalition including federal authorities, primarily the Ministry of Economic Development, business associations and the Open Government. I believe that we will be able to organise the two-level oversight mentioned by Mr Belousov. Mr Medvedev, please let’s finalise our proposals regarding oversight and come up with a good, functional and honest system. Thank you.
Dmitry Medvedev: Thank you very much. Of course, these proposals should be finalised. The system should not only be open but honest as well. All right, agreed then. Anyone else? Colleagues, I'm not going to go through the list, so as not to make our meeting too formal. Please raise your hand if you want to say something. Please go ahead.
Leonid Kazinets (chairman of the board and owner of Barkley Corporation): Thank you, Mr Medvedev. My name is Leonid Kazinets. I head the working group on administrative barriers in the construction industry. First of all, I would like to thank the government for paying so much attention to our industry, and thank the colleagues who helped us do the work, particularly the team led by Economic Development Minister Andrei Belousov, the Strategic Initiatives Agency and Delovaya Rossiya as represented by Messrs Nikitin, Galushka and Pirozhenko. These people helped us a lot.
Unfortunately, after the roadmap was finished (in late April), the painful process of reconciliation began. I reported to Mr Putin on its completion on May 3. It has not been signed yet. Unless you have signed it right before this meeting...
Dmitry Medvedev: No, I haven’t. I’d love to make your day and surprise you by saying that I have just signed the construction roadmap, but no, I have not.
Leonid Kazinets: Unfortunately, this is true. As a result, we have largely refocused our attention on instructions and regulations governing the activities of field-specific ministries and agencies and left a lot of business initiatives unattended. This is great, but I'm afraid it will not work. Monitoring conducted on a monthly or quarterly basis is great, but it will not work as it should. Please ask the business community to participate in drafting laws as well, so that ministries and agencies are not the only ones doing this. We are prepared to hire lawyers with experience of working with the Duma, and we will even pay them for their work (it’s not a lot of money), because if ministries alone drafts laws, we will have to go back to Resolution 982. I was involved in drafting it two years ago. It is a remarkable resolution, but today we have what we have. What is it exactly that we have? Today, most new businesses orientated toward the Russian market are being built abroad, including in Kazakhstan, China, and so on. We import items that were manufactured at foreign-based factories built with the money of Russian entrepreneurs. The examples abound.
With regard to housing construction, we built 68 million square metres of housing over the course of one year. According to the State Statistics Committee, 32 million square metres of structurally deficient housing went off the market in 2010. According to our estimates, the number is 70 million, and I can prove it. So, more housing is being taken off the market than is being built. We should be building as much as 150 million square metres. That’s one square metre per person, if you take the entire Russian population.
Dmitry Medvedev: I remember that we came up with this number in 2006 when I got involved in the national project Affordable and Comfortable Housing: one square metre per person.
Leonid Kazinets: Today we are losing 30 to 70 million square metres, according to various estimates, while we are building only 60 million, which means that we have not resolved the problem. That also means that if we continue doing what we’ve been doing, nothing will change. This is a policy issue: please allow us the broadest possible access to the discussion of laws. Let’s discuss this with the Strategic Initiatives Agency’s working group, with the government’s Expert Council, let’s include all the national business associations, but give us the right to veto bills, for one very simple reason: businessmen are not idiots, and, no matter how nicely you dress it up with fine-sounding words, if a draft law such as one on lifting administrative barriers, on increasing, expanding or improving something, does more harm than good in our view, it should not be approved. This is a point of principle. Because currently I find myself in a situation where I, as head of the working group have been reconciling, getting approvals and agreeing for three months… so I found myself in a situation that I was ready to agree to any changes.
I have a comparison chart: what we proposed towards the end of April and what is currently awaiting your signature. We believe that we’ve lost 60% of business initiative. But I ask you to sign at least this, because at least this, phrased in the mildest wording, makes it possible for us to move forward. We can’t retreat anymore; there is the whole of Russia behind us, because all these things have been watered down as far they’ll go. If we approve laws that stick to the letter of the roadmap, they’ll do more harm than good, I’m absolutely convinced of that. So I’m asking you to instruct the ministries and departments to develop all draft laws, and changes to legislative initiatives, at least in the area of construction (the Land Code, the Urban Planning Code) jointly with us, to make it possible for us to introduce our draft laws and in effect give us the right of veto. Because if a domestic producer says “we don’t need this,” why should the ministry persist in pushing it through? What’s more, we examined the documents published in 2010; over 100 of them, 86%, are detrimental to domestic producers, although they hide behind wonderful wording. Thank you.
Dmitry Medvedev: As a rule, every major problem is initially formulated as a measure to support some business or social sector, but then it degenerates into the exact opposite of what it was designed to do or gets distorted in the course of being implemented. Meanwhile, I’d like to ask you based on Mr Kazinets’ speech: where do they keep this roadmap? Where is it?
Leonid Kazinets: They say you have it. Maybe check with the government staff...
Dmitry Medvedev: I don’t have it. But I’ll check; if it’s awaiting my signature, I’ll sign it of course. But you think they have taken out 60% of the useful things, and 40% of the more inferior things are left, but I should sign at least this – is that what you’re saying?
Leonid Kazinets: In addition, I ask you to grant us the right of veto so that we don’t lose everything that’s left in the process of endless reconciling, getting approvals, etc.
Dmitry Medvedev: No, you’re already… I’ve got a good memory, but I’ve also made a note of this. You say concerning the right of veto: give it to us once. I’ll talk on this issue now.
Leonid Kazinets: Give us an option to work things through and we will develop the correct additions to the main legislative document based on this roadmap.
Dmitry Medvedev: You know, I’ll put it very simply: if you’re not satisfied with the roadmap that was developed with your participation, I will not sign it! Simply because there is no use creating a senseless document that either won’t work or – I repeat - will turn into the polar opposite of what is meant to be. I suggest that I give you back this roadmap, you write down everything that is required, meet with your colleagues in the economic sector and construction sector, you will probably adjust it, but submit it again, so that it includes not 40% of regulations that are good enough but at least 80%. Agreed? Where is the map?
Leonid Kazinets: Yes, thank you very much.
Maxim Akimov (Deputy Chief of the Government Staff): Mr Medvedev, that was in fact agreed. It was the result of a difficult compromise, we literally carried it in our hands (your assessment of the results of the development of the draft law is spot on) although it lost a considerable part of what had been proposed.
Dmitry Medvedev: Why do we need a well-rounded compromise that leads nowhere? I do know what it takes to approve a document. It can be polished to such an extent that it meets with everybody’s approval but is devoid of all meaning. So are we agreed? We send the roadmap back for revision, and given the powers at my disposal I would like to set the deadline for you. You have a fortnight to improve this roadmap and submit it to me for my signature. I also appeal to the business community, the authors of the roadmap and naturally the government staff.
As far as the right of veto is concerned, it cannot be merely perfunctory. But I will tell you plainly: given the communication and monitoring system that we are creating, if you are against an initiative, you should just come right out and say so. If they do not hear you, raise the alarm, knock at every door and at the door of the Open Government, and at my door, if necessary, since my door is also open for you. Thank you.
Maxim Akimov: Thank you very much.
Dmitry Medvedev: Yes, and the last thing that I want to say is in reply to what you said on asset retirement. A law on major housing repairs has to be adopted. It is a complicated law and the social consequences it creates are complicated. I have heard it recently. We agreed to revise and improve it, and yet we have to move forward in this direction – otherwise no matter how much housing we build, asset retirement will cut down on any gains we make, because buildings are subject to wear and tear and become uninhabitable over time. Who would like to continue? Colleagues, please take turns.
Vitaly Survillo (Chairman of the Board of Directors of Espro and Vice President of Delovaya Rossiya): Let me begin. I am Vitaly Survillo, a working group, the customs administration issue. It was thought to be the second most, if not the most complex group, but fortunately it was agreed and approved by you on June 29. This roadmap sets out 40 measures; if they are implemented to the letter, Russia will be able to make serious advances up the ratings of efficient and convenient customs procedures. However, these measures have differing rates of implementation, they extend over time, they affect business differently, and they concern a great many departments. Unfortunately these measures are not always interpreted in the same way by business and the Federal Customs Service. There are also parallel processes: we find the simultaneous reforms of the customs administration within the Customs Union rather baffling. We hope that the Federal Customs Service of the Russian Federation, in defending national interests, takes up the most advanced positions in these consultations and we hope that within the Customs Union the Federal Customs Service will be able to get Kazakh and Belarusian companies involved and invested in our national jurisdiction. But so far, unfortunately, these consultations within the Customs Union have taken place without consulting or eliciting the views of businesses. We find this very confusing.
Given the complexity of the context, we believe that continuously monitoring how the roadmap is being implemented is a task of national importance, so that we can prevent the roadmap from withering completely and being stripped of all meaning in the process of constant amendments and adjustments which we witnessed in the last stage during the final wording of the document.
As for the short-term events up to the start of 2013, we have provided a 17-point roadmap. From the standpoint of business, I would divide them into three groups. The first group are the measures which require our direct participation jointly with the executive bodies. The second group are the measures that are being developed by the executive bodies – we can only monitor these. And there is a third group of measures, where businesses are excluded from their development and monitoring.
Regarding the measures which require joint development, I’d like to draw your attention to the most important aspect, which is the fact that we planned to develop a comprehensive programme for improving transport in seaports in September 2012. After you signed your directive on the roadmap, our first contacts with the executive bodies, the Ministry of Transport and the Federal Agency for the Development of the State Border Facilities of the Russian Federation put us on our guard and confused us. The bottom line of the departments is that our legislation has everything it needs and it is up to you to decide how to use the law in each specific seaport because ports are a delicate matter, they require manual adjustment, and we have done everything that we could. Meanwhile the situation in the ports is deplorable. The country with the longest coastline in the world, the country that has a surprisingly convenient location in terms of transit flows has all but lost its status as a maritime commercial power. The main problems that have accumulated in ports can be divided into two groups. The first is the absence of any interplay between the executive bodies represented in the ports. There are over 40 executive bodies, and you have to negotiate with each body, hold separate talks with each body, submit specific documents to each body. There is no single coordinated system (or one-stop-shop service system) in ports. It takes an enormous amount of time and enormous effort, and requires a ridiculous number of documents. While under the international convention which we’ve signed up a cargo owner is required to produce six documents, in Novorossiisk say, they are required to produce 44 documents, including for example education certificates of the crew members. To this day in this country a ship does not start to be unloaded until it has been visited by a commission representing all the federal executive bodies. Why such a full inspection? Besides, the commission is invariably late to arrive, as a result of which the vessels spend more time idle in ports. Every agency comes up with its own corporate objectives and gives no thought to the end result, which is the cargo owner. There is no single coordinator at the port, and our main proposal is for the Transport Ministry, or any other ministry you charge with the task, to be responsible not only for preparing a “one-stop” legislation procedure, but for implementing it in practice as well. Somebody must be responsible for coordinating port activities.
The second problem the ports face has to do with the customs. Customs offices in the sea ports are specialised, that is, the cargo in ports can be processed only there and nowhere else. The timeframe for processing goods at marine customs posts is the lowest within the Federal Customs Service. One-fifth of cargo is actually inspected. In accordance with the practice that is becoming more widespread, cargo owners are forced to display the container for independent customs supervision. This is not mandatory, but they won't sign the documents without it. So, producing a container for this form of inspection, initiated by customs service, takes several days extra.
My point is that any cargo movement within a port costs money, and also that the railway trains that are ordered for unloading – if you do not use them on schedule, you have to wait another three days before you can place a second order. The result is a chronic transportation bottleneck, because customs bodies at sea ports are much slower than at the automobile crossing points, let alone air terminals. As a result, the cargo turnover at the St Petersburg port dropped by 1.5% in the first five months of this year on the same period of 2011. Meanwhile in Kotka it increased by 7% and Latvia’s cargo ports increased their turnover by 17%.
Regarding activities that are not within our frame of reference but which we can monitor, the main point that everybody has already announced is the introduction since June 2012 of advance notification in crossing points. I am sure you have received some triumphant reports to the effect that everything is fine and that every cargo processing time has diminished. Unfortunately, this is not quite the case, because the rationale of advance notification was that advance information makes it possible to bring in the risk management system so that when the goods arrive at the border the customs officer knows what to do with them. In reality the resolution of the Federal Customs Service on the procedure of the use of advance information came into force two weeks later than scheduled, and besides, it provides for a six-month period during which the customs agencies have to adjust their software. This means that the risk management system based on advance notification will not work for another six months, and in reality, only kicks in when the goods arrive at the crossing point, at which point the customs official, reading off the modernised bar code, punches the data on the goods by hand into four different systems.
I would like to join my voice to that of the previous speaker and say which changes in the road map we do not welcome. Item 7 should contain a provision that rules out duplication of electronic documents on hard copies. This, Mr Medvedev, applied only to the goods not identified as risk goods, that is, where everything is normal and only the papers are inspected. For some reason, at the last moment the deadline was shifted from September 2012 to 2014. We do not see the reason why. If the goods are normal, why should the documents be duplicated on paper? Why should this provision be postponed until 2014?
Another issue is the creation, reorganisation and dismantling of customs posts. This is an old headache that you are aware of. But there again, I would like to note that for some reason the provision has been dropped from the text about “paying particular attention to establishing the specialisation of customs posts.” You see, one may change the specialisation of a customs post without shutting it down, thereby making that customs post useless. One example is the Svyatogorsk pulp and paper plant, which is three kilometers from the Svyatogorsk customs post. Twenty big vans come from Finland every day to provide the plant with chemicals, I believe the amount is 120,000 tonnes a year. Now, pursuant to the decision passed last year, the Svyatogorsk customs post has been removed from the list of posts specialising in chemical products without any prior consultations with the business community. The Governor of the Leningrad Region is pulling strings to make sure that each time the ban on the operation of that post is postponed. On August 1, theoretically, the handling of chemical products by this post will be banned and the Svyatogorsky plant will grind to a halt.
As regards the road map items with which we are not immediately involved (with good reason). I would like to take advantage of the presence of the Finance Minister to highlight the following point: we believe it is inadmissible that Federal Customs Service employees receive much lower wages than those of other analogous services. Very little may depend on us, but we believe that this is a matter that should be looked into so that the salaries and social benefits of FCS employees are raised to the average level.
We are also looking forward to the introduction of the system of performance indicators of Federal Customs Service workers, something that the Ministry of Economic Development and the Federal Customs Service are engaged in.
And very briefly, two final points. The Federal Customs Service still adopts regulations without consulting the business community. True, Andrei Belousov has promised that the issue will be resolved as of January 1 and the Regulatory Impact Assessment system will be spread to the customs system as well.
In general, in conversations with executive bodies (customs bodies and others), they always speak about the conflict of interests between the state and business. Mr Medvedev, in my opinion, there is no such conflict. Both business and the state are interested in transparent, predictable and efficient customs administration. This meets the interests of the state, of good-faith entrepreneurs and good-faith customs officials.
We are also sure that the proposals made by businesses, many of which have been put on the back burner, pose no threat to the fiscal aspects of the Customs Union. On the contrary, they will help to get rid of grey imports and will increase budget revenues. On these issues, Mr Medvedev, you and your government can always count on the support of the business community, because we are more interested than anyone in our customs administration becoming a shining example for other countries. Thank you for your attention.
Dmitry Medvedev: Thank you very much. Everything you said is good and right. Only I would like to ask you to be brief because there are many people here. Examples are important, but by and large we know what is happening everywhere.
Some brief comments on what you have said, Mr Survillo. I agree with you all the way regarding the Customs Union and the possibilities for exchanging opinions and information in the drafting of corresponding documents. In effect, we have transferred some state functions to a supranational agency, and business must be involved in these contacts and these negotiations. We should see how to fit this in, though, because it is not at the government level when we may say, okay, let's set up a working group under the customs service, for example, you come up with proposals and if there is something you do not like, report to the higher authorities and complain that they don’t listen to you… Here we have three states, and I think the matter needs to be discussed. I will issue instructions to prepare the proposals to integrate you into these activities, taking due account of the position of our partners, because we cannot afford to ignore them - I mean Belarus and Kazakhstan. I hope they will not object. Regarding the situation in ports: clearly, as you say, the situation is bad and it genuinely needs to be changed. I don’t know why so many documents need to be presented, I don’t know why this commission is involved. Perhaps to collect some kind of levies, perhaps to demonstrate its relevance, but of course all this impedes work.
Concerning duplication on paper: this is of course a totally strange thing. We should look into it, and I would like the customs authorities to express their position on this. If we are moving towards electronic media, why keep the paper duplicate and why should it be cancelled in 2014? There must be a coherent argument there. Please, go ahead (addressing Sergei Fakhretdinov, Director General of the Neftegazinvest Investment Company). Work must go on, of course.
Sergei Fakhretdinov: Mr Medvedev, colleagues. Our map is called “Broader Access for Medium-Sized Businesses to the Procurements of Infrastructure Monopolies and Companies with State Participation.”
Everybody knows that the development of private enterprise is a key priority in the country’s economic development. The middle class is the core element of all the leading world economies. The share of the middle class, or rather, of small and medium-sized businesses, is on average 50% of the GDP. In this country, owing to the historical structure of the economy and other factors, that indicator is barely 20%. The percentage of people employed in this sphere is about the same. Of course, this is not sufficient if we are to meet the government target of diversifying the economy and making it more competitive.
The state has done a great deal in recent years, and various measures have been taken in support of small and medium-sized businesses – I mean development institutions, various legal, financial and administrative measures. It is true that the state spends billions of roubles to support small and medium-sized enterprises. We propose adding to this set of measures one more project that has to do with stimulating demand for the products of small and medium-sized enterprises, which in our opinion can be essential in the medium term and in the development of our economy. I am referring to giving small and medium-sized enterprises broader access to state company procurement. Today these procurements account for 8 trillion roubles annually, or about 20% of the GDP. Today the access of small and medium-sized businesses to state company procurements is limited, and according to many experts, it accounts for just 2% of the total. In the U.S., for example (it may not be a very appropriate example considering the economic problems in the United States, but in terms of the problem at hand it is fairly indicative), the share of small and medium-sized businesses supplying the needs of the army through subcontracts with major corporations amounts to 30%. That would be a fantastic indicator for our defence industry. Behind it is the government agency established back in the 1950s. By the same token, another important problem is solved, and that is the introduction of innovative ideas, most of which are generated by small and medium-sized businesses across the world. This is a very complex topic which is also touched upon in our proposals.
What is the current situation with state company procurement? The system of qualified selection of procurers for state companies is aimed at pooling in single lots products that are technologically and functionally disparate, which of course gives an edge to big companies with which small and medium-sized businesses have to compete. The so-called systemic integrators, authorised providers of goods and services in state companies, is a strictly vertical structure beginning with a subsidiary and a sub-subsidiary and so on. In other words, the people who work on the ground and make the product, their profit margin is pruned by countless middlemen standing above them. The tender procedure of state companies today is oriented entirely towards price. That amounts to a direct ban on the use innovative solutions and technologies, and this feature calls for serious analysis. We should move on to the life-cycle and cost of ownership system in the process of state company procurement.
Also, there is no ‘one-stop’ system in the state-owned companies in terms of implementing innovative solutions, meaning they can send you on such a wild goose chase that it will take two years to get the requisite approval for an elementary product that is essentially already used all over the world. In other words, the system needs a ‘one-stop’ system so that the entrepreneur knows where to go, how to test, at what range, how long the product's service life should be, and after that it should to be able to be used in state-owned companies according to a clear procedure.
And most important, of course, is the lack of state-defined targets for the participation of small and medium-sized businesses in procurement by state-owned companies, as an element of public policy to support small and medium businesses. What do we propose? Mandatory assignment of reference targets and the establishment of a compulsory share of small and medium-sized businesses at a rate of 20% in direct purchases by state-owned companies.
I have already said that this would at least partially eliminate intermediary companies. Another 20% would be required in the first level of subcontracting; in other words, we propose a tenfold growth rate in the first stage. This should be a condition for tenders by state-owned companies and should be clearly digitised and monitored at all stages. By 2018, we propose to increase direct purchases of state-owned companies from small and medium-sized businesses by up to 25% – this is, in principle, a worldwide figure in the context of European countries and the United States.
We certainly need to ban state-owned companies from combining technically unrelated products into single lots. Today, many large companies are supplying everything from nails to helicopters, and this just is not right. We propose to develop public sector companies, partnerships between small and medium-sized companies and state companies, which in essence will really be a partnership programme, where the various simplifying procedures for tenders and sufficient advance payments from these companies can be examined – and most importantly, participation in research and development in those programmes that the Economic Development Ministry has now successfully developed in the context of state-owned companies – as well as the introduction of life cycle concepts into the tendering process. Those are basically the main proposals; in other words, the roadmap is still being drafted. Of course, we thank the Economic Development Ministry for such close cooperation through Andrei Belousov and the department, which is working with us today. Unlike colleagues who have gone through the entire procedure, we are just at the beginning of this path, and we already understand that it is rather difficult.
Dmitry Medvedev: You still have a certain amount of optimism.
Sergei Fakhretdinov: Yes. It's a complex process, but we hope that we will find a way to work together. We thank the Strategic Initiatives Agency and the Leaders Club, which have actively participated in the development of our roadmap. Thank you very much.
Dmitry Medvedev: Thank you very much. We must continue our work. I will not specifically comment on anything at length. One thing I will say is that it seems to me that establishing a mandatory share for small and medium-sized businesses in government procurement, implemented by companies with state ownership, as well as in the corresponding contract work, would be fair, especially since a similar rule applies to ordinary public procurement. So you can integrate it into the set of proposals that you are making. But also continue cooperation in other areas.
We had changed the subject from customs issues. I would still like to know about this paperless document processing. How are things?
Vladimir Malinin (deputy head of the Federal Customs Service of Russia): Thank you, Mr Medvedev. Let me briefly comment on Mr Survillo's statement. The situation in the ports is really not the most favourable, and problems have accumulated over the years. They depend on many factors, including the infrastructure. A simple example is the removal of containers arriving in the ports, which sometimes causes delays. And the customs office does not always make enough effort to clear the port terminals.
As for business, I remind you that the Public Advisory Council under the Customs Service of the Russian Federation has been in existence for many years. All who wish to can consult it. We listen to everyone and draw the appropriate conclusions.
As for the business and consultations with Kazakh, Belarusian and Russian businesses, it's no secret that sometimes Kazakh, Belarusian and Russian business interests diverge. Of course, we try to overcome this, but there are different interests, and there are plenty of examples of this. From the standpoint of advance notification, as presented by Mr Survillo, this is a direct misrepresentation of our esteemed meeting. Advance notification was introduced on June 17 and, if you recall, only at automobile crossing points. So it was planned and done. And I myself was very aware of how it would happen, but it was comprehensively worked through and there have been almost no large failures in this regard. For those who submit papers in advance and timely arrive at a crossing point and present their papers, clearance is greatly accelerated. Our plan is to introduce advance information or notification at seaports and air hubs.
As for the crossing points, their reorganisation, specialisation – it's all there in the roadmap, which you, Mr Medvedev, approved, and the appropriate deadlines have been set concerning consultations with business about reorganisation, liquidation, and specialisation. It will certainly be done.
As for paper document processing, it is a perennial topic. The fact is that for some reason we must ask for documents in paper form the other departments. We are now resolving this problem with the tax authorities – one of the documents that needs to be provided to us – and it concerns the tax authorities and a number of ministries and departments. This will be resolved, and it is also in the roadmap.
Dmitry Medvedev: The question is when it will be resolved, because as my colleagues here inform me, that all of this was supposed to be resolved in 2012, but now it's been postponed to 2014.
Vladimir Malinin: Mr Medvedev, I am aware that the elimination of paper documents is crucial; therefore, we will expedite the elimination of paper documents and will make every effort to ensure that everything is transferred to electronic form.
Moreover, it is crucial to limit the number of documents to be provided to Customs – not just limit but actually reduce their number, which is the principal thing. And second, cutting customs clearance time at crossing points. All other points on the roadmap are very important, but these are the crucial concepts, and this will be done, of course. We are aware of this, Mr Medvedev, I assure you.
Dmitry Medvedev: I am glad that you are aware, we here are also all aware that nothing will change while these paper documents are in circulation. All of us realise this. Paper documents is our scourge, and all the main problems revolve around paper documents. This also involves bribery and all other aspects linked with mismanagement on the part of civil servants. Nevertheless, the truth is always specific. They say the problem is linked with the Tax Service, rather than the Customs Service. Please admit it, if you are at fault. Let them assume responsibility.
Vladimir Malinin: No, no, Mr Medvedev, the problem does not have to do with the Tax Service. Not at all, I did not say that.
Mikhail Mishustin (Head of the Federal Tax Service of the Russian Federation): I am prepared to admit this, but to the best of my knowledge, this calls for confirming zero rates in line with article 151. Is that right? Does this mean exchanging information with the Customs Service during the confirmation of the pertinent documents, which we must submit to the Customs Service? This has already been virtually implemented on the website, and we have agreed on the required format regarding such information exchanges. We have approved this format, the road map also stipulates this, and the relevant deadlines have been laid out. I don’t perceive this problem.
Dmitry Medvedev: Nor do I. So, when will you get rid of these paper documents?
Mikhail Mishustin: What paper documents? Do you mean confirmations? We are already prepared to submit digital documents to the Customs Service tomorrow, provided that they are ready to accept them.
Dmitry Medvedev: Well, the Customs Service says that they are ready to do without paper documents, but it is the Tax Service, and not us, that needs these paper documents.
Mikhail Mishustin: If you will allow me, Mr Medvedev, 70% of companies nationwide file digital tax declarations. We understand the formalisation of information exchange procedures to be in line with a format, which …
Dmitry Medvedev: We are not talking about tax declarations now, we are talking about the inter-departmental exchange of paper documents, including those between the Customs Service and the Tax Service.
Mikhail Mishustin: Excuse me, but the website now stipulates this confirmation.
Dmitry Medvedev: Colleagues, let’s stop blaming each other then, and let’s stop tossing the ball back and forth. I give you ten days to sort things out. If there is any problem, then you should explain what kind of problem it is. If not, please settle this issue and see to it that at least these two key departments exchange digital, rather than paper, documents, at long last.
Mikhail Mishustin: Yes, sir.
Dmitry Medvedev: Agreed. You have the floor, please (Addressing Pyotr Fradkov).
Pyotr Fradkov (Director of the Export Insurance Agency of Russia): Thank you, Mr Medvedev. I’ll say a few words about the export-support road map. I can say that our work has probably been more creative, because we were talking about creating something essentially new, and the creation of such a system of comprehensive state support for exports, rather than changes in the current system or comprehensive changes in the existing system. True, the business community was extremely interested in this issue.
Without going into details, I would like to discuss the following three main aspects, which we have singled out. This includes consultative-information support regarding market sales, with due consideration of Russia’s accession to the World Trade Organisation (WTO). Technically speaking, we know how to involve the state machinery abroad, how to utilise the business community’s capabilities and how to involve business councils. We also know what should be done in the regions in the context of establishing export-support centres and the so-called powers. I believe that active work will continue here, and there is also complete understanding. The second aspect involves administrative-fiscal procedures, value-added tax compensations during exports, foreign-currency control and the refunding of foreign-currency proceeds. This situation is also completely routine, and we need to work in just two or three areas here. I would like to dwell on a more complicated issue, namely, the provision of funding and access to funding. This is the main question being asked by the business community, and this involves cheap, and most importantly, long money in the context of export financing. This is probably the most complicated issue so far. The working group also assesses it rather closely. We know how to move ahead. On the whole, we cooperate with the Ministry of Finance, the Central Bank and all the concerned departments.
I would like to point out one aspect. Russia is now actively moving to join the Organisation for Economic Cooperation and Development (OECD). The OECD is virtually the main regulator of the state export-support system. It would probably be very important if the business community became actively involved in this process because, on the one hand, we consider it highly important that regulatory documents be brought in conformity with the requirements of this respected organisation. On the other hand, these concepts should also be applied in Russia. On the whole, our working group prioritises this issue. Moreover, we have agreed that three such sub-groups will be established within the format of the working group. I don’t want to say that the process is becoming entangled in red tape, but we are ready to provide our own internal assessment for all actions of executive bodies, including in the context of crowd-sourcing. This means assessing the effectiveness of such actions, whether the business community will find this interesting enough and the feasibility of such actions in real-time. On the whole, we would like to point out this aspect, and to say that the financing issue is now probably the most important aspect in the context of export support.
Dmitry Medvedev: All right. Thank you, Mr Fradkov. Work is underway, and let’s hope that specific results will be attained, all the more so as the most important decisions on this issue have virtually been adopted. You now have the floor, followed by you.
Sergei Mironosetsky (Deputy General Director of the Siberian Coal Energy Company): Thank you. Mr Medvedev, ladies and gentlemen. Our working group on facilitating access to the energy infrastructure started its work by analysing numerous proposals of ministries, departments and business people. During our meetings we reached a consensus between proposals of private companies and federal executive bodies on almost all issues. The latter also came to terms on their own proposals, which were sometimes poles apart.
We have drafted a roadmap of 33 events, almost half of which are planned for this year. Today, the ministries and departments are carrying out the first measures that were drafted before the start of work on the roadmap. We are continuing to monitor the implementation of these measures. The Ministry of Economic Development, the Energy Ministry and the Federal Tariff Service have drafted their own proposals and have published them on their sites. We are now reviewing them to see how they match the goals that have been set in the roadmap.
I’d like to suggest that the ministries should consult businesses not only when analysing the final proposals but also in the process of drafting, because the final documents should have more influence on businesses and should be more helpful for reaching the goals of the roadmap.
In general, our roadmap is based on compromise. This is very important for us and for private companies to launch the electric capacity that is reserved for, but not used by, a customer. Today, we have to build additional grids or sub-stations only because this energy is not being used because it is reserved for a customer, and we have to build new capacities for new customers. We must make the existing procedures much simpler in many places, including Moscow. We won’t have to build additional sub-stations because they are already there, and they are merely reserved for some customers. All these changes are detailed in the roadmap and have been approved by the ministries. All we have to do now is to monitor compliance with them.
Owing to the big contribution of the Boston Consulting Group (many thanks!), the mechanism of drafting roadmaps has proven to be effective. The Strategic Initiatives Agency and the ministries also played a big role in these efforts. We think the very idea of drafting roadmaps should be applied on a broader scale. In other words, the “Doing Business” section could be gradually supplemented with other directions, for instance, development of heat supply. We believe this will be the right thing to do. Thank you.
Dmitry Medvedev: Thank you very much. I’d like to draw your attention to one unpleasant moment regarding the roadmap you are involved with. If we look at the practical results, the Doing Business rating ranks Russia 183rd in terms of connection to electric power grids. If I’m correct, we are in last place, not even second to last. In other words, we are the worst.
If someone said this to me 20 years ago, I wouldn’t have believed it. Yes, our country is difficult because it is very large and the climate varies widely, but this is simply awful that we are worse than all African countries that are just embarking down the road of development (I don’t mean to offend them), as well as many new economies.
Our goals in this respect are not even too ambitious – if not to join the top 20, at least to reach some more or less decent level. However, as for connection to electric grids, our aim is ambitious – to go up from 183rd to 18th place. Will we make it?
Sergei Mironosetsky: The processes we have developed consist of several parts, including some quick moves, and I believe that by making these moves we will be able to raise higher in the rankings next year, and the goal of reaching 18th place is quite feasible, provided we cooperate.
Dmitry Medvedev: Alright, let’s get to work. Please, I think you wanted to say something…
Gleb Arkhangelsky (CEO of Time Management): Yes. My name is Gleb Arkhangelsky. I will speak about the roadmap for simplifying company registration.
Mr Medvedev, colleagues, I would like to focus on two issues that will concern all these roadmaps. The first issue concerns communications. When I became head of my working group, I was surprised to learn that our government agencies are not villains at all, and that representatives of the Federal Tax Service in the working group, for example, have proposed absolutely appropriate and reasonable solutions. They proposed cancelling a number of documents which no one, neither business people nor the tax agencies, need. But the trouble is that no one knows about the good things they do. For example, I was surprised to learn that companies can register online. We thought that only companies in Singapore or New Zealand could do this, but it turns out that we can also do this in Russia.
Dmitry Medvedev: It’s good that we have met today. I didn’t know either that we had this service in Russia. This is good news. How can I do it? Can I do it now – I’m a techy person and can go online any time – can I register a business now?
Gleb Arkhangelsky: Yes, I will tell you how. In Singapore you go on Google, type “register a company,” find the regulator’s site and register your company. In Russia, you write “register a company” in Yandex and see the first 10 results of registering companies.
Dmitry Medvedev: And?
Gleb Arkhangelsky: You don’t immediately see the site nalog.ru. When – if – you find it, you will have to dive deep, past many subtopics and a bunker of legal documents before you find the area for registering legal entities (I don’t want to offend the tax service) and download the software for preparing documents for registering legal entities. Next you will install this software on your computer – but not on an iPad; you’ll have to apply to Rostelecom for an electronic signature, without which you cannot do anything and finding the agency where you can get it is an additional quest, and only after that will you be able to register your company online.
Dmitry Medvedev: Well, these obstacles aside, this is a good initiative. It enables you to register your company cheaply, including in an offshore area – this is clearly the most important thing for many. By the way, registering an offshore company is one of the first replies you get. Anyway, you can register your company online, if you have an electronic signature?
Gleb Arkhangelsky: Yes, you can.
Dmitry Medvedev: Have you done it?
Gleb Arkhangelsky: We have instructed two members of our working group to try to do this.
Dmitry Medvedev: How many weeks have they been trying?
Gleb Arkhangelsky: I didn’t risk doing this online.
Dmitry Medvedev: It seems simpler to do it the old way.
Gleb Arkhangelsky: Yes, it is simpler to go to the 46th tax agency and register your company in 30 minutes. What am I trying to say? The same thing concerns all the roadmaps. Even a simple procedure often becomes… Take tax payments, which take five days and not 30, as the World Bank believes (the additional obstacles include receiving documents from funds and the like): the package of documents you need is quite possible to collect, but people don’t know about it, which is why we have created a powerful communication unit in our working group. Question: where are the comic strips, YouTube promos and cartoons? Where are the websites that have been promoted and pop up as soon as you type your request, where are twitter channels? Oh, I must commend the Federal Antimonopoly Service, which has a wonderful twitter account. They write at 7:00 a.m.: “Are you sleeping? But the FAS isn’t sleeping, they are investigating the case of such-and-such steel corporation.” This is great, people read that account, and this is really very good. So the first element is communication. And the second element…
Dmitry Medvedev: So you start at 7:00 in the morning?
Gleb Arkhangelsky: And the second very important element concerns performance monitoring. We have been talking about trucks that stand in long lines – or not that long – at customs. We have a similar issue for discussion: How do the tax agencies operate in the regions? The 46th agency in Moscow is very efficient. When you go there, you see that everything is nice and comfortable, with an electronic queue system. I never spent more than 20 minutes there, and I have registered several companies. I wonder how this is done in the regions. It would seem simple to monitor the situation through friendly universities, the Strategic Initiatives Agency or business associations. It could be done like a sample purchase: Go to your local tax agency and later answer questions about the simplicity of registering there. Go to Yandex and try to find your local website for registering a company. We would be glad to organise this. And lastly, I agree with previous speakers that the issue concerns monitoring rather than what we write in the roadmaps. Anything can be eroded and turned into one more absurdity at the state level without constant monitoring and a system of government feedback at the level of the Economic Development Ministry or the Strategic Initiatives Agency. I believe that this is the most difficult and the most important part, and if you support us, if this channel of access to upper levels is created, it will be a big help. The roadmap could be slightly worse, but the results of implementing it would be better. I believe this is very important. Thank you.
Dmitry Medvedev: Yes, I can support this idea, of course, provided that it does not take some infernal technology to reach the upper levels. You are right that awful sites often pop up before anything else. For example, registration should take five days, but it could last months at some agencies. And the worst examples involving the maltreatment of business people who want to achieve something become public knowledge and are also noted by international institutions that assess the situation in this country.
There are many positive examples, but even the issue of self-registration slips, which you mentioned, when it comes to popularisation. You asked about comic strips, twitter channels and other social networking opportunities. But, colleagues, I would like to tell you that you cannot put the blame squarely on the government. As if everything the government does is always boring and dull, but is it? All of you are creative people who have, apart from this social commitment, your own businesses, which give you an opportunity to do something. Moreover, using social networks is not expensive, as I know from my own experience. It is not very difficult to write something, or even shoot a video for use there. Such videos, although cheap to make, often become very popular, which is why I am addressing you, as well as the agencies concerned, to do this. The agencies must do it, but you, our business community, can do at least as much as they can.
Getting back to the issue of registration, how do I do it?
Mikhail Mishustin: You were shown the system of online registration during your visit to Singapore… I’m sorry to say that when I saw it, I tried to phone Mr Dvorkovich (Arkady Dvorkovich, Deputy Prime Minister) to tell him that the same system had been operational in Russia for two months, since March. As for online registration, it was launched in Moscow in April 2011 and across the country on May 30 this year (I made a short report for you on this), so you can request registration as a legal entity or a self-employed entrepreneur online. To date, 10,500 companies have registered online.
Dmitry Medvedev: You say 10,500 companies? That’s a lot.
Mikhail Mishustin: What was the problem? The problem was that unfortunately we did not have an electronic notary stipulated under Law No. 129 for authenticating your documents, so we needed to stipulate that our notaries have the right to use their electronic signatures. We did it several months ago jointly with the Ministry of Justice. So to date this opportunity… personally, I don’t share your impression about our interface: we have 27 electronic services, and I would like to ask Mr Medvedev – I know that you are working on this issue – to see how we do it... Of course, we have also agreed with you that we will improve this system and make it simpler, but I want to say that it is working as it is.
Second, regarding self-employed entrepreneurs. No matter how hard we try to popularise the system on the site (it lights up when you enter it) and to convince people to use it, they don’t want to register online. They still take their documents to the agency.
Dmitry Medvedev: Of course, this is a matter of habit.
Mikhail Mishustin: In all, 900 self-employed entrepreneurs have registered online.
Dmitry Medvedev: That is, the number of legal entities that registered online is much bigger, is it?
Mikhail Mishustin: Yes, it all began in Moscow. Moscow business people are more active.
Third, there are two reasons, two main reasons for denying registration: you either went to the wrong agency or have not collected all the necessary documents. There are 4.5 million legal entities in our register, but 2.5 million of them are inactive. Last year, we removed 450,000 inactive companies from the register at the initiative of the tax agencies.
And lastly, about electronic services. I fully agree that we should popularise them, but it would be rather difficult to [add them to] the KPIs (key performance indicators) in a bid to ensure that everyone files for registration online.
And one more thing. A World Bank delegation led by Mr Lopez-Claros, which is responsible for assessing economies for the Doing Business report, including registration, has visited Russia. It was three weeks ago, and, as Mr Siluanov (Anton Siluanov, Minister of Finance) knows, we took them to the 46th tax agency. They were impressed (there were two ladies from former socialist countries) when they saw that it could be done within five days. Moreover, they asked us (this is why they give us 30 days) to provide original copies of the registration documents. I don’t see why, because we have been doing it online since 2002. They replied that until we get the original copy... I asked them why? Five days is the deadline across the country, the timeframe is strictly stipulated in Law No. 129, and if the tax agencies… And here is what I want to tell you: it does not matter where in the country this happens, but if you [get your documents] on the sixth day, you can sue the tax agency, or impose an administrative fine on the tax inspector who failed to do that. That’s no problem. The World Bank’s challenges in assessing the registration rating are these: first, the number of days for establishing a fund, second, the complexity of opening an account (or so they believe, Mr Medvedev), and third, a biassed attitude towards the Russian Federation.
Dmitry Medvedev: I will not comment on the third point. In principle I understand, because it’s there and we know about it. We have our problems, but they often behave narrowly themselves. Yet the issue now is not how they see us. We will be changing, I hope, and so will they. But right now I’m interested in the electronic signature – can this be done without it? When we discussed this procedure in Singapore, which was mentioned here, they don’t use the e-signature there.
Mikhail Mishustin: One of the proposals in our road map is the possibility of registering an enterprise on the site without an electronic signature and coming with an identity card for a ready-made set of documents.
Dmitry Medvedev: As a matter of fact, I was going to suggest this because the formal issuance of appropriate packages, if there is no electronic signature, can be done quickly electronically and later you identify yourself in a positive way and show that you are a really normal person and a normal citizen and will be accountable for the enterprise.
Mikhail Mishustin: I’m sorry, but that’s already possible. It is issued today as an individual enterprise package. You come and get it physically. Why are we asking for the electronic signature? Mr Medvedev, as you are perfectly aware, this is about deadlines. Law No. 129 imposes strict timelines, and without an ID card …
Dmitry Medvedev: No, I’m not insisting … We really … We’re not in Singapore, but our people are so inventive that what they don’t do in Singapore will be done in our country and it would be just a fine example of how one can manipulate this system and discredit it. I really mean to make electronic formalisation of all documents independent or not register them for an actual person. I think this is quite possible. If it works, I’m ready and willing to test it. Send me the link to the site and how to enter it and we’ll see. I’m even prepared to register something and have somebody else come for the result. Good? You wanted to say something? Let’s start wrapping up.
Oleg Skufinsky (chairman of the Evaluation and Economics of Real Estate Committee in the Chamber of Commerce and Industry): Good afternoon, Mr Medvedev and colleagues. The measures outlined in our road map Optimising Property Registration Procedures will enable us to move from today’s fairly good 45th place to 4th thanks to the following steps. We are planning to cut the number of procedures from five to one as early as 2015 and the registration period from the current 45 days to seven in 2018 and propose that the applicant’s charges be fixed as a government stamp duty.
Our key initiatives are these: a single register instead of the two we now have as well as other registers: in fact, a single real estate register. Second, digitalisation of all documentation. Today, documents move about in hard copies, tomorrow they must fly electronically. Next. We want to use an exterritorial principle for registration, with businesspeople able to register any facility in any spot of our country. Our next step: we must include integrating the courts and notary offices into this system, because there are many risks involved without this information integration.
Next. An important step is to enable registration via the internet. We are planning to better guarantee registered rights through a range of mechanisms. We consider it an important initiative to abandon the declarative principle of cadastre formation and registration and make it mandatory because many business risks arise from the fact that this resource is incomplete and questionable. Suffice it to say that 29 million land plots have no cadastre boundaries, to say nothing about the fact that the land, buildings and rightholders exist independently. Hence financial, tax and judicial risks, incidentally.
We are also planning a set of measures to make the system more client-oriented. This involves integration with the International Financial Centre and separating the front and back offices. We are planning to make motivation stronger by going public and increasing the registrar’s responsibility: we could, for example, issue a public list of registrars. The monstrous number of refusals and suspensions being encountered by business today should be brought to the public’s attention. And, of course, what Gleb Arkhangelsky mentioned today – the explanatory part. Media cooperation, convenient websites and navigation services for customers are very important. As a result of these measures, by 2018 we are planning to make 70% of these services electronic, cut queuing time to 10 days and prior appointments to one day (instead of today’s 20 days and occasionally two months). And we will also focus on informing the public and businesspeople of available services, increasing their proportion to 70%.
An important point, Mr Medvedev, is that our efforts are facing certain risks – I mean amendments to the Civil Code concerning mandatory notarised certification. We would like to draw particular attention to this. Our working group and other groups have examined this very carefully. Here, we believe it would be wiser to opt for preferences rather than a mandatory notary system because since it adopted the law on registration 14 years ago the government has invested heavily in the system of state registration of ownership rights and today this system is working well. Of course, we have our work cut out for us, but by 2018 our system will become one of the best in the world – in fact, we are planning to achieve a ranking of fourth in the world. A point of note: countries with a traditional notary service, France, for example, occupies 149th place, Germany, 77th, and Russia, 45th.
Dmitry Medvedev: You mean France has a lower rating?
Oleg Skufinsky: Yes, Mr Medvedev. Please, support our initiative.
Dmitry Medvedev: You see, the point is this. As I just sit and think (I have thought a lot about our Civil Code and its new wording), I always see arguments for and against. On the one hand, you are absolutely right. The more the formalities, the more difficult it is to do something, to engage in business. Registration of ownership rights turns into an ordeal or at least a difficult, costly and time-consuming process. On the face of it, it looks like a formal element. On the other hand, the notary system for all its faults is, of course, a very dependable defence against deceit. And perhaps from the standpoint of doing business it is cumbersome, but in terms of evidentiary material for a court and the subsequent protection of ownership rights it is more of a benefit, which explains why many countries maintain notary offices. Perhaps, you are right. I am not prepared to say right now that maybe it would be better to create a system of preferences or privileges – if you, let us assume, are using a system of notary certification system, if you have some additional opportunities there, or if some evidential procedures are being simplified, but, at any rate, this involves a choice between these two aspects.
So, colleagues, I would like you to say little by little… All right, two minutes. Please finish your statement.
Remark: Mr Medvedev, colleagues. We are now discussing the federal aspects of cooperation between the business community and the state. Thank you very much for supporting this project and the entrepreneurs involved in such work. It is common knowledge that business people also face numerous problems at the level of regions and municipal entities. And the agencies are currently implementing a similar project to improve the investment climate in the regions. This requires specific regional government standards to create a favourable investment climate. The relevant standards comprise 15 practical methods, which have proved successful in the most advanced regions in the context of attracting investment. The agency, business associations and the leaders’ club, which has been established under the auspices of the agency, now make up similar working groups, which monitor the implementation of such standards in 12 pilot regions. As per the president’s instructions, we must draft a proposal to spread such standards to all Russian regions in conjunction with the Ministry of Regional Development.
I would like to say that the dialogue between the regional business community and regional governments is proceeding with difficulty. The concerned parties are failing to reach agreement in many cases. And I would like to suggest that we hold a meeting, similar to our today’s meeting, with the leaders of regional groups that have been established in pilot regions, and discuss regional issues. Such a meeting would provide the agency and entrepreneurs with considerable support and would simplify subsequent dialogue. Thank you.
Dmitry Medvedev: Thank you. I absolutely agree that all problems are not only rooted at federal level. There are numerous problems at the regional and municipal level. We need to think about how to do this. Mr Belousov, first I will ask you to assess this issue and to hold the relevant meeting on regional and municipal issues. If need be, I will join this process later on. Please.
Alexander Galushka (President of the National Public Organisation Delovaya Russia): Thank you, Mr Medvedev, colleagues.
First, I would like to say a few words about the road map to improve anti-monopoly legislation and to promote competition. The very fact that such a map is in the making shows that the national business initiative is continuing to expand as a method of work. In effect, this does not only include issues associated with the administrative barriers, but also issues relevant to the development of competition. We have a lot of documents that were approved some time ago. We have the required anti-monopoly legislation, and a programme to promote competition, which proclaims correct principles and ideologemes of such development.
The Global Competition Review puts the Federal Anti-Monopoly Service in 19th place among the world’s 40 anti-monopoly services. What is the specific feature of our road map? Why is it being created today?
Actually, this is a viewpoint from below, a viewpoint in the context of law enforcement issues. Consequently, the business expert community formulates priorities and all key events in the context of law enforcement issues. What is the most important thing? Today, we can clearly see, after the group has started working and after the three-week work, that anti-monopoly legislation comes first. The group advocates subsequent liberalisation and efforts to monitor economic concentration.
In 2011, 3,000 transactions were examined in Russia and coordinated with the Federal Anti-Monopoly Service. As for the relevant European and US experience, this amounts to an average of 300-400 transactions annually. Consequently, the excessive coordination of specific transactions primarily creates unjustified administrative pressure on small and medium-sized businesses. We have come up with specific proposals on how to conduct such liberalisation, and the first package of such proposals has been drafted.
The situation in the regions is the second aspect. Russian regions have drafted specific programmes to promote competition. And we can see today that different practical aspects of competition promotion are evolving in the regions. We know a lot about worse practices, but some better practices obviously exist today. In St Petersburg, they have created a one stop shop service for business registration, which functions rather effectively and makes things easier for business persons, allows new companies to develop and promotes competition. In Lipetsk and Kursk, they outsource state services in those sectors that lacked any competition at all. This serves to expand business operations and promote competition. The formulation of a public state procurement plan, which can be easily accessed by business persons, serves as legal grounds for some individuals wishing to engage in business activity. Such plans providing an insight into state procurement are currently being drafted in Ulyanovsk. Consequently, we have voiced a proposal to systematise the best regional practices and to summarise them in the form of some regional competition-promotion standards, the spirit and meaning of which is that there should be a presumption of best practices. Such practices should become widespread, and they should not be confined to specific regions.
The third proposal of the working group is called on to assess regulatory impact. This new Russian institution has already proved its effectiveness. Today, this concept primarily addresses the problem of administrative barriers. The group suggests that the institution should also encompass the issues of competition.
A rather interesting case has been formulated. Australia has implemented one of the world’s best reforms in the course of seven years. The reform stipulated an inventory of all previously approved regulatory documents and an assessment of their negative and stifling influence on competition. The OECD (Organisation for Economic Cooperation and Development) notes this fact. Yes, this took time, money, and seven years. It took Australia seven years to complete this reform. As for the results of such work, the Australian GDP grew by 4.25% in 2011. This is among the best results for OECD member-states. The OECD estimates that annual society profits account for some 2.5% of the GDP, or $6,000 per household. This is accomplished by reducing outlays for the population and the business community. Yes, the reform was rather difficult and long, but its effect is quite obvious today. The OECD recommends this as the best international practice.
The business community’s concerns are the fourth aspect. Business persons are concerned that they have to compete against state unitary enterprises, municipal unitary enterprises and state companies. In this regard, we have reached an agreement with the Opora Rossii (Russia’s Pillar) National Public Organisation, and we will compile a list of state unitary enterprises and municipal unitary enterprises operating on competitive markets. Moreover, we will suggest a stage-by-stage programme for their withdrawal from competitive markets based on this list.
The regulation of natural monopolies is the fifth aspect. Mr Medvedev, we are launching a crowd-sourcing platform regarding this competition-promotion category. We have announced this just today, and we are receiving some rather interesting responses. Colleagues send in pictures of natural monopolies’ offices in the regions and reasonably wonder why they should pay for their excessive consumption and whether it can be streamlined in some way. The core idea of these proposals is to make natural monopolies’ investment and operational expenses transparent.
In addition, colleagues point out that these companies have guaranteed rates of return and are first-class borrowers. Why would they raise tariffs instead of using loans to take care of their investment needs? Colleagues also draw our attention to RAB rules. Fine-tuning of RAB regulations is very important, because the rate of return is calculated using all types of assets. However, the point is in calculating it only for core assets. Non-core assets should either be used for making money in the market or be sold. The fact is that consumers are now covering the cost of non-core assets when their pay RAB tariffs. These are the key issues related to natural monopolies that colleagues are pointing out to us. However, information disclosure is the most important thing.
I have two more points to make. Of course, promoting competition is industry- and market-specific. Issues vary across industries and markets, be it the notarial system where things look extremely monopolised and ineffective, or the government defence contracting with its own specific rules. Of course, this work should be performed systematically across all major industries and markets, but we cannot cover everything at a time.
Mr Medvedev, my last point has to do with the clearly defined conclusion that we have come up with in this working group. Promoting competition is not something that has to be addressed by the Ministry of Economic Development or the Federal Antimonopoly Service alone. This task also falls on all related ministries and departments and all regions and municipalities. The Ministry of Healthcare and the Ministry of Labour should also address it in parts that are within their respective terms of reference. These are the preliminary results of the three weeks of work of our group.
Dmitry Medvedev: Thank you. I would like Mr Artemyev to briefly comment on this, and we will then wrap it up. Please go ahead.
Igor Artemyev (Head of the Federal Antimonopoly Service): Thank you. Mr Medvedev and colleagues, this year Russia will be rated for the seventh straight year… alongside 140 other countries. I am not going to discuss whether Russia’s rating is high or low – this is not the subject of today’s discussion – but I believe that the Ministry of Economic Development has already studied all rating agencies and their methodologies and has an in-depth understanding of how ratings are compiled.
Our experience tells us, and I want to make you aware of the fact that they are beginning to understand that Russia is very different than other countries; we are not Vietnam or even France. First of all, Russia is a vast country. Secondly, Russia, unfortunately, does not have developed communication lines, such as rail or roads, and this creates a particular market structure. For example, we have thousands of markets, where, say, Germany can have a single market or even a single EU market. They are willing to consider these specifics if we keep in touch with them and adopt various additional criteria that will also be included in the ratings precisely because we are very different from the vast majority of countries with which we compete in the ratings in terms of digits.
We could achieve a lot. We should focus primarily on substantive matters, of course. This is what we are discussing today. However, we also need to explain and clarify things, provide arguments and so on. Most importantly, we should be doing this on a continual basis, including e-mail exchanges and other modern telecommunications channels. This would help us a lot. This is my first request. Mr Belousov has an enormous amount of work to do, because it looks like this area of work has long since been abandoned. There were other things to do over the past 20 years, but now there were other things to do over the past 20 years, but now we really want things that we have in Russia to be recognised. I can cite many examples.
My second point is that promoting competition is great, but we are an oversight agency just like taxation authorities and some others. I don’t think it’s a good idea to invite colleagues who have been on the other side in a litigation process for over five years as core representatives of the business community. There is a conflict of interests. I am confident that there is no conflict of interests between entrepreneurs and public officials, as mentioned by Mr Survillo today. Deep down we want just one thing. But since we find ourselves fighting each other in all seriousness in courts for five years now, I don’t want to end up in a situation where one of them will come as their senior representative and will be telling me how I should go about my work ... Of course, this is one way to go, but most likely we will end up with a lack of understanding. I want to avoid this when we start forming the working group. This has nothing to do with Mr Survillo, but there are some other people ... Therefore, we should keep this in mind.
Dmitry Medvedev: Do you mean someone in particular in this room?
Igor Artemyev: No, not in this room, but I have a serious conflict of interests with two members of the working group. I think you might even know their names, Mr Medvedev, but I don’t want to reveal them publicly now.
My third point has to do with what Mr Survillo and others have rightfully pointed out. In fact, when conducting these reforms, we must keep the Customs Union in mind, because in our case we are creating a single supranational body and making appropriate decisions. I am not even sure what will be left of the Federal Antimonopoly Service. Generally speaking, most of its competencies will be transferred to this supranational body in line with the choice that we are making. Deadlines are very tight – it may happen a year from now. Therefore, everything is decided there, and the harmonisation effort there is very strong. In fact, things should also depend on what local entrepreneurs say. Therefore, things must be strongly tied in primarily through the Ministry of Economic Development, but they haven’t been tied in in any way so far, so we just need to move forward here. Thank you.
Dmitry Medvedev: Thank you. Now, with regard to comments on anti-monopoly regulations. In this sense, it is, of course, very unusual, since this country has a mediocre, to put it mildly, business environment, but at the same time a very good antimonopoly regulation system. We pointed out this irony when not so long ago we heard the report by the head of the Antimonopoly Service. Indeed, our laws and the work of the Antimonopoly Service receive high praise, and Russia ranks high in respective ratings. However, it does not improve our business environment in any way. In my opinion, the problem here is exactly what Mr Galushka mentioned just now. This issue goes beyond the competency of the antimonopoly body. If the antimonopoly body does everything to promote competition, everyone else is doing the opposite, trying to narrow it down based on their understanding of their respective professional interests. Then, of course, the business environment in such a country will not be very good, but at the same time anti-monopoly legislation will work quite well. As I mentioned at a government meeting, we should start with ourselves. I was referring to specific ministries that are responsible for regulating certain sectors of the economy.
I would like to support the best regional practices, I think it is the right thing to do. Regulatory Impact Assessment is also a fair approach. We assessed all of this during a recent government meeting on this subject.
I will certainly not comment on all issues, but we put a lot of effort in order to transition to the RAB-based regulation of tariffs. Now that we have transitioned to it, no one likes it. Everyone says that it still distorts everything and is inaccurate and incorrect. We should pay attention to this. I would like to have Mr Novak (Alexander Novak, Minister of Energy), some other colleagues who are engaged in this, and perhaps the Ministry of Economic Development address this issue. We have been very actively addressing it so far, but don’t have much to show for it.
Finally, the last issue that we already covered today has to do with the transfer of several functions to the Customs Union, its bodies and other supranational entities that will be established in the future. This is a real problem, even in areas where things looks good, as, for example, in the regulation of antimonopoly investigations and the regulation of monopolistic activities. Frankly, the transfer of the corresponding functions to the supranational authority may sink instead of lift us, because, frankly, our colleagues don’t do as well as we do. Without false modesty, things don’t look stellar in their economies. We are in a better position, even though we do have problems of our own as well. Therefore, we must do everything to make sure that the transfer of corresponding regulatory functions of antimonopoly investigations and limitation of monopolistic activity does not degrade the results that we have already achieved. In this case, it is better to wait and see. We do have deadlines, of course, but before we go ahead and do this, we need to weigh the pros and cons.
Colleagues, I would like to thank you. It was interesting to hear your opinions. In general, I’m getting mixed impressions, but clearly things are not hopeless and there is progress across all areas, even where we are not quite happy with the results.
Getting back to practical things: I will certainly sign all instructions, and we will return one road map for further work, there’s nothing wrong with that. Let's agree that if any of you who are working on road maps, including the ones who have their maps ready and approved by me, still feel that a significant portion of the items will not work, I'm ready to get back to discussing them again. Let's butt heads, bring in the Minister of Economic Development, and you’ll show us the items that do not work or have been washed out as a result of bureaucratic procedures. We will reword them. We will invite departments and try to reach agreements with them. If we fail to agree, then we will impose certain decisions on them. Thank you.