STRATEGY FOR GROWTH - BUSINESS-PLAN FOR RUSSIA
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STOLYPIN “ECONOMY OF GROWTH” INSTITUTE
STRATEGY FOR GROWTH -
BUSINESS-PLAN FOR RUSSIASTOLYPIN GROWTH ECONOMY INSTITUTE –
THINK TANK FOR 'STRATEGY FOR GROWTH' DEVELOPMENT
BRINGING EXPERT VISION AND BUSINESS THINKING TOGETHER
Our mission is to consolidate efforts of the government and business, scientific communities and society with the purpose of drafting optimal
solutions for economic growth and raising of living standards in Russia
Academic Board: Supervisory Board:
Yakov Mirkin - Chairman Boris Titov – Chairman
Chariman of the Board of Evrofinansy Investment Company OJSC, Head of Presidential Commissioner for Entrepreneurs' Rights
the Department of International Capital Markets at the Institute of Maxim Volkov
World Economy and International Relations (IMEMO) at the Russian Academy of Sciences (RAS) General Director of CJSC 'Pikalevskaya soda'
Abel Aganbegyan Sergey Generalov
Head of Department of Economic Theory and Politics at RANEPA Co-Chairman of All-Russia Public Organization 'Business Russia', President of Industrial
Mikhail Golovin Investors Group
First Deputy Director of the Institute of Economics, RAS Anton Danilov-Danilian
Oksana Dmitrieva Co-Chairman of All-Russia Public Organization 'Business Russia'
Doctor of Economics, Member of Legislative Assembly of Saint Petersburg Oleg Deripaska
Viktor Ivanter President of En+ Group
Director of the RAS Institute for National Economic Forecasts Vitaliy Machitskiy
Aleksandr Idrisov Founder and President of Vi Holding Group
President of Strategy Partners Group Alexey Repik
Andrey Klepach President of All-Russia Public Organization 'Business Russia', Chairman of the Board of 'R
Deputy Chairman of the Board of Vneshekonombank Pharm'
Viktor Polterovich Zakhar Smushkin
Head of the Laboratory of Mathematical Economics in Central Economics and Mathematics Chairman of the Board of Ilim Group
Institute, RAS; Deputy Director of Moscow School of Economics, Lomonosov Moscow State University Gleb Fetisov
Mikhail Eskindarov Businessman, Member of the Russian Academy of Sciences
Rector of the Finance University under the Government of the Russian Federation Arsen Canocov
Chairman Sindica Group
Director: Anastasia Alekhnovich
Head of the Expert Center under the President Commissioner for Entrepreneurs' Rights,
Igor Hudocormov
Vice-President of the All-Russia Public Organization 'Business Russia' President “Group Prodimeks”
2FOR BUSINESS MAIN PROBLEMS ARE OF ECONOMICAL NATURE
What people think: What business thinks:
What main difficulties do you think people starting their own business Rating of factors inhibiting production growth (on a scale
face? (any number of responses, % of all respondents) from one to five)
Сложность бюрократических процедур
Red tape 20% 3,2
Corruption Коррупция
15% 2,5
Административные
Administrative барьеры
barriers (quality (качество
of legislation, 14% 3,4
законодательства,
courts) суды)
Высокая
Tough конкуренция
competition (в т.ч.import,
(including со стороны
the
12% 2,9
informal
импорта, sector,сектора,
теневого monopolies)
монополий)
Частые проверки
Frequent checks 3% 3,1
Недостаток квалифицированных трудовых
Shortage ofресурсов
qualified workforce 1% 3,3
Высокие финансовые затраты (издержки
High costs (tariffs, credits, rent/land) 9% 3,4
на тарифы, кредиты, аренду/землю)
The rouble exchange rate Курс рубля
3,5
Отсутствие
No seed стартовогоcredits)
capital (long-term капитала
7% 3,5
(долгосрочных кредитных ресурсов)
Высокий процент коммерческого кредита
5% 3,6
High commercial credit interest rates
Высокий уровень налогообложения
High taxation 17% 3,8
Снижающийся спрос на внутреннем рынке Source: surveys
Falling demand on the domestic market 3,8
conducted by the
Неопределенность экономической All-Russian Public
Uncertain economic situation 5% 3,9
ситуации Opinion Research
Center, 2017
3ECONOMIC CERTAINTY IS UNDERSTOOD DIFFERENTLY BY THE GOVERNMENT
AND BUSINESS
ECONOMICAL CERTAINTY IS :
FOR THE GOVERNMENT AND THE CENTRAL BANK – LOW INFLATION AND STABLE
BUDGET, IMPROVED BUSINESS CLIMATE, REFORM OF INSTITUTIONS
FOR BUSINESS – SUSTAINABLE GROWTH AND IF THE GOVERNMENT CAN GIVE A CLEAR
ANSWER TO THREE QUESTIONS:
WHAT NON-RESOURCE-BASED SOURCES WILL CONTRIBUTE TO THE RUSSIAN ECONOMY GROWTH?
IS THERE A PLAN TO STIMULATE THEIR DEVELOPMENT?
IS THERE A TEAM THAT WILL BE RESPONSIBLE FOR ITS IMPLEMENTATION?
Source: calculations of RAS Institute
for National Economic Forecasts
4STOLYPIN REFORMS –
to trust private sector initiative, to create landownership
KEY AREAS:
Development of private sector initiative, market relations;
P.A. STOLYPIN
Agrarian reform – creating private landownership;
RUSSIAN PRIME MINISTER
Reform of local government; from July 1906 to October 1911
Judicial reform. (5 years 2 months)
KEY RESULTS:
Production of grain crop increased by 37.5%, №1 position in the world;
Export of alimentary products grew by 93.7%;
Trade surplus rose by 103.4%;
Manufacturing Index went up by 8.8% annually;
Production of iron and steel grew by 53.1% from 1902 to 1912;
Expenditure on public education soared by 256%;
Defense expenditure rose by 50.1%;
Russian population grew by 22.7% from 139.3 to 171.0 million people from 1902 to 1912
Source: Edmond Théry, La Transformation économique de la Russie, 2008
5THE RUSSIAN ECONOMY – NEW GROWTH SOURCES
DEVELOMENT OF INDUSTRIAL SMEs, SHRINKING INFORMAL SECTOR, RECOVERY OF
CONSUMER GOODS PRODUCTION
NEW INDUSTRIALIZATION – HIGHER LABOUR FORCE PRODUCTIVITY:
IN EXISTING INDUSTRIES (MIC, aircraft and space, machine-tool and professional
equipment, transport and car industries, power industry, medical equipment)
DEVELOPMENT OF NEW SECTORS (deepening of natural resources processing, light and
food industry and others)
DEVELOPMENT OF THE FUTURE ECONOMY INDUSTRIES (DIGITAL ECONOMY)
HOUSING DEVELOPMENT, UTILITIES AND INFRASTRUCTURE
AGROINDUSTRIAL COMPLEX DEVELOPMENT
FAR EAST RECLAMATION, DEVELOPMENT OF 'ASIA – EUROPE' TRANSPORT CORRIDOR
6ON EACH STAGE DIFFERENT DRIVERS OF GROWTH SHOULD BE WORKING
Stage № 1: Stage № 2: Stage №3 :
Reset Use growth Moving to high speed growth Sustainable Growth
(2017–2019 гг.) (2020–2025 гг.) (2026–2035 гг.)
A balanced combination of
developing internal market by
Demand on the domestic market. Investment into increasing improving the quality of living
Import substitution. Increased productivity of the industrial standards and the dynamic
revenues from traditional export production. development of non-commodity
high-technology exports.
The strengthening of the ruble
Nominal rate and PPP coming
A moderately-low exchange rate exchange rate in accordance with
(relative to the current state) the parameters of the normal close as the main sign of
functioning of the economy developed economy
The presence of Russian
Increasing investment in fixed companies in global innovation
Using existing capacity markets and management of
assets and human capital
global product chains
7THREE KEY REFORM AREAS
MACROECONOMICS – ALL-SYSTEM SOLUTIONS FOR LOWER
COSTS OF PRODUCTION
MICROECONOMICS – REGIONAL AND INDUSTRIAL POLICIES
INSTITUTIONAL REFORMS – LOWER RISKS
8MACROECONOMICS – to reduce costs, ensure accessible long-
term credits at low interest rates
NOT WAITING FOR LONG-LASTING STRUCTURAL REFORMS:
• to reduce interest rates on loans – the effective interest
rate policy
of the central bank (< 1%)
• targeted medium low stable exchange rate of the ruble
• taxes stimulating growth, investment
• to establish a new tariff system in order to increase competitiveness of
the whole economy instead of dependence on oil and gas companies as
profit centers
• public funding to the amount of 2.2 trillion rubles
9
30.11.2017IN OUR IMPORT-DEPENDANT ECONOMY INFLATION IS INFLUENCED BY THE ROUBLE EXCHANGE
RATE WHICH IS DRIVEN BY OIL PRICES
Data on the RF confirms inverse relation between consumer Inflation structure
Структура in 2013-2016,
инфляции % гг., п.п.
в 2013-2016
price index and oil prices 14,0%
140 14%
12,0%
120 12% Инфляция (прочие
4,5% Inflation (other
10,0% факторы), %
factors), %
100 10%
80 8% 8,0%
8,1%
60 6% 6,0% Инфляция
Inflation (курс), %
40 4% 7,0% (rate), %
4,0%
4,0% 3,0%
20 2%
2,0% 0,7% Inflation
0 0% 2,8% 1,1%
(tariffs), %(тарифы),
2009 2010 2011 2012 2013 2014 2015 2016 2017 1,7% Инфляция
1,4% 1,3%
0,0% 0,4% %
M2, трлн руб. Brent, $ 2013 2014 2015 2016
USD/RUB ИПЦ на конец года, год к году
The study 'On Effective Monetary Policy in Russia…' conducted from January 2009 to March 2016 by the Center for Macroeconomic
Analysis and Short-term Forecasting demonstrated that tightened monetary policy in the RF:
- has a statistically significant recessionary effect;
- does not have statistically significant impact on restraining inflation or ensuring stability of the national currency;
- results in higher inflation.
THE MAIN MEANS OF LONG-TERM CONTROL OF INFLATION IS ECONOMIC GROWTH
10INTERNATIONAL BEST PRACTICE –
11
GROWTH STIMULATION LEADS TO LOWER INFLATION
Countries which made a significant development breakthrough had been consistently implementing the strategy of economic and
financial stimulation. Their practices proved that at the early stage of active growth acceptable inflation might comprise a two-digit
value and it's the economic growth which became the primary driver for its further decline.
Lending rate (credits to
Credit / GDP, % Money / GDP, % Investments / GDP, % Inflation, %
the economy), %
Country
before after before after before after before after before after
1953 1990 1953 1990 1955 1990 1955 1990 1953 1990
Japan
n/a n/a 9.08 6.95 45.4 109.1 19.4 32.1 6.6 3.1
1970 2010 1980 2010 1970 2010 1970 2010 1970 2010
South Korea
35.3 103.2 18.0 5.50 28.0 141.6 25.5 28.6 14.8 2.9
1970 2010 1980 2010 1970 2010 1970 2010 1970 2010
Singapore
20.0 83.9 11.7 5.38 66.4 132.7 32.6 25.0 0.4 2.8
1978 2010 1980 2010 1978 2010 1980 2010 1990 2010
China
38.5 172.3 5.04 5.81 24.7 182.4 28.8 46.1 3.1 3.3
Financial Strategies for Modernization of the Economy: World Practices / edited by Y.M. Mirkin – М.: Magistr, 2014. – 496 p.
11THE POLICY OF QUANTITATIVE EASING (QE) FOR RUSSIA:
To achieve growth rate of 3.5-5$ at the first stage (the end of the third year of the programme implementation) and increase the
share of investment in GDP to 24-26%, the sum of 5.9 trillion roubles per year is required in the first two years of the programme
implementation (measured in prices as of 2015). 1 rouble of public funding will attract 4-5 roubles of private funds
Investment
2.02 tn. RUB
Capitalization and refinancing of development institutes (Industrial Development Fund (IDF, Bank for Development and Foreign
Economic Affairs (VEB) (infrastructure projects including PPP), SME Development Corporation, VEB Foundtion of Mono-Cities,
700
The Russian Agency for Export Credit and Investment Insurance (EXIAR), creation of Agro Industrial Development Foundation
and others)
Project financing: CB re-financing of commercial banks on security and/or repurchase of project bonds of Special Project
100
Financing Institutes (SPFI)
Re-financing securitized portfolios of loans granted to SMEs by commercial banks 100
CB re-financing of the syndicated loans portfolios, trade financing 100
CB re-financing of leasing companies on the security of lease contracts' portfolios 50
450
Founding a Bank of Bad Debts (restructuring debts of industrial SMEs)
Stimulating demand:
⁻ Mortgage 5%, food and medicines for the poor to the amount of 150 billion
520
⁻ Stimulating demand for domestic machine building
⁻ Foodstuffs and basic medicines for poor population groups
* Experience of Foundation for Industrial Development
12MICROECONOMICS – GROWTH PROJECTS
THE MAIN PRINCIPLE – COOPERATION
IN ORDER TO LAUNCH INVESTMENT PROCESS THE GOVERNMENT SHOULD SUPPORT IMPLEMENTATION OF THE FIRST
100 ANCHOR PRJECTS WHICH GIVE MAXIMUM MULTIPLYING EFFECT FOR ECONOMIC DEVELOPMENT
Projects of three Cluster Projects in Russia Areas EXAMPLES OF 'BUSINESS RUSSIA' PROJECTS
types are considered: pulp and paper plant Pprogramme for development and
higher performance of industrial parks
Technological processing of
associated gas for production of 'simple things'
development of timber processing (consumer goods) near big cities.
corporate groups and machine-tool building
industries; Development of agricultural cooperation, building
fish and meat cooperation centers for storage, wholesale and
Infrastructure industries
seed production retail sale of agricultural goods in the main city
development;
centers, New Markets programme.
Higher human potential tourism
Developing plants for processing natural gas
and capital.
IT cluster into chemicals and mineral fertilizers in ports
Services to the elderly
with the focus on export.
Medical equipment cluster in St.
Petersburg, pharmaceutical
cluster in Kaluga.
Priority spheres for project implementation are new sources of growth.
Complexes for gathering and deep processing of
Modernization projects can be carried out only by private companies with the aid from the state, which should associated gas and for production of electric
coordinate selection of projects to provide maximum multiplying effect, establish conditions, necessary power in Western and Eastern Siberia.
legislative framework, and provide support at the first stage of recovery growth.
Textile cluster in the Ivanovo region.
Project management is possible on the basis of territorial clusters.
Public financing might vary from partial loan guarantees to covering up to 75% of expenses.
The most attractive mechanism for large projects' financing is Public-Private Partnership and project financing.
Instrument of special investment contracts should be actively used.
13INSTITUTES – to reduce risks for property and property owners
• JUDICIAL REFORM
• LOWER ADMINISTRATIVE PRESSURE
• CRIMINAL JUSTICE SYSTEM REFORM
14
30.11.2017TO CREATE GROWTH ADMINISTRATION
TO SEPARATE GROWTH MANAGEMENT FROM OPERATIONAL MANAGEMENT
To create the reform headquarters – "DELIVERY UNIT" to organize, conduct and coordinate implementation
of ’Strategy for Growth' in cooperation with other authorities, business and the public.
On the basis of new technological opportunities to analyze "big data" of the Russian economy, the basis for
further decisions.
To introduce the system of strategic indicative planning which can forecast output and consumption, assess
needs in infrastructure and resources, inter alia, on the basis of interregional and input-output tables
(dynamic input-output models).
To create an effective system of project management for development: to ensure stable funding of priority
public programmes in accordance with their passports, to create a mechanism of flexible links beеween
public programmes and the contractual system, to introduce the system of professional assessment of key
projects; to introduce KPI for agencies coordinating programmes, development institutes and state-owned
enterprises, participants oriented at meeting economically feasible target indicators and project deadlines.
15FINANCIAL RESOURCES NEEDED FOR GROWTH
Necessary initial
FINANCING MECHANISM TOTAL
funding
ENSURING SHORT-TERM AND LONG-TERM CREDIT AT COMPETITVE RATES 1,500 BN RUB
DEMAND PROMOTION 520 BN RUB 2.02 TN RUB
MAINTIANING BUDGET EXPENDITURES AT THE LEVEL OF 2016 139 BN RUB
NEW SOURCES OF GROWTH FINANCING
Potential, per year TOTAL
Capital increase of the development institutes financed by the CB and new refinancing mechanisms
1,500 BN RUB
including project and trade financing. Creating a bank of bad debts
State banks assets via adjustment of lending mechanisms and specialized mechanisms of refinancing 500 BN RUB
Government guarantees in PPPs 500 BN RUB
Public property privatization 500 BN RUB + 6.2 TN RUB
Borrowing from the general public and financial investors via attractive instruments, such as indexed
1,000 BN RUB
bonds
Treasury support – increased effectiveness of public finance management 700 BN RUB
Admission of 3% GDP deficit in the mid-run, and the ceiling of government debt of up to 30–35% GDP 1,500 BN RUB
EVERY PERCENTAGE POINT OF GROWTH IS AT LEAST 300 BILLION RUB EXTRA PROFIT OF CONSOLIDATED BUDGET
16STRATEGY FOR GROWTH WILL ALLOW TO DOUBLE GDP BY 2035,
or even triple if the full potential of the Russian Economy is reached
GDP dynamics scenarios, 1990=100% GPP (PPP) per capita dynamics, the US=100%
4 3.65
120.0
100.0
3 2.86
80.0
2.05 60.0
2
1.37 40.0
1 20.0
0 0.0
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2013 2016 2019 2022 2025 2028 2031 2034
Russia – Inertia scenario World The USA China Russia – Potential
Russia – Strategy for Russia - Potential Germany India Russia – Strategy for Growth
Growth Source: Institute for National Source: Institute for National
Economic Forecasts, RAS Economic Forecasts, RAS
GDP growth rate, %
GDP GROWTH RATE : 7
Russia's share in the
STAGE 1 (2017–2019, third year): economic growth Number of high 40 3,25 6 world economy, %
performance jobs,
mln
35
1,65
4,5 (PPP) 2035
recovery – 3.5-5.0 % 25
2,9 Potential
2,25
STAGE 2 (2020–2025): reaching high rate and quality of 2,25
48,4 Strategy for Growth
5
economic development – 5.0-6.0 % 19
66,6 86.2 'No change' scenario
Inflation, % 25 GDP per capita, thous.
STAGE 3 (2026–2035): sustainable development – 3-3.5% 31 UDS (PPP)
Investment share in
GDP, % Source: Institute for National
Economic Forecasts, RAS
17RUSSIA IS A COUNTRY OF HIGH POTENTIAL
SUCCESS OF STOLYPIN REFORMS :
"If trends emerging in the largest European countries
between 1900 to 1912 continue until 1950, Russia will
dominate Europe from both the economic and the financial
points of view"
Edmond Théry,
a French economist delegated by the French Government to study the
Russian economy in 1912
A STRONG COUNTRY NEEDS A STRONG ECONOMY
THE WHOLE COUNTRY AND THE AUTHORITIES THEMSELVES SHOULD BELIEVE IN
OPPORTUNITIES FOR GROWTH; THE AUTHORITIES SHOULD STOP OVERESTIMATING RISKS
AND SHOULD LEARN TO TRUST BUSINESS AND CITIZES AND PERSUADE CITIZENS TO TRUST
THE GOVERNMENT
18THANK YOU
________________________________
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