Talking points of the Chairman of FBA EAC Coordinating Council A. Murychev

at the conference Vienna process 2019:

“Russia and the EU: Dialogue through Business and Civil Society Channels”

February 4-5, 2019 (Vienna, Austria)

The current economic situation is stable. Nominal figures such as growth of GDP, industry and agriculture, oil extraction and export demonstrate positive dynamics. The long-term obligations risks are minimal. The total amount of FX reserves (20.4% of GDP) covers the risks under Russian debt.
The authorities take efforts to avoid the dollar dependence. Treasury investments in 2018 fell down to 14.9 billion. At the beginning of the year the figure was $ 100 bn. The share of dollar in the FX reserves is receding. Last year the Central Bank of Russia bought a record amount of gold – 92.2 tons and became the largest buyer of gold in the world. The share of gold in the global FX reserves has reached 18 %, the gold reserve has exceeded two thousand tons.
Russian banking sector in 2018 showed moderately positive result of the dynamics of assets, loans, liabilities.
The amount of mortgage loans issued by banks has reached the record of RUB 2.3 trillion (36.7% more than in 2017). The banks’ profit last year was very high which means that the banking sector has overcome the problems of the last years. The profit was over RUB 1.3 trillion.
Today the regulator and the banking society are focused of four main areas of the financial market development: the formation of trusted environment; the development of competition; the support of financial stability and availability of financial services and capital.
The investment environment does not correspond yet to the scale of challenges the economy faces today. Business which is ready to invest to the state projects doesn’t have any guarantees of reliable fiscal terms. Since summer 2018 the government and RSPP have carried out joint work to select the priority investment projects.
But business is still hesitating. There are different drafts of the law on investments, and the stabilization clause is on the first place as well as the instruments of support and protection of investments. External environment impedes the cooperation with the European business.
At the same time, in spite of the difficulties which are likely to become long-term and permanent, and we should take it into account, the cooperation between Russian and European business continues.
Certainly the political expenses of cooperation are very high, but the European business targets to interaction because the work on the Russian market is profitable, and it is against the restrictions towards Russia. RSPP actively cooperates with the European partners through business associations, for example Association of European Business, German Eastern Business Association, Russian-German Chamber of Commerce and other.
The European partners regularly publish their official opinions on such crucial for the European business issues as sanctions on Russia encouraging the authorities to lift them. For example this year such documents were published by the Association of European Business and the German Eastern Business Association.
RSPP in its turn supports this position because sanctions lead to losses on both sides. For example in 2014-2015 the losses amounted to 90 billion Euros. According to the UN it was 100 billion Euros in 2014-2016.
However, in spite of the unfavorable political situation the European partners invest more in the Russian economy. Many of them apply such support instruments as Special investment contracts, Free trade zones. Export to the EAEU countries through the investment to Russia is in focus too.
According to the Central Bank in the first quarter of 2018 the European FDI to Russia’s economy amounted to $311.6 billion with positive dynamics in the last three years (2016-2018). And the share of European investments in total FDI was over 67%.
The largest European investors were Cyprus, the Netherland, China, the United Kingdom, Luxemburg, Germany, France, Ireland, Austria, Sweden, Italy, with the share of 97% in total European investments to Russia.
The most attractive industries are manufacturing, wholesale and retail trade, financial and insurance sectors.
In conclusion I would like to mention that the sanctions negatively influence the investment promotion. But in spite of the political strains many “old” European market players create new manufactures, avail of new opportunities and remain on the market, which means that the policy of investment facilitation and investment retention is effective.