Alexey Ulyukaev: All people got tired of sanctioning pause
Good morning, dear colleagues, Ladies and Gentlemen, I would like, first of all, to thank the hosts of the conference, represented by the Russian and German chamber of commerce, and its President, Herr Sele, also Herr Wansleben, and State Secretary Machnig, for those definitions and positive relations, which they provide. Two years ago, I appeared before the audience in this assembly hall at the same conference, and, perhaps, everyone agrees that two years ago we all lived in much more comfortable world, in which there were less menace, and perils but more chances, and positive anticipation. For the past two years the situation changed dramatically. In this reality a great deal of objective entity occurs: fundamental changes of global macroeconomics, reduction of worldwide trade, and decrease of global economic growth take place.
Every year we look to the future with certain expectations, and world analysts, and international financial institutions implement them into rather haughty forecasts, but subsequently throughout the year, these predictions diminish, and we come again to the same level, where we have started from.
But there is more to it than that. The issue is about considerable political tension, and that anxiety, which ordinary people in Russia, and in Germany experience at the moment. They’ve never known fear before, but presently terror has knocked on their doors. And this is a kind of challenge, which all of us should face – politicians, businessmen, and average citizens, – and we should honorably reply to these provocations. You know, mutual dependence becomes specifically evident. There is such an expression: “He whose windows are of glass should never throw stones”. The whole mankind lives in the vitrescent home, and it is very fragile. Any false motion may distort the balance, and result in worse than death consequences.
So, keeping in mind the distinguished biblical wisdom, finally it is necessary to descend from stones pecking to their gathering, to harvesting of our knowledge, experience, and to building of economic, cultural, scientific, and technological bridges. And I am pleased that this extended pause is gradually winding down. Everyone got tired of it.
Business is tired, and politicians are tired too. It is hard to make the first move. When we discuss complications for economics imposed by politicians, such as, for instance, sanctions regime, we speak the formal language, and language of arrangements. In particular, it is the language of well-known Minsk accords. But, I would like to remind that agreement cannot be accomplished by a single party, and any accord should be fulfilled by all the parties. It is impossible to applaud with one hand – you can't do that. And count me out of logic repeating, according to which we believe that our partners, principally Ukrainian party, do not implement their obligations arising under the articles, to the full extent.
At the same time, also in such a complicated situation, we find ways for coming together, especially, bringing about a rapprochement between European nations. I can take a note that bilateral dialogue has been recommenced, and our international commissions on Human Rights together with a number of European states reopen for functioning. Our joint working group with Germany, – which has not been running together during the previous two years, and which is led by the dearest Herr Machnig from the German side, and by my First Deputy Mister Likhachev from the Russian side, – has finally met up, though not exactly under ceremonial standard, but it came together last year. It is important. I think, this year we are going ahead further, and we’ll bring back the status, both official and fruitful, to this group activities. It has a great scope of work for practicing.
Our commercial intercourse has dropped rather badly, though total trade between Russia and Germany has declined less than to European Union in general. It is remarkable that, whereas recently, and technically Germany has been our second business partner after the Netherlands, then presently (we understand, that it is matter of oil products export accounting, and statistics), and technically Germany is our trading partner number one.
This commercial trade depression, of course, is a consequence of external circumstances: such as global constraint in demand, and decrease in value of raw commodities. The sales turnover doesn't decline in physical quantity, but in value it sinks rather deeply. This means that we should apply additional efforts in sustaining non-oil-and-gas export business, in elaboration of commodity exchange in the field of high technologies, and, last but not least, in development of trade turnover at the level of small and medium business.
I have no intention to say that time of national champions has passed away – it will never elapse, – and leaders of our private sector, both Russian and German, will always take rightful place. At the beginning of this month we have celebrated the milestone occasion – 45 years since the initiation of the largest Russian and German gas project. In 1970-s there was real cold war, and actually complicated relationship, but our precursors were mensch enough, and demonstrated political wisdom, and responsibility, to take the steps. That was not easy to achieve – because there were plenty of opposing parties both in the Soviet Union, and in Germany. But, we harvest the results of positive choice, which had been made at that time, and even our children will gain from it. That is why, sure enough, we should also realize peculiar liability and undertake major measures toward bringing a rapprochement immediately.
By the way, business community in this context moves faster than politicians: it doesn’t slow down its diligence even during the period of this tough time. And I mean that, recession exists in regards of trade turnover, but investments grow. Maybe, not so fast, as it is desired. Nevertheless, growth of investments takes place: in 2015 about 2 billion of German investments flew into the Russian economy – large attractive projects: Siemens commissioned the gas turbine and combined cycle gas turbine units Plant in Saint Petersburg in June last year, in September DMG MORI – machine tool industry Plant in Ulyanovsk, in October Volkswagen – in Kaluga, in November Claas – agricultural machinery production in Krasnodar. Briefly summarizing – big business in demand, with high degree of location in the Russian market, which provides job places both for German companies, and Russian enterprises, and makes it possible to derive taxes, and improve prosperity – is on its way to come.
Today in the course of my present visit, two significant agreements for rather massive capacity of German investments into the Russian Federation are going to bear the signatures too. It makes a great difference and certainly, we set especially high hopes on contribution of small and medium business. We have founded the Corporation for Small and Medium business Supporting, and focus on their promoting under the principle of “one contact”, and among them prominent tentative projects. The cooperation between Corporation SMS and Russian export center, which wields competence in order to render financial and non-financial backup both to those, who have already become exporters, and to those, who can be. They have not known yet, that they are ready for being export merchants, that there are markets where they are welcomed to, that their price and quality are good enough to let them enter these markets. And we should help them with this determination, with this knowledge, and for this reason Russian export center is going to work in this trend very firmly. We would like to find new form of operation of such private-public partnership in the field of commercial foreign-economic affair. Specifically, on the base of our trade missions, together with Russian export center, we are going to establish such merchant ventures, which will deliver the best options in terms of exhibitions, advising, assistance in legal, and juridical backup, through logistic facilitation, furnishing warehouse positions, and so on, and one of the first firms shall be founded here, in Berlin. Now, we are about to open scientific and technological subdivision on the base of our trade mission office, together with Academy of Sciences, which shall assist innovative and technology intensive businesses with their adapting to strict requirements existing in European market, over here. Obviously, on the other hand, that the same structures and my ministry are ready for giving aid to German corporations to the maximum, since nowadays, more than 5500 thousand German companies operate in Russia, with annual turnover around 45 billion euro, and engaging 270 thousand of Russian citizens, and where also many German citizens are employed, so we consider these enterprises as Russian entities. We are talking about the fact, that the status of domestic producer is merely attributed to providing defined level of location. These are quite transparent procedures. They are mandatory discharged according to location. Complete Knock Down – that's not it what all of us would like to witness. As for production with high degree location – it ensures both status of domestic producer, and opportunity to derive corresponding exemptions, and vindication measures, to participate in supply and service for the state needs, in operation of project financing system, to achieve the state financed guarantees, to receive credit support, including interest rate subsidies, and so on. We have developed a system of special long-term investment contracts, according to which these partnerships with the participation of German capital, will be given with bonds. But here, these warrants have nothing to do with quality deterioration of regulatory environment, wherein they function. This circumstance is overwhelmingly important.
This time period is complicated not only from the comprehensive point of view, but also in the context of specific economy. In Russia, we have experienced a period of substantive economic decline. Last year, the 3.7% depression of gross domestic product took place – it’s bad, but findings actually indicated that the bottom was touched in the middle of previous year. If we look at seasonally adjusted monthly dynamics, we’ll see that, starting from July, month by month recession is practically absent. There was one more slender process in November, but now it’s restored. Rather stable financial, and budget situation is observed. The government assumes special measures for backing both the branches, which appear in intricate situation, and the sectors, which have better chances for ambitious progression. It is subject to agriculture, food processing, machine industry, chemistry, and fertilizer manufacturing. We gained from these lines of business last year. And if we speak of financial result of enterprises, and their profit, then Russian business achieved 50% more last year, and 1.5 times bigger benefits than a year before. And it pertains also to those 5500 German firms, with German capital in Russia, – since they’ve gained higher profits too.
Revenues increased 3.7 times in agriculture, and 2.9 times in machine building. This is a real opportunity for investments, credible invitation to turn up one's sleeves, because we can give evidence of social mission of business community. But anyhow, business means making money, and right now conditions for this action are clinking well, in my opinion. We conceive that those major companies, who have stepped into Russian market, will never leave it. They run business here, and are very satisfied. But a large number of operators, including Germans, who are not aware of such potential, have alarms, and risks. The whole story about sanctions is poor not because one can’t do some particular things, but it is mean because of creating the atmosphere of timidity, and turbulence. The word “faith” for business is the most important thing. Without faith, one can’t give credence to counterparts: so, they say – “we’d better wait” if the situation changes or not in a year, two, or three. But if you are waiting now, you won’t earn what you could gain today and tomorrow. So it makes, certainly, sensible to rise the performance through our trade missions, merchant ventures, directly to subordinate entities of the Federation, and over there, as a matter of fact, opportunities are instantiated, not in Moscow, but through the regions of Russia, and it becomes all-in-all for us. As I’ve already said, we are going to elaborate measures for reducing investment cost of business through punctual policy as per tariff of natural monopoly, and salary, through keeping lower fiscal burden, through extension of measures aimed at lowering of regulatory encumbrance in the field of supervision, control, and checking practice, through introduction of special immunity for SMS in the field of inspection, and monitoring. I mean introduction of method, when freelancers, and solo traders, who receive patent, are excused from tax liability for particular period of time, when it is not allowed to carry out a scheduled inspection at such an enterprise. This is extremely valuable trend.
I’d like to say couple of words about wider context of relationship between Russia and European Union in general. They, relations, are also in such a… “frozen” state. Recently we had such a fresh word for this commitment – it was partnership and cooperation agreement. We jointly prepared the agenda on development of this agreement, and attribution of new opportunities in the course of panel sessions. Unfortunately, we do not go forward along this track during the latest two years, but it would be better to ram ahead. We have delivered the appropriate proposals to Herr Juncker, President of European Commission, and other colleagues. We look forward to moving ahead in this matter.
The dialogue in business is vitally important. The foundation of this platform – is Russian and German business dialogue, where two largest business associations of Russia and two most influential representatives of German private sector have closed the ranks and led their initial meeting, opening sitting, and started to discuss this agenda – regarding matters, how to unlock the potential development, and on contrary, how to arrest negative factors. This is extremely valuable.
We witness so much that a great number of forums, such as current one, are carried out. Some individual German territories host serious appointments. The latter meeting in Munich, wherein Chairman of the Russian Government Dmitriy Medvedev participated, possesses a value. In May, the appointment will be held, and in April the Eastern Conference in Berlin will take place. So, the grounds for dialogue exist. It is necessary to arrange talks, to discuss frankly all the problems, and to descend from negotiations to materialization of these contacts, to conclusion of mutually beneficial contracts, to delivery of expansion, and to teamwork in the markets of the Third Countries, which is of great importance at present time, because many enterprises with the participation of German capital are located in the Russian Federation, and at the moment have jolly good feasibility in order to operate in the markets of the Third Countries, and the Eastern Europe, Asia, Latin-America, and in the Middle East. Better to take the opportunity.
I warrant that as late as this year the indexes of our trade turnover, and investments are going to return into affirmative plane. It is possible that they can’t reach those better exponents at once, which we experienced formerly, – our sales turnover composed 90 billion euro at that time, – seasons and efforts are required for that. But it seems to me that, as early as this year, and owing to objective and subjective circumstances, the scope of work, like contribution of those institutes, and those formats, which we are launching now, and according to which we are going to collaborate, will result in delivery. And by all means, this depends on everyday action produced by each of us.
I wish success to all men on count of this commitment. We shall contrive to promote this operation for our part. I reckon on our discussion to Vice chancellor, Federal Minister for Economic Affairs and Energy Herr Gabriel, that this step will help to create those auxiliary facilities, which business community needs along here too.
I would like, also, to invite my most esteemed colleagues to arrive in Saint Petersburg for economic forum in June. Since this is a perfect site for comparing notes, negotiating streams of joint activities, and by the chance contracting corresponding agreements.