Interview with Minister Alexey Ulyukaev to Itogi magazine
In autumn Alexey V. Ulyukaev, in addition to purely state affairs, makes at least two important actions: publishes a collection of poems and gives an interview to our magazine. The occasion for the interview is the nearest birthday of the Banker. A theme has defined by a new book by Ulyukaev under the self-explanatory title "Vitamin Deficiency." The Minister of Economic Development told "Itogi”, how economy feels.
- At the end of June, taking a new position, you said that you were experiencing a state close to happiness, that join the Ministry of Economic Development with pleasure. Has the happiness reduced since then? Or vice versa: now you experience extreme drive?
- I believe the word “pleasure” was not mentioned. About happiness - I can confirm it. These are different things ... In a word, there is little pleasure, of course, because it is a material category. My working hours increased one and a half times, the salary was reduced four times, and the stress increased several times. So there is no pleasure visible from any side. A drive - yes, absolutely. Now I learn a lot of new things every day. I would not say that I worked in a narrow range, but obviously not as wide as it is here. I was engaged in financial and about-financial issues for more than a decade. Now I have expanded the range of interests, activities, understandings in different areas - in industrial economy, transport, heating, electricity and gas supply, agriculture, innovative economy, metallurgical industry, automobile production ... This is a huge sphere. And this is not macroeconomic things, that are more or less clear to me. This is microeconomics. And micro-economics means conflicts. This is relationship between the supplier and the consumer, employer and labor collective, taxpayer and fiscal authorities. It is a constant challenge: from morning to night, every day you have to be on our toes, astrain ... I have not figured out everything yet. I learn constantly from my employees. They enlighten me. By the way, I have not expected such a high quality of the team. Salaries are low in the Ministry of Economic Development, but people worth much more than they receive ...
- Risks that now face, have you figured out them precisely at that time?
- That is the risks that were clear to me.
- So your personal economic outlook complied with the life?
- Roughly coincided ...
- In the third quarter instead of the expected upswing the decline by 0.2 percent occurred. Your deputy Andrey Klepach said the word "stagnation."
- I spoke the word "stagnation" two months ago. It really is the correct definition. You know, we have that kind of horror stories: crisis, recession ...
- And it is trendy to argue that is the worse.
- Both are bad ... But the critical decline or a recession, it's a part of the business cycle. The recession is always followed by an upturn. At the stage of recession inefficient production are liquidated, inefficient jobs are closed, inefficient employment is reduced, some new technology management solutions are found, that allow to reduce costs, new businesses are started. And after getting rid of excess fat, they begin to develop. This is what happens on the stage of cyclical development. But stagnation, it is not from the "cycle." It is separate. It is associated with problems of structural, institutional nature, and it can last for a very long time.
- Like a straight line on an oscilloscope.
- Straight or roughly straight. Do you know this book, its authorship is attributed to Vladislav Surkov - "About zero?" It is in that situation - all about zero. it seems that nothing wrong happens. Unemployment does not grow. The plants are not closed. The demonstrations are not held. Everyone gets some income, though not as big as expected. Markets work. Everything exists. But no prospects of development! And either the nation somehow finds the strength, mobilizes them to look for solutions, or it does not. And the solutions are always of two types only. First, you have to cut costs, that is to produce what you produce, but in a different way, more efficiently. And second, you should go into areas where you have not been before, to produce new technologies, new products, new services. Are we capable of that, or not? This determines the potential of withdrawing from the stagnation.
- Meanwhile, it seems that the government has some secret knowledge about the fact that oil prices will fall, and for a long time. And it is preparing for that: refashions the budget, new excise taxes, fines are introduced at the mundane level, the Prime Minister scares us with the unemployment...
- There is no secret knowledge in that. There is a forecast until 2016. We have prepared a forecast up to 2030, according to which we expect some decline in oil prices from the current level of about 108 to 90 dollars per barrel within next three or four years. Then a gradual slight rise. But all that is in nominal terms. Taking into account the inflation to the dollar, apparently, it is not a grow, it's also some kind of stagnation. Because there is a set of demand and supply factors. There are demand factors associated with the forecast of growth in the global economy, and there are supply factors associated with the emergence of new alternative sources of energy - shale gas, shale oil. They are in a certain balance in terms of each other. So, from my point of view, there is no problem of decline in energy prices, there will not just be a continued growth. Nothing else will fall from the sky, one will have to struggle and work for everything.
- But $ 90 per barrel - it is also that bad.
- Not bad at all.
- Then what is happening: the oil ceased to be our nurse, a panacea for all diseases?
- It ceased in may ways.
- So it means that the economic model starts to fail?
- Of course, these are the problems of the model of economic growth. Until recently, he was largely caused by the fact that the United States is accumulating negative balance in the current account, trade balance, importing everything that they need as import, and this was contrasted with capital account, high public debt, that balanced that. And the global economy gained huge turnover in terms of liquidity. Now the States are more self-sufficient: shale gas, shale oil, reducing the balance of the current and capital accounts.
In simple terms, there were "global city" of the States and the "global village" of China. The global village produced products at a very low cost, sold them to the global city. The global city paid for that to the global village, and it invested the money in the investments in the global city. That's how they lived. But there will be no such a bipolar system any more. World trade will grow at a much slower rate than the rate of global economic growth. China is more dependent on domestic investment, domestic consumption. India will be more dependent on these facts. And so we are.
But the growth of our domestic consumption, which is now quite high, is supported, besides other things, by the salaries of state employees, due to renowned presidential decrees. And it also comes up against limitations. Because salaries become requirements in business sectors, where they are converted into costs. Plus, consumer credits, which supported consumer demand: now its share is not that high. The consumer market in general will support the economic growth, but again, not that much. Because everything will depend on investment: we will invest in the economy or not. We as a state, and we as a business, which the state has helped to, creating comfortable environment, as well as foreign investors. It is not possible to invent anything else.
- Returning to the model. Shale revolution does not create incentives for management revolution here in Russia, does it?
- This is a very big words, the "shale revolution". There is no revolution. Just large areas of energy self-sufficiency. And implications that the export of energy will determine the economic growth, will not work out. This is a serious challenge, new rules of the game. State managers and business managers shall learn how to control costs. It is clear even in the day-to-day sense. If you do not have strict restrictions on income, there is no reason to work with costs. But we have entered a period of severe restrictions, especially for income, related to exports and consumer sectors. In this situation, a day-to-day job of cost management is a categorical imperative.
- Still one of the growth drivers is the consumer demand.
- It's a fact.
- But due to what it will be supported? Now presidential decrees played their role, and how to support personal budgets afterwards?
- For several years we have a high share of payroll budget, income reduces. And a source for investments is the income. Thus over the years the income growth is outstripping the growth in labor productivity. That means, the costs do not allow for flexibility. Plus we're mostly self-funded economy. Businesses need investments, but a source for them is the profit, its decline undermines the potential growth. Therefore, income in the foreseeable future can not be built up rapidly. They will grow, but much more moderately.
On the other hand, there are always good and bad news. The bad one is that the income is not so high. The good news is that the costs of manufacturers will be reduced due to that, therefore, the manufacturer gets a clear grounds for building its financial model: how it spends the money, what are the costs and what will be the return on capital. And this is the basis for the growth of investments.
No growth other than investment one, can occur right now.
- On the eve of the Banker’s Day I can not help but ask: what is the role of banking system in this situation? What will it be for the state: a headache or support?
- Support, absolutely. The banking system is administratively qualitative environment. Risk assessment and their account - this is the essence of the banker’s work. Another thing is that it is impossible to impose too much expectations on the institution. It is clear that the pace of lending decrease objectively. We are now on a local segment, when the growth rate of deposits of companies in banks is higher than the growth in loans. In a sense, the banking system is a vacuum cleaner that takes liquidity from the market. But it is a reflection of a common understanding of investment risks.
We unfairly criticize the banking system, because banks maintain too high interest rates. It is a matter of rational behavior of the borrower and the lender. One must be very careful when he borrows, the other - when it gives loan. And state agencies are aimed at creating a model that will give assurance to the first that their money and yield will return, and to the second - that their products will be in demand and, consequently, there will be funds to pay bills. Therefore, it is necessary first of all to call us to task, not the banking system.
- Is the ruble overvalued or undervalued now?
- I'm not ready to talk in those terms, the answer is given by the market. The policy of inflation targeting in the Central Bank is actually implemented, and virtually free floating of the ruble suggests that supply and demand are equal. There is not reasons to suggest that the ruble will significantly strengthen. But it is not expected that it will greatly weaken, too. Therefore, it is likely some kind of balance. While there will be quite a high level of volatility, we can hardly expect any fundamental move towards lowering or raising of the exchange rate.
- So it means that the global stagnation also dictates its conditions to the ruble?
- Look what's happening in the euro /dollar pair. It came almost to 1.39, the next year it returned back. Everybody was seriously worried, gave advice to the Central Bank, when I worked there, to withdraw from the assets denominated in Euros, and then there was an exchange rate of 1,25-1,27. They said that everything will fail. And now - 1,37-1,38! This is a very delicate matter, and if some analyst says he knows whether a currency is undervalued or overvalued, he is just lying or an amateur and does not understand the nature of these relationships.
- Recently the Advisory Council for Foreign Investments tool place. What does the business say? What words do they say: "recession", "stagnation" or, as the poet Ulyukaev, it is "only a vitamin deficiency?"
- Vitamin deficiency is probably closer to them ... Investor votes with money. And in general the voting of the foreign investor is more positive than voting of domestic investors. Direct foreign investments are increasing. There is an inflow of funds and institutional investors, and those who invested directly in the establishment of production facilities. In general, they estimate the chances of the Russian economy in terms of the potential, size of the market, gradual improvement of investment environment, pretty high.
The fact is that the investor has a country, regional look. It compares the investment environment in Russia with the investment environment in China, Brazil, England, New Zealand ... And it sees that the risks are acceptable, and the return on capital is perhaps better - and makes the choice. Of course, it is also necessary to help it to make this choice.
Investors have a lot of claims, but they do have a technical character. For example, customs clearance, labor laws, the use of so-called temporary agency work, environment, conditions for connection to the power networks. A large number of just requirements, but they somehow understandable. Foreign investors do not say, make the investment climate change. Their proposals are very specific: such and such laws require adjustments, and we have proposals in this regard ...
But domestic investor does not make comparisons with other countries. It compares with other time periods: three years ago I had this situation, and now - another. We have changed the terms of the insurance payments for medium-sized businesses, and the investor of small and middle-sized business says: I'm not ready, I thought that in case of 20 percent I will work, and in case of 30 I will not work. And it washes its hands away from this market. And it is not clear whether it really withdraws, or just imitates it is withdrawing - stomping loudly, and quietly it stays at the market, but does not pay taxes. This is a critical difference.
We have a very constructive dialogue with foreign business, but the Russian business, perhaps, is more skeptical about our efforts.
- What external factors could spur the stagnation?
- External factors are clear: change in global growth.
- It's general. What regional shifts are most sensitive for Russia?
- From my point of view, the main risks are now in the countries of emerging markets. The matter is how the economic growth in China, India, South-East Asia will be adapted to the new realities. How manageable its decline will be. It is crucial for us. Because both America and Europe will come - and they are coming - out of this recession with new requirements for raw materials, energy. Europe's demand for energy is not reduced, because Europe began to emerge from recession. But it does not increase. In this sense, the main thing is what will occur in developing economies because the demand for our metals, our energy is mainly there. This is a global change.
I believe that we should think less about that, and more - about internal costs and the domestic investment environment, about internal risks to the business, help to make right decisions.
- A quote of Alexey Valentinovitch from October 2011: "There will be no deep falls and recessions, but there will be very cautious movement, as if on the ice." Can you confirm that?
- I do. Since April 2009 I have been saying the same thing. It is 4,5 years already. It's a different reality, with different estimates of investors risks, with other volatility, with other economic growth!
- How long will we crawl on this thin ice?
- As in "The Life of Archpriest Habakkuk": "Until the death, Markovna, the very death ..." Well, at least till my retirement.
- That is how the poet Ulyukaev says that: "Winter, winter again. Again my people will feel cold here.”
-Something like this ...