Alexei Kudrin: we cannot say that the peak of problems is passed

Alexei Kudrin: we cannot say that the peak of problems is passed


Moscow. December 27. The head of “the Committee of civil initiatives” Alexei Kudrin, unlike the current leaders of the Executive authorities of the Russian Federation, believes that the peak of problems in the economy of the country has not yet passed, because the government has not taken comprehensive crisis management measures. However, the former Finance Minister is limited to advice to the Cabinet and not commented on his possible return to power. Thus Kudrin politically indifferent, though, and believes that Russia lacks a strong opposition party and a fierce political debate. About the situation in politics and the economy of the Russian Federation Alexey Kudrin spoke, the reviewers Rodion Roma and Andrey Novikov.

– President Putin during his recent press conference, when asked about the situation in the economy, responded with a joke about the alternating black and white stripes – “it turns out, was white.” The economy’s decline this year is approaching 4%, even worse with investments, with the retail turnover. While there is an opinion that is actually some sort of restructuring occurs, there is increase in exports in industries that previously were not export, but with the weakening of the ruble became more competitive. As You look at the current situation in the economy and the prospects of next year?

– Some time ago many experts, and I, too, felt that we had reached the bottom, or, as some say, passed the peak of the crisis. But today we see some additional deterioration, which already shows us the November. This means that the situation is still precarious, plus added an even more serious problem is the sharp decline in oil prices. If the price will remain at this level for another half a year or year, we are waiting for the continuation of the declining economy.

Thus, we cannot say that the peak of problems is passed. Next year poses a serious challenge. Reduced public spending, this is inevitable, since both incomes will be less. Devaluation has not yet moved all your energy on consumer prices, inflation next year will be about 1.5 percentage points above expected official forecast of 6.4%. All this is fraught with high-stakes loans, retaining risk in a number of industries, as production and employment, profits, there is a risk of a new wave of non-repayment of debts. And now the situation is not very good, but, let’s say, while it is stable, except for individual banks or individual branches. But it can deteriorate.

Yes, at some enterprises increased production, we also see, especially in export-oriented industries, where the situation is better due to the fact that the devaluation played a role. Part of the industries oriented to the domestic market, also feels better, because the devaluation has hampered imports, given market niche. In principle, everyone expected a greater response of industry to the devaluation, as some protection from competition and the ability to expand production.

But, first, we, unlike 1998, the year when capacity was underutilized and the GDP after the devaluation increased by 10%, now there are no large free areas, so quickly and sharply, the devaluation has no impact. We have no additional labor. In the crisis, some migrants have left the country, because in dollars, their earnings are significantly decreased. In this regard, we have no serious resources available for a strong expansion of production. For the first time in many years has been a serious decline in real incomes, which lowers consumption. Even now, the New year the demand is much less in comparison with last December. In some regions it is 15%, some at 30%. It all inhibits growth. But this short-term effect. While he is rather negative than positive.

Very alarming that investment is practically not growing, despite the fact that companies have available resources: there is a growing volume of funds on accounts in banks. The increase in balances of household deposits in Bank accounts totaled over 11 months of this year, nearly 16%, while the growth of the balances of companies is 7.6%. It is a resource for investment, which is not used.

This suggests that proposals to add money into the economy are completely false: money is in the accounts, meaning they have banks and banks are afraid to invest. Because very large risks in the economy.

I was surprised to hear: the government believes that the anti-crisis program is largely neutralized external risks. It is not, this cannot be accepted. Yes, the anti-crisis measures, perhaps, the peak of the problems lifted, I agree, and especially in the banking sector they have played a key role. However, the collapse of investment and real income were significant. The state had to do more to simplify regulation, improve the performance of the economy and reducing costs for businesses. The devaluation of their part of the “work” done, but the government should also simplify procedures to increase the individual payments. Truckers – the most striking example, but the same happens on all tariffs, for all paid services, where the government regulates or is involved.

Now we discuss the new tariffs for the next year: if they are indexed more than 5-7% – it is again the business hit. This means that everything will remain in the area these risks when investing nobody wants. The lack of investment in the economy – this means that in the coming years, three to five years, we will have very low growth rates.

– In the conditions of crisis the budget money goes on support of the Crimea, Donbass military operation in Syria. Do our economy the factor of safety?

– Crimea, definitely worth the money. According to my estimates, it would cost approximately 200 billion rubles a year. But the costs of operation in Syria is not very high. For example, cruise missiles, which the Russian VC release at ISIS positions, still fired on the teachings. Another thing is the cost of the defense as a whole. Laying two new submarine, which I read recently, maybe that will require money in annual terms, more than the Syrian conflict. There is a need to build them today? I do not know. But speaking about Russia’s participation in the Syrian events, should not be discounted additional, more serious than before, the risks of unintended incidents that could affect our relations with the countries – partners of Russia.

In Syria involved the armed forces of many States with whom we have established economic cooperation. The story of a Russian plane that was shot down by Turkey, has shown how these costs are substantial. Risks continue unabated. On the contrary, they, most likely, will increase, a factor that investors take into account, which become more conservative.

In this case, the game in Syria worth it?

– Economic costs are definitely there. You get involved in the Syrian conflict political dividends to Russia, despite the economic price we will pay for it, I’m not going to comment on. It requires a deep analysis of the strategic prizes of the Russian Federation.

– The Russian leadership has repeatedly stated that sanctions are not a method of solving inter-state problems. Restrictive measures against Turkey were adequate?

– Russia has changed its position on sanctions. My opinion on the matter remained unchanged: in principle, I am against economic sanctions – against Russia and against Turkey. I think, after the attack on the su-24 had to be limited to political demarches in Ankara. Economic relations limit is not worth, as this suffers the Russian business: no do components for the Russian industry, leaving construction workers. Recently met with entrepreneurs, one says: I have a matter of days before completion of construction, and I was forced to take Turkish workers quickly to replace them I can’t, and I have responsibility for the loans, penalties. Very seriously hits Russian business.

Changing the rules of the game is always a deterioration of economic institutions. The Institute is the most important thing today is on the world market. Today, countries are competing not the production of potatoes and production of electronic chips, and institutions that generate and update your production. Open interaction with leading countries, especially with neighbors, is always the additional factor of growth of their country.

The theory of the protectionist barrier to limit imports, and because of that more will make themselves, is flawed. The most effective openness of interaction with the leading countries: we import the best from others. A natural control is the exchange rate. That’s why I have a negative attitude to sanctions against other countries. The only thing that was done correctly – measures to ensure the safety of Russian tourists.

– You could say about the fallacy of the sanctions to the President. You still meet him tete-a-tete?

– Met with the President in August and in October. We talked about the economy.

– What did You say to him?

– Such meetings are not made comment.

– In addition, a significant negative impact on the economy has corruption. What is “watchesnot” of the Russian state system, for example, in percentage of the sum of the state contract?

I don’t know the average, some of the contracts is 10%, and in some reaches 40-50%. These are expert estimates.

– Do You think that Prosecutor General Yuri Chaika had to resign after the publication of an investigation into the business his sons?

– Don’t think that the officials who cast the shadow, must in any case to resign. After all, the media can and tell the person what has happened with our policies. But the revelation of these facts require public verification. Compromising the information in respect of these figures, as the public Prosecutor, the head of the investigative Committee, in short, civil servants dealing with enforcement, should check the relevant committees of Parliament. As far as I know, the Federation Council intends to consider an appeal of the Fund of struggle against corruption in relation to Yuri Chaika.

– However, obviously, the officials should not be beyond criticism from public organizations and political parties. You deplore the lack of serious player in the liberal wing?

– Political competition in our country frostbitten. In public and some private entities are not encouraged employee participation in political campaigns, especially if they involve criticism of government. People are just afraid to engage in opposition activities. While criticism, political debate will not be normal practice, we will be full of the liberal party. This is a major shortcoming of the Russian political system. Ultimately, there is no feedback from the public and the preservation of inefficient state institutions.

– Coming 2016 elections to the state Duma. Will You in some capacity to participate in them?

– I will not participate in the elections, will not support any political party. Do not plan to support any individual candidates. However, the work I am heading the “Committee of civil initiatives” related to the examination of key events and the most acute problems in the country. I do not exclude that our materials will be of interest to individual parties. Actually, we work for that. In this sense, we will indirectly influence political processes. But it will not be addressed to specific politicians or parties.

And if you look at 2018, what is the presidential term, in Your opinion, is optimal for Russia?

– Five-year. Two-for-five.

– The President gave a positive assessment to the government. Goes, Your chances to return to power melting?

– These categories is high if the chances or not is not operating. I from anybody did not receive appropriate sentences.

– Recently there appeared publications that You can go to work in the presidential administration. Is this true?

Long time ago this kind of issues not comment.

– You, unlike the President, don’t you think anti-crisis measures of the government are sufficient. What is missing?

– The whole banking sector has received support on a trillion rubles, and one state VEB, which itself needs to help everyone, spend about the same, if not more. That is, the state I know that doesn’t help the banking sector and his Bank, which is responsible for itself – it is just an example, when the harm has turned out more than good for the sector. I repeat: a trillion for the banking sector is a very important stabilizing moment. But their own actions as state, turned out to be more expensive. We redistributed a portion of GDP from one direction to another, from effective to ineffective.

Where will this trillion for VEB? It’s all words, that is only bonds, in fact are they still at the expense of taxpayers. So, the money was taken and spent, for example, on the road. The claim that these bonds are cash-strapped – purely conditional. If there OFZs, there is a security it has security and you need to collect the money under it. Theoretically, this money can build roads. But we are saving the web, that is, with some redistributed to other areas is less effective, as it kills the growth.

If we created those points of inefficiency in state-owned companies, the additional subsidy in there to kill the growth. If we permanently freeze pension, we reduce the flow of money in the investment market more than 300 billion rubles a year.

Some steps to reduce the investment potential of the regions. Over the past five years, the subjects decreased 2% investment in its infrastructure. And increased articles associated with wages and social spending. It’s all irrational actions, they do not lead to GDP growth. In case, if we took the opposite decision in these areas that would recharge growth. That’s why I believe that the government is not everywhere operates rationally. These actions are totally inadequate. Everything is quite chaotic. All assumed that the oil price will be $ 50, and it will be lower, and this means that now we will see some new chaotic solutions. For example, or a significant reduction in public expenditure in certain sectors, or raising taxes. We have a potential revenue shortfall of 1.5-1.7 trillion rubles, this amount fits all education, health and construction of roads at the expense of the Federal budget. Such is the scale.

– We talked about Turkey. If you translate the crisis in our relationship to the language of Economics, it, apparently, would cost somewhere in the order of 0.5 percentage point of inflation it is already clear that the impact of this factor.

– I agree.

There is Turkey, there is a “Plato” with its inflation risk, there is the oil situation, which can lead to further devaluation, which also airs in prices, there are factors, which, as you said, we may not yet know. Against this background, the Central Bank prefers to keep inflation in check when taking decisions on monetary policy. It’s not like that in the near future this situation will change: the risk of inflation will remain strong and the Central Bank will be forced to consider it. Accordingly, the rate will not significantly decline, and the investment process will continue under pressure this rates. When do you think this situation may change when credit resources may become more available?

– As I said, funds in Bank accounts, but they are not invested because of the risks involved. If the Central Bank will begin additional issue or weakening of the policy, it will lead to further weakening of the ruble. Money will be transferred in the currency in anticipation of devaluation on the falling oil price. During the fall of oil prices to give more money to the economy very inefficient, two-thirds goes straight to the currency. And maybe three-quarters. There are examples of how this happened in the same moments. Us and in other countries.

That’s why those who say: let’s soften the policy despite the fact that the price is falling, despite the risks of high inflation, are irrational, rather, it will hit growth, what will cause it. Give 500 billion rubles, of which only a quarter may prove to be growth. Three-quarters will work against growth. Maybe not against growth, but not really for growth.

And further devaluation again increases the risks of import of components, the fall in consumption. And further, ironically, the decline of production in many industries. That’s only when the fall in oil prices, when everyone is calm, only then will a little add money into the economy. And even then, only if you add up other factors associated with the growth of investment demand, for Example, lower costs for business. The demand needs to stabilize and start slowly, gradually increasing. Then you can add money into the economy.

– You mentioned about the risks of a shortfall to the budget next year. Can we partially solve this problem by increasing the debt? And can we do it, not too much raising the price of servicing the national debt? And are there any markets where we can attract such large sums? How Asia from this point of view assistant?

– Global markets are practically closed to us – they are expensive anyway. Or don’t give, or too expensive. Whole categories of investors generally will not participate in the purchase of our risk. Means, will involve the most speculative, requiring high risk premiums. This time.

But the foreign market has never been a major source of our borrowings. Next year we are planning a serious increase in borrowings, net of attracting the domestic market from 80 to 300 billion rubles. That would be a serious blow to the market, rates will rise. But this is a new indicator for the market, including for private borrowing, and they are also more expensive. The national debt will draw that portion of resources, which has yet go to investment, the budget will be pulling money out of the economy. Many in the private sector to take not be able. It also works against growth.

The government just need to take the points, which reduce the growth of, and paragraphs that increase growth. Here the increased government borrowing reduces the growth, it is a known rule.

– And if You now asked what to do with the web not from the point of view of repayment of its obligations (of course, one way or another a solution will be found), namely from the point of view of the future as a structure, as a development Bank. Which scenario would you advise to those, who makes the decision?

– I believe that the web can remain. No need to redeem or withdraw assets from bad debts, may the VEB itself and works with bad debt. But it needs to make a new team. That is, I advocate the change of leadership of the Bank. The old team it’s harder to do because of their involvement in these projects, bad loans, let’s just say there is a conflict of interest in this part. It should create a totally new team.

There is the price issue of recapitalization. I think this issue should be solved with the new head. It should be a responsible, respected person, with whom the Ministry of Finance should prepare a program of recovery. Then we will see how actually this program worth 500 billion or 700 billion rubles.

– So, with the new Supervisory Board? Because the Supervisory Board is, apparently, also must then bear some responsibility.

I wouldn Supervisory Board has completely changed. Maybe would have left the head of the Supervisory Council of the Prime Minister, this question is not as critical (although I am opposed to the chairmen of the government was headed by Supervisory boards of commercial entities in General, and, by the way, when the Supervisory Board was formed, was against this model). But I would have limited significantly the number of Ministers there. We have examined the web such as typical state-owned company.

– That is, with the independent Directors?

– Yes, and later with the sale of a substantial package on the market, with privatization. At the first stage – 25 plus one share. When the state has spent to correct the situation and when the Bank rose to her feet and begins again to build their capability, I would have sold this a growth package, thereby partially offsetting the state’s costs. Partly – completely is impossible.

– But can he then remain a development institution, still investors, probably not very interesting global challenges state of nature? They need clear, transparent business model, which in many projects does not fit that, in theory, the web should implement.

– This is a good conversation. The thing is, I’m against unprofitable projects. Time. Institute of development cannot be a negative value and capital. If he knowingly plans loss-making projects, it is a bad Institute, in the prospect of bankruptcy. This should not be.

The average commercial Bank finances projects for 2-3 years, very rarely at 3-5 years. Because of the market risks associated with inflation, devaluation and other costs, the change in the rules. Such a Bank, VEB, may have more resources from quasi-public sources – NWF, cheap loans under the state guarantees. He’s a bit below the cost of resources, and he can longer give. And if happened any other risks, the government could subsidize rate or other things. This does not mean that the Bank should be unprofitable.

In this regard, in the perspective of private investors could be. Just a different range of instruments – more guarantees, more gosuchastiem, partial subsidy.

Another issue, tied to the election cycle, question your agenda even Ministerial: what do you think, is there a chance that by 2018 we discuss the inevitability of raising the retirement age still to some concrete steps come? Or already have to think about the next political cycle?

– The real need of this came long ago and to say that we don’t need this or maybe it’s not justified – all, this stage has been completed. Everyone already understands it so much that, unfortunately, today is already paying existing pensioners, not receiving full indexation. Everyone who said that raising the retirement age to avoid already failed. Because we can not ensure that the current indexation of pensions to pensioners.

Always say: better to ask adult citizens who are able to work one or two more years to work, but to index retirement pensions. What makes now the government is already forced steps in a situation when the desired solution has not been adopted before.

This imbalance will increase. No idea what to do in 2017-2018. And money is not, and how to index pensions before the election – I don’t understand. And the scale of funds required is large. This year, full indexing (the size of the actual inflation in 2015 – Interfax) would require an additional 300 billion rubles. And such an amount of resources every year.

What is 300 billion roubles? This half of the funding of all higher education in the country in a year. That is, after two years of indexing can “eat” all of higher education. This half of the funding of roads in the country. That’s the scale of what is happening. When I say that we should raise the retirement age, I just realize the extent of the impact of this issue. By the way, from 2008 to 2015 the financing of the pension system increased by 4% of GDP, despite the fact that everything in education goes to 4.2% of GDP In 2015. And this is just extra money!

In this regard, the most correct way like this: the President has now announced that after the elections to 2018 or 2019, there is an increase in the retirement age. All decisions are made now, in 2016, let’s say, year. And this issue removed from the agenda, with him as the country lives with the reality.

Undoubtedly, the President will assume the burden of political responsibility. But, if you do this in 2016, then it will be easier. Give about 40% of what it really will be done.

In the country will decrease standard of living, including state employees and retirees, if this is not done. State employees all the same people working, and pensioners – those who need to create conditions in whatever became.

Finally all now probably heard the question of raising the retirement age for pensioners.

– You were at the origin of the stabilization Fund, which is now divided into two components. Then, as now spent, in particular, NWF, right?

– NWF we have, in fact, already turns into a replacement reserve Fund. Although they are functionally separated, at the expense of the NWF was intended to cover the long gaps in the pension system, that time is coming. In this sense, SWFs, most likely, in the near future will be spent.

Today it is also used as a source of long-term funds for investment projects. Some of these projects, in my opinion, poorly justified or risky. NWF needs, as you know, to invest in reliable projects. If we are talking about infrastructure bonds, the first company that operates any facility, building, must place the private issuance market, and only on indicators that market output must go NWF, and it will be an open and transparent option. It will be seen, trust is the market these risks, whether they are balanced. Today it is decided by several officials, not the market, so such investments are notoriously opaque and inherently risky given the weak practice of long-term investments in infrastructure, such objects.

I can say that is sverrisson objects. In this regard, I presuppose that some of these resources will not be back any circumstances again pushed the delivery date, would increase the cost of projects, and when you start the infrastructure, it turns out, for example, that there is no such traffic, or another truckers say that they are not going to pay such a tariff. All key risks such infrastructure facilities. And the state will have to compensate for it, or restructure, as it again resources, additional warranty. That’s why I think it could be infrastructure bonds, but substantially more efficiently designed and has a market history.

– Recently, we have in many ways worsened the relations with foreign partners, one of the highlights of this diverse picture – a tighter regulation of rating activities. The state was offended by a foreign rating Agency for the movement in 2014 and took them seriously. Now the probability that we say goodbye to the “big three”, which is far easier to leave Russia than to meet the new requirements. On the other hand, we supported the Central Bank has a new Russian Agency claiming to be the market leader. Do you think that our financial market without foreign agencies live?

– Of course, the international rating Agency is quite professional and I trust their estimates. They also made big mistakes, system errors, especially in the period before the global crisis of 2007-2009. However, today these problems are known, appropriate adjustments to the regulation made, any risks we escaped, and before the formation of the new “invisible” risks, I completely trust the work of the agencies.

When agencies talk about country risk, they are not normally politicized. They reduced the ratings of the USA, and there against them opened an investigation. They reduced the assessment and European countries, and reduce us, we too are dissatisfied. In this sense they beat them all, and to say that they are politicised or act in the interests of any group of States, I think not. Risk assessment – this is their livelihood, they earn it, they should timely warning. I repeat – Yes, they are late sometimes. But as soon as the market will be real reason to believe that these ratings are politicized – they will lose a significant part of their business, and perhaps will disintegrate. While in the world believe them, and they also try to be objective.

However, do not rule out that Russian and need ratings, but to acquire authority by imposing impossible. A reputable new Agency can be many years, if objectively and independently act. Must be a “credit history” to become in a number of large global agencies, or regional. Now there are only the first steps in this direction, and the first results will be in three to four years. So the crisis we go through without having any major impact of the new Agency anyway.

– With foreign agencies, it is too early to say goodbye?

– Of course, and not sooner, and generally do not need. The further we enter into the international division of labor, integration, the more we will continue to use the services of international institutions, including the ratings. We must not forget that all of our companies are in international cooperation.