"Facing unprecedented challenges"
Interview with ELVIRA NABIULLINA
Minister of Economic Development of the Russian Federation
The XI St Petersburg International Economic Forum (SPIEF) exceeded expectations in terms of the quality of speakers, attendance figures and interest from the international media. How do you intend to build on these achievements and what highlights can delegates expect from the XII Forum?
In my opinion, the programme of this year's Forum will be especially interesting, including as it does discussion of events in the global financial markets, the food stock situation, climate change and global energy trends, as well as the investment protectionism recently observed in certain developed countries. These themes will be widely discussed by the world's business and political elite.
Each year, the SPIEF reaffirms its right to be called a true forum for discussion. We not only want reports and presentations, but are also interested in dialogue and live relationships. Each of the subjects I mentioned will be covered by one or two experts, being among the five top specialists in their respective fields.
This Forum, like the last one, will be quite representative, as famous economists such as Horst Siebert, professor of European integration and economic policy; Lord Nicholas Stern, Professor of the London School of Economics; Kjell A Nordstrom & Jonas Ridderstrale, professors of the Stockholm School of Economics and the top executives of many of the world's largest multinational corporations, including Russian companies, will be taking part in it.
It is also very important for us that an interesting cultural programme has been prepared for our guests this year, including several surprises, which I'd prefer to keep secret for the time being.
Your predecessor as Minister of Economic Development and Trade, Herman Gref, was closely associated with the SPIEF. What innovations will you be introducing to this year's programme?
This year, Herman Gref also is closely involved with both preparation and holding of the Forum, as we asked him not only to join the organising committee but also to head the programme group, which determined the main themes of the debates. This year, Mr Gref is taking part in preparation of the Forum in a quite different capacity, thus creating a new alternative view of the programme. As for innovations, I think that the Forum's format is quite comprehensive, but we want to make the conference and round table more informative and content-rich, to vary their themes and to increase the liveliness and quality of their debates.
This year's SPIEF takes place against a very different economic backdrop from that of 12 months ago, with high energy and food prices and the fallout from the US sub-prime mortgage crisis posing very real threats to the world economy. How will this year's programme address these issues, and what other themes do you expect to dominate the discussions?
Of course, in putting together the programme we have tried to make discussions more thematic, corresponding to the reality of the current situation in the world economy. We will therefore discuss both the foodstuffs and energy resources price spirals. In reality, we face a number of questions, such as: What will be the structure of demand for energy resources? And what is the role of alternative fuels in this scenario? These questions, as well as many others, will be discussed in the session 'Energy- Global Players and Arbiters'. Climate change and its influence on the world economy and human existence will be discussed separately, as the prevention of the negative effects of this phenomenon requires the joint efforts of many different countries. Most of the preeminent world scientists studying climate change were invited to take part in this debate.
Within the plenary session 'National Economic Interests versus Global Governance Institutions' we will attempt to determine developing trends in the global commodity and financial markets, as well as to discuss those changes that will require management at a global level.
How is Russia responding to the present international economic turmoil, and what steps is the government taking to mitigate its impact?
The current situation that we are witnessing in the world economy is a new economic reality. For the first time in recent history, troubles in the world financial market are being caused by processes taking place not in emerging markets but in the leading economy of the world - the USA. Global financial institutions are therefore having to re-evaluate such concepts as 'rating' and 'risk'. This process is accompanied by global inflation as well - almost all commodities, including foodstuffs, are rising in price.
In today's Russia, as in the rest of the world, we are searching for approaches to mitigate the impact of these negative processes.
As one of the largest economies in the world, we believe that Russia should make a significant contribution to the world's financial security. That is why we are currently elaborating measures for the development of a national financial market and the formation of a regional financial centre in Russia. This matter also will be discussed at the Forum.
So-called 'imported' inflation from global markets remains one of the most problematic factors in the Russian economy. Structural analysis of inflation processes has shown that the acceleration of inflation in the last few months was largely caused by external factors, and we will be implementing a number of solutions, combining monetary and budgetary policy with structural measures aimed at the expansion of consumer demand and the development of a more competitive business environment.
Are you satisfied with the rate of progress in the building up the non-oil sector of Russia's economy? Do you believe that further rises in oil and gas prices may exacerbate existing economic imbalances?
I think that the development of the non-oil sector should be intensified. However, even now the rates of growth in the mechanical engineering and processing industries in our country are several times higher than in the energy industry. Thus, during the first quarter of thus year trie processing sector grew by 8.7 per cent, while the extractive sector grew by less than 1 per cent. Several sectors are growing sharply, for example construction by about 30 per cent, and trade by almost 17 per cent.
At the same time, additional budget incomes related to high export prices for our energy resources allow us to provide accelerated growth of investments into the development of our human resources, including the modernisation of our education and healthcare systems; in other words to provide a basis for development of the economy as a whole.
In this sense, we are trying to make our oil funds work for the development of value-added industries.
How concerned are you about the effect of Russia's declining population on the country's long-term economic development?
The decrease in our population is, undoubtedly, a serous challenge for us. Recalling the experience of the 20th century, all the ordeals that our country had to pass through, and the resulting unrecoverable human losses, we understand more clearly than ever that a human life is of the highest value.
That is why the realisation of a demographic policy became one of highest priorities of the government's legislative programme. In 2007, we began to take concrete measures in this area and we have already overcome the trends of increased mortality and decreased birth rate.
As for the economic aspect of this problem, in the coming years we may well face a lack of manpower. This leads us to pay special attention to increasing our labour productivity. Today, labour productivity in several branches of our economy is ten times lower than in other G8 countries. This is unacceptable. We must make it our mission to increase productivity in the principal economic sectors at least fourfold within the next 12 years.
Despite the increasing internationalisation of many Russian companies, the issue of the country's accession to WTO is still to be agreed. What is the current status of this process and what timetable do you have for its completion?
Russia is approaching the final stage of accession to WTO. Negotiations on access to product and service markets are almost completed. Most system problems related to our fulfilment of WTO agreements have been resolved successfully and general work on the adjustment of Russian legislation to WTO requirements is practically finished, apart from amendments to three or four regulatory instruments, which will be made this summer.
The privatisation of UES notwithstanding, the current economic framework in Russia involves renewed state control and the creation of national champions in certain sectors. To what extent, in your view, should the state play an active role in the economy?
Yes, there is a public perception that the state sector of the economy is expanding. This is caused by the consolidation of state assets into new holding structures. The main goal of such activities is to arrange assets already owned by the state, which were formerly dispersed in order to optimise the management structures of state enterprises, to increase their effectiveness and, finally, to make them truly public companies, in other words, to bring them to IPO.
Besides, those state holdings are formed where there is no serious competition in our domestic market - for example, in aircraft engineering. OAK OJSC was organised in order to consolidate this branch and to create a national leader which in future could compete with Boeing and Airbus.
The Russian Government does not plan to establish 'state capitalism' - which is the term sometimes used to describe this kind of process. But without state support of certain strategically vital branches - such as aircraft engineering, ship engineering, nanotechnologies, the nuclear industry and others - it is impossible to carry out their reorganisation within a reasonable timeframe and to achieve results which would allow the innovative development of the Russian economy to accelerate.
What is your view of the current state of the economic reform programme in Russia, and what further reforms are expected under the Administration of President Dmitry Medvedev?
The main priorities for the government's economic policy include macro-economic stability, the development of economic institutions and freedoms, and competitiveness. Most of the tasks set previously have now been completed. And today, under conditions of economic, political and social stability for the first time in the post-Soviet history of Russia, we can, and have to, develop a strategy of really long-term development. At present, we are openly discussing the main parameters of the concept of social and economic development of our country to 2020. In fact, this document will determine the logic of governmental activities for many years.
Do you feel that women have a bigger role to play in Russian public life? If so, what encouragement should they be given to participate fully?
I do not see any obstacles which would impede the self-realisation of women in social life of Russia. At the same time, I agree with Vladimir Putin that women's participation in the social and political life of a country is one of the indicators of the maturity of its society.
The issue of urban regeneration remains high on the political agenda internationally, as growing migration to the world's cities places an ever-increasing burden on transport, housing and the environment. What lessons can be learned from the renaissance and redevelopment of St Petersburg in recent years?
First of all, I do not believe there is such a direct correlation between migration problems and the modernisation of the urban medium, not in Russia at any rate. The main problems of today's St Petersburg are not caused by massive immigration. Our efforts are being applied to the development of infrastructure, particularly road and transport links, and the improvement of housing maintenance and utilities.
St Petersburg is a city with a unique historical heritage, a real open-air museum, and its modernisation requires due diligence. But at all times the architectural image, social life and cultural development of this city represent a combination of novelty and tradition. Its inhabitants have always been open to innovation and keen to acquire useful experiences.
Russian and foreign investments, which benefit both industry and the city's economy, are a powerful stimulus for its economic development. Thus, the value of foreign investments over the past year exceeded US$6.3 billion, which is nine times higher than in 2003. According to international rating agencies, St Petersburg's investment climate is one of most favourable both in Russia and worldwide.
It is our understanding that St Petersburg will maintain its historic appearance, but, at the same time, it should develop, improve its social infrastructure, its roads and its transport system and be integrated into the global process of urban construction and architectural development. These are the principles of the present City Administration headed by Valentina Matvienko.
St Petersburg boasts many of the world's greatest art and architectural treasures - indeed many regard the city as a work of art in itself. How important is this cultural heritage to the success of the SPIEF and to the projection of Russia's image internationally?
We will do our best to conserve all the historic features of St Petersburg because a high aesthetic quality and conservation of historic buildings add to the special investment attractiveness of the city and its real commercial value, as well as improving the quality of life of its inhabitants. For St Petersburg, its cultural heritage has the same significance and value as natural resources, oil and diamonds do for other regions of Russia.
The stable development of St Petersburg is a testament to the successes of the Russian economy as a whole. The appearance of the largest Western companies on the banks of the Neva demonstrates the investment attractiveness of Russia and its growing economic and industrial potential. For St Petersburg, this Economic Forum becomes a great opportunity to show its investment potential and achievements in innovative development.
St Petersburg symbolises two features typical of Russia and its policy as a whole, namely: striving for the future on the basis of the greatest achievements of the past. These are features which we have attempted to use as an ideological basis for the SPIEF.
Last year's Forum witnessed the unlikely spectacle of German heavy metal band The Scorpions sharing a stage with the Mariinsky Theatre Orchestra in front of the Winter Palace. Given the President's enthusiasm for rock music, can we look forward to a similar performance from Deep Purple in June?
This year, Palace Square will be a site of another mega-event. Roger Waters, one of founders, bass guitarist, singer and author of many songs of the legendary Pink Floyd, comes to St Petersburg with his performance of 'The Dark Side Of The Moon'. The show will take place on the evening of June 6th and will be a gift to both the inhabitants and guests of the Northern Capital of Russia. Besides which, the Mariinsky Theatre and Mikhailovsky Theatre, as well as The Hermitage and Peterhof are preparing special performances for the VIP visitors to St Petersburg.
