Economic Forum Digest
Published: June 21, 2013 (Issue # 1764)
Nadezhda Belyaeva / SPT
Seating was at a premium on the first day of the forum, as delegates began discussing matters of global import.
The 13th St. Petersburg International Economic Forum opened yesterday morning with the first session at 9:45 a.m. The forum this year focuses on finding ways to build a new global economy.
Discussion topics included maintaining the growth in the BRICS economies, accelerating investment in energy and infrastructure sectors in Russia, the Russian-Indian bilateral economic relationship, and the role of central banks in economic growth.
Participants also discussed the economic relationship between U.S. and Russian businesses since Russia’s accession to the World Trade Organization, support for entrepreneurship in Russia, and the involvement of international players in Siberia’s development. Following is a digest of the major developments.
Anti-Corruption Center
A group of leading companies announced that they would form a center by the end of the year aimed at assisting them in combating corruption in Russia and other Group of 20 countries.
The center, called the Collective Action Hub on Anti-Corruption, will be developed and managed by the Basel Institute on Governance in Switzerland in partnership with the UN Global Compact in New York, according to the Task Force on Transparency and Anti-Corruption, a group comprised of more than 50 companies, many from emerging markets like Russia.
“In my opinion, this issue is not going to come close to being resolved at the global level unless we have the full participation of the emerging markets,” said task force chairman Andrei Bougrov, vice president of Interros and Norilsk Nickel.
The new center will identify, analyze and exchange best practices and experience in collaborative efforts by companies, government and civil society in opposing corruption, the task force said.
“We view the Collective Action Hub as a significant groundbreaking initiative that will become a formidable force in the fight against global corruption,” said Peter Solmssen, a member of the managing board and general counsel at German company Siemens.
The anti-corruption task force eventually hopes to open anti-corruption centers in every G20 country to promote awareness among investors, provide training in compliance techniques, and act as a neutral platform where company and government officials can tackle issues related to corruption.
The task force also will present the G20 heads of state with a list of recommendations on how to combat corruption at a G20 summit in St. Petersburg in September. The recommendations will include “more regular and in-depth exchanges between business and government on practical ways to create a level playing field and a more attractive environment for investment — for example, how to create incentives for businesses to self report, how to clean up public procurement, and how to raise the standards of compliance in companies’ supply chains,” the task force statement said.
In its preparations of its recommendations on fighting corruption, the task force took a close look at Russia, where corruption is so epidemic that President Vladimir Putin called it the biggest threat to the national economy at last year’s St. Petersburg forum. The task force produced a publication titled, “Implementing and sharing best practices in anti-corruption in Russia,” with special recommendations for the Russian government.
Shuvalov Defends Russia From WTO Jibe About Trading Bloc
First Deputy Prime Minister Igor Shuvalov put up a vigorous defense of a Russian trade bloc with its ex-Soviet neighbors, but WTO chief Pascal Lamy tore into the concept as misguided, saying Russia needed to focus on the EU if it wanted to integrate with the global economy.
The two leaders traded sharply contrasting viewpoints during a panel discussion on economic integration at the forum.
Shuvalov, who received a smile and a wave from Lamy when he arrived 40 minutes late for the session, said that a proposed Eurasian Economic Union with founding partners Russia, Belarus and Kazakhstan had no ambitions to rival the European Union.
Instead, he said, the new bloc would give Russia more equal footing in its efforts to integrate with the world economy.
“We will have more muscle as a trio than alone,” he said.
He also insisted that the union was all about business and had no political goals, in remarks that clearly tried to dispel worries that President Vladimir Putin, the initiator of the project, hoped to use its integration drive to restore the Soviet Union.
Putin, who addressed the forum yesterday, has said the bloc would build upon the “best values of the Soviet Union.”
Weaker Ruble Will Not Bring Growth
Ruble devaluation will not contribute to economic growth, first deputy chairman of the Central Bank Alexei Ulyukayev said.
“I do not believe it would help the economy. I will not go into specifics explaining why, but it affects various sectors of the economy and various economic agents in different ways,” Ulyukayev told journalists.
Finance Minister Anton Siluanov said that devaluing the ruble had been considered as a possible measure for stimulating economic growth at a meeting with President Vladimir Putin.
Siluanov called the idea an “absurdity,” which could raise inflation.
Meanwhile, he pointed out that the Finance Ministry would not be against some devaluation of the ruble, but only if it is a result of market forces, and not via administrative means.
Increasing the dollar exchange rate by one ruble can raise about 190 billion rubles ($5.9 billion) of additional revenue for the federal budget, Siluanov said.
Russia-China Cross-Border Bridge
Russia and China have signed an agreement to build a bridge over a section of the river Amur at the border between the two countries.
The two sides plan to start the building work on the bridge, which will be 2.2 kilometers long, at the end of 2013. Only 309 meters of the bridge will be in the Russia, specifically, the Jewish autonomous region, while the rest will be on the Chinese side of the border.
Pavel Grachev, general director of the Far East and Baikal region development fund, said that the initial projected cost of construction to the Russian side is 9 billion rubles. But he said that the figure will be confirmed following a tender, and that he expects the figure to fall.
Grachev said that it will be possible to involve private investors at a later date. At present, the development fund is providing finances for the project itself.
Iron ore, coal, chemical fertilizers, timber and other goods will be exported from Russia to China across the bridge, while mainly containers will come in the other direction.
In the first stage of the project, 5.2 million tons will be transferred across the bridge, and the figure will rise to 20 million tons upon realization of the second stage.
Exchange Rate Stability
The purchase by the Finance Ministry of foreign currency on the market won’t have an impact on the exchange rate, first deputy chairman of the Central Bank Alexei Ulyukayev, said.
He also said that until August, when the system is due, there is time to rework everything, Interfax reported.
Earlier, Finance Minister Anton Siluanov said that currency purchases by the ministry to replenish the Reserve Fund will start in August.
Central Bank chairman Sergei Ignatiev said that this practice could become commonplace if it turns out to be fruitful.
But if part of the reserve fund has to be spent, in the case of a budget deficit, then the Finance Ministry will sell currency to the Central Bank, which will in turn sell these funds on the market, he added.
Outflow of Capital Doubles
The outflow of capital from Russia doubled between April and May, first deputy chairman of the Central Bank Alexei Ulyukayev said.
Trying to offer a concrete reason for the outflow, he said: “There are complex reasons, perhaps we first of all need to understand why the outflow fell in April,” adding that the bank does not yet plan to retract the official annual forecast based solely on this figure.
The bank’s basic forecast for outflow of capital in 2013 was $10 billion, Interfax reported.
On Wednesday, chairman of the Central Bank, Sergei Ignatiev, said that the net outflow in May was “very big; unexpectedly big.” He said that concrete indicators will be published, probably when the summary for the second quarter is being presented.
Earlier, the Deputy Economic Development Minister Andrei Klapach said that his ministry estimated outflow for May at $8 billion, almost twice as much as in April.
Net outflow of capital in the first quarter of 2013 came to $25.8 million compared to $33.6 million for the first quarter of 2012.