According to President Vladimir Putin, Russia has to fundamentally change the country’s business climate in the six years to come. Sergey Beliakov, Director of the Department for the Investment Policy and Private and Public Partnership Development at the Russian Federation Ministry of Economic Development, told us about what is done to achieve this goal.

— In June, Saint Petersburg will host the 16^th International Economic Forum. What about its status today?

— Today the forum has become a landmark international event. And assessment of the forum’s participants, namely heads of the largest foreign and national corporations, the world’s leading experts, and heads of states, is important. Primarily, it is so because of the highest level of its participants. We have managed to maintain the achieved intellectual and organizational levels of the event, form the appropriate agenda, which is a difficult task.  Discussions held during the last few years are quite meaningful and useful. I believe that this year, the forum will be interesting as well and even higher in terms of the participation level and, hopefully, its organization.

—  Naturally, it seems strange to ask the following question in the sixteenth year of holding the forum, but it was the first forum in Russia. After it, many regions have been holding their own conferences at different levels of success. What is the fundamental difference between Saint Petersburg Forum and others?

—  Saint Petersburg event has a somewhat different format and scale. This is a leading international platform in terms of its content, the level of its participants, and organization. We have a different agenda. Unlike many other regional forums, the purpose of Saint Petersburg Forum is not to present Russia’s opportunities. This is not only a platform where today’s global problems relevant to all of the world’s economies are discussed; this is a place where opinions on the future development of the world’s economy are formed. And it involves those who shape this future both at the governmental and corporate levels.

Other Russian forums hosted by Krasnoyarsk, Yaroslavl, Baikal, and even Sochi, are primarily associated with investments. Perhaps, Krasnoyarsk and Sochi forums should be distinguished as they discuss the agenda of future development of Russia, just as Saint Petersburg does, but not the global one.

However, the investment component of Saint Petersburg Forum is important as well. We open Russia for investors as well. Many managers of international companies visited Russia for the first time just to participate in the Forum and were surprised to discover that Russia as they saw it differs from those clichés that dominate the foreign media and from those stereotypes they used to have with respect to it.

There is nothing wrong about Russia having several platforms. Any forum is a kind of a trade fair of opportunities. The main work begins after that: the potential of Russia and its regions should be implemented through the routine relations with investors, which came, and, to a greater extent, with still hesitating investors, through development of favorable conditions for a specific entrepreneur and the entire business environment.

— President Vladimir Putin has set an objective: by 2018, Russia has to be included in the top twenty countries in terms of entrepreneurship freedom. According to the Doing Business ranking of the World Bank, we currently hold the 120^th position. Other expert associations estimate that we are even lower in such rankings.

— All the rankings are conditional and subjective to some extent. This is related to the assessment methods. For example, the ranking made by Bloomberg Agency assesses entrepreneurship freedom in various countries as well. Apart from indicators included in the Doing Business ranking, Bloomberg uses also actual data relating to capital flows. In other words, the Agency takes into account both the conditions for doing business and the way capital responds to such conditions. The list of factors is longer. Does it mean that this ranking is more objective? I can’t say it.

Well, they have studied 160 economies of the world and distinguished 50 best ones among them where Russia holds the 47^th position. We should agree that our position in this ranking is more pleasant for us. We were included in the list of the best economies of the world, and we do not hold the last position, although we are close to it.

This example shows that we should treat rankings in a careful manner. After all, they could also point out to both favorable and uncomfortable conditions for doing business in the same way.

By the way, in our work we are focused on Doing Business according to which we are at the 120^th position, and not on Bloomberg, although it may sound strange. Doing Business is the most reputable and generally recognized ranking dedicated to simplicity of doing business.

The specific methods of Doing Business is that it does not include any abstract indicators, but the real conditions for doing business as exemplified by small and medium — sized businesses, both regulations and the way laws are implemented. Since 2011, the ranking takes into account ten indicators: company registration (Russian holds the 106^th position), obtaining construction permits (179), connection to the electricity supply system (183), ownership registration (51), crediting (96), investor protection (108), taxation (107), international commerce (166), contract execution enforcement (19), insolvency solution (60).

Going up to the 20^th position is not an end in itself. The purpose is to improve conditions for doing business so as to have entrepreneurs opt for Russia. A position in a ranking is the result of our efforts to improve the investment climate. As the ranking using the same methods measures conditions for doing business in all of the world’s economies, it may be used as an indicator of efficiency of our efforts.

Today we are departing from the format of work according to which we reported on adoption of laws and other regulations. Even though these were correct ones. We adopted a law: a tick. This is not enough! As we can judge from our experience in considering information from investors, the main problems are not related to the imperfect legal framework, but to failure to enforce laws. For this reason, we will assess our work according to the extent to which an adopted law have changed the conditions for entrepreneurship development. Have it led to fewer inspections, procedures? Is it cheaper to do business? Have risks declined? We should keep in mind that conditions for doing business are evaluated for businesses located in the largest cities of our countries. In case of Russia, this is Moscow. Therefore, Russia’s position in the ranking of the World Bank does not mean that conditions in other regions are as bad as in the studied region. In 2010, the Russian Federation Ministry of Economic Development reached an agreement with the World Bank for conducting a “Doing Business in Russia” subnational study on the Russian Federation territory.

In order to assess conditions for doing business in the regions, we reached a preliminary agreement with the EBRD for funding and surveying entrepreneurs in thirty constituent territories of the Russian Federation according to the BEEPS methodology. 

Based on the survey of company managers in thirty — seven Russian regions, it will be necessary to build an objective and independent picture of problems businesses are faced with, their acuteness and importance. The results of this survey and their comparison between regions and other countries of the world make it possible to arrive at comparable evaluations of the business environment development level according to several parameters, prepare recommendations on the areas where regional government authorities have to focus their additional efforts to improve the business climate in each of the analyzed constituent territories of the Russian Federation.

By the way, in 2008 we surveyed the Russian business environment to find out what key factors, according to businessmen, determine comfort of entrepreneurship. With minor variations, they named the same categories as the World Bank, i.e. they overlap to a great extent. Criteria also include the number of procedures to be completed, the cost of implementing such procedures, non — financial expenses, time spending, etc. And, finally, there is a certain integral indicator.

Based on these factors, we prepared a plan of improving the investment climate in Russia, in which we emphasized the specific measures to be taken at the specific time, end industry — specific indicators, and performers.

What is done to improve conditions for doing business?

In addition, one of the areas in which Russia holds a low position in the ranking of the World Bank is obtaining of construction permits. We hold the 178^th position out of 183 ones. Taking measures to improve conditions for building new facilities, we have moved up from the 182th position over the last few years. Of course, this is not a leap, but we are moving in the right direction. All the countries are quite conservative from this perspective. There are many factors here to be taken into consideration. It is not possible to just replace this conservative legislation with the liberal one.

— Apart from rankings, there are obviously other benchmarks. Who are those heroes that we take for model?

— We are attentively looking at the European countries and China. Well, they are our neighbors and we compete with them for investments; the economies of both China and Russia have been developing fast. The problem is that investors are initially encouraged to place plants and factories in our country as Russia’s investment climate and the capacity of its domestic solvent market are quite high. However, risks entrepreneurs are faced with force them to build factories in the neighboring countries. Of course, investors come to Russia, but expenses they have to incur make us less competitive.

Therefore, we have prepared a proposal to improve the investment climate. This is an entire program that is being implemented and amended. It is included in the program of the Agency for Strategic Initiatives (ASI). Based on the ranking of the World Bank and expert recommendations, we and the Agency for Strategic Initiatives (ASI) have prepared the so called road maps to reform the situation in the area of obtaining construction permits, connecting to energy networks, customs administration, and export support. This is another evidence of the practical importance of the ranking by the World Bank. Maps include target indicators of the number of procedures, deadlines, and costs and are based on the best global and regional practices, mechanisms of their achievement and responsibility for them. Maps have already been approved by the ASI supervisory board, chaired by V. V. Putin; appropriate draft regulations have been developed to implement them.

—  Do you cooperate with the National Business Initiative implemented within the ASI framework to form the business climate in Russia? Are you pursuing different goals?

—  Four priority areas I described above are included in their list. We will implement the rest of them later. By the way, heads of the working groups are entrepreneurs. They determine what has to be done, and we oversee that measures proposed by them are practicable.

As part of our joint work, we have also prepared proposals regarding creation of a system of indicators for assessment of efficiency of individuals heading federal executive authorities and regional administrations; we have sent those proposals to other institutions for approval. Heads of governmental authorities, i.e. customs service, Ministry of Regional Department, Ministry of Energy, and others, will have to show what has been done to achieve the said indicators by years and what the real effect of the steps they take is. On the whole, the official’s behavior model is revised and businesses can now both send requests to and control public officials in charge of state regulation in the specific areas.

— You have mentioned the national bureaucracy and changes several times. Is the national public official changing?

— I hope so. We have seriously changed the format of our work. Today we target the result.

Factors encouraging us to change are numerous: pressure from the top to the bottom. But the most important is the objective need for socio — economic development. The public official should not slow the country’s development. Regardless of whether we want it or not, the growing foreign investments make institutions restructure themselves. Foreign investors are used to working according to a certain format. They view the government as an organization providing services. And this function is delegated by society. They expect the same from the Russian government. This is similar to the process of joining the WTO. We have been negotiating and amended our legislation for eighteen years. When negotiations were over, our laws met the requirements of the WTO. This is the same situation in our case: investments will not naturally flow to Russia tomorrow, but the requirements the investment environment imposes on us pressurize us and makes us perform better. All the solutions we propose result from our discussions with businesses.

—  The recently established Foundation of Direct Investments joined in to contribute to the investment appeal improvement in Russia.

—  This is a limited liability company and a 100% subsidiary of Vnesheconombank. By the way, the idea of setting up the Foundation was proposed by former President Dmitriy Medvedev at Saint Petersburg Forum 2010. In 2011, the Foundation was created and concluded several deals worth approximately USD 1.00 billion early this year. It is important that, having invested 200 million, the Foundation attracted about USD 800 million in investments. The Foundation has a very qualified council consisting of the world level experts in investment management, which is quite important because their opinion is valued by potential investors. The Foundation is headed by Kirill Dmitriev, a very experienced investor.

The key idea of the Foundation is as follows: by co — financing projects that are interesting for foreign investors and us, it protects them from risks in Russia. Of course, the Foundation is primarily aimed at attracting new foreign investors. It should be noted that USD 200 million invested by the Foundation yielded USD 800 million, in other words, the plan is efficient. Investors are interested in such cooperation.