Published: January 21st, 2015

High interest rates and lack of branch support from the state — these problems big business cited as major ones on a Monday meeting with the Prime Minister Dmitry Medvedev devoted to the problems of business and enterprises’ support in the conditions of recession. One of the participants of the meeting from the government, a businessman who took part in the meeting, and a source in surrounding of an entrepreneur — participant of the meeting, told RBC about it.

“Medvedev has gathered his subordinates and representatives from different sectors of the economy in order to listen to them”, explains one of the interlocutors of the RBC. “Many topics were discussed — from rising metal prices and export support to the cost of services of natural monopolies, in particular, Russian Railway. But the main thing, that drew attention of the businessmen is high lending rates”, one of the participants from the business told RBC.

“Now rates are at the level 25–38%. This cuts competitiveness of industry. Theme with rates sounded in every speech of representatives of industry”, the entrepreneur says. Decrease in interest rates on loans is the most burning question for industrialists, it was discussed at the meeting in the first place, echoed a source in surrounding of one of the participants — a head of a large industrial holding company. “Almost all suggestions of the business resolve into reduction of credit rates”, another source in the government confirms.

At the meeting the head of the Ministry of industry and trade Denis Manturov presented a plan of support of the industry, sources tell RBC. It was proposed to use 1 trillion rubles allocated by the Deposit Insurance Agency of Russia (DIA) and federal loan bonds mechanisms for banks’ additional capitalization and increase in volumes of lending more effectively, a source in the government said.

The Minister proposes to link assistance with prohibition for banks participating in the program to change the rates, contracts’ options and requirements of their early repayment, the source says. It is necessary to reduce lending rates for businesses up to 10%, and to achieve this, it is necessary to reduce the key rate of the Central Bank or the government should subsidize interest rates on loans for enterprises, another participant of the meeting from the part of business said.

“It was argued that banks with a capital from 25 billion roubles will receive for additional capitalization a total of 1 trillion roubles for loans to enterprises. It was proposed to limit banks in the interest rate, so that it does not exceed 10%”, an RBC source says.

Also Manturov proposed to provide subsidies for replenishment of working capital of enterprises. For this purpose, up to 20 billion rubles will be required for the first two quarters of 2015. According to the source, the share of working capital in the industry, which is financed by bank loans, is about 40% now, and in some sectors reaches 80%. For this purpose it is proposed to reallocate funds of already planned support measures, without burdening the budget with additional expenses.

It was also proposed to define the term key rate in legislation in order to bind to the subsidies amount, a source in the government says. In fact, he explains, there is no such term in the legislation and existing subsidies are focused on the refinancing rate of the Central Bank. According to him, about 38 billion roubles of subsidies in all programs of the Ministry of industry and trade are now tied to the refinance rate.

It is also necessary to stimulate demand for the products of enterprises — agricultural machinery, cars and so on — through subsidies. It is offered to give them basing on the example of already used mechanisms of demand support for gas fuel or truck fleet renewals. It is proposed to give state structures funds to upgrade the truck fleet. According to the Ministry of industry and trade assessment, state structures can purchase in 2015 up to 3.5 thousand vehicle units. Ministry of internal affairs was called the main buyer at the meeting.

It was proposed to guarantee that minimum threshold of the contract execution security size will not exceed the level from 5 to 30% of the original maximum contract price. On the other hand, it is proposed to the government to promise to advance public procurements in the amount of 80% for civil contracts and 100% for state defense orders, a source in the government says.

Support of non-resource export was discussed separately. “There is a possibility of providing support to other countries not through loans but through commodities positions”, one of the meeting participants says, noting that the proposal was not discussed at the meeting with the Prime Minister on Monday, but this topic was raised during several government meetings.

Finally, it was proposed to allow the White House to reallocate planned budget appropriations within the state programs quickly by governmental decision, i.e. without long-term agreements with the Ministry of finance and changes in the law on the federal budget. “It is necessary in order to respond quickly to rapidly changing conditions in the economy”, a participant of the meeting explains.

According to one of RBC sources, all proposals for support of the industry were discussed with the Ministry of industry and trade during the past year. “There were nothing new and unexpected at the meeting”, he says. A RBC source in the government said that the Prime Minister agreed that these proposals should be presented to the President this Wednesday.

Medvedev did not expressed directly for or against particular proposals at the meeting, but said that “all points are reasonable” one of the meeting participants says. But they met resistance from the financial unit of the government and the Central Bank, one of the entrepreneurs told RBC. Manturov’s suggestions and request of business to reduce the cost of loans suppose an increase of government financing and additional measures in the framework of monetary policy. Finance Minister Anton Siluanov pointed that there are no additional funds in the budget for support, one of the businessmen said. In addition, the head of the Central Bank Elvira Nabiullina made it clear that there is no possibility to reduce the key rate.

Source: RBC