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Published: May 23rd, 2016

Prior to joining the Vnesheconombank (VEB) two years ago, Andrei Klepach has being developing options for social and economic development of the country for 10 years, was one of the authors of the first - and still the only approved by the government concept of long-term development until 2020. As a strategist he speaks at a discussion platform and in this capacity he gave an interview to "Vedomosti". It is not about VEB's business, which now has to be saved, but the problem with the development of the institute, according to the interview, have the same cause, and that the problem of the country's development, which also went on a winning path. Among them - the short planning horizons, and the inability to calculate the prospects of work in advance. Now, under the auspices of the government a new strategy for 2030 is preparing, but the previous is still relevant to this day, insists Klepach. Its basic idea is to go to the "smart economy" - sooner or later, must be carried out, he believes. But for this economic policy should not simply adapt to changing circumstances, but it has to actively create conditions for an economic breakthrough. Klepach believes that one of these conditions is the emission of investment support, the proposal causes a fierce debate in the expert community now, since, according to opponents, "printing money" results in the acceleration of inflation, rather than the economy.

– In the "plan of salvation" of VEB does not say anything about your block - will it be affected by changes?

– I have two departments: macroeconomic - it deals with the analysis of the industries and regions - and the Department of Strategic Development, which were engaged in a strategy of VEB earlier. Certain changes in the current restructuring, apparently, will be, but basically everything is because the expert-analytical work is VEB priority as a development institution. Development institutions - they help not only with money, but also brains. Vnesheconombank, in particular, is one of the leaders in the development of the sustainable development proposals.

– What do you think about the idea of the division of VEB on Commercial Bank and Bank of special projects carried out for budget money?

– I think to talk about the prospects of VEB would be correct when a new strategy will be ready. But the original position of the government and the bank's new team is that it is a development institution. This means that, like all institutions of development in all countries, it implements projects that are systemically important from the point of view of the economy as a whole, but beyond the scope of normal banking and credit logic - either because of the high risks, either due to low yields. For example, Olympic Games in Sochi: its projects were financed by the budget, there were private investment, but much of it was later refinanced by VEB credits. We can assume that this is quasi-fiscal funding because the money will not come back, or will in 20 years, but the result is not only that Olympic Games were held - there are a new resort and new sports complex developed. Clearly, this is a task that commercial bank lending can not afford. While funding from the development of the institution - it's still not budget support and investment should be returnable.

– As a result, the task appeared to be too heavy for VEB.

– If approached with the standards is not 3-5, and 20-30 years, most of the Olympic projects will pay off. VEB were the creditor of the Ring Road construction through the concession mechanism. It is also fairly complex project, with long periods of the refund, but necessary. VEB is a major creditor of the project "Sukhoi Superjet", especially in terms of its exports to Mexico. Development and production of the Su-35, which has already gone into service, have been made, including the expense of VEB credits. This is a long project, but it paid off, the plane was made, the money is returned. But bank lending project was risky, because there is a large component of the ROC (experimental development) and state defense order was not clear. For such projects - with increased risk, with long repayment terms, with a lower yield - Institute for Development was necessary. And not only individual projects - the whole sector of our economy, too, owe their birth to VEB. For example - the development of beef cattle breeds. The project of "Miratorg" demanded the establishment of a new culture of production - before that in Russia it just was not a specialized breed for meat. The project was originally intended to long payback periods and had a big enough risk. Only now, when everything has already unfolded, Rosselkhozbank and Sberbank began lending to similar projects.

"Painfull zone of the economy"

– That means that any company can come to VEB and say: here is a good project, but banks do not give the money because of risk?

– Anybody can come, but if this project meets the objectives of the system of economic development, including ensuring its diversification - is a matter of choice for VEB. VEB still is one of the government's hands: the Supervisory Board is headed by the prime minister, there also are the ministers. And my opinion: the contribution of VEB as a development institution should increase rather than fold. Addressing systemic, complex, problematic tasks anywhere in the world, and here in particular, requires the participation of development institutions.

– To make another such institution of the Central Bank to uphold its commercial risks is suggested in the Stolypin club program. Do You as the co-author of the program, support this proposal?

– I would not agree with you. I am a member of the Stolypin club, and of the program development, although this does not mean that I agree with the editors of all the provisions. But in this part of the position it was different: the Central Bank are not supposed to assume the credit risk, almost anywhere in the world, central banks do not. The idea was that there should be some emission channel, well, or credit support from the Central Bank for the development institutions and investment banks in general projects. There are well-known cliché that we do not have the long resources or they are very expensive - like pension funds, due to which even to finance commercial projects is difficult, and even more systemic. We need some kind of resource. This is a public debt that is too expensive, or the Central Bank loans, he gives special rules. For VEB they must be non-market, banks - quasi-market, albeit tied to the inflation target. So it does, for example, the Chinese People's Bank, which gives China Development Bank very cheap money. Position of the Stolypin club matches and practice of the Chinese People's Bank and the Brazilian and South African bank, the same as in 1960-1970 gg. it worked for the Central Bank of Japan. But we exist in some other dimension, trying to live by the rules, by which lives a modern market economy.

– And Russia's economy is not the market?

– It is, we just are in another sports category. Before you go ahead of the entire planet in terms of market requirements, we must also grow and solve a lot of systemic problems that we, unfortunately, can not decide. And even with a decrease in inflation, they will not be solved. Risk system is that the focus on short-term profitability - pain unit of our economy and will remain so, most likely, in the medium term.

– Is not chronically high inflation - one of the reasons for sustained focus on short projects?

– I do not agree - we had periods of low inflation. Now it is reducing again, and another thing - what is the price of this decline. The monetary base declined in nominal terms for a year - 2015-th, and the money supply shrank in real terms for two years. It is possible to suppress inflation and get 4% or even less - the question of what will happen to the economy.

– And the money supply shrinks not because of lower demand for money, which falls out of the crisis? And does the Central Bank act without looking back to the state of the economy?

– On the demand side, it is the question of what comes first - the chicken or the egg. At a rate of 24-28%, which offer loans for small businesses, there is no demand. The economy has fallen and will fall further - it is possible to argue, by 0.3%, as the Ministry of Economic Development believes or more. Our estimate - if the oil price will be about $ 40 per barrel, the decline in this year will be 0.9-1.4% and it is likely that next year we do not get growth. Under these conditions - this is the practice of all central banks and finance ministers of all - a package of incentives are implemented. One can endlessly argue that it is something short-term, does not solve all problems, structural changes are needed. But this does not mean that we should not do anything in terms of the economy and the fiscal stimulus and monetary. And here of fundamental importance to lower interest rates, which is not only the Stolypin club says, but also many experts who hold quite liberal views on monetary policy.

– And even the Central Bank. Just have in mind a rate cut after inflation, rather than the emission credits.

– To solve the problems of investment built channel, when the Central Bank refinances loans to key banks that the Central Bank trusts, for projects which are released or infrastructure investment bonds. If you do not trust the key banks, it remains a development institution. If you are using a development institution, it is necessary to feed and provide support through investment.

– To ensure under any mortgage or simply on trust?

– Central Bank may act differently, if we take the example of the Chinese, the Brazilian central bank. Through these loans, China has built a system of high-speed railway lines, we do not have one. Brazil has created new oil industry, including the production of oil equipment, despite all the problems. The manufacture of equipment for the production and exploration is our Achilles' heel. Especially aviation industry. We periodically sanitize the KLA - in 2009, in 2015 - it may need another sanation in 3-4 years: projects that are implemented there are very risky and very poor return on investment. But if we want to maintain and develop civil aviation, it is costly. Maybe not to rely on the fact that banks credit extremely risky projects, and then periodically sanitize the KLA, but rather directly give it money - they will return, even in 10-15 years, but this project has to take some position in the world . Development Bank of Brazil 20 years investing in Embraer - if it had not, the Embraer would not be, as the world's first producer of regional jets. Brazil achieved the result, why are we worse than them? Why do we need to arrange financial disassembly and sanitation every 3-4 years? Let's work on the horizon of 8-10 years, and then win. We need comparable efforts, and they are an order of magnitude less, even though technically "Sukhoi Superjet" is quite promising machine, as well as MS-21 that is harder project with even lower probability of a refund. Or it is necessary to put an end to it, and fly only in the Airbus and Boeing. We started it, but did not give any funding. All these projects are balancing each time on the brink of default - it's not normal. We need some stable rules of the game.

– Are these projects can be financed only at the expense of the emission ?

– VEB virtually has no corporate deposits. There is a direct tax source for the bank of Brazil, almost all state-owned companies in Brazil are required to keep money in the bank - we do not have any of it. Therefore, another option - funding from the budget, and another possible variant is the Institute of bonds, which are obliged to buy in some range of banks and state corporations, or loans from the Central Bank at rates that allow you to make these projects paid back or at least break even. This means that the rate should be comparable with the inflation target, for which the Central Bank fights - 3-4%, not 11-12% or even 9%, under which the Central Bank refinances export credits, because it is non-competitive conditions for export. We will lose to China and around the world.

Losing almost all

– And which Stolypin club proposals you do not agree with?

– With a focus on what is most important - the high scale of it is the emission of support - 1.5 trillion rubles. In my opinion, if the Central Bank would have refinanced VEB on 200-300 billion rubles and expanded lending channels for investment projects for commercial banks, it would be possible to reverse the situation with the investment. And it does not fundamentally change monetary policy parameters. The growth of the monetary base in recent years, we had about 500-600 billion rubles. This year is likely to be 1.8 trillion rubles., And then 300 billion does not change the picture. Moreover, there is a possibility of substitution: as the money will be spent on investment projects, the need for short-term lending may be reduced.

– You can give a lot of cheap money and make many products for which there is no demand, then what?

– We do have competitive products. But there is a final result - the economic downturn. It needs some dampers but there are almost none. All countries even Europe, are growing faster and more accurately now, growing unlike us. If you do not change the approach to economic policy, in 2017, at best, we get close to zero growth, and then, at best, 2-2.5%. This is lower than the expected rate of the United States and Europe. It is losing in almost everything. I do not exclude that in a year or two, even Ukraine, which is now in the worst position among the European countries will overtake us.

– But Russia also needs a different model of growth, the investment? Investing in Europe do not grow, although there rate just almost zero.

– I think next year we will see there is growth in investment. As for Russia - in the 2000s. and after the crisis of 2009, we had a high rate of consumption, but the full investment-led growth did not happen. And there really is a matter not only in the interest rate. But if we talk about how to restart growth, then easing of the monetary policy or create special channels and risk sharing of money are necessary. There is the Industry Development Fund, it selects the export-oriented projects or related to import substitution, it has a good expertise in this area, commercial banks are considered with it. But it has all the resources of 20 billion rubles. and in the long term - 40 billion rubles. For a country where the investment even in a recession account for 14 trillion rubles., it is a penny. Efforts should be commensurate with the scale of the problems. Do not trust commercial banks or VEB - refinances the same Industry Development Fund, let it issue bonds, which can be bought, and gain projects. And so, it turns out, and one is bad, and other is not good, we can only wait for the inflation to decrease and happiness to come. It will not. The price issue is very big - we are losing the competition and can continue to lose if new solutions not found.

To earn, rather than freeze

– Medium-term forecasts suggest that, after going through the recession, the economy will be back to square one, in fact, the beginning of fall - do you agree?

– Not really. The idea is different, for example, the idea of the desired option of the Government forecast is to limit and hold income and consumption growth in the coming years and thereby stimulate higher investment growth. That is, investment growth is a priority. But the question is - how to achieve it. And I think that the economy, which is expected to gain by limiting the growth of incomes of the population - will not allow to give a substantial investment. This requires other factors.

– Which one?

– We have a significant outflow of capital, we have a gap between savings and investments - 3-4 pp of GDP... This is very important. All the time we are exporting capital - with the exception of 2006-2007. You can certainly create a foreign exchange control, but it can be avoided. It is necessary to establish a mechanism for mobilizing savings and transforming them into investments. To believe that this will only happen at the expense of inflation - a utopia. Going back to the fact that Stolypin club says: we must still create some channels and through the state and through the Central Bank to support investment. Create a risk-sharing mechanism - to remove them from the commercial banks and businesses. But we need not only money and loans, the Government needs businesses trust.

– And how it arises?

– For a start it should not be so that due to certain conflicts over property, or safety, you can get arrested, as [the owner of the "Domodedovo" Dmitry] Kamenshik and [chairman of the Board of Directors of AFK "Sistema" Vladimir] Yevtushenko. Confidence needs to be restored and strengthened. We have confidence in the president - it is important not only social but also an economic factor. But there is, in my opinion, no full confidence of the government to the business or business to economic policy. Trust depends ultimately on the cases and on actions. If the business understands that the state, initiating projects, is ready to support them and to refinance on favorable terms, the business will go to these projects too. We can see it in agriculture. Production of pork, and poultry is growing - all thanks to the fact that since 2003 the government has consistently supported this business: introduced quotas to protect the market, established a mechanism for subsidizing interest rates on loans.

– You mentioned that in the Ministry of Economic Development forecast incomes are not "pinched" in order to give an incentive to investment. Is there any way without pinching?

– In terms of export revenues drop everything - business, and especially the population - are suffering losses. And there is always an exchange - to leave more in demand or more investment. But I would start with the fact that without the creation of conditions for the growth of household income and consumption there is no recovery of growth rates. If we want to run economic growth - it is necessary to give people the opportunity to earn money, and do not freeze their income. A current trend is simply programs that impoverishes and the middle class, and state employees, and military personnel, and scientists - most of the population. Increasing investment, including by limiting consumption, it is necessary to fnd an answer to the challenge and the demands of justice. Otherwise, some are tightening their belts for ithree years, and others exporting capital.

– In general, it is not a myth, it is possible now, pinching profits receive investment growth? ?

– This is not a myth, it is indeed possible. We just have never been able to.

– Well, why not. In the 1930s it worked.

– But now it is the 2000s. The risks that are associated with unemployment are underestimated. First of all, it started to rise, for March - 5.7%, which is lower than the peak of 2009 crisis, but, second, the problem is that we have not considered normal unemployment. We have a huge number of people who are part-time and, in fact, working for the minimum wage, which is the de facto hidden unemployment. This is one of the most serious threats. We need a growth that will create jobs and reduce unemployment. Maybe not 20 million high-performance workplaces, which "Business Russia" and Stolypin club were just talking about (in my opinion, the figure is too high), but job growth should be.

– And why the figure is too high? In the decrees of the President the figure was 25 million.

– We now have 14 million high-end jobs -to almost double that number even for 10 years is not possible. We have employed in the economy of 68 million people in total, if you remove the public sector and private entrepreneurs - the 38 million and more than half of that was a high-performance, performance should be already close to the EU and OECD figures, that is unattainable. You need to improve the performance - it is an axiom, the whole question is at what cost. In the stagnation the increase can not be provided.

We still need to go to the public sector wage support measures: it was frozen in real terms and a strong decline in 2015 and especially in 2016. It is necessary to do additional indexation. This will increase the deficit not dramatic - by 0.3-0.5%, it will give some impetus to economic growth - not too big, 0.3-0.4 nn in the coming years... But it is a matter of investment in social capital and human - we need not go back as a result of the current crisis events in a situation where the teacher, physician and scientist belong to poor families.

To support the investments we have to unfreeze SWF: because if the state does not use the resource, it is not clear why should business risk. And in any case, the support of the Central Bank is needed. Then it will provide opportunities for growth and private investment, and you can make greater use of tax incentives - do not try to fix them as in 2017 for the production of software, thereby pushing quite competitive segment in Belarus, Ukraine, and Vietnam. We have great ability to roll out investments. In this case, even if not immediately, but in 2018-2019 yy. we can get on the pace to commensurate with the growth of the world economy by - 3.5-4%.

Missed growth

– There are forecasts that Russia has entered "a century of stagnation," but, on the other hand, secular stagnation - it is a world problem. And if economic growth in the world began 250 years ago, then maybe its absence are normal?

– The economic growth did not began 250 years ago, unless you start from the Industrial Revolution, from the industrial growth. The growth of the economies was before, it was just coming into effect with the changes in the population and weather conditions. As for the idea of "a century of stagnation," for Russia that is not exactly threatening.

– Why?

– The idea of secular stagnation reflects the risks, which are primarily associated with the aging of the population and arising in connection with this financial imbalance - low-income and equity investments. But in Russia the demographics problem is still not the same as in Europe. And Europe is developing in spite of them. We have a migration channel, there is the potential birth, not used to the full. I would say that we, on the contrary, have the delayed or foregone economic growth, which we need to compensate. Over the past 100 years, if you take in 1913, Russia was growing somewhere in the 3-4% per year. This growth has been very uneven, wavy - once the record, then there were long gaps - but the average is 3-4%. I believe that we have every opportunity to get out on this path. Although we can grow faster even through resource factor - increasing gas production and exports towards Europe, and Asia. But this requires another, more aggressive pricing and export policy, strengthening the technological base - currently 60-70% of the equipment for oil and gas production is imported. It will take probably to move away from the of "Gazprom" export monopoly in the near future.

– To demonopolize "Gazprom"?

– The same "Rosneft", "Novatek" , with a certain co-ordination with "Gazprom", may export gas, so as not to displace each other. This will allow us to increase the volume of gas exports even to the European market and to strengthen its position there, but not to lose them.

– Do You remember the idea of creating a state-owned champions - the biggest industry players created a state corporation, "Rosneft" has bought BP. Now oil countries - Kazakhstan, Saudi Arabia - announced the privatization of its largest companies. If the growth with the "statechampions" does not work, to go the way of the denationalization of the economy?

– I think that is not the case. Virtually all the companies and all countries in the world support the elite of the business one way or another, more than that - it is often grown by them. Here you can take the example of Korea - in the early 1970s, they almost did not make the ships, they did not have normal shipyards. Now Korea is world's number one shipbuilding. There was no automobile - they created it, created the company in the field of electronics: give preferential money to private businesses through state-owned banks, through the development of institutions, then the money returned. It has grown a whole pleyad of Korean businessmen, who had previously worked in different areas. So do France - is now one of the leaders in Europe for high-speed rail transport. I'm not talking about Airbus - the fruit of cooperation of several states. We once tried to create such an alliance with Ukraine, did not manage. Any country that wants to occupy a leading position must have their champions. In my understanding, the champions - we see it on sports - need help. Without money you can not do that, though, as we see in our football, even a lot of money does not ensure a good result.

– That is the problem.

– But it is not the question necessety for cultivation of champions - it's a matter of who the coaches and what the rules are. "Russian Technologies" - in itself is a champion company, and within it there is a whole group of companies that are potentially champions. For example, "Russian Helicopters", which can, after some time, be taken to the IPO, as it was supposed to be, and will become an independent company. There are companies within the "Russian Technologies" that produce radio-electronic, radar products, and not just military or dual. Have interesting groundwork and civil photonics, and medtech. Maybe, we should set a goal - to grow independent champions of them for the Russian, and in the Asian market, using the "Russian Technologies" as the parent company.

To repeat the miracle

– In the Concept-2020, you described the two options - the path to energy superpower or to the country of intelligent people. Neither the one nor the other is impossible - where are we going?

– Many believe that the long-term development concept, the CRA 2020, were already obsolete at the time of adoption - it has been prepared for a long time, and was signed just before the 2008 crisis, but it is still the only strategic document there is. And although the numbers have changed significantly, that what was laid there ideologically, I think, remains relevant today. Moreover, [Prime Minister] Dmitry Anatolyevich Medvedev said that the bet on the turn in the direction of innovative development - the country of smart people and smart economy is our priority. The alternative was energy and raw materials superpower, and in fact our development in recent years has gone along this path, just below the quantity - in this version the growth rate expected to be around 3% per year. It was assumed that we do not provide a serious breakthrough in terms of R & D expenditure in terms of human capital costs, provide only a patchy, fragmentary development of the innovations associated with the oil and gas and defense industry. Actually, we're going this way. And in the most CRA it noted that under the circumstances this is the most likely scenario.

– Where will we end up?

– I remain optimistic and believe that the turnaround will happen. We need institutional and structural changes to go to an innovative way, and major change management system. I believe - and this government does not crossed out, - it is our task. The question now - that this transition took place without hazards and in the mobilization version, but still based on free enterprise and consensus within society.

– That is, the time is lost and now only a political cataclysm is the only way to a smart economy, except for a miracle?

– Well, a miracle does happen periodically. At the beginning of the 2000s. nobody expected that there will be growth, - not by chance this time, some experts called Russian miracle. I think that we have the opportunity to repeat this miracle, if not with the pace, but it is a great social consensus, intellectual, knowledge-based economy.

– That miracle was based on the increase in oil prices.

– Not only. There have been trust, quite high competitiveness of businesses. At that time we were able to create a state corporation, and seriously restructure and increase the efficiency of state-owned assets, to build a system of state regulation in agriculture, in the defense industry. All this has given results. Now we need a new way, in the new, more rigorous conditions to find a way to combine the freedom of certain budgetary constraints and to develop our scientific and technological capabilities. We have a tremendous opportunity to increase exports of wood products complex, metallurgy, for reconstruction of production equipment for oil and gas production. We have many high-tech projects, but they need to be brought to mind: not to say that there are no projects, but to help them to structure the business so they really came for bank lending. There is space projects, where we can enter the commercial market, and go at it - and launch services and satellites. But for this it is necessary not only to fight for the market, but actually create new missiles, which would be more economical and cheaper. Because even "Angara", when we deploy it, according to their economic characteristics will still give way to competitors. We have the ability and super-computers and algorithms of calculations, where we are among the leaders. In composite materials, we are lagging behind the Chinese in terms of production dozens of times, but the technologycaly closing the gap with the advanced countries. All this requires significant cost and coordination, because they have often been separated: corporations do one thing, Ministry of Defence another; at the same time we are investing in the national technology initiative and freeze, rather reducing spending on basic research. We largely focus on copying or use of old backlog. We will not win this way. Although to copy, and learn new methods of foreign advanced design and development is necessary.

– What we can do to change trajectory?

– We need to create the fundamental basis for a breakthrough in the 2020-ies. - As did the Soviet Union, as China do now. It overtakes us in technological development. We are spending on R & D 1.2% of GDP, China - already 1.8% and by 2020 will exceed 2%. The government, in principle, stated that the priority is the innovative development - this was a task in 2008, but we have not solved it. Technological and scientific development did not became priority. Although the government has all the levers, and not only financial - this is innovative development program of state-owned companies, and long-term development programs that the government has forced many companies to adopt.

– Maybe the deal is not in the levers? The projects are implemented by people who are integrated into the system of incentives and disincentives may be that the control system is built so that it supports not the best means of action?

– I do not think that we have aligned incentives right or effective. But then again, I think the original is not the question. Firstly, that we have now formed a lack of confidence to the captains of industry and entrepreneurs. And it appears in building a redundant control and inspection system. They are needed because there is corruption, there are many inefficient things - but soon there will be more of those who control and inspecti than of those who do something creative. Secondly, we need training - not only managers and officials, as evidedent by German Gref [President of the SberBank]. It is necessary to improve the quality of the engineering staff and managers, because they will drive business and create new technologies. There are people who can become the new Russian business and scientific elite. They are in state corporations and private companies, and in science. It is a matter of selection: it is necessary to look for them, perhaps - to organize the primaries, as political parties.

– And why specifically seek out? Maybe create conditions that would allow people to express themselves and realize themselves?

– In any case we need a coach and a specific system of training - without that we will not reach significant results. Russia is a country of talents; but for these talents to grow, they need serious support system. Just so they will not grow up - or rather, will go to the foreign company or leave Russia. We are back at the beginning of a new wave of brain drain - and of science, and of business.

– Probably they leave not due to the fact that they do not recieve help, but due to the fact that there are somebody in the way, that there is no possibilities of implementation.

– I believe that there is a possibility, but it is necessary to be offered to them. And people need to create the conditions necessary to talent in droves could find realization in Russia.

Source: Vedomosti