Is there a way out of the crisis for Russian industry?

Published: February 26th, 2018

The situation in the Russian industry, which has seen a decline in production over the past six months, is causing serious concern. Issues related to development and the real state of affairs in the domestic industry were discussed in the program "Pronko. Economics." The author of the program Yuri Pronko discussed with Russian producers - the president of the Rosspetsmash Association, the chairman of the RF CCI Council on Industry and Competitiveness of the Russian Economy, the co-chairman of the Moscow Economic Forum - Konstantin Babkin, and the Chairman of the Board of Directors of the Magnolia Casting and Mechanical Plant from Naberezhnye Chelny - Sergey Majorov.

Industrial growth in the whole last year was only 1%, which the head of the Russian state found unsatisfactory: "I note that last year industrial growth in Russia amounted to 1%." Of course, this can not satisfy us. " Vladimir Putin stressed that stimulating industrial and economic growth is the most important task for all levels of government, a key condition for the development of the social sphere, improving the quality of people's lives. "We need to support promising projects for the production of high-value products, products that will be in demand both on the domestic and foreign markets," he said.


Yu.P .: Konstantin Anatolievich, it was your industrial enterprise that was visited by the head of the Russian state, after which a meeting took place, where the president clearly stated that stimulating industrial and economic growth is a priority for everyone. I saw Mrs. Nabiullina, Mr. Siluanov, at this meeting. Someone else was from the representatives of the financial and economic block of the government.

KB: Oreshkin.

Yu.P. Yes, Oreshkin. Did you feel that they are ready to fulfill the president's instruction and change their policy?


KB: I rather felt that they were not ready. Initially they said: the topic of the Central Bank and its policy should not be raised, nothing should be said about the tax system. In principle, on the sidelines, during the passage through the plant, I said to Siluanov: you raise the tax burden, this makes our industry less competitive. He said: Well, yes, but what?

YP: So the Minister of Finance agreed with you.

KB: Yes. He said: we do not raise taxes any more. I say: but you are more strict in approaching their collection. Last year, with the same, in principle, tax rates, you collected taxes by 10% more. Well, taxes must be paid!


YP: Nobody refuses to pay them either.


KB: Well, yes, but lower the tax rates then, so that there could be some kind of stimulus and development. But no, we will tighten up, everyone will be forced to pay. I realized once again that neither the policy of the Central Bank nor the tax policy will fundamentally change. And it will not acquire a stimulating nature for industry with the current leaders.

YP: We directly showed this fragment from the speech of the president, where he clearly said: the stimulation of the industrial, I even noted, and economic growth is a priority for all. Including those sitting in this room.


KB: The president said that. He said that fuel is becoming more expensive due to higher excise taxes. He recognized this problem. He said that the entire policy of the government should be sharpened in order to make it profitable to produce in Russia. That is, he said the correct words on several points. He said that it is necessary to continue supporting agricultural machinery and agriculture. But when we turn to those who need to implement it, half of them, a significant part, has a different point of view and believes that the president's instructions are not something that should be done urgently, and do not consider it necessary to think about how to better fulfill them, but rather think about how to avoid them. This is how I understood the situation in the government.

YP: Including from private conversations with Mr. Siluanov.


KB: And from private, and from their open speeches at the State Council.


YP: Sergey Vasilievich, tell me, for Tatarstan enterprises, since this is an industrial region that has a huge potential, are there priority issues and problems that do not allow enterprises to develop? Or, in fact, Siluanov is right, or Nabiullina is right, who says: Well, we achieved growth in industrial production of 1%, what should we change, we are doing well.


SM: I think that the real sector of the economy should be called a priority. There is a good motto, and, our last meeting with Vladimir Vladimirovich Putin went exactly under him - "the country lives while the factories are working."

YP: A good slogan.


SM: The real sector of the economy, of course, needs to be supported. I agree with the previous statement: support is needed not in words, but in deeds. In fact, this means: today we have a fiscal regime of our economy that does not develop, but destroys. Today, if someone develops, it is not thanks to some kind of support, but rather, in spite of everything. The types of support that exist today for small and medium-sized businesses are certainly necessary and important. But, probably, not on the scale in which they are today. It seems to me that even such a simple type of support, as tax incentives for those companies that invest, is necessary, at least this.

Yu.P .: In development.


SM: It used to be. Previously, this went into offsetting the cost price. Why not take it back? And no money is needed. It is clear that tax revenues will decrease somewhat in the short term. But we do not live by one day, we must think about tomorrow. But there is no such stimulation. A lot of such examples can be cited. And when they say that we have 1% growth, so, sorry, the world economy is growing faster. And our country, with such resources, with such human resources, having an abnormal model of economic development, naturally does not grow.

YP: So you think the current model is abnormal?


SM: Fiscal - destructive. And the economic model should be stimulating, developing. Suppose, if I invested money, I must understand what I will get from investing. What benefits can my enterprise have? I invested 100 million rubles, and I understand: they will be charged to the cost price, conditionally, I will reduce the cost of production, the result will be much more interesting than just spending money in anywhere. And, of course, today the program "Six and a half", implemented by the development corporation of the Russian Bank for Support of Small and Medium Enterprises, is launched. Great, three points. Alexander Arnoldovich Braverman said: three points from the Central Bank. You can not imagine what efforts it cost him to create the program "Six and a half."

YP: That is, again, not thanks, but in spite of.


SM: Thank you, that he does it.


YP: I mean, contrary to the policy pursued by the Central Bank.


SM: He did it, well done. There is a stimulation, subsidization, a difference in rates. This means that the mechanism is defined, today it is brought to the enterprises. It will be fine if there is good capitalization. But this is again 6.5%. This is not the 2% that is in Europe. Negative rates, we know, in Japan deposit rates, in Switzerland negative deposit rates. Where the cost of the loan is 1-2%. We are also competing with them.

Yu.P .: Is this a flashy question?


SM: Yes, of course. Flashy.


Yu.P .: Konstantin Anatolievich, do you agree?


KB: Absolutely. Monetary policy - is the main brake.

Yu.P .: That is, the lack of access to financial resources, the inability to attract them?


KB: Yes, the lack of credit is a very serious issue, which hinders the renovation of enterprises and the sale of our products. Because all agricultural machinery is sold on credit, not only our products. If we take the lag for five years and calculate the rise in price of this loan, which the peasant must take to buy the combine, and compare the terms of the loan for the Russian combine and for the western, we see that for the Russian combine - the farmer pays 10% per annum, for the western - 3% per annum. If this is multiplied by five years, we get a price difference of one and a half times. Of course, this is a flashy question.

YP: And as for the fiscal policy, which Sergey Vasilievich speaks about - that there is no intelligibility, there are no incentives and there are no benefits? Is there a need for their introduction? To which Siluanov immediately responds with the answer: and from what I will collect taxes?


KB: From the growing pie. We must do everything to ensure that the economy is growing, production is expanding. And then from the lower taxes you can collect much more. But they took a policy to shave this sheep, cut the cake as much as possible, cut off everything-everything and leave nothing for development. That is, the task of modern tax policy in the last couple of decades is to collect as many taxes as possible with less noise, with less perturbation. What will happen after that, whether the economy will develop, whether agriculture will develop - is not taken into account. How salaries will grow is not important. The main thing is that now there was no squeak. Such a policy leads to the fact that it is not profitable for enterprises to invest in development. It is profitable to withdraw money, put it in Cyprus or deposit with a bank, start speculating, but do not invest in the development of enterprises.

First, open the market. And there are corresponding decrees, Medvedev signed, and in general by whom only they were not signed. Changes occur, but very slowly. And we need a good financial and credit policy. This person should be told: let small and medium-sized businesses make money, first open the market for him, and he will less appeal to the state with outstretched hand for support. But at the same time, monetary policy should be accessible to the enterprise. If the enterprise works today, engineering, on a minimum margin or close to zero, or even negative, where to get modernization today? What is our interest rate today? 9%. And if you go to the bank, they will add to your expenses - 11 and 15%. The smaller the business, the greater the interest.


YP: Profitability of zero or minus?


SM: Machine building?


YP: Yes.


SM: It's normal for engineering.


Yu.P .: Normally?


KB: In Russia, yes.

Yu.P .: I like your reaction, colleagues. So smiling, you talk about losses or, at best, about zero.


SM: Today, if machine builders produce their products on the market and are the final producer of some products, then the earnings, in the main, are received by the sellers. And sellers everywhere earn. And this is the maximum that can be earned. Today, machine builders produce not so many final products, mainly they are suppliers of the second-third level. There they are squeezed very well by suppliers - those that produce the final product. And they are squeezed out by sellers, who earn the maximum margin. And if you follow this chain, you can see that the machine building gets zero percent - it's good. This means closed energy, closed wages. That means closed fixed costs. In general, in mechanical engineering, it is not a secret, there are negative orders. If only to close at least some of the fixed costs.

YP: It turns out that when answering the representative of the Central Bank, the Director of the Department of Monetary Policy, you advise him: you, a young man, give us an opportunity to earn money and we will invest. Do I understand you correctly?


SM: It's not in his, probably, competence - to give an opportunity to earn, open the market. But in his competence, perhaps, to move to a monetary and credit policy that would be competitive in relation to the world.


YP: At the nearest Board of Directors, the Central Bank, with a very high probability, can reduce the key interest rate by 25 percentage points.


KB: 0.25% percentage points.

YP: Yes, of course. Is this an important priority for you? That is, the first question is monetary policy and decisions to exit stagnation in which industry is located. The second is fiscal policy. Is that all the questions? I'll explain why I'm asking this question. After all, you managed to increase production at your enterprises. What is the secret of success?


KB: Not only I managed at my enterprises. All agricultural machinery in Russia, this is 70 enterprises, demonstrates growth, twofold, in four years. What is the reason? There are a number of reasons. The first is that the government has launched a program in which peasants receive subsidies for the purchase of Russian agricultural equipment.


YP: That is, the program was launched for one specific sector.


KB: For the peasant, 15% of the acquired Russian agricultural machinery is subsidized. We can continue to follow this path, expand this mechanism to the whole economy, subsidize all Russian producers. There is an opportunity to go a little different way - to lower taxes for producers and to protect the market more actively from unequal competition from abroad.

YP: You mean protectionist measures.


KB: Some protectionist measures. If they are impossible, then the option with a subsidy - replaces them, it turns out that the government takes a lot of taxes, but some of them are returned. And only for Russian manufacturers, protecting them, cutting them off from foreign ones.


Yu.P .: This is logical.


KB: This is a good measure, and it pays off. The Finance Ministry itself, the whole government, all calculations, academicians show that the state, investing a ruble in this subsidy, receives a return of 1.8 rubles, that is, 80 kopecks of profit, in the same year. And if we take our industry as a whole, four years ago we paid 10 billion rubles of taxes a year, now we are paying, according to the results of the last year, 31 billion.

Yu.P .: This means that such support has had a multiplier effect, including a tax one.


KB: Having invested 10 billion in support of both the peasants and our industry, the state received 20 billion dollars back. We need to expand this mechanism, but so far our industry is struggling to ensure that this measure is continued.


YP: Are there any doubts?


KB: The government has not spoken about any enlargement yet and is constantly in doubt. This program is valid for four years and every month during these four years we prove that it is necessary to continue its financing, and for the next six months we ask for funding. They think and, as a rule, allocate at the last moment.

YP: I just remembered how much money was spent on the so-called recovery of the domestic banking sector. How much did you say, 10 billion?


KB: Yes, 10 billion.


Yu.P .: For them it's like having lunch.


KB: Compared to a trillion - yes, this is one-hundredth part of what was poured into the banks. Moreover, neither the economy nor the people received anything from these injections into banks.


Yu.P .:

There are other beneficiaries.


KB: So there is a recipe. And we showed the government, the State Council, the president that a certain package of measures leads to development, to creating jobs, to increasing taxes, to increasing salaries. Please continue and expand. The president understood this and took it. But there are people in the government who do not understand this and do not perceive it.


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