Gaidar Forum 2014: Day 2

The second day of the Gaidar Forum 2014 dedicated to "Resources and Infrastructure of Sustainable Development" was opened by a plenary discussion on "The Future Industrial Structure".

The discussion was moderated by ROSNANO Executive Board Chairman Anatoly Chubais. The discussion was also attended by Ministry of Industry and Trade of the Russian Federation Denis Manturov; Vice-President of the Skolkovo Institute of Science and Technology (Skoltech) Alexey Ponomarev; Executive Chairman of the Board of East Office of Finnish Industries, Prime Minister of Finland fr om 1991to 1995 Esko Aho; Chief Executive Officer of ОАО RBK Igor Igamirzyan; Chairman of the Board of Kaskol Sergei Nedoroslev; Presidential Commissioner for Entrepreneurs' Rights Boris Titov.

The forum participants pointed out that over the past decade the industrial sector has received a wide range of new technologies which allow structurally sophisticated products to be rapidly designed and manufactured. At the same time, the present-day production must be ready to transition under rapidly changing market conditions, which according to those who attended the discussion requires flexibility and technological progress and management.

Mr. Manturov stated that industrial parks are currently one of the promising lines of development. Having such an organization of the high-tech business, countries with non-resource economy can attract substantial investment in their production facilities. At the same time, he put a special emphasis on that this line of technological development was created "at the bottom", i.e., by the business itself. It is basically medium-sized businesses that are engaged, as "the primary economic driver", in the work of industrial parks, according to the Minister. Therefore, a special program of support to industrial parks, providing for tax privileges for startups, will be adopted this year. The minister also noted that there 36 active industrial parks are currently operating in Russia. Another 80 industrial parks are scheduled for opening in the short-term and 300 technology parks within the next five years.

According to Mr. Ponomarev, new industrial technologies (NIT) are being the topic of discussion like nanotechnologies were about a decade ago. He believes that current opportunities of designing and making tangible assets makes it possible to manufacture one-of-a-kind personified products as part of a single piece rather than mass production. Such technologies, according to Mr. Ponomarev, may be used in industry, everyday life, and science.

Disagreeing with Mr. Ponomarev's point of view, Mr. Chubais argued that single piece production technologies can oust mass production technologies fr om the market. Mr. Ponomarev responded that the present-day technological development requires the reliance on production flexibility and ability to readjust to changes in the consumer demand.

Esko Aho talked about international experience in developing new industrial (digital) technologies, including the example of Finnish Nokia company. Furthermore, he put a special emphasis on the fact that Finland is anticipated to lose up to 50% of its jobs in a decade or two as a result of the introduction of new technologies.

Winding up his speech dedicated to the contents of new technologies, Mr. Igamirzyan stated that the ongoing technological revolution has been eliminating a huge number of mass professions, will further worsen the socio-economic differentiation in the society and eventually have serious socio-economic effects.

Mr. Nedoroslev, emphasized that all innovations are currently take place at small businesses.

Speaking of the specifics of employers' rights in the industry at large, Mr. Titov pointed out that creating jobs in this area is priority. He also pointed out that the development of new industrial facilities needs promotion of investment inflow (which includes introduction of a tax credit on a part of investment costs, special VAT etc.), as well as a clear-cut cluster policy.

Summing up the results of the discussion, Mr. Chubais pointed out that "the industrial policy has been rehabilitated and should be taken care of".

A plenary discussion – "Doing business in Russia 2.0" – was held by Chairman of the State Duma of the Russian Federation Sergei Naryshkin and Otkritie Financial Corporation Chairman of the Board Ruben Aganbegyan. The discussion was also attended by Augusto Lopez-Carlos, Director of the Word Bank's Global Indicators Analysis Department (GIA) the World Bank; Deputy Minister of Economic Development of the Russian Federation Sergei Belyakov; Stanislav Voskresensky, Deputy Presidential Plenipotentiary Envoy to the Northwestern Federal District of the Russian Federation; Zoran Vucinic, President, Russia, Ukraine & Belarus Business Unit for Coca-cola; Alexey Komissarov, Moscow Government Minister, Head of Moscow Department for Science, Industrial Policy and Entrepreneurship; Kaluga Region Governor Anatoly Artamonov; Krasnoyarsk Territory Governor Lev Kuznetsov; Rustam Minnikhanov, President of the Republic of Tatarstan, Chairman of the Board of the Association of Innovative Regions of Russia; Ulyanovsk Region Governor Sergei Morozov; Deputy Head of the Federal Tax Service Alexey Overchuk.

Those attended discussed what the Doing Business ranking means for the Russian economy, how the ranking can help improve investment environment, the credibility of the methods of making the World Bank's ranking and scoring of various countries.

According to Mr. Naryshkin, Russia has a very modest score in the World Bank's ranking despite the potential of Russia's economy and GDP. He reminded that in his Decree in May 2013 President Putin specified the World Bank's long-term economic policy ranking as a metric of changes in the economic development of Russia and pointed out that the Russian Federation must be rated 50th in the ranking by 2015 and 20th by 2018. "In the last two years Russia has moved up 28 points to take a very, I must say, modest 92nd place which fails to show Russia's economic potential, economy's contribution to GDP", said Mr. Naryshkin. He also pointed out that, "nonetheless, we can see the trend. If the government and the society get united, set the right objective for themselves, they will be able to achieve this objective."

Augusto Lopez-Carlos answered Mr. Naryshkin's question about what Russia should do to move up in the ranking, and whether any changes are planned to the scoring method. He first of all pointed out that any ranking is relative, including the Doing Business ranking. The score in the ranking is not just based on the country itself, but also the development of other countries, nevertheless, according to the World Bank's representative, Russia has advanced considerably in absolute values over the recent years to take 3rd place on the rate of positive changes. Augusto Lopez-Carlos suggested that in order to further improve business environment in Russia the Russian Government should improve business regulation, differentiating the company requirements by scope and type of business, as well as think on enhancing the taxation system. Regarding upgrading the ranking method, the World Bank's representative, the authors of rankings should extend the coverage of large countries so that metrics reflect the situation in the regions rather than in a single or a few major cities. Rankings are planned to consider not only just bare figures, but also be based more closely on qualitative metrics.

Mr. Belyakov reported that the Russian Government had selected the Doing Business ranking as a principal benchmark in measuring the development of business environment, because it measures not only formal norms of relationship between government authorities and business, but also their actual performance. According to Mr. Belyakov, relying on the ranking in its law-making activity, the Ministry of Economic Development of Russia measures the effect of every draft law concerning business, estimates countervailing measures required to prevent business environment from getting worse.

Zoran Vuchinich emphasized the importance of the Doing Business ranking as incentive for the development and competition between countries and regions. He noted, however, that though rankings is a good thing, no one should get enslaved to it, and it is the availability of opportunities, not rankings, that basically makes investors decide whether to invest in a country.

Mr. Minnikhanov reported about his Republic's experience in making the region more appealing for business. "All regions have lots of weaknesses. There is a lot to be changed. We do our best to change", he stated.

Mr. Voskresensky reported about what is being done to improve scores in the ranking for the North-West Administrative District of the Russian Federation including the Kaliningrad Region, A. Komissarov reported about the same for Moscow, L. Kuznetsov for the Krasnoyarsk Territory, S. Morozov for the Ulyanovsk Region.

A plenary discussion – "Energy Sustainable Development: How to Make the Wish Come True?" – was moderated by Director of National Research Center "Kurchatov Institute" Mikhail Kovalchuk. The discussion was also attended by Minister of Energy of the Russian Federation Alexandr Novak; Deputy Chairman of the Board of ОАО Gazprom Valeriy Golubev; ОАО LUKOIL vice-president Andrei Gaidamaka; President, French Development Agency (AFD) Board of Governors Laurence Tubiana; ROSNANO Executive Board Chairman Anatoly Chubais; Group Chief Economist and Vice President of BP Plc. Christof Ruehl.

Mr. Kovalchuk believes that Russia's rich natural resources makes it irrelevant to develop an innovative economy. "We enjoy a God-given richness, we are stinking rich, we have the largest natural resources in the world, I mean potable water, woods, crop areas plus mineral resources. To use all this, we need advanced high technologies". He believes, however, that it would be impossible and even useful to create an innovative economy outside the scope of mineral extraction branches. "Unlike any developed country which has no natural resources and follows the way of innovative economy, we will never have such an economy. We just don't need it, because we are very rich ", stated the "Kurchatov Institute" Director. He noted that Russia is still leading in some non-resource sectors. "We are among the leaders in high-tech sectors such as nuclear, space. We are definitely a high-tech power, judging by these sectors".

Mr. Chubais stated that the development of solar power and wind power generation is to become a key factor influencing the power market in the decade to come. He believes that those countries which have been actively engaged in developing an alternative energy, will soon be able to control the global market and have other advantages for their economy. He noted that even now renewable sources of energy, despite their economic unprofitability, account for 8% of the global market. "This is fantastic", believes Mr. Chubais, and by 2050 it is expected to reach up to 40%. Therefore, those will be the winners who are subsidizing solar or wind power generation, like in the European countries.

Furthermore, it is not only the energy sector that benefits from the development of renewable sources of energy. "Fifteen years of developing such types of power generation have facilitated the advancement of such sectors as manufacturing of solar power generation equipment, manufacturing of wind power generation equipment, including the development of their engineering framework, and both helped find sources of financing of the domestic science". Although Russia has no its research base for the development of alternative sources of energy, this country still has a chance to "catch up with the leaving train" to the extent that the package of documents on the development of wind and solar power generation adopted in May last year has been implemented. By 2020 the Ministry of Energy of Russia plans to generate solar power and wind power energy up to 1.5 and 3.6 megawatts, respectively. Mr. Chubais believes that it is quite feasible.

Owing to the expansion of alternative sources of power generation and technological development, a "grid parity" will be established worldwide in the decade to come, as a result of which power grids' cost per 1 kW of power generated from traditional sources will be equal to that per 1 kW generated from alternative sources. According to the Head of ROSNANO, it may be expected in 5 to 7 years. Despite having plenty of traditional sources of power generation, Russia should accelerate the development of alternative power generation to be able to retain its place in the power market, as well as address its specific issues, such as the provision of power supply to isolated territories wh ere construction of power grids is impossible or unviable. This issue is being addressed using expensive and obsolete diesel power stations.

Mr. Kovalchuk noted that Russia's unique natural resources allow this country to develop wind, solar, and other types of power generation, such as tidal, geothermal etc. based on the capability and needs of each region.

Natural gas pricing should be based on market-driven factors, not politics, stated Mr. Golubev. "Relationship between producers, consumers, other market participants, institutions, and entities should be built in such a way as to create a market which would be free from politics, depoliticize it, make it absolutely nondiscriminatory, transparent and non-biased". At the same time Mr. Golubev blamed Gazprom's European partners for non-market approaches towards making their power packages for creating unilateral advantages for European consumers. "Laying barriers to Russia as producer and exporter while creating advantages for their own countries is not a market measure at all. We can't agree to that, because Europe won't be able to feel itself safe in terms of energy security, without being secured by the mineral reserves located on the territory of the Russian Federation", noted Gazprom's Deputy Chairman.

Mr. Golubev also believes that the gas sector can's be stable unless it is subject to long-term pricing. In this context he spoke against attempts to switch the market to spot prices and link them to the cost of shale gas in the United States, because these prices are speculative and my volatile drastically when exposed to external factors.

The second day of the Gaidar Forum 2014 dedicated to “Resources and Infrastructure of Sustainable Development” was opened by a plenary discussion on “The Future Industrial Structure”.

The discussion was moderated by ROSNANO Executive Board Chairman Anatoly Chubais. The discussion was also attended by Ministry of Industry and Trade of the Russian Federation Denis Manturov; Vice-President of the Skolkovo Institute of Science and Technology (Skoltech) Alexey Ponomarev; Executive Chairman of the Board of East Office of Finnish Industries, Prime Minister of Finland from 1991to 1995 Esko Aho; Chief Executive Officer of ОАО RBK Igor Igamirzyan; Chairman of the Board of Kaskol Sergei Nedoroslev; Presidential Commissioner for Entrepreneurs' Rights Boris Titov.

Mr. Manturov stated that industrial parks are currently one of the promising lines of development. Having such an organization of the high-tech business, countries with non-resource economy can attract substantial investment in their production facilities. At the same time, he put a special emphasis on that this line of technological development was created “at the bottom”, i.e., by the business itself. It is basically medium-sized businesses that are engaged, as “the primary economic driver”, in the work of industrial parks, according to the Minister. Therefore, a special program of support to industrial parks, providing for tax privileges for startups, will be adopted this year. The minister also noted that there 36 active industrial parks are currently operating in Russia. Another 80 industrial parks are scheduled for opening in the short-term and 300 technology parks within the next five years.

Disagreeing with Mr. Ponomarev’s point of view, Mr. Chubais argued that single piece production technologies can oust mass production technologies from the market. Mr. Ponomarev responded that the present-day technological development requires the reliance on production flexibility and ability to readjust to changes in the consumer demand.

Mr. Nedoroslev, emphasized that all innovations are currently take place at small businesses.

Speaking of the specifics of employers’ rights in the industry at large, Mr. Titov pointed out that creating jobs in this area is priority. He also pointed out that the development of new industrial facilities needs promotion of investment inflow (which includes introduction of a tax credit on a part of investment costs, special VAT etc.), as well as a clear-cut cluster policy.

Summing up the results of the discussion, Mr. Chubais pointed out that “the industrial policy has been rehabilitated and should be taken care of”.

A plenary discussion – “Doing business in Russia 2.0” – was held by Chairman of the State Duma of the Russian Federation Sergei Naryshkin and Otkritie Financial Corporation Chairman of the Board Ruben Aganbegyan. The discussion was also attended by Augusto Lopez-Carlos, Director of the Word Bank’s Global Indicators Analysis Department (GIA) the World Bank; Deputy Minister of Economic Development of the Russian Federation Sergei Belyakov; Stanislav Voskresensky, Deputy Presidential Plenipotentiary Envoy to the Northwestern Federal District of the Russian Federation; Zoran Vucinic, President, Russia, Ukraine & Belarus Business Unit for Coca-cola; Alexey Komissarov, Moscow Government Minister, Head of Moscow Department for Science, Industrial Policy and Entrepreneurship; Kaluga Region Governor Anatoly Artamonov; Krasnoyarsk Territory Governor Lev Kuznetsov; Rustam Minnikhanov, President of the Republic of Tatarstan, Chairman of the Board of the Association of Innovative Regions of Russia; Ulyanovsk Region Governor Sergei Morozov; Deputy Head of the Federal Tax Service Alexey Overchuk.

According to Mr. Naryshkin, Russia has a very modest score in the World Bank’s ranking despite the potential of Russia’s economy and GDP. He reminded that in his Decree in May 2013 President Putin specified the World Bank’s long-term economic policy ranking as a metric of changes in the economic development of Russia and pointed out that the Russian Federation must be rated 50^th in the ranking by 2015 and 20^th by 2018. “In the last two years Russia has moved up 28 points to take a very, I must say, modest 92^nd place which fails to show Russia’s economic potential, economy’s contribution to GDP”, said Mr. Naryshkin. He also pointed out that, “nonetheless, we can see the trend. If the government and the society get united, set the right objective for themselves, they will be able to achieve this objective.”

Augusto Lopez-Carlos answered Mr. Naryshkin’s question about what Russia should do to move up in the ranking, and whether any changes are planned to the scoring method. He first of all pointed out that any ranking is relative, including the Doing Business ranking. The score in the ranking is not just based on the country itself, but also the development of other countries, nevertheless, according to the World Bank’s representative, Russia has advanced considerably in absolute values over the recent years to take 3^rd place on the rate of positive changes. Augusto Lopez-Carlos suggested that in order to further improve business environment in Russia the Russian Government should improve business regulation, differentiating the company requirements by scope and type of business, as well as think on enhancing the taxation system. Regarding upgrading the ranking method, the World Bank’s representative, the authors of rankings should extend the coverage of large countries so that metrics reflect the situation in the regions rather than in a single or a few major cities. Rankings are planned to consider not only just bare figures, but also be based more closely on qualitative metrics.

Mr. Minnikhanov reported about his Republic’s experience in making the region more appealing for business. “All regions have lots of weaknesses. There is a lot to be changed. We do our best to change”, he stated.

A plenary discussion – “Energy Sustainable Development: How to Make the Wish Come True?” – was moderated by Director of National Research Center “Kurchatov Institute” Mikhail Kovalchuk. The discussion was also attended by Minister of Energy of the Russian Federation Alexandr Novak; Deputy Chairman of the Board of ОАО Gazprom Valeriy Golubev; ОАО LUKOIL vice-president Andrei Gaidamaka; President, French Development Agency (AFD) Board of Governors Laurence Tubiana; ROSNANO Executive Board Chairman Anatoly Chubais; Group Chief Economist and Vice President of BP Plc. Christof Ruehl.

Mr. Kovalchuk believes that Russia’s rich natural resources makes it irrelevant to develop an innovative economy. “We enjoy a God-given richness, we are stinking rich, we have the largest natural resources in the world, I mean potable water, woods, crop areas plus mineral resources. To use all this, we need advanced high technologies”. He believes, however, that it would be impossible and even useful to create an innovative economy outside the scope of mineral extraction branches. “Unlike any developed country which has no natural resources and follows the way of innovative economy, we will never have such an economy. We just don’t need it, because we are very rich ”, stated the “Kurchatov Institute” Director. He noted that Russia is still leading in some non-resource sectors. “We are among the leaders in high-tech sectors such as nuclear, space. We are definitely a high-tech power, judging by these sectors”.

Mr. Chubais stated that the development of solar power and wind power generation is to become a key factor influencing the power market in the decade to come. He believes that those countries which have been actively engaged in developing an alternative energy, will soon be able to control the global market and have other advantages for their economy. He noted that even now renewable sources of energy, despite their economic unprofitability, account for 8% of the global market. “This is fantastic”, believes Mr. Chubais, and by 2050 it is expected to reach up to 40%. Therefore, those will be the winners who are subsidizing solar or wind power generation, like in the European countries.

Furthermore, it is not only the energy sector that benefits from the development of renewable sources of energy. “Fifteen years of developing such types of power generation have facilitated the advancement of such sectors as manufacturing of solar power generation equipment, manufacturing of wind power generation equipment, including the development of their engineering framework, and both helped find sources of financing of the domestic science”. Although Russia has no its research base for the development of alternative sources of energy, this country still has a chance to “catch up with the leaving train” to the extent that the package of documents on the development of wind and solar power generation adopted in May last year has been implemented. By 2020 the Ministry of Energy of Russia plans to generate solar power and wind power energy up to 1.5 and 3.6 megawatts, respectively. Mr. Chubais believes that it is quite feasible.

Owing to the expansion of alternative sources of power generation and technological development, a “grid parity” will be established worldwide in the decade to come, as a result of which power grids’ cost per 1 kW of power generated from traditional sources will be equal to that per 1 kW generated from alternative sources. According to the Head of ROSNANO, it may be expected in 5 to 7 years. Despite having plenty of traditional sources of power generation, Russia should accelerate the development of alternative power generation to be able to retain its place in the power market, as well as address its specific issues, such as the provision of power supply to isolated territories wh ere construction of power grids is impossible or unviable. This issue is being addressed using expensive and obsolete diesel power stations.

Mr. Kovalchuk noted that Russia’s unique natural resources allow this country to develop wind, solar, and other types of power generation, such as tidal, geothermal etc. based on the capability and needs of each region.

Natural gas pricing should be based on market-driven factors, not politics, stated Mr. Golubev. “Relationship between producers, consumers, other market participants, institutions, and entities should be built in such a way as to create a market which would be free from politics, depoliticize it, make it absolutely nondiscriminatory, transparent and non-biased”. At the same time Mr. Golubev blamed Gazprom’s European partners for non-market approaches towards making their power packages for creating unilateral advantages for European consumers. “Laying barriers to Russia as producer and exporter while creating advantages for their own countries is not a market measure at all. We can’t agree to that, because Europe won’t be able to feel itself safe in terms of energy security, without being secured by the mineral reserves located on the territory of the Russian Federation”, noted Gazprom’s Deputy Chairman.

Mr. Golubev also believes that the gas sector can’s be stable unless it is subject to long-term pricing. In this context he spoke against attempts to switch the market to spot prices and link them to the cost of shale gas in the United States, because these prices are speculative and my volatile drastically when exposed to external factors.