XI GAIDAR FORUM: RESULTS OF THE FIRST DAY

One of the first sections of the Forum was dedicated to the topic “Modern Monetary Theory: A New Look”, moderated by Sergey Drobyvshevsky, Scientific Director of the Gaidar Institute for Economic Policy. He noted relevance of discussions around “Modern Monetary Theory (MMT) as an alternative economic policy that could ensure economic growth in current specific macroeconomic conditions.
According to Maxim Oreshkin, Minister of Economic Development, in fact, this concept became very popular recently. He agreed with main thesis contained in the works dedicated to this theory. The first thesis is the following: level of inflation is a significant indicator of economy while excessively low and high inflation signify signs of economic disease. The second thesis assumes that nominal economic indicators should never be considered out of the situation context at specific markets. Minister added: “It is true that one can find sound views in any theory but there are no canonical texts”.
According to Maxim Oreshkin, inflation is the main sign of unhealthy economy. “This is a signal that stimulating measures stop working. It is the structure of demand inside economy that is important, the balance between private investment and state expenditures and timely response. Challenges emerge exactly when countries do not respond to inflation”.
In this regard, Minister urged to take an example from China in the issue of managing aggregate demand in the national economy. “China is purposefully working on structure of demand in the economy and   demand level is growing. Each year it is about 20% of GDP,” Minister said.
According to Minister, Chinese government identifies industries that need financing and then state-owned banks lend to enterprises representing these industries as directed "from the top." “Over the past 30 years, China has not experienced a single serious crisis, they have a lot to learn from: demand management is at the highest possible level,” Minister explained the advantage of this approach.
Kenneth Rogoff, Professor of Harvard University, noted that successful implementation of monetary policy is possible only under independent Central Bank: “Its subordination to monetary authorities is a catastrophic route. I remember January 2015 in Russia, low oil prices, high currency debts. It contributed to probability of a new crisis. Russia responded professionally, logically, Central bank handled the task excellently”.
During the discussion, Sergey Drobyshevsky urged participants to share their opinion on the activities that Russia and developing countries should undertake in order to accelerate economic growth. Kenneth Rogoff noted that Russia has strong scientific capacity, many innovations invented by Russian developers serve as an example for the world. However, it is still a pending issue to effectively put them in place in Russia. Therefore, country requires improvement in this field also for development of private sector.
James Galbraith, Professor of Texas University at Austin said that internal redistribution of wealth, effective distribution of capital, national resources is relevant for Russia. Strong points of Russia represent provision of services to population, healthcare, education and it is possible to provide high quality of life for Russians using this platform. Economist said: “High economic growth is important, however, it is also important to assure quality of life. It is critical to understand specific goals behind economic growth.”
Maxim Oreshkin noted that Russia managed to reduce inflation rates, which reached their maximum in 2015 since 2008. Reduction of budget deficit allowed to achieve this goal having the strongest anti-inflation impact on economy in 2015–2016. Oreshkin said: “Using this channel, we switched from 4–5% in 2016 to deficit-free budget. This process, reduction of demand in this area significantly cooled inflation, allowed to strongly decrease it.
According to Minister, Russia achieved a lot having avoided high inflation. M.Oreshkin expressed his opinion: “At present, situation is significantly better compared to 5 or 10 years ago”. He also noted that the main thing is that Russia should not be trapped in weak demand. In this regard, it is necessary to concentrate on long-term growth factors, efficient allocation of resources.
Oleg Vyugin, Chairman of the Moscow Exchange Supervisory Board, and Oleg Zamulin, Director of the Center for Macroeconomic Research, Sberbank, took part in the panel discussion.
Another meaningful discussion “Financial system under macroeconomic stability: new opportunities and old restrictions” took place in the course of the Forum. Aleksey Vedev, Head of Financial Studies Department of the Gaidar Institute, moderated this session. During the session, experts discussed issues and prospects of financial market development with most attention paid to the topic of growth in private investment market.
Mikhail Mamuta, Head of the Service for Consumer Protection and Financial Inclusion, Bank of Russia, stated: “Nowadays, Russia has a unique situation: on one hand, low inflation proves macroeconomic stability leading to a boost of interest towards our market from foreign investors. On the other hand, a simultaneous reduction in interest rates on deposits has an impact on behavior of retail customers who show their interest to the stock market.”
Expert noted positive impact of an increase in the share of retail investors, however, there is also a flip side to this process: unskilled investors enter investment market. In this regard, it is required to develop tools intended to protect interests of such people. Draft law dedicated to protection of retail unqualified investor discussed at present is intended to solve this issue.
Mikhail Mamuta noted: “Before selling the tool to a client one needs to be confident that this client understood the product. Nevertheless, information alone is not sufficient, it is necessary to understand nature of the tool and its associated risk. Expert also emphasized that Central Bank actively support  development of “digitalization” in financial markets with due positive impact on the availability of various tools.
 Aleksey Timofeev, President of NAUFOR (National Association of Securities Market Participants) also estimated success in attraction of Russian retail investors to securities market. Expert expressed his confidence: “We have done a fantastic job on attraction of retail investors. I’d go as far as saying that attraction of a retail investor was one of the most successful reforms of financial market… I think that tendency of attraction of retail investors will continue in 2020”.
Presently, according to NAUFOR data, around 4 million citizens trusted their finances to brokers and trust managers. The amount of these finances is estimated at Rb 3 trillion. “Many clients are new, they are young and more conservative citizens, less informed, and attitude towards them should be special.” President of NAUFOR expressed his opinion that draft law on scoring of investors aimed at protection of retail clients from losses will probably be approved by mid of 2020 and start operating next year.
At the same time, Aleksey Timofeev considers that major role in the development of securities market is not a positive factor. President of NAUFOR stated: “In the near future, retail investors will start playing a more important role than two other industries at the securities market. This is not about right. We need much higher activity of institutional investors at this market… We need long- term strategies which are not often typical for retail investors but incidental to institutional investors. We need clearly formulated requirements for corporate management to be shaped by institutional investors”.
Aleksey Timofeev added that the third factor required for sustainable functioning of securities market is to maintain competition. It is critical to ensure regulatory environment for launching digital platforms (marketplaces), so that non-banking institutions could compete with banking platforms.
Aleksey Savatyugin, Auditor of Accounts Chamber, spoke about common issues relevant for Russian financial market and barriers preventing new participants to enter this market. According to expert, in December, Accounts Chamber considered results of implementation of the document titled “Main trends of development of financial market in Russia in 2016–2018” and came to conclusion that this document was fulfilled by 98%. Aleksey Savatyugin concluded: “Document fulfilled but there is no happiness”. Formal fulfillment of this document on development of financial market did not lead to its real development”.
Speaking about private investors massively entering the market, he noted that one could not dream of it 4-5 years ago, however, this is first of all related to reduction of banking rates and, secondly, to very high dividend yield of Russian companies. Frequently, this yield is secured at the expense of administrative method. Management of these companies demand distribution of a significant portion of profit. “Is it good or bad? Probably, owners are not confident in their future, they do not want to invest their profit and do not think that growth will continue for a long period of time”, auditor of Accounts Chamber shared his opinion.
He also focused on poor development of equity market compared to bonded market. Aleksey Savatyugin said: “Who remember the latest successful IPO at the Russian market or just only the latest? It all proved the unjustified high barriers for entering this market as well as total impoverishment of financial system. Finally, there is another challenge, that is, growth of private lending and stagnation at the lending market of real sector. “Bankers talk about lack of attractive projects while real sector representatives have a different opinion. We have work to do in financial sector”, Aleksey Savatyugin concluded.
A scientific and expert discussion took place on the first Forum day dedicated to future of endowments. Participants noted that endowments (target capital) of non-profit organizations in Russia are gaining momentum with organizations not only traditionally established in the field of education but also in culture, health care and sports. The following participants of this sector attended the session: representatives of leading endowment and charity funds of Russia, public associations and authorities who spoke about the meaning of endowment capital market, how it is developing, how to become its successful representative and what its future is.
In the course of discussion, they considered draft Federal Law “On amending certain legislative acts of the Russian Federation related to improvement of mechanisms of setting and using endowments of non-profit organizations”, reserves for further development of target capitals, establishment of Russian Endowment Association.
Session was moderated by Irina Tolmacheva, Head of Legal Department of the Gaidar Institute, chair of the group “Legal support of research projects and intellectual property issues”, RANEPA.
Aleksey Anisin, Director of MGPU endowment fund, spoke on the activity of National Endowment Association under his leadership. He said that this Association acting in the interests of industry development organize and participate in elaboration of development strategy, conduct awareness-raising activity involving a high number of acting and potential stakeholders, develop and implement industry specific standards, etc.

Presentation of the speaker

Elena Schetinina, Deputy Head of Department for Controlled Targeted Use of Funds and Reporting,  “Istoki” Endowment Fund, dedicated her presentation to creation of a unified information resource for Russian endowment capital. Endowments are a new industry: over 13 years of history, about 200 funds established with average total assets of Rb 25 billion. Speaker emphasized that potential of endowments in Russia has not yet been fully used, industry not consolidated and information not disclosed at website of the Ministry of Justice. In addition, there are different forms of presenting information and there is no resource, which could embrace all relevant collected information both for the industry as a whole and for individual funds.
In this connection, Elena Schetinina considers vitally important and necessary to create a unique information resource of Russian endowments. According to Elena, endowments market will be more organized and transparent thanks to this resource, industry will get a boost for development, trust to endowments improve and new opportunities for fundraising emerge.

Presentation of the speaker

As a reminder, Gaidar Forum is the largest international expert forum that is taking place at RANEPA since 2010. It brings together leading world scientists and politicians, representatives of financial community and global business elite. This year, there were more than 80 discussion platforms, panel and expert discussions, open dialogs, presentations and meetings organized in the course of the forum. This year, more than 14.700 participants registered including 600 speakers from more than 30 countries.

Gaidar Forum photo gallery day 1