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Asia does not hurry to understand Russia, and the most difficult thing for us is to learn not to rush things
Igor ChumakovskyManaging Director of the Federal Center for Project Finance for International Cooperation (FCPF, VEB Group)
- Igor Olegovich, a lot of big words have been said recently about the Far East and the ambitious plans connected with it. However, finance, as you know, “loves silence”, and “a thousand li way” involves the difficulties of the first steps. Is there a real opportunity now to raise funds in Asia and the Pacific instead of lost investments from America and Europe?
- Nothing is done in the East and is not solved with a swoop. The most difficult thing for us when we go there is not to rush things. It's useless. The best thing here is the principle of "hurry slowly" - not to miss the good opportunities, but also not to make hasty decisions. And finance, I will clarify, love not so much silence, as carefulness and professional approach. This is how we act. As for Asia and the East, our company is aimed at finding the best models of cooperation with partners in the APR. "Sturm and the onslaught" for the rapid attraction of funds here are not appropriate. And we work in such a way as to maximally strengthen the authority and reputation of the Russian side. In the eastern direction this is the main guarantee of success.
- A framework loan agreement worth 2 billion has recently been signed between Vnesheconombank and the China Export-Import Bank. Within its framework, the Chinese side will allocate loans to Russia for financing projects in the Russian Federation - including in the Far East and Siberia; in this way, it is planned to increase the volume of trade and economic cooperation. The Chinese side has a similar agreement with VTB. What kind of “corridor of opportunities” does this partnership offer Russia?
- It is good anyway, especially in the conditions of sanctions. Having such a limit, it is possible to significantly expand the ability of Vnesheconombank to fund various types of activities. If some Chinese company wins a tender for the construction of a large facility in Russia, then VEB will be able to attract a preferential loan in China's Eximbank for the execution of these works. It is necessary, however, to understand that the framework agreement itself does not mean that the Chinese bank will immediately “ship” the money so that the Russian partner spends it at its discretion. The mentioned agreement defines the limits of one credit organization for another. And export-import banks of any country work according to an understandable principle - they support exports from their state to other countries. Naturally, China is interested in exporting its products and services. Over the past 30 years, the Chinese have learned to produce almost everything. They are world-class players in the markets of engineering products, road machinery, shipbuilding and other industries and do everything to increase the size of their exports.
As for services, it is primarily about Chinese construction companies. Abroad, they build literally everything from infrastructure facilities to turnkey enterprises. The activities of China's Eximbank are a classic model of export financing, when it finances foreign trade operations, exports and import important for the country as a priority. I am sure that the Chinese side, within the framework of an agreement with Vnesheconombank, will insist on such interaction models. Another thing is that VEB also has its own strategy and clear goals. For both banks, the signed agreement means a significant expansion of opportunities for finding mutually beneficial options, which is the essence of any cooperation.
- And yet it is a sin not to remember once again the proverb about the thousand and the first step. Especially when there is an agreement at the highest level about the next steps.
- Of course, when the resource base expands, even if it’s still on paper, it’s at least comfortable. I just would not become euphoric. Working with China is not easy, and building relationships and gaining the trust of Chinese partners is a painstaking and long job. There are, of course, issues that are resolved at the political level. For example, as was the allocation of 25 billion dollars in a loan for the construction of ESPO.
Another aspect is the interaction of our Russian companies with Asian financial institutions, in particular, with Chinese ones. Over the past decades, we have learned to act according to western standards of borrowing, having mastered various debt instruments. But the culture of financial markets in the US and Europe is different from Asia, where long market presence and personal contacts are important. Even if you are brought to the Asian bank by the minister, it will not mean anything to the bank. My own experience is negotiations over 2 years on behalf of a serious Russian banking structure with one of the largest Chinese banks and, I will especially emphasize, with full political support from both sides and signed cooperation agreements. The desired result was finally achieved. In this case, the final factor in the decision-making by the Chinese side was not the financial statements of the borrower, but mine, I don’t want to seem immodest, a conversation in Chinese with the chairman of the bank’s board of directors.
Our bankers, who work in Beijing and Shanghai, know very well: you can, of course, open a representative office in China. But according to the requirements of the Chinese Banking Supervision Committee, it should be headed by a person who not only speaks Chinese, but also held senior positions in the Russian banking system. Also, a representative office is obliged to work in China for more than 3 years, performing, in fact, only representative functions. If the capital of a Russian bank meets the requirements of the Chinese side, it will then be allowed to open a branch and start operating activities, but only with foreign companies and only with foreign currency. After a while, one can hope to get a permit to work with local currency. Thus, each step takes years. We want everything to happen as in the West - quickly and in accordance with our ideas. But this is the East ...
- But, for example, Yury Makarov, general director of Petropavlovsk-Black Metallurgy LLC told in an interview to EastRussiathat in 2009 – 2010. they managed to find funds for urgent financing only from Chinese partners - the Russian ones refused. True, today there are also some problems with this: the bank set tough conditions, imposed "its contractor" who purchased the equipment, which is why the deadlines for entering the enterprise were constantly postponed.
- That's exactly what I said earlier. At the same time, as far as I understand, the negotiations did not come from scratch, but with the support of foreign shareholders and partners of the company that have good contacts and authority in China. In addition, this loan was related to the supply of equipment and services from China. "It's simply impossible to enter" into the financial structures of this country unrealistically. However, in Hong Kong - the market is completely different. It is transnational in its essence, and there are American, European and, of course, Chinese money. Even at a time when China was behind the Iron Curtain, Hong Kong played the role of its business and financial outpost in the rest of the world. But in general, Asia "understand" Russia is not in a hurry. Do we, for example, have direct Singapore investments in industrial or infrastructure facilities? I do not remember.
Russian projects using public-private partnership mechanisms are especially difficult to perceive by foreign investors and cause them a lot of natural questions regarding the elaboration and stability of the legislative base, currency risks and guarantee mechanisms.
The task of FCPF is to refine business ideas and make of them feasible, ready-to-finance projects. The experience of international development institutions confirms that in such a mechanism of support and support infrastructure projects are particularly needed. My many years of practice in both banks and the Development Fund of the Far East and the Baikal region testifies that finding a project that can be financed right away is a great success. All infrastructure projects are long-term, not highly profitable, capital-intensive and imply a complex regulatory procedure. But it is in them that is the guarantee of future development, since for any "initial breakthrough" a firm support is required, and enterprises do not arise without infrastructure in the open field.
- And do the regions of the Far East, who are vitally interested in such projects, show initiative?
The projects themselves are usually generated by a business - large federal or Moscow. In order, for example, to start work at a gold mine, you must first build a thousand kilometers of power lines through the mountains and taiga. And to understand that the profitability of this infrastructure will be significantly less than that of the mine itself. As a rule, the scale of regional business is not enough to initiate and participate in large projects. And this applies to the Far East in the first place.
And then for any project it is necessary to integrate the efforts of various parties, taking into account their interests. This is a matter of professional investment consultants. In this case, problems can arise even in the most promising endeavors. Take, for example, a very good project - the coal terminal Port Vera in Primorsky Krai (Fokino). The project for the construction of a transshipment terminal with a volume of 20 million tons of coal per year is gradually moving forward - project documentation and a business plan are being developed. Energy companies and financial institutions of the Republic of Korea are interested in its implementation. But the key issue of this project is to ensure the project load of the terminal.
Also, difficulties may arise at the stage of formation of share capital. I do not want to offend the Far Easterners, but there were cases when they brought a project worth 5 billion rubles, and when asked what contribution the initiator of the project was ready to make, they answered: “Well, five million ... Or fifty”. This is not serious.
There are promising projects in the Far East, and now the main thing is not to stop, but to structure them to the required level of quality acceptable to Eastern investors whose money we want to attract.
- Are there any examples from foreign practice that Russia would need to adopt when it comes to attracting investors from the APR?
"We live where we live, and we need to take from foreign experience what is right for us: our goals are real, not academic. Look, for example, how much time China has accumulated resources before starting its "jerk". Or take the economic model of Taiwan. They began with the reform of agriculture and, when surplus funds and hands were formed, began to sew clothes and make toys. Today, Taiwan, where 30 million people live, exports more than the Russian Federation. However, in Taiwan there are no resources and earthquakes and floods are always happening. And, nevertheless, trains travel through tunnels in the mountains at a speed of 200 km per hour, and up to 90% of GDP are formed by small and medium-sized businesses.
In the world practice, there are project preparation mechanisms (Project Preparation Facility). They are successfully applied in a number of regions of Asia and Africa to support infrastructure projects at the stage of formation. We are quite able to create our own mechanisms, our system of preparing projects and apply them in Russia and, for example, spread them to the SCO countries. The FCPF sets such a task before itself, and we do not see any big obstacles on this path.
But there are things that “transplant” onto Russian soil amenable to poorly. For example, such a tool as infrastructure bonds is practically not working with us. Such an idea was discussed in the Development Fund of the Far East and the Baikal Region, but in the end “something didn’t grow together”.
Money for the development of infrastructure is not enough not only in Russia. The problem of funding such long-term, capital-intensive and low-profit infrastructure projects exists all over the world. For example, there is a project for the construction of a road, when the investment invested in the cost of travel to 100 rubles will pay off in 30 years. And if you assign a fare to 500 rubles, then the invested funds will return faster, but at the same time, no one will simply go by it. How to finance such construction not from the budget? Now all national and international development institutions are trying to get close to the money of pension funds and insurance companies, and in some cases this is obtained to some extent.
“Anyway, but this path is also in the fact that the basis of export is natural resources ...”
- I believe that the country is not ashamed to use what is given by nature. It is just that these gifts must be disposed of wisely. You can send natural gas through pipes, and liquefied gas - by gas carriers abroad. And you can make from it methanol, and from it a lot of other products. Finally, it is possible for gas carriers themselves to learn how to build so that they no longer need imported ones. Or, instead of sending tens of millions of tons of coal for export in a falling market and asking for support from the industry, you can build coal-chemical plants and produce high-value-added export chemical products with orders of magnitude higher. With the availability of appropriate technologies, we with our territory and resources could feed and water the whole world.
- And what do you think about the idea of TORs - territories of advanced development?
- Points of growth, of course, should be. Torah should be considered, with a competent approach, in the format of the integrated development of the territory, the essence of which is the interrelation of infrastructure and industrial facilities. I think the impetus to the development of the territories will be the implementation of the most important projects for each region. For example, as soon as, say, a profitable and competitive transformer plant appears or the Power of Siberia begins to be built and operated, much will change in the adjacent territories. Business always goes where it is comfortable, and as soon as the Far East can provide investors with such conditions, the effect will be immediately visible.
If we talk about models of development systems for the Far East, then the idea of creating a state corporation for the development of this region seems reasonable to me. Remember, there was such a company "Bratskgesstroy", created at the beginning of 1954 of the last century? It grew out of the construction department of the Ministry of Electricity and Electrification of the USSR. But the company proved itself so successfully and debugged the work mechanism that it built the Bratsk and other hydroelectric power plants, as well as pulp and paper mills and many other small and large facilities. We have such state corporations as Rosatom and Rostec. One can argue for a long time about whether they are good at managing industrial assets or not. But the fact remains: the enterprises in these sectors have been preserved, lined up in whole industrial groups and are actively developing.
- Any empires need not only emperors, but also a lot of intelligent, literate subjects. Where are they now looking for?
Now the training of specialists to work in the Chinese direction requires the same state approach as was demonstrated in the 50-s of the last century, when a large detachment of young, intelligent and active people was sent to China to study the language. Of these, an array of specialists was formed to work both in science and in the real sector. However, this potential is being exhausted. Therefore, now it is necessary to train several dozen engineers, oil workers, chemists, computer scientists, lawyers, economists with knowledge of the Chinese language in Chinese universities, incidentally, reaching high ratings among world universities. This is much cheaper than stretching the gas pipeline. And then distribute these specialists to leading companies and state corporations, but not to the position of referent-translators, but to significant positions with sufficient salaries and understandable prospects. Then, at the talks and correctly, the figures will be translated, and we will become clearer for the Asian partners, and rhetorical questions about how to attract funding in the East will be less.