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Official website of the President of Russia

Commissions and Councils   /

Meeting on Economic Issues

April 20, 2010, The Kremlin, Moscow

The development of Russian financial markets and the establishment of an international financial centre in Russia were the subjects discussed at the meeting.

Mr Medvedev recalled that this goal was stated in the 2008 Presidential Address to the Federal Assembly and specific activities designed to attain it were outlined in 2009. The global financial crisis, however, meant that these plans were only partially implemented.

In this regard, the President laid out several tasks. First of all, Mr Medvedev pointed out that it is necessary to analyse international experience regarding the establishment of such financial centres, to attract foreign experts who were involved in setting up such sites, and decide which procedures and formats are best suited to Russia.

It is also necessary to complete the legislative framework that will govern the centre’s operation.

The President referred to the most important task at hand as creating a propitious climate for business endeavours, including for attracting financial institutions to Russia that want to participate in establishing the financial centre.

The meeting was attended by First Deputy Prime Minister Igor Shuvalov, Deputy Prime Minister and Finance Minister Alexei Kudrin, Presidential Aide Arkady Dvorkovich, Economic Development Minister Elvira Nabiullina, Central Bank Chairman Sergei Ignatyev, and representatives of major Russian and foreign businesses.

* * *

President of Russia Dmitry Medvedev: Colleagues,

Today, I would like to discuss with you issues related to the development of Russia’s financial market, but given the group of participants in this meeting, we would like to have joint consultations, first and foremost on creating an international financial centre. You know (or at least, the Russian colleagues here do) that I set this goal in the 2008 Presidential Address [to the Federal Assembly].

The creation of such a centre should allow Russia to integrate more actively into the global capital market, boost business activity and investments, create a more favourable investment climate, and ultimately, encourage an economic upturn and the implementation of a so-called innovative model for economic development which, lately, I have been trying to discuss at every opportunity.

In addition, the recent global crisis has demonstrated the inadequacy and shortcomings of the existing financial centres. Naturally, nothing is perfect – including the traditional financial centres – and it is clear that they were not fully able to handle the problems, challenges, and risks that emerged.

On many occasions, the leading economies were forced to reconsider the rules and procedures regulating their financial sectors. And in this context (as I have said before), it seems to me that Russia has an opportunity – one that is perhaps even better than the one that existed before the financial crisis – to become that kind of centre for financial innovation, and ultimately, to make a real input into the development of a more effective global financial system.

The plan of action passed by the Government on July 11, 2009 outlines concrete steps for creating a financial centre in Russia. Some of these steps have already been implemented, but I cannot say that we have made radical progress.

Naturally, it is important to note that some serious corrections have been made to the plan since the global crisis. For obvious reasons, our priorities now include measures of first-line support for our financial system – at least, this was the case last year, and to some extent, this year as well. Still, this is not the most important factor in our potential for creating a financial centre.

First and foremost, this has allowed us to stabilise our financial system, but it slowed the establishment of a financial centre. Out of the 48 items listed on that plan, we have implemented only five, and passed four federal laws. In other words, we have completed about 10 percent of what needs to be done.

The current situation can no longer be considered a justification for not working intensively on this matter. That is why I would like to draw your attention to several key issues.

First of all, we need to analyse global experiences in organising similar financial platforms very carefully. That is precisely why today, we invited foreign colleagues to attend this meeting; I have already spoken with some of them in private. We also need to perform a detailed analysis of the possible options for creating these platforms, based on our competitive advantages. At the same time, we need to look at our advantages honestly, with our eyes fully open. The same is true of considering the enormous number of problems that we face; we have received information about them from our colleagues and foreign partners. Thus, I feel it is critically important to attract foreign specialists and companies that have already engaged in similar projects to help us with our work.

In addition, we will need to determine whether we should create a managing company with government and business participation, or whether we can manage with just a few specialised working groups responsible for specific projects. In other words, do we need a managing company, or are support units enough? I would like the subsequent speakers to share their thoughts on this matter.

Second, – and this may be no less difficult – we need to finalize the legal framework that will serve as a basis for the financial centre’s activities. At a Council session I chaired on February 9 on developing the financial market, we looked into the draft legislation that must be passed first. Today, I would like our Government representatives to report on the progress and brief us on what’s been done in the last two months. As far as I recall, one of the projects we discussed concerned prohibitions on market manipulation, insider information, and affiliated structures, as well as stock and clearing activities.

A third matter that is also very important is the formation of a favourable business climate. If we want to attract financial structures to the Russian Federation, and if we plan to ultimately create a financial centre in our nation, then the people who are coming to work in our country – those who will come here with the intention to participate in the creation of this financial centre – these people have the right to count on us to create normal conditions for them to do so.

We will create comfortable, favourable conditions for investing capital, along with corresponding tax and customs opportunities, an equally effective judicial protection and property rights protection – first and foremost, modern risk insurance models, — create a general infrastructure for this kind of centre, so that it would be convenient for people, and no worse than in other global centres of a similar level.

First Deputy Prime Minister Igor Shuvalov: Mr President, colleagues,

I would like to report that following your instructions in May 2008, the Government began developing an action plan to create an international financial centre. Later, in autumn of 2008, you signed an executive order to create a council on financial market development. And at its first session, we looked into the possibility of creating an international financial centre, what will be needed in terms of administrative and financial resources, and are our foreign partners ready for this kind of work.

Now, I will not repeat what you said about the crisis and how we are faring. Indeed, a great deal of attention and work has been focused on stabilising the monetary system, the financial system, and the banking system. Naturally, our actual day-to-day work was not devoted to the creation of an international financial centre, although we did continue work on developing regulations, despite the difficulties we ran into. The Finance Ministry and the Economic Development Ministry worked on conceptual provisions for these laws and Government resolutions, as well as other regulations and bylaws. The Government did this work.

Nevertheless, the Government approved its plan to create an international financial centre last summer, and in the second half of 2009, we already held many consultations with Russian and foreign investors. This was the time when we observed positive growth rates in the economy and we had reason to hope that we could soon resume implementing this project.

Beginning from 2010, all the consultations we held showed that indeed, amid the financial crisis and watching the way it affected other international financial centres – successful international financial centres, Russia’s prospects have changed.

In 2008 and 2009, we were looking at this as a possibility and a plan that should be implemented to reach that goal. But today, our domestic investors and foreign analysts say that Russia has a clear and distinct chance to create an international financial centre.

This centre will be a real instrument to attract capital in order to promote the modernisation of Russia’s economy and generally help to achieve our modernisation goals within the framework of the Customs Union – i.e., the need to modernise the economy of Kazakhstan and Belarus, as well as the post-Soviet region overall.

Capital is vital for modernisation. In any case, we will need to deal with this issue by improving the investment climate and using other instruments. In this case, the international financial centre has multi-faceted value, and we must certainly fulfil this project.

Following your instructions, Mr President, we formed a working group consisting of Russian and foreign specialists and bankers. These are people who carefully monitor the global financial trends, people who create capital themselves. Members of the Russian Government and experts were also engaged in this work. Today, we would like to brief you on Russia’s current opportunities. And after we discuss this matter, you will need to make a definitive decision on how we will proceed.

Dmitry Medvedev: Mr Shuvalov, as a follow-up to your brief introduction, I would like to make the following point: in any case, we must come up with a set of instructions that the Government will need to implement, and agree on our next set of steps. I understand that a task force has been created for this purpose – in other words, to continue the work you have been doing. Do I understand it correctly?

Igor Shuvalov: We will do as you say, but speaking honestly, I think that all the mechanisms which will be used to implement this project should belong to the Presidential Council on Financial Market Development. We could do this either within the framework of the groups you mentioned, or I suggest that a project group should be specifically created, and…

Dmitry Medvedev: Do you mean a group or a company?

Igor Shuvalov: A project company.

Dmitry Medvedev: A registered company?

Igor Shuvalov: Yes, it should work within the framework of the Presidential Council headed by Deputy Prime Minister and Finance Minister Alexei Kudrin.

Dmitry Medvedev: Very well, thank you.

<. . .>

April 20, 2010, The Kremlin, Moscow