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Meeting with President of Business Russia Alexei Repik

November 7, 2018, The Kremlin, Moscow

Vladimir Putin held a working meeting with Alexei Repik, the President of the all-Russia Public Organisation Delovaya Rossiya (Business Russia).

President of Russia Vladimir Putin: Good afternoon, Mr Repik.

Delovaya Rossiya is one of the most respected business organisations.

You know that just recently I attended on Opora Russiyi meeting. There is no point repeating what I said, but I would like to hear from you about what is being discussed, how it is being discussed, and what expectations your colleagues have in relations with the authorities. That would be useful and interesting.

You and I are in constant contact; however, there are always questions that are most relevant and most important at a given time.

President of Business Russia Alexei Repik: Mr President, as we were preparing for the 14th convention, in the process of preparations we held a series of consultations to determine the possible role of business in the realisation of the national goals you set in the May Executive Order.

At the same time, we wanted to see what barriers are impeding the most efficient use of the potential of entrepreneurs and the business community to make our country stronger, more competitive, better.

Delovaya Rossiya has worked out a package of relevant initiatives. I would like to present a number of them to you today, and hear your comments on this matter.

Firstly, the ideology embedded in the national goals, as well as the unprecedented size of the resources that are being invested into making our country stronger in the future requires, in and of itself, the best collected efforts on behalf of the state and businesses alike. In this regard, we are very responsible about our involvement in this process.

Primarily, this concerns the ability of the state to effectively spend budgetary funds through enhanced competition and wider participation of Russian companies in achieving national goals.

At this point, unfortunately, we believe that the system could have been more efficient if there had been better planning of long-term goals – all the more so as the national project system implies this – and timely implementation of all the necessary procedures.

These may include, for example, tender procedures for companies to be able to upgrade their production facilities and to properly build their production processes, including with the assistance of the development institutions and the Corporation for Supporting Small- and Medium-Sized Businesses, which is very active now, and the Industry Development Fund.

Accordingly, we should participate in implementing the state tasks rather than give this very important and competitive market away to foreign companies.

Speaking of this particular matter, if we sign contracts and hold tenders at least six months before we begin to actually implement them, when the issue is not about immediate procuring, more Russian companies will be involved in the process. That way, we will be able to get more closely involved in improving our economy’s growth rates and, accordingly, joining the top five global economies.

The second block, which I believe is equally important, and our businesses are now speaking of it louder and louder, is predictability of the terms and conditions of doing business, including predictability of such an important variable as state support.

This is because when it comes to industry, tourism, and the service sector, the state encourages entrepreneurs to invest more in creating new production sites and new jobs.

However, it becomes effective and really works only if this support is 100-percent guaranteed. If you cannot make the support measures promised to you part of your business plan, then, by and large, you leave them out of your business process, and all this state support ends up being nearly pointless and a waste of budget funds.

In this regard, we now have a number of signals telling us that the promised, let us put it this way, support measures in the sphere of agriculture and industry, including support for the exporters who began to sell our engineering products, among other things, on international markets…

Since the support measures are revised or not implemented in full, we must adjust the system in such a way that what is promised gets realised, and then the financial institutions will be aware of that and entrepreneurs will invest more in new projects.

There is another, I believe highly positive factor that we discussed while preparing for the convention. This concerns new areas, including exports. First, I would like to focus on tourism.

In your speeches, you often mention the Russian agro-industrial sector’s successful performance. By the way, Business Russia, at least the national agricultural sector representatives, always ask us to thank you for this. Indeed, they have scored obvious successes. You often say that Russian agricultural exports now exceed arms exports.

I would like to say that incoming tourism is another major project in this respect. After the 2018 FIFA World Cup, incoming tourism volumes have reached $9 billion. To my mind, this sector can offer some tough competition to Russian agricultural producers and technological companies.

What is important here? When drafting infrastructure expansion plans, it is important to pay attention to specific tasks. It is necessary to coordinate urban development plans with the business community and to understand clearly what can and cannot be done in various areas.

In the long run, it would also be fair to subsidise interest rates on loans used to build new interesting recreational facilities for tourists. We always say that there are soft loan rates and cheap money for building industrial plants. However, a good hotel or a good concert hall are also a kind of plant, but in the services sector. To be honest, they generate just about the same number of successful export projects.

Today, services exports can play a very important role alongside tourism. Unfortunately, the Russian Tax Code does not define service exports today, unlike our rivals – European countries and even some BRICS countries.

Therefore it turns out that, unlike the exports of goods, we are becoming less competitive because VAT payments are levied both abroad and here in Russia. Moreover, Russian companies are unable to apply for VAT deductions. On behalf of our entrepreneurs, I would also like to ask you to instruct the Government to focus on this issue and to analyse it.

We would also like to give you some good news – there are more and more interesting projects in Russia involving scientific research and technology development, R&D, intellectual creation, and this is a good sign.

This suggests that a link is finally forming between research and business, and the economy. But in this context, of course, it is very important to avoid outflow, the transfer of these intellectual property rights to various offshore preferential or tax-free jurisdictions.

To avoid that, various experiments have been proposed, such as experiments with preferential tax rates on the export of intellectual property, provided that the product is located in Russia. Still, unfortunately, many of them are exported from offshore jurisdictions.

It seems to me that if we look at other countries’ experience – that of the United States or the European Union – in using the so-called patent box tool, maybe that would bring us additional budget revenue sooner.

These initiatives and a number of others are on our agenda. In numbers, representatives of the construction sector were most active in the preparation of this convention.

It is difficult for everyone to transition to a new financing arrangement, I mean from equity financing to project financing. In this context, it is important for developers that they are allowed to account for infrastructure facilities that are donated to the state as part of their costs. They want to do their job well, to build good social infrastructure facilities and public utilities.

The transition to project financing will certainly lead to developers losing part of their profits, having to share with banks. In this regard, at least during the transition period, we would ask you to consider this issue in terms of possible support for our developers.

Vladimir Putin: First, I would like to thank you for choosing this subject – support and joint participation in implementing national projects – because only by pooling our efforts (I have already spoken about this, in public as well.) we can achieve the result that we all need: both the business community and the state as a whole. It is very important that you focused your attention on these areas. I consider this valuable and would like to thank you for this.

Now I would like to say a few words about specific areas. We will now discuss this in greater detail, but I agree with you that if the state promised support, it should keep its promises. Otherwise, we will put business in a predicament.

What matters is not that something was not provided as promised, but that this leads to the collapse of a project. Relying on this support, people take out loans and draft business plans, but when this support disappears, the entire business project falls into pieces. I understand this full well and faced this more than once. People are also talking about this.

Now a few words about another important subject, construction. This is a very important issue, very delicate and sensitive for both the economy in general, the construction industry and the people.

We should prevent serious setbacks in the scale of construction – this is the number one task for today.

At the same time, we must ensure the implicit interests of our citizens, who should not sustain losses because of some schemes or even their absence, and because of the risks involved in shared-equity construction. We should leave that behind and definitely switch to modern marketing regulations in this area.

State support is important here as well. It is necessary to adopt understandable and transparent procedures of such support and ways of providing it to the industry. I hope we will have a serious conversation with the Government about this, but I want you to know that I am committed to such joint work.


November 7, 2018, The Kremlin, Moscow