The main results of the third day of the Gaidar Forum
The main topics of the third day of the 10th Gaidar Forum 2019 were the development of the trunk infrastructure and elements of a “smart” city, the future of agriculture after institutional restructuring, and global trends in the agro-industrial sphere, business responsibility and digital transformation, factors of efficient leadership, the elimination of foreign exchange controls, the national “Education” project, electronic atlas of Russian industry, as well as the creation of preconditions for increasing of the level of financial literacy of the Russian Federation population.
On January 17, the panel session “Priorities of Transport Development: a New Quality of Life” opened the third day of the Gaidar Forum. The speakers discussed the plan for spatial and economic development in relation to the country’s geographical outreach.
Igor Shuvalov, Chairman of the VEB.RF State Development Corporation, said that the Spatial Development Strategy of the country, along with the national projects, is a fundamental document for the government” it is a document of the Prime Minister’s level.
Together with Corporation for SMEs support (MSP), DOM.RF, Russian Export Center (REC) and other corporations and development institutions, in close cooperation with non-commercial education centers and innovative institutions, VEB contributes to the development of an economically sound and high-quality strategy of infrastructure development.
“Thanks to federal projects, a minimum standard will appear and prohibit anything that is below it, but a high standard is a willingness to fit into the race for quality of life,” said Igor Shuvalov.
According to the Deputy Minister of Economic Development of the Russian Federation Vadim Zhivulin, Russia is experiencing the main trend of concentration and internal migration of the population to economic growth centers; their current number is about 20. Thus, the main task is to increase the number of centers of gravity and economic growth. "GVA (gross value added) in Moscow per capita is $17 000; it is $28,000 in Seoul, $42,000 in Tokyo, $18 000 in Shanghai, $61,000 in Paris, $69,000 in London... We have to participate in the global urban competition, and from this point of view, the focus on urban policy and urban development is largely justified. It provides the necessary breakthrough in a number of areas that will become priorities for the next few years,” explained Vadim Zhivulin.
The main mechanism contributing to the disclosure of the urban infrastructure potential is an integrated balanced development program. “Transport has both a connecting infrastructural function and a function associated with economic growth. We are thinking about both centers and people who do not live in these centers representing points of growth. These people should also be provided with the necessary level of transport services. Therefore, in this balance of economic growth and social sphere, I see the basis of our activity,” said Yevgeny Dietrich, the Minister of Transport of the Russian Federation.
“The development of railway infrastructure is a serious driver for the development of the economy of the whole country, and the implementation of this program will enable Russian Railways to become one of the leading players in the global transport and logistics market,” said Vadim Mikhailov, first deputy general director of Russian Railways.
Session experts determined the global trend: agglomeration always develops faster than the city, the city always develops faster than the region, and the region always develops faster than the country.
Panel Discussion “Electronic atlas of Russian industry: machine learning for economic statistics and regional studies” was a logical continuation of one of the main plenary sessions of the third day of the Forum named “Priorities of transport development: new quality of life”. The main purpose of the meeting was to discuss the shifts in the geographical location of economic activity, the study of which is important for the development of public policy and forecasting of economic growth.
Tatiana Mikhailova, Senior Research Fellow at the Laboratory for Infrastructural and Spatial Research of the RANEPA, spoke about two economic factors: the global mechanisms and processes — the transport infrastructure, which changes the actions of economic agents, as well as the mechanisms that are unique to Russia due to geographical, economic and historical features. According to the expert, the second type of factors makes economic geography very inert.
“After the transition from planned economy to market economy, Russia joined the processes and transformations that took place in the 20th century in other countries, and now the country is moving at an accelerated pace much faster,” Tatiana Mikhailova said.
According to Tatyana Mikhailova, Russia still has a big problem of integration of ports and port regions into the overall infrastructure of the country. According to her, the solution of this problem depends on the country’s integration into international trade.
“We do not have enough population to form full-fledged agglomerations in all million-plus cities. Therefore, some of them will win, and some will lose in the battle for the resettlement of the population,” the expert said.
In her opinion, the centers located near the cities with the greatest mobility of the population can win. The cities of the North Caucasus and the South have great demographic potential, and Yekaterinburg and Chelyabinsk can merge into one large agglomeration in the Urals. Experts suggest the formation of large agglomerations in Vladivostok and Kaliningrad at the expense of economic corridors and transport routes.
On the third day, the participants of the Gaidar Forum also discussed current issues of cross-border trade regulation and aspects of its taxation.
Bruno Basalisco, Managing Economist of Copenhagen Economics Institute, presented the findings of the study of European Internet trading market, which was drawn up for the European Commission. Based on the research findings, about 52% of European electronic commerce is made up by small- and middle-scale business. The use of the electronic commerce elements allows to reduce trade barriers. The main outcome of the research is the understanding, that the change of VAT threshold affects markedly the costs incurred for all participants of electronic trading - from the delivery service and seller to buyer. Electronic methods of VAT collecting for such trade format can be a solution to reduce costs, since, according to the Sweden experiment, consumers do not want to pay additional logistics fees, and 60% of the goods they ordered earlier remained at the customs. So, the taxation threshold affects the situation in whole. For electronic commerce to be most efficient, all processes should be harmonized in order to prevent interruptions and imbalances.
Alexey Petrovsky, Chief Analyst of Rambler&C, continued the topic of Internet trading market analysis and reported on current situation in Russia. In 2017, the ratio of retail and online trading volumes in Russia was 97.75% to 2.7%. In last three years, the increase for online-retail amounted to 15,4%. According to the expert, the market growth estimations may be both optimistic and conservative. The stable scenario for market volume calculation may is to be displayed by formulae: number of buyers x purchases frequency x average bill = market volume
Artem Sokolov, President of the Association of Internet Trading Companies, noted that for registration of a legal trade entity in Russia, it is necessary to collect a set of documents, to obtain certificates, documentation translated into Russian, sales register, reporting documents, to comply with laws, and pay taxes and fees. In opposition to this, there is a legal way to import goods into the country without any costs, taxes, and obligations. In 2010, the volume of domestic Internet trading in Russian market was 92%. By 2018, the ratio of foreign online trading increased from 8% to 38%. According to the expert, the most prosperous and large-scale business developed namely from a pattern of cross-border trade. The failure to make any measures for regulation of the trade will allow foreign companies to occupy the whole market in the near term. The absence of intended regulation, could result in revenues reduction, job cuts, cutting of investment in trade infrastructure development, and withdrawal of business activity abroad.
The expert discussion of the repeal of the Law “On Foreign Exchange Control” focused on the possibility of taking into account regulatory and control functions in other legislative instruments, and on the potential consequences in terms of the efficiency of countering illegal and dubious transactions. An important aspect was to consider the relationship between the current pace of the foreign exchange control system simplification and the fundamental possibility of meeting export growth goals. In particular, Antonina Levashenko, Head of the Russian Center for Competences and Analysis of OECD Standards, RANEPA, presented the key arguments in favor of foreign exchange control liberalization and legislation adjustment. Among them: the abolition of the repatriation of revenues, the introduction of an open mode of foreign accounts use, the transfer of rules on notification and reporting on foreign accounts into the Tax Code of the Russian Federation, the prohibition of foreign exchange transactions on a territorial basis and not on the basis of residency.
Participants of the session dedicated to assessing of the inflation targeting regime implementation noted its undoubted positive effect for the Russian economy. However, according to Sergey Drobyshevsky, director for scientific work at the Gaidar Institute for Economic Policy, who presented the report “The Benefits and Costs of Inflation Targeting in Russia”, it is possible to talk about the success of inflation targeting in Russia after passing through the phase of economic and political cycles. If the Central Bank is able to maintain the commitment to the stated policy after the change of its manager, this will strengthen its reputation and secure inflation expectations. Also, the Central Bank must go through a "growth/recession" cycle and keep inflation under control. After that, the Central Bank of the Russian Federation will finally take shape as an independent regulator that targets inflation”, Drobyshevsky believes.
The authors of the report argue that currently the conditions for the transition from strict to neutral policy have not been formed, since with a goal of 4% the neutral level of the nominal key rate is 6-7%, and inflation itself is somewhat higher that the goal, and the expectations are quite high. It is necessary to improve communication with the market, since the stabilization of inflation expectations at the level of 4% will lead to a decrease in the entire range of rates.
An expert discussion of “National Project “Education”: 9 Lives of the Regions” touched upon the issues of financing, regulation, and the need for national education projects. In particular, Tatiana Klyachko, Director, the Center of Economy of Continuing Education, RANEPA, pointed out that problems in higher education come from the main share of expenses — if one item fails, the dependent items will fail either. Distribution of expenses on the education among the regions focuses only on the general, additional and secondary vocational education for children and on professional training and advanced training of personnel. Only the central region focuses on the higher education in terms of finance (96.3% versus 3.7%). The expert also noted that the regions still face the challenge to provide increase in the salary of employees of the educational system, thus entailing heavy loads on the regional budget. Therefore, the federation undertakes development of the higher education. As a whole, Tatyana Klyachko identified the major problem, i.e. lack of financing of education for all formats. Despite this, other national projects also have financing sections related to education.
The participants of the round table devoted to the project of “Contributing to Improvement of Financial Literacy of the Population and Development of Financial Education in the Russian Federation” noted that in an ideal, theoretical model, a change in financial literacy leads to a change in the financial behavior of the population, which contributes to its well-being and, as a result, to the development of financial markets. All this affects the development of the national economy. Reports from pilot regions on the implementation of educational programs showed positive results. For instance, in Tomsk the share of overdue loans is lower by 15%, share of special-purpose loans is higher than the average in the Siberian Federal District, deposit growth rate is higher than the growth rate of loans issued, the volume of deposits per capita and the level of electronic payments is also higher than the average in the district.
At the same time, Anna Zelentsova, Strategic Project Coordinator; Co-Chair of the Financial Consumer Protection and Financial Literacy G20 Subgroup; Member of the Board of Trustees of the OECD International Financial Education Network, noted that further analysis of the peculiarities of the regions is needed to develop clearer recommendations for them. The regions are not sufficiently communicating, which reduces the overall efficiency of the financial literacy program implementation. So far, there is no legislative basis for regional financing of model programs in the regions, while the regions are ready to act as development hubs for such programs. The issue of the territories stimulation remains unresolved, since the teachers motivation is not always high. As a motivation, it was proposed to make the availability of these programs a criterion for assessing of regions general development when they are rated. The actors involved in the implementation of the project are left with the task of developing sustainability models in the personnel training, as well as consolidating federal and regional roadmaps into unified documents for the formation of a common project infrastructure.
The participants of the Gaidar Forum also paid attention to the complication of the social structure of society, the challenges to social and economic policy. Stepan Lvov, head of the research department at the Russian Public Opinion Research Center, noted that modern society is in a state of anxiety. 51% of population are anxious about the future. Respondents were asked to rate their fears by 13 criteria. 36% have their fears expressed in a high degree. Fears are conventionally divided into several categories: economic, physical and social. The first category is the largest. “A person in fear needs to be protected, and stereotypically refers to “common places”. Thus, the effect of general intelligence arises. As a result, people develop the so-called mantras. The most common mantras are related to the retirement age raising, Telegram blocking, elections, etc. Collective life suits the majority, to some extent being a part of the “seriality” is attractive since it excludes inequality”, the expert notes.
According to the expert Vladimir Petukhov, Head of the Integrated Social Research Center at the Institute of Sociology of the Russian Academy of Sciences, many fears are man-made and not the results of objective reality. The highest indicators of anxiety according to research results are caused by the situation in the country, whereas the situation in the region of residence causes the lowest fears.
Oleg Chernozub, Head of the Center for Social and Economic Research, RANEPA, paid attention in his report to the problem of loss of explanatory models relevance. A modern person does not understand what is beneficial for him/her and how to behave. The crisis of the concept of a modern man should be overcome through the study of decision-making mechanisms and related factors.
Natalya Tikhonova, chief research fellow at the Center for Stratification Studies of the Institute for Social Policy at the National Research University - Higher School of Economics, commented on the thesis of the rational behavior of the Russians and noted that there is a fundamental difference between economic rationality and rationality in general. The Russians, according to the expert, are generally relatively rational. In modern realities, they prefer to build up their material capital in order to remain in their social stratum. Even if it is associated with the need to undertake credit and mortgage obligations. On the one hand, such behavior is irrational, but from a social point of view it is rational, since in modern society social status is of high importance.
Iosif Diskin, Deputy Chairman of the Academic Council of the Russian Public Opinion Research Center, Member of the Public Chamber of the Russian Federation, remarked that moral sensitivity is growing in society. As crisis expectations grow, such sensitivity intensifies. This, in turn, limits the corridor of opportunities in the implementation of socio-economic policy.
Participants in the discussions on January 17 at the Gaidar Forum noted the importance of the social situation in the country and the fact that its understanding is one of the mandatory components for development of an efficient socio-economic policy.
10th Gaidar Forum Organizers:
The Russian Presidential Academy of National Economy and Public Administration (RANEPA);
The Gaidar Institute for Economic Policy (Gaidar Institute);
The Association of Innovative Regions of Russia (AIRR).
The general partners of the Gaidar Forum are Gazprom and Gazprombank; strategic partners include Prosveshcheniye publishing house, Coca-Cola, Pharmstandard group, ACIG Group of Companies, the Russian Textbook Corporation, SANOFI, Novartis, Johnson & Johnson, Russian Railways, MSD, and Mastercard; EY, Cisco and Russian Direct Investment Fund are partners. This discussion’s partners are Philips, Cherkizovo and RVC.
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