In an interview for Sputnik on Thursday, Deputy Minister of Economic Development Alexei Likhachev discussed the continuing reform of the country’s overseas trade missions, how sanctions and countersanctions have affected the missions’ work, and new developments aimed at improving the missions’ responsiveness to the needs of Russian businesses.
Alexei Yevgenevich, about two years ago Russian authorities launched a reform of its global network of trade missions, designed, in large part, to orient them to support companies’ specific projects. Can we say that the reform has been successful?
Alexei Likhachev: The main objective of the reform of our network of trade missions was to make them as customer-oriented as possible – to focus on concrete results in promoting Russian companies in international markets. We hope that soon, trade missions will become, first and foremost, “service centers” which will assist our businesspeople.
Right now we’re undertaking the second stage of the reform. A great deal has already been accomplished, but much also remains to be done. But we already have our first results.
Most importantly, we have created an approach which includes country action plans for each trade mission. We have introduced a series of ‘passport projects’ which describe the specific assistance that trade missions will provide: the events/activities, the timeframe, and the people responsible for their implementation.
I can say that about 75 percent of the projects are related to the promotion of our exports, with about 15 percent oriented toward attracting investment to Russia and 10 percent, toward attracting technology.
The sum total [laid out] for these projects has exceeded $30 billion USD [since the beginning of the reforms]. This does not mean that the $30 billion has already been spent; we are talking about projects at various stages of readiness. But we can speak about the implementation of the first stage, where the direct involvement of trade missions has supported tens of billions of dollars’ worth of Russian exports and investments.
Are all trade missions abroad able to handle their objectives?
Alexei Likhachev: We have implemented a system of evaluation of the trade missions. Companies working with the missions rate the effectiveness of their activities on a 10-point scale. In general we are pleased with the results of the evaluations. The average score ranges from 8 to 8.3, but of course there are exceptions; we have received a rating of 4 – this is a subject for a separate discussion. If any events or projects fail, or if the rating given by companies drops then we set up and carry out a debriefing.
We have a total of about 380 projects on the go. About 40 have already been completed, most of them yielding good results. However, some of the projects have not met with any measurable level of success – the company finding itself not to be in demand in the market or itself choosing to refuse the [market] conditions offered. In any case, the trade mission system still saves companies a great deal of money; after all, its services are provided for free.
Russia has now been under sanctions by the West for several months now. Have any special challenges been placed before the trade missions as a result?
Alexei Likhachev: Of course this year’s sanctions have brought their own corrections to the trade missions’ work. I would point specifically to two particular efforts. First is the effort to help our companies in connection with the sanctions which have been applied against Russia. Clearly, sanctions are not applied to contracts which had been entered into prior to the adoption of the sanctions. But there remains a risk that some dishonest suppliers abroad may take advantage of the situation, which can include changing their positions on already-existing contracts.
For this reason, trade missions provide support, helping to ensure the fulfillment of obligations made to our businessmen, as well as monitoring the situation, so that sanctions do not turn into the unfair infringement of our entrepreneurs’ rights. This task was set for us by companies themselves, and we are working on it.
The second problem relates to the change of supply markets. If before, technologies, components and finished products came from one country, after the introduction of sanctions, the trade missions’ task has been to find suppliers in other countries who have not imposed sanctions, or imposed them in other sectors.
Under the conditions of sanctions, trade missions have become an important platform for business to business (B2B) communication. More and more contracts and agreements are being signed [directly] within our trade missions.
Russia has imposed its own measures in response to restrictions from the West…
Alexei Likhachev: A large amount of work has been done. We have received instructions from the government to do everything possible to find alternatives to the drop in imports of agricultural products from the European Union and the United States. We have done a great deal of negotiation, and organized many business missions. Our trade missions’ networks have sent over three thousand contacts of companies from abroad willing to supply the relevant goods.
As a result about 40 contracts have already been realized, with agreements signed for over 140 thousand tons of goods from Turkey, Serbia, Argentina, Tajikistan, Uzbekistan, Belarus, Armenia, South Africa, Vietnam, Kyrgyzstan, and Kazakhstan. Another 68 contracts for the supply of over 250 thousand tons of fruits and vegetables, meat and seafood products are being worked out at present between our networks and specific companies, as well as by regional networks in Kurgan, Kursk, Moscow, Nizhny Novgorod, Novosibirsk and other regions.
We believe that this is only the beginning. The nuance lies in the fact that the market is currently saturated with old supplies, as well as products from our own harvests. Now the task exists to supply the market [with the new goods] in time for the New Year and Christmas holidays, and here we are talking about serious amounts of goods.
Are there any plans to change the locations of trade missions in this respect?
Alexei Likhachev: The optimization of the location of trade mission is certainly among the most important components of reform. Today we have 55 trade missions around the world. Recently, missions were established in Nicaragua, Abkhazia, South Ossetia, South Africa and Cuba. Less than a month ago, the decision was also made to resume our mission’s activities in Singapore.
By 2016, we will be looking into the possibility of opening more trade missions in Venezuela, Mongolia, Myanmar, the United Arab Emirates, Peru, Ecuador, Ethiopia, Bangladesh and Nigeria.
Plans also exist for the creation of ‘combined missions’, meaning the distribution of responsibilities of one mission for two or more countries in a region. This model is already actively used by our Foreign Ministry for the country’s embassies.
These proposals are not related to the current complications in foreign affairs. We were already considering these regions [for the opening of new trade missions] since 2012, when we were conceptualizing the reform of trade missions. The regions were selected following consultations with our businesses, focusing on those regions with the most prospects for increasing our exports, especially our non-raw materials exports.
What other innovations await our trade missions? What remains to be done?
Alexei Likhachev: Ahead lies the third stage of the reform. We are working to determine how to more effectively use the trade mission structure, this instrument of public-private partnership, and how best to attract the most active companies. We are now considering three instruments which will be formalized legally in the future.
Firstly, a new provision will allow companies to place their representatives within the trade missions. We have already begun moving in this direction, and are presently working out the details with a number of companies.
Secondly, infrastructure can be developed alongside the trade missions, which will operate without government funding. This may include things like exhibition complexes, consulting centers, structures for the organization of business missions. For a number of reasons, we cannot provide support for exports only via the country’s budget. We need projects that can pay for themselves.
Thirdly, we would like to see, along with the trade missions, which offer non-financial instruments to support exporters, the development financial instruments of support as well. We hope that together with EXIAR [the Russian Agency for the Insurance of Export Credit and Investment] and the Eximbank [The Export-Import Bank of Russia] we will be able to organize work in the sphere of crediting and insurance of exports, first and foremost for those countries which are most important for us in terms of exports.
How does the Development Bank of Russia see the new format of economic dialogue with the European Union? Is a rapprochement possible after the cooling of relations that has occurred? What still needs to be done, taking account of the postponement of the implementation of the economic component of the agreement between Ukraine and the EU until the end of 2016?
Alexei Likhachev: Russia is ready for constructive dialogue with our European and Ukrainian partners. We propose using the postponement for the formation of a new agenda and a transition to a new series of negotiations with a view not only to resolve existing differences, but also to promote trade and economic cooperation. We do not want to see a fall in the turnover of trade and investment with Europe or with Ukraine.
At present we are waiting for the new European Commission to begin its work. Our task is to find a constructive agenda for the development of trade and economic relations, based, first and foremost, on the needs of European and Russian businesses. I believe that the “four freedoms” format best fits the needs of our businesses, calling as it does for the freedom of movement of goods, services, labor and capital from Lisbon to Vladivostok.
You are an official with the Ministry of Economic Development; therefore we can’t help but bring up the topic of the World Trade Organization and its relation to the sanctions. In your view, are there any prospects for challenging sanctions in the WTO, regardless of which country files the challenge?
Alexei Likhachev: Russia is working hard on the analysis of the situation concerning Western countries’ sanctions policies, especially in relation to the [potential] violation of WTO rules. But this organization does not have any precedents for dealing with this problem. Several attempts undertaken earlier to challenge countries’ sanctions policies did not provide any results, mainly because the sanctions were lifted [before the conclusion of the arbitrators’ work], and their work became meaningless. This means that we must prepare very carefully for the possible dispute.