Sergei Ryabukhin: “Today more money is allocated to the real economy”
Chairman of the Federation Council Committee on Budget and Financial Markets, senator from the Ulyanovsk region Sergey Riabukhin, told Vestnik Kavkaza about the formation of the anti-crisis budget plan and the development of a roadmap for intergovernmental fiscal relations.
- Dmitry Medvedev, speaking at the State Duma, said that Russia has a new economic reality, and it will test all of our strength, I literally quote, "in full". How is this new reality reflected in the budget for the next three years?
- A very good question, and it contains several sub-questions. In fact, the budget, and many experts pay attention to it, it was changed, amendments were put in it. Usually after the first quarter and even the first half of the year we amend the budget of the current year. A situation that is linked to the sanctions, the antisanctions which we had to implement against the EU and a number of other countries, which being under pressure from Washington imposed sanctions against us, this was reflected, of course, in the budget, and in access to external borrowings for the real sector of our economy. You know that over the years a large number of businesses, corporations, small and medium-sized businesses were relying on external borrowing and were under the illusion that it is good for us, the Central Bank particularly, unfortunately, tried very hard to accomplish the task of reducing the interest rates on loans, so most borrowings were from abroad. You know that our income depends 50% on the implementation of hydrocarbons, it is oil and gas. And so, of course, the combination of these three factors has forced the government to respond quickly to these challenges, about which the prime minister spoke in the State Duma. And we support this approach, although there are some expert estimates that we rushed in vain, it was necessary to wait for the full-scale reporting in the first quarter, to evaluate, to make an analysis. But the fact is that in the regions, and in the spheres of the economy, the main distributor of the budget system (MMBF), they are also waiting to be assigned, when full-scale assignations will be made on certain types of expenditures from the federal budget. Therefore, I believe that it is possible to apply to this budget, which we took last week, that it is an operating budget. A budget of prompt response, I would even call it. And I think this is not the last amendment. Absolutely the right step was taken by the government that represented these changes to the Federal Assembly. And I think that we can handle these challenges.
- So you think that there can be another amendment to the budget? But it will probably be connected to some positive factors. For example, if there is a rise in oil prices, which is observed, despite all the instability.
- And not only. Because there is volatility in the price of the national currency. There are also factors that affect the budget’s parameters.
- That means we are ready for the positive and the negative scenario.
- Yes. But I still would like to distinguish one factor, which significantly influenced the decision of the amendment of the budget, it is the anti-crisis plan, as it is called by people. A plan of the urgent measures which are now necessary to implement in view of these circumstances, which are caused by sanctions. An anti-crisis plan supposes the involvement of a large injection into the real economy. You know that to support agriculture it is necessary to invest more than 20 billion in the agricultural sector; in industry, for example, through the Russian Technologies corporation, to support the engine, there are four powerful joint-stock companies, including the Rybinsk plant and engine factory and other plants that received big orders from our civil and defense aviation, also 21.5 billion has to be invested. Reconstruction of the six largest airports in Russia, this is also about 6 billion. The creation of innovative regional clusters – 1.5 billion. The list can go on for a long time. That is a very large amount of money that goes to the real economy. And in this situation the sooner we have these amendments, the faster the assignation will be, budget allocations on the basis of which these funds will be used in the industry, made to our national economy and in the form of grants to the subjects of the Russian Federation.
- Last year the main task of the committee that you are heading was the protection of regions. In connection with the present, the new economic realities, what tasks do you set for this year? Or priorities are the same?
- I named two key priorities in priority activities of the Budget Committee of the Federation Council, and Council Chamber supported it, and Valentina Matvienko supported it. This is a balance of regional budgets. In this regard, she gave instruction even at a plenary session to develop a road map for improving the inter-budgetary relations. We got a very serious road map, it contains 21 chapters. The Ministry of Finance has agreed with the vast majority of these proposals. This is the first task that we performed during the past year. And we, by the way, will insist on strict compliance of all these items, because any deviation from this road map for improving the inter-budgetary relations leads to an increase in the debt overhang, which has already exceeded 2 trillion rubles.
This is one of the key, painful problems in our country's budget system. I mean, the consolidated budget, because it consist, strictly speaking, of three levels. Even if we talk settlement like, than it is four levels of the budget system. So for us, it hurts equally, what finger hurts - federal, regional, municipal or settler. There are people, and any failure of budget commitments is very painful to the ordinary citizen.
Last year another local, but sensitive, very important theme for us, all the Federation Council and V.I. Matvienko supported it, and most importantly, we saw a confirmation in the words of the President, that we are on the right track. We are talking about de-offshorization of economy. Now it is hears, but when we analyzed a report of the Accounting Chamber on November 2013, we were amazed that out of $520 billion of foreign trade turnover, 329 billion at the end of 2013 were all these transactions, all international contracts, agreements went through low-tax jurisdictions through offshore zones.
- Bypassing the budget?
- Absolutely. We have developed 5 bills. A number of them have already passed the first reading, and we are waiting for the second reading, when they will be adopted. And it's not just about controlled foreign companies, an acronym called CFC. But we have considered a possibility of amnesty in these parliamentary hearings. However, amnesty is a wrong word. By the way, the Prime Minister, answering this question, correctly formulated it in State Duma, this is not an amnesty in the ordinary, traditional sense of the word. The idea is that the state gives opportunity for the owner of the asset has a right, without the prosecution to declare about their existence and from that moment to be honest, respectable and disciplined tax payer. It is not an amnesty, but nevertheless, it is such a procedure which, in my opinion, can be called an amnesty in some way.
In 2004 President Putin said: "It will be the hardship of swallowing dust, when you are returning your money." The time will come ... Then, in 2004, people did not understand what that was about, and now the time has come when the political, economic, financial leverage of the Washington Regional Party is used against us, and now it becomes relevant.
The illusion that we are all awaited with open arms on the consumer and finance world markets, this illusion is now disappearing like smoke. All people are beginning to understand that we must all be concerned not only with the state of personal business, the economy, security, but with filling the revenue part of the regional, municipal, federal budgets in order to perform the functions associated with the sovereignty of our state, to put it briefly. Here is a set of measures that tighten or at least qualify that theft is theft, it is necessary to register it, it must be described in legislation. Because we have deliberate tax evasion, which was affectionately called until recently, until 2014, "optimization of tax policy."
In this part we not only started the legislative process, but already achieved some results, which start working literally from July 1.
- What are priorities of this year?
- Today we should concentrate on the quality of management of budget and financial resources. It is a multifaceted task. It is connected with the fact that 24 trillion rubles, which are sold, so to speak, that are given at an annual auction and procurement for state and municipal needs, it is necessary to restore order in this sphere.
If we analyze the materials that we receive from Golikova, in our budget committee, it's just amazing. No penalties, no sanctions, the most severe criminal measures can never sober unfair and dishonest people, who still find ways to evade the law, which governs the rules of procurement and purchasing procedures.
70% of trades for public use are not on a competitive basis, but from a single service provider. This is done in order to increase the cost of services. If we can save 10% of these trades, that is 2.4 trillion.
It is necessary to restore order in the tax administration. In the administration of VAT on foreign trade operations, we can see 2 trillion being given by scammers every a year. So to speak, it is a whole industry which is emerging.
- How is this possible?
- The most popular fraud scheme is: we have a car produced during World War I; one takes it to Poland or the Baltic countries and sells it to a day-fly company which has been registered earlier. And the car, which is actually utility scrap, costs a million dollars, according to a declaration. If you scrap the car, you will get 2-3 thousand rubles; but one has declared that it costs $1 million, and according to the current laws, one has a right to get 18% of the VAT, i.e. 180 thousand rubles.
This is a drawback of our legislation. The tax services, the customs services should be responsible for this. If such juridical practice emerges, courts should react to such fraudulent schemes.
According to experts, this amounts to about 2 trillion rubles of illegal VAT repayment. There are some republics and regions of the federation where the volume of VAT repayments is equal or bigger than the trade turnover.
However, there are many other factors that make us concentrate on the task of quality of usage of financial and other public resources, for instance, usage of the property complex (the Defense Service’s case).
- Finance Minister Anton Siluanov has recently stated that the outflow of capital has slowed down in recent months, in comparison with the end of 2014. Is this a trend or a timely phenomenon?
- It is a trend which is based on many factors. A big role was played by an appeal to the country’s business by top officials, that if you do care about the fate of your business, your capital, you should return under Russian jurisdiction. Don’t believe that Europe will protect, secure, insure, and support you. Come back! The 1990s are over, when the state didn’t support business, and there was no policy in the sphere at all within Gaydar’s market economy. However, by that time we had already seen the powerful emissive center of the euro appear in Europe. They imposed disorientation on us in the context. Guys from Harvard told us: “It doesn’t matter that Europe is uniting, establishing a united currency and an emissive center. Don’t pay attention to the fact that America has plans for the next 50 years…”
Thank God, the hard times of the 1990s are over. Today there is the law on strategic planning. We needed 23 years to reject the motto “We don’t care where we go, we won’t go the wrong way ever.”
I am glad that the top political leadership, the government, the financial structures, including Anton Siluanov, understand this. Everybody understands that a concept of strategic development is necessary, operating laws are needed.
External threats are that the US Federal Reserve System prints money and materializes it into our assets; and then the ‘funny paper’ goes abroad. This is erosion of the national economy. The role of the government and the Central Bank is very important.
The events of December 2014, when there was a targeted attack on the ruble, gave us a good lesson. The Central Bank had to take a complex of measures.
This is a blessing in disguise. Double devaluation of the ruble established favorable conditions for development of domestic industries. When the ruble is falling, it stimulates the development of domestic production, and not only within the anti-crisis program.
I am skeptical about theories that the program of import substitution will provide an impetus to the economy. It will simply fill the gaps that have emerged. At the same time, a radical breakthrough in the real sector of the economy, in industry and in agriculture will take place if there is a strategy of development. When money is not spent in vain, to fill a gap, but is invested in high-tech science and practical science.
The sums are huge. About 320 billion rubles are required for science by the budget. If I was told 15-16 years ago that such a sum would be spent on science, I would have never believed it. I mean practical science, which is connected with industries, production, and establishing our domestic consumer market. We should move away from dollar dependence in the economy. Thus, we should make our credit and monetary policy more stable.
The situation in the system depends on the situation with the weakest element. Our weakest element in our credit and monetary policy is absence of cheap and long-term money.
We need a complex of measures on credit and monetary regulation, which would make loans available, i.e. bring the necessary inflow of money into the economy. According to the Central Bank, in 2014 the loan portfolio grew by more than 3 trillion in comparison with 2013. In 2013 the gross loan which was issued by the Central Bank was 5 trillion, while in 2014 it was 8.5 trillion rubles.
We have many talented, energetic people who are willing to engage in personal production. It is necessary to make the monetary system of our country competitive, so that enterprises won’t have to borrow money abroad, can develop their business, strengthen our economy, engage in import substitution, not just running errands for the prime minister, but so there would be a system.
The product range of the chemical industry in the USSR period exceeded 700 positions, and now there are 70 positions at most. They have to bring it from abroad. Why do we supply gas and oil abroad, and then depend on sanctions of the Latvians and Lithuanians if we supply them with oil?
Now a large petrochemical complex opens in Tatarstan. There are big programs in other subjects of the Federation - in the Belgorod region, in the Kaluga region. There are a number of regional innovation clusters, which are now systematically involved in these issues.
- A number of foreign ratings agencies such as S&P and Moody's have downgraded Russia’s rating. Is this an economic decision or is there a political component to this issue?
- This is a purely political action - to discredit and destabilize. This is not just some virtual show where when the rating decreases, the global market availability of our borrowers is reduced.
- Russia does not have its own ratings agency. But China, for example, does. Should we think about creating our own ratings agency?
- By the way, this work is already undergoing. We had a conversation with Anton Germanovich Siluanov, also with [the chairman of the Central Bank] Elvira Nabiullina. I think that this year we will already have such an agency. Another thing is that its credibility and relevance won’t obtain such capacity within one year. Therefore, the sooner the better. There is a similar situation with the national payment system. We have been held captive by delusions – why do we need to reinvent the wheel when there are MasterCard and VISA? But they "showed their teeth" by destabilizing the environment for two days, and starting panic. This sobered everyone up immediately.
In the world, there are about 10 billion bank cards. And in first place is not MasterCard or VISA, 34% of these 10 billion cards are from China, Chinese cards. The Chinese did not fall into delusion, into such credulity.
This seems to be a tendency of the Russian character only, to trust anyone, but the Chinese are pragmatic, they are raised on Confucius - they trust, but they do their own thing. They did it 12 years ago. I would not be surprised if after a year or two we will find out that China has become the third emission center, which will print their yuan, and they will go the same way as the dollar and the euro. And we must aspire to this. We cannot depend on the US dollar or the euro, it is necessary to create our own system.
Our Chinese friends offered us cooperation (we are even in BRICS together), but I think that we should create a national system. On July 8-9 there will be a summit of BRICS, and I think it will be one of the topics discussed there. A key theme will be the same Central Bank. We must move away from dependence on the European or international banks' monetary system. Last year, at the BRICS summit in Latin America, we identified the amount of the share capital, and where the bank and the billing center and Audit Commission will be located, who will be heading it. Maintenance works ended. And it did not happen over 20 years, as in Europe, it was very dynamic. Here, of course, the authority and dynamism of President Putin influenced it, he was personally involved in this matter. Therefore, we are now on the threshold of events, when in July, in addition to the banking and cash-settlement system, the question of a unified system of relationships of national card systems within the BRICS will be considered.
- Sergey Nikolaevich, we are in Vestnik Kavkaza, so I cannot help but ask you, have you ever been to the Caucasus, do you have favorite places there?
- I worked as an auditor of the Accounting Chamber for more than 12 years. Together with Sergei Stepashin we checked the implementation of federal target programs in Chechnya and Ingushetia, made an assessment of national programs in terms of legitimate targets for fixed costs in Dagestan, Karachay-Cherkessia and Kabardino-Balkaria.
When Stepashin headed the European Organization of Supreme Audit Institutions, we had a lot of activities carried out in Azerbaijan. We had to deal with the problem of integration of legislative bodies in South Ossetia and Abkhazia.
In the Caucasus I have a lot of friends and acquaintances. These are amazing people, amazing places, unique stories, each country, each region has its own particular national characteristics, its own appeal. So I like to spend time there, I love the people who live there. And as much as possible I try to help in the regional socio-economic development.