Translated material
VEB will take on the image of Russia
The Development Bank will increase the investment attractiveness of the country
The Development Bank (Vnesheconombank) is not going to limit itself only to the functions of a credit institution. An insurer for export credits, a state manager of pension funds, responsible for the investment image of Russia - all these responsibilities and tools for their implementation are spelled out in the bank's new development strategy, which was approved by the supervisory board last week . “What we will do is determined by the government, but we need to understand how we will do it,” this is how Sergei Vasiliev, a member of the board and deputy chairman of VEB, explained yesterday the need to adopt a strategy.A bank’s business strategy is usually a closed document, since it defines the internal parameters of the organization’s activities and the direction of its development, and it is not customary to share this information with competitors. But, as Vnesheconombank deputy chairman Sergei Vasiliev said at a briefing, “VEB is a specific organization”: “We are not part of the banking system, we are not subject to Central Bank regulations, although we report to it.” The State Corporation “Bank for Development and Foreign Economic Affairs (Vnesheconombank)” is a non-profit partnership, and profit is not the goal of its activities. Accordingly, other work guidelines were needed, such as “assistance in the implementation of an innovative socially-oriented type of economic development”, “development of public-private partnership (PPP) mechanisms”, “assistance in the promotion of Russian goods on the world market”.
All these general phrases in the strategy received more specific presentation and numerical expression. For example, by the end of 2012, the bank’s loan portfolio should grow to 850 billion rubles. (at the end of 2008 it will be 270 billion), the share of PPP projects in the total portfolio should be at least 30%. VEB has retained its functions as an agent for servicing external debt and is gradually adding new ones to them: support and development of small businesses, insurance of export loans against political and commercial risks. One of the important areas of activity is cooperation with the Investment Fund. “There is a gap in public and private resources for most projects,” says Mr. Vasiliev, “and we will have to close it.” But in the total portfolio of issued loans, projects co-financed from the Investment Fund will take up less than 20%.
Projects, as the deputy chairman of the Development Bank said, are selected from several sources. There are partners with whom VEB has been working since 2004 and continues to cooperate. There is a so-called Belousov list prepared by the Ministry of Economic Development and Trade, which is recommended for consideration by the bank. “We,” Mr. Vasiliev noted, “work in close contact with the relevant departments - the Ministry of Industry and Energy, the Ministry of Natural Resources, from them we constantly receive proposals for projects. There are proposals from regional administrations.” At the same time, he recalled that according to the law, government agencies cannot interfere in the activities of the bank. So, close cooperation with departments does not mean that the minister can write a letter with an order to accept any project for implementation.
Decisions on projects are made based on assessments of their effectiveness. But VEB mainly participates in projects that do not bring immediate and high profits, which are not very attractive to private investors or are beyond their capabilities. “We have our own priorities. The main one is the generalized socio-economic efficiency of the project. Of course, it is very difficult to evaluate it objectively. Nevertheless, the bank will soon adopt a regulation on selection and a methodology for assessing the effectiveness of projects,” Mr. Vasiliev said.
For now, what makes selection and evaluation difficult is that a significant part of the projects coming to the bank are “very poorly developed from a financial point of view.” “Even from ministries, it’s more like wishes and business ideas,” he says. Therefore, VEB often takes on the functions of a developer and design documentation, as will be the case, for example, in the case of the construction of a pulp and paper mill in the Lower Angara region. “We act as an investor, operator, financial and investment consultant,” clarifies Sergei Vasiliev.
Another difference is the absence of client money in the bank’s liabilities. “We do not have deposits from investors, we can only serve the organizations that we lend,” explained the deputy chairman of VEB. “Our assets include investment projects, our liabilities include our own funds and borrowed funds: bank loans (now their share is larger) and bond issues.” To maintain its rating, the Development Bank must comply with high liquidity requirements. “The minimum amount for this year,” Mr. Vasiliev clarified, “is set at 108 billion rubles, or 40% of the loan portfolio. In the future, the percentage will fall. A significant portion of the funds is currently on bank deposits rather than in securities, which would be more profitable. But in the future this ratio will change.”
By the fall, the Development Bank's strategy will be supplemented with the main directions of shaping Russia's investment image. “There was an idea to create a separate agency in the form of a bank subsidiary, but then they abandoned it. Most likely this will be a VEB department,” said Mr. Vasiliev. According to him, it is too early to talk about specific measures.
As for such an area of activity as managing the pension savings of Russians, no one is going to give it up yet. “We constantly present our proposals to the government on how to manage funds more efficiently, for which we need to expand the range of tools. After all, for us, efficiency is a matter of the bank’s image. As for the complete abandonment of pension funds, this is a political decision that must be made by the government. In the meantime, we are preparing to extend the contract as a state manager,” Mr. Vasiliev assured.