The Finance Ministry plans to raise 8 trillion of investment :: Economy :: RBC

The Finance Ministry told how to involve the private big business to invest in the economy through new agreements on protection of investments. The companies hope for additional guarantees and preferences

Russia’s Finance Minister Anton Siluanov

(Photo: Ilya Pitalev / RIA Novosti)

The Ministry of Finance developed a bill on “the protection and promotion of investments” in Russia, explained how it expects to attract trillions of rubles of private investments in the Russian economy in the coming six years. It is necessary to implement the tasks put by the President Vladimir Putin, to increase the proportion of investment in fixed capital in Russia’s GDP to 25% (from the current 21% of GDP).

Stabilization clause

As told in Thursday, August 30, reporters Deputy Finance Minister Andrei Ivanov, this will require additional investment in 21 trillion in the years 2019-2024. One of the ways is a new model of investment projects when the business on the basis of “free will” would enter into with the state agreement on the protection and promotion of the (maintenance) of capital. It is a compromise reached by the Finance Ministry, big business and presidential aide Andrei Belousov, earlier offered to withdraw from metallurgical and chemical companies in the short-lived “windfall” on hundreds of billions of rubles for financing investment tasks of the state.

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“If you estimate that CAPEX [capital expenditure] account for about 70% of the investment project, the 10-15-20% equity that we need to attract, can be estimated at about 8 trillion in six years. We believe that this is an achievable goal [to draw in the basic capital of the 8 trillion],” — said Ivanov. “We in the Ministry of Finance and economic block of the government not pursued in respect of new projects of fiscal problems. <…> Our main task is to create such conditions under which the investor would benefit from wrap capital in the Russian Federation”, — he stressed.

Ivanov emphasizes that the fundamental difference of the proposed mechanism from all previous attempts of the authorities to encourage corporations to invest in “stabilization clause”, which promises investors the immutability of the regulatory and fiscal conditions for the entire project implementation period (six or 12 years depending on amount of attachments), but guarantees the legal (judicial) protection of capital investment. The agreements will stipulate the obligation of the government to compensate the losses of investors in case of deterioration of conditions of project implementation.

According to the law “On investment activities in RF, implemented in the form of capital investment”, adopted in 1998, the rights of subjects of investment activities, which concluded contracts, are stable and remain valid for the duration of their action. “But de facto stable conditions, the investor does not receive”, — was stated in the may report of the business Ombudsman of the President. Now in investment agreements, which are expected by the Finance Ministry, it is expected that the budget will act as a guarantor: if the conditions are violated, the budget will compensate investors losses from changes in conditions. “It will be very important for foreign investors, particularly Asian,” says Ivanov. According to the current version of the bill (there RBC), the investor, whose investments are protected, can be a Russian legal entity with foreign capital.

Priority state support

Other key elements of the proposal of the Ministry of Finance are the principle priority opportunities for such projects to receive state support and the mechanism for cost recovery on creation of infrastructure in the amount of taxes paid by the investor in the project. In addition, the possible long-term state order “for the formation of primary demand for the unique products of the project”, from the presentation of the Ministry of Finance, which saw RBC. While tax incentives are not due to the subsequent reimbursement of taxes paid will occur anticipatory funding of infrastructure that is de-facto the state as a partner to partially Finance the infrastructure project.

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A source in one of companies list Belousov told RBC that the business, in particular, has proposed to Finance Ministry to amend the bill by providing tax deductions (tax breaks on the property for several years of the amount commissioned assets, a tax deduction in income tax in the amount of investments) and interest-free Treasury bonds.

Now the RSPP is forming a list of projects under three headings: has been declared but povisshie projects of the companies; new enterprise projects that meet the criteria of the may decree of Vladimir Putin; the infrastructure projects of the state (with an eye on the regions where the companies are implemented on a public-private partnership). According to a source RBC in one of the companies, the fourth group (megaprojects) will determine the state.

“The Ministry of Finance formed a portfolio of 407 projects with more than 30 trillion of announced investments in fixed assets. Even if half of what we are negotiating, will be implemented, we will follow the presidential task,” — said Ivanov.

Photo: Vladimir Gerdo / TASS

Old and new projects

Many companies, according to RBC, have already presented their pilot projects in the Finance Ministry and the RSPP. They do not disclose what projects were included in the list, if there are any new and aimed at development of infrastructure of public use. “We have so much investment in the coming years, including environmental, they explain,” said RBC source in one of the companies on the list.

Of the listed companies Belousova extensive investment programme, including environmental projects announced “Norilsk Nickel” (up to 2023 intends to invest about 1 trillion, including $2.5 billion in “Sulphur” project and 40 billion rubles in the modernization of the Norilsk concentrator) and SIBUR (in 2018 capex plan — 170 bln). In addition, Mechel is needed to finish the railroad to the Elga coal Deposit (investment 2017-2019 was estimated at more than 15 billion rubles).

In General, the proposed Treasury action is adequate, almost like an ADZ (the territory of advancing socio-economic development. — RBC), the Director of group corporate ratings ACRA Maxim Hudalov. Moreover, not all investment projects will be proposed by the government: the part of the business is doing independently on his own initiative, he said. According to him, in addition, the Ministry of Finance could include, for example, the subsidization rate, as in the aviation industry and agriculture, but individual large-scale projects through public-private partnerships.

How did it progress

9 August it became known about the letter, presidential aide Andrei Belousov Vladimir Putin with a proposal to take 513,7 billion rubles of windfall profits of metallurgists, manufacturers of fertilizers and SIBUR for 2017. Money, as he explained, necessary for the execution of the may decrees. His proposal was approved by the President, by putting a resolution “Agree”.

On the same day the initiative Belousova criticized the owner of NLMK and President of the Association of Russian steel, which unites the largest manufacturers of metallurgical products in Russia, Vladimir Lisin. He ridiculed the idea, telling the story of the hare. In response Belousov said: “it is necessary to Share”. The Russian Union of Industrialists and entrepreneurs (RSPP) wrote a letter to Prime Minister Dmitry Medvedev and heads of ministries, in which he indicated that the initiative Belousova is not conducive to competitiveness and will negatively affect the investment attractiveness of the country.

In the public debate have entered and the basic owner “Severstal” Alexey Mordashov, saying that his company would be forced to reduce investment in the case of increasing tax pressure on business. In response to the flood of criticism of the idea of exemptions Belousov invited the heads of companies caught in his list for a meeting.

The government and ministries, including the Ministry of Finance and the Ministry of industry and trade, took the position of business proposing to change the agenda of the discussion on more positive: as to reinvest profits into the economy.

At the meeting on 24 August Belousov has assured the business that increases the tax burden will not, and invited companies to invest in projects in infrastructure, environment and of digitalization (coincide with three national projects from the may decree of Vladimir Putin: “Ecology”, “Digital economy” and the development of infrastructure).

At the beginning of next week, the Finance Ministry introduced the companies bill about the participation business in the investment projects for the implementation of the may presidential decree. The Department has proposed to freeze for businesses in almost all regulatory changes and ensure the money back through taxes.

The Kremlin for all this time and has not formulated its position on the plan Belousov, Putin has no plans to discuss it with the owners at a special meeting, said his press Secretary Dmitry Peskov.

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