Day 1 of the Gaidar Forum 2017

On January 12, 2017, the Gaidar Forum – Russia and the World: Setting Priorities – sponsored by the Gaidar Institute, the RANEPA and the Association of Innovative Regions of Russia (AIRR) opened in Moscow.


President Vladimir Putin sent a message to the participants of the Gaidar Forum. The head of the state expects in particular that proposals and guidelines developed at the Forum will help solve social and economic challenges faced by Russia.

In the morning of the Forum’s Day 1, a business breakfast expert discussion – 25 Years: Foreign Investments in Russia’s Social and Economic Development – with participation of members of the Russian Foreign Investment Advisory Council was held with support of Unilever. Participants discussed the following issues: how have the realities of work for investors in Russia changed over 25 years; how far did global companies become Russian companies; to what extent does the Russian market continue to be attractive to foreign investors in the environment of modified supply chains, regional needs, labor costs and other; to what extent does the level of dialogue of the Russian authorities and investors meet the expectations of investors and how can foreign companies contribute to further development of the Russian economy?

The meeting was attended by heads of federal and regional authorities and managers and representatives of global companies in Russia.

According to Maksim Oreshkin, Minister of Economic Development of the Russian Federation more and more companies in Russia, including foreign ones work for export mainly due to the fact that the ruble is no longer overvalued.

Maksim Oreshkin reminded that in the past 15-20 years when a larger portion of foreign investments came to Russia the economic situation was different, primarily, the ruble was rather strong. In that environment, the foreign business which came to Russia focused mainly on the domestic market.


Maksim Oreshkin stressed that for investment growth it was necessary to ensure a proper business climate and economic certainties for the business, that is, sustainability of the economy to volatility of oil prices, stability of the fiscal system and efficiency of the state regulation in general.

According to Maksim Oreshkin, two years ago many foreign investors doubted the prospects of making investments into Russian assets due to instability on financial markets and high inflation rate. “However, on the basis of the results of the past two years it can be seen that the ruble and ruble denominated assets have become the strongest in the world. So, those who feared they certainly missed a very serious opportunity”, M. Oreshkin believes.

“In terms of investments into the real sector of the economy it is the situation when the economy has started to grow and the government has concentrated its efforts on eliminating structural limitations for growth; those who act promptly will get a higher yield”, said M. Oreshkin and invited foreign colleagues to make investments.

At present, there are about 1,600 enterprises with foreign capital operating in the Republic of Tatarstan, said Rustam Minnikhanov, President of the Republic of Tatarstan.

“Attraction of foreign companies requires elaborate system-based work. Numerous presentations of the region’s economic and investment potential abroad, as well as participation in various fairs and forums contribute to expansion of business contacts. But success in that work depends on commitment of the region’s leaders. It is necessary to meet with each investor, accompany him and render him assistance in dealing with different issues. As far as we are concerned, we actively work on all those issues”, said Rustam Minnikhanov.

Within the frameworks of the first day of the Forum, the World Bank’s Report – Russian Federation Systematic Country Diagnostic: Pathway to Inclusive Growth – dedicated to the analysis of limitations hindering Russia’s sustained economic growth was presented. In their study, the World Bank’s experts came to a conclusion that Russia had to increase investments in the infrastructure. The moderator of the meeting was Sergei Drobyshevsky, Academic Director of the Gaidar Institute.

Аna Revenga, Deputy Chief Economist of the World Bank outlined the main points of the study. According to her, for achieving a sustained economic growth trajectory Russia has to carry out large-scale structural reforms. In addition to that, sustained economic growth is ensured among other things by means of investments in material resources and human capital and through solution of poverty- and inequality-related problems. Ana Revenga pointed out that the outputs of structural reforms of the 1990s yielded results in the 2000s, having promoted individuals’ prosperity. However, the 2008 crisis showed that the former growth model failed to ensure efficiency growth and the economic growth rates fell dramatically.

According to analysts of the World Bank, the key factors limiting productivity growth are a substandard investment climate, lack of competition, inefficient infrastructure links, a relatively low potential for corporate innovations, a gap between the available skilled workforce, the standard of education and the labor market needs.

Ana Revenga stressed that the extent of development and introduction of innovations and R&D by Russian enterprises was much lower than in Europe. According to her, introduction of innovations is limited by an insufficient level of market competition and a lack of motivation for innovations in large companies. The problem can be solved through creating of equal opportunities for all the business activity participants.

In her report, Ana Revenga touched upon the issues prevailing in Russia’s education and healthcare systems. According to her, in the course of preparation of the study a correlation between the level of income on the one side and health condition and the level of skills on the other side was found. For example, children fr om poor families study worse than those fr om better-off ones. Also, the World Bank expert pointed out that Russia lagged behind as regards life efficiency indices. Inequality is observed in health, too. In addition, correlation between households’ incomes and their health and the level of education has identified the problem of “a chronic poverty” where availability of quality medical services and motivation to receive education depend on income and are passed fr om one generation to another.

Also, there was no permanent education in Russia, Ana Revenga stressed and that factor in combination with the aging population factor limited labor market opportunities. The above can be explained by the fact that people are not able to change during their life the field of their activities and adjust to new economic realities.

Ana Revenga’s co-speaker was Cyrril Muller, Vice-President, Europe and Central Asia, World Bank who touched upon limitations hindering sustained economic growth in Russia. In particular, Cyrril Muller outlined the following three important preconditions for achieving higher economic growth rates: upgrading of public administration, reforming of the budget system and more efficient utilization of the country’s vast natural resources. Also, Cyrril Muller touched upon the issue of high energy intensity of the Russian economy and stressed that Russia’s volume of hydrocarbon emission was comparable to that of the entire Latin America, while Russia produced only a quarter of added value of all the Latin American countries. According to Cyrril Muller, the factor behind such a high energy consumption is preservation of state subsidies to individual industries and obsolescence of capital funds.

Кsenia Yudayeva, First deputy Chairman of the Central Bank of the Russian Federation took part in the discussion. According to Ksenia Yudayeva, Russian economic growth will intensify this year if there are no external shocks. “For the Russian economy now it is not the issue of how to switch over to recovery growth it is the issue of how in new conditions after a short period of recovery growth to escape tumbling into a chronic stagnation.”

Ksenia Yudayeva pointed out that sustained economic growth can be achieved only by means of applying a comprehensive approach with the specifics of the fiscal and monetary policies taken into account: introduction of institutions which investors trust, monitoring of system financial risks, development of instruments of long-term financing and other. She stressed that thanks to the RF Central Bank’s effective monetary policy in 2014 –2016 chronic stagnation was avoided. According to Ksenia Yudayeva, it is not the issue of how to achieve the trajectory of sustained economic growth it is the issue how to avoid chronic stagnation.

Yaroslav Kuzminov, Rector, National Research University Higher School of Economics called for solution of the issue of the informal sector of the economy. The expert said that annually a few percent of the workforce went to the shadow economy fr om “factories”, so in the next ten years that issue was to be resolved and the opposite trend should be formed.

Yaroslav Kuzminov also complained that state social expenditures were not sufficient enough. According to him, shortages of social expenditures on education and healthcare amount to about 1% of GDP and 2% of GDP, respectively.

Yaroslav Kuzminov called for a switchover to a progressive individual income tax scale, that is, charging 20% from incomes of individuals making Rb 150,000-Rb 200,000 a month. That will permit the economy to receive about 1% of GDP and reduce largely social tensions.

Vladimir Kolychev, Director, Budgetary Policy and Strategic Planning Department, Ministry of Finance of the Russian Federation added that for achieving the trajectory of sustained growth it was necessary to introduce the mechanism of isolation of oil volatility which adjusted investors’ behavior.

In his turn, Dmitri Pankin, Chairman of the Board of the Eurasian Development Bank stressed that the issue of searching for mechanisms which could permit to achieve the trajectory of sustainable development should be dealt with together with development of the Eurasian space in general. For example, the problem related to transport accessibility of individual regions of Russia cannot be solved without taking into account the expansion of long-distance transport routes connecting the Eurasian space, for example, the Silk Road.

Also, Dmirti Pankin believes that the issue of human capital in Russia cannot be solved without taking into account the factor of migrants who come to Russia every year for employment purposes in the number of 4 million people.

Dmirti Pankin stressed that expansion of free-trade zones may produce a strong favorable effect on sustained growth. In particular, he says negotiations on that issue are currently underway with Singapore, Israel and South Korea. According to his estimates, establishment of a free-trade zone with South Korea may yield Russia GDP growth of 0.2–0.6 p.p.

Alexander Dynkin, Director of the Institute of World Economy and International Relations, RAS criticized the World Bank’s study. According to Alexander Dynkin, the World Bank presented a standard set of recommendations.

Also, Alexander Dynkin stressed that development of transport infrastructure did not have an effect on labor efficiency and that fact was underpinned by figures of growth in the length of hard-surface motorways and stagnation of labor efficiency indices. In addition, Alexander Dynkin said that the policy of creating high-efficiency jobs was at variance with the logic of the report dedicated to inclusive economic growth. According to A. Dynkin, creation of high-efficiency jobs will contribute to growth in the well-being of high-skilled workers and, thus, increase the income gap between them and less skilled workers. A. Dynkin pointed out that the goal of exclusion of institutional traps of innovation development was not pursued by the report and that was justified by domination on the market of large companies which were not prone to innovations.

The moderator of the panel discussion – Social Development: Historical Lessons and Future Challenges – was Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs. The key report was delivered by Olga Golodets, Deputy Prime Minister of the Russian Government.

О. Golodets said among other things that about 5 million people received the minimum monthly wage. From July 1, 2016, the minimum monthly wage in Russia amounts to Rb 7,500, while from July 1, 2017 it would be equal to Rb 7,800. “A lack of consumption and shrinkage of retail sales are serious limitations for further development of our economy. There is a serious problem, that is, the minimum monthly wage and the number of people who receive it. That figure is at the level of 4.9 million people.”

In addition to that, O. Golodets says that at present the issue of labor relations and decent labor remuneration has become a priority. “I believe that in 2017 a decent level of labor remuneration should be the main trend, rather than intentional underpayment on the part of business. The business should pay decently to the youth. By underpaying their workers, employers do not think about the future, so there is no growth and long-term sustainable development, only a short-term trend which has an adverse effect on the economy.”

Also, O. Golodets says that over 1.5 million Russians work abroad and that serious problem is related to an insufficient level of labor remuneration in the Russian Federation. “It is a dangerous trend, too. We want to prepare personnel primarily for development of our own economy and the business should provide competitive wages and good conditions”, Olga Golodets added.

At present, for self-realization in Russia such industries as the pharmaceutical industry and agriculture are the most appropriate ones, but there is a large number of other industries which do not develop, she added.

Maksim Topilin, Minister of Labor and Social Protection of the RF took part in the discussion. He said that the minimum monthly wage should be brought closer to the minimum subsistence level by the autumn.

Also, M. Topilin commented on the situation related to control over workers’ health and occupational diseases. According to him, such problems fail to be identified at early stages. The system does not “notice” the worker until he or she dies on the factory floor, M. Topilin said.

A panel discussion – Priority Projects as a Factor of Economic Growth – with participation of Igor Shuvalov, First Deputy Prime Minister of the Russian Federation and Mikhail Men, Minister of Construction Industry, Housing and Utilities of the Russian Federation was held at the Forum.

Igor Shuvalov declares that the government is not yet satisfied with a switchover to the project method. He added that the outputs of the government’s work on priority projects and strategic development would be known by May 2018.

Irina Makieva, Deputy Chairman of the Vneshekonombank said that until the end of 2017 the Vneshekonombank would actively work in single-industry cities. It is planned to repair central streets, entry zones to medical institutions and fit up the fleet of ambulances.

The panel discussion – The Role of the Legal System in Sustainable Social and Economic Development – was held under moderation of Stanislav Mogilevsky, Director of the Institute of Law and national Security, RANEPA and Аlexander Radygin, Head of the Center for Institutional Development, Property and Corporate Governance, Gaidar Institute and Dean of the Economic Department, RANEPA.

The issues discussed included the following: the concept of effective legal regulation as a source of economic development; the spheres of economic and financial activities wh ere the law could contribute the most to movement towards modern markets; economic expedience or the rule of law; economic environment roots which bring about unlawful actions; economic institutions which lim it unlawful actions and the optimal structure thereof; problems related to the ownership rights and their specifics in the Russia economy; knowledge management and intellectual property rights.

Revold Entov, Academician of the RAS, Chief Research Fellow, Gaidar Institute, Dmitri Dedov, Judge for the Russian Federation, European Court of Human Rights and Yuri Tikhomirov, Deputy Director, Center for Public Studies, Institute of Legislation and Comparative Law took part in the discussion.

Revold Entov stressed the importance of protection of property rights for development of the economy. According to him, the extent of development of financial markets is determined by protection of private property rights. In his speech, D.Dedov touched upon the issues of law enforcement.

Participants in the panel discussion – Patterns of Sustainable Development as Defined Today – under moderation of Pavel Kadochnikov, President of the Center for Strategic Development, Leading Researcher, Gaidar Institute discussed the following issues: challenges of long-term development; long-term goals of sustainable development; the extent of credibility of voluntary goals and initiatives within the frameworks of the Paris Climate Change Agreement; low-emission strategies; technological challenges and demand on innovations; the role of business in achieving sustainable development goals.

Those who attended that panel discussion were asked to answer the question what driver behind securing of goals of the country’s sustainable development should be. About 60% of respondents said that it should be the government, against 31% who voted for the “society”.

Commenting on the results of voting, Tarja Halonen, Former President of Finland stressed that for achieving the goals both the government and the society, as well as the business should do their utmost together.

On the first day of the Gaidar Forum, the expert discussion – Rating Results of the Association of Innovative Regions of Russia: Innovative Business in Regions of Russia and Rating of Innovation Development of the Regions of Russia – was held. The moderator was Ivan Bortnik, Advisor to the Director General of the Innovation Promotion Fund.

Participant in the discussion were as follows: Oleg Fomichev, State Secretary and Deputy Minister of Economic Development of the Russian Federation, Artem Zdunov, Minister of Economic Affairs of the Republic of Tatarstan, Oksana Kozlovskaya, Chairperson of the Legislative Duma of the Tomsk Region, Roza Semenova, Project Supervisor of the Association of innovative regions of Russia, Vera Barinova , Head of the Center for Corporate Strategies and Firm Behavior, RANEPA and Stepan Zemtsov, Senior Research Fellow, RANEPA.

V. Barinova and S. Zemtsov presented a new Innovative Business in Regions of Russia rating which was developed jointly by the RANEPA and the AIRR with support of the Interfaks, an international information group and the Chamber of Industry and Commerce of Russia.

Presentation to the report:

According to Vera Barinova, the rating’s main objective is to identify conditions and outputs of development of high-tech business in order to determine potential points of non-oil and gas growth in the economy, rather than rank regions. Unlike investment climate and innovative development ratings, the new product is highly specialized on high-tech and mid-tech companies and science –intensive industries.

Stepan Zemtsov highlighted the outputs of the rating of regions. The speaker singled out groups of regions on the basis of efficiency of development of high-tech companies. Through the example of a few constituent entities of the RF, their competitive advantages and problems were shown and that practice could be actively used by regional authorities in evaluating target priorities.

Oleg Fomichev commented on the outputs of the ratings, stressed the importance of both the ratings and presented his ideas on how they should be upgraded.

Vladimir Mau, Rector of the RANEPA was the moderator of the day plenary discussion: Russia and the World: Setting Priorities.

Participants in the discussion were as follows: David Lipton, First Deputy Managing Director of the International Monetary Fund, Martin Wolf, Chief Economic Commentator of the Financial Times, Marek Belka, Former Prime Minister of Poland, Kevin Michael Rudd, Former Prime Minister of Australia and Paul Polman, CEO, Unilever Group.

David Lipton expects the world economy to show growth of 3.4% or 3.6% on the basis of the results of 2017. Last year, the forecast was lower (3.1%). According to David Lipton such expectations are underpinned by recovery of developing economies, as well as the economies of Europe and the US. At the same time he noted that the uncertainty related to geopolitical developments was a major challenge. According to his forecast the situation will remain unstable during the next two years and that is going to have an unfavorable effect on the business and international trade.

Martin Wolf told about his meeting with Yegor Gaidar in the 1990s. “I was impressed by his intellect, plans and resolve.”

Martin Wolf said that his vision of the economic situation was sooner pessimistic: “The world politics and the economy suffer together and I, certainly, want the world to change for the better, but I think I am a realist, so I have to be a pessimist.”

Martin Wolf called Britain’s exit from the European Union “idiotism”. “They should not have held that referendum at all. If before I could say that Britain was a moderately mature and democratic state, now I will not say that.”

Мarek Belka, Former Prime Minister of Poland and Former President of the National Bank is certain that structural changes in the world, technological changes and a slowdown of economic growth rates have been the three major economic issues of the past decade.

“Structural changes consist in the rise of China and a relative decline of Europe and the US. That cannot, but have both direct and indirect consequences to economies of the world. Technological changes result in destabilization as financial markets operate online now, while other sectors do not,” Belka said. As regards slowdown of growth rates in Europe, the prospects are optimistic because the balance of payments both of individual households and the European economy as a whole is getting better, Marek Belka said.

According to Кevin Michael Rudd, Former Prime Minister of Australia in the next five years one is going to see a lot of risks and they will outnumber potential growth drivers. Those risks are primarily international relation challenges, particularly, a growing face-off in the US-Chinese relations.

Dmitry Medvedev, Prime Minister of the Russian Federation took part in the discussion. In his speech, Dmitry Medvedev said that participation of the government’s representatives in the Gaidar Forum which was usually held at the beginning of the year became an established tradition.

The RF Prime Minister called the risk of a long-term stagnation a common problem. According to Dmitry Medvedev, economic growth cannot be recovered by financial injections alone, so structural reforms which one has been talking about over the past 15 years are required.

According to Dmitry Medvedev, Russia has managed to pass through the crises better that it was forecasted, however, problems still remain. According to the RF Prime Minister, economic growth in Russia is hindered by a lack of investments and a “loan paralysis” and the risk of technological inferiority is high.

Dmitry Medvedev agrees that a switchover to the digit economy will result in a revision of the role of the state in the economy. Also, he declared that the digit economy would require reforming of the state machinery which had to become more flexible and compact.

After the break, the expert discussion – New Regional Policy – was held under moderation of Аlexei Kudrin, Chairman of the Board of the Center for Strategic Research Foundation and Chairman of the Supervisory Board of the Gaidar Institute. The issues discussed were as follows: how have Russian regions and cities developed in recent years and are we in the trend of global development; what objectives should be set for the new regional policy and can we find a proper balance between staking on strong regions and supporting the lagging ones; does the current system of distribution of authorities provide the incentives and resources for development of regions and cities; how can development of urban agglomerations be sped up and how and on what can the efforts of federal, regional and municipal authorities be coordinated and focused.

Participants in the discussion were the President of the Republic of Tatarstan and governors of constituent entities of the RF.

Rustam Minnikhanov, President of the Republic of Tatarstan believes that regions should be trusted more. According to him, regions are the foundation of the country. Also, Rustam Minnikhanov said that the Republic of Tatarstan experienced a very high burden after holding the Universiade (World Student Games).

Viktor Tolokonsky, Governor of the Krasnoyarsk Territory said that the entire ideology of management is aimed at maintaining stability, rather than motivating development. “I am certain that the state budget should play an important role in the present-day development, while at present that role has diminished,” he said.

Sergei Morozov, Governor of the Ulyanovsk Region believes that the issue of assignment of a larger portion of federal executive authorities to regional authorities has become long overdue.

Svetlana Orlova, Governor of the Vladimir Region says that the economic situation has prompted state corporations to get actively involved in regions. “They brought R&D, new jobs, new production facilities and other.” According to her, such an involvement can be a form of support to regions.

At the same time, Svetlana Orlova is confident that the tax system should remain unchanged.

According to Аnatoly Artamonov, Governor of the Kaluga Region, Russian regions should be assigned more authorities related to every-day life management, but not political ones. A. Artamonov believes that “regions should be motivated more so that all of them become donors.”

Аlexey Prazdnichnykh, Head of the Spatial Development Direction of the Center for Strategic Development stressed that the gaps between the most developed and underdeveloped regions were growing and that process happened worldwide. “From 2000 to 2005, a new trend emerged – the difference between different provinces within one country has become greater than that between countries. Today, one does not have to go to the US and then to Africa to see the difference between a developed country and a developing one. It would be sufficient enough to visit different states of the US,” Alexey Prazdnichnykh said.

Also, Alexey Prazdnichnykh called for reduction of barriers within the country. “People should be given the right to vote by feet and choose a more comfortable place for living inside their country,” he explained.

Аlexander Tsybulsky, Deputy Minister of Economic Development of the Russian Federation believes the issue of assignment of more authorities to regions should be dealt with very carefully. According to him, it is impossible to find a comprehensive solution in Russia. ”The foundations of the regional policy in Russia date back to 1996. In terms of the very definition, the country has changed,” stressed Alexander Tsybulsky. In addition, Alexander Tsybulsky suggested that subsidies should be allocated to regions in return for their obligation to prevent a drop in the level of social and economic situation in those regions.

Participants in the discussion – Banking Services without Banks – discussed the issue of innovations in banking services.

Moderator of the discussion Ruben Aganbegyan, Chairman of the Management Board and Member of the Board of Directors of the Otkrytie Holding, JSC gave the floor to Оlga Skorobogatova, Deputy Chairman of the Central Bank of Russia and then asked Vadim Kulik, Deputy Chairman of the Sberbank to tell about the future of the banking sector. In his speech, Vadim Kulik said that banks would not be able to “outsit innovations” and the banking sector would have to transform and adjust to the needs of consumers among others.

Оleg Tinkov, Chairman of the Tinkoff Bank declared at the discussion: “I do not see what to buy in Britain, it is only trash there. As for China, the situation is almost the same there as in Russia. Take, for example, AliPay (a subsidiary of AliExpress). It is easy to develop in places wh ere there is no competition. AliPay in China is like the Sberbank in Russia.” According to Oleg Tinkov, Chinese companies have no prospects on the Russian market, either, as they cannot compete with the Sberbank and Alfa-Bank.

Answering the moderator’s question, Pyotr Aven, Member of the Board of Directors of the Alfa Bank, JSC said that banks would not disappear altogether, but their number would decrease. Pyotr Aven is certain that those banks which have managed to utilize their technological advantage will remain on the market. “Neither the Sberbank, nor ourselves have to run ahead of the entire planet; we are not Tinkov, he is a revolutionary. We have been receiving stable profits for 20 years and not for two-three years,” P. Aven answered.

The moderator of the discussion asked Аlexei Malinovsky, Head of MasterCard in Russia, Kazakhstan, Belarus and Armenia if “pieces of plastic” would remain in use or turn into “obsolete Nokia”. Answering the question, A. Malinovsky stressed that MasterCard had stopped positioning itself as a “card company” long ago. “We are a technological company. The future of banks is an important issue to us because banks are still our main partners,” A. Malinovsky said. Also, A. Malinovsky drew attention to the fact that at present the company was switching over to card-based technologies, for example, ApplePay and SamsungPay.

Also, the issue of the effect of the technological revolution on the labor market was discussed. Vadim Kulik, Deputy Chairman of the Sberbank said that in Q4 the bank put into service a lawyer-robot device which could file in claim forms. However, due to the above 3,000 jobs would be closed down. “We will try to retrain partially the personnel, but cuts are inevitable,” he said.

Oleg Tinkov said in his turn that in the 1990s there were hordes of accountants in his office. “Now in St. Pete we have opened a product engineering office and there is a horde of product engineers in that big glass building,” he said.

At the expert discussion – Financial Institutions in Russia: Qualitative Changes over 25 Years – participants discussed the influence of financial institutions on corporate development and regulatory environment. The moderator of the discussion was Carol Leonard, Director for the Center of Russian Studies, RANEPA.

Кatharina Pistor, Professor of the School of Law, Columbia University opened the discussion and touched upon the issue of codification of supranational financial systems.

Мaksim Buyev, Dean of the Economics Department of the European University in St. Petersburg spoke about the instruments of evaluating system risks. In particular, he touched upon application of the graph theory in evaluating the stock market volatility. In accordance with the above theory, individual sectors of the economy are not entirely isolated from one another, but correlate. Accordingly, if one sector is exposed to risk, it is likely that the same risk may spread over to adjacent industries. Taking the above factor into account, the system crisis can be identified a few years before it begins by analyzing risks and correlation of individual sectors of the economy or companies.

In his speech, Кoen Shoors, Professor of the Ghent University briefly spoke about the history of development of the banking sector in Russia. He noted that the banking sector growth late in the 1980s was accompanied by a surge of instability – a lot of small banks collapsed and due to that factor households’ confidence in banks diminished. In the 2000s, households’ confidence in banks changed thanks to introduction of the deposit insurance system and strengthening of regulatory functions of the Central Bank of Russia. At the same time, the state interference into the banking sector increased. On the one side, strengthening of the government’s position in the banking sector helped solve the issue of confidence, while on the other side the banking sector became largely state-owned. The financial system deals with placing of assets and that is a source of growth. But the government is often unable to invest funds effectively, so there is no progress. Taking into account that fact, it is necessary to lim it the state influence on the financial system in Russia, Koen Shoors concludes.

In his speech, Grzegorz W. Kolodko, Professor of the Kozminsky University touched upon the issue of state overregulation of the Russian banking sector. Also, he spoke for expansion of the network of banks specializing in long-term financing. “It is necessary to have a large number of banks working with venture capital and facilitating structural changes in the economy at the expense of long-term investment into infrastructure projects,” stressed Grzegorz Kolodko.

In his turn, Lawrence Kotlikoff, Professor of the Boston University and Head of the International Department of Budget Stability Research spoke about his approach to comprehension of the functioning of the financial system. According to Lawrence Kotlikoff, the financial system is a sort of social good. He compares the financial system with roads in which no one wants to invest, but everyone uses and such a situation has an indirect effect on economic and business activities. But as banks take risks and try to earn and do not perform a social good function, there are financial system risks. Lawrence Kotlikoff believes that banks should deal with their primary function, that is, deposit taking, while investing should be left to special mutual investment funds which specialize in management of investments and derivatives markets.

In his speech, Оleg Shibanov, Professor of the New Economic School (NES) touched upon the issue of banks’ bad assets. He reminded that from 2013 the Central Bank of Russia withdrew licenses from 300 banks, that is, precisely one-third of the Russian banking sector. According to Oleg Shibanov, it does not matter whether the above figure is big or small. It is important to what extent the banking sector was cleared from banks which assigned assets to their balance sheets. Oleg Shibanov said that according to some estimates “holes in banks’ balance sheets may be found with a half of the remaining banks.” At the same time, Oleg Shibanov rated highly the work of the Central Bank of Russia during the crisis and called it effective as macroeconomic stability was secured and the inflation rate was retained at a low level.