Gaidar Forum-2018: Day One

On 16 January 2018, the international conference ‘Russia and the World: Values and Virtues’ began its work in Moscow within the framework of the Gaidar Forum 2018, traditionally the first major international economic calendar event in Russia.


The program of the Gaidar Forum 2018 differs from that of the previous forums by being focused not only on burning economic issues, but also on social humanitarian and civic ones.

The Forum 2018 accredits 15.4 thousand participants, or about 1.5 times more than the previous one. On the whole, 650 speakers, including 12 foreigners, will deliver their presentations at the Forum’s sessions. It should be noted that this time, most of the foreign experts have come not from the USA and Canada, but from Europe and China.

The first official event of the Forum was the business breakfast devoted to ‘Investment in the Field of Public Health’. Its participants included Minister of Healthcare of the Russian Federation Veronika Skvortsova; Minister of the Russian Federation for North Caucasus Affairs Lev Kuznetsov; President of the Republic of Tatarstan Rustam Minnikhanov; Head of the Republic of Bashkortostan Rustem Khamitov; Governor of Ulianovsk Oblast Sergei Morozov; Governor of Khanty-Mansi Autonomous Okrug Natalia Komarova; and a number of representatives of the business community. The moderator was EY Managing Partner for Russia Alexander Ivlev.

The discussion was focused on public health issues. Its participants exchanged their views on the most optimal strategies for forming a healthy way of life, the desirable healthcare infrastructure, and the possible ways to make cutting-edge technologies benefit society.

On the morning of the Conference Day One, there was an open plenary discussion titled ‘Efficient Budget Expenditure As a Mirror of Efficient Public Administration’. The discussion was chaired by Chairman of the State Duma Committee on Budget Issues and Taxes Andrei Makarov.

In present-day Russia, public administration on the federal level alone is represented by 53 ministries and other government bodies (16 ministries, 19 services and 18 agencies), which comprise the structure of the Government of the Russian Federation. These ministries and other government bodies are staffed by 373.6 thousand persons, who administer more than 66% of federal budget expenditure and simultaneously generate an ever-expanding budget-funded network. The multi-stage character of the public administration system creates administrative problems within the system, obscures the institutional responsibility for implementing various government decisions, and impairs the quality of supervision over the spending of budget resources.

The experts discussed the strategic challenges faced by Russia’s public administration system and the specific measures that should be taken in order to enable the state apparatus to adequately meet tomorrow’s needs. In the course of the discussion, its participants dwelled on a number of issues, including as follows: what should be changed to make the public administration system function more efficiently; whether it would be worthwhile to assess the performance of a civil servant; whether the system of material incentives granted to civil servants should be changed; what should be done in order to reduce the volume of violations and inefficient expenditure in the course of public resource usage; what should be done in order to improve the quality of implementing the powers delegated to the regions and municipal formations; and whether the said powers should indeed be delegated to the regions’ level, with the subsequent redistribution of revenue sources or exchange of the powers in question for some other spending powers.

The experts determined what changes should be made to the system of selection and development of civil servants, and also gave an answer to the question of whether 21st -century civil servants should possess an entirely different set of skills and competencies.

The keynote presentations were delivered by Chairperson of the RF Accounts Chamber Tatiana Golikova and RF Minister of Finance Anton Siluanov.

Tatiana Golikova concentrated on the RF Accounts Chamber’s proposal that the off-budget funds, including the RF Pension Fund, the RF Social Insurance Fund, and the RF Federal Fund for Compulsory Medical Insurance, should be amalgamated into a single state off-budget fund. ‘We should make it unnecessary for each of the three state off-budget funds to create any parallel information systems. The resources that they are currently spending on informatization are sufficiently sizeable. In this connection, we dare take the risk of establishing a single organizational structure – a joint state off-budget fund that would amalgamate all these funds’.

She emphasized that, judging from the best practices accumulated by similar institutions worldwide, a joint fund for compulsory medical insurance should be a unique managerial structure in civic, not public, ownership. ‘Because part of this fund’s budget, namely the insurance contributions, are administered, and will be administered, by the Federal Tax Service. The point at issue in this case is the redistribution of the resources that comprise the revenue side of the fund’s budget. We believe that such an arrangement should be reflected in the Civil Code’, added the Head of the Accounts Chamber.

According to Tatiana Golikova, the creation of a joint structure would make it possible to organize the way of managing this basically new social insurance fund on the principle of social partnership, to increase the transparency of its activities, and to build trust with the population. The Head of the Accounts Chamber noted that at present, the existing off-budget funds administer a total of RUB143.8bn, exclusively generated by insurance contributions.

RF Minister of Finance Anton Siluanov, who also participated in the session, offered no comments directly relating to the idea put forth by the Head of the Accounts Chamber. Some region’s heads, and particularly the head of Ryazan Oblast, spoke in favor of her idea despite the fact that its actual implementation would first of all deprive the regional tier of the budgetary system of its current function of managing the territorial compulsory medical insurance funds (CMIs).

Beside the idea of consolidating the public welfare system, Tatiana Golikova also reasserted, in her presentation, her previously proclaimed plan of liquidating the federal agencies in their current capacity of separate government branches, and integrating them into the existing federal ministries.

Budget expenditures are a direct upshot of the government’s performance quality, according to RF Minister of Finance Anton Siluanov. ‘The way the government management is structured largely depends on how efficiently the government uses the resources that the structure has at its disposal. Many government departments and RF subjects alike are adamantly striving to receive money from the center, the more the better. However, the most important task is to build an actually workable governance system’, he said.

Mr. Siluanov emphasized that one can perform efficiently without substantial resources, but this can only be achieved on the basis of unambiguous goal-setting procedures within the governance system. ‘We also have problems, both at the federal level and in the RF subjects. We have the goals set by the May 2012 Presidential Executive Orders. And the program tools should be built in accordance with these goals’, the Minister explained.

It had been long since Russia’s economic development strategy had last been upd ated, added Anton Siluanov. He then noted that the current strategy was being regulated by more than 400 documents that ‘are absolutely useless’. These documents, according to the Minister, had been largely failing to comply with the tasks outlined by the RF President back in 2012, or to correspond to the resources actually available in this country. ‘They were written at a time when the situation that emerged three years ago had not yet become a reality, [now] we are living in accordance with another financial paradigm. Therefore administrative decisions are not being implemented, and their issuance is either incompatible with the existing realities or is not being translated to the level of a government department or the individuals appointed to implement them’, the Minister added.

According to the Minister, the RF Ministry of Finance, provided that the situation in the world oil market should remain favorable, will increase its reserves by 3% of GDP in 2018. ‘This year, if the current economic situation persists, we will be able to additionally replenish our reserves by approximately 3% of GDP – this is a big sum; of course, if oil prices remain the same’.

Anton Siluanov also said, in the course of the behind the scenes discussions during the Gaidar Forum, that he was not in favor of the idea of raising the rate of personal income tax from 13% to 15%. He added that he, in fact, was totally against any changes with regard to personal income tax, because ‘this is a stable tax.’

The ruble’s current strengthening, observable since the beginning of the current year, is attributed by the RF Minister of Finance Anton Siluanov to the increasing interest, on the part of foreign investors, in the assets and securities issued by the Russian Federation. ‘Now we can see a certain strengthening of the ruble’s exchange rate, this has to do with the strong interest displayed by foreign investors since the start of the current year towards the assets issued into the markets of the developing countries, Russia including.’


The experts who participated in the session were Rector of HSE University Yaroslav Kuzminov; President of the Republic of Tatarstan Rustam Minnikhanov; Acting Governor of Krasnoyarsk Krai Alexander Uss; Governor of Vologda Oblast Oleg Kuvshinnikov; Governor of Ulianovsk Oblast Sergei Morozov; Acting Governor of Novosibirsk Oblast Andrey Travnikov; Acting Governor of Nenets Autonomous Okrug Alexander Tsibulskiy; Governor of Khanty-Mansi Autonomous Okrug Natalia Komarova; Governor of Novgorod Oblast Andrey Nikitin; Governor of Ryazan Oblast Nikolay Lyubimov; Governor of Vladimir Oblast Svetlana Orlova; Head of the Republic of Tyva Sholban Kara-ool; Governor of Tomsk Oblast Sergey Zhvachkin; Acting Governor of Ivanovo Oblast Stanislav Voskresenskiy; and Executive Vice-President of Gazprombank JSC Alexey Chichkanov.

In the framework of the plenary discussion ‘Values and Virtues’, moderated by Rector of the RANEPA Vladimir Mau, its participants touched upon the issue of values changing in response to new challenges: the emergence of state-of-the-art technologies, plunging labor productivity, and visibly growing inequality and protectionism.

In particular, the World Bank’s Chief Executive Officer Kristalina Georgieva spoke, at the plenary discussion, of the shifting human capital share in world GDP and the need to increase investment in human capital.

President of the European Policy Centre, former President Emeritus of the European Council (2009–2014) and former Prime Minister of Belgium (2008–2009) Herman Van Rompuy believes that, in order to boost labor productivity, it is necessary to intensify investment and to put the accent on innovations. He also noted that, in view of the fertility decline and population ageing, technological innovation activity will likewise plunge, and over the next few years, the responsibility for growth will be shouldered by the not-so-numerous younger generation.

He also believes that the obstacle in the way of global development is the presence of populists in politics, and their influence on the economic agenda. Mr. Van Rompuy emphasized the fact that a populist would not take risks seriously, because a populist would never go against popular public opinions prevailing in a country, and that is why politicians do not want to implement long-term reforms and thus slow down the development processes.

According to Minister for Foreign Trade and Development of the Republic of Finland Kai Mykkanen, the key global challenge today is trade protectionism in international markets. By way of example, he pointed to Argentina, the country whose economy blossomed in the 19th and early 20th century thanks to her free trade policy. However, the achievements of all the previous efforts in the economic sphere were squandered after World War II, when the country switched over to protectionism.

Russia’s Prime Minister Dmitry Medvedev centered his speech at the Gaidar Forum around the changes that can potentially be produced by the implementation of new technologies not only in the production sphere, but also in state administration and public education.

He noted that contemporary man must quickly adapt to the technological changes that have a profound impact on practically all the facets of human life. ‘The present time is shifting everything that has been customary for decades if not centuries. These shifts in their deep impact on society are sometimes compared to the invention of printing. This comparison is justified in many respects. But, as any other comparison, it is, nevertheless, somewhat lame. At the time, development of a technology and establishment of new social institutions were divided by a wide gap of several centuries. Now the gap has shrunk to decades, sometimes just years or even months. The question is: Are we prepared for such dynamic and drastic changes? It appears to me, not quite’, said the Prime Minister.

According to Dmitry Medvedev, new technologies have changed the role of the consumer of goods and services. He said that a good example of this phenomenon is 3D printing, which had made consumption more industrialized – ‘now a person can basically design products tailored to his own needs – and therefore, becomes a manufacturer rather than just a consumer’.

The Prime Minister noted that during the process of introduction of new technologies, man becomes the main value and virtue, while the humanistic character of such technologies consists in the fact that they are oriented towards the unraveling of his individual and collective potential. ‘Product personalization has even affected mass and serial production, not to mention such spheres as education and healthcare, which from the very beginning should have been linked to the concrete person. Even today it is obvious that, for example, future education will be a system following an individual learning trajectory, with open educational resources and new approaches to assessing learning outcomes. And the objects of learning will apparently also be different’.

‘The new technological way of life increases the value and virtue of intellectual capital manifold. Human potential is both knowledge and art, as well as the quality of public management. These are the factors that are becoming more and more important in global competition.

‘In these conditions, it is the individual who becomes the main value and the main guideline to making management decisions. In Russia, this happens when any development programs are drafted. As is known, the end of last century was an epoch of high-tech – that is, a period of development of high technologies in industry and agriculture. And now that epoch is overlapping the ongoing epoch of high-hume, the epoch of the high humanitarian technologies designed to maximally develop and efficiently use the individual and collective potentials of people’, remarked the Prime Minister.

Besides, Dmitry Medvedev touched upon the issue of labor market transformation through new technologies. He believes that, on the one hand, unemployment growth is a direct upshot of automation and implementation of new technologies. On the other, automation boosts labor productivity and leads to shorter working hours.

The expert discussion ‘New Trends in Capital Flow: The OECD Code’ focused on the theme of liberalization of international capital transactions.

One of the invited participants in the discussion was Deputy Director of the OECD Directorate for Financial and Enterprise Affairs Pierre Poret, who described the role of the OECD Code in capital movement regulation and its significance for the world business community. The Code was adopted in 1961 with the purpose of easing the constraints on capital flows. The Code as a multilateral agreement is binding for the 35 OECD countries, including twelve G20 members. The Code regulates 16 groups of operations (foreign direct investment, money market operations, forex operations, personal capital movements, etc.).

The Code builds on the principles of non-discrimination (a member state must ensure that the benefits of liberalization measures are equally enjoyed by all the other members and impose restrictions in a non-discriminatory manner), transparency (a member state must disclose the relevant information on barriers to capital movements), and avoidance of new restrictions, or the introduction of restrictions only in compliance with the rules established by the Code.

Deputy Director of the Department for Europe, North America and International Organizations at the RF Ministry of Economic Development Elena Stoyanova noted the importance, for the RF Government, of the issue of accession to the OECD Code, and primarily in connection with Russia’s participation in G20. The OECD has few other document that are as binding for its members as the OECD Code of Liberalization of Capital Movements. The Code contains no strict provisions concerning capital movement liberalization. Russia will still need to decide whether she truly needs to accede to the Code, or not.

Head of the Russia-OECD Center at the RANEPA Antonina Levashenko, who acted as moderator, emphasized the Code’s principal importance for businesses. The participants in the discussion spoke of the existing restrictions in Russia that work against capital movement liberalization - forex market regulation (restrictions on foreign accounts and liberalization requirements), and restrictions on foreign investment and securities. RF Deputy Minister of Finance Alexey Moiseev pointed out that as of today, Russia had abolished mandatory transaction certificates and introduced some alterations in the procedures regulating the use of foreign accounts. He further spoke of the necessity to abolish mandatory repatriation of proceeds denominated in foreign currencies and lift all the restrictions on foreign accounts. The standpoint of the RF Ministry of Finance is shared by the RF Ministry of Economic Development, but the RF Central Bank is still cautious in its approach. In spite of the necessity to abolish the restrictions on foreign accounts, it is nevertheless mandatory to fill in a special form in order to control settlements and the payment balance. Among other things, a system of fines for failure to submit such reports will be enforced.

Antonina Levashenko emphasized that the repatriation requirement and restrictions on foreign accounts are, as a matter of fact, restrictions on movements of capital. None of the OECD Code members presently has any such restrictions.

As far as the liberalization of foreign exchange regulation is concerned, partner in Goltsblat BLP Vladimir Chikin described the alterations introduced from 1 January 2018: abolition of the requirement that a foreign account notification should be submitted in an event of a money transfer from the RF; enlargement of the list of permitted operations with foreign accounts. From 1 March 2018, a mandatory transaction certificate will be abolished, but mandatory entry in records of foreign trade transactions will be introduced instead, which is not conducive to legislation liberalization. Besides, from 14 May, the requirements that banks should be notified of the exact timelines for the execution of obligations assumed under foreign trade contracts will be introduced, and the list of grounds for a refusal to grant permission for a transaction denominated in a foreign currency will be extended.

A presentation titled ‘Foreign Exchange Restrictions in Russia As Barriers to Free Capital Flows’ was delivered by Ivan Khamenushko, Senior Partner at Pepeliaev Group. The speaker described the main components of foreign exchange policy, such as economic measures (interventions) and a legal regime relying on foreign exchange restrictions and control, designed to protect national currency from competition with foreign currencies. And if Russia may indeed lift the restrictions on foreign exchange transactions, the foreign exchange control must in any event be maintained. In this connection, individuals must not be punished for violating the control rules, for example, for carrying out an illegal foreign exchange operation. In order to understand the composition of the system of foreign exchange restrictions in Russia, foreign exchange operations could be arranged into 4 squares. Thus, there exist international current foreign exchange operations (dealing with international trade); foreign exchange operations, foreign or offshore, carried out within the country; and foreign exchange operations (for example, foreign exchange operations on foreign bank accounts). A very strange paradox has emerged. The paradox consists in the fact that although all restrictions on foreign exchange operations within the country have been abolished, international current foreign exchange operations remain subject to the repatriation rule. In this connection, Mr. Khamenushko made a number of proposals: to alter Russia’s legislation - for example, by way of adopting a new wording of the Federal Law ‘On Foreign Exchange Regulation and Foreign Exchange Control’ and abolishing foreign exchange restrictions; and to implement import control through the application of measures designed to prevent money laundering and financing terrorism.

Ms Antonina Levashenko noted that, having found themselves in strained economic circumstances, countries are definitely entitled to imposing restrictions on capital foreign exchange operations.

Pavel Trunin, Director of the Center for Macro-Economics and Finance of the Ye. T. Gaidar Institute for Economic Policy, noted that if economic liberalizations measures are to be introduced as a quid pro quo for creating the possibility to introduce foreign exchange restrictions in time of crisis, it will surely make political sense. However, the state of the country’s balance of payments does not change in response to the introduction of foreign exchange restrictions in time of economic crisis. It will be necessary to thoroughly consider the economic consequences of the proposed introduction of foreign exchange control.

Nevertheless, it should be noted that many countries are able to manage without introducing foreign exchange restrictions and to prevent money laundering all the same.

The business community in the discussion was represented by Anna Nesterova, Chairperson of the Board of Directors of Global Rus Trade. Her presentation was devoted to the development of E-commerce in Russia. The lifting of restrictions on the movements of capital is important for enabling Russia’s national exporters to get access to electronic trading floors, which have become fully-fledged participants in Russian foreign economic activities. The electronic trading floors connect suppliers and buyers; they represent an important link in the foreign-goods supply chain. In many countries, electronic trading floors cooperate with various government agencies. Anna Nesterova suggested that an electronic trading floor should be granted the right to accumulate information on all export transactions and then to submit it to an authorized bank, so that it could be entered in records for the purpose of foreign exchange control.

Ivan Ermokhin, Expert of the RANEPA Center for Competence and Standard Analysis, spoke of the restrictions on foreign direct investments that are incompatible with the OECD Code of Liberalization of Capital Movements: the requirement that an affiliation, representative office, or branch of a foreign not-for-profit organization must acquire State registration and notify the relevant authorized bodies concerning such State registration; the ban on investments in private detective and security services; the ban on the establishment of the affiliation offices of a foreign bank in the Russian Federation, etc.

Leading Researcher of the Gaidar Institute Alexey Vedev pointed out the still persisting issue of the ban that prevents foreign investors from entering certain sectors of the economy. According to Mr. Vedev, it would be best if foreign direct investment could be freed of any restrictions, with the exception of the banking sector. The speaker positively estimated the restrictions imposed on foreign banks, because before such restrictions could be lifted, the problems faced by the national banking system must be solved. It is still disputable how the restrictions can influence the length of the economic crisis period.

Vice-President of Gazprombank JSC Denis Shulakov noted that Russia constitutes an integral part of the world financial system. The existence of modern infrastructure enables Russia to compete with other major financial centers. The local capital markets have a potential for efficient risk diversification and investment attractiveness. One example is Russia’s Moscow Exchange, which rates third in the world by its bond and derivative turnover. Foreign investors are met with restrictions in the Russian market, for example when they place there bonds issued by foreign companies.

According to Alexandra Koval, Director of the Club ‘Russia-OECD’ at the Russian Foreign Trade Academy, the barriers to free capital movements existing in Russia more than double the average number of similar barriers across the OECD. The removal of these barriers is associated with capital movement liberalization. The targets se t for exports cannot be achieved without free capital movement. Russian businesses must have access to foreign capital, and adequate conditions must also be created for free foreign investment in Russia. The speaker pointed to the main restrictions applied in Russia, which are incompatible with the usual practices of the OECD members. These restrictions have to do with direct investment, operations with securities, forex transactions, etc.

Presentations to the reports