It is Hardly Possible to Create a Separate Budget of Development

The Ministry of Economic Development of the Russian Federation has submitted to the Government of the Russian Federation a proposal on transformation of the Investment Fund in order to solve the issue of financing of infrastructure projects, said Andrei Belousov, Minister of Economic Development of the Russian Federation.

The Development Fund which according to the above proposal is to be established on the basis of the nonworking Investment Fund is to be funded by means of oil and gas revenues in excess of the value of regulatory allocations to the Reserve Fund. At the same time, the Ministry of Economic Development has proposed to ease the budget rule under which the regulatory minimum of the Reserve Fund should amount to 5% instead of 7% so that 2% of GDP is formed by the resources of the new fund.

If the stance of the Ministry of Economic Development is clear as regards the revenue side of the Fund, there are still some questions regarding the lines of investment. The thing is that establishment of a development budget which includes all the investment expenditures is hardly possible for a number of reasons.

First, as seen fr om international experience organization of such development budgets is accompanied by establishment of a new administrative and supervising authority. The above situation normally results both in growth in management costs and formation of a center wh ere individual companies seek to lobby their interests.

Second, division of the budget will entail a shift of the emphasis in public spendings from social and economic sectors, such as healthcare and education, to commercial profitability of projects.

Third, the investment budget as a separate instrument has no effect on higher efficiency of distribution of the budget and is unable to contribute to higher quality of management decisions.

Most probably, the initiative of the Ministry of Economic Development is a more modest one and mainly boils down to establishment of an authority which is in charge of management of state-financed investments in the innovation and infrastructure sector. Taking into account the fact that institutions of development (Rosnano, RVK, GK Avtodor and other) already operate in that sector, the Development Fund should be a multi-industry institution, that is, without a niche sectorial specialization.

Taking into account the fact that it is hardly possible to change the existing system of investment project selection at the Investment Fund by another one, the difference between the new Fund and its predecessor may consist in different approaches to management of investments and other instruments of attraction of funds in investment projects. Incidentally, the competence of such a Fund should sooner be limited to fulfillment of exceptionally financial and supervising functions with developers or outside management companies entrusted with operating management of projects.

I.А. Sokolov, PhD (Economics), Head of the Budget policy Department