the flagship of french business - medef international...of georgia bakhtiyar khamidov, general...
TRANSCRIPT
# 2 (7) | 2019
O F F I C I A L P U B L I CAT I O N O F F B A E AC , I B C
e u r a s i a n f i n a n c i a l & e c o n o m i c
GEOFFROY ROUX DE BÉZIEUX:
MEDEF – the flagship of Frenchbusiness
PERSONALITY
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P.C. AgiusBlockchain and the banking sector of the Republic of Malta
O.BerezovoyFinancial & Banking Association of Euro-Asian Cooperation: dynamic growth and new frontiers
A. ShokhinRussia–US economiccooperation in turbulent times
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November 2019
Nominations 2019: BANKER OF THE YEAR
(for personal contribution
to the development of banking
business)
STANDARD OF STABILITY(bank leader on sustainable
development, stability, holder
of international and country ratings)
TRIUMPH OF TECHNOLOGY(bank leader in the implementation
of modern IT technologies)
Prize:Exclusive author's statuette
The of�icial award ceremony will be held on November
2019 with the participation of representatives
of business, political and cultural circles, national
governments and banks, heads of trade unions and
associations, representatives of leading mass media
of the countries of Eurasia
Award«Financial and Banking
Elite of Eurasia»
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Registration Form and Terms of participation
in the competition: www.�bacs.comOrganizing committee:
tel.: +7 495 663‐02‐08, 663‐02‐13,
e‐mail: bev@�bacs.com of�ice@�bacs.com
Alexander Murychev, Chairman of Editorial Board, Chairmanof Coordinating Council of FBA EAC, Executive Vice-Presidentof RSPP, Chairman of IBC
Anvar Abdraev, President of Union of Banks of Kyrgyzstan
Bakhytbek Baiseitov, President of Association of Banks of the Republic of Kazakhstan
Oleg Berezovoy, General Director of FBA EAC
Andrea Boldi, owner of the company NEMESI S.R.L. (Italy)
Yves Pozzo di Borgo, Former President of friendship group with Central Asia in the Senate (France)
Samvel Chzmachian, Deputy General Director of FBA EAC,Head of Representative office of FBA EAC in Armenia
Alexandre Dzneladze, President of Association of Banks of Georgia
Bakhtiyar Khamidov, General Director of Uzbekistan BankingAssociation
Anatoly Kazakov, Chairman of the Coordination Council of Financial and Banking Council of the CIS
Elena Korobkova, Executive Director of Independent Association of Banks of Ukraine
Manish Kumar, General Director of Soltex Group Ltd., Head of Representative office of FBA EAC in India, Sri Lanka,Bangladesh, Malaysia
Alexander Kuchinsky, Deputy Chairman of FBA EAC Coordinating Council, Chairman of the Association of Belarusian Banks
Berislav Kutle, CEO of Banks Association of Bosnia and Herzegovina
Istvan Lengyel, Secretary General of Banking Association for Central and Eastern Europe
Amirsho Miraliev, Chairman of the Board of Association of Banks of Tajikistan
Valery Murin, Editor in Chief of the magazine "Eurasian Financial and Economic Herald"
Zakir Nuriyev, President of Azerbaijan Banks Association
Svetlana Orlova, General Director of Information and Publishing Center “Eurasia” Ltd.
Bratislav Pejaković, Secretary General of Association of Montenegrin Banks
Krzysztof Рietraszkiewicz, Chairman of Polish Bank Association
Anatoly Tkachuk, Vice-President of FBA EAC, President of “Russian mineral resources” JSC – managing company of GC Rustitan
Dumitru Ursu, Chairman of Moldovan Bankers’ League
Vladimir Vasić, Secretary General of Association of Serbian Banks
FOUNDERS:
Financial & Banking Association of Euro-Asian
Cooperation (FBA EAC)
International Banking Council
(International Coordinating Council of Banking
Associations)
PUBLISHER:
Financial & Banking Association of Euro-Asian
Cooperation (FBA EAC)
Editor in Chief: V. Murin
Executive editor: S. Orlova
Editor: A. Gusev
Corrector: A.Panyugina
Page-proofs: A. Bagaev
Editorial Board: E. Berezovaya, O. Ryazanov
Translators: S. Arkhipova, K. Tereshenko
PUBLISHER'S ADDRESS:
17 Kotelnicheskaya nab., Moscow,
109240, Russia
+7 495 663–02–08/13
www.fbacs.com
PRINTING HOUSE:
Released in the «Granitsa Publishing House» Ltd.
Format 210x297 mm. 124 pages.
ISSUE DATE:
May 2019
Opinions of authors do not necessarily coincide with those of the
editorial office.
The editorial office is not responsible for the content of the ad-
vertisements. Advertised goods and services are subject to
mandatory certification. Reprint is allowed only with the written
permission of the editorial office.
Manuscripts are not reviewed and not sent back.
Reprint of texts and photos of the magazine “Eurasian Financial
& Economic Herald” is allowed only with the written permission
of the editorial office.
When quoting, reference to the magazine is required.
Registered in the Federal Service for Supervision of Communica-
tions, Information Technology, and Mass Media (Registration
number ПИ № ФС77-75043 dd. 19.02.2019).
EDITORIAL BOARD:# 2 (7) | 2019
eurasian financial & economicHERALD
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Глобальная экономика
PERSONALITY
Geoffroy Roux de Bézieux. MEDEF – the flagshipof French business
EAEU TODAY AND TOMORROW
Т. Valovaya. Macroeconomic policy of the EAEU in the era of advanced financial technologies
RSPP NEWS
A. Shokhin. Russia–US economic cooperation in turbulent times
FOUNDER’S PAGE. FBA EAC
General Meeting of FBA EAC Members
O.Berezovoy. Financial & Banking Association of Euro-Asian Cooperation: dynamic growth and new frontiers
FBA EAC: Business life
PROFESSIONAL STANDARDS
D. Mashtakeeva. In the coming years the Russian labor market will totally switch over to professional standards
FOUNDER’S PAGE. IBC
A. Abdraev. Development of modern financial instruments:problems, risks, safety (Kyrgyzstan)
Z. Nuriyev. Digital transformation of banking system of the Republic of Azerbaijan
FINANCIAL SYSTEM OF THE COUNTRIES OF EURASIA
Government securities – safe investment (Serbia)
P.C. Agius. Blockchain and the banking sector of the Republic of Malta
HISTORY OF MONEY
V. Krasnikov. Two types of Cuban peso
PROJECTS
A. Lisitsyn. «Digital Belt»: opportunities and prospects
TECHNOLOGIES
A. Antipov. Food sublimation as a factor of economic development
PRACTICE
V. Karamzin. Infant food industry – development and tasks
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Dear colleagues and friends!
Winter is behind us,summer is coming soon -and the past period wehave tried to fill withvigorous activity aimedat the further develop-ment of the FBA EAC soit remains an effectivebusiness platform for in-teraction between repre-sentatives of various sec-tors of the Eurasianeconomy.
Perhaps, the important thing to note is the growingpotential of the Association. In fulfilling the mission tointegrate the economic space of Eurasia, we cannot butlook ahead, cannot fail to take into account futuretransformations in the world of the economy, and thepast period clearly testifies to this: now the Associationis not just confidently solving its tasks - its activitiescover more and more ways and areas of economics. So,at present, a large-scale system of relations between thebusiness and the banking community is already beingbuilt within the framework of the FBA EAC, and manyof our projects have grown into full-fledged areas of itsactivities.
These and other achievements were noted by theparticipants of the annual General Meeting of themembers of FBA EAC, held in March. There we alsolooked to the future, approved a range of tasks for thenext five years.
The important event for all of us has become XIIRussian Business Week which is annually held by theRussian Union of Industrialists and Entrepreneurs.Within the framework of the Week, the traditionalRSPP Congress was held, attended by the President ofthe Russian Federation V. Putin.
More information about these events can be foundin this issue of the Herald, which by tradition we havetried to fill with interesting and diverse materials cov-ering the most important issues of the economy and thefinancial and banking sphere. Readers find out aboutthe coming implementation of professional standardsin the Russian economy, the large-scale project of theEuro-Asian digital platform Digital Belt, cryptocurren-cies and risks associated with them, as well as the digi-tal transformation of the banking system and the prob-lems of regulating financial technologies. We have notforgotten about leisure – our photo contest continuesand we look forward to works from amateur photog-raphers from different parts of the world.
Time doesn’t wait – and the Association tries tokeep pace with it. That is why there are still a lot ofevents ahead of us, which we will definitely continueto talk about on the pages of the Herald.
See you next time!
chairman’s corner
CONTENT
Alexander Murychev, Chairman of Editorial Boardof the magazine "Eurasian Financial and Economic Herald"
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019
MACROECONOMIC POLICY OF THE EAEU IN THE ERA OF ADVANCED FINANCIAL TECHNOLOGIESТatyana Valovaya. The interest of theEEC to the usage of cryptocurrenciesand relevant technologies relates firstof all to their potential possibility toinfluence the macroeconomic stabilityof member-states with regards to thecoordinated macroeconomic policy ofthe EAEU.
FBA EAC: DYNAMIC GROWTH AND NEW FRONTIERSOleg Berezovoy. FBA EAC has shift-ed from the traditional idea of abanking association as a structurewhich protects the professional inter-ests of certain participants to the ideaof a multi-level, client friendly sys-tem of interaction between businessand banking society.
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RUSSIA–US ECONOMIC COOPERATION IN TURBULENT TIMESAlexander Shokhin. The United Statesremain a technological leader and thecentre of the global financial systemand will likely continue to be so fordecades to come.
BLOCKCHAIN AND THE BANKINGSECTOR OF THE REPUBLIC OF MALTAPierre Clive Agius. The Maltese bank-ing sector, recognised by the WorldEconomic Forum amongst the top 30worldwide in terms of stability, has al-ways been at the forefront in adoptingnew strategies.
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DEVELOPMENT OF MODERN FINANCIAL INSTRUMENTS: PROBLEMS, RISKS, SAFETYAnvar Abdraev. The emergence ofnew technologies is caused by theneeds of the current generation whowants to get services in a digital formand at the same time requires ex-cluding the human factor. The digitaltransformation of the financial serv-ices market changed the financial en-vironment of most countries.
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ПрактикаPersonality
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 5
GEOFFROY ROUX DE BÉZIEUX:
THE FRENCH BUSINESS MOVEMENT (MOUVEMENT DES ENTREPRISES DE FRANCE - MEDEF) –IS THE MOST IMPORTANT REPRESENTATIVE OF THE FRENCH BUSINESS. WITH 800 000 ENTER-PRISES MORE THAN 95% OF WHICH ARE SMES MEDEF IS A RECOGNIZED AND NECESSARYPARTNER OF THE FRENCH GOVERNMENT.MEDEF IS MAINLY FOCUSED ON JOB CREATION AND SUSTAINABLE DEVELOPMENT, WHILE INA CONTEXT OF FAR-REACHING CHANGES (ECONOMIC, DEMOGRAPHIC, DIGITAL, SOCIAL), ITSMISSION IS TO PROMOTE FREE ENTERPRISES AND ENCOURAGE AND ENHANCE ENTREPRE-NEURSHIP.IN ORDER TO ACHIEVE THIS GOAL MEDEF TAKES INITIATIVES THAT ENABLE BUSINESSES TOBENEFIT FROM A FAVORABLE LEGISLATIVE AND REGULATORY ENVIRONMENT IN THE ECO-NOMIC, FISCAL, LABOUR, ENVIRONMENTAL, AND SOCIAL FIELDS AND TO DEPLOY THEIR AC-TIVITIES BOTH IN FRANCE AND ABROAD. ONE OF THESE INCENTIVES IS MEDEF INTERNA-TIONAL AIMED TO SUPPORT FRENCH COMPANIES ABROAD, SET COOPERATION WITH STATELEADERS AND PRIVATE SECTOR OF MANY COUNTRIES. EVERY YEAR MEDEF INTERNATIONALARRANGES DELEGATIONS OF FRENCH BUSINESS-LEADERS TO THE TARGETED COUNTRIES ASWELL AS WELCOMES IN FRANCE THE LEADERS OF COUNTRIES AND GOVERNMENTS, MINIS-TERS OF ECONOMY, FINANCE, REGIONAL AND LOCAL AUTHORITIES.MEDEF PROMOTED THE PRINCIPLES OF “SUSTAINABLE DEVELOPMENT” RAISING THE AWARE-NESS THAT THE PROTECTION OF THE ENVIRONMENT CAN BE A COMPETITIVE ADVANTAGE.SINCE JULY 2018 GEOFFROY ROUX DE BÉZIEUX, A FAMOUS FRENCH BUSINESSMAN HAS BEENTHE HEAD OF MEDEF.
«MEDEF –THE FLAGSHIP OF FRENCH BUSINESS»
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– Recently on July 3, 2018 you becamethe President of the French BusinessMovement MEDEF. MEDEF is theleading network of entrepreneurs inFrance including the internationallevel. The organization promotestrade, technological cooperation, in-vesting, creates long-term partner re-lations especially on the developingmarkets, sets direct contacts withstate leaders and private sector ofmany countries. Could you dwell up-on the mission and the goals ofMEDEF?
– The leading role of the Westerneconomies including the French one isfacing a challenge. The French compa-nies and enterprises have to work in thesituation of large-scale geopolitical, eco-logical, technological and social changes.They have to structure new economicmodels in the conditions of internation-al competition, to pursue production inFrance with reduced resources and en-ergy breakthrough.
French enterprises also have to quick-ly introduce digital technologies, whichhave become part of every-day life fortheir clients, suppliers, partners and em-ployees.
In addition to the above mentionedFrench companies have to take into ac-count the changes in the society includ-ing high unemployment among youngpeople, numerous migration flows aswell as the high mobility of goods andcapital.
It is important that business has theanswers to all the challenges that our so-ciety is facing. With the current social,economic and ecological situation busi-nessmen find the most innovative solu-tions. And we all have to take our standin order to play the main role in the con-text of the circumstances.
MEDEF is an integral player of theprocess. Our slogan is “Act together forsustainable development”. This sloganalso supports the general mission ofMEDEF defined in the valid charters.Being written 20 years ago theycouldn’t take into account today’s Eu-rope, the sustainable development, orthe corporate social responsibility(CSR).
In achieving these goals the updatedMEDEF works to be an example andtake the responsibility for observance ofpublic interests in Europe – reaching allthe corners of France for better under-standing of economic realities and rep-resenting all enterprises, tackling all is-sue referring to the society.
– How do you structure your workin France and beyond?
– MEDEF as a voice of all French compa-nies is the main partner of the authori-ties: we advocate the interests of busi-nesses in all economic and social agen-cies – on the local, regional and nationallevels, convey to the authorities theopinions of the entrepreneurs to im-prove the conditions of their work.
MEDEF is also represented in Brus-sels and beyond France.
The House of French enterprises inBrussels represents MEDEF and its mem-bers in Eurocommission and Europarlia-ment. MEDEF is also the member ofBusiness Europe which includes all 40European management trade unions. Atthe European level we work on betterintegration and the development ofcommon market of the EU.
Besides the branch MEDEF Interna-tional assists the French companies inpromoting their position internationallyin particular in the developing coun-tries. Every year we arrange about 200meetings and delegations with the high-est authorities and private sector, wehave 85 geographical councils embrac-ing 150 countries.
– Proceeding with the internationalactivity of MEDEF, what is the corner-stone of the cooperation and jointprojects of the French companies andcompanies from other countries?
– Firstly, MEDEF unlike the British, Ger-man or Italian corresponding institutesis the only organization representing allsectors of economy at once – industry,banking sector, insurance, services andso on. We always take this into accountin our work.
Secondly, we closely cooperatewith our European and global part-ners in different formats – from thework in inter-European (Business Eu-rope) and international (Global Busi-ness Coalition, Business at OECD,ICC) organizations to the cooperationwith informal groups (B7, B20) andwithin bilateral agreements with sim-ilar organizations of other countries –Germany, Italy, Israel, Mexico… Thisjoint activity allows to share our solu-tions, to connect the French compa-nies with foreign partners and to de-velop common positions in accor-dance with current events in theeconomy and trade.
It’s not always easy. We have to beopen, flexible, diplomatic, especiallywhen our points of view and interestsdiffer. On the whole the negotiations
Personality
About the author
Geoffroy Roux de Bézieux
Graduate of ESSEC and a DESS at the Uni-
versité Paris-Dauphine Geoffroy Roux de
Bézieux has more than 22-year experience
as an entrepreneur. In 1996 he founded The
Phone House – the first chain of shops en-
tirely dedicated to mobile phones. In 2004
he pursued his career by founding Omea
Telecom which started the first alternative
mobile operator (MVNO) Breizh Mobile. Ten
years later, in 2014 Geoffroy Roux de
Bézieux founded Notus Technologies, a
group active in the agri-food industry,
leisure and new technologies.
He is a Vice-President of the Peugeot SA
industrial group supervisory board and a
Parrot board member. He has also spent
time as a board member at IMS,
Seloger.com, Micromania, Budget Telecom,
and Nocibé.
Since 2000 Geoffroy Roux de Bézieux has
been an Angel investor for many start-ups
contributing to the rise of French Tech.
In 2009 he created ISAI with Pierre Kosci-
uzko-Morizet, Ouriel Ohayon and Stéphane
Treppoz, an investment fund for Internet
entrepreneurs.
Between 2003 and 2008 he was vice-pres-
ident then president of CroissancePlus, the
association for growth of entrepreneurs.
He has also been a member of the France
Investment Council and participated in the
Attali Commissions. He has also been Vice-
President of the Fédération Française des
Télécoms.
In 2008-2012 he was a Vice-President and
then a President in Unedic for MEDEF and
vice-president of an Employment Center.
Since July 2013 he has been an assistant
Vice-President and a treasurer of MEDEF.
Holding this post he has founded the Digi-
tal University.
Together with his wife he founded a charity
ARAOK Foundation supporting humanitari-
an associations.
He is a Knight of the Légion d’Honneur and
Officer of the Ordre national du Mérite
Author of the works: «Salauds de Patrons!
Pourquoi les Francais n’aiment plus leurs
chefs d’entreprise?» (Hachette, 2007),
«Pour sortir de la crise, le capitalisme»
(Editions du Moment, 2011).
with our partners from other countriesare very much similar to those with for-eign authorities and the representativesof economic and social spheres.
– France and Russia cooperate quiteclosely. For example your country ac-tively participates in job creation inRussia. What is MEDEF’s work in Rus-sia like in general? What are the diffi-culties and how hard is it to overcomethem?
– French companies are widely repre-sented in Russia: total investmentamount equals to 20 billion Euros andour companies rank first among the for-eign employers in Russia – it’s about140 000 employees. Our trade turnoverhas recommenced its growth after 2017–2018 and is now reaching the pre-crisislevel – it evidences that our relationshave become stable regardless of sanc-tions.
MEDEF through MEDEF Interna-tional actively works with Russia – astrategic partner of France and Europe.30 years of joint activity have createdclose ties, mutual trust providing forlong-term plans.
We organize regular meetings be-tween the leaders of the French compa-nies and the major Russian representa-tives of public and private sectors.There are discussions of actual indus-tries such as transport, energy, telecom-munication, urban development, in-dustry. Business issues and business cli-mate are also on the agenda. We dealwith these issues directly with ourRussian partners on-site – RSPP repre-sentatives and the Minister of econom-ic development of the Russian Federa-tion Maxim Oreshkin.
We also tackle the problem of bilat-eral relations very often, particularly atthe sessions of the CEFIC (Franco-Russ-ian Economic, Financial, Industrial andTrade Council). It concerns the regula-tions at the level of the Russian Feder-ation and the Eurasian EconomicUnion.
These meetings are always positivebecause we always find partners amongour Russian friends ready to listen andsmoothen things down for the Frenchenterprises in Russia, as much as possi-ble. However leaving out “internal” diffi-culties in every-day work the sanctionsconsiderable hinder business in particu-lar due to the exterritorial Americansanctions. We often encourage theFrench and Russian authorities to takemeasures for retaining the sovereignty ofour economy facing the unilateral deci-sions without consent of partners.
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– Could you tell us about what is in theMEDEF priority area when it’s aboutworking in the Eurasian space partic-ularly in Russia or in Azerbaijanwhere you will go soon? Which indus-tries are you most interested in? Whatare the most important projects and ar-eas within your cooperation withthese countries that you could men-tion?
– For MEDEF Eurasia is a vast regionstretching from Central Europe to Mon-golia. Of course, this part of the world in-cludes the most diverse economieswhere the markets of such large indus-trial countries as Turkey and Russia arerepresented and developed as well asmarkets that are closely linked to the EU– for example, the market of Uzbekistan.
In addition, the Eurasian countriesare the heterogeneity of the political sys-tem and business conditions.
And in order to engage in conditionsof these diversity, MEDEF Internationaldivides Eurasia into macro-regions, in-cluding countries that are most similarin characteristics.
Our priority is the countries of Eura-sia seeking to diversify their economyand reduce dependence on the exportof commodities. We are talking hereabout countries such as Kazakhstan,Mongolia and Azerbaijan where I willgo in July 2019 with a large delegation,representing French business both largeand medium and small. Food industry,digital technologies, tourism, logisticroutes, ecology these are the main topicsthat we will discuss in Baku with the au-thorities of Azerbaijan.
Other countries of Eurasia express aneed to modernize their industrial sec-tor, to explore the field of alternative en-ergy sources due to future environmen-tal problems, to structure new sectors ofthe economy and protect their digitalsovereignty. We offer our knowledge inthese areas and always try to highlightand emphasize the uniqueness of theFrench solutions.
Russia pays a lot of attention to theindustry of the future - we could discussthis topic in June, at the next economicforum in St. Petersburg. In addition, theindustry of the future is closely linkedto climate change since the moderniza-
tion of Russian heavy industry, thesource of environmental pollution, is abig challenge not only for Russia but forthe entire planet. New solutions for theindustry of the future could increase theefficiency, competitiveness and helpsave recourses and energy. Moreoverthey will contribute to the transforma-tion of the Russian economy and itsworkforce.
We also follow closely the needs ofRussian cities and the development ofthe food sector, the latter gained rapidlocal development after the Russian em-bargo on products from the EU, the USAand Canada in August 2014.
Last thing that I would note thetransport infrastructure which is, ofcourse, important in a country, whosearea is almost 27 times larger than thearea of France! Railways and highways,river and air routes require developmentand integration in order to make logis-tics more efficient.
Russia is a huge country which is astrategic partner for Europe and for ourcompanies and the current situationcannot change this.
– How do you assess the current stateof business and the economy of Eu-rope in general and of France in partic-ular? And what are the most relevanttasks now, in difficult conditions forthe whole world, facing entrepre-neurs?
– The state of the global economy ismarked by the strengthening of posi-tions of those countries where theprotectionism is practiced, in particu-lar in the USA and China. I deeply be-lieve in the role of free trade on aglobal scale because it bears growthand development. But neverthelessfree trade should be balanced - coun-tries should not introduce such rulesthat in fact protect only their ownmarket.
Within the framework of MEDEF Icreated a committee of economic sover-eignty with a view to moving the har-monization of rules in the EU andFrance as opposed to tools that the USAuses (exterritoriality of American law)and China (theft of technology and in-accessibility of government orders).
In France, after the first successfulmeasures of President EmmanuelMacron, such as the enterprise taxationand labor legislation reform, we are wit-nessing popular protests that reflect theextremely uneven development be-tween our regions which may later be-come an obstacle to growth. The role ofMEDEF today is to be able to respond tothese challenges through the proposalsthat we formulated in the process “GreatNational Debates” (fr. Grand Débat Na-tional) which have been conducted inFrance since January 2019: increasing themobility of workers and their purchas-ing power through the issuance ofbonuses, non-taxable, assistance toyoung people by concrete measures(creation of start-up capital, assiatance inobtaining a driver’s license).
– When you were an assistance ofVice-president and Treasurer ofMEDEF, you founded Digital Univer-sity. Could you tell us what the pointof its activity is?
– Since I am strongly convinced that dig-ital transformation is a major upheavalfor all entrepreneurs regardless of theirsize and field of activity, MEDEF allo-cates a separate time to this processevery year.
The activity of the Digital Universitycovers all French enterprises and is aimedto raise awareness and support of Frenchcompanies, in particular small and medi-um enterprises which have not yet takenadvantages of all digital opportunitiesthat this kind of revolution gives us.
The Digital University allows to seehow French enterprises follow this trendin each individual industry and alsoshow and evaluate both the alreadyknown and potential advantages of ourcountry in this field.
After four successful graduates, Dig-ital University of MEDEF continues todevelop thanks in particular to cooper-ation with France Digitale. We offer apitching format to stimulate innovativedevelopment between small and medi-um businesses and start-ups. Our goal isto find and identify those who will bethe main engines of digital technologyand who could work with to acceleratethe digital transformation.
Personality
Rapid development of the state control mechanisms: automation of tax accounting and control systems,tracking of transactions and goods flows, tougher requirements to contractor checking lead to additionalcustom payments and fines for the foreign trade operators as a result of incorrect import documents,wrong article codes and poor estimation of customs duties, etc.
Current legislation permits to collect from a fair foreign trade operator the taxes payable by his unfaircontractor, up to the fourth echelon.
Since 2017 tax collection has become possible on account of the property, while a nominal director hasthe right to considerably reduce the share of his responsibility giving testimony against the real decision-makers. Considering the standard customs and tax audit “extent” of three years the liability can be basedon the facts which are not classified as violation at the occurrence of the event but fall under the definitionaccording to a new legislation and law enforcement practice.
…The best way to manage the risks is to detect them.
Seminar for foreign trade operators on management of exposure risks during post clearance control
The seminar gives opportunities:
to prepare for an in-office or an on-site audit of a customs authority, to make timelyadjustments to one’s work;
to choose the best strategy and protection plan in case of initiated prosecution of an administrative offenceand criminal trial;
to look at the audit after the release of goods, through inspector’s eyes.
Practicing experts of customs and tax legislation will share their recommendations for the customs riskmanagement and smoother interaction with customs authorities.
Organizers:
Association of Customs Auditors and Consultants (ATAiK)
Customs and Logistics Center of FBA (CLC FBA)
Financial & Banking Association of Euro-Asian Cooperation (FBA EAC)
Registration: prior registration is required, seats are limited.
Participation: free of charge
Venue: 17 Kotelnicheskaya nab., Moscow
Time: 10.00–12.30
Contacts: Maria Serebrova, Development Director of ATAiK, tel.: +7 985 233 4301, email: [email protected]
June 14,2019
to preparefor customs and tax
inspectionHOW
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MACROECONOMIC POLICYOF THE EAEUIN THE ERA OF ADVANCED FINANCIAL TECHNOLOGIES
Т.Valovaya,Member of the Board – Min-ister in charge of Integrationand Macroeconomics of EEC
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”IN THE LAST DECADE THE WORLD HAS BEENGOING THROUGH A NEW PHENOMENON - CRYP-TOCURRENCIES. TOGETHER WITH DIGITAL TECH-
NOLOGIES – THE BASIS FOR CRYPTOCURRENCIES –THEY HAVE AFFECTED A LOT OF FACETS, FIRST OFALL ECONOMY LEADING TO A NEW FINANCIALTOOLING AVAILABLE TO ALL THE MARKET PAR-TICIPANTS, TO THE RETHINKING OF THE MEANSOF ECONOMIC ACTIVITY AND WAYS OF ECONOMICREGULATION.
“
EAEU today and tomorrow
New technologies in the economy
A while back the cryptocurrenciesprovoked political repercussions on themarket: firstly they were private money,secondly they were strongly anony-mous due to the new technologies inthis sector, particularly the blockchaintechnology.
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 11
The interest of the Eurasian Econom-ic Commission to the usage of cryp-tocurrencies and relevant technologiesrelates first of all to their potential possi-bility to influence the macroeconomicstability of member-states with regardsto the coordinated macroeconomic pol-icy of the EAEU. At the same time thetechnologies cryptocurrencies base onare the key element of implementationof the Union’s digital agenda. Theymight go far beyond transactions withcryptocurrencies. These digital tech-nologies can potentially be implementedin different areas and evidence thechanges in the social and economic sys-tem, they can even influence the verysubstance of macroeconomic regulation.
The distributed ledger in the moderntechnological variant is certainly de-manded, attracts large investments andis supported by central banks in differ-ent countries. Noteworthy that the con-cept peculiarity of the distributed ledger– which is to ensure data storage on dif-ferent media forming a common database without a single control center – iswell-known and has been applied for along time: as an example is the ability ofpeople to collect and exchange informa-tion at the time when there weren’t even
books, dictionaries, school books andthe writing itself.
Today this fundamentally provedmethod of data storage has gained a dig-ital image and can be used in differentareas of economy.
Blockchain is known for its certainadvantages – low commissions, instanttransactions, high security due to cryp-tion, small number of agents, simple datatransfer and identity verification, lowerinformation disbalance. Such technolo-gies provide for security and flexibilityof different services and can be used forthe work of payment systems, bank sys-tems control and robot-controlledprocesses, logistic platforms, cyber secu-rity, voting, copyright protection, decen-tralized systems of energy supply.
There are large prospects for the ap-plication of new digital technologiesparticularly in finance and economy.However there is still uncertainty aboutthe birth and further development ofcryptocurrencies – the most famous re-sult of the technology of distributedledger, which stipulates the need of thein-depth analysis of the phenomenonand the work-out of approaches to itsregulation. The need exists not only atthe level of separate states but also at the
integration level especially when thecountries have already included themacroeconomic regulation into their in-tegrational agenda. When the EAEUmember-states became concerned aboutpossible risks of cryptocurrencies andblockchain technologies the EurasianEconomic Commission started workingon the problem having taken on the roleof a supra-national coordinator.
International seminar “Blockchain and cryptocurrencies – new channels of influence on the macroeconomic policy in the Eurasian region”.
Moscow, Russian Federation, headquarters of EEC, February 12, 2018
About the author
Tatyana Valovaya
Member of the Board – Minister in charge of
Integration and Macroeconomics of EEC.
Date of birth – April 11, 1958.
In 1980 she graduated from the Moscow Fi-
nancial Institute, Department of International
Economic Relations.
Doctor of economic sciences.
1999 to 2012 – Deputy Director and then Di-
rector of the Department of International Co-
operation of the Government of the Russian
Federation at Office of the Government of the
Russian Federation.
Since February 1, 2012 - Member of the Board
(Minister) on the Main Areas of Integration
and Macroeconomics of the Eurasian Eco-
nomic Commission.
Possible ways of regulation
The cryptocurrencies boom was inthe groove two years ago, the price ofbitcoin was reaching top record levelsevery day, all this without official posi-tion of state bodies regarding the use ofcryptocurrencies and without legisla-
tive principles of the regulation forthose market players who operatedwith cryptocurrencies and blockchain.The Commission accurately studied notonly theoretical aspects but also inter-national experience with regards to reg-ulatory “forks” which in general are thefollowing:
to allow the use of cryptocurrencies,to fix related legislative aspects andimpose taxes;to prohibit the use of cryptocurren-cies;to stay put, not to impose any regula-tion in the sector.Gradually it became clear that you
can’t stay put, it is necessary to keep upwith the times and ensure macroeco-nomic stability in the conditions of newtrends. However it was difficult to de-fine regulatory terms due to a largenumber of related contradictions, someof which still remain.
On the one hand cryptocurrenciesand blockchain technology is on theagenda at the high level discussions, in-cluding G20 summits, on the other handcryptocurrencies are losing value, theICО investments decrease, and the Inter-net giants such as Google and Facebookban ICO ads on their resources.
History shows that all pioneer prod-ucts in the financial and economic sys-tem provoke ambivalence. Largescale in-novations bring largescale risks, for ex-ample the creation of the customarybank notes was also accompanied by bigproblems. As for the cryptocurrenciesthe period of their top level prices has
12
International seminar: “Cryptocurrencies and blockchain – a phenomenon of the XXI century: regulatory challenges in the context of macroeconomic stability of the EAEU”.Minsk, the Republic of Belarus, HighTech Park, June 198, 2018
Panel session at the III International Forum“Eurasian Week”: “Cryptocurrencies andblockchain: new economy or insecure experiment?”
Cryptocurrency market situation: market cap and number *
Data source: https://coinmarketcap.com/
* Data valid for the first week of January of each year.
РMarket capitalization of all cryptocurrencies, $ bn
Number of cryptocurrencies
EAEU today and tomorrow
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 13
probably passed confirming the predic-tions about their temporary nature andat the same time their importance not asan instrument itself or an asset, but asthe key element of the new global socialand economic reality being formedthese days.
The spurt that was seen signaledthat digital financial technologies beara huge untapped potential, and thecountries realizing the effect of the sec-tor on the economy arrived at the es-tablishment of the relevant regulationsystem.
The previous year was marked bythe intense interest of governmentalbodies and international organizationsto the search of the most suitable reg-ulatory means, and the experts agreeon the need of further study of thepossibilities of the cryptocurrenciesand blockchain regulation. Today it isthe most favorable time to graduallywork out a strategy for such regulationwhen the craze related to the privatecryptocurrencies has died out and thethreat of a direct destabilization of theglobal financial system doesn’t comefrom them anymore. There is still noentrenched approach, countries areonly experimenting. For example
small countries, off-shore territoriestry to take an advantage of these inno-vations to attract foreign investmentscreating quite liberal legislation; othercountries restrict cryptocurrenciestransactions to reduce risks and avoidparallel channels of currency circula-tion.
What happens in the EAEU?
Towards macroeconomic sustainabil-ity, one of the main tasks of the EEC isto promote a favorable economic envi-ronment, avoiding risks of divergenceof regulator practices and working to-wards convergence in conditions for ef-fective business at any point of theUnion. This has necessitated the full in-volvement of the Commission in coop-eration with the EAEU countries in thefield of cryptocurrency and blockchaintechnology.
The EEC has become the platformwhere member states are discussing thisissue and developing the common ap-proaches. A series of joint events in var-ious countries of the Union was heldthereby to involve business representa-tives and experts from member states tothe discussion.
Today the dialogue on cryptocurren-cy and blockchain in the EAEU contin-ues developing which confirms the needfor a common platform. This year theCommission together with the memberstates plans to establish a commonframework for understanding terminol-ogy and regulatory principals in thisarea. A glossary, containing the maindefinitions, will be adopted, that willgive an opportunity to discuss the topicof cryptocurrency and blockchain in thesame language throughout the Unionand the regulation approaches will be re-flected in the Commission’s recommen-dation. All this will make the discussionmore systematic.
Many other international organiza-tions, not only the EEC, are working inthis regard. Originally, the Commis-sion carried out its activities in thisarea on the principal of openness tothe interaction with international ex-perts, including the OECD specialists.Cooperation on the EEC site with theinvolvement of other international or-ganizations is particularly importantin order to correlate the approachesdeveloped in the Union with thosecurrently being formulated in theworld.
Erevan, the Republic of Armenia
October 23, 2018
Expert seminar: “Cryptocurrencies: their place in the system of currency circulation and influence on macro economy”,
Moscow, the Russian Federation, headquarters of EEC, December 18, 2017
Despite the secondary role that eco-nomic ties have traditionally played inU.S.–Russia relations, as the confronta-tion that has been raging since 2014 (andis likely to continue for a long time tocome) and the sanctions, the UnitedStates is and will remain an importanteconomic partner for Russia for the fore-seeable future. The true volume of trade– and especially investment – ties couldbe several times larger than official sta-tistics indicate and it would appear thatthe United States is among Russia’s topfive trade and economic partners (al-though officially it is in 6th place).
Russia’s substantial dependence onthe United States in certain sectors ofthe economy (metallurgy, engineering,aviation, finance, ICT) persists, both interms of exports and imports. It is diffi-cult to curtail imports and exports en-tirely within a short period of time.Gradual diversification is necessary. Firstof all, this would involve reducing therole of the U.S. dollar in settlements be-tween Russia and third countries andcreating measures to protect Russia’s re-lations with third countries from U.S.sanctions. With the understanding that
this diversification will take years toachieve. There is also an indirect nega-tive dependence on U.S. extraterritorialsanctions that is detrimental to Russia’srelations with third countries.
Russia’s financial dependence on theUnited States is of particular impor-tance. This dependence is a consequenceof the fact that a significant part of Rus-sia’s national wealth is made up of ex-ports, is denominated in dollars and iseven stored in U.S. deposit accounts(it was previously stored in the U.S. na-tional debt). What is more, in recentyears, Russia has become a part of theAmerican technological platform and,accordingly, the need to continue to useU.S. technologies. It is unlikely that Rus-sia will be able to get away from eitherquickly. What is more, Russia is still in-terested in obtaining American tech-nologies for the sake of modernizing theeconomy and attracting capital from theUnited States.
With partial exceptions in the nu-clear sector, the mutually dependent re-lationship between Russia and the Unit-ed States is asymmetrical. In this regard,the decision of the Russian leadership to
not resort to tit-for-tat measures in re-sponse to the U.S. sanctions (banningsupplies of Russian titanium alloys, rock-et engines, non-ferrous metals, etc.)seems completely justified. The coun-try’s economic interests dictate that thiscooperation should continue.
Despite the sharp collapse of eco-nomic relations between Russia and theUnited States in 2014–2015, on thewhole, they withstood the stress test ofthe confrontation and sanctions and inmany ways have adapted to the deteri-orating political situation. There was anoticeable increase in trade turnover be-tween the two countries in 2017 (by$4 billion, according to official statis-tics), as well as an increase in the volumeof accumulated U.S. investments in Rus-sia (by $1 billion according to the CentralBank of Russia). Russia’s accumulated in-vestments in the United States occurredone year earlier. The positive trend con-tinued in 2018.
On the one hand, this indicated thatthe initial shock of 2014 has passed, andthe sanctions are now viewed by busi-nesses in both countries as the norm.While the adoption in the August 2017
14
RSPP news
RUSSIA–US ECONOMIC COOPERATIONIN TURBULENT TIMES:SUMMARY ON MARCH 13 WITHIN THE RUSSIAN BUSINESS WEEK ORGANIZED BY RSPP A JOINT CONFER-ENCE OF THE INTERNATIONAL DISCUSSION CLUB “VALDAI” AND RSPP WAS HELD WITH THEPARTICIPATION OF THE RUSSIAN-AMERICAN COUNCIL FOR BUSINESS COOPERATION. THE CON-FERENCE WELCOMED THE LEADERS OF THE LARGEST BUSINESS UNIONS FROM RUSSIA ANDTHE USA, REPRESENTATIVES OF BUSINESS AND STATE BODIES. THE PARTICIPANTS SUPPORTEDMAXIMUM DE-POLITICIZATION OF BUSINESS COOPERATION, THE DEVELOPMENT OF ECONOM-IC RELATIONS ON A PRAGMATIC BASIS IN THOSE AREAS OF MUTUAL INTEREST WHERE THE CO-OPERATION IS OBVIOUSLY ADVANTAGEOUS. AFTER THE DISCUSSION THE PARTICIPANTSFORMED A NUMBER OF RECOMMENDATIONS TO PRESERVE THE ECONOMIC RELATIONS OF RUS-SIA AND THE USA AND TO PREVENT THEIR FURTHER DEGRADATION.
Form the speech of RSPP President A.Shokhin at theconference “Russia-US economic cooperation in turbu-lent times” at the Russian Business Week March 13, 2019
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 15
of the Countering America’s AdversariesThrough Sanctions Act (CAATSA) inthe United States means that the sanc-tions will not be lifted any time soon, itis understood that, in the absence of fur-ther sharp political escalation, it is un-likely that “total” sanctions will be im-posed against Russia in the short termbecause of how important individual ar-eas of economic cooperation with Russiaare for the United States, its allies andthe global economy as a whole.
On the other hand, the intensifica-tion of economic relations points to in-creased confidence in the Russian econ-omy, a recognition of its stability, and itreflects the country’s successful recoveryfrom the economic recession of 2015–2016. The main factors for the sustain-ability of U.S.–Russia relations are: • Russia’s continued (for now) depend-
ence on the export of a range of prod-ucts to the United States and EUcountries and, consequently, the de-sire to avoid sanctions in this area(primarily aluminium and non-fer-rous metals);
• The United States’ continued (fornow) dependence on the import of
certain Russian products (titanium al-loys and rocket engines);
• The commercial attractiveness of op-erating on each other’s markets de-spite the “toxicity” of Russian compa-nies and the Russian market broughtabout by the sanctions;
• The selective nature of U.S. sanc-tions, which (thus far) are not all-en-compassing and cover a small num-ber of sectors of the Russian econo-my and a range of U.S.–Russia eco-nomic ties;
• Russia’s connectedness to the Ameri-can technological platform;
• The continuing attractiveness of theU.S. domestic market and its financialsystem, including for storing its goldand foreign currency reserves, thepreservation of the dollar as a worldreserve currency and the currency ofinternational settlements;
• Russia’s integration into the global fi-nancial system. They minimize the likelihood of a
further dramatic decline in economic re-lations between the United States andRussia, provided that the confrontationdoes not escalate in the coming years
and “total” sanctions are not introducedagainst Russia.
Right now, we can say that there aresix main pillars of economic relations be-tween Russia and the United States,which appear to be very stable: • The export to the United States of
Russian products that are importantfor the U.S. economy and/or theeconomies of its key partners (alu-minium and non-ferrous metals, tita-nium and titanium products, RD-180rocket engines and nuclear fuel).
• The import from the United States ofproducts that are important for theRussian economy (aircraft and air-craft parts, software, drilling rigs andturbines, medical devices and equip-ment, pharmaceuticals). • The purelymarket-based cooperation betweenthe two countries (exports of Russianoil products, crude oil and mineralproducts to the United States and im-ports of American motor vehicles,spare parts), which has thus far re-mained untouched by the sanctions.
• The trade in services, which is deter-mined by market factors and doesnot fall under the sanctions.
A. Shokhin – President of the Russian Union of Industrialists and Entrepreneurs
• The U.S. investment projects in Russiaand Russian investment projects inthe United States that are not subjectto sanctions. Investment cooperationwill likely continue at roughly thesame level in the short and mediumterm, that is, without any largescalefluctuations in either direction.
• The intensive financial cooperationbetween Russia and the UnitedStates: two thirds of Russian finan-cial resources accumulated throughexports continues to be held in U.S.dollars in deposit accounts, al-
though these investments are gradu-ally declining; and U.S. capital playsa significant role on the Russianstock market). Not only will the U.S. sanctions
against Russia not be lifted in the comingyears or even decades, they will mostprobably be tightened. The most likelyscenario is that they will be expandedgradually, affecting an ever-growingnumber of companies, entrepreneursand types of activity. We cannot rule outthe possibility of sharp, wave-live jumpsin the qualitative tightening of sanc-
tions, such as the Defending AmericanSecurity from Kremlin Aggression Act(DASKAA) that was reintroduced intoCongress in February 2019. However,tighter sanctions are more likely to beadopted in the event that the Ukrainiansituation suddenly worsens or newcrises emerge in U.S.–Russian relations.The likelihood of introducing “total”sanctions against Russia similar to thoseimposed against Iran is small given thesize of the Russian economy and the de-gree to which it is integrated into theglobal economy.
It is unlikely that the sanctionsagainst Russia will remain at the currentlevel, and the prospect of an easing ofthe sanctions is inconceivable at best.
Deglobalization, one of the funda-mental trends of global economic devel-opment, will also have a negative impacton economic relations between Russiaand the United States. The crisis of theinternational free trade regime, thegrowing protectionism and mercantil-ism in the foreign economic policy of theUnited States and numerous other coun-tries, the reshoring of industrial produc-tion and the unpopularity of liberal for-eign economic policies will reduce thepolitical significance of integration intothe global economy and interdepend-ence. As a result, those factors that limitthe introduction of much tougher sanc-tions against Russia today (the non-in-troduction and ultimate lifting of
16
RSPP news
U.S.–Russ 2010 2011 2012 2013 2014 2015 2016 2017January –
September2018
23 416,6 31 009,0 28 233,5 27 637,1 29 078,9 20 909,9 19 972,0 23 129,9 18 018,7
31 787,0 43 068,0 40 201,0 38 326,0 34 497,0 23 526,0 20 327,7 24 019,9 20 855,9
12 319,9 16 425,3 12 867,1 11 135,1 10 582,7 9456,4 9269,4 10 632,2 8610,8
25 713,0 34 652,0 29 398,0 27 120,0 23 689,0 16 388,0 14 536,1 17 021,4 15 885,7
11 096,7 14 583,7 15 366,4 16 502,0 18 496,2 11 453,5 10 702,6 12 497,7 9407,9
6074,0 8416,0 10 803,0 11 206,0 10 808,0 7138,0 5791,6 6998,5 4970,2
TurnoverFederal Customs Service of Russia
TurnoverU.S. Department
of Commerce
Exports from Russiato the U.S.
Federal Customs Service of Russia
Imports from Russiato the U.S.
U.S. Departmentof Commerce
Imports from theU.S. to Russia
Federal Customs Service of Russia
Exports from the U.S. to Russia
U.S. Departmentof Commerce
Table 1. U.S.–Russia Trade Turnover in 2010–2018 ($ million)
according to Official U.S. and Russian Statistics
Source: Federal Customs Service of Russia (FCS), www.customs.ru ; United States Census Bureau of the Unites States Department of Commercehttps://www.census.gov/foreign-trade/balance/c4621.html
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 17
the sanctions against RUSAL and En+and the direct recommendation of theUnited States Secretary of the Treasuryto not impose sanctions on Russia’s na-tional debt) may no longer be taken intoaccount in five to seven years’ time.
Against the backdrop of the con-frontation between the United Statesand Russia and the further strengthen-ing of the U.S. sanctions, economic re-lations in strategically important sec-tors (aviation, space and, to a certaindegree, mechanical engineering) willbe drastically reduced to the minimumnecessary “core.” Each party will striveto produce products and componentsthat are vital to their security inde-pendently, or in cooperation withfriendly partners. This “shrinkage” willbe targeted in nature and will not becharacteristic of the general picture ofeconomic relations between Russia andthe United States as a whole.
Due to objective market factors,many areas of U.S.–Russia trade and in-vestment relations that have not been af-fected by the sanctions, or have onlybeen partially affected by them, will,from a commercial point of view, contin-ue to benefit both sides and will even beable to expand in the coming years, de-spite the sanctions and the political con-frontation. The sanctions affect an ever-smaller part of the palette of trade andeconomic relations between Russia andthe United States, as they are focusedprimarily on the financial and energysectors. The sanctions do not affect suchareas as household goods, the fast foodindustry, public catering, the automo-tive industry and aircraft manufactur-
ing, and they are not likely to, so coop-eration in these areas will persist.
In the medium term (three to fiveyears), economic relations between Rus-sia and the United States will either re-main at the current level or gradually ta-per off. The latter scenario is the morelikely. We are unlikely to see sharp upsand downs in trade and investment. Anumber of factors will stand in the wayof an increase in their volumes: the sanc-tions, the scale, quantity and severity ofwhich will continue to grow in the com-ing years; the desire of both sides to re-duce their dependence on each other instrategic industries, the growing compe-tition between the United States andRussia on the markets of third countries;
and the disappearance of the interest onthe part of the United States in Russianenergy, except as a competitor. At thesame time, market factors, the integra-tion of Russia into global financialprocesses and its belonging to the Amer-ican technological platform will preventa further collapse in relations.
A further reduction in economic tiesis likely in the longer term (five to sevenyears). U.S. dependence on Russian met-allurgical and mechanical engineering(rocket engine) exports will either dis-appear by the end of that period or willlose its current significance. The politicalsignificance of Russia’s integration intothe global finance system will also weak-en in the context of the deglobalization
U.S.–Russ 2011 2012 2013 2014 2015 2016 2017January –
June 2017
January –June 2018
Turnover
growth, +/– %
Exports
growth, +/– %
Imports
growth, +/– %
Balance
Table 2. U.S.–Russia Trade in Services in 2011–June 2018 ($ million)
according to Official Russian Statistics
9225,4 10 242,8 10 912,3 10 285,6 7696,3 7397,1 7657,1 3360,0 3 894,2
– +11,0 +6,5 – 5,7 – 25,2 – 3,9 +3,5 +15,9
4366,9 4110,9 4275,1 3677,7 2774,9 3384,7 3566,5 1591,4 2 115,4
– – 5,9 +4,0 – 14,0 – 24,5 +22,0 +5,4 +33,0
4858,5 6131,9 6637,2 6607,9 4921,4 4012,4 4090,7 1768,6 1 778,8
– +26,2 +8,2 – 0,4 – 25,5 – 18,5 +2,0 – +0,6
– 491,6 – 2021,0 – 2362,1 – 2930,2 – 2146,5 – 627,7 – 524,2 – 177,2 336,5
Source: Central Bank of the Russian Federation, https://www.cbr.ru
of the world economy and the spread ofeconomic nationalism. Today it still pre-vents the US from imposing the increas-ingly harsh sanctions; however, this isunlikely to be the case five to sevenyears from now. The general sanctionsregime will probably be far more strin-gent than it is today. It is highly unlikelythat the sanctions war will be over fiveto seven years from now.
In the foreseeable future, economicrelations between Russia and the UnitedStates will be dominated by indirectforms of cooperation that are not reflect-ed in official statistics: trade and invest-ments through third countries and in-vestments through offshore companies.
In these conditions, it would be op-timal for Russia to take a selective ap-proach to the developing its relationswith the United States. In the shortterm, the areas of cooperation wheredependence on the United States ismost noticeable (ICT, the import of air-craft, aircraft parts, medical devices andpharmaceuticals) or which are impor-tant to the economy right now (the ex-port of metallurgical products), shouldbe preserved. At the same time, howev-er, Russia should step up the diversifica-tion of its economic ties, substitute anumber of products that are importedfrom the United States (or replace withimports from other countries) or try tolocalize their production by U.S. com-panies operating in Russia. The sanc-tions had a sobering effect on the Russ-ian elites. The faith in the supreme reli-
ability of Western markets and banksthat had built up over the past fewdecades has disappeared, and pro-West-ern sentiments are fading. The most ef-fective way to reduce Russia’s depend-ence -20- -21- on the U.S. sanctions is toreduce the role of the U.S. dollar intrade settlements with third countriesand continue withdrawing Russian de-posits from American banks.
It would make sense to continue co-operation with the United States inthose areas that bring commercial bene-fits, are not considered to be a securitythreat and are not prohibited by sanc-tions, but with the understanding thatthis cooperation could “shrink” as an in-direct consequence of the sanctionsregime. In this regard, it is necessary tocontinue to develop alternatives.
It is necessary to depoliticize eco-nomic relations with the United Statesthat remain and not position them as ameans of improving political relations.Otherwise, the U.S. leadership and polit-ical elite will view them as an obstacleand an irritant. Further attempts to in-tensify economic cooperation “fromabove” in order to improve political re-lations should be abandoned. Such ac-tions have not led to the desired result,and could be disastrous in current con-ditions. Not only will the creation of var-ious commissions and high-level groups– and their public activities in particular– not convince the American politicalelite of the impracticability of imposingsanctions against Russia, they may have
the opposite effect right now: they willbe the ones telling U.S. lawmakers andthe executive branch who else to imposesanctions against. The current non-pub-lic activities of such structures as theAmerican Chamber of Commerce, theRussian-American Business Council andthe U.S.–Russia Business Council appearto be quite sufficient at present.
It would be wise to create an infra-structure that helps Russian and Ameri-can companies comply with the U.S.sanctions regimes and feel confident do-ing business within the confines of them.Many private companies, particularlysmall-scale operations, may be wary ofdeveloping cooperation between Russiaand the United States, despite its com-mercial viability, because of the sanc-tions, even if their potential activities donot fall under sanctions and are unlikelyto do so in the near future. In this regard,it would be useful to have experts andstructures that could advise them on thisissue and, where necessary, help thempresent their activities in such a way thatthey do not fall under restrictive meas-ures (prepayments instead of loans, car-rying out operations through thirdcountries and partners, etc.). In the nextdecade, there will be greater demand forsanctions experts than for specialists inWTO regulations and private interna-tional law.
Creating mechanisms to protect eco-nomic relations with third countriesfrom the extraterritorial sanctions of theUnited States is an absolute priority. To
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RSPP news
U.S. direct investmentin Russia and Russian
investment in the United States
2013 2014 2015 2016 2017January – June
2018
Equity participation
Revenues reinvested
Debt instruments
Total incoming
Table 3.
Direct Investment: From the United States in Russia and from Russia in the United States in 2013–2018 ($ million). According to Official Russian Statistics
306 1020 256 941 27 489 345 819 297 1055 289 201
103 41 227 244 – 5 0 – 7 10 4 0 – 11 0
76 – 322 225 468 187 330 63 43 194 – 929 – 21 107
485 739 708 1 653 209 819 401 872 495 126 258 308
Direct cumulativeinvestments of the United
States in Russia andof Russia in the United
States
2013 2014 2015 2016 2017January – June
2018
Equity participation
Debt instruments
Total cumulative
17 907 19 895 1969 5574 1461 5054 2307 5963 2413 6066 2729 6117
72 1 048 – 283 1 002 – 125 1102 – 69 1256 728 999 571 1032
17 979 20 943 1686 6576 1336 6156 2238 7219 3141 7065 3300 6117
Source: Central Bank of the Russian Federation, https://www.cbr.ru
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
Fromthe U.S.
FromRussia
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 19
do this, interaction with major state- andquasi-state-owned enterprises in thesecountries that are guided by govern-ment impulses just as much as they areby market factors needs to be built, andthe country needs to move away fromsettlements in U.S. dollars in trade withthese countries. This is particularly trueof Russia’s trade with China and India,where settlements in U.S. dollars cur-rently account for approximately 90 percent of Russia’s exports and over 70 percent of its imports.
The United States remains a techno-logical leader and the centre of the glob-al financial system and will likely con-tinue to be so for decades to come, orlonger if it succeeds in crushing Chinaand forcing it to change its model ofeconomic development. The “TrumpRevolution” is also likely to spur the de-velopment of the U.S. economy. In thisregard, Russia’s strategic economic inter-est in the United States remains un-changed: gaining access to capital andtechnologies; using cooperation withthe United States as an instrument tomodernize the country’s economy.From a tactical point of view, this can-not be done while the confrontation be-tween the two countries persists andthe United States desires to inflict ageopolitical defeat on Russia. However,cooperation in individual sectors is bothpossible and desirable.
Ignoring the major increase in U.S. in-vestments into the Russian energy sectorand cooperation in the development ofoffshore fields, Russia’s main prioritieswith regard to the United States in thisarea in the current climate are: the jointregulation of the world oil market;
preservation of nuclear energy coopera-tion; and harmonization of the rules ofcompetition in the markets of thirdcountries.
In the metallurgical industry, itwould be wise to maintain the currentlevel of cooperation and try to preventthe United States from imposing sanc-tions against Russian metallurgical com-panies, including through lobbying onthe part of EU countries. According toexperts, if such sanctions are introduced,it is likely that the industry will have tobe nationalized.
In mechanical engineering, it is im-portant to maintain investment coop-eration with American engineeringcompanies, encourage them to localizeproduction in Russia in non-securi-tized sectors and sectors that have notbeen greatly affected by the sanctions(transport, auto manufacturing, ma-chine tool building, etc.) and expandthe use of Russian-made componentsand materials.
In the aviation sector, Russia needs topreserve cooperation with Boeing, bothin terms of importing aircraft, and interms of delivering titanium parts to theUnited States. At the same time, the pro-duction of a large number of compo-nents for Boings intended for the Russ-ian (and EAEU) market should be en-couraged in Russia. At the same time,Russia should try and reduce its depend-ence on American components in theconstruction of aircraft (the Sukhoi Su-perjet and the MC-21), taking advantageof import substitution and cooperationwith other countries. To the extent thatit is possible, existing projects in thespace industry should be maintained
(commercial launches, delivering crewsto the International Space Station andexporting RD-180 rocket engines until areplacement has been found) and a dia-logue on the development of a regulato-ry base for non-military space activitiesshould be initiated with the UnitedStates.
In terms of ICT, it would be wise toencourage cooperation between Russianand American IT companies, includingworking together in the markets of thirdcountries, for example the former Sovietcountries. Mechanisms for offering legalassistance to Russian IT companiesshould also be created in order to ensurecompliance with the sanctions require-ments and reduce the “toxicity” of thesecompanies in the United States.
Russia’s priority in the agro-industrialcomplex is to reduce its dependence onthe import of American breeding mate-rials, crop seeds, trout and salmon hatch-lings and seed potatoes. It would beworthwhile to maintain cooperation inthe food production and catering indus-tries.
Russia’s dependence on imports ofAmerican medical and pharmaceuticalproducts will probably continue in theshort term. Given the fact that a signifi-cant amount of the goods produced byU.S. pharmaceutical companies are sup-plied via third countries, the UnitedStates is the second largest supplier ofsuch goods to Russia. Russia’s prioritiesin this area include improving the invest-ment climate in order to attract Ameri-can investments, localizing productionand stimulating exports of Russian phar-maceutical products.
In the banking sector, it would be ad-visable to preserve the demand of U.S.portfolio investors for the financial lia-bilities of Russian banks and other seg-ments of the economy, thereby reducingthe likelihood of even harsher financialsanctions being imposed against Russia.It is even more important to reduce theshare of operations in U.S. dollars in for-eign trade settlements, primarily withthe BRICS countries.
One promising area of economic re-lations with the United States is the pro-vision by Russian specialists of remoteservices to American consumers withrespect to the development of telerobot-ics and telepresence technologies. Thisprimarily concerns health technologies(Russian physicians treating patientsfrom the United States remotely) andeducation (Russian instructors teachingremotely at American universities),where Russian specialists are cheaperthan their American counterparts yetequally competent.
The Vice-President of FBA EAC Ana-toly Tkachuk opened the Meeting. Hewelcomed the participants and pointedout that in the last five years Associationhas not only proved its feasibility but hasalso grown in quantity and quality. Afterthat he gave the floor to the Chairman ofCoordinating Council AlexanderMurychev.
In his speech A.Murychev dwelledupon the development of the structureof FBA EAC, goals and strategic priori-ties. As a focus area of Association henamed the development of effective fi-nancial instruments to meet the businessneeds of its members and partners.
Then the Vice-President and theChairman of Coordinating Council pre-sented FBA EAC Membership Diplomasto new members of Association.
After that the meeting proceeded tothe agenda.
The FBA EAC General Director OlegBerezovoy spoke about the work of As-sociation during the period from 2013 to2018 and about the most promising focusareas.
He pointed out that in 2013-2018 theAssociation has grown in number, sever-al international structures were createdsuch as the legal center, the customs andlogistic center, the financial corporation,the human resources center, the infor-mation and publishing center, contact-center, commodity exchange, consultingcenter. The General Director also re-minded that due to a well-coordinatedsystem of representative offices the As-
sociation today is represented in 20countries on Eurasia, and the recentMeeting of Coordinating Council madea decision to open new FBA EAC repre-sentative offices in Mongolia, Moldova,the Republic of Korea, Malta and Serbia.
The Meeting then welcomed the re-port of Konstantin Topornin, the Chair-man of the Audit Commission, whosereport was approved and the work ofAssociation was confirmed as satisfacto-ry. He reported about the work of theCommission.
After that the discussion of the re-ports began. Every speaker told aboutbusiness opportunities of the Associa-tion within his responsibilities. The re-ports included:
Anatoly Tkachuk – FBA EAC Vice-President;Alexander Murychev – Chairman ofCoordinating Council;Andrey Bespalov – Chairman of Coor-dination Council of the EurasianCenter of Human ResourcesAndrey Lisitsyn – senior researcher ofthe Institute of Industrial Policy andInstitutional Development of the Fi-nancial University under the Gov-ernment of the Russian FederationVladislav Karasyuk – President of theEurasian Customs and Logistic Cen-terIgor Sinchyrin – Deputy Director ofSPC “Mashinoexpert” Ltd.Roman Fadeev – Vice-President on fi-nance of “Silk Way” UCE JSC
Alma Obaeva – CEO, NP “NationalPayment Council”Maria Serebrova – General Director ofthe Association of Customs Auditorsand Consultants (ATAiK)Vladimir Obydenov – Head of AntaresGroup CompaniesAnatoly Kazakov – Advisor to the Of-fice of the Chairman of the ExecutiveCommittee – CIS Executive Secre-tary, Chairman of the CoordinationCouncil of CIS Financial and BankingCouncilPavel Nefidov – General Director ofCIS Financial and Banking CouncilMarat Baitokov – 1st Vice-President,Chairman of the Executive Commit-tee of the Association of Banks of theRepublic of Kazakhstan
At the end of the General Meetingthe composition of managing bodies ofFBA EAC was elected. After the votingit was unanimously decided to elect forfive years as the President of AssociationBakhytbek Baiseitov (the Republic ofKazakhstan), as Vice-Presidents - Ana-toly Tkachuk (Russia) and KumarManish (India). The Chairman of theSupervisory Board was elected TimurZhaksylykov (the Republic of Kaza-khstan), the Chairman of CoordinatingCouncil - Alexander Murychev (Rus-sia), the General Director - Oleg Bere-zovoy (Russia). The Meeting also decid-ed on the composition of the Superviso-ry Board, the Coordinating Council andthe Audit Commission.
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Founder’s page. FBA EAC
GENERAL MEETING OF FBA EAC MEMBERS
ON MARCH 6, 2019 IN MOSCOW IN THE HEADQUARTERS OF FINANCIAL & BANKING ASSOCI-ATION OF EURO-ASIAN COOPERATION ON 17 KOTELNICHESKAYA NAB. THE GENERAL MEET-ING OF THE MEMBERS OF THE ASSOCIATION WAS HELD TO HEAR REPORTS AND ELECT NEWOFFICIALS. THE AGENDA INCLUDED THE ACTIVITY OF ASSOCIATION DURING FIVE YEARS,GUIDELINES FOR 2019 AND FOR THE NEXT FIVE YEARS, ELECTION OF MANAGEMENT BODIESOF FBA EAC.
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Five years have passed since the es-tablishment of FBA EAC, and todaywe can assert that its hallmark andmajor advantage is that it unites notonly financial and banking structureson its platform, but also the players ofthe real sector of economy from thecountries of Eurasia. FBA EAC hasshifted from the traditional idea of abanking association as a structurewhich protects the professional inter-ests of certain participants to the ideaof a multi-level, client friendly systemof interaction between business andbanking society. The Association isconstantly searching for new forms
and methods of business and bankscooperation, for innovative financialinstruments.
Summing up the results of FBA’swork it is necessary to mention the proj-ects which have contributed most to theAssociation’s development.
During these five years a “Bank ofprojects” of FBA EAC has been formed.The most part of the projects were prac-tical – like search for investors, businesspartners, coordination of multilateralprojects. The examples of internationalcooperation of the recent years are theproject “VOLGA-BUS” for the produc-tion of electro buses in Volgograd with
the participation of the French andRussian companies, the Armenian-Chi-nese project for the construction of afactory to produce electrical goods inArmenia, the construction of vegetablestorehouse in Tula, the Russian-Indianproject in the Tver region to grow andproceed flax.
Also worth mentioning are such proj-ects as the Universal Commodity Ex-change “Silk Way”, the Eurasian Cus-toms and Logistics Holding Company,Digital platform of the Eurasian Eco-nomic Union, the European Union andChina “Digital Belt”, the Eurasian Hu-man Resources Center.
Oleg Berezovoy,General Director of FBA EAC
FINANCIAL & BANKING ASSOCIATION OF EURO-ASIAN COOPERATION:DYNAMIC GROWTH AND NEW FRONTIERS
One of the current activities of theAssociation originated in the project ofthe Eurasian Human Resources Center(Center), created to provide the membersand clients of the Association with up-to-date HR-services and qualified specialists.Extending the project, an HR Develop-ment Center was created on the basis ofthe Center together with the Council forProfessional Qualification Developmentand the Eurasian Economic Commission.
The competitive environment en-courages the companies to innovationswhich leads to changes in the manage-ment models and the instruments ofknowledge management. The qualifica-tion and competence of personnel de-fine the price of a company, becomemore critical and expensive resource.
In order to overcome the currentmarket contradictions one needs to con-
solidate the intellectual and research ef-forts in HR sector policies, HR technolo-gies and practices which have the con-tent and the accounting flexibility forcorporate context to constantly developthe companies. This goal is topical againboth for the Russian companies and forthe international labor market players inthe Eurasian space.
The Association incorporated aQualification Assessment Center, withtrained experts and branches in Erevanand Bishkek having launched a net-work of examination centers allthrough EAEU.
The head of the Eurasian Human Re-sources Center today chairs a Workgroup of the EAEU Business Council onthe contingency of specialists’ qualifica-tions for different kinds of performancein the EAEU member-states.
Andrey Bespalov, Head of the project
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The Development concept of cus-toms audit on the EAEU territory, ap-proved at the FBA EAC General Meetingin 2018 has grown into a pilot project tobe implemented on the platform ofEurasian Customs and Logistics HoldingCompany. A new program product ofthe Association of Customs Auditorsand Consultants (ATAIK) has been cre-ated and passed evaluation test. It wasworked out on the basis of a unique pro-priety methodology for customs audit.
The effective system of interactionbetween customs – CIS (Customs Infor-mation System) and the favorable cli-mate for foreign trade operators in 28 EUcountries was anticipated by the exten-sive use of customs audit in such key ar-
eas as customs regulation, risk manage-ment, categorization of foreign trade op-erators, follow-up control based on auditmethods.
Thus the introduction of customs au-dit in the EAEU will solve most hotproblems in the customs regulation andalso will apply the obligatory interna-tional standard of WTO.
Following the customs audit the for-eign trade operators with solid reputa-tion only are selected. These operatorsare defined as fair and can recon on theremoval of most risk profiles of theirgoods at the declaration stage, in otherwords to recon on the “green corridor”.
Another contemplation at the EAEUlevel is the possibility to give to the fair
operators the right to declare the goodsin all national customs bodies in theEAEU member-states. At the beginningit will allow the EEC to lay out the ap-proaches to the future abolition of the“residence principle”.
The customs audit can also become alegitimate alternative to the inspection,mandatory for all operators who haveclaimed the status of an Authorized Eco-nomic Operator. While the audit findingcan confirm the financial soundness of acompany according to Article 433 of theCustoms Code of the EAEU.
The nearest plan is to create a Workgroup under the EEC or the EAEU Busi-ness Council involving all the partiesconcerned.
Vladislav Karasyuk, Head of the project Maria Serebrova, Head of section Vladimir Obydenov, Head of section
Within the pilot project of FBA EACon the establishment of the UniversalCommodity Exchange new settlementinstruments were worked out and of-fered to the foreign trade operators, new
opportunities for business developmentwere proposed to SME (for which thisproject was actually designed).
The Universal Commodity Exchange“Silk Way” is a working structure on theFBA EAC platform. Obviously the maintask of the “Silk Way” UCE is to ensurethe exchange space and provide to all in-terested players equal rights and oppor-tunities for their foreign trade activity,for the expanding of the target market,faster settlements and lower transactioncost prices.
Due to synergetic effect from theinteraction of other FBA EAC projects,such as the Eurasian customs and logis-tic holding company and the DigitalBelt, the “Silk Way” UCE is supposedto become an experimental platformfor exchange relationships betweenthe traders within the Eurasian Eco-nomic Union and to unite the ad-vanced technologies in logistics, cus-toms, digital technologies and banksettlements.
The main goal of this project is to cre-ate and develop a common financial andeconomic, trade space in the EAEU andbeyond. The project concept is to gener-ate an interaction system for the foreigntrade operators of the EAEU countriesand financial institutes of these coun-tries through an exchange market. Theintermediary of the process is the clear-ing center of the “Silk Way” UCE in closecooperation with the “Bank CenterCredit” (the Republic of Kazakhstan).The clearing center ensures settlementswithin one working day between the ex-change players in six currencies (RUR,CNY, KZT, SOM, $, €). The players (buy-ers and sellers) have the opportunity tonominate and pay for any commodity inany of these currencies. The exchangemechanism allows deals without limita-tions as to the jurisdiction of the playersand type of the exchange commodities.All trades are open, the information isupdated daily online on the exchangewebsite.
Roman Fadeev, Head of the project
Founder’s page. FBA EAC
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Another promising trend of the As-sociation which emerged from the co-operation between FBA EAC and theNational Payment Council is a Con-cept of digital platform for theEurasian Economic Union, EuropeanUnion and China called “Digital Belt”to be implemented up to 2022. Theproject “Digital Belt” is a complex ofinformation and technological, organ-ization and legal mechanisms provid-
ed by standardization and automationof business processes, a remote inter-action between market players in or-der to select and sell goods, work,services with minimum expenses. It issupposed to be achieved by transpar-ent information, collection of maxi-mum amount of demand and supply,effective settlements with minimumtransaction expenses and conversioncosts.
Andrey Lisitsyn, Head of the project
One more work stream was initiatedby the needs of the participants of break-out sessions during the annual MoscowInternational financial and economic fo-rum and resulted in the creation of aCenter of innovative technologies of FBAEAC. It is designed to research the keyeconomy industries and their growthrates as well as to search and introduceadvanced technologies and equipmentto the benefit of Association’s membersand partners.
The Center will focus on the coordi-nation, to the benefit of the EAEU, ofthe innovative technological solutions,their effective support, integration andpromotion within the development in-
dustries at the level of regional and in-ternational programs, plans and proj-ects of rapid development. The Centerwill provide services in such EAEU in-novative development areas astelecommunication, finance and insur-ance, construction, transport, innova-tive production, agriculture, biotech-nologies, new energy, health, ecology,knowledge.
The clients of the Center will im-prove their investment activity, engi-neering and innovative technologies in-troduction with regards to the use of sci-entific and technical potential of theEAEU countries and the existing inter-national platforms.
Igor Sinchyrin, Head of the project
An important project of the Associa-tion is the Moscow International finan-cial and economic forum of FBA EAC. Ithas become a benchmark for new focusareas: many projects and incentives ap-peared due to business communicationsof its participants. During five years itsaw about a thousand participants from38 countries. In 2018 the Forum includ-ed the meeting of the InternationalBanking Council. The Association washosting banking unions from 18 coun-tries of Europe and Asia including suchlarge associations-members to IBC as CISand BACEE.
Another traditional event of FBAEAC is now the competition “Financialand Banking Elite of Eurasia”. In the lasttwo years the representatives of financialand banking sector from 11 countrieswere honored with awards.
Worth mentioning is the informationand promotion element of the Associa-tion’s work. This year the FBA EAC pressorgan – the magazine “Eurasian Finan-cial & Economic Herald” was incorporat-
ed as a mass media in the Federal Servicefor Supervision of Communications, In-formation Technology, and Mass Media.The important role plays the Associa-tion’s website – a unique mass media, abrand identity of the organization. As-
sociation has set a challenge to promoteits website in the search engines of thosecountries where FBA EAC has its repre-sentative offices. One should mentionthat promotion of the Association’swork and the discussion of crucial issues
related to the financial and bankingsector of economy are also enhancingFBA’s business area and contribute tocloser cooperation between all theplayers involved into the developmentof economic relations on the territoryof Eurasia.
Another “brand identity” of Associa-tion is the international photo contest“The world through the eyes of a pho-tographer” announced by the editorialboard of the Herald. The first wrap-uptook place last year during the reward-
ing ceremony of the International publicaward “Financial and banking elite ofEurasia”. 16 people from 11 countries pre-sented their pictures, the winners wererewarded with certificates and money.
Speaking about the staff of Associa-tion as a whole one should point out thatin the past five years they have preparedand carried out 13 meetings of Coordi-nating Council (two of them in Minskand Almaty), 4 meetings of SupervisoryBoard, 6 General Meetings, 12 round ta-bles, 2 IBC meetings (in Minsk and
Moscow). The Association also was a co-organizer of international forums in Be-larus and Kyrgyzstan.
At these meetings and round tablesmore than 50 topical issues were dis-cussed as well as initiatives of organiza-tional and scientific and practical char-acter, which concerned the cooperationof companies-members to FBA, thework out of concept focus areas of Asso-ciation, approval of pilot projects, busi-ness cooperation with EEC on qualifica-tion assessment of labor migrants andcreation of international network of HRservices, integration of SME into thecommon exchange system of the EAEUspace and introduction of multi-curren-cy clearing system.
It should be stressed that the above-mentioned projects, the business trendsthat followed, and successful implemen-tation of many of them are not just localone-time achievements. It is the groundon which the work of FBA EAC will bedeveloping further, because all these ar-eas are essential for the Association,each of them will be promoted coveringever larger scope of functions. That iswhy the recent General Meeting of theAssociation’s members approved theseareas as priority for 2019. Their imple-mentation will sustainably develop theAssociation itself allowing to solve cru-cial tasks in the Eurasian economicspace and to create ever more effectiveforms of cooperation between businessand banking society.
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Founder’s page. FBA EAC
On March 27-28 in Bishkek the 8thRussia—Kyrgyzstan Interregional Con-ference ‘Towards New Horizons ofStrategic Partnership and Integration’was held timed to coincide with RussianPresident Vladimir Putin’s state visit toKyrgyzstan.
The President of the Kyrgyz RepublicSooronbay Jeenbekov and the Presidentof the Russian Federation VladimirPutin welcomed the plenary session andpointed out the importance of mutualrelations, strategic partnership and inte-gration of the two countries.
Anatoly Tkachuk, the FBA EACVice-President, RSPP Board Membertook part in the conference within theRussian businessmen delegation.
He attended business breakfast of theMinister of economic development ofRussia Maksim Oreshkin and the Ministerof economy of Kyrgyzstan Oleg Pankratovwith the leaders of regions and companies.
During his visit to Kyrgyzstan Ana-toly Tkachuk held negotiations andbusiness meetings with the heads andrepresentatives of the regions of Russiaand Kyrgyzstan, with entrepreneurs,state and business structures, heads ofseveral public unions.
A lot was discussed at business meet-ings regarding the development of agri-culture in Russia and Kyrgyzstan, the im-provement of the investment and finan-cial cooperation and the promotion ofgoods on the Russian and Kyrgyz mar-kets and the set of perspective focus areasto execute different business projects.
The results of the 8th Russia—Kyr-gyzstan Interregional Conference ‘To-wards New Horizons of Strategic Part-nership and Integration’ will be taken in-to account in the work with Kyrgyzstanand other Eurasian countries within theactivity of FBA EAC.
RUSSIA—KYRGYZSTAN INTERREGIONAL CONFERENCE
On March 28–31 in Tashkent the In-ternational Financial and Banking Fo-rum of CIS member-states was held. Theplenary session of the Forum involvedthe Chairman of FBA EAC CoordinatingCouncil, Executive Vice-President ofRSPP A. Murychev.
In his speech he dwelled upon the de-velopment of the EAEU integration proj-ects proposed by the Russian part: “A net-work of wholesale distribution centersfor the food and other products of theEAEU member-states”, “The creation ofEAEU internet platform (EiUnion),“The creation of EAEU platform forSME – “We do business together”.
Special attention is paid to the project“Money transfer between the citizensand organizations in the EAEU”. Promot-ing the economic cooperation betweenthe EAEU countries the project implies acommon system of instant money trans-fers within the EAEU. The main advan-tages of the system are the client-friendlypayment scheme, the speed, the lowcost, the precise credited amount in thelocal currency and autonomy from theinternational payment systems.
Another issue on the agenda was thecreation of the EAEU common paymentunit as a necessary measure for easier
mutual settlements particularly with re-gards to sanctions challenges. The EAEUpayment unit is supposed to replace the
national currencies, and to be limitedonly by the settlements within theEAEU member-states.
INTERNATIONAL FINANCIAL AND BANKING FORUM
OF CIS MEMBER-STATES
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 25
26
The Russian Union of Industrialistsand Entrepreneurs (RSPP) congress tookplace on March 14, 2019 during the XIIRussian Business Week.
The event gathered the representa-tives of business unions, heads of con-stituents of the Russian Federation,heads of the leading domestic compa-nies and development institutes, mem-bers of the government: the First Vice-
Premier – Minister of finance AntonSiluanov, Vice-Premier Dmitry Kozak,heads of the Ministry of industry andtrade and the Ministry of economic de-velopment Denis Manturov and Mak-sim Oreshkin, the Assistant to the Presi-dent Andrey Belousov.
RSPP President Alexander Shokhinpresented a report about the business cli-mate in 2018 and the key results of the
Russian Business Week stressing thatbusinessmen are still concerned aboutqualified human resources, administra-tive barriers, high level of fiscal burden.At the same time RSPP head mentioned“a few positive moments for business” ofthe previous year, for example the grad-uation of movable property from taxa-tion. Alexander Shokhin reminded thatthe “regulatory guillotine” should re-lieve business from the outdated govern-ment requirements and should reducethe number of regulatory authorities.
The President of the Russian Federa-tion attended the plenary session of thecongress. In his welcoming speech hepointed out that business is a direct andcrucial player in the national projectsand infrastructure development plans.Following the congress Vladimir Putinhad a meeting with RSPP PresidentAlexander Shokhin and members ofRSPP Board gathering 29 representa-tives of large business, members of theCabinet of Ministers and the Head ofthe Central Bank of Russia ElviraNabuillina.
The congress also saw the signing ofthe Agreement of cooperation betweenRSPP and the Ministry of ConstructionIndustry, Housing and Utilities Sector ofRussia; the Agreement of cooperationbetween RSPP, the Administration ofSmolensk region and the Science and In-dustry Union of Smolensk.
RSPP CONGRESS
On March 21 in the Financial Univer-sity under the Government of the Russ-ian Federation within the Internationalscience and methodology conference“Education Foresight: academic free-doms VS accreditation limits” the Gen-eral Meeting of the Financial MarketsAssociation "Council for ProfessionalQualifications Development" and themeeting of CPQD were held.
The General Director of CPQDD.Mashtakeeva pointed out that the mostactive work with the regions is carried outby the HR Development Center estab-lished together with FBA EAC to roll-outprofessional standards into the HR sys-tems of enterprises and organizations (theDirector of FBA EAC QAC is A. Bespalov).
The meeting was also informed aboutthe signing of a trilateral agreement ofCPQD with the Higher School of Eco-nomic and the Eurasian HR Center ofFBA EAC on the program “HR Manage-ment”. The agreement includes compre-hensive aspects of the employers’ switchto the professional standards, the cre-ation of common labor market of theEAEU member-states, the mutual quali-
fication recognition and the mobility oflabor resources.
Summing up the General Meetingthe Financial Markets Association
unanimously accepted FBA EAC as itsmember. The FBA EAC General Direc-tor was re-elected to the Council for anew term.
GENERAL MEETING OF THE FINANCIALMARKETS ASSOCIATION
Founder’s page. FBA EAC
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 27
On March 13, 2019 within the frame-work of Russian Business Week 2019 theAnnual Forum of RSPP on the topic“Eurasia: Space for Business and Cooper-ation” was held.
The panel at the Forum was devotedto the discussion of key global and re-gional trends in the development of theeconomy and business; the tasks thatface business and government in orderto achieve the goal of entering the tra-jectory of sustainable growth, to ensuregrowth rates higher than the world ones,and to be among the five largesteconomies in the world.
Alexander Shokhin, President ofRSPP, welcomed participants of the Fo-rum. Victor Vekselberg, President of
the Skolkovo Foundation and Chair-man of the RSPP Committee on Inter-national Cooperation, spoke about howbusiness sees priorities for internationalcooperation in the region. The Forumwas attended by representatives of theauthorities: Deputy Minister of ForeignAffairs of the Russian FederationAlexander Pankin, Deputy Minister ofIndustry and Trade of the Russian Fed-eration Alexey Grusdev, Deputy Minis-ter of Economic Development of theRussian Federation Timur Maximov,Member of the Board (Minister) for do-mestic markets, informatization, infor-mation and communication technolo-gies, Eurasian Economic CommissionKarine Minasyan.
Oleg Berezovoy, General Director ofFBA EAC, also took part in the work ofForum.
Chairman of the Board and ManagingPartner KPMG in Russia and the CIS, OlegGoshchansky, presented an analysis of theinfluence of geopolitical risks on businessdevelopment in Eurasia. General Directorof Interstate Development CorporationJSC, Ivan Polyakov, paid special attentionto the trends of economic cooperationand consolidation of Eurasian businesswith countries of Southeast Asia. UlfSchneider, Founder and General Directorof SCHNEIDER GROUP, told about strate-gies, success factors and prospects for busi-ness development in Eurasia. Xu Jingli,Head of the Representative Office of theChina International Trade PromotionCommittee, told about the strategies ofChinese companies in Eurasia.
Following the discussion, the partici-pants of the Forum formulated a numberof recommendations, aimed at improvingcompetitiveness of the Russian economyand developing economic cooperationwith key partner countries. The partici-pants stressed that the implementation ofthe strategic objectives of the develop-ment of Russia is practically impossiblewithout successfully solving a complex offoreign policy and foreign economic prob-lems directly related to ensuring sustain-able economic growth in the region andthe world; business should contribute tothe development of bilateral and multilat-eral relations in the macroregion.
EURASIA: SPACE FOR BUSINESS AND COOPERATION
On February 27 the FBA EAC head-quarters welcomed the representativesof the Korean Institute of IndustrialTechnology (KITECH).
KITECH is the only state scientificand research institute in the South Ko-rea focused on the development andcommercialization of industrial tech-nologies in order to support small andmedium business.
The FBA EAC General Director O.Berezovoy told the Korean colleaguesabout the main focus areas of the Associ-ation and gave several examples of suc-cessful projects, informed about the plansto open a Eurasian center of innovativetechnologies on the FBA EAC platform.
The Director of KITECH, Doctor ofScience, professor Taek-Soo Kimthanked for the information about theAssociation activity and expressed hisinterest in the cooperation with FBAEAC in several areas including the or-ganization of a session at the nextMoscow international financial and eco-nomic forum “EAEU and EU: search fornew formats of cooperation”.
MEETING WITH THE KOREAN INSTITUTE OF INDUSTRIAL TECHNOLOGY
- We know that finance is a multi-sec-toral segment involving a lot of people.And it is well known that startingfrom July 1, 2019 old qualification cer-tificates of financial market specialistswill become invalid. Does it mean thata moment is coming when all peopleemployed in financial sector will haveto take qualification exams again toconfirm their competency?
– Yes, it does. In the Article 11 of the Fe-deral Law “On the independent quali-fication assessment” the transition pe-riod is regimented. From July, 2019 inRussia other systems of assessment willbecome invalid – both non-mandatoryand those within sectoral mandatorysystems of qualifications. For example,financial market. The access to vacanci-es here is regimented within the attesta-
tion of the Central Bank of Russia.CPQD and CBR have signed an agre-ement on smooth transition to the insti-tute of the independent qualificationassessment.
What will this institute look like inthe end? There are still a lot of que-stions under discussion with the regu-lator according to an action plan. Butin general the system is as follows. To
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Professional standards
“IN THE COMING YEARS THE RUSSIAN LABOR MARKET WILL TOTALLY SWITCH OVER TO PROFESSIONALSTANDARDS”
DIANA MASHTAKEEVA:
QUALIFIED PERSONNEL PLAY THE KEY ROLE IN THE STRUCTURAL CHANGES OF ECONOMYWHICH ARE THE CRUCIAL ELEMENT OF THE ECONOMIC DEVELOPMENT OF THE COUNTRYTODAY.
THE DECREE OF THE PRESIDENT OF THE RUSSIAN FEDERATION DATED APRIL 16, ESTABLISHEDTHE PRESIDENTIAL NATIONAL COUNCIL FOR PROFESSIONAL QUALIFICATIONS. ONE OF THEMAIN TASKS WAS TO ROLL-OUT PROFESSIONAL STANDARDS IN ALL SECTOR OF THE RUSSIANECONOMY.
IN 2015–2016 SEVERAL REGULATING DOCUMENTS WERE ADOPTED INCLUDING THE FEDERALLAW # 238 “ON THE INDEPENDENT QUALIFICATION ASSESSMENT”. THESE DOCUMENTS COVERTHE BASIC DEVELOPMENT PROCESSES OF THE SYSTEM OF PROFESSIONAL QUALIFICATIONS,THE PUBLIC ACCREDITATION OF EDUCATIONAL PROGRAMS AND THE INDEPENDENT QUALIFI-CATION ASSESSMENT.
DIFFERENT QUALIFICATION COUNCILS FOR DIFFERENT PROFESSIONS WERE CREATED, INCLUD-ING THE COUNCIL FOR PROFESSIONAL QUALIFICATION DEVELOPMENT (CPQD). ITS TASK IS TODEVELOP THE SYSTEM OF PROFESSIONAL QUALIFICATIONS ON THE FINANCIAL MARKET OFRUSSIA.
VLADIMIR MIRONOV, THE OBSERVER OF THE PORTAL FINVERSIA.RU. TALKED TO DIANAMASHTAKEEVA, THE GENERAL DIRECTOR OF THE COUNCIL FOR PROFESSIONAL QUALIFICA-TION DEVELOPMENT.
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 29
fill a vacancy, a candidate must meetcriteria of a qualification which is al-ready specified in a professional stan-dard. It means that the specialists sho-uld now think about a necessary edu-cation level and job experience – theseparameters are also specified in theprofessional standard.
In order to switch to the system of in-dependent qualification assessment theDecree of the President of the RussianFederation has establishes an institute ofQualification assessment centers (QACs).QACs are commercial structures whichwill independently evaluate qualifica-
tions according to the rules approved atthe governmental level. The task of theprofessional qualification councils is towork out criteria of a professional stan-dard and a qualification. On the plat-forms of QACs a relevant qualificationwill be conferred. Of course we recom-mend arranging the qualification examsin advance.
– Who should take care about it? Thepeople themselves? Or the employers?– There are two variants. And both ofthem are clearly specified in regulato-ry documents. A candidate can go
through the qualification assessmenthimself at his own expense. Or an em-ployer arranges the attestation of itspersonnel at the expense of a compa-ny. Thus a candidate should apply forqualification exam to his HR depart-ment and discuss the ways he can ac-hieve the level of qualification whichis specified in the professional stan-dard of his position.
- It turns out that many people mustpass these exams within just sixmonths. What will happen after July 1to those who don’t do it in time?
– The system is very strict. There will beinspections on the territory of an em-ployer. He is the one who is responsiblefor the qualification of a worker in hiscompany. The moratorium on the rele-vant inspections valid until recently, hasbeen removed; the inspections are alrea-dy being carried out in different regions.Moreover there are first cases of fines forthe workers lacking qualification certifi-cates.
So our advice is pretty decisive: if youare a working specialist and want to stayin a company you should discuss withyour HR how to achieve the qualifica-tion according to new rules. And anot-her variant is if you are looking for a job,then you are the one who is responsible.It is already common practice when can-didates confirm their qualification inQACs themselves.
– How many people employed in thefinancial market have passed theseexams so far? – Up to now a bit more than a thousandpeople have passed the qualification as-sessment. Is it a little or a lot? Well for themarket on the whole it is not so much.At the same time we started to incorpo-rate the QACs, so to say on a nationwidebasis, only in May, 2018. However evenin the Summer, a holiday period, and inthe Autumn we saw people actively ta-king exams.
– Do you fear a mess on the market incase thousands of experts don’t takethe exams in time?– I don’t. We have offered a relativelyloyal transition period. We have ac-corded with CBR, Rosfinmonitoringand other specific federal legislativebodies that the current certificateswill be valid for some time. But wecan’t fully influence the situation sin-ce we are not a controlling body. It isthe Labor Inspection. We will carryout negotiations closer to July, 2019 ifwe see that the market is facing as yousay a mess. We will try to coordinatewith the Labor Inspection some de-lays of inspections.
It is a crucial task for us – to arrangea smooth switch to a new system. Obvio-usly the current situation is that a full-fledged infrastructure for the institute ofindependent qualification assessment ona nationwide scale is not prepared yet.Some territories don’t have QACs, manyemployers don’t have budgets for theprocess. Although one should mentionthat the Tax Code implies tax preferen-ces. Both the employer and the employ-
ee can charge the expenses to the inco-me tax refund.
– Does it concern only state-ownedcompanies for now?– Not really. There are three stages of atransition period. The first one as wehave already discussed will start on Ju-ly 1, 2019 when all other attestation sy-stems will become invalid. In January,2020 we offer a transition to the systemof independent qualification assess-ment to the state-owned companiesand corporations with public owners-hip. We offer it to all such companies,not only to mandatory attestations andmandatory access. It means that eventhe qualifications of drivers and came-ramen at All-Russian State Televisionand Radio Broadcasting Company willhave to be brought into conformitywith criteria of professional standards.It concerns professions for which thereare such standards. And it should bedone throughout all positions by Janua-ry, 2020.
And the third stage of transition pe-riod has no time limits yet. It is beingdiscusses. It implies a total refusal frommanagers, specialists and workforcequalification reference book and fromthe Unified rating and skills guide forjobs and occupations of manual wor-kers and their replacement with the cri-teria of professional standards. Todaythese books are an alternative acco-unting method in HR policy. Once theyare invalid all HR workers in all compa-nies will have to use only the criteria ofprofessional standards. The first para-graph in the abovementioned bookswhich we have offered to remove rela-tes to the accounting.
– You have already said about thenumber of people who have passed theexams. What other results of CPQDcan be marked for now?– This year was full of events. We haveadvanced from the stage of infrastruc-ture formation for the system of inde-pendent qualification assessment tothe stage of practice. We developedthe infrastructure taking into accountthe requirements for people with disa-bilities. We also developed internatio-nal cooperation. In particular we ac-hieved some results with the EAEUmember-states in the conjunction ofqualification criteria. Besides we beca-me the first sectoral council on profes-sional qualifications to sign a large-sca-le international agreement within theframework of the system of indepen-
dent qualification assessment. Ourpartners now are two main attestationsystems on the territory of the GreatBritain: CIMA –The Chartered Institu-te of Management Accountants andInstitute of Certified Bookkeepers,Russian office of ICB-Global. It impliesthat not only the Russian part shallconsider the international qualifica-tion criteria in its national system, butour national qualification certificateswill be recognized in Britain as valid tofill a position.
– What professions are concerned?– Accounting and internal audit. It wasthe first block we worked on last year.
Now back to the results. This year theEntry Level Qualification was adopted.We said recently that one of the maintasks in 2018 was to shape the Entry Le-vel Qualification without high require-ments to work experience and skills forthe graduates, students and people of ot-her professions. It’s a simple mechanismto enter a profession. By the way in Bri-tain specialists have the competence le-vel equal to our 9-grade students. All therest is achieved while working duringthe life.
Another large project was executedwith VCIOM and the National Agencyfor Qualification Development. We ha-ve worked out a method for labor mar-ket monitoring. We have managed tocomputerize all processes and now weare collecting information from HR de-partments and organizations about thelist of qualifications demanded on themarket. It is also an important block ofour work. The analysis of this datashows which qualifications are deman-ded and which ones should be abolis-hed or developed. We anticipate themonitoring results to become the mainindicator for us during the allocation ofstate-financed openings in the institutesin different regions.
Another important task solved isthe development of the method ofpublic accreditation of education pro-grams (PAEP). We have agreed withthe Federal Service for Supervision inEducation and Science (Rosobrnadzor)to sign an agreement on criteria recog-nition while conducting the state ac-creditation and PAEP. This will allowus to consider the results of state accre-ditation in our procedures and viceversa the state accreditation will consi-der our results. Besides we have agreedto carry out the state accreditation to-gether starting from 2019. It is a big stepin the development of the institute of
30
Professional standards
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 31
independent qualification assessmentin general, and in particular it elimina-tes overlapping.
Regarding PAEP we have anotherpositive result. We have completed anagreement with the Agency for Qua-lity Assurance in Higher Educationand Career Development (AKKORK)which represents international stan-dards on the territory of Russia corres-ponding to the principles of Bolognaprocess. These principles imply theharmonization of the higher educa-tion systems of the European countri-es with the aim to create a commonEuropean space of higher education.For example we harmonize the met-hods of international accreditationagencies on the standards. It meansthat using our accreditation the edu-cation sector will get also the interna-tional accreditation, which directlyinfluences the world ratings and pub-lic accreditation.
We have finally enlarged the num-ber of experts all through the territoryof Russia. Today the number is almostenough to launch the independentqualification assessment on a nationwi-de scale.
We have also completed the esta-blishment of the internal audit servi-ces for CPQD. Now there are offices inthe Russian regions which monitorand control the QACs. We have discus-sed with the federal executive bodiesthat they will assign personnel to theseoffices to join the internal audit servi-ce. In particular they will deal withQACs allowances and attestation pro-cedure.
– You have said that the infrastructurefor the independent qualification as-sessment has not been completed yetand is still being shaped. Is there a po-ssibility for unfair, “commercialized”shell QACs at this stage which will at-tract people?– Do you mean the sales of qualifica-tion certificates? Let’s face it! In orderto minimize this opportunity we mo-ve really slowly. Of course Russia is avery big country and it’s quite diffi-cult to monitor and control QACsfrom Moscow.
As for commercialization, all QACswork on a commercial basis. It is stipu-lated by the law and corresponds withthe principle of independence provi-ded for by payable procedures. A rele-vant instrument was included in theFederal Law “On independent qualifi-cation assessment”. But at the same ti-
me we realize that without monitoringand control it will be impossible to en-sure adequate level of good faith, toguarantee the quality of this instru-ment both to the specialists and to em-ployers.
The law strictly specifies the proce-dures of the professional exam. Theyare also specified at the level of the Rus-sia’s government regulations. All pro-cesses and procedures are strictly regi-mented. From our side we have alsoworked out the system of monitoringvery thoroughly. As I have alreadymentioned there will be permanent ter-ritorial control services. Besides, theprocedure implies video recording ofthe exam. Moreover there will be an ap-peal commission where any candidateand employer have the right to file acomplaint. This is something the man-datory attestation of the mega-regula-tor was lacking.
– Two small practical questions. First,how not to fall into a trap of thoseQACs without an adequate level of go-od faith? How to identify the “fair”QAC? And second, how much does thequalification assessment cost for a can-didate?– All QACs were thoroughly selected.There are correspondent registers ofthe Ministry of Labor of Russia. All in-formation is public and can be foundon the websites of the Ministry andCPQD and connected resources ofQACs. All the information about theauthorized QACs, the accredited ex-perts of these QACs (they also have the-ir qualification level and correspondingstatus fixed in the national register) –all this can be found in the official in-formation resources, which is an impor-tant provision of the law.
As for the price there is a calcula-tion method. Its basis was suggested bythe National Agency for QualificationDevelopment. Today the minimum pri-ce of a professional exam is 7.5 tho-usand Rubles, the average is 10 tho-usand Rubles.
There is a single tariff policy appro-ved at the level of CPQD and specializedcommissions. The price of every profes-sional exam is evaluated in accordancewith the approved method and with re-gards to the level and complexity of thequalification. In general the calculationmethod is focused on the payment to ex-perts who take part in the assessmentprocedure. So the higher the qualifica-tion, the higher the experts’ fee and theprice of the exam are.
I would like to mention though thatwe are working now on reducing theprice of the exams. For example on No-vember 15 it was decided to give a disco-unt to people with disabilities, studentsand elderly people. The discount will beabout 30%. Besides in Russia there is a re-solution on tariff regulation and now weare working on a reginal index whichwould allow to change the price of theprofessional exam depending on the lo-cation.
– What can you say about the plansof CPQD in 2019, what is on theagenda?– The agenda is the same: to updatethe approved qualifications, to enlar-ge the storage of assessment meansand the key task – to ensure the infra-structure and security of the profes-sional exam procedure. We are takingsustained efforts to create an automa-ted system for CPQD to work “digital-ly” with all counterparts, from thecandidates to the education sector. Ona nationwide scale the system is anti-cipated in February 2019. Its first par-ticipants will be QACs and CPQD ser-vices. This system will storage the re-sults of professional exams, informa-tion about updated assessment means,appeals, etc.
And we will also proceed with theimprovement of the transition periodprocedures. We systematically meetwith the representatives of the candi-dates market, discuss the smoothswitch of the current attestation sy-stem to the independent qualificationassessment. Everyone will be engaged,we don’t set a task to create a totallynew instrument. Of course we aspire toautomate the process but the main con-dition is to preserve the whole value ofthe subject.
At the same time in many cases theprocedure becomes more complicatedbecause the current attestation doesn’timply any practical part. While one ofthe main goals of the reform and theswitch to the independent qualifica-tion assessment is to make it morecomprehensive and to have the possi-bilities to confirm not only academicknowledge of a specialist but his prac-tical skills as well. The process automa-tion is supposed to include into theexam procedure some program pro-ducts applied by industries. For exam-ple, an accountant who wants to con-firm qualification in payroll calcula-tion will have to show his skills in theprogram 1С.
EURASIAN ECONOMIC UNION & EU:SEARCH FOR NEW FORMATS OF COOPERATION
NOVEMBER
FORUM
2019+7 495 663-02-08/13/19 [email protected], [email protected], [email protected] www.fbacs.com
VI MOSCOW INTERNATIONAL FINANCIAL AND ECONOMIC
FINANCIAL & BANKING ASSOCIATION OF EURO-ASIAN COOPERATION
Russian Union of Industrialists and Entrepreneurs EURASIAN
ECONOMICCOMMISSION
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 33
On November 30, 2018, an openmeeting of the International BankingCouncil was held in Moscow. Themain issue on the agenda was “Regula-
tion and development of financialtechnologies: problems, risks and secu-rity”.
The meeting was attended byleaders and representatives of bank-ing associations of Armenia, Azerbai-jan, Serbia, Russia, Montenegro, Be-larus, Bosnia and Herzegovina, Kaza-khstan, Kyrgyzstan, Uzbekistan,Mongolia, as well as major bankingassociations - the Financial and Bank-ing Council of the CIS, the BankingAssociation for Central and EasternEurope and the Financial and Bank-ing Association of Euro-Asian Coop-eration, which hosted the event. Inthis issue of Herald, a glance at thediscussed problems will be presentedby materials from Azerbaijan andKyrgyzstan.
Founder’s page. IBC
INTERNATIONAL BANKING COUNCIL (IBC) IS THE CONSOLIDATION OF BANKING ASSOCIATIONSAND UNIONS OF 14 STATES INITIATED BY THE ASSOCIATION “RUSSIA” IN 2004. THIS WAS DONETO STUDY THE EXPERIENCE OF THE BANKING ASSOCIATIONS OF CIS COUNTRIES AND EASTERNEUROPE AND CREATE CONDITIONS FOR THE BANKING COMMUNITY TO EXCHANGE INFORMA-TION, REGULARLY ANALYZE THE DYNAMICS OF THE DEVELOPMENT OF THE BANKING SECTORSOF STATES AND COORDINATE THEIR ACTIONS IN THE INTERESTS OF THE EFFECTIVE DEVELOP-MENT OF INTERSTATE ECONOMIC COOPERATION.
International Banking Council (IBC)
The International Coordinating Council of Banking Asso-
ciations is a public organization open to banking asso-
ciations of all countries interested in cooperation. The
members of the IBC are banking associations of Be-
larus, Kazakhstan, Kyrgyzstan, Russia, Azerbaijan, Geor-
gia, Serbia, Tajikistan, Uzbekistan, Ukraine, Moldova, Ar-
menia, Montenegro, Bosnia and Herzegovina, as well as
the Financial and Banking Council of the CIS, Banking
Association for Central and Eastern Europe, Financial
and Banking Association of Euro-Asian Cooperation.
Currently, the International Banking Council includes 18
organizations.
The IBC is chaired by the Executive Vice-President of the
Russian Union of Industrialists and Entrepreneurs, the
Chairman of the Coordination Council of the Financial
and Banking Association of Euro-Asian Cooperation,
Alexander Murychev.
Reference:
34
Currently financial technologies tookup a strong position in the banking in-dustry but the digital transformation ofthe financial services market changedthe financial environment of most coun-tries. These are known facts.
Today fintech is a sector of new tech-nologies and financial services, start-upsand the relevant infrastructure. In finan-cial services sector the latest technolo-gies and tools are increasingly being ap-plied, it allows to efficiently carry out its
functions and create new solutions forconsumers. Modern financial technolo-gies occupy a growing part of manufac-ture sector (retail, telecommunications,pharmacy, agriculture) and affect the in-surance, credit, accounting services, real
Founder’s page. IBC
REGULATION AND DEVELOPMENTOF FINANCIAL TECHNOLOGIES:
PROBLEMS, RISKS, SAFETY
KYRGYZSTAN:
Anvar Abdraev,President of the Union of the Banks of Kyrgyzstan
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 35
estate, asset management, investment,tax administration, etc.
According to forecasts made by PwCin 2016, by 2020 fintech can get 28 % ofthe banking services and payments mar-ket and up to 22 % of insurance, assetmanagement and private capital man-agement markets (PwC's report «Blurredlines: How FinTech is shaping FinancialServices», 2016).
Such changes are connected withthe emergence of virtual currencies andvirtual banks, the development of newfinancial technologies (blockchain, “Bugdata”), the appearance of new types ofonline lending and online investment,the promotion of innovation in paymentsystems as well as the use of advancedtechnical solutions (cloud technologies).
The emergence of new technologiesis caused by the needs of the currentgeneration who wants to get services ina digital form and at the same time re-quires excluding the human factor.
Clearly, the development of fintechdepends on the volume of investmentsand on the readiness of the infrastruc-ture. According to a KPMG research,the absolute record in terms of invest-ment in fintech was reached in 2015. In2016 investment in fintech in the USAand Europe declined but in Asiancountries it continued to grow (KPMGreport 2016).
The success of the development offintech in a single country dependslargely on the state regulatory of thissphere. The international practice of sell-ing fintech products has shown thatstatutory regulation is one of the mostimportant practical issues since in somecases it is necessary to make changes tothe existing regulatory framework. Thedirect involvement of the regulator atthe decision-making stage in the devel-opment of new technologies is funda-mentally important from the point of
view of successfully achieving the ulti-mate goal.
The National bank of the Kyrgyz Re-public developed a draft Regulation “Ona special mode of introducing innova-tive services/technologies in the bankingservices market of the Kyrgyz Republic”in order to create conditions for the in-troduction of innovative services tosolve problems in the field financialdepth, improve the efficiency of bankingand payment services. To implement thisregulation changes and additions aremade to some legislative acts of the Kyr-gyz Republic in order to empower theNational Bank to establish and regulatespecial regulatory regimes. Within thiscontext the National Bank prepared adraft law “On amendments to certainlegislative acts of the Kyrgyz Republic”.
The purpose of fintech projects isconvenience (including lower prices,easier access to the service, etc.) as wellas safety of financial transactions.
Currently much has been said aboutthe benefits of financial technologies,but risks of their use are not discussed soactively. For example, consumers are in-formed about how fast the digital cur-rency rate is growing, how convenient itis to carry out operations, how such op-erations are safe and anonymous but atthe same time they ignore the flaws ininformation security, the lack of legal
guarantees in transactions with digitalcurrencies, high volatility.
Therefore at the state level and inprofessional environment it is necessaryto make a separate discussion not onlyabout the advantages of financial tech-nologies but also about the risks associ-ated with their introduction and devel-opment as well as how to manage theserisks.
Risk is understood to mean theprobability of negative consequencesfrom something under certain circum-
stances. The risk of applying financialtechnologies is commonly understoodas any likelihood of adverse conse-quences for users, financial servicesproviders and the economy as a whole,connected with the use of financial tech-nologies under certain circumstancesand in certain situations. Accordingly,the risks of applying financial technolo-gies can be divided into client risks (userrisks), provider risks and system risks(risks of the economy and society as awhole). You should consider the clientrisks system and determine the condi-tions for managing these risks.
Risks of consumers of financial serv-ices associated with the use of financialtechnologies are divided into two largegroups - direct and indirect.
Direct risks: data theft;significant changes in the market sit-uation;violation of uninterrupted provisionof services;impossibility or significant difficultiesin protecting the rights and legitimateinterests of consumers;mislead consumers about a serviceprovider.
Indirect risks:application of financial technologiesfor the purpose of money and financ-ing of terrorism;risks of regulatory arbitration (thedifference in requirements abroadand in the country of the provider’sactivities);technological, organizational and le-gal obstacles.
As noted the most important factorin the successful development of fintechis the possibility to manage these risksand therefore, in order to reduce themit is necessary to ensure:
lack of legal vacuum;setting requirements for transparencyof services;preventing the imposition of the useof remote services;creating a system for identifying un-fair practices.
The global trend on the creation ofa new financial system increases the re-quirements for state regulatory organi-zations and the banking system. Theyshould provide consumers with themaximum benefits, reducing risks of us-ing financial technologies as well as im-proving the financial literacy of con-sumers of these services.
Investment in fintech
Territory Amount (billion US dollars)
2014 2015
USA 14,1 27,4
Europe 12,0 10,9
Asia 3,3 8,4
36
Founder’s page. IBC
DIGITAL TRANSFORMATION OF BANKING SYSTEM OF THE REPUBLIC OF AZERBAIJAN
AZERBAIJAN:
Zakir Nuriyev,President of AzerbaijanBanks Association
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 37
Some time ago Azerbaijan startedsystemic reforms of e-payments. Thesereforms not only expand financial mar-kets and simplify payments betweenbusiness units, but also provide for a safeand effective development of the coun-try’s economy in general. Deeper digitaltransformations in the banking systemraise the level of application of the inno-vative payment solutions and make thee-payments an essential part of ourevery-day life, enhance confidence ofthe population in the e-payments.
The country is also taking complexmeasures to develop a payment ecosys-tem and to speed up the digital transfor-mation in the banking system. Aiming toreform different economy sectors in2016 according to the decree of the Pres-ident of the Republic of Azerbaijan sev-eral strategic road maps were adopted,including the ones focused on the appli-cation of the advanced experience in thefinancial services, telecommunicationsand information technologies. One ofthem is the “Strategic road map on thedevelopment of financial services in theRepublic of Azerbaijan” approved by thePresident’s Decree dd. 06.12.2016. It de-fines priority measures to improve finan-cial inclusion in the country, regulationmechanisms with the aim to speed upthe digital transformation in the bankingsystem, and to develop professionalknowledge and skills of the financialmarkets players.
Within the Strategic road map theFinancial Market Supervisory Author-ity (FIMSA) of the Republic of Azerbai-jan aiming to increase access to the fi-nancial services in the country and tocreate an effective system of regulationand control of the non-bank providersof payment services and payment sys-tems operators has worked out a draft“On payment services and payment sys-tems”. The draft shall classify the typesof payment services, the rights and du-ties of the providers, the economic, le-gal and organizational basis for the es-tablishment and work of payment insti-tutes, organizations of e-money andpayment systems operators, and also itshall shape the main trends of the stateregulation and control over these or-ganizations.
Based on the international experi-ence this draft will raise the efficiencyand security of the payment services,create basic principles of the paymentsystems, develop a form for retail pay-ment processing and a legal basis for theregulation of the rights of the payment
services consumers. The legal basis forthe issue and application of e-money -one of the most popular payment in-struments in the world practice to de-velop e-commerce and draw differentretail payments to non-cash transac-tions – will also be determined by thisdraft.
The “Strategic road map ontelecommunications and informationtechnologies in the Republic of Azer-baijan” implies higher productivity andeffectiveness of companies through ex-tended digital payments. To imple-ment this strategy the Central Bank hasprepared the “State development pro-gram of digital payments in the Repub-lic of Azerbaijan in 2018–2020” ap-proved by the decree of the Presidentof the Republic of Azerbaijan on Sep-tember 26, 2018.
The strategic goal of the Program isto develop non-cash payments betweenindividuals, companies and state agen-cies, to minimize the volume of cash inthe turnover and as a result to strength-en the financial resource base of thebanking sector. The main tasks of theprogram are to improve the institutionalenvironment for e-payments, to createeffective measures for the banking sec-tor recovery, to shape a healthy digitalecosystem, to raise financial awarenessof the population and to develop e-ser-vices. The anticipated result is better fis-cal discipline of business, transparentcorporate sector including cutting offfiscal avoidance, minimized “grey econ-omy”. Moreover anticipated is a lowervolume of cash and thus lower expenseson production, storage and transporta-tion of cash.
To implement this Program the Cen-tral Bank has launched an instant pay-ments system. In line with the currentnetwork of ATM, POS-terminals andself-service terminals the payment sys-tem will be enhanced with cash registersfor businesses.
Taking business steps to improve themechanism of regulation and ensure dig-ital transformation in the financial sectorin late 2017 FIMSA carried out a generalassessment of the banking sector. The as-sessment specified the main legislationreforms to be conducted for faster digi-tal transformation particularly in thebank system.
For example an important step hereis to provide for a remote opening ofbank accounts. The current legislationrequires personal attendance of aclient when opening an account.
The changes introduced by FIMSAprioritize opening accounts with anaccredited e-signature and with avideo-call. Besides a client who al-ready has an account can open anoth-er one in the same bank using a specialsoftware of the bank.
To a larger extend one of the re-forms necessary in the e-payments sec-tor is a formation of a system of com-mon digital identification. Dependingon the functional opportunities thissystem is created basing on the infor-mation about clients of differentspheres of the financial sector. TheCentral Bank is taking steps to workout a system of digital identificationwith blockchain. At this stage the ten-der process is completed and the rele-vant work group is created. The systemof digital identification will speed updigital identification in the bankingsector and will allow to introduce newtechnologies of remote opening ofbank accounts.
Another reform meant for deeperdigital transformation in the bankingsystem is amendments in to the “Guide-lines of emission and application of plas-tic cards”. These amendments will pro-vide for innovative technologies on themarket of plastic cards, improve thefraud combating measures in the sphereof e-payments, further consolidate therights of the users of e-services, ensure asuccessful implementation of the token-project in the country and develop con-tactless payment system.
Aiming to draw retail payments tothe non-cash turnover, to clearer definethe frames of identification proceduresand transactions, to raise the effective-ness, the current limits on the prepaidcards were increased. In addition aimingat fraud combating in the sphere of pay-ment cards the project of amendmentsincludes the guidelines for the interac-tion between banks-acquirers and busi-nesses.
According to the amendments thebanks-acquirers must reveal alert casesin their service network and react swift-ly, including the cases of tampering inthe work of ATM, POS-terminals andother equipment.
In general the abovementioned re-forms and a number of other measurescarried out in digital transformation willallow to increase non-cash payments inthe Republic of Azerbaijan to a new lev-el and to form a more competitive pay-ment ecosystem in full accordance withthe up-to-date requirements.
38
Financial system of the countries of Eurasia
GOVERNMENT SECURITIES —SAFE INVESTMENT
THE NEWS THAT THE GOVERNMENT OF SERBIA INTRODUCED A NEW TYPE OF GOVERN-MENT SECURITIES, I.E. SAVINGS BONDS, MADE US REFLECT ABOUT THE MAIN CHARAC-TERISTICS OF GOVERNMENT SECURITIES WHICH ARE, DESPITE THE BROAD RANGE OFLEGAL POSSIBILITIES, INSUFFICIENTLY PRESENT AT THE DOMESTIC MARKET, AS OP-POSED TO THE SECURITIES MARKETS IN DEVELOPED MARKET ECONOMIES CHARAC-TERIZED BY A LARGE NUMBER OF ISSUERS, WELL ORGANIZED INTERMEDIARIES, LONGMATURITIES AND DEEP TRUST ON THE PART OF INVESTORS.
Republic of Serbia
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 39
Savings Bonds of the Republic of Serbia
Government securities in the form ofsavings bonds, recently issued for thefirst time by the Republic of Serbia, areaimed at financing the budget deficitand refinancing the matured liabilities.The purpose of this form of borrowing ispursuant to the Law on Public Debt(LPD) adopted in 2005. It stipulates thefollowing types of borrowing as allowed:financing the budget deficit and currentliquidity deficit, financing the outstand-ing debt, financing capital investments,acquisition of financial equipment, andsettlement of liabilities in respect ofgranted guarantees. In our country in-vestment into government securities hasstarted to intensify since 2009, which iswhen their mass sales began as well.
In addition to government securities,according to the issuer, there are alsomunicipal, corporate, mortgage andsupranational securities (i.e. securities is-sued by foreign states). However, gov-ernment securities are treated as thesafest ones since the state usually honorsits liabilities. Given that they incur thelowest risk, as a rule, these securities alsoentail the lowest rate of return for theirowners, i.e. they get the lowest interestcompared with the securities by other is-suers. Government securities can be is-sued by: the Republic, an autonomousprovince, local self-governments, legalentities using budget funds, and organi-zations of mandatory social insurance.Government securities can be short-term and long-term (when the repay-ment period extends to the subsequentbudget years). Their issuance takes placewithin the limits prescribed by the lawregulating the budget of the Republic.Such securities can be purchased by alldomestic legal entities and natural per-sons, and by foreign legal entities andnatural persons under the conditionsprescribed by the Government of the RS(LPS, Article 27).
The decision on issuing long-termgovernment securities is passed by theGovernment of the Republic of Serbia,which may borrow in the country andabroad, in both domestic and foreigncurrencies. When it comes to the is-suance of short-term government secu-rities, the borrowing is exclusively in do-mestic currency. The clearing and settle-ment of government securities issued atthe domestic market is conducted bythe Central Securities Depository andClearing House, whereas the Minister ofFinance makes the decision about theclearing and settlement in the primaryissuance of the government securitiestradable at foreign markets, and chooses
the foreign clearing house. These securi-ties are disbursed upon maturity de-fined by the issuance bylaw, althoughdisbursement is possible before maturityif that option is specified by the men-tioned bylaw. It is possible for the Re-public to purchase the securities beforematurity provided that all investors aregranted this possibility.
The Decision on Issuing SavingsBonds of the Republic of Serbia, pub-lished on 10.11.2017, specifies their mainelements: the issued amount of 3 billionRSD, i.e. 20 million EUR, with 2-, 3-, 5-and 10-year maturity, sales per piece inthe nominal value of 2,000 RSD or 100EUR. Investors into savings bonds canonly be resident citizens above 18 yearsof age, with the maximum purchase of5,000 pieces of dinar or 500 pieces of eu-ro savings bonds per issuance and permaturity. The accession period for pur-chasing these savings bonds lasted from20 November until 18 December 2017.The distribution of savings bonds is con-ducted according to the priority princi-ple - the priority was on the part of in-vestors who first applied for the pur-chase. Savings bonds, issued in the nameof the bearer, in non-material form, andregistered with the Central SecuritiesDepository and Clearing House, werepurchased via the business network ofthe Postal Savings Bank in the form ofbonds with the annual coupon disburse-ment. The coupons mature on 27 De-cember 2019, 2020, 2022 and 2027.
Investors, i.e. the legal holders of sav-ings bonds, pursuant to Article 40đ ofthe Decree on General Terms and Con-ditions for Issuing and Selling Govern-ment Securities, may file a Request forPremature Disbursement of SavingsBonds of the RS at the primary marketafter 12 months since the issuance date,except in the case of a serious illnesswhen it is allowed to file this requesteven sooner. Premature disbursementincurs the calculation of fees.
Government securities, either in di-nars or in euros, including savingsbonds, are tax exempt, which is anotheradvantage of theirs. Namely, there arethree main advantages of purchasinggovernment securities: 1. Low credit risk;2. Higher earnings than from saving in
banks;3. Exemption from taxes.
It is a generally accepted view thatbonds are less exposed to risk thanshares, meaning that when funds are in-vested into shares the investor is directlyexposed to both failures and successes ofthe issuer (state, company, etc.), as wellas to the overall conditions at the mar-
ket. By investing into bonds the investorknows precisely when to count on a cer-tain cash inflow. If the market is unfavor-able, the investor can give up selling ashare whose value is decreasing, al-though it is also possible for him not toachieve any revenues from dividendswaiting for more favorable circum-stances to happen. Investing into bonds,the investor achieves the inflow fromthe interest that can be reinvested whilehe expects the return on the principal.Bonds issued by entities certain to serv-ice their liabilities are awarded the so-called “investment grade”, whereas thoseentailing higher risk are called junkbonds. Due to the uncertainty they im-ply, as a rule, they also entail higher rev-enues and higher interest rates.
The bond ratings are published bythe worldwide specialized agencies like:Moody’s, S&P and Fitch. More precisely,they provide two different types of acountry’s credit rating: issuer’s rating anddebt securities rating. Credit rating agen-cies have a major impact on the financialmarket since both investors and issuersclosely monitor their ratings. The ratingof an issuer or a bond affects the cost ofborrowing for the issuer. The ratingawarded to a country influences thecredit ratings of other issuers seated inthat country.
Domestic Experience So FarWe resorted to the Belgrade Stock
Exchange data, trying to learn moreabout the experiences in trading govern-ment securities in Serbia. Total turnoverin respect of securities of the Republic ofSerbia at the Belgrade Stock Exchangein the past fourteen and a half yearsamounted to 1.1 billion EUR. The largestshare of bonds of the Republic of Serbiain total Stock Exchange trade wasrecorded in 2015, when these securitiesaccounted for 23.73% in total turnover.The highest annual turnover of thesebonds was achieved in 2007, amountingto 207 million EUR. The biggest numberof transactions in the Stock Exchangetrade was recorded in 2003, when therewere 82.81 thousand transactions. Theaverage size of transactions has been in-creasing over the years. In the first threeyears of the Stock Exchange trading theaverage size of an individual transactionranged from 1,000 to 2,000 EUR, where-as in the period from 2014 until May2016 the average transaction size rose toseveral dozen thousand euros.
For investors, evidently enough, gov-ernment securities in dinars are most at-tractive. These are the securities whosedisbursement is guaranteed by the Gov-ernment of Serbia, and which achievedthe turnover of 271.7 million EUR in the
40
first eight months of 2017. This amountaccounts for as much as 85% of theturnover achieved in the same period inrespect of all securities traded on the
capital market of Serbia. In the firsteight months of 2017 at the domesticcapital market the government securi-ties of the series RSO15105 were the
most traded ones. These are the three-year dinar bonds maturing for disburse-ment in early March 2018, whose totalturnover amounted to over 8.6 billion
Table 1Main Characteristics of Savings Bonds
of the Republic of Serbia
EURO
20.000.000
1.000%
after 12 months
0.500%
20.000.000
after 18 months
1.750%
1.000%
20.000.000
2.500%
after 30 months
1.750%
20.000.000
4.000%
after 60 months
2.750%
100 EUR
500 pieces
12 months ≤ deadline:0.250%
12 months < deadline ≤ 18 months: 0.750%
18 months < deadline ≤ 30 months: 1.500%
30 months < deadline ≤ 60 months: 2.500%
DINAR
3.000.000.000
4.000%
after 12 months
3.000%
3.000.000.000
after 18 months
4.500%
3.500%
3.000.000.000
5.250%
after 30 months
4.000%
3.000.000.000
6.250%
after 60 months
5.500%
2.000 RSD
5.000 pieces
12 months ≤ deadline:2.750%
12 months < deadline ≤ 18 months: 3.250%
18 months < deadline ≤ 30 months: 3.750%
30 months < deadline ≤ 60 months: 5.000%
CURRENCYElements
Issuance volume:
Coupon rate:
Premature repayment
Coupon rate for premature repayment:
Issuance volume:
Coupon rate:
Premature repayment
Coupon rate for premature repayment:
Issuance volume:
Coupon rate:
Premature repayment
Coupon rate for premature repayment:
Issuance volume:
Coupon rate:
Premature repayment
Coupon rate for premature repayment:
Maturity (in years)
2
3
5
10
Maturity date
27 December 2019
27 December 2020
27 December 2022
27 December 2027
Nominal value of a savings bond
Maximum number of savings bonds per investor, issuance and maturity
Coupon rate for premature repayment in the case of a serious illness
Financial system of the countries of Eurasia
* The coupons’ maturity date is 27 December. The coupons are disbursed annually until the savings bonds’ maturity.
Source: Public call for the purchase of savings bonds of the Republic of Serbia, Public Debt Administration, Ministry of Finance of the Republic of Serbia
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 41
RSD. The second and third most tradedbonds are the dinar bonds maturing inApril 2018.
Republic of Serbia cooperates withthe rating agencies S&P, Moody’s andFitch, which assess its credit rating in re-spect of short-term and long-term bor-rowing, in both domestic and foreign
currencies. The first credit rating B+ (sta-ble prospects) was awarded to Serbia byS&P on 1 November 2004. The Fitch rat-ing agency was hired in 2005, when itawarded rating B- (stable prospects) toSerbia, whereas Moody’s awarded it itsfirst rating B1 (stable prospects) in July2013.
The review of the current credit rat-ings for long-term FX borrowing of theRepublic of Serbia provided by the cred-it rating agencies:
EurozoneInterest rates on government securi-
ties in the Eurozone have been low forquite some time, because the centralbanks purchase government securitiesfrom investors in the effort to boosteconomic growth by injecting higherliquidity. The European Central Bankcut the key interest rates to zero per-cent and launched a major securitiespurchase program, aiming to recoverthe Eurozone economy and increaseinflation.
In mid-2017 it was published that,in the period from 2012 to 2016, theEuropean Central Bank (ECB) earned7.8 billion EUR from interest on Greekbonds which it had purchased to sup-port the recovery of this country’sfragile economy. Mario Draghi, Presi-dent of the ECB, explained that thesebonds were obtained as part of theBank’s asset-backed securities pur-chase program, and that the achievedprofit was distributed among the cen-tral banks of the 19 Eurozone coun-tries. The program was launched atthe beginning of the Eurozone debtcrisis in 2010, in order to mitigate themarket pressures to the memberstates’ borrowing, and it preceded themore ambitious securities purchaseprogram, called quantitative easing -QE, launched by the EBC in 2015. Sofar, the European creditors and theIMF jointly participated in the threeprograms of financial support toGreece, their total value exceeding240 billion EUR. Germany participat-ed in these programs with the largestfunds, having provided 30% of the to-tal amount.
With reference to the profit basedon purchasing the Greek debt, in mid-2017 the Münich journal, DieDeutsche Zeitung, published that Ger-many had earned 1.34 billion EURfrom new loans and purchased securi-ties used to save Greece from the fi-nancial ruin. The journal further elab-orates that Germany achieved thebiggest profit by purchasing QE bondsin order to help the countries affectedby the financial crisis, includingGreece. The mentioned 1.34 billionEUR are only a part of the profit ac-quired by Germany in the past yearsof the financial crisis in Greece andthe entire Eurozone. The Leibniz In-stitute for Economic Studies inMünich, based on its research results,
Table 2Credit rating of the neighboring countries in the category
of long-term borrowing
Source: Bloomberg
Source: Bloomberg
Table 3Credit rating of the parent countries
of banks operating in the Republic of Serbia
Serbia BB BB Ba3
Bosnia and Herzegovina B – B3
Montenegro B+ – B1
Macedonia BB– BB –
Bulgaria BBB– BBB Baa2
Romania BBB– BBB– Baa3
Hungary BBB– BBB– Baa3
Croatia BB BB Ba2
S&P Fitch Ratings Moody’s
Rating agency – Credit rating for long-term borrowing Country
S&P Fitch Ratings Moody’s
Rating agency – Credit rating for long-term borrowing
Country
Austria AA+ AA+ AA+ AA+ Aa1 Aa1
Greece B– B– B– B– Caa2 Caa2
Italy BBB BBB BBB BBB Baa2 Baa2
Hungary BBB- BBB- BBB- BBB- Baa3 Baa3
Germany AAA AAA AAA AAA Aaa Aaa
Russia BB+ BBB– BBB- BBB– Ba1 Ba1
USA AA+ AA+ AAA AAA Aaa Aaa
Slovenia A+ A+ A– A– Baa1 Baa1
France AA AA AA AA Aa2 Aa2
Норвегия AAA AAA AAA AAA Aaa Aaa
Turkey BB BB+ BB+ BBB– Ba1 Ba1
UAE – – – – Aa2 Aa2
China A+ A+ A+ A+ A1 A1
Czech Republic AA AA A+ A+ A1 A1
Foreigncurrency
Domestic currency
Foreigncurrency
Domestic currency
Foreigncurrency
Domestic currency
42
concluded that Germany obviouslybenefited from the Greek crisis.“Every time in the recent years whenthe financial markets faced some badnews from Greece, the interest rateson the German government securitiesdropped, and every time there wassome good news, the revenues in-creased.” The profit on these securitieswas earned by other countries as well,including the USA, France and theNetherlands, but not to such an ex-tent as Germany. Two years ago, theLeibniz Institute disclosed that Ger-many had earned about 100 billionEUR from lower interest rates on secu-rities issued by the Government at thetime they were in high demand, be-cause foreign investors consideredthem a safe haven, as opposed to otherEurozone countries.
Germany is one of the three Euro-zone countries with the highest AAAcredit rating. In the middle of the lastyear, for the first time, Germany sold itsgovernment securities, worth over 4 bil-lion EUR, with the negative interest rateof -0.05% and the repayment deadline of10 years. Unusually enough, for the firsttime the investors accepted the negativeinterest rates and will be paying for theprivilege of owning the German securi-ties. In general, the German bonds aretaken to be the benchmark at the debtmarkets, and are considered the safestinvestments at the financial markets, es-pecially given the apprehension sur-rounding Brexit and the impact of othereconomic afflictions.
Another “first” in relation to govern-ment securities happened in France.Namely, the first issuance of green gov-ernment bonds started in France in early2017. Thus, France became the secondcountry, after Poland, to issue govern-ment securities for the purpose of fi-nancing environmental protection proj-ects. They differ from the classic bondsin that they are used to finance specificgreen investments without incurringany additional risks for the investors.The announcement that France will bethe first country to issue green bondswas released by its Government at theConference on Energy Transition, inApril 2016. However, Poland was quick-er, and issued green government bondsworth 750 million EUR.
Also interesting to examine are theexperiences in trading government secu-
rities in our twoneighboring coun-tries. In February2017, the citizens ofHungary investedabout 30 billionforints (100 millionEUR) of their sav-ings into govern-ment securitiesthanks to the highrevenues these secu-rities offered. Thecitizens now ownthe Hungarian debtsecurities in the to-tal value of 776.2 bil-lion forints, which isthe highest amountin the past two anda half years. Accord-ing to the data ofthe GovernmentDebt ManagementAgency (AKK),each segment of thegovernment debt
securities owned by the citizens hasbeen recording considerable growth.The government’s advertising campaignhas obviously been fruitful although thehigh revenues, in some cases exceedingthe inflation rates by as much as five per-centage points, largely contributed tosuch results. Last summer the Govern-ment gave the citizens a chance for newinvestments into debt securities withshorter repayment deadlines. Foreign in-vestors, primarily American funds andbanks, are present at the government se-curities markets in Hungary, Poland andRomania, their share ranging from 20 to30 percent.
As opposed to Hungary, Poland andRomania, the securities market in Croa-
tia almost has no foreign investors at all.In November 2016 the revenues on gov-ernment securities in these three coun-tries surged, whereas in Croatia theycontinued to decline until the Agrokorcrisis in April 2017. The drop in rev-enues on the Croatian securities has re-cently been affected by the improvedfiscal and economic results, lower expo-sure of the investors to the Croatian se-curities, better risk perception, thesomewhat lower need for financing in2018 and 2019, as well as the fairlystronger development of the long-termyield curve, which in July 2017 resultedin the issuance of the domestic bondwith the 15-year maturity.
Norwegian Oil Fund as theLeader among the Government
Securities OwnersWhen it comes to foreign investors, it
is interesting to mention the largest in-vestment fund in the world, i.e. the Nor-wegian Oil Fund, whose decision to sellthe securities of 23 worldwide countries,in mid-September 2017, came as a bigsurprise for the international financialmarkets, causing just as much apprehen-sion that this might strike a blow to theglobal debt market.
The letter by Norges Bank, underwhose jurisdiction the management ofthis fund is, suggests that the Oil Fundin the future invests only into the gov-ernment and corporate securities de-nominated in the euro, US dollar andBritish pound. Currently, the Oil Fundmanages 987 billion USD of assets, onethird of which is invested in securities.Norges Bank elaborates on this propos-al in the following way: “In the longrun, the profit from a wide interna-tional diversification is significant forshares, and moderate for bonds. For aninvestor whose 70% of assets is invest-ed into shares, the reduction of the di-versification risk through investmentsinto a large number of currencies isnegligible.” If this proposal gets ap-proved by the Government, this doesnot mean that the Fund immediatelystarts to sell off its securities, however,the analysts believe that other in-vestors could follow the Oil Fund,which could, due to its size, havesmaller or bigger consequences for theJapanese yen, Swiss franc, Canadiandollar and the currencies of some oth-er countries.
Those well versed in investmentfunds management consider the OilFund’s decision understandable, giventhe expected growth of inflation in thedeveloping countries, and the fact thatthis Fund primarily deals with long-term
Reference
Five-Year Greek BondsIn July 2017, the Government of the
Greek Prime Minister, Alexis Tsipras, an-nounced that, after a three-year pause, thesale of the five-year Greek bonds was suc-cessfully completed. These bonds wereworth three billion euros, with the interestrate of 4.625%. This was substantiallylower than the previous issue of bondsfrom 2014, when the interest rate was4.95%. The government representativesstated that this market comeback con-firmed the positive developments in theGreek economy, marking the first stage ofexiting the crisis.
Financial system of the countries of Eurasia
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 43
Date of issue – 01.07.1881, nominal value – 100 dinars, country of issuance – Serbia.Bond issued by the Minister of Finance
Date of issue – 01.06.1931, nominal value – 1000 French francs,country of issuance – Yugoslavia. Bond issued by the Ministry of Finance of Yugoslavia
Date of issue – 1922, nominal value – 1000 dollars, country of is-suance – the USA (Loan issued to the Kingdom of Serbia, Croatiaand Slovenia). Bond issued by Chase National Bank of the city of New York
Date of issue – 3/15.06.1888, nominal value – 10 dinars gold, country of issuance –Serbia.Bond issued by the Minister of Finance
Date of issue – 01.07.1910,nominal value – 500francs, country of is-suance – Serbia.
Bond issued by LandLoan Bank of the King-dom of Serbia
Nominal value – 100 dinars, country of issuance – Bosnia andHerzegovina. Bond issued by the Minister of Finance
From private collections
44
investments wishing to avoid the men-tioned risks. It has been assumed thatthe process of selling the governmentsecurities will go slowly, since this is inthe Fund’s interest, because otherwisethe decreased value of securities wouldimply that their owner has no otherchoice but to sell a part of them at alower price.
Results of the Serbian SavingsBonds Sale
Finally, let us go back to the savingsbonds of the Republic of Serbia, forwhose purchase the citizens were ableto pay funds incurring no fees by 18December 2017 at the special countersin all branches of the Postal SavingsBank. Other than payment, these coun-ters enabled the citizens to completeall other required procedures, such asopening the account on which themoney is to be paid, and the accountwith the Equity Fund for the purposeof registering the ownership over thepurchased bonds. This time the stateacknowledged the criticism accompa-nying the issuance of government secu-rities, wishing to simplify the proce-dures of their purchase, thereby at-tracting a larger number of interestedcitizens. To this end, some technicalsimplifications were introduced: toown these securities, one does notneed to go to a broker, the buyers oflong-term securities were granted theoption of premature collection, and forthe first time one Serbian bond got in-surance elements, because in the caseof a serious illness, its owner can with-draw the invested funds with a part ofthe interest.
During the first sale realized on 27December 2017, the citizens purchasedthe bonds worth 17.5 million EUR.Among the bonds issued in the amount
of 80 million EUR, the most wantedones were those with ten-year maturi-ty, sold in the value of 10.6 millionEUR, and the least wanted were thetwo-year bonds, subscribed in theamount of 924 thousand EUR. Thestate expected the sale of dinar bondsin the value of 12 billion RSD, whereasthe citizens purchased them in theamount of only 195.7 million RSD. Evi-dently, the most interesting were theeuro-denominated securities, alongwith the bonds with the highest annualyield, and those with the longest matu-rity. When it comes to dinar bonds, thelargest amounts were purchased in thecategory of five-year bonds, in the
amount of about 82 million RSD, andten-year bonds, in the amount of 76million RSD. Although these bonds ar-rived at the right time, given that thebank interest rates on classic savingshave never been lower, these data leadto the conclusion that the results of thefirst sale have not shown a particularlyprominent interest on the part of thecitizens.
Therefore, it is necessary to providea stronger marketing support for the is-suance of these savings bonds, while thestate and its financial institutions informthe public into more detail, educatingthe citizens about the business princi-ples and safety of profit acquiredthrough such securities trading. More-over, as underlined by the relevant ex-perts, the biggest drawback of these fi-nancial instruments is the lack of thesecondary market and the consequentinability of reselling, which might be abig problem for ten-year bonds especial-ly. The motivation for the state to perse-vere in these intentions is clear, if webear in mind that the issuance of gov-ernment securities is a method of fi-nancing typically used by the develop-ing countries, since it facilitates the in-flow of the highly needed capital intothe economy, at the same time provid-ing substantial profit to the investors atthe lowest possible risk estimated forthe concerned country, while the indi-rect effects for a developing economycan be even more significant.
Reference
What are Bonds?
Savings bonds are long-term, coupon-based securitieswith two-year or longer maturity, which can be purchasedonly by resident citizens above 18 years of age. They guar-antee the annual disbursement of interest to the investor,within the previously specified periods until maturity, aswell as the disbursement of the nominal value of bonds uponmaturity date.
Reference
The Purpose of Issuing Savings Bonds
The Republic of Serbia, with a view to encouraging thedinar savings of its citizens, introduces a new form oflong-term securities, i.e. savings bonds. The developmentof the new segment of government securities is aimed atincreasing the trust of domestic investors and the share ofdomestic sources of finance in financing the budgetaryneeds of the Republic of Serbia.
Investing into savings bonds is the safest investment forthe citizens of the Republic of Serbia because the disburse-ment in respect of these bonds is fully guaranteed by thestate. Savings bonds enable the citizens of the Republic ofSerbia to invest into government securities without anymediation costs, and to gain profit without any risk.
Financial system of the countries of Eurasia
BLOCKCHAIN AND THE BANKING SECTOR OF THE REPUBLIC OF MALTA
46
Financial system of the countries of Eurasia
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 47
Introducing a recently-publishedConsultation Document on the MalteseFinTech strategy, Joseph Cuschieri, theChief Executive Officer of the Malta Fi-nancial Services Authority (MFSA), not-ed that “the digital revolution is bringingabout disruption to every sector of busi-ness, with the financial services industrybeing no exception.” Recent technologi-cal advancements such as artificial intel-ligence, distributed ledger technology,the internet of things and cloud tech-nologies, are rapidly transforming theway customers access financial servicesand engage with financial productsproviders.
The banking sector is also part of thisrevolution. It comes as no surprise, thatbanks around the world are looking atthe potential benefits of such technolo-gy, given the increasing popularity ofblockchain. According to the manage-ment consulting firm Accenture,through the adoption of blockchain, theglobal banking industry could save asmuch as $20 billion by 2022. Top inter-national banks are investing significantresources to develop blockchain banksolutions, with the key goals being a re-duction in time, costs and bureaucracy.
The Maltese banking sector, recog-nised by the World Economic Forumamongst the top 30 worldwide in termsof stability, has always been at the fore-front in adopting new strategies, tech-
nologies and products, and therefore theconsideration of blockchain technologyis a next natural step in their develop-ment. One of the major Maltese bankshas already indicated that it is studyingthe positive outcomes that these tech-nologies can bring about to their opera-tions. Most significantly, this technologycan be used to improve existing lengthybanking processes, be it the opening andmaintaining of bank accounts, the exe-cution of trade finance operations, orthe issuing of loans or payments.
The Maltese Government and theMFSA are pro-actively addressing theserealities by building the necessary infra-structure, allowing banks and other fi-nancial services operators to thrive inthese new realities. Whilst Malta hasbeen a first mover to comprehensivelyregulate the blockchain industry, Gov-ernment and the financial services regu-lator, are aware of the additional chal-lenges linked to the distributed and bor-derless nature of such products, as wellas the complexity in managing risk andensuring compliance with AML/CFT re-quirements. In order to maintain high-levels of cyber-security, technology itselfneeds to be at the heart of businessprocess design, data management andcompliance functions. This is the key tosuccess of the advanced technologies inthe financial sector ensuring furtherbanking development.
Pierre Clive Agius,Ambassador of Malta to Russia
Meeting with the Ambassador of the Republic of Malta to Russia Pierre Clive Agius. FBA EAC headquarters
48
TWO TYPESOF CUBANPESO
”
IN THE INTERNATIONAL STANDARDISO 4217, WHICH ESTABLISHED TRI-GRAM ALPHABETIC AND TREE-DIGIT
NUMERIC CURRENCY CODES, THERE ARETWO CODES LISTED FOR CUBA AT ONCE- CUP (CUBAN PESO) AND CUC (CUBANCONVERTIBLE PESO). WHEREBY LOCALSTRADITIONALLY CALL THE FIRST MON-ETARY “PESO”, BUT THE SECOND SIMPLY“CUC”. BOTH OF THEM CONSIST OF100 CENTAVOS.
“
History of money
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 49
Cuba is a unique country- followingsome global trends, it still choses its ownspecial development path including inthe financial sector. Today everyonewho comes to the Liberty Island, facesthe necessity to absorb two monetaryunits that are in parallel circulation inthe country.
In the international standard ISO4217, which established trigram alpha-betic and tree-digit numeric currencycodes, there are two codes listed forCuba at once - CUP (Cuban peso) andCUC (Cuban convertible peso). Where-by locals traditionally call the firstmonetary “peso”, but the second sim-ply “cuc”. Both of them consist of 100centavos.
Before the middle of the 19th centu-ry, Spanish reales circulated in Cuba.From that time, banknotes were issuedspecifically for use on Cuba. In 1881, thepeso was pegged to the US dollar at par.
In 1960, the peg to the US dollar was re-placed by one to the Soviet ruble. Whenthe Soviet Union dissolved, the peso lostmuch of its value. Today it is used onlywithin the country.
But tourist interest in Cuba forcedthe National Institute of Tourism to takea decision about the issue of the special“guest” banknotes, represented by coinsand special certificates containing thewords ‘Intur”. In fact, it was a prototypeof modern “cuc”, which were issued in1994.
The division of currencies into con-vertible and non-convertible was also af-fected in the plots, depicted on ban-knotes. Thus coins and bills “peso” con-tain portraits of the national heroes ofCuba as well as scenes, that show the cul-tural and historical features of the state.Pictures of the main touristic sights,buildings and monuments can be foundon “cuc”.
The image of Ernesto Che Guevaratakes a special place in the design of ban-knotes and coins. The first note with hisportrait was issued in 1993 and since thenthe denomination of three pesos on thebills and coins of both currencies in cir-culation has been dedicated exclusivelyto him. Bills which contain the signatureof Ernesto Che Guevara who held theposition of president of the Nationalbank of Cuba, are especially appreciated.
In 2013 there have been reports of thebeginning of the process of reachingmonetary unification, providing for agradual transition to a single Cuban cur-rency. At first it will significantly facili-tate domestic calculations and at thesame time it will make life easier fortourists because they often become thevictims of fraudsters who skillfully usethe ignorance of the guests of Liberty Is-land in the matter of local specificities ofmoney circulation.
Vitaly Krasnikov,analyst
50
projects
Andrey Lisitsyn,PhD in Law,Advisor to the Chairman ofthe Coordination Council ofFBA EAC, Leading ResearcherInstitute of Industrial Policyand Institutional DevelopmentFinancial University underthe Government of the RussianFederation
«DIGITAL BELT»:OPPORTUNITIES AND PROSPECTS
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 51
Eurasia is the largest continentwhere there are various models of eco-nomic cooperation including withinthe framework of the economic unionsof EAEU, EU, APEC and others. How-ever in spite of similar objectives andgoals, these unions practically do notcreate tools for business interactionacross the continent. The urgency ofthis problem cannot be doubt and thesearch for its solution led to the birth ofa project concept, the implementationof which will help to form marketmechanisms to reduce barriers for theinteraction of economic actors in theEurasian space. And the Eurasian Eco-nomic Union can (but in a way should)take a central place in the creation ofsuch mechanisms.
As is known, the EAEU was formedand developed in order to create condi-tions for sustainable development of theeconomies of member states, forming asingle market for goods, service, capitaland labor recourses within the Union,comprehensive modernization, cooper-ation and increasing the competitive-ness of national economies in a globaleconomy.
The most important foreign econom-ic partners of the EAEU are the Euro-pean Union (EU) and the People's Re-public of China (P.R. China) but the ter-ritorial location of the EAEU memberstates relative to the EU and China de-fines a critical infrastructural and com-mercial importance of the Union in itsinteraction with these partners.
But at the same time the possibilitiesof developing cooperation are com-pounded by such factors as the labor in-tensive of policy coordination processesby international legal means and mech-anisms, the presence of significant struc-tural, quantitative and qualitative dif-ferences in economies and the lack ofcompatibility of economic systems, thevast overall territorial extent of states aswell as cultural, linguistic and nationaldiversity.
However the negative impact ofthese factors can be reduced throughthe use the initiatives of business thatmeans through the use of market toolsand mechanisms that reduce supply anddemand from various locations and ju-risdictions. And in the conditions of thedevelopment of the digitalization of so-ciety the effective way to introducesuch mechanisms is the use of a digitalplatform.
The digital platform is a complex ofinformation-technical and organiza-tional-legal mechanisms, providing toremote interaction between market par-ticipants through standardization and
automation of business processes. Theobjectives of this interaction are the se-lection and sale of goods, works andservices with low cost through the max-imum transparency of information, thesettling of the maximum volume of de-mand and supply, and the providing ofeffective mutual settlements with mini-mum transaction and conversion costs.
Digital platforms will allow the inte-gration of various services, for example,on the proposal and selection of goods,works and services (“boards” of an-nouncements), to ensure fast, guaran-teed and confirmed execution of pay-ments (payment systems), to implementcompliance procedures, to conclude,change and confirmation of the execu-tion of agreements (electronic docu-ment management system), to hedgecurrency and credit risks and the appli-cation of tools of commodity exchanges(financial services).
Such platforms are a key infrastruc-tural element for removing barriers toeconomic cooperation including on theEurasian space. That’s why the idea ofcreation the EuroAsian digital plat-form “Digital Belt” appeared.
According to the concept, the plat-form “Digital Belt” should include thefollowing elements: 1) A set of standards and rules for the
operation of the platform, consis-tence with the law and agreed withthe regulators.
2) The platform portal on the Internetis a platform where information ongoods, works and services as well ason conditions for their sale and pur-chase will be posted.
3) The system of electronic documentmanagement and interaction basedon the technology of distributedledger, that provide verification of in-formation included in the systemand actions with them including theimplementation smart contracts.
4) The system of compliance proce-dures recognized by parties, KYC-procedures and in general AML pro-cedures insuring compliance withthe regulatory requirements of allcountries whose representatives par-ticipate in the platform.
5) The system of implementation of ac-tions on currency control, includingreporting on currency transactions.
6) The system for reducing conversioncosts and currency risks based on theorganization of settlements using adigital settlement and clearing system.
7) The system of organization of mutualexchange trade in the territory ofcountries whose representatives par-ticipate in the work of the platform.
In implementing of the project“Digital Belt” will have to be addressedsuch tasks as creating an informationtechnology infrastructure of the plat-form, ensuring the operation of theplatform before creating the need inter-national legal framework for coordinat-ing and harmonizing regulation andcontrol, attracting suppliers of goods,works and services as well as consumersto services platform, building interna-tional legal and institutional frame-work to ensure the continuous func-tioning of the elements of a single mar-ket space platform.
Prior to the approval of internation-al agreements a key tool to solve thetasks of the creation the platform “Dig-ital Belt” may be the use of “regulatorysandboxes” – mechanisms for imple-menting pilot innovation projects,some elements of which fall outsidethe current legal regulation system.Currently “regulatory sandboxes” arebeing created in most states of theEurasian space and it will allow to ob-tain the necessary tools by combiningkey project participants from variousstates.
As part of the integration processes inthe Eurasian space, the Digital Belt plat-form will allow:1) to carry out the actual generation of
key elements of a single market in theplatform space in pilot regime andthen in constantly regime.
2) to test key issues of integrationprocesses in relevant areas on orderto accelerate the harmonization ofregulation and policies at the interna-tional level.
3) to ensure the introduction of moderndigital tools and mechanisms withthe participation and under the con-trol of regulators of all interestedcountries.
4) to reduce economic, cultural andother obstacles to maintain the inter-national business in the platformspace.
5) to improve the transparence of regu-latory and other requirements for do-ing business in the territory of thestates included in the platform space.
6) to reduce business costs of trading ingoods, works and services in the plat-form space.
7) to make a complex transition to set-tlements in national currencies inthe platform space or its part thereof(for example in the EAEU or EAEU-China).
8) to increase the availability for cus-tomers of goods, works and servicesprovided by countries entering theplatform space.
The creation of the “Digital belt” plat-form should be carried out on a multi-pronged basis involving a series of se-quential actions divided into stages.
The first stage is the introduction ofkey elements of the platform on the basisof the current regulation and the mecha-nism of “regulatory sandboxes”. Thisprocess will include the following mainactivities:
creation of an information portal; formation of organizational and legalbasis for the functioning of the plat-form (decision-making and controlbodies, as well as a system for ensur-ing the operation of technologies andprocesses of the platform); development and approval of re-quirements and standards of the por-tal and platform; expansion the representation of spe-cialized regulators in the bodies ofthe platform operator and its organi-zational structure; coordination with specialized regula-tors that regulate and control adver-tising, the standard for promotinggoods, works and services using theplatform;creation of an expert coordinationcouncil on the formation and mainte-nance of the platform with the partic-
ipation of representatives of regula-tors;introduction of key elements andservices of the platform in the “regu-latory sandbox” mode.At this stage expect for the informa-
tion and technical component, the de-velopment and implementation of stan-dards that will comprehensively providethe rules for the operation of the plat-form is essential. Among other things,the standards will regulate: the contentof the portal; disclosure of informationabout the provider and the proposedgoods, works and services; the use ofpersonal data of users; ensuring informa-tion security and combating fraud whenusing the platform; realization of re-quests to counter the laundering of pro-ceeds from crime and the financing ofterrorism; implementation of currencycontrol in the commission and execu-tion of transactions.
The standards for individual servicesof the platform is also going to be intro-duced, including for the electronic doc-ument management system, a system forreducing of conversion costs and curren-cy risks and a system for organizing mu-tual exchange trading in the platformspace.
The second stage is the formation of apermanent international legal frame-work for the operation of the “Digitalbelt” platform. At this stage it is expect-ed, above all, the implementation of thefollowing activities:
evaluation of the results of the pilotoperation of the platform services;preparation of the concepts of thenecessary international agreementsbased on the evaluation of the per-formance of the services of the plat-form in the framework of the “regula-tory sandbox” and the position of reg-ulators;conducting conciliation proceduresfor the concepts of prepared interna-tional agreements and the develop-ment of relevant projects;ensuring the continued operation ofthe platform in the “regulatory sand-box” mode until the approval of therelevant international agreements;adoption and approval of internation-al treaties.At this stage the harmonization of
regulation at the supranational level(primarily within the framework of theEAEU) by international legal meansgains the particularly important. That’swhy the main task here is the develop-ment and implementation of interna-tional agreements that will lead to find
a common denominator a number ofstandards introduced at the first stageof the functioning of “Digital belt” andin general will ensure its further devel-opment.
The third stage is ensuring the contin-uing operation of the “Digital belt” plat-form. This period will be characterizedby the full scale harmonization of stan-dards, technological and other processesin line with accepted internationalagreements as well as with the work ofthe platform in the “regulatory sandbox”mode in areas where there are no inter-national agreements yet.
In parallel, taking into account theexperience, it is proposed to develop di-rections for expanding the compositionof the regions where the platform func-tions and (or) services. It is necessary toadd that in the process of promoting thisplatform, there is an opportunity to useit not only in the Eurasian space but alsoin the space of South and Central Amer-ica and Africa.
The creation of “Digital belt” is a fun-damental infrastructural task. It will re-quire the consolidation of recourses andefforts of business, government bodiesand science. So at the first stage, it willbe necessary to remove risks of unfairadvertising and develop effective mech-anisms to protect of rights of users of re-mote services, and provide the legal con-ditions for remote acceptance of clientsas well as to reduce currency regulationand currency control.
However, there are grounds to be-lieve that it is now the economic andtechnological conditions were ripe forthe realization of such a project. But itsimplementation is impossible withoutthe consolidating and balancing organi-zational role of the public non-profit or-ganization and therefore it is useful tomake the operator of the platform theFinancial and Banking association ofEuroAsian cooperation.
At the FBA EAC site representativesof the business communities of mostcountries of the Eurasian region com-bine their efforts and representatives ofnot only business, but also representa-tives of national and supranational reg-ulators participate in the Association'smanagement bodies and monitoringbodies. Moreover, the decision tolaunch the project was taken at the gen-eral meeting of the FBA EAC in Marchof this year.
This is only the beginning, but, as LaoTzu says “A journey of a thousand li be-gins with one step”. The main thing is tomake this step.
52
projects
Reference:
The Eurasian EconomicUnion is an internationalorganization of regionaleconomic integration withinternational legal person-ality and established by theTreaty on the Eurasian Eco-nomic Union.
The EAEU introducesthe free movement of goods,capital, services and peopleand provides for commoncoordinated policies in sec-tors of the economy. Mem-ber states are Armenia, Be-larus, Kazakhstan, Kyr-gyzstan and Russia
OF BADMINTONOF THE OREL REGION
FEDERATION
NOVEMBER 20–24,
2019
OPEN INTERNATIONAL YOUTH TOURNAMENT ON BADMINTON OF EURASIAN COUNTRIES
Russian Federation, Orel
For sponsors and partners
Conducting such a large-scale sports fes-tival will give a powerful impetus to theestablishment of political and economicties between the participating countriesof the tournament.
As a sponsor of the competition you makea huge contribution to the socio-culturaldevelopment of our country.
The support of the International YouthBadminton Tournament will provide yourcompany with increased loyalty both inthe Russian Federation and abroad.
ORPO “Federation of Badminton of the Orel Region” was created initiated by the current Presidentof the Federation - pilot-cosmonaut, Hero of Russia – Alexander Misurkin.
The tournament is included in the Unified calendar plan of the Russian Badminton Federationand will be held under the auspices of the National Federation.
MEMBER STATES:
Russian Federation (territorial entities), Belarus, Armenia,
Kazakhstan, Kyrgyzstan and others.
NUMBER OF PARTICIPANTS: 256
International youth tournament on badminton is
a personally-command competition format among boys
and girls in the categories up to 17 years old and up
to 15 years old.
Organizer:Federation of Badminton of the Orel Regionwith the support of FBA EAC
Location:Orel Region, Orel, TMK “Grinn”
54
Technology
FOOD SUBLIMATIONAS A FACTOR OF ECONOMIC DEVELOPMENT
Alexey Antipov,Academician of the International Academy of Refrigeration, Doctor of Science
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 55
Sublimation drying has been used forquite a long time: as a canning procedureit was developed in the USSR in the20th century, but the beginning of thattechnology was laid in the beginning ofthat century by a Russian mining engi-neer, Georgy Lappa-Starzhenetsky.
In the USSR, there were four plantsthat used this technology: sublimatedmeat was produced in Orsha (BSSR),sublimated curd – in Slutsk (BSSR), sub-limated vegetables were in the village ofDetchino of the Maloyaroslavetsky Dis-trict of the Kaluga Region (RSFSR) andat the Chisinau Cannery (MSSR) – sub-limated fruit. Subsequently, all of theseplants refused to sublimate products.
In 90s the plant of sublimation dryingwas built in Volgograd, where the “Gala-Gala” company still produces a widerange of freeze-dried products. Howeverit should be noted that the sale leavesmuch to be desired. Sublimation plantsproduced in Ukraine (Sumy) were usedat the plants but at present the produc-tion technology of sublimation dryershas been lost.
Then in 2000 in Borovsk (Kaluga re-gion) the workshop began working onthe sublimation of fruits and berries.
During the same period, the Nestleplant began to operate in Leningrad re-gion where coffee was freeze dried andin 2018 the workshop “Moglino” for thedrying of berries from China opened inPskov region.
Small plants for the production ofsublimation products are also operating:sweets made from freeze-dried berriesare produced in Tyumen and in Sol-nechnogorsk, fruit chips are produced inAnapa.
And they use either second-handequipment from pharmaceutical manu-facturers or Chinese installations. Unfor-tunately, the listing of domestic achieve-ments could be completed.
At the same time, the technology andtechnique of freeze-dries has becomevery wide spread in the world. Nowthere are more than 350 enterprises, pro-duced freeze-dried food products, main-
ly champignons, greens, meat with sidedishes, coffee and exotic fruits.
We should not ignore world experi-ence in this matter and therefore itmakes sense to consider sublimationequipment and technology as a mean togenerate additional income that is notcurrently being extracted.
But first, let's understand what con-stitutes freeze-drying.
Freeze-drying is the process of re-moving moisture from products that arefrozen (solid) without using the liquidphase. At the same time, volume color,aromatic and bioactive substances, traceelements are preserved. That’s conserva-tion is carried out through physicalprocesses which excludes using of auxil-iary material (sugar, salts, acids) used inother methods of conservation. Also inthe production of freeze-dried productsexposure to high temperatures that inac-tivate vitamins is excluded. But, for ex-ample, only the sublimation process isused in canning live vaccines andserums. It guarantees not only a speedyrecovery of dry objects but also thepreservation of viable cells and viruses.
The production of freeze-dried prod-ucts consists of several phase-processes:
freezing;freeze-dried frozen moisture (about80–90%);drying of non-frozen moisture;vacuum packing.Taking into account widespread intro-
duction of sublimation technology in theworld it should be considered from thepoint of view of the possibility of organiz-ing a new business that could bring profitboth inside our country and abroad.
In which areas is sublimation possi-ble?
Food products for the army. For ex-ample, in the satchel of the Americansoldier are sublimated products for40 days of autonomous power! It is a fulland varied ration. We two better get ahandle on that.
Dairy products. Given the increasingmobility of the population such dishesas sublimated cottage cheese, butter,sour cream, yogurt and other sublimat-ed dairy products could be a significantsupport in fast food at home and incatering.
Drinks. Recently at one Ural enter-prise I was asked, what sublimation is?This question was asked at the tablewhere the tea party was. I saw about tenpackets with coffee and asked: “Whatkind of coffee do you prefer?”. It turnedout, coffee was different but all of theseare sublimated. That is, employees ofthe company, not knowing what theprocess of sublimation is, all one andone voted for this product. And this isunderstandable: sublimated coffee isdefinitely higher in quality than any in-stant coffee.
We should pay no less attention totea. In other countries, tea is just tea. Butin Russia it is a healing drink, moreoveron a national scale. Moreover we couldput honey in tea and coffee. Dehydratedhoney is an own product that couldcompete with sugar and with just honey.Canadian and American dehydratedhoney is actively sold in Europe. Wehave also developed a method for ob-taining dry honey on vacuum-sublima-tion plants and now w negotiations are
underway to supply such a plant (pro-duced by firm “Fresco”) in Bashkiria.There is produced white honey for Eu-rope and a contract of delivery to Chinahas already been concluded. And if inour country dry honey is still an exoticproduct then in Europe it is already pop-ular.
Meat products. Freeze dried meatand processed meat products are wellknown abroad. We have developed anew product – meat snacks. They are al-so obtained by a sublimation method.For their production we specially devel-oped a new technique and technology:atmospheric freeze-drying. As early asthe 9th century nomadic Buryat tribesused freeze dried meat; they were driedfor 5–6 months. We offer the techniquethat allows carrying out this process for5–6 hours. The most expensive part ofthis equipment is the vacuum freeze dri-er – is excluded in the technology devel-oped by us.
Seeds. The most successful applica-tion of freeze-drying was a conservation
of vegetable seeds. When working to-gether with VNIISSOK we were subli-mated seeds of cabbage and carrot. As aresult we got an expected effect: withinitial seed germination of 40% andmediocre quality indicators, we ob-tained 95 percent germination seeds,with a five-point growth force and thesame seed quality indicators.
These results could be assessedthrough economic performance. Thecost of 1 kl of cabbage seeds with a ger-mination rate of 95% reaches 3000 rubles.And with 40 percent germination –400 rubles. The seed treatment time inthe sublimation chamber is two hours.Moreover, the processing in vacuumfreeze-dryers and in dryers for sublima-tion at atmospheric pressure showedthe same results.
Thus, if we sum up the above, it canbe argued that any moisture productturns a business using freeze-dryers intoan economically viable enterprise. Espe-cially if you don’t forget about the mar-ket outside of Russia.
56
Technology
May 15–18, 2019
WITH PARTICIPATION OF THE EU, EAEU AND SCO
UNDER THE AUSPICES OF ADB, FBA EAC, BC SCO
AND THE PEOPLE’S GOVERNMENT OF KHORGOS (PRC)
IN THE FORUM PROGRAM:
– Plenary session.
– Work sections and showcase of investment projects for Finance and economy, Transport and
logistics, International energy and environmental safety.
SUBJECTS OF DISCUSSION:
Effective development of interbank cooperation between banks and development institutions. Uni-
fied payment system for settlements in various currencies, such as the evolution of the world mon-
etary system (clearing, blockchain technology and cryptocurrency).
Dynamics of development (transformation) of the global banking system. The EU and the EAEU:
the economic need for rapprochement and interaction. Ways to link the EAEU and the Silk Road:
Development of cooperation between the EAEU and China and linking with the “One Belt, One
Road” (OPOR) initiative, as one of the most important foreign economic landmarks of the Eurasian
Union.
I EURO-ASIAN FINANCIALAND ECONOMIC FORUM
(EAFEF) – KHORGOS
ASSOCIATION OF BANKS OF THE REPUBLICOF KAZAKHSTAN(ABRK)
FINANCIAL & BANKINGASSOCIATION OF EURO-ASIAN COOPERATION (FBA EAC)
THE BUSINESSCOUNCIL OFTHE SHANGHAI COOPERATION ORGANIZATION (BC SCO)
THE PEOPLE’SGOVERNMENT OF KHORGOS (PRC)
Strategic partners:
СONTACTS:
www.abrk.kz/forum-khorgos Теl.: +7 (727) 267-45-56 E-mail: [email protected]
General sponsor:
ORGANIZERS:
58
Practice
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 59
Food is one of the main factors of hu-man’s health. Especially it refers to chil-dren. A sensible nutrition ensureshealthy growth of children, promotespreventive treatment, higher mental andphysical efficiency, provides for ade-quate adaptation to the environment.
Food can be considered healthy if itsatisfies the children’s needs not only inmacronutrients (proteins, fats and car-bohydrates) and energy, but also in mi-cronutrients (vitamins and minerals) inaccordance with physical needs.
Micronutrients refer to irreplaceablenutrient materials and are necessary forbalanced biological processes in the or-ganism: metabolism, growth, diseasesmanagement and protection from nega-tive environment factors. A human or-ganism doesn’t synthesize and doesn’tuptake the macronutrients so they mustbe supplied regularly with water andfood in full set and physiologic amounts.
The role of vitamins and minerals inthe childhood is essential due to rapidgrowth, formation, intense metabolismof a child’s organism.
Foreign producers dominate on theRussian food market. The main reasonsare long payback of investments for themodern technological production andthe lack of promotion of domestic prod-ucts. Some time ago the infant-feedingcenters were replaced by shops of babyfood mostly produced abroad. WhileRussian producers had to (and still haveto) survive in a stiff competition.
According to Rosstat up to 80–90% ofinfant food products are produced inthe factories owned by foreign compa-nies and in case of sanctions this produc-tion can be almost fully stopped.
The Decree of the President of theRussian Federation #120 dd. 30.01.2010adopted a Food Security Doctrine of theRussian Federation (Doctrine) which
underlines that food security of theRussian Federation “is one of the priori-ties of national security in the countryin the medium-term perspective, a fac-tor of its statehood and sovereignty, akey element of the demographic policy,a required condition to implement thestrategic national priority – the improve-ment of the quality of life for the Russianpeople through the guarantee of highliving standards”.
With the aim to carry out the Doc-trine in practice the Decree of the Gov-ernment of the Russian Federation#1873-p dd.25.10.2010 worked out andadopted “Guidelines of the state policyof the Russian Federation of healthyfood for the population for the periodup to 2020”. A considerable part of thedocument is dedicated to the produc-tion of infant food.
The main tasks of the state policy inthe area of healthy food are:
INFANT FOOD INDUSTRY – DEVELOPMENT AND TASKS
Valentin Karamzin,General Director of “Agromash” Ltd., Doctor of Engineering, Professor,Honored Scientist of the Russian Federation
To promote the production of foodproducts enriched by unreplaceablecomponents, special products of in-fant food, functional purpose prod-ucts, dietary (medical and preventive)food products and dietary food sup-plement, including corporate supplies(to workers, students enc.);To develop and introduce into theagriculture and food industry the in-novative technologies including bio-and nanotechnologies;To improve catering services in thecorporate sector, to provide adequatenutrition to pregnant and breastfeed-ing women and children under 3 yearsold for example through the specialmeal stations and shop, to upgrade di-etary (medical and preventive) food inhealth centers as an integral part oftreatment.On June 29, 2016 the Resolution of
the Government of the Russian Federa-tion #1364-р adopted the “Strategy ofthe improvement of food products inthe Russian Federation up to 2030”which will improve the quality andquantity of the produced infant foodproducts.
Also worth mentioning is the Decreeof the President of the Russian Federa-tion #350 dd. 21.07.2016 “On realizationmeasures of state scientific and technicalpolicy for the benefit of agriculture de-velopment” which seriously promotedthe processing sector of agriculture ingeneral and the sector of b infant abyfood in particular.
Analysis of the supporting mecha-nisms for healthy food in Russia showsthat the state is greatly interested innew producers which is proved by theannexes and amendments to the Decreeof the Government of the Russian Fed-eration #166 dd. 28.02.2012 “On theadoption of the Rules of provision andallocation of subsidies from the federalbudget to the local budgets of the sub-jects of the Russian Federation to sup-port the emerging farmers”. Thus point3 “Grants for establishment and develop-ment of peasant (farm) holdings…” con-tains a notion “agricultural processing”.Tax benefits for the food industry start-ups are also improving in special eco-nomic zones.
In general one should mention thatsupport mechanisms for the healthyfood producers require further develop-ment and improvement.
However, regardless of difficultiesthe infant food market keeps growingfollowing the rise in births in Russia inthe recent years. Starting from 2012 wehave seen the highest demographic in-dexes in the last 20 years. And according
to statistics 70% of the first-year babiesneed compound and bottle feeding,while 50% need medical formulas.
The analysis of Rosstat data of the in-fant food production as per one childclearly shows the demand for furtherpromotion of the infant food industry(Table 1).
A simple analysis of the table showsthat in most cases the amount of prod-ucts as per one child per year remainsvery little. For example the amount ofmilk-based and flour-based powdermilk is produced in the amount of160 grams/year and 580 grams/year cor-respondingly; drinkable milk – in theamount of 4.09 liters/year; infant meatspecialized cans – in the amount of0.34 standards cans per year (a can is330 grams).
The building of new high-tech enter-prises and the use of new equipment
will allow to raise the quality and thenumber of produced products, to im-prove the situation for national agricul-tural providers and to reduce the de-pendence on the foreign ones.
It is also worth mentioning that for-eign producers use not only materialsfrom the territory of Russia but also im-ported concentrates even with GMO. Itharms the national agricultural produc-ers as producers of raw materials.
According to Rosstat the main pro-duction of infant food is located in theCentral, North-West and South FederalDistricts (Table 2).
As we can see the Volga District, theSiberian District and the Ural District arenot involved at all although they have agood agricultural basis for infant foodproduction and a huge export potentialdue to close borders with China andSouth-East Asia.
60
Practice
Products
Infant meat (meat-containing) specialized products (0–4 years old), standard cans
Drinkable infant milk (0–14 years old), litersincluding drinkable infant milk (0–4 years old)
Infant milk powder (0–4 years old), kg
Infant milk powder formula (0–4 years old), kg
Infant curd (0–4 years old), kg
Fermented infant dairy products including infants (0–14 years old), kg
Homogenized infant meat products, meat by-products or blood excluding sausage products (5–9 years old), standard cans
Homogenized nonfrozen canned infant vegetables without vinegar, (0–14 years old), standard cans
Homogenized infant mix of food products (0–14 years old), standard cans
Homogenized infant fruit and berry products (0–14 years old),standard cans
Milk-based infant liquid or paste-like food (0–14 years old), kg
Milk-based infant food powder(0–14 years old), kg
Flour-based infant food powder (0–14 years old), kg
Infant food – homogenized cans with meat, vegetables, fruit , (0–14 years old), standard cans
Infant juices (0–14 years old), standard cans
Products as per one child
per year
0,34
4,099,4
1,22
0,54
4,28
2,72
0,069
0,22
1,02
6,7
0,38
0,16
0,58
27,87
118,99
Table 1Infant food production
on the territory of the Russian Federation (according to Rosstat)
EURASIAN F INANCIAL & ECONOMIC HERALD | #2(7) 2019 61
The Science and Research Institutetogether with “Agromash” Ltd., NPO JSC“Pribor” and the Science and PracticeCenter of the National Academy of Sci-ence of the Republic of Belarus have de-veloped a concept of a scientific andtechnical program “The development ofinnovative technologies and equipmentfor infant food production”.
The concept of the program was ap-proved at the meeting of the section ofpriority fundamental, applied scientificresearches and innovations in agricul-ture of the Scientific and TechnicalCouncil of the Ministry of agriculture ofthe Russian Federation.
The concept aims at several tasks ofthe state policy of healthy infant food.
To create a wide range of infant foodproducts it is necessary to develop andintroduce new technologies and re-search methods which will also result inthe development of science of food pro-duction.
The development and creation ofnew (including energy saving) tech-nologies and new equipment for in-fant food production will allow to ex-tend the range of products, to createspecial raw materials zones, to achievethe security of food, which meet the
up-to-date requirements, and to pro-duce the products equal to the worldanalogues.
The use and spread of the typicaltechnical and technological solutionswith regards to import substitution tasksallow to extend the range and the vol-ume of production of infant food for allage groups and also for pregnant andbreast-feeding women in accordancewith the modern conditions of food se-curity.
There will be:More than two hundred new types ofproducts and components of infantfood and food for pregnant andbreast-feeding women;New equipment complexes in accor-dance with all modern standards ofthe Common State and equal to theworld analogues (19);Larger volume and range of infantfood products and food for pregnantand breast-feeding women.
The spread of new equipment andtechnology will allow to:
provide for 70–80% of the Russianand Belarus markets with the maintypes of infant food products pro-
duced on the territory of the Com-mon State;provide for 80% of the market of spe-cialized infant food products includ-ing dietary (medical and preventive)food;strengthen the Russian and Belarusmarkets due to larger amount andrange of infant food and food forpregnant and breast-feeding women,produced on the territory of theCommon State; reduce deceases among children andteenagers related to nutrition (ane-mia, lack of food, obesity, diseases ofthe digestive system);raise vitamin provision to children,pregnant and breast-feeding women;improve the health of the population.
In conclusion it is worth mentioningthat Science and Research Institute to-gether with “Agromash” Ltd. have de-veloped a typical complex for infantfood production with the capacity of6000 cans/hour (90000 cans/day).
The complex contains the equipmentfor the production of infant food and babypuree packed in twist-off cans (110 grams),and for the production of puree in asepticcans (200 kg) packed in Bag-in-Box.
Dry infant milk formula including fermented
Liquid and paste-like dairy products
Dry cereal-based infant and diet food
232.6 101.9 43.8 59.6
131.5 62.0 47.2 –
60.7 20.5 33.8 –
9.6 6.1 63.2 –
8.3 4.98 59.9 –
6.97 3.75 53.8 .
15.5 4.55 29.4 –
26.1 16.48 63.2 21.6
21.1 15.5 73.5 –
5.0 0.98 19.7
24.6 13.0 56.7 26.3
8.53 4.13 48.4 –
8.92 4.79 53.7 –
7.09 4.07 56.7 –
Annual average capacity
Thousands of tons
ProductionThousands
of tons
Use of capacity%
Annual average capacity in 1990
Thousands of tons
Table 2Infant food production
in the regions of the Russian Federation (according to Rosstat)
Regions
Russian Federation
Central Federal District
North-West Federal District
South Federal District
Volga Federal District
Ural Federal District
Siberian Federal District
Russian Federation
Central Federal District
Volga Federal District
Russian Federation
Central Federal District
North-West Federal District
North-Caucasus Federal District