Yalta International Economic Forum Information portal

+7 (812) 6430709

Yalta International Economic Forum Information portal

+7 (812) 6430709

21 April '17

Economic Sustainability: Vital Requirement of A New Economic Model

Economic Sustainability: Vital Requirement of A New Economic Model

A meeting of the Free Economic Society was held as part of YIEF 2017. The moderator, Anatoly Aksakov, Member of the Board of the Free Economic Society of Russia and Chairman of the Russian State Duma’s Committee on Financial Markets, said the following: “Crediting of the economy today is stable, but it is stable at a very low level. Inflation runs at 4.1%, according to the Central Bank. More than 20 million citizens live in poverty. The investment rate should be 25%, in reality it is less than 18%. Russia’s share in the world GDP has dropped to 1.7%.

Mr Aksakov urges the need for the country to have a development strategy. Lack of investments is caused by lack of a coherent strategy which should include the monetary, tax and industrial policies. Intensive work is under way to work out such a strategy to 2030, the speaker said.

The moderator drew attention to yet another important point: “The banking sector in 2015 reported profits of 11 trillion roubles, but only a fraction of it went into investments.

Professor Sergey Glazyev, Vice President of the Free Economic Society and member of the Russian Academy of Sciences, began his speech with the question: “What prospects do we have today?” He thinks economic sanctions against our country will be preserved; Crimea will remain a comfortable and attractive place for everyone. This competitive advantage of Crimea must be used effectively.”

The people of Crimea, he said, have no savings to finance Crimean projects, they need credits. Russia’s share in the world GDP has been steadily going down between 1991and 2015 and today stands at less than 1.9%, whereas that of China is steadily growing and is already edging towards 10.0%.

The main task of the country’s monetary policy is to provide the economy with money. This is the job of the Central Bank of Russia. “What is needed is not printing of money, but increasing investments. In China and America interest rates are close to zero or even below zero,” Mr Glazyev said. All countries seek to create long money for investment. In contrast, our Central Bank has withdrawn 36 trillion roubles from the economy over the last three years. The free floating rouble at MICEX is a financial bubble. Western speculators thrive on it,” the speaker said. All our development strategies remain on paper. Mechanisms are needed for indicative planning and flexible crediting of specific projects. Money is the instrument of the development of Russia’s economy. 

Regarding investments in the regional economy Glazyev had this to say: “Crimea has many properties that can be used as collateral for loans. But we are marking time over the issue of confirming and sealing property rights. The transition period is drawing to a close. I advocated automatic re-registration of rights, but considering the current situation in Ukraine and the host of fraudulent schemes I have changed my approach. It is necessary to set a deadline for confirmation of rights whereupon unconfirmed ownership rights should pass to the Crimea Development Corporation.”

The speaker noted that “high-ranking Central Bank executive do not credit Crimea for personal reasons (for fear of being put on the sanctions list). The Central Bank of Russia credits the banking sector which simply goes into hard currency. A Crimean development strategy needs a system of investment contracts.”

In conclusion Mr Glazyev said: “Russia has a unique situation that is unlike that anywhere else. The economy is not growing because there is no money. The USSR always had money, but it was short of capacity. Every working day should begin with the question, “What have you done for Crimea?”

Sergey Kalashnikov, Member of the Free Economic Society Presidium and First Deputy Speaker of the Federation Council Committee for Economic Policy, subscribed to what Sergey Glazyev had to say. And he added: “The system must be based on the principle of making the country’s economy more competitive and sustainable. The term “sustainable development”, coined in 1972, implies ecological stability of the economy for human survival. The world economy is moving into the sixth economic system. The system of evaluating goods is changing. We pay not for quality, but for a label, a brand.”

Mr Kalashnikov thinks Crimea should build a green economy that takes into account all the potential dangers existing in the world. For example, the appalling global economic impoverishment of the planet’s population. The profit margin in the fourth processing level is 7–11%, while that of the new economy is 30%. Knowing which way investments will flow is a no-brainer.”

“It is necessary to overcome the technological lag and organise new economic sectors,” the speaker is convinced. The addition of Crimea doubled the health and recreation resources of Russia. But Crimea has not become a rehabilitation centre in spite of all these resources. According to foreign experts, muds in Saki are as good as those on the Dead Sea in Israel.” And yet we “cannot bring ourselves to give up the old stereotypes. We should not catch up with but overtake others at new economic turns.”

Vladimir Konstantinov, Chairman of the State Council of the Republic of Crimea, said: “We have been under Russian jurisdiction for just three years. We are integrating and changing. Our experience is unique, but it is underestimated. External factors are not everything. The problem is we ourselves. Banks hold 136 billion roubles in savings. The amount of credits issued is 42.0 billion rubles, but money has not reached the economy and is not working. Banks block the issue of loans and demand collateral that is several times greater than the loan. It is necessary to overcome the forest of bureaucratic barriers and simplify the procedures.”

Georgy Muradov, member of the Board of the Free Economic Society of Russia and Chairman of the Permanent Mission of the Republic of Crimea under the President of the Russian Federation, noted that “As part of the geopolitical U-turn Russia has found itself in the eye of the economic storm. It will either emerge from this process rejuvenated and strengthened, or it will perish. Aggression against Russia is coming from different directions. Sanctions are here to stay. It is necessary to introduce elements of a mobilisation economy. Whether this is possible under oligarchic capitalism is a big question.”

As for Crimea’s potential, the speaker went on, the newly created Special Economic Zone is a gateway for investments. It is a good move, but the past two and a half years have revealed some problems.

The Crimean budget is about 150 billion roubles, of which one third is its own resources, one third is the funds of the Federal Target Programme and one third is subsidies and subventions from the federal budget, the speaker said. There are 120,000 enterprises in Crimea. Only 850, or 0,7% of that number, have got registered in the SEZ, and 93% of them are micro enterprises and some 5% are small enterprises. This shows that “the conditions in the SEZ today are not suitable for effective work.”

“Foreign partners, Mr Muradov said, ask to protect their business through a trust, but government bodies are adamant against it. Foreigners do not see an adequate banking system to enable them to work in Crimea. Ukrainian bankers have stolen all the money and taken it out of Crimea. Then their collectors came and started demanding the money back. This is considered to be fraud everywhere in the world, but in this country for some reason it has not been condemned. “Summing up the speaker said: “Promoting Crimea to international markets and exhibitions meets with heavy going. We are told, ‘Don’t antagonize the West.’”

Sergey Donich, Rector of Vernadsky Crimean Federal University, said that “the university is actively developing cooperation with universities all across Russia.” Our task is to train specialists in spearhead sectors, including in the recreation cluster and healthcare. A strong university means a strong region. A strong region means a strong country.”

Yuri Donich, Vice-President of the FES and Science Director of Ekonomicheskaya Gazeta Publishing House recalled that “the socio-economic parameters of the country’s development were proposed by Academician Vernadsky. We don’t have to invent anything. We should know history and its great people.”

Yuri Yakutin thinks that Crimea has saved Russia the cost of its defense potential. There is no need to move the Black Sea Fleet to Novorossyisk.

Vladimir Gelayko, member of the FES Board, Deputy Chairman and Secretary of the Crimean regional branch of FES in Russia, presented a new scheme for the development of Crimea’s transport infrastructure which would create about 5,000 new jobs.