TRANSCRIPT: [Putin] Meeting with Business 20
(Kremlin.ru – St Petersburg, June 20, 2013)
The meeting took place on the sidelines of the St Petersburg International Economic Forum.
Excerpts from transcript of meeting with the Business G20
PRESIDENT OF RUSSIA VLADIMIR PUTIN: Ladies and gentlemen,
It’s very good to see you all. I am happy to welcome the B20 participants to St Petersburg, on the first day of the St Petersburg International Economic Forum. We always value the opportunity to discuss ongoing issues directly with the business community, especially since there are quite a few of them at present.
I would like to note that our meeting today, and in general, the work of the B20 at the St Petersburg Forum are of particular importance, bearing in mind that Russia will host the G20 Summit this year, very soon, in just two months, and it will take place near here, in St Petersburg. Therefore, such direct dialogue with the business community is extremely important to us.
Just recently, in Moscow, I had the pleasure of meeting with G20 representatives from non-governmental organisations, who had also analysed the situation and presented their proposals for the leaders. I must say that almost all of these suggestions somehow resonate with the challenges that you focus on in your research and proposals to the leaders of the 20 strongest global economies.
The concern that the world leaders feel about the processes unfolding in the world is obvious because global growth is slowing, or it is unstable in any case. Unfortunately, there are very few positive signals and numerous different risks.
2012 was the most difficult year for the global economy since the crisis of 2008-2009. Amid growing national debt, global GDP growth in 2012 was 3.2%. The figure was a little higher in Russia, at 3.4%. As for the debts, to our great regret, they have continued to grow at a remarkable pace. The average national debt in all developed economies stands at 109.3% of GDP, while in 2011 it was only 104%. In the G7 countries, the national debt is 125% of GDP, while in 2011 it was 120%. According to the International Monetary Fund, growth will continue in the current year and will come to about 3.3%.
We are all aware of the alarming unemployment figures. About 200 million people among the economically active population in the world are unemployed. In Europe, the unemployment rate exceeds 25%. There is a very difficult situation in South Africa. And unemployment among young people is a special subject, which I am sure you are familiar with and have discussed at your meetings. Youth unemployment is over 40% in Italy and Portugal, 56% in Spain and over 60% in Greece. That is a tragedy, a highly dangerous situation, not only for the economy but also for the social and political spheres.
Political developments are a separate issue, beyond the scope of today’s meeting. Many experts are talking about this now. During my visit to the UK for the G8 Summit, I had an informal business dinner with British experts. Many of them are wondering about the contribution of today’s political institutions to the economic crisis. This is a separate topic that we all need to think about.
Of course, the business community is responsible for the lion’s share of investments and new jobs in the modern world. That is natural and could not be otherwise. The confidence of businesspeople and their plans largely determine the standard and quality of life in their country, and ultimately the stability of entire nations.
In this regard, I note with great appreciation that the B20 agenda of this year includes such issues of global significance as infrastructure development and increased investment in human resources. This is reflected in the materials that have been provided.
In this context, you believe that education is paramount, and raise several other issues. I would like to say a few words about it.
Efforts are ongoing in most of these areas at the official G20 level. That is why the Russian Presidency in this association is aimed at promoting an active dialogue with the business community, that is to say with you, ladies and gentlemen, to ensure the utmost transparency in G20 activities. To do this, we conduct multilateral consultations with the business community. We expect to make the maximum use of your research and proposals.
Today the business summit is holding an open discussion of the first draft of your recommendations for the leaders. Mr Shokhin has passed on the Green Book to me. That’s a good picture. It shows raised drawbridges, a symbol of St Petersburg. But what we need to think about together is how to lower these bridges, that is, how to close the gaps in the global economy and the G20 countries, because the most important challenge is to remove barriers to investment and trade, and you highlight this point in your recommendations. The world trade is also slowing down, and we feel it.
I hope the White Book with the final proposals for inclusion in the G20 Summit documents will be ready soon. As I said, the event will be held here, and we will certainly try to take into account all of your proposals.
I want to go back to some of your ideas and suggestions that are based on the analysis you have conducted. Before we start our discussion, I would like to ask a few questions, the answers to which could become a basis for our conversation.
What financial instruments are most important for economic growth over the next several years? Most people’s answer is flexible financial regulation. First of all, I want to understand whether there are people here who feel regulation is unnecessary (indeed, this is a fundamental question). And if there is no one here who thinks we do not need any regulation, it means there has been an enormous shift in the consciousness of the business community, an enormous transformation.
But in that case, we need to define what is flexible regulation? Where does flexibility end and some sort of dictate from the regulating authorities begin?
What are the main priorities in trade? Is it to extend commitments in the fight against protectionism after 2014? My question to you is entirely concrete, and it concerns the G20’s work specifically. What do you mean work within the WTO framework, further discussions within the WTO framework, or just extending previous temporary arrangements and agreements? Do you suggest simply prolonging them?
This is a serious matter because last time, in Los Cabos, there was an argument about it between developed and developing economies. Representatives from developed economies said, “Let’s stop prolonging everything and reach some final decisions within the framework of the WTO.” I would like to hear your option. This is one of the fundamental questions.
Another question: what measures do you feel are most effective in creating new jobs and developing human capital? Education? I suppose this is clear, but we need to agree on everything.
And another issue: what actions do you see as priorities in fighting corruption? A fair and transparent state purchase system? I just want to let you know this is a problem we are trying to resolve as efficiently as possible in Russia. If you have any specific recommendations on this type of transparency, I would be very grateful.
Furthermore, what are the key success factors for stimulating private investment in infrastructure? Removing limitations on free flow of capital with the aim of stimulating cross-border investment.
I would like to let you know, and you have probably already heard this for yourselves, that regulating tax legislation and deoffshoring the global economy were among the main, key topics during the G8 discussions in the United Kingdom.
So my question is: how will removing restrictions on the free flow of capital correlate to deoffshorisation and the fight against tax evasion? Do you feel there are any problems with this? Are there any complications or contradictions? If so, what are they? I just want to hear your opinion.
And finally, how confident are you that the recommendations will be transformed into concrete decisions and actions? Mr Shokhin [president of the Russian Union of Industrialists and Entrepreneurs and B20 chairman] said that 15 percent of people replied they were “fully confident,” and another 56 percent replied they were “confident to some extent.”
Mr Shokhin was somewhat sceptical when talking about this, specifically stressing the “some extent” part, but I suggest we focus on the other parts, the words “fully confident” and “confident.” And that accounts for nearly 70 percent. I think we need to look at these issues with more optimism.
(On financial regulation) I agree with both my Russian and my American colleagues here. The point I want to make is that, first, we understand the fears, the Russian Central Bank’s fears in this particular case, about anything that might give rise to financial bubbles and fill markets with products for which there is no demand.
My Russian colleagues know that I had a business meeting, more of a friendly conversation really, with Russian business leaders yesterday, and we discussed this issue too. We discussed the lending issue and also talked about interest rates, which are quite high in Russia at the moment. But I want to touch on a slightly different aspect the relations between different countries and regions.
I met yesterday with the Dutch Prime Minister. The Netherlands is a small but highly developed and rapidly advancing European country, and also one of Russia’s biggest trading partners. Bilateral trade between our two countries comes to more than $82 billion, which is a sizeable figure. So, what’s the problem? The problem is that Dutch banks must comply with particular rules, which means that if a Dutch bank (incidentally, I haven’t told my Dutch colleague about it) invests more than 5 percent in the Russian economy it faces much higher reserve rules. In effect, this limits the investment process, and this is something I want to draw to your attention.
We will discuss this at the G20 too of course, but I hope that in your everyday practical work you could also nudge your regulators into lifting these kinds of completely unjustified restrictions. We will do this at the government level of course, but I think the business community also has an interest in doing away with these kinds of absolutely unfounded restrictions. We need to get rid of them.
(On protectionism and tariff policy) It does not cost much to abolish non-tariff barriers, but many countries think that abolishing these barriers will end up costing them dearly. It isn’t hard to get rid of them abolishing them doesn’t cost a penny, but some countries think they will suffer big losses as a result.
I understand it when business, especially active and forward-looking business such as Russia’s metals sector, makes these calls to be allowed to move freely without borders. We support this desire of course, but the issue does not rest with us alone. If we take the G20, for example, there are various economies represented there, including economies that consider themselves developing economies. It was hard enough already at the Los Cabos summit to agree on extending the earlier commitments regarding non-protectionist measures. Some countries insist that we either abolish everything right now, or we come to long-term agreements within the World Trade Organisation framework. I can tell you that all of this was the subject of much discussion. We agreed then to extend the earlier commitments, but what will the next step be? Discussions in the WTO, unfortunately, have not been getting anywhere so far.
In this connection I have for you not so much a question as a proposal and request. I’d like you to think about how you can all get your countries’ experts involved so as to help us reach a balanced decision. It’s one thing to say, “You know, it would be great to get rid of protectionism.” We know that this would be a good thing. There’s no need to convince me of the benefits here, because I myself am looking for ways to support Russia’s metals, chemicals, and power industries, so that they don’t run into problems and have new investigations opened into their activities. Of course we would like to put an end to all of this. But we need to find solutions that would be acceptable for our partners from the developing economies too. It’s absolutely crucial to strike the right balance of interests.
I therefore turn to you, colleagues, as people from leading companies, banks, and consulting firms. I know that this work is not easy of course, but if you could get your experts involved, finance their work, which wouldn’t cost you much at all, and draft proposals, these really would be valuable recommendations and could be of great value indeed for the G20 leaders’ work.
I stress again that creating new jobs is one of the Russian presidency’s priorities. I completely agree with you of course that we need not just any old jobs, but jobs that meet today’s economic development and labour quality demands. You have probably heard about how Russia is acting on the business community’s initiative to pursue a very ambitious programme of creating 25 million new jobs. We will not be creating all of these new jobs from scratch of course. In some cases we will re-profile existing jobs, and in other cases we will create completely new jobs.
This is not just an ambitious but also extremely difficult undertaking, but I think it is a realistic objective in Russia’s situation, given that economic modernisation is our absolute top priority. The economic modernisation process will create new jobs in any case. In other words, as we work on our top priority goal, we will be working on job creation at the same time. Of course this is an issue that we need to pay more attention to at the international level too, working through the international community.
There’s a point I want to make in this respect. I mentioned that some countries, South Africa, for example, are facing big unemployment problems. We have a whole programme underway in Russia for training and re-training personnel from countries with developing economies. We are steadily increasing the number of students we take from these countries. Their studies are paid for with Russian federal budget money, and we plan to continue this programme in the future.
(On offshore zones) The point I want to stress here is that all government leaders I’ve had the chance to talk to all support ending the offshore system. Everyone agrees at least that transparency is the best remedy for ailments of this sort, and everyone supports disclosure of end beneficiaries. This is the biggest issue to sort out. I want you all to know that this is the direction in which the world is moving now. This is where we are heading.
Many countries, even developed economies, say that they and their tax systems suffer from offshores and tax havens. Even the US economy has this problem, and that is why President Obama talked about the proposals and ideas that they are trying out in the US tax system. I think those are interesting ideas, and you would also do well to take a look at what they are doing. They have introduced a demand to make up the difference between the tax rate in the country where they are paying taxes, and the tax rate in the United States itself. There are a lot of proposals in this area, not just from the US President, but from other leaders too. Whatever the case, the global economy is moving in this direction now.
I can say right away just how we will go about our work [in the G20].
Once we have received your recommendations, we will give the relevant instructions to Russia’s sherpas. They are here and listening to all we are saying now. They will work through these questions with their colleagues from the other G20 member countries. We will transpose your recommendations to a practical dimension. I cannot say yet exactly in what form and volume it will all appear in the final documents. As you know, all issues are decided by consensus, and we cannot and have no plans to impose anything, but we will definitely put forward your ideas for discussion and will include them in the final document in one form or another. You can rest assured on this point.
(On the energy market) I want to say on this issue that no one should add new problems or difficulties to this very important and responsible sector.
I note too that we need absolutely stable decisions and laws in this sector. We need to be able to guarantee the fundamental principles, one of which is that laws do not have retroactive force. Laws that we pass today apply only from the moment they come into force and only to the future, not to the past. To act otherwise would be to destabilise the whole situation, and I think that in a sector like energy this would be very dangerous.
We are engaged in ongoing dialogue in this sector, and I do not hide the fact that our debates continue with our European partners, who want to implement the Third Energy Package, which they adopted after our companies signed long-term energy supply contracts. Now they want to apply these new rules to contracts signed earlier. In our view, this is not the right approach and does not comply with civilised behaviour. But we hope to find solutions to this problem through dialogue between partners.
This is so very important because we are already putting billions into infrastructure projects only to then discover that we cannot use the infrastructure we worked so hard on developing because of legal decisions that have been taken. I think this is a very counterproductive situation. This is something we need to think about now and in the future.
Before we part ways, let me add a few more words.
Our meetings have become something of an official event now. That is not a bad thing overall and creates a business-like atmosphere. The point I want to make is this. We went through the 2009-2010 crisis, and we see that the global economic situation is not at its best today either. There are a lot of risks and uncertainties, though we are all hoping for an improvement of course. But none of us really know for sure how things will develop. Let’s hope that all of the problems we have faced over these last years and are still facing today are the worst of it all, and that from here things will only get better. This is our hope, but we cannot be certain that this will really be the case.
It would be wrong, harmful and dangerous to add fuel to the fire and overdramatize things, but it would be equally dangerous to underestimate the problems. You can explain the situation in various ways. Some say that crisis was already in the making and would have come a lot earlier if it hadn’t been for the Soviet Union’s collapse, which opened up new markets in Russia, the post-Soviet area and Eastern Europe. Some say that the technological development and systems in place today no longer meet the demands of developed countries’ populations, or that existing political systems are unable to resolve the tasks that citizens want their governments to address today. There are many questions, but far fewer answers. We talked about the global economy’s complexities just now, and about how one of the biggest problems in the world today is the high unemployment level. As I noted before, youth unemployment in developed European countries is as high as 40, 50 or 60 percent.
You probably know that Russia’s unemployment rate is currently at a record low of 5.5 percent. We had GDP growth of 3.4 percent last year, which is equivalent to the global level. We have lowered the forecast for this year, though the IMF, which is fairly optimistic about the Russian economy, is forecasting that our GDP growth will remain at the global growth level. Our inflation rate is still high, but it is lower than at any other time over our recent history, and we will continue to keep it on a downward track. We have only minimal levels of debt. Our foreign debt comes to 2.5 percent of the Russian budget. This is compared to debt levels of 100 percent in the Eurozone and more than 100 percent in the United States. The difference is huge.
Overall, the Russian economy has good prospects and is totally healthy. But today’s situation still has us very worried even so, because we know that if the global economy goes into contraction, our economy will inevitably feel the impact too.
I am saying all of this because it is only through a common effort that we can find effective solutions to this situation. It would be extremely dangerous, given the complexities of the problems we face, for us all to shut ourselves away in our own backyards. It is very difficult to avoid all of these problems, but only if governments and business join forces and work together can we address and resolve the issues. You carry huge responsibility. I hope very much that this positive work together will continue over the years to come.
Thank you very much for taking part