Government Support 2.0. Open Dialogue or Rent-Seeking?

08 July 2019

Session Government Support 2.0. Open Dialogue or Rent-Seeking? was held on July 8, 2019 under INNOPROM Special Events track. Deputy Prime Minister of the Russian Federation Dmitry Kozak participated in the event. Discussion questions included the possibility of measuring the efficiency of state support, factors which determine its transparency and efficiency, issues faced by companies, and new instruments and prospects.

In his welcome speech, Dmitry Kozak pinpointed focal issues, “We must concentrate all public funds which we allocate to industrial development and make them work towards achieving the same goal, i.e. promoting technological development, implementing new technologies, boosting production efficiency, and improving the quality of Russian goods to ensure their competitiveness not only in the domestic, but also global market. Import substitution program should be replaced with a program targeting higher competitiveness so that Russian companies compete against the world’s top manufacturers in the domestic market and provide Russian consumers with industrial products of comparable quality, reliability, and affordability.”

According to Deputy Prime Minister of the Russian Federation, the national project International Cooperation and Export will serve as the main instrument for increasing competitiveness in the years to come. Dmitry Kozak summarized, “One of key results was the accelerated increase in the revenue of those enterprises which obtained state support. I would like to emphasize that the purpose of subsidies is not to boost company revenue, but achieve a socially significant outcome desired by the government.”

President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin talked about the need to increase the transparency of support instruments, “It is critical that we avoid excessive complication of regulatory framework and cumbersome legal constructs. It is important to perform a comprehensive efficiency assessment for state support measures, which requires the introduction of coherent methods for assessing the effect of these measures on company competitiveness. The second important direction is maximum digitalization of procedures for providing and administering state support.”

Vice-President of the Russian Union of Industrialists and Entrepreneurs Maria Glukhova pointed out, “Statistics allow for the following conclusions. First, the revenue of companies which receive state support is growing rather fast, actually it is growing faster compared against both sectoral data and the control group which did not receive state support. Thus, we can confirm that both instruments – comprehensive investment projects and loans provided by the Industrial Development Fund – are efficient. Second, we saw that these companies exhibit higher fixed assets dynamics for those support instruments which predominantly designed to promote corporate investment activity, and that is indeed extremely significant.”

Alexey Zabozlaev, Deputy Governor of the Khanty-Mansi Autonomous Okrug – Ugra, stated, “According to our estimates, the regional budget effect alone accounts for more than 14% of private investment into fixed production assets. We are optimizing state regulation mechanisms and developing comprehensive measures designed to support local entrepreneurs. For example, over the past three years the term for obtaining construction permits dropped from 100 days to 48 days. We have also introduced new regional support measures. This year, we allocated approximately RUB 1.7bn to the modernization of fixed assets and the development of industrial infrastructure. We have instituted more than 100 support measures at the regional and municipal levels and are using 240 federal support instruments. Only in the past eighteen months, our new projects will create more than 2,000 jobs, and additional budget revenue generated by the region will constitute over RIB 3bn annually.”

Other event participants included:

  • Andrei Klepach, Deputy Chairman (Chief Economist) and Board Member, Vnesheconombank,
  • Natalia Eremina, Chairman of the Board, OMK,
  • Yuri Simachev, Director of the Center for Structural Policy Research, National Research University Higher School of Economics,
  • Inna Rykova, Head of the Sectoral Economy Center, Financial Research Institute of the Ministry of Finance of the Russian Federation,
  • Igor Vdovin, Chairman of the Committee on Investment Policy, Development Institutions and Export Support, Russian Union of Industrialists and Entrepreneurs,
  • Elena Dybova, Vice-President, Chamber of Commerce and Industry of the Russian Federation.

Event information:
INNOPROM is an annual International Industrial Trade Fair that has been held in Ekaterinburg since 2010. Over the ten years of its existence, INNOPROM has become Russia's major event dedicated to showcasing the latest industrial technologies and solutions and has proven its efficiency as a trade site and instrument for promoting the exports of Russian industrial products. INNOPROM is the fastest growing exhibition in Eurasia.  Since 2015, the trade fair has featured a Partner Country. People’s Republic of China, India, Japan, and South Korea enjoyed this status in 2015-18. The Republic of Turkey is INNOPROM-2019 Partner Country.

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