Medvedev devoted to stopping money “running away” from economy

President Medvedev has admitted that the investment climate in Russia remains “very bad” and urged measures that would help to make the economy attractive to investors.

The Russian leader was speaking on Wednesday at a meeting of the commission for modernizing the Russian economy. Initially, the gathering was to be focused on problems of training engineers, but Medvedev suggested starting the session by discussing the investment climate instead.

The president stressed that in order to achieve the goal of modernizing the Russian economy, the country has to significantly increase the inflow of foreign investments. “We need investors’ interest and trust,” he stressed.

However, currently the investment climate is “very bad” and the “money is running away from our economy”. For many small companies the business conditions have only worsened in the past year due to higher insurance fees, increasing electricity prices, and Russia's worst evil – corruption.

"[The corruption] is not loosening its grip, but holding the economy by the throat,” Medvedev stated. The leader declared war on corruption at the very beginning of his presidency in 2008, but that uneasy battle has yet to be won.

Medvedev admitted that not many believe they can engage in safe and successful business in Russia, but, he stressed, it is time to change that. It is one of the key tasks for both the president and the government as bringing investment into the country and modernizing the economy makes people's lives better.

In order to improve the situation and the investment climate in Russia – and thus boost economic development – Medvedev suggested a ten-point plan.

First of all, he gave the government until June to come up with proposals on reducing the insurance fees. “A 34% rate of insurance assessment may appear to be back-breaking for many businesses,” he said. Ideally, he pointed out, the rate should not be much higher than it was before – which is 26% from the labor compensation fund. Medvedev admitted that it would not be easy for the state budget and would require at least reducing the money spent on state purchase contracts.

In a move to tackle corruption, Medvedev ordered the prosecutor general to introduce a new mechanism of considering complaints from citizens against state officials’ actions by May this year. That should include not only a thorough checkup of the information on bureaucrats' alleged involvement in corrupt schemes, but also publishing the results of the inspection.

He also pointed out that officials “who do not realize that creating conditions for the work of honest businessmen and investors” is a priority of any manager's activity, may lose their jobs. Medvedev warned the state servants against creating any kind of barriers which have nothing to do with interests of the state and its citizens.

The contradicting laws and decisions of some state departments, as well as their unpredictability, are yet another obstacle for both Russian and foreign businessmen. Medvedev said that he often gets complaints on the matter and added that he agrees that “it is a real problem in many cases”.

The president said that the Ministry of Economic Development will be given authority to apply to the Ministry of Justice and suggest that departmental decisions that unreasonably hamper business or investment activities are canceled. The Justice Ministry would demand that departments responsible for taking those decisions abolish them immediately. To avoid such documents and decisions being approved from the very beginning, Medvedev suggested discussing them publicly with representatives of the business community.

The next point of the plan is introducing a post of investment representative in every Federal District who would assist companies in fulfilling their investment projects as well as in cooperating with state executives.

"There are regions where it takes about three months from the moment of the investor's application until all the approvals are obtained. These are happy regions where happy investors live,” Medvedev said, adding that going through the same procedure in large regions used to take up to two years until recently.

In order to get rid of the companies’ excessive influence on the investment climate, the head of the Russian state demanded that the government ministers and deputy prime ministers stop working as top managers in large state corporations if these corporations work in a competitive environment. The president said this must be done before the middle of this year and that the bureaucrats must be replaced by independent directors. “The state tries to be a better businessman than the business itself. Such things can never happen,” Medvedev said.

He added that in seven or eight years the state must stop the involvement in the direct investment fund that is being created now. “A team formed with the investment market professionals must manage the fund” Medvedev said. The president also said that Russian state companies tend to spend more on the same goods than the companies working in the same field abroad and stressed that corruption was the only possible explanation of this phenomenon.

President Medvedev said that minority shareholders must have access to the information about activities of public corporations and about the opportunities to affect the activities of such corporations. The president said that in this regard it was necessary to update both the current corporate law and the work of the companies that remain under state control. He stressed that any infringement of the rights of minority shareholders would be considered an example of the managers’ ineffective work. He added that the recently reorganized department for regulation and control of financial markets will be put in charge of this.

The president ordered to radically improve the work of all state agencies, such as customs, airport services, labor inspectors, fire fighters and so on. He said that he had received a tremendous quantity of complaints on these issues from citizens and businessmen alike. Medvedev ordered that government and the presidential administration appoint special curators on the deputy prime minister level to oversee these issues and report in six months with possible replacement of the heads of the ministries and agencies that fail to prove themselves worthy. He added that the results of the work would be determined by the opinion of those who use the corresponding services and those who are subject to corresponding inspections.

President Medvedev ordered to organize a mobile reception office that would accept suggestions and complaints from citizens all over the country. He added that such offices will start working as soon as May this year and that clerks from the presidential administration will be sent to all regions to gather information from persons and organizations. The authorities will react to such complaints in the fastest mode possible. Medvedev’s aide, Arkadiy Dvorkovich, added that each complaint will receive a public reply in the media or social networks and this will be the key distinction from the present situation.

From words to actions

On April 2, Dmitry Medvedev signed a list of instructions to the government on priority measures to be taken in order to fulfill the ten-point plan aimed at improving the investment climate.

Under the presidential order, by July 1, eight top officials – including Deputy Prime Minister and Finance Minister Aleksey Kudrin, deputy premiers Viktor Zubkov and Igor Sechin, Defense Minister Anatoly Serdyukov, Energy Minister Sergey Shmatko, and others – will be removed from the boards of directors and supervisory boards in major state-owned corporations. By October this year, all state officials will have to give up their seats at companies' governing bodies. They will be replaced by independent managers.

Talking to journalists on Saturday, Medvedev’s press secretary Natalya Timakova specifically underlined “that all ministers and all representatives of the presidential administration, who represent the state in company boards now, should leave these company organs”.

Prime Minister Vladimir Putin has been named responsible for implementing the presidential order.

Fighting one of Russia's worst evils, corruption, is also among priority tasks in improving the investment climate. Despite the government's efforts, bribe-taking and kickbacks among officials still remain common in Russia, turning the lives of many businessmen into a nightmare and scaring away potential investors. In a move to improve the situation, the Prosecutor General's Office was instructed to come up with a draft law that would regulate the procedure of addressing citizens' complaints regarding corruption. The results of inspections carried out in order to check information concerning bribe-taking or any other violations will have to be published. Heads of state bodies that are repeatedly found guilty of corruption offenses, will bear personal responsibility.

The list of Medvedev's orders was published on the Russian President's official website, kremlin.ru.

­Read Gleb Pavlovsky's column on the issue here