HERALD - DECEMBER 2020 by HERALD

OFFICIAL PUBLICATION OF FBA EAC, IBC

ОФИЦИАЛЬНОЕ ИЗДАНИЕ ФБА ЕАС, МБС

№ 3 (11) | 2020

EURASIAN FINANCIAL & ECONOMIC

ЕВРАЗИЙСКИЙ

ФИНАНСОВО-ЭКОНОМИЧЕСКИЙ

# 3 (11) | 2020

№ 3 (11) | 2020

PERSONALITY

А. Shokhin Eurasian Economic Integration: prospects for creating a single financial market for the EAEU 6

A. Kishkembaev. Eurasian Economic Union: current status and perspectives

HERALD

ВЕСТНИК

D. Ivanov We have made a useful breakthrough

МГЕР ГРИГОРЯН: Евразийская интеграция – потенциал для развития экономических отношений

подробнее на стр.

А. Шохин Евразийская экономическая интеграция: перспективы создания единого финансового рынка ЕАЭС 6

А.Кишкембаев Евразийский экономический союз: текущее состояние и перспективы 10

# 3 (11) | 2020

page

EURASIAN FINANCIAL & ECONOMIC

Eurasian integration – potential for the development of economic relations

ЕВРАЗИЙСКИЙ ФИНАНСОВО-ЭКОНОМИЧЕСКИЙ

MHER GRIGORYAN:

ЛИЧНОСТЬ

Д. Иванов Мы совершили полезный рывок 26

E DITORIA L BOARD: # 3 (11) | 2020

Bakhytbek Baiseitov, Chairman of Business Council of FBA EAC, President of the Association of Banks of the Republic of Kazakhstan

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Ев иация роАзиат ск ог о

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Anvar Abdraev, President of Union of Banks of Kyrgyzstan

FOUNDERS:

Финанс

Alexander Murychev, Chairman of Editorial Board, Chairman of Executive Board of FBA EAC, Executive Vice-President of RSPP, Chairman of IBC

Oleg Berezovoy, General Director of FBA EAC, Member of Executive Board RSPP

Financial & Business Association of Euro-Asian Cooperation (FBA EAC)

International Banking Council (International Coordinating Council of Banking Associations)

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) Vladimir Vasic, Secretary General of Association of Serbian Banks Alexander Dzneladze, President of Association of Banks of Georgia Anatoliy Kazakov, Chairman of the Coordination Council of Financial and Banking Council of the CIS

PUBLISHER: Financial & Business Association of Euro-Asian Cooperation (FBA EAC) Editor in Chief: V. Murin

Elena Korobkova, Executive Director of Independent Association of Banks of Ukraine

Executive editor: S. Orlova

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Corrector: A. Panyugina

Manish Kumar, General Director of SOLTEX Group LTD., Head of Representative Office of FBA EAC in India, Sri Lanka, Bangladesh, Malaysia 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’

Editor: A. Gusev Page-proofs: A. Bagaev Editorial Board: E. Berezovaya, O. Ryazanov Translator: A. Lozhkina

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ISSUE DATE: December 2020

Bratislav Pejakovic, Secretary General of Association of Montenegrin Banks Krzysztof Pietraszkiewicz, Chairman of Polish Bank Association Anatoliy Tkachuk, Vice-President of FBA EAC, President of GC RUSTIAN Dumitru Ursu, Chairman of Moldovian Bankers’ League Tydor Afanasov, President of CCERR Bakhtiyar Khamidov, General Director of Uzbekistan Banking Association Samvel Chzmachian, Deputy General Director of FBA EAC, Head of Representative office of FBA EAC in Armenia

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Appeal to the readers Dear friends and colleagues! According to the genius Leonardo da Vinci, «Everything in nature is wisely thought out and arranged, everyone should mind his own business, and in this wisdom – the highest justice of life». Striving for «higher justice», the Editorial Board of the Herald, despite the pandemic with its limitations and new challenges, continues to «mind its own business». So that our magazine is still interesting and useful to you, so the dialogue between the business community and the authorities is not interrupted, so business, no matter what, Alexander Murychev, can grow and develop by sharing experience, Chairman of Editorial Board of the magazine “Eurasian discoveries and resources with colleagues. Financial and Economic Herald” In this issue business is presented in several areas: projects, innovative technologies and practices. In the situation with the COVID-19 pandemic, an article by Professor Lu Hung-Tu, Head of the FBA EAC Representative Office in Taiwan, co-authored with Vladimir Kondratenko, PhD in Technical Sciences, Denis Panasenko, Professor, «Nano-Ionised Water – the Strongest Protection against Сorona virus», in which the authors talk about a new method of treating tap water, as a result of which water acquires new unique properties of purification, sterilization and deodorization. According to test protocols from the Research Centre for Emerging Viral Infections at Changen University, the Сorona virus, EV71 virus, influenza A/B virus, Coxaca virus, Escherichia coli, Escherichia coli, Escherichia salmonella and Acinetobacter baumannii are 99.9% likely to be completely destroyed! Innovative technologies also include the production of new industrial greases by MAPS-OIL with the widest range of applications. The project presented by Aleksey Kovalenko, Director for Strategic Projects at Soltex Group, LLC, «Flax as a Prospective Crop of Agriculture» is interesting. The project requires investment. It is possible that interested entrepreneurs and financiers will be found at the Herald site. In the section «Business in countries» – China and Africa. The African economy has been growing at a rapid pace in recent years, exceeding the global economy. The recent decision at the level of the African Union to establish a Continental Free Trade Area has increased the interest of foreign companies in such a huge emerging market. This is what Alexander Biriukov, President of the Association of Russian Industrialists in West Africa, told us in his article. «To do business in China, you need to know it from the inside,» says Evgeny Bazhov, Head of the FBA EAC Representative Office in China, in his book, the presentation of which can be found on the pages of the magazine. As always, financial and banking topics are widely represented on the pages of the magazine. Chairman of the Executive Board of the IBEC Denis Ivanov, answering the interviewer’s questions about the experience of work in the crisis and the strategic goals of the bank, focuses on the rapid digitalization of the banking business. An analytical article by Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs (RSPP), reflecting on the prospects for creating a single financial market for the EEU, also arouses interest. According to A. Shokhin, «the creation of a common settlement infrastructure (common payment space) using modern financial technologies will increase the stability of the national payment systems of the EAEC Member States, ensuring greater economic sovereignty». Armenia is represented under the heading «Financial system of Eurasian countries». And this is not by chance. The face of the issue cover was Mher Grigoryan, Deputy Prime Minister of the Republic of Armenia, who being a lawyer devoted most of his professional activities to the banking business. Answering the question about the future of the Eurasian integration, he expressed confidence in its great potential. Detailed information on the current state and prospects of the Eurasian Economic Union is provided by Askar Kishkembaev, Head of the Secretariat of the EEC Board Member (Minister) for Economic and Financial Policy. «The Eurasian Union is gradually acquiring the status of an economic growth driver and will be a kind of «window of opportunity» for dynamic development of the EAEC Member States» – on such an optimistic note he concludes his article. I wish you a pleasant reading, from which you will undoubtedly receive not only intellectual but also aesthetic pleasure. Read and be happy!

CONTENT 4

PERSONALITY Mher Grigoryan: «The Eurasian integration vector offers great potential for the development of trade and economic relations»

NEWS FROM THE RSPP A. Shokhin. Eurasian Economic Integration: prospects for creating a single financial market for the EAEU

EEC TODAY AND TOMORROW A. Kishkembaev. Eurasian Economic Union: current status and perspectives

PAGE OF THE FOUNDER. FBA EAC VII Moscow International Financial and Economic Forum Great Eurasia in Search of New Formats and Areas of Cooperation

Alexey Evseev. BUSINESS PLACE – new integration B2B FBA EAC site

PAGE OF THE FOUNDER. IBC IBC discussed the digitalization of the banking system in the context of a pandemic

Association of Serbian Banks. Digitalization in the banking sector after COVID-19 pandemic

BANK. BANK. BANK D. Ivanov. We have made a useful breakthrough

FINANCIAL SYSTEM OF EURASIAN COUNTRIES S. Chzmachian. Armenia: an economy during a pandemic and development prospects for the financial sector

INVESTMENTS A. Kovalenko. Flax as a promising agricultural crop in Russia

PRACTICE V. Prikhodko, A.F. Kuzminskiy, S.V. Shubin. An intelligent social support network as one of the tools to increase efficiency public administration

Vl. Sokolov. Leasing as a progressive form of investment and economic stabilization

TECHNOLOGIES V. Bukin, Y. Fyodorov. MASMOL® – innovative industrial greases

SPECIAL OPINION Vl. Kotenev. Eurasia: between geopolitics and economic recovery

TOPIC FOR DISCUSSION Vl. Korenevskiy. From the 'scarlet ocean' to customs audits

INNOVATION D. Panasenko, Vladimir Kondratenko, Lu Hung Tu. Nano-ionized water – the strongest protection against Сorona virus

BUSINESS IN THE COUNTRIES A. Biryukov. Business in Africa: perspectives and features

IT IS INTERESTING E. Bazhov. To do business in China you need to know it inside

HISTORY OF MONEY Vitaliy Krasnikov. North Irish pound – UK regional currency

PHOTO CONTEST

BUSINESS PLACE – NEW INTEGRATION B2B FBA EAC SITE WITHIN THE FBA EAC PROJECT ‘DIGITAL BELT’ Alexander Lisytsyn. The main purpose of the BUSINESS PLACE operation is to create an environment for solving specific business tasks in the international space.

FLAX AS A PROMISING AGRICULTURAL CROP IN RUSSIA Alexey Kovalenko. With unprecedented government support measures aimed both at developing the agrarians and supporting the light industry, flax fiber could become one of the most promising sectors of agriculture.

14 24 24

DIGITALIZATION IN THE BANKING SECTOR AFTER COVID-19 PANDEMIC Association of Serbian Banks. It is becoming increasingly clear that the banking ecosystem and the way in which customers communicate with financial institutions are in no small part affected by the pandemic. We will remember this time as a transitional period between a world without the virus COVID-19 and the «new normality».

LEASING AS A PROGRESSIVE FORM OF INVESTMENT AND ECONOMIC STABILIZATION

34 31 55

Vladimir Sokolov. International between countries is one of the main ways of international leasing development. It will enable one country to lease the equipment or vehicle that it needs and other countries producing the equipment or vehicle to provide it. This will have a positive impact on the economies of these countries and will contribute to the development and revival of production. EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

BUSINESS IN AFRICA: PERSPECTIVES AND FEATURES Alexander Biryukov. The African economy has been growing rapidly in recent years at a rate that exceeds the global rate. Recent decisions at the level of the African Union on the establishment of a Continental Free Trade Area have further increased the interest of foreign companies in gaining a foothold in a huge market that is just beginning to develop.

Personality

Mher Grigoryan:

ÂŤ Eurasian integration vector has great potential for development trade and economic relationÂť 4

– Mher Herbertovich, I would like to start with the issue of integration processes and participation of the Republic of Armenia in them. What is the role of the EAEC for Armenia? – Integration processes in the framework of the EAEC are certainly an important topic for Armenia and we attach strategic importance to this process. A wide space with full standards of free movement of goods, services, capital and labor cannot but contribute to the development of economy and trade of the member countries. Moreover, Armenia has a certain peculiarity in terms of building standards and regulations to ensure full economic activity, as it is the only country without land borders from any of the countries of the Union. Accordingly, the development of integration processes with this fact in mind affects the ability of the EAEC to build the potential for full cooperation with various countries of other geographical regions. Armenia is a full member of the EAEC and takes an active part in all processes of the Union. – We know that in 2017 Armenia signed the Agreement on Comprehensive and Extended Partnership with the European Union. I would like to ask you a question, which you have certainly been asked many times before: how does Armenia synchronize its relations with the two integration unions – EAEC and EU? – Absolutely constructive. We do not see any different orientation in these two processes. On the contrary, the existence of this fact contributes to the processes of global integration, and in this sense Armenia is directly at the crossroads, where it is possible to promote the development of various cooperation processes. I think this should be welcomed. – What is your opinion about the future of the Eurasian integration vector in the general context of global evolution? – I see great potential for developing trade and economic relations in this direction. I believe that the mood in the private sectors of our countries is already contributing to this integration, which is very important. The development of cooperation on a large scale, the potential of the common market, the reduction of costs and expenses for business – all these factors contribute to the development of integration in this direction.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

– Mr. Deputy Prime Minister, we cannot help but touch upon an issue that is on the agenda of all countries and integration unions – the pandemic issue. How do you assess the response of the EAEC to the spread Сorona virus? – I believe that all the bodies of the EEU have worked quite quickly. I can confidently say that the organization has proven itself to be quite mobile, soldiery and constructive in this regard. In fact, it was a stress test, which, in my opinion, was successful. As for the process of mobilizing against the effects of the pandemic and working towards recovery – let’s see, it is too early to assess. – Mher Herbertovich, you touched on the measures taken by the Union, I would like to clarify: what measures has the Government of the Republic of Armenia taken to prevent the Сorona virus crisis in the country and what is your assessment of the effectiveness of these measures? – We and most of the countries in general have worked in three main areas – healthcare system, social support and economic support. We have conducted around 25 major social and economic support events with quite substantial budgets and, in our view, we have protected ourselves from social and economic crises. We were able to adjust the healthcare system accordingly as soon as possible and respond to all trends in a timely manner. I would not like to evaluate our actions. Moreover, the process is not complete and it will take time for complete expert assessments. But I am confident that the assessment of our actions will be positive, as a number of trends and indicators already testify to the correctness of the Armenian Government’s response. – And one last question, Mher Herbertovich. What do you think the world will be like after the pandemic? – The other one. I will not dwell on all factors separately, but one aspect should be addressed precisely – the role of time and pace in actions, communications and processes. I think almost everybody has felt and appreciated this and everywhere. And that will change a lot.

Mher Grigoryan, Deputy Prime Minister of Armenia. He was born on February 15, 1972 in Ashtarak (Armenia). Mr. Grigoryan studied at the Moscow State University, Faculty of Law (1989–1991). He continued his studies at Yerevan State University (1991–1994) and graduated from the Faculty of Law, qualified as a lawyer. In 1997-1998 he took a six-month qualification course at the Leeds University Business School (UK). He started his professional activity in 1996 at the Central Bank, where he was Head of Legal Department until 1999. Then he worked at Einerardbank (now Bank Ameria) as Head of Legal Service, Operational Director (1999– 2005). He provided legal consulting services to the World Bank (2002-2006); part-time worked at HSBC Armenia as Head of Legal Service (2004-2005). In 2005–2007 he was Executive Director of Inekobank. Deputy Executive Director at VTB-Armenia Bank (2007–2011), member of the Board of Arca Credit Reporting (2006–2018), Chairman of the Board of Ardshinbank (2011–2018), Chairman of the Board of Armenia Insurance Company (2012–2018). On May 12, 2018, he was appointed Deputy Prime Minister of the Republic of Armenia by the decree of the President of Armenia. From 16 October, 2018 he served as Acting Deputy Prime Minister of Armenia, on 16 January, 2019 he was reappointed Deputy Prime Minister of the Republic of Armenia by presidential decree. Awarded the Anania Shirakatsi Medal for his contribution to economic development (2016 and 2017).

News from the RSPP

Alexander Shokhin, President of the Russian Union of Industrialists and Entrepreneurs

EURASIAN ECONOMIC INTEGRATION:PROSPECTS

FOR CREATING A SINGLE FINANCIAL MARKET FOR THE EAEU The global economy is currently going through a difficult time: trade intensity is declining, trade barriers remain, and investment is highly volatile. World trade continues to decline rapidly, and at present, it is falling much faster than global GDP. For example, in the second quarter, world exports experienced an unprecedented decline – in monetary terms, trade shrank by 21% year-on-year to $3.7 trillion, which, however, is partly due to a sharp fall in energy prices. Total imports in the second quarter decreased 1 2

by 14.3% compared to the first quarter. Overall, exports of North America are expected to fall by 14.7%, Europe by 11.7%, and Asia by 4.5%. South America (by 13.5%) and Europe (by 10.3%) will have the largest reductions in imports1. According to data published by the Federal Customs Service in early October, Russia’s foreign trade in January-August 2020 fell by 18.3% (to $354.8 billion) by the same period of 2019. At the same time, exports fell by 24.2% (to $209.4 billion), while imports fell by only 7.9% (to $145.4 billion).

https://www.kommersant.ru/doc/4502648 ttps://www.wto.org/english/news_e/pres20_e/pr862_e.htm

Despite the more optimistic WTO forecast in October that the decline in world trade may not be as deep as previously expected (–13%) and will be 9.2% this year with a rebound of 7.2% next year, this estimate is still at high risk of revision due to a possible resumption of restrictions due to the spread of the second wave of the Covid-19 pandemic2. However, quite often, there are cases when trade restrictions stimulate the competitiveness of individual countries and their producers. For example, according to the WTO report on trade measures of the G20 members published on 29 June, between mid-October 2019 and mid-May

2020, the G20 countries introduced new restrictive measures unrelated to the COVID-19 pandemic for a total of USD 417.5 billion (the third-highest since May 2012). Concerning imports, the restrictive measures introduced in 2009 and still in force today continue to increase, currently affecting 10.3% of G20 imports (USD 1.6 trillion). Under these circumstances, there is growing interest in expanding economic cooperation within the EAEU, and these factors provide an additional incentive for developing integration processes within the Union. The evergrowing interest of Russian businesses in cooperation in the Eurasian space confirms this. However, economic integration implies the formation of a single financial market in general and an integrated currency market in particular. This process creates the most favorable conditions for the sustainable economic growth of the EAEU Member States, especially since the economies of the EAEU Member States are at a low level of saturation with money and loans, and the shortage of investment and financial resources is a constraint on economic growth. This understanding was reflected in the Declaration on Further Development of IntegraEURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

tion Processes within the framework of the EAEU, adopted on 6 December, 2018. One of the instruments to “ensure the maximum efficiency of the single market of the EAEU and the realization of its opportunities for business and consumers” was defined as “the formation of a common financial market of the EAEU “. And on 1 October of last year, the Concept of forming a common financial market for the EAEU in the space of the five countries by 2025 has already been approved. In general, we are talking about the formation of unified rules of the game in the EAEU countries in the insurance, banking, and exchange sectors. In other words, the essence is to harmonize the legislation of the countries of the Union, and as a result – to create the most favorable conditions for the population and business. This means sustainable economic growth. However, in the Eurasian Economic Union, unlike the European Union, there is no decision on transition to a single currency. One of the main problems of Eurasian regional integration, as well as European integration, is the significant differences in the level of economic development between the countries of the region. And under these conditions, an important element of the common finan-

cial market of the Eurasian Economic Union is the integrated currency market. Expansion of settlements in national currencies (bypassing the currencies of third countries) is one of the key tasks of the current stage of the formation of a common economic space of the Eurasian Economic Community, which is expressly set out in the Treaty on the Eurasian Economic Union. The use of the national currencies of the EAEU Member States in mutual cross-border transactions allows reducing costs, eliminating the need for conversion, helps eliminate barriers for participants in foreign economic activity, and promotes the development of national financial markets. Against the backdrop of the growth of world currencies concerning the ruble, the discussion about the depolarization of international settlements and the promotion of the ruble as the currency of payment under foreign trade contracts resumes. In 2019 16.5% of export transactions were carried out in rubles (60.6% – in US dollars, 20.6% – in Euros) and 31.6% of imports (36.5% – in US dollars, 28.1 % – in Euros).The share of the ruble in the structure of payments in trade in goods and services within the EAEU is quite high: in 2019 it was 72.4% against 1.5% of settlements in other national currencies.

News from the RSPP

Table 1 Currency structure of payments for the export and import of goods and services between the EAEU member states (for the period, percent) Reciprocal payments by the EAEU Member States

2013

2014

2015

2016

2017

2018

2019

In Armenian drams

0,1

In Belarusian rubles

0,4

0,3

0,5

0,4

0,3

In tenge

0,4

0,5

1,1

0,7

0,9

0,7

1,0

In soms

0,0

0,1

In Russian rubles

61,8

67,4

68,0

74,1

74,9

72,7

72,4

In USA dollars

30,3

26,3

25,0

19,3

18,3

19,2

19,4

In Euros

6,8

5,2

5,1

5,2

6,8

6,6

In other currencies

0,2

0,1

Source: EEC Express Information “On payments for the export and import of goods and services in 2019”

Table 2 Currency structure of revenues for the export of goods and services of the EAEU Member States to all countries of the world (for the period, percent) Export earnings

EAEU

Belarus

Kazakhstan

Kyrgyzstan

Russia

In Armenian drams

0,0

In Belarusian rubles

0,2

1,7

0,0

In tenge

0,2

0,0

2,8

0,2

In soms

0,0

In Russian rubles

16,5

34,4

9,7

23,4

15,2

In USA dollars

60,6

28,9

87,3

69,8

61,9

In Euros

20,6

34,4

2,4

3,0

20,6

In other currencies

1,9

0,6

1,0

2,1

Source: EEC Express Information “On payments for the export and import of goods and services in 2019”

Table 3 Currency structure of payments for the import of goods and services of the EAEU Member States from all over the world (for the period, percent) Payments for imports

EAEU

Belarus

Kazakhstan

Kyrgyzstan

Russia

In Armenian drams

0,0

In Belarusian rubles

0,1

0,6

0,0

In tenge

0,1

0,0

2,5

0,1

In soms

0,0

In Russian rubles

31,6

48,4

25,7

13,3

30,7

In USA dollars

36,5

22,3

57,0

80,0

35,0

In Euros

28,1

27,9

15,6

4,0

30,0

In other currencies

3,6

0,7

1,7

0,2

4,2

Source: EEC Express Information “On payments for the export and import of goods and services in 2019”

Tables 1–3 contain detailed currency payment structure in the EAEU countries. The strengthening of the role of national currencies in the settlement can have several additional positive effects at once: the ability to determine the exchange ratio of national currencies directly, rather than in cross-courses with reserve currencies, which will lead to an increase in liquidity in the respective markets; stabilization of exchange rates and increased financial stability of national currencies through additional external demand; elimination of undesirable currency risks, as well as reduction of transaction costs for exporters and importers related to the need for bilateral deals of sales and purchase transactions of reserve currencies, where many trade and investment transactions in mutual turnover are still nominated. As a result, barriers to the participation of resident individuals and legal entities in foreign economic activity are reduced, which has a beneficial impact on the dynamics of integration ties and economic development.

On December 6, 2018 the leaders of the Eurasian Economic Union (EAEC), following the results of the Higher Eurasian Economic Council, signed Declaration on further deepening the integration processes within the EAEC

However, speaking of the undoubted advantages of using national monetary units in calculations, one should not forget about the associated risks and possible negative consequences. The internationalization of the monetary unit may: reduce the effectiveness of monetary policy within the country; lead to the excessive strengthening of the national currency; destabilize the domestic financial market as a result of sharp changes in capital flows of non-residents. However, it is clear that the advantages of using national currencies instead of reserve ones in international transactions still outweigh the risks. Currently, settlements in national currencies are mainly with the Republic of Kazakhstan and the Republic of Belarus. However, to increase the attractiveness of transactions in the national currencies of other EAEU Member States, it is necessary first of all to increase their liquidity and ensure direct mutual quotations of currency pairs, simplify mutual access for residents of EAEU Member States to foreign exchange markets, improve technologies and capabilities of national payment systems. The most important perspective for the development of the payment systems EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

of the Union’s states is the expansion of national retail payment spaces to the scale of the Eurasian Economic Community and the creation of a common payment space infrastructure. It should make it possible to make payments taking into account the compatibility of national card systems, including the Russian National Payment Card System (NPCS) – the “World” card and the currently functioning BELKART (Belarus) and Armenian Card (Armenia) systems, as well as the card systems of BRICS member states. The creation of a common settlement infrastructure (common payment space) using modern financial technologies will increase the stability of the national payment systems of the EAEU Member States, ensuring greater economic sovereignty. For its part, Eurasian business is actively working to create effective mechanisms for the use of national currencies for foreign economic transactions in the EAEU area. Relevant clearing instruments are provided, in particular, at the international financial center “Astana”. Further ways of developing multilateral clearing at this site are also being worked out, including for its extension to operations with the RMB, the currency of the

People’s Republic of China – the most important trade and economic partner of the EAEU countries. The Russian Union of Industrialists and Entrepreneurs (RSPP), Russian business, is also involved in the formation of a common financial market for the EEEC and pays particular attention to expanding the use of national currencies in international settlements. At the end of 2019, the RSPP Commission on Banks and Banking adopted a decision to establish a subcommission on payment and settlement systems and technologies, which included representatives of the payment business, payment associations, and banks. In conclusion, it should be noted that Eurasian businesses within the framework of the Business Council of the Eurasian Economic Community actively participate in the work of the relevant working bodies operating within the framework of the EEC, as well as the working group on Strategic Directions of the Eurasian Economic Integration until 2025, which is expected to be fully approved by the end of 2020. And the issues of the common financial market will undoubtedly be reflected in the final text of this document.

EEC today and tomorrow

EURASIAN ECONOMIC UNION:

current status and perspectives Askar Kishkembaev,

Head of the Secretariat of a member of the Collegium (Minister) on economics and financial policy of the Eurasian Economic Commission, PhD in Law

Today the Eurasian Economic Union, having become part of the new architecture of the world economy, is an ambitious integration project in modern Eurasia. The largest integration association in terms of geography today is a gigantic common market â&#x20AC;&#x201C; without customs controls, administrative barriers, with common requirements. It attracts interest both from countries outside the Union and from potential transcontinental investors. As a full subject of international economic relations, the EEU actively develops international cooperation and mutually beneficial relations with trade partners. Thus, the Union operates in accordance with WTO principles and norms. At the same time, the Union concludes both non-preferential trade agreements (agreements on trade and economic cooperation) aimed at the removal of non-tariff barriers and preferential agreements, which set out mutual obligations to ensure the duty-free movement of goods and facilitate access to their markets.

In 2019, for example, the Agreement on Trade and Economic Cooperation between the EAEC and the Peopleâ&#x20AC;&#x2122;s Republic of China entered into force. It creates a legal framework for trade and economic cooperation on a wide range of issues, including customs cooperation, technical barriers to trade, trade protection measures and electronic commerce. The agreement is aimed at increasing the transparency of regulatory systems, simplifying trade procedures and developing co-operation links. The Interim Agreement between the EAEC and the Islamic Republic of Iran providing for the establishment of a free trade zone has also entered into force. The agreement includes all main products, which account for 55% of total EEU exports (mainly agricultural products and industrial product groups). At the same time, preferential import coverage accounts for 49% of total Iranian exports to the EEA. The agreement is aimed at stimulating the development of trade relations by ensuring transparent and predictable

trade conditions based on WTO rules. At the same time, all fees associated with the import of goods must not exceed the cost of services provided for customs clearance. In October 2019 the Agreement on Free Trade between the EAEC and the Republic of Singapore was signed, which provides for duty-free access for all goods of the EAEC countries, as well as dutyfree access for Singaporean goods, which make up 40% of the total commodity nomenclature. The Agreement establishes legal guarantees of compliance with the basic principles of non-discrimination of goods of the EEEC Member States with respect to goods produced in Singapore (national treatment) and imported to Singapore from third countries. In 2019 the Agreement on Free Trade between the EAEC and the Republic of Serbia was also signed. It not only harmonizes the terms of trade between Belarus, Kazakhstan and Russia with Serbia, with which bilateral free trade agreements already exist, but also creates a similar regime for Armenian and Kyrgyz goods

for which preferences were previously unavailable. Memorandum of Understanding and Cooperation have been signed with the Government of the People’s Republic of Bangladesh, the Government of Indonesia and the African Union Commission on Economic Cooperation. In July 2019 the Commission and the Pacific Alliance signed a Declaration on Partnership during the Presidential Summit in Lima. It should be noted that the alliance countries – Chile, Peru, Mexico and Colombia – account for more than 35% of Latin America’s GDP. It is also noted that the business community of the EAEC Member States is increasingly interested in India, which is to further develop trade and economic cooperation. Work is also continuing on negotiation tracks to establish free trade zones with Israel and Egypt. At the same time, it should be noted that relations with the countries of the European Union have not yet reached the desired level, despite the fact that representatives of European business and individual politicians have shown EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

great interest in developing investments in the countries of the Union. The course towards deeper cooperation and development of mutual trade will give a positive impetus not only to the economies of individual countries, but also to the entire Eurasian region. Business is given certain advantages to develop investment cooperation within the Union. The EEU Member States have undertaken not to worsen the conditions for doing business provided for in the national legislation of the EEU Member States as of the date of signing the EEU Treaty, and to ensure the stability of market access conditions. Investors of the EEU Member States are granted both national treatment and most-favoured-nation treatment. Quantitative, investment and other restrictions (e.g. quotas, forms of establishment, shares in the charter capital of a legal entity) are not applied. The investor’s right to unhindered transfers of funds and payments related to investments to any country at the investor’s discretion is guaranteed.

Provision is made for the obligation of investment recipient states to guarantee investors of other EEA member states, after they have fulfilled all tax and other obligations, the right to dispose of income received as a result of making investments. Thus, the actual implementation of the conditions created within the framework of the Union will make it possible to noticeably intensify interaction with foreign investors and increase the inflow of foreign direct investment into the economy of the EEU Member States. Liberalization of the service sector is also an important factor in business development and economic growth in the EAEC Member States – it extends the boundaries of business activity. The development of investment cooperation among the EAEC Member States will also be facilitated by the formation of a common energy market by 2025, which will create conditions for free trade in energy resources, develop competition and ensure non-discriminatory conditions for businesses of the EAEC Member States. In addition, the countries of the

EEC today and tomorrow

Union will develop an Industrialization Map – a decision already taken by the Eurasian Intergovernmental Council – which will be an important tool for coordinating the actions of the EEU countries in implementing priority industrial projects and developing cooperation links. The development of this document will help intensify investment processes in the countries of the Union. Consistent and targeted work is being carried out to eliminate obstacles in the Union’s domestic market. Since 2016 the Eurasian Economic Commission in cooperation with the EAEC states has qualified 58 barriers, 43 of which have already been removed by the Union countries. Removal of exceptions and restrictions is carried out mainly through the conclusion of international treaties and agreements within the Union, as well as the adoption of separate action plans (or road maps) and the Union’s regulatory legal acts. At the same time, it is clear that the issue of restrictions needs to be approached in a new way today, and the Commission is working with the countries to improve mechanisms for identifying and removing barriers in the Union’s domestic market. Taking into account the existing practice, it seems advisable to develop a regulatory framework that would regulate the entire

process from the identification of barriers in the domestic market to its complete elimination, and contain more effective approaches to interaction between all stakeholders. The Union faces an important task – to build a common financial market for the EEU member states. Thus, the Concept of Common Financial Market Development adopted in October 2019 provides for the main goals, principles, stages and main directions of this process. The implementation of the Concept will make it possible to eliminate the existing barriers to the free movement of capital and financial services within the Union, to ensure greater accessibility and diversity of investment, banking and insurance products for individuals and business entities. In 2016 the Agreement on the exchange of information (including confidential information) in the financial sector came into force in order to create conditions for the free flow of capital. The Agreement defines the procedure for exchanging and using information between financial regulators; its implementation will improve the protection of the rights of financial market participants, investors and issuers, and ensure the transparency and sustainability of financial organizations.

In 2018 the Agreement on Harmonization of Legislation in the Financial Market was signed and entered into force in March 2020. The Agreement defines the directions and procedures for harmonization of legislation in the banking, insurance and securities market services sectors, as well as supervisory requirements and approaches to regulating financial market risks. At present, a plan has been prepared which defines the procedure and time frame for the convergence of norms and requirements established by national legislation in the financial sector. One of the key areas of formation of a common financial market is the creation of a common exchange space of the Eurasian Economic Union, which will be the basis for the formation of a common securities market. Currently, the Commission, together with financial regulators, has prepared a draft road map, the implementation of which will make it possible to ensure the free movement of capital, goods and services, increase mutual investments and increase the investment attractiveness of the Union’s financial markets. To intensify the formation of a common exchange space of the Union, a draft Agreement has been developed on the admission of brokers and dealers of one EAEC Member State to participate in

organized trading on exchanges of other EAEC Member States. The Agreement grants the national exchanges the right to recognize the licenses of brokers and dealers issued by the authorized body of the EEU Member State and to provide them with the opportunity to directly participate in the trades for conclusion of contracts for sale of securities and derivative financial instruments. Implementation of the Agreement will allow us to create prerequisites for the inflow of additional liquidity to the stock exchanges, expand investment opportunities, reduce risks and ensure increased funding for issuers. In order to harmonize procedures for the mutual recognition of securities issues and their admission to the stock exchanges, a draft Agreement on the mutual admission to the placement and circulation of securities in organized trading in the EEU member states has been developed. It is aimed at ensuring the mutual admission of securities from the list listed by the exchange to the quotation list of the highest category, as well as the freedom of issuing and trading operations with securities in the common exchange space. The Commission together with the financial regulators of the EAEC Member States, has also developed a draft Agreement on Harmonized Approaches to Regulating Foreign Exchange Legal Relations and Taking Liberalization Measures. Its aim is to gradually liberalize currency legislation. The draft defines currency transactions for which no restrictions will apply. After the Agreement comes into force, residents of the Union will be able to open accounts and deposits in national and foreign currencies with credit institutions of other EAEC Member States without restrictions and to perform various types of transactions. The national (central) banks of the EAEC Member States together with the Commission have also developed a draft Agreement on the Advisory Council on Exchange Rate Policy of the National Banks of the Union, the main purpose of which is to coordinate exchange rate policies of the EAEC Member States. Implementation of the Agreement will enable residents of some EAEC Member States, when entering into foreign economic transactions with residents of other EAEC Member States, to forecast the level of currency risks and make balanced decisions on the use of hedging instruments, reduce the level of inflation and devaluation expectations and increase the level of trust of economic entities in national currencies. To ensure equal rights and opportunities for consumers of financial services, EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

on the one hand, and an accessible tool for identifying and assessing the credit risk of a potential borrower, on the other hand, the Commission, together with the Member States of the Union, has developed a draft Agreement on the procedure for exchanging information included in credit histories. This will create equal conditions for residents of some EAEC Member States when applying for credit resources from banks located in the territories of other EAEC Member States, and will facilitate the development of cross-border lending within the Union. To develop a common financial market, the Eurasian Economic Commission and the International Financial Centre «Astana» (IFAC) signed a Memorandum of Cooperation in July 2018, which provides for cooperation in the development of financial markets, protection of rights and interests of consumers of financial services and investors, trade and investment cooperation. In order to implement the Memorandum, a Plan of Joint Activities was signed, which provides for cooperation in the development of financial markets, capital markets and digital financial technologies. Implementation of the plan will contribute to intensifying investment cooperation and access to international capital. The prospects for further development of integration processes in the Union are defined in the Declaration on Further Development of Integration Processes within the EEU, adopted in December 2018. The goals of the Declaration are to deepen integration processes in all key areas, to ensure maximum efficiency of the single market, to use effectively the potential of integration to improve the quality of life of people, to form the Union as a centre for the development of the modern world, open to mutually beneficial and equal cooperation with external partners. In May 2020 the Supreme Eurasian Economic Council approved the draft Strategic Directions for the Development of the Eurasian Economic Integration until 2025. The Strategic Directions include 330 measures and mechanisms that disclose the provisions of the Declaration on Further Development of Integration Processes and will help to completely eliminate barriers and reduce to the maximum extent possible exceptions and restrictions on the free movement of goods, services, capital and labor in the internal market of the Union. These measures and mechanisms are aimed at improving the efficiency of the functioning of the Union’s goods markets, improving customs regulations, as well as ensuring quality guarantees,

Askar Bulatovich Kishkembaev (03.08.1975), Head of the Secretariat of the Member of the Board (Minister) on Economy and Financial Policy of the Eurasian Economic Commission. He trained higher education in law and higher education in economy with degree Master of Economy and PhD in Law. He his experience in professional activity is 24 years. He is author of over 100 publications on law, economics and Eurasian integration. His competence in the framework of the Eurasian integration is financial policy, admission and distribution of import customs duties, tax policy, monetary policy, currency policy, banking policy, insurance market, securities market, payments and coordination in the sphere of budget policy, social protection, labor resources, migration, services, investments, legal protection and protection of intellectual property rights, entrepreneurship, business environment and business advocacy. safety of goods in circulation and adequate protection of consumer rights. It is planned to create a digital space in the EEU, digital infrastructures and ecosystems. The strategic directions will ensure the development of flexible mechanisms for targeted assistance to the economic development of the Union’s countries, the construction of an effective system of management and financing of joint cooperation projects, the creation and development of highly productive, including export-oriented sectors of the economy. There are also plans to expand economic cooperation in education, healthcare, tourism, sports, innovation and science. Currently, the Commission is developing a detailed plan for the implementation of the strategic directions together with the EAEC Member States. This plan contains mechanisms for solving the tasks set out in the Declaration on Further Development of Integration Processes. In conclusion it should be noted that the Eurasian Economic Union is becoming a regional investment attraction centre with a favorable business climate, territory for innovations and high technologies, as well as a competitive, developing and promising integration association. The Union is gradually acquiring the status of an economic growth driver and will be a kind of «window of opportunity» for the dynamic development of the EAEC Member States.

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VII MOSCOW INTERNATIONAL FINANCIAL AND ECONOMIC FORUM

GREAT EURASIA

IN SEARCH OF NEW FORMATS AND AREAS OF COOPERATION

FOR SEVEN CONSECUTIVE YEARS, THE FINANCIAL AND BUSINESS ASSOCIATION OF EURO-ASIAN COOPERATION, SUPPORTED BY THE RUSSIAN UNION OF INDUSTRIALISTS AND ENTREPRENEURS AND THE EURASIAN ECONOMIC COMMISSION, HAS BEEN LEADING THE MOSCOW INTERNATIONAL FINANCIAL AND ECONOMIC FORUM "GREAT EURASIA IN SEARCH OF NEW FORMATS AND AREAS OF COOPERATION." DEPARTMENT FOR EXTERNAL ECONOMIC AND INTERNATIONAL RELATIONS OF MOSCOW JOINED THE TRADITIONAL FORUM'S CO-ORGANIZERS THIS YEAR.

7th Moscow International Financial and Economic Forum was held on 27 November, 2020 by video conference. The format of the Forum was represented by a Plenary Session and three parallel industry panels, which gave participants the opportunity to listen to the speeches of those announced speakers who were particularly interesting to them in different panel sessions, freely moving from one to another.

The Forum was opened by Alexander Murychev, Chairman of the Board of the FBA EAC. On behalf of the Forum organizers, he greeted the participants. Speaking about the history of the Forum, Alexander Murychev noted that over the past years the Forum has acquired its individual recognizable face, has proved itself as an effective business platform, which allowed to bring together over three thousand representatives of business communities from 38 countries of Europe, Asia and Africa and discuss the most pressing issues of Eurasian integration.

Speaking about the peculiarities of the Moscow Forum, Alexander Murychev noted its exceptional focus on the Eurasian business community. Panel sessions of the Forum have long been productive platforms for finding business partners, since their work has always been based on the industry principle. A. Murychev thanked the General Sponsors of the Forum – Promtex LLC, RNG Group and the sponsor of the first panel session – Simpatek LLC for their assistance, which was expressed not only in the financial support of the Forum, but also in the specific intellectual content of its program. At the end of the Plenary session the International Public Award "Eurasian Business Elite" was presented. "Golden Bees" were awarded to Promtex, a Russian company in the Stability Standard category, UniCredit Bank in the Social Responsibility category and Nanoplus Ltd, a Taiwan company in the Technological Breakthrough category. The winners warmly thanked the Awards Organizing Committee for the high appreciation of their work. While presenting the awards, Anatoly Tkachuk, President of the FBA EAC, and Alexander Murychev, Chairman of the Board of the FBA EAC, drew the attention of the Forum participants to the fact that the award was established by the FBA EAC in cooperation with the International Banking Council and since November 30, 2017 the winners have been 27 leading financial, banking and business structures from Russia, Kazakhstan, Belarus, Bosnia and Herzegovina, Serbia, Italy, China, Armenia, China, Armenia, China.

The moderator of this year’s Plenary Session was Alexey Gromyko, Director of the Institute of Europe of the Russian Academy of Sciences, PhD in Political Sciences, Corresponding member of the Russian Academy of Sciences, which gave the Forum additional interest and significance in the view of participants. During the Plenary session, the theme was: "How to put together the Eurasian puzzle?", the effectiveness of Eurasian economic unions in ensuring the free movement of capital, goods and labor, the most attractive areas and projects for the formation of Eurasian companies, the role of digital transformation in the development of production and services were discussed.

Askar Kishkembaev, Head of the Secretariat of the Member of the Board (Minister) on Economy and Financial Policy of the Eurasian Economic Commission, gave a welcome speech from the Eurasian Economic Commission. In his speech, he noted that in the context of the global economic crisis, regional integration cooperation is becoming a real factor contributing to the sustainable development of states. "Building economic cooperation with the countries of Great Eurasia, expanding mutual trade, implementing joint projects, attracting investment in the real sector of the economy, EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

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Also presentations given by: Tadzio Schilling, General Director of the Association of European Businesses, Peter Bystrone, Member of the German Bundestag, India's ambassador to Russia, Venkatesh Varma and others.

developing cooperation with the European Union and China may become an impulse for the recovery of industrial growth of countries and increase their competitiveness," – said Аskar Kishkembaev.

Ilya Kuzmin, Deputy head of the Department of External Economic and International Relations of Moscow, noted in his speech that Moscow accounts for half of foreign direct investment in Russia. "In 2019, Moscow was the second most attractive city in Europe for investment. According to the results of 2020, the flow of investments to the capital amounted to 400 billion dollars,"-said Ilya Kuzmin in his speech. Alexander Shokhin, President of RSPP, noted in his speech that the modern globalization processes are undergoing a profound transformation against the background of economy crisis. "According to the WTO, the fall in world trade amounted to 19 trillion dollars. Free trade is constantly facing challenges against the backdrop of the weakening effectiveness of global governance institutions. Implementation of many decisions of such institutions, including at the G20 level, is not high enough,"- said Alexander Shokhin. «I think 2021 will pass under the sign of the third and subsequent waves of pandemic, the world will have to face restrictions in various areas, including in the areas of service, tourism and industry. According to the UN, global direct investment in 2020 will be reduced by 40%. At the same time, more than 10% of G20 imports fall under restrictions, » – said Alexander Shokhin, mentioning the RSPP's participation in various integration projects, including the initiative "Common Economic Space from Lisbon to Vladivostok", in building relations between Russia and the EU, taking into account the "green deal". He also underlined that the launch of the Eurasian partnership requires overcoming gaps in the level of trade and economic development of countries, eliminating administrative barriers, expanding cooperation with the EU and involving business in integration processes. Alexander Shokhin called the "Great Eurasia" project a kind of puzzle, which would be impossible to add up, without developing a partnership.

Tadzio Schilling

Peter Bystrone, Member of the German Bundestag

Michael Harms, Executive Director of the Eastern Committee of the German Economy, presented a wide range of the EU and Eurasia cooperation, pointing to such priorities as green energy, digital and new technologies, the initiative "Single Economic Space from Lisbon to Vladivostok". France's Special Representative for Central Asia, Loro Pascal, spoke about the political and economic interaction between Europe and Russia, and noted that France is the first largest producer in Russia.

India's ambassador to Russia, Venkatesh Varma

After this the Forum participants began their work in Panel sessions. Participants of the first session "Development of Eurasian cooperation: from bilateral trade and industrial cooperation to the creation of Eurasian companies. The digital transformation of enterprises in the context of sustainable development", speaking about the enormous damage to production and services caused by the pandemic, agreed that digital transformation and artificial intelligence used in the management of many production processes can and should become growth drivers. Industry 5.0, innovation and digital development can provide significant support to basic industries. More than ever, the social responsibility of business and its involvement in the development of human capital is in demand, and this has been the subject of separate consideration by the session participants.

The panel session was moderated by Alexander Kotlyarsky – First Vice President of the FBA EAC, CEO of LLC PROMTEX, PhD in Technical Sciences, Professor, and Anatoly Tkachuk – President of FBA EAC, President of GC RUSTITAN. «Financial provision of cross-border partnership"» was discussed at the second thematic Panel. Speakers noted the volatility of the monetary and financial sphere, growing banking risks, the challenges of improving the system of crossborder payments, the prospects for using national currencies while ensuring their sustainability and the possibility of the emergence of new regional currencies, including a collective one in Eurasia. It was noted that digitalization is becoming an important factor of competitiveness in the financial and banking sector. The representative of Great Britain spoke about the importance of correct, professional

Moderators of the second panel session Oleg Preksin, Askar Kishkembayev

aly, Kazakhstan, China and Japan spoke about the need to overcome the sanc-

Moderators of the first panel session Alexander Kotlyarsky, Anatoly Tkachuk

communication in the language of business, and MFC "Astana" was presented as an example of successful establishment of an international financial center in the post-Soviet space. The panel session was moderated by Askar Kishkembayev – Head of the Secretariat of the Member of the Board (Minister) on Economy and Financial Policy of the Eurasian Economic Commission, and Oleg Preksin – Member of the Board of the FBA EAC, Vice-President of ARB. Participants of the third Panel session "Eurasian transport and economic corridors: the development of highways and crossroads" noted large reserves for sustainable growth in the development of Eurasian transport and economic corridors. Colleagues from Germany, ItEURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

tions syndrome to join forces in implementing large-scale cross-border projects. The object of such efforts could be the Meridian commercial project presented to the participants, which provides for the construction of a PPP format along the shortest possible route of the missing highway segment, which will connect the transport network of China with the road system of Central and Western Europe through Kazakhstan, Russia and Belarus. The regional aspect of forming a transport and logistics network for the development of areas remote from the landmark Eurasian highways, such as the Sakha Republic, was also not missed. The panel session was moderated by Oleg Dunayev – Vice-Chairman of the RSPP Committee on International Cooperation, Chairman of the Subcommittee on Transport and Logistics, Professor, PhD in Economy and Vladimir Kotenev – Member of the Board of the FBA EAC, Managing Director of Eurusian Strategic Consulting GmbH.».

Moderators of the third panel session Oleg Dunayev, Vladimir Kotenev

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"Our Forum took place at a difficult time. The pandemic has long ago become not only a medical, but also an economic fact of a global scale," said Аlexander Murychev. "Today we have tried to put together a «Eurasian puzzle» by listening to dozens of reports filled with valuable ideas and suggestions concerning key aspects

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of Eurasian integration. More than 300 people from 32 countries took part in the Forum, the final results of which we have yet to be summed up, and the ideas expressed in the form of conclusions and proposals will definitely be incorporated into the final resolution of the Forum," – said Alexander Murychev.

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The results of the Forum were summarized by Alexander Murychev, Chairman of the Executive Board of the FBA EAC. He thanked all Forum participants, moderators and speakers, members of the Organizing Committee, the FBA EAC Office, the PRUFIX technical support team and the Forum sponsors.

ЕВРАЗИЙСКАЯ ЭКОНОМИЧЕСКАЯ КОМИССИЯ

Financial & Business Association of Euro-Asian Cooperation

Eurasian Economic Commission

Department for External Economic and International Relations of Moscow

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BUSINESS PLACE

NEW INTEGRATION B2B FBA EAC SITE

BY THE END OF 2020, IT IS PLANNED TO LAUNCH THE BUSINESS PLEASE PORTAL (BP) AS PART OF THE FBA EAC DIGITAL BELT FBA PROJECT. THE DIGITAL BELT PROJECT IS HEADED BY ANDREY LISITSYN, ADVISOR TO THE CHAIRMAN EXECUTIVE OF THE BOARD OF THE FBA EAС, DIRECTOR OF THE RSPP CENTRE FOR FINANCIAL POLICY AND FINANCIAL MARKETS, AND THE PORTAL FOUNDERS – VIKTOR NOVOSADOV AND ALEXEY EVSEEV.

The main purpose of the BP’s operation is to create an environment for solving specific business tasks in the international space. The BP is an online resource where various business services developed by the team of the “BUSINESS PLACE” project will be placed according to standards and in close partnership with the FBA EAC, its members and partners, as well as information about companies offering their goods, services and projects to solve almost any business problems. The portal will provide ample opportunities, among which: quick search for necessary goods, services and services on the international market (the prospects for developing an electronic trading system on this site are also being discussed); obtaining prompt legal, information, audit, consulting and other support at any stage of the business cycle; conducting marketing research and selecting business partners (business intelligence system); promotion of business, brand, product and services, PR, GR using modern technologies; attracting and placing investments; participation in business club events, including joint cultural and creative projects. The portal is currently operating in test mode at www.bp-eac.ru Information on the following services has already been posted at the site: “Find a partner”. A service that allows you to search for suppliers, buyers and distributors. “Marketplace”. Placement and selection service: requests for the purchase of goods, works and services, as well as to obtain financing and attract investments; offers for the sale of goods, works and services, as well as for the placement of financing and investments. The service also represents a system for promoting products and services, including through advertising, PR, GR. “Financial brokerage”. The service provides assistance in attracting and placing financial resources, obtaining and processing bank loans, bank guarantees, bills of exchange, closed mutual funds.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

Payment and settlement ecosystem. Service for accepting payments without the use of additional equipment and with minimal expenses for making payments, including cross-border (analogue and partner – WeChat). Business anti-barriers. Service that provides consulting services on practical implementation of the requirements of tax legislation and AML regulation in order to reduce the risks of applying impact measures, including blocking of accounts and non-acceptance write-off of funds by decision of administrative authorities. Investment accelerator. Service, which is a bank of investment ideas (requests for investments, investment proposals) of various projects, including scientific and practical developments, as well as carrying out the initial processing of projects, which may, in accordance with the FBA EAC procedures, enter the FBA EAC Investment Club’s project bank (through the FBA EAC Business Council) or enter the ICO through the relevant BP service. The placement of information on goods, works and services will be done on a commercial basis in close cooperation with the FBA EAC, including through the development and implementation of the following standards of activity, which are accession contracts: the standard of non-disclosure of confidential information. standard for posting information on the BP Portal, which includes a registration form for the participant of the BP Portal (basic survey), a form for providing data by the participant of the BP Portal for posting business information on the BP Portal, a form of request for purchasing goods, works and services, for obtaining financing and attracting investments, forms of proposals for the sale of goods, works and services, as well as for posting financing and investments. standard for the provision of services to the participants of the BP Portal by the BP team, including a form of approval of the participant’s profile, as well as a form of approval of tariffs for the portal services. standard for providing and receiving goods, works, services, financing

and investments presented on the BP Portal. BP’s services within the framework of integration processes in the Eurasian space will make possible actual formation of the key elements of the single market on the platform space, in a pilot and subsequently on a permanent basis; test the key issues of integration processes in the respective areas in order to accelerate the harmonization of policy regulation at the international level; ensure that modern digital tools and mechanisms are put into practice, with the participation and supervision of regulators from all interested countries; reduce economic, cultural and other barriers to conducting international business in the platform area; improve the transparency of regulatory and other requirements for doing business in the countries covered by the platform area; reduce business costs for trading goods, works and services in the platform area; make a comprehensive transition to settlement in national currencies in the platform space or a part of it (e.g. UAE or China); improve consumer access to goods, works and services provided from other countries within the platform area. Thus, the wide range of relevant services and portal services will enable international business to find reliable solutions to their tasks within one platform (ecosystem), which will reduce the time spent on this process.

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IBC DISCUSSED THE DIGITALIZATION OF THE BANKING SYSTEM IN THE CONTEXT OF A PANDEMIC

ON NOVEMBER 11, 2020 ON THE INVITATION OF THE ASSOCIATION OF BANKS OF UZBEKISTAN THE REGULAR MEETING OF THE INTERNATIONAL COORDINATING COUNCIL OF BANKING ASSOCIATIONS (INTERNATIONAL BANKING COUNCIL – IBC) WAS HELD IN A VIDEO CONFERENCE MODE. THE MEETING WAS ATTENDED BY MEMBERS OF THE IBC AND HEADS OF BANKING ASSOCIATIONS AND UNIONS INVOLVED IN THE WORK OF THE COUNCIL, REPRESENTING THE ASSOCIATION OF BANKS OF RUSSIA, THE ASSOCIATION OF BELARUSIAN BANKS, THE ASSOCIATION OF BANKS OF UZBEKISTAN, THE ASSOCIATION OF BANKS OF AZERBAIJAN, THE ASSOCIATION OF BANKS OF ARMENIA, THE ASSOCIATION OF BANKS OF GEORGIA, THE UNION OF BANKS OF KYRGYZSTAN, THE ASSOCIATION OF BANKS OF THE REPUBLIC OF KAZAKHSTAN, THE ASSOCIATION OF BANKS OF MONTENEGRO, THE ASSOCIATION OF BANKS OF BOSNIA AND HERZEGOVINA, THE ASSOCIATION OF BANKS OF CENTRAL AND EASTERN EUROPE, THE ASSOCIATION OF BANKS OF UKRAINE, THE EURASIAN FINANCIAL AND BUSINESS ASSOCIATION Oleg Berezovoy, General Director of the FBA EAC, spoke on behalf of the FBA EAC. In his speech he recalled the stages of joint cooperation over the past three years and drew the participants’ attention to the prospects for cooperation in new areas. These include the expansion of leasing programs, the use of the best resource and energy-saving technologies, and the introduction of optimal environmental management mechanisms into production processes. Oleg Berezovoy also called for more active cooperation in the development and promotion of the Eurasian Financial and Economic Bulletin, a multiprofile publication covering various business areas.

He noted that there is a surplus of liquidity in the banking system and growth of banks’ loan portfolios and their assets. Profit of credit institutions for 9 months amounted to 1 trillion 100 billion rubles. “Now one of the main problems of banks is asset restructuring. At the end of October this year the volume of restructured assets amounted to more than 4 trillion rubles. For individuals, banks restructured 1 million 600 thousand loans, which reduced the negative effect on business”, – said Alexander Murychev.

He delivered a report on the main topic – “Digitalization as the main requirement for the development of modern financial and banking system in the conditions of overcoming the pandemic. Bank development strategy in the postcrisis period” – spoke Alexey Voilukov, Vice-President of the Association of Russian Banks. He noted that in connection with the pandemic, the banking community’s proposals on the process of remote customer service, including customer identification and a number of other measures to establish information about customers, proved to be relevant. During the quarantine period, credit institutions were temporarily allowed to open current accounts with SMEs and individuals in certain cases, subject to their subsequent appearance for identification. “Banks are interested in taking this practice into account even after the end of the period of the pandemic, but to date there is no positive regulatory decision on this issue. To further advance the process of remote customer service, it is necessary to develop remote identification channels, including video conference. The Association is actively working on this issue. The experience gained in the implementation of this approach opens up the possibility of legislative changes to remove the barrier to the transition to a digital economy,” said Alexey Voylukov.

As an organizer, General Director of the Association of Banks of Uzbekistan Bakhtiyar Hamidov told in detail about the aspects of economic and banking sector development in the country, about the reforms carried out by President Shavkat Mirziyoev and the government.

The participants exchanged information about the state of the economy in their countries, discussed competition between large financial institutions and small regional banks, shared their views on the digital ruble and changes in the financial intermediation system.

At the invitation of the Association of Banks of Central and Eastern Europe, it was decided to hold the next IBC meeting in Budapest in May 2021. The theme of the future meeting is “Prospects for small and medium-sized banks. Challenges and solutions”.

The event was also attended by representatives of the Bank of Russia, Central Bank and Ministry of Finance of the Republic of Uzbekistan, Interstate Bank, EEC, credit organizations and companies of Uzbekistan. Analytical materials for the meeting and proposals for the Agenda were also sent by the Association of Polish Banks and the Association of Serbian Banks. Alexander Murychev, Chairman of the IBC and Chairman of the Executive Board of the FBA EAC, reported on the results of the work for three years and introduced the participants to the current economic situation in Russia and the measures taken by the government and the regulator to overcome the consequences of the new Сorona virus infection.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

The meeting participants unanimously voted in favor of extending the powers of the current management of the IBC. For the next three years Alexander Murychev was elected Chairman of the IBC, Bakhytbek Baiseitov, President of the Association of Banks of the Republic of Kazakhstan, Istvan Lendiel, Secretary General of WASEE, Elena Korobkova, Executive Director of the Independent Association of Banks of Ukraine, Zakir Nuriyev, President of the Association of Banks of Azerbaijan, Bratislav Peyakovich, Secretary General of the Association of Banks of Montenegro, were elected Deputy Chairmen.

Page of the founder. IBC

Association of Serbian Banks

DIGITALIZATION IN THE BANKING SECTOR AS AN OPPORTUNITY TO MITIGATE THE IMPACT OF THE PANDEMIC The COVID-19 pandemic is clearly a humanitarian crisis that still has tragic consequences for people’s lives. However, it can also be seen as a catalyst for change – economic, social, personal and business – on a scale that we have not seen even after world wars. The drama and speed of the process clearly shows that these changes facing society are fundamental, once-in-a-lifetime. As for the question what the future will be like, it is already clear that it will be digital.

We are witnessing the historical impact of distance working and the digital approach on virtually every area of activity. The rapid transition to digital technologies that began as a result of the pandemic will continue after the pandemic has ended. Within a few weeks, in the area of digitalization of consumers and businesses, Serbia has taken a step into the future that would otherwise take several years to achieve. Banks switched

to remote operations and approached customers “digitally” to enable flexible loan and mortgage payments. Shops have been transformed into online ordering and delivery – and as a core business. Schools have, in some cases, completely switched to distance learning and organized digital classrooms. Manufacturers are planning full automation of production and procurement chains. Telemedicine has been actively used.

The future of banking also depends on the introduction of new digital tools to better serve customers who are already used to an advanced digital environment. It should be noted that the need to switch to a digital banking model has been mentioned for almost ten years, but COVID-19 has made the need to reduce operating costs and improve digital experience more important than ever. Financial organizations need to review their existing business models, structure, distribution networks, their attitude towards innovation, product range and competition issues. It is becoming increasingly clear that the banking ecosystem and the way in which customers communicate with financial institutions are in no small part affected by the pandemic. We will remember this time as a transitional period between a world without the Сorona virus SARS-CoV-2 and the “new normality”. Even before Сorona virus, it was clear: industry leaders know what needs to be done and, in most cases, know where and how to go next. However, there was a lack of need to react quickly. The Сorona virus has changed everything. In the period of the “new normality” we began to live in an environEURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

ment where the way we do business, communication with banks and training our employees in new skills completely changed. The extent to which these changes take root will depend on business and social dynamics, as well as the time required to achieve the new balance. The Serbian outdated payment system was not ready for the digital age, especially during the pandemic. A person can make several purchases during his or her normal day – in a shop, at a petrol station, in a restaurant, dry cleaning, etc. And there are not many traditional payment mechanisms that do not expose both parties – buyer and seller – to the risk of Сorona virus infection. But millions of transactions are carried out every day – and there are millions of opportunities to spread any infection, including a new Сorona virus. Under these circumstances, traditional banking organizations have no choice but to transform themselves to the current realities, where there is extreme pressure on costs and a growing demand for simple digital solutions. It is necessary to adapt to an open banking approach and use solutions offered by third parties, including partnerships with financial service providers. This process includes improving the existing system, introducing innovations and using customer data through advanced analytics – so that the ability to provide proactive, relevant services can be improved. However, on the other hand, digital on boarding also exists. Organizations are currently facing different challenges related to traditional on boarding processes for new customers. The challenges that will arise in future market conditions must also be taken into account. The COVID-19 pandemic has identified two key groups of challenges in traditional on boarding. The first group concerns customer experience. Traditional on boarding processes are often slow, repetitive and complex. However, almost 7 out of 10 members of the younger generation require trouble-free integrated service work across all channels, so a positive user experience becomes a rule rather than a bonus. The second group of problems has a direct impact on the internal work process of organizations. The point is that traditional on boarding: involves more stakeholders, which makes the process more time-consuming;

reduces employee performance, with most of the workforce performing several rehearsal tasks; can reduce the quality of services and hinder expansion in the existing restrictive business environment. Digital on boarding solves a number of problems with traditional on boarding models in the Serbian banking sector. Thus, banks are given the opportunity to use remote on boarding faster and more convenient for new customers. Some of the above-mentioned problems of digital on boarding in the banking sector are solved as follows: automation of rehearsal tasks, including data entry, verification and credit checks with the help of robotic process automation (RPA), which increases the efficiency of employees, also when working outside the office; the use of artificial intelligence that uses information to improve employee efficiency, automate product offerings and provide faster solutions; ensuring a uniform position for customers of one organization, speeding up service delivery, which helps to attract customers more quickly and increase their retention; availability of analytical capabilities that enable managers to continuously assess performance and identify weak and critical areas of service delivery. Given the circumstances, organizations must learn to react quickly to prepare for the future; they will inevitably have to develop a strategy to recover from the pandemic, with downtime and employee inefficiency having an adverse impact. This is why those organizations that are quick to start implementing digital on boarding will be successful. However, this will require a sector-wide response – intelligent solutions, which include digital on boarding, can contribute to the long-term development and strengthening of banking and financial services. Of course, digitalization will not save Serbia’s economy entirely in times of crisis, but it will certainly help to mitigate, and perhaps even halt, the impact of the epidemic by enabling employees to stay in their homes. In general, the impact of the crisis on the way we work in the future depends directly on whether we want change to happen. And here, every organization has to choose its own path. Thus, the most important thing for successful recovery and rehabilitation after the pandemic is to quickly turn the page on the business agenda. In doing so, digitization will undoubtedly play a crucial role

Bank. Bank. Bank

Denis Ivanov: « We made a useful breakthrough» 26

– This year has been a special one for all humankind due to the COVID-19 pandemic. New problems have been added to the big tangle of global problems, significantly changing the usual formats of interaction – between people, companies and states. What role will multilateral development institutions play in a changing world, and what new opportunities can they offer to their participants and the entire international community? – The Сorona virus epidemic has caused crisis phenomena in the medical, social and economic sectors, and the amount of resources required to deal with the consequences is unprecedented. In the context of pandemics the actors in national economies are often limited in their acting. We are aware that the current situation requires a collective response from the international community in the area of restoring broken links and further financing development. This is why the resources mobilized by the public sector and international development institutions are of particular importance in the global economy. Global development banks have already announced special programs to support countries in overcoming the consequences of the pandemic. Back in April the World Bank announced plans to spend 160 billion dollars over the next 15 months to support global growth, support small and medium-sized enterprises and protect the poor and vulnerable. An additional 80 billion will be provided by regional multilateral organizations: EBRD, EIB, ABII, Asian and African Development Banks and the Inter-American Development Bank. Regional development banks, including the IBEC, can also make a significant contribution to a more effective architecture for the global economy. The challenges of the present will help to shape the future model of the world economy based on the right principles, which will give a new and significant filling to the term “sustainable development”. – Any crisis is also a new opportunity. What has the IBEC “acquired” in this difficult year? – COVID-19 has fundamentally changed our work and life. The restrictions imposed around the world have led to work of organizations in a remote format. This unprecedented model of “working from home” required the adoption of new realities. Given the multi-nationality staff and, consequently, the different experiences of all participating countries in the fight against the pandemic, the IBEC worked quickly and smoothly EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

under these conditions. IBEC showed well-coordinated work and, as a result, its sustainability in this unique crisis. In general, the current situation has shown that the issues of IT-support of organizations are becoming the most urgent for today and future work. We have made a forced, but useful breakthrough in infrastructure development. In particular we have seriously improved electronic document flow procedures. In general, despite the pandemic, the IBEC is demonstrating positive dynamics this year in all key indicators. In the first half of the year, assets grew by 13.5% and the loan and document portfolio by 12%, reaching 396 million euros. The quality of the growth is also important – the Bank continued to diversify its portfolio, and now all member countries are represented among the borrowers. In addition, the share of long-term liabilities in loan funding exceeded 50% – for the first time in the Bank’s recent history. These results were reflected in the assessments of leading rating agencies. In March 2020, Fitch Ratings revised the outlook for the IBEC’s Long-term Issuer Default Rating (IDR) from ‘stable’ to ‘positive’ and confirmed the IDR at ‘BBB–’. The IBEC’s Short-term Rating was affirmed at F3. In June 2020, Fitch Ratings affirmed a positive outlook for the IBEC rating amid the ongoing global crisis caused by the COVID-19 pandemic. The financial results of the first half of the year, along with investment grade ratings from Fitch (BBB–, positive) and Moody’s (Baa3, stable), the highest national scale rating from ACRA (AAA(RU), stable) and rating from the European rating agency ACRA Europe (BBB, stable), confirm the reputation and status of the IBEC as a stable and reliable partner. In general despite the pandemic the IBEC is demonstrating positive dynamics this year in all key indicators. In the first half of the year, assets grew by 13.5% and the loan and document portfolio by 12%, reaching 396 million Euros. The quality of the growth is also important – the Bank continued to diversify its portfolio and now all member countries are represented among the borrowers. In addition the share of long-term liabilities in loan funding exceeded 50% – for the first time in the Bank’s recent history. These results were reflected in the assessments of leading rating agencies. In March 2020 Fitch Ratings revised the outlook for the IBEC’s Long-term Issuer Default Rating (IDR) from ‘stable’ to ‘positive’ and confirmed the IDR at ‘BBB–’. The IBEC’s Short-term Rating was affirmed at F3. In June 2020 Fitch Ratings affirmed a positive outlook for the IBEC rating amid the ongo-

Denis Ivanov was born in Moscow in 1974. In 1997 he graduated with honors from the Moscow State Institute of International Relations. In 2011 he received an MBA degree from Cass Business School at City University (London). He holds an advanced diploma in corporate finance from London Business School. In 1997-2004 he worked for the Russian Foreign Ministry and the Embassy of the Russian Federation in the UK. In 2004-2013, he headed Vnesheconombank’s Representative Office in London. From February 2013 to April 2018 he worked at the International Investment Bank (IIB) as Deputy Chairman of the Executive Board. He made a significant contribution to the implementation of the «restart» program of the IIB. Under his leadership the IIB’s loan and documentary portfolio demonstrated record growth dynamics through the attraction of major strategic projects implemented jointly with other IFIs to the Bank’s portfolio. The Bank started financing large infrastructure projects in Russia and other countries. From April 2018 by unanimous decision of the Bank’s shareholders he assumed the position of Chairman of the Executive Board of the International Bank for Economic Cooperation. Since then a new concept for the Bank’s development has been approved and full-scale reforms have been launched, including the intensification of business and the dynamic growth of the Bank’s credit and documentary portfolio. As a member of the Supervisory Board he participates in the activities of the International Fund for Technological Development, established in November 2019 under an agreement between the Government of the Russian Federation and the International Bank for Economic Cooperation. He is a member of the Presidium of the National Committee for the Promotion of Economic Cooperation with Latin America of NC SECLA, a member of the Board of Directors of the RussianBritish Chamber of Commerce and a member of the Business Council of the Financial and Business Association of Euro-Asian Cooperation. He was awarded the medal of the Order of Merit for the Fatherland, 2nd class, for his great contribution to the development of the financial and banking system of the Russian Federation and attraction of investments into the Russian economy. He has gratitude from the President of the Russian Federation.

Bank. Bank. Bank

Signing a loan agreement with Polish company Laude Smart Intermoda

ing global crisis caused by the COVID-19 pandemic. The financial results of the first half of the year along with investment grade ratings from Fitch (BBB–, positive) and Moody’s (Baa3, stable), the highest national scale rating from ACRA (AAA(RU), stable) and rating from the European rating agency ACRA Europe (BBB, stable), confirm the reputation and status of the IBEC as a stable and reliable partner. – Where is IBEC moving, what are your strategic goals and aims? – This is a time when it is useful to pay special attention to general approaches to solving economic and financial issues, to human health, protection of biodiversity and ecosystems, fight against climate change and inequality in general. For the IBEC as a multilateral development bank, these tasks are a priority. The time to rethink how we live, work and invest, and to start on our way to more flexible, inclusive and sustainable solutions and to strengthen international cooperation has come. We will emerge from the pandemic into a changed world that will require even greater efficiency and competitiveness. This primarily concerns the process of forming the Bank’s strategy for a five-year cycle, which is already in its final stages of development. The document will define the starting position of the IBEC in the current conditions, will make it possible to take into account the impact of the challenges of the current economic situation, assess their impact on the economies of member countries, and most importantly, to enter confidently into a new strategic period.

– Trade finance is one of the key areas of IBEC business, not too typical for international development banks. What is the attractiveness and uniqueness of the service that the IBEC offers? – Indeed, IBEC has a rare mandate for MDBs – the main focus of the business model is focused on supporting trade operations and settlements, which is confirmed by both the unconditional interest of shareholders and the interest of core client segments. At the same time the Bank can carry out project finance transactions, participate in syndicated transactions and carry out treasury operations with counterparties of all member countries, using the attributes of an international development institute, having an international investment grade rating and being beyond sovereign economic sanctions. It should be remembered that under conditions of economic and geographical restrictions, special attention is paid to the state of world trade. The financing of world trade is a source of vitality for the daily turnover of goods and services, enabling transactions between buyers and sellers around the world. In particular, trade finance provides the flexibility and security required for the movement of goods and services. In the context of the decline in business activity caused by the pandemic, the disruption of supply chains and production and trade links, supporting and financing existing contracts is of utmost importance. Now the priority statutory tasks of the IBEC as a multilateral development institution focused on the development of international trade have become particularly important for the economies of all partici-

pating countries, for all our partners and customers, including those from third countries. Active promotion over the last year and a half of the complex of trade finance products allows the IBEC to offer now effective tools and optimal solutions. During its remote operation the IBEC has issued more than 20 loans to secure export-import operations – transactions were conducted through the banks of member countries and other partner countries. Despite the high volatility in the financial markets, credit terms reach 12 months, which became possible due to the stable resource base of the IBEC. In total, over 90 trade finance transactions were completed during the year. These are operations with our main partners in the member countries, targeted trade credits, financing under letters of credit, as well as documentary transactions to support foreign trade between member countries, as well as with countries from the EU, Asia, Africa and South America. This also includes active work with the CIS in 2020. The IBEC started cooperation with financial institutions of Uzbekistan, implemented the first credit

Ulan-Bator Railway

and documentary transactions to support Russian non-material exports. The syndicated business has continued to develop and since 2019 has been participating in syndicated financing of corporate clients and financial institutions in the participating countries (including local currencies) – Romania, Bulgaria, Mongolia and other countries (e.g. Uzbekistan) in the amount of more than 120 million Euros in equivalent. Often, the “traditional” format of international development banks’ financial support for exports involves the activities of state or quasi-state export support institutions that act as intermediaries between the state and exporting companies: export credit agencies, excimbanks. However, it must be understood that in general the agencies’ mandate is limited to supporting only the interests of one country, although on a global scale. Interregional development banks can be not only a platform for identifying crossovers of mutual foreign trade interests, but also an effective tool for subsequent targeted support of multinational export and import projects within their mandate. The implementation of such projects can pro-

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vide an impulse for development for a multitude of trade and integration initiatives involving several IBRD shareholders at the same time: both within the “membership area” and outside the geography of the institute. – One of the global trends is the “green economy”. The IBEC has repeatedly declared its commitment to these principles, supporting, in particular, the UN Sustainable Development Goals. How do you move in this direction, how is it reflected in the Bank’s balance sheet? – The IBEC is in the process of active formation of its plan to involve development institutions in international efforts to stabilize economic and social and environmental development in accordance with the UN sustainable development goals. We expect and believe that the new five-year strategic cycle of the IBEC, which will begin in 2021, will be an innovative breakthrough in the Bank’s work not only in terms of volume and scope of operations, technological development, but also in terms of responsible financial contribution to the economies of member countries. We will build our future

work taking into account the most important stage in the global community’s implementation of sustainable development goals, which will take place in the next ten years. “Green financing, as one of the most relevant areas of socially responsible business today, is becoming one of the priorities for the renewed IBEC and an integral part of its new business profile. The IBEC has been already actively developing “green” projects. We have signed agreements and memorandums of cooperation with a number of partners from participating countries, where environmental issues are given considerable attention. For example the Memorandum of Understanding with Mongolian Golomt Bank. It is aimed at developing a “green economy” and outlines joint plans of financial institutions to finance environmental projects in Mongolia, the IBEC member countries and the regions of its presence. The ideological platform for such agreements are the goals of sustainable development – low-cost and clean energy, responsible consumption and production, and combating climate change.

Bank. Bank. Bank

Signing of the Memorandum of Understanding aimed at development of "green economy" with Mongolian Golomt bank

Among the priority sectoral areas are transport, housing construction, renewable energy, energy-saving technologies, i.e. all key items of the world agenda in the field of “green” economy and environmental protection. As an example, there are two significant for the IBEC projects, combining both the environmental aspect and promoting cooperation between the Bank’s member countries. We provided an earmarked loan to the Ulaanbaatar Railway for the purchase of Russian-made diesel locomotives. The transaction was carried out with maximum efficiency by attracting tied financing for 11 years from Roseximbank under the insurance coverage of EXAR JSC. This complex structured transaction worth a total of 40 million Euros contributes to the implementation of the long-term investment program to modernization of the Mongolian railway infrastructure. The locomotives purchased under the agreement meet the most modern environmental safety requirements. The Polish company Laude Smart Intermodal has opened a 15 million Euro credit line to finance the purchase of innovative intermodal freight rail containers and platforms manufactured in Russia and Belarus. The use of innovative containers makes it possible to significantly optimize the structure of goods being transported and, by filling in goods flows in both directions, to avoid “empty” railcar runs. Evidence of the importance

of using such equipment is the European Union’s support for the transaction, which encourages changes in the transport and logistics industry aimed at optimizing and greening transport. For this project, Laude receives special subsidies from EU funds. – What place will digital technologies occupy in the new IBEC strategy? – The world is increasingly becoming digital. This creates both opportunities and challenges. The digital world has served as a saving alternative reality in a time of long physical distance and selfisolation during a crisis. Digitalization affects most production processes and activities in the economy, including products in all sectors, from agriculture to services. Although we are now only seeing the early stages of digital transformation, we can no longer deny the increasing role of digitalization and its inevitable rapid development. It seems that the invisible hand of the market will become digital. E-commerce and other aspects of the digital economy are driven by two main factors: data and platforms. Digital data has become a new economic resource for value creation. Control over data is strategically important to be able to transform it into digital intelligence. In virtually every value chain, the ability to collect, store, analyze and transform data provides additional opportunities and competitive advantages. They lie at the

heart of all rapidly developing digital technologies such as data analytics, AI, blockchain, IoT, cloud computing and all Internet services. In particular, the IBEC is involved in a joint project with an international IT company to develop and implement a blockage solution for trade financing (and, in the future, settlement) to facilitate cross-border trade. Traditionally, trade finance has been heavily dependent on paper-based transactions related to information, asset transfer, goods transfer and payment processes. In this established paradigm, business parties build trust through a central operating mechanism, such as payment by letter of credit. However, low efficiency and vulnerability to malicious changes (including direct fraud) hinder overall performance. Decentralization of operational business networks can help address issues such as transparency, real-time transaction tracking and trust-based transactions between players. A blockchain serving as a general ledger (database) can facilitate trade finance through its distributed network. In addition, its subsidiary technology – Smart Contract – can be deployed in a blockchain environment to fulfill the terms of contracts or event-based agreements. The IBEC is currently testing a prototype platform for its first trade finance products, and we plan to launch these new products by the end of 2021.

Financial system of Eurasian countries

ARMENIA: AN ECONOMY DURING A PANDEMIC AND DEVELOPMENT PROSPECTS FOR THE FINANCIAL SECTOR The Armenian economy lost 5.7% for the last 7 months of the current year (more recent data has not yet been published) compared to the same period in 2019. However, the country was comEURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

pletely “sent home” due to the pandemic only in April. Obviously, the Armenian government has not yet been very successful in ensuring a reasonable compromise between

Samvel Chzmachian,

Member of the Bureau of Executive Board of FBA EAC, Deputy General Director of the FBA EAC – Head of Representative Office in the Republic of Armenia

health and economic considerations. However, the decline could have been much more significant had it not been for the 24 state anti-crisis programs through which about USD 300 million (or 2.3%

Financial system of Eurasian countries

of the country’s GDP) has already been spent on supporting the population and economy. The government is prepared to contribute another 100 million dollars as co-financing for large investment projects worth between 500,000 and 4 million dollars, which is equivalent to private business. In order to support businesses affected by the effects of the Сorona virus, the state authorities are relaxing tax policy (but not all of it, which is related only to production) and budget policy, including by using fiscal buffers and increasing borrowing. The monetary regulator’s actions are aimed at ensuring favorable financial conditions by reducing interest rates and generally mitigating financial conditions, supporting bank liquidity and the ability of deposit institutions to lend to economic agents. At the same time, the banking system of Armenia is still quite confident, though not without problems, acting as a “source of strength” and a lifeline capable of effectively resisting the pandemic and pulling the entire economy out of its impact. The relatively good health of the banks is due to the high level of liquidity and extremely strict regulations that prevent them from entering the highrisk zone. We will not discount the fact that the government has spent most of its anti-crisis programs through banks. Thus, as a result of the first half of the year, the banking system of Armenia has demonstrated growth in all key indicators, except for deposits of non-residents. True, it was not a double-digit rate as in all recent years, but still the growth in the global crisis, even at the level of 3–6% can be considered quite acceptable. Moreover, although the COVID-19 pandemic triggered the devaluation of national currencies in many countries, this process has had little impact on Armenia. In a recent report by the Eurasian Development Bank (EDB) “Evaluation of Unobservable Economic Variables in the EDB Member States” (5 EAEC countries plus Tajikistan) states that currently all the countries in the region with the exception of Armenia “tend to weaken the balance of real effective exchange rates”. I must say that the Central Bank of the Republic of Armenia has always been criticized for the fact that the megaregulator in its monetary policy adheres to the need to maintain a stable exchange rate, which does not allow exporters to fully operate. But this is a double-edged sword, because if the national currency is gradually devalued, it will certainly support exports, but on the other hand, it will hit the drams depositors and in general the savings of the population,

which will suffer losses. And that’s why we think that Martin Galstyan, Chairman of the Central Bank of Armenia, is unambiguously right, having noticed the other day that the Central Bank will always criticize in this matter. Of course, we cannot completely rule out the possibility of some deterioration in the health of banks at the end of this year or at the beginning of next year, primarily due to a massive revision of loan agreements in favor of customers and the provision of credit holidays, which could later lead to an increase in the share of non-performing / unsecured assets due to the decline in solvency (by the way, this, by the way, called for special attention of the IMF) and the decline in the activity of consumer society. In other words, credit holidays cannot last too long, because in this case both banks and borrowers may have very big difficulties. In addition, in the context of high uncertainty, the mismatch between the situation on financial markets and the development of the real economy has deepened, which can also be considered a financial vulnerability factor. Nevertheless, banks have significant capital, which provides a comfortable level of absorption of potential losses, and it can be assumed that under all possible scenarios the situation in the financial sector of the country will remain manageable due to reliable “airbags”, and apocalyptic or close to them forecasts will remain on the pages and sites of some media. Now for the medium and long-term perspectives. It is clear that some processes will go much faster in the future, not because of the pandemic, but precisely because of it. We are talking about further digitalization of the banking sector, the development of online services and, in general, leaving online. This year, even the most conservative and age-conscious part of society had to master modern technologies for using banking services and, after the end of the pandemic, is unlikely to give up the skills acquired. Speaking about the development prospects of Armenia’s financial sector, it is impossible to ignore the factor of our country’s participation in the Eurasian Economic Union (EAEC) and, accordingly, the general integration vector of development within the framework of this Union. It should be recalled that one of the important achievements of the meeting of the Supreme Eurasian Economic Council held in Yerevan on October 1, 2019, was the agreement of the Heads of the EAEC member states on the concept developed by the central banks of all countries of the Union of forming a single financial market of the EAEC by

2025. Thus, the President of the Russian Federation Vladimir Putin put the approval of common rules on the financial market among the priorities, stating that this concept “...will become a road map for the formation of common rules for the provision of banking and financial services in the territory of the EAEC, making this market segment unified and transparent”. And already on 31 October in Minsk the Сhairman of the central/national banks of the EAEC member states approved the road map of the measures provided by the concept, which is to be implemented within 5 years. This road map presents the directions for creating a single financial market of the EAEC Member States in three sectors – banking, insurance and securities market. Thus, the difficult task of harmonizing the legislation of the financial

markets of the Union’s member states is to be solved, which is a very complex institutional and methodological problem. In addition, the Integration Five countries will carry out partial harmonization of regulatory functions in the banking, insurance and stock market sectors. If we look into further nuances, it should also be noted that by 2025 the EAEC countries will have to come to agreed approaches to mutual recognition of financial and banking licenses. In this regard, the objective is to ensure a level of harmonization sufficient to ensure that participants in the financial markets of the Union countries are mutually admitted to their domestic markets. In particular, a single exchange space will be created in which brokers and dealers of one EAEC Member State will be able to participate in transactions EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

on the exchange of another Member State. As a result of all the planned actions, the single financial system of the EEU will allow all subjects of the integration union to have free, simplified and nondiscriminatory entry and exit to all EEU markets. In turn, it is expected that this will lead to an increase in the quantity and quality of financial services for all companies and citizens of the member countries, strengthening the economies of these countries, including through increased competition and increased business activity. In this regard, the banks operating in the EAEC area should already think about the synchronous transformation of banking culture and the formation of a trusting environment, which will make it possible to create a balance between ad-

equate safety control and an acceptable risk of applying the latest digital technologies within the ecosystems, which are also a promising area for development of the financial sector. Today, in the context of global development, banks are losing their classic form, transforming themselves into ecosystems with alternative services and opportunities. Financial agglomerations will be formed in the form of fin courts – similar to food courts. The provision of related services and even goods will play an increasingly important role in the formation of banks’ profits, rather than the percentage of traditional banking generated by the difference in interest generated by attracting and placing borrowed funds. Nowadays, some Armenian banks placed protective masks and gloves for customers on a separate table in the lobby, which was fully used by those who just walked past the bank. They would come in, take free protective and hygiene equipment, wash their hands with antiseptic gel, and then, having made a trip around the hall, they would quietly leave. It may not seem like an exaggeration or a joke, but it was in miniature the way to the future ecosystem, when banks, along with traditional banking products, offer collaterals from their partners. Thus, it is possible to present the structure of the bank’s ecosystem as a single window for the sale of various financial products and services, including those produced and offered by third parties, such as real estate/mortgage, insurance, cars (rent anywhere in the world), TV, leisure (hotel and air and rail reservations). In other words, the bank is able to cover the entire consumer product line related to the areas listed above, and now, by applying to the bank for a purely bank product, it is possible to leave the bank not only with, say, a loan, but also, conventionally speaking, with a paid protective mask. The Bank becomes a sales channel for the services of other companies, offering them competently to its customers, i.e., it forms a marketplace and generates additional profit for the Bank. Thus, in the context of the formation of a unified financial market of the EEU, the problem of synchronizing the transformation of banks into modern ecosystems becomes of paramount importance, as it is difficult to imagine a common financial market of the Union, where some banks operate in a completely new cultural format, while others – in the old way. These are the general prospects for the development of the financial sector, at least for the next five years (we hope that this will not cut anyone’s ears).

Investments

Alexey Kovalenko,

Director for Strategic Projects, Soltex Group LLC

FLAX AS A PROMISING AGRICULTURAL CROP IN RUSSIA Influence of flax on human development The well-known plant – flax – has been cultivated by people for so long that it is impossible to say the exact date of its “domestication” at this time. Archaeological findings confirm that flax was cultivated by people already in the Neolithic Age. Signs that people cultivated flax in the Bronze Age were found during excavations in Spain. In the Iron Age, narrowleaved flax was cultivated everywhere in Europe, as evidenced by the remnants of bread, which include flax seeds, found by archaeologists. According to scientists, flax was used as a spinning crop nine thousand years ago in ancient India. There are written Ancient Indian sources dating back to the

seventh millennium B.C., which already mention flax cultivation. The greatest states of antiquity – Assyria, Mesopotamia and Egypt – adopted the art of producing linen fabrics and reached unprecedented heights in it. Egypt was particularly famous for the art of weavers. Thin materials were produced there so thin that even through five layers the outlines of the body could be seen. This fabric was compared to the ‘breath of a child’ and was called the ‘blessing of the gods’. Colchis was also famous for producing the finest linen cloth, just as much as the Egyptian examples. Colchis paid tribute to Turkey with these rare fabrics. And the famous Odyssey’s quest for the Golden

Fleece could well have been a journey behind the secret of producing precious linen material. Unfortunately, the secret of Colchis’ threads has also been lost. The technology of growing and processing flax entered the territory of the East European Plain long before Kiev Rus emerged. In the 5th century, the Arab traveler Ibn Fadlan admired Slavic women in white linen clothes. Flax in Ancient Rus Proof that flax was cultivated in Russia in ancient times was found by archaeologists during excavations of an ancient pile settlement on the Modlon River in the Vologda Region. The settlement dates back to the second half of

the third millennium BC. Despite such a significant age, the seeds of the longfibre flax (or cultural flax) found in the excavations managed to germinate. A spinner and linen cloth impressions on ceramic shards were also found there. In the 9th century flax was brought to the Middle Volga, and since then it has been closely associated with our ancestors. Prince Oleg went on his famous campaign to Constantinople in rooks with linen sails. The significance of flax was so great that the church charter of Prince Yaroslav of 1050–1051 contained a separate paragraph about the punishment for stealing flax and clothing from it. It was believed that linen fabrics had healing properties, while the whiteness of the clothes spoke of moral purity. The patron saint Paraskeva Linyanitsa became the patron saint of the industry, and her holiday is celebrated on 28 October, the day when all the linen cloths were finished. Flax served as a means of exchange, and peasants paid them a duty to the royal treasury. And the merchants who traded linen paid the duty “from the box”. By the way, the very word “to pay” comes from the ancient Slavonic “linen” – and this is the fabric from linen, as only such material was called linen in Russia, and it was used as a means of payment. Flax has been the main export commodity for many centuries, and in severe poor harvest years it was forbidden to export linen, sticks and cloth. Flax production in the Russian Empire and its role in the development of the European economy In Europe Russian flax was highly valued for its excellent quality. The name itself was a kind of “trademark”. Some merchants managed to forge documents for flax produced in Poland or Germany and gave it away as Russian. A great contribution to the development of the flax processing industry was made by Peter the Great, who in 1715 issued a decree “On the breeding of flax and hemp in all provinces”. At that time there were already several large manufactories in the country which produced ropes, hemp and canvas. Further increase in linen production was made possible by a decree of Empress Catherine II – in 1763 she allowed free export of linen abroad, which gave a large increase in linen exports. For several centuries the leading English and French factories producing both fine batiste fabrics and coarse canvas worked on raw materials supplied from Russia. EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

In the 18th and 19th centuries Russian flax was worn by peasants and noble people in Russia and abroad. In the XVIII century, more than 1 million poods of flax (16,400 tonnes) were sold abroad, and 80% of English factories worked on Russian raw materials. The advent of machine spinning increased the demand for Russian flax threefold. In 1837, 1.7 million poods of flax were already exported from Russia to England, which accounted for 70% of all raw materials supplied to the UK. And within the next 10 years Russia took the leading position in supplying raw materials to all countries in Western Europe, where the linen industry was developed. In Russia, linen consumption was second after bread. Such a promising niche could not be ignored, and in the second half of the 19th century merchants began building flax factories. At the same time, there is a growing demand for flax raw materials and international markets. By 1913, Russia had exported 21 million 570 thousand poods or 352 thousand tonnes. Of these, 96,000 tonnes were exported to France, 73,000 tonnes to Germany, 91,000 tonnes to Belgium, 37,000 tonnes to Austria-Hungary and 82,000 tonnes to England. At the same time, the development of flax processing has brought Russia to the second place in the world by the number of mechanical looms. Linen industry in the USSR The decline in linen production in the post-revolutionary period was shortlived. In 1926, flax production was 66,000 tones, 30% higher than in 1913. Export of fiber brought the state treasury considerable income – about 100 million rubles in gold.

Soviet flax was readily purchased abroad: in North and South America, Africa and Oceania. The linen industry was on the rise until the 1970s. With the advent of synthetic yarns and the development of cotton crop production, linen products began to give way to cheaper materials. Consumers at that time began to be more inclined to buy “promising” and fashionable synthetic clothing that did not need careful maintenance, or to buy cotton products. The production of linen and fabrics from it gradually decreased, and by 1986, linen fabrics accounted for only 6.7% of the total number of fabrics produced. On the other hand, the increased production of sunflower oil and synthetic olive has had a negative impact on the cultivation of oil flax. Industry development prospects in the Russian Federation After the collapse of the USSR, the linen industry suffered crushing losses. Against the backdrop of the general crisis, the fact that the largest flax processing plants were located in the Russian Federation, while flax was mainly grown in the republics, also played a negative role. The main producers of flax were Belarus, Lithuania, Latvia, Estonia and Ukraine. This state of affairs led to a shortage of flax fiber and the factories began to close down or switch to other raw materials. However, linen products have not been replaced. This is why flax farming needs to be restored as quickly as possible. The profitability of this industry with the right approach to production organization and effective marketing can be very significant. Even in Russia’s domestic market at the moment there is a significant deficit of raw materials and linen industry products. For example,

Investments

in medicine, the military industry and the construction industry, the demand for Kotonin was about 200,000 tones in 2019. Domestic demand for linen products from our own production can be met by introducing new technologies for growing and processing linen, energysaving technologies, and by increasing labor productivity and training our own highly qualified specialists. The long-fiber flax is also unique in that there is no waste during its processing. Various types of textiles are produced from long fibers: clothing; medical products; home textiles; footwear; wallpaper; technical textiles; twines and ropes. Cellulose products are made of: varnishes, paints, enamels and adhesives; drilling fluids, detergents and medicines; gunpowder for various needs; solid fuels. Fire is used: for thermal insulation; bonfire; manufacturing of fuel briquettes; in composite materials; for the manufacture of packaging and packaging paper; for fertilization, in soil. The last decade has seen an increase in demand for natural products. Residents of developed countries are taking a more responsible attitude towards the environment and their own health. Here, linen fabrics, and other linen-based products, are unparalleled. The properties of flax have allowed it to be used even in space: a new generation of composite materials is being created from flax fibre, which can be used both for the outer shell of aircraft and for interior decoration. These materials are included in aerospace research and development programmes. As for linseed oil, this natural product has exceptional properties: the paints made from it are two to three times more durable than their artificial counterparts, deeply impregnate the base on which they are applied, and have bacterial properties. Renaissance painters’ paintings were painted on linen canvases coated with linseed oil and paints based on the same oil. Perhaps this is the secret of their longevity. The fire heater attracts with its properties of keeping the temperature in the

house, its insulation against noise and electrostatic stress, its vapour permeability and antibacterial properties, and its affordable price for a service life of up to 75 years. All these properties make flax promising for cultivation and processing. Government support for the industry On 28 February, 2018 the Ministry of Agriculture of the Russian Federation launched a program to support flax farms from the federal budget as well as from regional budgets. The support measures are aimed at improving the quality of flax trusts, increasing the area under crops, modernizing production and construction of flax processing factories, and purchasing new agricultural equipment for flax sowing farms, flax factories with the status of an agricultural producer and sowing flax. These actions will help create up to 100,000 jobs in the Nechernozem region, which will boost agricultural development in the region. Alexei Mayorov, Head of the Federation Council Committee on Agrarian and Food Policy and Environmental Management, believes that the program should create preferences for flax clusters. Flax factories and fields should be located in close proximity to each other. This is due to the high moisture content of flax, which makes it impossible to transport it over long distances. In this way, a continuous production chain is created: gathering flax – drying – processing. In addition, another problem is being solved – the commissioning of new agricultural land plots. Measures have already been taken to seize unused agricultural land and hand it over to farmers. Support from the state will make these lands attractive for investment in flax farming, which will not only meet domestic demand, but will also make it possible to introduce products to the international market. In terms of figures, the SME business will receive preferential loans: 1. From the Ministry of Economic Development of the Russian Federation: for investments from 3 million to 1 billion rubles; working capital from 0.5 million to 500 million rubles at 8.5% per annum; support for the cultivation of flaxlong-long-haul – 10 thousand rubles / ha; 50% compensation for capital construction costs. 2. From the Russian Export Centre for Agricultural Producers and Exporters: grants and subsidies: compensation of up to 80% of transportation costs;

compensation of part of the costs of transporting agricultural and food products – up to 50% of the costs incurred by the exporter; compensation for part of the costs of holding and participating in exhibitions and business missions – up to 80% of the costs for SMEs; subsidizing the interest rate on commercial loans for exporting companies – up to 4.5% per annum of the bank’s commercial rate. Flax – growing and primary processing Investment project of Soltex Agro LLC with the support of FBA EAC Some time ago ”Soltex Group” LLC proposed a project, business plan and financial model for growing and primary processing of flax in Baryatinskiy district for consideration of the Kaluga Region Government. The project was recognized as a priority and fully supported by the Administration of Kaluga Region and Baryatinskiy District. Today preliminary agreements have been signed between “Soltex Group” LLC and the owner of agricultural land “Agrosistema” LLC for acquisition of 2.5 thousand hectares of land from it and for long-term lease of 2 thousand hectares with further redemption. ”Soltex Group” LLC and the Baryatinskiy District Administration signed a memorandum of cooperation in the implementation of the project in the district. The administration also confirmed in writing the availability and possibility to allocate up to 8 thousand hectares of municipal land for long-term lease for 49 years with further redemption. For the construction of two short and long fiber production lines, the district administration is allocating 67 ha of land for production purposes. There are plans to build production areas, a site for machinery, warehouses for raw materials and finished products, and an administrative building. The site is conveniently located in close proximity to the railway station. Electricity, water and gas have already been supplied to the site. In 2019, «Soltex Agro» LLC was registered to manage the project, which is recognized as an agricultural producer with the right to receive all benefits and subsidies at the federal and regional levels. The Ministry of Economic Development of the Kaluga Region provides state support and subsidies to small and medium-sized businesses and agricultural producers. This support includes: compensation for part of the cost of purchasing production equipment – up to 50% of the cost of equipment (not exceeding 4 million rubles per recipient);

FLAX Seeds

Cellulose

Fibre

Bonfire Thermal insulation

Shoes and accessories

Cellulose esters

Oil

Solid fuels

Сloth Сolloxyline Lacquers

Сarboxymethyl cellulose

drilling fluids

Edible

Technical

Linseed oil

Natural oliphora

Gunpowder

Wallcoverings Colors

cleansing agents

Long-range weapon

Medicine

Fuel briquettes

Omega 3 Technical cake Feed mix

Technical textile

Home textiles

Kostroplits

Enamels

Adhesives

drugs

Small arms

Hunting and sporting weapons

Composite materials

Omega 6

Eco-products

Food cake Flour

Tare, packaging, packing materials

Twines and ropes Mounting chucks

involvement of retired agricultural land in the turnover through cultural and technical events – 25% of costs (not more than 6,500 RUB/ha); subsidies for interest payments on loans – up to 70% of costs; subsidies for participation in exhibitions – up to 70% of costs. Tax benefits: tax rate when investing equal or more than 10 million Euro – 10% to the regional budget, 0% to the federal budget. Logistical solutions to the project are provided by a well-developed transport network. The Baryatinskiy district is located just 100 km from Kaluga and 240 km from Moscow. The district’s territory is covered by the A101 – Varshavskoe highway; there is also a railway station in the district centre. There is a major railway junction, the Vorsino station, 210 km from Baryatino. This logistics complex has its own customs terminal and warehouses. The existing railway network connects Vorsino with countries in Europe and Asia. As a result, transport costs for shipments to China, Vietnam, India, Latvia and Belarus are significantly reduced and transport time is reduced by three times. In 2019, in order to expand the export of Russian agricultural products to China, the Agroexpress project was launched; its train route also runs through Vorsino.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

The development of ice-making in the Baryatinsky district was assessed as a promising area of activity by the initiator of the project – Manish Kumar, President of Soltex Group, Vice-President of the Commission on Foreign Economic Cooperation with Partners in India at the CCI, as well as a member of the Board of the Financial and Business Association of Euro-Asian Cooperation and a member of the Business Council for Cooperation with India. Manish Kumar, who has 22 years of experience in management and international trade, skilfully implements new technologies in all areas of his extensive activities – industrial chemicals, oil refining, agribusiness (investment projects, farming, agricultural trade), project management, investments, finance, renewable energy. The company’s profitability calculation shows that with a four-field system of crop rotation of 12,000 ha and an average yield of 30 quintals per hectare, the yield from the sown area will be 9,000 tonnes. Fibre output from the trust: 10% long fibre – 900 tonnes X 130 RUB/ kg = 117000000 RUB/kg; 20% short fiber – 2700 tons. X 70 rub./ kg = 18900000000 rub. Total: RUB 306 million per year. The cost of the project is RUB 1.1 billion, of which about 800 million is a soft loan from Russian banks at 3.5%

Сosmetics

Fertilizers, soils

per annum. The banks’ demand is 25% of their own funds. Thus, investments amounting to approximately 300 million roubles are required. The key investors are Soltex Agro and FBA EAC, which together hold 60% of the shares. Investors are offered 40% of shares (not more than 20% per shareholder) – with the possibility to sell back their shares in 2 years with a 50% premium. The payback period of the project is 7 years. Primary sowing of flax will take place in the spring of 2021 on an area of 3000 ha, with the preparation of 6000 ha by planting herbaceous or grain crops, which contribute to the increase in flax yield. Once again, it must be pointed out that the world’s consumption of flax is steadily increasing, but not all countries are able to cultivate it due to climatic conditions. Northern Russia is seen as the most promising region in this respect: it is on the land of the Black Earth that the highest quality flax has been grown for centuries. According to a pessimistic scenario, by 2025 flax fiber exports from Russia will increase 26 times, flax yarn 50 times, and linen fabric 2 times. And with unprecedented government support measures aimed both at developing the agrarians and supporting the light industry, flax fiber could become one of the most promising sectors of agriculture.

Practice

V.V. Prikhodko, PhD on Technical Sciences, Professor, General Director of NRTB JSC

A.F. Kuzminskiy, PhD on Technical Sciences, Deputy General Director of NRTB JSC

S.V. Shubin, ISSP Project Manager

AN INTELLIGENT SOCIAL SUPPORT NETWORK

AS ONE OF THE TOOLS TO INCREASE EFFICIENCY PUBLIC ADMINISTRATION 38

The rapid pace at which digital technologies are being introduced in all areas of life in modern society means that familiar economic and social patterns are changing. The world’s leading countries are relying on digitalization of their economies in order to maintain their leadership. Strategically, in the face of fierce economic and political competition, a serious gap in this area for any independent state borders on self-liquidation. In Russia the development of the digital economy has been declared a priority of government policy and is seen as a prerequisite for economic sovereignty. The development and accelerated introduction of digital technologies is one of the national goals that the national project (program) “Digital Economy” is designed to achieve. The implementation of the project required a significant expansion of the legislative framework. For this purpose, the Government of the Russian Federation and the State Duma have prepared and implemented a number of initiatives supported by federal laws. In addition, legislative initiatives need to be constantly reviewed, expanded and refined to take into account constantly evolving trends in digitalization. The amount of work carried out is enormous and the number of projects – both completed and under development – is also very large. However, there are still current tasks that can be solved through digital improvement. One such challenge is in the area of social security. For Russia as a social state, the importance of this segment of social life cannot be overestimated. Not only the success of current reforms, but also the future of the country depends on how it is organized. An important aspect of digitalization could be the creation of an applied digital platform for the implementation of the Intelligent Social Support Network (ISSP) project. This network should be seen as an instrument of digital assistance to public authorities in the implementation of their social programs (functions), budget management and exercise of power. The idea behind creating such a tool is to optimize processes: budgeting (federal, regional, municipal) by shifting the financing of social obligations according to actual indicators of benefits use; implementation of measures of social support of the population, including a set of social services, benefits, subsidies, monetary or in-kind assistance, which can be provided to a citizen in accordance with the legislation of the Russian Federation, as well as regulaEURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

tory legal acts of the constituent entities of the Federation or municipal entities. These processes are to be optimized: providing public authorities with prompt and reliable information on actual social security expenditures; implementation of legally significant electronic interaction between the state, business and citizens; widespread transition from subsidies for covering social obligations of the state to reimbursement of expenses upon their use; cardinal expansion of business involvement in the implementation of social programs; increasing the level of information security in the digital environment of the state. In doing so the EISR itself must provide mechanisms: sale of preferential (subsidized) products and services (medicines, treatment, food, travel, housing and utilities, etc.) to individuals through publicly accessible trade networks, healthcare and transport companies, etc.; reimbursement from the budget of actual expenses on sold products (services) under social programs, as well as other possible types of subsidy; personalized accounting for the use of benefits. In order to understand how the ISPN works, it is necessary to consider the basic concepts and basic principles of its construction. One of the main components around which the entire concept of an ISSP is built is the Social Payment Card (SPC). The SPC is a multifunctional name plastic card, which is issued to the applicant on a voluntary basis and allows the SPC to receive public services, including social support measures, cash and settlement operations, as well as additional functions and facilities. SPC serves as a personal electronic key to information about the cardholder and their rights to social assistance. Any able-bodied citizen who has received it in accordance with the established procedure can be a JPC holder. SPC has social and payment applications, which are supported by integrated technical means and information resources. The social application ensures the provision of state service cards to holders, including social support measures, and also keeps track of transactions completed. The application consists of information services of personal access. In general, the application may be issued by any federal executive authorities,

local authorities and subordinate institutions and unitary enterprises, nonbudgetary funds. The social application may also contain services that are not directly related to the social sphere, but provide additional functions and conveniences for the SPC holders (commercial and other services – discount, bonus, identification, etc.). The payment application allows the SPC to be used as a bank card in accordance with the bank account agreement concluded between the holder and the bank. The application enables holders to make settlements for transactions related to cash flow. The issuer of the payment application can be the bank that issues the SPC, has placed its own payment application on it and ensures its use. Issuing banks issue SPCs (which are essentially a type of payment cards) in accordance with Russian legislation. The payment application includes services provided by the issuing banks under an agreement with a SPC holder. The social and payment applications allow citizens to use the SPC to conveniently manage the functionality of the system of services and services provided by government agencies, local authorities, commercial and non-commercial organizations. The system is also logged in via SPC. Thus, SPK provides the following main functions of the ISPS: identification of the cardholder’s; certification of the right to make a bank transaction when using the card as a payment instrument; certification of the right to receive social support measures and other services; recording of transactions. The functioning of the ISPS requires the mandatory participation and interaction of the holders of the SPC, the issuing bank of the payment application, government authorities and acceptors. The acceptor is a legal entity that participates in the ICSP and provides services to the JPC. An acceptor, for example, can be any trade organization that has joined the network and has the necessary terminal equipment. In order to avoid abuse and irregularities on the part of the acceptor, the authorities must have mechanisms in place to control the activities of the acceptor. The overall architecture of the ISPS is shown in Figure 1. The core of the ISPS is a non-financial processing centre (NPC), which is a software and hardware complex that ensures the execution of social applications and maintains a database containing information on social transactions.

Practice

IСSP OPERATOR customer call centre

unified social register (USR)

non-financial processing centre (NPC)

system portal

databases, applications

social transactions

access to services

monitoring system

card issue point

control, statistics

UNITED PROTECTED TRANSPORT ENVIRONMENT (UPTE)

PAYMENT GATEWAY authorities, funds, institutions public information resources

TRADE AND SERVICE NETWORK ACCEPTORS

web-banking

BANK

bank payment system

POS-terminals ATMs

Fig. 1. General architecture of the ISPS

The main functions of the NPC are as follows: identification – identification of an individual, registration, linking to systems of interaction with the population; certifying – confirms a citizen’s right to certain benefits; control – registers the fact that a service has been used. These functions ensure the key process of implementing social support measures in the ISPC – social transactions. The Unified Social Register (URS) is a system of databases and applications that provides for the management of “social passports” (personal data) of URS holders. The Unified Social Register is formed on the basis of data from automated systems of social security agencies and other sources containing up-to-date data on benefits and privileges. An appropriate gateway is provided for the design of the PCP to ensure direct work with the ECP data. The ISPP portal includes a set of applications, databases and hardware that ensure the operation of and access to information services. The Unified Protected Transport Environment (UPTS) is an integration platform that brings together all the main components of the ISPS based on a single

protocol (information exchange standard). The EZTS implements targeted guaranteed delivery of messages within the ISPS, interpretation and routing of requests between subsystems, and ensures security of information traffic. Coordination of the activities of the network members is entrusted to an authorized body, which is to become the ISPS Operator. The main tasks of the Operator are as follows: Ensuring the operation of the ISPS; maintenance of the ISPS; information integration (including its technical and organizational aspects) of ISPP members; development of technological, functional and organizational infrastructure of the ISPP. To perform these tasks, the functions of an ECP holder, a social application issuing authority and a social transaction processing centre must be transferred to the Operator. The functions of the Operator also include provision of information and reference services of the ECR and organization of card acceptance and issue points. The Operator must be staffed with engineering and technical personnel in the field of information technology, have an extensive FPV infrastructure, be equipped with communication and data

transmission facilities, customer call processing (call centers), software and hardware to host components of the UZTS, the ECR, the SPC and the System Portal. Figure 2 shows a typical process implemented by the ISPS and related to the receipt of preferential (subsidized) goods/services by a citizen (SPC holder) eligible for social support. In this case, on the basis of a complex transaction, part of the goods/services are paid for by cashless transfer of funds from the account of the JPC holder, while the remaining part is repaid from the budget by reimbursing actual expenses to the supplier. In this case, the account of the recipient of the transfer does not need to be opened in the issuing bank; settlements can be made through the acquiring banks that interact with the issuer. For the sake of simplicity, we will accept the condition that the trading terminal is directly connected to the processing centre of the issuing bank and the account of the recipient of the transfer is also opened there. Except for a number of auxiliary actions, the overall work algorithm will look as follows. The SPC holder applies to the acceptor to receive the goods or services. The acceptor sends a transaction confirmation request to the bank. The bank, in turn,

social payment card

payment at a discount

customer – holder of SPK

receipt of a preferential product/service

acceptor – product/ service supplier discount payment

reimbursement of actual expenses on benefits

budget manager

BANK verification

confirmation of benefit

ISSP operator list of actually used benefits

the core of the network – NPC

Fig. 2. Typical process for obtaining preferential goods/services through an ISPP

generates a request to the NPC for the rights to receive social support measures from the SPK holder. The SPC confirms the complex transaction, reflects its execution in the primary accounting and reduces the corresponding limit for receiving social assistance (if necessary). Having checked the status of the account, the bank confirms the solvency of the SPC holder and reflects the transaction in the bank records. The bank then sends the transaction confirmation to the acceptor, who issues goods/services to the SPC holder at a reduced price. At the same time, the bank writes off the funds corresponding to a reduced price from the account of the JPC holder, transfers them to the account of the supplier of goods/services and sends a statement to the JPC holder. Data on the completed transaction are received from the NPC to the budget holder as a basis for reimbursement of actual expenses to the supplier through the bank. The JPC also allows receiving fully subsidized goods/services on the basis of social transactions, or, if the JPC holder has no privileges for a particular product, to use it as a normal bank card. The effectiveness of the proposed system can be illustrated by an example of purchasing free medicines by preferential categories of citizens (Fig. 3). EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

The use of the ISPS in this segment makes it possible to significantly reduce logistics, increase the transparency of the purchase and sale of medicinal products distributed on preferential terms, and make them convenient for citizens. Studies conducted in one of Russia’s regions have shown that this approach creates an opportunity to save up to 30% of the budget allocated for medicines. The list of services and facilities provided to the population through the ISPC can be very extensive. For example, payments for housing, utilities and other services through the ISPC will ensure that subsidies and surcharges are only used in a targeted manner. This will increase the collection of payments and support family budgets in disadvantaged and low-income families. Compensation, various benefits, child nutrition, social products, transport, prosthetics, etc. – Full implementation of the ISPS implies coverage of 90-95% of the country’s (regional) population. At the same time, the implementation process should be carried out in stages, with priorities and priority setting. Services should be ranked according to their social importance and demand (mass of services). The performance of the CoES can be assessed by the economic, social and ad-

ministrative effects that can be achieved after its implementation. It is assumed that the economic effect will come at the expense of it: ensuring accurate accounting for the volume of social services actually provided and reducing redundancy; increased control over the targeted use of budgetary funds allocated to the social sector; improving the completeness, reliability and promptness of accounting for the actions of persons entitled to social support; reduction of expenses for ensuring the circulation of cash through the expansion of the non-cash settlement system; growth in the tax base due to an increase in the share of retail non-cash transactions; reduction of operating costs for the management and operation of social programs The analysis shows that the main factor here is the possibility of saving by planning not according to norms, but on the basis of analysis of actual data on consumption of social benefits. This transition will allow saving up to 6% on social budget items. Implementation of the ISPS project will also lead to a reduction in the

Practice

INTELLIGENT SOCIAL SUPPORT NETWORK allocation of funds and purchases are generally purchase of medications made at a price above the market provided under benefits

tocking, distribution

sale in allocated pharmacies

additional logistics

absence of required medicines at the right time

BUDGET FUNDS ARE NOT SPENT EFFICIENTLY

allocation of funds and purchases are generally purchase of medications made at a price above the market provided under benefits

tocking, distribution

buying medicines in any pharmacy chain at any time

prompt reimbursement of costs incurred

additional logistics no deficit, convenience for the customer

budget savings of up to 30%

Fig. 3. Purchase of free medicines: the benefits of the ICPD

operating time for the provision of social benefits, increased transparency in their accounting and control, and comprehensive automation of the process of social benefits and services. Such a reduction in labor intensity will make it possible to optimize expenditures on social budget items by at least 5% per year. The social effect from the implementation of the ISPP can be defined as: improved economic security for citizens; improved convenience for recipients of social services; simplifying the procedures for providing social assistance to citizens and reducing the time for receiving it; increasing citizens’ trust in the state social security system. The administrative effect is to increase the efficiency of the functioning of government bodies implementing social security programs. This effect will be manifested in the following: optimization of interaction between government agencies among themselves and with other members of the network by ensuring a legally significant electronic turnover; expanding social projects while ensuring cost savings, including through the use of unified organizational and technical procedures;

increasing the productivity of administrative personnel, with the possibility of redistributing functions and optimizing the quantity and quality of staff. The social and administrative effects of the ISPP project are determined to a greater extent by qualitative assessments and consist in increasing public satisfaction with the state’s social policy and reducing communication barriers between agencies. The basic principles of the ISPP are: openness – the possibility of expanding its functionality and of new citizens and organizations joining it; equality of participants – interaction under common rules; transparency – a clear work algorithm, control and accounting of all operations. The ISPS will allow the state to reach a qualitatively new level of fulfilling its social obligations. An important result will be the unification of information resources of various agencies, which is a necessary basis for e-government. The ISPS will contribute to increasing the transparency of the activities of social security agencies and increasing the productivity of their employees, the active participation of business in the implementation of social programs, as well as the effectiveness of the dialogue between authorities and beneficiaries.

The technical implementation of the project may be undertaken by the Joint Stock Company National Radio Technical Bureau (hereinafter – NRTB). It was established in 2000 to carry out work to ensure the electromagnetic compatibility of GSM cellular networks and radio-navigation equipment of the state aviation. Today NRTB is a developer and supplier of integrated solutions for the development of third, fourth and fifth generation networks, radio relay communication, digital television and the optimization of radio frequency resource use in Russia. The company actively participates in large-scale IT projects, creation of new and modernization of existing air navigation systems, development of automated control systems, technical and software tools for testing complex systems. NRTB is a member of the Radio Communications Sector of the International Telecommunication Union (ITU-R), has the status of a collective member of the Russian Academy of Natural Sciences, and holds a significant number of Russian Federation patents for inventions and certificates of state registration of computer programs that have passed certification tests.

Practice

Vladimir Sokolov,

General Director of JSC MLG, Chairman of FBA EAC Committee on International Leasing

LEASING AS A PROGRESSIVE FORM OF INVESTMENT AND ECONOMIC STABILIZATION In recent years leasing has been the most progressive and popular form of investment for companies. In many countries leasing financing in constant competition with bank loans has become an integral part of the development and stabilization of economic processes aimed at reviving production, increasing its capacity, as well as meeting the needs of companies in various industries for necessary equipment and transport. The weakness and imperfection of the banking system has shown that enterprises benefit most from leasing financing, which has a number of advantages. First of all leasing is a long-term source of financing (up to five years) and also guarantees control over the targeted use of funds, since it is directed at specific assets, whereas banks are usuEURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

ally ready to consider financing up to one year. The schedule of payments under a lease is adapted to each lessee. The banks, on the other hand, usually introduce a strict payment schedule. The object of the lease can be the collateral for the repayment of the funds, with an average advance payment of 2030%. Banks prefer to pledge property that exceeds the loan in value by 1.5–2 times and to issue guarantees. Leasing does not increase the debt in the balance sheet of the lessee and does not affect the ratio of own funds to borrowed funds, which makes it possible for the company to obtain additional loans. Leasing is easy to process, free of bureaucratic delays and fast decisionmaking – from one hour to one day. Each

bank has its own requirements for obtaining a loan, its own criteria for selecting clients and there is no clear uniform methodology for evaluating the borrower. As a result each time it is necessary to adjust to a particular bank and collect a huge number of documents. And this is despite the fact that it is not yet a fact that a company will receive a loan for which the bank will spend one to three weeks. Leasing also has a number of economic advantages over loans. These are accelerated depreciation (coefficient 1.1–3%) and the inclusion of leasing payments in the cost of production, which reduces the taxable base and thus stimulates the development of production. It is also important that insurance is often paid for by the lessor when leasing a vehicle.

Practice

For clarity the advantages of leasing can be seen in the table. One of the priority areas of leasing is environmental leasing. Its subject matter is electric vehicles, such as domestically

Comparative factors

produced electric buses, which fully meet modern requirements for economy, comfort, safety and environmental friendliness. At the same time all leasing tasks must be performed by professionals. Joint

Stock Company International Leasing Group (JSC MLG) is rapidly developing and is one of the leading companies to participate in procurement procedures in accordance with Federal Laws 44-FZ

Leasing

Credit

6–8

15–20

2 hours – 3 days

1–3 weeks

Time to make a decision

1 hour – 1 day

1–3 weeks

The need for a notarial certification

Yes

1-2 (advance and, possibly, insurance).

10-15 (advance payments, insurance payments, bank fees, currency conversion fees, notary services, registration with the traffic police, etc.).

Yes

Leasing object

Pledge of property, bank guarantees, mortgage, surety, etc.

1,1–3

VAT on the total lease contract amount in current payments

Value added tax on equipment. VAT on interest paid on the loan is not refundable

Lease payments in full

Only loan interest payments and accrued depreciation

Advance payment of 20–30%

Liquid assets whose value exceeds the loan amount by 1.5–2 times

Number of documents required to assess of the borrower Document processing time

Number of payments to the contract

Need to have a credit history Credit security

Rate of accelerated depreciation VAT paid

Payments related to production costs Providing

and 223-FZ of the Russian Federation. JSC “ILG” clients are many Russian state and municipal institutions: the Ministry of Foreign Affairs, the Ministry of Defence, JSC “STC Promtehaero”, Zhukovsky Airport, Administration of the municipal formation of Bratsk and others. The company keeps pace with the times and relies on ecological technologies, the share of which is increasing from year to year. The planned transition of industries, enterprises and private households to “ecological rails” is not far off, and MLG JSC can bring tangible benefits to these enterprises on the way to their development, giving them the opportunity to experience all the advantages of leasing. It should be noted that international leasing also exists, and one of the main ways of its development is integration between countries. It will enable one country to lease the equipment or vehicle that it needs and other countries producing the equipment or vehicle to provide it. This will have a positive impact on the economies of these countries and will contribute to the development and revival of production. EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

The question who will regulate leasing activities is currently under active consideration in Russia. The Ministry of Finance and the Central Bank are insisting on the Bank of Russia being supervised. On the other hand, ILG proposes that the regulation of the leasing industry should be attributed to the powers of the Eurasian Economic Union through the creation of a special leasing structure within the framework of the EEU, which will keep a register of leasing companies of the Union’s member countries, establish uniform rules for them to work within the EEU, and bring the regulatory framework governing their activities into conformity. It is also important that this sector is not purely financial, as the leasing also includes the property complex and the risks associated with it. Therefore, the supervision of the Bank of Russia may not have the best effect on leasing. Moreover, regulation by the Bank of Russia may also lead to the concentration of leasing business with major players, as is the case in the banking sector. In this

case, small participants will simply be “squeezed” out of the market. If we talk about business leasing models, they are very diverse. For example, there is returnable leasing, where the obligations of the lessee and the seller are combined in one person. Leverage leasing is also gaining popularity, where the lessor, when buying equipment, pays only a part of its funds, and takes a loan for the rest of the amount, where the loan is secured by leasing payments and the leased property issued to lenders. At the same time, the lessor continues to benefit from tax incentives. Another interesting and progressive aspect is the green securitization of leasing assets: securities issued as green bonds to attract investment in environmental industries, clean technologies and renewable energy sources. Thus, leasing as a financial instrument is diverse, flexible, has significant advantages over credit, stimulates the development of industries, the economy and, most importantly, is available to both large enterprises and small businesses.

Technologies

MASMOL®

innovative industrial greases

Victor Bukin,

Ph.D. in Economy, Senior Researcher at NITU MISiS, General Director of the International Centre for Business Support, Corresponding Member of the International Academy of Engineering

The official supplier of Masmol® is LLC “Innovation and Energy Saving” Address: 117049, Leninskiy Prospekt, Moscow, Russia. 2-2a, office 423 E-mail: rantol@yandex.ru; energomet@misis.ru Phone: +7 (910) 260-99-98 46

Yuriy Fyodorov ,

General Director of the International Centre for Business Support, Corresponding Member of the International Academy of Engineering

In Russia and the former Soviet Union, production volumes of modern high-performance greases are low. The range of new innovative products is slowly expanding. Many scientific and technical developments are outdated and require significant updating. Modern technologies demand greases with a long service life at high mechanical loads and the need to operate at low and high temperatures. Foreign greases used in high-tech equipment are extremely expensive and, as a result, their use is limited to individual, most responsible equipment components. Scientists and specialists of OOO MAPS-OIL have been consistently engaged for many years in the development and manufacture of industrial greases with high performance characteristics and acceptable costs, and by now they have developed and introduced into production universal heat-resistant industrial greases of the new generation. MASMOL greases are designed: for easy assembly, operation and grease of sliding and rolling bearings, gear joints, low-speed and high-speed friction units, threaded joints; for rolling mill units, furnace rollers, coiler drums, tapping rollers, roughing and finishing stands and other metallurgical equipment; for friction units of mining and ore processing equipment, for open and closed gearboxes; for use in the gearboxes of underground equipment of coal mines, gears of industrial equipment and open gears of forging and press equipment. MASMOL® presents a full range of greases: MASMOL®-З (mortgage). It is used for heavy-duty, low-speed and highspeed units of friction, sliding and rolling bearings. Operating temperature range from –60°C to +425°C. Operates in abrasive, corrosive and waterlogged environments. Replaces standard greases such as PHIL, UNIOL, LITOL, LKS, ET, VNII NP and CYATIM, as well as imported greases such as Shell (Alvania, Stamina, Malleus) Mobllplex, Loctite, Klutz STABUTERM. EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

MASMOL®-C (centralized). Designed for units of rolling mills, roller conveyors, coiler drums and other metallurgical equipment. Operating temperature range from –60°C to +425°C. Used instead of standard IP-1, Phyol-1, UNIOL2M-2 and imported Shell Alvania, Shell Stamina, Mobilplex greases. MASMOL®-R (gearbox). Designed for use in all gearboxes (with straight, bevel and bevel teeth) of open and closed types of underground equipment of coal mines, gear drives of industrial equipment, as well as for grease of open gear drives of rotary kilns of forging press equipment. Operating temperature range from –50°C to +185°C. Used instead of standard greases Redusma, SKP-M, TRANSOL, LZ-PZL-00 and imported Klubersunth EG4-1000, Cavex GTA-160. MASMOL®-U (sealing). Designed to seal and eliminate gas leaks, protect shut-off valve sealing assemblies from corrosion, including when operating in environments containing hydrogen sulphide, as well as for operating oil and gas wells and threading at pipe plants. The operating temperature range is from –60°C to +185°C. It is used instead of RS, Hermocor greases, sealing paste for fittings 131–435, sealant greases 5050, 2525, 7030 produced by Silveld Corporation. The effectiveness of these greases is achieved by creating a reliable barrier (which is a strong oil film) between rubbing vapours in aggressive, abrasive and waterlogged environments. MASMOL greases significantly reduce wear and energy loss in the rubbing parts of mechanisms, which increases the mechanical efficiency of engines, as well as significantly increases the service life of rubbing vapours and protects them from wear and seizures. The second important role is that of heat dissipation from friction-heating parts. Greases also protect the parts against corrosion, flush out and remove impurities, ensure that components are sealed, and in some cases perform special tasks – for example, serving as a separating layer between mold and casting.

Greases ensure their effectiveness by extending their service life in comparison to their analogues due to the fact that they do not cock and slag at high temperatures (–60°C – +425°C). Greases are inert to all types of seals. They are distinguished by their high bearing capacity and high resistance to washing out by aggressive and abrasive media. Economic justification for using MASMOL greases: savings from volume reduction – significantly reduced consumption of greases compared to analogues; savings in price – the price of the grease is significantly lower compared to imported analogues; savings from reduced unit wear – a longer service life of the parts allows reducing the cost of updating them; savings on scheduled preventive maintenance – reduced labour costs for maintenance of parts and assemblies as a result of a longer grease life compared to their analogues; savings due to reduced downtime of equipment – due to reduced planned preventive maintenance of equipment. Calculations show that the use of MASMOL greases leads to significant economic benefits. Direct costs per unit are reduced by 25-50 thousand rubles per year. Savings per 1,000 nodes are estimated at 25-50 million rubles per year. Additional economic benefits can also be achieved by reducing equipment downtime, significantly reducing noise levels in the workshops, reducing transport costs for the supply of greases and reducing payments for environmental pollution.

Special opinion

EURASIA

Vladimir Kotenev,

General Director of «Eurasian Strategic Consulting» LLC

EURASIA: Today the world is ruled by the COVID-19 pandemic. Its human and economic consequences are not yet fully predictable, and at this point no one can say when the virus will finally stop spreading or how much the pandemic will change our lives. In addition to taking care of our health and lives (especially the elderly and those burdened with various diseases), we are all concerned about the economic downturn and the crisis in many industries. Massive bankruptcies and job cuts are expected. Better minds are thinking about how to get the economy back on track faster, how to save and radically improve national health systems, and how to maintain the level of prosperity we have achieved. In this article I would like to share my thoughts on this issue and mark some opportunities.

between geopolitics and economic recovery

As a Soviet and Russian diplomat with more than 30 years of international experience, I observe and analyze dramatic political changes that began long before the pandemic. We are experiencing a steady shift in economic priorities and other activities from transatlantic space to Asia. Asian tigers have taken better advantage of globalization and have confidently survived sanctions and trade wars. In the context of the pandemic, digitalization has accelerated rapidly and the internet and information flows have become more globalised. On the other hand, Corona virus has once again put on the agenda the role of the state, national independence in the production of strategically important products and the importance of regional (along with international) production and technological chains. The pandemic has not given a clear answer as to which

continents, which societies – democratic or autarchic – are better able to cope with this danger. Notions of expensive medicine or strong health care, of international scientific cooperation and universal solidarity, of alliances whose members close their borders to each other and do not help their neighbors, of new national or regional egoisms are being reviewed or redefined. Once again, the rapid digitalization of our lives is driving us towards political, social and mental rethinking. However, let us leave these painful questions for now and return to the main topic. Above all, however, we would like to take a short historical tour, which will facilitate our further reflections. During the Cold War, the world was divided into two warring blocks with the constant prospect of guaranteed mutual destruction. In the mid-eighties, Ameri-

cans and Western Europeans following them cultivated fears about Japan’s impending economic and technological expansion. After the collapse of the USSR the world faced a new dilemma: could the US, as the only hyper power, monopolize everything in the world or are there other alternatives? Later US President Barack Obama wanted to rule the world through the socalled Chimerica, but China did not buy it. A few years later China announced its “One Belt, One Way” initiative, better known as the New Silk Road. And now, already in Germany, you can hear voices that are increasingly saying the word “Chinopa”, i.e. the possible EU’s interaction with China. It is true that this new concept is connotation there more like the fears of Europeans of the expansion of Chinese companies that are willing to buy up everything European at a cheap price. What can be contrasted with these fears? When I founded my consulting company in 2012, the first thing I thought about was the network business, similar to the existing network diplomacy. That’s why I gladly accepted invitations from the International Economic Senate of Berlin (IESB) and the Financial and Business Association for Euro-Asian Cooperation (FBA EAC), which was founded in Moscow, to participate in their governing bodies. Soon it was possible to establish close contractual and business contacts between these two economic associations of entrepreneurs, which, among other things, lobby the interests of their members and their countries in various markets. Last year, a protocol on cooperation between MESB and the Marketing Club from St. Petersburg was added. We often discuss with colleagues why the rapprochement between the European Union and Russia was not possible at the beginning of the new millennium. Now I come back to the 1990s and remember the book “The Big Chessboard” by Zbigniew Brzezinski, a former American national security adviser and well-known geo strategist, which he published in 1997. No one, in my opinion, has ever written out such comprehensively diverse interests and goals of individual states and groups of countries, either before or after it. No one has so openly formulated the idea of the full dominance of the United States, both at that time and in the distant future. This book is not so much a scientific study as a well-structured overview of the analytical reports of US embassies in major countries. EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

Brzezinski quotes the “father” of geopolitics, Englishman McKinder: “He who rules Eastern Europe owns the Heart of the Earth; he who rules the Heart of the Earth owns the World Island (Eurasia); he who rules the World Island owns the world. Brzezinski then portrays Eurasia as a chessboard on which countries, like pieces, can make their moves, but only under the supervision of the only player who can change these moves at any time. According to the author, Germany in western Eurasia and Japan in the East are American bastions, while Western Europe as a whole is a springboard for American interventions in the East and the centre of the continent. It is interesting that Brzezinski does not mention at all the wars and conflicts that have either been waged by the US since the early 90s or in which America has been involved. Some of his predictions, such as the EU or NATO enlargement, have come true, but other events have gone completely differently. Almost simultaneously with the publication of this book Evgeny Primakov, Russia Minister of Foreign Affairs, who later became Prime Minister of the Russian Federation, formulated the doctrine of a multi polar world. Such organizations as the Shanghai Cooperation Organization and BRICS, which are rarely spoken of in the Atlantic space, were founded. Meanwhile, China has become an economic and financial giant. India, Pakistan and Vietnam are developing rapidly. At the same time, the EU is likely to have reached the limits of its enlargement, and the question arises as to whether it will become a separate pole of power or play the role of a junior partner of a world power. The United States, especially on the eve of the forthcoming presidential elections, is falling apart into a tough race and antitrust regime, and is experiencing a severe economic crisis and dramatic racial and social unrest due to the pandemic. This is why I think that chess games in Eurasia should give way to economic interests. Not only is there an urgent need for a new security architecture across the continent, but above all for countries with different government models to jointly create a giant market. A prominent German politician, Egon Bar, already in the 70s and 80s called for “change through trade” in Eurasia. The most obvious and important step along this path, I think, should be the rapid rapprochement of the EU and the Eurasian Economic Union (EAEC). And now the first cautious contacts are being made,

and important issues such as customs, technical and logistics regulations and rules, and finance are being raised. The current crisis could dramatically accelerate these processes. I am sure that industry and the economy on both sides can and must say their very strong words here. Many German, French, Italian and Austrian companies, especially those operating in Russia and Eastern Europe, share these views. What can these new forms of cooperation, which could later be extended to other Eurasian countries such as India and China, offer? They could create a completely different atmosphere of cooperation and coexistence. Naturally, the participation of companies and banks from other countries, such as the USA, Canada, Japan, Australia, etc., would be welcome when implementing large-scale projects. The global logistics and transport market is currently undergoing enormous changes. Geographical, logistics, transport and economic corridors EastWest can be laid together: through Russia, Kazakhstan and Russia, from China to Pakistan (possibly further through Afghanistan, Iran to the Caspian Sea, then Azerbaijan, Turkey), Bangladesh – China – India – Myanmar. Sea routes of the New Silk Road extend to SouthEastern and Southern Asia, Middle East. Russia also supports the South-North corridor: India – South Iran – North Iran to the Caspian Sea – Russia – Western Europe. These gigantic infrastructure projects cannot be lifted by one country, even one as economically powerful as China. But they could give an incredible boost to the growth of the entire world economy, as thousands of kilometers of new railways, highways, power lines, pipelines, etc. will be laid. This would also include the Russian-Chinese agreement on the use of the Northern Sea Route from Asia to Europe. It will be an alternative to shipping across the Pacific and Indian Ocean. It will help save a lot of money for European and Asian companies and better protect the environment. There is no doubt that the economic interests of Russians and Chinese are facing each other in Central Asia, and maybe elsewhere. But so far they are not antagonistic. Both countries are currently engaged in the question of how best to reconcile the New Silk Road plans with the interests of the Eurasian Economic Union. And my experience in establishing cooperation in transport, logistics and other areas shows that Eurasian cooperation has excellent prospects.

Topic for discussion

We tend to assume chaos and darkness, where everything is unknown to us. Johann Wolfgang Goethe

From the ‘SCARLET OCEAN’ to CUSTOMS AUDITS At present the urgency of introducing customs audit into the customs regulation practice in the EAEC is particularly high. The measures taken to combat the COVID-19 pandemic in the area of customs regulation are reflected in the reduction of control measures and the number of customs officers involved – both at the EEU border and within its constituent countries. In force majeure, the list of “sanctioned” goods has been revised until recently. Customs checks have been frozen for the duration of the threat of virus spread. Thus, at the same time, the risks of improper compliance with customs legislation and the burden on bona fide market participants are increasing, as are the tasks for post-control after the pandemic.

On 14 April, 2020 at a meeting of members of the Supreme Eurasian Economic Council held via video conference, Russian President Vladimir Putin said: “Methods to combat the pandemic must be reasonable and proportionate, and not lead to the severance of decades of cooperation, the interruption of international trade and the cessation of mutual investment. Already now it is necessary to start developing systemic measures within the EEU to create conditions for recovery and further economic development. This includes, among other things, intensifying the process of digitalization in logistics, which has already been mentioned, customs and tax procedures. And it is along these lines – the ways of automating verification activities and the

Vladislav Korenevskiy, General Director of the Association of Customs Auditors and Consultants

use of audit reports in order to improve the efficiency of customs control and the categorization of participants in foreign economic activity – that the Russian customs went back to 2014. At that time, the Working Group on Customs Audit was established, which, unfortunately, last met in late 2016. In 2019, the introduction of the Customs Audit Institute as an additional instrument of state control became one of the goals of the “Customs 2030” programme. However, given the damage caused by COVID-19 to the country’s economy as a whole and to foreign trade in particular, innovative measures cannot be postponed until 2030. In the meantime, the EAEC Member States have already caught up with and surpassed Russia in terms of cooperation in order to improve the efficiency of customs control between customs authorities and persons conducting business in the field of customs (para. 2 of Article 363 of the EAEC TC). The potential effectiveness of such an alliance can be assessed briefly and clearly by referring to Article 209 of the Law “On Amendments to the Law of the Republic of Belarus “On Customs Regulation in the Republic of Belarus”, one of the paragraphs of which reads as follows “In order to carry out customs control after the release of goods, as well as when performing customs operations, customs authorities may use the results of the audit carried out in accordance with the legislation on auditing”. The introduction of this norm alone will allow law-abiding market participants to initiate the process of confirming their trustworthiness to the regulatory authority, to accelerate the procedure of including their company in the “green corridor” with all its advantages in terms of speeding up customs clearance. The guarantee of confirmation of financial stability of a participant in foreign economic activity for the Customs Service will be provided by self-regulatory organizations of auditors, which are responsible for the development and proper compliance with the standards of verification, as well as forming a reserve cash fund from membership fees, which ensures payment of customs payments in case of revealing violations among participants in foreign economic activity that have successfully passed customs audit. Indeed, in accordance with the Auditors’ Code of Professional Ethics, a distinctive feature of the audit profession is the recognition and acceptance of the obligation to act in the public interest. The above model for the introduction of customs audits into the sphere of cusEURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

toms regulation will encourage the rapid and qualitative self-improvement of the “white sector” of foreign economic activity, allowing the Customs administration to focus its efforts on risk companies and trade processes. The Union working body currently being set up at EEC aims to modernise and simplify customs procedures, unify business conduct, and achieve a balance between public and business interests with the involvement of business itself. Why do the most effective innovation projects not take root in Russia? Why can’t officials work intellectually, based on public interests, and it’s not profitable for business to be transparent and law-abiding? Experts in the field of customs affairs, who regularly sit in numerous councils and working groups, pretend that Russia has its own way of developing postclearance, which is different from the rest of the world, knowing very well that the near-clearance business that they lobby for will suffer significant losses or go bankrupt when implementing customs audits. In addition, the introduction of a customs audit institute in Russia will destroy the corrupt ties that have been worked out over the years, which, unfortunately, are often systemic in foreign economic activity. Thus, the introduction of customs audit in EEU legislation is a problematic issue and in order to solve it, it is necessary to “look at the root”, as recommended by Kozma Prutkov. And the root of the problem, in our opinion, is that Customs controls the goods and their monetary characteristics. Just like the tax authorities, the information on income and expenses is obtained from the accounting registers. In K. Marx’s general capital formula for circulation (D – T – D’), the conversion process, symbolized by a dash, is of great importance in our case, and its ineffective control negates all efforts to “whitewash” foreign economic activity in the country. We will not talk about the bodies involved in this formula (in the case of foreign economic activity) – banking, currency, customs and tax control, non-declaration or false declaration of goods, as well as the withdrawal of money abroad for their real payment. Everything here is quite trivial, and these schemes, as well as examples of how the organizers of these schemes have been exposed to everyone. We are interested in the process of converting imported (or illegally imported) goods that have undergone conditional customs clearance into an accounting object in monetary terms. In Russia,

this “p-n” transition between customs and tax authorities, where billions of budget money materialize into Comrade Bender’s crystal dream, unfortunately, still remain under the control of shadow structures. The Russian Federal Customs Service is not even trying to begin to solve this problem by implementing, of course, the necessary but insufficient forms and methods of customs clearance and customs control. Thus, the Federal Tax Service of Russia, rather, from “hopelessness” tries to introduce an automated system of traceability of goods, actually substituting it for customs control after the release of goods. While in the progressive world, the regulators of this “transition” are postclearance audit units. However, the “chest just opened”. We have talked more than once about a resource developed by the Association of Customs Auditors and Consultants (ATAiC) that allows customs audits to be carried out in an automated mode (hereinafter referred to as AuditXP Customs). It should only be emphasised here that AuditXP Customs meets all system requirements, the development of which was called for by the President of the Russian Federation in order to restore and ensure further economic development. For example, AuditXP Customs can be used to fill the risk management system (RMS) by creating Big Data. AuditXP Customs also allows for customs audit and/or customs control after the release of goods remotely. At the same time, all that is needed for the audited persons is to unload a number of XML documents from internal accounting systems. Based on the results of the customs audit, a model report is prepared electronically using AuditXP Customs, indicating the errors and violations identified and recommendations for their elimination. A significant difference between a customs audit and a customs audit is the category of “materiality”, or international audit standard 320 “Materiality in planning and conducting an audit”. This standard gives a financially stable market participant the “right to make a mistake” when a customs and tax underpayment identified during the audit is not classified as a violation within a certain range, but is subject to reimbursement without reputational costs to the company. Thus, customs audits will make it possible to radically change the vicious practice of “sticky” indicators of customs performance in Russia, motivate businesses to act with integrity and reduce corruption.

Innovation

NANO ION WATER–

THE STRONGEST PROTECTION AGAINST ÑORONA VIRUS

Lu Hung Tu,

President of Nanoplus Ltd.

OVER THE PAST FEW YEARS, SPECIALISTS FROM NANOPLUS LTD., TAIWAN, HAVE BEEN RESEARCHING A NEW STATE OF WATER OBTAINED BY APPLYING AN ELECTROLYTIC METHOD OF WATER FORMATION WITH THE ADDITION OF HYDROXIDE ANION AND ELECTRON. THE RESEARCH CONDUCTED UNDER THE GUIDANCE OF PROFESSOR LU HUNG-TU, ONE OF THE BEST INVENTORS OF THE REPUBLIC OF CHINA IN 2019, AND WITH THE SUPPORT OF PROFESSOR VLADIMIR KONDRATENKO, ONE OF THE BEST INVENTORS OF THE WORLD IN 2014 AND 2019 (ACCORDING TO WIPO, THE INTERNATIONAL INTELLECTUAL PROPERTY ORGANIZATION). THE PRODUCT IS CALLED NANO ION WATER (NIW).

Vladimir Kondratenko, PhD on Technical Sciences, Professor

Denis Panasenko,

Chairman of the Committee on Economic and Strategic Development

[–] [+] Nano Ion Water

[+]

[–] а

Fig. 1. Electrolytic method in Nano Ion Water production: a – clusters of ordinary tap water (15–20 H2O molecules); b – NIW clusters (4–6 H2O molecules); c – negatively charged hydroxyl ion [OH-] and positively charged hydrogen ion [H+].

NIW, developed by Nanoplus, has its patent in many countries. Ultrapure water, the original material, is one-way electrolyzed under high pressure. Water molecule and water molecule clusters

decompose and then recompose to form NIW. Containing high ion content and small water molecule clusters, it can kill main elements in bacteria and viruses and restrain them.

Normal water consists of 12–14 water molecules per cluster, while NIW is composed of smaller water clusters of less than 7 water molecules per cluster (Fig. 1).

Hydroxide ion can destruct protein and nucleic acid from bacteria and viruses. This sterilization method does not include chemical reactions and does not lead to side effects. Good sterilization usually requires high concentration of hydroxide ion, which is corrosive to human body, while NIW has low-medium concentration of hydroxide ion. Yet it has the same sterilization and antibacterial effect as high-density hydroxide ion. Most of the water from NIW is decomposed as small molecule clusters. High penetration and convergence of small water clusters accelerate the rapid and effective sterilization under low-medium hydroxide ion environment. This is the reason why it doesn’t harm people. NIW was tested and assessed by Swiss company SGS, the world leader in this field. Tests have shown that Nano Ion Water is safe, environmentally friendly and harmless to humans and the environment. The test results done by a specialized agency of the FBUN Research Institute of Disinfectology, Rospotrebnadzor (Moscow) in Russia confirmed its safety for humans and animals. The Nano Ion Water was classified as Hazard Class 4 in accordance with GOST 12.1.007-76. Nanowater is a reliable and safe cleaning agent, with good cleaning, sterilization and deodorization effects. There is no chemical substance added in ultrapure water during the production. It does not contain any synthetic surface activators and does not require special disposal. NIW has the following unique properties: – purifies and disinfects; – eliminates different types of fungi and bacteria; – neutralizes unpleasant odors;

– has a long shelf life (2~3 years indoors and in a place protected from direct sunlight, UV radiation and exposure to high temperatures). The hydrogen ions are detrimental to viruses and bacteria. As determined by SGS, which tested the properties of Nano Ion Water, bacteria associated with food poisoning die in NIW within 30 seconds. Leading scientists from the Chinese Academy of Sciences have experimentally confirmed that NIW can effectively destroy the influenza A/B viruses, enterovirus EV71, coxsackievirus CA16. According to the test protocols from the Emerging Viral Infections Research Center at Chang Gung University, the probability of inhibiting the specific viruses and bacteria is 99.9%. The efficiency of removing bacterial colonies in air by spraying nanowater within 1 hour can also reach 99.99%, while the treatment of NIW on protective masks provides the same degree of protection against penetration of bacteria, Сorona virus and allows repeated use. NIW destroys the Сorona virus, penetrating its four-layer proteins due to 100% hydroxide anion. The SARS-CoV-2 virus enters the mucous membrane 4-6 hours after joining the ACE2-receptor in the human body. Three to four days later, the virus invades the lungs. According to leading scientists at Taipei Medical University, if a person periodically inhales or sprays NIW into the mouth after contact with the virus, it may probably kill the Сorona virus and prevent infection. One of NIW’s popular and successful household applications is the OHTrust antiseptic (fig. 2, 3) with 99.9% antibacterial effect, which can be used as a hand sanitizer or spray on object surfaces. Free

from alcohol and chemical additives, it does not cause irritation or allergy; therefore, there is no need to rinse after use. Besides, medical organizations in China and Taiwan have certified the product. In addition, the atomizer plate in the OHTrust water oxygen machine gives off frequent high vibrations of ultrasound and the disinfectant has its maximum effect to purify the air. Smaller water molecule cluster is the reason why it does not cause any harmful effect to human body, while being efficient to suppress bacteria and viruses. It is worth mentioning that there is less consumption when using NIW compared to ordinary water and synthetic detergent. As a cleaning agent for maintaining cleanliness in public places, Nano Ion Water can ensure: – cleaning and sterilization in buildings, shopping malls, sports clubs and recreational facilities; – cleaning and sanitary control of equipment in hospitals, nursing homes, kindergartens and schools. The applications of this unique and eco-friendly product with various functions are not only for household purposes, but also in industry. The use of Nano Ion Water as a detergent, an anticorrosive agent and a diluent for coolants allows us to solve the following production tasks: – cleaning hard-to-reach areas of metal products and equipment; – protection of metal products and equipment against corrosion; – elimination of unpleasant odours from bacterial activity; – prolongation of the coolant’s life cycle through protection against biohazards;

Fig. 2, 3. OHTrust antiseptics EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

Innovation

â&#x20AC;&#x201C; reduction of industrial waste by reducing the consumption of cleaning solutions; â&#x20AC;&#x201C; improving working conditions of employees and the working environment. Moreover, it is also possible to apply NIW and nano-microbubbles to treat exhaust gases. The structural diagram of the flue gas cleaning process in the combustion furnace please see Fig. 4. Today, our world is facing a global challenge in COVID-19 pandemic, which threatens not only the physical, social

and psychological health of people, but also the economies of all countries. Therefore, the basis for any action aimed at combating COVID-19 should be improving the hygienic awareness of citizens, having the most appropriate preventative measures that are safe for people and performing decontamination tasks at public facilities (medical, cultural and educational facilities, public transport, industrial enterprises, etc.) and private facilities, such as apartments and country houses.

The NIW team is ready to assist government leaders and businesspersons in combating the spread and consequences of the ĐĄorona virus pandemic by organizing joint NIW production in foreign countries. This joint work will contribute to reducing social tension in society and will be the beginning of the formation of a global system of epidemiological safety and prevention of epidemiological disasters, as well as bringing a sense of security and confidence in the future to people in many countries.

Upper jet tank

Cleaning quality control

Axial fan

Lower jet tank System of nano microbubbles

Silencer Spraying system

Water circulation system

Pump NSIW

Waste incinerator

Fig. 4. Structural diagram of the flue gas cleaning process in the incinerator furnace using NIW and nano-microbubbles

Business in the countries

Alexander Biryukov,

President of the Association of Russian Industrialists in West Africa, General Director of WARIG

THERE IS NOW A NOTICEABLE INCREASE IN FOREIGN ACTIVITY TO EXPAND ITS ECONOMIC PRESENCE IN AFRICA. THE EUROPEAN UNION (ESPECIALLY FRANCE), THE USA, TURKEY, CHINA, THE GULF STATES, JAPAN AND SOUTH KOREA ARE THE MOST ACTIVE COUNTRIES.

As activity grows, the approach to investing in African projects is also changing: from investments under government guarantees to direct investments involving various mechanisms of non-governmental guarantees (banks, investment funds, pension funds, etc.). It is estimated that African countries alone have about 1 trillion US dollars in various funds and savings that could be raised to guarantee investments. In particular, green bonds are issued for investment projects in the fields of clean energy and the environment, and blue bonds are issued for marine economic EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

projects. Due to the huge public debt, most African countries have started to actively encourage investment projects based on long-term concessions of 25 to 99 years through public-private partnerships. Russia is not one of Africaâ&#x20AC;&#x2122;s main economic partners, but there is considerable potential for expanding economic cooperation. African countries continue to associate Russia with the USSR, recalling the Soviet Unionâ&#x20AC;&#x2122;s political and economic assistance in the struggle for independence and the creation of national economies in many African

countries. Against the backdrop of success in the confrontation between the US and its allies in the Middle East and Latin America, almost all African leaders are ready to develop cooperation with Russia and Russian companies in many areas. Russia can use this favorable foreign policy environment to strengthen its presence on the African continent with a much lower cost than the presence in other countries. In this context the Russia-Africa Economic Forum in Sochi has played an important role and African

Business in the countries

countries have shown increased interest in it. Now it is necessary to develop the positive results of this event in the form of concrete practical steps (signing of memorandum and contracts, establishment of joint ventures, etc.), otherwise increased positive expectations of Africans may turn into disappointment. The African economy has been growing rapidly in recent years at a rate that exceeds the global rate. Recent decisions at the level of the African Union on the establishment of a Continental Free Trade Area have further increased the interest of foreign companies in gaining a foothold in a huge market that is just beginning to develop. African governments have identified the main areas of their development in which they are interested to cooperate in the first place: – development of the digital economy and cyber security; – energy; – infrastructure development (ports, roads and railways, air transport, logistics centers);

– development of the processing industry and high-tech industry; – ecology; – agriculture and fisheries. African leaders watch closely Russia’s political decisions in the area of Russian-African cooperation. Despite the overall positive political background, Russia will not be able to achieve real success in Africa unless Russian businesses start implementing real projects on African soil. Here it is very important to create conditions at the interstate level that would minimize the risks of investors. Conducting business in Africa has a number of features that any company planning to operate on that continent must take into account.

and services, that meet the needs and financial possibilities of the market are created, it is possible to implement a highly profitable project; – long-term development prospects: for local management, projects with a long-term development program are of the greatest interest; – stable and predictable political and economic situation: few countries in Africa are stable. Before making an investment decision, it is necessary to assess the likelihood of armed clashes, terrorist activity and negative changes in legislation. However, in most cases the domestic political struggle does not affect foreign investors, whose presence is important for all warring parties.

Choosing the right place to do business in Africa The following geopolitical factors must be considered here: – competition: in any African country there is still a free niche without strong competition. If new products

Efficient production and low prices The obvious African buyer has a low purchasing power. The decisive factor in sales is therefore price. It is possible to reduce the price and obtain additional preferences on the local market by, for example, localizing production.

The meeting of S. Kogogogin and P. Fradkov with the President of Senegal (February 2017) as an example of preparation and implementation of direct contacts with the management of African countries for the successful implementation of specific projects

Meeting of O. Berezovoy, General Director of FBA EAC, with A. Sow, President of WARIG West African and Russian Industrial Group (Senegal)

Introduction of new technologies African leaders attach great importance to the development of the digital economy and digital sovereignty. Almost every country has special government structures that encourage projects in this area. Long-term investments Companies with long-term investments (5 years and more) initially have an advantage over others as they have a clear development perspective. In addition, politically and socially, they will receive support from local authorities and society. Control of the entire value chain Only ensuring 100% control over the entire production chain from raw materials to the final product can guarantee the success of a project. Transferring even partial control to a local partner significantly increases risks. Integration into the social and political environment The countryâ&#x20AC;&#x2122;s political forces and civil society must understand and feel that the project is in the national interest. It is very important to respect political neutrality and to involve municipalities, trade unions and other

EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

influential public organisations in the project on a mutually beneficial basis. Refraining from corruption schemes During the implementation of a project, proposals of a corrupt nature almost always arise. In most cases, corruption schemes lead to the loss of business or legal proceedings. It is necessary to choose the right local partner, which will help to avoid involvement in corruption schemes and at the same time respect national traditions. Training of local staff and technology transfer Companies that include local training and technology transfer in their projects will have a significant advantage over others. Social responsibility to employees and local communities In African countries, social responsibility is about respecting the elders and providing material support to poor family members. A company wishing to gain a foothold in the country must behave (of course, within reasonable limits) as a wealthy family member: pay bonuses for religious holidays, help pay for medical services, and participate in charity events.

The African continent is still remote and incomprehensible for Russian companies, but nevertheless, it is a promising and developing region. It has the potential to become a reliable guide and adviser in organizing mutually beneficial and long-term cooperation between Russia and African countries. Social responsibility to employees and local communities Most African countries have a tradition of respecting the elders and providing material support for poor family members. A company wishing to gain a foothold in the country must behave (within reasonable limits, of course) as a wealthy family member: pay bonuses for religious holidays, help pay for medical services and participate in charity events.

The African continent is still far from being understood by Russian companies, but it still represents a promising and developing market. The FBA EAC is well placed to become a reliable guide and advisor in the organization of mutually beneficial and long-term cooperation between Russia and African countries.

It is interesting

Evgeniy Bazhov: « To do business in China you need to know it inside» MANY PEOPLE ARE EAGER TO START THEIR OWN BUSINESS. IT IS PARTICULARLY TEMPTING TO DO SO IN A COUNTRY WITH A STRONG ECONOMY AND A HUGE MARKET. IN A COUNTRY LIKE CHINA, FOR EXAMPLE. IT WOULD SEEM THAT THIS IS WHERE LIMITLESS BUSINESS OPPORTUNITIES OPEN UP, AND THIS AWAKENS THE IMAGINATION AND AMBITION OF ENTREPRENEURS. AND TO SOME EXTENT THIS IS TRUE – BUT ONLY IF YOU KNOW THE COUNTRY, ITS CULTURE, THE LIVES OF ITS PEOPLE AND, MOST IMPORTANTLY, THE PECULIARITIES OF LIFE IN IT AND THE SUBTLETIES OF BUSINESS RELATIONS – WHICH ARE NOT ON THE SURFACE... FOR ALMOST TWO DECADES EVGENY BAZHOV HAS LIVED AND WORKED IN CHINA – HEAD OF FBA EAC REPRESENTATIVE OFFICE IN CHINA, SINGAPORE, HONG KONG AND MACAU. HE IS WELL AWARE OF THE SPECIFICS OF BUSINESS IN CHINA, THE LIFE, MENTALITY AND INTERESTS OF LOCAL PEOPLE. BEING ALSO AN EXPERT IN ENTREPRENEURSHIP IN RUSSIA, EVGENY BAZHOV SUMMARIZES HIS PROFESSIONAL EXPERIENCE AND SHARES IT ON THE PAGES OF HIS BOOKS.

Nanpu Bridge in Shanghai, China

– Evgeniy, how did you get the idea to write books and accumulate your knowledge and experience in them? – For a long time, back in 2009, I wondered: what was the meaning of my life, how to develop further? Business grew steadily, the company was working on its own, and I wanted something more. I decided to consult with my teacher, Academician Mikhail Litvak, who, unfortunately, recently left us... And he answered: “Eugeniy, do you want to get deep into the question? Write a book about it. Write it in simple words – so that a person who is far from your world can understand your ideas, get interested and get carried away by them. For me, then, far from being creative, it was a real challenge. What should I write? How? About what? But gradually I came to understand that I am interested in China, the soul and way of thinking of its people, how to do business and life itself in the Celestial Empire. That’s what I write about in my books. – Can you tell me a secret, how do you manage to make a story interesting and fascinating? – The recipe for an interesting book is the following formula: one third theory, one third practice and one third personality of the author or his personal life. And I just follow this recipe. My books are not dry scientific or business literature. I describe the Chinese way of doing business, the intricacies and nuances of living as a foreigner in China, the technical aspects of corporate work, and the secrets and life hakes gained during almost twenty years of life and work in the country. – To put it very briefly, what is the main feature of doing business? And how do modern, not too joyful, realities reflect on business? – Business has something in common with military actions between companies – often not the strongest warrior wins, but the most intelligent commander, who can make important, far-reaching strategic decisions. By buried in tactics, you can win the battle, but lose the war. As for the realities, it becomes even more difficult for entrepreneurs to stay afloat in the situation of an impending global crisis and the onset of the post-Сorona virus era. A serious question arises: how can business in such conditions continue to be ahead of time and competitors? This is not a short story, but I present my vision and understanding of possible answers to the challenges of our time in the practical book “E-commerce: Chinese experience. If you are not online, then you just aren’t”. EURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

– Like any writer, you must have faced criticism. What do they say about your books? – Basically only good things, which is nice. Here is, for example, how Anna Bastrykina, editor-in-chief of one of the leading federal Russian TV channels, spoke about the aforementioned book: “Evgeny Bazhov analyzes companies’ approaches to doing business, expanding their target audiences and the specifics of management decisionmaking using the example of one of the world’s fastest growing markets and leading corporations in his online segment. As a third-party business consultant to a major holding company, one of the leaders in Europe in the production of children’s clothing and one of the TOP 3 leading suppliers of toys, the author is building a new strategy for the development of the company in China. Together with the reader, he is studying the specifics of the structure of the complex holding structure, analyzing management problems, issues related to hiring and dismissing employees and cost reductions. The book provides a lot of useful information about the features and working conditions of Chinese marketplaces, which can become a useful tool for promoting a foreign brand in China. On the pages of the book the author also reflects on the rules of achieving personal effectiveness, the importance of setting long goals, mental attitude and digital hygiene. The book will be primarily useful for entrepreneurs who are planning to bring their product to the Chinese market – the advice provided on its pages will help them avoid the most common mistakes associated with doing business abroad. It will also be of interest to those entrepreneurs who are developing long-term strategies for working in the Russian market. The book will also prove to be a boring and useful reading for line managers and key employees who make business decisions in companies”. I must say, this is a very concise and correct assessment of my work, everything is said on the case.

– Which of your other works would you advise to pay attention to first? – I have a book called “The Dark Side of Business in China” published in Russia and the USA. I outlined my path as an entrepreneur in China, told you how to build a business from scratch to sell CIS products to the Chinese. And all of this without a touch of decoration, revealing all the secrets. This is something that no business coaches, experts or TV channels talk about. The image of the main character in the book is collective, based on my experience and the cases of other business colleagues. – Could you conclude by saying a few words about how you should treat China? – China today is the second economy in the world with the ambition to be the first! Many people perceive China as a cheap “Made in China” product – but it is not China. In fact, not many foreigners know China from the inside. And very few of them have experience working with the Chinese in the closed world of Business. Very few people know how the Chinese – real – economy really works. And also how to give gifts, give bribes and “solve” issues. And you can learn about all these subtleties, as well as many others, on the pages of my books.

History of money

THE NORTH IRISH POUND IS ONE OF THE WORLD’S BEST EXAMPLES OF A LOCAL MONETARY SYSTEM THAT INCORPORATES THE MOST IMPORTANT FINANCIAL, CULTURAL AND POLITICAL ASPECTS. IN FACT, THE REGIONAL CURRENCY OF NORTHERN IRELAND LARGELY DUPLICATES THE

”

MAIN MONETARY UNIT OF GREAT BRITAIN, BUT IT ALSO HAS SOME PECULIARITIES.

NORTH IRISH POUND –

UK regional currency

Vitaliy Krasnikov, Analyst

The North Irish pound is one of the world’s best examples of a local monetary system, that incorporates the most important financial, cultural and political aspects. In fact the regional currency of Northern Ireland largely duplicates the main monetary unit of the UK, but also has some peculiarities. Banknotes of Northern Ireland, which began its history in 1929, have become a logical element in developing the region’s historical relationship with Great Britain. Although banknotes have been issued by private banks for a long time, with minor adjustments, they are all denominated in pounds sterling. Currently four banks have the right to issue banknotes for circulation in Northern Ireland: Bank of Ireland, First Trust Bank, Danske Bank/Northern Bank and Ulster Bank. At the same time, all banknotes differ in their design, which emphasizes certain cultural features of the region. Initially banknotes with denominations of 1, 5, 10, 20, 50 and 100 pounds were issued. It is true that not all authorized banks issue the full nominal range, adjusting it depending on domestic policy and other circumstances. Thus a £1 note in Northern Ireland was last issued in 1984, and a £5 note today is issued only by two of the four issuing banks. In Northern Ireland itself, banknotes are freely traded alongside the British pound. But in other parts of the counEURASIAN FINANCIAL & ECONOMIC HERALD | #3 (11) 2020

try, despite formal legitimacy, they are accepted with great reluctance or not at all. Similar problems can be encountered when using the Scottish Pound. One interesting feature is that coins are minted exclusively on behalf of the UK and there are no regional issues of coins. Thus even when paying with the North Irish pound, you will always get the usual British coins for change. It is interesting that Northern Ireland has put plastic banknotes into circulation on its territory long before

they were introduced in the UK itself. However, here we are talking about commemorative issues, which were aimed at tourists and collectors. But today in Northern Ireland, as in Britain itself, plastic money has become very widespread. One way or another, the regional monetary unit, given the many complex aspects of British relations, underlines a certain financial autonomy for a large and important part of the United Kingdom.