HERALD - OCTOBER 2018 by HERALD

O F F I C I A L P U B L I CAT I O N O F F B A E AC , I B C № 3 (5) | 2018

eurasian financial & economic

60 П. Пневски Банковский сектор Польши в 2017 году

23 № 3 (5) | 2018 Е В РАЗИЙСКИЙ ФИ Н А Н С ОВ О - Э КОН ОМИ ЧЕ С К И Й

Д. Урсу Молдова: проблемы с NPL

20 МБС 15 лет со дня создания

4 Б. Байсеитов: Дорога к пятилетию

Консерватизм как фактор успеха Андрей Бельянинов: личность

EURAS IAN F INAN C IAL & E C O N O MIC

HER ALD

В Е С ТНИК

B. Bayseitov: Road to the fifth anniversary

4 IBC 15 years from the date of creation

20 D. Ursu Moldova: The problem of non-performing loans

№ 3 (5) | 2018

23 P. Pniewski Banking sector in Poland in 2017

Personality

Andrew Beliyaninov:

Conservatism as a success factor

Евразийский финансово-экономический ОФИЦИАЛЬНОЕ ИЗДАНИЕ ФБА ЕАС, МБС

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Премия «Финансово-банковская элита Евразии» 30 ноября 2018 года Номинации 2018 года: 1 БАНКИР ГОДА (за личный вклад в развитие банковского бизнеса) 2 ЭТАЛОН СТАБИЛЬНОСТИ (банк — лидер по устойчивому развитию, стабильности, обладатель международных и национальных рейтингов) 3 ТОРЖЕСТВО ТЕХНОЛОГИЙ (банк — лидер по внедрению современных ІТ-технологий) Приз: Эксклюзивная авторская статуэтка

Официальная церемония награждения пройдет 30 ноября 2018 года при участии представителей деловых, политических и культурных кругов, национальных правительств и банков, руководителей отраслевых союзов и ассоциаций, представителей ведущих деловых средств массовой информации стран Евразии Заявки на участие принимаются до 1 ноября 2018 года. Форма регистрации и условия участия в конкурсе: www.fbacs.com Оргкомитет конкурса: тел.: +7 495 663-02-08, 663-02-13, e-mail: bev@fbacs.com office@fbacs.com

Organizing committee: tel.: +7 495 663-02-08, 663-02-13, e-mail: bev@fbacs.com office@fbacs.com Registration Form and Terms of participation in the competition: www.fbacs.com Applications for participation are taken until November 1, 2018.

The official award ceremony will be held on November 30, 2018 with the participation of representatives of business, political and cultural circles, national governments and banks, heads of trade unions and associations, representatives of leading mass media of the countries of Eurasia

BANKER OF THE YEAR (for personal contribution to the development of banking business) 2 STANDARD OF STABILITY (bank leader on sustainable development, stability, holder of international and country ratings) 3 TRIUMPH OF TECHNOLOGY (bank leader in the implementation of modern IT technologies) Prize: Exclusive author's statuette 1

Nominations 2018: November 30, 2018

«Financial and Banking Elite of Eurasia»

Award 2

CONTENT FOUNDER’S PAGE. FBA EAC Road to the fifth anniversary. Greeting from President of FBA EAC Bakhytbek Bayseitov FBA EAC — platform for dialogue News PERSONALITY Conservatism as a success factor. Interview with the Chairman of the Management Board of the Eurasian Development Bank (EDB) A. Beliyaninov FOUNDER’S PAGE. IBC 15 years from the date of creation IBC meeting in Montenegro D. Ursu. Moldova: The problem of non-performing loans B. Pejaković. Montenegro: Problems with NPLs and European Commission positions

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FOUNDERS: Financial & Banking Association of Euro-Asian Cooperation (FBA EAC)

International Banking Council (International Coordinating Council of Banking Associations of the member states of the Commonwealth of Independent States, Central and Eastern Europe)

21 23 26

HOT TOPIC V. Pereboev. Big Eurasian Partnership in the foreign trade policy of EAEU

PARTNERS J. Clausen. Russia and France: growing partnership

INNOVATION A. Antipov. Future food: meat snacks

№ 3 (5) | 2018

RSPP NEWS Stronger partnership with В20

EXPERT OPINION F. Luca. Romania and Russia are not enemies V. Lopatin. Intellectual property and Eurasian financial market

HERALD eurasian financial & economic

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PUBLISHER: Financial & Banking Association of Euro-Asian Cooperation (FBA EAC)

Editor in Chief: V. Murin Executive editor: S. Orlova Editor: A. Gusev Corrector: A. Panyugina Editorial Board: E. Berezovaya, O. Ryazanov Translators: S. Arkhipova, K. Tereshenko Page-proofs: «Granitsa Publishing House» Ltd.

PUBLISHER'S ADDRESS: 17 Kotelnicheskaya nab., Moscow, 109240, Russia +7 495 663–02–08/13 office@fbacs.com www.fbacs.com

FINANCIAL SYSTEM OF THE COUNTRIES OF EURASIA P. Pniewski. Banking sector in Poland in 2017

EDITORIAL GUEST «I wish to keep the “flame”...»

HISTORICAL NOTES N. Tanshina. An other famous Corsican

PHOTO CONTEST «The world through the eyes of a photographer»

PRINTING HOUSE: Released in the «Granitsa Publishing House» Ltd. Format 210x297 mm. 152 pages.

ISSUE DATE: October 2018

PRICE: Free

The editorial office is not responsible for the content of the advertisements. Advertised goods and services are subject to mandatory certification. Reprint is allowed only with the written permission of the editorial office. Manuscripts are not reviewed and not sent back.

EDITORIAL BOARD

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

Anvar Abdraev, Bakhytbek Bayseitov, President of the Union President of the Associaof the Banks of Kyrgystan tion of Banks of the Republic of Kazakhstan

Veroljub Dugalić, General Director of the Association of Serbian Banks

Oleg Berezovoy, General Director of FBA EAC

Andrea Boldi, Yves Pozzo di Borgo, President of the company Former President of the AREZZO FIEREE friendship group with CONGRESSI SRL Central Asia in the Senate (Italy) (France)

Anatoly Kazakov, Elena Korobkova, Manish Kumar, Aleksandr Kuschynski, Istvan Lengyel, Chairman of the Executive Director of the General Director of the Chairman Secretary General Coordination Council of Independent Association Soltex Group Ltd., of the Association of Banking Association for the Financial and Banking of Banks of Ukraine Head of the Representative of Belarusian Banks Central and Eastern Europe Council of the CIS office of FBA EAC in India, Sri Lanka, Bangladesh, Malaysia

Amirsho Miraliev, Valery Murin, Zakir Nuriyev, Svetlana Orlova, Chairman of the Board Editor in Chief of the President of Azerbaijan General Director of the Association magazine «Eurasian FinanBanks Association «Information and Publishof Banks of Tajikistan cial and Economic Herald» ing Center «Eurasia» Ltd.

Anatoly Tkachuk, Vice-President of FBA EAC

Dumitru Ursu, Chairman of the Moldovan Bankers’ League

Artak Anesyan, Chairman of the Union of Banks of Armenia

Bratislav Pejaković, Secretary General of the Association of Montenegrin Banks

Bakhtiyar Khamidov, General Director of the Association of banks of Uzbekistan

Krzysztof Рietraszkiewicz, Chairman of the Polish Bank Association

Samvel Chzmachian, Deputy General Director of FBA EAC, Head of the Representative office of FBA EAC in Armenia

word to the readers

Dear friends and colleagues! You are holding not just another issue of the “Herald” but an anniversary one. This September Financial & Banking Association of Euro-Asian Cooperation (FBA EAC) turned five years old and the International Banking Council (IBC) — 15 years old. They are the founders of the «Herald» which also has its small round number — it is the fifth issue of the magazine. As usual we tried to include the hottest topics of economy in general, of financial and banking sector, financial technologies. And as usual we did our best to make the issue interesting and diverse. The Eurasian Development Bank works since 2006. It was established by Russia and Kazakhstan and now also comprises Armenia, Belarus, Kyrgyzstan and Tajikistan. Its key mission is to develop economic growth of the Bank’s memberstates, to expand trade and economic ties between them, to facilitate integration processes. The cover story is the interview with Andrey Belyaninov, the Chairman of the Board of Eurasian Development Bank. Doctor of economics, Honored economist of the Russian Federation A. Belyaninov gives details regarding the diverse work of the Bank, speaks about its large-scale key projects, its goals and plans, as well as about such an important side of the Bank’s work аs its cooperation with regional integrational associations (EAEU, CIS, SCO) and international financial institutes. In the context of Eurasian integration the crucial issue for all of us is closely connected with current challenges — the need to create a single financial market, to meet the needs of digital economy. According to expert Vladimir Lopatin, intellectual property plays important role in these processes. But it has its peculiarities as concerns CIS and EAEU countries. He reveals these aspects in his article «Intellectual property and Eurasian financial market». Another important aspect of an effective Eurasian integration is the comprehension of financial systems in the countries of Eurasian continent. This issue of the magazine provides for profound review of the banking sector of Poland. Head of Projects in EDB Centre for Integration Studies Vladimir Pereboyev follows up with the topic of Eurasia. He raises the question about Big Eurasian Partnership: its idea, tasks and goals within foreign trade policy of EAEU. Meanwhile our partners from Kazakhstan analyze financial stability of the Republic in the light of the increased short-term borrowings. Zhannur Ashigali, Associate Director in the Research and Forecasting Group of ACRA speaks about this under the heading «Analytics». To illustrate the activity of our founder International Banking Council we are publishing information about the meeting of International coordinating council of banking associations of CIS and Central and Eastern Europe which was held on May 17–19, 2018 in Budva (Montenegro). The meeting discussed the issues of non-performing loans — NPL. The topic is also covered in the articles «Moldova: the problem of non-performing loans — NPL» and «Problems with NPLs and European Commission positions. How to

deal with NPLs» from our partners from Moldova and Montenegro. In his article the General Secretary of the European Fund named after N. Titulescu, a historian, an economist and an experienced manager Florin Luca reflects and gives strong arguments for his vision of the future of Russia and Romania. Alexander Murychev, «There are more things Chairman of Editorial Board, that bring us together Chairman of FBA EAC Coordithan set us apart», — nating Council, Executive Vice-President of RSPP, Florin Luca believes. Under the heading Chairman of IBC «RSPP news» we continue to tell you about the life of the Russian business society. This issue focuses on the Regional consultative forum of G20 which was held by RSPP for the fifth time. The topics of the Forum were digital economy, future markets and education. Economic relations with Europe have always been in the center of special focus, both from Russian and European sides. With this regard there is an interesting article «Russia and France: growing partnership», covering the cooperation of the Russian Direct Investment Fund and the French investment company CDC International Capital. This is a strategic partnership, which creates favorable conditions for joint business and gives advantages to the French companies in the Russian market and vice versa. As we all know «business before pleasure». Well, business has consumed a great deal of time today, and we have every right for some rest. With a certain profit, of course. First of all I have great news for the readers: we have a new heading «Editorial guest». And our first and honored guest is Hero of the Russian Federation, space pilot of Russia Alexander Misurkin. The role of space in the life of a human being is an immortal and everlasting topic like the space itself. That’s why it’s always interesting to hear about the work of astronauts, about the «relations» between the space and people firsthand. Another article of the same interest is under the heading «Some history», which is about an unusual life of one of representatives of an ancient Corsican lineage Pozzo di Borgo — Count Charle-Andre Pozzo di Borgo. His life was closely connected with Russian Empire which her served a lot and influenced (positively!) the attitude of many people to the profession of a diplomat. Today’s world is the world of speed and swift changes, unexpected sometimes. It equally refers to economy with its instant reaction to any changes in the world. That’s why numerous events are waiting for us in future, whether we want them of not. And that’s why we will always have story to cover. Join us — you are always welcome!

Founderâ&#x20AC;&#x2122;s page. FBA EAC

ROAD TO THE FIFTH ANNIVERSARY

www.fbacs.com

GREETING FROM PRESIDENT OF FBA EAC BAKHYTBEK BAYSEITOV 4

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

Dear friends and colleagues! On September 11, 2018, Financial and Banking Association of EuroAsian Cooperation celebrated its first anniversary — five years from the date of its foundation. Creating FBA EAC, we pursued the goals of realizing the needs of the members of the Association in Eurasia, to form a new understanding of business, to find new approaches, new financial and banking instruments and new platforms for effective mutually beneficial cooperation. By creating FBA EAC, we couldn’t even guess how pertinent and timely this decision would become. With the rapid change of the habitual world order, with the steady and inescapable growth of various ways of contradictions, the medium-sized businesses and commercial banks have a situation of hostages to global political and economic changes. And the imposition of mutual economic sanctions has destroyed the longstanding financial and trade ties throughout the Eurasian space. In this regard, the emergence of FBA EAC as an interregional union of a wide range of entrepreneurs has become, in a sense, a life saver for interested participants in international financial and economic activities. The role of such associations becomes crucial in the times of crises as soon as only together we can address the threats that the whole world economic system is exposed and it is only possible to become full participants in the process of forming a new model of international economic development. To say that it was difficult — was to say nothing. Like any new idea, it went through all three classical stages: from the total rejection «why is it necessary to create another financial and banking association?» through «the idea is good, but difficult to implement» to «we had to do it long ago». Today, the Association’s site brings together over 60 financial and banking and commercial structures of 25 countries that are members of

interstate integration unions on the territory of Eurasia. Such a broad geography allows the members of the Association, in the process of solving current business tasks, to enter new markets with the support of the Association partners and the network of regional representative offices of FBA EAC. It gives a significant impetus to the revitalization of the entire Eurasian private market, new initiatives and proposals for more effective international cooperation, and also significantly complements the programs of interstate cooperation in the Eurasian economic space. The Association accumulates the efforts of banks, financial funds, investors, representatives of the real economy for participation in the development and implementation of multilateral programs and projects within the framework of interregional cooperation. The work of FBA EAC on the implementation of investment projects bank is very important: in the focus of the project activities of the Association — comprehensive support of such projects, including pre-project expert value, structuring and development of necessary documentation and management of implementation at all stages of the life cycle of the project. The result of the international project activity of FBA EAC, which is highly appreciated, was the including of approved projects in the outcomes of the meeting of the EAEU Business Council in order to its replication on the emerging unified Eurasian economic space. The Association is a living developing organism. In addition to solving absolutely vital business tasks, we undertook propaganda and information work by establishing the Eurasian Financial and Economic Herald — a magazine that now you hold in your hands. This is another platform for achieving mutual understanding, developing a dialogue on the most significant, debated and topical issues of the evolution of financial and credit system, the formation of an innovative economy, the promising tasks of financial and

banking industry, regional and sectoral development and Eurasian integration in general. I have honestly served the banking business for almost 40 years. And I understand how it is important for anyone who is obsessed with a chosen profession, to hear words of recognition, respect, and evaluation of your contribution to the common cause. Therefore, the establishment of the international public award «Financial and Banking Elite of Eurasia» has become a natural extension of our work. The second awarding ceremony will take place this year. We are sure that in the near future the Award will be the most prestigious industry award and the best of the best will compete for the victory in the contest. What I want to say in conclusion. The goals that we set for ourselves at the time of the creation of the Association have been largely achieved. For five years we walked the road difficult but interesting. But the most important is effectiveness. And, of course, it should be noted especially that the decisive factor for the success of the Association were people. We managed to assemble a team of like-minded people, persons who are not indifferent, possess great creative potential, are able to progressively think, set clear goals and achieve impressive results. Thanks to them, today FBA EAC is an established and effective business platform where representatives of the financial and banking and real economy sectors of Eurasian countries are on equal terms. This is the feature and exclusivity of our Association and, I think, we have all the opportunities to become one of the leaders in the development of integration processes in the Eurasian economic space. I congratulate all of us on the fifth anniversary of FBA EAC and thank the members of the Association for their joint activities, dedication and friendly partnership. We still have a lot of challenges ahead, to meet them we will stride firmly and confidently — for the benefit of our countries. 5

Founder’s page. FBA EAC

FBA EAC — PLATFORM FOR DIALOGUE FINANCIAL & BANKING ASSOCIATION OF EURO-ASIAN COOPERATION IS 5 YEARS OLD

eptember 11, 2018 is the fifth anniversary of Financial & Banking Association of Euro-Asian Cooperation. Today Association unites more than 60 members (not including associated members). Among them are financial and banking associations of Russia, CIS, Tajikistan, Kazakhstan, Kyrgyzstan, Azerbaijan, Central and Eastern Europe, Armenia, Belarus, banks and business structures of Uzbekistan, China, Kazakhstan, Slovenia, Russia, India, Germany, France, Italy, UAE, Bulgaria, Hungary and other countries. It all started five years ago when seven financial and banking associations — Association of banks of Russia, SCO Business Club, Financial corporation 6

ICIE, Banking Association of Tajikistan, Financial institutions’ association of Kazakhstan, CIS Financial and Banking Council and Association of Banks of the Republic of Kazakhstan founded the Financial and Banking Association of countries-members of the Cooperation of Shanghai» (FBA CS), which was renamed on February 26, 2016 by the decision of its General Meeting into Financial & Banking Association of EuroAsian Cooperation (FBA EAC). Since its first days the managers of Association are the President of FBA EAC — Chairman of the Board of Directors of Centercredit Bank Bakhytbek Baiseitov and the Chairman of FBA EAC Coordinating Council — Executive VicePresident of RSPP, Deputy Chairman of

the Council of the Association of banks of Russia Alexander Murychev. Timur Zhaksylykov has been the Chairman of FBA EAC Supervisory Board for the last two years. He is a Member of the Board — Minister in charge of Economy and Financial Policy of the Eurasian Economic Commission (EEC). The latest Annual meeting of FBA EAC elected Anatoliy Tkachuk as Vice-President of FBA EAC. He is the Chairman of the Board of Directors of JSC «Russian Mineral Resources», RSPP Board member, Chairman of RSPP Commission on the Military Industrial Complex, First VicePresident of ICIE. Oleg Berezovoy has been FBA EAC General Director from its first day.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

WE HAVE DISCUSSED THE ACHIEVEMENTS AND PROSPECTS OF ASSOCIATION WITH TWO OF ITS MANAGERS: THE CHAIRMAN OF FBA EAC COORDINATING COUNCIL ALEXANDER MURYCHEV AND ASSOCIATION’S GENERAL DIRECTOR OLEG BEREZOVOY.

Five years of effective work of the organization you manage, moreover the work in the difficult, turbulent years for the world economy and policy, is a considerable achievement. Let me congratulate you on the fifth anniversary of your Association. A. M. Thank you. The date is really important for us. As you have just mentioned the organization was created in tough times. But to create is only half the battle. The real challenge is to preserve, develop, make well-known and demanded. We know that in Moscow alone, where FBA EAC Headquarters are located, there are a lot of other associations, including those with international status. Not to mention such large ones like the Association of Russian Banks and the Association of banks of Russia. How do you find your potential members in such intense competition? A. M. Our management structure shows that since our first days we are aimed at the direct dialogue between banking society and business, and you are right — there are a lot of

banking and sectoral associations on Eurasian area. All of them solve complicated and crucial tasks but within their professional inner corporate interests. While we have created a kind of a business club — a platform where for the benefit of Association’s members we establish interbank communications, select the most favorable financial and economic formats to support trade, production, scientific and technical and investment cooperation, also we select, assess and implement business projects. In fact this is our peculiarity and competitive advantage. O. B. It’s worth mentioning that from the very start of Association we paid attention to the necessary infrastructure to meet business needs of our members. We have established the Universal Commodity Exchange — Eurasian Cooperation (UCEX), the Eurasian Customs and Logistics Holding Company, the Eurasian Center of Human Resources, the International Legal Center, Eurasian Contact Center, Qualification Assessment Center. Besides FBA EAC representative offices work in 18 countries of the world.

As far as I understand FBA EAC focuses on a wide range of bankers and businessmen? A. M. FBA EAC mainly focuses on medium business, commercial banks, private capital, public-private partnerships. O. B. For the benefit of Association’s members we have initiated and we are successfully carrying on the project of integration of small and medium businesses in a single exchange system on the EAEU territory with the possibility of their participation in international payment systems and value chains. This has allowed us to increase suspend and demand on the territory, to enlarge the range of products, to help small and medium enterprises join the international trade. For further development of this project together with our branches we are creating a network of aggregators with the functions of «Central aggregator», which being a commodity infrastructure, provides SME with a useful and economically advantageous cooperation model based on the allocation of functions between producers and suppliers, and which 7

allows to form the purchase and sell plan with reference to market volatility. A. M. As for interbank settlements, we usually select a bank in each country. These banks become members of Association and get involved in multi-currency clearing, which reduces transaction costs and guarantees stability and safety of payments. Currently we are making arrangements to switch exchange contracts, interbank correspondent payments to Blockchain platform together with a Chinese-Canadian company Tai Cloud Corp. It’s worth mentioning that the management of Eurasian Economic Commission actively supports us in this work.

How close do you cooperate with EEC? A. M. As I have mentioned before the Supervisory Board of Association in headed by Timur Zhaksylykov — Member of the Board — Minister in charge of Economy and Financial Policy of EEC. Besides I am the member of the Presidium of EEC Business Council. And Association members participate in sectoral EEC commissions on a regular basis. For example in April, 2017 the Annual meeting of the Presidium of EEC Business Council made a fundamental decision to create a Eurasian Electronic commodity exchange of Silk Road, and EEC suggested that this project be implemented on the basis of UCEX.

O. B. Another idea widely supported by EEC is the establishment of a system to recognize and assess qualifications of immigrants when they look for a job in EAEU. Now we are creating a network of examination centers to conduct such work. In October, 2017 the first FBA EAC Qualification assessment center was opened in Yerevan at the premises of RussianArmenian University, and the end of September, 2018 will see the opening of the second Center in Bishkek at the premises of Kyrgyzstan-Russian Slavic University named after the First President of Russia B.N. Yeltsin. Your activity is so diverse. I know that Association even has its magazine…

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

A. M. Yes, it does. Together with International Banking Council (IBC) we have created several «image products». One of them is the «Eurasian Financial & Economic Herald». The magazine is useful for a wide audience of businessmen, financial and banking society. Through the «Herald» we aim to attract interesting creative people, new ideas, technologies, projects. The «Herald» is distributed in 25 countries of Eurasia. O. B. I would like to add that last year, also together with IBC, we launched in International public award «Financial and Banking Elite of Eurasia». Launching the competition we set tasks which we successfully completed. First of all it was the coverage of the best achievements in financial and banking activity on the international level, the promotion of the leaders of financial and banking sector, of the companies and people to set high standards of professionalism and to have spotless reputation in the business circles of Eurasia. At the same time our main goal was to give Association members the right guidance in choosing reliable financial partners in Eurasia, which the competition successfully ensures. The official ceremony is solemn and festive. It welcomes the representatives of business, political and cultural circles, national governments and banks, heads of sectoral units and associations, leading mass media of Eurasia. This year the ceremony is taking place on November 30 in «Lotte-Hotel Moscow». A. M. Another landmark of FBA EAC is Moscow international financial and economic forum «Eurasian Economic Union and the EU: search for new formats of cooperation». This year we are organizing the Forum for the fifth time. Every year the audience of the event grows. The participants are attracted by the practical business character of the Forum. Last year it was difficult to accommodate all the participants in

the conference-halls of RSPP on Kotelnicheskaya naberezhnaya, so this year we are conducting the Forum at the premises of «Lotte-Hotel Moscow». What attracts European partners to Association? A. M. The Europeans are interested first of all in the increasingly developing Eurasian market with its broad possibilities for effective business and profits. With this regard FBA EAC acts as a kind of conduit to achieve their aims. The Association becomes an even more attractive partner considering its joint working programs with EEC on the creation of a single financial and economic market of EAEU, and our participation in the work on a single legislative base of the Union. O. B. I would like to add that this year within the Forum we are organizing an anniversary meeting of IBC. FBA EAC has undertaken this honorable mission. Leaders of banking associations from 17 countries of Europe and Asia will gather in Moscow. Is Association a member of IBC? A. M. Yes, of course. Moreover FBA EAC is a member in the Russian Union of Industrialists and Entrepreneurs, in the Russian-Chinese Financial Council, in the Financial Markets Association «Council for Professional Qualifications Development», in the Silk Road Chamber of International Commerce. This close cooperation also contributes to the development of our international activity. The anniversary is not only a holiday but also a reason to think about the future... A. M. Certainly. Association will continue going forward. The joint programs with EEC are plurennial. We will get on with the network of Qualification Assessment Centers, with the exchange infrastructure and we plan to complete the project of electronic exchange on the basis of UCEX. We will also follow up

with the incorporation of the standard of custom audit in EAEU, with the Center of financial innovations and transfer of high technologies. A Center for HR audit is also in sight, as well as the work on the «bank of projects» of Association. This is far from all our ideas to be accomplished. O. B. In conclusion I would like to name those who were the pioneers of Association and thank them for their support to a start-up institution with the help of their incontestable authority in the banking society. Among them is first of all Bakhytbek Bayseitov — Chairman of the Board of Directors and principal shareholder in the largest Kazakh bank «Centercredit Bank», which possesses the forth in succession license on the former USSR territory, the President of our Association; Gennadiy Aksakov — at that time the President of the Association of banks «Russia» and now the Chairman of the Council of the Association «Russia» and the deputy of the State Duma of the Russian Federation; Alexander Murychev — Executive Vice-President of RSPP, the Chairman FBA EAC Coordinating Council since its first days. Another considerable contribution to the development of Association was made by Sergey Kanavskiy — Executive Secretary of SCO Business Council. We also express our gratitude to Timur Suleimenov — former Member of the Board — Minister in charge of economy and financial policy in EEC and now Minister of National Economy of the Republic of Kazakhstan and member of FBA EAC Supervisory Board, who actually made our close cooperation with EEC possible. And we would like to thank all our members for their loyalty and devotion to our common goal. And our special thanks are to FBA EAC team for their dedicated service, inviting and creative atmosphere in our work.

Founder’s page. FBA EAC

PRAGUE BUSINESS MEETINGS From 25 to 28 of April, 2018, in Prague, the II International Financial and Economic Forum of CIS countries and Europe «Prague Business Meetings» was held, organized by the CIS Financial and Banking Council with the support of the CIS Executive Committee. The Forum participants were the leaders of central (national) banks and exchanges, financial structures, banking unions and associations, heads of the largest investment companies from CIS and EU, as well as representatives of administration of the President of the Czech Republic. Financial and Banking Association of Euro-Asian Cooperation was a partner of organizers. Its delegation was headed by Alexander Murychev, Chairman of Coordinating Council of FBA EAC, Executive Vice-President of the Russian Union of Industrialists and Entrepreneurs. Other participants were Oleg Ryazanov, Executive Director of FBA EAC and Svetlana Orlova, Managing Director of FBA EAC.

BISHKEK INTERNATIONAL FINANCIAL FORUM-2018 On June 1–2, 2018 the annual «Bishkek International Financial Forum 2018» was held. This year the event was dedicated to the 25th anniversary of the national currency som and the 10th anniversary of the Agency of deposit security of Kyrgyzstan. The Forum was organized by the Union of Banks of Kyrgyzstan and the National Bank of Kyrgyzstan. The co-organizers were FBA EAC, Agency of deposit security of Kyrgyzstan and the Interbank processing center. The Forum saw a lot of representatives from financial, credit organizations, business society, telecom operators, experts, equipment and IT solutions suppliers, foreign guests with relevant experience. Discussions on financial issues were held at the sections of the Forum: «Banking technologies, services and money transfers», «New approaches to information security», «Green economy and sustainable financing».

PROSPECTS FOR THE EU — EAEU COMMON ECONOMIC SPACE: CHALLENGES & OPPORTUNITIES FOR BUSINESS THE ASTANA On June 6, 2018, the Round Table «Challenges and Opportunities of the Common EcoECONOMIC FORUM nomic Space of the EU — EAEU» was held. The organizer was the Russian Union of Industrialists and Entrepreneurs (RSPP) in partnership with the Eurasian Economic Commission (EEC), the International Institute for Applied Systems Analysis (IIASA), the Association of European Businesses (AEB) and the National Coordinating Center for the Development of Economic Relations with the Countries of the Asia-Pacific region (NCC DER APR). More than 80 representatives of Russian and EEC authorities, business leaders, experts from EU countries and the EAEU took part in the Round Table. The FBA EAC was represented by General Director Oleg Berezovoy. During the main discussion, three blocks of issues were discussed: technical standards and regulation in the EU and the EAEU — first of all, opportunities for harmonization; trans-Eurasian land transport corridors; foreign direct investment in the EU and the states of Eurasia.

On May 17–19, 2018 in Kazakhstan the Astana Economic Forum Global Challenges Summit was held. This year the Forum was based on general trends: economic growth and resource turbulence, longevity and financial revolution, digitalization and urbanization, global safety and cultural shift. The event was attended by Denis Berezovoy, Head of the Department of Projects and Expertise of the FBA EAC, and Alexander Uzkih, Chairman of the Board of the Universal Commodity Exchange — Eurasian Cooperation.

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ADVISORY COMMITTEE On June 15, in Minsk, a meeting of the Advisory Committee on Financial Markets EEC was held under the chairmanship of the member of the Board (Minister) for Economic and Financial Policy of the Eurasian Economic Commission (EEC) T. Zhaksylykov. General Director of FBA EAC O. Berezovoy attended the meeting as an expert. Among the issues discussed were: the implementation of the draft Concept for the formation of the common financial market of the Eurasian Economic Union; development of the Roadmap for the formation of a single exchange space of the Eurasian Economic Union; implementation of the Protocol of February 8, 2018 No. 1-TZ / KKF meeting of the Advisory Committee on Financial Markets— on the draft Agreement on mutual admission to placement and circulation of securities at organized trading in the member countries of the Eurasian Economic Union, as well as on the appointment of the responsible secretary Advisory Committee on Financial Markets.

MEETING WITH THE FRENCH BUSINESS COMMUNITY On June 5, 2018, FBA EAC hosted Yves Pozzo di Borgo, the Honorary President of the friendship group with Central Asia in the Senate (France), and Jerome Clausen, Head of FBA EAC Representative office in France. The parties discussed the possibility of attracting representatives of the business communities of France, Africa and the Middle East to the FBA EAC platform, the prospects for cooperation with the French-Russian Chamber of Commerce, as well as the possibility of participation of French business in the projects of the FBA EAC. The subject of discussion was issues of implementation of joint investment projects and ways to develop comprehensive cooperation.

EXTENDED MEETING OF SUPERVISORY BOARD AND COORDINATING COUNCIL OF FBA EAC

On June 21, 2018 the FBA EAC headquarters in Moscow, 17, Kotelnicheskaya nab. hosted the extended meeting of FBA EAC Supervisory Board and Coordinating Council. The meeting was dedicated to the outlook on the creation of a single payment space of EAEU. The participants of the meeting were the members of FBA EAC Supervisory Board and Coordinating Council, leaders of financial and banking associations of Europe and Asia, heads and representatives of specific departments of

EEC, Central Bank of Russia, leading banks and payment systems. T. Zhaksylykov, Chairman of FBA EAC Supervisory Board, Member of the Board — Minister in charge of Economy and Financial Policy and A. Murychev, Chairman of FBA EAC Coordinating Council, Executive Vice-President of RSPP provided opening speeches. After that the Chairmen and General Director of FBA EAC O. Berezovoy presented certificates to the new member of Association and the FBA EAC Badge of Honor.

L. Mityasheva, Executive Vice-President of the ARB, and R. Frolov, General Director of «Torensa» Ltd. received the FBA EAC Certificate of membership. B. Georgiev, Head of FBA EAC Representative office in Bulgaria received the FBA EAC Badge of Honor for big contribution to the international financial and banking activity. The main speaker on the key topic of the meeting was A. Obaeva, CEO of the National Payment Council and member of FBA EAC Supervisory Board. She spoke about statistics and indicators which characterize payment infrastructure in EAEU countries in the recent 7 years. The ideas of NPC regarding the creation of a single payment space of EAEU were presented by the NPC Adviser A. Lisitsyn. He pointed out free payments as the key element of the Concept. Speaking about the main principles of the Concept Mr. Lisitsyn named transparency, harmonization of supervision policies and pro-activity of supra-national institutes. He also dwelled upon wider range of indicators of payment statistics, and the necessity of a common information resource under the auspices of EEU. The decisions of the Meeting were transferred to the EEC.

FOUNDER’S PAGE. FBA EAC

BUSINESS MEETING WITH REPRESENTATIVES OF FRENCH BUSINESS On June 20, 2018, in Moscow, a multilateral business meeting with representatives of French business was held. France was represented by M. Jean-Marie le Guen — Adviser to the President of SIACI, M. Martin Ferte — Executive director of SIACI, M. Emmanuel Quidet -President of the French-Russian Chamber of Commerce, M. Jérôme Clausen, General Director — CTI ADVISORY. FBA EAC was represented by Oleg Berezovoy — General Director of FBA EAC and Arseniy Vinogradov — General Director of Legal Center Euro-Asian Cooperation. From the RSPP the meeting was attended by Alexander Murychev — Executive Vice-President of RSPP, Vyacheslav Mochalov — Councilor of the RSPP, Anatoly Drantusov — Managing Director of the Center for Bilateral Cooperation of the RSPP. From the insurance market of Russia in the negotiations participated Andrey Yuryev — Executive Vice-President of the All-Russian Insurance Association, Anastasia Malenik — Assistant to the President of the All-Russian Insurance Association for International Cooperation, Nikolay Galushin — President of the Russian National Reinsurance Company. Parties discussed the possibility of reviving the Russian insurance market in case of active entry of the French insurance business into Russia and noted the interest in restoring economic, political and cultural relations between Russia and France.

FORUM «RUSSIA — EUROPE: COOPERATION WITHOUT FRONTIERS» On July 28, 2018 the annual Moscow B2B forum «Russia — Europe: Cooperation without Frontiers» was held in Moscow. The Forum is part of a long-term integrated B2B program «Russia — Europe: Cooperation without Frontiers» of Moscow Entrepreneurs Association. This program is aimed to support Russian small and medium industry enterprises (SME) in working out investment projects and proposals, in expanding export, in the attraction of FDI and advanced technologies to the real sector of Russian economy. The Forum focused on: trade and economic relations of Russian and EU, experience and problems of European countries in Russia, instruments of support for foreign trade of Russian companies in Europe and European companies in Russia, agriculture, water arteries of Russia and Europe, attraction of investments, digital economy. FBA EAC was represented by S.Arkhipova, Deputy Head of Projects and Expertise Department.

CONFERENCE «ASTANA FINANCE DAYS» The Conference «Astana Finance Days» was held on July 3–5, 2018 in Astana (the Republic of Astana). Within the conference the Eurasia Economic Commission organized a plenary session «The influence of blockchain and crypto currencies on the coordinated macroeconomic policy and single financial market in EAEU». FBA EAC was represented by the President B.Bayseitov and the Chairman of Coordinating Council, RSPP Executive Vice-President A. Murychev who delivered a speech. On July 5 the International Financial Center «Astana» (IFCA) was opened. It is charged with the task to attract investments to the economy of Kazakhstan, to develop the segments of financial market, financial and professional services basing of the best world practices. IFCA will become the main body of financial infrastructure of Kazakhstan and a financial hub for Central Asian region. The President of the Republic of Kazakhstan N.Nazarbayev took part in the official opening ceremony of IFCA. Among other participants were leading experts from the development institutes, governmental bodies, professional associations, scientific and research institutes, financial structures of the EAEU member-states and their partners.

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BANKING FORUM A MEETING IN THE EMBASSY On July 26, 2018 Ambassador Extraodinary and Plenipotentiary of the Republic of Tajikistan to the Russian Federation I.Sattorov hosted in his residence General Director of FBA EAC O. Berezovoy and Chairman of Coordination Council of the Eurasian Center for Human Resources А. Bespalov. The parties discussed possibilities for cooperation between FBA EAC and financial and business circles of Tajikistan. Among them was FBA EAC capacity to provide financial resources for certain investment projects in Tajikistan including the construction of wholesale-distribution centers for agricultural products. On mutual interest was the creation of Examination Center for professional qualifications assessment in financial and economic sector in Dushanbe. The prospects to attract Tajikistan exporters and importers to the Universal Commodity Exchange Eurasian Cooperation UCEX were also on the agenda.

XVI International banking forum «Russian Banks — XXI century» was held on September 5–8, 2018 in Sochi. The event was supported by the Bank of Russia, the World Bank and IMF. The Forum united the heads of the Bank of Russia, federal ministries and agencies, state corporations and development institutes, top managers of credit organizations, representatives of foreign financial institutes. This year the Forum in Sochi focused on the competitiveness among Russian banks. The agenda included the pending common information digital environment. These solutions will facilitate connections between users, banks, governmental bodies and business. The event gathered bankers from Italy, Poland, Germany, Eurasian Economic Commission, European Institute of Financial regulation, Association of banks of Germany. FBA EAC was represented by the Chairman of Coordinating Council of FBA EAC, RSPP Executive Vice-President A. Murychev.

BUSINESS COUNCIL IN SOCHI «FUTURE FINANCIER» On September 15, 2018 in Moscow the rewarding ceremony was held for finalists and prize winners of the school stage of the All-Russian contest of professional skills in financial market FinSkills «Future Financier 8+». This stage was for 2–11 grades of Moscow public schools and comprised more than 1500 participants. The contest focuses on the promotion of modern financial professions among school children, and on the development of fundamental financial literacy and youth entrepreneurship. FBA EAC was one of the main sponsors of the event. Svetlana Orlova, Executive Director of FBA EAC granted the prizes to the finalists.

On September 27, 2018 Sochi hosted the meeting of the Presidium of EAEU Business Council. The event was held simultaneously with the meeting of RSPP Coordination Council in the Southern Federal District. A.Shokhin, the President of RSPP and the Chairman of the Presidium of EAEU Business Council moderated the meeting. Among the participants were members of the Presidium, their authorized representatives and delegations of all parties to the Business Council, leaders and responsible experts of Eurasian Economic Commission, including such Board members (Ministers) as A. Subbotin (Industry and Agriculture), V. Nazarenko (Technical Regulation), E. Kaikiyev (Energy and Infrastructure). The discussion covered important issues of Eurasian integration, Eurasian Economic Union, business conditions on EAEU territory. FBA EAC was represented by A. Murychev, Chairman of FBA EAC Coordinating Council, Executive Vice-President of RSPP.

PERSONALITY

CONSERVATISM AS A SUCCESS FACTOR INTERVIEW WITH THE CHAIRMAN OF THE MANAGEMENT BOARD OF THE EURASIAN DEVELOPMENT BANK (EDB) A. BELIYANINOV

www.eabr.org

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We are well known. Many are looking to cooperate with us. And this is the most important.

ANDREY BELIYA N I N O V Chairman of the EDB Management Board He was born on July 14, 1957 in Moscow. Honored economist of the Russian Federation, Doctor of Economics, Doctor of Political Science. In 1978, Andrey Beliyaninov graduated from Plekhanov Moscow Institute of the National Economy with a degree in finance and banking, an economist. In 2005, earned a doctorate in economics, and in 2015 — a doctorate in political science. After graduation, Beliyaninov served in KGB of the USSR. He worked in a number of foreign countries, and in the late 1980s was an employee of the USSR Embassy in the German Democratic Republic. In 1992–1994, Beliyaninov was Deputy Chairman of the Management Board of REA-Bank. In 1994–1999, he held the positions of Deputy Chairman of the Management Board, Chairman of the Management Board of Novikombank. In 1999, he took the position of Deputy Director General of the Federal State Unitary Enterprise Promexport. In 2004–2006, he was Director of the Federal Service for Defence Contracts. In 2006–2016, he headed the Federal Customs Service. In 2017, he became Secretary General of the Eurasian Peoples' Assembly. Andrey Beliyaninov has received governmental and departmental awards. On 1 December 2017, Beliyaninov was appointed Chairman of the EDB Management Board.

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we know the Eurasian Development Bank was established in 2006, and its main tasks are to support economic growth of member-states, to expand their trade and economic ties, to develop integration processes. Can you draw up some interim results of your activity now? In 2006 the Bank was established by two states — Russia and Kazakhstan. Now we have six shareholders: Armenia, Kyrgyzstan, Belarus and Tajikistan have joined — in other words all EAEU members plus Tajikistan. This is an indicator that the work of EDB is in demand and that our goals are proper. We are well known. Many are looking to cooperate with us. And this is the most important. In my opinion the Bank is quite successful in capital raising. Only $1.5 billion out of $7 equity capital of the Bank is paid by the founders. At the same time today our loan portfolio accounts for $2 billion, investments portfolio — $3 billion. I wish it to reach $4 billion by the end of the year, and there are certain grounds for it, but final results will be drawn up at the beginning of 2019, and then we will understand if I was right or not. And of course it is important not just to try to increase this indicator, but to conduct tidy work. So what are our advantages as a development bank over commercial banks? First of all we have the opportunity to finance long-term projects 15- or 20-year-long. In this re-

gard we are a comfortable partner both for concessioners and for the state. Besides, concerning interest rates we are not trying to maximize profits unlike commercial banks. However it’s clear that we can’t afford unprofitable activity either as we have serious shareholders and high responsibility to them. In 2017 our profit amounted to $ 41.2 million. Our task is to ensure project implementation on economically advantageous basis. For the Bank it means to cover expenses and possible risks. In the cases of concession or public-private partnership we have a possibility to reduce our interest rate. However we want more: we have a desire and competence but lack of money. Thus our priority is to raise money for the current business portfolio. Basically we recon on external financing because member-states have their own challenges and budgetary rules. Therefore we work mainly with national banks of member-states. The highest demand is in local currencies — Rubles, Tenge. Borrowers are reluctant to take obligation in US Dollars and Euro and request local currencies. So now we are actively searching for them and keep to the market of local currencies. And this is not even a strategic task but a tactical one. EDB activity implies the work with different economies of member-states of the Bank. Is it difficult to take into account economic interests of different countries, and what are their focus areas?

I believe all of them have a similar goal — steady development. Another problem is that their economies are really different. But certainly the main focus for all member-states is higher competitiveness of national economies, upgrade of enterprises, bigger export capacity. Among other challenges in our countries are unemployment, poverty and low labor productivity. That’s why we need to attract capital, technologies and well qualified workforce, as well as to develop infrastructure for trade and services. As for the special features of the Bank’s work in our countries, pallid statistics can help us here. Today 43.5 per cent of our investment portfolio accounts for Kazakhstan, 40 per cent — for Russia, 11.1 per cent — for Belarus, 2.1 — for Armenia, 2 per cent — for Kyrgyzstan, 0.2 per cent — for Tajikistan. These figures illustrate both the volume of economies and the demand for investments in the development projects. At the same time we should be more active with our partners. The Bank has eight offices with various statuses. The head-quarters are in Almaty, the branch is in SaintPetersburg. Representative offices are opened in Moscow, Astana, Bishkek, Dushanbe, Yerevan, Minsk. We are improving the effectiveness of our regional network. We are releasing them from postman’s functions, giving additional authorities for preliminary negotiations and deal terms. We have started to open current accounts, and soon it will be possible to do in our representative offices «right off the bat». We trust

Meeting with the President of Russia V. Putin in a position of the Head of Federal Customs Service. Moscow, December 6, 2013

At the reception of the President of the Republic of Kyrgyzstan Sooronbay Jeenbekov, discussing EDB on-going projects. Bishkek, July 5, 2018

our representative offices and we hope for further development through this trust. Project activity of the Bank comprises many sectors like infrastructure, power engineering, chemical and petrochemical industry, oil and gas industry, metallurgy and mining industry, financial sector, information technologies… What are Bank’s criteria in making decisions on this or that project? And considering the current situation which sectors are the most promising for the accomplishment of the Bank’s tasks? Are there any other sectors, equally interesting for EDB in the context of financing and integration development?

The Bank’s Development Strategy 2022 was adopted in February, 2018 and approved by the Council of the Bank on June 22. The Bank has always been a conservative player and still is: we are extremely careful in selection of our activities and can’t afford any risky projects. I guess I could call us «hard-core conservatives». We focus on the projects with strong integration effect for the economies of member-states. And they are first of all movement of goods and services across borders, larger turnover and capital flow. One example could be the deal with Belorussian producer of dump trucks «BELAZ» supplying its goods to the Russian coal miners in Kuzbas. We are interested in taking part in transport infrastructure. I’m firmly convinced that EAEU countries should focus on transportation by railroads rather than by lorries. In such countries like Kazakhstan and Russia with their huge distances railway transportation is much more effective. We have already signed documents and scheduled the work on high-speed rail line Moscow—Kazan and in the project «Belkomur» (White sea — Komi — Ural) — a railway connecting Arkhangelsk, Syktyvkar and Solikamsk. Besides, the before mentioned strategy comprises sectors new for us. For example, agriculture and information technologies. The latest one can be considered as promising. For instance, the creation of an IT-infrastructure demanding to construct data processing centers, super-computers and broadband circuits. Globally on the market of data processing centers the USA is the leader with 44 per cent share; another 10 per cent of computation capacities are located in China, other countries of top-10 account for 4–5 per cent. None of EDB member-states is in top-10, but the construction of data processing centers can be a promising area, with some limitations howev-

er, like low profitability of projects. This is crucial for private investors in IT infrastructure, but not so crucial for the development banks. As for other areas with strong integration effect… EDB is determined to become an interbank clearing center. We have a software solution for this and capacity. We have launched testing transactions and opening of current accounts for our clients. This implies settlements in national currencies as well. The world has already started the run from US Dollar, or rather an easy departure. And we have joined it too. I’m sure that in future EAEU countries will be able to give up US Dollar, also with the help of the Eurasian Development Bank.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

velopment Board (UNCTAD), the International Investment Bank. Do you have any difficulties related to the current political situation? You must be talking about the steps of the USA and its satellites towards Russia? I can say the following. Eurasia finds itself in a winning situation here. I could say «Thank you!» to Mr. Trump for this. Higher external pressure has allowed to draw attention to high potential of EAEU countries. We are a little bit impudent, even aggressive on the Eurasian area, and now it’s clear that there are structures inside Eurasian economic space which enable us to face the future with confidence. We are able to create a regional payment unit. For me it’s Ruble.

Today EDB unites Russia and Kazakhstan (as founders) and (as parties) Armenia, Belarus, Kyrgyzstan and Tajikistan. Do you plan to include other countries? What are the advantages of territorial extension for the Bank? We declare that we are open for new members; however such decision is beyond our authority, it’s the level of our governments. As for international cooperation today the Eurasian Development Bank considers the possibility to open representative office in Uzbekistan and to increase investment in the country. Even though Uzbekistan is not our member yet we want to start work there — in agriculture, industry, mining sectors. We are also actively developing ties with China. It’s important for us

to have representatives in China; we see serious liquidity market in the country. And they also demonstrate a desire to participate in the projects on EAEU territory, not only though investments but also with technologies. Unfortunately there is lack of experience in cooperation between EAEU investors and business society of another large country in Asia — India. But we are tackling the problem. The Bank has a status of international organization and is subject to international law. Moreover the Bank holds the observer status at the UN General Assembly, the в Eurasian group on combating money laundering and financing of terrorism (EAG), the Trade and De-

Singing of Cooperation Agreement (from left to right): General Director of NPK «Zvezda» Pavel Plavnik, General Director of JSC «BELAZ» Petr Parkhomchik and Chairman of the Board of EDB Andrey Belyaninov. Moscow, February 20, 2018

At the conference «Window of opportunities: investments and new projects in Eurasia». Moscow, June 28, 2018

Today a number of development banks for example the Group organizations of the World Bank, EBRD, EIB have ceased their activity on the territory of Russia. Our task is to replace them. This year the EDB provided additional funding for the amount of RUB 1.3 billion to complete the EBRD modernization project in the Vodokanal of Yakutsk. We have also replaced EBRD loan to the project «Western High Speed Diameter» for the amount of Euro 193 million. As a result of our work EDB has become the largest international financial institute in funding volume since 2016

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As a result of our work EDB has become the largest international financial institute in funding volume since 2016 to provide funding to the private sector in the Russian Federation.

to provide funding to the private sector in the Russian Federation. As for those international organizations you mentioned, there are no difficulties. We are in international financial institute and not representatives of a banking sector of a certain country. For example this year EDB and the United Nations

Development Program (UNDP) have launched a joint project «Stronger potential for the sustainable development of financing in CIS region». We plan to co-finance the preparation of FS for the projects of EDB financing. UNDP is going to support second-tier banks which receive loans from EDB.

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Could you name the most crucial social and economic effects from the support of the development, modernization and diversification of the economies in the Bank’s member-states? All the projects supported by the Bank have positive social and economic effect. Basically that’s the reason we work for. We estimate that our projects have or will have created more than 26 thousand workplaces. Last-year projects alone ensured more than three thousand workplaces. Our projects will increase total output by $ 6.5 billion in the EDB countries. As of December 31, 2017 EDB investment portfolio had capacity to create mutual trade flows in the amount of $3.5 billion yearly, while mutual investment growth, secured by investment portfolio projects during all its activity amounted to more than $ 1.9 billion. Among key large projects of EDB today is the construction of the third power unit of Ekibastuz GRES-2 (Kazakhstan), the construction of the motor-road «Western High Speed Diameter» (Russia), the construction of Beloporozhsky HPP-1 and HPP-2 in Karelia, the construction of motorroad Central Ring Road-3 (Russia) and many other. Are there any projects of equal importance in the long run? EDB is ready to support the construction of gas-turbine generators for BelAES in Belarus. In August the Bank signed a memorandum with «Rusatom — International Net». One of possible projects is the construction of peak gas-turbine generators with capacity of 800 Mega Watts. We are considering the project together with Belorussian partners. Peak substations are supposed to backup if the power unit is under repair. Another Bank’s project is financing the construction of a full-cycle car plant in Ust-Kamenogork in partnership with «Auto VAZ». During the Moscow auto show we sign an

agreement with «Asia-Auto Kazakhstan» on extended production of AutoVAZ products in Kazakhstan. Many are surprised that this company producing cars in Kazakhstan seriously extends its dealer network in Russia. It’s worth considering: those who desire to profit do profit. The Bank is going to invest RUB 2.12 billion in tourist attractiveness of Saint-Petersburg and river tourism. Thus five mooring houses and a passenger river terminal will be built. I have already mentioned two railroad projects where we’re ready to take part: «Belkomur» and highspeed line «Moscow—Kazan». They are at the outset but we are seriously considering them. Another idea is utilization of solid domestic waste. The idea is the hottest one not only in Russia and for all EAEU countries. Moreover these projects are not charitable, they are profitable. Unfortunately we don’t have any active projects of the kind, but we are tackling the issue. Could you give some details about the Eurasian Fund for Stabilization and Development (EFSD), where EDB is the manager of the EFSD resources and Secretariat? How are decisions taken on financing and grants, does the Fund have partners and joint projects?

The Eurasian Fund for Stabilization and Development — EFSD — is a regional financial mechanism. Through the Fund its members — which are EDB member-states as well — support each other. The interventions of the EFSD take the form of financial credits to support the budget, balance of payments, project finance. By the way project finance is a unique instrument for such funds. The EDB manages EFSD including the functions of Secretariat of EFSD Council. The total value of EFSD amounts to $8.5 billion. And the fund doesn’t raise money on capital markets but uses its net profit for financing. EFSD Council consists of ministers of finance of member-states. It’s the top authority to take decisions on financing and any other issues of EFSD. The EFSD provides privileged credits and grants to its member states. In general the portfolio of programs and projects of EFSD as of September 1, 2018 accounts for $5.6 billion (current projects — $ 2.8 billion, completed projects — $ 2.6 billion). The Herald editorial board would like to thank you for your time and detailed answers. Good luck, Mr. Beliyaninov!

Founder’s page. IBC

15 YEARS FROM THE DATE OF CREATION ON SEPTEMBER 3, 2004, IN SOCHI, DURING THE II INTERNATIONAL BANKING FORUM «BANKS OF RUSSIA-XXI CENTURY», AT THE INITIATIVE OF THE ASSOCIATION OF REGIONAL BANKS OF RUSSIA (NOW-ASSOCIATION OF BANKS OF RUSSIA), A MEETING OF LEADERS AND REPRESENTATIVES OF BANKING ASSOCIATIONS (UNIONS) OF THE CEE-CIS COUNTRIES WAS HELD WHERE THE ISSUE OF CREATING A UNION OF BANKING ASSOCIATION WAS DISCUSSED. THE GOAL OF THE CREATION OF SUCH A UNION WAS THE DESIRE OF THE INTERNATIONAL BANKING COMMUNITY TO COORDINATE ITS ACTIONS IN THE INTERESTS OF MORE EFFECTIVE USE OF THE CAPACITIES OF BANKS AND OTHER FINANCIAL ORGANIZATIONS FOR THE DEVELOPMENT OF INTERSTATE ECONOMIC COOPERATION

September 3, 2004 it was the starting point for the creation of the International Coordinating Council of Bank Associations of the Countries of the Commonwealth of Independent States, Central and Eastern Europe (International Banking Council). Later, banking associations (unions) of Azerbaijan, Armenia, Georgia, Serbia, Tajikistan, Uzbekistan, Ukraine, Moldova, Montenegro, as well as the Financial and Banking Council of the CIS, the Financial and Banking Association of EuroAsian Cooperation joined the IBC. Currently the IBC includes 17 organizations. In addition, the Polish Bank Associa-

tion takes part in the work of the IBC as an observer. The Council is still open to membership of banking associations of all countries, interested in international cooperation. In 2018, the Association of Russian Banks (ARB) and the Association of Banks of Bosnia and Herzegovina filed applications for joining the IBC. With regularity, twice a year, the IBC meets alternately in one of the member states of the Council, to discuss the most pressing issues in the development of monetary and financial systems of the member countries IBC. Currently the Chairman of the IBC is A.Murychev, Vice-Chairman of the Council of the Association of Banks of

Russia. The Vice-Chairmen of the Council are B. Bayseitov (Kazakhstan), Z. Nuriyev (Azerbaijan), E. Korobkova (Ukraine), I. Lengyel (BACEE), V. Dugalic (Serbia). Executive secretary of the IBC is S.Porskova (Association of Banks of Russia). The IBC signed cooperation protocols with the secretariat of the Integration Committee of Eurasian Economic Community and with the Executive Committee of the Commonwealth of Independent States. The anniversary meeting of the IBC will be held on November 30, 2018 in Moscow at the invitation of the Financial and Banking Association of EuroAsian Cooperation.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

IBC MEETING IN MONTENEGRO

www.asros.ru

FROM 17 TO 19 MAY, 2018 IN BUDVA (REPUBLIC OF MONTENEGRO), A MEETING OF THE INTERNATIONAL COORDINATING COUNCIL OF BANK ASSOCIATIONS OF THE CIS, CENTRAL AND EASTERN EUROPE (IBC) WAS HELD. THE TOPIC WAS «THE PROBLEM OF NON-PERFORMING LOANS — NPL».

The

meeting was attended by members of the IBC and heads of banking associations and unions involved in the work of the IBC. They were represented by the Association of Montenegro Banks, the Association of Banks of Russia, the Independent Association of Banks of Ukraine, the Association of Belarusian Banks, the Association of Serbian Banks, the Polish Bank Association, the Banking Association for Central and Eastern Europe (BACEE), the Association of Banks of the Republic of Kazakhstan, the Financial and Banking Association of Euro-Asian Cooperation (FBA EAC) and its representative offices in the Republic of Armenia. Representatives of the Central

Bank of Montenegro, the Association of Banks of Bosnia and Herzegovina, CB «Assotsiatsiya» and PJSC «Rosgosstrakh Bank» also took part in the meeting. The session was moderated by Chairman of the IBC, Vice-Chairman of the Council of the Association of Banks of Russia, Alexander Murychev. Bratislav Pejakovic, Secretary General of the Association of Montenegrin Banks, gave an opening address on the importance of exchanging experience and discussing the problems of the financial sector of the IBC member-countries. Analytic materials and suggestions for the agenda were presented by the Azerbaijan Banks Associa-

tion, the Union of the Banks of Kyrgyzstan, the Moldovan Bankers’ League, the Uzbekistan banking Association and the Union of the Banks of Armenia. The overviews of the situation and solutions of non-performing loans were made by Nicolo Fabris (Deputy Chairman of the Board of the Central Bank of Montenegro), Istvan Lengyel (General Secretary of Banking Association for Central and Eastern Europe), Samvel Chzmachian (Deputy General Director of FBA EAC - Head of the Representative office in the Republic of Armenia), Elena Korobkova (Executive Director of the Independent Association of Banks of Ukraine), Veroljub Dugalic (General Director of the 21

Association of Serbian Banks) and Marat Baytokov (First Vice-President, Chairman of the Executive Board of the Association of Banks of the Republic of Kazakhstan). Oleg Berezovoy, General Director of Financial and Banking Association of Euro-Asian Cooperation, outlined the joint projects of the FBA EAC and IBC. In his speech, he spoke about the stages of the development projects, new perspectives and proposed a road map for the promotion of projects for 2018 and 2019. In particular, referring to the first joint project, he noted that the International Public Award in the field of finance «Financial and Banking Elite of Eurasia» received a successful start in 2017 and undertakes its tasks fully: international coverage of

the best achievements in the field of financial and banking activities in the Eurasian space; popularization of the activity of leaders in the financial and banking industry of the Eurasian states, companies and individuals, who affirm high standards of professionalism and have irreproachable reputation in the business community; ensuing a publicly available and obvious, for potential clients, choice of reliable financial partners in the space of Eurasia. Within the framework of the second project — the publication of the journal «Eurasian financial and economic herald», — there were also positive trends: a unique style of the magazine was formed, the quality of the content of columns grew from release to release, the Herald re-

ceived its regular readers in more than 20 countries and their number is steadily increasing. At the end of the meeting, Alexander Murychev and Oleg Berezovoy presented the FBA EAC award — Badge of honor for special services, high professionalism, and active participation in the activities of FBA EAC as well as for the contribution to the development of the banking sector of the economies of the Eurasian countries. Three IBC members became the holders of the Badge of honor: E. Korobkova — Executive Director of the Independent Association of Banks of Ukraine, A. Kuschinski — Chairman of the Association of Belarusian Banks and V. Dugalic — General Director of the Association of Serbian Banks.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

www.lbm.md Dumitru Ursu, President of the Moldovan Bankers’ League

MOLDOVA:

THE PROBLEM OF NONPERFORMING LOANS THE REPUBLIC OF MOLDOVA CONTINUES TO PROMOTE THE BANKING SECTOR REFORMS, WHICH FOCUS ON ENSURING THE TRANSPARENCY OF SHAREHOLDERS IN ORDER TO ATTRACT NEW INVESTORS MEETING HIGH QUALITY REQUIREMENTS, ON ESTABLISHING SOLID CORPORATE GOVERNANCE IN THE BANKING SECTOR, ON IDENTIFYING BANK RELATED PARTIES AS WELL AS ON RECORDING IN TIMELY MANNER THE NON-PERFORMING LOANS IN THE BALANCE SHEETS OF BANKS.

new Law on Banking activity (based on Basel III) came into effect on January 1, 2018. Once implemented, the new regulatory and control base will provide for security and reliability of the banking sector, including the ability to face shocks and crisis, to

improve inner management, to reflect all risks in the bank’s reports as well as to maintain a relevant capital regarding both its quantity and quality. Financial service will become mоre enhanced and reliable too. As of December 31, 2017 there were 11 banks in Moldova licensed

by the National Bank of Moldova (NBM), including 4 subsidiaries of foreign banks and financial groups. With 2017 being a tough year for the banking system of Moldova, at its end all financial institutes registered good results. Total assets grew by 10% compared to 2016. Revenues grew by 8.6%, ROA amounted to 23

1.8%, ROE — by 11.1%, which is 3.8% higher than inflation. Tier I capital grew by 8.7%. Banks continue to maintain high liquidity ratios. Thus, the value of the long-term liquidity indicator (1st liquidity principle) recorded 0.6 (the limit being set at ≤1), a level equal to the one of the end of 2016. The current sector liquidity (2nd liquidity principle) increased by 6.1 p.p. recording 55.4%. Thus more than a half of assets of the banking sector are concentrated in liquid assets. It’s worth mentioning that the largest share in total liquid assets is held by deposits placed with the NBM — 36.1%. Liquid securities share is 34.3%, current net interbank funds — 20.3%. During 2017 these positions increased by 11.5%, 35.7% and 30.7% correspondingly. The high risk-weighted capital adequacy ratio for the banking sector (average — 31.0%, requirement ≥16%) allowed banks to absorb losses from lower quality of loans. The limit set for all banks is complied with. It varies between 24,7% and 98,1%. As of 31.12.2017 the balance of the gross loan portfolio accounted for 42.1% of total assets, having decreased by 3.7% during 2017. Among the reasons for the loan portfolio decrease are economic situation in the country in general and a more prudential approach of the banks when choosing potential borrowers. At the same time the volume of new loans extended in 2017, against the background of the decrease in interest rates on loans, increased by 9.0 pp. compared to the same period of the previous year. During 2017 the National Bank fell back on lower basic rate having decreased it from 9 to 6.5%. This reduction was connected with inflation risks. If we analyze that period we can see that when basic rate went down deposit rates declined automatically for corporate and retail deposits, as well as for new loans. At the beginning of 2017 average rate for new deposits in LEI amounted to 6.79%, while by the end of the year it went down to 24

5.19%; as for new loans the rate was 11.55% in early 2017, and 9.58% in early 2018. The banking sector also faces high level of non-performing loans in loan portfolios today. During the year 2017, the share of non-performing loans (substandard, doubtful and compromised) in total loans increased by 2.0 pp. compared with the end of 2016, making up 18.4% on 31.12.2017. Reclassification of loans to non-performing risk categories took place as a result of a more prudent approach in classification of loan portfolio. The specified indicator varies from one bank to another, the highest value constituting 34.1%. It should be mentioned that in the banking sector of Moldova NPLs are connected with previous periods of development of several banks which didn’t comply with prudential requirements in crediting, risk level and classification of assets, which led to the growth of NPL share in those banks’ loan portfolio, and especially in total capital. High NPL level in banks mean: — Lower profitability (due to reserves and operational costs for NPLs monitoring); — Higher requirements to capital (NPLs are risk assets); — Limited availability of banking resources (and limited possibility to issue new loans); — Higher financial losses (other financial institutes are reluctant to lend money to banks with high NPL level which leads to higher losses).

Pursuant to the finding of some indices related to shareholders’ nontransparent structure and engagement in high-risk lending operations, according to the Law on Financial Institutions, the National Bank of Moldova, in June, 2015, placed several banks under special supervision procedure. Due to the amendments of the legislation, special supervision was replaced by intensive supervision, and in October, 2016 the intensive supervision regime on one of these banks was replaced by early intervention. It should be noted that these 3 banks hold 65.2% of total assets of the banking sector. At the same time, for the purpose of non-admitting excessive risks, the National Bank, on a daily basis, monitors the activity of banks under intensive supervision and under the early intervention regime. In such a way, is being examined the financial situation of the concerned banks, their transactions, the agenda of governing organs’ meetings, etc. The specified banks are well-capitalized and operate in ordinary regime (provide all services, including those concerned with deposits, loans and settlement operations). Starting from 2017 banking sector of Moldova has become more accurate with lending. Firstly because of the coming introduction of a new regulatory base and a base of banking activity correspondent to Basel III principals, which raise requirements to more prudent risk assess-

20 18

16,4

16,2

31.12.2016

31.03.2017

17,6

17,4

30.06.2017

30.09.2017

18,4

16 14 12 10 8 6 4 2 0

31.12.2017

Dynamics of the share of non-performing loans in total loans in the banking sector (%)

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

ment. Secondly, there is a Loans Register now which allows the regulator to monitor on a day-to-day basis every loan in every bank. And as a consequence banks also assess risks more carefully. However in 2018 there might be a background for lower share of NPLs. On January 01, 2018, the Law on banks’ activity came into force, aimed to strengthen the banking regulatory and supervision framework by aligning to European standards (transition from Basel I to Basel III). Once the new law regulating the activity of banks in the Republic of Moldova enters into effect, there will be public consultations in stages the draft secondary regulatory framework subordinated to it (approximately 30 regulations), as well as the COREP reporting framework, which will enter into force at different time periods till 2020. Development of the mentioned regulations was initiated within the framework of the Twinning project of the European Union in order to strengthen the capacity of the NBM in the field of banking regulation and supervision in cooperation with the Central Bank of the Netherlands and the Central Bank of Romania. It should be noted that the new regulatory framework will keep some previously applicable prudential provisions and will focus, predominantly, on strengthening the internal corporate governance and risk management practices in banks. New approaches will also be introduced for the calculation of regulatory capital (own funds), riskweighted capital adequacy (which will include, besides the credit risk other risks — operational, market and other risks related to banking activity) and liquidity ratios. In addition, new concepts will be introduced such as leverage ratio and risk associated to it, capital buffers, internal capital adequacy assessment process (ICAAP) and internal liquidity adequacy assessment process (ILAAP), disclosure requirements.

By the implementation of the law on banks’ activity, the National Bank of Moldova initiated the fundamental review of the banking supervision system, using the supervisor’s arguments based on risk, provisioning and approach of the supervision review and assessment process (SREP). Presently, the NBM possess a range of tools in order to apply the supervisory and remedial measures. Prudential supervision will be carried out including on a consolidated basis and on tight cooperation with foreign supervisors (including participation in supervision panels) and other competent authorities. In order to improve the corporate governance in banks, on July 1, 2017, the Regulation on Internal Governance and Risk Management in Banks entered into force, with provisions concerning the risk management, requirements on policies for risk management and limits on risk appetite and risk profile, which ensure a gradual transition to the transposition package of the Basel

III framework. In the near future, the specified regulation will be updated, that will strengthen the regulatory framework for issues related to the responsibilities of the management organ and its organization, the capital adequacy risk assessment (ICAAP) process and respectively the supervision and assessment process (SREP) etc. Alignment of banking legislation of the Republic of Moldova to international standards by improving the quantitative and qualitative bank management mechanisms will contribute to promoting a secure and sound banking sector, to transparency increase, to confidence and attractiveness of the domestic banking sector for potential investors and creditors of banks, among whom are and the depositors, etc. The new framework conditions the development of new financial products and services due to ensuring a financial stability environment that permits maintaining financial soundness of banks and of the entire system. 25

www.ubcg.info Bratislav PejakoviÄ&#x2021;, Secretary General of the Association of Montenegrin Banks, member of the IBC

MONTENEGRO:

PROBLEMS WITH NPLS AND EUROPEAN COMMISSION POSITIONS How to deal with NPLs The financial crisis directly affects the quality of banksâ&#x20AC;&#x2122; loan portfolios. Loans that are over 90 days past due, or how they have been called in recent years, non-performing loans (NPLs), represent problems for banks both in terms of liquidity and solvency, as provisions directly affect the capital. Non-performing loans reduce the amount of 26

reinvestment; they are time-consuming in respect of their collection, and drain resources from current business, burden operating costs, reduce profit, and affect the level of interest rates. However, they are present in both the most developed countries and developing countries. The IMF statement on the status and the level of NPLs supports the accompanying analysis of the situation, which

could be defined, as mentioned in the reports for the Western Balkans, by the impact on the level of available resources, insufficiently developed financial infrastructure, non-harmonised regulation or by those that is in the process of alignment with the EU regulations, insufficient efficiency in bankruptcy proceedings. All of the above had influenced the slowing down of the growth of lending in banks operating in the EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

Western Balkan economies (Serbia, Bosnia and Herzegovina, Montenegro, Macedonia, Albania and Kosovo) and also influenced higher level of NPLs in these countries than in majority of EU countries. The recommendation of the IMF is that a legal framework for tackling non-performing loans must be provided, the judicial reform must be accelerated (length of court processes), and the Law on Bankruptcy and Insolvency must be improved. Return on equity fell from 10 to 35 percentage points during the crisis, and has not yet returned to the pre-crisis level, but we definitely have positive trends both in terms of lowering the NPL levels and increasing the level of loans, and consequently the revenue.

The Podgorica model and other measures gave results Montenegro must be commended as it reduced NPLs from 25.6%, which was the highest recorded level of NPLs at the banking system level in 2011, to 7.1% which is currently the level of NPLs, and it approached the pre-crisis level, with the trend of further decline. The Regulator, i.e. the Central Bank of Montenegro (CBCG), played a quality role preventively and directly influencing the level of NPLs through its activities, including the Podgorica Model and subsequently passing the Law on Voluntary Financial Restructuring (which entered into force on 2 May 2015 and it has been further amended with limited implementation until May 2019), alongside the statement that they wanted to continue with the measures to mitigate NPLs, because the existing level affects the banks' balance sheets as well as the investments and credit activity. The essence of this model is to provide incentives for restructuring of loans to companies that are currently illiquid but have a market perspective. The success of this model relied on the positions that envisaged also incentives for banks (in the sense of a more favourable classification of restructured loans) as well as for clients (longer repayment terms, possibility of the write-off of a portion of credit obligations, interest reduction, tax debt restructure, etc.).

The Regulator has taken several actions in tackling the NPLs. First, they required the banks to prepare a three-year NPL resolution strategy. Secondly, the Central Bank's approval was required in the portfolio transactions where NPLs were pronounced. The intention was to prevent any potential repurchase of the portfolios that had already been sold to one of the factoring companies, in cases where there would be likely an intent to buy time to ease the balance sheet of a specific bank. In the first years after the crisis, the support of parent banks in resolving NPLs was also significant. It should be emphasized that commercial banks had a constructive approach to NPL work out. They significantly reduced the share of NPLs in their portfolios using the practices of more developed countries through special purpose vehicles (SPVs) and sale of NPLs, as well as through the rescheduling agreements signed with debtors.

What to do to prevent errors from repeating in the future The successful work out of NPLs through the actions of the Regulator and the banks in order to stabilise the balance sheet and loan potential are the activities that give rise to the recovery of economic activity and the improvement of income opportunities of the economy. This is what has just happened in Montenegro: the economy has recovered, and the estimated growth in the 2017 World Bank Report was 4.4%, while it is expected to be about 3% in 2018. According to the regulations adopted in May 2018, the factoring companies are also placed under the supervision of the Central Bank. Therefore, the Regulator will have more complete insight into developments in the area of non-performing loans. Finally, the key issue remains, what actions needs to be taken to prevent significant share of NPLs in the bank's portfolio from repeating in the future? It is obvious that Montenegro is a country with a small number of citizens, a small area, and thus with the structure of the economy which is subject to stronger external economic impacts than some of larger states. On the other

hand, high liquidity of banks, which experienced a large inflow of funds in 2007/2008 after the renewal of Montenegro’s state independence, contributed to application of looser set of investment criteria. The customers, taken by high investment boom, opted easier for borrowings, whereas business plans did not really reflect the reality. The problems with transition have not spared our country as well. It is good that we are all aware of where the mistakes were made. The problem is that one can easily go to another extreme if bank’s lending becomes conservative, as without the support of banks there is no quality investment development. In line with ensuring adequate conditions, Montenegro, although not an EU member, implements the IFRS 9 until gradual implementation of Basel III, which strengthens banks' capital and liquidity. The portfolio growth must be accompanied by adequate capitalization, thus preventing unhealthy growth from becoming a problem. The KPMG document «Impediments: Why does the problem remain» clearly gives the insight in the structural barriers. In some countries, the development of an active market for NPLs may be limited by various structural obstacles. As such, they can significantly increase the timeframe for their work out and increase costs in the process of recover and resolution of NPLs, or in the process of collection from collateral pledged as a part of a loan, or it can be a broader scope of collection options. These structural barriers, which are out of control of banks according to the KPMG findings, include the following: — unbalanced national bankruptcy proceedings, in which some types of creditors (e.g. natural persons, mortgage borrowers) are excessively protected from legally enforced actions in closing the NPL by taking over the collateral; — unavailability through out-ofcourt restructuring procedures; — insufficient number of adequately trained staff in judiciary system that are experienced in banking issues for adequate debtors' processing; — political pressure on lenders and the judiciary system to avoid bankruptcy proceedings; 27

“

Montenegro must be commended as it reduced NPLs from 25.6%, which was the highest recorded level of NPLs at the banking system level in 2011, to 7.1% which is currently the level of NPLs, and it approached the pre-crisis level, with the trend of further decline.

— regulatory limits regarding the assets held by the lenders, classification, provisions which limit the scope for optimal management of the income-earning portion of portfolio, where there are regulations that allow the sale of the bank's portfolio only to other banks; — regulatory or some other limits regarding the sale of some types of collateral, like residential property. The legal regime for the purchase of receivables differs between jurisdictions. Thus, there are situations where: — purchase of receivables is reserved exclusively for banks (e.g. Austria, Hungary, Romania — generally less strict regime exists in relation to NPLs); — the purchase of receivables is not regulated (Bulgaria, Czech Republic, Slovakia). In Montenegro, the limits are set by the Decision on Minimum Standards for Credit Risk Management in Banks passed by the CBCG. A bank in Montenegro may do the following: — transfer loan or other receivable exceeding 50,000 euro with the prior approval obtained from the CBCG; — however, the legal solution provided for in Article 36 of the Consumer Protection Law implies that a receivable against a natural person may be transferred exclusively to another bank or financial institution licensed by the CBCG; — the Decision on Minimum Standards for Credit Risk Management in

Banks does not say anything about the characteristics of a receivable (i.e. whether it is a performing or non-performing loan). With regard to the protection of customers who are natural persons in Montenegro: — the natural person retains all rights that he had in relation to the bank transferor and acquirer, including the right to complain; — the acquirer may not bring user of financial services into a position that is less favourable than the one it would have been if the receivable has not been transferred; — the user of financial services may not be exposed to additional costs as a result of the transfer of receivables; — the existence of an ongoing court dispute does not affect the completeness of the transfer. However, having regard to the provisions of the Law on Civil Procedure (Article 196), a new creditor does not automatically enter into proceedings instead of the original creditor. A new creditor can only enter into proceedings if the debtor agrees with that. - Civil proceedings may be resumed with the same parties (i.e. with the original creditor) and in that case a new creditor may charge the claim and execute it on the basis of a final court decision even though he was not a party in the proceedings. We should also note that there is no developed case law.

Transfer of receivables The transfer of loans through the transfer of receivables (direct sales) is subject to a regulatory procedure, which implies obtaining of the opinion ex ante from the CBCG on the justification of the sale of receivables (8 days after the receipt of the complete documentation by the CBCG). Prior to the start of the sales process, the seller should define the basic goals and expectations of the process, such as price maximum, process efficiency, disposal of non-core activities / assets. Depending on the seller's goals, it is often necessary to carry out an initial analysis of the possibilities for achieving the expected sales outcomes.

The purchase price achieved in the sales process depends on the attractiveness of the portfolio, i.e. the quality of the security interest, the expected collection, the age of the portfolios, as well as the existing relevant legal framework, and other factors. Generally, loans with higher collateral offered in the sale of individual loans may potentially be sold at a higher price than the sale of total portfolio. As a problem, there is a situation where banks are not in a position to sell NPLs due to a large difference between the appraised value and offers received from potential customers. This may be a shallow market in terms of small demand, but in general, bank buyers expect large discounts, while banks want to recover as much of the funds they have placed and thus cover the provisions that burden capital and solvency. This problem is also expressed in contracting sales that have institutional character, where several factors may affect the price level that will be offered: — inadequate database and information that are asymmetric with the willing factor of the investor, who offers lower price due to uncertainty; — potential time and costs that are estimated for the process of the collection of NPL portfolio being purchased or collection from collateral being assumed, thereby reducing i.e. decreasing long-term economic value of NPL; — different views of macroeconomic trends — local banks may be more optimistic about the economic trends than buyers with regard to the strength, potential and perspective of the local economy.

Non-performing loans also a concern for EU member states The problem of NPLs represents a concern for the developed countries of the EU, which is a model of an economy for all non-EU members — the problem that is different from country to country. One of the estimates suggests that the EU bank’s exposure to NPLs amounts to roughly 1,000 billion euro. Accordingly, the European Central Bank (ECB) has

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

announced additional measures to regulate the NPLs by imposing higher provisions for these loans. It is announced that, starting from 1 January 2018, the banks would have a deadline of twoyears to cover the unsecured part of the loans, which would, according to the new definition, fall into the category of non-performing loans or loans which collection is difficult. A secured portion of new loans that become non-performing should be covered within seven years. The provisions would be increased, according to the ECB, gradually and parallel with the full amount of nonperforming loans. The European Commission in the Information on non-performing loans has announced that the share of non-performing loans in the European Union declined y-o-y in the second quarter of 2017 from 5.6 percent to 4.6 percent, while in Croatia, for example, it grew slightly from 11.6 to 11.7 percent. In the

aforementioned period, the share of non-performing loans fell in 24 member states, while in Sweden and Finland this share stagnated, and it only increased in Croatia and Latvia. The highest share of non-performing loans had Greece, even 46.9 percent, while it reached 47.2 percent in the previous year. The lowest share of non-performing loans in total loans granted had Luxembourg, only 0.7 percent compared to 0.9 percent a year earlier. In the observed period, except in Greece and Croatia, the share of nonperforming loans exceeded 10% in seven countries: Cyprus (33.4%), Portugal (15.5%), Italy (12.2%), Bulgaria (12.1%), Ireland (11.6%), Slovenia (11.4%), and Hungary (10.4%). The share of non-performing loans declined y-o-y in Q2 2017 in all these countries. The Commission announced and proposed in the spring of 2018 a comprehensive package of measures to reduce the share of non-per-

forming loans, which consists of the following recommendations: — how to set up Asset Management Companies (AMC) in accordance with the current banking regulations and the best practices of EU member states. This type of transfer of portfolios to AMC allows banks to focus on the core business of lending and provide banking services to their clients; — the development of secondary market for NPLs with a focus on removing unnecessary barriers to loan servicing and credit transfer to third parties; — measures to improve the protection of creditors by providing them with more efficient methods of collection, recovery of the value of secured loans through the Accelerated Extrajudicial Collateral Enforcement (AECE). This refers to an urgent and efficient out-ofcourt execution that allows secured creditors to collect receivables from col-

NPLs and advances as a percentage of total loans and advances

Bad Debt Divides Europe. The extent of non-performing loans Source: European Central Bank, 2nd quarter 2017

“

The problems with transition have not spared our country as well. It is good that we are all aware of where the mistakes were made. The problem is that one can easily go to another extreme if bank’s lending becomes conservative, as without the support of banks there is no quality investment development

lateral pledged as a part of a loan in accordance with law; — introduce legal prudential procedures to prevent the risk of inadequate provisioning for non-performing loans. In this context, the European Commission also considered introducing a NonPerforming Exposure (NPE) that would differ from the existing definition in supervisory reports; — strengthen future transparency with regard to NPLs in Europe by increasing the availability of data in both the access and NPL comparability, with the support to the development of quality data on market participants that are classified as NPLs through the development of a dedicated information platform or through a credit registry.

EU proposed a package of four measures The measures were presented in March 2018 and they should improve the conditions for Member States and banks of those countries aspiring to join the EU to deal with non-performing loans. In the opening remarks of Valdich Dombrowski at the European Commission conference on the Risk Reduction Package in Banking Union, the measures to accelerate the reduction of NPLs in the banking sector were presented. The goal is simple: to speed up the ongoing reduction of NPLs in banks, and prevent them from building up again in the future. The package combines four policy actions that are outlined in more detail through the following views: First, prudential backstops. Prevention is the best cure, so the first proposal seeks to ensure that banks have enough

funds to cover losses from future nonperforming loans. This would be done by amending the Capital Requirements Regulation. The proposal introduces minimum coverage levels for newly originated loans that become non-performing. These requirements would create incentives for banks to work out NPLs at an early stage and avoid excessive accumulations. It has been also stated that the conditions for banks needs to be improved to deal with those loans that still fall through the cracks and become non-performing. Thus, Dombrowski promoted a directive that will do exactly that, by acting along two avenues: The first avenue – which would only apply to business loans - is speeding up the ability of banks and other creditors to recover the collateral pledged as part of a loan. For this, a new mechanism for an accelerated out-of-court procedure is proposed. In other words, a procedure for creditors to recover the collateral from a loan without having to go to court. This would provide more speed and legal certainty to creditors, subject to appropriate safeguards for debtors. This procedure would only be accessible if both lender and borrower have agreed on it in the loan contract. Why would they do so? Because the new procedures would enable banks to lend at lower cost, especially in Member States where insolvency is currently slow. A reduction of funding costs of about 10-18 basis points on average, and up to 40% more for SMEs is estimated. The second avenue is to further develop secondary markets for NPLs, to facilitate their sale and transfer to spe-

cialised market participants. This is especially useful if stocks of non-performing loans have become so high that banks cannot work them out on their own, as is the case in some Member States. In such countries, the proposed measures of the European Commission could help increase NPL sales by up to 15% per year, thereby speeding up the reduction of NPL ratios. EU directive would harmonise requirements for credit servicing, and allow those servicers that meet them to operate across the EU based on a single authorisation. And it would come with legal safeguards and transparency rules to ensure that the transfer of a loan does not affect the legitimate rights and interests of the borrower. The fourth and final action is the publication of a blueprint for setting up Asset Management Companies, in full compliance with current EU State aid and bank resolution rules. This will be helpful in the potential case where NPLs have become a significant problem for a Member State, and it wishes to address this systematically. The end result would be a banking sector that is strong and stable, with the capacity to withstand future shocks, wherever they may come from. This is a key ingredient in future economic prosperity, and a resilient Economic and Monetary Union. Conclusion. As a conclusion we can state the recommendations of the World Bank that promotion of the growth should focus on the strengthening of financial efficiency, increasing savings and developing capital markets. Financial development should be balanced between the stability (e.g. NPLS work out and reduce instability in loans, efficient reduction of total operating costs and net interest margins on assets), inclusions (increase the use of types of savings and insurance) and depth (capital market development and diversification of the financial system of a country). The stability and predictability bring prosperity to all market players.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

“KATRIN-KO” LTD 4150 Rakovski, Bulgaria 1A Reka Srebra Street Tel :+359 32 63 63 63 Fax: +359 32 63 63 61 Katrin-Ko Ltd. is a Bulgarian company, entirely focused on the food industry since the time of its establishment. KatrinKo Ltd. works since 2009 and is well-known with the quality and extensive range of products which you can find in different retail and wholesale chains not only in Bulgaria — a lot of products are exported around the world. Katrin-Ko Ltd. is located in Industrial Zone Stryama — Rakovski municipality near Plovdiv — on an area of 53,000 sqm. On the territory of 9430 sqm. there is a high-tech manufacturing plant. It consists of such industrial units as ketchup, tomato paste, pepper relish and sauces unit; mayonnaise, mustard and dressing unit; packaging of honey and honey products unit; wild and cultivated mushrooms processing unit; sterile processing of fruits and vegetables unit; vacuumevaporation installation and fruit juice production line. The plant is also equipped with physicochemical and microbiological laboratories, 50-ton scales, accounting department and corporate offices. Annual production capacity amounts to 12,000 t. The high-tech manufacturing plant of Katrin-Ko Ltd. produces consumer goods under a well-known brand «Rubikon». «Rubikon» is a wide range of goods. It is a leader on the canning market. Katrin-Ko Ltd. also sells its goods under the label «Private Label» for large companies of public catering. For «Private Label» Katrin-Ko Ltd. is able to work out special technologies on high-quality equipment. Production and canning of nonstandard products is made by experienced technologists and creative professionals who can help with your choice of packing. The range of products is really wide: tinned vegetables — fried and pickled pepper, tinned meat, bell pepper, green and dry beans, pickled cucumbers, non-peeled tomatoes, hot pepper and different types of salads; cultivated mushrooms; ready-made Lenten meals — stuffed vine leaves, baked beans, braised potatoes, braised mushrooms, rice with vegetables, zucchini with rice, cabbage with rice and many others. Katrin-Ko Ltd. is taking care for growing of 1,500 000 sqm. of vineyards planted with Cabernet Sauvignon, Merlot, Mavrud, Syrah, Temprenilo, Aromatico Classico, Barbera, Cabernet Franc, Pinot Noir.

People know that they can trust the quality of our products. And we appreciate this trust! That is why we work so hard to produce high-quality products. We constantly control and monitor the safety of our products keeping high standards of quality of ingredients and materials. We progress and raise the standards for better taste of our products. And this is what our clients expect – to feel better!

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STRONGER PARTNERSHIP WITH В20 TODAY’S WORLD IS A WORLD OF CHANGES WHERE BUSINESS AND PEOPLE HAVE TO WORK. GLOBALIZATION AND DE-GLOBALIZATION, PROTECTIONISM, FAST DIGITAL TECHNOLOGIES CREATE BOTH CHALLENGES AND OPPORTUNITIES. THAT IS WHY AN INTERNATIONAL DIALOGUE IS CRUCIAL FOR MINIMIZING RISKS AND TAKING ADVANTAGE OF ARISING OPPORTUNITIES.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

The

Group of Twenty is one of the most important dialogue platforms of today, starting from 2008 financial crisis. The agenda of G20 extends from year to year covering new topics and areas. To make the measures, approved by G20 leaders and implemented at national level, not harmful but beneficial to business and citizens we need a dialogue between G20 and social partners — «Business 20» (B20), «Women 20» (W20), «Labour 20» (L20) and other.

Business 20 has always been and remains a reliable partner of the Group of Twenty in the creation of stable and inclusive societies. B20 unites business societies, companies and experts from memberstates of G20, which offer new ideas and solutions for the benefit of everyone, basing on their practices. Russian Union of Industrialists and Entrepreneurs (RSPP) has been involved in the work of B20 from its very beginning. Every year RSPP members take part in focus groups of B20 to work out recommendations for the leaders of the Group of Twenty. In 2013 RSPP successfully accomplished the function of a chairman of B20. The priorities set during the Russian chair were later included in the agenda of G20 and B20, for example the use of innovative potential for development. To ensure the continuity of the agenda and the interests of Russian business in such recommendations for the leaders of G20 since 2013 RSPP members have closely cooperated with partners from B20. The members of RSPP Bureau and the Board of Directors act as co-chairs in relevant focus groups, give speeches at the B20 events and announce the position of RSPP. Starting from 2015 RSPP supports the incentive of the B20 Turkish chair to organize regional consultative forums with the aim to ensure interests of businesses from countries non-members of G20 and to include them in the recommendations for G20 leaders, as well as to inform state bodies, business and citizens about the work of B20/G20. In 2015 RSPP held the first regional consultative forum of B20 within SPIEF in St. Petersburg. The forum attracted attention of Russian and international companies and mass media. Since then the Forum has become one of important events at SPIEF. In 2018 the regional consultative Forum of B20 was held by RSPP for the fifth time.

Co-organizers of the B20 Forum were six Argentinian business unions — Argentine Bankers Association (ADEBA), Argentinian Stock Exchange (BCBA), the Argentine Chamber of Commerce and Services (CACS), the Argentine Chamber of Construction, the Argentine Rural Society (SRA) and the Industrial Chamber of Argentina (UIA), as well as the International Organization of Employers (IOE). The B20 Forum participants discussed draft recommendations for G20 leaders in the area of digital economy and future labour markets. The recommendations regarding digital economy focus on the development of the personnel and its digital skills; the establishment of crossborder infrastructure; working out and introduction of industrial technologies 4.0; development of digital trade and international data flows; support for innovations in financial technologies. Three main recommendations for G20 regarding employment and education shaped during the Argentinian chair, include: the development of open, dynamic and inclusive labour market; promotion of skills development and lifelong learning; support for business and innovations. The Forum was opened by the welcoming address of Deputy Prime Minister of Russian Federation Маxim Akimov and the representative of the President of Russian Federation in G20, Deputy Head of Expert Department under the Russian President Svetlana Lukash. Ambassador Extraordinary and Plenipotentiary of the Argentine Republic in Russia Ricardo Lagorio spoke about the priorities of the Argentinian chair in G20 in 2018, including digital economy, employment and education. Daniel Funes Rioja, B20 Chairman opened the discussion. He presented the recommendations for G20 leaders and shared his view on technological changes in the development of economic growth and

the key digital challenges as a driver of modernization. Victor Vekselbeg, Renova CEO, President of Skolkovo Fund, Chairman of RSPP Committee on international cooperation in his speech told about the incentive of the Russian business in digital area aimed at economic growth. The recommendation on digital economy and industry 4.0 shaped 34

during the Argentinian chair in 2018 were presented by Deep Kapuria, co-chairman of B20, CEO of the HiTech Group. Oleg Dukhovnitskiy, Head of the Federal Communication Agency spoke about communication availability as a factor of the development of digital economy and inclusiveness. Cees 't Hart, Carlsberg CEO and

co-chair of the Round Table of entrepreneurs of Russia and EU shared the experience and priorities of companies from EU member-states regarding rational digitalization as a model for business. Vladimir Basko, Chairman of the Committee of EAEU Business Council on digital agenda, General Director of scientific and technological association Infopark presented the priorities of EAEU businesses in digital area. The session ended with the address of Arkadiy Dvorkovich, RZHD CEO, member of the board of guardians, Co-chair of Skolkovo Council, about digitalization in transport. The first session on digitalization was moderated by Mikhail Oseevskiy, President of Rostelekom, Chairman of RSPP Committee on digital economy. The second session on employment and education was opened by Svetlana Lukish. Maxim Topilin, Minister of Labour and Social Protection of the Russian Federation described national policy on employment with regards to general aspects of higher productivity and equal opportunities. The session discussed the B20 recommendations on employment and education, including effective models for interaction between business, government, education institutes and citizens. It covered the skills for future labour markets; place of labour resources and other factors of production for better economy, as well as priorities and the work of international employment organizations. RSPP plans to keep positive practice of regional consultative forums of B20 at SPIEF. Currently negotiations are in process with Japanese partners from Keidanren (Japan Business Federation) â&#x20AC;&#x201D; the next B20 chair in 2019. Elizaveta Safonkina, Advisor, Foreign Department of RSPP EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

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Hot Topic

BIG EURASIAN PARTNERSHIP IN THE FOREIGN TRADE POLICY OF EAEU

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According to experts the EAEU countries are interested in a complex agreement with EU

V LADIMIR PERE B O E V PhD (Pol), Head of Projects, EDB Centre for Integration Studies

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

FOREIGN TRADE POLICY OF THE MEMBER-STATES OF EURASIAN ECONOMIC UNION (EAEU) IS QUICKLY BECOMING A CONTINENTAL ECONOMIC PARTNERSHIP. MEMBER-STATES OF THE UNION ARE ALMOST UNANIMOUS ABOUT THIS PRINCIPLE. FOR EXAMPLE RUSSIA’S INTERESTS REGARDING THE EAEU FOREIGN TRADE POLICY WERE STATED IN JANUARY, 2018 BY THE PRESIDENT OF THE RUSSIAN FEDERATION VLADIMIR PUTIN IN HIS MESSAGE TO EAEU MEMBER-STATES. RUSSIA PAYS SPECIAL ATTENTION TO THE DEVELOPMENT OF FREE TRADE ZONES OF EAEU WITH A NUMBER OF COUNTRIES, TO THE COOPERATION WITH OTHER INTEGRATION UNIONS, TO THE TRADE AND ECONOMIC RELATIONS WITH CHINA, TO THE CONJUNCTION OF EAEU AND CHINESE BELT AND ROAD INITIATIVE (BRI).

arlier in 2016 the President of Russia initiated the idea of Big Eurasian Partnership between EAEU, China, India, Pakistan, Iran, CIS partners and other countries and unions interested in the idea. Russia is interested in the EAEU as one of the centers for the formation of a larger integration space. According to Russia’s position the Big Eurasian Partnership is an open format of continental cooperation which implies first of all elimination of barriers between EAEU and its partners, basing on WTO principles. Also in 2016 the President of the Republic of Kazakhstan N. Nazarbaev supported the idea of conjunction of the economic areas of EU and EAEU, which has big potential for a breakthrough in development of the Big Eurasia and the whole world. The President of Kazakhstan also supports partnership between EAEU, SCO and ASEAN. Moreover the Kazakh leader believes that such inter-block integration should be focused on absolute priority of economic pragmatism beyond any political situation. And this is the way EAEU member-states develop the continental economic partnership from SouthEast Asia to Europe. Officially this

process is called the formation of Big Eurasian Partnership or «Big Eurasia». Big Eurasian Partnership first of all means the formation of a network of free trade zones (FTZ) by the Eurasian Economic Union, an overall trade and economic partnership between EAEU and China and conjunction of EAEU with Belt and Road Initiative. The idea includes the plans to make trade and economic agreements between EAEU and ASEAN, EAEU and SCO, and EAEU and EU later. The Eurasian Development Bank (EDB) also supports this foreign trade policy of the Eurasian Union. For example in 2013 the EDB Centre for Integration Studies pointed out that it’s necessary to develop EAEU with a draft name «Eurasian Partnership» and to develop different forms of deep integration with neighboring countries and multilateral continental cooperation. A flexible approach was offered implying both bilateral and multilateral cooperation. At the same time it was stressed that bilateral agreements are preferable considering special features of each partner and interests of all parties. Besides agreements there were also join action plans (like in European Neighborhood Policy) and join programs offered.

Moreover since 2014 EDB has supported a large project with the International Institute for Applied Systems Analysis (IIASA) in cooperation with Eurasian Economic Commission (EEC) «Challenges and opportunities of economic integration in the European and Eurasian spaces». The project aims to work out recommendations on conjunction of EU and EAEU positions, to form a negotiation agenda for the two unions to promote their cooperation and to develop a discussion platform on a high level. For example within this project an international group of researchers work on an overall trade and economic agreement between EAEU and EU. According to experts the EAEU countries are interested in a complex agreement with EU covering a larger range of issues than a standard free trade zone. Such an agreement (or a pack of agreements) could include a lot of areas from trading of goods and services to free capital and labor force flows, visafree regime, cross-border trade and infrastructure, mutual recognition of technical standards and other promising areas of cooperation. It must be borne in mind that EAEU exports to Europe mostly raw materials, energy sources, base metals, grain, fertilizers, and imports en-

Volumes of EAEU export and import in the trade with third countries by sectors of economic activity in January-July, 2018 (US dollars) Source: www.eurasiancommission.org

Quarter

2018 in % to 2017

2018

Balance

Turnover

Export

Import

Turnover

Export

Import

2017

2018

171 998 186 376

112 111 526 716

59 886 659 660

123,6

124,4

122,2

41 084 976 773

52 224 867 056

186 953 436 794 120 142 711 059

66 810 725 735

121,5

130,0

108,8

31 053 894 558

53 331 985 324

gineering products and consumer goods. According to the German institute IFO, in case of free trade zones with the EU, agriculture and car industry of EAEU may suffer. That’s why EAEU states don’t race to open their boarders and reduce their custom duties to zero. There should be a fair solution when, for example, EAEU partly opens its market and receives reasonable advantages in return, including guarantees of access to the European capital and European technologies. With the lack of official dialogue between EAEU and EU a joint implementation of large industry projects could become one of the main areas of their cooperation, for example transport infrastructure. According to EDB Centre for Integration Studies the volume of shipment on the route China — EAEU — EU grows rapidly. In the last five years

transit nearly doubled every year. This area appeals both to EU and EAEU. Eurasian Union is interested in good transport and logistic infrastructure which would shift part of transit from sea shipping to overland shipping so that goods could come and go from China to Europe (and back) via EAEU territory. However such mega-projects still remain in political field, while a more realistic way for the EAEU to promote its foreign trade interests is to execute bilateral free trade agreements with its continental partners. FTZ network is supposed to expand and make more available the access for EAEU producers-exporters of goods and services to other markets, to facilitate the inclusion of the Union countries into regional and global production chains, to attract investments. Eventually such

Volumes of EAEU export and import in the trade with third countries by sectors of economic activity in January-July, 2018 (US dollars) Source: www.cbr.ru/statistics/?PrtID=int_rat

Sector

Export

Import

8 113 177 492

9 042 478 434

Mining Industry

129 952 309 667

1 096 419 685

Manufacturing Industry

117 362 290 059 132 616 345 758

Agricultural, forest and fish industry

Electric power, gas, steam and air-conditioning

423 108 897

9 353 595

Water supply, sanitary systems, waste management and remediation

1 071 753 513

102 285 585

Information and telecommunication services

310 981 072

304 376 543

Professional, scientific and technical services

1 346

205 027

6 182 249

5 360 172

Art, entertainment and leisure time services Total

270 488 743 570 149 129 694 939

agreements aim to solve two tasks: additional growth of export and increase of investments which are seen as drivers of economic growth. When choosing the form of interaction with a partner the Union considers its involvement into transport corridors and international cooperation nets. For example free trade zone with Vietnam allows producers and suppliers of EAEU to get access to already working supply chains of Vietnam in Asia-Pacific region. The same situation is with Singapore which, according to its Ministry of Foreign Affairs has 21 FTZ agreements with 32 trade partners. The agreement with Egypt also allows joining a special economic zone of Suez Canal. The country has a large net of FTZ agreements with North Africa states. Thus EAEU is creating a kind of regional hub on the territory of Egypt where produced goods will have Egyptian origin but made with components from EAEU countries, and sold on the markets of Egypt’s partners as well. In order to take all such opportunities into account Eurasian Union works on individual model of agreement with every partner to the mutual benefit of the parties. As for the free trade zone between EAEU and Vietnam activated in October, 2016 it’s worth mentioning that the turnover grew by 30% in the first year. According to EEC in 2017 the turnover grew by 36% in comparison to 2016 — from $4.3 bn. to $5.9 bn. Import growth from Vietnam to EAEU states in 2017 accounted for 34.7% (from $2.7 bn. in 2016 to $3.6 bn. in 2017), export growth to Vietnam — 39.5% (from $1.6 bn. to

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

$2.2 bn. correspondingly). At the same time in 2018 import from Vietnam is higher than export to Vietnam from EAEU states. The data of January – March, 2018 in comparison to the same period in 2017 evidence import growth from Vietnam (from $7.4 bn. to $8.9 bn.) and export decrease from EAEU (from $3.9 bn. to $3.7 bn.). In any case positive dynamics in the EAEU — Vietnam trade is obvious and proves the effectiveness of free trade zone. Also worth mentioning is the progress in the relations of EAEU with China and Iran. The Union concluded important agreements with them in May, 2018. The Agreement on trade and economic cooperation between EAEU and China provides for a whole range of sectors crucial for EAEU states and China which are supposed to facilitate trade procedures between the parties. In particular it concerns electronic trade. In general the Agreement is focused on the creation of infrastructure of official cooperation, on sectoral interaction, on higher transparency and predictable trade conditions. Only after such basic agreement one can think of a preferential one (on overall trade and economic partnership), covering a lot of elements of nontariff regulation which today limits the access to China’s market. The three-year Temporary agreement between EAEU and Iran conducive to free trade zone, signed in May, 2018 covers a limited list of goods of mutual interest. Within a three-year validity term parties plan to consider possibilities and details of an overall FTZ agreement between EAEU and Iran. In that case the agreement can include the whole classification of goods subjects to mutual trade of the parties. A full-fledged FTZ according to join expert group may increase export from EAEU states to Iran by 73%. In future the turnover can rise up to 150%. Currently the Union is considering possibilities of FTZ agreements

with Egypt, Israel, India, Iran and Singapore. Alongside EAEU conducts negotiations on a common preferential trade regime between all EAEU states and Serbia. Trade and economic agreements with South Korea, Cambodia, Mongolia, Peru, Chile are also within the bounds of possibility. Eurasian Development Bank with participants from all EAEU memberstates could become a multilateral financial mechanism for join projects of EAEU member-states and their foreign trade partners, identifying, preparing and financing these projects involving a wide range of financial products and instruments. Within such projects supra-national institutes can ensure multiplication of science-based projects with transfer of high technologies to the companies in EAEU countries. EDB could also become a basic lender/investor in joint projects providing resource leveraging of lenders, first of all international financial organization (including BRICS bank, Asian Infrastructure Investment Bank, European financial institutes).

However today EEC has just a mandate to discuss trade of goods within the negotiation process on free trade zone with the third countries. Investments and trading of services which are the most profitable for FTZ remain strictly within the competence of member-states. Thus foreign trade policy of the Eurasian Economic Union today is being fast realized and has ambitious strategies. The originating Big Eurasian Partnership facilitates access for producers and exporters of goods as well as investors of EAEU member-states to foreign markets significant to them. Besides the Big Eurasian Partnership attracts investments and necessary products, especially technologies, on preferential conditions. At this stage it’s crucial for the Union to have maximum advantageous terms within agreements with the third countries and their associations. These conditions should meet the interests of non-energy exporters and investors from EAEU. And the first results evidence that the Eurasian Union is no slouch here.

Round Table meeting: «Conjunction of integration unions EAEU and EU: opportunities and perspectives». Moscow, April 17, 2018

Partners

RUSSIA AND FRANCE: GROWING PARTNERSHIP

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“

One of the focuses of CDC IC is to become known and accompany the Franco-Russian businesscommunity in the long term.

JÉRÔME CL A USE N Founder and CEO of CTI Advisory. Head of the Representative office of FBA EAC in France Advises the French sovereign fund CDC International Capital (CDC IC) in Russia, and in this capacity coordinates investment activities between France and Russia within the framework of partnership with the Russian Direct Investment Fund (RDIF). He has 20 years of experience in trade and international investment.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

CDC IC is a partner of the Russian Direct Investment Fund (RDIF). This partnership is strategic and it allows jointly investing in the business of French companies, developing in the Russian market, as well as in subsidiaries or projects of Russian companies in French. The strategy of joint investment of CDC IC and RDIF has the following characteristics: — the amount of investment varies in size from 5 to 100 million Euros with equal parity between CDC IC and RDIF: for 1 Euro, invested by CDC IC, RDIF also invests 1 Euro; — the ability to contact other partner investors for additional amounts, as well as investing in several tranches, depending on the needs; — projects with the sum of investments from 5 to 10 million Euros can be financed under the accelerated pattern; — expected rate of return corresponds to market conditions (including associated risks); — non-financial criteria (job creation, social and environmental impact) are taken into account; — medium- and long-term investment with a provision on the duty of jointly sale shares for a duration from 4 to 7 years; — CDC IC and RDIF always act as minority investors;

— investments are made from equity, quasi-equity or borrowed funds; — the possibility of investing in infrastructure. RDIF was founded in 2011 under the leadership of President of the Russian Federation Dmitry Medvedev and Prime Minister Vladimir Putin to realize joint investment projects with the best world investors. Thus, RDIF acts as a catalyst for direct investment in Russia. The capital of RDIF is $30 billion; the main purpose of the fund is to support the development of Russian companies, which in turn is called upon to contribute to modernization of the Russian economy and attracting the best world talents and technologies to Russia. In this regard, in 2014 the fund launched the project Invest in Russia. It is an information portal on investment opportunities in Russia and state instruments and mechanisms. Thus, the participation of RDIF in the capital of a French company, planning to open in Russia, for example a production facility, provides many benefits throughout the project (support in choosing the location of the facility, fingding partners and determining the opportunity of receiving state aid, administrative support, etc.). It should be noted that among the European countries only France and Italy signed a strategic partnership agreement with RDIF. At the same time, France is a part of an influential club of 20 countries and in-

reference CDC International Capital CDC International Capital (CDC IC) is a multi-asset investment company owned by the Caisse des Dépôts Group and dedicated to direct investments in partnership with sovereign wealth funds and major international institutional investors. CDC IC has been operating since 2014, and with its sovereign wealth fund partners and through its seven partnerships has a mobilisable investment capacity of nearly €4 billion. To date, the company has made 12 investments in such sectors as health care, industry, real estate, agricultural and education.

ternational sovereign funds, having a partnership with RDIF. Moreover, the economic relations France and Russia, in general, tend to strengthen. Thus, the trade growth between France and Russia resumed in 2017 (+26%) and reached €13,2 billion. According to the date of the French customs, Russia took the seventh place in the French market, continuing the growth, which began in 2016, when she took the eighth place. It happened in the context of the economic recession (2015-2016), the fall of the ruble, international sanctions and the Russian embargo on European food commodities. Such a growth in Franco-Russian trade could be explained by a significant increase in French import of Russian products (+37 and €7,59 billion in 2017), which is partly due to higher oil prices (+21% in 2017, the price per barrel of Brent oil). The

growth of France’s export to Russia, which began in 2016, continued in 2017 (+14% and €5,57 billion). On another note to the date of the Russian customs, then in 2017 France was the sixth largest supplier in the world to Russia, which accounted for 4,2%, slightly down from 2016 (4,7%), ahead of Italy. In terms of share in Russian exports, France took the 18th place, accounting for 1,6% (1,7% in 2016). But the Russian imports from France (also according Russian customs authorities) increased by 43% in 2016 and 13,4% in 2017, after a decrease of 44,5% in 2015. On January 2016 in Moscow, Emmanuel Macron, while still Minister of Economy, resumed a partnership between CDC IC and RDIF during a meeting of the Russian-French Council on economic, financial and trade issues, and over two years it received positive feedback from the leadership of Russian and French companies. The current desire of the two sovereign funds to accelerate the development of this unique Franco-Russian mechanism has made it possible to identify several projects that meet the necessary criteria for joint investment. The appropriate arrangements were signed at the St. Petersburg International Economic Forum in May 2018. The expressed interest of economic entities in the mechanism of

joint investment, proposed by CDC IC and RDIF is the result of a combination of several factors: — broad presence of French companies in Russia (1200 companies, including 35 from the list of the largest French companies CAC 40). France is Russia’s second largest trade partner in European Union. In 2017 the volume of trade between two countries increased by 26 %; — confirmed growth potential and availability of investment projects, in particular in three sectors: agriculturt, energy and retail trade. In addition, the Russian policy of import substitution promotes the localization of production activities in Russia through new projects or the acquisition of assets;

— less access to liquidity in the market: French banks present in Russia, are reluctant to invest in the capital of national companies, and institutional banks (EBRD, EIB) have frozen most of their co-financing programs since 2014; — mechanism developed by CDC IC and RDIF, has emerged in a successful time for our companies: the proposed investments (from 5 to 100 million euros) meet the needs for own capital, quasi-equity capital or even borrowed funds announced by many leaders of both medium and large French companies; — decision makers consider investment criteria to be effective and reliable: minority investments, the rate of return in accordance with the market, consideration of risks, «double» institutional protection, rapid decisions taking. The activities of CDC IC in Russia fully correspond to the model for financing the French economy, announced by French state investment bank Bpifrance and the Caisse des Dépôts group. One of the focuses of CDC IC is to become known and accompany the Franco-Russian business-community in the long term. In 2018 and 2019, in order to increase the volume of cross-investments in both countries, it is planned to conduct targeted information and communication activities, in particular business seminars.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

Read in the next issue

Nobel Prize in Chemistry for the discovery of quasicrystals

QUASICRYSTALLINE TECHNOLOGICAL ADVANCES In the scientific world in the early eighties of the last century, namely in 1982, there was a discovery which cannot be over-emphasized. Daniel Shechtman, an Israeli physicist, discovered the phenomenon of quasicrystallization. He found a crystalline structure with a fifth axis of symmetry in the AlMn6 alloy. You’d think what's the big deal? There was the opening that connected the yawning gap between living and non-living matter, for which D. Shechtman was awarded the Nobel Prize in Chemistry in 2011. Moreover, with time it became clear that substances (mostly alloys) that possess this structure have unique properties that can be used in a number of industries.

However, difficulties arose along this path: it is difficult to synthesize such materials in any significant amounts. It is this circumstance that has been an obstacle for their wide application for the last ten years. His overcoming is done by scientists of many countries — but so far without much success. This problem was also puzzled by the international group of scientists, which was united by Professor Paul Steinhard — director of the Center for Theoretical Science of Princeton University, a recognized expert in the field of the creation and evolution of the universe. He was joined by a scientist from Italy a well-known mineralogist and director of the Museum of Natural History of the University of Florence Luca Bindi, as

well as three scientists from Russia — Vadim Dietler, Marina Yudovskaya (Institute of Geology of Ore Deposits) and worked for many years in the Northeast Integrated Research Institute Valery Kryachko. The material on the progress of the research of this group will be published in the next issue of the journal. Slightly lifting the curtain, let's say that this international team of researchers had to face considerable difficulties, including making a complex, but extremely interesting and efficient geological expedition in Russia. V. Kryachko, Candidate of Geological and Mineralogical Sciences

Expert opinion

ROMANIA AND RUSSIA ARE NOT ENEMIES

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â&#x20AC;&#x153;

Even if the relations between Russia and Romania do not offer many reasons for happiness, I believe that, there are more things that bring us together than set us apart.

FLORIN LU CA Secretary General, Titulescu European Foundation, a historian, Master in Business Law at Sorbonne University. Graduated from Saint-Cyr Military Academy, Public Finance Sector (France). Attended the Leadership and Performance Program at London Business School. Has over 20 years of banking and international executive management experience (including board memberships) in large corporations and organizations, has academic and diplomatic experience.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

THE MOST PRESTIGIOUS ROMANIAN DIPLOMAT, NICOLAE TITULESCU, STATED THAT «IN THE HISTORY, RUSSIA HAS ALWAYS BEEN AN ALLY AND NOT AN ENEMY OF ROMANIA». EVEN IF WE CANNOT TALK ABOUT AN ALLIANCE AT THIS MOMENT, I BELIEVE THAT ALL OF US HERE AGREE THAT WE ARE NOT ENEMIES AND THAT WE CAN BUILD GOOD NEIGHBORHOOD RELATIONS BETWEEN OUR COUNTRIES EVEN ON THE DIFFICULT AND COMPLEX BACKGROUND OF OUR TIME.

my opinion, a good neighborhood can be built on at least 5 pillars: — shared understanding of the current situation; — diplomacy; — economic exchanges; — cultural relations; — sports.

Сurrent context When we speak about a shared understanding of the current context we do not refer here to a Russian or a Romanian understanding, but to a common Russian – Romanian vision. Here are a few subjects that I would like to propose for your consideration in building this vision: First of all the Romanian Carpathians are the link between two civilizations, the Western and the Eastern world, as well as the Russian Urals are the place of interference of the European and Oriental cultures. Each of us have to cope, at different scales, with a vast cultural and geographical diversity. Further we have to point out that over the last 30 years both Russia and Romania have suffered important demographic losses and this phenomenon is unlikely to disappear soon. In both Romania and Russia, the collective memory accounts of the traumas of the multiple invasions. This awareness of the invasion, as the French analyst Emile Montegut was saying, «exists and will continue

to exist until Europe finds its lost unity or, better said, until it finds a new unity». We, the Romanians, should understand the dramatic moments lived by Russia in the nineties during the last century and the consequences of those tragedies, as well as the Russians should understand the causes that led to the formation of an anti-Russian sentiment in Romania. However we should understand that the deepest geopolitical conflicts and peace cannot be solved exclusively by international law, while the concepts of collective security and balance of power are not opposite, but complementary. On the other hand, beyond the geopolitical and economic background of these days, the present offers many challenges. The digital and internet is shaking the traditional cultures and working methods, transforming forever the human behaviors. The classic political ideologies undergo major changes too. The way in which the politics is conducted has dramatically changed, and the role of the State institutions evolved both in Russia and in Romania and no one knows now what governance model will rise on the medium term. I think that the providential leaders are about to disappear and be gradually replaced in history by individuals capable of building efficient teams and durable systems.

The growing importance of alliances, international organizations and large worldwide corporations does not prevent a return to economic nationalism and State sovereignty. I do not however believe that a return to an European or global nationalism are possible. I believe in the appearance of a subtler sovereignty, where the state institutions will find their vocation in the changing geography generated by the digital era and the cultural diversity that we are witnessing. More than ever, beyond geography, economy, diplomacy and army, the power of the States will rely heavily on their capacity to create influence networks at an international scale.

Monument to Eugen Garad in Bucharest, a Romanian poet, writer, fighter for unity of principalities, one of the founders of Romanian economy

Diplomacy When referring to Diplomacy, first of all I believe there is much to be done at a bilateral level. In July 2003 Romania and the Russian Federation signed the Treaty on Friendship and Cooperation. This treaty is valid, but unfortunately it is not alive. What are the most important stipulations of this Treaty? — The recognized principles of the conventions and regulations of international laws shall be complied with; — The use of force or threats of aggression are not acceptable; — Regional and sub-regional cooperation as part of the general European process; — Regular consultations; — Extended economic relations; — Cooperation in the fields of science, culture and intelligence; — Commemoration of the heroes. Some cultural actions and events on the commemoration of the heroes were more visible. Unfortunately very few of these important principles of the bilateral understanding are being monitored, animated or capitalized upon at their full potential. This treaty has to come to life by reviving the bilateral work commissions and by promoting individual relations between Russian and Romanian high officials and statesmen. I consider this to be possible. It is up to us to establish our priorities to make it possible. Our diplomatic relations have to also be active in the international organizations and conventions. Here we can build many things. We (Romanian and Russians) have to be aware that the West will impact the destiny of this world for a long time to come. In my opinion, the dialogue and cooperation between Romania and Russia will be more substantial if we embrace this reality and if we accept that all shared Romanian — Russian actions that we want to undertake have to be based on a convergence with the Western

countries. Starting from here, we could build a solid bilateral relation relying on a multilateral context with a changing geometry. It means that Romania could play a more active role in the teams of the European Union and NATO responsible for the dialogue with Russia; we can find convergence links to the United Nations Organization, a structure that has lost a lot of its magnitude during recent years. Russia might invite Romania to be more present in projects of the Eurasia Economic Union or the Shanghai Cooperation Organization; we could work together in the Republic of Moldavia, trying to replace current differences by useful projects; we could also find a common point and shared interest in the fight against terrorism, where both Russia and Romania have recognized expertise. Here I would like to remind you the words of our prominent diplomat Nicolae Titulescu: «I am one of those Romanians who can sign something in Berlin without being suspected in Paris, Prague or Moscow, because I am a partisan of

the collective Security and indivisible peace». I believe that in these words lies the foundation of our future diplomacy in the Romanian — Russian relations.

Economic exchanges The real challenge is to get the present military defense shield to turn into a capitalistic defense shield based on business projects involving all important actors interested in the Black Sea region, without ruling out of course the standing agreements and alliances of each country. From this perspective I believe that Romania — an important emerging market and one of the most promising investment destinations from Europe — may become a true connecting bridge between Russia and the Western world in order to set up business projects in the Black Sea region. The development of the Romanian — Russian economic partnerships depends on how well we are able to combine our interests. As for Romania, its most important economic interests are financial services, in order to answer the financing

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needs of many strategic industries; the infrastructure; the energy sector, common exploitation of the oil and gas resources at the Black Sea; IT sector; the medical system; research and education. Of course, the list of opportunities is not complete. We can talk of many other domains: tourism, agriculture, food industry and so on… I believe that one day, not far from now, we will be able to launch large business projects in the Black Sea region with partners from Romania, Russia, USA, European countries. But for this plan to work, the first step has to be the creation of a special instrument: a Business Forum in Constanta, a kind of Davos of the Black Sea. But first, we have to share the same vision which can be shaped based on a precise definition of our interests. Afterwards, we have to establish common principles for the utilization of the business potential in the area (currently the economic exchanges between our countries exceed EUR 4bn per year. I think that the real potential is between EUR 7bn and 10bn per year). And further we can think from the European perspective, es-

pecially in the light of our complementarity. We could get inspired by a series of resounding success stories that are presently functioning, for example European and American investments in Russia, European and American investments in Romania, Russian successes in the European Union. And, last but not least, we need to share a sentiment of solidarity, understanding that we could both benefit from working together.

Republic of Moldavia, for example, for the professional training and social rehabilitation of children and youth from poor environments. I believe in the same time that we should open up to the other Christian churches (especially Catholic and Protestant) and try to identify other common projects at a larger scale, capitalizing on the 150 years of experience of these churches in partnerships and social involvement.

Sport

Cultural ties Our cultural similarities and our shared Christian-Orthodox values can generate other common projects. Many manifestations from the Russian culture (music, literature, movies, ballet…) are welcome in the houses and souls of the Romanian people, just as Dimitrie Cantemir and his son Antioche were received and adopted at the Russian Imperial Court as true symbols of their times. I would like, for example, to see in the future a revival of Romanian – Russian movie projects, a common music festival, representatives of the Russian and Romania Orthodox churches working together in the

At the seminar dedicated to the centenary of the Russian Revolution organized by Rossotrudnichestvo in Romania and the Konstantinou Center for Soviet and Russian researches. The National Museum of Romanian History, October 31, 2017

Sport plays an important diplomatic role: many times, sport lead to reconciliation. We could use to meet more often on stadiums. I believe that Romania should organize sporting competitions for military teams from NATO countries, Russia and other countries of the Black Sea region, which would ease the tensions in the area; we could also organize competitions between Russia and Romania in domains as gymnastics, athletics, handball or football, actions that would help us communicate better. “Happy families are alike; unhappy families live their unhappiness in their own way…” said Lev Tolstoi in “Anna Karenina”. Even if our present relations do not offer many reasons for happiness, I believe that, there are more things that bring us together than set us apart. Let’s work on them!

Expert opinion

INTELLECTUAL PROPERTY AND EURASIAN FINANCIAL MARKET

www.rniiis.ru

“

Unfortunately today in public and corporate policy issues of intellectual property commercialization are often replaced by the issues of legal protection of the results of intellectual activity and its accounting.

V LADIMIR L O PATI N Academic advisor in The Republican Scientific Research Institute of Intellectual Property (RSRIIP), General director of Intellectual property corporation RSRIIP, Chairman of interstate (МТК-550) and national technical committee on standardization «Intellectual Property» (ТК-481), Doctor of Laws, Professor, honored scientist of Russia, expert of RAS

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

FUTURE EURASIAN INTEGRATION IMPLIES SINGLE FINANCIAL MARKET PENDING IN 2025 ACCORDING TO THE DECISIONS OF EURASIAN ECONOMIC COMMISSION (#146 DD. 27.09.2016) AND THE SUPREME EURASIAN ECONOMIC COUNCIL. WHAT DO WE HAVE TO DO TO SEE EAEU CREDIT, INSURANCE AND FOREX MARKETS IN 7 YEARS IN LINE WITH MARKETS OF GOODS, SERVICES AND LABOR? AND WHAT IS THE ROLE OF INTELLECTUAL PROPERTY (IP) HERE CONSIDERING GLOBAL RULES AND SPECIAL FEATURES OF CIS AND EAEU COUNTRIES WITHIN THE DECLARED DIGITAL AGENDA?

Global trade rules In order to develop successful economic regional and national relations, including innovative cooperation, it’s necessary to take into account the global trade rules. First, with IP market (fourth basket) being restructured, its role in the world trade in the 21st century is growing (from 4 to 15% of GDP). The world crisis of patent system is still on, and the share of unpatented sales has grown by several times (today it’s more than 80%), which doesn’t need a patent or mandatory public registration of deals. The share of commercialization of intellectual property secured by patents in EAEU and CIS is near zero and accounts for only 0.4 to 2%, besides every second patent valid for 20 years terminates after several years of its issue. In 25 years only 1.2 million patents were issued in the EAEU, only 350 000 of them are valid, and only 1–2 percent are sold per year. It evidences the ongoing crisis in the patent policy (a patent for the sake of a patent). The efficiency of the economic leverages of IP sales in Russia and other EAEU countries is far from great. According to the President of the Russian Federation «the added value contribution of IP turnover to Russia’s GDP is less than 1 percent. It’s not just little, it’s very little. In the USA it accounts for 12 percent, in Germany — for 7–8 percent, in the neighboring Finland — for 20 percent».

The most important thing here is profitability analysis of RIA (results of intellectual property) where the rights belong to the government. With six main public accounting systems for R&D and their results (Treasury, Russian Federal Agency for Intellectual Property, Ministry of Education and Science, Ministry of Communication and Mass Media, Ministry of Culture, Federal Agency for

Ministry of Economy of the Republic of Belarus Ministry of Internal Affairs of the Republic of Belarus

State Property Management) and with 85 percent of public financing of the common accounting system, the state has no rights for RIA. It gives background for corruption. «Leaky» accounting policy provokes corruption, «grey» IP turnover and industrial spying in favor of private companies and foreign states. During a project inventory the Republican Scientific Research Institute

Ministry of Economic Development of the Russian Federation Ministry of Culture of the Russian Federation Ministry of Industry and Trade of the Russian Federation

State Committee on Science and Technology of the Republic of Belarus

Ministry of Internal Affairs of the Russian Federation

State Customs Authorities of the Republic of Belarus

Federal Service for Intellectual Property of the Russian Federation

Federal customs service

National Center of Intellectual Property of the Republic of Belarus

Ministry of National Economy of the Republic of Kazakhstan Ministry of Justice of the Republic of Kazakhstan Ministry of Internal Affairs of the Republic of Kazakhstan State Revenue Committee, Ministry of Finance of the Republic of Kazakhstan National Institute of Intellectual Property of the Ministry of Justice of the Republic of Kazakhstan

BUSINESS DEVELOPMENT DEPARTMENT OF THE EURASIAN ECONOMIC COMMISSION

Ministry of Economic Development and Investments of the Republic of Armenia Ministry of Finance of the Republic of Armenia

Ministry of Economy of the Kyrgyz Republic State Service of Intellectual Property and Innovation under the Government of the Kyrgyz Republic

Intellectual Property Agency of the Ministry of Economic Development and Investments of the Republic of Armenia

State Customs Service under the Government of the Kyrgyz Republic

Interaction of the Business Development Department with the authorities of member-states Source: «Intellectual property within Eurasian integration» — www.eecommission.org

XXth meeting of Business-Dialogue headed by EEC Minister V. Nikishina, September 20, 2018

of Intellectual Property (RSRIIP) recommends to define the type of legal protection of RIA with regard to three main variants of its use: 1) for domestic production (copyright items — works of science, IBM PC, data bases; objects of related rights and know-how with obligatory patent search before R&D); 2) within national territory (in addition to the first variant — in Russia — common technology); 3) abroad (in addition to the first variant — patenting in the countries of anticipated use of RIA, accompanied by a «patent landscaping»). These measures will lead to lower official figures of patent bodies, but will ensure better effectiveness of legal protection for technologies and profitability of their use in favor of national technical competitiveness. Second, obviously there can be no innovations without intellectual property, they are interrelated and interdependent. According to WIPO Instruction on IP strategy work-out in emerging economies «IP strategy should be installed in the general development and be connected with current policy of economic, scientific and cultural development». Suc-

cessful examples in foreign countries confirm the idea. National strategies of innovative development and intellectual property in CIS and EAEU countries often ignore the abovementioned rules and conditions for a civilized IP market. In Russia these issues were initiated by RSRIIP and such strategy was prepared (on a common base) in 2006. However a long-term strategy for IP development still hasn’t been approved. Many strategies and programs of innovative development at national, sectoral, regional and corporate levels (more than 200) don’t include provisions on IP market. Third, the effective public control of management in these processes has been a necessary and obligatory condition for a successful IP market since 1967 (WIPO establishment). In EAEU and CIS countries this rule was reflected in the creation of single inter-state and governmental bodies having centralized the management functions for copyrights, related rights, patent rights and other intellectual rights with regard to all main IP objects (except Russia where functions of governance and control in IP are still dissimilated

among more than twenty federal agencies). Forth, unfair competitiveness and lack of IP market in EAEU and CIS are directly interrelated and interdependent. With digital economy, the share of added value in the turnover of IP will rise in the pricing of goods, services and finance, as well as the level of unfair competitiveness in this industry. In the last decade there has been a strong contradiction between patent monopoly on RIA and the opportunities to develop competitiveness on the markets of goods, works and services with the use of such IP objects. In the last 10 years the growth of patent issuance (in Russia — 5 %) is provided only by foreigners. Today in Russia every second holder of patent is a foreigner; in some industries the number is even higher — up to 90%. At the same time joint ventures are not created, licensed agreements are not executed with domestic producers, compulsory licenses are not issued. All this leads to shake-out of domestic companies in favor of international and foreign corporations. When legal monopoly of copyright holder results in actual monopoly on commodity markets, it means

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

unfair competitiveness and demands a patent reform, in particular for antimonopoly regulations. Fifth, with conflict of laws remaining on national level (in EAEU countries as well) and its growth considering rule-making by EEC and EAEU supra-national bodies, the role and importance of standardization increases — as a «soft power» regulator with possibility to use later the rule of «regulatory reference» when a voluntary standard becomes a compulsive one. Today in Russia there are 10 national standards in this sphere. For the development of the financial market with intellectual property the most important are national standards implied in the Program on national and interstate standardization in 2018–2019: «Intellectual property. Credit organization management», «Intellectual property. Stock market management» and «Intellectual property. Risk hedging». It’s necessary to consider global rules as well as national features of

Eurasian IP market in EAEU and CIS countries. It’s necessary: — to work out and approve an IP Development strategy and a special program for the establishment and development of Eurasian IP market as a part of global IP market and basic conditions for technological modernization of the national industry; — to change profoundly public and corporate strategies of accounting policy, of RIA legal protection in scientific and technical sector with budgetary financing to further commercialize the IP; — to actively use the institute of national and interstate standardization based on the technical committees on standardization «Intellectual property» (МТК-550 and ТК-481).

Challenges of digital economy The evaluation of legislation and legal practices of execution, turnover and protection of IP in Russia and other EAEU and CIS countries in

2015–2018 when shifting to digital economy has revealed the following challenges: — foreign software is still widely used to create corporate information systems. It bears considerable risks. For example, under an open license you are obliged to provide, free of charge, the developed software to anyone who wants to buy it or use programs for computer; — commutative license agreements claim non-exclusive rights as their object. However according to international law there are personal non-property rights which are inalienable, and exclusive (property) rights subjects to assessment, turnover, sales and subjects to relevant agreements; — such agreements on behalf of foreign companies (Microsoft, Oracle, etc.) claim as their subjects the so called official partners of these companies which distribute relevant services and software. At the same time there are no copies of licensed agreements between the corpora-

Plenary session «Digital economy — a shift to a new technological mode» within the All-Russian conference «Digital sector of industrial Russia 2017» in Innopolis (Russia). May 25, 2017

tion — rights holder and its official partner necessary for sub-licensed agreements, while the status of a partner and of a license holder do not always coincide; — agreements don’t usually include the type of use of software. However, unlike property law, in IP law, the absence of a ban does not imply the existence of consent. The consent must be expressed directly in writing in the form of an agreement, otherwise there is a risk of recognition this product as counterfeiting. Within the formation of digital economy in EAEU in 2016–2018 more than 60 decisions were made. Their assessment with regard to digital agenda for CIS and EAEU, revealed risk groups in IP sphere, subjects to measures of EEC and CIS Executive Committee as well as national authorities. Thus to build integrated information system (IIS) with integrated component EEC resolutions instructed the governments of EAEU member-states to unite national information resources in all sectors of economy, to ensure the work of national segments of the integrated system and the implementation of general processes within IIS EAEU. At the same time EEC «executes rights and duties of a right holder» regarding software of integration

Аdded value creating

Сontribution to equity capital Legal security

segment of IIS, and according to the Procedure of transfer of software of EEC integration segment to the integrated information system of EAEU and its use (Decision of EEC Board dd. 26.01.2016 #10), the Commission is not responsible for «any direct or indirect, special, occasional or other damage caused to the demander of the national segment of third parties acting upon charge of the on demander of the national segment regarding the use of software». With delicate character and the volume of data bases and information resources regulated by PC IIS EAEU the level of risk is obviously high, and the responsibility should be handles to EEC. Procedure of transfer of software of EEC integration segment to the integrated information system of EAEU should be amended considering that EAEU in the name of EEC has the rights on PC in this segment of IIS.

IP commercialization Unfortunately in public and corporate policy today IP commercialization issues are often replaced by the issues of legal protection of RIA and its accounting. At the same time the economy of intellectual property implies added volume; otherwise it becomes «as good as a headache». And it happens a lot today.

Investment resource

Figures change

The main ways to commercialize intellectual property are: — Build-up of added value (up to 10–15% of the product price), vertically (government order), horizontally (related items), mostly in the form of agreements (license, franchise, alienation, leasing, etc.); — Capital increase (via intangible assets — up to 50 percent); — Inclusion into equity capital (RSRIIP by order of Ministry of Industry and Trade of Russia is working on a package of such documents); — M&A of companies; — investments (loans, borrowings, banking guarantees on pledge of intellectual property); — securities pledge (assets and bonds of PJSC, LTD bonds, Russian depositary receipts; investment units; clearing participation certificates) on stock exchanges. To transfer IP into liquid assets, to decrease risks and manage them institutional mechanisms are needed. Most companies in EAEU and CIS still don’t have a single management system for IP life cycle. In late 2017 MOEX welcomed a meeting of Corporate Management and Investment Committee (with participation of RSRIIP and Association of Managers) called «Board of Director and capitalization of Russian companies

Joint management system

Authorization Pooling of assets

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

by means of intellectual property and intangible assets: practical aspects». The meeting pointed out that there is hardly any IP in Russia’s and EAEU economy unlike western companies. For example: in IBM 330 IP specialists accrue to 3000 employees. It brings $2–3 bn. of additional revenue every year. To overcome formalism and increase the role and effectiveness of Boards of directors in companies when solving the problems of IP commercialization one needs a relevant decision of shareholders as well as corresponding regulatory instructions including such measure as: — adjustment of strategies and programs of long-term and innovative development of companies with regards to national and intergovernmental industry strategies and programs as well as regional documents in this sphere (strategy committee); — creation of a system to reveal, assess and manage risks of IP within the framework of innovative, investment and budgetary policies (risk management committee, audit committee); — changes of the main effectiveness criteria for the boards of directors and management of companies (compensation committee, nomination committee); — authorization of an independent director to set IP policy and creation of a special committee in the board of directors (IP management committee).

Financing on pledge of intellectual property Financing on pledge of intellectual property can be legally based on the decision of Basel Committee on banking supervision «International Convergence of Capital Measurement and Capital Standards: A revised Framework», as well as on national laws. In Russia it’s Civil Code of the Russian Federation (Article 1233. «Disposing of an exclusive right» and Article 358.18. «Pledge of exclusive rights»). Here the pledge item is exclusive rights for IP assets.

According to Russian practice in 2009–2017 Rospatent registered more than 500 pledge agreements, 34 banks issued loans on pledge of intellectual property. At the same time the USA issue more than 4000 such loans every year. To increase this number EAEU and CIS need a system of risk detection and management with the following elements: — complex expertise (Legal — existence of RIA, author of RIA, rights holder, legal protection term; technological – patent search, prototyping, area of usage; economical – marketing report, cost assessment report for exclusive rights for IP item); — state registration of the pledge of exclusive right regarding the patent right objects, trade mark and the names of the places of goods origin (Article 1232 of the Civil Code of Russia); — notarial certification of license agreements on disposal of pledged item by pledger; — risk insurance and reinsurance (IP Value Insurance — in case of reduced income related to IPI disposal; IP Abatement Coverage — in case of breach of rights of beneficiary in IPI disposal by third parties; IP Defense Cost — in case of claims to beneficiary from rights holders — RPX Corporation, IPISC); — right to levy execution on a pledge within up to 180 days. To support the practice central banks in EAEU countries could include intellectual property in the I quality category to decrease loan loss provisions. Considering that EAEU is building single financial market, launches on January 1, 2025 single rules in services sectors (banking sector, insurance, forex market), promotes non-discriminatory access to financial markets of EAEU memberstates, we should take into account the results and recommendations of the International forum «Innovative development through the market of intellectual property». These recommendations address EEC, parlia-

ments, governments and central banks of EAEU countries and imply: — special provisions in the concept and the program of single financial market in EAEU regarding goals, principles and tasks to create mechanisms of IP management in the banking sector, insurance and forex market sector by 2020; — harmonization of legislation with international standards regarding IP risks including risks of digital economy, banking sector, insurance and forex market; — broader functions of Eurasian Development Bank (EDB) as an investment and innovative bank for large pilot projects of lending on pledge of intellectual property in EAEU countries.

Innovation

Alexey Antipov, Academician of the International Institute of Refrigeration, Candidate of Technical Sciences

FUTURE FOOD: MEAT SNACKS IN THE ASSESSMENT OF SPECIALISTS FROM THE DANISH COMPANY NIRO A/S, THE VOLUME OF WORLD PRODUCTION OF FREEZE-DRIED FOOD PRODUCTS IS ABOUT 70,000 TONS, OF WHICH 40,000 TONS ARE VEGETABLES, 25,000 TONS ARE MEAT AND FISH, 5,000 TONS ARE FRUITS AND BERRIES. THE GROWTH OF THE GLOBAL MARKET OF FREEZE-DRIED PRODUCTS IS ABOUT 3,5% PER YEAR. THE PRODUCTION OF THESE PRODUCTS IS CURRENTLY CARRIED OUT BY VACUUM FREEZE-DRYING (VFD).

is necessary to note the high quality of freeze-dried products, which, in their nutritious and taste properties, are comparable only with fresh frozen ones. The main advantage of products, produced by VFD, is the duration of storage (depends only on the expiry date). Disadvantages are the high cost of equipment and large amounts of energy. The moisture removal in VFD is 15-26 times more expensive than the cost of heat dehydration.

We were tasked to develop a new system of freeze-dried products. It was also proposed to replace the vacuum sublimation equipment by drying equipment under atmospheric pressure. In the future all this can reduce not only the operational costs of production of products but also the one-time costs for the value of the equipment. An exclusive atmospheric freeze dryer was manufactured for the East-Siberian State University. Processing by freeze drying in our facility is carried out at atmospheric pressure.

Chamber of atmospheric freeze dryer

The dryer is presented in the photo 1. The equipment for sublimation of frozen moisture in the product is located in a low-temperature chamber and consists of:

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

t = –25°C φ ~ 100%

t = –5°C φ ~ 100%

Heater Air cooler

t = –5°C φ = 60%

Pieces of meat Perforated baking tray

t = –5°C φ ~ 100%

Fig. 1. Flowchart of the sublimation process at atmospheric pressure

— air cooler; — fan; — air-duct; — freeze drier. Flowchart of the sublimation process at atmospheric pressure is shown in the Fig. 1. Air passes through an air cooler, where moisture is frozen from it. The temperature of air decreases, its absolute humidity reduces and the relative humidity increases. Then air enters the heater, where the temperature of air increases but the relative humidity decreases. Dry air, «flow around» pieces of meat, takes up moisture from the product; its tem-

perature increases, as well as absolute and relative humidity. Already moist air is sent to the air cooler and the cycle of its processing is completed. The optimized freeze drying process consists of the following steps: — freezing of heat-treated meat to –30°С, at the same time, about 80% of moisture in the meat is frozen out; — processing of dry air with a temperature –5°С to residual moisture of 20%; — redrying to a specified final humidity of 5% in a thermal dryer at a temperature of 40°С.

At the same time, freeze drying at a temperature pressure makes it possible to use the natural cold that is so rich in Eastern Siberia. It was the East Siberian State University in 2003 that opened a laboratory on innovative atmospheric freeze-drying and intensively uses it to study the production of various products. There the idea was born to unite national traditions and modern technology. Thus, the technology for obtaining the national meat product «Burdoun» was developed with the help of set of equipment for atmospheric freeze drying. Foreign experts in sugarless snacks say: «Chips are not only the most popular but also the oldest kind of snacks. Their industrial release began in 1850 in the American town of Saratoga, in the state New York. In 1913 potato chips began to be produced in the UK – under the name «crisps» and half a century later — in the USSR». As always they have poor knowledge the history of the peoples of Russia who were engaged in the production of snacks long before the discovery of America. Back in the IX–XIV centuries on the territory of the present-day Buryatia, the peoples whom the Russians called «fraternal» (from where their modern name «the Buryats» came), were engaged in the production of snacks, and even with technology that is unknown in the West and in the 21st century. Preparation of a number of national meat products was carried out using natural cold. The manufacturing technique was that raw or lightly cooked meat was hung where it was cold, and where warm air came from the home. Usually it was in November when the mass slaughter of livestock was conducted. The meat was taken off in March-April. The feature of weather in Eastern Siberia during this period is a low and fairly stable temperature: from –20 to 40–50°С. Of course, thaws were possible, and nobody observed the temperature

Acceptance commodities

Quality attributes of national meat product «Burdoun» Source: www.cbr.ru/statistics/?PrtID=int_rat

Meat cuts (meat bars weighing 400–500 g) Pickle pumping (5% of the mass of raw materials, 10% NaCl solution, temperature 3°С, time — 12 h) Toing break up (cubes or strips with a defining size of 5 mm) Thermal conditioning of meat (temperature — 100°С, time — 5–7 min) Freezing (temperature –18–20°С, time — 30 min) Sublimation drying (time — 6–7 h, pressure — 101,3 kPa) Pre-packing, vacuum packing Storage at uncontrolled temperatures (duration — 2 years) Fig. 2. Technological scheme of obtaining a meat product «Burdoun»

regime but by its properties this meat was sublimated. However, the historical literature notes the usefulness of meat, dried in this way. According to Buryat legends, the warrior received a cow’s heart stuffed with meat powder and could «autonomously» exist for a month. Confirmation that those products were sublimated is that only sublimated meat can be turned into a powder. In Fig. 2 shows the technological scheme of obtaining a meat product «Burdoun». Studies were conducted to identify the quality of meat product, sublimated at atmosphere pressure. The quality is an integral indicator and is determined by the organoleptical, physicochemical and microbiological characteristics of the investigational product.

Attributes

«Burdoun»

Taste, smell, consistency

Match the taste and smell of the raw material, the consistency is elastic with slight fragility

Weight fraction, % moisture

4,22 ± 0,22%

protein

79,8 ± 2,68%

fat

8,50 ± 0,81%

ash

6,52 ± 0,61%

NaCl

3,1 ± 0,24%

Calories

445,70 ккал

Coefficient of recovery

2,5 ± 0,2

CGB (coliforms) in 1g of product

Not detected

Pathogenic, including salmonella, in 25g of product

Not detected

Molds

Not detected

Quality attributes of meat product «Burdoun» are presented in tab. To determine the storage times, microbiological indices of freezedried meat products were studied during storage, studies were conducted on the degree of initial contamination of meat products. As a result of the experience the coliform bacteria and the pathogenic flora were not detected. Bacteriologic examinations of samples of freezedried meat products upon storage for 24 months showed a slight growth of microorganisms, which, however, did not exceed the accepted level. Pathogenic microflora was also not detected. The studies were identified that the sublimated product «Burdoun» can be stored for 2 years. Organoleptic studies have shown that the developed technology of

production of this product allows to get excellent meat snacks in taste palatable which are fundamentally defferent from jerky meat. Sublimated snacks are a product with an elastic consistency and slight fragility which have a concentrated meat taste. The use of atmospheric freeze drying gives an opportunity to reduce energy costs more than twice as well as allows using natural cold and reducing costs several times more (0,3 kW/1 kg of sublimated meat). Thus, this could lead to the conclusion that the equipment developed by the company «Fresco» for atmospheric freeze drying can replace the traditional vacuum, with a significant reduction in the value of equipment and energy costs for the production of sublimated products in it.

Russian Union of Industrialists and Entrepreneurs

FINANCIAL & BANKING ASSOCIATION OF EURO-ASIAN COOPERATION

LОТТЕ HОТЕL МОSCOW 2 Bld., 8 Novinskiy Blvd., Moscow, Russia

V MOSCOW INTERNATIONAL FINANCIAL AND ECONOMIC

FORUM EURASIAN ECONOMIC UNION&EU: SEARCH FOR NEW FORMATS NOVEMBER OF COOPERATION

EURASIAN ECONOMIC COMMISSION

FORMAT • Plenary sessions • Breakout sessions • IBC meeting SESSIONS OF THE FORUM I session. Production, storage and processing of agricultural products II session. Gold-mining: new opportunities and technologies III session. Customs and logistics — «alpha» and «omega» of foreign trade IV session. The International Banking Council meeting «Regulation and development of financial technologies: problems, risks, security»

+7 495 663-02-08/13/19 sgk@fbacs.com, tkd@fbacs.com s.arkhipova.fbacs@mail.ru www.fbacs.com

Financial system of the countries of Eurasia

BANKING SECTOR IN POLAND IN 2017 www.zbp.pl

â&#x20AC;&#x153;

The significant acceleration of the Polish economy's growth rate observed in 2017 and the continuing recovery in Poland's main trading partners favours the development of the banking sector.

PAW EL PNI E WSKI Director, International Relations Department, Polish Bank Association

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

General introduction 80 70

70,3

60 50

43,0 40

35,3 32,2 27,8

19,9

11,8 14,9

10,1 5,5 1,9 0,8

4,3 3,7

2,5 4,2 3,5

3,5 2,1

7,3 0

2,6

1,0

0,0

0,9

...

2,0

–0,9 2017

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–10 1991

Poland was the only European Union member state to post economic growth amid the financial crisis. Even in 2009, when the whole EU went into recession, Poland continued to grow at 2.6 percent. Today, Poland’s economy is over a quarter larger than at the onset of the crisis. This remarkable performance resulted from a number of factors, including timely fiscal and monetary stimulus, a large depreciation of the currency, and a relatively large domestic economy, which limited the country’s exposure to falling international trade. In addition, growth was supported by growing inflows of funds from the European Union, a diversified export structure, and sustained confidence among Polish consumers and entrepreneurs. Poland’s good performance has also been driven by a healthy banking sector. Polish banks remained profitable, liquid, and well-capitalized throughout the crisis. They did not need a single dollar of public support. In contrast to most other EU countries, Poland’s banks managed to increase lending to the private sector during the crisis, supporting the country’s growth. Before the dissolution of communist rule in Poland, all banks in Poland were state-owned. The gradual transformation of the country to a market-oriented economy was ini-

Inflation in Poland Source: GUS-Polish Central Statistical Bureau

tiated during 1992–1997 with the restructuring of some of its financial institutions. In short, the late 1990s witnessed the flowering of the banking sector, which emerged as a commercially-oriented entity. To put things in perspective, the number of banks in Poland declined by over 60% since 1995, thanks mainly to the structural changes that were implemented in the cooperative banking sector. At last count (May, 2018), the number of banking and credit institutions stood at 615, of which 35 were commercial banks, 29 were branches of credit institutions and 551 were co-operative banks. At the end of May 2018 the sector employed 164 685 people and

had 13 536 service outlets (branches and sub-branches).

Polish banks and the crisis The banking sector in Poland was able to weather the financial crisis without support from the government. This is because the seeds of the banking sector’s resilience were sown well before the crisis struck. All banking activities in the country come under the purview of the Polish Financial Supervision Authority (PFSA), a publicly financed entity established in 2006. Since January 2008, the agency has become the single contact point and watchdog for all segments of the Polish finan-

“

subsidiaries to bolster their lending activities back home. Timely intervention by institutions such as the International Monetary Fund and the European Bank for Reconstruction and Development ensured that Western banks stayed put in Poland. The Vienna Initiative, launched in January 2009, made it mandatory for parent banks to maintain their agreed exposure limits. What’s more, the scheme also gave banks the flexibility to utilize sector support packages announced by their home countries to recapitalize their Polish subsidiaries. Another helping factor has been the counter-cyclical role of PKO BP — a commercial public bank and the largest player in the Polish market with almost a 20 percent market share — in helping to deal with the crisis. While foreign-owned banks, which controlled then almost 75 percent of the banking sector’s assets, were cutting lending, PKO BP was expanding credit action at the same time. Its loan portfolio increased by 1.2 percent of GDP in 2009 and represented 40 percent of total new bank lending in that year. The bank’s lending increased for all market segments, including the crucial small and medium-sized enterprise sector. PKO BP’s decision to expand credit was based on the country’s strong economic fundamentals, while lending decisions of foreignowned subsidiaries largely followed

PKO BP’s decision to expand credit was based on the country’s strong economic fundamentals, while lending decisions of foreign-owned subsidiaries largely followed the risk-averse policies of their international parent banks.

cial market. Even a cursory glance at the PFSA’s report card during the period 2006–2011 would show that not a single financial institution in the country has failed since the regulator took charge. Most of the banks in the country followed simple business models, staying away from risky products, which also helped keep them in good stead. However, it won’t be a fair assessment to say that Polish banks weren’t hit by the financial crisis at all. Before the crisis, the easy availability of credit until 2008 was the main driver of growth in Eastern Europe. But Polish companies and households alike, who had gone on a borrowing spree during the credit boom, found it tough to service their debt once the crisis came. Their problems were exacerbated by the fact that the many loans were denominated in foreign currencies such as Swiss francs or euros. It was feared that the parent foreign banks would pull out money from their 5 4,71

4,41

4,5

4,15

4,10 4

4,26 4,26

3,5

4,17

3,41 3,51 3,09

3 2,94

2,85

2,5

2,96

4,27

4,17 3,90

4,09 70,3 3,63

4,42

4,38

3,64

3,01 EUP/PLN USD/PLN

2,43

EUR/PLN, USD /PLN exchange rate Source: NBP-Polish central bank

07’2018

2017

2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

2006

2005

2004

2003

the risk-averse policies of their international parent banks. The government supported the bank’s rights and new share issue in 2009, which strengthened the bank’s capital base and allowed for expansion of lending. PKO BP maintained a conservative funding structure before and during the crisis, which minimized its dependence on the refinancing market. The bank’s domestic deposits fully financed outstanding loans, in contrast to the market average, where loan-to-deposit ratio reached at that time almost 120 percent. PKO BP improved its liquidity owing to an outflow of deposits from foreign-owned banks, early repurchase of long-term bonds by the National Bank of Poland, and a reduction in the mandatory reserve.

Polish banking sector in 2017 The situation of the banking sector in 2017 remained relatively stable, thanks to sustained economic recovery and the environment of recordlow interest rates. The capital base was strengthened (equity increased from PLN 175,5 billion at the end of 2016 to PLN 198,2 billion at the end of 2017 (i.e. by 12,9%), the Total Capital Ratio (TCR) increased at the end of 2017 from 17,7 to 19,0%, and the ratio of Common Equity Tier 1 (CET1) from 16.1 to 17.3%) It was achieved thorough retaining at the banks a substantial part of the profits earned in connection with the individual recommendations received from the Chairman of the Polish Financial Supervision Authority. The satisfactory capital position is confirmed by a small percentage of banks with TCR of less than 12% or CET1 lower than 9% (0,3% of banking sector assets). The situation in terms of liquidity remains favourable. Key liquidity ratios remain relatively stable and stay at satisfactory levels (Average LCR in the sector remains at 150%). The ratio of loans to non-financial sector to deposits from this sector

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

Proﬁts PLN gross

Proﬁts PLN net

18,490 13,750

18,080 13,900

2013

14,310 11,310

2012

19,970

18,650 15,425

2011

15,980

19,144 15,446

10,112 8,278

14,206 11,420

15,539

19,594

2015

2016

2017

2009

2010

2014

Profits in Polish banking sector 2009–2015 (in PLN bn ) Source: PFSA

has further decreased (from 94,7% at the end of 2016 to 93,9% at the end of 2017) supporting further development of the sector. Despite the satisfactory situation in terms of current liquidity, actions aimed at increasing the stability of funding sources are recommended all the time. In particular, the Polish Financial Supervision Authority indicates need for further diversification of the the funding sources and lengthening the maturity of liabilities. Net profit realised by the banking sector in 2017 proved to be lower by than in the 2016 (net profit of the banking sector amounted to PLN 13,75 billion and was lower by ca. 2.1% than in 2016). This was mainly caused by extraordinary profits gained by banks in 2016 due to the sale of shares of VISA Europe. Had the extra income been excluded the profits would be ca 20% higher than in 2016. In 2017, the profits from banking operations improved (by PLN 2,4 bn, i.e. 4.1%), which was due to the increase in net interest income (by PLN 4,6 bn, i.e. 12.1%) and the result on fees and commissions (by PLN 1,15 bn, 9.1%), while the result on other banking activities decreased (PLN –3307 million, –38.0%). The improvement in net interest income, which reached a record level in history, was due to changes in the deposit and credit policy made in previous periods consisting in lowering

interest rates on deposits, while increasing the interest rate on some loans. As a result, interest income increased by PLN 4,26 billion i.e. 7.9%, while interest expenses were reduced (PLN –338 million, –2.1%). The growth of business volumes in some areas also supported the increase in revenues. On the other hand, the increase in net fee and commission income resulted from the increase in income from loans and advances granted in some banks, the sale of insurance products, the servicing of bank accounts, payment and credit cards, investment fund services, brokerage and emission organization, etc. The observed changes translated into an improvement in the interest margin (from 2.29 in 2016 to 2.44 in 2017), but the remaining basic performance measures deteriorated slightly. In particular, there was an increase in the cost ratio (from 55.97 to 56.36), a decrease in ROA (from 0.84 to 0.78) and ROE (from 7.76 to 7.07). In the case of ROE, however, it must be borne in mind that the decline observed in recent periods is also a consequence of a significant increase in bank funds. Despite a generally favourable situation, the decline in revenues in some areas observed in recent periods, as well as an increase in burdens and an increase in regulatory requirements, is a significant challenge for some banks and requires them to

take actions that will provide them with an adequate level of profitability in the coming years. The acceleration of the economic growth rate influenced the increase in the scale of the banking sector operations in certain areas. The nominal growth of the balance sheet total recorded in 2017 (by PLN 70.4 billion, i.e. by 4.1%) was lower than in 2016, but this was due to the strengthening of the zloty against the main currencies. After eliminating the impact of changes in exchange rates against the zloty, the increase was higher than in 2016. Banks continued activities aimed at increasing the efficiency of operations through optimization of employment and sales network. This process was strengthened by acquisitions and mergers as well as the development of electronic banking. As a result, in 2017, there was a reduction in the number of employees in the banking sector (by 4,400) and sales network (by 1,083 branches). Bearing in mind the global trends, one can expect that this process will be continued. The level of concentration has not changed significantly (the share of the 10 largest banks in the sector's assets decreased marginally and at the end of 2017 remained at 70.1%). In 2017 the most noteworthy change in the structure of the banking sector was the increase in the share of domestic investors in banking sector assets. The share passed above 50% as a thanks to the takeover of Bank Pekao SA by PZU SA and PFR SA. As a result, for the first time since 1999, the share of domestic investors in the banking sector's assets has been higher than the share of foreign investors (at the end of 2017 it amounted to 54.5%). In 2017, the acceleration of lending growth was observed the value of total loans increased by PLN 41.9 billion, i.e. by 3.6%. This was mainly due to the increase in loans to households and enterprises, and to a lesser extent to the increase in loans to the financial sector.

creased (by PLN 14.2 billion, i.e. by 3.7%), and the recorded increase was higher than in 2016. In the currency structure of the portfolio there was a further reduction in the share of foreign currency loans (from 41,4% at the end of 2016 to 34.3% at the end of 2017), as well as the reduction in the debt in the original currency (CHF loans decreased from CHF 32.6 billion at the end of 2016 to CHF 30, 0 billion at the end of 2017). Acceleration of the growth rate of the economy was contributed to the expansion of lending in the area of corporate loans, the increase in 2017 (by 6.1%) was significantly higher than in 2016. The increase was observed both in the area of loans for large companies and loans for SMEs.

135,2

381,3 234,4234,4 165,9

373,9 212,0 169,3

191,6 181,9

335,7 190,4 165,5

321,8 167,0 168,7

143,5 178,3

121,2

169,3

217,8 98,2

75,6

126,9 59,1

28,2 50,0 78,2 52,2 74,7

150

135,0

200

142,1

194,1

250

197,8

267,5

Total

300

100

319,0

FX mortgages 350

355,9

PLN mortgages

400

400,3

450

259,1

In 2017, the value of the portfolio of household loans in nominal terms was only slightly increased (by PLN 11.3 billion, or 1.7%), which resulted from the strengthening of the zloty, resulting in a reduction in the currency loans denominated in PLN. After eliminating the impact of exchange rate fluctuations, the recorded increase was significantly higher (by PLN 32.9 billion, i.e. 5.2%). The growth rate of mortgage loans remains relatively stable. Although in nominal terms in 2017, the portfolio of these loans decreased (–6.0 billion PLN, –1.5%), it was also due to the strengthening of the zloty. After eliminating the impact of exchange rate fluctuations, the total sum of housing loans in-

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Янв. 2016 2017 2015

Zloty and foreign currency mortgage loans in Polish banking sector (in PLN bn)

1335,3

1294,6

1159,4

1200

1057,0

1400

1711,6

1420,0

EUR

1600

1532,0

PLN

1599,9

2000 1800

1781,4

Source: PFSA

338,1

359,6

375,6

387,2

427,2

400

326,5

600

293,6

800

292,8

257,9

1000

2010

2011

2012

2013

2014

2015

2016

2017

200 0

2009

Polish banking sector assets (PLN bn and EUR bn) Source: PFSA

From the point of view of the loan's purpose, the increase in lending was mainly observed in the area of investment credit. In the context of dynamics of the credit action, one has also to keep in mind the constant development of alternative forms of financing operations and the fact that financing of some enterprises controlled by foreign capital is based on funds from the parent group. The quality of the total loan portfolio remains stable. In 2017, there was a slight decrease in impaired loans (by -1.2%), which combined with an increase in the loan portfolio led to a decrease in their share in the entire portfolio (from 6, 2% at the end of 2016 to 5.9% at the end of 2017). In 2017, a significant decline in the growth rate of non-financial sector deposits was noted, and their increase (4.1%,) was the lowest in recent years. This concerned both household deposits, and deposits of the enterprise sector. At the same time there was a further increase in the share of current deposits at the expense of term deposits (in the case of household deposits, this share increased from 56.0% at the end of 2016 to 60.6% at the end of 2017). At present, it is difficult to say whether the decline in the growth rate of the deposit base observed in recent periods will be permanent. In particular, accelerating economy encouraged some enterprises to expanding the scale of investments on the basis of own funds, including those held so far in banks. However, undoubtedly, the development of the deposit base remains under pressure from the low interest rate environment, which reduces the propensity to save in banks. Additional pressure is exerted by the return of inflationary phenomena, which causes that real interest rates on deposits become negative, prompting some depositors to look for alternative forms of saving and investment. The significant acceleration of the Polish economy's growth rate ob-

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

1200

Enterprises dep. Households dep.

1000

730,8

761,3

665,7 800

606,4 548,2

600

477,4

516,0

422,4 387,7 330,8

400 238,8

262,4

200 125,9

149,1

2006

2007

2008

165,1

182,8

206,0

191,3

209,7

2009

2010

2011

2012

2013

229,4

253,3 274,9

284,9

2014

2015

2017

0 2016

Deposits for Polish enterprises and households (in PLN bn) Источник: PFSA

1200

Enterprises credits Households credits

1000

628,5

660,7

671,9

588,3 800 532,0

533,2

555,5

475,4

600

368,6

400

416,4

254,2 183,4

200 138,3

171,7

2006

2007

222,7

222,1

219,7

2008

2009

2010

264,5

272,3

277,9

300,9

327,3

2011

2012

2013

2014

2015

344,9

366,0

2016

2017

Loans for Polish enterprises and households (in PLN bn) Source: PFSA

served in 2017 and the continuing recovery in Poland's main trading partners favours the development of the banking sector However the external environment of the Polish economy has a number of sources of uncertainty and potential risk, and the realisation of unfavourable scenarios may lead to an increase in risk aversion, zloty weakening, an increase in risk premium for Polish assets, and in the case of accumulation of negative phenomena may lead to the deterioration of the economic situation in Poland (in the central bank’s opinion the main source of uncertainty and risk is possible downturn in the US or the euro area, oil prices in global markets, possible slowdown of integration processes in the global economy and changes in supply on the domestic labour market). The article was prepared on the basis of reports and documents of Association of Polish Banks (Związek Banków Polskich), Polish FSA (Komisja Nadzoru Finansowego) and Polish central bank (Narodowy Bank Polski)

editorial guest

«I WISH TO KEEP THE “FLAME”...» TODAY OUR GUEST IS THE HERO OF THE RUSSIAN FEDERATION, SPACE PILOT OF RUSSIA ALEXANDER MISURKIN, WHO SPEAKS ABOUT HIS UNIQUE, EXCITING AND FAR FROM EASY PROFESSION, ITS FEATURES, AS WELL AS HIS OWN PHILOSOPHY AND PLANS.

lexander, on behalf of our readers we would like to thank you for your consent to answer our questions. If you don’t mind I would like to begin with the most common one. How did you decide to become a space pilot? I have always felt drawn to the world of unknown. Sometimes my mother allowed me to watch «Star Wars», and I’m grateful to her for that. I remember how my friends and I were seriously going to build

a flying saucer. Actually I wish everyone to have a strong idea and follow it. And it doesn’t matter what you will be, the main thing is your desire. As for me, I made a choice of my profession at the age of about 12. And further I was following the plan: aero club, air force school for pilots, military service as a pilot, shortlisting of astronauts… You were born in the Smolensk Region, but the citizens of Orel al-

so consider you their townsman, moreover you are an honorary citizen of this town. How did it happen? It is connected with the change of domicile when I was a child. I went to school (second grade) in Orel and then spent all my youth in this town. My parents also live there, so Orel is my hometown. I certainly don’t deny Smolensk Region, which is all the more the homeland of the first astronaut, but that’s how it all happened.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

This year you returned from your second flight. And both of your flights were really long-term. Tell us about adaptation? Yes, I returned on February 28. I had promised to bring spring, but still it came pretty late… As for the flights, I wouldn’t say that they were long-term, they were quite standard. Today almost all our flights last for half a year. And mine wasn’t an exception. There is a lot to tell about adaptation… For example after the flight I found out that I had grown up for 2 sm.! And in a couple of days after landing I returned to my regular height. It’s because your vertebra diverse without usual weight. Though we run there and even have a special costume with weight for muscles and upright posture. My colleagues don’t like it, but I had been wearing it all the flight, and nevertheless I grew up. Another thing is a fast weight gain after the flight. It happens because of fluid redistribution. We all remember that we consist of water for eighty percent, and in normal life the fluid goes closer to the legs due to gravity. While in the space the fluid redistributes and goes closer to the head. And the brain doesn’t like it by the way, it even aches sometimes… So, our body perceives this efflux of fluid to the head as fluid surplus and begins getting rid of it. But when we come back to the Earth we have a lack of fluid, and here comes weight gain. I gained about 8 kg during the first week on the Earth. And the amplitude increases every time. With muscles it’s easier, maintenance system is very good. The next day after landing I went to the gym and did as many chin-ups as before the flight. But the main thing is vestibular tolerance, of course. I think you have noticed that after the flight the astronauts are lead by the hands. It’s not because of their weakness but due to vestibular defect. Our vestibular system is designed for

gravity, and in zero gravity you get under transient performance. I’m sure you all have heard about kinesia. And then you return and it starts again. That’s why you see these waggles and rickety walk. By the way I was surprised: after the first flight I recovered faster, I felt no discomfort after three-four days of my usual life. After the second flight it took me longer… But in general the rehabilitation begins on the second day after landing, including the physical one. We

Reference Two flights and four spacewalks 116th astronaut of Russia (USSR) and 531st astronaut of the world Alexander Misurkin was in space twice on the International Space Station during 334 days 11 hours and 29 minutes. Both expeditions were marked with records of spacewalk time: the first one (with Feodor Yurchikhin) lasted for 7 hours and 29 minutes, the second one (with astronaut Anton Shkaplerov) lasted for 8 hours and 12 minutes. In general Alexander Misurkin had four spacewalks and spent 28 hours and 13 minutes in the open space.

Meeting on the Earth

don’t go running, of course, but we swim — the load on your joints is not so heavy in the swimming pool. You had four spacewalks. Moreover in you first spacewalk you spent record time in the open space among Russian astronauts, and in your second spacewalk you beat your own record. Has anyone spent more time in the open space after you? There was a comic situation with the spacewalk. The next day after our first record we got in touch with a specialist who had trained us on

the Earth, in the Operation Control Center and supported during the spacewalk. He congratulated us and said that the previous record was achieved twenty years ago, and ours might last the same time. However in just two months our colleagues established a new record! And my friend was in that team. So I called his wife with congratulations, and she laughed: «Sorry, we didn’t mean it». Jokes aside, the time of spacewalk is limited by the possibilities of a space suit, to be precise its ability to absorb СО2, and this time is usually

10.5 hours. And when people say that a spacewalk lasted for eight hours and there is still a large quantity of oxygen, one should remember about the time spent in the space suit inside an airlock. These procedures of direct and reverse airlocking also take time: pressure leak check for a space suit, for entry hatch, denitrogenation … So when my colleagues had a spacewalk of eight hours and seven minutes everybody considered it a reasonable limit from the technical point of view, and nobody expected any records. However there was a

Just before the spacewalk

44th spacewalk on ISS

small force majeure, and as a result the spacewalk was longer than expected. This time we had a task to make a high-speed data link system which would allow to transfer large volumes of necessary scientific information. It’s necessary for scientists to get experiment data online. However the antenna didn’t return to its normal position. And it was important since in its shipping position in which we were working with it, the antenna was lapping over the docking unit in the assembly compartment of the service module, and it couldn’t be left in such position. So

we spent some time to return the antenna to its normal position. Thus I treat such records with a certain touch of humor. As for our record, it hasn’t been beaten yet — there hasn’t been any spacewalks yet. And normally nobody plans such long spacewalks… It was said that during your first flight you discharged two cargo space crafts «Progress», had three spacewalks. Your second flight lasted the same time. What are its results? Well, it’s a difficult question. It’s not about the number of discharges or spacewalks. They are not the results as such. It is the quality assessment that should be a result, not the quantity. My first flight was really exciting for me. The main task was to test a new rendezvous and docking system we were the first to test within ISS. And I am happy to be part of this new development stage of the Russian cosmonautics. Earlier the docking of two space ships took about two days, and now we managed to accomplish it with a short scheme for only six hours. It’s a great victory. It was all new for me, and besides after that I had a really busy program with spacewalks! I would like to add that it was when Feodor Yurchikhin and I set a new record of a spacewalk in Russian space suits. We had a task to show that the system of a Russian space suit can ensure normal life-sustaining conditions for an astronaut for a long period of time– and we succeeded. The second expedition had less «action»: I realized that I would see nothing new, and I was looking for motivation to keep the «flame» inside. However it wasn’t difficult: in the second flight I was a crew commander and the captain of the expedition which implies a different level of responsibility. You can feel it only when you do it, not just watch from the side. My colleague has a saying «Deputy is not a head», which I to-

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

tally agree with. When you’re in the flight engineer’ seat, you estimate a situation, understand what is happening and offer a solution to the commander. He usually agrees, and the crew does what is needed. And you think there is no difference if you sit in the commander’s chair. Meanwhile when you do so, you realize what your word and your decision mean. When even tiny things happen, you realize the price of you decisions… That’s why in the second flight it was important to me to go as an honorable commander and to meet all expectations. As for the expedition itself, we are conducting a long-term scientific program and our task is to make everything correctly and not to spoil experiments. The results are being collected step by step and are seen with statistics, they are not expected right after the flight. The biggest part of all the tests — I took part in fifty of them — is connected with the problem «a man in the space», with further research of the impact of space flights on a human and the ways to counteract it. You said that you had wanted to become an astronaut from youth. But after the first expedition your award and rank were delayed for three years… Did you think about quitting your profession? I prefer inside records and I treated this situation as a kind of antirecord too. Eventually it all ended happily. In 2016 I was already a reserve crew commander, we were going to Baikonur for pre-launch procedures. At that moment I received an invitation for September 22 to the Kremlin — to get the award from the President’s hands. The start was scheduled on the day after next as far as I remember, and to get the award we had to shift all the launch programs. So I thought it was not on the cards… However three day before the start a technical problem appeared, and the start was shifted for one month. So went back to the Star

In the Autumn, 2017 the space suit «Pobeda» with the dreams of 180 children from 10 cancer hospitals in four cities of Russia and USA was delivered to the International Space Station «MIR»

City and I attended the rewarding ceremony without any problems, moreover it was the day before my birthday. Everyone was joking that «Misurkin has broken the spaceship on purpose to get to the meeting with the President». So I take the situation easy. But I would like to add that one of the most valuable things in my profession is that you can grow up. And such anti-records can also help you with that. These situations can offend you if go to the profession for material values, but if you have other goals and ideals you take it easy. When young people ask me about a salary of an astronaut I answer it’s not their profession… Motivation is always important, and it’s not money at all. I meet such people, of course, and I’m always bored and uncomfortable with them. It is the shared benefit and good results that should come first, and only then you begin to make

money on it. Yes, we live in a material world, but it will be more effective if you try to make this world better, not only take something from it. And when you bring something good, you receive something good and benefit. What are your professional plans? For example your colleagues had three, four or five expeditions. Are you going to continue your flights and for how long? I have always needed a challenge, I’m not fond of monotonous work. I went on an excursion with my class at school to a radio tube factory and I saw an assembling conveyer there, and after the excursion I thought that such work for eight hours every day wasn’t my dream at all. The same thing is the space expeditions — I must see the final goal, for which it’s all done. And I should admit that it’s hard for me to conduct a scientific program when I don’t see the final

long-term preparations before the flight. You must have a positive health prognosis for 8–10 years, when you finally go to the space. It is also stipulated by the acceleration load while you go to at the orbit and back. And technically space flights are really expensive, so we don’t expect any space route taxis in the nearest future. Thus space tourism will be an extreme and at the same time an expensive entertainment. And with time it might become more and more available for travelers. Have you ever seen anything extraordinary in the space?

View from the space

goal of the experiments and the final results if any, whether you will see them or not. Honestly I want to keep the «flame». However today we can see ambitious and optimistic ideas about the flights to the Moon, new ships and modernizing — I would like to take part in it, of course. I really hope that these ideas will come true. So I’m not going to quit. And I’m not going to chase the figures either! The record is six flights – so make it seven. Why? I have such possibility in theory, but I’m always focused on quality, not quantity. So I will continue flying, but for something new. What do you think about commercial flights? I think that those few corporations which produce space equipment can only benefit from competitiveness. It’s a good opportunity for development and producing new space ships and special equipment. You were lucky to become an astronaut. For many people it’s just a dream. However space tourism is popular today, so what do you think about its future in general and in our country in particular?

Have we examined the space good enough to let common people to the orbit, or the space is still only for professionals? If we turn to the history of aviation and remember all the flights which had lasted for a few seconds only, even when those flights became real people split into two camps. Many doubted that there could be anything more than entertainment out if all that. They believed that anything heavier than the air couldn’t fly. And we all see the level of aviation today. So I personally have no doubts that manned astronautics will develop. And I’m sure that private capital invested in astronautics will contribute to its even faster development. Space tourism will be expanding, I even know a company in Moscow which plans to build a space ship for suborbital travel. I believe it’s a new milestone in our astronautics, and I hope these flights will be launched very soon. At the same time one should realize that not everybody can go to space. The strict shortlisting of astronauts is stipulated not by the fact of being in the space but by the

In the first expedition we were preparing our space suits before the third spacewalk. The commander rushed in and said: «Come with me quickly!» We realized something serious had happened. We hurried to the large window and saw that something was flying in 1.5 meters from the station. Then we found out that it was an element of the ship, and a question arose, whose element it was — ours or our partners’ from the neighboring segment. My colleagues started to take photos. The next day we learned that it was a vacuum seal from one of our antennas. Pictures were sent to the Earth, and the Internet was buzzing about a UFO near ISS. What do you do in your free time in an expedition? Honestly there isn’t much free time. We have a strict schedule. 8.5 hour of sleep. I slept only 5–6 hours, I was taking a lot of pictures and observing the Earth, the Moon and the space in general. Every time before going to bed I went to the Cupola and had a rest for about 15 minutes just observing the Earth. Colleagues called the Cupola my dacha. Besides observing the space I was speaking to my family and colleagues. Eight and a half hours for sleep… and you don’t sleep enough as you have mentioned. How does it influ-

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

ence you? Do they claim that you break the schedule? Of course we can’t break the work-rest schedule. So I consider it my draw-back. But people with proactive approach to life never have enough time during the day. I decided long ago that I should review my time management, I haven’t done it yet. It’s all because there is a lot I want to do on the Earth and in the Space. For example? For example I dedicate a lot of time to badminton. I support it in Orel – with the help of my friends and townsmen we have organized a Federation of Badminton of the Orel Region. I would like to ramp it up so that the system could work itself, and I could only observe and control that everything goes right.

What is my goal? To show people that there is a cheap, available instrument to make their life better. I don’t aim to raise Olympic champions, but I want to show that badminton is a serious, Olympic sport and a nice way to reduce stress. After the training session your head is clear, your breath is deep and your life seems great… I wish that as many people as possible would know about it and try it. I spend a lot of time on it, but my goal is ambitious too: I aim to involve at least five percent of the Orel Region’s population into this sport by 2021. By the way recently I organized a marathon in Orel — I was playing badminton for 24 hours with any person who joined me. Very different people were coming but participated with great interest. To make this sport more popular we even

played in the space. On January 1, 2018 there was a friendly doubles tournament in the space, and it became the first team game ever beyond the Earth! Moreover it had feedback in badminton sphere too: we published the information right before the Europe Championship in Kazan in February, and the organizers were so impressed that they «issued» medals for us, real, gold ones, «For presenting badminton in the space». I even felt ashamed, because golden medals are usually earned «in blood and sweat», not the way we did… But the main thing is that I found inner motivation in badminton to benefit people and society. The society gave me opportunity to fly to space, and I found my way to recompense. I really hope for success…

Everything is great!

historical notes

Nataliya Tanshina, professor of the School of the Advanced Studies in the Humanities, Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, doctor of Science (History)

AN OTHER FAMOUS CORSICAN IN THE MEANTIME, ONES MAY HAVE FORGOTTEN THAT THERE IS AN OTHER OUTSTANDING MEMBER OF THIS OLD NOBLE CORSICAN FAMILY, WHOSE LIFE IS RELATED TO THE RUSSIAN HISTORY – THE COUNT CARLO ANDREA POZZO DI BORGO (1764–1842). IF HIS NAME DOESN'T BRING ANYTHING TO YOUR MIND, LET'S MENTION THAT HE IS CLOSELY TIED TO THE MOST FAMOUS CORSICAN EVER, NAPOLEON BONAPARTE. HOWEVER, THERE IS A SLIGHT DIFFERENCE IN THE WAY THEY CAME TO RUSSIA: WHEN ONE CAME AS A CONQUEROR, THE OTHER WAS CONQUERED AND DEDICATED 35 YEARS OF HIS LIFE TO SERVE THE RUSSIAN EMPIRE — 25 YEARS IN THE RUSSIAN DIPLOMATIC MISSION TO FRANCE AND 4 YEARS IN THE UNITED KINGDOM. IN THE 19TH CENTURY HIS AURA WAS SO WIDELY SPREAD ON THE EUROPEAN DIPLOMATIC STAGE, THAT SOME OF OUR COMPATRIOTS WOULD CONSIDER HIS NAME AS A PERFECT DEFINITION OF DIPLOMACY.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

ow such a proud Corsican aristocrat had found himself serving Russia? The Prince Tallayrand in person wrote that a genuine Corsican vendetta had brought him in Russia. In an attempt to explain why, we must come back to the roots, namely in the Alata village, some kilometers away from Ajaccio, where Carlo Andrea was born in 1764, on the 8th of March. The island was facing one of the toughest periods of its history: with Pasquale Paoli, the Corsicans were seeking independence from Genoa, to which it belonged. Although Genoa yielded up the island to France in 1768, the Corsicans didn't give up their dream of independence. However, some members of the Corsican elite were sympathizing with France. So always had done Bonaparte's and Pozzo di Borgo's families, being times to times either friends or enemies. According to Pozzo di Borgo's traditions, their family was mainly composed of lawyers, who used to plead for Bonaparte family. Carlo Andrea followed this tradition and had known the future Empereur des Français from his childhood. At that time, they had used to be close friends. The French Revolution in 1789 definetly separated them: the Bonapartes supported the Jacobins extremists, whereas the Pozzo di Borgos standed for the constitutional monarchy. Carlo Andrea was even elected in the Legislative Assembly in 1791. Since then, Carlo Andrea's life can be easily compared to a James Bond movie — along with Pascale Paoli, he stood against the French policy in Corsica, the Bonapartes were considered as betrayers, Napoleon was arrested by Pozzo di Borgo men but could escape. Their childhood friendship turned into a serious vendetta. For a short period of time, the Corsicans claimed Great Britain's protection over their island, but in 1797, it came back under the French

Portrait of Count Karl Osipovich (Charles-André) Pozzo di Borgo by George Dawe

rule. Carlo Andrea had found a way to run away to England, where he was provided with a monthly pension of 400 pounds. Since then, his life had taken a new turn. As the Revolution and Napoleon forced him to leave his homeland, then his mission would be to act against Napoleon, without blemishing France's honor. As a handsome, fine and self-assured man, along with a critical, bright mind — always keeping his «aristocratic distance» — he became a regognized personality in the European high society. In Vienna, he caught the attention of the Russian Ambassador to Austria Count Andrey Razumovsky, who immediatly proposed him to serve the Russian Empire. Pozzo di Borgo was firstly dubious about Emperor Pavel I murder in Russia, but Razumovsky convinced him. Therefore in 1805, the Corsican found himself serving the Csar, without speaking any word of Russian, under the Russian-style name Karl Ossipovitch.

The next years have clearly showed that some of Pozzo di Borgo's actions were driven by his vendetta, although his revenge on Napoleon always stayed constructive. For instance, in the last months of the Napoleonic wars, on service for the Russian Empire, Carlo Andrea had always defended the necessity of a strong France to ensure balance of power in Europe. As Napoleon Bonaparte wrote in his memoirs, Karl Ossipovitch himself proposed to Alexander I to send the Army straight to Paris. The appeal to the Parisians, spread around during the allied occupation of Paris, was Reference About a hero Carlo Andrea Pozzo di Borgo In politics and business, the name of Yves Pozzo di Borgo is well-known — an influent French politician, senator, who used to chair numerous organisations and European commissions, such as the parliementary group «France – Central Asia» in the French Senate, or the Association «French-Russian Dialogue». He did a lot to improve the image of Russia in the world.

also written by Pozzo di Borgo; Alexander I had only added a few notes. Moreover, he had brought a valuable contribution to the work on the French constitution — the 1814 Charter, that established a constitutional monarchy. After Napoleon's return for Hundred Days and his final defeat in Waterloo (where Pozzo di Borgo was wounded), according to himself, Pozzo di Borgo proposed the island of Saint Helena, 1.800 km offshore, to be the place of his permanent exile. Pozzo di Borgo put many efforts in softing the terms of the Second Treaty of Paris, which were very tough to France. With his advice, Louis XVIII addressed a letter to Alexander I, stating his readiness to abdicate in case national honor would be at stake. Carlo Andrea headed the Russian Embassy to France from 1814. His influence was so important that one civil servant once asked to Tal-

layrand: «Are we still ruled by a Corsican?». He kept his position long after the death of Alexander I. In fact, Nicolas I had never appreciated Pozzo di Borgo, his excessive autonomy and his independent opinions, but he cleary understood that this kind of diplomats are the most effective in Paris. In July 1830, he stayed at his own risk during the July Revolution, assuring the continuity of FrenchRussian relations. After 4 years, he was promoted in London. Although elegant, beloved by women all accross Europe, Carlo Andrea didn't get married and remained without a family. He could not find enough time for that, as a «wandering diplomat» until his 50. On the financial side, he couldn't complain: Louis XVIII returned him his confiscated lands in Corsica and granted him for his work. He had never refused to help his Corsican compatriots: he gave money to build roads and restore village churches.

He retired in 1839 but didn't come back neither to Corsica nor to Russia: until his death he stayed in a luxious mansion in Paris, rue de l'Université. He lies at Père Lachaise Cemetery in Paris. When you visit Ajaccio, take the small street Pozzo di Borgo. There is a bistro (which means quick! in Russian, based on the phrase shouted by Russian soldiers during Russian occupation of Paris in 1814) called Bonaparte. Indeed, this is how History finally brought the two proud and ambitious families together, that couldn't get on with each other on such a small island. It may the the main reason of their permanent struggle. But in France and Russia, the glorious name of this Corsican aristocrat, a general, the European «diplomatic marshal», the Count Carlo Andrea Pozzo di Borgo, bacame a symbol of French-Russian friendship and unity. It was his dreamed wish…

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

Photo Contest

«THE WORLD THROUGH THE EYES OF A PHOTOGRAPHER» In routine we usually don’t have a chance to see the beauty around us. To snatch a slipping moment and capture it is only possible for a photo camera in the hands of a receptive and creative person. Financial & Banking Association of Euro-Asian Cooperation launches a new project — photo contest «THE WORLD THROUGH THE EYES OF A PHOTOGRAPHER». This contest is for true lovers of their motherland’s beauty, for those who take photos not for profession but for hobby, self-expression, willingness to share joy from what they have seen and felt. V E NU E Russia, Moscow

TIM E L I M I T S Works are received from February to October 2018, wrap-up on November 15, 2018

PH OTO ST YLE «Countries and cities», «Native nature», «Self-artist», «World of emotions», «Snatch a moment», «Family album», «Package of impressions», «Incredible is close», «Proactive attitude»

C O NTAC T S :

PRI ZE Each winner receives a laureate diploma and a chance to become famous. Best works will be published in the Herald

E-mail: sgk@fbacs.com, bev@fbacs.com, office@fbacs.com Теl.: +7 495 663-02-08, 663-02-13, 663-02-19

Photography is a moment in the chain of life events

Lake Merzbacher, Kyrgyzstan

PARTI CI PANTS Non-professional photographers from all countries without restrictions are allowed to the contest

NIKOLAY SCHETNIKOV Born in Bishkek (Kyrgyzstan) in 1948. General Director of Kyrgyz — British travel agency «Dostuk-Trekking»

Kyzyl-Asker peak, Kyrgyzstan

EURASIAN FINANCIAL & ECONOMIC HERALD | #3(5)-2018

For me photography is firstly the way of keeping memories and secondly it allows me to creatively play with the light

VLADISLAV VETROVETS Born in the Czech Republic in 1990. PR-specialist and interpreter

Even a fallow deer can show on its face what it thinks

An evening under patrol of a sheepdog on a high-mountain range in Romania.

When the camera is at hand, the most beautiful is always there

Winter landscape

ZLATKO SAYE Born in Ljubljana (Slovenia) in 1941. Retired

Lake Bled, Slovenia