HERALD - FEBRUARY 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 № 1 (3) | 2018

eurasian financial & economic

60 В.Саламатов Торговля России с Китаем набирает обороты

42 № 1 (3) | 2018 Е В РАЗИЙСКИЙ ФИНАНСО В О -Э КОН ОМИ ЧЕ С К И Й

Премия Финансовая элита Евразии

32 П. Цагаан О проблемах повышения конкурентоспособности экономки Монголии

ЕАЭС: преодоление противоречий и рост взаимного доверия Александр ШОХИН личность

12 А. Мурычев Развитие экономического партнерства — залог успеха

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

HER A LD

В Е С ТНИК

А. Murychev Economic partnership is the key to success

12 P. Tsagaan About the problems of enhancing the competitiveness of the Mongolian economy

32 Award Financial and Banking Elite of Eurasia

№ 1 (3) | 2018 № 1 (3) | 2018

42 V. Salamatov Russia and China: Turnover grows

Personality

Alexander SHOKHIN

EAEU: overcoming differences and growth of mutual trust

Евразийский финансово-экономический ОФИЦИАЛЬНОЕ ИЗДАНИЕ ФБА ЕАС, МБС

CONTENT PERSONALITY А. Shokhin. EAEU: overcoming differences and growth of mutual trust

FOUNDER’S PAGE. FBA EAC

RSPP NEWS А. Murychev. Economic partnership is the key to success

FOUNDER’S PAGE. IBC Financial Ombudsman in the IBC member-states Kazakhstan: Institute of financial ombudsman: instruments and methods

STRATEGY А. Shokhin. Russia and EU: search for new formats of cooperation

FORUM Russia & the World: Top level of business

PROJECTS «Baikal harbor»: new horizons of development

EXPERT OPINION P. Tsagaan. Bargaining chip. About the problems of enhancing the competitiveness of the Mongolian economy

HERALD eurasian financial & economic

BANKING SYSTEM OF THE COUNTRIES OF EURASIA Е. Korobkova. Banking market of Ukraine: outlook for 2018

FINANCIAL LITERACY Armenia: Financial Literacy as national strategy

AWARD Financial and Banking Elite of Eurasia Nominations 2018: competition goes on

SUCH A BROAD EURASIA S. Mikhnevich. Institutes of Broad Eurasian Partnership

№ 1 (3) | 2018

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)

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

Editor in Chief: V. Murin Executive editor: S. Kiyatkina 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

PHOTO CONTEST «My Country»

BUSINESS IN THE COUNTRIES S. Chemachyan. Republic of Armenia: building bridges to the future

PRACTICE V. Ponomarev. Banking fraud. Protecting assets

MATERIAL FOR THOUGHT V. Salamatov. Russia & China: Turnover grows

PRINTING HOUSE: Released in the «Granitsa Publishing House» Ltd. Format 210x297 mm. 124 pages.

ISSUE DATE: February 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, President of the Union of the Banks of Kyrgystan

Saydullo Abdullaev, General Director of the Association of Banks of Usbekistan

Hakob Andreasyan, Chairman of the Union of the Banks of Armenia

Bakhytbek Bayseitov, President of the Association of Banks of the Republic of Kazakhstan

Oleg Berezovoy, General Director of FBA EAC

Zurab Gvasalia, President of the Association of Banks of Georgia

Veroljub Dugalić, General Director of the Association of Serbian Banks

Anatoly Kazakov, Chairman of the Coordination Council of the Financial and Banking Council of the CIS

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

Manish Kumar, General Director of the Soltex Group Ltd., Head of the Representative office of FBA EAC in India, Sri Lanka, Bangladesh, Malaysia

Aleksandr Kuschynski, Chairman of the Association of Belarusian Banks

Georgy Kuchkov, General Director of the Information and Publishing Center «Eurasia»

Istvan Lengyel, Secretary General of Banking Association for Central and Eastern Europe

Zakir Nuriyev, President of Azerbaijan Banks Association

Bratislav Pejaković, Secretary General of the Association of Montenegrian Banks

Krzysztof Рietraszkiewicz, Chairman of the Polish Bank Association

Amirsho Miraliev, Valery Murin, Chairman of the Board Editor in Chief of the of the Association of Banks magazine «Eurasian Financial of Tajikistan and Economic Herald»

Anatoly Tkachuk, Vice-President of FBA EAC

Dumitru Ursu, Chairman of the Moldovan Bankers’ League

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

A word to the readers

Dear colleagues and friends! First of all, I want to congratulate all of you, readers and authors of our magazine, on the coming 2018 year! What was the last year for each of us? What pleased or disappointed? Anyway, that is history. We are confidently entering a new year, full of hope and ideas, which we will certainly share with you. This issue of the Herald is devoted increasingly to Russia — the largest country on the map of Eurasia. The face of the cover is President of the Russian Union of Industrialists and Entrepreneurs, Alexander Shokhin. Our choice is not accidental. In addition to the fact that Alexander Nikolaevich himself is an outstanding personality, he heads one of the most powerful business associations for 13 years. The second weighty argument for Russia and the head of the RSPP is Russia will preside over the Eurasian Economic Union bodies for this year and the RSPP will chair the presidium of the EAEU Business Council. The Eurasian Economic Union began fourth year of work. Recently, the transformation of the world economy and the changing world order have a significantly impact on the integration processes in the EAEU and cause the need to respond to the challenges that not only correct the goals and change the integration priorities, but also lead, unfortunately, to slow down of integration processes. There is an increase in the number of unresolved issues, including in the area of the division and harmonization of national and supranational powers. There is a feeling of dissatisfaction with unrealized expectations, insufficient integration, which is connected to a large extend with objective conditions for the development of economies of the countries of the Union. Nevertheless, it is very important to note the following main results of the integration: the functioning of common markets for services and labor; the launch of the general market for drugs and medical products; the entry into force of the new Customs Code; support the course on the development of the digital economy by the presidents of the Union countries and the formation of the common digital agenda of the EAEU; systematization of work to remove barriers in the domestic markets of the Union; activation of trade and economic cooperation of the Union with third countries. The coming year should be a period of consolidation and development of the achieved levels of integration and accelerated movement towards the goals, defined by the Treaty on the Union. The Editorial Board of the Herald closely follows the development of events and will share information with you at first hand.

In this issue we continue to publish the materials on the most interesting, debatable topics of the financial and banking industry, the economy as a whole, fintech. The geography of Eurasia includes such countries as Armenia, Hungary, Kazakhstan, Mongolia and Ukraine. The official rewarding ceremony of the annual international public award «Financial and Banking Elite of Eurasia» was held in November last year. In this issue we tell about nominees and laureates of the award. And you will also find the information of the nominations in 2018 year. In the opinion of the participants, the Fourth Moscow International Financial and Economic Forum «Eurasian Union and the EU: search for new formats of cooperation» was successfully held. The results of the Forum can be read on the pages of our Herald. This year, the Editorial Board of the Herald announces a photographic competition «MY COUNTRY». It will be held among those for whom photography is not a profession, but a hobby, a way of selfexpression, a desire to share joy from what they have seen and experienced. We want to see the beauty of your native countries by your biased and loving eyes. I wish success to all of us in the coming year! And see you all on pages of the Herald!

A. Murychev, Chairman of the Editorial Board of «Eurasian Financial and Economic Herald»

Personality

EAEU: OVERCOMING DIFFERENCES AND GROWTH OF MUTUAL TRUST

www.рспп.рф

ALEXANDER SHOKHIN Was born in the Arkhangelsk Region on December 25, 1951. Graduated from the Economical Faculty of the Moscow State University in 1974. Mr. Shokhin is Doctor of Economics, Professor. From 1974 to 1987 he worked with several research institutions associated with the USSR Academy of Sciences, the USSR State Planning Committee and the USSR State Labor Committee. From 1987–1991 Mr. Shokhin was Economic Adviser to the Minister of Foreign Affairs, and Head of the Department of International Economic Relations of the USSR Ministry of Foreign Affairs. Twice, in 1991–1994 and in 1998, he held the post of Deputy Prime Minister of the Russian Federation. In 1991–1994 he also held positions of Minister of Labor, Minister of Economics, Chairman of the Russian Agency for International Cooperation and Development, and Russian governor at the IMF and the World Bank. On behalf of the Russian government he represented Russia in the international negotiations on Soviet-era debt. Additionally, he represented the President of the Russian Federation in Russia's relations with the G7 countries. From 1994 to 2002 Mr. Shokhin was a Deputy of the State Duma, where he occupied the posts of First Vice Chairman of the State Duma, leader of the Duma party bloc 'Our Home is Russia', Head of the Duma Committee on Credit Institutions and Capital Markets. 1995 — President of the National Research University — Higher School of Economics, Chairman of the Department for Theory and Practice of Interaction between Business and Government. Since 2005 — President of the Russian Union of Industrialists and Entrepreneurs.

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Successful functioning of the EAEU is impossible without the establishment of mutually beneficial relations with third countries and regional integration associations, business circles of foreign states.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

INTERVIEW OF PRESIDENT OF THE RUSSIAN UNION OF INDUSTRIALISTS AND ENTREPRENEURS ALEXANDER SHOKHIN TO THE MAGAZINE «EURASIAN FINANCIAL AND ECONOMIC HERALD».

lexander Nikolaevich, the expiring year has been very difficult for the economy of the Russian Federation. Can results already be seen of Russia’s participation in the EAEU? I have to start by saying that this is not just an international treaty. In some way it is an outside environment which looks inside — inside Russia. And the obligations, taken by the countries, are the obligations to establish a full-fledged economic union, based on Customs union first of all. And then within the framework of the Customs union supranational technologies develop regarding decision making and regulation for entire economic sectors. The creation of the union is an important step for Russia. It shows that, despite the sanctions and the treat of isolation, other countries are trying to establish contracts with us. There was a time when Russia won politically, but lost economically. But when the basic principles of the functioning of the single economic space came into force, the situation began to change. And what about these changes in more detail? Technical regulation has already passed from a national level to a supranational level, for example.

And such transfers of authorities are becoming more and more often. Under difficult conditions of the unfavorable economic and geopolitical conjuncture, it is the integration format of the EAEU that has enabled the Russian economy, like its partners, to reduce the level of economic losses. The integration format of cooperation ensured the growth of Russian exports due to the price factor and open borders in times of crisis 2014–2016 in the countries of the Union. Cooperation in the EAEU and the formation of common markets by industry provide for the growth of product quality (including through the introduction of technical regulations). Russian producers have advantages in these conditions due to the availability of a higher level of financial and resource security. The common market offers the access prospects for Russian producers to raw material recourses of the partner countries in addition to their own (aluminum, copper, zinc, rare earth metals, fertilizers, uranium ores, etc.), which can contribute to the creation of closed technological cycles for a number of industries, avoid direct competition in foreign markets and accelerate the production cooperation within the EAEU. In the long run, a higher level of trade integration could facilitate the

formation of joint trade groups, consortia and exchange platforms aimed at reducing competition for the same type of products exported to third countries. A strong argument in favor of the EAEU for the Russian economy is the prospect of not only access to the migrant recourses of partner countries, but more importantly, the creation of unified rules for the regulation of migration flows, which simultaneously contributes to the goal of economic and security development. The EAEU provides Russia to enhance the efficient use of its own transit and technological capabilities, raises the level of competitiveness in the world and regional markets in competition with other integration projects (APEC, EU, Chinese initiatives), creates conditions for expanding trade and economic cooperation with other countries, solving the problem of «integration of integration» in a global aspect (the creation of free economic zones allows to promote Russian interests in geoeconomics and geopolitics). The factor of overcoming geopolitical restrictions in relation to Russia through the institutions of the EAEU creates additional opportunities for solving political and economic problems facing the country in modern conditions.

However, it should be noted that all these advantages of using the EAEU format for Russia will be possible only during the transition from a resource economy to a technology economy since just it will ensure the most complete use of the resource, financial, investment and geopolitical potential of the country in the integration project. Over the past year, there have been significant developments in the development of the Eurasian integration. Which of them are the most important? On October 11, in Sochi, the presidents of the countries of the Union adopted the main directions for the development of the digital agenda of the EAEU until 2025. The creation of the digital space of the EAEU will make it possible to achieve a synergistic effect from the implementation of national digital agendas.

On November 15, 2017 a Committee on Digital Economy has been established by the decision of the Bureau of the Board in the RSPP consisting of working bodies. Work has continued on removing obstacles on the domestic market of the EAEU. At the time of the Union’s creation, about 600 unresolved issues were in the preliminary list of seizures, barriers and restrictions for mutual access of businesses to the national markets of the member countries of the Union. Now they are an order of magnitude smaller. At the end of 2016, the RSPP passed to the Eurasian Economic Commission the information on 22 existing, in the opinion of business, barriers in the domestic markets of the EAEU and the proposals of the business community to remedy them. The Commission, on the basis of real problems, prepared the re-

port «Barriers, exemptions and restrictions in the EAEU», the socalled "The White Paper", which fixes 60 barriers. And on October 25, 2017, at the meeting of the Eurasian Intergovernmental Council, a plan of action on removing exemptions and restrictions in the domestic market of the EAEU for 2018-2019, first of all, included in «The White Paper», was approved.

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After the entry into force of the Customs Code on January 1, 2018, all barriers on the domestic market, related to the sphere of customs regulation, should be addressed.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

On April 11, the phase of signing the Treaty on the EAEU Customs Code was completed. The member states start some in-house procedures which are necessary prior to ratification of the document. After the entry into force of the Customs Code on January 1, 2018, all barriers on the domestic market, related to the sphere of customs regulation, should be addressed. The Customs Code of the EAEU was the first major document in the legal framework of the Union, which was developed jointly at all stages with the business communities of the 5 member states. According to our estimates, more than 70% of proposals received from the business are reflected in the code. A joint statement of the Eurasian Economic Commission (EEC) and the Ministry of Commerce of the People's Republic of China (PRC) on the principal conclusion of negotiations on the agreement on trade and economic cooperation was signed on October 1. The EAEU and China agreed that in the shortest possible time they will carry out legal and technical adjustment of the text of the agreement, after which they will start implementing the necessary internal procedures for signing the document. What can we expect in the near future? In 2018, the Russian Federation has assumed the presidency of the bodies of the Eurasian Economic Union. During the same period, the RSPP will chair the Presidium of the EAEU Business Council. Today the process of Eurasian integration is characterized by an increase in the number of unresolved issues, including in the sphere of the division and harmonization of national and supranational powers. There is dissatisfaction with unrealized expectations, insufficient inte-

gration. This is largely due to the objective conditions for the development of economies of the countries of the Union. The EAEU is an economic union. But it is created and strengthened by the labor of citizens. And we should seek to create such conditions that would motivate people to actively participate in integration processes. We need to involve social, humanitarian, scientific and technical directions in the integration process, develop cooperation in the environment, culture, sports, and tourism. Expansion of cooperation ties, development of foreign economic activity of the Union and member states, inclusion of value added into global value chains will help to overcome contradictions and increase mutual trust. And, of course, the successful functioning of the EAEU is impossible without the establishment of mutually beneficial relations with third countries and regional integration associations, business circles of foreign countries. Alexander Nikolaevich, you often talk about a «green» or environmentally friendly economy. From your point of view what incentives can there be for an entrepreneur to become interested in this and promote the «green» jobs, in addition to corporate social responsibility? You know, many environmental requirements are simultaneously demands for exporters, and it is very difficult to promote a particular product if your technology is «dirty». Many markets, including Europe, are closed for this kind of products. And in this regard, we are actively implementing the principle of the best available technologies. That is, all new projects should be based on the best known and available ones. First, it is forbidden

upon ratification; in particular, we consider that the business, government and the president agree with this, that those methods do not sufficiently take into account the absorbing capacity of Russian forests. If we compare the Russian and American methods, it turns out that, all other things being equal, our forests are low-power producers of oxygen. Another thing is that we ourselves came up with this method but since it is the international comparative comparable volumes of emissions then we certainly need to take as a basis at least American or any other technology. We need not only mechanisms of pressure on enterprises that are associated with schedules for the introduction of the best available technologies, we need incentives. Incentives are the wider application of tax benefit, such as investment deductions and the invested part of the profit tax. Also that is using such mechanisms as a special investment contract that is now only used in industry and has limited duration of projects that fall under this mechanism. We suggested to extend this mechanism to other branches of economy — energy, transport — and

to design enterprises and new technological processes that do not correspond to the directories of the best technological achievements, then it is forbidden to build, and then they will be removed from production. The legislation has already adopted a rather tough program, which is forcing the business to do this kind of renovation of production on a «green» basis. But there are still many unresolved problem in this issue. In particular, mechanisms are needed for automated evidence of emissions into the atmosphere and discharges into water bodies. Such automated control doesn’t yet exist: there are neither devices in sufficient number nor requirements to the quality of the environment. This will require hard work, especially government institutions, to develop these standards and automated accounting devices. In addition, we must bear in mind that our adherence to the Paris Agreement on climate has not been completed yet. Although the Paris Agreement is already in force and ratified by many countries but Russia has not yet ratified it. We have every reason to include some special conditions 104 103

102,7

102,6

102,4

102

102,5

102,3

101,5 101,2 100,9

100,9

100,8

100,9

101,1

101 100,6

100

100,7

100,3

2017 year

2016 year

99 98,8

98 I

I–II

I–III

I–IV

I–V

I–VI

I–VII I–VIII I–IX

I–X

I–XI

I–XII

Dynamics of industrial production of the EAEU (in% to the corresponding period of the previous year; in constant prices) Source: www.eurasiancommission.org/ru/act/integr_i_makroec/dep_stat/econstat/Documents/indicators201710.pdf

to prolong the payback period of projects. Now the limit value is 10 years. But if infrastructure projects are implemented, then 10 years is not enough. The President of Russia supported these ideas at the St. Petersburg Economic Forum. We need mechanisms that facilitate companies to invest in «green», resource-saving, environmentally friendly technologies, to develop as a universal scheme for promoting innovative and investment activity of companies, where environmental requirements will be only a part. I think, under this approach, the business will feel not only socially responsible, but also cost-effective and we will able to begin the process of «greening» the Russian economy. A balance of interests can be found here. Another important point. In order to build a «green» economy, employees of relevant specialties are needed, which, perhaps, are yet unavailable on the Russian labor market. In your opinion, when will these qualifications appear in our country and how will training be organized? If we need specialists, we need demand for them. The labor market should make a request to the system of vocational education, the system of retraining of personnel. Therefore, step by step, this demand will be formed. But I wish to emphasize once again: we believe that there cannot be separately «green» production and separately innovative production, separately digital and individually socially-oriented. All this should be connected. The system of vocational education, in particular, secondary vocational education, should reflect these demands of the labor market in its programs. And then the system of independent evaluation of the

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

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Mechanisms that facilitate companies to invest in «green», resource-saving, environmentally friendly technologies.. Under this approach, the business will feel not only socially responsible, but also costeffective.

qualifications of graduates should assess, whether the graduate, who received a professional education, meets the requirements of the labor market, which were presented in due time. This is a classic model. But we understand that while the market will form a request and the specialist will be prepared, the technology may not even «leave», but «fly away» very far ahead. Therefore, continuous adaptation is necessary. And this cannot have a five-year cycle. Many professions may become obsolete for five years. Our task is to develop perspective branches of the

economy. So there is the National Technology Initiative in Russia, which is trying to identify those types of technology that will be in demand in 10–15 years. We need to connect such regular schemes of interaction such as the labor market, the vocational education system and trying to find promising activities and the methodology of the «WorldSkills» competitions could help us with this. In 2019, the World Championship "WorldSkills" will be held in Kazan. Its task is to show a high level of achievements in the working professions, and also to maximally incorporate typical competencies and skills into the education system. The combination of all such technologies allows us to say that «green» and digital technologies will not be without competent employees who will manage them, adapt and operate at a high level. In a word, is there no end of work to be done? Yes, indeed, there are a lot of works. So far, Russia doesn’t fully use innovations as a mechanism for

solving the tasks on the agenda. A serious barrier for investments in innovation is the low level of predictability of the business environment, which is related not only to objective economic reasons, but also to the vagueness of strategic directions of socio-economic policy. We believe that the priority in innovation should remain for private business, and the state should ensure the predictability of the business environment. This is a key condition for long innovative projects. The attraction of foreign capital and technology to Russian innovation projects, in both traditional sectors and new directions, will create competitive advantages for all participants. Specific projects and global issues of innovative development will be discussed at the St. Petersburg International Economic Forum, which will be held on May 24–26. I am sure that this Forum, especially taking place after the presidential elections in Russia, will become a key global communication platform for the whole year.

Founder’s page. FBA EAC

MEMORANDUM OF COOPERATION — A NEW STAGE OF BUSINESS RELATIONS

AT BUSINESS LEVEL Joint meeting of Supervisory Board and Coordinating Council of FBA EAC took place on December 1, 2017 in Moscow. The meeting was moderated by Timur Zhaksylykov, Chairman of Supervisory Board of FBA EAC, Member of the Board (Minister) for Economy and Financial Policy of the Eurasian Economic Commission and Alexander Murychev, Chairman of Coordinating Council of FBA EAC, Executive Vice-President of RSPP, Deputy Chairman of the Council of Association of Banks “Russia”. The meeting discussed cooperation of the companies – members of FBA EAC, assessment of labor migrants during their employment process, and introduction of multicurrency clearing system of settlements on UCEX platform. Discussion resulted in the decision of Supervisory Board and Coordinating Council to share the experience of creating an Examination Center in Erevan (Armenia) in two other EAEU countries and to work out proposals on centralized control of qualification assessment for inner migration flows in EAEU. As for the second point of the agenda it was decided to submit to the Presidium of the Business Council of EAEU a proposal to create Eurasian Electronic Commodity Exchange of the Silk Road on the basis of UCEX. Another decision was to approve the proposal of the new FBA EAC member «Tai Cloud Corporation» (China) to create UCEX branch for digital electronic assets trading on the platform of International Financial Center “Astana” (Kazakhstan) and also to switch exchange contracts, multicurrency clearing exchange settlements, interbank correspondent payments to Blockchain platform.

November 16, 2017 Shanghai (China): Vice-Director of Financial Development of Shenyang Free Trade Zone F. Dang and General Director of FBA EAC O.Berezovoy October 30, 2017, Moscow: O. Berezovoy, General Director of FBA EAC and General Director of Iranzamin Development Consersiam M. Mazaheri

December 1, 2017, Moscow: FBA EAC General Director O. Berezovoy and General Director of Association of customs auditors and consultants M. Serebrova

RESULTS OF THE YEAR For substantial contribution to international financial and banking activity and effective implementation of statutory purposes of FBA EAC the Badge of Honor Order is conferred to Anatoliy Aksakov — Member of Supervisory Board of FBA EAC (Deputy of the State Duma of Russia, Chairman of the Committee of the Duma on Financial Market, Chairman of the Council of the Association of Banks «Russia»). For enduring activity and special contribution to effective business, development of economic potential of financial and banking sector of Eurasian countries the Badge of Honor Order is conferred to Boris Miroshnikov, Vice-President of «Citadele» group of companies, and to Samvel Chemachyan, Head of FBA EAC Representative office in Armenia. For standard of professionalism and personal contribution to financial and banking business in Eurasia the Badge of Honor is conferred to Alma Obaeva — Chairman of the Board of NP «National Payment Council» (Russia).

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

DELEGATION FROM IRAN

CLOSE LOOK AT AFRICAN CONTINENT

On October 30, 2017 a business meeting between the management of Association and Iranzamin Development Consersiam (IDC) was held in Moscow in the headquarters of FBA EAC (17, Kotelnicheskaya nab.).

On November 14, 2017 in Moscow a meeting was held with representatives of African development bank group.

IDC unites business structures from Iran. FBA EAC was represented by A. Murychev, Chairman of Coordinating Council of FBA EAC, Executive Vice-President of RSPP, A.Tkachuk, Vice-President, Member of the Board of RSPP, Member of the Board of RSPP, O.Berezovoy, General Director of FBA EAC, E Ivankov, Head of Branch Network of UCEX and others. The parties discussed a wide range of practical issues of mutually advantageous financial and economic cooperation between Iranian and Eurasian SME, implementation of instruments of UCEX branch network. Much attention was paid to the idea of International Investment Fund.

SMALL BUSINESS FORUM On September 28–29, 2017 года in Ufa under the patronage of the Head of Bashkortostan Republic R.Khamitov the Third Small Business Forum of the regions of state-members of SCO and BRICS was held — an important platform for interregional cooperation. FBA EAC was represented by Deputy General Director of Association, Head of Branch Network of UCEX E.Ivankov. He told the participants about FBA EAC Program on integration of small and medium business into a single exchange system in Eurasian area.

Association was represented by Vice-President Anatoliy Tkachuk and Executive Director Oleg Ryazanov, the African development bank group — by Executive Director Moussa Dosso and representative in Europe Jose-Luis Ortiz-Reumond. The parties of the meeting discussed loans to small and medium business, investment in production and sales of coffee and cocoa, as well as computers and software for banks. The parties expressed interest in development of their contacts.

EXPANDING HORIZONS At the invitation of Bank of China the delegation of FBA EAC visited China on November 10–16, 2017. The program included negotiations with businessmen of Shanghai and Shenyang (Liaoning). The main event of the business trip was Shenyang Investment and Trade Fair organized by the government of Liaoning and Bank of China Liaoning branch. During the Shenyang Fair the delegation of FBA EAC arranged several business meetings.

RSPP news

ECONOMIC PARTNERSHIP IS THE KEY TO SUCCESS

www.рспп.рф

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Better commercial certainty is the main thing that business is waiting from the government. There should be conditions for business to work confidently and predictably for half a year, for one year, or better for two or three years ahead.

ALEXANDER MURYCH E V Chairman of Coordinating Council of FBA EAC, Executive Vice-President of RSPP

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

BRUSSELS AND MOSCOW MUST GET RID OF MUTUAL PREJUDICE AND STEREOTYPES AND START A NEW CHAPTER IN RELATIONS BETWEEN RUSSIA AND EU. THIS ISSUE WAS DISCUSSED BY EXPERTS IN VIENNA AT THE CONFERENCE CONFERENCE WHICH WAS HELD BY THE INTERNATIONAL CENTER FOR ADVANCED AND COMPARATIVE EU-RUSSIA/CIS (ICEUR) ON DECEMBER 5, 2017. WE OFFER OUR READERS A WRITE-UP BASED ON THE SPEECH OF A.MURYCHEV IN VIENNA.

EAEU and EU Cooperation In the current difficult global situation Russia and EAEU countries continue cooperation with European states. The amount of accrued foreign direct investments (FDI) of Russia in the European Union is $50.8 bn., its share in the total Russian investments in Eurasia is 62%. Kazakhstan is the second largest capital exporter to Eurasia among EAEU countries. Its FDI is over $6 bn. with 90.5% going to the European Union. At the same time 50% of FDI in Russia come from EU countries. According to the Russian-German Chamber of Foreign Commerce direct investments from Germany to Russia have grown in the last three years and reached 2 bn. Euro. Moreover 9 of 10 German companies are ready to keep and even raise the level of investment activity. Deep economic integration with the European Union has crucial importance for Russia and Eurasian Union due to the following reasons: • EU is the largest trade partner of the Union countries. Its share in EAEU total export is 50.3% and in import — 40.8%;

• EU could be an important capital supplier; • EU could play important role in economic improvement of EAEU states and become a source of technological upgrade. Restrictions and sanctions haven’t had any positive effect for any party. They only redirected the flows of trade. In 2016 the amount of import to EAEU from Asia for the first time exceeded the amount of import from the European Union. Import in EAEU from EU countries decreased from $152 bn. in 2013 to $82 bn. in 2016. Export to the EU from EAEU countries also decreased from $340 bn. in 2013 to $155.1 bn. in 2016. Import to EAEU from APEC countries amounted to 42.3% compared to 40.8% from EU in 2016. And the trend line remained the same in 2017. In spite of the growing Asian economic focus, trade and investment ties with European Union are of key importance for Russia and EAEU in general. The EU is also interested in the development of economic relations: EAEU is its third largest trade partner after the USA and China. The European business realizes the importance of our huge market,

Reference RSPP is the leading business association in Russia The Russian Union of Industrialists and Entrepreneurs celebrated its 25th anniversary in 2016. Through its activities, the RSPP has confirmed the right to represent the Russian business community both inside the country and abroad as one of the most representative public organizations of Russia in upholding the interests of Russian business, positioning in power and business structures, in international organizations and improving its activities. To a large extent, the effectiveness of these functions has enabled the RSPP to position itself not only as a public organization but also as the only All-Russian Association of Employers. Today the RSPP is 148 industry and regional associations of employers. Regional branches of the RSPP have been established in constituent entities of the Russian Federation. Coordination councils of the RSPP branches function in 8 federal districts. The member companies of the Russian Union of Industrialists and Entrepreneurs represent all the regions and sectors of the Russian economy on which most of Russia's GDP is created. The members of the RSPP are such major organizations as Russian Railways JSC, Sovcomflot PJSC, Tatneft PJSC, Severstal PJSC, RusHydro PJSC, EvrazHolding LLC, Mountain-metallurgical company Norilsk Nickel PJSC, VTB (PJSC), Mechel PJSC, UGMK-Holding LLC, Ilim Group OJSC, Nizhnekamskneftekhim PJSC, SIBUR LLC, Transmashholding CJSC, HK METALLOINVEST JSC, EUROCEMENT group JSC, MegaFon PJSC, Aeroflot PJSC, Group of Companies S-7 CJSC, Russian Post FGUP, KNAUF, Interfax CJSC, PepsiCo Russia, United Chemical Company URALCHEM, Gazprom Neft PJSC, SOGAZ JSC, Basic Element Company LLC, SUEK JSC, Total Intelligence Development Russia, EuroChem JSC, First Freight Company JSC, ER-Telecom Holding JSC, Yandex LLC, AFK «System» PJSC, «Television Technical Center Ostankino» FGUP and many others. The maximal account of the interests of all members of the Union in the formation of proposals and positions of the RSPP provides many areas for discussion and decision-making: the Congress, the meetings of the Bureau of the Board and the Board of the RSPP and other working bodies. Due to a wide system of discussions both in regional and sectoral organizations and at the federal level, any company has the opportunity to make its point of view on topical issues of socio-economic policy. The unique advantage of the Russian Union of Industrialists and Entrepreneurs as an employers' organization is the availability of formalized mechanisms of interaction with authorities through the Russian Trilateral Commission on the Regulation of Social and Labour Relations (RTC), regional and territorial trilateral commissions. The RSPP represents the side of employers in the Russian Trilateral Commission on the Regulation of Social and Labour Relations. The President of the Russian Union of Industrialists and Entrepreneurs A. Shokhin is the Coordinator of the employers' party in the RTC. Representation of the interests of the business community is also carried out through the mechanism of concluding trilateral regional and sectoral agreements by industry and regional associations of employers — members of the RSPP.

proximity, cross-border infrastructure, interaction of border regions. With the capital of the leading Asian economies entering this market Europe is exposed to risk of losing it. RSPP actively cooperates with businesses form Europe. Large business and governments of some EU countries and Russia more actively advocate normalization of relations between EU and EAEU. For four straight years RSPP conducts International Financial and Economic Forum «Eurasian Union and the EU: search for new formats of cooperation» in December. This year the Forum gathered in Moscow representatives from 22 countries. Their speeches and discussions demonstrated that everybody is interested in the development of cooperation in many sectors: finance, engineering, new technologies, agriculture etc. We organize the Forum together with the World Economic Council (Berlin). In summer 2017 a joint Declaration was signed on cooperation with the Eurasian Economic Commission and the Government of Greece. The

document implies cooperation on many issues with regards to the powers of EEC and obligations of Greece arising from the European Union law. In July the International Youth Forum «Greater Europe Meetings» initiated by UNESCO in Paris focused on the importance of official partner relations between EAEU and EU. The key topic at the X Eurasian Economic Forum in Verona in October was «Greater Eurasia as the flywheel in the current international geopolitical and economic context». The question of long-term outlook on interaction between EU and EAEU was raised. For the third year in a row the International business-forum «Eurasian Economic Union — Belgium — Luxembourg Economic Union» is organized in Moscow. Discussions include investments, transfer of innovative technologies, joint production, entry of Eurasian business to European markets. During 9 months of 2017 Belgium increased sales in Russia by 40%, and Russia in Belgium — by 14%, in Luxemburg — by 22%.

The German society contributes a lot in convergence process between EAEU and EU. In January-August 2017 bilateral trade of Russia and Germany increased by 25% up to Euro 31.3 bn. Today Germany is the second largest trade partner of Russia after China with a share of 8.6% in the Russian turnover. Since 2013 Berlin hosts the Eastern Forum. One of its aims is to create Single economic area from Lisbon to Vladivostok. The Eastern Committee of German economy together with RSPP actively promotes this incentive. The work group of the Single economic area from Lisbon to Vladivostok is developing the project and its provisions which are supposed to be spread on the territories of the future partners. These provisions are aimed to facilitate business procedures and requirements on the Single economic area. In the long-term perspective we won’t get along without a complex agreement between the European Union and the Eurasian Economic Union. Austria, our long-term partner can be a good example. Austrian

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

business and politicians are most loyal to Russia in the current conditions. We see it and respond relatively. RSPP advocates a full-fledged cooperation between enterprises and business associations of our countries. RSPP supports the recovery of dialogue between our states under the name of «Russia-EU. Economic relations, finance and business. New challenges and opportunities. The Vienna process».

Economy of Russia After nearly two years of recession Russian economy is moving from adjustment to negative external shocks like oil prices collapse and sanctions towards the growth recovery. Inflation is at its lowest rate in all years of market economy (about 4%). The key rate is spiraling down (currently — 8.25%). Russia has overcome the crisis of oil prices collapse better than many other «oil-oriented» countries. According to the Bank of International Settlements in 2015-2016 the volume of Russian gold and forex reserves decreased by $19 bn., while in the Middle East countries — by $228 bn. In spite of sanctions total debt of nonfinancial private sector in Russia amounts to 68% of GDP while in the developing countries it is 107%, in the developed economies — 195%, worldwide average — 138%. During 2017 Russia has climbed from the 40th position (and during 6 years — from the 124th position) to the 35th in the Doing Business rating of the World Bank. When your position becomes higher, you investment environment becomes more favorable. In this regard the most difficult sectors for improvement are construction and foreign trade, so they are going to be subject to reforms in the first place if we want to reach the «20th position in 2018» target. In January-September, 2017 capital investment in Russia amounted

INCOME

total 13487

16241 total

PETROLEUM 5050

EXPENSES

5092 SOCIAL POLICY

2069 ECONOMY VAT 4895 1271 SECURITY & ENFORCEMENT PROFIT TAX

600

EXCISE DUTIES

872

CUSTOMS DUTIES

527

1141 NATIONWIDE ISSUES 1021 DEFENSE

OTHER 1542 RESOURCE FOR FINANCING OF BUDGETARY DEFICIT WITH REGARDS TO FOREIGN DEBT CUT DOWN

total 2995

DOMESTIC BORROWINGS 1050 RESERVE FUND 1151 NATIONAL WEALTH FUND OTHER

757

SUPPORT FOR REGIONAL BUDGETS

728

STATE DEBT SERVICING

595 378 99 90 79 77 76

EDUCATION HEALTH CULTURE, CINEMATOGRAPHY PHYSICAL TRAINING AND SPORTS HOUSING & UTILITY INFRASTRUCTURE MASS MEDIA ENVIRONMENT PROTECTION

2768 SECRET AND STRICTLY SECRET EXPENSES

668 86

Income and expenses of the budget in 2017, bn. Rubles Source: Source Law on Federal Budget

to 10 tn. Rubles, 4.2 % upwards of the is favorable business climate. A lot is same period previous year. The being done, but in order to ensure at growth is slight but here the dynamleast worldwide average growth rate ics is more important. (3.5%) we must now have 5 tn. of inNot everything depends on these vestment funds. Perhaps this important and necessary figures. In amount will appear someday, but the previous years we were convincwe need it now in 2018 in order to ing each other: why don’t we turn to reach worldwide average rates. inflation targeting with low rate, In current conditions with sancbigger amount of loan resources and tions pressure getting higher we can more available funds. Does it work? rely only on our inner resources Not yet. which implies creation of favorable It doesn’t work because there are business climate. deeper reasons and there is a probWe have progress in important lem in such sustainable developsectors. For example connection to ment. Any figures we mention — electrical grids, easier registration of 1.5%, 2% — are quite modest. Howeventerprises. Foreign trade transacer there are sectors with tangible tions have also been slightly facilitatprogress such as engineering complex, aircraft engine building, agricultural machine building, agricultural complex, which show Any figures we mention are quite modest. real growth. GovernHowever there are sectors with tangible ment should follow this progress such as engineering complex, formula: do not interaircraft engine building, agricultural fere, help a little, and machine building, agricultural complex, here are figures and which show real growth. Government growth rate for you. should follow this formula: do not Thus the main condiinterfere, help a little, and here are tion for sustainable high figures and growth rate for you. economic growth rates

“

ed. However one serious problem remains and it restrains investment in the whole economy and business first of all — building permission. We rank in the second 100 among countries with unfavorable conditions for building contracts. And we haven’t been able to move from this position in the recent years. Needless customs barriers have been eased which is important for the growth of technological export. The Doing Business polls show that previously our export procedures lasted for 22 days. Now they last for less than 100 hours. Business also gives positive examples. Leading business associations signed a Charter of Fair Foreign Trade Operators. They appealed to their main players, members of associations, organizations, and large businesses first of all, to abide by this Charter in their foreign trade activity. Supported and initiated by RSPP is another document which is ready for the Duma consideration — draft Federal Law «On basic governmental control (supervision) and municipal control in the Russian Federation». We are waiting impatiently for the law to be approved because in

our opinion it will provide for better business climate in Russia. Better commercial certainty is the main thing that business is waiting from the government. There should be conditions for business to work confidently and predictably for half a year, for one year, or better for two or three years ahead. RSPP is also considering the problem of personnel training and its qualifications as one of the most important focus in structural reforms, digital economy programs, financial technologies. RSPP is working on a global project of national system of qualifications in the country with an independent assessment of experts by employers.

Banking sector of Russia As of November 1, 2017 there were 572 credit organizations in Russia. During the year 57 credit organizations were deprived of licenses and 28 credit organizations were put under financial restructuring. Like in other emerging markets the share of banking system in assets of Russian financial industry is high (a bit less than 80%). Russian banks are the main providers of financial services. As of July 1, 2017 total amount of loans issued by the banks to companies and individuals was 41.2 tn. Rubles (51% of total assets of the banking system). Debt investments amounted to 11.7 tn. Rubles (14.5% of total assets). Banks are the main operators in the domestic exchange market (over

90%), repo market (about 85%) and bond market (almost 70%). Banking system ensures most domestic and international settlements. The amount of private deposits is almost 25 tn. Rubles. That is why stability of the banking sector, environment and trends of its development has crucial economic and social importance. With slow dynamics of the main figures in banking sector for the second year in a row there is growth of financial result and profitability of credit organizations. In the previous year banks’ profit amounted to 929 bn. Rubles which is 5 times as much in 2015. As of November 1, 2017 397 credit organizations were profitable. According to the Bank of Russia in the first six months of 2017 banks’ profit amounted to 770 bn. Rubles. If this dynamics remains banks’ profit will reach its historical maximum (1.5-1.5 tn. Rubles). Asset profitability will be around 2% — higher than in most countries today, and capital profitability will exceed 15% and reach worldwide average level. Among key problems of the Russian banking sector is the high share of government in the capital of banking system and as a result weak competitiveness in the sector, lack of equal access to instruments and products of the Bank of Russia and federal agencies and funds, restriction of long-term loans for economy.

“

Federal Law «On basic governmental control (supervision) and municipal control in the Russian Federation» will provide for better business climate in the country.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

Founder’s page. IBC

FINANCIAL OMBUDSMAN IN THE IBC MEMBER-STATES

THE REGULAR MEETING OF THE INTERNATIONAL COORDINATION COUNCIL OF BANKING ASSOCIATIONS OF THE CIS, CENTRAL AND EASTERN EUROPE (INTERNATIONAL BANKING COUNCIL) WAS HELD IN BAKU (REPUBLIC OF AZERBAIJAN) ON OCTOBER 26, 2017. FBA EAC WAS REPRESENTED BY OLEG BEREZOVOY, GENERAL DIRECTOR. THE MAIN TOPIC OF THE BAKU MEETING WAS THE ACTIVITY OF THE INSTITUTE OF FINANCIAL OMBUDSMAN IN THE FINANCIAL MARKETS OF THE IBC MEMBER-STATES.

eaders of banking associations and banking ombudsmen from Ukraine, Kazakhstan, Azerbaijan, Georgia, Montenegro made presentations and gave speeches. The meeting was attended by the deputy of Milli Mejlis of Azerbaijan Vakhid Akhmedov, the representative of the Ministry of Justice of Azerbaijan Fank Gurbanov and the executive director of the Chamber

for Financial Supervision Chamber of Azerbaijan Ibraghim Alyshov. At the end of the meeting it was decided to publish the most interesting information in the next issue of Eurasian Financial and Economic Herald. Alexander Murychev, Chairman of the International Banking Council reported on the work of the IBC for the period 2014–2017 and the election of a new board of directors. For the next three years, A. Murychev

was again elected to the post of chairman of the IBC, the heads of the banking associations became the vice-chairmen: Ukraine — E. Korobkova, Serbia — V. Dugalic, Azerbaijan — Z. Nuriyev, Kazakhstan — B. Bayseitov and Secretary General of Banking Association for Central and Eastern Europe I. Lengyel. During the meeting, the agenda of the next IBC meeting was approved, which will be held at the end of May 2018 in Montenegro.

Founder’s page. IBC

KAZAKHSTAN:

INSTITUTE OF FINANCIAL OMBUDSMAN: INSTRUMENTS AND METHODS www.kba.kz

The

legislative basis for the functioning of ombudsmen varies from country to country, but there is much in common. According to international association of lawyers, ombudsman is a service established by special decision of legislative body and headed by independent public servant of high rank. Thus in the Republic of Kazakhstan the institute of banking ombudsman was established in February 2011 according to amendments to the Law on Banks and Banking Activity of the Republic of Kazakhstan dd. 31.08. 1995 № 2444. The Law determined Banking ombudsman as an independent in his activity individual who settles arguments arising from a mortgage agreement between a bank and a borrower — individual aimed to reach agreement on satisfaction of the rights and secured by law interests of a borrower and a bank. According to the Article 401 of the Civil Code of the Republic of Kazakhstan the terms of a loan agreement may change only when both parties agree. That is why it is important before signing a loan agreement to pay attention to the terms of agreement and loan maturity, to appraise your possibilities to repay the debt, possible risks. If the

Financial ombudsmen of Kazakhstan and Armenia E.Siyrbaev and P.Sargsyan at the International conference on exchange and search for the best practices of state regulation of the rights of financial services customers «Protection of the rights of financial services customers: global challenges and prospects». Moscow, October 19–20. 2017

borrower doesn’t do it there inevitably will be a situation when he asks the credit provider to change the payment schedule or payment delay for a certain time. And a bank might not always meet these demands. For such situations loan agreements imply the right of a borrower to apply to the bank ombudsman. The final goal of the argument settlement is not to release the debt but to restore the infringed payment schedule and agreement obligations. Starting from July 1, 2016 within amendments to the Law on Banks

and Banking Activity of the Republic of Kazakhstan the order of maturity was changed. Previously the amount credited by a borrower was used for fees payment, then for interest repayment and then for the repayment of the principal, and if a borrower always credited an amount smaller that the fee, debt amount grew incrementally and there was an illusion of a debt pit. It was forbidden to issue loans in foreign currency to those clients who don’t have revenues in foreign currency.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

A Law on debt collection of the Republic of Kazakhstan and a Law on amendments and annex to some legislative acts of the Republic of Kazakhstan on collection were adopted. They referred to the powers of banking ombudsman too. Now the banking ombudsman is entitled to settle arguments of a borrower with the third party — collection agency to whom the borrower sold a debt. In order to investigate a claim the law now obliges collectors to cooperate with banking ombudsman and to submit information he demands regarding such claims. The banking ombudsman is not a judge who decides who is innocent and who is guilty. More over according to the provision 2 of article 40-3 of the Law on Banks and Banking Activity of the Republic of Kazakhstan, the banking ombudsman is not authorized to consider claims about those loans which already have final judgement. The institute of banking ombudsman is a pretrial instance for claims on mortgage agreements. Necessary powers and rights of banking ombudsman are included in the legislation on banks and banking activity of the Republic of Kazakhstan. For example bank secrecy can be revealed for him regarding considered claims. Decisions of ombudsman are compulsory for banks if they are taken by a borrower. During the period of the work of banking ombudsman more than 5000 claims have been considered not all of them include arguments with a bank. Unfortunately borrowers address ombudsman when they already have a large amount of debts and fees. And there are hardly ever two similar situations. Difficult situations with debt management have different reasons. Both sides of the agreement have risks: the lender and the borrower, but to a different extent. For a bank

it’s just the NLP ratio — indicator of non-performing loans, but for a borrower in may lead to the loss of a single home for his family or relatives. Most often difficult situations appear with those borrowers who underestimated negative consequences of loan default or relied on a bit of luck. Banks too should warn their clients from fast steps and chose long-term borrowers more carefully. But unfortunately it happens, and not always with the aim to spend credit resources. There are many factors of the quality of loan portfolio. But we shouldn’t forget that most borrowers solved their everyday and housing problems with the help of credits and became successful businessmen. Nobody has a right not to repay loans! So when a bank demands to return a loan within a loan agreement it doesn’t breach any rights of consumers of financial services. However during debt collection it often happens that bank workers don’t address claims and problems of borrowers properly. That is why ombudsman always listens to a borrower carefully and studies his correspondence with a bank. As a rule borrowers turn to the bank orally

and receive oral answers. However it is not enough especially it relates to the change of the order of monthly payments, their maturity dates which later can become a matter of argument. That is why a written claim is the main requirement when you turn to the ombudsman. If there are facts of bureaucracy and breach of rights from secondtier banks revealed within argument case-handling, such cases are handed over to the Financial Services Consumers’ Rights Protection and External Communication Division of National Bank of the Republic of Kazakhstan for information and handling. Financial ombudsman himself meets with citizens twice a month (on the first and third Monday) at the Public reception office of the National Bank of the Republic of Kazakhstan. We should mention that there is no template in solving problems. Every case is unique, each claim has its way and solution. Each situation has a way-out. If you turn to the institute of banking ombudsman in time and realize that there is a need to make concessions you are likely to have positive results.

strategy

RUSSIA AND EU: SEARCH FOR NEW FORMATS OF COOPERATION www.рспп.рф

“

Our national business does its best to use all opportunities for cooperation and synergy with our European partners at this point

ALEXANDER SHOKHIN President of the Russian Union of Industrialists and Entrepreneurs

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

TODAY WE CAN SEE A SYSTEMIC FAILURE IN THE RELATIONS OF RUSSIA AND EUROPEAN UNION IN KEY AREAS OF COOPERATION. GEOPOLITICAL TENSION CREATES A «TRACK OF DEPENDENCE» AND REDUCES POTENTIAL OF FUTURE MUTUALLY ADVANTAGEOUS COOPERATION. HOWEVER IN SPITE OF DIFFICULT SITUATION IN POLITICAL RELATIONS, EU REMAINS ONE OF THE KEY PARTNERS OF THE RUSSIAN FEDERATION.

Global strategy of foreign and security policy of EU: principle of «selective engagement» Although the EU countries recognize interdependence of EU and Russia, in their Global Strategy of foreign and security policy they have determined relations with Russia as «strategic challenge» and chosen the principle of «selective engagement» with our country. Areas of selective engagement include climate, Arctic Region, security of sea routes, education and science, crossborder cooperation, stronger interaction of civil society, students, researchers and businesses. At the same time the Strategy doesn’t even mention cooperation with Russia in such traditional areas as energy or new ones as digitalization. Unfortunately this difficult political situation badly influences economy, though EU remains one of the key partners of the Russian Federation. Turnover between Russia and EU in January-September, 2017 amounted to $ 177.44 bn. 42.7% of Russian foreign trade accrues to EU1. At the same time European business shows urge to develop cooperation with Russia basing on the principle of pragmatism. According to 1

According to Federal Customs Service of Russia at the stated period.

Russian-German Chamber of Commerce 63% of German enterprises anticipated growth of turnover in Russia in 2017, 40% of companies are going to enlarge the number of their staff in Russia, and one third of companies intent to invest in Russia. Moreover 68% of companies were optimistic about Russian economy in 2017. And what is even more important 91% of companies back either immediate or gradual lifting of economic sanctions against our country2. In spite of the signals of business the EU management sticks to the principle of «selective engagement». While we are interested in cooperation in areas that are advantageous for economy of Russia even in this «selective» regime based on «principled pragmatism».

Digitalization: common goals are basis for cooperation Digitalization could become one of such areas. Even a quick glance at the key documents of Russia and EU is enough to realize huge potential for cooperation here. The state program «Digital economy» approved in July, 2017 the goal 2 Business climate in Russia in 2017. 14th poll of the Eastern Committee of German economy and Russian-German Chamber of Commerce. 2017

is to create ecosystem for digital economy in Russia where digital data would be the main factor of production and where effective interaction including cross-border cooperation would be ensured between business, science, government and citizens. Implementation of the program implies removal of obstacles and barriers for high-tech companies in different sectors of economy as well as creation of relevant institutional and infrastructure conditions for this. The final result should be better international competitiveness of Russian economy and its sectors. Basic development areas of digital economy in Russia are regulatory control, staff and education, research and technical abilities, information structure and security. «Strategy of single digital market for Europe» approved by the European Commission in May 2015 underlines three points: 1. Easier access of customers and business to goods and services through Internet within the whole European Union which demands quick removal of key differences between online and offline «worlds» that is removal of barriers for crossborder activity. 2. Favorable conditions for digital nets and services based on highspeed and secure infrastructure and

services backed by relevant regulatory practice for the development of innovations, investment, fair competitiveness. 3. Maximum growth of potential of the European digital economy which demands investment in ICT infrastructure and such technologies as cloud calculations and enormous data as well as extended research and innovations in order to increase industrial competitiveness, and also implementation of the best experience in the area of public services, inclusion and competences. The full implementation of the program is expected to lead to GDP growth within EU in the amount of €415 bn. per year as well as to essential increase of effectiveness of the whole European economy. As part of the Strategy the Incentive of digitalization of European industry was launched last April. It includes different areas: from regulatory control to education. At many points of the digital agenda mutually advantageous cooperation can be launched. New impetus could come from the Russian program of establishment of common digital area of Russian industry «4.0 RU». The establishment of the common digital area «4.0 RU» can be based on a complex adoption of digital technologies at all stages and levels of industrial production. Such cyber-physical environment could ensure shorter period of entering of new goods to the market. More effective production processes and finally a new level of industry in the country. We don’t offer to initiate Partnership for digitalization remembering

about unfortunately reposed Partnership for modernization, but we consider that in digitalization Russia and EU could be partners on multilateral platforms. Our national business does its best to use all opportunities for cooperation and synergy with our European partners at this point. RSPP and the Eastern Committee of German Economy established German-Russian Incentive for Digitalization (GRID)». It is aimed to support Russian companies with their digitalization strategies. In this regard RSPP and the Eastern Committee will form a joint work group which will include third parties if they wish. We have already determined certain steps for the incentive and a draft plan of joint measures. Thus a platform will be created to attract partners from other European countries. For example our French partners expressed interest in cooperation with RSPP and Russian companies in digitalization. Many European companies

are already working on digitalization of Russian economy: • Renault is launching a Center for digital projects in Russia with a focus on development of digital technologies on the Russian market as well as on their export to other markets. • Schneider Electric is a global energy company which passed original codes to Russia and organized a full circle of software production. Investment to the project amounted to €1 m. • Enel has started a joint project with Rosset on digitalization of part of a net for 150 thousand ultimate consumers in the Pskov Region. The results of it can be implemented in all Russia. Besides in October the company opened its own innovation center in Moscow. Joint incentives of digitalization with EU could set a goal of experience exchange, spread of the most effective technologies, and implementation of unified standards. Cooperation could also strengthen digital security of all partners.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

Investment: business demands cooperation Investment is another area of potential cooperation between Russia and EU on multilateral platforms. In 2010-2013 investment dialogue was one of the most dynamic, where on the one hand Partnership for modernization had positive influence, and on the other hand — investment cooperation within G20. EU remains the largest investor in the Russian economy. In particular aggregated volume of FDI from EU to Russia according to the Bank of Russia as of April 1, 2017 amounted to nearly $ 277 bn. European companies are also among leaders in the number of investment projects. In 2016 among 205 projects which received FDI 43 projects accrued to Germany, 20 — France, 9 — Austria, in 7 projects Italian and Finnish companies took part and in 5 — the Dutch ones3. Moreover many companies plan their strategies for many years. Here are some of the projects. • Metro is planning to invest €100 m. in construction of new supermarkets in the Moscow Region until 2020. • IKEA plans to finance its net until 2023 for €1 bn.4 • Leroy Merlin is going to finance its business within 5 years for up to €400 m. on a yearly basis. Retail also develops. • In October, 2017 Sanofi announced a special investment contract on modernization of industrial pharmacy production at the plant «Sanofi-Aventis Vostok» in the Orlov Region. On June 1, 2017 they began to export insulin produced at this plant. • In 2017 Fortum started a project of construction of wind farm with ca3 Investment attractiveness research of European countries. Russia, May, 2017. E&Y. 4 Russlands wirtschaft mit neuem Schwug. Wichtige Branchen legen zu. 2017. GTAI.

pacity of 35 MW (14 turbines) in the Ulyanovk Region. Anticipated volume of investment is € 65 m. • The project of construction of the second stage of the plant «ElektroMonoblock» by Schneider Electric is in process in the village Kommunar, Leningrad Region. The relevant agreement was signed in 2016 at SPEF. • The German machine producer Niles-Simmons-Hegenscheidt Gruppe announced the construction of milling machines plant in Zelenograd. • German-Russian company Econiva will open three diary plants this year. • Hochland is extending its production capacities in the Belgorod Region and will invest in it about € 20 m. • Volkswagen is planning to build a plant of vehicle components

in the Chelyabinsk Region, and Mercedes is already constructing its plant in the Moscow Region. • Liebherr opened this year a service center in Kemerovo worth RUB 1.5 bn. • In 2017 Nokian opened the 14th production line at its plant in Vsevolozhsk in the Leningrad Region. Thus its capacity will reach 17 million of car tires per year. The company produces 85% of its tires in Russia. There is also cooperation of European partners. For example Thyssen Krupp, Uhde Inventa-Fischer, Oerlikon Neumag and Czech Unistav Construction are constructing a factory in Ivanovo on polyester production for light industry.

However the potential for foreign investment in Russia is still underused. As well as Russian investment in EU. For example more than a half of Russian investments in Germany are from Gazprom and Rosneft. However recently we have seen diversification of Russian investment in EU. For example our IT companies develop business in Germany, such as Kasperskiy Laboratory and Data Matrix. In 2017 Russian biotechnological company «Biocad» announced about construction of a plant in the Finnish town Turku. Project investment will amount to more than €25

m. Medicine produced at the plant is expected to improve the position of the company in Europe market. In 2015 the United Shipbuilding Corporation bought out the Finnish shipyard Arctech Helsinki Shipyard where ice-class vessels of the latest design are built. In October the ceremony of naming a new vessel was held at the shipyard. It was an icebreaking replenishment ship for FPU platforms built at the shipyard by order of «Sovkomflot», and it was named «Fedor Ushakov». In 2017 the company Power Machines has accomplished a project for updating of hydraulic unit #1

with capacity of 14.4 MW at the Finnish hydro-electric power station «Tainionkoski». In 2018 the company is planning to update the second hydraulic unit at the station. IT company Luxoft opened a subsidiary in Krakow — Luxoft Poland. It offers IT solutions for tourism, car industry and finance. In Poland there are also assets of such companies as Gazprom, NOVATEK, Russian Standard. The lastmentioned one owns assets of the alcohol holding Central European Distribution Corporation (CEDC), one of the leading producers and distributors of alcohol in Poland.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

The holding also owns the brand «Zubrovka». However most Russian investments are in raw materials sector. The largest Russian project is the gas pipe «Nord Stream-2» aimed at secure supply of gas to EU. Many companies are involved in the project such as French Engie, British Dutch Shell, German Uniper and Wintershall and Austrian OMV. At the same time we know that Russian investors in EU countries often meet regulators’ pressure and non-stipulated obligations. With this regard we appeal to build a correct and mutually advantageous dialogue on investment based on transparency, statute of the law and free of politics and protectionism. We also offer to use multilateral platforms, instruments and obligations. For example G20, WTO, OECD. In 2016 G20 initiated a Work group on trade and investment, approved Guidelines of G20 on global investment policy aimed to create open and transparent regulatory environment for investment. Obligations to assist investment in sustainable infrastructure including energy, and higher quality of infrastructure investments are regularly confirmed. Business actively cooperates with our European partners on multilateral platforms. In Business 20 headed by Germany in 2017, European and Russian business worked out complex recommendations for key areas of digitalization, SME, investment, combating climate change and other areas. Many business ideas were taken into account by governments of G20 and were reflected in final documents of the German Presidency. Regarding digitalization the leaders approved a relevant «road map» and confirmed continuity of G20 resolutions since summits in Antalya and Hangzhou. The final declaration of the summit and the «road map» in-

cluded the ideas of the special work group of G20 on digitalization regarding cyber security, digital infrastructure, development of international standards, free dissemination of information and other key areas. * * * In conclusion I would like to stress that there is now a demand for normalization of relations between Russia and EU. For example IIASA (Austria) and Center for Integration Studies of EDB carry out a project «Challenges and opportunities of economic integration within European and Eurasian area». The project aims to reveal possible approaches to normalization and development of relations between EU and EAEU and finally in the long-term perspective work out an overall integration agreement between the two unions. Another incentive to collaborate interaction of Russia and EU is the partnership «From Lisbon to Vladivostok». The relative work group was created in November, 2015 in Berlin on the basis of five business associations: Eastern Committee on German economy, German-Russian Forum, German-Russian Chamber of Commerce, East European Associa-

tion of German business and Raw Materials forum initiated by a German businessman Ulf Schneider and expert Alexander Rara. The work group includes sectoral groups on issues related to technical rules, standards, certification procedures, mutual recognition of documents, customs, relax visa requirements. The concept of Single economic area from Lisbon to Vladivostok and certain proposals of the work group are set forth in the Berlin Memorandum published in March, 2017. Thus basing on the work group a new independent platform is formed which provides for dialogue and exchange of views between Russian and European businesses. The work of the Round table of industrialists of Russia and EU and the work of the Russian Parliamentary «European Club» is also carried out. EU has formed three possible scenarios for political relations with Russia: status-quo, full recovery of cooperation and search for «preliminary compatibility». Status-quo seems to be more likely for now. While experts and business search for opportunities for «preliminary compatibility».

Forum

RUSSIA & THE WORLD: TOP LEVEL OF BUSINESS www.fbacs.com

The

speakers of the Forum were the President of RSPP Alexander Shokhin, Vice-President of the World Economic Council Ambassador Thomas Matussek, Member of the Board â&#x20AC;&#x201D; Minister in charge of Economy and Financial Policy of the Eurasian Economic Commission

Timur Zhaksylykov, President of FBA EAC Bakhytbek Bayseitov, Executive Vise-President of RSPP, Chairman of FBA EAC Coordinating Council Alexander Murychev, Secretary General of BACEE Istvan Lengyel and other economic and financial experts. The participants managed to cover up-to-date economic aspects of

Eurasian integration; to discover possibilities of European suppliers and producers to entry the EAEU market; to have a look at typical challenges and features of business in Russia and EAEU which the European companies might face; to discuss legal conditions and legal security of entrepreneurs in Russia with the influence of EAEU.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

ON DECEMBER 1, 2017 THE FOURTH MOSCOW INTERNATIONAL FINANCIAL AND ECONOMIC FORUM «EURASIAN UNION AND THE EU: SEARCH FOR NEW FORMATS OF COOPERATION» WAS HELD. ABOUT 200 PARTICIPANTS FROM 24 COUNTRIES OF EUROPE, ASIA AND AFRICA GATHERED IN RSPP BUILDING ON KOTELNICHESKAYA NABEREZHNAYA. BESIDES RUSSIAN ECONOMIC AND FINANCIAL EXPERTS THE MOST NUMEROUS DELEGATIONS CAME FROM GERMANY, KAZAKHSTAN AND CHINA.

Thomas Matussek , Vice-President of the World Economic Council

Tanja Galander, Senior Manager, PricewaterhouseCoopers Legal AG

Besides plenary sessions the participants were involved in breakout sessions. The first breakout session — «Providing access of entrepreneurs to capital markets and funding sources in Eurasia» — included issues of building single financial market in EAEU, European experience in alternative funding of innovative business, as well as possibilities for busi-

Istvan Lengyel, Secretary General of BACEE

Sunder Lal Bhatti, President, Commercial Indo Bank LLC Moscow

ness both of the local and international scale. The session «Agricultural engineering: from intentions to cooperation» covered such issues as fund raising in agricultural sector, technologies transfer, favorable environment for local content of world manufacturers in the EAEU, international standardization of local enterprises and technical solutions as well

Irina Golovchenko, Chairman of the Board, International Bank for Economic Co-operation

as possibilities for EAEU and EU agricultural products to entry the markets of third countries. The agenda of the session «Industry: new opportunities for EuroAsian integration» was as follows: local content and import substitution, industrial integration and cooperation development, new business models for the forth industrial revolution.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

A.Murychev invited the guests to participate in the Fifth Moscow International Financial and Economic Forum in Moscow on November 30, 2018

The name of the session «At the speed of light — the latest trends and changes in financial technologies and regulation» speaks for itself. It included new fintech releases and experience of their implementation in financial sector.

New FBA EAC Russian and foreign members received diplomas. Among them were «STEP» (Russia), «Nord Group» (Russia) «DADENAZH» (Russia), «Tai Cloud Corporation» (China) and the Canadian «Cascadia Consumer Electronic Corp» (Canada).

FBA EAC signed a Memorandum of Cooperation with the Association of customs auditors and consultants. The Memorandum was signed by the General Director of FBA EAC Oleg Berezovoy and General Director of the Association of customs auditors and consultants Maria Serebrova.

Projects

Igor Olennikov, Head of the branch of JSC «SEZ» in the Republic of Buryatia, Ph.D. of Geographic Sciences, Associate Professor

«BAIKAL HARBOR»: NEW HORIZONS OF DEVELOPMENT

www.russez.ru

special economic tourism and recreational zone «Baikal Harbor» is located on the territory of Baikal Region in the Republic of Buryatia and occupied more than 3,5 thousand hectares. The length of the coast line along the territory of the SEZ is 60 km. On February 3, 2007 the Government of the Russian Federation approved a Resolution to create the SEZ «Baikal Harbor». Construction works began in July 2009. The presentation was attended by the Russian Finance Minister Alexei Kudrin, the President of Buryatia Vyacheslav Nagovitsyn, the head of the Federal Agency for Special Economic Zones Andrei Alpatov, the heads

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

of the resident companies of the tourist zone. At the end of 2010 the first phase of the infrastructure of the SEZ — objects of energy supply, in-ground water supply networks, domestic sewerage, embankment, was introduced. In February 2011 treatment facilities and an electric substation began to work. Given that Lake Baikal is included in the UNESCO World Heritage List, tourism and the ecology-oriented economy of «Baikal Harbor» have good prospects for successful development with the participation of countries, belonging to the Eurasian Economic Area.

Tourism and rest The geographical location of the Special Economic Zone «Baikal Harbor» allows to develop different kinds of recreation: — ecological and business tourism; — skiing; — cultural and recreational tourism; — medical tourism with the use of unique mineral springs, methods of Tibetan medicine and balneological recourses.

change of innovative technologies with the countries that are part of SCO, APR and neighboring Mongolia. For the successful development of this area, the issue of creating an International permanent exhibitionexposition of the best global environmental-oriented achievements of a wide range that can be introduced into the real sector of the economy both in Russia and abroad is considered here. The project has been implemented through three-tier financing. The funds are received from both the budgets of the Russian Federation, the Republic of Buryatia and municipal entity «Pribaikalsky district», as well as from private investors. Currently, the volume of state investment is more than 22 billion rubles and the attracted private investments — over 47 billion rubles.

The SEZ «Baikal Harbor» gives the opportunity to develop unique directions of tourism and creates the momentum to the further realization of the world-class project with tasks to maintain Lake Baikal as a special world natural value. Each object (area) of the SEZ «Baikal Harbor» has its own tourist orientation. Thus, all-season operation is achieved, ensuring a good profitability of the whole project as a whole and stable profitability of the projects of individual residents. Favorable conditions, created in the SEZ «Baikal Harbor», make it possible to implement projects that meet the best world criteria. The formation of correct, understandable procedures and conditions for working with investors and reliable partners will provide the basis for creating an enabling investment climate in the Republic of Buryatia.

Ecology-oriented economy The special economic tourism and recreational zone «Baikal Harbor» is one of the federal projects in the Republic of Buryatia. The functioning of the tourist-recreational zone is based on the mechanism of publicprivate partnership. It is envisaged that these objects will be visited by 1 to 2 million tourists per year. The leadership of the Republic of Buryatia also envisages the creation of the Euro-Asian data bank of «breakthrough technologies» on the territory of the SEZ «Baikal Harbor» which will allow more effective cooperation in the field of the ex-

Expert Opinion

BARGAINING CHIP ABOUT THE PROBLEMS OF ENHANCING THE COMPETITIVENESS OF THE MONGOLIAN ECONOMY

www.montsame.mn

“

A well-elaborated and effective economic policy will be a powerful tool for overcoming the economic challenges, developing those sectors of the economy that have potential for competitiveness.

PU NTSAG TSAG A A N Board Chairman of the Economic Policy and Competitiveness Research Centre of Mongolia. In 1996-1998 Former Minister of Finance of Mongolia. In 2004–2006 — Minister of Education, Science and Culture of Mongolia. In 2009–2016 — Adviser, Senior Adviser and Chief of Staff of President of Mongolia.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

IN THE CONTEXT OF INCREASING GLOBALIZATION OF THE WORLD ECONOMY, THE ISSUE OF ENHANCING THE COMPETITIVENESS OF MONGOLIA'S ECONOMY IS BECOMING A PRIORITY. SINCE THE EARLY 1990S, FOLLOWING THE TRANSITION TO A MARKET ECONOMY, THE COUNTRY HAS BEEN DEVELOPING WITH VARYING SUCCESSES. NEVERTHELESS, OVERALL ECONOMIC AND LEGAL CONDITIONS FOR DEVELOPMENT OF A MARKET ECONOMY HAVE BEEN CREATED. TODAY, NEARLY 82% (AS OF 2016) OF THE COUNTRY'S GDP IS PRODUCED BY THE PRIVATE SECTOR.

ith the liberalization of the economy, Mongolia's foreign economic relations, its comparative advantages and emerging demands are all determined by the country's geopolitical positioning. Currently, Mongolia maintains trade relationships with almost 100 countries around the world. Although the economy is growing at a relatively fast pace thanks to mining boom, but its growth pattern is not stable. Animal husbandry, the traditional backbone of Mongolia's economy, is successfully developing and the number of livestock of the main five species has reached 65.0 million heads. Mongolia is one of the leading countries in the world in terms of the number of livestock per capita. However all countries face challenges, and Mongolia is no exception. A number of issues remain to be solved, and improving the competitiveness of Mongolia’s economy is one of them. Having a competitive economy is an essential feature of Mongolia’s sustainable development. Regrettably, our society and government has not acknowledged this so far. In short, we lack a clear national government policy aimed at increasing the competitiveness of Mongolia on the international stage. The Economic Policy and Competitiveness Research Center (EPCRC), which was established on my initiative in 2010, is actively cooperating with the Swiss-based World Competitiveness Center for this purpose.

In 2010, for the first time in Mongolia, the EPCRC developed a publiclyavailable report on the Competitiveness of Mongolia. For the initial study, 14 countries were selected by us and compared to Mongolia in order to assess the country’s relative competitiveness in an international context. According to the report, Mongolia ranked 14th out of 15 countries. In subsequent years the EPCRC increased the number of countries included in the study to 63, and Mongolia now ranks 60th. Thus, the results of the reports indicate that targeted actions need to be taken in order to improve the competitiveness of Mongolia. In the case of Mongolia, the current low level of competitiveness is attributable to a number of factors including reduced foreign direct investment (FDI), inflation, a slowdown in GDP growth, reliance on commodity exports, increased external debt, and political instability. During the period from 1992 to 2016, the preceding governments of Mongolia promoted foreign investment, particularly FDI. However, they were criticized for their inability to create a stable economic and legal environment to attract foreign investments. This fact is evidenced by our studies. 2012

2013

Despite certain economic advancements in recent years, the structure of exports is still the same as it was several decades ago, with mining commodities composing more than 80% of total exports. Mongolia is still positioned in the world market primarily as a supplier of mineral raw materials. According to the World Bank's flagship publication «Doing Business in 2017», Mongolia ranks 64th out of 189 countries on the «Ease of doing business» index, which is 2 positions lower than in 2016. Over the past year, Mongolia has improved its business environment for only one of the 10 indicators included in the ranking. In regards with the «Paying taxes» ranking, our country occupies the 36th place (in 2016, it was 73rd), on «Registration of new business entities», it remained at the level of 2016 (32nd). For all other indicators, Mongolia dropped in the ranking. For example, in terms of cross-border trade, it is now ranked 103rd, and 102nd for connectivity to the power supply system. Having studied Mongolia's competitiveness for several years, the EPCRC has identified a number of problems related to internal and external factors that may affect the national competitiveness of Mongolia. 2014

2015

2016

Reports on the competitiveness of Mongolia for 2012–2016

1. Political Instability and Uncertainty. Ensuring political stability is an important challenge that has a direct impact on the country's national competitiveness. In the early 1990s, Mongolia abandoned the single political party, centrally planned economy and chose a new political path based on the liberal values of a market economy and a multi-party political system. Since that time, the new political system has been evolved and established. Indeed, the successful development of a new political system has been a key driver of the development of Mongolia's economy. At the same time, the EPCRC has identified a number of negative outcomes related to Mongoliaâ&#x20AC;&#x2122;s political system that might affect the national competitiveness and security of the country as a whole. For instance, the frequent changes of government, combined with the predominance of two major political parties in the decision-making process, are an issue. In addition, various illegitimate and informal alliances as well as lobbying groups are parts of the political sphere. These influential groups act for the interests of the main political actors and pressure the decision-makers into adopting policies in their favor. These kind of negative developments, adversely impact on political stability in Mongolia. Over the past 26 years, Mongolia has experienced 15 changes of government. Political instability does not allow cabinets to consistently implement their policies, especially longer term economic development strategies, and it also discourages foreign investors. The resignation of the government in September 2017 after the parliamentary elections of 2016 clearly is timely reminder of the political instability that exists within Mongolia, hampering our economic development. Improving political

stability is imperative to improving our overall economic conditions. 2. Stable Economic Growth. In the context of globalization of the world economy, sustainable economic growth is the most vulnerable aspect of Mongolia's competitiveness. The graph below provides evidence that economic growth in Mongolia is very volatile in recent years: 4.7% in 2002, 10.6% in 2004, 1.25% in 2009, 17.3% in 2011, 2.3% in 2015, 1.3%, in 2016 and an estimated 5.5% in 2017. Although unstable, a relatively high economic growth contributes to the country's competitiveness to some extent. Nevertheless, Mongolia still lags behind not only developed but also many developing countries on many economic indicators and parameters of economic development. For instance, by indicators such as gross national product per capita, productivity, average salary, pension allowances, we are below the world average. Thus, a well-elaborated and effective economic policy will be a powerful tool for overcoming the economic challenges, developing those sectors of the economy that have potential for competitiveness, finding and filling the niches in the world market. The level of foreign investment is declining and the economyâ&#x20AC;&#x2122;s

dependence on the mining sector is increasing. Government debt is growing and has reached 80 percent of the country's GDP. The balance of payment deficit worsens every year. Corruption has spread through all areas of our society. All these negative facts suggest that the competitiveness of the country is at an extremely low level and that the economic security of the country is at risk. In this context, we propose to develop a holistic national economic policy, including a strategy for increasing competitiveness, and get it approved by the State Great Khural (Parliament) of Mongolia. This document should include concrete actions aimed at achieving sustainable economic growth and economic diversification, as well as a list of indicators allowing for the assessment of the performance of the economic system and the competitiveness of the country. In our opinion, it is possible to measure the level of the country's competitiveness based on the following indicators of financial sustainability: the level of budget deficit; stability of prices; normalization of financial flows and settlements, stability of the banking system and national currency, degree of protection of depositorsâ&#x20AC;&#x2122; interests,

35 31,8

30 28,5

26,2 22,2

17,3

23,2

24,2

19,2 16,7

15 13,2

12,3

9,8

7,1 11,6

5,1 7,9

3,0

2,3

1,3

2015

2016

6,4

0 2010

2011

2012

Economic growth and GDP

2013

2014

2017

2018

2019

GDP, trillion Mongolian tugriks Economic growth, %

Source: Ministry of Finance of Mongolia, 2017

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

gold and foreign exchange reserves of the country, state and level of development of the financial and securities market, external and internal debt of the country, balance of payments deficit, economic and legal conditions promoting foreign and domestic investment. Within the framework of the economic policy concept, we should create a comprehensive mechanism for ensuring the country's competitiveness on the world market. Government agencies should take practical actions for implementation of the economic policy on a daily basis. In our opinion, a consistent modernization of the economy and implementation of targeted economic policies will contribute to the development of the non-commodity sector and will improve the competitiveness of all economic sectors on the world market. 3. Increasing Foreign Investment. Foreign investment, in particular FDI, is an important factor to consider when seeking to increase the competitiveness of a country. According to government sources, over the past 26 years, more than 13,000 foreign economic entities from 112 countries have made direct foreign investment (FDI) to Mongolia totaling $15 billion. Over 80 percent of this was invested into the Mongolian economy in the period from 2008 to 2012. At the same time, the mining sector accounts for 72.5 percent of total FDI. In 2014–2016, companies with foreign capital created more than 38 thousand new jobs, of which 80% are occupied by Mongolian nationals. The largest contributors of FDI in Mongolia are the Netherlands, China, Luxembourg, the United Kingdom, Singapore, Canada, the Republic of Korea and the United States*. However, in recent years, due to *

URL: http://www.montsame.mn/ru/read/11210

Mongolia's political instability and economic downturns, foreign investors have been taking a wait-andsee approach. It is regrettable that a political party’s internal frictions lead to political instability, which in turn discourages foreign investors, and ultimately impact the general public via diminished economic activity. At the moment, the government’s priorities should include stabilization of the economy at the macro level, improvement of investment climate in order to restore confidence of foreign investors in Mongolia. 4. Regional Economic Integration. Currently there are two major economic projects developing around Mongolia — the Eurasian Economic Union and the Economic Space of the New Silk Road initiated by China. We believe cooperation with the Eurasian Economic Union (EAEU) and participation in the Chinese project «One Belt — One Road» will become cornerstones of Mongolia’s economic development and powerful triggers in increasing competitiveness of the Mongolian economy on the Eurasian market. The creation of a new Chinese-Mongolian-Russian transport and economic corridor through Ulaanbaatar will bring Mongolia's trade and economic cooperation with the

Russian Federation and the PRC to a whole new level. As a result, Mongolia will be able to supply its products without quotas or duties to the markets of the member-states of the EAEU and PRC. In mid-2017, the Government of Mongolia officially expressed its wish to join the Eurasian Economic Union. I am confident that in the near future the «Agreement on free trade between the Eurasian Economic Union and Mongolia» will be signed. Implementation of this agreement will significantly increase the trade turnover between Mongolia and the EAEU member-countries and will also become the basis for cross-border economic cooperation. The abolition of customs duties is likely to lead to an increase in exports from the EAEU to Mongolia, and in turn, Mongolia will be able to export meat, cashmere products and mineral raw materials to the countries of the EAEU. In conclusion, I would like to emphasize that a well-elaborated and effective economic policy is a powerful tool for overcoming the current economic challenges, developing sectors of the economy where Mongolia can become truly competitive and filling the niches in the world market.

Banking system of the countries of Eurasia

BANKING MARKET OF UKRAINE: OUTLOOK FOR 2018 www.nabu.com.ua

“

I believe that 2018 will be a turning point in non-performing loan management

ELENA KOROBKO VA Executive director of Association «Independent Association of Banks of Ukraine» (NABU). Born on November 1, 1982 in Odessa. Graduated from Odessa National University of I.Mechnikov and Odessa National Economic University. She has worked in financial sector for 10 year, eight of them she has been on managing positions in Ukrainian banks.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

What has been already done The first thing worth mentioning is that the cleaning-up of banking system after a large scale crisis 2014– 2015 is completed. More than 90 banks (about a half of the total number at the end of 2013) were removed from the market, most of them — due to insolvency and many — due to non-transparent ownership structure. Reforms carried out by the National Bank are usually highly estimated by international financial experts and are also backed by the market itself. Once the best world practices have been implemented in Ukraine there are only such banks left: with transparent ownership structure, clear business model and what is crucial — capitalized and liquid ones. The structure and principles of banking supervision and financial monitoring have been radically changed. Small banks have increased capital up to normative UAH 200 m. and more, their capital adequacy and asset quality are confirmed by diagnostics of the National Bank. Some

smallest banks still have difficulties with making up of capital and might leave the market soon. Some of them continue to work as non-banking financial companies — as of the end of 2017 such decision was announced by 5 banks (in mid. 2017 the relevant Law was voted and registered which gives possibility to speed up capital increase and leave). These processes don’t influence stability and landscape of the market. Late December the National Bank supported small banks by having approved the proposals of NABU and changed the time limits for capital increase (the requirement of UAH 300m. has been delayed for two years). Speaking about the banking sector of Ukraine we can’t but mention the participation of government in it. The nationalization of the large Privatbank more than a year ago when it was on the verge of bankruptcy went smoothly (without payments stop or deposit freezing). Stability of banking system was preserved by means of intrusion of competitiveness in the Ukrainian market. Today government share in the banking sector has increased up to

Reference

Independent Association of Banks of Ukraine (NABU) The Independent Association of Banks of Ukraine is an open public organization aimed to adhere to equal and transparent relations within fair dialogue. MISSION. To support thoroughly the stability of financial system of Ukraine, the solution of problems and goals of banking system to increase income of business and development of national economy. VISION. The Independent Association of Banks of Ukraine is a powerful and effective representative of banking system, reliable partner for governmental bodies and management. Members of Association in their work support the development of banking system, acknowledge stability as its highest quality based on reliability of each component, and success of each bank depends on the success of the whole system. Only harmonic development of the whole system can ensure sustainable growth. Each bank no matter the size, form of ownership and capital source has its unique function in the banking system. Priority of banks can’t be determined by their size, form of ownership and capital source. Fair competitiveness is the basis for stability of banking system. Unfair competitiveness denounced.

56% in net assets and up to 62% in retail deposits. On the one hand state banks have preferences in dealing with some types of clients and on the other hand — higher (than average) level of non-performing loans.

Where we are now Unfortunately Ukraine has reached and it keeps a kind of bad record — the share of non-performing loans on total bank portfolio steadily exceeds 50% (in July-August it peaked to 59%). However provision for these loans is duly made, and they don’t carry any threat to stability. With this backstage there is a recovery of deposits and lending (most in UAH, foreign currency portfolios decrease). Consumer sec-

tor became the driver (growth is about 25% in UAH). Corporate loans grow slower (about 5%). But it’s not bad with weak economic growth. It all shows more trust in the banking system. During the last two years stabilization in economy and finance has been followed by gradual slide of discount rate of the National Bank. The National Bank also gradually lifted restrictions which were imposed in 2014–2015 in the foreign exchange market. However it is still a long way to full liberalization and launch of accommodative monetary policy. Higher inflation risks in the second half of 2017 forced the National Bank to raise the discount rate twice (up to 13.5% and 14.5%) after a long period of relaxation. If the elec-

tion year doesn’t bring any new turmoil we can intimidate easing policy and lower rates in Ukraine by the middle of this year. At large in 2017 the banking system of Ukraine made up capital by UAH 45 bn., became unprofitable and raised to earning zone again: in 10 months of 2017 total income of

“

Unfortunately Ukraine has reached and keeps a kind of bad record — the share of nonperforming loans on total bank portfolio steadily exceeds 50%

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

the banking system exceeded UAH 2 bn. and as statistics show banks remain the drivers of economic growth. Today there are also wake-up calls around exchange risks and stability of foreign exchange market. There are huge reserves accumulated on the accounts of the State Treasury, more than UAH 54 bn. as of early December, which is twice as much compared to previous year. But taking treasury funds at the end of fiscal year might lead to destabilization at the exchange market and lower UAH exchange rate. However there are more positive changes in Ukrainian banking market and what is crucial today we have the most reliable banking system in the last 10–15 years.

What shall we wait in future Analytics say that 2018 we will see growing credit demand from borrowers and stronger abilities to perform them. And a lot is already done: Law on consumer lending (includes consumer lending information, etc.), amendments to the Tax Code of Ukraine, Credit Registry under the National Bank (passed in the first reading). Taking into account that nominal wages have increased by 36%, real wages — by 19%, while nominal income has increased only by 5%, there is large potential for growth of credit demand in Ukraine. According to NABU the share of consumer credits in GDP is 6% while in the developed countries the share is 60%, and in Eastern Europe — 40%. So Ukraine has new challenges ahead. Rates of purpose credits are expected at the level of 15–16%, nonpurpose with higher risks — 22–25%. So according to our experts 2018 will see growth of profitability in the banking sector of Ukraine. The development is restrained by high lev-

el of non-performing loans (56% for now). But the problem was tackled a lot in 2017 and seems to have found a solvation — draft Law on debt management, which I hope will be registered in January in Parliament. Banking sector also needs a package of laws on borrowers’ rights. Ukrainian borrowers are reluctant to repay their obligations, so many large borrowers credit funds to offshore accounts and refuse to pay obligations. But draft law #6027-d is already in Parliament and is recommended for approval by the relevant Committee of Rada, so I believe that 2018 will be a turning point in non-performing loan management. Another important document for the banking sector of Ukraine is the «split» law (which liquidated Natskomfinservice and passes its functions to National Bank and National Commission on securities and forex market). And registration and approval of draft Law on currency (instead of Decree of 1993), especially considering that all these incentives were worked out with direct assistance of NABU.

“

According to our experts 2018 will see growth of profitability in the banking sector of Ukraine. The development is restrained by high level of non-performing loans (56% for now).

As for creative plans of banks, in 2018 it will be necessary to invest in technologies and staff to raise the effectiveness of the work. As for retail lending partner programs are a big hope. With rates continuing to slide bank lending will incorporate in investment (now bank credits are too expensive for business) and in general have a positive effect. How we will meet these challenges time will show. Our task as professional union is to remind the government about its responsibilities and its driver role for changes for the better.

Financial literacy

ARMENIA:

FINANCIAL LITERACY AS NATIONAL STRATEGY

or the last few years Armenia has carried out the National strategy of financial literacy which includes an annual event — «A month of my finance» confined to World Savings Day. Financial literacy, conscious spending, products on financial market, saving, debt management, insurance, pension funds planning — this is a far from full range of options at the Month. They are not just theoretical but also practical. Thus with joint efforts of several organizations and agencies — Central Bank, Union of Banks of Armenia, Deposit Guarantee Fund of Armenia, some commercial banks — financial education is regularly conducted for pupils

and students, representatives of mass-media and broad public in general. Intense interest is paid by Armenian citizens to such format of education as «Financial Dictionary» (banners in public places with financial terms and their meanings). During the Month a lot of contests are carried out — photography, comics, kid painting, mobile applications for budget planning, creation of new or update of existing financial products. There are bus tours to financial organizations, information evenings «Open doors», short seminars and interactive courses in universities and schools, visits to stock exchange, training, flashmobs on finan-

cial planning, open air exhibitions, films about personal finances, various games. Central Bank of Armenia (which has a special division — Center for protection of consumers’ interests and financial education) together with the Payment system Visa initiated an interactive game «Financial Football» spread on relevant websites. The game deals with budget management, savings, investment, credits etc. You can play individually or with a partner, and there are no age limits because the game has three levels: for 11–14-year olds, 15–18-year-olds and over 18-yearolds. Last April Central Bank of Armenia and International news agency

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

Within the program «A month of my finance» an information seminar was organized in the Armenia State Economic University for students and teacher

«Armenia-News» presented a joint project «Financial Literacy». Within this project the news agency set up a column on its website called «Wallet» where you can get some skills in finance. The project aims to teach citizens through entertainment tests and interesting articles how to use appropriately the services of the participants of financial market, to manage your finance with the help of innovative technologies, be careful with your money avoiding unnecessary spending and debts, keep your savings duly.

Now there is an office of financial Ombudsman in Armenia — the institute has worked since 2009 and is aimed to settle arguments between individuals and financial organizations quickly and free of charge. We should mention that the growing number of claims from consumers is caused not by bad work of financial structures but by better knowledge and trust of people in the newish market institute of Armenia. This is also the result of active financial awareness-building by Ombudsman office.

Since 2009 there has been an office of financial Ombudsman in Armenia

Central Bank of Armenia together with Visa launches an Armenian variant of interactive online-game «Financial football»

International news agency «Armenia-News» and Central Bank of Armenia presented a joint project «Financial Literacy». Within this project the news agency set up a column on its website called «Wallet» where you can get some skills in finance

Award

FINANCIAL & BANKING ELITE OF EURASIA

www.fbacs.com

ON NOVEMBER 30, 2017 THE «SOKOLNIKI» HALL AT THE HOTEL «HOLIDAY INN MOSCOW SOKOLNIKI» WELCOMED THE OFFICIAL REWARDING CEREMONY OF THE ANNUAL INTERNATIONAL PUBLIC AWARD «FINANCIAL AND BANKING ELITE OF EURASIA». AMONG THE PARTICIPANTS WERE REPRESENTATIVES OF BUSINESS, POLITICAL AND CULTURAL CIRCLES, NATIONAL GOVERNMENTS AND BANKS, HEADS OF TRADE UNIONS AND ASSOCIATIONS OF EURASIA.

Премия «Финансово-банковская элита Евразии» 30 ноября 2017 года

The

speakers of the ceremony were Timur Zhaksylykov — Member of the Board — Minister in charge of Economy and Financial Policy of the Eurasian Economic Commission, Chairman of the Supervisory Board of FBA EAC; Alexander Murychev — Chairman of International Banking Council, Executive VisePresident of RSPP; Bakhytbek Bayseitov — President of FBA EAC, President of the Association of Banks of the Republic of Kazakhstan; Oleg

Berezovoy — General Director of FBA EAC; Ambassador Thomas Matussek — Vice-President of World Economic Council. «Financial and Banking Elite of Eurasia» is a new award in the area of economy and finance. It was launched by Financial & Banking Association of Euro-Asian Cooperation together with International Banking Council (International Coordinating Council of BACEE). As the prize the winners received designer statutes with a bee on it — a symbol of hard work, thrift, zeal,

unity, prudence, inspiration and wealth. The statutes were designed by a professional Moscow artist, a winner of international competitions Mila Zakatova and made of bronze, silver and gold. The winners of 2017 were determined in three categories: 1. Standard of Reliability. 2. Development Benchmark. 3. Triumph of Technology. At the end of the ceremony all the guests were also presented chocolate copies of the award made of elite Belgian chocolate.

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«Standard of Reliability» «Development Benchmark» «Triumph of Technology»

GoldBE E

INTERNATIONAL BANK FOR ECONOMIC CO-OPERATION www.ibec.int The prize was awarded to the Chairman of the Board Irina Golovchenko

The International Bank for Economic Co-operation is an international intergovernmental financial organization, established in 1963. The Bank operates in accordance with an international agreement registered with the United Nations Secretariat. The bank's member countries are the Republic of Bulgaria, the Socialist Republic of Vietnam, Mongolia, the Republic of Poland, the Russian Federation, Romania, the Slovak Republic and the Czech Republic. The investment-grade ratings were assigned to the bank by the international rating agency Fitch Ratings: long-term BBB- with a stable outlook and short-term F3.

GoldBE E

OPTIMA BANK OJSC (KYRGYZSTAN) www.optimabank.kg The prize was awarded to the Chairman of the Board Beibut Kapyshev OJSC «Optima Bank» is a bank with a 20-year successful history and an impeccable reputation. It is one of the most stable banks in the Kyrgyz Republic. The main goal of the activity is to support enterprises of the fuel and energy complex of the republic. The Bank operates in accordance with European business standards, customer service quality, and constant monitoring of customer satisfaction. From 2010 the bank became a full member of UniCredit Group. The branch network of the bank includes 18 branches and covers 7 cities of Kyrgyzstan. Correspondent network has more than 10 correspondent banks.

GoldBE E ASSOCIATION OF SERBIAN BANKS — CREDIT BUREAU (СЕРБИЯ) The prize was awarded to the General Secretary of the Association of Serbian Banks Verolub Dugalić

UNIVERSAL COMMODITY EXCHANGE — EURASIAN COOPERATION (KAZAKHSTAN) The prize was awarded to the Head of the Moscow Branch of the Commodity Exchange Irina Kaltygina

Credit Bureau is a very important project for the banking sector development in Serbia. The project provides comprehensiveness meaning that, after banks, all other credit providers joined the Credit Bureau. The absolute completeness of data for natural persons and legal entities was achieved. The work of the Bureau corresponds to the highest European standards. The JSC «UCEX» was created to bring together the commodity markets in Europe and Asian. For several years the UCEX has been among the best five companies in the country. The stock Exchange has the status of «Best Enterprise of the Country 2017». The UCEX acts as an administrator of a unified electronic trading system with a single electronic exchange platform. It provides an equal access for all participants and is ensuring the multilateral stock trading with all necessary tools such as the existence of a modern electronic platform, the developed system of clearing settlements in the course of export-import transactions, the organization of multicurrency trading, the introduction of blockchain-technologies. The UCEX has three branches in Kazakhstan, representatives in Moscow and Bishkek.

The prize was awarded to Ashot Osepyan — Chairman of the Board, Executive Director of ARARATBANK OJSC

SilverBEE BELINVESTBANK JSC (BELARUS) www.belinvestbank.by The prize was awarded to the Executive Director Andrey Romanenko

SilverBEE

Belinvestbank JSC is one of the top five Belarusian banks by the criteria of total assets and has an extensive branch network throughout the country. The Bank is one of the largest issuers in the market of bank payment cards of the country. Belinvestbank has huge experience and traditions accumulated for the quarter-century history and it successfully combines them with the modern world business practices. The bank’s development strategy for 2018–2020 is to create a financial ecosystem of the banking-client partnership, in which the Bank helps to acquire time for life.

JSC Bank CenterCredit is one of the top commercial banks in Kazakhstan in terms of assets and total deposits. The Bank’s primary business consists of corporate and retail banking. Its corporate banking activities include a broad range of wholesale banking products to a diversified group of JSC BANK domestic customers, primarily small and CENTERCREDIT medium sized companies.The Bank’s retail banking activities and products include re(КАЗАХСТАН) tail lending and deposit taking and credit www.bcc.kz and debit cards. The Bank is also an active The prize was awarded to the Chair- participant in the fixed income securities market and foreign currency markets in man of Executive Committee of the Kazakhstan. The Clearing Centre of JSC Association of Banks of Kazakhstan «UCEX» was opened on the basis of the Marat Baitokov bank.

NOVA BANKA AD BANJA LUKA (BOSNIA AND HERZEGOVINA) www.novabanka.com The prize was awarded to the General Director of the Bank Dr. Milan Radovic

BronzeBE E COMMERCIAL INDO BANK LLC (INDIA) www.cibl.ru The prize was awarded to President of the Bank Sunder Lal Bhatti

BronzeBE E COMPANY BROKERCREDITSERVICE LLC (RUSSIA) www.broker.ru The prize went to Head of Small Business Division Dmitry Kostenko

Nova banka AD Banja Luka is getting closer to its full age as the largest bank in the Republic of Srpska and the third largest in Bosnia and Herzegovina by the amount of assets. For many years Nova banka has been operating as a highly profitable bank, solvent, liquid and capitalized. Since November 2002, the Bank has been listed on the Banja Luka Stock Exchange of Securities. In December 2009, Nova banka was listed in the common index of the Vienna Stock Exchange. The Bank has a large number of industry awards, including, as the «The Best Internet Bank in Bosnia and Herzegovina».

Commercial Indo Bank LLC was founded in 2003 as a Russian bank that provides banking services to corporate clients. The Bank’s task is to promote the development of Indian-Russian trade and economic relations, with which the bank successfully manages by lending legal entities-representatives of import and export business, making multicurrency settlements. The Bank’s task is to promote the development of Indian-Russian trade and economic relations. The Bank lends legal entities — representatives of import and export business, makes multicurrency settlements, money transfers, issues credit and bank guarantees.

The company BCS (BCS Broker) is one of the largest and oldest brokerage houses in Russia, the foundation of the BCS Financial Group. Today BCS Broker is the absolute leader in the volume in the stock and currency market of the Moscow stock exchange. It serves more than 260 thousand customers and has 42 offices and 56 agent points in the biggest cities of Russia. The company has a long-term and short-term credit rating of FG BCS Ltd.at the level «B–/B» with a stable outlook from the international agency S & P Global Ratings and the maximum reliability rating among investment companies of the Russian Federation - the «AAA» category by the National Rating Agency (NRA) version.

«Standard of Reliability»

www.araratbank.am

BronzeBE E

«Development Benchmark»

ARARATBANK OJSC (ARMENIA)

ARARATBANK is one of the leading Armenian banks in many areas of banking. The bank is in the third place in the banking system of Armenia on the number of branches. The Bank is among the most active players in the securities market and it is already ten times it has issued corporate bonds.The Bank is a partner of the Ministry of Finance and Ministry of Economic Development and Investments of the Republic of Armenia in the field of the internal public debt management. The Bank participates in programmes of co-financing with the European Bank for Reconstruction and Development, Izmirlian Fund and other financial institutions.

«Triumph of Technology»

SilverBEE

Award

NOMINATIONS 2018: COMPETITION GOES ON THE SECOND YEAR FINANCIAL AND BANKING ASSOCIATION OF EURO-ASIAN COOPERATION TOGETHER WITH THE INTERNATIONAL BANKING COUNCIL CONDUCT THE COMPETITION FOR AWARDING THE INTERNATIONAL PUBLIC AWARD «FINANCIAL AND BANKING ELITE OF EURASIA». IN 2018, THE NEW NOMINATIONS ARE WAITING FOR PARTICIPANTS, AND NEW DISCOVERIES — THE BANKING COMMUNITY.

1. BANKER OF THE YEAR — for personal contribution to the development of banking business This is a personal award for personal contribution to the development of the banking business or other course of action that has had a significant positive impact on the banking sector, including regulatory, political and technological support to the banking industry. Evaluation criteria in the nomination: 1. The existence of recognized outstanding achievements and results of work in the relevant areas, depending on the personal contribution of the nominated and/or the team under the leadership of him. 2. Initiation, development, implementation of political decisions that positively affect the stability of the banking industry, the conditions for its development, the functioning of professional and corporate industry associations. 3. An outstanding contribution to the formation of banking professional communities, including those aimed at protecting industry interests. 4. Leading role in the generation of news and trends that have received worldwide recognition and determined a positive interest in the banking community. 5. Realization of significant projects in the field of bank staff transformation, development of its competencies. It is obligatory to provide evidence of planning, execution and control, distinction or uniqueness of the project in relation to other similar. 6. Strengthening the international positions of the national banking system. 7. Outstanding achievements in the areas of banking and related areas for a long period (at least 3 years prior to the nomination) and associated with the an-

niversary date of the nominee (or the anniversary of the work in a particular direction) in the year of nomination. 8. An exceptional contribution to international banking cooperation, development and strengthening of international banking associations. 9. Other merits to the banking industry, which determined its positive development and received public recognition (a detailed justification of the contribution and evidence of its materiality is given in advance).

2. STANDARD OF STABILITY — bank leader on sustainable development, stability, holder of international and country ratings Evaluation criteria in the nomination: 1. A sustainable improvement of the indicators of banking activity in the period not less than 3 years preceding the year of the nomination. 2. Absence of reclamations to the main activities that had received publicity during the year preceding the nomination. 3. Place in the top third of any of the international or country ratings. 4. Mandatory implementation of capital adequacy ratios and bank liquidity ratios 5. Compliance with nine mandatory banking ratios (in accordance with the requirements of national regulators), and the bank's compliance with the first four ratios (N1-N4) on capital adequacy and liquidity is mandatory. The following ratios are taken into account: • The bank equity capital adequacy ratio (N1); • The instant liquidity ratio (N2); • The current liquidity ratio (N3); • The bank long-term liquidity ratio (N4)

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• Maximum risk per borrower or group of related borrowers (N6) • Maximum big credit risk (N7) • The aggregate amount of credits and loans, extended to the bank’s shareholders (partners) (N9.1) • The aggregate amount of credits and loans extended to insiders (N10.1) • The ratio of the bank’s equity capital used for the purchase of stakes (shares) in other legal entities (N12) To determine the place in the ranking, the average score is calculated by the following formula: C1 × C2 × (1 + C3/10) × (1 + C4/10)… ————————————————————— , 25 where: C1 — the amount of compliance with the requirements of the ratios for the year preceding the nomination (it cannot be less than four in view of the mandatory first four ratios); 1 — compliance with the ratio, 0 — non-compliance with the ration; C2 — positive development (average for the last 3 years, preceding the nomination compared to the previous period, with 1 — positive development, 0 — its absence); C3, C4, etc. — presence in the top third of world/ country ratings provided that the rating agents for all participants coincide; in the case of simultaneous finding of one estimated index in the top third of the world and country rating, these indicators are counted twice (C1 and C2 for their owners, and for other participants, the corresponding coefficient is reset); 25 — norming constant.

6. Unanimous approval of the candidate bank by the members of the commission on the basis of existing public information and information from a trustworthy source.

3. TRIUMPH OF TECHNOLOGY — leader in the implementation of modern IT technologies Unconditional technological achievement in financial and banking and related industries, including in the humanitarian field, in part affecting the financial and banking community. Applications can be received from the candidates themselves, upon presentation of representative, state and non-state bodies, associations, and also be offered by the members of the Competition Committee on the basis of their professional judgment. Evaluation criteria in the nomination: 1. The relevance of a project by market participants (conjuncture and competition), or the undoubted public benefit of the project, which strengthens the positions of the financial and banking community or clients of the bank; 2. The influence of technology on the development of the banking sector and the changing role of banks in the economy. 3. The security, environmental friendliness and humanitarian significance of the project.

4. Level of «seamlessness» of integration, interaction with other automated systems of organizations on the territory of Eurasia. 5. Development of cross-platform solutions, reduction of dependence on suppliers of proprietary software. 6. Development of mobile apps and client services. 7. Information security of technologies. 8. Increase the financial literacy of the population and the formation of a pool of competent users. 9. Signs of novelty, intellectual capitalization of the organization, prospects for the development of ideas for subsequent investments. 10. Replicability and scalability of technological solutions. 11. The role of technology in overcoming the existing stereotypes of work, stimulating the development of the labor resources of the organization. 12. Ergonomics of new technological solutions, availability of training programs for personnel and customers, the effectiveness of the assimilation of material by users of the system.

Registration Form and Terms of participation in the competition: www.fbacs.com Organizing committee: tel.: +7 495 663-02-08, 663-02-13, e-mail: bev@fbacs.com office@fbacs.com

Such a broad Eurasia

INSTITUTES OF BROAD EURASIAN PARTNERSHIP* Sergey Mikhnevich, Director of the Center for multilateral cooperation of the Russian Union of Industrialists and Entrepreneurs

IN HIS ADDRESS TO THE FEDERAL ASSEMBLY IN 2015 PRESIDENT OF THE RUSSIAN FEDERATION VLADIMIR PUTIN POINTED OUT THE NECESSITY TO FORM ECONOMIC PARTNERSHIP BETWEEN EAEU, MEMBER-STATES OF SCO AND ASEAN. IN 2016 IN HIS SPEECH AT SPEF HE DECLARED THAT RUSSIA AND OTHER COUNTRIES OF EURASIAN ECONOMIC UNION (EAEU) BACK THE IDEA OF BROAD EURASIAN PARTNERSHIP (BEP) INCLUDING CHINA, INDIA, PAKISTAN, IRAN, SIC AND OTHER COUNTRIES. AS A STARTING POINT THE PRESIDENT OFFERED EASIER UNIFICATION OF REGULATION IN SECTORAL COOPERATION AND INVESTMENT, TECHNICAL AND SANITARY REGULATION MEASURES, CUSTOMS REGISTRATION, PROTECTION OF INTELLECTUAL PROPERTY RIGHTS.

ince the speech of the Russian leader the idea of BEP has been widely discussed in Russian and foreign mass media and among expert and academic society. However it is still unclear how to impellent the idea. One thing is clear: BEP should bear complex and overwhelming character and should deal with political and economic interaction as well as with highefficient integration, should take into account interests of all parties and maximize their relative and absolute advantages. BEP may result in lower costs on national strategies of economic development with inter-sectoral and industry specialization, increasing return on the scale with broader markets, higher competitiveness and investment attractiveness. At the same time it is vital to form a single understanding of BEP incentive, its basic idea in order to develop it fur-

ther. The concept could be based on principles of equality, justice and inclusion of all parties, not just some power centers, as a base of «integration of integrations». We should apply the approach typical for Eurasian integration. If we find areas of common interests and develop trade and economic cooperation it will have positive influence on political and social spheres of memberstates. According to experts such as OECD growth in prosperity is the most effective instrument to reduce public uproar and to eliminate reasons for radical ideology and relevant movements. Besides stronger trust as a result of cooperation will also contribute to interstate relations. Ultimately BEP should have three main qualities: it should be controllable, resistant, capable of development. With global turmoil institutional structure can be the only way to an effective system. Here an important task is the reduc-

tion of potential costs of activity on the one hand, and on the other hand — possibility for key participants to influenced BEP — first of all for business of member-states. It’s common knowledge that political structures can’t be effective without a good content such as growing trade, investment and other forms of international business activity. At the same time politicians and civil servants tend to first take a decision, make an agreement and then put the fact in front of business: «Install into a new structure». That’s the reason why many institutional processes often trudge, lead to high costs and hinder development. That’s why we would like to offer our organization novelty: within the framework of BEP business (together with expert and academic society) must participate not only in consultations but also in the process of decision-making on the development and functioning of the

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

Partnership as equal party with governmental bodies. In order to reflect interests of all sectors and companies it’s necessary that the «voice of business» is cast by representatives of key business associations of member-states. For example through the institute of national business moderators of BEP, which could be appointed officially and also through the connected institute of responsible secretaries with the aim to cooperate with partners online. There could also be created an institute of national political moderators. Supreme Council of Partnership could become a governing body of BEP. It could equally include representatives of authorized state bodies (sectoral vice prime ministers — ministers), business and expert and academic society. This body would be authorized to take key strategic and management decisions regarding BEP and also to settle disputes. Next level of institutional structure could include Council of Business Associations, Political and Expert Councils as well as Association of Financial Institutes and Association of International Organizations. These structures would be aimed to work out and aggregate key incentives within their sector and correspondingly unite business, governmental bodies, expert society, banks and representatives of international partner organizations which could help to synchronize international agenda of different global organizations and diversify cooperation. At this level projects of BEP could be discussed and the main problems and tasks subject to decisions of Supreme Council could be identified. We can’t forget about implementation of practical projects because without them the BEP incentive will be «dead-born». Besides we should provide for a project office in the BEP institutes. This office would collect project ideas and revise them to project offers for further implementation. Projects could be discussed in special project groups including a moderator and interested participants. Ground institutional level could include sectoral committees and councils in key areas: transport and logistics, trade and investment, energy, industry, agriculture, communication systems, tourism, science and some other. There could also be a Council of Regional Authorities uniting representatives of regional governments. We offer principle of equal representation of governments, business and experts.

To reduce costs on BEP we offer a scheme of consequent dative chairmanship in the BEP bodies. This principle will give each member-state an opportunity to contribute in BEP development and share costs. This scheme would allow avoiding a large Secretariat which we would still need for technical organization. Moreover with the aim to represent and promote BEP ideas in different member-states there should be an institute of business ambassadors which could spread information among business about options and formats of the Partnership and also search for new project ideas. There should be two basic funds for financing BEP: 1) to finance secretariat and working bodies; 2) for projects. The first fund will be financed by member-states. The second one will be credited both by governmental funds and companies. A project cycle within the presented institutional BEP structure will look as follows. 1. A project idea comes to BEP Secretariat through the Council of Business Associations, Political or Expert Councils, Association of Financial Institutes or International Organizations, or through the project office or business-ambassadors. Different entry points are possible. 2. The Secretariat checks the project idea in accordance with basic requirements and sends it to the author for improvement or to sectoral bodies for primary appraisal. 3. Once the project idea is appraised by sectoral bodies it is sent to the project office for elaboration of a project proposal based on it. 4. The project proposal is sent to sectoral bodies and then after their approval it is submitted by the project office to the Association of Financial Institutes. Together with the Association the project proposal is revised and submitted to a project group. 5. The revised project proposal is submitted to the Council of Business Associations, Political and Expert Councils and to the Association of International Organizations to determine the parties who are interested in the project. 6. After that the project proposal is submitted to approval by the Supreme Council which decides on its implementation, financing, participating parties and other steps.

7. The project proposal is sent for implementation to relevant project groups. Some project tasks during their implementation can be considered by BEP bodies. We suggest institutional frameworks for project implementation such as «advantages chain», «progressive growth zones» and scientific and production «development clusters». For «advantages chain» we imply value chains for goods and services created with participation of cross-border institutes of development such as SEZ, PDA, techno-parks etc. on territories of different partner-states of BEP. Such products will be competitive in quality and price. Besides based on these chains BEP may work out special development programs to maximize the advantages of the Partnership members. To develop cooperation we need to use modern global trends such as digitalization and «industry 4.0». They can help to develop remote territories and create new formats of cooperation for example scientific and production «development clusters». They could unite scientific potential, production capacities, labor and logistics resources of the interested parties. And in such clusters we could organize «progressive growth zones» based on scientific and production platform of one or several participants inckuding investments of interested countries. Besides cluster format can successfully coincide with the mechanism of «chains» mentioned before. Only BEP participants may have access to such mechanisms of raising competitiveness. Thus participants will be more interested in BEP. In conclusion I would like to mention that BEP shouldn’t be launched from point zero. It could be based on existing practices of cooperation within the framework of international organization such as SCO. In cooperation with it and active participation of EAEU bodies as well ASEAN, Greater Tumangan Initiative and other the idea of BEP could be implemented in practice. BEP success depends on how its authors manage to take advantage of the «soft power» of existing institutes and rules of Eurasian integration, and on how much business will be involved.

* The article reflects personal opinion of the author and not the position of the organization he represents.

Photo Contest

«MY COUNTRY» In routine we usually don’t have a chance to see 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. Editorial board of “Eurasian Financial and Economic Herald” announces a contest «MY COUNTRY» among those who take photos not for profession but for hobby, self-expression, willingness to share joy from what they have seen and felt. We want to see the beauty of your motherlands through your non-objective and full-of-love eyes.

V E NU E Russia, Moscow

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»

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

C O NTAC T S :

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

FI R ST CO M P E T I TO R S

Photography is my hobby, my passion. Peculiarity of photography — to be both science and art

SHKHIR JAILAN Born in Turkey in 1977. Philologist

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

Taking photos during an exotic expedition is a natural part of a journey

Pictures are immortal if not lost

ALEXANDER SHOKHIN Born in Russia in 1951. President of RSPP

ISAEV NATIK AGASALIM OGLY Born in Azerbaijan in 1990. Student

Business in the countries

Samvel Chemachyan, Deputy General Director of FBA EAC — Head of Representative office in the Republic of Armenia

REPUBLIC OF ARMENIA:

BUILDING BRIDGES TO THE FUTURE IN THE LAST YEAR THE MOST POPULAR LEXICAL ITEM AMONG EXECUTIVE AUTHORITIES OF ARMENIA WAS “BRIDGE”. BEING IN QUITE A DIFFICULT GEOPOLITICAL POSITION, WITH OPEN BORDERS ONLY WITH GEORGIA AND IRAN, A SMALL REPUBLIC WITH $10 BN. GDP SEES ITSELF IN THE NEAREST FUTURE AS A BRIDGE BETWEEN EURASIAN ECONOMIC UNION (EAEU) AND EUROPEAN UNION, BETWEEN NEIGHBORING IRAN AND THESE UNIONS. AND IT HAS EVERY REASON TO DO SO.

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Between EAEU and EU The unique position of the Republic has been recently confirmed, when being a member of EAEU Armenia signed the Agreement on overall and extended cooperation with EU on November 24 this year. However previously Armenia already had privileged trade regime with EU, USA, Canada. For example under the GSP+ regime with EU Armenia can export to Europe 6400 commodity items at zero or reduced customs rate. Today almost 90% of goods are exported to Europe within this system. Until recently the geographical structure of Armenia’s export which the authorities mostly rely on considering small domestic market, hasn’t been really diverse (Armenia mostly exported to EAEU end products of agribusiness and to EU — mining raw materials: copper and molybdenum concentrate and other non-ferrous metals as well as gold in the form of «Dore gold»). But today things are changing. The share of end products in export to Europe grows — especially pharmaceuticals and textile. Aluminum foil is worth mentioning which is produced by foil-rolling plant «Rusal Armenal». In 2017 Armenia exported ready-made foil to Europe for the amount of $50 m. We should mention that in the first 10 months of 2017 turnover with EU increased by 20% compared to the same period last year. Moreover starting from January 2018 Armenia will implement REX (Registered Exporter System). This system implies self-declaring for entrepreneurs — SME in particular — which means that having registered once a businessman is forever exempt from additional certification of goods exported to EU. Food, alcohol, fish, textile and mining raw materials under the brand «Made in

Armenia» do not need a certificate when exported to Europe. Regarding export to EAEU one should mention that fresh and processed (at numerous canning factories) vegetables and fruits, cognac and wine are accompanied today by growing supplies of machinery and equipment. Export to third countries also develops — first of all to Middle East and Gulf countries. The «Grand Tobacco» products have become the most important export unit supplied from Armenia. It is exported to more than 20 countries and the amount grows yearly. It might be a surprise but Armenia produces whiskey for a couple of years. «Alex Holding» supplies it to Iran and has created an effective logistic chain including caravan track with donkeys at one of the stages. The neighborhood of Armenia to Islamic East has also influenced its export structure. For example it supplies mutton and lamb meat to Iran and UAE. Earlier they exported live animals, but now there is a halal certified office in Armenia and a network of slaughterhouses

Reference Republic of Armenia A state in the south of Caucasus. Territory is 29 743 square km, population — 2998.6 k (2016). The country ranks 136 in the world by population and 138 by territory. Capital — Erevan. Official language — Armenian. Presidential Republic (from April, 2018 — Parliamentary Republic). The first country in the world where Christianity was adopted as official state religion (in 301). The country borders with Azerbaijan in the East. In the SouthWest — with Nakhchivan Autonomous Republic, with Iran — in the South, with Turkey — in the West and with Georgia in the North. It doesn’t have access to the sea. Agricultural and industrial country with rapidly developing economy. Currency — Armenian dram.

(including halal ones), and they supply processed meat.

Border with Iran unlocks the door Just recently the lexical item «bridge» has gained one more meaning. On December 15 this year free economic zone (FEZ) «Megri» was opened on the border of Armenia and Iran. It has all necessary infrastructure on the square of 2.5 ha next to checkpoint. At the second

“

The construction of a new third high-voltage electric transmission line Armenia — Iran is of great importance. It will be set to work in 2019 and triple the mutually advantageous exchange of energy products between two neighboring countries.

stage of FEZ construction it will be enlarged up to 70 ha. In the nearest years FEZ is supposed to attract 5070 local households with $130-150m. of investment and annual export of $250 m. Today about twenty Russian, Iranian and European companies have expressed interest in FEZ. Residents of FEZ are exempt from taxes except income taxes. «The construction of a new third high-voltage electric transmission line Armenia — Iran is of great importance. In will be set to work in 2019 and triple the mutually advantageous exchange of energy products between two neighboring countries.» Commodity flows from EAEU and EU to Iran are expected to run through «Megri» FEZ. Besides one should add that EAEU and Iran are completing negotiations on a temporary (for three years) Agreement of free trade zone. The Agreement will cover about 400 commodity items of export interest of EAEU and Iran is ready to decrease import tariffs on them. These two incentives together can ensure big economic dividends for Armenia.

Privileged energy resources Energy sector in Armenia shows serious changes while energy market is heading to liberalization. The Republic receives gas from Russia at a privileged price of $150 per 1 TCM.

Within the frameworks of development of renewable energy and energy conservation the first heliostations have been constructed. Distribution company «Electric network of Armenia», owned since the last year by the holding «Tashir Group», will receive $900 m. for modernization. The atomic power station of Armenia is also under modernization and NPP life extension for 10 years. This atomic power station produces one third of all electrical energy in the country. Armenia also receives gas from Iran under the scheme «gas in exchange for electricity» (1 cubic meter of gas for 3 kW), but transmission capabilities are constrained today. That is why the construction of a new third high-voltage electric transmission line Armenia — Iran is so important. It will be set to work in 2019 and triple the mutually advantageous exchange of energy products between two countries.

The construction of a new high-voltage electric transmission line Armenia — Georgia will be completed even earlier and also triple power exchange.

IT and tourism: two-digit growth rates IT and tourism are also among priority sectors in Armenia. Both sectors have shown two-digit growth rates in the recent years. IT and high-tech have found their way into all sectors of Armenian economy: IT growth has been about 20-25% in the recent years. 2016 saw peak growth by 38.2%, 7 months of 2017 — 35%, so we can expect at least 20% growth at the end of 2017. Annual turnover of ICT companies have exceeded $600 m., and the number of IT specialists is over 15000. About 600 IT companies are there in the sector, some of them with subsidiaries in Silicon Valley in the USA. R&D centers of

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

famous world brands are opened in the country. In appreciation of Armenia’s results in the sphere in 2019 Erevan will host a large IT event — World Congress on Information Technology. As for tourism in 2017 three-million-citizen Armenia will welcome about 1.5 million of foreign tourists (during 9 months of 2017 the number of tourists grew by 21% and reached 1172000 people). Here the aim is 3 million tourists in 5 years. Not more in order not to damage eco system of the country.

Sustainable macro economy Government manages to ensure macroeconomic stability in the country and to develop business environment. In the annual rating Doing Business 2018 Armenia is on 47th position among 190 economies of the world. Armenia is considered a country with low debt level: total

national debt in 2017 will amount to 55.1% of GDP, next year — 1% lower. Expected government deficit in 2017 is about 3.6% of GDP — against 5.5% previous year (in 2018 the level is planned at 2.7% of GDP). On January 2018 a new Tax Code will be introduced in Armenia with higher excise taxes and royalty, as well as limited tax allowances and better tax administration. Government procurement has been improved aimed to avoid conflict of interests. It has become more effective with the electronic platform where more than 95% of all government procurement is now conducted. With new changes of legal acts and reforms of business conditions investment appeal of the country has increased. Important changes have been made in the Law on foreign investments. Public confidence in the banking system grew due to a number of legal acts of the Central Bank of Arme-

nia — in particular the required amount of minimum total capital was raised six times up to $62.0 m. Share of foreign capital in deposit base was decreased from 71.6% in 2014 to 62.4% in 2017, loan dollarization decreased from 66.6% to 62.7% in the same period due to the policy of the Central Bank of Armenia of improving availability of loans and deposit returns in national currency. By September 2017 deposit base increased by 16.7%.

“

Government procurement has become more effective with the electronic platform where more than 95% of all government procurement is now conducted.

practice

Vladimir Ponomarev, General Director, «GARDA TECHNOLOGIES» («Citadel»)

BANKING FRAUD. PROTECTING ASSETS AN ENGLISH WORD «FRAUD» IS USUALLY USED IN RUSSIA TO SPEAK ABOUT CHEATING IN THE INFORMATION TECHNOLOGY FIELD. INFORMATION TECHNOLOGY IS IN ALL BUSINESS AREAS AND NOW WE NEED MORE KNOWLEDGE, TIME AND TOOLS TO CONTROL ITS SECURITY.

www.strongholdsb.ru the banking sector there are two types of fraud —

internal and external. Banks have known external fraud for many years and have partly learnt how to combat it. This type includes fake cards, false documents, phishing and many others. However internal fraud has remained unaddressed by banking security services for a long time while

the losses are already comparable with those from external one. Internal fraud is a fraud committed by employees due to their positions and access to information and resources. Both the bank itself and its clients can become victims of such fraud. Disclosure of information about accounts of VIP-clients, abstraction of funds from accounts, cheating with data from information systems for fraudulent transactions — these are examples of fraud.

Abuse of authority is a typical example of internal fraud. In the work of the company «Garda Technologies» there was a case when one of the banks found itself in front of a serious reputational and financial risk. One of the key VIP-clients revealed that somebody stole information from his bank account. In order to find reasons and possible criminals they installed a database monitoring system «Garda DB». In took them two weeks to reveal an em-

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

ployee who was collecting that information and passing it to third parties.

Sources of threat Access to information about accounts, transactions and personal data is of much interest for criminals. Employees who are inclined to betrayal abuse their authority on purpose and pass banking information to third parties which leads to million losses. Faithful employees sometimes become an instrument for criminals too — their ignorance of security policy gives possibility for access to unused accounts for example. The main reason for such cases is weak security control of banking systems. Uncontrolled processes in IT systems, chaos in the access to database together with weak work discipline provide the criminals with opportunities to use database for personal advantage and conceal traces of crime. Banks are responsible for safety and secrecy of their clients’ data. Each case leads not only to indemnification but also to fines from supervisory bodies. In the case with PCI DSS it means thousands of dollars. And moreover it leads to huge reputation loses if information emerges in mass media. According to the research center MFI Soft it was the internal fraud that lead to leakage of 74% of databases in the black market, which included more than 1.2 bn. of personal records. During the research client bases of 18 large Russian banks were found off the shelf. And that is one third of all data. Average price for such database is about RUB 15000. Moreover data integrity allows to use every tenth record to falsify a loan agreement and even something more serious. The information in the bases includes full contact details,

his passport information, current location, account statement and property list, tax and fines data. The modern national product «Garda DB» helps security services to reveal signs of fraud and to prevent negative incidents. Any changes in standard banking procedures can indicate to internal fraud. Depending on the criminal’s subterfuge these indications can be revealed easily or demand delicate adjustment and profound analysis of security data. Unreasonable access to VIP-clients’ cards, huge data upload, transactions backdating, operations with dormant accounts, cancelled or deleted operations, agreements with different provisions, etc. For example a sudden or higher than average growth of sales in a bank office may indicate to fraudulent deals which won’t bring income to a bank but will bring bonuses to employees.

Data protection from internal fraud It is evident that for more effective security program you need to struc-

ture all information resources in a company. From the most sensible ones to the open ones. And determine access levels to these resources for different categories of employees. These are the main steps of security policy in a company. To undercut human factor it is necessary to train employees, explain and remind about security policy. Of cause you can reveal suspicious activity in a manual way but usually it takes months and months of investigation with subtle result. Leading banks use automatic security systems. Machine learning technologies allow to determine typical behavior for each division and employee. «Garda DB» is a leading solution in its class in the Russian market. The system analyses itself incoming data, compares it to standard and gives clear analytical reports. Besides automatic data security system can provide for compliance of the applied measures with the requirements of international regulators PCI DSS. Bank’s security is the basis of its reputation. Thus investment in information security systems is always justified.

App server

Databases

Users

Server agent

Check of compliance with DB policy

Administrators control

Analyzer

Deployment scheme of «Garda DB4»

DWH + interface

Material for Thought

Vladimir Salamatov, General Director of the Research Center for Foreign Trade and Integration, Chairman of EAEU Business Council Committee of trade and economic relations with China and other priority trade partners

RUSSIA & CHINA: TURNOVER GROWS EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

2017, China reached the first position in the list of export markets of the Russian Federation, pushing down the Netherlands who had been topping the list for a number of years. Russian exports to China for a period from January to October totaled 30.13 billion US dollars, which is 38.42% more compared to the corresponding period in 2016. Commodity exports dominate the structure of exports (65.6% of total exports). However, the share of non-commodity non-energy Russian exports to China is growing: in 2017 it amounted to 26.43% while in 2014 it was only 18.04%. The rate of growth for non-commodity non-energy exports averages 39% in the said period. However, exports of downstream non-commodity non-energy products have grown by as much as 64.9%. The leading sectors in the structure of supplies are mechanical equipment and machinery, as well as electrical devices and appliances. According to Boston Consulting Group (BCG), Chinese total consumer market is going to grow by

Export from Russia to China

9,6% Chemical industry products

3,9% Machinery and equipment 1% Metals

Import to Russia from China

7,9% Chemical industry products

8,5% Metals

1,5% Wood

3% Food

72,3% Mineral Resources

10,1% Wood

3,5% Food

49,9% Machinery and equipment

28,7% Consumer goods

Trade with China

2.3 trillion US dollars reaching 6.5 trillion US dollars by 2020. Such a massive and fast-expanding consumer market opens up a lot of opportunities for businesses that produce competitive goods and services. Also, the fast-growing uppermiddle class in China forms a new generation of consumers seeking high-quality products (among other things, eco-friendly food products).

According to Chinese consumers, goods produced in Russia and other EAEU countries fall into this category. Rather a wide range of Russian food products can be found in Chinese chain stores, primarily in border districts. Some supermarkets have a special area for Russian food products. Also, there are specialized stores selling Russian goods only.

Russian products on display in Harbin shops

Meanwhile, the fast-developing electronic commerce facilitates international trade and gives new opportunities for both consumers and suppliers. Experts estimate that the middle class in China spend about 16% of their savings on purchases in online shops, and this figure is steadily growing. In 2016, the volume of e-commerce market in the PRC reached 0.98 trillion US dollars. High-quality and innovative products are the most popular with Chinese customers in online shops. An example of Russian products that sell well are innovative toothpastes Splat and R.O.C.S. With the new industrial revolution going on, it's vital for Russia to fall in with the global development trends and find its own new areas for technological leadership. The example of China, Singapore and South Korea, the countries that have made a leap in technological growth (including growth in sectors like aviation and space industry, shipbuild-

ing, and computer systems design and production which are new for these countries), shows that our businesses could form cooperative ties in order to build new value chains in pioneering technologies and to initiate creating new national and supranational regulations so as to establish a legal foundation for using new products and technologies. This would open new windows of opportunities for developing Russian â&#x20AC;&#x201C; Chinese relations in a range of areas, such as finance, investments, technologies, infrastructure, developing and establishing new rules and standards. This is all the more relevant in the new economic reality when state borders cease to be barriers to cooperative ties and e-commerce and when, in fact, we find ourselves in a digital economy environment. Taking a broader view, we see Russian and Chinese leaders meeting regularly, which suggests that the two countries have found a solid political common ground. This mode of communication is just what enables us to take other, more business-related steps which aren't as widely covered in the media. For instance, a joint statement on principal conclusion of negotiations on the agreement for trade and economic cooperation between the EAEU countries and China was signed on October 1, 2017 in Hangzhou, PRC. The content of the document is finalized and no further fundamental changes are planned. The agreement is being prepared to be signed by the heads of the two countries in 2018. First of all, it should be noted that this is not a preferential agreement, i.e. it doesn't reduce tariffs in the trade between the two countries. The parties to the agreement established common rules in areas like

technical regulations, phytosanitary measures, competition, e-commerce, cooperation in customs control, and some other. What is very important is that all the stages of the negotiations starting from the opening of talks in 2016 and up to their conclusion were held in close cooperation with the business community of the EAEU member states. The Business Council of the EAEU had formed a specialized committee to support the negotiations and to coordinate the standpoint of the business in order to ensure a prompt and efficient interaction. It's worth mentioning that the work was also aimed at collecting data on barriers to bringing products to the Chinese market, from logistics-related problems to issues with certification and labeling. Largely thanks to the proactive position of the business, the agreement now has a section on sectoral cooperation, which makes it possible to actively search for new opportunities for a fundamental change in the mode of interaction between the real economy, producers and investors in our countries.

â&#x20AC;&#x153;

Regular meetings of Russian n and Chinese leaders is just what enables to take other, more business-related steps.

To summarize, the success of this agreement lies in building a legal foundation for a dialog between businesses, i.e. between people aimed at gaining profit by creating and exchanging cutting-edge technologies, forming effective production chains, and generally using the strengths of each other. This is the main objective at the moment.

EURASIAN FINANCIAL & ECONOMIC HERALD | #3-2018

COMPLEX BUSINESS SOLUTIONS

Consulting on business and management Maintenance supply — function of «Central Agent» at the Universal Commodity Exchange Eurasian Cooperation Trust and asset management Investments Legal support of deals

www.salus.ru info@salus.ru +7 495 120-24-88 the link to the video

Форма регистрации и условия участия в конкурсе: www.fbacs.com

«Financial and Banking Elite of Eurasia»

Заявки на участие принимаются до 1 ноября 2018 года.

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

November 30, 2018 Nominations 2018: 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

1 БАНКИР ГОДА (за личный вклад в развитие банковского бизнеса) 2 ЭТАЛОН СТАБИЛЬНОСТИ (банк — лидер по устойчивому развитию, стабильности, обладатель международных и страновых рейтингов) 3 ТОРЖЕСТВО ТЕХНОЛОГИЙ (банк — лидер по внедрению современных ІТ-технологий) Приз: Эксклюзивная авторская статуэтка

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

Номинации 2018 года: 30 ноября 2018 года

«Финансово-банковская элита Евразии»

Applications for participation are taken until November 1, 2018. Registration Form and Terms of participation in the competition: www.fbacs.com

Премия

Organizing committee: tel.: +7 495 663-02-08, 663-02-13, e-mail: bev@fbacs.com office@fbacs.com

Оргкомитет конкурса: тел.: +7 495 663-02-08, 663-02-13, e-mail: bev@fbacs.com office@fbacs.com

Award