Business leaders searching for alternatives to Russia’s commodities-based economy

The forum, graced by Russian Prime Minister Vladimir Putin and key business leaders from all regions of Russia operating in the non-raw-commodity sectors of the local economy, also presented its Annual Economic Report, titled, “Business Strategy for Russia – Creation of 25mln New, Modern Jobs.” 

Opening the forum, Delovaya Rossiya Chairman Boris Titov congratulated the delegates on occasion of the Russian Entrepreneur’s Day and also read Russian President Dmitry Medvedev’s congratulatory telegram to the forum. After the official part, the forum went to work, covering broad subjects discussed in a round table format to ensure brainstorming from contributors. Thus, among the key topics tabled for the round-table discussions were “Russia’s city of the future, an intelligent city?” “Transportation Business Strategy: Efficiency and Safety,” “Entrepreneurship and Orthodox Church,” "Business and Culture – Philanthropy or Cooperation?", “The type of ruble that Russia needs for its modernization and transformation into a non-raw-commodities economy.”

VIP guest’s opening speech 

The plenary session was officially opened by a keynote address by Putin, the forum’s guest of honor, which was largely conceptual in presentation. In the speech, the prime minister outlined a number of highly ambitious economic goals and objectives, the successful implementation of which will make Russia a qualitatively better and more comfortable country. “We have set ourselves an ambitious goal of making Russia one of the world’s top five largest economies, while its GDP per capita will increase from the current level of $19,000 to about $35,000 and above by 2025.”

“Putin has condemned the current raw-commodities-based model of Russia’s economic development as a road to nowhere, as it has completely exhausted its growth potential.”

Putin has condemned the current raw-commodities-based model of Russia’s economic development as ‘a road to nowhere,’ calling for the country to develop in an innovative way as the existing model has completely exhausted its growth potential. “We all fully understand the scale of risks involved in such a development model. Therefore, we can no longer afford to base our strategic development only on export-oriented industries,” he added. “This is because, first all, all experts’ analyses have shown that even with today's high prices for Russia's traditional commodities exports, raw materials alone can no longer serve as a growth engine for our economy,” he noted. “And, secondly, raw-commodities-based economy does not only put Russia at the lowest positions in the global division of labor, but has also become a big limiting factor, blocking its shift to a new stage in the global development of human capital and attainment of living standards worthy of the 21st century.”

The prime minister also noted that Russia can no longer tolerate a situation, where meeting its growing domestic social obligations to citizens, raising incomes for public workers and execution of other equally vital tasks are directly related to external factors that are beyond its scope of direct influence. “Specifically, I mean such negative factors as price fluctuations, instability of demand for commodities and the perennial cycle of busts and booms on the global commodity markets."

Putin sees exit from the obsolete raw-commodities-based model of economic development in new industrialization and creation of new high-quality jobs. “We have set a task for us to create up to 25mln jobs in the next 10-15 years. All of us — I mean the government, business, regional administration and the whole society — need to work together to attain this goal.” 

Forum delegates’ responses to keynote address

In his response, Titov noted that Putin’s idea of ​​creating new jobs was completely in line with Delovaya Rossiya’s recently adopted plan for New Industrialization of Russia, better known in the local business community as ‘Concept 25x25.’ From his side, Vladimir Dmitriev, the chairman and CEO of Vnesheconombank (VEB), describing Putin's speech at the forum as ‘a program of action’ for the state bank, dwelled in detail about how the bank, acting as a development agency, can contribute to the successful realization of the projects highlighted in the prime minister’s speech. "I must note that most of the projects on the creation of industrial parks became a reality, thanks to active funding from VEB.”

Alexander Idrisov, a member of Delovaya Rossiya’s General Council and a managing partner of Strategy Partners, called a myth the widespread view that Russia is not profitable for setting up new productions because of the high business overhead costs associated with its draconian climate and expensive labor force. “Today, Russia currently ranks 16th, with real potential to climb up to the fifth spot, in the global ranking of countries’ attractiveness for setting up new productions.”

Specifically, Idrisov noted that Russia’s unique geographical position, putting it in close proximity to all global key markets in Europe, Asia-Pacific region, China and the United States, makes the country a highly attractive destination for locating modern industrial production facilities. “Russia, despite its current problems, still has huge human capital, and to strategic global investors, the availability of such skilled labor is the first among the key factors influencing a decision to launch business ventures in any country.”

Role of business in Russia’s social services system

“Russia, despite its current problems, still has huge human capital, and to strategic global investors, the availability of such skilled labor is the first among the key factors influencing a decision to launch business ventures in any country.”

The issue of improving the nation’s social welfare system was also among the subjects of deliberations at this year’s forum. Thus, speaking on the subject, Elena Nikolaeva, Delovaya Rossiya’s deputy chairperson and a member of the Public Chamber of Russia, called on Russian businesses to play more prominent roles in the national system of public social services with the end goal of improving their overall quality. “Today, our existing social system is unpardonably cumbersome and almost absolutely inefficient,” she noted. “The state really disburses huge amount of money for social services, but they are completely mismanaged,” she added. “This is evident in the fact that up to 40% of the money annually earmarked for social programs is spent on maintaining the system itself, rather than for providing quality services to citizens.”

Stanislav Voskresensky, the deputy economic development minister, acting on behalf of Economic Development Minister Elvira Nabiullina, presented certificates of personal gratitude to Delovaya Rossiya board members ‘for their enormous contribution to the development of small- and medium-sized enterprises’ in Russia.  Those honored this year included International Grain Co. CEO Yuri Ognev, Soyuzprom Investment Co. CEO Viktor Malakhov and Engineer Group of Companies President Alexander Levchenko. 

At the completion of the plenary session, the forum delegates also participated in the award ceremony of Delovaya Rossiya’s first National Prize, "Good Deed,” specially set up to mark public recognition, highlight and promote the meritorious services of Russian business leaders involved in philanthropy aimed at solving social problems in the country.