VEB.RF and Russian Export Centre Launch a New System to Support Russian Exports, with a Pilot Project in China
State Corporation VEB.RF and the Russian Export Centre have opened in China the Hua No E San Russian Trade Company. This commercial structure will help Russian companies to integrate effectively into the local market and very soon begin exporting their products to China. A unique distinguishing feature of the Russian Trade Company is the principle of “payment for results,” meaning it will only receive payment for its services if the applying Russian company successfully enters the local market. The Russian Trade Company in China will breathe new life into the Russian export support system. If it is successful, VEB.RF and the Russian Export Centre will create similar structures in other states.
Practical work concerning the launch of the Russian Trade Company has been delegated to VEB.RF’s subsidiaries: VEB Asia Limited, which develops VEB.RF’s projects in Asia and the Pacific, and the Russian Export Centre. The Chairman of the Board of Directors is the General Director of VEB Asia Limited and General Representative of the Russian Export Centre in Asia, Artem Sharov.
The management structure of the Russian Trade Company in China is Hua No E San LLC (华诺俄翔贸易有限公司), which translates as “Russia soars in harmony with China.” The name adheres to Chinese principles of naming, and an expanded version is interpreted as follows: “Russia soars above all the world in harmony with prosperous China.”
“The Russian Trade Company aims to become a reliable inter-industry platform for the conclusion of foreign trade deals between the Russian manufacturer and the Chinese consumer, by taking on itself some of the risks of the foreign economic activity of both parties, and receiving payment for this to compensate expenses,” said Artem Sharov. “Payment for services is for us a practical measure of the value of the service itself, and an acknowledgement of the effectiveness of our work, and the principle of payment only upon success is an honest and riskless format for the exporter.”
In accordance with Chinese law, the Russian Trade Company has the right to: conduct trading and import-export operations; consult on a wide range of questions; act as an agent for partner enterprises, with a view to solving certain tasks in the organisation of business in China; make equity investments in other companies; participate in the mechanism of providing guarantees for Chinese enterprises importing Russian goods; develop logistics delivery schemes; and act as a freight-forwarding service agent, with a view to reducing risks and costs for both parties of a foreign trade deal.
The Russian Export Centre will act as the Company’s head office in Russia, collaborating with Russian exporters on a “one-stop shop” basis. The Company is connected to the Russian-Export-Centre-developed information system for Russian export-oriented enterprises, in order to have the opportunity to select prospective stakeholders to fulfill the demand of the Chinese market. There are provisional collaboration arrangements with a range of Russian suppliers and Chinese importers in Beijing and Shanghai, and the Guangdong, Heilongjiang, Shandong and Sichuan provinces.
VEB.RF’s management has given the Trade Company the task of taking an active part in implementing agreements between the Russian President Vladimir Putin and the President of the PRC Xi Jinping, concerning an increase of bilateral trade volumes to $200 billion, and we intend to make a sizable contribution to this important common cause,” added Artem Sharov.
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Global Financial Institutions Urge Governments to Turn Their Attention to PPP Contingent Budgetary Commitments due to Pandemic
On 29 June, on the initiative of the Russian Ministry of Finance and the French Ministry of the Economy and Finance, and supported by VEB.RF and the International Monetary Fund, The Liability Side of PPP and the COVID-19 virtual workshop was held. The workshop was moderated by Artem Volodkin, Managing Director of the National PPP Centre.
Participants discussed the importance of evaluating financial risks in infrastructure projects, including those delivered on PPP principles, in the context of the COVID-19 pandemic, as well as the necessity to develop a management system for the contingent liabilities of public partners.
An opening address was given by Vladimir Tsibanov, Director of the Russian Ministry of Finance’s Department of Budgetary Policy and Strategic Planning, and Ronan Venetz, Director of the French Ministry of the Economy and Finance’s Department of Bilateral Relations. They stressed the importance of risk management in the sphere of PPP. “The pandemic may become a good stress test for PPP-project risk-control systems, which will bring to light the best practices for their evaluation and minimisation, to provide budgetary sustainability,” stressed Tsibanov. France already has practical models to evaluate such risks, aside from which, PPP projects throughout the European Union undergo strict risk and liability assessments.
Isabel Rial, an International Monetary Fund representative, and Clive Harris of the World Bank, spoke of the systematic evaluation of financial risks, including contingent liabilities, in PPP projects. Together with the IMF, the World Bank has developed a suitable model (PFRAM), which can be used to evaluate the effect of contingent liabilities accepted by public PPP-project partners on budgetary sustainability. A separate platform, created by international development banks (SOURCE), contains various tools for working with infrastructure projects, including the possibility of evaluating their risks. Christophe Dossarps, General Director of the Sustainable Infrastructure Foundation, spoke about the operating procedure of the platform.
Evgenii Dombrovsky, Deputy Director of the Russian Ministry of Finance’s Department of Budgetary Policy and Strategic Planning, and Maxim Merkulov, Managing Director of VEB.RF and Member of the Board of the National PPP Centre, used their speeches to highlight the situation on the Russian PPP market, and the prospects of creating an integrated management system for contingent liabilities in Russia. According to data from the ROSINFRA platform for the support of infrastructure projects, 3,425 PPP projects are realised in Russia for $60 billion, of which 2,684 projects are within the framework of concession agreements, and direct budgetary liabilities for them are valued at $10 billion. Maxim Merkulov underlined that the situation with COVID-19 demands that the Government pays close attention to budgetary stability and risk monitoring.
According to Evgenii Dombrovsky, the Ministry’s chief goals in this regard are: regular evaluation of direct and contingent government liabilities; development of a methodological framework for evaluating contingent liabilities in PPP projects; assessment of risks and liabilities under agreements; and consolidation of information on direct and contingent liabilities.
An important element in identifying and evaluating liabilities is their record in state financial statistics. The particularities of reporting budget liabilities in PPP projects, which are applied to PPP agreements in the European Union according to Eurostat regulations, were disclosed by Luca Ascoli, head of Unit for EDP statistic in Eurostat. He stressed that for statistics, it is the “economic,” rather than the legal, owner of an asset, accounting for risk sharing between parties, which is important.
With a view to informing on international approaches to evaluation, forecast and management of contingent liabilities, VEB.RF and the National PPP Centre, supported by the Russian Ministry of Finance, have prepared a research paper, “Management of Contingent Budgetary Liabilities in PPP Projects.”
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