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#2 - JRL 2008-209 - JRL Home
November 13, 2008
Speech at EU-Russia Industrialists’ Round Table
Cannes, France

DMITRY MEDVEDEV: Good afternoon, ladies and gentlemen,

Good afternoon, colleagues,

First of all, I want to say that it gives me great pleasure to have this chance to speak here today, and I want to thank you for your invitation. I am happy to be able to take part in this tenth jubilee meeting of Russian and European Union business leaders.

To say something that is self evident, the dialogue between our continent’s leading businesses is a vital resource for reinforcing our ties and cooperation and bolstering the partnership ­ a partnership that we now see as strategic ­ between the Russian Federation and the European Union.

I also want to say that I find it exceptionally useful and interesting to have this chance to discuss matters with you just before the Russia-EU summit takes place. This gives me at the very least the chance to hear your views and concerns and get a better understanding of the issues of concern in general to businesspeople in Russia and the European Union. I think there is a lot of practical benefit to be gained from this meeting. Furthermore, you know that tomorrow the leaders of the world’s biggest economies will hold their first meeting in Washington. The reasons for this meeting are clear. I will be flying to Washington tomorrow, and I would be grateful to you if you could perhaps take a broader look at the problems before us and go beyond the context of Russian-European cooperation. This would give me the possibility of speaking in Washington on the basis of a common mandate, a common mandate accorded to me by our Russian businesspeople and the European colleagues.

I want to note your positive contribution to building up cooperation between Russia and the European Union. Over this time thousands of projects have been carried out and trade turnover is growing. Figures have already been quoted here and I must say that they really are very good. We are talking about figures in the billions of euros now. As far as I recall, trade turnover increased by 26 percent over the first half of this year. I do not know what result the second half will bring, because we all face the same difficulties ­ the global crisis has not spared anyone ­ but I think the results for the year overall will be really quite good.

Of course, we want to continue increasing our trade and making our cooperation more effective. But what is clear is that, as I just said, the outlook for our cooperation depends a lot on what response our countries make to the global challenge that we all face today. And it should be said too that this is the first time that we have encountered a crisis of quite this kind. No comparison is entirely fitting. Comparing the current situation to the crises in the 1970s, 1980s and even the Great Depression is not entirely accurate because today’s crisis is different in nature.

The total losses caused by all of the problems the crisis has brought have already mounted up and, according to the figures I have, now come to around $1.5 trillion. These are only the losses that have been actually calculated so far. The real problems and real losses are even greater. It is not easy and is certainly not a pleasant task to calculate them, but it is a necessary task.

That the crisis has had such serious consequences forces us all to raise the issue of reforming the world financial system and its main institutions such as the International Monetary Fund and the World Bank. Russia is ready for this and would like to work together directly with the European Union countries and our other partners on creating a new financial architecture.

I want to outline our views on what needs to be done. We have already put forward these views before. What we have now, you could say, is a position that has crystallised. Essentially, what I want to say now is the same as what I will say tomorrow and the day after tomorrow to my colleagues in the G-20.

What do we need? First, we need to systematise and bring order to the national and international financial regulation institutions.

Second, we need to eliminate the imbalance between the amount of various financial instruments issued and the real investment yields they bring.

Third, we need to increase the transparency of all types of public companies.

Fourth, we need to tighten supervisory requirements.

Fifth, we need to make ratings agencies and auditing companies more responsible. I would add here that we also need to introduce a new universal and mutually acceptable accounting system.

Sixth, all players on the market need to share responsibility for risk management.

Seventh, we need to ensure that everyone can profit from and gain access to the benefits of removing the barriers and obstacles to international trade and free movement of capital.

Finally, we put forward the initiative of establishing a system for early warning of and rapid response to approaching crises.

The biggest problem in the current crisis is that everyone saw what was going on in the United States, saw the bubbles that were growing and the liquidity problems, and everyone heard what our American friends were saying, but no measures were taken either in individual countries or in the global economy as a whole. This is why a global reaction system is needed to change this situation.

We are impressed in general by the carefully considered position of the business community, which sees harmonisation of laws as a two-way process. I am referring here to the specific case of harmonising Russian laws with European laws and the laws of individual EU member states. This is a reciprocal process and it involves giving recognition and priority to international standards. This is particularly relevant in the context of Russia’s accession to the World Trade Organisation.

We could spend a long time discussing the reasons for the delays in this process. One of the reasons is clear: the organisation itself, its work methods and its rules and regulations are not sufficiently well adapted to the accession of new members.

We now find ourselves once again confronted by the dilemma of whether or not to join the WTO. My position is straightforward: we will join the WTO. We want to join, but we want to do so under normal and non-humiliating conditions. There have been enough negotiations now. It is time for decisions.

Another point I want to make, another factor for stability that should be part of this new financial architecture we need to build, is the existence of new financial centres and new regional currencies. This has already happened with the euro.

If this crisis had arisen before the euro became the main currency circulating in the EU countries I think the consequences, the monetary consequences at least, would have been a lot more serious.

We want to develop our own currency, the Russian rouble, and we are working now on making use of our possibilities to develop our country as one of the world financial centres and turn it into one of the global financial players.

With time, we hope to be working on the markets of the CIS countries and the countries of Central and Eastern Europe. But we will not restrict ourselves to the Eurasian area. Regardless of the crisis and the current difficulties, including in our country, a package of laws will be passed by the end of the year for developing a financial centre of this kind in our country. Not only will we not abandon this idea, we think that now is the best time for putting it into practice.

I want to say a few words now about the situation in Russia and the steps we are taking (I am referring here to the Russian leadership, the Central Bank and the Government). We have taken urgent measures to stabilise the key economic sectors. In order to inject more funds into the economy we have decided to accord subordinated loans for a period of ten years. We are doing this because we all know that the biggest problem we face right now is a shortage of ‘long’ money, a shortage of long-term liquidity on the market. We hope that this measure will make it possible to increase banks’ capital and offset the liquidity shortage on the market.

As a result, the banks should end up with more funds available for according loans and supporting the real sector of the economy. We are looking at total figures of somewhere around $200 billion.

This year we will manage to maintain overall macroeconomic stability. We expect GDP growth of around 7 percent for the year overall. This growth is driven above all by an increase in domestic demand.

But it is clear that next year will be more difficult. It will be more difficult for all of us and for Russia too. We will probably see a slowdown in the growth rate and a difficult situation with inflation. We will of course address all of these issues.

The Government has put together a support plan for the real sector of the economy. This is a three-part plan. The first component concerns laws and regulations. We are now working rapidly to make changes to the laws. As the situation requires, we have reached agreements with the parliament and are working very swiftly to pass the necessary laws and presidential or government orders and regulations. The second component of the plan is support for big business, support for the large companies that employ a huge number of people. And the third component is support for small and medium businesses.

I would like to say a few more words about the crisis. Any crisis has destructive effects of course, but at the same time, it also creates new opportunities. There is a certain contradictory nature in development. Crises are dangerous, sometimes mortally so for ineffective companies, but they also give the chance to make a business more effective and optimise human resources. Finally, there are also new opportunities to introduce cutting-edge technology and work on energy conservation. Russia is an energy-rich country but in this area, unfortunately, we have done very little and have been very ineffective. This is something we need to work on, and the crisis gives us a unique opportunity to do something about addressing and resolving these problems.

But most importantly of all, the crisis should not stop us from carrying out our plans for upgrading and modernising our production enterprises and technology. We will continue working on tackling the problems in our economy, including the bureaucratic problems. We will work on removing the administrative barriers. We know full well that they are still a problem in Russia. We will improve our tax laws and customs procedures. Finally, we will fight corruption. I spoke about this just recently in my Address to our parliament. Not only will we not scale down our efforts in this area, but this task remains one of vital importance. No matter what the circumstances, no matter what the problems and costs involved, we will continue to carry out our plans in this area. The aim is clear: we want to make our economy more attractive for investors and improve the business climate in the country as a whole.

What else do I want to say? The crisis has created a situation when big economies, completely deregulated economies, are forced to transfer blocks of shares to state ownership. We do not intend to carry out nationalisation, and the transfer of shares to state ownership would be only a temporary measure taken to save this or that company of strategic importance for the country’s development. In any event, in the case of private companies, these shares would not remain in state ownership and would have to be privatised once again. I think that other countries will take the same steps.

We have no intention of closing our market. We intend to take part in the global processes, take part in the international division of labour, but of course we will also try to make maximum use of our country’s competitive advantages.

I will conclude by returning to what I said at the beginning.

I am confident that the European Union will continue to be a strategic key partner for Russia. We want to develop the broadest range of contacts with business in the European Union, with the regions, the different countries, and the civil society of the European Union. We see a similar desire among most of the EU countries. After all, we are all pursuing one and the same objectives today. Russia has set out these objectives in its national development programme for the period through to 2020. The European Union has set out these objectives in its Lisbon Strategy.

Our cooperation has such scale and substance that it would be best not to let it become hostage to private problems as has sometimes been the case. This is sometimes linked to the specific interests of this or that country. I think we need to do our utmost to free our dialogue from this kind of problem. The goal of our work together is to create a safe and comfortable modern environment for the citizens of a united Europe. I am sure that we can achieve this goal. I am confident that we can overcome the crisis that has hit most of the developed economies, and ultimately we can build up their potential.

Thank you very much.