Resources for modernization

The last 14th Petersburg International Economic Forum has set entirely new points of the country’s economy growth. Askar Jabasov, First Deputy General Director of Belomorsky port LLC, who had participated in the forum, believes the decisions voiced at the St. Petersburg conference might have positive affect on the future of Russia’s ports industry.
 

- Mr. Jabasov, the St. Petersburg forum was focused on the global financial crisis, budget deficit, international cooperation and energy resources, education and even on the movie making issues. But the problems of transport infrastructure were just not included in the event’s agenda. How this event could be meaningful to you, the port industry manager?

- It is clear that not all things could be discussed in three days, the issues relating to any and all of the areas of economy and industries. And private panel discussions on cinema or football, which were just additional to the major meetings of the forum, and should not frustrate professionals from other fields.

For me the most valuable was the fact that this event offered new models of effective economic policies of the nations and large corporations. What is especially significant, the local officials and businessmen, foreign experts as well came together in the basic approaches to addressing them.

 
Many commentators covering the St. Petersburg Economic Forum emphasized modernization as a dynamic combination of investment and innovation. In essence, this is true. But this statement appears to be shallow, if we switch to the analysis of specific financial, economic and social instruments of modernization, more simply, from the question "what to do?" to the question "exactly how to do?"
 

- In whose hands is the whole set of "tools" today?

- Of course, first and foremost in the hands of the president, government and our parliament, in terms of the legislative framework for economic development.

By the way, speaking about the legal aspects of the proposed reforms, President Dmitry Medvedev announced a new framework for investment policy, including for companies of maritime and river transport. Among a number of businesses that have lost the status of the strategic ones, following presidential decree, there are 22 ports and 11 shipping companies. Now their shares and the stocks will be much more actively traded on financial (including international) markets.

But it's not just that. Modern innovation economy - is too complex and fragile education, development of which requires not only a little political will and a supportive financial market conditions. Its basis should be a strong and diversified industrial and production potential.

And I was pleasantly surprised when at the meetings and discussions of forum I heard this idea from foreign (including American) financial experts. It is not a secret that before the financial crisis, the role of the real economy was underestimated by Western experts, who were reputed to be adherents of postindustrial society. Now, it is time for the most prosperous countries to increase jobs in the manufacturing sector, at least in order to cover domestic demand. And this is especially true for Russia, which is still far from exhausting the possibilities of industrial expansion.

Weak points

- Does the Russian leadership clearly understand such approach?

- It seems to me that the the views of this system were presented by Vice Premier, RF Finance Minister Alexei Kudrin inmost deployed and consistent manner. And it systematically compensated certainly bright and ambitious speeches made by President Medvedev. Leader of the nation was aimed to show the substantive directions of the domestic economy without stucking in the particulars.

Government officials, including Minister of Finance, connected these benchmarks to (not entirely safe) the realities of Russian life.

I remember Mr Kudrin as saying that modernization should certainly include the three areas of work: economic diversification, integration into the production of goods and services (already developed and mastered) technological developments, and on this basis - innovation, that is, the introduction of inventions, which have not been on the market.

Moreover following the countries leading in the field of hi-tech, you must clearly understand that for many years hi-tech will not dominate our economy. It is therefore vitally necessary to bring to mind those technological and infrastructure networks that can provide development and business, and social workers, and, ultimately, to support those most innovative components of the economy of the future.
 

- What production chains do you exactly mean?
 

The easiest way I could explain this with an example of our company. To date, the construction of the Belomorsky Sea Commercial Port - is a project, however, almost fully ready for implementation, and already included in the Federal target program "Development of Transport System of Russia (2010-2015)".

Its urgency was caused by just a structural imbalance in the Russian transport scheme. Everyone knows that Russia, being recognized leader in natural resource extraction, leaves enormous financial opportunities associated with the processing and transportation of these resources.Currently about 100 million tons of Russian cargo annually go to the ports of the Baltic and Ukraine, promoting economic growth and establishment of new jobs in our foreign neighbors. At the same time our own territory, such as the Republic of Karelia, where our company, literally suffocates from lack of investment and lack of their own points of growth. Our port - this is just one of those most missing links in the chain of production and infrastructure, which desperately needs the Russian economy.
 
A chance for economic breakthrough

- But implementation of such a project requires substantial costs, doesn't it?

- Yes it does, the construction may cost some 16 billion rubles. But according to the most cautious forecast the project payback period will be only 8.5 years. And it is very promising and profitable investment in such a serious subject.

That is why the interest of investors, both domestic and foreign, in our construction is immense. Due to this circumstance, we can not just lay in your project the most modern port facilities, but use the latest advances in logistics and environmental safety.

Thus, the Belomorky seaport is fully consistent with the statements made by Russian leaders with a course for the modernization of the economy. Yet it is not directly affiliated with any innovation, or the production and development of high-tech. Hence, in some hot-heads that can turn into any strategic campaigning promise of our state leaders may be tempted to declare ineffective those costs from the federal budget, which included a federal program referred to, and which by law may only be made through the treasury.
 
- What are the volumes of these funds?

- About 4 billion rubles. These funds are needed primarily for dredging (insufficient depth for the voyage of large vessels - the main curse of the majority of Russian ports). But this - reimbursable funds that will be the state share in the property of the company.

Now imagine what would happen (or rather, what will not happen), if the federal funding of the program will be scrapped, for example, through reducing the fiscal deficit.

Launch of only first stage of the Belomorsky Sea Commercial port gives 600 new jobs with a decent, stable wages and adequate social benefits. Gradual increase in transshipment capacity of the port and launch of the second phase will double this amount.

But it is only one side of the issue. According to specialists from the Russian Academy of Transport every job place at the port leads to the creation of seven jobs in related fields of management and services, which is quite natural and understandable.

Next Step. The taxable base of the company will also grow. And according to preliminary estimates for the first ten years will amount to 5.59 billion rubles, payments to the budgets of all levels, reaching 950 million USD annually. And there is in fact more budgetary allocations in the form of, for example, rent.

Additional tax revenues from the same adjacent and newly established enterprises, which will appear through the operation of Belomorsky Sea port, are even more difficult to count before the launch of the project. But if we take as the basis the positive dynamics of growth of employment, the obtained figures appear to be very impressive.

Three or four such companies, like ours, could provide a real breakthrough in the economy of the Karelian republic. That, in turn, would trigger a sharp rise in the social field, particularly in education.  Training system of human recources would be amended considerably. And then on this basis we would have more reason to talk about the creation and development of high-tech industries and venture capital funds at the territory of the republic.

The hi-tech economic base

- Of course, such ambitious projects, as Skolkovo, can significantly advance the domestic applied science and technology. But do not forget that today the gifted children, living, say, in Belomorsk, may not even know about their talents and abilities and do not get the opportunity to show them somehow. Who, then tomorrow will be working in the domestic "Silicon Valley" - foreign experts?

- High technology should always be based on a sound power of an advanced industrial economy. Otherwise, all our claims on the hi-tech and hi-Hume will be simply a shaky top of a house of cards of unfulfilled dreams. It is not only the challenges of financial crisis. The greatest danger - to squander human capital, to take away the future from those who are still studying at schools.

 

And it is quite possible, if projects such as ours, will be considered only in terms of disappointing financial costs, which would be better to avoid, referring to the crisis.

Yes, what we get is a sombre picture. And we should call it "missed opportunities" in this case. How many pictures we see everywhere in the Russian reality.

So I was really glad to hear sober and balanced discussion about the trends and prospects of the national policy of modernization at the St. Petersburg forum from representatives of Russian and world economic elite.

The main priority - investment

In his keynote speech, Russian President Dmitry Medvedev has clearly identified the main priority for our country: "It is clear that investment activity is a crucial factor in the development of innovative and successful modernization of our economy. Russia needs a real investment boom."

By this fundamental objective a new tax policy has already been iplemented, the principles of budget spending are reviewed. Since 2011, the budget process will be changed from the obsolete practice of line-item funding for specific targeted programs.

All this can not but inspire. At the St. Petersburg Economic Forum, the international expert community has presented many valuable and very interesting ideas on all the exciting challenge of reducing the budget deficit.

- And still the model, Russian leadership has chosen, seems to me the most justified. What does it present?

- Resources for domestic modernization are both in terms of innovation and high technology, and in optimizing and expanding of the already established production and industrial capacity. To mobilize work in these areas - this is a major problem, which today stands in front of our business and government.

That is, in my view, the main conclusion to be drawn from the work of the forum.