OFFICIAL PUBLICATION OF FBA EAC, IBC eurasian financial & economic

# 2 (7) | 2019

PERSONALITY GEOFFROY ROUX DE BÉZIEUX: MEDEF – the flagship of French business 4

A. Shokhin Russia–US economic cooperation in turbulent times 14 O.Berezovoy Financial & Banking Association of Euro-Asian Cooperation: dynamic growth and new frontiers 21 P.C. Agius Blockchain and the banking sector of the Republic of Malta 46 Award «Financial and Banking Elite of Eurasia»

November 2019

Nominations 2019: 1 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 The oficial award ceremony will be held on November 2019 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

Registration Form and Terms of participation in the competition: www.bacs.com Organizing committee: tel.: +7 495 663‐02‐08, 663‐02‐13, e‐mail: bev@bacs.com ofice@bacs.com HERALDeurasian financial & economic EDITORIAL BOARD:

# 2 (7) | 2019

Alexander Murychev, Chairman of Editorial Board, Chairman of Coordinating Council of FBA EAC, Executive Vice-President of RSPP, Chairman of IBC FOUNDERS: Financial & Banking Association of Euro-Asian Anvar Abdraev, President of Union of Banks of Kyrgyzstan Cooperation (FBA EAC) Bakhytbek Baiseitov, President of Association of Banks of the Republic of Kazakhstan International Banking Council Oleg Berezovoy, General Director of FBA EAC (International Coordinating Council of Banking Andrea Boldi, owner of the company NEMESI S.R.L. (Italy) Associations) Yves Pozzo di Borgo, Former President of friendship group PUBLISHER: with Central Asia in the Senate (France) Financial & Banking Association of Euro-Asian Samvel Chzmachian, Deputy General Director of FBA EAC, Cooperation (FBA EAC) Head of Representative office of FBA EAC in Armenia Alexandre Dzneladze, President of Association of Banks Editor in Chief: V. Murin of Georgia Executive editor: S. Orlova Editor: A. Gusev Bakhtiyar Khamidov, General Director of Uzbekistan Banking Corrector: A.Panyugina Association Page-proofs: A. Bagaev Anatoly Kazakov, Chairman of the Coordination Council Editorial Board: E. Berezovaya, O. Ryazanov of Financial and Banking Council of the CIS Translators: S. Arkhipova, K. Tereshenko Elena Korobkova, Executive Director of Independent PUBLISHER'S ADDRESS: Association of Banks of Ukraine 17 Kotelnicheskaya nab., Moscow, Manish Kumar, General Director of Soltex Group Ltd., 109240, Russia Head of Representative office of FBA EAC in India, Sri Lanka, +7 495 663–02–08/13 Bangladesh, Malaysia [email protected] Alexander Kuchinsky, Deputy Chairman of FBA EAC www.fbacs.com Coordinating Council, Chairman of the Association of Belarusian Banks PRINTING HOUSE: Released in the «Granitsa Publishing House» Ltd. Berislav Kutle, CEO of Banks Association of Bosnia Format 210x297 mm. 124 pages. and Herzegovina Istvan Lengyel, Secretary General of Banking Association ISSUE DATE: for Central and Eastern Europe May 2019 Amirsho Miraliev, Chairman of the Board of Association of Banks of Tajikistan Opinions of authors do not necessarily coincide with those of the Valery Murin, Editor in Chief of the magazine editorial office. "Eurasian Financial and Economic Herald" Zakir Nuriyev, President of Azerbaijan Banks Association The editorial office is not responsible for the content of the ad- vertisements. Advertised goods and services are subject to Svetlana Orlova, General Director of Information and mandatory certification. Reprint is allowed only with the written Publishing Center “Eurasia” Ltd. permission of the editorial office. Bratislav Pejaković, Secretary General of Association of Montenegrin Banks Manuscripts are not reviewed and not sent back.

Krzysztof Рietraszkiewicz, Chairman of Polish Bank Reprint of texts and photos of the magazine “Eurasian Financial Association & Economic Herald” is allowed only with the written permission Anatoly Tkachuk, Vice-President of FBA EAC, President of the editorial office. of “Russian mineral resources” JSC – managing company of GC Rustitan When quoting, reference to the magazine is required. Dumitru Ursu, Chairman of Moldovan Bankers’ League Registered in the Federal Service for Supervision of Communica- Vladimir Vasić, Secretary General of Association tions, Information Technology, and Mass Media (Registration of Serbian Banks number ПИ № ФС77-75043 dd. 19.02.2019). chairman’sГлобальная corner экономика

Dear colleagues CONTENT and friends!

Winter is behind us, PERSONALITY summer is coming soon - Geoffroy Roux de Bézieux. MEDEF – the flagship and the past period we 4 of French business have tried to fill with vigorous activity aimed at the further develop- EAEU TODAY AND TOMORROW ment of the FBA EAC so 10 Т. Valovaya. Macroeconomic policy of the EAEU it remains an effective in the era of advanced financial technologies business platform for in- Alexander Murychev, Chairman of Editorial Board teraction between repre- of the magazine "Eurasian sentatives of various sec- RSPP NEWS Financial and Economic Herald" tors of the Eurasian 14 A. Shokhin. Russia–US economic cooperation economy. in turbulent times Perhaps, the important thing to note is the growing potential of the Association. In fulfilling the mission to integrate the economic space of Eurasia, we cannot but FOUNDER’S PAGE. FBA EAC look ahead, cannot fail to take into account future 20 General Meeting of FBA EAC Members transformations in the world of the economy, and the O.Berezovoy. Financial & Banking Association past period clearly testifies to this: now the Association 21 of Euro-Asian Cooperation: dynamic growth is not just confidently solving its tasks - its activities and new frontiers cover more and more ways and areas of economics. So, at present, a large-scale system of relations between the 25 FBA EAC: Business life business and the banking community is already being built within the framework of the FBA EAC, and many PROFESSIONAL STANDARDS of our projects have grown into full-fledged areas of its activities. 28 D. Mashtakeeva. In the coming years the Russian These and other achievements were noted by the labor market will totally switch over participants of the annual General Meeting of the to professional standards members of FBA EAC, held in March. There we also looked to the future, approved a range of tasks for the 33 FOUNDER’S PAGE. IBC next five years. A. Abdraev. Development of modern financial instruments: The important event for all of us has become XII 34 problems, risks, safety (Kyrgyzstan) Russian Business Week which is annually held by the Russian Union of Industrialists and Entrepreneurs. 35 Z. Nuriyev. Digital transformation of banking system Within the framework of the Week, the traditional of the Republic of Azerbaijan RSPP Congress was held, attended by the President of the Russian Federation V. Putin. FINANCIAL SYSTEM OF THE COUNTRIES OF EURASIA More information about these events can be found in this issue of the Herald, which by tradition we have 38 Government securities – safe investment (Serbia) tried to fill with interesting and diverse materials cov- 46 P.C. Agius. Blockchain and the banking sector ering the most important issues of the economy and the of the Republic of Malta financial and banking sphere. Readers find out about the coming implementation of professional standards in the Russian economy, the large-scale project of the HISTORY OF MONEY Euro-Asian digital platform Digital Belt, cryptocurren- 48 V. Krasnikov. Two types of Cuban peso cies and risks associated with them, as well as the digi- tal transformation of the banking system and the prob- PROJECTS lems of regulating financial technologies. We have not forgotten about leisure – our photo contest continues 50 A. Lisitsyn. «Digital Belt»: opportunities and prospects and we look forward to works from amateur photog- raphers from different parts of the world. TECHNOLOGIES Time doesn’t wait – and the Association tries to keep pace with it. That is why there are still a lot of 54 A. Antipov. Food sublimation as a factor of economic events ahead of us, which we will definitely continue development to talk about on the pages of the Herald. PRACTICE See you next time! 58 V. Karamzin. Infant food industry – development and tasks

2 14 RUSSIA–US ECONOMIC COOPERATION IN TURBULENT TIMES 25 Alexander Shokhin. The United States remain a technological leader and the centre of the global financial system and will likely continue to be so for decades to come.

46 BLOCKCHAIN AND THE BANKING SECTOR OF THE REPUBLIC OF MALTA Pierre Clive Agius. The Maltese bank- ing sector, recognised by the World Economic Forum amongst the top 30 worldwide in terms of stability, has al- 14 ways been at the forefront in adopting new strategies.

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10 MACROECONOMIC POLICY OF THE EAEU IN THE ERA OF ADVANCED FINANCIAL TECHNOLOGIES Тatyana Valovaya. The interest of the 48 EEC to the usage of cryptocurrencies and relevant technologies relates first of all to their potential possibility to influence the macroeconomic stability 28 of member-states with regards to the coordinated macroeconomic policy of the EAEU. 34 DEVELOPMENT OF MODERN 21 FBA EAC: DYNAMIC GROWTH FINANCIAL INSTRUMENTS: AND NEW FRONTIERS PROBLEMS, RISKS, SAFETY Oleg Berezovoy. FBA EAC has shift- Anvar Abdraev. The emergence of ed from the traditional idea of a new technologies is caused by the banking association as a structure needs of the current generation who which protects the professional inter- wants to get services in a digital form ests of certain participants to the idea and at the same time requires ex- of a multi-level, client friendly sys- cluding the human factor. The digital tem of interaction between business transformation of the financial serv- and banking society. ices market changed the financial en- vironment of most countries. 38

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 ПрактикаPersonality

4 GEOFFROY ROUX DE BÉZIEUX: «MEDEF – THE FLAGSHIP OF FRENCH BUSINESS»

THE FRENCH BUSINESS MOVEMENT (MOUVEMENT DES ENTREPRISES DE FRANCE - MEDEF) – IS THE MOST IMPORTANT REPRESENTATIVE OF THE FRENCH BUSINESS. WITH 800 000 ENTER- PRISES MORE THAN 95% OF WHICH ARE SMES MEDEF IS A RECOGNIZED AND NECESSARY PARTNER OF THE FRENCH GOVERNMENT. MEDEF IS MAINLY FOCUSED ON JOB CREATION AND SUSTAINABLE DEVELOPMENT, WHILE IN A CONTEXT OF FAR-REACHING CHANGES (ECONOMIC, DEMOGRAPHIC, DIGITAL, SOCIAL), ITS MISSION IS TO PROMOTE FREE ENTERPRISES AND ENCOURAGE AND ENHANCE ENTREPRE- NEURSHIP. IN ORDER TO ACHIEVE THIS GOAL MEDEF TAKES INITIATIVES THAT ENABLE BUSINESSES TO BENEFIT FROM A FAVORABLE LEGISLATIVE AND REGULATORY ENVIRONMENT IN THE ECO- NOMIC, FISCAL, LABOUR, ENVIRONMENTAL, AND SOCIAL FIELDS AND TO DEPLOY THEIR AC- TIVITIES BOTH IN FRANCE AND ABROAD. ONE OF THESE INCENTIVES IS MEDEF INTERNA- TIONAL AIMED TO SUPPORT FRENCH COMPANIES ABROAD, SET COOPERATION WITH STATE LEADERS AND PRIVATE SECTOR OF MANY COUNTRIES. EVERY YEAR MEDEF INTERNATIONAL ARRANGES DELEGATIONS OF FRENCH BUSINESS-LEADERS TO THE TARGETED COUNTRIES AS WELL AS WELCOMES IN FRANCE THE LEADERS OF COUNTRIES AND GOVERNMENTS, MINIS- TERS OF ECONOMY, FINANCE, REGIONAL AND LOCAL AUTHORITIES. MEDEF PROMOTED THE PRINCIPLES OF “SUSTAINABLE DEVELOPMENT” RAISING THE AWARE- NESS THAT THE PROTECTION OF THE ENVIRONMENT CAN BE A COMPETITIVE ADVANTAGE. SINCE JULY 2018 GEOFFROY ROUX DE BÉZIEUX, A FAMOUS FRENCH BUSINESSMAN HAS BEEN THE HEAD OF MEDEF.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 5 Personality

– Recently on July 3, 2018 you became – How do you structure your work About the author the President of the French Business in France and beyond? Movement MEDEF. MEDEF is the – MEDEF as a voice of all French compa- leading network of entrepreneurs in nies is the main partner of the authori- Geoffroy Roux de Bézieux France including the international ties: we advocate the interests of busi- level. The organization promotes nesses in all economic and social agen- trade, technological cooperation, in- cies – on the local, regional and national Graduate of ESSEC and a DESS at the Uni- vesting, creates long-term partner re- levels, convey to the authorities the versité Paris-Dauphine Geoffroy Roux de lations especially on the developing opinions of the entrepreneurs to im- Bézieux has more than 22-year experience markets, sets direct contacts with prove the conditions of their work. as an entrepreneur. In 1996 he founded The state leaders and private sector of MEDEF is also represented in Brus- Phone House – the first chain of shops en- many countries. Could you dwell up- sels and beyond France. tirely dedicated to mobile phones. In 2004 on the mission and the goals of The House of French enterprises in he pursued his career by founding Omea MEDEF? Brussels represents MEDEF and its mem- Telecom which started the first alternative – The leading role of the Western bers in Eurocommission and Europarlia- mobile operator (MVNO) Breizh Mobile. Ten economies including the French one is ment. MEDEF is also the member of years later, in 2014 Geoffroy Roux de facing a challenge. The French compa- Business Europe which includes all 40 Bézieux founded Notus Technologies, a nies and enterprises have to work in the European management trade unions. At group active in the agri-food industry, situation of large-scale geopolitical, eco- the European level we work on better logical, technological and social changes. integration and the development of leisure and new technologies. They have to structure new economic common market of the EU. He is a Vice-President of the Peugeot SA models in the conditions of internation- Besides the branch MEDEF Interna- industrial group supervisory board and a al competition, to pursue production in tional assists the French companies in Parrot board member. He has also spent France with reduced resources and en- promoting their position internationally time as a board member at IMS, ergy breakthrough. in particular in the developing coun- Seloger.com, Micromania, Budget Telecom, tries. Every year we arrange about 200 French enterprises also have to quick- and Nocibé. ly introduce digital technologies, which meetings and delegations with the high- have become part of every-day life for est authorities and private sector, we Since 2000 Geoffroy Roux de Bézieux has their clients, suppliers, partners and em- have 85 geographical councils embrac- been an Angel investor for many start-ups ployees. ing 150 countries. contributing to the rise of French Tech. In addition to the above mentioned In 2009 he created ISAI with Pierre Kosci- French companies have to take into ac- – Proceeding with the international uzko-Morizet, Ouriel Ohayon and Stéphane count the changes in the society includ- activity of MEDEF, what is the corner- Treppoz, an investment fund for Internet ing high unemployment among young stone of the cooperation and joint entrepreneurs. projects of the French companies and people, numerous migration flows as Between 2003 and 2008 he was vice-pres- companies from other countries? well as the high mobility of goods and ident then president of CroissancePlus, the capital. – Firstly, MEDEF unlike the British, Ger- association for growth of entrepreneurs. man or Italian corresponding institutes It is important that business has the He has also been a member of the France is the only organization representing all answers to all the challenges that our so- Investment Council and participated in the ciety is facing. With the current social, sectors of economy at once – industry, Attali Commissions. He has also been Vice- economic and ecological situation busi- banking sector, insurance, services and President of the Fédération Française des nessmen find the most innovative solu- so on. We always take this into account tions. And we all have to take our stand in our work. Télécoms. in order to play the main role in the con- Secondly, we closely cooperate In 2008-2012 he was a Vice-President and text of the circumstances. with our European and global part- then a President in Unedic for MEDEF and ners in different formats – from the MEDEF is an integral player of the vice-president of an Employment Center. work in inter-European (Business Eu- process. Our slogan is “Act together for Since July 2013 he has been an assistant rope) and international (Global Busi- sustainable development”. This slogan ness Coalition, Business at OECD, Vice-President and a treasurer of MEDEF. also supports the general mission of ICC) organizations to the cooperation Holding this post he has founded the Digi- MEDEF defined in the valid charters. with informal groups (B7, B20) and tal University. Being written 20 years ago they within bilateral agreements with sim- Together with his wife he founded a charity couldn’t take into account today’s Eu- ilar organizations of other countries – ARAOK Foundation supporting humanitari- rope, the sustainable development, or Germany, Italy, Israel, Mexico… This an associations. the corporate social responsibility joint activity allows to share our solu- (CSR). tions, to connect the French compa- He is a Knight of the Légion d’Honneur and In achieving these goals the updated nies with foreign partners and to de- Officer of the Ordre national du Mérite MEDEF works to be an example and velop common positions in accor- Author of the works: «Salauds de Patrons! take the responsibility for observance of dance with current events in the Pourquoi les Francais n’aiment plus leurs public interests in Europe – reaching all economy and trade. chefs d’entreprise?» (Hachette, 2007), the corners of France for better under- It’s not always easy. We have to be standing of economic realities and rep- open, flexible, diplomatic, especially «Pour sortir de la crise, le capitalisme» resenting all enterprises, tackling all is- when our points of view and interests (Editions du Moment, 2011). sue referring to the society. differ. On the whole the negotiations

6 with our partners from other countries are very much similar to those with for- eign authorities and the representatives of economic and social spheres.

– France and Russia cooperate quite closely. For example your country ac- tively participates in job creation in Russia. What is MEDEF’s work in Rus- sia like in general? What are the diffi- culties and how hard is it to overcome them? – French companies are widely repre- sented in Russia: total investment amount equals to 20 billion Euros and our companies rank first among the for- eign employers in Russia – it’s about 140 000 employees. Our trade turnover has recommenced its growth after 2017– 2018 and is now reaching the pre-crisis level – it evidences that our relations have become stable regardless of sanc- tions. MEDEF through MEDEF Interna- tional actively works with Russia – a strategic partner of France and Europe. 30 years of joint activity have created close ties, mutual trust providing for long-term plans. We organize regular meetings be- tween the leaders of the French compa- nies and the major Russian representa- tives of public and private sectors. There are discussions of actual indus- tries such as transport, energy, telecom- munication, urban development, in- dustry. Business issues and business cli- mate are also on the agenda. We deal with these issues directly with our Russian partners on-site – RSPP repre- sentatives and the Minister of econom- ic development of the Russian Federa- tion Maxim Oreshkin. We also tackle the problem of bilat- eral relations very often, particularly at the sessions of the CEFIC (Franco-Russ- ian Economic, Financial, Industrial and Trade Council). It concerns the regula- tions at the level of the Russian Feder- ation and the Eurasian Economic Union. These meetings are always positive because we always find partners among our Russian friends ready to listen and smoothen things down for the French enterprises in Russia, as much as possi- ble. However leaving out “internal” diffi- culties in every-day work the sanctions considerable hinder business in particu- lar due to the exterritorial American sanctions. We often encourage the French and Russian authorities to take measures for retaining the sovereignty of our economy facing the unilateral deci- sions without consent of partners.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 7 Personality

– Could you tell us about what is in the tion of Russian heavy industry, the In France, after the first successful MEDEF priority area when it’s about source of environmental pollution, is a measures of President Emmanuel working in the Eurasian space partic- big challenge not only for Russia but for Macron, such as the enterprise taxation ularly in Russia or in Azerbaijan the entire planet. New solutions for the and labor legislation reform, we are wit- where you will go soon? Which indus- industry of the future could increase the nessing popular protests that reflect the tries are you most interested in? What efficiency, competitiveness and help extremely uneven development be- are the most important projects and ar- save recourses and energy. Moreover tween our regions which may later be- eas within your cooperation with they will contribute to the transforma- come an obstacle to growth. The role of these countries that you could men- tion of the Russian economy and its MEDEF today is to be able to respond to tion? workforce. these challenges through the proposals – For MEDEF Eurasia is a vast region We also follow closely the needs of that we formulated in the process “Great stretching from Central Europe to Mon- Russian cities and the development of National Debates” (fr. Grand Débat Na- golia. Of course, this part of the world in- the food sector, the latter gained rapid tional) which have been conducted in cludes the most diverse economies local development after the Russian em- France since January 2019: increasing the where the markets of such large indus- bargo on products from the EU, the USA mobility of workers and their purchas- trial countries as Turkey and Russia are and Canada in August 2014. ing power through the issuance of bonuses, non-taxable, assistance to represented and developed as well as Last thing that I would note the young people by concrete measures markets that are closely linked to the EU transport infrastructure which is, of (creation of start-up capital, assiatance in – for example, the market of Uzbekistan. course, important in a country, whose obtaining a driver’s license). In addition, the Eurasian countries area is almost 27 times larger than the are the heterogeneity of the political sys- area of France! Railways and highways, tem and business conditions. river and air routes require development – When you were an assistance of and integration in order to make logis- And in order to engage in conditions Vice-president and Treasurer of tics more efficient. of these diversity, MEDEF International MEDEF, you founded Digital Univer- divides Eurasia into macro-regions, in- Russia is a huge country which is a sity. Could you tell us what the point cluding countries that are most similar strategic partner for Europe and for our of its activity is? in characteristics. companies and the current situation – Since I am strongly convinced that dig- cannot change this. Our priority is the countries of Eura- ital transformation is a major upheaval sia seeking to diversify their economy for all entrepreneurs regardless of their size and field of activity, MEDEF allo- and reduce dependence on the export – How do you assess the current state cates a separate time to this process of commodities. We are talking here of business and the economy of Eu- every year. about countries such as Kazakhstan, rope in general and of France in partic- Mongolia and Azerbaijan where I will ular? And what are the most relevant The activity of the Digital University go in July 2019 with a large delegation, tasks now, in difficult conditions for covers all French enterprises and is aimed representing French business both large the whole world, facing entrepre- to raise awareness and support of French and medium and small. Food industry, neurs? companies, in particular small and medi- digital technologies, tourism, logistic um enterprises which have not yet taken – The state of the global economy is routes, ecology these are the main topics marked by the strengthening of posi- advantages of all digital opportunities that we will discuss in Baku with the au- tions of those countries where the that this kind of revolution gives us. thorities of Azerbaijan. protectionism is practiced, in particu- The Digital University allows to see Other countries of Eurasia express a lar in the USA and China. I deeply be- how French enterprises follow this trend need to modernize their industrial sec- lieve in the role of free trade on a in each individual industry and also tor, to explore the field of alternative en- global scale because it bears growth show and evaluate both the already ergy sources due to future environmen- and development. But nevertheless known and potential advantages of our tal problems, to structure new sectors of free trade should be balanced - coun- country in this field. the economy and protect their digital tries should not introduce such rules After four successful graduates, Dig- sovereignty. We offer our knowledge in that in fact protect only their own ital University of MEDEF continues to these areas and always try to highlight market. develop thanks in particular to cooper- and emphasize the uniqueness of the Within the framework of MEDEF I ation with France Digitale. We offer a French solutions. created a committee of economic sover- pitching format to stimulate innovative Russia pays a lot of attention to the eignty with a view to moving the har- development between small and medi- industry of the future - we could discuss monization of rules in the EU and um businesses and start-ups. Our goal is this topic in June, at the next economic France as opposed to tools that the USA to find and identify those who will be forum in St. Petersburg. In addition, the uses (exterritoriality of American law) the main engines of digital technology industry of the future is closely linked and China (theft of technology and in- and who could work with to accelerate to climate change since the moderniza- accessibility of government orders). the digital transformation.

8 Rapid development of the state control mechanisms: automation of tax accounting and control systems, tracking of transactions and goods flows, tougher requirements to contractor checking lead to additional custom payments and fines for the foreign trade operators as a result of incorrect import documents, wrong article codes and poor estimation of customs duties, etc. Current legislation permits to collect from a fair foreign trade operator the taxes payable by his unfair contractor, up to the fourth echelon. Since 2017 tax collection has become possible on account of the property, while a nominal director has the right to considerably reduce the share of his responsibility giving testimony against the real decision- makers. Considering the standard customs and tax audit “extent” of three years the liability can be based on the facts which are not classified as violation at the occurrence of the event but fall under the definition according to a new legislation and law enforcement practice. …The best way to manage the risks is to detect them.

Seminar for foreign trade operators on management of exposure risks during post clearance control to prepare for customs HOW and tax inspection? June 14, 2019 The seminar gives opportunities: to prepare for an in-office or an on-site audit of a customs authority, to make timely adjustments to one’s work; to choose the best strategy and protection plan in case of initiated prosecution of an administrative offence and criminal trial; to look at the audit after the release of goods, through inspector’s eyes. Practicing experts of customs and tax legislation will share their recommendations for the customs risk management and smoother interaction with customs authorities. Organizers: Association of Customs Auditors and Consultants (ATAiK) Customs and Logistics Center of FBA (CLC FBA) Financial & Banking Association of Euro-Asian Cooperation (FBA EAC) Registration: prior registration is required, seats are limited. Participation: free of charge Venue: 17 Kotelnicheskaya nab., Moscow Time: 10.00–12.30 Contacts: Maria Serebrova, Development Director of ATAiK, tel.: +7 985 233 4301, email: [email protected] EAEU today and tomorrow MACROECONOMIC POLICY OF THE EAEU IN THE ERA OF ADVANCED FINANCIAL TECHNOLOGIES Т.Valovaya, Member of the Board – Min- IN THE LAST DECADE THE WORLD HAS BEEN ister in charge of Integration GOING THROUGH A NEW PHENOMENON - CRYP- and Macroeconomics of EEC TOCURRENCIES. TOGETHER WITH DIGITAL TECH- NOLOGIES – THE BASIS FOR CRYPTOCURRENCIES – New technologies THEY HAVE AFFECTED A LOT OF FACETS, FIRST OF in the economy ALL ECONOMY LEADING TO A NEW FINANCIAL TOOLING AVAILABLE TO ALL THE MARKET PAR- A while back the cryptocurrencies “ provoked political repercussions on the TICIPANTS, TO THE RETHINKING OF THE MEANS OF ECONOMIC ACTIVITY AND WAYS OF ECONOMIC market: firstly they were private money, secondly they were strongly anony- REGULATION. mous due to the new technologies in this sector, particularly the blockchain ” technology.

10 International seminar “Blockchain and cryptocurrencies – new channels of influence on the macroeconomic policy in the Eurasian region”. Moscow, Russian Federation, headquarters of EEC, February 12, 2018

The interest of the Eurasian Econom- books, dictionaries, school books and About the author ic Commission to the usage of cryp- the writing itself. tocurrencies and relevant technologies Today this fundamentally proved Tatyana Valovaya relates first of all to their potential possi- method of data storage has gained a dig- Member of the Board – Minister in charge of bility to influence the macroeconomic ital image and can be used in different Integration and Macroeconomics of EEC. stability of member-states with regards areas of economy. to the coordinated macroeconomic pol- Blockchain is known for its certain Date of birth – April 11, 1958. icy of the EAEU. At the same time the advantages – low commissions, instant In 1980 she graduated from the Moscow Fi- technologies cryptocurrencies base on transactions, high security due to cryp- nancial Institute, Department of International Economic Relations. are the key element of implementation tion, small number of agents, simple data of the Union’s digital agenda. They transfer and identity verification, lower Doctor of economic sciences. might go far beyond transactions with information disbalance. Such technolo- 1999 to 2012 – Deputy Director and then Di- cryptocurrencies. These digital tech- gies provide for security and flexibility rector of the Department of International Co- operation of the Government of the Russian nologies can potentially be implemented of different services and can be used for Federation at Office of the Government of the in different areas and evidence the the work of payment systems, bank sys- Russian Federation. changes in the social and economic sys- tems control and robot-controlled Since February 1, 2012 - Member of the Board tem, they can even influence the very processes, logistic platforms, cyber secu- (Minister) on the Main Areas of Integration substance of macroeconomic regulation. rity, voting, copyright protection, decen- and Macroeconomics of the Eurasian Eco- The distributed ledger in the modern tralized systems of energy supply. nomic Commission. technological variant is certainly de- There are large prospects for the ap- manded, attracts large investments and plication of new digital technologies is supported by central banks in differ- particularly in finance and economy. integration level especially when the ent countries. Noteworthy that the con- However there is still uncertainty about countries have already included the cept peculiarity of the distributed ledger the birth and further development of macroeconomic regulation into their in- – which is to ensure data storage on dif- cryptocurrencies – the most famous re- tegrational agenda. When the EAEU ferent media forming a common data sult of the technology of distributed member-states became concerned about base without a single control center – is ledger, which stipulates the need of the possible risks of cryptocurrencies and well-known and has been applied for a in-depth analysis of the phenomenon blockchain technologies the Eurasian long time: as an example is the ability of and the work-out of approaches to its Economic Commission started working people to collect and exchange informa- regulation. The need exists not only at on the problem having taken on the role tion at the time when there weren’t even the level of separate states but also at the of a supra-national coordinator.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 11 EAEU today and tomorrow

International seminar: “Cryptocurrencies and blockchain – a phenomenon of the XXI century: Panel session at the III International Forum regulatory challenges in the context of macroeconomic stability of the EAEU”. “Eurasian Week”: “Cryptocurrencies and Minsk, the Republic of Belarus, HighTech Park, June 198, 2018 blockchain: new economy or insecure experiment?”

Possible ways of regulation tive principles of the regulation for to allow the use of cryptocurrencies, those market players who operated to fix related legislative aspects and The cryptocurrencies boom was in with cryptocurrencies and blockchain. impose taxes; the groove two years ago, the price of The Commission accurately studied not to prohibit the use of cryptocurren- bitcoin was reaching top record levels only theoretical aspects but also inter- cies; every day, all this without official posi- national experience with regards to reg- to stay put, not to impose any regula- tion of state bodies regarding the use of ulatory “forks” which in general are the tion in the sector. cryptocurrencies and without legisla- following: Gradually it became clear that you can’t stay put, it is necessary to keep up with the times and ensure macroeco- nomic stability in the conditions of new Cryptocurrency market situation: trends. However it was difficult to de- market cap and number * fine regulatory terms due to a large number of related contradictions, some of which still remain. On the one hand cryptocurrencies and blockchain technology is on the agenda at the high level discussions, in- cluding G20 summits, on the other hand cryptocurrencies are losing value, the ICО investments decrease, and the Inter- net giants such as Google and Facebook ban ICO ads on their resources. History shows that all pioneer prod- ucts in the financial and economic sys- tem provoke ambivalence. Largescale in- novations bring largescale risks, for ex- ample the creation of the customary РMarket capitalization of all cryptocurrencies, $ bn bank notes was also accompanied by big Number of cryptocurrencies problems. As for the cryptocurrencies Data source: https://coinmarketcap.com/ the period of their top level prices has * Data valid for the first week of January of each year.

12 Erevan, the Republic of Armenia Expert seminar: “Cryptocurrencies: their place in the system October 23, 2018 of currency circulation and influence on macro economy”, Moscow, the Russian Federation, headquarters of EEC, December 18, 2017

probably passed confirming the predic- small countries, off-shore territories Today the dialogue on cryptocurren- tions about their temporary nature and try to take an advantage of these inno- cy and blockchain in the EAEU contin- at the same time their importance not as vations to attract foreign investments ues developing which confirms the need an instrument itself or an asset, but as creating quite liberal legislation; other for a common platform. This year the the key element of the new global social countries restrict cryptocurrencies Commission together with the member and economic reality being formed transactions to reduce risks and avoid states plans to establish a common these days. parallel channels of currency circula- framework for understanding terminol- The spurt that was seen signaled tion. ogy and regulatory principals in this that digital financial technologies bear area. A glossary, containing the main a huge untapped potential, and the What happens in the EAEU? definitions, will be adopted, that will countries realizing the effect of the sec- give an opportunity to discuss the topic tor on the economy arrived at the es- Towards macroeconomic sustainabil- of cryptocurrency and blockchain in the tablishment of the relevant regulation ity, one of the main tasks of the EEC is same language throughout the Union system. to promote a favorable economic envi- and the regulation approaches will be re- The previous year was marked by ronment, avoiding risks of divergence flected in the Commission’s recommen- the intense interest of governmental of regulator practices and working to- dation. All this will make the discussion bodies and international organizations wards convergence in conditions for ef- more systematic. to the search of the most suitable reg- fective business at any point of the Many other international organiza- ulatory means, and the experts agree Union. This has necessitated the full in- tions, not only the EEC, are working in on the need of further study of the volvement of the Commission in coop- this regard. Originally, the Commis- possibilities of the cryptocurrencies eration with the EAEU countries in the sion carried out its activities in this and blockchain regulation. Today it is field of cryptocurrency and blockchain area on the principal of openness to the most favorable time to gradually technology. the interaction with international ex- work out a strategy for such regulation The EEC has become the platform perts, including the OECD specialists. when the craze related to the private where member states are discussing this Cooperation on the EEC site with the cryptocurrencies has died out and the issue and developing the common ap- involvement of other international or- threat of a direct destabilization of the proaches. A series of joint events in var- ganizations is particularly important global financial system doesn’t come ious countries of the Union was held in order to correlate the approaches from them anymore. There is still no thereby to involve business representa- developed in the Union with those entrenched approach, countries are tives and experts from member states to currently being formulated in the only experimenting. For example the discussion. world.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 13 RSPP news

Form the speech of RSPP President A.Shokhin at the conference “Russia-US economic cooperation in turbu- lent times” at the Russian Business Week March 13, 2019 RUSSIA–US ECONOMIC COOPERATION IN TURBULENT TIMES: SUMMARY ON MARCH 13 WITHIN THE RUSSIAN BUSINESS WEEK ORGANIZED BY RSPP A JOINT CONFER- ENCE OF THE INTERNATIONAL DISCUSSION CLUB “VALDAI” AND RSPP WAS HELD WITH THE PARTICIPATION OF THE RUSSIAN-AMERICAN COUNCIL FOR BUSINESS COOPERATION. THE CON- FERENCE WELCOMED THE LEADERS OF THE LARGEST BUSINESS UNIONS FROM RUSSIA AND THE USA, REPRESENTATIVES OF BUSINESS AND STATE BODIES. THE PARTICIPANTS SUPPORTED MAXIMUM DE-POLITICIZATION OF BUSINESS COOPERATION, THE DEVELOPMENT OF ECONOM- IC RELATIONS ON A PRAGMATIC BASIS IN THOSE AREAS OF MUTUAL INTEREST WHERE THE CO- OPERATION IS OBVIOUSLY ADVANTAGEOUS. AFTER THE DISCUSSION THE PARTICIPANTS FORMED A NUMBER OF RECOMMENDATIONS TO PRESERVE THE ECONOMIC RELATIONS OF RUS- SIA AND THE USA AND TO PREVENT THEIR FURTHER DEGRADATION.

Despite the secondary role that eco- this diversification will take years to not resort to tit-for-tat measures in re- nomic ties have traditionally played in achieve. There is also an indirect nega- sponse to the U.S. sanctions (banning U.S.–Russia relations, as the confronta- tive dependence on U.S. extraterritorial supplies of Russian titanium alloys, rock- tion that has been raging since 2014 (and sanctions that is detrimental to Russia’s et engines, non-ferrous metals, etc.) is likely to continue for a long time to relations with third countries. seems completely justified. The coun- come) and the sanctions, the United Russia’s financial dependence on the try’s economic interests dictate that this States is and will remain an important United States is of particular impor- cooperation should continue. economic partner for Russia for the fore- tance. This dependence is a consequence Despite the sharp collapse of eco- seeable future. The true volume of trade of the fact that a significant part of Rus- nomic relations between Russia and the – and especially investment – ties could sia’s national wealth is made up of ex- United States in 2014–2015, on the be several times larger than official sta- ports, is denominated in dollars and is whole, they withstood the stress test of tistics indicate and it would appear that even stored in U.S. deposit accounts the confrontation and sanctions and in the United States is among Russia’s top (it was previously stored in the U.S. na- many ways have adapted to the deteri- five trade and economic partners (al- tional debt). What is more, in recent orating political situation. There was a though officially it is inth 6 place). years, Russia has become a part of the noticeable increase in trade turnover be- Russia’s substantial dependence on American technological platform and, tween the two countries in 2017 (by the United States in certain sectors of accordingly, the need to continue to use $4 billion, according to official statis- the economy (metallurgy, engineering, U.S. technologies. It is unlikely that Rus- tics), as well as an increase in the volume aviation, finance, ICT) persists, both in sia will be able to get away from either of accumulated U.S. investments in Rus- terms of exports and imports. It is diffi- quickly. What is more, Russia is still in- sia (by $1 billion according to the Central cult to curtail imports and exports en- terested in obtaining American tech- Bank of Russia). Russia’s accumulated in- tirely within a short period of time. nologies for the sake of modernizing the vestments in the United States occurred Gradual diversification is necessary. First economy and attracting capital from the one year earlier. The positive trend con- of all, this would involve reducing the United States. tinued in 2018. role of the U.S. dollar in settlements be- With partial exceptions in the nu- On the one hand, this indicated that tween Russia and third countries and clear sector, the mutually dependent re- the initial shock of 2014 has passed, and creating measures to protect Russia’s re- lationship between Russia and the Unit- the sanctions are now viewed by busi- lations with third countries from U.S. ed States is asymmetrical. In this regard, nesses in both countries as the norm. sanctions. With the understanding that the decision of the Russian leadership to While the adoption in the August 2017

14 A. Shokhin – President of the Russian Union of Industrialists and Entrepreneurs

of the Countering America’s Adversaries certain Russian products (titanium al- and “total” sanctions are not introduced Through Sanctions Act (CAATSA) in loys and rocket engines); against Russia. the United States means that the sanc- • The commercial attractiveness of op- Right now, we can say that there are tions will not be lifted any time soon, it erating on each other’s markets de- six main pillars of economic relations be- is understood that, in the absence of fur- spite the “toxicity” of Russian compa- tween Russia and the United States, ther sharp political escalation, it is un- nies and the Russian market brought which appear to be very stable: likely that “total” sanctions will be im- about by the sanctions; • The export to the United States of posed against Russia in the short term • The selective nature of U.S. sanc- Russian products that are important because of how important individual ar- tions, which (thus far) are not all-en- for the U.S. economy and/or the eas of economic cooperation with Russia compassing and cover a small num- economies of its key partners (alu- are for the United States, its allies and ber of sectors of the Russian econo- minium and non-ferrous metals, tita- the global economy as a whole. my and a range of U.S.–Russia eco- nium and titanium products, RD-180 On the other hand, the intensifica- nomic ties; rocket engines and nuclear fuel). tion of economic relations points to in- • Russia’s connectedness to the Ameri- • The import from the United States of creased confidence in the Russian econ- can technological platform; products that are important for the omy, a recognition of its stability, and it • The continuing attractiveness of the Russian economy (aircraft and air- reflects the country’s successful recovery U.S. domestic market and its financial craft parts, software, drilling rigs and from the economic recession of 2015– system, including for storing its gold turbines, medical devices and equip- 2016. The main factors for the sustain- and foreign currency reserves, the ment, pharmaceuticals). • The purely ability of U.S.–Russia relations are: preservation of the dollar as a world market-based cooperation between • Russia’s continued (for now) depend- reserve currency and the currency of the two countries (exports of Russian ence on the export of a range of prod- international settlements; oil products, crude oil and mineral ucts to the United States and EU • Russia’s integration into the global fi- products to the United States and im- countries and, consequently, the de- nancial system. ports of American motor vehicles, sire to avoid sanctions in this area They minimize the likelihood of a spare parts), which has thus far re- (primarily aluminium and non-fer- further dramatic decline in economic re- mained untouched by the sanctions. rous metals); lations between the United States and • The trade in services, which is deter- • The United States’ continued (for Russia, provided that the confrontation mined by market factors and does now) dependence on the import of does not escalate in the coming years not fall under the sanctions.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 15 RSPP news

tions, such as the Defending American Security from Kremlin Aggression Act (DASKAA) that was reintroduced into Congress in February 2019. However, tighter sanctions are more likely to be adopted in the event that the Ukrainian situation suddenly worsens or new crises emerge in U.S.–Russian relations. The likelihood of introducing “total” sanctions against Russia similar to those imposed against Iran is small given the size of the Russian economy and the de- gree to which it is integrated into the global economy. It is unlikely that the sanctions against Russia will remain at the current level, and the prospect of an easing of the sanctions is inconceivable at best. Deglobalization, one of the funda- mental trends of global economic devel- opment, will also have a negative impact on economic relations between Russia • The U.S. investment projects in Russia though these investments are gradu- and the United States. The crisis of the and Russian investment projects in ally declining; and U.S. capital plays international free trade regime, the the United States that are not subject a significant role on the Russian growing protectionism and mercantil- to sanctions. Investment cooperation stock market). ism in the foreign economic policy of the will likely continue at roughly the Not only will the U.S. sanctions United States and numerous other coun- same level in the short and medium against Russia not be lifted in the coming tries, the reshoring of industrial produc- term, that is, without any largescale years or even decades, they will most tion and the unpopularity of liberal for- fluctuations in either direction. probably be tightened. The most likely eign economic policies will reduce the • The intensive financial cooperation scenario is that they will be expanded political significance of integration into between Russia and the United gradually, affecting an ever-growing the global economy and interdepend- States: two thirds of Russian finan- number of companies, entrepreneurs ence. As a result, those factors that limit cial resources accumulated through and types of activity. We cannot rule out the introduction of much tougher sanc- exports continues to be held in U.S. the possibility of sharp, wave-live jumps tions against Russia today (the non-in- dollars in deposit accounts, al- in the qualitative tightening of sanc- troduction and ultimate lifting of Table 1. U.S.–Russia Trade Turnover in 2010–2018 ($ million) according to Official U.S. and Russian Statistics

January – U.S.–Russ 2010 2011 2012 2013 2014 2015 2016 2017 September 2018 Turnover 23 416,6 31 009,0 28 233,5 27 637,1 29 078,9 20 909,9 19 972,0 23 129,9 18 018,7 Federal Customs Service of Russia Turnover 31 787,0 43 068,0 40 201,0 38 326,0 34 497,0 23 526,0 20 327,7 24 019,9 20 855,9 U.S. Department of Commerce Exports from Russia 12 319,9 16 425,3 12 867,1 11 135,1 10 582,7 9456,4 9269,4 10 632,2 8610,8 to the U.S. Federal Customs Service of Russia Imports from Russia 25 713,0 34 652,0 29 398,0 27 120,0 23 689,0 16 388,0 14 536,1 17 021,4 15 885,7 to the U.S. U.S. Department of Commerce Imports from the 11 096,7 14 583,7 15 366,4 16 502,0 18 496,2 11 453,5 10 702,6 12 497,7 9407,9 U.S. to Russia Federal Customs Service of Russia Exports from 6074,0 8416,0 10 803,0 11 206,0 10 808,0 7138,0 5791,6 6998,5 4970,2 the U.S. to Russia U.S. Department of Commerce

Source: Federal Customs Service of Russia (FCS), www.customs.ru ; United States Census Bureau of the Unites States Department of Commerce https://www.census.gov/foreign-trade/balance/c4621.html

16 Table 2. U.S.–Russia Trade in Services in 2011–June 2018 ($ million) according to Official Russian Statistics January – January – U.S.–Russ 2011 2012 2013 2014 2015 2016 2017 June June 2017 2018

Turnover 9225,4 10 242,8 10 912,3 10 285,6 7696,3 7397,1 7657,1 3360,0 3 894,2

growth, +/– % – +11,0 +6,5 – 5,7 – 25,2 – 3,9 +3,5 +15,9

Exports 4366,9 4110,9 4275,1 3677,7 2774,9 3384,7 3566,5 1591,4 2 115,4

growth, +/– % – – 5,9 +4,0 – 14,0 – 24,5 +22,0 +5,4 +33,0

Imports 4858,5 6131,9 6637,2 6607,9 4921,4 4012,4 4090,7 1768,6 1 778,8

growth, +/– % – +26,2 +8,2 – 0,4 – 25,5 – 18,5 +2,0 – +0,6

Balance – 491,6 – 2021,0 – 2362,1 – 2930,2 – 2146,5 – 627,7 – 524,2 – 177,2 336,5

Source: Central Bank of the Russian Federation, https://www.cbr.ru the sanctions against RUSAL and En+ ing, and they are not likely to, so coop- and the disappearance of the interest on and the direct recommendation of the eration in these areas will persist. the part of the United States in Russian United States Secretary of the Treasury In the medium term (three to five energy, except as a competitor. At the to not impose sanctions on Russia’s na- years), economic relations between Rus- same time, market factors, the integra- tional debt) may no longer be taken into sia and the United States will either re- tion of Russia into global financial account in five to seven years’ time. main at the current level or gradually ta- processes and its belonging to the Amer- Against the backdrop of the con- per off. The latter scenario is the more ican technological platform will prevent frontation between the United States likely. We are unlikely to see sharp ups a further collapse in relations. and Russia and the further strengthen- and downs in trade and investment. A A further reduction in economic ties ing of the U.S. sanctions, economic re- number of factors will stand in the way is likely in the longer term (five to seven lations in strategically important sec- of an increase in their volumes: the sanc- years). U.S. dependence on Russian met- tors (aviation, space and, to a certain tions, the scale, quantity and severity of allurgical and mechanical engineering degree, mechanical engineering) will which will continue to grow in the com- (rocket engine) exports will either dis- be drastically reduced to the minimum ing years; the desire of both sides to re- appear by the end of that period or will necessary “core.” Each party will strive duce their dependence on each other in lose its current significance. The political to produce products and components strategic industries, the growing compe- significance of Russia’s integration into that are vital to their security inde- tition between the United States and the global finance system will also weak- pendently, or in cooperation with Russia on the markets of third countries; en in the context of the deglobalization friendly partners. This “shrinkage” will be targeted in nature and will not be characteristic of the general picture of economic relations between Russia and the United States as a whole. Due to objective market factors, many areas of U.S.–Russia trade and in- vestment relations that have not been af- fected by the sanctions, or have only been partially affected by them, will, from a commercial point of view, contin- ue to benefit both sides and will even be able to expand in the coming years, de- spite the sanctions and the political con- frontation. The sanctions affect an ever- smaller part of the palette of trade and economic relations between Russia and the United States, as they are focused primarily on the financial and energy sectors. The sanctions do not affect such areas as household goods, the fast food industry, public catering, the automo- tive industry and aircraft manufactur-

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 17 RSPP news

Table 3. Direct Investment: From the United States in Russia and from Russia in the United States in 2013–2018 ($ million). According to Official Russian Statistics

January – June U.S. direct investment 2013 2014 2015 2016 2017 in Russia and Russian 2018 investment in the United States From From From From From From From From From From From From the U.S. Russia the U.S. Russia the U.S. Russia the U.S. Russia the U.S. Russia the U.S. Russia Equity participation 306 1020 256 941 27 489 345 819 297 1055 289 201

Revenues reinvested 103 41 227 244 – 5 0 – 7 10 4 0 – 11 0

Debt instruments 76 – 322 225 468 187 330 63 43 194 – 929 – 21 107

Total incoming 485 739 708 1 653 209 819 401 872 495 126 258 308

Direct cumulative January – June 2013 2014 2015 2016 2017 investments of the United 2018 States in Russia and of Russia in the United From From From From From From From From From From From From States the U.S. Russia the U.S. Russia the U.S. Russia the U.S. Russia the U.S. Russia the U.S. Russia Equity participation 17 907 19 895 1969 5574 1461 5054 2307 5963 2413 6066 2729 6117

Debt instruments 72 1 048 – 283 1 002 – 125 1102 – 69 1256 728 999 571 1032

Total cumulative 17 979 20 943 1686 6576 1336 6156 2238 7219 3141 7065 3300 6117

Source: Central Bank of the Russian Federation, https://www.cbr.ru of the world economy and the spread of ability of Western markets and banks the opposite effect right now: they will economic nationalism. Today it still pre- that had built up over the past few be the ones telling U.S. lawmakers and vents the US from imposing the increas- decades has disappeared, and pro-West- the executive branch who else to impose ingly harsh sanctions; however, this is ern sentiments are fading. The most ef- sanctions against. The current non-pub- unlikely to be the case five to seven fective way to reduce Russia’s depend- lic activities of such structures as the years from now. The general sanctions ence -20- -21- on the U.S. sanctions is to American Chamber of Commerce, the regime will probably be far more strin- reduce the role of the U.S. dollar in Russian-American Business Council and gent than it is today. It is highly unlikely trade settlements with third countries the U.S.–Russia Business Council appear that the sanctions war will be over five and continue withdrawing Russian de- to be quite sufficient at present. to seven years from now. posits from American banks. It would be wise to create an infra- In the foreseeable future, economic It would make sense to continue co- structure that helps Russian and Ameri- relations between Russia and the United operation with the United States in can companies comply with the U.S. States will be dominated by indirect those areas that bring commercial bene- sanctions regimes and feel confident do- forms of cooperation that are not reflect- fits, are not considered to be a security ing business within the confines of them. ed in official statistics: trade and invest- threat and are not prohibited by sanc- Many private companies, particularly ments through third countries and in- tions, but with the understanding that small-scale operations, may be wary of vestments through offshore companies. this cooperation could “shrink” as an in- developing cooperation between Russia In these conditions, it would be op- direct consequence of the sanctions and the United States, despite its com- timal for Russia to take a selective ap- regime. In this regard, it is necessary to mercial viability, because of the sanc- proach to the developing its relations continue to develop alternatives. tions, even if their potential activities do with the United States. In the short It is necessary to depoliticize eco- not fall under sanctions and are unlikely term, the areas of cooperation where nomic relations with the United States to do so in the near future. In this regard, dependence on the United States is that remain and not position them as a it would be useful to have experts and most noticeable (ICT, the import of air- means of improving political relations. structures that could advise them on this craft, aircraft parts, medical devices and Otherwise, the U.S. leadership and polit- issue and, where necessary, help them pharmaceuticals) or which are impor- ical elite will view them as an obstacle present their activities in such a way that tant to the economy right now (the ex- and an irritant. Further attempts to in- they do not fall under restrictive meas- port of metallurgical products), should tensify economic cooperation “from ures (prepayments instead of loans, car- be preserved. At the same time, howev- above” in order to improve political re- rying out operations through third er, Russia should step up the diversifica- lations should be abandoned. Such ac- countries and partners, etc.). In the next tion of its economic ties, substitute a tions have not led to the desired result, decade, there will be greater demand for number of products that are imported and could be disastrous in current con- sanctions experts than for specialists in from the United States (or replace with ditions. Not only will the creation of var- WTO regulations and private interna- imports from other countries) or try to ious commissions and high-level groups tional law. localize their production by U.S. com- – and their public activities in particular Creating mechanisms to protect eco- panies operating in Russia. The sanc- – not convince the American political nomic relations with third countries tions had a sobering effect on the Russ- elite of the impracticability of imposing from the extraterritorial sanctions of the ian elites. The faith in the supreme reli- sanctions against Russia, they may have United States is an absolute priority. To

18 do this, interaction with major state- and preservation of nuclear energy coopera- (commercial launches, delivering crews quasi-state-owned enterprises in these tion; and harmonization of the rules of to the International Space Station and countries that are guided by govern- competition in the markets of third exporting RD-180 rocket engines until a ment impulses just as much as they are countries. replacement has been found) and a dia- by market factors needs to be built, and In the metallurgical industry, it logue on the development of a regulato- the country needs to move away from would be wise to maintain the current ry base for non-military space activities settlements in U.S. dollars in trade with level of cooperation and try to prevent should be initiated with the United these countries. This is particularly true the United States from imposing sanc- States. of Russia’s trade with China and India, tions against Russian metallurgical com- In terms of ICT, it would be wise to where settlements in U.S. dollars cur- panies, including through lobbying on encourage cooperation between Russian rently account for approximately 90 per the part of EU countries. According to and American IT companies, including cent of Russia’s exports and over 70 per experts, if such sanctions are introduced, working together in the markets of third cent of its imports. it is likely that the industry will have to countries, for example the former Soviet The United States remains a techno- be nationalized. countries. Mechanisms for offering legal logical leader and the centre of the glob- In mechanical engineering, it is im- assistance to Russian IT companies al financial system and will likely con- portant to maintain investment coop- should also be created in order to ensure tinue to be so for decades to come, or eration with American engineering compliance with the sanctions require- longer if it succeeds in crushing China companies, encourage them to localize ments and reduce the “toxicity” of these and forcing it to change its model of production in Russia in non-securi- companies in the United States. economic development. The “Trump tized sectors and sectors that have not Russia’s priority in the agro-industrial Revolution” is also likely to spur the de- been greatly affected by the sanctions complex is to reduce its dependence on velopment of the U.S. economy. In this (transport, auto manufacturing, ma- the import of American breeding mate- regard, Russia’s strategic economic inter- chine tool building, etc.) and expand rials, crop seeds, trout and salmon hatch- est in the United States remains un- the use of Russian-made components lings and seed potatoes. It would be changed: gaining access to capital and and materials. worthwhile to maintain cooperation in technologies; using cooperation with In the aviation sector, Russia needs to the food production and catering indus- the United States as an instrument to preserve cooperation with Boeing, both tries. modernize the country’s economy. in terms of importing aircraft, and in Russia’s dependence on imports of From a tactical point of view, this can- terms of delivering titanium parts to the American medical and pharmaceutical not be done while the confrontation be- United States. At the same time, the pro- products will probably continue in the tween the two countries persists and duction of a large number of compo- short term. Given the fact that a signifi- the United States desires to inflict a nents for Boings intended for the Russ- cant amount of the goods produced by geopolitical defeat on Russia. However, ian (and EAEU) market should be en- U.S. pharmaceutical companies are sup- cooperation in individual sectors is both couraged in Russia. At the same time, plied via third countries, the United possible and desirable. Russia should try and reduce its depend- States is the second largest supplier of Ignoring the major increase in U.S. in- ence on American components in the such goods to Russia. Russia’s priorities vestments into the Russian energy sector construction of aircraft (the Sukhoi Su- in this area include improving the invest- and cooperation in the development of perjet and the MC-21), taking advantage ment climate in order to attract Ameri- offshore fields, Russia’s main priorities of import substitution and cooperation can investments, localizing production with regard to the United States in this with other countries. To the extent that and stimulating exports of Russian phar- area in the current climate are: the joint it is possible, existing projects in the maceutical products. regulation of the world oil market; space industry should be maintained In the banking sector, it would be ad- visable to preserve the demand of U.S. portfolio investors for the financial lia- bilities of Russian banks and other seg- ments of the economy, thereby reducing the likelihood of even harsher financial sanctions being imposed against Russia. It is even more important to reduce the share of operations in U.S. dollars in for- eign trade settlements, primarily with the BRICS countries. One promising area of economic re- lations with the United States is the pro- vision by Russian specialists of remote services to American consumers with respect to the development of telerobot- ics and telepresence technologies. This primarily concerns health technologies (Russian physicians treating patients from the United States remotely) and education (Russian instructors teaching remotely at American universities), where Russian specialists are cheaper than their American counterparts yet equally competent.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 19 Founder’s page. FBA EAC

GENERAL MEETING OF FBA EAC MEMBERS

ON MARCH 6, 2019 IN MOSCOW IN THE HEADQUARTERS OF FINANCIAL & BANKING ASSOCI- ATION OF EURO-ASIAN COOPERATION ON 17 KOTELNICHESKAYA NAB. THE GENERAL MEET- ING OF THE MEMBERS OF THE ASSOCIATION WAS HELD TO HEAR REPORTS AND ELECT NEW OFFICIALS. THE AGENDA INCLUDED THE ACTIVITY OF ASSOCIATION DURING FIVE YEARS, GUIDELINES FOR 2019 AND FOR THE NEXT FIVE YEARS, ELECTION OF MANAGEMENT BODIES OF FBA EAC.

The Vice-President of FBA EAC Ana- sociation today is represented in 20 Alma Obaeva – CEO, NP “National toly Tkachuk opened the Meeting. He countries on Eurasia, and the recent Payment Council” welcomed the participants and pointed Meeting of Coordinating Council made Maria Serebrova – General Director of out that in the last five years Association a decision to open new FBA EAC repre- the Association of Customs Auditors has not only proved its feasibility but has sentative offices in Mongolia, Moldova, and Consultants (ATAiK) also grown in quantity and quality. After the Republic of Korea, Malta and Serbia. Vladimir Obydenov – Head of Antares that he gave the floor to the Chairman of The Meeting then welcomed the re- Group Companies Coordinating Council Alexander port of Konstantin Topornin, the Chair- Anatoly Kazakov – Advisor to the Of- Murychev. man of the Audit Commission, whose fice of the Chairman of the Executive In his speech A.Murychev dwelled report was approved and the work of Committee – CIS Executive Secre- upon the development of the structure Association was confirmed as satisfacto- tary, Chairman of the Coordination of FBA EAC, goals and strategic priori- ry. He reported about the work of the Council of CIS Financial and Banking ties. As a focus area of Association he Commission. Council named the development of effective fi- Pavel Nefidov – General Director of nancial instruments to meet the business After that the discussion of the re- CIS Financial and Banking Council needs of its members and partners. ports began. Every speaker told about Marat Baitokov – 1st Vice-President, Then the Vice-President and the business opportunities of the Associa- Chairman of the Executive Commit- Chairman of Coordinating Council pre- tion within his responsibilities. The re- tee of the Association of Banks of the sented FBA EAC Membership Diplomas ports included: Republic of Kazakhstan to new members of Association. Anatoly Tkachuk – FBA EAC Vice- After that the meeting proceeded to President; At the end of the General Meeting the agenda. Alexander Murychev – Chairman of the composition of managing bodies of The FBA EAC General Director Oleg Coordinating Council; FBA EAC was elected. After the voting Berezovoy spoke about the work of As- Andrey Bespalov – Chairman of Coor- it was unanimously decided to elect for sociation during the period from 2013 to dination Council of the Eurasian five years as the President of Association 2018 and about the most promising focus Center of Human Resources Bakhytbek Baiseitov (the Republic of areas. Andrey Lisitsyn – senior researcher of Kazakhstan), as Vice-Presidents - Ana- He pointed out that in 2013-2018 the the Institute of Industrial Policy and toly Tkachuk (Russia) and Kumar Association has grown in number, sever- Institutional Development of the Fi- Manish (India). The Chairman of the al international structures were created nancial University under the Gov- Supervisory Board was elected Timur such as the legal center, the customs and ernment of the Russian Federation Zhaksylykov (the Republic of Kaza- logistic center, the financial corporation, Vladislav Karasyuk – President of the khstan), the Chairman of Coordinating the human resources center, the infor- Eurasian Customs and Logistic Cen- Council - Alexander Murychev (Rus- mation and publishing center, contact- ter sia), the General Director - Oleg Bere- center, commodity exchange, consulting Igor Sinchyrin – Deputy Director of zovoy (Russia). The Meeting also decid- center. The General Director also re- SPC “Mashinoexpert” Ltd. ed on the composition of the Superviso- minded that due to a well-coordinated Roman Fadeev – Vice-President on fi- ry Board, the Coordinating Council and system of representative offices the As- nance of “Silk Way” UCE JSC the Audit Commission.

20 FINANCIAL & BANKING ASSOCIATION OF EURO-ASIAN COOPERATION: DYNAMIC GROWTH Oleg Berezovoy, General Director AND NEW FRONTIERS of FBA EAC

Five years have passed since the es- and methods of business and banks the participation of the French and tablishment of FBA EAC, and today cooperation, for innovative financial Russian companies, the Armenian-Chi- we can assert that its hallmark and instruments. nese project for the construction of a major advantage is that it unites not Summing up the results of FBA’s factory to produce electrical goods in only financial and banking structures work it is necessary to mention the proj- Armenia, the construction of vegetable on its platform, but also the players of ects which have contributed most to the storehouse in Tula, the Russian-Indian the real sector of economy from the Association’s development. project in the Tver region to grow and countries of Eurasia. FBA EAC has During these five years a “Bank of proceed flax. shifted from the traditional idea of a projects” of FBA EAC has been formed. Also worth mentioning are such proj- banking association as a structure The most part of the projects were prac- ects as the Universal Commodity Ex- which protects the professional inter- tical – like search for investors, business change “Silk Way”, the Eurasian Cus- ests of certain participants to the idea partners, coordination of multilateral toms and Logistics Holding Company, of a multi-level, client friendly system projects. The examples of international Digital platform of the Eurasian Eco- of interaction between business and cooperation of the recent years are the nomic Union, the European Union and banking society. The Association is project “VOLGA-BUS” for the produc- China “Digital Belt”, the Eurasian Hu- constantly searching for new forms tion of electro buses in Volgograd with man Resources Center.

One of the current activities of the solidate the intellectual and research ef- Association originated in the project of forts in HR sector policies, HR technolo- the Eurasian Human Resources Center gies and practices which have the con- (Center), created to provide the members tent and the accounting flexibility for and clients of the Association with up-to- corporate context to constantly develop date HR-services and qualified specialists. the companies. This goal is topical again Extending the project, an HR Develop- both for the Russian companies and for ment Center was created on the basis of the international labor market players in the Center together with the Council for the Eurasian space. Professional Qualification Development The Association incorporated a and the Eurasian Economic Commission. Qualification Assessment Center, with The competitive environment en- trained experts and branches in Erevan courages the companies to innovations and Bishkek having launched a net- which leads to changes in the manage- work of examination centers all ment models and the instruments of through EAEU. knowledge management. The qualifica- The head of the Eurasian Human Re- tion and competence of personnel de- sources Center today chairs a Work fine the price of a company, become group of the EAEU Business Council on more critical and expensive resource. the contingency of specialists’ qualifica- In order to overcome the current tions for different kinds of performance Andrey Bespalov, Head of the project market contradictions one needs to con- in the EAEU member-states.

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Vladislav Karasyuk, Head of the project Maria Serebrova, Head of section Vladimir Obydenov, Head of section

The Development concept of cus- eas as customs regulation, risk manage- operators the right to declare the goods toms audit on the EAEU territory, ap- ment, categorization of foreign trade op- in all national customs bodies in the proved at the FBA EAC General Meeting erators, follow-up control based on audit EAEU member-states. At the beginning in 2018 has grown into a pilot project to methods. it will allow the EEC to lay out the ap- be implemented on the platform of Thus the introduction of customs au- proaches to the future abolition of the Eurasian Customs and Logistics Holding dit in the EAEU will solve most hot “residence principle”. Company. A new program product of problems in the customs regulation and The customs audit can also become a the Association of Customs Auditors also will apply the obligatory interna- legitimate alternative to the inspection, and Consultants (ATAIK) has been cre- tional standard of WTO. mandatory for all operators who have ated and passed evaluation test. It was Following the customs audit the for- claimed the status of an Authorized Eco- worked out on the basis of a unique pro- eign trade operators with solid reputa- nomic Operator. While the audit finding priety methodology for customs audit. tion only are selected. These operators can confirm the financial soundness of a The effective system of interaction are defined as fair and can recon on the company according to Article 433 of the between customs – CIS (Customs Infor- removal of most risk profiles of their Customs Code of the EAEU. mation System) and the favorable cli- goods at the declaration stage, in other The nearest plan is to create a Work mate for foreign trade operators in 28 EU words to recon on the “green corridor”. group under the EEC or the EAEU Busi- countries was anticipated by the exten- Another contemplation at the EAEU ness Council involving all the parties sive use of customs audit in such key ar- level is the possibility to give to the fair concerned.

opportunities for business development The main goal of this project is to cre- were proposed to SME (for which this ate and develop a common financial and project was actually designed). economic, trade space in the EAEU and The Universal Commodity Exchange beyond. The project concept is to gener- “Silk Way” is a working structure on the ate an interaction system for the foreign FBA EAC platform. Obviously the main trade operators of the EAEU countries task of the “Silk Way” UCE is to ensure and financial institutes of these coun- the exchange space and provide to all in- tries through an exchange market. The terested players equal rights and oppor- intermediary of the process is the clear- tunities for their foreign trade activity, ing center of the “Silk Way” UCE in close for the expanding of the target market, cooperation with the “Bank Center faster settlements and lower transaction Credit” (the Republic of Kazakhstan). cost prices. The clearing center ensures settlements Due to synergetic effect from the within one working day between the ex- interaction of other FBA EAC projects, change players in six currencies (RUR, such as the Eurasian customs and logis- CNY, KZT, SOM, $, €). The players (buy- tic holding company and the Digital ers and sellers) have the opportunity to Belt, the “Silk Way” UCE is supposed nominate and pay for any commodity in Roman Fadeev, Head of the project to become an experimental platform any of these currencies. The exchange for exchange relationships between mechanism allows deals without limita- Within the pilot project of FBA EAC the traders within the Eurasian Eco- tions as to the jurisdiction of the players on the establishment of the Universal nomic Union and to unite the ad- and type of the exchange commodities. Commodity Exchange new settlement vanced technologies in logistics, cus- All trades are open, the information is instruments were worked out and of- toms, digital technologies and bank updated daily online on the exchange fered to the foreign trade operators, new settlements. website.

22 One more work stream was initiated dustries at the level of regional and in- by the needs of the participants of break- ternational programs, plans and proj- out sessions during the annual Moscow ects of rapid development. The Center International financial and economic fo- will provide services in such EAEU in- rum and resulted in the creation of a novative development areas as Center of innovative technologies of FBA telecommunication, finance and insur- EAC. It is designed to research the key ance, construction, transport, innova- economy industries and their growth tive production, agriculture, biotech- rates as well as to search and introduce nologies, new energy, health, ecology, advanced technologies and equipment knowledge. to the benefit of Association’s members The clients of the Center will im- and partners. prove their investment activity, engi- The Center will focus on the coordi- neering and innovative technologies in- nation, to the benefit of the EAEU, of troduction with regards to the use of sci- the innovative technological solutions, entific and technical potential of the their effective support, integration and EAEU countries and the existing inter- Igor Sinchyrin, Head of the project promotion within the development in- national platforms.

Another promising trend of the As- ed by standardization and automation sociation which emerged from the co- of business processes, a remote inter- operation between FBA EAC and the action between market players in or- National Payment Council is a Con- der to select and sell goods, work, cept of digital platform for the services with minimum expenses. It is Eurasian Economic Union, European supposed to be achieved by transpar- Union and China called “Digital Belt” ent information, collection of maxi- to be implemented up to 2022. The mum amount of demand and supply, project “Digital Belt” is a complex of effective settlements with minimum information and technological, organ- transaction expenses and conversion ization and legal mechanisms provid- costs.

Andrey Lisitsyn, Head of the project

An important project of the Associa- ed as a mass media in the Federal Service sociation has set a challenge to promote tion is the Moscow International finan- for Supervision of Communications, In- its website in the search engines of those cial and economic forum of FBA EAC. It formation Technology, and Mass Media. countries where FBA EAC has its repre- has become a benchmark for new focus The important role plays the Associa- sentative offices. One should mention areas: many projects and incentives ap- tion’s website – a unique mass media, a that promotion of the Association’s peared due to business communications brand identity of the organization. As- work and the discussion of crucial issues of its participants. During five years it saw about a thousand participants from 38 countries. In 2018 the Forum includ- ed the meeting of the International Banking Council. The Association was hosting banking unions from 18 coun- tries of Europe and Asia including such large associations-members to IBC as CIS and BACEE. Another traditional event of FBA EAC is now the competition “Financial and Banking Elite of Eurasia”. In the last two years the representatives of financial and banking sector from 11 countries were honored with awards. Worth mentioning is the information and promotion element of the Associa- tion’s work. This year the FBA EAC press organ – the magazine “Eurasian Finan- cial & Economic Herald” was incorporat-

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related to the financial and banking ing ceremony of the International public Moscow). The Association also was a co- sector of economy are also enhancing award “Financial and banking elite of organizer of international forums in Be- FBA’s business area and contribute to Eurasia”. 16 people from 11 countries pre- larus and Kyrgyzstan. closer cooperation between all the sented their pictures, the winners were At these meetings and round tables players involved into the development rewarded with certificates and money. more than 50 topical issues were dis- of economic relations on the territory Speaking about the staff of Associa- cussed as well as initiatives of organiza- of Eurasia. tion as a whole one should point out that tional and scientific and practical char- Another “brand identity” of Associa- in the past five years they have prepared acter, which concerned the cooperation tion is the international photo contest and carried out 13 meetings of Coordi- of companies-members to FBA, the “The world through the eyes of a pho- nating Council (two of them in Minsk work out of concept focus areas of Asso- tographer” announced by the editorial and Almaty), 4 meetings of Supervisory ciation, approval of pilot projects, busi- board of the Herald. The first wrap-up Board, 6 General Meetings, 12 round ta- ness cooperation with EEC on qualifica- took place last year during the reward- bles, 2 IBC meetings (in Minsk and tion assessment of labor migrants and creation of international network of HR services, integration of SME into the common exchange system of the EAEU space and introduction of multi-curren- cy clearing system. It should be stressed that the above- mentioned projects, the business trends that followed, and successful implemen- tation of many of them are not just local one-time achievements. It is the ground on which the work of FBA EAC will be developing further, because all these ar- eas are essential for the Association, each of them will be promoted covering ever larger scope of functions. That is why the recent General Meeting of the Association’s members approved these areas as priority for 2019. Their imple- mentation will sustainably develop the Association itself allowing to solve cru- cial tasks in the Eurasian economic space and to create ever more effective forms of cooperation between business and banking society.

24 On March 28–31 in Tashkent the In- ternational Financial and Banking Fo- rum of CIS member-states was held. The plenary session of the Forum involved the Chairman of FBA EAC Coordinating Council, Executive Vice-President of RSPP A. Murychev. In his speech he dwelled upon the de- velopment of the EAEU integration proj- ects proposed by the Russian part: “A net- work of wholesale distribution centers for the food and other products of the EAEU member-states”, “The creation of EAEU internet platform (EiUnion), “The creation of EAEU platform for SME – “We do business together”. Special attention is paid to the project “Money transfer between the citizens and organizations in the EAEU”. Promot- ing the economic cooperation between the EAEU countries the project implies a common system of instant money trans- fers within the EAEU. The main advan- tages of the system are the client-friendly INTERNATIONAL FINANCIAL payment scheme, the speed, the low AND BANKING FORUM cost, the precise credited amount in the local currency and autonomy from the OF CIS MEMBER-STATES international payment systems. Another issue on the agenda was the mutual settlements particularly with re- national currencies, and to be limited creation of the EAEU common payment gards to sanctions challenges. The EAEU only by the settlements within the unit as a necessary measure for easier payment unit is supposed to replace the EAEU member-states.

Anatoly Tkachuk, the FBA EAC Vice-President, RSPP Board Member took part in the conference within the Russian businessmen delegation. He attended business breakfast of the Minister of economic development of Russia Maksim Oreshkin and the Minister of economy of Kyrgyzstan Oleg Pankratov with the leaders of regions and companies. During his visit to Kyrgyzstan Ana- toly Tkachuk held negotiations and business meetings with the heads and representatives of the regions of Russia and Kyrgyzstan, with entrepreneurs, state and business structures, heads of several public unions. A lot was discussed at business meet- ings regarding the development of agri- culture in Russia and Kyrgyzstan, the im- provement of the investment and finan- RUSSIA—KYRGYZSTAN cial cooperation and the promotion of goods on the Russian and Kyrgyz mar- INTERREGIONAL CONFERENCE kets and the set of perspective focus areas to execute different business projects. On March 27-28 in Bishkek the 8th The President of the Kyrgyz Republic The results of the 8th Russia—Kyr- Russia—Kyrgyzstan Interregional Con- Sooronbay Jeenbekov and the President gyzstan Interregional Conference ‘To- ference ‘Towards New Horizons of of the Russian Federation Vladimir wards New Horizons of Strategic Part- Strategic Partnership and Integration’ Putin welcomed the plenary session and nership and Integration’ will be taken in- was held timed to coincide with Russian pointed out the importance of mutual to account in the work with Kyrgyzstan President Vladimir Putin’s state visit to relations, strategic partnership and inte- and other Eurasian countries within the Kyrgyzstan. gration of the two countries. activity of FBA EAC.

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On March 21 in the Financial Univer- sity under the Government of the Russ- ian Federation within the International science and methodology conference “Education Foresight: academic free- doms VS accreditation limits” the Gen- eral Meeting of the Financial Markets Association "Council for Professional Qualifications Development" and the meeting of CPQD were held. The General Director of CPQD D.Mashtakeeva pointed out that the most active work with the regions is carried out by the HR Development Center estab- lished together with FBA EAC to roll-out professional standards into the HR sys- tems of enterprises and organizations (the Director of FBA EAC QAC is A. Bespalov). The meeting was also informed about the signing of a trilateral agreement of CPQD with the Higher School of Eco- GENERAL MEETING OF THE FINANCIAL nomic and the Eurasian HR Center of FBA EAC on the program “HR Manage- MARKETS ASSOCIATION ment”. The agreement includes compre- hensive aspects of the employers’ switch fication recognition and the mobility of unanimously accepted FBA EAC as its to the professional standards, the cre- labor resources. member. The FBA EAC General Direc- ation of common labor market of the Summing up the General Meeting tor was re-elected to the Council for a EAEU member-states, the mutual quali- the Financial Markets Association new term.

Russian Business Week stressing that businessmen are still concerned about qualified human resources, administra- tive barriers, high level of fiscal burden. At the same time RSPP head mentioned “a few positive moments for business” of the previous year, for example the grad- uation of movable property from taxa- tion. Alexander Shokhin reminded that the “regulatory guillotine” should re- lieve business from the outdated govern- ment requirements and should reduce the number of regulatory authorities. The President of the Russian Federa- tion attended the plenary session of the congress. In his welcoming speech he pointed out that business is a direct and crucial player in the national projects and infrastructure development plans. Following the congress Vladimir Putin had a meeting with RSPP President Alexander Shokhin and members of RSPP Board gathering 29 representa- RSPP CONGRESS tives of large business, members of the Cabinet of Ministers and the Head of The Russian Union of Industrialists Premier – Minister of finance Anton the Central Bank of Russia Elvira and Entrepreneurs (RSPP) congress took Siluanov, Vice-Premier Dmitry Kozak, Nabuillina. place on March 14, 2019 during the XII heads of the Ministry of industry and The congress also saw the signing of Russian Business Week. trade and the Ministry of economic de- the Agreement of cooperation between The event gathered the representa- velopment Denis Manturov and Mak- RSPP and the Ministry of Construction tives of business unions, heads of con- sim Oreshkin, the Assistant to the Presi- Industry, Housing and Utilities Sector of stituents of the Russian Federation, dent Andrey Belousov. Russia; the Agreement of cooperation heads of the leading domestic compa- RSPP President Alexander Shokhin between RSPP, the Administration of nies and development institutes, mem- presented a report about the business cli- Smolensk region and the Science and In- bers of the government: the First Vice- mate in 2018 and the key results of the dustry Union of Smolensk.

26 Oleg Berezovoy, General Director of FBA EAC, also took part in the work of Forum. Chairman of the Board and Managing Partner KPMG in Russia and the CIS, Oleg Goshchansky, presented an analysis of the influence of geopolitical risks on business development in Eurasia. General Director of Interstate Development Corporation JSC, Ivan Polyakov, paid special attention to the trends of economic cooperation and consolidation of Eurasian business with countries of Southeast Asia. Ulf Schneider, Founder and General Director of SCHNEIDER GROUP, told about strate- gies, success factors and prospects for busi- EURASIA: SPACE FOR BUSINESS ness development in Eurasia. Xu Jingli, Head of the Representative Office of the AND COOPERATION China International Trade Promotion On March 13, 2019 within the frame- the Skolkovo Foundation and Chair- Committee, told about the strategies of work of Russian Business Week 2019 the man of the RSPP Committee on Inter- Chinese companies in Eurasia. Annual Forum of RSPP on the topic national Cooperation, spoke about how Following the discussion, the partici- “Eurasia: Space for Business and Cooper- business sees priorities for international pants of the Forum formulated a number ation” was held. cooperation in the region. The Forum of recommendations, aimed at improving The panel at the Forum was devoted was attended by representatives of the competitiveness of the Russian economy to the discussion of key global and re- authorities: Deputy Minister of Foreign and developing economic cooperation gional trends in the development of the Affairs of the Russian Federation with key partner countries. The partici- economy and business; the tasks that Alexander Pankin, Deputy Minister of pants stressed that the implementation of face business and government in order Industry and Trade of the Russian Fed- the strategic objectives of the develop- to achieve the goal of entering the tra- eration Alexey Grusdev, Deputy Minis- ment of Russia is practically impossible jectory of sustainable growth, to ensure ter of Economic Development of the without successfully solving a complex of growth rates higher than the world ones, Russian Federation Timur Maximov, foreign policy and foreign economic prob- and to be among the five largest Member of the Board (Minister) for do- lems directly related to ensuring sustain- economies in the world. mestic markets, informatization, infor- able economic growth in the region and Alexander Shokhin, President of mation and communication technolo- the world; business should contribute to RSPP, welcomed participants of the Fo- gies, Eurasian Economic Commission the development of bilateral and multilat- rum. Victor Vekselberg, President of Karine Minasyan. eral relations in the macroregion.

On February 27 the FBA EAC head- quarters welcomed the representatives MEETING WITH THE KOREAN of the Korean Institute of Industrial INSTITUTE OF INDUSTRIAL Technology (KITECH). KITECH is the only state scientific TECHNOLOGY and research institute in the South Ko- rea focused on the development and commercialization of industrial tech- nologies in order to support small and medium business. The FBA EAC General Director O. Berezovoy told the Korean colleagues about the main focus areas of the Associ- ation and gave several examples of suc- cessful projects, informed about the plans to open a Eurasian center of innovative technologies on the FBA EAC platform. The Director of KITECH, Doctor of Science, professor Taek-Soo Kim thanked for the information about the Association activity and expressed his interest in the cooperation with FBA EAC in several areas including the or- ganization of a session at the next Moscow international financial and eco- nomic forum “EAEU and EU: search for new formats of cooperation”.

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DIANA MASHTAKEEVA: “IN THE COMING YEARS THE RUSSIAN LABOR MARKET WILL TOTALLY SWITCH OVER TO PROFESSIONAL STANDARDS”

QUALIFIED PERSONNEL PLAY THE KEY ROLE IN THE STRUCTURAL CHANGES OF ECONOMY WHICH ARE THE CRUCIAL ELEMENT OF THE ECONOMIC DEVELOPMENT OF THE COUNTRY TODAY. THE DECREE OF THE PRESIDENT OF THE RUSSIAN FEDERATION DATED APRIL 16, ESTABLISHED THE PRESIDENTIAL NATIONAL COUNCIL FOR PROFESSIONAL QUALIFICATIONS. ONE OF THE MAIN TASKS WAS TO ROLL-OUT PROFESSIONAL STANDARDS IN ALL SECTOR OF THE RUSSIAN ECONOMY. IN 2015–2016 SEVERAL REGULATING DOCUMENTS WERE ADOPTED INCLUDING THE FEDERAL LAW # 238 “ON THE INDEPENDENT QUALIFICATION ASSESSMENT”. THESE DOCUMENTS COVER THE BASIC DEVELOPMENT PROCESSES OF THE SYSTEM OF PROFESSIONAL QUALIFICATIONS, THE PUBLIC ACCREDITATION OF EDUCATIONAL PROGRAMS AND THE INDEPENDENT QUALIFI- CATION ASSESSMENT. DIFFERENT QUALIFICATION COUNCILS FOR DIFFERENT PROFESSIONS WERE CREATED, INCLUD- ING THE COUNCIL FOR PROFESSIONAL QUALIFICATION DEVELOPMENT (CPQD). ITS TASK IS TO DEVELOP THE SYSTEM OF PROFESSIONAL QUALIFICATIONS ON THE FINANCIAL MARKET OF RUSSIA. VLADIMIR MIRONOV, THE OBSERVER OF THE PORTAL FINVERSIA.RU. TALKED TO DIANA MASHTAKEEVA, THE GENERAL DIRECTOR OF THE COUNCIL FOR PROFESSIONAL QUALIFICA- TION DEVELOPMENT.

- We know that finance is a multi-sec- – Yes, it does. In the Article 11 of the Fe- tion of the Central Bank of Russia. toral segment involving a lot of people. deral Law “On the independent quali- CPQD and CBR have signed an agre- And it is well known that starting fication assessment” the transition pe- ement on smooth transition to the insti- from July 1, 2019 old qualification cer- riod is regimented. From July, 2019 in tute of the independent qualification tificates of financial market specialists Russia other systems of assessment will assessment. will become invalid. Does it mean that become invalid – both non-mandatory What will this institute look like in a moment is coming when all people and those within sectoral mandatory the end? There are still a lot of que- employed in financial sector will have systems of qualifications. For example, stions under discussion with the regu- to take qualification exams again to financial market. The access to vacanci- lator according to an action plan. But confirm their competency? es here is regimented within the attesta- in general the system is as follows. To

28 fill a vacancy, a candidate must meet tions according to the rules approved at through the qualification assessment criteria of a qualification which is al- the governmental level. The task of the himself at his own expense. Or an em- ready specified in a professional stan- professional qualification councils is to ployer arranges the attestation of its dard. It means that the specialists sho- work out criteria of a professional stan- personnel at the expense of a compa- uld now think about a necessary edu- dard and a qualification. On the plat- ny. Thus a candidate should apply for cation level and job experience – these forms of QACs a relevant qualification qualification exam to his HR depart- parameters are also specified in the will be conferred. Of course we recom- ment and discuss the ways he can ac- professional standard. mend arranging the qualification exams hieve the level of qualification which In order to switch to the system of in- in advance. is specified in the professional stan- dependent qualification assessment the dard of his position. Decree of the President of the Russian – Who should take care about it? The Federation has establishes an institute of people themselves? Or the employers? - It turns out that many people must Qualification assessment centers (QACs). – There are two variants. And both of pass these exams within just six QACs are commercial structures which them are clearly specified in regulato- months. What will happen after July 1 will independently evaluate qualifica- ry documents. A candidate can go to those who don’t do it in time?

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– The system is very strict. There will be ee can charge the expenses to the inco- dent qualification assessment. Our inspections on the territory of an em- me tax refund. partners now are two main attestation ployer. He is the one who is responsible systems on the territory of the Great for the qualification of a worker in his – Does it concern only state-owned Britain: CIMA –The Chartered Institu- company. The moratorium on the rele- companies for now? te of Management Accountants and vant inspections valid until recently, has – Not really. There are three stages of a Institute of Certified Bookkeepers, been removed; the inspections are alrea- transition period. The first one as we Russian office of ICB-Global. It implies dy being carried out in different regions. have already discussed will start on Ju- that not only the Russian part shall Moreover there are first cases of fines for ly 1, 2019 when all other attestation sy- consider the international qualifica- the workers lacking qualification certifi- stems will become invalid. In January, tion criteria in its national system, but cates. 2020 we offer a transition to the system our national qualification certificates So our advice is pretty decisive: if you of independent qualification assess- will be recognized in Britain as valid to are a working specialist and want to stay ment to the state-owned companies fill a position. in a company you should discuss with and corporations with public owners- your HR how to achieve the qualifica- hip. We offer it to all such companies, – What professions are concerned? tion according to new rules. And anot- not only to mandatory attestations and – Accounting and internal audit. It was her variant is if you are looking for a job, mandatory access. It means that even the first block we worked on last year. then you are the one who is responsible. the qualifications of drivers and came- Now back to the results. This year the It is already common practice when can- ramen at All-Russian State Television Entry Level Qualification was adopted. didates confirm their qualification in and Radio Broadcasting Company will We said recently that one of the main QACs themselves. have to be brought into conformity tasks in 2018 was to shape the Entry Le- with criteria of professional standards. vel Qualification without high require- – How many people employed in the It concerns professions for which there ments to work experience and skills for financial market have passed these are such standards. And it should be the graduates, students and people of ot- exams so far? done throughout all positions by Janua- her professions. It’s a simple mechanism – Up to now a bit more than a thousand ry, 2020. to enter a profession. By the way in Bri- people have passed the qualification as- And the third stage of transition pe- tain specialists have the competence le- sessment. Is it a little or a lot? Well for the riod has no time limits yet. It is being vel equal to our 9-grade students. All the market on the whole it is not so much. discusses. It implies a total refusal from rest is achieved while working during At the same time we started to incorpo- managers, specialists and workforce the life. rate the QACs, so to say on a nationwide qualification reference book and from Another large project was executed basis, only in May, 2018. However even the Unified rating and skills guide for with VCIOM and the National Agency in the Summer, a holiday period, and in jobs and occupations of manual wor- for Qualification Development. We ha- the Autumn we saw people actively ta- kers and their replacement with the cri- ve worked out a method for labor mar- king exams. teria of professional standards. Today ket monitoring. We have managed to these books are an alternative acco- computerize all processes and now we – Do you fear a mess on the market in unting method in HR policy. Once they are collecting information from HR de- case thousands of experts don’t take are invalid all HR workers in all compa- partments and organizations about the the exams in time? nies will have to use only the criteria of list of qualifications demanded on the – I don’t. We have offered a relatively professional standards. The first para- market. It is also an important block of loyal transition period. We have ac- graph in the abovementioned books our work. The analysis of this data corded with CBR, Rosfinmonitoring which we have offered to remove rela- shows which qualifications are deman- and other specific federal legislative tes to the accounting. ded and which ones should be abolis- bodies that the current certificates hed or developed. We anticipate the will be valid for some time. But we – You have already said about the monitoring results to become the main can’t fully influence the situation sin- number of people who have passed the indicator for us during the allocation of ce we are not a controlling body. It is exams. What other results of CPQD state-financed openings in the institutes the Labor Inspection. We will carry can be marked for now? in different regions. out negotiations closer to July, 2019 if – This year was full of events. We have Another important task solved is we see that the market is facing as you advanced from the stage of infrastruc- the development of the method of say a mess. We will try to coordinate ture formation for the system of inde- public accreditation of education pro- with the Labor Inspection some de- pendent qualification assessment to grams (PAEP). We have agreed with lays of inspections. the stage of practice. We developed the Federal Service for Supervision in It is a crucial task for us – to arrange the infrastructure taking into account Education and Science (Rosobrnadzor) a smooth switch to a new system. Obvio- the requirements for people with disa- to sign an agreement on criteria recog- usly the current situation is that a full- bilities. We also developed internatio- nition while conducting the state ac- fledged infrastructure for the institute of nal cooperation. In particular we ac- creditation and PAEP. This will allow independent qualification assessment on hieved some results with the EAEU us to consider the results of state accre- a nationwide scale is not prepared yet. member-states in the conjunction of ditation in our procedures and vice Some territories don’t have QACs, many qualification criteria. Besides we beca- versa the state accreditation will consi- employers don’t have budgets for the me the first sectoral council on profes- der our results. Besides we have agreed process. Although one should mention sional qualifications to sign a large-sca- to carry out the state accreditation to- that the Tax Code implies tax preferen- le international agreement within the gether starting from 2019. It is a big step ces. Both the employer and the employ- framework of the system of indepen- in the development of the institute of

30 independent qualification assessment me we realize that without monitoring I would like to mention though that in general, and in particular it elimina- and control it will be impossible to en- we are working now on reducing the tes overlapping. sure adequate level of good faith, to price of the exams. For example on No- Regarding PAEP we have another guarantee the quality of this instru- vember 15 it was decided to give a disco- positive result. We have completed an ment both to the specialists and to em- unt to people with disabilities, students agreement with the Agency for Qua- ployers. and elderly people. The discount will be lity Assurance in Higher Education The law strictly specifies the proce- about 30%. Besides in Russia there is a re- and Career Development (AKKORK) dures of the professional exam. They solution on tariff regulation and now we which represents international stan- are also specified at the level of the Rus- are working on a reginal index which dards on the territory of Russia corres- sia’s government regulations. All pro- would allow to change the price of the ponding to the principles of Bologna cesses and procedures are strictly regi- professional exam depending on the lo- process. These principles imply the mented. From our side we have also cation. harmonization of the higher educa- worked out the system of monitoring tion systems of the European countri- very thoroughly. As I have already – What can you say about the plans es with the aim to create a common mentioned there will be permanent ter- of CPQD in 2019, what is on the European space of higher education. ritorial control services. Besides, the agenda? For example we harmonize the met- procedure implies video recording of – The agenda is the same: to update hods of international accreditation the exam. Moreover there will be an ap- the approved qualifications, to enlar- agencies on the standards. It means peal commission where any candidate ge the storage of assessment means that using our accreditation the edu- and employer have the right to file a and the key task – to ensure the infra- cation sector will get also the interna- complaint. This is something the man- structure and security of the profes- tional accreditation, which directly datory attestation of the mega-regula- sional exam procedure. We are taking influences the world ratings and pub- tor was lacking. sustained efforts to create an automa- lic accreditation. ted system for CPQD to work “digital- We have finally enlarged the num- – Two small practical questions. First, ly” with all counterparts, from the ber of experts all through the territory how not to fall into a trap of those candidates to the education sector. On of Russia. Today the number is almost QACs without an adequate level of go- a nationwide scale the system is anti- enough to launch the independent od faith? How to identify the “fair” cipated in February 2019. Its first par- qualification assessment on a nationwi- QAC? And second, how much does the ticipants will be QACs and CPQD ser- de scale. qualification assessment cost for a can- vices. This system will storage the re- We have also completed the esta- didate? sults of professional exams, informa- blishment of the internal audit servi- – All QACs were thoroughly selected. tion about updated assessment means, ces for CPQD. Now there are offices in There are correspondent registers of appeals, etc. the Russian regions which monitor the Ministry of Labor of Russia. All in- And we will also proceed with the and control the QACs. We have discus- formation is public and can be found improvement of the transition period sed with the federal executive bodies on the websites of the Ministry and procedures. We systematically meet that they will assign personnel to these CPQD and connected resources of with the representatives of the candi- offices to join the internal audit servi- QACs. All the information about the dates market, discuss the smooth ce. In particular they will deal with authorized QACs, the accredited ex- switch of the current attestation sy- QACs allowances and attestation pro- perts of these QACs (they also have the- stem to the independent qualification cedure. ir qualification level and corresponding assessment. Everyone will be engaged, status fixed in the national register) – we don’t set a task to create a totally – You have said that the infrastructure all this can be found in the official in- new instrument. Of course we aspire to for the independent qualification as- formation resources, which is an impor- automate the process but the main con- sessment has not been completed yet tant provision of the law. dition is to preserve the whole value of and is still being shaped. Is there a po- As for the price there is a calcula- the subject. ssibility for unfair, “commercialized” tion method. Its basis was suggested by At the same time in many cases the shell QACs at this stage which will at- the National Agency for Qualification procedure becomes more complicated tract people? Development. Today the minimum pri- because the current attestation doesn’t – Do you mean the sales of qualifica- ce of a professional exam is 7.5 tho- imply any practical part. While one of tion certificates? Let’s face it! In order usand Rubles, the average is 10 tho- the main goals of the reform and the to minimize this opportunity we mo- usand Rubles. switch to the independent qualifica- ve really slowly. Of course Russia is a There is a single tariff policy appro- tion assessment is to make it more very big country and it’s quite diffi- ved at the level of CPQD and specialized comprehensive and to have the possi- cult to monitor and control QACs commissions. The price of every profes- bilities to confirm not only academic from Moscow. sional exam is evaluated in accordance knowledge of a specialist but his prac- As for commercialization, all QACs with the approved method and with re- tical skills as well. The process automa- work on a commercial basis. It is stipu- gards to the level and complexity of the tion is supposed to include into the lated by the law and corresponds with qualification. In general the calculation exam procedure some program pro- the principle of independence provi- method is focused on the payment to ex- ducts applied by industries. For exam- ded for by payable procedures. A rele- perts who take part in the assessment ple, an accountant who wants to con- vant instrument was included in the procedure. So the higher the qualifica- firm qualification in payroll calcula- Federal Law “On independent qualifi- tion, the higher the experts’ fee and the tion will have to show his skills in the cation assessment”. But at the same ti- price of the exam are. program 1С.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 31 Russian Union of FINANCIAL & BANKING ASSOCIATION Industrialists and OF EURO-ASIAN COOPERATION EURASIAN Entrepreneurs ECONOMIC COMMISSION

VI MOSCOW INTERNATIONAL FINANCIAL AND ECONOMIC FORUM EURASIAN ECONOMIC 2019 UNION & EU: NOVEMBER SEARCH FOR NEW FORMATS OF COOPERATION

+7 495 663-02-08/13/19 [email protected], [email protected], [email protected] www.fbacs.com Founder’s page. IBC

INTERNATIONAL BANKING COUNCIL (IBC) IS THE CONSOLIDATION OF BANKING ASSOCIATIONS AND UNIONS OF 14 STATES INITIATED BY THE ASSOCIATION “RUSSIA” IN 2004. THIS WAS DONE TO STUDY THE EXPERIENCE OF THE BANKING ASSOCIATIONS OF CIS COUNTRIES AND EASTERN EUROPE AND CREATE CONDITIONS FOR THE BANKING COMMUNITY TO EXCHANGE INFORMA- TION, REGULARLY ANALYZE THE DYNAMICS OF THE DEVELOPMENT OF THE BANKING SECTORS OF STATES AND COORDINATE THEIR ACTIONS IN THE INTERESTS OF THE EFFECTIVE DEVELOP- MENT OF INTERSTATE ECONOMIC COOPERATION.

tion and development of financial Reference: technologies: problems, risks and secu-

rity”. International Banking Council (IBC) The meeting was attended by The International Coordinating Council of Banking Asso- leaders and representatives of bank- ciations is a public organization open to banking asso- ing associations of Armenia, Azerbai- ciations of all countries interested in cooperation. The jan, Serbia, Russia, Montenegro, Be- members of the IBC are banking associations of Be- larus, Bosnia and Herzegovina, Kaza- larus, Kazakhstan, Kyrgyzstan, Russia, Azerbaijan, Geor- khstan, Kyrgyzstan, Uzbekistan, gia, Serbia, Tajikistan, Uzbekistan, Ukraine, Moldova, Ar- Mongolia, as well as major banking menia, Montenegro, Bosnia and Herzegovina, as well as the Financial and Banking Council of the CIS, Banking associations - the Financial and Bank- Association for Central and Eastern Europe, Financial ing Council of the CIS, the Banking and Banking Association of Euro-Asian Cooperation. Association for Central and Eastern Currently, the International Banking Council includes 18 Europe and the Financial and Bank- organizations. ing Association of Euro-Asian Coop- The IBC is chaired by the Executive Vice-President of the eration, which hosted the event. In Russian Union of Industrialists and Entrepreneurs, the On November 30, 2018, an open this issue of Herald, a glance at the Chairman of the Coordination Council of the Financial meeting of the International Banking discussed problems will be presented and Banking Association of Euro-Asian Cooperation, Council was held in Moscow. The by materials from Azerbaijan and Alexander Murychev. main issue on the agenda was “Regula- Kyrgyzstan.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 33 Founder’s page. IBC

Anvar Abdraev, President of the Union KYRGYZSTAN: of the Banks of Kyrgyzstan

REGULATION AND DEVELOPMENT OF FINANCIAL TECHNOLOGIES: PROBLEMS, RISKS, SAFETY

Currently financial technologies took Today fintech is a sector of new tech- functions and create new solutions for up a strong position in the banking in- nologies and financial services, start-ups consumers. Modern financial technolo- dustry but the digital transformation of and the relevant infrastructure. In finan- gies occupy a growing part of manufac- the financial services market changed cial services sector the latest technolo- ture sector (retail, telecommunications, the financial environment of most coun- gies and tools are increasingly being ap- pharmacy, agriculture) and affect the in- tries. These are known facts. plied, it allows to efficiently carry out its surance, credit, accounting services, real

34 estate, asset management, investment, view of successfully achieving the ulti- stances. The risk of applying financial tax administration, etc. mate goal. technologies is commonly understood According to forecasts made by PwC The National bank of the Kyrgyz Re- as any likelihood of adverse conse- in 2016, by 2020 fintech can get 28 % of public developed a draft Regulation “On quences for users, financial services the banking services and payments mar- a special mode of introducing innova- providers and the economy as a whole, ket and up to 22 % of insurance, asset tive services/technologies in the banking connected with the use of financial tech- management and private capital man- services market of the Kyrgyz Republic” nologies under certain circumstances agement markets (PwC's report «Blurred in order to create conditions for the in- and in certain situations. Accordingly, lines: How FinTech is shaping Financial troduction of innovative services to the risks of applying financial technolo- Services», 2016). solve problems in the field financial gies can be divided into client risks (user Such changes are connected with depth, improve the efficiency of banking risks), provider risks and system risks the emergence of virtual currencies and and payment services. To implement this (risks of the economy and society as a virtual banks, the development of new regulation changes and additions are whole). You should consider the client financial technologies (blockchain, “Bug made to some legislative acts of the Kyr- risks system and determine the condi- data”), the appearance of new types of gyz Republic in order to empower the tions for managing these risks. online lending and online investment, National Bank to establish and regulate Risks of consumers of financial serv- the promotion of innovation in payment special regulatory regimes. Within this ices associated with the use of financial systems as well as the use of advanced context the National Bank prepared a technologies are divided into two large technical solutions (cloud technologies). draft law “On amendments to certain groups - direct and indirect. The emergence of new technologies legislative acts of the Kyrgyz Republic”. is caused by the needs of the current The purpose of fintech projects is Direct risks: generation who wants to get services in convenience (including lower prices, data theft; a digital form and at the same time re- easier access to the service, etc.) as well significant changes in the market sit- quires excluding the human factor. as safety of financial transactions. uation; Clearly, the development of fintech Currently much has been said about violation of uninterrupted provision depends on the volume of investments the benefits of financial technologies, of services; and on the readiness of the infrastruc- but risks of their use are not discussed so impossibility or significant difficulties ture. According to a KPMG research, actively. For example, consumers are in- in protecting the rights and legitimate the absolute record in terms of invest- formed about how fast the digital cur- interests of consumers; ment in fintech was reached in 2015. In rency rate is growing, how convenient it mislead consumers about a service 2016 investment in fintech in the USA is to carry out operations, how such op- provider. and Europe declined but in Asian erations are safe and anonymous but at countries it continued to grow (KPMG the same time they ignore the flaws in Indirect risks: report 2016). information security, the lack of legal application of financial technologies for the purpose of money and financ- ing of terrorism; Investment in fintech risks of regulatory arbitration (the difference in requirements abroad Territory Amount (billion US dollars) and in the country of the provider’s activities); 2014 2015 technological, organizational and le- gal obstacles.

USA 14,1 27,4 As noted the most important factor in the successful development of fintech is the possibility to manage these risks Europe 12,0 10,9 and therefore, in order to reduce them it is necessary to ensure: lack of legal vacuum; Asia 3,3 8,4 setting requirements for transparency of services; preventing the imposition of the use of remote services; The success of the development of guarantees in transactions with digital creating a system for identifying un- fintech in a single country depends currencies, high volatility. fair practices. largely on the state regulatory of this Therefore at the state level and in sphere. The international practice of sell- professional environment it is necessary The global trend on the creation of ing fintech products has shown that to make a separate discussion not only a new financial system increases the re- statutory regulation is one of the most about the advantages of financial tech- quirements for state regulatory organi- important practical issues since in some nologies but also about the risks associ- zations and the banking system. They cases it is necessary to make changes to ated with their introduction and devel- should provide consumers with the the existing regulatory framework. The opment as well as how to manage these maximum benefits, reducing risks of us- direct involvement of the regulator at risks. ing financial technologies as well as im- the decision-making stage in the devel- Risk is understood to mean the proving the financial literacy of con- opment of new technologies is funda- probability of negative consequences sumers of these services. mentally important from the point of from something under certain circum-

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 35 Founder’s page. IBC

AZERBAIJAN:

Zakir Nuriyev, President of Azerbaijan DIGITAL Banks Association TRANSFORMATION OF BANKING SYSTEM OF THE REPUBLIC OF AZERBAIJAN

36 Some time ago Azerbaijan started services consumers. The legal basis for The changes introduced by FIMSA systemic reforms of e-payments. These the issue and application of e-money - prioritize opening accounts with an reforms not only expand financial mar- one of the most popular payment in- accredited e-signature and with a kets and simplify payments between struments in the world practice to de- video-call. Besides a client who al- business units, but also provide for a safe velop e-commerce and draw different ready has an account can open anoth- and effective development of the coun- retail payments to non-cash transac- er one in the same bank using a special try’s economy in general. Deeper digital tions – will also be determined by this software of the bank. transformations in the banking system draft. To a larger extend one of the re- raise the level of application of the inno- The “Strategic road map on forms necessary in the e-payments sec- vative payment solutions and make the telecommunications and information tor is a formation of a system of com- e-payments an essential part of our technologies in the Republic of Azer- mon digital identification. Depending every-day life, enhance confidence of baijan” implies higher productivity and on the functional opportunities this the population in the e-payments. effectiveness of companies through ex- system is created basing on the infor- The country is also taking complex tended digital payments. To imple- mation about clients of different measures to develop a payment ecosys- ment this strategy the Central Bank has spheres of the financial sector. The tem and to speed up the digital transfor- prepared the “State development pro- Central Bank is taking steps to work mation in the banking system. Aiming to gram of digital payments in the Repub- out a system of digital identification reform different economy sectors in lic of Azerbaijan in 2018–2020” ap- with blockchain. At this stage the ten- 2016 according to the decree of the Pres- proved by the decree of the President der process is completed and the rele- ident of the Republic of Azerbaijan sev- of the Republic of Azerbaijan on Sep- vant work group is created. The system eral strategic road maps were adopted, tember 26, 2018. of digital identification will speed up including the ones focused on the appli- The strategic goal of the Program is digital identification in the banking cation of the advanced experience in the to develop non-cash payments between sector and will allow to introduce new financial services, telecommunications individuals, companies and state agen- technologies of remote opening of and information technologies. One of cies, to minimize the volume of cash in bank accounts. them is the “Strategic road map on the the turnover and as a result to strength- Another reform meant for deeper development of financial services in the en the financial resource base of the digital transformation in the banking Republic of Azerbaijan” approved by the banking sector. The main tasks of the system is amendments in to the “Guide- President’s Decree dd. 06.12.2016. It de- program are to improve the institutional lines of emission and application of plas- fines priority measures to improve finan- environment for e-payments, to create tic cards”. These amendments will pro- cial inclusion in the country, regulation effective measures for the banking sec- vide for innovative technologies on the mechanisms with the aim to speed up tor recovery, to shape a healthy digital market of plastic cards, improve the the digital transformation in the banking ecosystem, to raise financial awareness fraud combating measures in the sphere system, and to develop professional of the population and to develop e-ser- of e-payments, further consolidate the knowledge and skills of the financial vices. The anticipated result is better fis- rights of the users of e-services, ensure a markets players. cal discipline of business, transparent successful implementation of the token- Within the Strategic road map the corporate sector including cutting off project in the country and develop con- Financial Market Supervisory Author- fiscal avoidance, minimized “grey econ- tactless payment system. ity (FIMSA) of the Republic of Azerbai- omy”. Moreover anticipated is a lower Aiming to draw retail payments to jan aiming to increase access to the fi- volume of cash and thus lower expenses the non-cash turnover, to clearer define nancial services in the country and to on production, storage and transporta- the frames of identification procedures create an effective system of regulation tion of cash. and transactions, to raise the effective- and control of the non-bank providers To implement this Program the Cen- ness, the current limits on the prepaid of payment services and payment sys- tral Bank has launched an instant pay- cards were increased. In addition aiming tems operators has worked out a draft ments system. In line with the current at fraud combating in the sphere of pay- “On payment services and payment sys- network of ATM, POS-terminals and ment cards the project of amendments tems”. The draft shall classify the types self-service terminals the payment sys- includes the guidelines for the interac- of payment services, the rights and du- tem will be enhanced with cash registers tion between banks-acquirers and busi- ties of the providers, the economic, le- for businesses. nesses. gal and organizational basis for the es- Taking business steps to improve the According to the amendments the tablishment and work of payment insti- mechanism of regulation and ensure dig- banks-acquirers must reveal alert cases tutes, organizations of e-money and ital transformation in the financial sector in their service network and react swift- payment systems operators, and also it in late 2017 FIMSA carried out a general ly, including the cases of tampering in shall shape the main trends of the state assessment of the banking sector. The as- the work of ATM, POS-terminals and regulation and control over these or- sessment specified the main legislation other equipment. ganizations. reforms to be conducted for faster digi- In general the abovementioned re- Based on the international experi- tal transformation particularly in the forms and a number of other measures ence this draft will raise the efficiency bank system. carried out in digital transformation will and security of the payment services, For example an important step here allow to increase non-cash payments in create basic principles of the payment is to provide for a remote opening of the Republic of Azerbaijan to a new lev- systems, develop a form for retail pay- bank accounts. The current legislation el and to form a more competitive pay- ment processing and a legal basis for the requires personal attendance of a ment ecosystem in full accordance with regulation of the rights of the payment client when opening an account. the up-to-date requirements.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 37 Financial system of the countries of Eurasia GOVERNMENT SECURITIES — Republic of Serbia SAFE INVESTMENT

THE NEWS THAT THE GOVERNMENT OF SERBIA INTRODUCED A NEW TYPE OF GOVERN- MENT SECURITIES, I.E. SAVINGS BONDS, MADE US REFLECT ABOUT THE MAIN CHARAC- TERISTICS OF GOVERNMENT SECURITIES WHICH ARE, DESPITE THE BROAD RANGE OF LEGAL POSSIBILITIES, INSUFFICIENTLY PRESENT AT THE DOMESTIC MARKET, AS OP- POSED TO THE SECURITIES MARKETS IN DEVELOPED MARKET ECONOMIES CHARAC- TERIZED BY A LARGE NUMBER OF ISSUERS, WELL ORGANIZED INTERMEDIARIES, LONG MATURITIES AND DEEP TRUST ON THE PART OF INVESTORS.

38 Savings Bonds the foreign clearing house. These securi- ket. By investing into bonds the investor of the Republic of Serbia ties are disbursed upon maturity de- knows precisely when to count on a cer- Government securities in the form of fined by the issuance bylaw, although tain cash inflow. If the market is unfavor- savings bonds, recently issued for the disbursement is possible before maturity able, the investor can give up selling a first time by the Republic of Serbia, are if that option is specified by the men- share whose value is decreasing, al- aimed at financing the budget deficit tioned bylaw. It is possible for the Re- though it is also possible for him not to and refinancing the matured liabilities. public to purchase the securities before achieve any revenues from dividends The purpose of this form of borrowing is maturity provided that all investors are waiting for more favorable circum- pursuant to the Law on Public Debt granted this possibility. stances to happen. Investing into bonds, (LPD) adopted in 2005. It stipulates the The Decision on Issuing Savings the investor achieves the inflow from following types of borrowing as allowed: Bonds of the Republic of Serbia, pub- the interest that can be reinvested while financing the budget deficit and current lished on 10.11.2017, specifies their main he expects the return on the principal. liquidity deficit, financing the outstand- elements: the issued amount of 3 billion Bonds issued by entities certain to serv- ing debt, financing capital investments, RSD, i.e. 20 million EUR, with 2-, 3-, 5- ice their liabilities are awarded the so- acquisition of financial equipment, and and 10-year maturity, sales per piece in called “investment grade”, whereas those settlement of liabilities in respect of the nominal value of 2,000 RSD or 100 entailing higher risk are called junk granted guarantees. In our country in- EUR. Investors into savings bonds can bonds. Due to the uncertainty they im- vestment into government securities has only be resident citizens above 18 years ply, as a rule, they also entail higher rev- started to intensify since 2009, which is of age, with the maximum purchase of enues and higher interest rates. when their mass sales began as well. 5,000 pieces of dinar or 500 pieces of eu- The bond ratings are published by In addition to government securities, ro savings bonds per issuance and per the worldwide specialized agencies like: according to the issuer, there are also maturity. The accession period for pur- Moody’s, S&P and Fitch. More precisely, municipal, corporate, mortgage and chasing these savings bonds lasted from they provide two different types of a supranational securities (i.e. securities is- 20 November until 18 December 2017. country’s credit rating: issuer’s rating and sued by foreign states). However, gov- The distribution of savings bonds is con- debt securities rating. Credit rating agen- ernment securities are treated as the ducted according to the priority princi- cies have a major impact on the financial safest ones since the state usually honors ple - the priority was on the part of in- market since both investors and issuers its liabilities. Given that they incur the vestors who first applied for the pur- closely monitor their ratings. The rating lowest risk, as a rule, these securities also chase. Savings bonds, issued in the name of an issuer or a bond affects the cost of entail the lowest rate of return for their of the bearer, in non-material form, and borrowing for the issuer. The rating owners, i.e. they get the lowest interest registered with the Central Securities awarded to a country influences the compared with the securities by other is- Depository and Clearing House, were credit ratings of other issuers seated in suers. Government securities can be is- purchased via the business network of that country. sued by: the Republic, an autonomous the Postal Savings Bank in the form of Domestic Experience So Far province, local self-governments, legal bonds with the annual coupon disburse- We resorted to the Belgrade Stock entities using budget funds, and organi- ment. The coupons mature on 27 De- Exchange data, trying to learn more zations of mandatory social insurance. cember 2019, 2020, 2022 and 2027. about the experiences in trading govern- Government securities can be short- Investors, i.e. the legal holders of sav- ment securities in Serbia. Total turnover term and long-term (when the repay- ings bonds, pursuant to Article 40đ of in respect of securities of the Republic of ment period extends to the subsequent the Decree on General Terms and Con- Serbia at the Belgrade Stock Exchange budget years). Their issuance takes place ditions for Issuing and Selling Govern- in the past fourteen and a half years within the limits prescribed by the law ment Securities, may file a Request for amounted to 1.1 billion EUR. The largest regulating the budget of the Republic. Premature Disbursement of Savings share of bonds of the Republic of Serbia Such securities can be purchased by all Bonds of the RS at the primary market in total Stock Exchange trade was domestic legal entities and natural per- after 12 months since the issuance date, recorded in 2015, when these securities sons, and by foreign legal entities and except in the case of a serious illness accounted for 23.73% in total turnover. natural persons under the conditions when it is allowed to file this request The highest annual turnover of these prescribed by the Government of the RS even sooner. Premature disbursement bonds was achieved in 2007, amounting (LPS, Article 27). incurs the calculation of fees. to 207 million EUR. The biggest number The decision on issuing long-term Government securities, either in di- of transactions in the Stock Exchange government securities is passed by the nars or in euros, including savings trade was recorded in 2003, when there Government of the Republic of Serbia, bonds, are tax exempt, which is another were 82.81 thousand transactions. The which may borrow in the country and advantage of theirs. Namely, there are average size of transactions has been in- abroad, in both domestic and foreign three main advantages of purchasing creasing over the years. In the first three currencies. When it comes to the is- government securities: years of the Stock Exchange trading the suance of short-term government secu- 1. Low credit risk; average size of an individual transaction rities, the borrowing is exclusively in do- 2. Higher earnings than from saving in ranged from 1,000 to 2,000 EUR, where- mestic currency. The clearing and settle- banks; as in the period from 2014 until May ment of government securities issued at 3. Exemption from taxes. 2016 the average transaction size rose to the domestic market is conducted by It is a generally accepted view that several dozen thousand euros. the Central Securities Depository and bonds are less exposed to risk than For investors, evidently enough, gov- Clearing House, whereas the Minister of shares, meaning that when funds are in- ernment securities in dinars are most at- Finance makes the decision about the vested into shares the investor is directly tractive. These are the securities whose clearing and settlement in the primary exposed to both failures and successes of disbursement is guaranteed by the Gov- issuance of the government securities the issuer (state, company, etc.), as well ernment of Serbia, and which achieved tradable at foreign markets, and chooses as to the overall conditions at the mar- the turnover of 271.7 million EUR in the

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 39 Financial system of the countries of Eurasia

Table 1 Main Characteristics of Savings Bonds of the Republic of Serbia

CURRENCY Maturity Maturity Elements (in years) date DINAR EURO

2 27 December 2019 Issuance volume: 3.000.000.000 20.000.000

Coupon rate: 4.000% 1.000%

Premature repayment after 12 months after 12 months

Coupon rate for premature 3.000% 0.500% repayment:

3 27 December 2020 Issuance volume: 3.000.000.000 20.000.000

Coupon rate: after 18 months after 18 months

Premature repayment 4.500% 1.750%

Coupon rate for premature 3.500% 1.000% repayment:

5 27 December 2022 Issuance volume: 3.000.000.000 20.000.000

Coupon rate: 5.250% 2.500%

Premature repayment after 30 months after 30 months

Coupon rate for premature 4.000% 1.750% repayment:

10 27 December 2027 Issuance volume: 3.000.000.000 20.000.000

Coupon rate: 6.250% 4.000%

Premature repayment after 60 months after 60 months

Coupon rate for premature 5.500% 2.750% repayment:

Nominal value of a savings bond 2.000 RSD 100 EUR

Maximum number of savings bonds per investor, 5.000 pieces 500 pieces issuance and maturity

Coupon rate for premature repayment in the case 12 months ≤ deadline: 12 months ≤ deadline: of a serious illness 2.750% 0.250%

12 months < deadline 12 months < deadline ≤ 18 months: 3.250% ≤ 18 months: 0.750%

18 months < deadline 18 months < deadline ≤ 30 months: 3.750% ≤ 30 months: 1.500%

30 months < deadline 30 months < deadline ≤ 60 months: 5.000% ≤ 60 months: 2.500%

* The coupons’ maturity date is 27 December. The coupons are disbursed annually until the savings bonds’ maturity. Source: Public call for the purchase of savings bonds of the Republic of Serbia, Public Debt Administration, Ministry of Finance of the Republic of Serbia first eight months of 2017. This amount capital market of Serbia. In the first most traded ones. These are the three- accounts for as much as 85% of the eight months of 2017 at the domestic year dinar bonds maturing for disburse- turnover achieved in the same period in capital market the government securi- ment in early March 2018, whose total respect of all securities traded on the ties of the series RSO15105 were the turnover amounted to over 8.6 billion

40 Table 2 The review of the current credit rat- Credit rating of the neighboring countries in the category ings for long-term FX borrowing of the of long-term borrowing Republic of Serbia provided by the cred- it rating agencies: Rating agency – Credit rating Country for long-term borrowing Eurozone Interest rates on government securi- S&P Fitch Ratings Moody’s ties in the Eurozone have been low for Serbia BB BB Ba3 quite some time, because the central banks purchase government securities Bosnia and Herzegovina B – B3 from investors in the effort to boost Montenegro B+ – B1 economic growth by injecting higher liquidity. The European Central Bank Macedonia BB– BB – cut the key interest rates to zero per- Bulgaria BBB– BBB Baa2 cent and launched a major securities purchase program, aiming to recover Romania BBB– BBB– Baa3 the Eurozone economy and increase inflation. Hungary BBB– BBB– Baa3 In mid-2017 it was published that, Croatia BB BB Ba2 in the period from 2012 to 2016, the European Central Bank (ECB) earned Source: Bloomberg 7.8 billion EUR from interest on Greek bonds which it had purchased to sup- Table 3 port the recovery of this country’s Credit rating of the parent countries fragile economy. Mario Draghi, Presi- of banks operating in the Republic of Serbia dent of the ECB, explained that these bonds were obtained as part of the Bank’s asset-backed securities pur- Rating agency – Credit rating for long-term borrowing chase program, and that the achieved Country S&P Fitch Ratings Moody’s profit was distributed among the cen- Foreign Domestic Foreign Domestic Foreign Domestic tral banks of the 19 Eurozone coun- currency currency currency currency currency currency tries. The program was launched at the beginning of the Eurozone debt Austria AA+ AA+ AA+ AA+ Aa1 Aa1 crisis in 2010, in order to mitigate the Greece B– B– B– B– Caa2 Caa2 market pressures to the member states’ borrowing, and it preceded the Italy BBB BBB BBB BBB Baa2 Baa2 more ambitious securities purchase program, called quantitative easing - Hungary BBB- BBB- BBB- BBB- Baa3 Baa3 QE, launched by the EBC in 2015. So Germany AAA AAA AAA AAA Aaa Aaa far, the European creditors and the IMF jointly participated in the three Russia BB+ BBB– BBB- BBB– Ba1 Ba1 programs of financial support to USA AA+ AA+ AAA AAA Aaa Aaa Greece, their total value exceeding 240 billion EUR. Germany participat- Slovenia A+ A+ A– A– Baa1 Baa1 ed in these programs with the largest funds, having provided 30% of the to- France AA AA AA AA Aa2 Aa2 tal amount. Норвегия AAA AAA AAA AAA Aaa Aaa With reference to the profit based on purchasing the Greek debt, in mid- Turkey BB BB+ BB+ BBB– Ba1 Ba1 2017 the Münich journal, Die Deutsche Zeitung, published that Ger- UAE – – – – Aa2 Aa2 many had earned 1.34 billion EUR China A+ A+ A+ A+ A1 A1 from new loans and purchased securi- ties used to save Greece from the fi- Czech Republic AA AA A+ A+ A1 A1 nancial ruin. The journal further elab- Source: Bloomberg orates that Germany achieved the biggest profit by purchasing QE bonds in order to help the countries affected RSD. The second and third most traded currencies. The first credit rating B+ (sta- by the financial crisis, including bonds are the dinar bonds maturing in ble prospects) was awarded to Serbia by Greece. The mentioned 1.34 billion April 2018. S&P on 1 November 2004. The Fitch rat- EUR are only a part of the profit ac- Republic of Serbia cooperates with ing agency was hired in 2005, when it quired by Germany in the past years the rating agencies S&P, Moody’s and awarded rating B- (stable prospects) to of the financial crisis in Greece and Fitch, which assess its credit rating in re- Serbia, whereas Moody’s awarded it its the entire Eurozone. The Leibniz In- spect of short-term and long-term bor- first rating B1 (stable prospects) in July stitute for Economic Studies in rowing, in both domestic and foreign 2013. Münich, based on its research results,

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 41 Financial system of the countries of Eurasia

concluded that Germany obviously Another “first” in relation to govern- tia almost has no foreign investors at all. benefited from the Greek crisis. ment securities happened in France. In November 2016 the revenues on gov- “Every time in the recent years when Namely, the first issuance of green gov- ernment securities in these three coun- the financial markets faced some bad ernment bonds started in France in early tries surged, whereas in Croatia they news from Greece, the interest rates 2017. Thus, France became the second continued to decline until the Agrokor on the German government securities country, after Poland, to issue govern- crisis in April 2017. The drop in rev- dropped, and every time there was ment securities for the purpose of fi- enues on the Croatian securities has re- some good news, the revenues in- nancing environmental protection proj- cently been affected by the improved creased.” The profit on these securities ects. They differ from the classic bonds fiscal and economic results, lower expo- was earned by other countries as well, in that they are used to finance specific sure of the investors to the Croatian se- including the USA, France and the green investments without incurring curities, better risk perception, the Netherlands, but not to such an ex- any additional risks for the investors. somewhat lower need for financing in tent as Germany. Two years ago, the The announcement that France will be 2018 and 2019, as well as the fairly Leibniz Institute disclosed that Ger- the first country to issue green bonds stronger development of the long-term many had earned about 100 billion was released by its Government at the yield curve, which in July 2017 resulted EUR from lower interest rates on secu- Conference on Energy Transition, in in the issuance of the domestic bond rities issued by the Government at the April 2016. However, Poland was quick- with the 15-year maturity. time they were in high demand, be- er, and issued green government bonds cause foreign investors considered worth 750 million EUR. Norwegian Oil Fund as the them a safe haven, as opposed to other Also interesting to examine are the Leader among the Government Eurozone countries. experiences in trading government secu- Securities Owners rities in our two When it comes to foreign investors, it neighboring coun- is interesting to mention the largest in- Reference tries. In February vestment fund in the world, i.e. the Nor- 2017, the citizens of wegian Oil Fund, whose decision to sell Hungary invested the securities of 23 worldwide countries, Five-Year Greek Bonds about 30 billion in mid-September 2017, came as a big In July 2017, the Government of the forints (100 million surprise for the international financial Greek Prime Minister, Alexis Tsipras, an- EUR) of their sav- markets, causing just as much apprehen- ings into govern- sion that this might strike a blow to the nounced that, after a three-year pause, the ment securities global debt market. sale of the five-year Greek bonds was suc- thanks to the high The letter by Norges Bank, under cessfully completed. These bonds were revenues these secu- whose jurisdiction the management of worth three billion euros, with the interest rities offered. The this fund is, suggests that the Oil Fund citizens now own in the future invests only into the gov- rate of 4.625%. This was substantially the Hungarian debt ernment and corporate securities de- lower than the previous issue of bonds securities in the to- nominated in the euro, US dollar and from 2014, when the interest rate was tal value of 776.2 bil- British pound. Currently, the Oil Fund lion forints, which is manages 987 billion USD of assets, one 4.95%. The government representatives the highest amount third of which is invested in securities. stated that this market comeback con- in the past two and Norges Bank elaborates on this propos- firmed the positive developments in the a half years. Accord- al in the following way: “In the long ing to the data of run, the profit from a wide interna- Greek economy, marking the first stage of the Government tional diversification is significant for exiting the crisis. Debt Management shares, and moderate for bonds. For an Agency (AKK), investor whose 70% of assets is invest- each segment of the ed into shares, the reduction of the di- government debt versification risk through investments Germany is one of the three Euro- securities owned by the citizens has into a large number of currencies is zone countries with the highest AAA been recording considerable growth. negligible.” If this proposal gets ap- credit rating. In the middle of the last The government’s advertising campaign proved by the Government, this does year, for the first time, Germany sold its has obviously been fruitful although the not mean that the Fund immediately government securities, worth over 4 bil- high revenues, in some cases exceeding starts to sell off its securities, however, lion EUR, with the negative interest rate the inflation rates by as much as five per- the analysts believe that other in- of -0.05% and the repayment deadline of centage points, largely contributed to vestors could follow the Oil Fund, 10 years. Unusually enough, for the first such results. Last summer the Govern- which could, due to its size, have time the investors accepted the negative ment gave the citizens a chance for new smaller or bigger consequences for the interest rates and will be paying for the investments into debt securities with Japanese yen, Swiss franc, Canadian privilege of owning the German securi- shorter repayment deadlines. Foreign in- dollar and the currencies of some oth- ties. In general, the German bonds are vestors, primarily American funds and er countries. taken to be the benchmark at the debt banks, are present at the government se- Those well versed in investment markets, and are considered the safest curities markets in Hungary, Poland and funds management consider the Oil investments at the financial markets, es- Romania, their share ranging from 20 to Fund’s decision understandable, given pecially given the apprehension sur- 30 percent. the expected growth of inflation in the rounding Brexit and the impact of other As opposed to Hungary, Poland and developing countries, and the fact that economic afflictions. Romania, the securities market in Croa- this Fund primarily deals with long-term

42 Date of issue – 01.07.1881, nominal value – 100 dinars, country of issuance – Serbia. Date of issue – 01.06.1931, nominal value – 1000 French francs, Bond issued by the Minister of Finance country of issuance – Yugoslavia. Bond issued by the Ministry of Finance of Yugoslavia

Date of issue – 3/15.06.1888, nominal value – 10 dinars gold, country of issuance –Serbia. Bond issued by the Minister of Finance

Date of issue – 01.07.1910, nominal value – 500 francs, country of is- suance – Serbia. Date of issue – 1922, nominal value – 1000 dollars, country of is- Bond issued by Land suance – the USA (Loan issued to the Kingdom of Serbia, Croatia Loan Bank of the King- and Slovenia). dom of Serbia Bond issued by Chase National Bank of the city of New York

Nominal value – 100 dinars, country of issuance – Bosnia and Herzegovina. Bond issued by the Minister of Finance

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 43 From private collections Financial system of the countries of Eurasia

Reference amount of about 82 million RSD, and ten-year bonds, in the amount of 76 million RSD. Although these bonds ar- What are Bonds? rived at the right time, given that the bank interest rates on classic savings have never been lower, these data lead Savings bonds are long-term, coupon-based securities to the conclusion that the results of the first sale have not shown a particularly with two-year or longer maturity, which can be purchased prominent interest on the part of the only by resident citizens above 18 years of age. They guar- citizens. Therefore, it is necessary to provide antee the annual disbursement of interest to the investor, a stronger marketing support for the is- within the previously specified periods until maturity, as suance of these savings bonds, while the state and its financial institutions inform well as the disbursement of the nominal value of bonds upon the public into more detail, educating maturity date. the citizens about the business princi- ples and safety of profit acquired through such securities trading. More- over, as underlined by the relevant ex- perts, the biggest drawback of these fi- investments wishing to avoid the men- of 80 million EUR, the most wanted nancial instruments is the lack of the tioned risks. It has been assumed that ones were those with ten-year maturi- secondary market and the consequent the process of selling the government ty, sold in the value of 10.6 million inability of reselling, which might be a securities will go slowly, since this is in EUR, and the least wanted were the big problem for ten-year bonds especial- the Fund’s interest, because otherwise two-year bonds, subscribed in the ly. The motivation for the state to perse- the decreased value of securities would amount of 924 thousand EUR. The vere in these intentions is clear, if we imply that their owner has no other state expected the sale of dinar bonds bear in mind that the issuance of gov- choice but to sell a part of them at a in the value of 12 billion RSD, whereas ernment securities is a method of fi- lower price. the citizens purchased them in the nancing typically used by the develop- amount of only 195.7 million RSD. Evi- ing countries, since it facilitates the in- Results of the Serbian Savings dently, the most interesting were the flow of the highly needed capital into Bonds Sale euro-denominated securities, along the economy, at the same time provid- Finally, let us go back to the savings with the bonds with the highest annual ing substantial profit to the investors at bonds of the Republic of Serbia, for yield, and those with the longest matu- the lowest possible risk estimated for whose purchase the citizens were able rity. When it comes to dinar bonds, the the concerned country, while the indi- to pay funds incurring no fees by 18 largest amounts were purchased in the rect effects for a developing economy December 2017 at the special counters category of five-year bonds, in the can be even more significant. in all branches of the Postal Savings Bank. Other than payment, these coun- ters enabled the citizens to complete Reference all other required procedures, such as opening the account on which the money is to be paid, and the account The Purpose of Issuing Savings Bonds with the Equity Fund for the purpose of registering the ownership over the purchased bonds. This time the state The Republic of Serbia, with a view to encouraging the acknowledged the criticism accompa- dinar savings of its citizens, introduces a new form of nying the issuance of government secu- rities, wishing to simplify the proce- long-term securities, i.e. savings bonds. The development dures of their purchase, thereby at- of the new segment of government securities is aimed at tracting a larger number of interested citizens. To this end, some technical increasing the trust of domestic investors and the share of simplifications were introduced: to domestic sources of finance in financing the budgetary own these securities, one does not need to go to a broker, the buyers of needs of the Republic of Serbia. long-term securities were granted the Investing into savings bonds is the safest investment for option of premature collection, and for the first time one Serbian bond got in- the citizens of the Republic of Serbia because the disburse- surance elements, because in the case ment in respect of these bonds is fully guaranteed by the of a serious illness, its owner can with- state. Savings bonds enable the citizens of the Republic of draw the invested funds with a part of the interest. Serbia to invest into government securities without any During the first sale realized on 27 mediation costs, and to gain profit without any risk. December 2017, the citizens purchased the bonds worth 17.5 million EUR. Among the bonds issued in the amount

44

Financial system of the countries of Eurasia

BLOCKCHAIN AND THE BANKING SECTOR OF THE REPUBLIC OF MALTA

46 Introducing a recently-published nologies and products, and therefore the Consultation Document on the Maltese consideration of blockchain technology FinTech strategy, Joseph Cuschieri, the is a next natural step in their develop- Chief Executive Officer of the Malta Fi- ment. One of the major Maltese banks nancial Services Authority (MFSA), not- has already indicated that it is studying ed that “the digital revolution is bringing the positive outcomes that these tech- about disruption to every sector of busi- nologies can bring about to their opera- ness, with the financial services industry tions. Most significantly, this technology being no exception.” Recent technologi- can be used to improve existing lengthy cal advancements such as artificial intel- banking processes, be it the opening and ligence, distributed ledger technology, maintaining of bank accounts, the exe- the internet of things and cloud tech- cution of trade finance operations, or nologies, are rapidly transforming the the issuing of loans or payments. way customers access financial services The Maltese Government and the and engage with financial products MFSA are pro-actively addressing these providers. realities by building the necessary infra- The banking sector is also part of this structure, allowing banks and other fi- revolution. It comes as no surprise, that nancial services operators to thrive in banks around the world are looking at these new realities. Whilst Malta has the potential benefits of such technolo- been a first mover to comprehensively Pierre Clive Agius, gy, given the increasing popularity of regulate the blockchain industry, Gov- blockchain. According to the manage- ernment and the financial services regu- Ambassador of Malta ment consulting firm Accenture, lator, are aware of the additional chal- to Russia through the adoption of blockchain, the lenges linked to the distributed and bor- global banking industry could save as derless nature of such products, as well much as $20 billion by 2022. Top inter- as the complexity in managing risk and national banks are investing significant ensuring compliance with AML/CFT re- resources to develop blockchain bank quirements. In order to maintain high- solutions, with the key goals being a re- levels of cyber-security, technology itself duction in time, costs and bureaucracy. needs to be at the heart of business The Maltese banking sector, recog- process design, data management and nised by the World Economic Forum compliance functions. This is the key to amongst the top 30 worldwide in terms success of the advanced technologies in of stability, has always been at the fore- the financial sector ensuring further front in adopting new strategies, tech- banking development.

Meeting with the Ambassador of the Republic of Malta to Russia Pierre Clive Agius. FBA EAC headquarters

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 47 History of money TWO TYPES OF CUBAN

IN THE INTERNATIONAL STANDARD ISO 4217, WHICH ESTABLISHED TRI- GRAM ALPHABETIC AND TREE-DIGIT PESO NUMERIC CURRENCY CODES, THERE ARE TWO CODES LISTED FOR CUBA AT ONCE - CUP (CUBAN PESO) AND CUC (CUBAN “CONVERTIBLE PESO). WHEREBY LOCALS TRADITIONALLY CALL THE FIRST MON- ETARY “PESO”, BUT THE SECOND SIMPLY “CUC”. BOTH OF THEM CONSIST OF 100 CENTAVOS. ”

48 Vitaly Krasnikov, analyst

Cuba is a unique country- following In 1960, the peg to the US dollar was re- The image of Ernesto Che Guevara some global trends, it still choses its own placed by one to the Soviet ruble. When takes a special place in the design of ban- special development path including in the Soviet Union dissolved, the peso lost knotes and coins. The first note with his the financial sector. Today everyone much of its value. Today it is used only portrait was issued in 1993 and since then who comes to the Liberty Island, faces within the country. the denomination of three pesos on the the necessity to absorb two monetary But tourist interest in Cuba forced bills and coins of both currencies in cir- units that are in parallel circulation in the National Institute of Tourism to take culation has been dedicated exclusively the country. a decision about the issue of the special to him. Bills which contain the signature In the international standard ISO “guest” banknotes, represented by coins of Ernesto Che Guevara who held the 4217, which established trigram alpha- and special certificates containing the position of president of the National betic and tree-digit numeric currency words ‘Intur”. In fact, it was a prototype bank of Cuba, are especially appreciated. codes, there are two codes listed for of modern “cuc”, which were issued in In 2013 there have been reports of the Cuba at once - CUP (Cuban peso) and 1994. beginning of the process of reaching CUC (Cuban convertible peso). Where- The division of currencies into con- monetary unification, providing for a by locals traditionally call the first vertible and non-convertible was also af- gradual transition to a single Cuban cur- monetary “peso”, but the second sim- fected in the plots, depicted on ban- rency. At first it will significantly facili- ply “cuc”. Both of them consist of 100 knotes. Thus coins and bills “peso” con- tate domestic calculations and at the centavos. tain portraits of the national heroes of same time it will make life easier for Before the middle of the 19th centu- Cuba as well as scenes, that show the cul- tourists because they often become the ry, Spanish reales circulated in Cuba. tural and historical features of the state. victims of fraudsters who skillfully use From that time, banknotes were issued Pictures of the main touristic sights, the ignorance of the guests of Liberty Is- specifically for use on Cuba. In 1881, the buildings and monuments can be found land in the matter of local specificities of peso was pegged to the US dollar at par. on “cuc”. money circulation.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 49 projects

«DIGITAL BELT»: OPPORTUNITIES Andrey Lisitsyn, PhD in Law, AND PROSPECTS Advisor to the Chairman of the Coordination Council of FBA EAC, Leading Researcher Institute of Industrial Policy and Institutional Development Financial University under the Government of the Russian Federation

50 Eurasia is the largest continent automation of business processes. The In implementing of the project where there are various models of eco- objectives of this interaction are the se- “Digital Belt” will have to be addressed nomic cooperation including within lection and sale of goods, works and such tasks as creating an information the framework of the economic unions services with low cost through the max- technology infrastructure of the plat- of EAEU, EU, APEC and others. How- imum transparency of information, the form, ensuring the operation of the ever in spite of similar objectives and settling of the maximum volume of de- platform before creating the need inter- goals, these unions practically do not mand and supply, and the providing of national legal framework for coordinat- create tools for business interaction effective mutual settlements with mini- ing and harmonizing regulation and across the continent. The urgency of mum transaction and conversion costs. control, attracting suppliers of goods, this problem cannot be doubt and the Digital platforms will allow the inte- works and services as well as consumers search for its solution led to the birth of gration of various services, for example, to services platform, building interna- a project concept, the implementation on the proposal and selection of goods, tional legal and institutional frame- of which will help to form market works and services (“boards” of an- work to ensure the continuous func- mechanisms to reduce barriers for the nouncements), to ensure fast, guaran- tioning of the elements of a single mar- interaction of economic actors in the teed and confirmed execution of pay- ket space platform. Eurasian space. And the Eurasian Eco- ments (payment systems), to implement Prior to the approval of internation- nomic Union can (but in a way should) compliance procedures, to conclude, al agreements a key tool to solve the take a central place in the creation of change and confirmation of the execu- tasks of the creation the platform “Dig- such mechanisms. tion of agreements (electronic docu- ital Belt” may be the use of “regulatory As is known, the EAEU was formed ment management system), to hedge sandboxes” – mechanisms for imple- and developed in order to create condi- currency and credit risks and the appli- menting pilot innovation projects, tions for sustainable development of the cation of tools of commodity exchanges some elements of which fall outside economies of member states, forming a (financial services). the current legal regulation system. single market for goods, service, capital Such platforms are a key infrastruc- Currently “regulatory sandboxes” are and labor recourses within the Union, tural element for removing barriers to being created in most states of the comprehensive modernization, cooper- economic cooperation including on the Eurasian space and it will allow to ob- ation and increasing the competitive- Eurasian space. That’s why the idea of tain the necessary tools by combining ness of national economies in a global creation the EuroAsian digital plat- key project participants from various economy. form “Digital Belt” appeared. states. The most important foreign econom- According to the concept, the plat- As part of the integration processes in ic partners of the EAEU are the Euro- form “Digital Belt” should include the the Eurasian space, the Digital Belt plat- pean Union (EU) and the People's Re- following elements: form will allow: public of China (P.R. China) but the ter- 1) A set of standards and rules for the 1) to carry out the actual generation of ritorial location of the EAEU member operation of the platform, consis- key elements of a single market in the states relative to the EU and China de- tence with the law and agreed with platform space in pilot regime and fines a critical infrastructural and com- the regulators. then in constantly regime. mercial importance of the Union in its 2) The platform portal on the Internet 2) to test key issues of integration interaction with these partners. is a platform where information on processes in relevant areas on order But at the same time the possibilities goods, works and services as well as to accelerate the harmonization of of developing cooperation are com- on conditions for their sale and pur- regulation and policies at the interna- pounded by such factors as the labor in- chase will be posted. tional level. tensive of policy coordination processes 3) The system of electronic document 3) to ensure the introduction of modern by international legal means and mech- management and interaction based digital tools and mechanisms with anisms, the presence of significant struc- on the technology of distributed the participation and under the con- tural, quantitative and qualitative dif- ledger, that provide verification of in- trol of regulators of all interested ferences in economies and the lack of formation included in the system countries. compatibility of economic systems, the and actions with them including the 4) to reduce economic, cultural and vast overall territorial extent of states as implementation smart contracts. other obstacles to maintain the inter- well as cultural, linguistic and national 4) The system of compliance proce- national business in the platform diversity. dures recognized by parties, KYC- space. However the negative impact of procedures and in general AML pro- 5) to improve the transparence of regu- these factors can be reduced through cedures insuring compliance with latory and other requirements for do- the use the initiatives of business that the regulatory requirements of all ing business in the territory of the means through the use of market tools countries whose representatives par- states included in the platform space. and mechanisms that reduce supply and ticipate in the platform. 6) to reduce business costs of trading in demand from various locations and ju- 5) The system of implementation of ac- goods, works and services in the plat- risdictions. And in the conditions of the tions on currency control, including form space. development of the digitalization of so- reporting on currency transactions. 7) to make a complex transition to set- ciety the effective way to introduce 6) The system for reducing conversion tlements in national currencies in such mechanisms is the use of a digital costs and currency risks based on the the platform space or its part thereof platform. organization of settlements using a (for example in the EAEU or EAEU- The digital platform is a complex of digital settlement and clearing system. China). information-technical and organiza- 7) The system of organization of mutual 8) to increase the availability for cus- tional-legal mechanisms, providing to exchange trade in the territory of tomers of goods, works and services remote interaction between market par- countries whose representatives par- provided by countries entering the ticipants through standardization and ticipate in the work of the platform. platform space.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 51 projects

The creation of the “Digital belt” plat- ipation of representatives of regula- a common denominator a number of form should be carried out on a multi- tors; standards introduced at the first stage pronged basis involving a series of se- introduction of key elements and of the functioning of “Digital belt” and quential actions divided into stages. services of the platform in the “regu- in general will ensure its further devel- latory sandbox” mode. opment. Reference: At this stage expect for the informa- The third stage is ensuring the contin- tion and technical component, the de- uing operation of the “Digital belt” plat- velopment and implementation of stan- form. This period will be characterized dards that will comprehensively provide by the full scale harmonization of stan- The Eurasian Economic the rules for the operation of the plat- dards, technological and other processes Union is an international form is essential. Among other things, in line with accepted international organization of regional the standards will regulate: the content agreements as well as with the work of of the portal; disclosure of information the platform in the “regulatory sandbox” economic integration with about the provider and the proposed mode in areas where there are no inter- international legal person- goods, works and services; the use of national agreements yet. ality and established by the personal data of users; ensuring informa- In parallel, taking into account the tion security and combating fraud when experience, it is proposed to develop di- Treaty on the Eurasian Eco- using the platform; realization of re- rections for expanding the composition nomic Union. quests to counter the laundering of pro- of the regions where the platform func- ceeds from crime and the financing of tions and (or) services. It is necessary to terrorism; implementation of currency add that in the process of promoting this The EAEU introduces control in the commission and execu- platform, there is an opportunity to use the free movement of goods, tion of transactions. it not only in the Eurasian space but also capital, services and people The standards for individual services in the space of South and Central Amer- of the platform is also going to be intro- ica and Africa. and provides for common duced, including for the electronic doc- The creation of “Digital belt” is a fun- coordinated policies in sec- ument management system, a system for damental infrastructural task. It will re- tors of the economy. Mem- reducing of conversion costs and curren- quire the consolidation of recourses and cy risks and a system for organizing mu- efforts of business, government bodies ber states are Armenia, Be- tual exchange trading in the platform and science. So at the first stage, it will larus, Kazakhstan, Kyr- space. be necessary to remove risks of unfair The second stage is the formation of a advertising and develop effective mech- gyzstan and Russia permanent international legal frame- anisms to protect of rights of users of re- work for the operation of the “Digital mote services, and provide the legal con- belt” platform. At this stage it is expect- ditions for remote acceptance of clients ed, above all, the implementation of the as well as to reduce currency regulation The first stage is the introduction of following activities: and currency control. key elements of the platform on the basis evaluation of the results of the pilot However, there are grounds to be- of the current regulation and the mecha- operation of the platform services; lieve that it is now the economic and nism of “regulatory sandboxes”. This preparation of the concepts of the technological conditions were ripe for process will include the following main necessary international agreements the realization of such a project. But its activities: based on the evaluation of the per- implementation is impossible without creation of an information portal; formance of the services of the plat- the consolidating and balancing organi- formation of organizational and legal form in the framework of the “regula- zational role of the public non-profit or- basis for the functioning of the plat- tory sandbox” and the position of reg- ganization and therefore it is useful to form (decision-making and control ulators; make the operator of the platform the bodies, as well as a system for ensur- conducting conciliation procedures Financial and Banking association of ing the operation of technologies and for the concepts of prepared interna- EuroAsian cooperation. processes of the platform); tional agreements and the develop- At the FBA EAC site representatives development and approval of re- ment of relevant projects; of the business communities of most quirements and standards of the por- ensuring the continued operation of countries of the Eurasian region com- tal and platform; the platform in the “regulatory sand- bine their efforts and representatives of expansion the representation of spe- box” mode until the approval of the not only business, but also representa- cialized regulators in the bodies of relevant international agreements; tives of national and supranational reg- the platform operator and its organi- adoption and approval of internation- ulators participate in the Association's zational structure; al treaties. management bodies and monitoring coordination with specialized regula- At this stage the harmonization of bodies. Moreover, the decision to tors that regulate and control adver- regulation at the supranational level launch the project was taken at the gen- tising, the standard for promoting (primarily within the framework of the eral meeting of the FBA EAC in March goods, works and services using the EAEU) by international legal means of this year. platform; gains the particularly important. That’s This is only the beginning, but, as Lao creation of an expert coordination why the main task here is the develop- Tzu says “A journey of a thousand li be- council on the formation and mainte- ment and implementation of interna- gins with one step”. The main thing is to nance of the platform with the partic- tional agreements that will lead to find make this step.

52 Organizer: FEDERATION Federation of Badminton of the Orel Region OF BADMINTON with the support of FBA EAC OF THE OREL REGION Location: Orel Region, Orel, TMK “Grinn”

OPEN INTERNATIONAL YOUTH TOURNAMENT ON BADMINTON OF EURASIAN COUNTRIES

Russian Federation, Orel

MEMBER STATES: Russian Federation (territorial entities), Belarus, Armenia, Kazakhstan, Kyrgyzstan and others.

NUMBER OF PARTICIPANTS: 256 International youth tournament on badminton is a personally-command competition format among boys and girls in the categories up to 17 years old and up to 15 years old.

ORPO “Federation of Badminton of the Orel Region” was created initiated by the current President of the Federation - pilot-cosmonaut, Hero of Russia – Alexander Misurkin. NOVEMBER 20–24, The tournament is included in the Unified calendar plan of the Russian Badminton Federation 2019 and will be held under the auspices of the National Federation.

For sponsors and partners Conducting such a large-scale sports fes- tival will give a powerful impetus to the establishment of political and economic ties between the participating countries of the tournament. As a sponsor of the competition you make a huge contribution to the socio-cultural development of our country. The support of the International Youth Badminton Tournament will provide your company with increased loyalty both in the Russian Federation and abroad. Technology FOOD SUBLIMATION AS A FACTOR OF ECONOMIC DEVELOPMENT Alexey Antipov, Academician of the International Academy of Refrigeration, Doctor of Science

54 Sublimation drying has been used for ly champignons, greens, meat with side The production of freeze-dried prod- quite a long time: as a canning procedure dishes, coffee and exotic fruits. ucts consists of several phase-processes: it was developed in the USSR in the We should not ignore world experi- freezing; 20th century, but the beginning of that ence in this matter and therefore it freeze-dried frozen moisture (about technology was laid in the beginning of makes sense to consider sublimation 80–90%); that century by a Russian mining engi- equipment and technology as a mean to drying of non-frozen moisture; neer, Georgy Lappa-Starzhenetsky. generate additional income that is not vacuum packing. In the USSR, there were four plants currently being extracted. Taking into account widespread intro- that used this technology: sublimated But first, let's understand what con- duction of sublimation technology in the meat was produced in Orsha (BSSR), stitutes freeze-drying. world it should be considered from the sublimated curd – in Slutsk (BSSR), sub- Freeze-drying is the process of re- point of view of the possibility of organiz- limated vegetables were in the village of moving moisture from products that are ing a new business that could bring profit Detchino of the Maloyaroslavetsky Dis- frozen (solid) without using the liquid both inside our country and abroad. trict of the Kaluga Region (RSFSR) and phase. At the same time, volume color, In which areas is sublimation possi- at the Chisinau Cannery (MSSR) – sub- aromatic and bioactive substances, trace ble? limated fruit. Subsequently, all of these elements are preserved. That’s conserva- Food products for the army. For ex- plants refused to sublimate products. tion is carried out through physical ample, in the satchel of the American In 90s the plant of sublimation drying processes which excludes using of auxil- soldier are sublimated products for was built in Volgograd, where the “Gala- iary material (sugar, salts, acids) used in 40 days of autonomous power! It is a full Gala” company still produces a wide other methods of conservation. Also in and varied ration. We two better get a range of freeze-dried products. However the production of freeze-dried products handle on that. it should be noted that the sale leaves exposure to high temperatures that inac- Dairy products. Given the increasing much to be desired. Sublimation plants tivate vitamins is excluded. But, for ex- mobility of the population such dishes produced in Ukraine (Sumy) were used ample, only the sublimation process is as sublimated cottage cheese, butter, at the plants but at present the produc- used in canning live vaccines and sour cream, yogurt and other sublimat- tion technology of sublimation dryers serums. It guarantees not only a speedy ed dairy products could be a significant has been lost. recovery of dry objects but also the support in fast food at home and in Then in 2000 in Borovsk (Kaluga re- preservation of viable cells and viruses. catering. gion) the workshop began working on the sublimation of fruits and berries. During the same period, the Nestle plant began to operate in Leningrad re- gion where coffee was freeze dried and in 2018 the workshop “Moglino” for the drying of berries from China opened in Pskov region. Small plants for the production of sublimation products are also operating: sweets made from freeze-dried berries are produced in Tyumen and in Sol- nechnogorsk, fruit chips are produced in Anapa. And they use either second-hand equipment from pharmaceutical manu- facturers or Chinese installations. Unfor- tunately, the listing of domestic achieve- ments could be completed. At the same time, the technology and technique of freeze-dries has become very wide spread in the world. Now there are more than 350 enterprises, pro- duced freeze-dried food products, main-

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(7) 2019 55 Technology

Drinks. Recently at one Ural enter- underway to supply such a plant (pro- of vegetable seeds. When working to- prise I was asked, what sublimation is? duced by firm “Fresco”) in Bashkiria. gether with VNIISSOK we were subli- This question was asked at the table There is produced white honey for Eu- mated seeds of cabbage and carrot. As a where the tea party was. I saw about ten rope and a contract of delivery to China result we got an expected effect: with packets with coffee and asked: “What has already been concluded. And if in initial seed germination of 40% and kind of coffee do you prefer?”. It turned our country dry honey is still an exotic mediocre quality indicators, we ob- out, coffee was different but all of these product then in Europe it is already pop- tained 95 percent germination seeds, are sublimated. That is, employees of ular. with a five-point growth force and the the company, not knowing what the Meat products. Freeze dried meat same seed quality indicators. process of sublimation is, all one and and processed meat products are well These results could be assessed one voted for this product. And this is known abroad. We have developed a through economic performance. The understandable: sublimated coffee is new product – meat snacks. They are al- cost of 1 kl of cabbage seeds with a ger- definitely higher in quality than any in- so obtained by a sublimation method. mination rate of 95% reaches 3000 rubles. stant coffee. For their production we specially devel- And with 40 percent germination – We should pay no less attention to oped a new technique and technology: 400 rubles. The seed treatment time in tea. In other countries, tea is just tea. But atmospheric freeze-drying. As early as the sublimation chamber is two hours. in Russia it is a healing drink, moreover the 9th century nomadic Buryat tribes Moreover, the processing in vacuum on a national scale. Moreover we could used freeze dried meat; they were dried freeze-dryers and in dryers for sublima- put honey in tea and coffee. Dehydrated for 5–6 months. We offer the technique tion at atmospheric pressure showed honey is an own product that could that allows carrying out this process for the same results. compete with sugar and with just honey. 5–6 hours. The most expensive part of Thus, if we sum up the above, it can Canadian and American dehydrated this equipment is the vacuum freeze dri- be argued that any moisture product honey is actively sold in Europe. We er – is excluded in the technology devel- turns a business using freeze-dryers into have also developed a method for ob- oped by us. an economically viable enterprise. Espe- taining dry honey on vacuum-sublima- Seeds. The most successful applica- cially if you don’t forget about the mar- tion plants and now w negotiations are tion of freeze-drying was a conservation ket outside of Russia.

56 May 15–18, 2019 I EURO-ASIAN FINANCIAL AND ECONOMIC FORUM (EAFEF) – KHORGOS WITH PARTICIPATION OF THE EU, EAEU AND SCO UNDER THE AUSPICES OF ADB, FBA EAC, BC SCO AND THE PEOPLE’S GOVERNMENT OF KHORGOS (PRC)

IN THE FORUM PROGRAM: – Plenary session. – Work sections and showcase of investment projects for Finance and economy, Transport and logistics, International energy and environmental safety.

SUBJECTS OF DISCUSSION: Effective development of interbank cooperation between banks and development institutions. Uni- fied payment system for settlements in various currencies, such as the evolution of the world mon- etary system (clearing, blockchain technology and cryptocurrency). Dynamics of development (transformation) of the global banking system. The EU and the EAEU: the economic need for rapprochement and interaction. Ways to link the EAEU and the Silk Road: Development of cooperation between the EAEU and China and linking with the “One Belt, One Road” (OPOR) initiative, as one of the most important foreign economic landmarks of the Eurasian Union. СONTACTS: www.abrk.kz/forum-khorgos Теl.: +7 (727) 267-45-56 E-mail: [email protected]

ORGANIZERS:

ASSOCIATION FINANCIAL & BANKING THE BUSINESS THE PEOPLE’S OF BANKS ASSOCIATION COUNCIL OF GOVERNMENT OF THE REPUBLIC OF EURO-ASIAN THE SHANGHAI OF KHORGOS OF KAZAKHSTAN COOPERATION COOPERATION (PRC) (ABRK) (FBA EAC) ORGANIZATION (BC SCO)

General sponsor:

Strategic partners: Practice

58 INFANT FOOD

INDUSTRY – Valentin Karamzin, General Director of “Agromash” Ltd., Doctor DEVELOPMENT of Engineering, Professor, Honored Scientist AND TASKS of the Russian Federation

Food is one of the main factors of hu- The role of vitamins and minerals in underlines that food security of the man’s health. Especially it refers to chil- the childhood is essential due to rapid Russian Federation “is one of the priori- dren. A sensible nutrition ensures growth, formation, intense metabolism ties of national security in the country healthy growth of children, promotes of a child’s organism. in the medium-term perspective, a fac- preventive treatment, higher mental and Foreign producers dominate on the tor of its statehood and sovereignty, a physical efficiency, provides for ade- Russian food market. The main reasons key element of the demographic policy, quate adaptation to the environment. are long payback of investments for the a required condition to implement the Food can be considered healthy if it modern technological production and strategic national priority – the improve- satisfies the children’s needs not only in the lack of promotion of domestic prod- ment of the quality of life for the Russian macronutrients (proteins, fats and car- ucts. Some time ago the infant-feeding people through the guarantee of high bohydrates) and energy, but also in mi- centers were replaced by shops of baby living standards”. cronutrients (vitamins and minerals) in food mostly produced abroad. While With the aim to carry out the Doc- accordance with physical needs. Russian producers had to (and still have trine in practice the Decree of the Gov- Micronutrients refer to irreplaceable to) survive in a stiff competition. ernment of the Russian Federation nutrient materials and are necessary for According to Rosstat up to 80–90% of #1873-p dd.25.10.2010 worked out and balanced biological processes in the or- infant food products are produced in adopted “Guidelines of the state policy ganism: metabolism, growth, diseases the factories owned by foreign compa- of the Russian Federation of healthy management and protection from nega- nies and in case of sanctions this produc- food for the population for the period tive environment factors. A human or- tion can be almost fully stopped. up to 2020”. A considerable part of the ganism doesn’t synthesize and doesn’t The Decree of the President of the document is dedicated to the produc- uptake the macronutrients so they must Russian Federation #120 dd. 30.01.2010 tion of infant food. be supplied regularly with water and adopted a Food Security Doctrine of the The main tasks of the state policy in food in full set and physiologic amounts. Russian Federation (Doctrine) which the area of healthy food are:

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To promote the production of food to statistics 70% of the first-year babies will allow to raise the quality and the products enriched by unreplaceable need compound and bottle feeding, number of produced products, to im- components, special products of in- while 50% need medical formulas. prove the situation for national agricul- fant food, functional purpose prod- The analysis of Rosstat data of the in- tural providers and to reduce the de- ucts, dietary (medical and preventive) fant food production as per one child pendence on the foreign ones. food products and dietary food sup- clearly shows the demand for further It is also worth mentioning that for- plement, including corporate supplies promotion of the infant food industry eign producers use not only materials (to workers, students enc.); (Table 1). from the territory of Russia but also im- To develop and introduce into the A simple analysis of the table shows ported concentrates even with GMO. It agriculture and food industry the in- that in most cases the amount of prod- harms the national agricultural produc- novative technologies including bio- ucts as per one child per year remains ers as producers of raw materials. and nanotechnologies; very little. For example the amount of According to Rosstat the main pro- To improve catering services in the milk-based and flour-based powder duction of infant food is located in the corporate sector, to provide adequate milk is produced in the amount of Central, North-West and South Federal nutrition to pregnant and breastfeed- 160 grams/year and 580 grams/year cor- Districts (Table 2). ing women and children under 3 years respondingly; drinkable milk – in the As we can see the Volga District, the old for example through the special amount of 4.09 liters/year; infant meat Siberian District and the Ural District are meal stations and shop, to upgrade di- specialized cans – in the amount of not involved at all although they have a etary (medical and preventive) food in 0.34 standards cans per year (a can is good agricultural basis for infant food health centers as an integral part of 330 grams). production and a huge export potential treatment. The building of new high-tech enter- due to close borders with China and On June 29, 2016 the Resolution of prises and the use of new equipment South-East Asia. the Government of the Russian Federa- tion #1364-р adopted the “Strategy of Table 1 the improvement of food products in Infant food production the Russian Federation up to 2030” on the territory of the Russian Federation (according to Rosstat) which will improve the quality and quantity of the produced infant food Products as products. Products per one child Also worth mentioning is the Decree per year of the President of the Russian Federa- tion #350 dd. 21.07.2016 “On realization Infant meat (meat-containing) specialized products 0,34 measures of state scientific and technical (0–4 years old), standard cans policy for the benefit of agriculture de- velopment” which seriously promoted Drinkable infant milk (0–14 years old), liters 4,09 the processing sector of agriculture in including drinkable infant milk (0–4 years old) 9,4 general and the sector of b infant aby Infant milk powder (0–4 years old), kg 1,22 food in particular. Analysis of the supporting mecha- Infant milk powder formula (0–4 years old), kg 0,54 nisms for healthy food in Russia shows that the state is greatly interested in Infant curd (0–4 years old), kg 4,28 new producers which is proved by the annexes and amendments to the Decree Fermented infant dairy products including infants 2,72 of the Government of the Russian Fed- (0–14 years old), kg eration #166 dd. 28.02.2012 “On the Homogenized infant meat products, meat by-products 0,069 adoption of the Rules of provision and or blood excluding sausage products (5–9 years old), allocation of subsidies from the federal standard cans budget to the local budgets of the sub- jects of the Russian Federation to sup- Homogenized nonfrozen canned infant vegetables 0,22 port the emerging farmers”. Thus point without vinegar, (0–14 years old), standard cans 3 “Grants for establishment and develop- ment of peasant (farm) holdings…” con- Homogenized infant mix of food products (0–14 years old), 1,02 tains a notion “agricultural processing”. standard cans Tax benefits for the food industry start- Homogenized infant fruit and berry products (0–14 years old), 6,7 ups are also improving in special eco- standard cans nomic zones. In general one should mention that Milk-based infant liquid or paste-like food (0–14 years old), kg 0,38 support mechanisms for the healthy food producers require further develop- Milk-based infant food powder(0–14 years old), kg 0,16 ment and improvement. However, regardless of difficulties Flour-based infant food powder (0–14 years old), kg 0,58 the infant food market keeps growing Infant food – homogenized cans with meat, vegetables, fruit , 27,87 following the rise in births in Russia in (0–14 years old), standard cans the recent years. Starting from 2012 we have seen the highest demographic in- Infant juices (0–14 years old), standard cans 118,99 dexes in the last 20 years. And according

60 Table 2 Infant food production in the regions of the Russian Federation (according to Rosstat)

Annual average Production Use of capacity Annual average Regions capacity Thousands % capacity in 1990 Thousands of tons of tons Thousands of tons

Liquid and paste-like dairy products Russian Federation 232.6 101.9 43.8 59.6 Central Federal District 131.5 62.0 47.2 – North-West Federal District 60.7 20.5 33.8 – South Federal District 9.6 6.1 63.2 – Volga Federal District 8.3 4.98 59.9 – Ural Federal District 6.97 3.75 53.8 . Siberian Federal District 15.5 4.55 29.4 – Dry infant milk formula including fermented

Russian Federation 26.1 16.48 63.2 21.6 Central Federal District 21.1 15.5 73.5 – Volga Federal District 5.0 0.98 19.7 Dry cereal-based infant and diet food

Russian Federation 24.6 13.0 56.7 26.3 Central Federal District 8.53 4.13 48.4 – North-West Federal District 8.92 4.79 53.7 – North-Caucasus Federal District 7.09 4.07 56.7 –

The Science and Research Institute up-to-date requirements, and to pro- duced on the territory of the Com- together with “Agromash” Ltd., NPO JSC duce the products equal to the world mon State; “Pribor” and the Science and Practice analogues. provide for 80% of the market of spe- Center of the National Academy of Sci- The use and spread of the typical cialized infant food products includ- ence of the Republic of Belarus have de- technical and technological solutions ing dietary (medical and preventive) veloped a concept of a scientific and with regards to import substitution tasks food; technical program “The development of allow to extend the range and the vol- strengthen the Russian and Belarus innovative technologies and equipment ume of production of infant food for all markets due to larger amount and for infant food production”. age groups and also for pregnant and range of infant food and food for The concept of the program was ap- breast-feeding women in accordance pregnant and breast-feeding women, proved at the meeting of the section of with the modern conditions of food se- produced on the territory of the priority fundamental, applied scientific curity. Common State; researches and innovations in agricul- reduce deceases among children and ture of the Scientific and Technical There will be: teenagers related to nutrition (ane- Council of the Ministry of agriculture of More than two hundred new types of mia, lack of food, obesity, diseases of the Russian Federation. products and components of infant the digestive system); The concept aims at several tasks of food and food for pregnant and raise vitamin provision to children, the state policy of healthy infant food. breast-feeding women; pregnant and breast-feeding women; To create a wide range of infant food New equipment complexes in accor- improve the health of the population. products it is necessary to develop and dance with all modern standards of introduce new technologies and re- the Common State and equal to the In conclusion it is worth mentioning search methods which will also result in world analogues (19); that Science and Research Institute to- the development of science of food pro- Larger volume and range of infant gether with “Agromash” Ltd. have de- duction. food products and food for pregnant veloped a typical complex for infant The development and creation of and breast-feeding women. food production with the capacity of new (including energy saving) tech- 6000 cans/hour (90000 cans/day). nologies and new equipment for in- The spread of new equipment and The complex contains the equipment fant food production will allow to ex- technology will allow to: for the production of infant food and baby tend the range of products, to create provide for 70–80% of the Russian puree packed in twist-off cans (110 grams), special raw materials zones, to achieve and Belarus markets with the main and for the production of puree in aseptic the security of food, which meet the types of infant food products pro- cans (200 kg) packed in Bag-in-Box.

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