Connect with us

Economy

Financial Institutions to Support Russia-African Business Projects

Published

on

An Interview with Dmitry Golovanov

Russian financial institutions have shown high interest in helping to raise the economic and business profiles both ways, Russian business in Africa and African business in Russia. For example, Eximbank of Russia has expressed readiness to take advantage of huge opportunities and existing growth potential in both regions. Eximbank of Russia is always open for a dialogue and discussion of projects of various degree of complexity.

In this exclusive interview, Dmitry Golovanov, Chairman of the Management Board of Eximbank of Russia, believes “there is everything necessary for that – significant experience of implementation of complicated infrastructural projects accumulated from Soviet days.”

He further advocates for an increased economic partnership between Russia and African countries, reaffirms the desire to continue developing business dialogue with interested companies in efforts to pursue active involvement in international programmes and projects for Africa. In addition, he raises some specific proposals necessary for facilitating business between Russia and Africa.

How do you assess the level of activity of economic cooperation between Russia and Africa today?

Golovanov: For the purposes of visibility, I would like to proceed to figures right ahead. Goods turnover between Russia and countries of Africa to the south of Sahara is today only about US$1.5 bn. Export – less than US$1 bn., among almost 50 countries real counteragents in export operations are less than 10. We can see that the structure of Russian export has deformed significantly towards export of raw materials. One more impressive statistics is that about 80% of Russian investments into Africa relate to exploration and mining of natural resources.

Skeptics will probably call such situation as “pessimistic”. We, Eximbank of Russia, see in the current situation high opportunities – a growth potential, on account of development of export of products other than raw materials. There is everything necessary for that – significant experience of implementation of complicated infrastructural projects and development of the territories accumulated from the times of the USSR, experience of Eximbank of Russia (financing of the project for construction of the satellite communications system), comprehensive approach to achievement of the objective: a line of credit and insurance products developed together with the Export Insurance Agency of Russia (EXIAR) especially for exporters, efficiency of taking decisions on issue of loans, market expertise and individual approach to every client.

Do you think that Russian authorities should support the business in cooperation between Russia and Africa? Can such support become a driver of growth of business activity between Russia and Africa? What is the role of the banking sector in this process?

Golovanov: Russian authorities provide considerable support to the business – moreover, at present support of its export initiative is a priority for the Russian Government. We, as a state bank oriented towards support of exporters, provide one of the efficient instruments capable to give a new impulse to economic cooperation between Russia and Africa.

In addition to specific proposals from exporting companies, in aggregate with deep understanding of needs of the African market, our portfolio contains a line of various financial products – this may be loans to Russian exporters, loans to foreign purchasers, leasing offers, financing involving foreign banks, all this is supplemented with a line of insurance products of EXIAR – so, the state provides significant support to export.

As regards to the banking sector, today there is no designated product line for the Russian exporters. Banks experiencing a difficult economic situation prefer only short-term profits and cannot afford development of business models which will become efficient in the long term. The state oriented towards timely support of export understands that it is necessary to invest into and develop this direction which will further become a driver of economic growth.

It is very important that cooperation between Russia and Africa can and should be developed on account of expansion of the export potential of companies which are now operating in the domestic market only. Eximbank of Russia has taken negotiations with companies willing to expand their business on account of achievement of foreign markets which need our financial support for this purpose.

Now we are taking negotiations for implementation of projects in such directions as supplies of geological equipment, equipment for washing plants, metal structures for construction of mining modules at the carrier Katoka (the 4th diamond deposit in the world by size). There are some perspective projects for supply of mineral fertilizers to Senegal, Togo and Benin, supply of medical goods, we discuss the possibility of financing of construction of social residential facilities in the region etc.

Experts believe that the share of Russian export to African countries is very low, first of all, due to insufficiently developed infrastructure in the industrial sector and problems with the production base. Do you agree to such an opinion? How the situation may be improved in the long term?

Golovanov: Obviously, Russia has faced some problems associated with poor development of the industrial base, however such problems are much less critical compared to the situation in the beginning of the 2000’s. Tasks set to our country may be resolved by means of implementation of joint projects.

In addition to the standard set of instruments for support and stimulation of export being implemented by national development institutes, the experience of our cooperation also includes such a solution as cooperation of Russian and African companies aimed at implementation of projects for export to third countries.

Cooperation will provide additional opportunities for investments; ensure additional load of production capacities; improve competitiveness of products on account of cooperation with other companies; become a catalyzer of expansion of sales markets by means of implementation of the strategy of “joint reach” of new markets. Competitiveness of joint projects will be ensured by advantages of our economies and instruments for support of private initiative.

We should not forget about accessibility of financial instruments regardless the level of development of the industrial sector and perspectives of a company interested in international trade, if the instrument necessary for that, for example, a loan is accessible at the rate of 17-20%, implementation of business plans will be postponed till stabilization in economy. Although we speak about the reserve dynamics – first we should support export, and in the long term, this will facilitate stabilization of economy.

How do you assess the potential of African producers interested in the Russian market? What may attract them to Russia?

Golovanov: Russia is a large developing market with growing purchasing capacity, interested in development of competition and improvement of quality of products supplied from abroad. We can surely say that companies which are ready to try the Russian market have a chance to gain much profit. It is to be noted that the Russian market has its own peculiarity, so companies entering the market should clearly understand economy, political components and legal issues.

We often face a problem that companies willing to enter international markets cannot simply find foreign purchasers for their products. I suppose that the same problem is experienced by African businessmen. Provision of consulting services, thanks to development of special state institutions, – they would facilitate their activity in Russia. If such support would be useful on our part, we are willing to provide it to our African partners.

You pronounced at the annual meeting of the AfroCom at Vnesheconombank some of specific solutions and proposals to improve the business climate between Russia and Africa – what steps do you suggest?

Golovanov: It is necessary to arrange large-scale Russian-African forums/summits. This format proposed by partners from China, USA and European Union, has proved itself – personal communications and contacts at all levels favor dynamics of cooperation development. A significant effect can be caused by formation of general registers of businessmen interested in cooperation. This will allow to facilitate the task of importers/exporters search for counteragents for placement of orders or sale of products.

Besides, joint implementation of projects in the area of infrastructural development will positively influence development of contracts between Russian and African companies. However, transparency and possibilities for medium and small business to access contracts within the framework of implementation of major projects are required. Such projects generally have significant multiplicative effect in terms of comprehensive development of territories.

One more direction of stimulation of cooperation may be provision of Russian and African companies with assistance in creation of value added chains, including creation of joint ventures which base their competitive potential on the use of country advantages. Eximbank of Russia works in this direction to the extent of creation of financial infrastructure to procure such projects. The Bank plans to develop cooperation with institutions for development of countries of the region. We are always open for a dialogue and discussion of projects of various degree of complexity.

MD Africa Editor Kester Kenn Klomegah is an independent researcher and writer on African affairs in the EurAsian region and former Soviet republics. He wrote previously for African Press Agency, African Executive and Inter Press Service. Earlier, he had worked for The Moscow Times, a reputable English newspaper. Klomegah taught part-time at the Moscow Institute of Modern Journalism. He studied international journalism and mass communication, and later spent a year at the Moscow State Institute of International Relations. He co-authored a book “AIDS/HIV and Men: Taking Risk or Taking Responsibility” published by the London-based Panos Institute. In 2004 and again in 2009, he won the Golden Word Prize for a series of analytical articles on Russia's economic cooperation with African countries.

Continue Reading
Comments

Economy

Role of WTO in Regularization of International Trade

Published

on

International trade is one of the main features of the globalized world and global economy. There it needs also a well-organized institutional mechanism to regulate it. World Trade Organization is an international organization established in 1995, whose main objective is to facilitate trade relations among its member countries for their mutual benefits. Currently 164 states are its members. The activities and works of WTO are performing by a Secretariate of about 700 staff located in Geneva, Switzerland, led by the Director General. English, Spanish and French are the official languages of World Trade Organization. The annual budget of WTO is about 180 million dollars.

Since its creation it is playing an important role in the regularization of international trade. It offers a forum and facilitation for negotiating trade agreements in order to reduce the barriers in the way of smooth international trade among member countries. Thus, the role of this organization is playing very important role in the regularization of international trade which is contributing to economic development and growth of member countries in this globalized world. The World Trade Organization also offers an institutional structure and legal framework for the execution and supervising of the international trade related agreements which are very helpful in regularization of international trade. It also settles disputes, disagreements and conflicts occurring during the interpretation and execution of the components of the international agreements related to international trade. During the past 60 years, the World Trade Organization and its predecessor organization the GATT (General Agreement on Tariffs and Trade) have assisted to establish a solid and flourishing global trade system, by this means helping to extraordinary international economic development.

The WTO is regularizing international trade more specifically through negotiating the decrease and finally elimination of barriers to trade among countries and try to make smoothly the working of the rules and principles governing the international trade e.g. tariffs, subsidies, product standards, and antidumping etc. It also administers and monitor the execution of the World Trade Organization’s determined guidelines for trade in services, goods as well as intellectual property rights related to international trade. It also monitors and review the member states international trade policies as well as make sure the transparency in bilateral and multilateral trade agreements. Likewise, it also solves disputes arising among members related to trade relations or related to the explanation of the provisions of the trade agreements. It also offers services to the governments of the developing states in the fields of capacity building of officers in matters related to international trade. WTO is also doing research on matters related to international trade and its related issues and collect data in order to find better solutions of the problems and obstacles in regularization of international trade. It is also trying to bring into the organization the 29 states who are yet not members of the organization aimed to assist and regulate their international trade according to the international standard.

One of the main barriers in way to international trade is disputes between the engaged parties. Since long this was a very critical issue limiting the trade among states. The WTO is playing very good and instrumental role in the solution of trade related disputes. Since the establishment of WTO in 1995 over 400 disputes related to trade have been brought by its member countries to WTO. The increasing number of bringing trade related disputes to WTO is showing the faith of member countries in the organization. Close trade relations have massive advantages but also create disputes and disagreements. With the increase of international trade, the possibility of its related disputes also increases. Previously, such problems and disagreements have caused in severe disputes. But at present, in the era of WTO the international trade related disputes are decreased because the member states have now dispute’s solution platform, and they are turning to the World Trade Organization to solve their trade related disagreements and disputes. Before the World War Second, there was not any such international organization or forum which could facilitate international trade and its related affairs, and there was also noany legal framework for solving trade related disputes among states of the word.

One of The World Trade Organization’s guiding principal is to continue the open boundaries for trade, ensure the Most Favoured Nation (MFN) status among member countries and stop discriminatory behaviour of members towards other member(s) and bring transparency in doing international trade. It is also assisting counties to open their indigenous markets to global trade, with justified exemptions or with suitable flexibilities, promote and support to durable growth, reduce trade deficit, decrease poverty, and promote economic stability. It is also working to integrate different international trade policies and principles. The member countries of WTO are also under the compulsion to bring their trade related disputes to this organization and avoid unilateral actions. WTO is the central pillar of the current international trade system.

Continue Reading

Economy

Russia and France to strengthen economic cooperation

Published

on

On April 29, Russian President Vladimir Putin held videoconference with leaders of several French companies-members of the Franco-Russian Chamber of Commerce and Industry (CCI France-Russia) to discuss some aspects of Russian-French trade, economic and investment cooperation, including the implementation of large joint projects as well as the prospects for collaborative work.

Putin noted that the Economic Council of the Franco-Russian Chamber of Commerce and Industry is still operational in spite of difficulties, and the late April meeting was the fourth time since 2016. From the historical records, France has been and remains a key economic partner for Russia, holding a high but not sufficiently high, 6th place among EU countries in the amount of accumulated investment in the Russian economy and 5th place in the volume of trade.

Despite a certain decline in mutual trade in 2020 (it went down by 14 percent compared to 2019) the ultimate figure is quite acceptable at $13 billion. French investment in Russia is hovering around $17 billion, while Russian investment in France is $3 billion.

Over 500 companies with French capital are operating in various sectors of the Russian economy. French business features especially prominently in the Russian fuel and energy complex, automobile manufacturing and, of course, the food industry. “It could have been more if the French regulatory and state authorities treated Russian businesses as Russia is treating French businesses. We appreciate that in a difficult economic environment, French companies operating in Russia have not reduced their activity,” Putin pointed out.

The Russian Government established the Foreign Investment Advisory Council, which includes six French companies. Further, there is an opportunity to discuss specific issues related to the economic and investment climate in Russia, and that opportunity is traditionally provided at the St Petersburg International Economic Forum, which will be held on June 2-5.

French companies are involved in the implementation of globally famous landmark projects, such as the construction of the Yamal LNG and Arctic LNG 2 facilities and the Nord Stream 2 gas pipeline project. This, Putin regrettably said “We are aware of and regret the amount of political speculation concerning the latter. I would like to point out once again that it is a purely economic project, it has nothing to do with present-day political considerations.”

Russia intends to increase assistance to the development of science and technology. Funds will be directed primarily to innovation sectors such as pharmaceuticals and biotechnology, nuclear and renewable energy, and the utilisation of carbon emissions.

“We are interested in involving foreign companies that would like to invest in Russia and in projects we consider high priority. In order to do this, we will continue to use preferential investment regimes and execute special investment contracts, as you know. A lot of French companies successfully use these tools on the Russian market. For example, more than one third of 45 special investment contracts have been signed with European, including French, partners,” he explained during the meeting.

He also mentioned continuous efforts to attract foreign companies to localise their production to state purchases and to implementing the National Development Projects, as well as existing opportunities for French businesses in special economic zones. Today there are 38 such zones created throughout the Russian Federation.

Russia pays particular attention to attracting high-quality foreign specialists. Their employment is being fast-tracked, and their families can now obtain indefinite residence permits. There is a plan to launch a special programme of ‘golden visas’ whereby to issue a residence permit in exchange for investment in the real economy, a practice is used in many other countries.

Taking his turn, Co-Chair of the CCI France-Russian Economic Council, Gennady Timchenko, noted that the pandemic has changed the world, people and business, and that French companies in Russia are responsible employers and socially responsible members of Russian society.

Despite the crisis and the geopolitical situation, a number of French companies have launched production in 2020–2021. Companies such as Saint-Gobain and Danone have renewed their investments. French companies have increased their export of products manufactured in Russia; they are investing in priority sectors of the Russian economy. For example, this year the French company Lidea is launching a plant called Tanais to produce seeds. Russia is dependent on the import of 30 to 60 percent of these seeds, according to various estimates.

Despite the current geopolitical conditions and information field, there are important signals for French business and the Russian side to strengthen economic cooperation, attract investment, and create partnerships on a new mutually beneficial basis.

Co-Chair of the CCI France-Russian Economic Council, Patrick Pouyanne, noted that the meeting has become an excellent tradition, the presence of 17 CEOs and deputy CEOs of French companies shows the importance of these joint meetings, and further reflect the deep interest of French business in Russia.

In addition, Patrick Pouyanne further offered some insights into Russia-French cooperation. By 2020, twenty members of the Economic Council invested a total of 1.65 trillion rubles, supporting 170,000 jobs. These companies have operated in Russia for decades and continue investing in the Russian economy despite the sanctions and the epidemic. These companies help France maintain its status as the second largest investor in Russia. In 2020, France invested over $1 billion in Russia despite the economic difficulties caused by the pandemic.

Concluding his remarks, Patrick Pouyanne stressed that the economic operators believe everyone will benefit if Russia, France and all of Europe are not divided or isolated. This is the challenge today. Indeed, diplomacy has to continue playing an important role in settling differences, and businesses are convinced that meetings like this create bridges between Russia and France to strengthen investment and economic cooperation.

Continue Reading

Economy

Iran’s Economic Diplomacy through CPEC

Published

on

U.S. sanctions against Iran are characterized by strategic flexibility and adaptability. They are designed to have maximum negative and deterrent effect on Iran’s military, economic and diplomatic growth.  Tehran is exploring ways to counter these sanctions most probably by economic engagements with the regional countries. Iran’s perception of CPEC lends some credit to this argument.

Since the initiation of CPEC, the regional perception has already started to change as many countries have begun to see the project within the domain of their national interests. Iran has expressed its long-standing interests to join the CPEC viewing the corridor as a cornerstone for the country economic prosperity and regional connectivity.

Iran solely focuses more on the economic aspect of CPEC. Regional connectivity through CPEC can boost Iran’s stake in the global output. In 2015, on the sidelines of the United Nation General Assembly (UNGA) address, Iran’s President Hassan Rouhani expressed a desire to be the part of CPEC. He emphasized the importance of connectivity projects for the region. Iran’s initial reluctance to CPEC was transformative in nature and heavily came down with the unfolding of new geoeconomic realities.

Iran’s inclination for the CPEC project even becomes the part of official discourse. Iran’s ambassador to Pakistan Mehdi Monardost showed keen interest to participate in the CPEC and named it as one of the greatest projects in the history of the region. He envisioned a great boost to bilateral trade between Pakistan and Iran under the framework of this regional connectivity corridor. In 2017, Iran’s economy minister Ali Tayyebnia participated in the New Silk Road summit. He praised the New Silk Road concept for regional connectivity.

Iran’s economy is already clutched due to the international sanctions invoked by the Trump administration after pulling back from the Iranian Nuclear Agreement formally known as the Joint Comprehensive Plan of Action (JCPOA) in May 2018.Downplaying the perception of geopolitical competition between Gwadar and Chabahar, Iran higher officials negated the impression of competition falsely exaggerated by International and India media and insisted on the complementary nature of two ports.

In 2016,Iran and India signed an agreement for the development of Chabahar port and it was view as the counterweight to Gwadar port. Without explicitly mentioning India by name, Iran’s ambassador to Pakistan Syed Mohammad Ali Hoseeni defended the decision of his country to drop out India from the project in Chabahar by stating “when some foreign governments found reluctant in their relations with Iran and need other’s permission for even their normal interactions, for sure they would not be capable of planning and implementing such long-term cooperation contracts”.

The same rhetoric appears in the views of Chinese leadership. Brushing aside the allegations of Iran’s perceived resistance to CPEC and Gwadar port, Iran’s foreign minister Jawad Zarif dismissed the allegations and supported growth and development anywhere in Pakistan.

Chabahar is often seen as a rival to Gwadar port. However, Indian discourse has got an altogether different lease of life in the media compared to the Iranian one. Iran’s ambassador to Pakistan Mehdi honardoost utterly disregarded the narrative of competition of two ports. He invited both Pakistan and China to closely work in Chabahar port.

China considers Iran as an important country for its energy security, BRI and in the larger context of global competition with USA. China dual role both in Gwadar and Chabahar, according to the analysts, will likely reduce the impression of competition between two ports. Chinese stance on the Chabahar port also complement the Iran’s position on Chabahar. Chinese premier Le Keqiang rejected the notion that Chabahar port is in competition with the Gwadar. He is convinced with the idea that both ports have the potential to complement each other.

Tehran global status goes upward with the emerging financial and diplomatic backing of China. Beijing openly backs Tehran in the face of U.S. might.  On March 26, 2021, China and Iran signed an agreement expressing a desire to increase cooperation and trade relations over the next 25 years. Wang Yi, Chinese foreign minister, said that USA should rescind the sanctions against Iran. The 25 years deal is considered as part of the Belt and Road Initiative (BRI). According to Tehran Times analysts Peyman Hassani and Ammar Hossein Arabpour, this deal is considered a relief to Iran’s gas and oil sector against USA sanctions.

USA sanctions forcefully bar the countries from purchasing oil from Iran. The US Department of Defense’s report notes that China Pakistan Economic Corridor (CPEC) focus on pipelines and port construction. Pakistan’s reluctance to follow the Iran-Pakistan gas pipeline which is stalled due to American pressure can be reviewed, too much sigh of relief for Tehran’s energy export.

Triangular relations of China, Pakistan and Iran will likely put Iran on the strong footing. Richard Caplan, a professor of international relations at the university of Oxford, notes, “The agreement which predates Biden, undercuts U.S. efforts to isolate Iran economically and, to some extent, diplomatically.

Diplomatic and economic isolation remain at the center of Iran’s foreign policy under the severe U.S. sanctions. Iran’s perceptions of CPEC revolves around the same fact that through regional engagements under CPEC and BRI, it can tackle its global problems to some extent.

Continue Reading

Publications

Latest

EU Politics36 mins ago

Coronavirus: EU Strategy for the development and availability of therapeutics

The European Commission is today complementing the successful EU Vaccines Strategy with a strategy on COVID-19 therapeutics to support the...

Development2 hours ago

Circular solution to Mosul’s conflict debris launched

Mosul – Iraq’s second largest city – suffered massive devastation during the conflict with the Islamic State in Iraq and...

Energy News3 hours ago

Hydrogen in North-Western Europe: A vision towards 2030

North-West Europe has a well-developed hydrogen industry that could be at the edge of an unprecedented transformation should governments keep...

Americas5 hours ago

Trump Lost, Biden Won. Is Joe Biden’s presidency a signal towards Obama’s America?

Greek statesmen, Pericles once said, “Just because you don’t take an interest in politics doesn’t mean the politics won’t take interest...

Green Planet7 hours ago

Climate Change Problem: an Emerging Threat to Global Security

Climate Change is one of the greatest challenges faced by humanity. The Greenhouse–gas emissions and over-exploitation of natural resources result...

Development8 hours ago

Viet Nam’s mango industry: towards compliance with export market requirements

A Swiss-funded project, implemented by the United Nations Industrial Development Organization (UNIDO), is helping mango value chain stakeholders in the...

Eastern Europe9 hours ago

Armenia After the Parliamentary Elections

On June 20, snap parliamentary elections will be held in Armenia. The move will ease tensions in the country but...

Trending