19 November 2002 00:00
EDOCKAS LES ECHOS (FRANCE) INTERVIEW WITH RUSSIA'S PRIME MINISTER MIKHAIL KASYANOV
Question. Why is the Russian-French inter-governmental commission meeting in Toulouse, of all cities?
Answer. The fact that the joint inter-governmental commission which we lead with Mr Raffarin, the French Prime Minister, is meeting this time in Toulouse, speaks for itself: the focus is shifting to aerospace cooperation and investments. Besides, we are concentrating on agriculture and energy, and also on measures to develop trade between our countries. I expect this meeting to give traditionally firm Russian-French economic ties a new qualitative impulse and have a positive effect on real term volumes.
Q. At a time when the French sell Russia goods worth 1 euro, the Germans do so with 3.5 euros. Russia, in turn, exports to Germany (in value terms) three times as many goods as to France. What is your explanation of this discrepancy? How could the French correct the situation?
A. First of all, I have to emphasise that the difference in figures you drew attention to quite correctly is not at all due to a preferential and/or discriminatory regime set by Russian authorities. Our economy is open to any mutually beneficial contacts regardless of the state to which a partner company belongs. Our perception of the causes is mainly that the business communities in our countries have not yet succeeded enough in establishing such contacts.
The key to livening up trade and economic cooperation, in our view, is an activation of the investment process. Accumulated French investments in Russia, despite the activism of such companies, as Danone, Total-Fina-Elf, Renault, Rodia and others, are less than 3.4 billion dollars, compared with, for example, 7.2 billion dollars of German investments. Direct French investments do not exceed 300 million dollars, which is one-eighth of the similar figure for companies from the Netherlands.
Q. In what area of bilateral relations can one expect expansion of cooperation?
A. We in Moscow see clear progress in bilateral relations. Over recent months contacts have quickened in the traditionally successful area of Russian-French joint work -- aerospace. Such firms as Auchan's and Lactalis are strengthening their presence in Russia. Apart from the aerospace industry, the most promising today, I think, is cooperation in energy, motor vehicles, chemicals, building materials and communications. Besides, successes and robust growth of Russian farming have in recent years put on the agenda joint work in the agro-industrial complex.
Q. The European Union, as it expands, draws nearer to Russian borders. From Russia's viewpoint, is that good or bad? Would you like to have an association treaty with the European Union of 15 nations, which is soon to become a European Union of twenty-five?
A. We welcome the European Union's enlargement and reckon that our traditional multi-faceted ties with East and Central European countries will only grow stronger. An expanded European Union will become Russia's dominant trading partner, accounting for more than half of our trade turnover. And the fact that our businesses, with contacts with various European countries, will function within one business environment, will no doubt facilitate our trade and investment links.
So, naturally, the enlargement is creating conditions for closer coordination with the European Union in the economic field. A concept for a common European economic space now being developed must serve to bring our economic systems together. I am sure that by travelling along this path step by step we can achieve a lot. I do not rule out that in the future we will find some other, more advanced forms of cooperation between Russia and the European Union, but definite conditions must ripen for that. After all, Europe also reached its present, rather high level of integration gradually, as it coordinated interests and updated mechanisms of such coordination.
Q. Russia's WTO entry will mark an important step on the road of your country's integration into the world economy. But talks on the terms of entry are stalling. What is your explanation?
A. I want to emphasise that we still attach tremendous importance to our country's entry into the WTO. And I would not say that the talks are stalling. We always and at various levels contact our main partners in the talks, exchange arguments, and remove from the agenda issues that seemed insoluble before. As I perceive it, now we are understanding each other much better than, say, several months ago and are ready for serious breakthroughs on these negotiations.
Q. Your partners in negotiations are not happy with subsidised gas and oil prices, insufficient openness of farming and aircraft manufacture to other countries. How are you going to address this situation?
A. Deviation of domestic Russian gas and oil prices from world ones cannot be regarded as a subsidy in WTO terms, because their application is non-specific, they apply equally to all businesses in Russia, whether it be a national enterprise or foreign investors. The fact that domestic prices for energy sources are below world levels is a normal practice and a natural advantage for many energy-exporting countries, including the long-established WTO members.
An agreement on civil aircraft equipment is not binding on WTO members and so formally it cannot be viewed as an obstacle to the normal conduct of entry negotiations. Russia's farming, for its part, is defending at the talks its level of protection of national producers, which, as a minimum, is one order of magnitude lower than in a number of WTO member-countries, including many European countries.
In our view, these and other existing difficulties can be overcome, but, as on a similar occasion one of the American presidents said, "it takes two to tango".
Q. Inflation in Russia is keeping above the 15 per cent mark, while in European Union countries and the US it is in the area of 2 per cent. How are you going to remedy this defect, which is lowering the country's competitive ability?
A. You are right, deflation does not threaten us yet. But let us be accurate, to begin with: in 2002 inflation in Russia will be below the figure given. Year in and year out we lower the inflation rate -- it is enough to recall that three years ago it was almost three times as high. The main thing is that inflation today is quite predictable and is not due to chronic budget deficits as earlier (2003 will be a fifth straight year with a budget surplus). A quicker drop in inflation is held back by still existing price biases and also by a lack of effective means of money sterilisation.
One of the main areas of work to reduce inflation further is a continuation of structural reforms, including restructuring of natural monopolies, their financial transparency and development of competition. This is why we pay considerable attention to reforms in power and on the railways, and are preparing for changes in the gas sector.
Q. Restructuring of the banking sector, which is viewed as an indispensable condition for Russia's final switchover to a market economy, is making no progress. How and when do you intend to address this delicate matter?
A. I am not prepared to agree with you. After the government and the Central Bank adopted a joint strategy for reforming the banking sector, our efforts in this field have shown marked headway. The main lines of transformation in the banking sector are the state's withdrawal from the capital of commercial banks, tougher supervision of lending organisations, development of a competitive environment, greater financial transparency of the banks and trustworthiness of reporting. Preparations are well under way to go over to international accounting standards from January 1, 2004, that is in a little more than one year's time. Final touches are being put to a law on the insurance of household deposits on the principles applied in most of the developed countries.
At the same time we are aware that to turn the banking system into a locomotive of the country's economic development a lot has to be done -- today it does not fully act as a transformer of savings into investments. But the government sees eye to eye with the leadership of the Bank of Russia on further steps to implement the joint strategy, and we will steadily move according to planned schedule.
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