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Escrow well-being from ex-minister
Alexander Galushka and Artur Niyazmetov offered the state a new financial instrument - a targeted project issue using escrow accounts. Than the recipe can be useful to the Far East - EastRussia understood
Photo: Alexander Galushka. Photo from minvr.ru
First in the March issue of the theoretical and scientific journal “Finance”, and then - in the April 1 issue of the journal “Expert” saw the light article "The use of escrow accounts and target project emissions as a non-inflationary method of financing investment projects." Authors - Alexander Galushka, from 2013 to 2018 year - Minister for the Development of the Far East, and Artur Niyazmetov, Ph.D. in Economics, Deputy Plenipotentiary of the President of Russia in the CFA [The publication indicates a different position - Associate Professor of the Department of Public Finance of the Financial University under the Government of the Russian Federation, - approx. EastRussia].
Recall that in May, 2018, Alexander Sergeevich Galushka resigned the Minister of the Russian Federation for the development of the Far East. For almost a full year, his name disappeared from the media agenda — journalists never found out about his future employment. One way or another, the appointment of Alexander Osipov as acting governor of the Trans-Baikal Territory, as well as Artur Niyazmetov as deputy plenipotentiary of the President of the Central Federal District, was associated with the lobbying potential of Alexander Galushka. However, Mr. Galushka methodically abstained from any comments both on these appointments and on the activities of his successors in the Ministry of Eastern and Eastern Development. Thus, the publication of the article in the magazine “Finance” was a real surprise: the ex-official, who gained a reputation as an innovator and a person with a non-standard approach to management, proposed a comprehensive financial instrument, supposedly able to solve many pressing problems across the country. A survey of experts conducted by EastRussia shows that the creative year was not in vain. The proposed mechanism is quite timely, very efficient, although not easy to implement.
If we briefly describe the mechanism proposed by Alexander Galushka and Artur Niyazmetov, we are talking about the formation of an instrument of money issues for the Central Bank for the implementation of specific investment projects. Moreover, the key aspect of the proposed measure is its “non-inflationary” - according to the authors, today you can create such a chain of money infusion into the economy that the “printing press” will not accelerate inflation. The aspect is extremely important - after all, against the implementation of the new “May Decrees”, it is unlikely that it will be possible to avoid ruble emissions, the authors say. And they cite an impressive figure: “some experts believe that for GDP growth to be one and a half times more than 2024, it is necessary to increase the real money supply nine times”.
In the opinion of the authors, inflation can be avoided with such emission volumes in the following way. New money will be issued under special investment contracts, which will be concluded by three parties - the investor, a commercial bank and an authorized government agency. At the same time, the investor undertakes to achieve value added indicators, a commercial bank - to provide the investor with the required financing, and an authorized state body - to accept the provision of the necessary source by the Bank of Russia to a commercial bank to finance a specific investment project.
After the conclusion of a special investment contract, the Bank of Russia issues money for project financing of investments and deposits them in the stipulated amount on an escrow account in a commercial bank. "The issue volume excludes labor costs and the import component of the project in order to reduce inflation risks by limiting the receipt of additional money to the consumer and foreign exchange markets," the authors point out. The funds placed on the escrow account are not charged interest and are not enforced.
According to the authors, the cost of a commercial loan in such conditions will be based solely on the risk premium of the bank and will be about 3% per year. After the project is implemented (namely, after the project reaches certain financial indicators fixed by a special investment contract), the “deal” is closed, namely, the emitted money is transferred to the bank to repay the principal debt of the investor to the commercial bank. The bank receives its 3% per annum risk, the investor is rewarded through the write-off of the principal debt, and the state receives a stable taxpayer in the person of the operating enterprise, which has reached the planned indicators of economic activity.
“In the case of non-fulfillment of investor’s obligations under a special investment contract, that is, the non-launch of a new production, the issue is withdrawn — funds deposited by the Bank of Russia, and the relationship between a commercial bank and an investor continues under normal conditions,” the authors note.
"The crediting mechanism itself is quite working, but the experience of its practical implementation is quite controversial," notes in a conversation with EastRussia Chief Economist “Expert RA” Anton Tabakh.- The use of it on a broad front may well lead to an imbalance of the mechanism and a sharp surge in inflation - and the initiative should consider this. The use of such a mechanism in large projects, with mechanisms of control and regular assessment of credit quality can contribute to growth - the main thing is that this process should be fairly accurate, ”the expert notes.
Alexander Galushka and Arthur Niyazmetov emphasize that the proposed mechanism, based on the use of escrow accounts, insures the state as much as possible against ineffective emissions and inflation risks.
"The use of escrow accounts allows us to legally retain ownership of emission money for the Bank of Russia, while providing commercial banks with the opportunity to make investment loans in amounts within the escrow accounts," the authors note. - These funds will finally go into the money turnover only after creating the added value and strictly in its size by writing off the principal debt of an investor to a commercial bank. ”
The restrictions that are imposed on the participants of a special investment contract are designed to protect against inflation: for example, emission project financing is not provided in terms of the wage fund and import. “Such expenses are financed by the investor independently, at the expense of own funds and borrowings. This orients investors to the development of domestic cooperation chains,” say Alexander Galushka and Arthur Niyazmetov.
Finally, it is also important that the state will be able to set priorities for the development of industry in a targeted way, selecting projects for targeted emissions on a competitive basis. Such contests are proposed to be held annually in the framework of national projects and government programs, selecting projects according to indicators of the ratio of the planned value added to the required amount of funding.
According to experts interviewed by EastRussia, the proposed mechanism deserves close attention, since it can serve as an effective tool for targeted state support for large investment projects.
"In the current conditions of economic development in the country, emission project financing proposed in the article by A. Galushka is one of the few ways to attract investments in large-scale projects," said in a conversation with EastRussia Nikita Krichevsky, Doctor of Economics, Professor. -However, it should be noted that in the year 2006 there was already an attempt to do this when the Investment Fund of the Russian Federation was created. Of the billion rubles allocated to 200, only projects with 83 billion were selected. One of the famous projects is the Kyzyl - Kuragino road, for which the banker Pugachev received 5 billion rubles. The state has not received any money or road within the promised time, and this is not an isolated case. Now projects are being completed by other companies. ”
I agree with this opinion Andrei Ostrovsky, Doctor of Economics, Deputy Director of the Institute of the Far East of the Russian Academy of Sciences. “Of course, the use of escrow in the proposed variant insures against inflation, but the main problem remains - is the investor’s responsibility for the execution of the investment project. What is the investor’s responsibility in the event of a project failure?” Mr. Ostrovsky wonders.
"The very idea of phased emission project financing is not new and, in general, is reasonable," Oleg Grigoriev, State Counselor of the First Class, Founder and Scientific Director of the Scientific Research Center Oleg Grigoriev Neoconomic. - A.S. Galushka she outlined more competently than the C V. Glazyev. But it is difficult to implement with us. "
Mr. Grigoriev, in a conversation with EastRussia, expressed the opinion that, “provided that it were possible to build a blockchain system, in order, first, to isolate the flow of non-cash money into cash circulation, and second, to make the additional money supply it did not spread over the bureaucratic top, which would be responsible for the implementation of projects, then theoretically it could work. Printing money in Russia could be justified - if you understand that this will bring a small effect and at the same time will have a very complicated mechanism. "
According to experts, there are many examples in the world to analyze the effectiveness of targeted project emissions tools, and one of the key examples is China. "The mechanism of phased emission financing has existed in the West since the 80-s and has proven itself well," Nikita Krichevsky. - In 2000, the same idea was used in China and the countries of Southeast Asia, which allowed them to make special emissions for infrastructure projects and thus develop them. This has become a significant factor in the growth of the Chinese economy. Now China is the country with the largest money supply, but there is no uncontrolled inflation, which is predicted when using the money issue, in the country. ”
"The example of China shows that at one time the issue of money was justified, and the country could, firstly, become effective as a successful export country, and secondly, it helped turn it from an agricultural country into an industrial country," Oleg Grigoryev. - But in China, money was thrown into private structures, hundreds of thousands of private businesses, which created incentives for its development. And even with a positive effect, there is certainly a negative result, since a huge money bubble has formed and any attempts to reduce it immediately lead to a fall in economic growth, which significantly affects the entire global economy. "
"Inflation in China is at the level of 1,5-2,0% per year," explains Andrey Ostrovsky. - Such low inflation is often achieved through a large amount of investment in the production of goods and services, and an increase in production leads to curbing inflation tendencies. As a result, an increase in the production of goods and services in the PRC leads to a decrease in the general price level, and investors, both foreign and local, are interested in investing in production, but not in consumption. "
At the same time, as Mr. Ostrovsky notes, the state in China is actively investing in infrastructure development — roads and railways, ports, airfields, bridges, and other facilities. “Many large infrastructure facilities are built at the expense of public-private partnership with the participation of foreign investors. At the same time, the projects go to the payback stage only after 15-20 years, and only then the investor starts to make a profit,” the expert emphasizes. state participation is also provided by attracting a private investor, who finds benefits from participating in such projects, despite the long payback period. "
According to experts, the mechanism proposed by Alexander Galushka and Artur Niyazmetov, if applied, will be especially in demand in projects in the Far East and in the Arctic. This is largely due to the fact that with the successful implementation of the project and its release on the declared indicators, the actual construction cost is covered by the emission funds. And this means that, firstly, the burden of expensive construction and complex transport logistics is removed from the project economy. And secondly, the state gets the opportunity to “revitalize” the region through the simultaneous deployment of large-scale construction projects - this is earnings for business, and new jobs, and the development of the social sphere.
The fact that it is expensive and unprofitable for business in the Far East to work on “common” conditions has been said a lot. In many ways, the intensive development of investment projects in the Far East regimes of TOP and the Free Port shows how direct financial participation of the state (through unprecedented tax breaks or through targeted financing of infrastructure) allows compensating the costs of work in the Far East, stimulates business to work. The model of TOP and Free Port is recognized as workable, but it has a significant limitation - the financial resource of the federal budget, directed to the development of economic regimes, financial support for investors and compensation of tax losses to local budgets, unfortunately, is finite. At the same time, the mechanism of target project emissions proposed by Alexander Galushka and Artur Niyazmetov allows you to effectively influence the economy of “expensive” investment projects in the most difficult and difficult construction conditions, leading them to market payback parameters that are interesting for investors.
The desire to use the mechanism in the Far East has already been declared Head of the Trans-Baikal Territory Alexander Osipov. Mr. Osipov told TASS: “We have a shortage of long and cheap money. The budget of the Trans-Baikal Territory for 2019 is a year more than in previous years, but nevertheless it cannot be called a development budget. To solve this problem, we are ready to become a pilot region in using escrow accounts when implementing investment projects. We have an understanding of how to accomplish this, "said Osipov.
According to the acting governor, “in order for people's well-being to grow and feed themselves, the state first of all needs to create money for cheap loans.” Upon successful implementation of the project, the principal debt issued on the escrow account is written off, and only small interest is paid to the commercial bank, - said Alexander Osipov.
By the way, a short footnote, put at the very end of the article, indirectly testifies to the seriousness of the elaboration of the mechanism of the target project emission. Literally: “The authors express their deep appreciation to P.M. Volkov, V.V. Gerashchenko, K.A. Dmitriev, S.V. Kachaevu, A.N. Klepachu, PI Korotkov, A.V. Krutikov, M.V. Kuzovlev, A.N. Mogilat, A.M. Osipovu, S.E. Prokofiev, V.A. Fadeev, I.O. Shchegolev and E.L. Yuriev for informative remarks and valuable advice in finding solutions to the problems raised in this article. ” This comprehensive list is not only a blob of national financial and economic expertise, but also a solid administrative resource. If the text published in the journal “Finance” is indeed a consensus for the listed people - in the coming months we can expect the emergence of a corresponding legislative initiative regulating the use of the target project emission mechanism using escrow accounts. So it's time for the Far East to prepare projects.