Half-year of Russia’s G20 Presidency: main outcomes
The Russian G20 Sherpa, Head of the Russian Presidential Experts Directorate Ksenia Yudaeva and Deputy Finance Minister of the Russian Federation Sergei Storchak gave a news conference at the RIA Novosti International Multimedia Press Center on June 10, 2013. They spoke on the main outcomes of the events held during the first half-year of the Russian G20 Presidency, as well as on the prospects and plans for preparing the upcoming G20 Leaders' Summit, to be held in St.Petersburg on September 5-6, 2013.
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Moderator: Hello and welcome to the RIA Novosti International Multimedia Press Center. Today we are talking about the early results of Russia's G20 Presidency and this news conference is given by the Russian G20 Sherpa and Head of the Russian Presidential Experts Directorate Ksenia Yudaeva and Deputy Finance Minister of the Russian Federation Sergei Storchak. They will review the results of the first six months of the Russian G20 Presidency. Ms. Yudaeva, you have the floor first.
Ksenia Yudaeva: Thank you very much. I will start with some of the formal results of what we have accomplished. We have held: three G20 Sherpas' meetings; two meetings of Finance Ministers and Central Bank governors, four meetings of Deputy Finance Ministers, including consultations between finance deputies and the Task Force on Employment members; a total of ten working groups on different work streams, i.e. two meetings per each area of work; 12 seminars; 20 outreach meetings, i.e. meetings with various external partners (namely, associations of states or various social dialogue formats working jointly with the G20). All these meetings discussed substantive points of view, items of the G20 Summit's agenda, helped gather information for the actual policies and analyze various decision-making options.
Let me tell you straight away what we are anticipating in the next two to three weeks. This week we are having the Civil 20 Summit, and right before the St.Petersburg International Economic Forum (SPIEF) there will be the Y20 Russia 2013 Summit, while the Business 20 Summit will be partially held in the framework of the SPIEF.
These are the summits of the G20 partners representing the business community, youth and the civil society. The participants of these summits will discuss and endorse their respective communities' recommendations for the G20 Leaders. These recommendations will be presented to the President of the Russian Federation and this year's G20 Chairman Vladimir Putin.
We are not planning to discuss the content of the recommendations today; we will get acquainted with it at these summits.
What I would like to discuss now is bottom line of all these numerous discussions. I must once again stress that what I am talking about is only the preliminary results, because we have gone through the first stage of all these measures I have mentioned, and that is the stage of gathering information and discussing possible decisions. We are now moving on to negotiations on the final documents. By the Summit the final documents will have been agreed on, further discussed by the Leaders and finally approved at the Summit. This is the stage we are now embarking on.
Speaking more precisely on the content, the focal points of our presidency are economic management, ensuring economic growth, rebalancing global demand and job creation. As we said at the very beginning, economic growth, stimulating investments and creating new jobs are the themes that run through all the discussions in all the main working groups of the G20, and there is a considerable number of them. We suggest that all these initiatives should be discussed at the summit. Most probably, at the Summit, as usual, much time will be spared for the situation in the global economy and ways to stimulate investments and create jobs.
As for the specific areas of the G20's work, stability of the International Financial and Economic Situation is the first one. The G20 Leaders will assess the situation at the summit, and we expect a St.Petersburg Action Plan on Growth and Employment to be endorsed.
Two key initiatives for this work stream are currently being discussed. First, there is an ongoing discussion and Sergei Storchak (Deputy Finance Minister of the Russian Federation) will speak in more detail about the countries' new commitments - on state debt and investment policies. A package of measures for the employment sphere and on creating jobs is being discussed, as well as measures on what is called activation of the vulnerable groups, with primary attention to the young people. The closer we come to the summit, the more acute the issue of youth unemployment becomes. Therefore, we hope that we will agree on certain issues in this particular area. As you know, these issues will be actively debated in mid-summer at the joint meeting of the G20 Labour and Employment and Finance Ministers.
There also exists a study group analyzing investment financing issues. It will prepare its proposals on improving country specific factors influencing investments; on ways to improve the situation at the financial markets and use the financial market more effectively as a means to attract investments; on strengthening the role of the multilateral development banks; and on the use of state budget, as well as assessment of the impact of financial regulation reforms on financing state investments. The OECD recently held a seminar on the principles of financing long-term investments by the institutional investors. I took part in that seminar, and its recommendations will also be among the documents to be presented at the summit.
With respect to the employment agenda, an assessment the current situation, as well as a review of the policies pursued in various countries will be made, and their effectiveness may also be discussed. An action plan in this sphere will be approved as a cornerstone of future labour market policies.
In the sphere of financial regulation progress in introducing Basel III Bank Regulation Standards will be assessed, as well as in the implementation by G20 countries of the over-the-counter derivatives regulation. Russia has also proposed to assess the impact of reforms in the financial system on the economic situation in the respective countries.
The role of the tax issues discussions within the G20 has substantially grown recently. It looks as if it may become one of the central issues at the summit. Two main tax initiatives are on the table. The first one is the initiative on automatic information exchange. The OECD is preparing proposals concerning the relevant standard. The second initiative is called Base Erosion and Profit Shifting (BEPS). That initiative seeks to develop a joint policy set to prevent the transfer and tax evasion by legal methods through offshore zones. As you all may be well aware, there have recently been many tax evasion scandals in several countries, especially in Europe. These involved leading businessmen and even politicians, as well as some companies - we have recently seen some high-profile scandals. Therefore, the issue is being discussed ever more actively and many leaders are calling on the G20 to discuss it separately, perhaps even in a separate session, and adopt certain decisions in this area.
The biggest challenge as the Sherpa office sees it is the reform of the financial architecture. We very much hope that some progress will be achieved through the Finance track negotiations. As far as I know, the US Congress has yet to ratify the 2010 reform, and this is a barrier to further progress in this direction. We will probably suggest at the summit that the Leaders could reaffirm their commitment on the IMF reforms implementation, and that the role of new economic power centers within it should be increased.
Trade is a traditional area of the G20's activities. Naturally, Russia can by no means exclude it from its presidency agenda, especially considering that a ministerial conference will be held in Bali this year. Basically, after a prolonged period of inactivity talks will be held in the framework of the Doha Round and everybody would certainly be willing to see the light at the end of the tunnel and to see certain agreements. Therefore, first, we hope that the Leaders will grant at the Summit their political support for the negotiating process and back the main initiative, including the agreement on trade facilitation.
Furthermore, there is a strong demand (especially on the part of the business community) for extending, within the G20, a standstill agreement on protectionism, and that issue will also be discussed. Russia insists on continued WTO-led monitoring of the protectionist measures applied by the G20 countries. We have come up with an initiative to agree on approaches to ensuring transparency of regional trade agreements. We are actively discussing it with our partners and we very much hope to be able to agree on certain transparency principles on that matter.
Finally, a new topic that has been a subject of particular attention within the G20 is new forms of trade having emerged just recently. More precisely, this pertains to the transformation of the forms of international trade that are currently underway.
We are used to discussing trade in goods or services. In reality, production processes are spread across various countries, and a computer, for example, may cross borders 400 times before it is fully assembled. So, the main form of trade today is connected with global value creation chains.
The OECD jointly with the WTO has done extensive research into this topic, and are preparing policy recommendations. A couple of weeks ago I took part in a seminar that actively discussed this very issue: what could be possible policy recommendations and, by the way, not only trade policy. Considering this new type of trade, it is not enough to simply remove trade barriers to promote trade; it is necessary to implement a certain development policy inside the country, including the development of the services sector. The OECD will prepare these recommendations in some shape: either as ready recommendations or specific wishes concerning what these recommendations should be. This topic will be discussed at the Summit.
Finally, development assistance policy has recently become one of the key areas for the G20.
Before I turn to development, I would like to mention that the G20 has been holding Leaders' summits for five years and the meetings at the level of Finance Ministers and Central Bank Governors for 15 years. Therefore, increasing attention is being paid not to endorsing new decisions, but to reports on what has actually been accomplished in all these areas that the G20 accepted commitments earlier. On the financial track such reporting exists in most areas, and similar reporting is being introduced on the new tracks. Among the new tracks, there will be a report on the Framework (for the strong, sustainable and balanced growth) working group, and a report on the implementation of the G20 commitments in the field of international development assistance.
That was a decision of last year's Summit, and the reports are being prepared now. A new action program for the next period, 2014-2016, is being prepared simultaneously. We hope that by the Summit this program will be ready focusing on such areas as food security; human capital development; infrastructure project financing; enhancing financial literacy and protection of the rights of financial services consumers; as well as accomplishing the Millennium Development Goals and elaborating the agenda on sustainable development for the post-2015 period.
I would like to dwell on the last point. You know that the deadline for the fulfillment of the Millennium Development Goals is 2015, it is a UN-led process, and what has and has not been done is being currently assessed new Millennium Development Goals are being drafted. The G20 is not going to hijack that process, but it is certainly in the interests of the G20 to support that UN process; therefore it will require considerable attention, including at the Summit.
Another area of work is fighting corruption. Last year we adopted a two-year action plan, and this year we are preparing a report on the implementation of its various activities. We will mention in the report which countries have joined the UN Convention against Corruption, what anti-corruption legislation the G20 countries have adopted based on the recommendations of the action plan and so on. Then we will present reports and some additional suggestions on the initiatives proposed by Russia.
We have put forward the initiatives on fighting against corruption at holding major sports events and during the privatization process, as well as on analysis of the link between corruption and economic growth. There are some practical proposals relating to these initiatives, and they are now being discussed by the Anti-Corruption Working Group. The findings of this discussion will be submitted for the Summit. We have also suggested starting drafting a long-term comprehensive strategy on fighting corruption, and we hope that at the G20 Leaders' Summit the main tasks and objectives of this strategy will be agreed on.
Energy sustainability is a major area of our work. There is a long-running US initiative on removing ineffective fuel subsidies. This year experts are working on the methodology of identifying such subsidies and developing plans for eliminating them. Countries will also start making bilateral assessments of these subsidies.
In addition, the G20 and the G8 have established special formats for collecting information and making energy markets more transparent. I'm referring to the so-called JODI Oil and JODI Gas initiatives. Russia has announced its intention to discuss these databases with the market players and companies that trade in financial instruments, and we will also submit our proposal to extend the format of data collection.
The issue of investment is very important for us, and hence last week Russia conducted the Roundtable of national energy regulators in Kazan within the framework of the outreach dialogue. The participants endorsed a statement that I have already got acquainted with and that will be submitted to the Energy Sustainability Working Group. This statement defines the main principles of energy regulators' operation and their mutual exchange of best practices. This statement will be reviewed at the Energy Sustainability Working Group Meeting.
We believe that cooperation between regulators aimed at attracting investment in the energy industry and improving the quality of regulation is a very promising area of work. We hope to achieve some results in this area by the Summit.
Finally, in 2010 Russia put forward its initiative on preserving the marine environment, the Global Marine Environment Protection initiative. This year we have announced that we will try to translate it into practice as an operable mechanism. We have already agreed on the information exchange parameters with our partners. The relevant website will be launched this summer and by the Summit the initiative will be in full swing. In other words, all countries will use this website to report on their activities in preserving the marine environment while extracting energy resources. This initiative was inspired by the oil spill in the Gulf of Mexico. Therefore, we have decided to set up this very pattern of information exchange, which will allow users to share their experiences in preventing and overcoming the consequences of similar environmental disasters caused by fuel and energy deposits mining.
These are the main areas. As I have already mentioned, we are closely working with all our outreach partners. This month we will hold the three summits that I mentioned in the beginning - the Civil 20, the Business 20 and Y20 Russia 2013 summits. Our social partners will also meet in July, before the Joint G20 Finance and Labour Ministers Meeting. Trade unions will also have a meeting in July. Then the representatives of trade unions and business community will meet the Labour Ministers to discuss the recommendations of these G20 outreach partners on the employment policy. That is where I would like to stop with my opening remarks. Mr. Storchak, over to you please.
Sergei Storchak: Good afternoon. After such a detailed introduction by Ms. Yudaeva, I will try to be very brief. To start with, I'd like to answer the two questions that I've asked myself while listening to Ms. Yudaeva. I did not prepare them in advance although we knew about this news conference long ago.
And these two questions that I've asked myself are what are the best results of the half-year of the Russia's G20 Presidency and what is its biggest disappointment? Let's start with the disappointments. The biggest one is that the G20 Seoul Agreements have not been made through. The G20 couldn't keep its promise as the world's premier multilateral forum for financial and economic cooperation.
Ms. Yudaeva mentioned the reasons for this failure but it is a lame excuse for us. You will still be disappointed even if you know the reason - say, an investor pledges to buy some shares but then fails to do so. We could long discuss why he didn't do that, but the bottom line is that we haven't moved any further forward with the Seoul Agreements. They are still on paper, which is applicable not only to increasing the capital of the International Monetary Fund (IMF) but also couldn't achieve sufficient outcomes in the governance reform of the IMF. But the good news is that when the G20 members have committed to allocate additional funds to the IMF after the Los Cabos Summit, a lack of money is not an urgent issue. This gives us grounds to hope that any new crisis situation will be quickly settled with these almost half a trillion of additional resources that the G20 members promised to provide at the Summit in Los Cabos.
Another obvious disappointment for me at least (and I'm being rather frank though someone may disagree) - is how enormous the G20 has become in terms of event management. When we took part in G20 meetings in previous years just as participants, we couldn't feel this largescale of the G20. And now that we have assumed the Presidency and have to rush around to cope with everything, it seems like the G20 as a club or a forum risks becoming excessively overloaded.
Just spare a thought for a broad range of areas that Ms. Yudaeva has highlighted. This is simply an incredible number of decisions that will have to be made, while the leaders usually come together for a little more than a day, and during this day they are supposed to discuss many questions and resolve the conflicting issue that always arise inevitably.
Here is one controversial issue that we discussed at Deputy Ministers' level in St.Petersburg last week - the so-called spillover effect. This neutral issue has come to the forefront literally during our presidency. An assessment of the macroeconomic policies effects pursued by the developed countries, and now by China as well, on all other countries is bound to be political by its nature. Obviously, disputes are inevitable as well as the differences in the assessment of that effects of, say, quantitative easing or something along these lines, and this will feed the debate in the G20. Debates require a lot of time that we simply don't have.
That is why I'm so disappointed that we have expanded too much. Suddenly it is appeared the Business 20 Summit. A summit is a meeting of leaders, and we have the Business 20 Summit, the Youth 20 Summit...what are they all about? Of course, I'm exaggerating but still this is the responsibility of the chair to take the rational kernel from all these processes, and that is no easy task. Nobody has relieved Ms. Yudaeva's areas of responsibilities - all internal economic issues. Nobody has reduced my area of responsibility either.
Let me turn to the best results that we have achieved to date. My personal opinion may not coincide with the Minister's, so I'm warning you right away not to make any assumptions about certain contradictions. We simply see things a bit differently - he sees them from a higher level, whereas I am taking a narrower view.
I think the most impressive result of our presidency pertains to starting the active search by all G20 members for the alternative sources of investment financing. We have agreed that we will reach a deadlock if we continue to rely exclusively on the banking finance.
In the last few decades banks were the main source of monetary or financial resources for project financing in all sectors of economy. For me this is important because I've been saying for a long time that the financial sector had lost its links with reality and begun to dominate by itself. Its historic mission - when it was an intermediary between investors and entrepreneurs - has grown into self-dominance, and I believe this notion is currently highly relevant for the G20. Although it may be not so clearly reflected in the G20 efforts to streamline the reform of financial regulation.
We have achieved obvious progress in this sphere. We hope that in St.Petersburg the G20 Leaders will produce a special statement reflecting that the problem of being too big to fail is resolved once and for all. From now on nobody will spend national budgets to save private financial institutions that have lent to unreliable borrowers, accumulated toxic assets and then ask the governments to give them astronomical financial assistance funds because of their crucial influence on national economies. We hope the G20 Leaders will draw a line in St.Petersburg and will agree with the Ministers that this issue has been resolved. It was the main reason behind the crisis of 2008-2009.
I am not going to list out all the items of the financial regulation agenda. It would be better if you asked your questions on them later. The enormous efforts that are being made in this field and also there has already been finalized the institutionalization of the Financial Stability Board. Interestingly enough, the G20 has remained as a club or forum and its right hand - the Financial Stability Board - has become an institutionalized organization, albeit under Swiss law. But it is still an organization with its own charter, budget and secretariat, that will only become stronger with time. After this fait, as we could observe, our colleagues who used to work in the G20 either as volunteers or enthusiasts and have been employed by the board's international associations have now straightened their shoulders and become tougher in upholding their points. They are attaining from the jurisdictions to fulfill all the commitments that are now being assumed on a large package of financial regulation measures.
We have achieved another decent result during this past six months, setting the stage for the successful work of the following President of the G20. The agenda that we'll hand over to Australia in December won't be an empty one. The Australians are already saying that they will continue our initiatives. They are clearly recognized as important, but it is also clear that we won't have enough time to implement all of them during our presidency.
Our main issue is the sources of long-term financing for investment. Towards the summit in St.Petersburg we hope to come up with a road map or the Action plan, that further will be implemented by G20's participants. We hope that in a month or a bit more within the G20 Finance Ministers and Central Bank Governors' meeting in Moscow in July. G20's participants will confirm the agreements we have reached now. The program is to be finalized and at the G20 Leaders' Summit in St.Petersburg it will be confirmed by the Leaders.
Another major accomplishment pertains to modernizing the public debt management. It took other countries a year to admit the validity of Russia's position that there is a need to revise the underlying principles of the borrowing policy of the past 15 years. A special meeting will be held in Washington D.C. in a week, which will bring together the state debt managers from all the jurisdictions within the International Monetary Fund members, not only the G20 participants. There will be made the Guidelines for Public Debt Management assessment from the viewpoint of all potential consumers of this high intellectual product. Of course, we will not be able to introduce concrete amendments to these guidelines on the Leaders Summit in St.Petersburg, but we are fixing our position so that our Australian colleagues could promote this item further. Correspondingly, this final product could include the causes, the consequences and the exit strategy for the developed countries in such a difficult debt situation. We expect subsequently, maybe this year or maybe early next year, to use the amended product to work with our regions, the constituent entities of the Russian Federation, which have been recently rather active in using bank credits and issuing their local bonds within the country. The task is very simple: to translate the best international practices into the Russian conditions, and to prevent the regions from being over-credited so that they remain in a state of debt stability regardless of the macroeconomic and financial situation.
That is all I wanted to say to get our dialogue started. I am opening it up for questions.
Question: On the one hand, it is a common belief that the G20 should become a kind of supranational regulatory body, and it is indeed trying to do so. But the economic problems of the key countries are very diverse and pertain to very different areas. Do you see the G20 working out uniform global rules considering that, say, Japan, the United States and the European Union are facing the problems that are utterly different?
And a second question. Ksenia Yudaeva mentioned the key areas of the G20 discussion, and it is a common knowledge that the situation is appalling on just about every count. Employment - we have a fairly good employment indicator, but still we should also pay attention to the quality of employment, and 25 million jobs is also a very ambitious target. Investments: what has been happening in this country for the second year according to the statistics of internal demand for investments is another tricky issue, and that prompts many Western commentators to conclude that Russia is pursuing its own interests only in the energy field, that is, it is not a global economic moderator considering its own economic performance.
And finally, Sergei Storchak has also mentioned debts, non-state debts, and financial regulation, and again what is happening here with corporate debts? Does it somehow run contrary to the intentions of the G20?
Ksenia Yudaeva: First of all, with respect to different interests and common rules. Indeed, a serious argument is under way about what issues require policy coordination and what issues are within national jurisdiction, and in that framework an exchange of experience can be organized without having to produce any serious recommendations. There must be a clear awareness that there are some global issues on which a coordinated global policy is needed. That is why the question of international trade always comes to the fore. Clearly in trade policy there are numerous spillover effects, including some that are counter-productive, and that is why it is a traditional sphere of policy coordination and joint actions.
Obviously, there are more and more such aspects in the financial sphere which the G20 is only beginning to address. We do not have direct influence on the spheres of financial regulation, but finance is an area where we are dealing with global institutions and national regulation. Clearly, there is a contradiction between the two, and the whole agenda is in many ways aimed at creating a common regulatory environment and removing this contradiction through coordinating policies and common standards in the absence of supranational regulation.
Monetary policy is associated with this issue via the issue of spillover effects. The G20 was created in response to intensifying global imbalances: imbalances in budgetary policy, trade, etc. This is also a sphere that requires joint actions. In many, though not all, areas policy coordination and joint actions are needed.
I agree, for example, that in the sphere of employment, which you mentioned, and that is in many ways an area of national policy because you cannot have "one-size-fits-all" approach to the employment issues for different countries, exchange of best practices, exchange of experience and its application in one's own country are very important. We have fundamentally different situations in different groups of countries. There is Europe, where in some countries unemployment stands at 25% and youth unemployment is over 50% and approaching 60% - an absolutely catastrophic situation. And there are countries like Russia or Brazil, where unemployment has been at an all-time low over a long period of time, while economic growth has slowed down substantially and the countries find themselves facing the challenge of stimulating the creation of jobs in the context of full employment. It is a serious challenge for our country. Then there are countries like India and Indonesia, where the labour market has its own specifics connected with what I have described as the processes of development.
In general, what is the labour market? It clearly cannot be measured in the developing countries by the same yardstick that is used in the Western countries. There are many diverse problems, but the basic problem of creating jobs - what to do to upgrade the quality of jobs and what principles to use for this purpose - is in many ways common for all. That's the first point. Point number two is the extent of flexibility of the labour market, how flexible it should be to create an environment for more jobs to appear and, let us put it sharp, to cut inefficient jobs.
For a country like Russia it is important to create efficient jobs and to get rid of the inefficient ones. Some questions can be discussed from this perspective. So I would disagree that it is a sphere of extreme diversity: there are spheres in which coordination is vital, and there are spheres where it is desirable to exchange experience and work out some common principles.
Speaking just recently at the OECD I drew a parallel with the events of a hundred years ago, the so-called first wave of globalization. One would have thought that there were no common interests. And yet at the time (100 or more than 100 years ago) some decisions were made that we are still using up to this day. But at that time they were absolutely basic, covering common systems of measurement, like how to measure weights, length, etc. Sure, there are countries in which these systems are slightly different, but anyway we live within a more or less standardized system of coordinates than, for example, in the Middle Ages, when everyone measured whichever way they liked. Of course, the tasks that we are facing are not of such a fundamental nature, but some parallels can be drawn in the financial sphere: there is clearly a need for some standard rules of the game, considering the massive links between countries through financial markets.
Everybody is berating Russia: where is Russia standing if the G20 agenda is projected on the local circumstances? It is not justification, but if you look at statistics, Russia looks pretty much the same as every other country. Economic growth this year slowed down in practically all countries, starting from China, the leader in economic growth in recent years. One may discuss the impact of internal and external factors on Russia, but still we are doing very much similar to all the rest.
Russia, like Brazil, has practically full employment and an economy that is slowing down. Motivating investments is also a common topic because here in Russia we have many companies with money that they are not investing. The media is reporting of staggering figures of the amounts of cash that Apple and some other companies have, which they are not investing and not paying in dividends to their shareholders. So, in spite of our major differences, the problems we are discussing are common for all the G20 countries, and the fact that Russia is raising them means, among other things, that these are also our problems, and we have to tackle them inside the country.
With respect to financing for investment, I think the job undertaken by the G20 is of pivotal importance for Russia. Russia needs to develop its financial market and its financial market institutions; the systems of financing infrastructure projects and various ways of assessing the projects, project management are key areas for Russia, the areas that we should build up our competence.
As for the labour market, what I can hear, and what business likes to talk about in particular is labour market flexibility... I think a sort of civilized flexibility (our market is often very flexible, but only because it has a huge informal sector), ensuring this civilized labour market flexibility is a very serious issue for us. The question of training and qualifications and retraining is a policy that goes hand in hand with job creation in Russia. Whichever way you look Russia can derive some lessons from the current G20 agenda and apply them here. In that sense we have many benefits from the G20 Presidency because this process involves many ministries, including core ministries which are actively exchanging information and experience. This enriches our own process of shaping domestic policies.
Sergei Storchak: I would like to make several additional points. The G20 process will never be and does not intend to be a supranational regulatory body, t it is obvious. The idea of a global government that, as Mikhail Gorbachev, the President of the USSR used to say, is "thrown in" - this is not how we behave within the G20. Nobody claims that the decisions we take should be treated as supranational regulation. We come to an agreement, then each jurisdiction acts independently: it accepts or does not accept the current recommendations. If these are concrete commitments, like in the Framework agreement, that is a different story. But again, before the Framework agreement includes specific commitments for concrete jurisdictions is adopted, these jurisdictions send these commitments to a working group on the Framework agreement, where they are gathers and fixed as national commitments. That, emphatically, is not supranational regulation.
I would utterly disagree with an assumption that Russia shows terrible performance by all criteria. I can't even understand what it is all about. What does "by all criteria" mean? In general, when the word "all" is used in a statement like this, it can be safely ignored. This assumption is absolutely wrong - we don't look the worst. Yes, we are currently facing a number of pressing domestic problems, but hardly there is now any government that is not facing problems.
Probably the main problem - and I would describe it as universal - is that we (I'm referring to governments) are tend to be focused more on the short-term tasks because very often they are viewed as an indication of the government's performance - successful or failing. This is unfortunate major drawback, and it is typical for all governments. Tasks are tailored to the election cycles. Resolving this issue is a serious challenge.
Implementation of some of the multilateral initiatives may take years. Here's an example that I consider typical. In 2006 we made a very short statement on financial literacy following the G8 finance ministers' meeting in St.Petersburg. This tiny statement gave birth to an enormous project. On June 13-14, the Ministry of Finance will hold in Moscow a large meeting to sum up the results of our efforts on developing the system of promoting financial education and countering financial illiteracy. Participants will compare the performance of different countries in this sphere over the past eight years. As always, we are slow starters, but I hope we'll move faster now and make good progress in what is a very sensitive sphere for the public. We anticipate good progress in this field in Russia in particular.
I also can't seem to understand the idea that Russia is not a global economic moderator. Our initiatives usually receive support. Try and get the support of 20-odd sovereign states for any of your initiatives. It will come in for much doubt before any result is achieved. We started promoting our initiative on new sources of investment financing nine months before assuming the presidency. It required a consensus of completely different people often with polar views. Clearly, the prevailing opinion is that the market forces are capable of overcoming the aftermath of the global crisis. This is how our dialogue began, but gradually people started realizing that this wasn't exactly the case.
The OECD is carrying out a major initiative, as mentioned by Ms. Yudaeva. I'm referring to the principles for extending the participation of the institutional investors in financing the real economy. This is a tremendous intellectual effort - experts are generalizing the national practices of dozens of jurisdictions.
Strange things are happening in many countries. Those, who have stockpiled resources and for whom growth is important, are mostly represented at the secondary market. If they invest in bonds and particularly equity, they always turn to the secondary market. IPOs almost vanished in many jurisdictions. What is going on? The United States with its enormous economy has about 30 IPOs per year. Something is amiss.
In this context the OECD has undertaken this analysis, and I hope it will be duly appreciated. It is a very complicated analysis. These principles will not turn into ready-to-eat bread because of the way they are construed. Domestic authorities should determine themselves what should be done and do it tailoring their policies to local circumstances.
We are talking much of the development of our national financial market and I hope the adoption of these principles will make a difference. I hope Mr. Moiseyev (Deputy Finance Minister Alexei Moiseyev), who is in charge of the financial markets' development, and other colleagues from the Federal Financial Markets Service will be encouraged to adjust these principles to Russia's circumstances.
This is how the G20 operates and this is the only way in which it can operate.
Question: I have questions for both Ms. Yudaeva and Mr. Storchak.
Ms. Yudaeva, we are naturally interested in the bilateral projects, talks and relations between Russia and the United States in the G20. The September summit will be peculiar in a sense because it will also be a Putin-Obama summit. Are there any joint Russia-US projects within the G20 and what is the general atmosphere of bilateral relations in the G20?
And another question. Could you tell us more about the Civil 20. For instance, will those who are registered as foreign agents represent Russia there? In general, how will the Civil 20 Summit be organized?
And a question for Mr. Storchak. During the last four years each St.Petersburg International Economic Forum opened with strong and sometimes subtler hints about the roots of the economic crisis. Do you discuss the ways to overcome the financial crisis with the United States? What is your interaction with the United Stated on this score? What are the main areas of agreement and disagreement?
Ksenia Yudaeva: The G20 is a multilateral forum and has no bilateral projects. Usually, all projects are multilateral. Though I could certainly describe our interaction with the United States in the G20 framework, in part, my contacts with it's Sherpa office.
I think we have normal working contacts. It is no secret that there is some disagreement, but it is more between America and Europe than America and Russia. America believes that the main topic, especially this year, is economic growth, whereas Europe is talking at length about fiscal stabilization. We had many debates on this issue, including those with the US Sherpa and the US Sherpa Office. We were trying to work out what to do given the current circumstances. So we are working on this together.
There are several economic and other issues that are probably not even on the G20 agenda that I'm going to raise at a bilateral meeting as the Head of the Presidential Experts Department. I am not going to go into details, you will find it out after the meeting, I would just say that these are the economic issues.
What other US-related issues, primarily the fiscal ones, do we discuss most often in the G20? This includes extraterritorial American legislation in the financial sphere, taxation, the derivatives market, and insurance companies, to name a few. I've recently read financial reports virtually on every subject and issue of the extraterritoriallity of the US legislation. The US financial institutions are also fully aware of this. I think this issue is fitting for some serious debates. Some of the ideas expressed in such discussions may grow into global initiatives.
Now let me turn to the second question - on the Civil 20. I'm quite familiar with the issue since I was the Head of the Organizing Committee of the summit.
First, I will brief you on how the recommendations were being prepared. The Civil 20 process was launched at a major conference in December, where we presented the priorities of the Russian Presidency. Representatives of civil society, analytical centers and business also held their first meetings at about the same time. The participants of the conference determined the areas for which recommendations would be drafted. Later on, the heads of the working groups for each area were elected (I don't know the details) - one from Russia and one from outside Russia, let's put it this way. Then the Civil 20 website was launched. It was surprising even for me how actively the Russian civil and expert organizations engaged in the Civil 20 process.
To give an example, Marina Larionova is the head of the Institute of International Organizations and International Cooperation at the Higher School of Economics National Research University. In cooperation with expert centers representing different 20 countries, the institute has given its assessment of the G20's performance for many years. They prepared reports on the G8 as well and had a very good website on the G20.
To put it shorter, an online platform was launched through which everyone could give recommendations on how the G20 should look like from the civil society perspective. Sort of crowdsourcing was organized -recommendations were elaborated and then put on ballot. This was a very interesting process. In some cases members of the groups failed to reach consensus. This is why we have two different packages of civil society recommendations on finance. We got acquainted with some of the civil society and business recommendations at the Sherpa meeting.
We only insisted on one condition - recommendations should be related to the G20 agenda, or topics that civil society wanted to discuss, although they were not actively reviewed by the G20, for instance, environment protection. Civil society has presented numerous recommendations in this regard, for instance on eco-safe implementation of the infrastructure and other major investment projects. Now the G20 is discussing this issue and credit for this goes to civil society. The main point was to produce recommendations on the initially selected topics. There will be a full-scale book of recommendations. The summit will open with the introductory part that will be followed by the discussion of different topics. Then its participants will adopt a final document that will be presented to President Vladimir Putin.
We are actively working with our partners in the Troika - Mexico and Australia. Australia is studying our experience to continue these activities next year. We worked with a diverse group of organizations but did not deal with those who are sharply political. Economic issues were tackled, say, by Transparency International at different meetings that I attended. I also met with NGOs representatives on different occasions, for instance I had a meeting with representatives of about 40 organizations during my last visit to Washington, and Transparency International always attended such meetings. As for the political organizations that you are alluding, I'll tell you straight that I don't know whether they took part in this process.
Question: More like civil society, notably, Human Rights Watch, those who deal with human rights rather than politics.
Ksenia Yudaeva: To put it straight, human rights is not a G20 topic. I can't say for sure, they probably took part in the discussion of some other issues. As for the G20 issues, all those who deemed it necessary were involved in the process. We couldn't even cut anyone off on the website.
Sergei Storchak: The question is about the bilateral cooperation with the United States at the finance ministry level.
Of course, it exists. Moreover, it is even institutionalized - we conduct meetings at this level once a year but usually keep a low profile. We also hold consultations on the global agenda. Needless to say, every meeting begins with the assessment of domestic fiscal conditions and economic growth or economic development. The exchange of opinions on what is happening in our economies is usually followed by the discussion of the global agenda in the G20 context.
We have consulted other G20 members on each and every initiative we made. This is not only the Troika that we are taking part in, but also the leading economies whose help we are counting on. The United States was among those states that we consulted long before the president signed the concept of Russia's G20 presidency.
Our dialogue is very open. Of course, it reflects the extent to which we are involved in each other's economies. Our interdependence is not that great, so we can call a spade a spade and openly speak about our likes and dislikes. It wouldn't be appropriate for me to speak about all this on the record, and it is actually beyond my authority. It would have been different if we had agreed with the United States in advance on what to say and what not to say. We held consultations with them also before the APEC summit in Vladivostok. This year we may not be able to conduct bilateral consultations at the finance ministry level before the summit in St.Petersburg but there is still some time left and maybe we'll do this.
It is necessary to take into account the US position on financial regulation reform. The crisis broke out in the United States not only because the regulators missed piling up of bubbles (which they honestly admitted) but also because the United States has the world's largest financial market. There is no getting away from this. All innovations and new products are generated by it. Probably not all but the overwhelming majority of such new products are produced at the American market. This is why I was surprised to see how quickly the Americans responded to the aftermath of the crisis by adopting the Dodd-Frank Act. This is an enormous document that covers literally all spheres of the financial industry. That was absolutely stunning. Likewise, the US was the country to inspire that the establishment of the financial regulation reform as one of the items of the G20 agenda.
Simply have a look at the two major projects that the G20 has implemented. The first one is about restrictions on compensation for the top level executives of the financial organizations. The Americans initiated this work, and were the first to introduce at home the principles for compensation practices elaborated by the G20 and the Financial Stability Board. The same refers to reducing reliance on credit rating agencies. The majority of other countries have done nothing with respect to reducing their dependence on the mechanistic use of credit ratings, and that was not because they misbehaved. We didn't do anything about this either, and again - not because we are so bad, but because we have no real alternative. We'll certainly do so as soon as we find the alternative, namely, the way to encourage any more or less decent creditor to assess risks independently when lending money to a borrower. We don't have it for the time being. Meanwhile, Americans are ahead of many others in blacking out the provisions on credit ratings from national legislation and regulatory instructions. They are getting rid of them, as they say. I haven't checked it, but they claim that they are deleting from regulatory documents provisions allowing institutional investors to invest or buy an instrument of a financial issuer that has a rating from the particular credit rating agency. We still have to consider ratings when it comes to investments from the National Sovereign Wealth Fund (NWF) and the Reserve Fund. Our regulatory system requires that the NWF sources can be used for purchasing the securities only of those companies who have a rating from the particular agency.
I don't know whether my answer was extensive enough, but I must reassure you that our interaction is very strong. When we issue sovereign bonds the biggest demand for them comes from the institutional investors, primarily the American ones. What is it? Interaction or a symptom of trust? You can think whatever you like, but the US firms are usually the biggest investors in Russia's sovereign debt.
Moderator: Mr. Storchak, thank you very much for your detailed answer. Ms. Yudaeva, I'd like to thank you for taking part in the news conference. I'd also like to thank the journalists for their questions.