RSPP Head Alexander Shokhin: «Why Does the State Need Domodedovo? It Should Be Auctioned»

Alexander Shokhin: One has to bet on the rate. It seems to me that, based on a simple arithmetic formula that our rate is twice the inflation rate – meaning when inflation was nearly 10%, the rate was 20-21% – if inflation, according to the Ministry of Economic Development`s forecast, reaches something over 7%, then by the end of the year the rate will be 15%. I forecast 15% by the end of the year. And next year, since the Central Bank expects the 4% target to be reached in the second half of 2026, the rate will be around 7-7.5%.

Alexander Shokhin: I`m ready to bet on the rate.

Alexander Shokhin: I think it`s a good way to somehow compensate for the high rate – for those who win.

Alexander Shokhin: No, I don`t think material resistance plays a role here: the more we pressure the Central Bank, the more desire there is not to succumb to pressure. It`s just that Elvira Sakhipzadovna doesn`t deviate from her path. If she goes off the rails, the train could crash, from her point of view. Therefore, she is steadily moving towards the planned four percent inflation and will adjust the rate accordingly. In December last year, we requested a meeting with the President regarding the rate and presented all our arguments because we feared the Central Bank would raise the rate in December, and rumors circulated that it would even reach 23%, maybe even 25%, and these leaks came from the Central Bank itself. Perhaps we took quite a tough stance there; many heads of large companies, and medium-sized ones too, were present. And the main point was: don`t touch the rate until April at least. 21% is a high rate, but let`s observe, maybe this rate is sufficient to cool the economy. And in April, we began a new stage of the fight for lowering the rate, because the economy had clearly cooled down, and now even the Deputy Prime Minister overseeing the economy, Alexander Novak, and the Minister of Finance Anton Siluanov, and the Minister of Economic Development Maxim Reshetnikov – everyone is openly saying that it`s time to warm up the economy, because otherwise, it will overcool and freeze. And credit must be given to the Central Bank: after that December meeting, we organized a joint working group between the Central Bank and RSPP, where we analyze the situation by sectors and by enterprises within those sectors to prevent the freezing or bankruptcy of certain companies crucial to these sectors. And the Central Bank began listening to us and made targeted decisions for individual companies by providing relief to some creditor banks, allowing them to restructure the debts of certain companies to prevent their collapse, and easing some regulatory requirements. Some borrowers who were willing to borrow at a 21% rate, and it ended up being 25% and even 30% at the finish line, encountered strict Central Bank regulation. Strict regulation is related to the fact that the risks of complying with standards increased, and many banks are not allowed to issue such loans, and moreover, they know that even stricter standards await them in the future. Therefore, the rate is one thing, but many companies couldn`t even use it.

Alexander Shokhin: You know, when Central Bank monitors start saying that it`s a healthy process – someone will go bankrupt, leave the market, strong companies will come, and so on – that`s true from the perspective of textbooks. But from the perspective of the real Russian economy, it`s not true: it`s in special conditions (SVO, sanctions, etc.), where there is no competition, firstly, and secondly, the most effective companies turn out not to be those demonstrating the best productivity and resource utilization parameters, but state-owned companies that have a higher credit rating and the ability to turn to the government for support. Therefore, there will be no more effective redistribution; there will be distribution in favor of the state sector, especially since the state doesn`t forget that from time to time, it should remember the mistakes of privatization and take certain assets into the treasury.

Alexander Shokhin: We prefer this approach by the Ministry of Finance more than raising taxes and simultaneously increasing the state`s share in the economy. There is a package agreement on taxes that was reached last year when business, if not supported, at least tolerated the increase in corporate profit tax, keeping in mind that taxes would not be raised until 2030 and these mutual agreements would be observed. And it must be said, the Minister of Finance in recent interviews clearly states: we do not have the right to raise taxes because it is our package agreement with business. But at the same time, the budget needs revenues, and therefore the Ministry of Finance has started talking about the next stage of large-scale privatization. As I understand it, this primarily concerns reducing the state`s share in state-owned companies, in financial institutions, in the energy sector, transport, and so on. Opportunities are certainly there, but who will buy shares of these companies given that deposit yields are still more attractive? Of course, Sber and VTB can buy each other`s shares, but in reality, we need to think now about what will happen to the tens of trillions of rubles that have accumulated in deposits, including those of the population and primarily the population. Freezing them would be, in my opinion, a crime, and forcibly converting them into shares would also be.

Alexander Shokhin: Yes, completely excluded. Only ill-wishers try to fantasize about this topic. Therefore, on the one hand, we need lower deposit yields, and in the process of lowering inflation and the rate, they will decrease. On the other hand, we need attractive, reliable, safe, and so on stock market instruments. And if we move in these converging directions, there will be resources for this privatization, and opportunities related to reducing the state`s share in state-owned companies and privatizing nationalized enterprises and organizations returned to the treasury. Today, a message came that Rosreestr registered Domodedovo as an asset belonging to the state. Why does the state need Domodedovo? It should be put up for auction. Frankly, I`m not 100% sure that the arguments for seizing Domodedovo from private to state ownership were chosen correctly, but that`s a separate topic. But since all instances have been passed, maybe there will be the Supreme Court, and even the Constitutional Court may arise, but in cases where an asset enters the treasury based on the law and finally adopted court decisions, why keep it in the treasury? It should be immediately put up for auction. Moreover, I know of a case where those from whom this asset was taken for errors of the 90s privatization are ready to buy it back. They say: show us the amount of damage in monetary form, we will pay or buy it back, give us the right of first refusal to purchase this asset. Why? Because they know the asset well, they built it with their own hands, but it turned out to be toxic, as the first privatization deal is deemed void, and all subsequent ones are also void. If there is an owner who is forced to answer for the mistakes of another era, and not even their own mistakes, but ended up in the chain of ownership transfer, let`s deal with these bona fide purchasers…

Alexander Shokhin: This requirement is absolutely correct. Indeed, strategic assets recognized as such by law cannot belong to foreigners or persons with dual citizenship by more than a certain percentage; such norms exist in the law. Another matter is that back in the autumn of 1993, we proposed directly to the President (I personally reported on this issue at a closed meeting with large businesses) to allow these errors to be corrected. If, during a prosecutor`s or other inspection, a violation of the law is established, before turning it into state property, let`s give a month to either sell this asset to Russian owners or revoke the foreign passport or residence permit, and so on. And if the requirements are not met within this tight deadline, then it can be taken into the treasury. That is, much depends on procedures, strangely enough, we are in favor of adhering to legal norms, and a strategic asset should indeed not belong to foreigners. Nevertheless, there should be a procedure where, for example, the FAS as the basic body that monitors these matters should issue a warning, notification, and then strictly demand compliance in case of non-observance. The same applies to various forms of violations of anti-corruption legislation. There is corruption in the form of a bribe, classic, especially large-scale. And there are violations of anti-corruption restrictions when a deputy or official forgot to declare some asset. And for this, this deputy and official is not punished. Their mandate can be revoked or they can be removed from office due to lack of confidence, but they don`t even incur administrative punishment. And the asset can be taken into state ownership. This confiscation is the most severe punishment for an offense for which there is no responsibility. We believe that here too, a body of evidence is needed. For example, if a person, while in public service, facilitated their former company, even having transferred it to management, to receive orders, and so on – that is fraud. It should be qualified as such, and such an asset can also, as they say, be taken into the treasury based on a court decision and current legislation. But how to prove that there were some instructions, for example, to management bodies or not? It is necessary to clearly define that an official, a deputy, must transfer this asset into a blind trust (there is such a concept, «blind trust,» some officials use it) and is not allowed to transfer management to a relative, brother, wife, and so on. But this also needs to be written into the law – to whom management cannot be transferred if you enter public service. And if there is no such restriction, then how to prove that a husband did not give his wife instructions at night, lying in bed, on where to invest, whom to fire, whom to hire, and so on? It`s almost impossible. Unless technical means, eavesdropping equipment, etc., are used. Therefore, we are in favor of clear procedures. But I will return to the beginning of this topic: if an asset, based on lawful decisions, court decisions that have passed through all instances, has transferred to the hands of the state and it is not strategic according to the law, where there can be restrictions, it should be put up for auction. If the only restriction is that it must have a Russian passport, then it can be sold without any restrictions. If there is a restriction of another kind, for example, that the share of a foreign owner cannot exceed 25% or 50%, then it must be sold according to this scheme, including considering the decisions of the commission on foreign investments, and so on. Again, the procedure. And this is a huge asset. The Prosecutor General`s Office reported at an expanded board meeting before President Putin that they returned 2.5 trillion rubles worth of assets to the treasury, while Anton Siluanov expects to receive about 300 billion rubles as a contribution from business to the federal budget. You see, the figures differ by an order of magnitude. So let`s then at least help the Ministry of Finance and the Russian budget, even if in a way not very clear to many entrepreneurs: assets that have gone to the treasury must be returned to business and simultaneously help the budget. This is a hint to the Ministry of Finance. The Ministry of Finance is responsible for privatization, controls, and coordinates the activities of Rosimushchestvo.

Alexander Shokhin: If in ten years, for example, or fifteen, they conclude that this asset was improperly seized, it can be taken from the private owner again and privatized again. But there is another direction: some of our assets are transferred to temporary management. And this, frankly, is also a not very clear construction from a legal and financial point of view for many. The asset goes to the state, and a manager is appointed in the form of an LLC or a respected person, and so on. And in principle, for some time, the revenues, the cash flow generated by this asset, also go, including, at the disposal of these temporary managers. How does the buyout work now: a 60% discount, a 35% duty, and only 5% to the owner. If I were the state, I would buy out these assets and put them up for sale. Some owners agree to at least be allowed to take these 5% out of Russia from blocked accounts using these schemes.

Alexander Shokhin: Some sell and leave. So far, the subcommittee of the head of the Ministry of Finance Siluanov on foreign investments states that they have several dozen people in line to exit. This means they can come to an agreement. And they are ready to fight for these 5%. Do you know why? Because they wrote this off as losses long ago, and 5% for them is a premium for their presence on the Russian market. Thus, if there is a desire, why not implement this formula, well, let VEB, VTB, Sber buy out these assets and put them up for auction as non-core assets. In my opinion, there are many ways we can significantly replenish the treasury, but I would not want there to be specific KPIs here.

Alexander Shokhin: Yes, let`s take something else into the treasury and sell it. What we fear is the growth of penalties. We see that in many areas the state is ready to become more active. Indeed, the law establishes fines, including turnover fines, for non-compliance with environmental legislation, for a number of other violations, to the point that the planned amounts of fines for traffic rule violations for citizens are increasing. In essence, this is a plan. And here, by means of turnover fines, the problem of budget replenishment can be partially solved.

Alexander Shokhin: And turnover fines too. Therefore, overall, business is optimistic. We trust the government that it indeed does not intend to raise taxes, but we also trust the President, who has repeatedly said that this page with the privatization of the 90s must be closed and a fresh start made. A fresh start means the operation of the Civil Code and the Constitutional Court ruling of 2013 on the ten-year limitation period for economic disputes. And a dispute about privatization is an economic dispute. Although often the Prosecutor General`s Office files lawsuits not on economic disputes, but a case is initiated regarding the violation of intangible rights, constitutional rights of citizens to well-being, health, a bright future, and so on. And if that doesn`t help, a criminal case can also be initiated.

Alexander Shokhin: There is certainly a dialogue; there is an interdepartmental commission headed by Dmitry Anatolyevich Medvedev, which I am a part of, as is the President of the Chamber of Commerce and Industry. We are in dialogue with the Ministry of Labour and the Ministry of Internal Affairs on these issues. What, in my opinion, is being done correctly here now? It is the formation of a digital profile of a migrant, the possibility of fingerprinting at the border, and so on. The necessity, say, to examine people, their health status in countries of origin, for example, if it concerns organized recruitment. Because if large groups of people who suffer from infectious diseases come, it is bad. To the same extent, the level of qualification and so on can also be assessed in the countries of origin. The legislation on organized recruitment is either already adopted or close to being adopted. And another thing is that organized recruitment still does not allow controlling all migration flows. A couple of groups are recruited, they arrive, and they disperse. The employer cannot find them, although within the framework of this organized recruitment scheme, they are responsible for them. Therefore, some measures of digital control over movements, over compliance with some rules, are certainly needed. The second thing, which concerns everyone: how to use migrants, with or without families, whether to use the experience of the Persian Gulf countries, where migrants come, work for a year under contract, return, then can come again, and so on, and do not bring families. By the way, this is precisely why the male population in many Persian Gulf countries significantly exceeds the female population, because they are without families. Can we do this here? Well, probably in the framework of visa countries, perhaps it is possible, because this is precisely organized recruitment. And moreover, different requirements are needed here. There is no need to know the legislation, the language, and so on. Vietnamese, Myanmar, or Filipino workers arrived, worked for three months, were put on a plane and taken back, so to speak. A new batch arrived. This is a different principle, this is a rotational method, and indeed, today I moderated a Russian-Indonesian session, they say that they have the opportunity to supply labor, but not if we impose requirements on knowledge of the language, culture, and so on, they want to work on a rotational basis.

Alexander Shokhin: Moreover, they already have this interpreter in their smartphone, and they can understand some basic key things, including using the same smartphone or translator. And another thing is the Eurasian Economic Union and our closest neighbors – non-members of the union – Uzbekistan, Tajikistan, and so on. A million-strong diaspora has already formed for each of these countries in Russia, and people cannot be expelled from here. In fact, here they need to be integrated into the culture, so that children know the Russian language, so that there are no compact areas of residence inaccessible, including, to law enforcement agencies. These are complex tasks, but here we understand the concerns not only of law enforcement officers but also of the country`s political leadership. But clearly, our migrant workforce has halved in recent years.

Alexander Shokhin: Well, the Central Bank is freezing the economy, and there is no increased demand for workers on construction sites. But this is a good way to use this lull to somehow organize not only migration flows but also to look at the normalization of the stay of diasporas in Russia. Some diasporas are well integrated, and no questions arise about the Armenian or Azerbaijani diasporas, for example. But, say, not getting compact places of residence with possibilities for the penetration of fundamentalism, for example, Islamic fundamentalism – that is an important task. We understand that in Tajikistan and Uzbekistan, the attitude towards fundamentalists is stricter than in Russia. We are only just beginning to notice them, while they have encountered this there and control it. So, we should adopt the experience of these countries. Well, I think that the problems are largely solvable, we will have to solve them, because our demographics are developing in such a way that only through young growing economies where the population is growing rapidly, where there is a young population of working age, can we solve our problems. And many countries solve them this way, but they also face the problems that we have just discussed, France, Europe as a whole.

Alexander Shokhin: That is, migrants should be used, but of course, now I would bet on organized recruitment and on visa countries to see how we can apply the ideal model of attracting migrants, gradually solving the problems that have arisen due to the lack of regulation of this issue in previous years.