SHORT-HAND NOTES OF A BRIEFING OF HEAD OF FAS IGOR ARTEMIEV AFTER A MEETING OF THE GOVERNMENT OF THE RUSSIAN FEDERATION

The Government discussed sectoral plans for developing competition in 2018-2019

The hand notes are published on the web-site of the Government of the Russian Federation:

Igor Artemiev: Today there is a great joy – FAS presented three items on the agenda of the Government of the Russian Federation. The key one is the progress in devising “Road Maps” by sectoral bodies under the frame of earlier orders of the Government and the President of 21 December 2018. It is for the first time in our history: the Decree for developing competition in Russia. The National Plan for Developing Competition was approved. Accordingly, the bodies were preparing their programmes, and some managed perfectly, as for instance, the Ministry of Labour and Social Protection. Regarding other bodies there is criticism. Somebody failed to meet the deadlines. Today Dmitry Medvedev was very tough commenting on all those things, saying that it is necessary to maximum engage competitive resources in all spheres and do one’s work.

Three levels of work. The first one is the Decree and the National Plan, which is mandatory for everybody. The second level includes sectoral department programs.  And the third element of this big work is the April State Council led by the President, which will consider regional competition development programmes, i.e., the work of Governors and local self-government bodies. It is expected that changes will be made to the Competition Development Standards in the regions, that is – how to decrease the share of state participation in transport, medicine, education, industry, etc. All three elements are part of the big, extensive efforts of the Government of Russia for achieving new formats, changing the structure of the economy and enhancing its efficiency. We had a very hard-hitting discussion about it today.

I must say that the Chairman of the Government has a very consistent, inspiring attitude to competition. It seems to me that the attitude of sectoral bodies is changing. A change is emerging for us.

Question: Mr. Artemiev, can you clarify what controversies did the bodies have, why didn’t they manage to complete the work? Do I understand it correctly that the deadline is in a week?

Igor Artemiev: No, Dmitry Medvedev gave a month for refinement, it’s the right period. The Presidential Order set strict parameters in some cases, so the programmes must be reviewed taking the Order into account – its general provisions, and specific parameters and figures. So, at least a month is necessary.

As for controversies, there are a lot of them. Look how many bodies are there! And we do a joint programme, we work with all of them. On the one side of the barricades there are FAS and the Ministry of the Economy... Certainly it is tentative, we try to make that there are no such barricades. Today there are dozens and hundreds of various controversies. But what is the most important? If a ministry understands and shares the values of competition, they build up a good progamme, with particular plans and parameters and it is clear what to do. Plus, it is, of course, privatization, non-discriminatory access – the main parameters of work associated with the support to business for creating equation conditions of competition, etc. If they do not want, they give a formal reply and everything ends with a report to the Government. I said today that there should be no such format swhen the end link of all enormous work would be wasted. A report to the Government and what then? One can write dozens of reports to the Government, but acts of the Government should be drafted, amendments to the federal law should be made and so on, that transform the system of relations. From the communist times we remember that it is necessary to change production relations, change the climate, the attitude to the business process in general, support small and medium companies, and the like. So I’d like to say that they are people who want and there are people who don’t.

Question: Do I understand it correctly that the deadline is extended till 1 April?

Igor Artemiev: Yes. A decision will be issued now, specifying a particular date. Dmitry Medvedev said: a month. So we add a month.

Question: Is there a “Road Map” deadline for regional programmes?

Igor Artemiev: The deadline is the State Council which supposedly will take place in April. There will be the final approval of the Plan. The event will be exceptionally important because the President effectively took the lead. He signed an Order; he will chair the meeting of the State Council of the Russian Federation, titled “On competition in the regions”. What should be the outcome, the quintessence of it? There should be amendment,s which the Government will pass on the basis of Presidential instructions and under the frame of the current Order, to the Regional Competition Development Standards. I can say that today the Competition Development Standards are executed or are being executed in few regions.

Once again, the problem is in the attitude. Some even pursue a kind of a Soviet leadership style – summon, shout, shower with money, bang the table with fist, scare everybody. But what’s that? It does not increase production much, and if it does, then just for five minutes. There are interesting things that can be done. Accepting the Rules for non-discriminatory access, businessmen compete with each other under equal conditions. Or when private sector goes to transport: I myself was involved in this when I was Vice-Governor on Finances in St Petersburg. Back then I worked on the transport reform, when 50% of private businesses were involved as a result of competitive bidding. And what’s now? It works. In St Petersburg, only in one year, private entrepreneurs bought around 3000 brand new, modern buses with their own money that we truly needed. Where would we be able to find the money in our budget in 1996? It was impossible; they could hardly pay wages at that time.

This is the approach! And now Governors for some reason re-privatize pharmacies, it means they take them away from private business, practically nationalizing them. Why put pharmacies into budget? They should be kept and maintained, wages should be paid. The state does all this again in many regions. What for? Narcotic substances – this is clear, a special storage regime, one state-run pharmacy may be kept, it will have 10% of the market, to deal with such dangerous things. But give back other things. Why it is not possible to do like [Mayor] Sobyanin allowed in Moscow, arrange day-care-centres in apartments: five mothers work while their kids are taken care of. It is convenient for everybody, in the same residential house, not bad at all. But one had to guess right to do it, obtain a permission from the sanitary inspection. One had to work on it. Otherwise we would have to wait until a state-run day-care centre is built up. Mothers would sit at home although they could prefer to work. You say “competition”, but in fact it concerns human life in all aspects. That is why I am very disappointed with regard to the Standard execution, but I very much hope that thanks to the Order and the government policy we will be able to change the situation dramatically.

Question: On 16 February VTB reached an agreement on buying 29.1% shares of “Magnit” from the chain founders. How do you evaluate the transaction? To what extent, in your opinion, it is negative or positive for developing retail market and how good it is for the market when a state-run bank becomes an owner of the block of stock?

Igor Artemiev: First, thanks God that the owner has reached such a big success. Sergey Galitsky undoubtedly is one of very positive examples for developing entrepreneurship in Russia. He privatized nothing, he stole nothing from anybody, he created this company from scratch, took the leading position, well done! If he thinks that it’s time to sell this asset and focus on some other things, I understand him. I know that he does a lot for the sport, which I appreciate, for instance. I do not know what he will be doing in the future but I have big respect for him.

When a state-run bank buys, it does not mean that the bank buys without an intention to resell. VTS certainly has bought this asset to resell it. They probably already have a prospective buyer or buyers. Under the frame of control over economic concentration, FAS will watch to make sure that no monopolistic monster emerges in this field. In principle, one can hardly imagine that such a monster will appear because the market is highly competitive. There are several very big chains apart from “Magnit”. If one of those chains swallows this giant system, FAS will consider all consequences, issue an injunction and we can ban the deal if necessary. So far, I do not see any grounds for prohibitions, whoever would be the buyer. But everything must be calculated, especially in the regions, to make sure that 25% threshold, proposed by FAS to the President at some point, is not exceeded. Anyhow, we will not allow dominance of any chain. Hopefully, the bank will not keep the asset for a long time. Looks like they will resell it with a profit, and there is nothing wrong in it. So it is a normal situation where everything is under control. If Mr. Galitsky in principle is satisfied with what he did and there were no violations in the course of the transactions, – and I think that there were none, – everything is fine.

Question: Mr. Artemiev, when is the next meeting of the Commission on Foreign Investments and what is the agenda, if it is already known?

Igor Artemiev: I know that the Chairman of the Government finalized: the Commission will sit at the end of March. The date will be reconfirmed according to the Chairman’s schedule, but it will definitely take place, we have been informed about it today. We have a month and together with the Government Office hold a series of meetings regarding the status of the items for the Commission’s consideration. Now we are putting together all mutual approvals that have been issued. You know that the Commission has not been in session in the past two months. The agenda will be announced in two – two and a half weeks, when we coordinate what we have ready to discuss at the Government Commission chaired by Dmitry Medvedev, and what is not ready. “Not ready” means that a particular body has not given an approval, and we will do our best and actively try to make it happen.