Transcript of the news conference of Minister of Finance of the Russian Federation Anton Siluanov following the G20 Finance Ministers and Central Bank Governors Meeting:
Good afternoon, colleagues. Today we have concluded the first meeting of G20 Finance Ministers and Central Bank Governors during Russia's Presidency. We discussed a number of key issues of the agenda. This is the first meeting that starts the series of preparatory meetings for preparing final document to the Leaders' Summit to be held in St.Petersburg on September 5-6, 2013. We will hold a series of discussions at the Financial track level to prepare for the Leaders' Summit.
Today we held our first meeting this year, where we discussed a number of key issues. First of all they involved: the situation in the global economy and the implementation of the G20 Framework, the commitments in the fiscal policy, sovereign debt, labor relations and the monetary policy that undertook by individual countries within the G20 process. I would like to say in general that the assessment of the IMF and our colleagues is that currently we can see the first signs of stabilization. The IMF has revised the forecast for the world economy growth from 3.25% to 3.5% in 2013 with the further upward trend.
It was said repeatedly that 2013 will be the year that sets that trend. It will be a make or break year. If we are not able to fix the stabilization and positive trends or if we fail to pursue policy coordination and stay on this positive note, we face the danger of sliding back into recession. Therefore, a great deal will depend on the extent to which joint and coordinated efforts in the area of economic policy will be pursued by the G20 Governments. This was the subject of our discussion.
Indeed we have not overlooked the question of currencies and the situation on currency markets. We discussed this matter as well as, the state of competition between currencies. We agreed, which was fixed in the final Communiqué, that we should not talking about currencies as well as about currency exchange rate regimes.
Russia and many other countries use the floating exchange rate, whereby the exchange rate is determined exclusively by the market. Imbalances can occur if Governments and Central Banks interfere in this process.
The currency policy and any changes in the policy of one country will naturally affect the situation for trading partner countries, in this case currencies could start competing rather than the economies. It is absolutely right that we should make every effort to promote competition between our economies, enhance labor productivity, increase experts' incentives and raise economic efficiency. This is a job for the Governments, and they should avoid currency intervention. This was emphasized by all the participants. It was a consensus opinion, and it was included in the communiqué.
We also discussed the matter of reducing fiscal deficits and sovereign debts level. As I said, this is one element of the G20 Framework. We accepted the Toronto commitments, which envisage halving public debt compared to 2010, when those commitments were made, and in 2013 we ought to see this halving of deficits. Some of the countries have reached these goals and fulfilled their commitment, while others did not. The reason is that when this commitment was undertaken in 2010 none of us had a clear idea about the future economic growth dynamics. We didn't know what impact the crisis would have. Therefore we had quite optimistic assessments and accordingly not all of the countries were able to meet their commitments.
Nevertheless, in order to provide an impetus and send investors a signal and a message of trust we have agreed that we will prepare mid-term and long-term guidelines and targets for such policies by the Leaders' Summit in St.Petersburg. These proposals will be formulated taking into account the reality and focus on cutting deficits and debt burdens.
We think that it is the right approach, while it is the right message to the markets and to investors regarding how one or other country sees its future fiscal policy and policy on debt management. This is one of the major conditions to stimulate or destimulate the inflow of investments and economic growth in a given country.
We also considered the issue of international financial architecture. We heard some critical comments stating that we failed to honor the obligations and commitments that we took on earlier. In January 2013 we agreed on the IMF quota formula and the shift of quotas in the IMF. It was very difficult. A number of countries lost their shares as a result of the shift. Therefore, this matter was debated at length.
Nevertheless, we have decided to set a timeframe and agreed that the formula and the quota distribution should be well developed and finalized by the Summit so that the leaders can settle this matter and set a course towards establishing a new formula and shifting quotas, which has to be finalized by the end of the year. So the issue of the quota formula and the distribution of quotas should be resolved by the end of the year.
It's a difficult task, not all of the members were ready to accept this decision but nevertheless we need to move forward because we can discuss this matter forever. It is impossible to take into account the interests of all the members and we need to bear in mind the changes that took place in the world recently: the increased role of emerging markets, developing economies and the changing proportions in the structure of the IMF and the distribution of IMF quotas. Based on these criteria we ought to move forward in order to improve the quota distribution system within the IMF.
Another important issue that was raised within the Russian Presidency was stimulating financing for investment as the source of the growth. We have decided on some directions in this item, where this could encourage institutional investors to invest in the economy. Currently institutional investors invest in the subnational, subfederal banks without directing the resources in the real sector. So, in order to foster the necessary conditions we instructed the OECD to elaborate on this issue and develop a set of incentives so that institutional investors could invest in infrastructure along with the alternative investing in sovereign bonds because infrastructure is always remain a source of development. OECD was asked to work on this issue.
Second, the stock markets. We noted that we have been seeing fewer IPOs recently than before. For instance, 20 years ago we saw 2,500 IPOs a year, whereas now it is only half of that. The volume of IPOs was more than $250 billion and now it is $150 billion. The crisis is affecting everybody here. So we agreed on the need to develop the local currency bond markets.
Let's take Russia for instance. We are undertaking all possible policies to further stock market development. We are doing our best to ensure favourable conditions for the investors as they might have in New York, London and so on. These include structural and tax policies and other legislation. You know that this week our Government adopted a special program for developing the financial market. We recommend these steps to other countries that are in the process of creating their own financial systems and markets.
The next point in the issue of long-term financing for investment is related to multilateral development banks. We consider that MDBs such as the World Bank and the EBRD should be participating more in the equity of private sectors' companies because at the moment these banks issue more loans instead of taking part in capitalization process of these enterprises. This could become a serious stimulation factor for developing investment and contributing to our main goal, ensuring economic growth and encourage major MDBs to invest in equity. This could be realized in the form of some project investments, improving the enterprises and selling them. That could be more lucrative than issuing loans. So this is one of the possible direction we discussed today.
We also spoke about increasing state investment. We know that it is now on the decline path; therefore, we need to develop the principles of stimulating investment through private-public partnership. That is what we are doing in Russia now and what are doing in other countries. We believe that each invested cent and invested ruble could bring some return should be used in the process of stimulating private resources in the economy. We are not the ones who invented this well-known fact but the PPPs are particularly important today.
Next point: foreign direct investment in emerging markets. We agreed to establish common rules that will help promote foreign direct investment in emerging markets, facilitating foreign investors' access to emerging markets. Although many colleagues stated that at this moment foreign direct investment is primarily directed to emerging markets because they are the most appealing markets for investors. Therefore, creating additional incentives is our goal at the moment.
We are glad that our colleagues gave us their support in the debt management issue. We suggested improving the recommendations issued by the World Bank on public debt management that were worked outsome time ago. We will update the guidelines for public debt management according to the current economic situation and desire to raise the effectiveness of this item. This target is very important for Russia because debt management and its efficiency of that management are always beneficial for economies.
Finally, we have agreed on the Communiqué. We did not have a major debate regarding the Communiqué because it was all agreed upon by our deputies, so we approved it by consensus. That is all I have to say, colleagues.
Question: Could you tell us which issue provoked the most heated arguments? And why was the wording on competitive currency devaluations softer as compared to the G8 statement that was published this week.
Anton Siluanov: Well, as regards competitive devaluations once again many speakers referred to this subject but that was not an axis item. We did not have a discussion because we all agree in our understanding of this issue and it's included in the final Communiqué. We did argue also about financial architecture because there are different views on the matter. We debated whether we needed to continue implementing the Toronto agreements and we reached a compromise that I think everyone was happy with.
Question: The Communiqué states that insolvency plans need to be finalized by the end of June 2013. What about systemically important national financial institutions? When are you planning to introduce similar criteria for the systemically important national financial institutions?
Anton Siluanov: We discussed this matter many times in the past and at this meeting as well. We spoke about the need to strengthen the supervision of global systemically important institutions as a step to increase supervision. The second step would be to improve the supervision of systemically important national financial institutions. Thus we could gradually improve supervision over global and national markets. These are logical steps that would help improve in the efficiency of financial markets' supervision. The Communiqué states a commitment to adopt such instruments by the end of June.
Question: Yesterday you said you would discuss the possibility of setting up a committee on supervision and control of rating agencies. The wording in the Communiqué is much softer. Could you tell us about the debate? And my second question: During the G20 meeting with the President, colleagues referred to assistance to Cyprus and the German colleagues said that you might consider this matter on the sidelines. Did you talk about Cyprus?
Anton Siluanov: I could only comment at the moment on the outcome of the meeting. It was not a private discussion so this item was not reflected in the Communiqué. As regards the supervision and supervision of rating agencies, that were indeed proposals of the Russian Federation. Generally I would say it was endorsed at the financial regulation conference that took place on the eve of the Summit. I believe we will return to this issue in our further discussions on financial regulation.
Question: Before the Summit you said that in order for G20 to come up with some definite decision on Japan you need to hear the opinion of the Central Bank and the Finance Minister. What can you tell us now, after the meeting?
Anton Siluanov: I have already expressed my position. The Japanese colleagues explained their position on the policy that was adopted at the end of last year. The goal was to tackle deflation. The Japanese economy was suffering from deflation, so steps had to be taken to remedy the situation and that was the priority for the Japanese Government's policy. That is what they told us.
What about the G20? The G20 reacted with understanding and we did not state our assessment of the Government's actions in our final Communiqué. We agreed that it is internal affairs of the state. Once again we reaffirmed our commitment to avoid competitive devaluation of currencies. And we believe that actions taken by the Japanese Government are in line with the general understanding we have achieved and with our vision of the currency policies approved by Finance Ministers and Central Banks Governors.
Question: Minister, point three of the Communiqué, if I'm not mistaken, says that "monetary policy should be directed toward domestic price stability and continuing to support economic recovery according to the respective mandates. We commit to monitor and minimize the negative spillovers on other countries of policies implemented for domestic purposes." Who is going to monitor this? That is my first question.
And my second question: What recommendations could you give on ways to improve public debt management and sustainability?
Anton Siluanov: As regards monetary policy, there was a heated debate on the point you mentioned. We said that monetary policy should encourage the economy of every country instead of encouraging economic partners.
Who is to perform the monitoring? The G20 and the IMF are constantly monitoring this process. So those multilateral financial institutions will be in charge of the job. I believe that the monitoring will continue during the upcoming G20 ministerial meetings this year. We will meet again in April, two months from now, and will talk once again about the situation with the exchange rates.
As regards the recommendations on sustainable debt management, some of the recommendations went out of date, they are not implemented by the countries in practice and they need to be updated. We think that this is timely and will come up with a set of proposals by the Ministerial Meeting in July, which will be held here in Moscow once again.
Question: I have a very short question. Switzerland was invited to participate in the meeting for the first time. Did you find its contribution valuable and will Switzerland be invited to participate in further meetings? Next year, for instance?
Anton Siluanov: That's right, we did invite our Swiss colleagues and they will take part in further meetings. I had a meeting with my Swiss counterpart and other colleagues from Switzerland. They took part in discussions of the issues on our agenda as a full member. The Swiss delegation made a valuable contribution to the discussion.
Question: The Communiqué says that the G20 states have agreed to establish the Financial Stability Board as a legal entity. Could you tell us more about this arrangement? What is going to be the Board's executive body? What is the timeline?
Anton Siluanov: Here is nothing new. We just reaffirmed that the Financial Stability Board has become a legal entity. It is a fact and Sergei Ignatyev (Chairman of the Central Bank of Russia), who was moderating the relevant session, congratulated the Financial Stability Board authorities on it's changes of status, so that is nothing new. We just noted that the new status of the Board would help to enhance its efficiency.
Question: You spoke about the need to control rating agencies, but you also spoke about supervision of all organizations that publish indexes and targets for the market. What about shadow banking? Before the summit you said that all these issues will be discussed. What are the results?
Anton Siluanov: As for the issue of supervision on rating agencies, I have already answered this question. A relevant commission will be established. But this issue will be addressed in greater detail at our next meeting. Nevertheless, the issues of rating agencies and shadow banking were debated as part of a broader financial regulation discussion. The final conclusions that were made by our colleagues from Central Banks are included in the Communiqué and I have nothing to add to it.
Basically I can say that we need to increase the efficiency of rating agencies activities and assess their objectivity regarding countries and companies. We talked about improving the quality of these agencies' work and will do our best to make sure that the objectivity of their rankings improves.
Question: Do you plan to revise the maximum size of the Reserve Fund as required by the Ministry of Economic Development and the Accounting Chamber?
Anton Siluanov: It is stipulated by the legislation as 7% of the GDP. The Government does not intend to return to this issue. This provision of law is stipulated by the law. Thank you very much.