HERALD - JULY 2020

OFFICIAL PUBLICATION OF FBA EAC, IBC

EURASIAN FINANCIAL & ECONOMIC # 2 (10) | 2020

38

О. Прексин Валютно-финансовое мироустройство: вчера, сегодня, завтра 34

Гюнтер Дойбер Западные банки: успешный нишевый подход к работе в России и Восточной Европе сохранится и в трудные времена

PERSONALITY EURASIAN FINANCIAL & ECONOMIC ЕВРАЗИЙСКИЙ ФИНАНСОВО-ЭКОНОМИЧЕСКИЙ

ВЕСТНИК

HERALD

IGOR DODON: The world must be more comfortable for life and developments page

4

А. Tkachuk Indicator of the Association work – satisfaction in the interests of its members 18

Gunter Doiber Western banks: successful niche of the countries of Eurasia to working in Russia and Eastern Europe will survive and through hard times

18

А. Ткачук Показатель работы Ассоциации – удовлетворение интересов ее членов

4

подробнее на стр.

ИГОРЬ ДОДОН: Мир должен быть более комфортным для жизни и развития ЛИЧНОСТЬ

№ 2 (10) | 2020

34

О. Preksin Monetary world order: yesterday, today, tomorrow 38

ЕВРАЗИЙСКИЙ

ФИНАНСОВО-ЭКОНОМИЧЕСКИЙ

ОФИЦИАЛЬНОЕ ИЗДАНИЕ ФБА ЕАС, МБС

г. МОСКВА

WWW.FBACS.COM

ЕВРАЗИЙСКАЯ Eurasian ЭКОНОМИЧЕСКАЯ Economic КОМИССИЯ Commission

BEV@FBACS.COM

EURASIAN ECONOMIC COMMISSION

OFFICE@FBACS.COM

н ово -Б из

Financial & Business Association FINANCIAL & BANKING ASSOCIATION of Cooperation OFEuro-Asian EURO-ASIAN COOPERATION

SGK@FBACS.COM

Финанс

Ев иация роАзиат ск ог о

ПОИСК НОВЫХ ФОРМАТОВ СОТРУДНИЧЕСТВА

26–27 НОЯБРЯ

2020

ЕАЭС и ЕС:

Ф ОРУМ

VI I М ОС КО В СК И Й М Е Ж ДУ Н А РОД НЫ Й ФИ Н А НС О ВО - Э КОН О М ИЧ Е С К ИЙ

• заседания по секциям • деловой завтрак

Ф ОР М АТ

V II M O S C O W IN TERNATI ONAL F IN A N C IA L A N D ECONOM I C

+7 495 663-02-08/13

соц Ас

тва ичес удн тр Со

Union of RussianRussian Union of Industrialists and Industrialists and Entrepreneurs Entrepreneurs

ес

F O R MAT • Business breakfast • Breakout sessions

FORUM THE EURASIAN ECONOMIC UNION&THE EU:

2020

NOVEMBER, SEARCH FOR NEW FORMATS OF COOPERATION 26–27 ово -Б из

тва ичес удн тр Со

Финанс

н

ес

соц Ас

Ев иация роАзиат ск ог о

WWW.FBACS.COM

ЕвроАзиатского Сотрудничества

BEV@FBACS.COM

ФИНАНСОВО-БАНКОВСКАЯ АССОЦИАЦИЯ Финансово-Бизнес Ассоциация ЕВРОАЗИАТСКОГО СОТРУДНИЧЕСТВА

OFFICE@FBACS.COM

ЕВРАЗИЙСКАЯ ЭКОНОМИЧЕСКАЯ КОМИССИЯ

SGK@FBACS.COM

Российский союз Российский союз промышленников промышленников и предпринимателей и предпринимателей

+7 495 663-02-08/13

E DITORIA L BOARD: # 2 (10) | 2020

Bakhytbek Baiseitov, Chairman of Business Council of FBA EAC, President of the Association of Banks of the Republic of Kazakhstan

н

соц Ас

Ев иация роАзиат ск ог о

ово -Б из

ес

тва ичес удн тр Со

Anvar Abdraev, President of Union of Banks of Kyrgyzstan

FOUNDERS:

Финанс

Alexander Murychev, Chairman of Editorial Board, Chairman of Executive Board of FBA EAC, Executive Vice-President of RSPP, Chairman of IBC

Oleg Berezovoy, General Director of FBA EAC, Member of Executive Board RSPP

Financial & Business Association of Euro-Asian Cooperation (FBA EAC)

International Banking Council (International Coordinating Council of Banking Associations)

Andrea Boldi, Owner of the company NEMESI S.R.L. (Italy) Yves Pozzo Di Borgo, Former President of Friendship Group with Central Asia in the Senate (France) Vladimir Vasič, Secretary General of Association of Serbian Banks

PUBLISHER:

Alexander Dzneladze, President of Association of Banks of Georgia

Financial & Business Association of Euro-Asian Cooperation (FBA EAC)

Anatoliy Kazakov, Chairman of the Coordination Council of Financial and Banking Council of the CIS

Editor in Chief: V. Murin

Elena Korobkova, Executive Director of Independent Association of Banks of Ukraine Manish Kumar, General Director of SOLTEX Group LTD., Head of Representative Office of FBA EAC in India, Sri Lanka, Bangladesh, Malaysia Berislav Kutle, CEO of Banks Association of Bosnia and Herzegovina Istvan Lengyel, Secretary General of Banking Association for Central and Eastern Europe Amirsho Miraliev, Chairman of the Board of Association of Banks of Tajikistan Valery Murin, Editor in Chief of the Magazine ‘Eurasian Financial and Economic Herald’

Executive editor: S. Orlova Editor: A. Gusev Corrector: A. Panyugina Page-proofs: A. Bagaev Editorial Board: E. Berezovaya, O. Ryazanov Translator: A. Lozhkina

PUBLISHER’S ADDRESS: 17 Kotelnicheskaya nab., Moscow, 109240, Russia +7 495 663-02-08/13 office@fbacs.com www.fbacs.com PRINTING HOUSE: Released in the «Granitsa Publishing House» Ltd. Format 210x297 mm. 128 pages.

Zakir Nuriyev, President of Azerbaijan Banks Association Svetlana Orlova, General Director of Information and Publishing Center ‘Eurasia’ LTD.

ISSUE DATE: Summer 2020

Bratislav Pejakovič, Secretary General of Association of Montenegrin Banks Krzysztof Pietraszkiewicz, Chairman of Polish Bank Association

Opinions of authors do not necessarily coincide with those of the editorial office.

Anatoliy Tkachuk, President of FBA EAC, President of GC RUSTIAN

The editorial office is not responsible for the content of the advertisements. Advertised goods and services are subject to mandatory certification.

Dumitru Ursu, Chairman of Moldovian Bankers’ League Tydor Afanasov, President of CCERR Bakhtiyar Khamidov, General Director of Uzbekistan Banking Association Samvel Chzmachian, Deputy General Director of FBA EAC, Head of Representative office of FBA EAC in Armenia

Reprint is allowed only with the written permission of the editorial office.

Manuscripts are not reviewed and not sent back Reprint of texts and photos of the magazine “Eurasian Financial & Economic Herald” is allowed only with the written permission of the editorial office.

When quoting, reference to the magazine is required.

Registered in the Federal Service for Supervision of Communications, Information Technology, and Mass Media (Registration number ПИ № ФС77-75043 dd. 19.02.2019).

Appeal to the readers

CONTENT 4

PERSONALITY I. Dodon: «The world must be more comfortable for life and development»

9

RSPP NEWS С. Krasilnikov. New opportunities for International Business Cooperation and the role of the RSPP

Dear friends, colleagues, readers!

Today, my opening statement could be limited to just one phrase: «The world is changing so rapidly that any prediction of future development will be, figuratively speaking, similar to the symptomatic treatment of COVID-19 - that is, to a large extent, a statement, but not a guide to action, because how to act is still unknown.

And yet what will be the world like after Alexander Murychev, the pandemic?

Chairman of Editorial Board Politicians, philosophers, entrepreneurs, of the magazine “Eurasian all reasonable people are trying diligently Financial and Economic Herald” to understand what really happened, and are building all sorts of models of post-crisis development of the world economy. But even the most famous theorists and practitioners today can not give a more or less accurate economic forecast, offer measures that can quickly and effectively revive the world economy.

We might recall that the word «crisis», written in Chinese, is composed of two hieroglyphs: one meaning «danger» and the other meaning «opportunity». And even though philologists still argue about the accuracy of this translation, this comforting formula gives us confidence that we will cope. It’s nice that our authors share this idea with us.

The face of this issue of «Herald» is the President of the Republic of Moldova Igor Dodon. The interview with him shows that even a small economy of Moldova is able to confront the pandemic challenges, balancing between such big integration associations as EU, CIS and EAEC. Soberly assessing the opportunities of his own market and taking into account the emerging trend of European countries towards the revival of economic sovereignty, the Moldovan president sees prospects for further cooperation with the EAEC and the Eurasian Development Bank.

An article by the founder and CEO of CTI Advisory, representative of the FBA EAC in France Jerome Closen is devoted to the theme of reviving the economic sovereignty of European countries. Analyzing the current state of the world economy, he questions the correctness of many years of practice of delocalization of economic activity of developed countries.

Much attention in this issue is paid to banks and money, which together are rightly considered the blood system of the world economy. Incredibly interesting is a deep and informative article by Oleg Preksin, a member of the Board of FBA EAС, in which he assesses the monetary and financial world order and discusses its prospects. Senior Director of Raiffeisen Bank International AG Gunter Doiber, evaluating the crisis of 2020 as one of the most severe economic crises of the last decades, still speaks positively about the current situation in the global banking system. Speeding up the digital transformation of the banking system, including those associated with pandemic restrictions, is discussed on the pages of «Herald» by the Executive Director of the Independent Association of Banks of Ukraine, Olena Korobkova and Samvel Chzmachian, member of the Executive Board, Head of the FBA EAC Representative Office in Armenia.

In conclusion I would like to inform the readers of «Herald» that by the decision of the General meeting of members of the Financial and Banking Association of Euro-Asian Cooperation on March 6, 2020 the Association was renamed. Its new name is the Financial and Business Association for Euro-Asian Cooperation. Not only the name of the Association has been changed, but also its structure and board. Readers will learn more about this, as well as about the prospects of the organization’s development from an interview with Anatoly Tkachuk, President of the FBA EAC. Read and be happy.

14

FOUNDER’S PAGE. FBA EAC General meeting of FBA EAC members: results

18

А. Tkachuk: «An idicator of the Association’s work – satisfaction of the interests of its members»

20

Video-conference «Features of work of credit institutions in a pandemic»

22

FOUNDER’S PAGE. IBS. B. V. Bayseitov. Implementation of measures by the banking sector to support the economy and population to overcome the consequences of the pandemic

25

B. Peyakovič. The banking system of Montenegro in conditions of the pandemic and the future of the European economy

28

Е. Korobkova. Priority directions of digital transformation of the banking sector: «The state in a smartphone» and system trends

32

С. Chzmachian. Technologies and Finance: from Services ecosystem

34

EURASIAN FINANCIAL SYSTEM G. Doiber. Western banks: a successful niche approach of the countries of Eurasia to working in Russia and Eastern Europe will endure through hard times

38

WORLD TRENDS О. Preksin. Monetary world order: yesterday, today, tomorrow

43

PARTNER NEWS International Economic Forum CIS «CIS + WORLD»

44

WORLD TRENDS Jérôme Clausen. COVID-19 and its impact to the world economy

46

TOPIC FOR DISCUSSION М. Sachev. The crisis has accelerated the evolution of the Russian legal industry

49

GEOGRAPHICAL HISTORY Р. Taran. Unknown Moldova or where to spend your vacation

52

ADVERTISING I. Muntyan. Wine tourism

56

SPECIAL OPINION Boldbaatar Bazaar, Tuvd Dorj. Prospects for transport infrastructure development in Mongolia as part of the creation of an economic China-MongoliaRussia corridor

62

HISTORY OF MONEY В. Krasnikov. Russian «scales» - unique in the money supply

64

PHOTO CONTENT

PROSPECTS 62 DEVELOPMENT MONGOLIA’S TRANSPORT INFRASTRUCTURE AS PART OF THE CREATION OF THE CHINA-MONGOLIA-RUSSIA ECONOMIC CORRIDOR

Tuvd Dorj, Boldbaatar Bazaar.

The emergence of a transport and logistics company, which will be the logistics operator between Mongolia, Russia and China, will allow to solve a number of urgent tasks, including the creation of a single transport platform, logistics infrastructure, freight terminals, as well as the development of rail container transportation.

40 9

44 28 9

28

32

INTERNATIONAL BUSINESS COOPERATION: NEW RSPP CAPACITY AND ROLE С. Krasilnikov.

Recently, the international activities of the RSPP have been flirted with new colors. One of the reasons for this is the gap that we were able to create in many areas of multilateral and bilateral cooperation even before the escalation of negative phenomena.

PRIORITY AREAS FOR DIGITAL TRANSFORMATION OF THE BANKING SECTOR: «GOVERNMENT IN SMARTPHONE» AND SYSTEM TRENDS Е. Korobkova.

Ukraine is moving absolutely synchronously with the world innovation processes. Innovation and digitalization of financial services at all stages is an effective way to increase financial inclusion in Ukraine, which is one of the strategic goals of the entire sector and, consequently, of the Independent Association of Ukrainian Banks.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

38 32

TECHNOLOGY AND FINANCE: FROM OF SERVICES TOWARDS ECOSYSTEMS С. Chzmachian.

In Armenia the formation of ecosystems is quite slow. Perhaps the reason is that Armenian entrepreneurs because of their individualistic mentality, are extremely reluctant to interact with other potential structures of a possible ecosystem, even if this promises them higher incomes and / or sharp cost reduction.

46

Personality

Igor Dodon:

ÂŤ The world must be more comfortable for life and developmentÂť 4

– This is a very difficult time for everyone, for the whole world. What is the state of Moldova’s economy and how it copes with the challenges of our time?

– In countries emerging from the Coronavirus pandemic, health care, social protection, business support and public administration responses to an ever-changing situation have been tested.

The Republic of Moldova is no exception.

We have understood there are factors that will contribute to the spread of infection among our population, e.g. the massive return of labour migrants and high population density. Therefore, we immediately decided to declare a state of emergency for the period till May 15, to create a centre for sorting the sick people, to equip hospitals with necessary medicines and equipment, to open new laboratories for testing the coronavirus and other anti-pandemic measures. Budgetary expenditures for the healthcare have been increased by almost a quarter.

The pandemic is a double blow to public health and the economy. It’s clear that human health is a priority. The unfolding economic crisis is the second challenge to which each country is responding based on its own capacities and traditions of economic policy. We have focused on two ways of dealing with the crisis.

The first one is to support the solvency of the population so that poverty does not increase and there is no excessive EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

failure of domestic demand. To this end, social benefits have been increased, the budget of the social support fund has been increased by more than 80%, and unemployment benefits have been simplified, and so on. The second way is support for business activity in the real sector of the economy. To this end, a deferment of the income tax payment on entrepreneurial activity has been granted, budget subsidies have been introduced for interest rates on bank loans and a temporary moratorium on all state inspections, tax expenses of employers on remuneration of labour have been subsidized, etc. We support business to the extent that our financial and budgetary capabilities allow us to do so.

– Does Moldova’s economy have any traits that help counteract the current crisis phenomena?

– It is very important in what condition the economy “meets” the economic crisis.

Whether it is unbalanced or not, whether the banking system has a safety margin, how big is the state debt – all these and other factors play their positive or negative role in the crisis conditions.

We have had a good starting pre-crisis position, which allows us to take certain maneuvers in this difficult situation. Over the past years, Moldova has seen a steady economic growth (GDP grew by over 4% annually) and a relatively low inflation rate (3% in 2018 and less than 5% in 2019).

Stability on the foreign exchange market contributed to the formation of sufficient foreign exchange reserves, which by early 2020 amounted to USD 3 billion and covered more than 6 monthly volumes of imports. The state budget deficit did not exceed 1.5% of GDP, while the public debt in early 2020 was 25% of GDP. Besides, commercial banks have had high liquidity and large reserves.

This macroeconomic situation allowed us to go for a significant increase in budget expenditures to support the population and business. Taking into account that at the beginning of the crisis the budget revenues will be reduced, we have more than doubled the state budget deficit, providing for the growth of borrowings in the domestic and foreign markets to cover it. We hope that relatively low public debt and high liquidity of the banking sector will allow us to pursue a borrowing policy with relatively low debt, financial and macroeconomic risks.

– Which states are you forming or have you formed a strategic partnership with in terms of economic sphere? What is this partnership about?

– It is difficult to separate strategic partnership in the economic sphere from the usual general context of strategic partnership. Thus, China and the US have a huge mutual trade turnover. But the US sees China not as a strategic partner, but as a foe, and even as a threat. At the same

5

Personality

time, despite the fact that Russia’s trade turnover with the EU has decreased due to sanctions, Russia considers the EU to be its strategic partner.

I will answer this question from a utilitarian standpoint. Given the volume of trade turnover and density of economic ties, Moldova’s strategic economic partners are the EU and CIS countries. The share of the EU member states in our foreign trade turnover is 55%, while that of the CIS states is 21%. Of course, the partnership is not limited to trade. The EU supports us in the implementation of reforms, in financing investment projects. Within the CIS, we participate in various committees and commissions of economic profile; we cooperate in solving common issues of development of agriculture, energy, industry, technologies, standardization, transport and other spheres of activity.

– What prospects do you see for further development of the Moldovan economy?

– The main thing now is to come out of the economic crisis with minimal losses. But the crisis reveals weaknesses and makes us reconsider the whole structure of further economic development. The peculiarity of the Moldovan economy is its super-openness – the volume of foreign trade turnover of goods and services is about 90% of GDP. High openness fits quite well into the economic picture of the global economic world – Moldova trades with almost the whole world, has free trade agreements with the CIS, EU, Turkey, the countries of the Central European Free Trade Association, and is

6

negotiating a free trade zone with China.

In other words, our economy develops as an economy open to the world. But now nobody can answer the question exactly what the world economy will be like after the pandemic and the crisis, how it will be arranged, what will happen with the international division of labor, freedom of trade and markets...

We come to the conviction that for the development of Moldova’s economy it is not enough to focus only on the improvement of foreign trade conditions. A wide access to foreign markets will not ensure the production growth we need, as these markets will be in a compressed state for some time. Our internal market is very small and the national economy, due to many objective reasons (lack of energy resources, minerals, many types of production, etc.) cannot be reoriented to the internal market, we cannot make any significant import substitution. It means that we need to develop close production cooperation, embed ourselves in larger economies, including those of regional associations. This approach is also supported by the fact that for many years we have failed to solve the problem of industrialization. Now it is absolutely clear that we will not be able to solve it ourselves for a long time.

Therefore, it is necessary to “connect” to large economies through industrial cooperation, through participation in long production chains, which implies strengthening industrial cooperation, modernizing old enterprises and creating new ones involved in production cooperation. The development of close production ties should become a powerful additional factor in the development of our trade relations.

– Several years have passed since the signing of Moldova’s Association Agreement with the EU countries. The discussion on the positive and negative sides of this decision was rather active and now, probably, we can already say about the real results of this Agreement aimed at deepening the ties between the EU and Moldova, can’t we?

– The main part of Moldova’s Association Agreement with the European Union is dedicated to economic issues. The creation of a free trade zone, the abolition of import customs duties, the implementation of EU regulations and directives in different sectors of the economy – all this means the transition to a new level of cooperation. However, the transition is not as simple or smooth as expected at the beginning. Many sectors and producers are not ready to move to EU standards. The required changes and reforms supported by the EU, financially and technically, are not always effective due to the lack of preparedness of our state institutions.

If we talk about the main quantitative result of the implementation of the Agreement – the development of trade – then there is also not everything that is clear. During the period of the Agreement’s implementation, Moldovan exports to the EU countries increased by 47%. At the same time, exports to the CIS countries decreased by 41per cent. This shows that the increase in exports to the

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

EU was largely due to the change in the geography of exports, their reorientation from the eastern to western markets.

Therefore, we assess the results achieved in trade with the EU ambiguously.

– How do you see the future of relations between the European Union and the Republic of Moldova? What milestones and priorities have been set?

– Moldova does not give up further cooperation with the EU and implementation of the signed agreement. But the way this cooperation will develop depends, to a great extent, on the European Union, whose future is not yet defined either by the member states or by the EU leadership. We are concerned about this because many of the current economic policies, plans and programmes of our government are related to the implementation of the agreement with the EU. I think that the EU will be able to overcome all the political and economic difficulties that have arisen. And I very much hope that the EU will review its policy towards the Greater East, will move to active development of relations with Russia, CIS, Eurasian Economic Union, SCO. This is in the interests of many countries of Great Eurasia, including Moldova.

– In May 2018 Moldova became the first country to receive the observer status at the Eurasian Economic Union. What was the basis of the Republic’s desire to obtain this status?

– We started cooperating with the Eurasian Economic Union even before obtaining the observer status. In 2017 a memorandum on Moldova’s cooperation with the Eurasian Economic Commission was signed. A number of meetings of the joint working group were held. Moldova’s representatives participated in the meetings of the EEC committees, receiving live information on the Eurasian integration processes and their regulation. Therefore, it became quite natural for us to strengthen our cooperation with the EEC and become an observer country. Participation in the meetings of the Supreme Eurasian Economic Council, Eurasian Intergovernmental Council, working bodies of the Eurasian Economic Commission – such a wide field of communication allows us to better understand the processes of Eurasian integration and to some extent feel ownership of them. It is as if we are trying on the format of the Eurasian integration for ourselves. I would like to mention that Moldova does not have such opportunities in its relations with the EU, despite the validity of the Association Agreement.

Igor N. Dodon is a Moldovan statesman and politician, since December 23, 2016 – President of Moldova. He graduated from the Moldovan State Agrarian University (Faculty of Economics), the Moldovan Academy of Economic Knowledge (Faculty of Management) and the National Management Institute (Faculty of Economic Law). Doctor of Economic Sciences. He speaks English, French and Russian (native language Moldavian).

He headed the Ministry of Economy and Trade of Moldova (2006–2008), held the post of First Deputy Prime Minister (2008–2009).

He was a member of the Parliament of the Republic of Moldova (2009–2016).

In 2011–2016 – chairman of the Party of Socialists of the Republic of Moldova.

President of the Chess Federation of Moldova since September 24, 2011.

Since 2006 – Leading Researcher at the Institute of Economics, Finance and Statistics (IEFS). The author of scientific articles, the developer of educational programs in specialized subjects within ULIM IMI. He is married, raising three sons.

– What is interesting for Moldova EAES? Which integration processes seem to be the most important?

– We consider the EAEC as a unique project of gathering and development on the new principles of the economic space of the former Union republics, interested in close cooperation with each other, in joint modernization of economies, in implementation of common projects and economic policies. Moldova was part of the once single state and economic space.

Despite everything, trade and economic ties, cooperation between business circles and, most importantly, interest in our eastern partners have been preserved.

– Which specific projects or programmes in the context of cooperation with the EAEC are particularly attractive for Moldova, and why?

– We closely follow the course of economic developments in the EEEC, the development and adoption of common programmes and projects. Of particular interest for Moldova are projects in the field of agro-industrial complex, ensuring food security of the EEEC countries.

We believe that participation in them would be beneficial not only for Moldova, but also for all countries of the Union.

The Republic is able to supply fresh and processed products, the production of which in the EAEC does not yet fully meet its needs – cherries, peaches, seedlings, quality grape wine and many oth-

7

Personality

ers. Moldova can connect to projects in the agricultural sector not only through supplies, but also through joint production. Promising directions are participation in Eurasian technological platforms, industrial cooperation, digital agenda...

The list can be continued. But so far, there are no mechanisms for involving the observer states in the common projects of the EAEC countries. I hope that they will certainly appear soon.

– The desire to cooperate both with the EU and the EAEC is an interesting and apparently promising way. Does it have any opponents in Moldova itself, as well as in the Eurasian or European space? What arguments do you bring to your opponents?

– Moldova is a country with a small open economy. It is absolutely illogical to erect barriers in the trade, economic, production, investment relations with some countries and their associations or to build ties with some countries, neglecting cooperation with others. The Republic needs economic multi-vector development, based on the peculiarities of the national economy.

Unfortunately, this is not understood or perceived by the “militant” supporters of European integration. European integration is a matter of their faith, not of arguments and arguments. Therefore, we have to constantly explain in

8

the public space the benefits of economic cooperation with both Western and Eastern partners for Moldova. The EAEC understands this and expresses its willingness to develop interaction with Moldova, satisfying its wish to become an observer state and not seeing obstacles in the fact that Moldova has an Association Agreement with the EU. – In 2019 Moldova decided to join the Eurasian Development Bank. This is an important step for Moldova to consolidate the economic ties with the Eurasian Union countries and Moldova’s long-term national interests.

What goals do you set within this cooperation? Which projects – national or regional – will help implement the Republic’s accession to the EDB? What new prospects are opening up for Moldova in the framework of cooperation with the Eurasian Development Bank and the Eurasian Economic Community as a whole – in a world which, as many claim, will never be the same now?

– Moldova has long collaborated with many international financial institutions – the World Bank, European Bank for Reconstruction and Development, European Investment Bank. Our interest in the Eurasian Development Bank is due not only and not so much to the search for a new investment partner. First of all,

it is related to the continuation of our policy of strengthening cooperation with the EAEC. Most of the Bank’s sectoral priorities correspond to the investment needs of Moldova – energy, industry, agro-industrial complex, infrastructure, information technologies.

We are very interested in inter-country projects that involve cooperation of economic entities. In order to implement such projects, Moldova can offer rather advantageous conditions for the production of various goods on its territory, with subsequent sale on the markets of the EU countries, Turkey and the Balkan countries with which the free trade regime is in force. Joint projects to create agro-hubs, transport and logistics centers and many others can be interesting and mutually beneficial. Such projects are unlikely to be of interest to our current financial partners.

We hope that the negotiations on Moldova’s accession to the Eurasian Development Bank will be successfully completed, and this will open the way to the implementation of both national projects and projects carried out together with our eastern partners.

Indeed, the world will not be the same. It will change. But the most important thing is for the world to become more comfortable for life and development of countries, peoples and every person.

RSPP News

Interview with the Vice-President – Executive Director of the Department of International Cooperation and Integration of the Russian Union of Industrialists and Entrepreneurs (RSPP)

Sergey Krasilnikov

INTERNATIONAL BUSINESS COOPERATION: NEW OPPORTUNITIES AND THE ROLE OF THE RSPP – Sergei, we often hear that today business has serious problems not only with development, but also often cannot, as they say, make ends meet. Is there any international cooperation in this situation? How has the crisis unfolding before our eyes affected the international activity of the RSPP? – As we know, the crisis is not only a serious problem, but also a new opportunity. We in the international RSPP bloc are trying to look at all the events from this perspective. I think that recently the international activities of the Union have been flirting with new colors. One of the reasons for this is the gap that we were able to create in many areas of multilateral and bilateral cooperation even before the escalation of negative phenomena.

In the work we are first of all guided by the tasks of promotion and protection of positions of the Russian business in the international arena, we promote consolidation of the Russian foreign economic interests. But the establishment and development of cooperation with foreign partners working in Russia is also one of EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

the unconditional priorities of the international bloc RSPP. The RSPP has traditionally organized a large number of events on international cooperation. These include international forums of Russian Business Week (RBW), specialized sessions at the St. Petersburg International Economic Forum (SPIEF), Eastern Economic Forum (EEF), Russia-Africa Forum (RAF), thematic seminars and webinars, and meetings within key bilateral and multilateral mechanisms of international cooperation, including the work of international business associations and a number of business councils of Russia with foreign countries.

Such events allow not only to convey to a wide range of participants the vision of Russian and foreign business, government agencies and foreign partners, but also to get excellent feedback.

For example, an online survey of 400 participants was conducted in the runup to the international NRB-2020 forum, originally planned for March but moved into virtual space. We received some

unexpected results for ourselves. Thus, according to the respondents, among international trends, the greatest impact on doing business is the growing international uncertainty, accelerated digitalization and the widening gap between the development needs of sustainable infrastructure and the level of investment in it. And illegal restrictive measures and their extraterritorial application, or, more simply, sanctions and trade wars, are on the «honorable» last place in this rating.

– Does business care about the current negative developments caused by the COVID-19 pandemic?

– Of course if we were to conduct a survey now, the pandemic would certainly be one of the most important problems.

COVID-19 has dealt a serious blow to all elements of the international structure: both States themselves, and the most powerful and global institutions of international engagement have been affected. Not to mention ordinary citizens. In the end, for the first time in this century

9

RSPP News

such a cheerful but truly comprehensive inclusion has been achieved.

According to WTO April estimates, the reduction in international trade by 2020 could range from 13 to 32%, depending on the success of the response to the pandemic. And the WTO World Trade Index in May fell to its lowest level since its launch in 2016, at 87.6, with a baseline value of 100. However, the current crisis may accelerate the transformation trends that have been observed in the international system for several years.

In particular I refer to a growing shift in the centre of economic dynamics and political influence in the Asia-Pacific region (APR).

While countries in the region, such as China and the Republic of Korea, were the first to encounter the new virus, they were able to respond quickly and effectively to the threat, minimizing the negative impact as far as possible. In summary, they are the first to emerge from the constraints and recover their production, which may help Asian companies to take up market niches of business from other countries and regions. Thus, according to the report entitled «The impact of COVID-19 on exports and prospects» published on May 8 by the Korea International Trade Association’s Institute of

Fig. 1. UMSI formats

10

International Trade, the Republic of Korea’s exports fell by 1.4% between January and March 2020. This decline was less significant compared to the USA (3.1%), Germany (4.0%) and Hong Kong (10.7%).

However, the rate of decline in exports from India (12.8%) and China (13.4%) was 9 times higher than that of the Republic of Korea.

In general, I would not talk about ending globalization and returning to the positions of the middle of the XX century, but a certain pullback to the dominance of national interests in the cooperation agenda may well be. It is more likely that the trends of regionalization based on equality and pragmatism, such as in the framework of the EAEC, will intensify.

In our work, of course, it is important to know the opinion of business not only about the most serious obstacles, but also about the preferred incentives to promote the entry into foreign markets of goods and investments. According to the RSPP survey, the most effective among such measures was the development of systems of mutual recognition and harmonization of standards and technological requirements for goods and technologies, support for national producers-exporters by reducing the fiscal and nonfiscal burden, as well as deeper

Fig 2. UMSI projects

integration into the UAE: removal of barriers and minimization of restrictions on the movement of goods, services, capital and labor in the Union.

– As priorities become more or less clear. We would now like to learn about the means and approaches used by the RSPP in its international activities.

– In total our Office for International Cooperation and Integration (OICI) currently has about 30 activity formats (figures 1 and 2).

The RSPP actively participates in the work of key institutions of global and regional governance, such as Business in OECD (BIAC), Business 20 (B20), World Trade Organization (WTO), Eurasian Economic Union (EAEC); cooperates with UN organizations, Asia-Pacific Economic Cooperation (APEC) forum, BRICS, SCO structures and many others; represents Russian employers in the International Labour Organization (ILO) and International Organization of Employers (IOE). I will tell you about some examples of cooperation in more detail.

Probably the key area of the RSPP’s multilateral cooperation is organization of work at the B20 site. The B20 is one of the key engagement groups of the Group of Twenty (G20). The main result of the

B20’s activities is the preparation of recommendations for G20 leaders containing consolidated approaches of global business to the most important international problems in the sphere of social and economic development.

The RSPP has been an active participant in B20 since its inception in 2010.

In accordance with the decision of the country’s leadership in 2013, the RSPP led the B20 process during the Russian presidency of the G20 and continues to perform the functions of ensuring and coordinating the participation of Russian business in the B20 to date. As part of the Saudi B20 Presidency in 2020, the RSPP’s efforts have led to a serious presence of Russian business in Task Forces (TFs) – the main formats for organizing work in priority areas. Russian participants accounted for more than 6% of the TF members, which is a very good result against the background of the dominance of the chairing party representatives.

In addition three representatives of Russian business have been chosen by the Saudi chairmanship to co-chair the Task Forces: A.N. Shokhin, RSPP President, appointed as Co-Chairman of the Energy, Sustainable Development and Climate Task Force; D.M. Yakobashvili, RSPP Board Member, President of Orion Heritage LLC, appointed as Co-Chairman of the Future Employment and Education Task Force; K.A. Dmitriev, RSPP Board Member, CEO and Chairman of the Board of the Russian Direct Investment Fund, appointed as Co-Chairman of the Finance and Infrastructure Task Force.

An example of RSPP’s confidence in the expertise and opinion is the invitation of our representative to the Trade and Investment Task Force. The Director of the Center for Multilateral Cooperation and Eurasian Integration of RSPP S.V. Mikhnevich was chosen as such representative; he became a member of the small group on coordination of controversial points of the draft text of recommendations on trade and investment in the TF. By the way, I can not but note that the discussion of individual issues in this area has significantly intensified, and it was difficult to find consensus solutions to the relevant agenda.

Another traditional area of our multilateral work is cooperation with BIAC, where the RSPP has observer status. This enables us to take part in consultations on OECD and BIAC documents, representing Russian business interests, as well as to facilitate the implementation of international best practices in Russia. In 2019 we increased our cooperation with BIAC, as exemplified by the inclusion of RSPP EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

proposals in the BIAC’s official statement to the annual OECD Council meeting, as well as in the BIAC position paper «Bringing trade back on track», which addresses issues ranging from industrial policy and trade facilitation to public procurement and digitalization.

– How are Russian business and RSPP represented in the processes of Eurasian integration?

– The RSPP is a member of the EAEC Business Council from the Russian Federation. The work of the Business Council is carried out in active cooperation with the Eurasian Economic Commission (EEC).

RSPP regularly participates in the work of practically all the Advisory Committees under the EEC Collegium on the Commission’s ministerial activities. A special role in building a dialogue is played by the Advisory Council on Interaction between the EEC and the EAEC Business Council, headed by the Chairman of the EEC Collegium and including not only members of the EAEC Business Council who are the largest employer organizations, but also chambers of commerce and industry, as well as individual companies.

RSPP has its own Integration Council for interaction with EEC. It is composed of representatives of the leading RSPP committees and commissions, as well as of large companies. Much attention in RSPP’s work to reflect the interests of Russian business is paid to identifying barriers to the development of Eurasian integration and to preparing proposals for its further development. Here are a few examples of our cooperation with the EAEC bodies in this area.

Firstly, at the end of 2019 the number of business proposals received under the Regulatory Impact Assessment (RIA) of ECE draft decisions was 80% higher than in 2018. More than half of these proposals (56 %) were considered.

Secondly, the EAEC Business Council took an active part in developing anti-crisis measures against the COVID-19 pandemic by preparing and submitting business proposals to the Commission.

And, thirdly, one should not forget about active cooperation with the EEC and Russian authorities in preparation of Strategic Directions of Eurasian Economic Integration for the period until 2025. This document, largely reflecting the interests and proposals of business, was generally approved at the meeting of the Supreme Eurasian Economic Council (SEC) on May 19, 2020. Now it is necessary to develop an action plan for its implementation, and the RSPP together with its partners in the EAEC Business Council will take an active part in this work.

Discussion of further ways of development of the Eurasian integration became the main topic of the International Forum of the Russian Business Week-2020 «Promoting the Eurasian economic integration: a factor of business cooperation», held on May 15 in a virtual format. The event was held at a high level and was attended by Deputy Prime Minister A.L. Overchuk, Chairman of the EEC Board M.V. Myasnikovich, EEC Ministers A.A. Slepnev and S.Y. Glazyev, Head of the UN Office in Geneva T.D. Valovaya, UNECE Chairman Yu. – And what is the status of RSPP cooperation with foreign partners working in Russia? It is often very difficult for foreign businesses to be heard by the Russian authorities.

– The absolute priority of the RSPP is cooperation with partners from foreign countries in various bilateral formats, based on strong partnerships and agreements. Moreover, the RSPP is actively developing relations not only with partners from Western countries, but also diversifies ties, deepening relations with our partners from Asia-Pacific, South Asia, Africa and Latin America.

For this purpose the RSPP uses a wide range of mechanisms, including the International Council for Cooperation and Investment (ICIC). This advisory body was established by the RSPP in 2008 as a platform for dialogue between foreign business and Russian authorities. The ISSI brings together leading foreign investors in the Russian economy, business associations and chambers of commerce and industry.

In 2019, the ISSI focused on such topics as improving the Russian investment climate, creating favorable conditions for doing business, improving the efficiency of government regulation, as well as the green vector of economic development.

The International Forum NRB-2020 «Development of the system of regulation and improvement of the investment climate in Russia under new conditions: strategic tasks and overcoming the consequences of the COVID-19 pandemic» will be held on 29 May 2020 with the support of the ISSI. During this event, representatives of leading foreign and domestic companies and business associations, government agencies and the expert community will be able to discuss key topical issues of creating a favorable climate for doing business in the aftermath of the COVID-19 pandemic, will offer approaches to the development of the regulatory system of individual economic sectors and the economy as

11

RSPP News

a whole, as well as exchange views on priorities and prospects for international business cooperation.

– Sounds positive! In difficult times,business needs this support...

– Absolutely. Moreover, we believe it is right to mark the success of business on its hard way. The Russian Union of Industrialists and Entrepreneurs holds the traditional All-Russian contest «Russian Business Leaders: Dynamics, Responsibility, Sustainability» every year. Its main goal is to popularize entrepreneurship in our country, form a sustainable positive perception of business as the most important participant in national development and encourage responsible and dynamic companies.

In 2020 a new one appeared among the nominations of the contest – «The Best International Project». This allowed companies active on the international arena to demonstrate their achievements to a wide range of professionals and to receive a well-deserved evaluation of their activities from leading specialists from government agencies, business and expert community. The results of the competition can be found on the official website of NRB-2020.

– But you had to give something up?

– Yes, of course, work in some areas, if not suspended at all, has somewhat lost its meaning in the current circumstances.

Mostly these are visits, business missions, exhibitions. Almost at the stage of 100% readiness the international forum NRB2020, which I mentioned earlier, had to be postponed due to the pandemic.

However, there is no bad thing without good. Since March, there have been many new international events affecting the business agenda, and new topics for discussion and exchange of views have emerged. As a result, by the decision of the RSPP leadership, the International Forum was held in the format of thematic sessions dedicated to issues of Eurasian integration, international investment and export support. This format allows for a significant expansion of the audience and provides an opportunity for speakers to contribute to the discussion, even in a busy schedule.

In addition, SPIEF was cancelled. This year, as part of its business program, we planned to hold a number of panel discussions and traditional events, including business roundtables (Russia – France, Russia – Germany, Russia – North America, Russia – Qatar, Russia – Africa, Russia – North-East Asia) and such long-awaited events for our foreign partners as the B20 Regional Consultation Forum and the

12

meeting of the President of the Russian Federation with foreign business leaders.

Also a business mission of Russian pharmaceutical companies to India was planned for May. This would be a return business mission to the visit of a large delegation of Indian companies in November last year.

The visit of RSPP representatives to Singapore in March 2020 to participate in the Russian-Singaporean Business Dialogue was also cancelled. I am not talking about regular business meetings with our foreign partners and representatives of diplomatic missions, which, for obvious reasons, also did not take place.

But modern technology allows you to work even from home, and we continued our activity using video and telephone.

– And what new directions and formats of the RSPP’s international activities, which have become relevant in the current context, would you still note?

– As I said earlier, it is important for the RSPP to create opportunities that contribute to the maximum reflection of Russian

business interests. These include the diversification of external relations. The Union is already making a great contribution to the formation of new mechanisms of business cooperation in the priority areas of Russian policy with partners from the Asia-Pacific region and Africa.

On August 22, 2019 in the fields of the Ministerial Consultative Commission of the Greater Tumen Initiative (GTI), a program of subregional cooperation, operating under the auspices of the United Nations Development Programme (UNDP), a Memorandum on the establishment of the North East Asia Business Association (NEABA) was signed.

The members of the new association are the largest business associations of Russia, China, the Republic of Korea and Mongolia: RSPP, China Committee for the Promotion of International Trade (CCITI), Chambers of Commerce and Industry of the Republic of Korea and Mongolia. In addition the association is open to business from other countries in the region, such as Japan and DPRK, as well as to partners outside the region.

The Association aims both to establish

information exchange on projects and cooperation opportunities for members of partner organizations and to promote their implementation.

In October 2019, as part of the business program of the Russia-Africa Economic Forum, the Russian Union of Industrialists and Entrepreneurs together with the Institute of Africa of the Russian Academy of Sciences, held a panel session on «Doing Business in Africa: Opportunities, Conditions and Risks». Following its results the proposals prepared by RSPP on improvement of interaction of the Russian business with the countries of Africa, including the offer on working out of a road map on a conclusion of trade and economic cooperation of Russia with the countries of Africa on the new level including concrete projects and recommendations have been supported.

We have also launched a new format – the newsletter «Key events of the RSPP’s international partners». To date, more than three dozen issues have been published, which can be found on the RSPP’s official website in the section «International Cooperation». The reader can EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

sometimes find there unique information about the position and proposals of business associations of many countries and international structures on how to move industries out of the blockades, restore the global and national economy, environmental aspects, mutual assistance, including assistance to least developed countries, to join forces to confront global problems. We have already received a positive response from partners, members of the RSPP and representatives of the expert community.

– And the last question: What’s next?

In what direction will the international front of the RSPP move in the future?

– We have many new ideas, we clearly follow previous agreements with our partners, we are constantly looking for new formats, taking into account current trends and requirements that the global environment and business community dictate to us.

Returning to the survey of the participants of the international NRB-2020 forum, I would like to note that they expressed interest in expanding the range

of services provided by the RSPP in the international direction. The greatest support was given to such services as development of a database of events (exhibitions, fairs, forums), projects and tenders, creation of an Internet platform of business services from RSPP member companies for potential clients, as well as creation of a database of experts on foreign economic activity.

In the near future we plan to organize a number of events – of course, online conferences – with our partners from the USA (American-Russian Business Council) and France (MEDEF International). These will be meetings with the RSPP management and interested Russian companies for French and American entrepreneurs. In addition a pool of projects and promising areas of cooperation with Egypt, Qatar and Iran is being developed, and the Russian-Hungarian working group created under the RSPP is actively working.

Also we study new opportunities and points of mutual interest in such directions as Israel, Kazakhstan and Turkmenistan.

At the initiative of the Russian Union of Industrialists and Entrepreneurs (RSPP) and the Russian Export Centre (REC), a collegial body for export support, the Coordinating Council, was established. Its main task is to ensure that representatives of the business community work together with development institutions in order to stimulate the growth of non-resource, non-energy export of Russian products abroad. On April 30, 2020 A.N. Shokhin, President of the Russian Union of Industrialists and Entrepreneurs (RSPP), and V.O. Nikishina, Director General of JSC «Russian Export Center» signed an agreement on its establishment.

The co-chairs also included the heads of the Chamber of Commerce and Industry of the Russian Federation, Business Russia and the Support of Russia. An Executive Committee was created, which included your humble servant. One of the most important areas of the Coordinating Council’s work will be the implementation of the RSPP’s proposals to improve the efficiency of business community participation in the activities of intergovernmental commissions between the Russian Federation and foreign countries, including through the revitalization of bilateral Business Councils.

At the international forum held on June 5, 2020 under the auspices of the said Coordinating Council, a session focusing on Russia’s export strategy and export support measures was devoted to it.

13

соц Ас

Финанс

ово -Б из

ес

Ев иация роАзиат ск ог о тва ичес удн тр Со

н

founderS’ PAGE. FBA EAC

GENERAL MEETING OF FBA EAC MEMBERS:

RESULTS ON MARCH 6, 2020 IN MOSCOW, IN THE HEADQUARTERS OF THE FINANCIAL AND BANKING ASSOCIATION OF EURO-ASIAN COOPERATION THE ANNUAL GENERAL MEETING OF THE ASSOCIATION MEMBERS WAS HELD. THE SUBJECT OF DISCUSSION WERE THE ACTIVITIES OF THE ASSOCIATION IN 2019, THE APPROVAL OF AREAS OF WORK FOR 2020, AMENDMENTS TO THE CHARTER OF THE FBA EAC IN CONNECTION WITH ITS REORGANIZATION, THE APPROVAL OF A NEW VERSION OF THE FBA EAC REGULATIONS AND ELECTIONS TO THE GOVERNING BODIES OF THE ASSOCIATION.

14

FBA EAC President Bakhytbek Baiseitov outlined the range of topics to be discussed, focusing on the main one – the change in the structure and name of the Association. Speaking about the purpose of such changes, the President noted that the distinctive feature of the FBA EAC has always been the association of not only financial and banking structures, but also participants in the real sector of the Eurasian economy. The FBA EAC has long gone from the traditional understanding of the banking association as a structure that protects the professional interests of a certain range

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

of participants to the construction of a multi-level «client-oriented» system of relations between business and the banking community.

According to B. Baiseitov, the Association is a living, dynamically developing organism, which today in a rapidly changing world cannot but undergo transformation. He also expressed confidence that if the proposed structural changes are approved by the meeting, the Association has every chance to become even more successful business association.

The results of the Association’s work in 2019 and the strategic directions of its activities were described by Oleg Berezovoy,

General Director of FBA EAC. In his speech, he noted that last year was not easy for business communities in Eurasia, but it did not prevent the Association to implement all plans. During the last year, 23 organizations became members of the Association and today the total number of the FBA EAC – 62 organizations representing 22 countries.

Last year the Association also opened new representative offices in the Republic of Bashkortostan, the Republic of Sakha (Yakutia), the Volga and Ural Federal Districts, Sudan, Egypt, Korea, Malta, the Republic of Moldova and Mongolia.

Last year the representative offices of FBA EAC in China (Yevgeny Bazhov), Malta

15

founderS’ PAGE. FBA EAC

(Irena Jagger), France (Jérôme Clausen), Bashkortostan (Denis Kantyukov), India (Kumar Manish), Germany (Vladimir Kotenev), the Central Federal District of the Russian Federation (Oleg Chernyshev) and Korea (Kim Gyeongjun) worked most efficiently.

Establishing international contacts, the management of the Association last year took an active part in more than 30 international events, as well as events of its members and partners, including meetings of the IASB, CIS FBS, EAEC Business Council, events of the Association of Regional Banks of Russia, RSPP, opening of the Korea-Russia Innovation Center in Korea, international forum in China, etc. The Association also co-organized the First Euro-Asian Financial and Economic Forum in Khorgos and the IV International Exhibition Forum «Eurasian Week – 2019» in Bishkek.

During the reporting period, the Office of the Association prepared and held four meetings of the Coordination Council and one joint meeting of the Supervisory and Coordination Council.

The strategic directions of the Association still remain: – formation of a single labor market in the EEU space; – implementation of the «Digital Belt» concept for the digital platform of the Eurasian Economic Union, the European Union and China;

16

– development of the institute of customs audit in Russia and the EAEC; – close cooperation with the Eurasian Economic Commission; – the work of the Innovation Technology Center; – formation and implementation of the «Project Bank»; – preparation and holding of the Moscow International Financial and Economic Forum; – publication of the magazine «Eurasian Financial and Economic Herald»; – a competition to award the International Prize «Eurasian Business Elite» and the competition «The World through the Eyes of the Photographer».

In the report of Konstantin Topornin, Chairman of the Audit Commission, it was noted that as a result of the audit it was confirmed that all statutory and registration documents of the FBA EAC, financial and business operations, accounting procedures and preparation of financial statements comply with the legislation of the Russian Federation. In conclusion K. Topornin informed the participants of the General Meeting that all expenses incurred by the Association correspond to its statutory goals and objectives, no violations were revealed in the distribution of funds.

During the discussion of the reports of the General Director of the Association and the Chairman of the Audit Commission made a speech: – Vladimir Kotenev is Managing Director of Eurasian Strategic Consulting and Ambassador of the Russian Federation to Germany in reserve; – Kumar Manish – President/Shareholder of Soltex Group LLC; – Oleg Preksin – CEO and co-founder of the New Brix Pay Financial Alliance LLC, Vice-President of the Association of Russian Banks; – Andrey Bespalov – Chairman of the Coordinating Council of the Eurasian Centre for Human Resources Management; – Maria Serebrova – Director for Development of the Association of Customs Auditors and Consultants.

As a result of the reports, as well as the discussion, the participants of the meeting recognized the work of the FBA EAC as satisfactory, noting the significant dynamics of its development, and approved the directions of the Association’s activities for 2020.

Chairman of the Coordination Council Alexander Murychev spoke on the issue of amendments to the Charter and approval of the new structure of the FBA EAC. In his speech, he justified the need for reorganization of the Association by

analysis of the accumulated over the years membership and business potential of the organization, which led to think about the future prospects of the FBA EAC. The existence of representatives of the banking and business communities on the same business platform – almost in equal proportion, as well as many years of experience in building and implementing various projects have led to the idea of changing the structure of the Association in the interests of all its members and, as a result, to a change in the name of the organization. In an effort to preserve the «FBA EAC», which has become the «top» abbreviation, the management of the Association proposed a new name for the organization, but in line with the previous one – the Association «Financial and Business Association of Euro-Asian Cooperation». This proposal, proposed changes to the Charter of the FBA EAC, as well as approval of new management bodies of the Association – the Board, Bureau of the Board and Business Council – members of the FBA EAC were unanimously adopted.

These decisions have led to changes in the regulatory documents of the Association: the FBA EAC Regulations on membership, membershipe fee, new structures of the Association, etc. All of them were also approved by the General Meeting.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

Finally, a new composition of the Association’s governing bodies was elected: President, CEO, members of the Executive Board and its Chairman, members of the Supervisory and Business Councils and their chairmen, as well as members of the Audit Commission. The voting was open, the new composition of the Association’s management was elected for five years.

Alexander Murychev, Executive Vice President of the Russian Union of Industrialists and Entrepreneurs, became Chairman of the Board.

Anatoly Tkachuk, President of the Rustitan Group of Companies and member of the RSPP Board, was elected President of the Association.

Oleg Berezovoy, a member of the RSPP Board, became CEO. The Supervisory Board of the Association was headed by Timur Zhaksylykov, member of the ECE Economic and Financial Policy Board (Minister).

The Chairman of the Business Council was Bakhytbek Baiseitov, President of the Association of Banks of the Republic of Kazakhstan.

The Audit Commission was headed

by Konstantin Topornin, CEO of Eurasia Corporation.

An award ceremony was held during the event.

The Order of Honour of the FBA EAC – the order for great contribution to international financial and banking activities and effective implementation of the statutory objectives of the FBA EAC were awarded to: Istvan Lendiel – Secretary General of the Banking Association of Central and Eastern Europe (Hungary) and Anatoly Kazakov – Advisor to the Office of the Chairman of the Executive Committee – CIS Executive Secretary, Chairman of the Coordination Council of the CIS Financial and Banking Council (CIS).

Diplomas of accession and badge of the FBA EAC member were awarded to the new members of the FBA EAC: the companies TsTO-Kasbi, New Financial Alliance Brix Pay, Aquatoc, Promtex, Rusigit, Dominion Business Park.

One of the important moments of the general meeting was the signing of the Memorandum of Association’s joining the initiative of «Schneider Group» – «Common Economic Space from Lisbon to Vladivostok». The initiative is aimed at activating business dialogue in the Eurasian space.

In conclusion Chairman of the General Assembly B. B. Baiseitov warmly thanked all participants of the event and expressed confidence that the Association will achieve even more impressive results in its new capacity.

17

founderS’ PAGE. FBA EAC

Interview with FBA EAC President, Member of the Executive Board of RSPP, President of RUSTIAN Group A.N. Tkachuk

Anatoly Tkachuk:

«An indicator of the Association work – satisfaction of the interests of its members» – Anatoly, why did you decide to head the FBA EAC at this difficult time on the international arena and what tasks do you set for yourself and for the organization?

18

– For many years I have been a member of the governing bodies of various international business structures and public associations focused on the development of business activity in the world.

And today this experience is important

within the framework of my activities in the FBA EAC. Undoubtedly, the time is not easy. Systemic changes in many areas of international activity require prompt and effective response from business. In particular, it is necessary to transform

existing social and business structures.

The FBA EAC now has a serious position in the Eurasian space and is one of the driving forces focused on the development of financial and business institutions in this huge and multifaceted region. But the Association also needs certain changes. Therefore, I see for myself the important task of reforming FBA EAC, transforming its institutions and activating a number of previously established structures.

– What kind of reforms do you plan to undertake?

– Of course, my role as President of the Association is great, but still the FBA EAC is a public structure, so the reform requires discussion and agreement with all members.

As for the changes proper, firstly, the Financial and Banking Association EAC is transformed into the Financial and Business Association EAC and the relevant amendments are made to the organization’s Charter in accordance with the decision of the General Meeting of the Association. This will provide an opportunity to integrate financial instruments and real business within the same structure. And there is a great perspective in this, because by joining the FBA EAC, different business structures will have an opportunity to implement projects in the Eurasian space, associated with the work of existing financial instruments of different levels.

Secondly, the Association is introducing the institution of Vice–Presidents.

This will make it possible to significantly diversify the organization’s activities in various areas. It is also worth noting the importance and necessity of development of committees in a number of areas, which will activate the project activities of the Association.

Thus, reformation of management bodies is a big step towards further development of the FBA EAC and attraction of new business representatives to its ranks.

– Project work is of great importance within the FBA EAC activities. Which areas are planned to focus on?

– During its work the Association has managed to implement many different projects. Some of them are now widely known in the Eurasian space, while others – for one reason or another – are not loudly spoken about. We are ready to take up different areas of activity, but it should be noted that today those projects that are related to trade, construction, infrastructure development, mining, agriculture are of great importance. To a great extent, members of the FBA EAC

pay attention to the development of technologies and innovations, as well as their implementation in various countries. A number of Association members are actively working in this direction. The main thing is that there are no closed topics for discussion on projects – we are ready to work with everyone.

– What is the basis for the formation of financial instruments for Association members?

– Various banking and financial structures are the basis of the FBA EAC. The members are both independent banks and large national banking associations of a number of countries. This makes it possible to form extraordinary financial support mechanisms for members of the Association. In the near future we will have a lot of work to create unified proposals that will interest our members and partners. This work is carried out daily in constant interaction with banks, other financial structures and taking into account real requests from business structures.

– How do you see the interaction with various integration structures and public associations?

– Today, contacts with many associations of industrialists and entrepreneurs in various countries have already established.

In Russia the Russian Union of Industrialists and Entrepreneurs is an important structure for cooperation. And our task is to significantly strengthen and give inertia to this partnership. We are also doing a lot of work on cooperation with the EEC, BRICS, EU and other integration structures, which are extremely important for the work of the Association, as they are in many ways an important basis for expanding the membership base and solving urgent tasks that require interaction at the highest level. It is the solution of international issues at the level of governing bodies of large structures that is largely the key to the effective work of the FBA EAC. – What kind of activities are planned as part of the expansion of the Association’s membership base?

– All the actions mentioned above are aimed at building effective work – both within the Association and at external sites. Our task is not just to attract new members, but to create working conditions that would bring real benefit to each participant in the business process. We are interested in companies that value the Association’s work and want to work on the international market, but need some assistance. I would like to empha-

Евразийский финансово-экономический вестник | #2(10) 2020

size: this process should always be mutual – that is, the FBA EAC is interested in those members who are interested in it.

And it cannot be otherwise. This must be understood by every structure that joins us. Each organization has an agreed road map of interaction, which is coordinated and implemented according to the interests and real opportunities. It is important to note that in the near future a number of activities are planned to increase the number of countries represented in the FBA EAC, as well as to enlarge the network of regional offices.

– What is the role of regional offices and what is the specificity of their functioning?

– It is the Representative Offices that can be considered as the anchor structures for the Association’s work in each individual country or region. The “one country, one representation” format is ideal, but it is not always possible for one reason or another. But it is the maximum expansion of the network of regional representative offices will significantly strengthen the interaction of the FBA EAC with state and commercial structures in each individual country. In fact, the representative becomes the center of communication of the FBA EAC with the business community and government agencies. This approach makes it much easier to deal with tasks related to work in different countries in a spot– on manner.

– How do you see the Association’s work in five years? What are the key indicators to be achieved?

– For each structure stability and development are important. Now by reforming the FBA EAC we are laying a solid foundation for the Association’s long– term work. Well– established work of governing bodies, councils and external structures will ensure the development of membership base and effective solution of tasks on implementation of business projects. These are the two pillars on which our activities are built. Over the next five years it is important to establish cooperation with many countries and their business structures. The main indicator of the Association’s work is to meet the interests of our members. If our activities are effective, it will certainly affect the success of each member of the Association separately. Taking into account global changes taking place in the world FBA EAC should take one of the key positions to ensure interaction between regions and business sectors. If this happens, it will be possible to consider our work successful.

19

founderS’ PAGE. FBA EAC

VIDEO CONFERENCE

PECULIARITIES OF CREDIT INSTITUTIONS’ WORK IN THE CONTEXT OF THE PANDEMIC

ON MAY 12, 2020 AT THE INITIATIVE OF DENIS IVANOV, A MEMBER OF THE BUSINESS COUNCIL OF THE FBA EAC, CHAIRMAN OF THE BOARD OF THE INTERNATIONAL BANK FOR ECONOMIC COOPERATION, THE ASSOCIATION HELD A VIDEOCONFERENCE WHERE HEADS OF CREDIT INSTITUTIONS, BANKING ASSOCIATIONS, MEMBERS OF THE EXECUTIVE BOARD OF THE FBA EAC FROM 11 COUNTRIES OF EURASIA DISCUSSED THE TOPICAL ISSUE OF PECULIARITIES OF THE WORK OF CREDIT INSTITUTIONS IN THE CONDITIONS OF THE PANDEMIC. THE CONFERENCE WAS MODERATED BY ALEXANDER MURYCHEV, CHAIRMAN OF THE MANAGEMENT BOARD OF THE FBA EAC, EXECUTIVE VICE-PRESIDENT OF THE RUSSIAN UNION OF INDUSTRIALISTS AND ENTREPRENEURS AND CHAIRMAN OF THE IASB. The subject of discussion were the issues of banks’ activities in organizing remote work of their employees, forming remote teams, transformation of models and processes of servicing bank customers, issues of organizing basic banking processes, ensuring their continuity and security. The participants also shared their experience of interaction between the banks and the regulator, and discussed the specifics of trade and export financing under general quarantine conditions.

Alexander Murychev made a keynote speech at the meeting. He said that in terms of its scale, geographical coverage, depth and severity of consequences, the current world crisis exceeds the global financial crisis of 2008-2009. The COVID-19 pandemic has not only served as a “trigger” for the realization of the crisis potential, which has already been formed in the world stock market, but also acted as a powerful autonomous

20

factor in the sharp deterioration of the macroeconomic situation.

In his speech Alexander Murychev spoke in detail about the situation in the Russian economy and banking sector, about a large-scale set of measures of the Russian Government and the Bank of Russia on social protection of citizens, industries and spheres of the economy that found themselves in the most difficult situation due to the crisis. The banking sector is actively involved in the implementation of these measures, ensuring uninterrupted functioning of the national payment system and providing services to clients throughout the entire perimeter of financial services under increased risks. The Central Bank timely incorporated a soft monetary policy and managed to cope with the volatility of the ruble exchange rate. The situation on financial and foreign exchange markets stabilized. The Central Bank did not have to actively provide foreign exchange

liquidity, and the gold and foreign exchange reserves were maintained and even slightly increased. At present, the Russian banking sector is not experiencing systemic problems, with liquidity and capital being managed.

Alexander Murychev, in particular, noted that the peculiarity of the current crisis is that, unlike the previous crises, support for the banking sector at its initial stage was not among the top-priority tasks of the state economic policy.

Meanwhile, international and Russian practice shows that the banking sector is characterized by increased vulnerability to external shocks and limited opportunities to absorb risks.

Subsequently, as the crisis developed, the Bank of Russia implemented a large number of measures to support the banking sector. They touched upon almost all possible aspects of banks’ activities: liquidity maintenance, approaches to provisioning, timing, number and con-

tent of requests, application of impact measures, timing and scope of submitted reports, inspection and supervision activities, deductions to DIAs, deferral of execution of prescriptions, assessment of pledges and property, postponement of adoption and implementation of new complex regulations. Nevertheless, there are still a sufficient number of issues that require attention from the Bank of Russia, taking into account the deferred impact of the crisis on the banking system and the need for a subsequent smooth and predictable exit from the relaxation regime. For now, the crisis is not banking, said Alexander Murychev, but it may well “end” the banks and we need to prepare for it. “Now the situation is beginning to change, the world economy is adapting to it. Many countries, including Russia, have started to gradually get out of the restrictions associated with the pandemic. The sustainability of the banking system will also depend on how quickly production will recover, including in those sectors that are under special pressure today,” said Alexander Murychev in conclusion.

In his speech Chairman of the Board of the IBEC D. Ivanov told in detail about measures to ensure uninterrupted operation of the bank. Even before the beginning of quarantine, a special commission was established in the IBEC, which, first of all, assessed the technical capabilities of remote work of employees, having grown them to the required volumes, ensured safe presence of employees in the office building, prepared additional agreements to employment contracts, taking into account the remoteness of personnel work, as well as new regulations for work with clients of the bank.

All these measures enabled the transfer of about 90% of the Bank’s personnel to remote work by March 16.

In order to avoid personal psychological problems of employees and in order to provide them with reliable information, on a weekly basis, on the basis of the information received from the heads of the bank’s main divisions, the IBEC prepares a bulletin in which employees are informed about the current activities of the bank and give the following information clarifications on their problematic issues. A weekly newsletter is also made to the shareholders of the bank. At the same time, the IBEC prepares plans to get out of this situation with varying degrees of rigidity, which, with the tightening of the quarantine regime, imply the transfer of part of the bank’s staff on duty, and with the weakening of quarantine measures – to enter the normal mode of operation within 2–5 weeks.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

As for the work with clients directly and the special role of the IBEC as a development institution, the bank understands the necessity of flexible approach in order to preserve clients and render them comprehensive assistance in the current situation. In the current conditions, the bank focuses on support of international trade, trade financing, financial support of existing contracts. During its remote operation, the IBEC has issued more than 20 credits for ensuring export and import operations. Work is underway to restructure the loans, which poses serious challenges to risk management.

Work is underway to adopt a new IBEC development strategy until 2025, which will also take into account the possibility of such future pandemics.

In his speech, the Executive Director of the Union of Banks of Armenia, Seiran Sargsyan, assessed the activities of the Government and the Central Bank of Armenia on stabilization of the banking system. In particular, the refinancing rate has been reduced, the terms of commercial banks’ reports have been extended for 2 months, the Ministry of Finance is considering a project to reduce additional capital from 30% to 20%. In individual cases, banks provide clients with loan deferrals and do not impose fines.

According to Elena Korobkova, Executive Director of the Independent Association of Banks of Ukraine, the country’s banking system was prepared for quarantine by super-liquidity. An anti-crisis headquarters was established. Today 70% of the country’s bank employees work remotely, remote identification has been introduced, and protocols have been developed in case an infected employee or visitor appears in the office. There is no outflow of deposits, cache loans are reviewed, no penalties are imposed on overdue loans. The terms of bank statements have also been postponed.

From the speech of the President of the Association of Banks of Uzbekistan Bakhtiar Hamidov conference participants learned that the fight against the pandemic in the country is led by the President of the Republic.

A working group consisting of ministers and bank representatives has been established. A special fund has been established to carry out sanitary, medical and other priority measures, as well as a fund to support poor families. The fund “Good and Mercy”, which involves public organizations, small and medium businessesi, is active. From the first days of quarantine in the country, most banks have introduced a shift work method.

In general, banks operate in three modes: permanent work, remote mode, vaca-

tion. Banks actively support international trade. It is predicted that the return to standard mode of operation should take a month and a half.

Secretary General of the Banking Association for Central and Eastern Europe (WACEEE) Istvan Lendiel (Hungary) said in his speech that now the main task of its member countries is to stimulate demand. In Europe GDP is expected to decline by 5-10%. As for loans, they are provided, but interest on them is frozen until the end of the year and the terms are automatically extended. On the whole, banks are operating smoothly and although a significant part of them have shifted to remote mode of operation, no restrictions on banking services.

The banks’ work in 2019 was completed with record profits, which laid a good foundation for solving current problems.

European regulation made it possible to reduce to make capital requirements for banks. Introduction of new Basel IV requirements was temporarily suspended, liquidity requirements were reduced. According to I. Lendiel, the economic crisis is inevitable, and it will necessarily lead to a social crisis.

President of the Association of Banks of Azerbaijan Zakir Nuriyev spoke about the measures taken in his country. The support to the banking sector included 1.5 billion manat has been allocated. According to Z. Nuriyev, there is already a tendency to increase problem loans.

“The Central Bank of Azerbaijan now has sufficient resources to help banks, which gives hope for a mild recovery from the crisis,” he said. According to the Central Bank’s management, banks with good liquidity and sufficient capital resources should take the blow of the pandemic as much as possible. Nevertheless, the government helps affected industries and reimburses banks for interest on loans.

The banks also restructure the loans, do not charge penalties and do not worsen the credit history of the clients.

President of the Union of Banks of Kyrgyzstan Anvar Abdraev noted that the discussion turned out to be interesting and important for understanding the situation in the world banking system today. Also, addressing the leadership of the FBA EAC, A. Abdraev said that the discussion was interesting and important for understanding the current situation in the world banking system. Abdraev proposed to mention the most prominent representatives of the banking community, who have achieved special success in overcoming the economic consequences of the pandemic, during the awarding of the International Award “Eurasian Business Elite” in 2020.

21

Founder’s page. IBS

ON MAY 28, 2020 A REGULAR MEETING OF THE INTERNATIONAL BANKING COUNCIL WAS HELD. FOR THE FIRST TIME IN ALL THE YEARS OF ITS EXISTENCE THIS MEETING WAS HELD VIA VIDEO CONFERENCE. THE THEME OF THE MEETING WAS «IMPLEMENTATION BY BANKS AND BANKING ASSOCIATIONS OF MEASURES TO SUPPORT NATIONAL ECONOMIES AND POPULATION TO OVERCOME THE CONSEQUENCES OF THE PANDEMIC».

THE VIDEOCONFERENCE WAS ATTENDED BY HEADS OF NATIONAL BANKING UNIONS AND ASSOCIATIONS FROM 11 COUNTRIES OF EURASIA (POLAND, UKRAINE, MONTENEGRO, KAZAKHSTAN, GEORGIA, HUNGARY, ARMENIA, UZBEKISTAN, RUSSIA, AZERBAIJAN, KYRGYZSTAN), REPRESENTATIVES OF THE FINANCIAL AND BANKING BLOC OF THE EURASIAN ECONOMIC COMMISSION, AS WELL AS HEADS OF BANKING ASSOCIATIONS OF CIS, CENTRAL AND EASTERN EUROPE. IN THIS SECTION YOU WILL GET ACQUAINTED WITH SOME OF THE SPEECHES OF THE HEADS OF THE NATIONAL BANKING UNIONS – MEMBERS OF THE IBU, AS WELL AS WITH THE MOST INTERESTING MATERIALS OF THE MINSK MEETING OF THE INTERNATIONAL BANKING COUNCIL, HELD IN MID-OCTOBER 2019.

KAZAKHSTAN:

ECONOMIC SUPPORT MEASURES IMPLEMENTED BY THE BANKING SECTOR AND THE POPULATION TO COPE WITH THE EFFECTS OF THE PANDEMIC In the context of the state of emergency in the country caused by the Corona virus pandemic, measures to support SMEs and the population have become a priority for economic stabilization. The Government is implementing a number of specialized measures to reduce the impact of COVID-19 on the country’s economy. Second tier banks (BVI) and microfi-

22

nance organizations are considering loan deferral applications from Kazakhstan.

The world economy is sinking into another crisis caused by the coronavirus pandemic. The virus has actively spread to almost all countries of the world, first paralyzing some production in China and then reaching countries in Europe, Asia and the United States.

Bakhytbek Bayseitov,

President of the Association of Banks of the Republic of Kazakhstan, a member of the FBA EAC Executive Board, chairman of the FBA EAC Business Council

Against the background of measures to prevent the spread of COVID-19, industrial production in a number of countries began to decline, which reduced the demand for oil. The situation on the oil market and the price conflict between Saudi Arabia and Russia, which during the meeting of OPEC+ countries could not agree on the volumes of reduction of hydrocarbon production, has worsened. Quotations of futures per barrel of Brent oil rushed to the level of 30 USD and below.

For the economy of Kazakhstan, which has a raw material orientation, a drop in the cost of oil may lead to a 3-fold reduction in payments of oil companies to the state budget. And this is a significant indicator, as the oil and gas sector provides more than 40% of all revenues to the budget. At the same time 18 of the 30 largest taxpayers are companies engaged in oil and gas production. In 2019, they provided more than 4.3 trillion tenge in payments.

Other factors of corona virus’ influence were the state of emergency, introduced in Kazakhstan since March 16, and quarantine practically in all regions and big cities. The adopted restrictions immediately affected small and medium businesses – many companies suspended their operations, employees were reduced or sent on leave without pay.

Even before the outbreak of the virus, SMEs had difficulties in development.

Despite the fact that the number of operating entities is increasing annually and as of 1 March, 2020 exceeded 1.3 million, 87% of the output is accounted for only 265.800 small and medium-sized businesses. One fifth of SMEs account for more than 60% of the industry’s profits.

In other words, 80% of the subjects are financially unsound.

Obviously, due to limited activities during the state of emergency, almost all SMEs and 3.3 million workers involved in the sector, or 36% of the economically active population, were affected. President Kasim-Jomart Tokayev responded promptly to the situation in the economy. On his instructions, the Government of the Republic took a number of stabilizing measures. Firstly, temporary exemption of SMEs from payment of all taxes and penalties for late payments was introduced, tax inspections were suspended. Secondly, concessional lending for one year at a rate not exceeding 8% per annum has been expanded.

To implement this measure, KZT 600 billion was allocated, and taking into account the growth of financing for the programme “Economics of Simple Things”, the volume of support for doEURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

mestic business reached KZT 1.0 trillion.

It is planned that KZT 700 billion will be allocated for processing and production in the agro-industrial complex, and KZT 300 billion – for manufacturing industry and services.

Moreover, to better mitigate the impact of the state of emergency, the President addressed the banking sector at the meeting of the State Commission on Emergency on March 23, emphasizing the need to introduce credit holidays in the country.

The second-tier banks and microfinance institutions have responded fairly quickly to the President’s appeal and expressed their readiness to start considering Kazakhstan’s loan deferral applications. At that Kaspi Bank offered the first delay of payments for its clients back on March 18. At that time, the bank proceeded to prepare infrastructure for online application.

In order to delay payments, the Agency for Regulation and Development of Financial Market (ARRFD) has approved a special Procedure agreed with banks on suspension of principal and interest payments on loans of population, small and medium businesses affected by the state of emergency, which provides as follows: 1. The procedure for suspension of payments of principal and remuneration for loans of population, small and medium businesses affected by the state of emergency shall apply to banks of the second level, organizations engaged in certain types of banking operations, organizations engaged in microfinance activities, including pawnshops, online lending companies, credit partnerships, including legal entities that were previously the above organizations (hereinafter – credit organizations).

2. Suspension of principal payments and remuneration applies to all bank loans and microcredits issued by credit institutions before March 16, 2020 and is granted for a period of 90 days from March 16 to June 15, 2020.

3. To ensure protection of the most vulnerable segments of the population, suspension of payments on the principal debt and remuneration under bank loan and/or microcredit agreements is carried out with the consent of the borrower without applications, supporting documents and signing additional agreements for the following categories of individuals: (1) Socially vulnerable segments of the population, in accordance with article 68 of the Housing Relations Act: – disabled people and participants of the Great Patriotic War;

– persons equated to the disabled and participants in the Great Patriotic War; – disabled persons of groups 1 and 2; – families that have or are raising children with disabilities; – persons suffering from severe forms of certain chronic diseases listed in the list of diseases approved by the Government of Kazakhstan; – old-age pensioners; – orphans and children without parental care, under twenty-nine years of age, who lost their parents before they became adults; – oralmans; – persons who have lost their homes as a result of environmental disasters, natural and man-made emergencies; – mothers with many children, awarded with pendants “Altyn alkha”, “Күміс alkha” or previously received the title of “Heroine Mother”, as well as awarded the Order of Mother Glory, I and II degrees, large families; – families of persons who died in the performance of State or public duties, military service, in the preparation or conduct of a space flight, in saving human life, or in law enforcement; – single-parent families; 2) Recipients of state targeted social assistance in accordance with the Act on state targeted social assistance; 3) Unemployed persons registered with the local employment authority in accordance with the Employment Act. The lists of these individuals will be provided to credit organizations on the basis of information from the Ministry of Labour and Social Protection and credit bureaus.

4. In accordance with the instructions of the Head of State, to natural persons whose financial condition has deteriorated as a result of the state of emergency, payments on the principal debt and remuneration under bank loan and/or microcredit agreements shall be suspended on the basis of an application without providing supporting documents for the following reasons: 1) temporary inability to work due to quarantine; 2) being on unpaid labour leave; 3) dismissal, termination of the employment contract and termination of other employment relations; 4) reduction or suspension of payment of wages or other income; 5) in case if an employee cannot be present at the workplace due to restrictions on entry (exit) to the area where a state of emergency and/or quarantine is in force;

23

Founder’s page. IBS

6) other reasons indicating deterioration of the financial situation. The borrower’s application shall be prepared in any form with indication of the reason for the deterioration of the financial condition, sent via e-mail, the “bank-client” system, the Internet resource of the organization, mobile application and other means of communication. The application of the borrower is considered by the credit organization within 10 working days. The application may be submitted to a credit organization at any time during the period from March 16 to June 15, 2020. At the same time, a credit organization may refuse to submit an application if the credit organization has information about the absence of deterioration of the financial condition of an individual. For the period of suspension of payments, a credit organization shall stop claims and search work on borrowers and notify the borrower of the need to repay overdue debts.

5. Subjects of small and medium-sized enterprises, including individual entrepreneurs, suspension of payments on the principal debt and remuneration under bank loan and/or microcredit agreements is carried out on the basis of the borrower’s application and documents confirming the deterioration of the financial situation. At the same time, the credit organization takes a decision on suspension in the following cases: – Activities in sectors of the economy restricted by the state of emergency, including: trade, including the tenants of shopping malls, consumer goods stores, supply chain, except for food stores, pharmacies and related supplies; sport, tourism and hotel business, including tour operators and travel agents; passenger and freight transport, except for food and medicine; catering, including restaurants and cafes; the consumer services sector, leisure and recreation, including theatres, cinemas, photo and video recordings, exhibitions and conferences, organization of celebrations, beauty salons and fitness centres, or – the financial condition of which has deteriorated, if a decrease in the volume of sold goods and (or) services, delay, suspension, postponement of payment from customers, reduction of staff or for other objective reasons during the state of emergency is confirmed. An application of a small or medium business entity, including an individual entrepreneur, may be submitted at any time during the period from March 16 to June 15, 2020 and considered by a credit institution within 10 working days.

24

6. In the period from 16 March to 15 June 2020, credit organizations do not charge the borrower commissions and other payments for consideration of the application for suspension of payments and amendment of relevant agreements.

BLDs were prepared for this situation and were able to quickly launch the online postponement review process. As a result, applications began to be accepted, and as of early April (10 days of emergency mode), their number exceeded 282 thousand, of which about 200 thousand came from the borrowers of Kaspi Bank, and the remaining 82 thousand – from other banks and organizations providing microcredit and online loans. According to the data of April 8, the number of applications from Kaspi Bank borrowers alone exceeded 773.6 thousand, of which 96% were approved, which is 10% of the total number of borrowers of all BLRs (a total of 7.46 million borrowers).

With around 1.3 million Kazakh citizens applying for income reduction or loss benefits, the number of applications for deferral continues to grow rapidly.

This in turn increases the burden on the banking sector. However, at the consolidated level, the banks have a significant stock of equity and liquidity to support their business continuity and provide a full range of banking services.

It should be recalled that according to the results of an independent assessment of asset quality, the excess of capital adequacy k1 against the regulatory minimum is 70% with adjustments. This means that there are no risks for bank depositors.

As can be seen, the current crisis situation has shown that Kazakhstan has an effective airbag in the form of the banking sector, which has recently significantly improved its financial position. For example, their total assets have grown by 51% over the last five years, and their equity has grown by 62%. In terms of assets, the top 5 banks form Halyk Bank of Kazakhstan, Sberbank, Kaspi Bank, ForteBank and Bank CenterCredit.

Now it is BWIs that have a stabilizing effect on the national economy through credit holidays both for SMEs, where 36% of all employed people and 29% of Kazakhstan’s GDP are concentrated, and for individuals. For the population, the postponement has become a social measure of support, as it has reduced the burden on the budget of Kazakhstan, which in the crisis period is a significant help.

It should be noted that the banking sector of the Republic of Kazakhstan has the largest share in the country’s financial market – almost 94%, while the share of MFIs is one of the lowest – only 1.2%. At

the same time, microfinance institutions participate in the implementation of anti-crisis measures on equal terms with the BVI of Kazakhstan.

In general, there was a ban on charging fines and penalties for late payments on all loans (microcredits), a ban on charging fees on unsecured consumer loans of individuals with overdue payments over 90 days, as well as provision of deferred payments. It should be noted that AMFOC microfinance organizations (about 90% of MFIs) declared their readiness to support anti-crisis measures even before the provisions on them were adopted at the legislative level.

The largest MFI market players are also actively informing their clients about anti-crisis measures. In particular, in addition to ARFR measures, KMF as the largest microfinance institution in the country (over 240,000 borrowers) has decided to introduce a number of additional measures to mitigate the negative impact on its clients. For socially vulnerable borrowers, the company provided a month of interest-free deferral, launched SENIM, a preferential product designed to support current clients who have not taken a deferral on their principal debt and are ready to develop their business. The loan is granted at a lower rate, with the possibility of a grace period on repayment of the principal debt.

Upon completion of the grace period to restore the business, KMF is ready to offer a QOLDAU loan with a grace period to repay the principal debt.

According to the Agency of the Republic of Kazakhstan on Regulation and Development of Financial Market (financial regulator of the country), today about 5.3 million citizens have debts on bank loans and microcredits in the amount of KZT 4.4 trln, and about 26.2 thousand small and medium businesses – in the amount of KZT 3.9 trln.

On the whole, as of the end of April this year, second tier banks, microfinance organizations, as well as other credit institutions received over 1.8 million applications for suspension of payments on loans and microcredits, which is about 34% of the total number of citizens who have a loan. Of these, 1.7 million borrowers, or 90.7% of all applications for suspension of payments, received approval. Individuals account for 99.3% of the total number of applications. In turn, SMEs submitted 13,100 applications for suspension, of which 88.2% (11,600) were approved.

In conclusion, it should be noted that granting a delay in payments will not affect the credit history of the borrower in any way.

MONTENEGRO:

THE BANKING SYSTEM OF MONTENEGRO IN CONDITIONS OF THE PANDEMIC AND THE FUTURE OF THE EUROPEAN ECONOMY At the end of his life Sigmund Freud said the famous words: “I am grateful for life, for nothing was given to me easily”.

It’s about flexibility. In situations such as the new Corona virus pandemic, it is necessary to find inner strength to turn it in the direction that will lead to the “green branch”. While the statistics for the Montenegrin economy at the end of March 2020 are positive, it is important to keep in mind that the economic impact of the pandemic will be much more visible in business results at the end of the second quarter of 2020.

Overall, the banking system in Montenegro is stable, liquid, with record profits at the end of 2019, with low NPLs of 3.85% at the systemic level, which has a constant downward trend. Important indicators are liquid assets at around 20% of total assets and system solvency at 17.8%. The EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

banking system is in a better position to manage the situation than it would have been in the earlier period.

However, an emergency situation, as required by the pandemic, carries specific risks. Home work, remote connectivity to banking applications and, as a result, heavy reliance on technology, have led to cyber risks that have been successfully addressed by banks, while we have not had a single reported case of this kind. Of course, what has been done with regard to digitalization in banks has had a stronger application since the beginning of the pandemic than in the previous 3 years and this is a great success in these difficult times, both in terms of number of users and transaction volume.

The pandemic has placed a heavy burden on banks, not only because of the

Bratislav Peyakovič,

master, General Secretary of the Association banks of Montenegro organization of remote work, but also because of the expectations from others that banks will amortize the financial blow through their actions, in the settlement of existing liabilities to clients, as well as in the financing of economic recovery, population and government projects. It is certainly a good fact that banks, in addition to the burden of the moratorium, continued lending operations so that the situation in the first quarter would be at a regular level, because the first cases were discovered only in the second half of March, and we can be proud that since May 25 Montenegro is a state without the Corona virus.

During the pandemic, previously visible economic problems or an inadequate economic structure were further identified and heavily imposed to address, but atypically through the expected support

25

Founder’s page. IBS

of the State, because it was caused by force majeure. As for banks’ efforts, they should follow international standards, balance softer approval procedures and thus help enterprises. Banks had to find a balance between quickly transferring liquidity to companies, but at the same time protecting the interests of the bank and then the state, which would guarantee a significant number of positions for companies, and this is achieved by eliminating guarantees for loans with a high risk of non-repayment.

The Ministry of Finance of Montenegro indicated the need for timely operation and the expected contribution of the banking system, which will not be left without public support. It also announced the expected implementation of negotiations on the provision of additional funds for the system through the state. The funds would have adequate maturity and quality support in reducing interest rates for vulnerable entrepreneurs in terms of liquidity, but which are solvent and have a comparative advantage on the market.

The need to support all those who deserve it in accordance with the standards and priorities of banking practice was emphasized, especially for SMEs, production, export substitution, tourism, etc. Representatives of business and population, as well as successful sportsmen of Montenegro have contributed funds for the purchase of respirators and other hospital equipment to the single recently opened special account of the National Coordination Council, which has provided sufficient equipment, and two new clinics are planned to be built out of the remaining funds through an EU grant. The banks, being socially responsible, have also made a qualitative contribution through monetary and non-monetary donations.

The international addresses with which more accessible funds for financing the economy are being negotiated are the EBRD, IFC, EBA - European Banking Authority, which stressed that the assessment of positions must meet standards that do not jeopardize the long-term sustainability of the system, while the EBRD has identified a EUR 1 billion support to entrepreneurs, the energy sector, small and medium enterprises, shops, etc., for South-Eastern Europe. In addition to the above addresses, we have an announcement of quality cooperation between the Central Bank and the European Central Bank, as well as the Bank for International Settlements.

The contribution of the measures of the Central Bank of Montenegro consists in actions and solutions in terms of weakening the banks’ Compulsory Reserves by 2%, which will contribute to additional

26

funds for client positions in the amount of about 70 million Euros, but will also reduce interest rates for banks by 50% if they use the Compulsory Reserves. Another quality measure relates to the flexibility of loan restructuring in the balance sheets of banks, where customers who document the fall in turnover as a result of the pandemic are allowed to treat these loans as newly approved. Consideration is being given to the possibility of an additional grace period after the existing moratorium, when a new moratorium of up to 90 days can be approved after June after the first moratorium, but this time it would not be the right of every client, but would depend on the bank’s assessment for direct losses due to the pandemic.

A special problem during this period was the implementation of measures of the National Coordinating Council for Health Standards transferred to banks when it comes to customer behavior, as the main focus was on ensuring that as many customers as possible use digital services: digital banking, strengthening the filling of ATM networks and POS terminals to ensure adequate social distance. In this sense, most banks have abolished fees for their clients for withdrawing money from ATMs, as well as fees for internal payment transactions when using electronic banking applications. It is estimated that banks directly supported the liquidity of the economy and households by about 3.2% of Montenegro’s GDP, which is a concrete contribution to the depreciation of the first strike of the economic slowdown.

At the beginning of the pandemic, we had a slightly more pronounced interest from clients in cash payments than usual.

According to an agreement with the Central Bank of Montenegro, it was decided that commercial banks, in addition to the euro, could take other currencies from the Central Bank of Montenegro vault, mainly US dollars. The Central Bank of Montenegro stated that they would not charge banks for participation. The technical part of the amount, the denomination structure is determined directly by the banks that have expressed interest.

Banks also raised the issue of development of electronic services in the field of online applications and loans, online account opening, including video identification, in accordance with the Regulator. The issue of end-to-end services, i.e. loan approval applications, which could function without the need for the physical presence of the client, was highlighted. The response was received promptly.

By reacting quickly banks managed to create the appropriate IT infrastructure and organize remote work for more than

80% of employees at the central office, while branch employees worked from 8:00 to 14:00 in the first weeks. During this period, the banks did not refuse any services to clients, but performed all operations with employees working remotely.

With clear organization, goals and objectives, rules and the highest standards of information policy and security policy and practice, as well as the use of modern multimedia tools, home working has proven to be fully effective and functional in most segments. The changed work environment has shown that all participants in the work, both providers and users, have made some improvements in the organization of daily activities, moved out of the existing templates, through which they solved or met their needs, and used additional tools and new (often more functional and effective ways), realizing their needs. This has opened up a new world of possibilities for all, so that existing problems can bring significant conclusions for the future organization.

Clients and staff have shown that they are ready for new challenges, and I believe that on this wave we need to continue to improve the process and (personal) organization in the future.

A lot of work has been done to include online applications for various products and services of the bank, to create so-called digital branches, which remotely contact customers and prepare all the necessary steps to ensure that customers as little as possible have to get to the branches personally, etc. The goal was to ensure that customers did not feel the difference in service and product sales between the so-called “usual” situations and this pandemic crisis.

Immediately after the announcement of the National Coordinating Council measures, banks adapted their business organization to the new circumstances.

The system, working processes, all possibilities of the bank were functioning fully and continuously. The Business Continuity Plan was put into effect in mid-March 2020. Banks’ crisis committees met once a day and made conclusions and decisions that had to be implemented efficiently and in a short time. All processes were organized to function in accordance with the established internal control system.

The biggest challenge during this period was the transformation associated with the introduction of the moratorium, which required significant procedural and software settings with mandatory remote application, i.e. through all available digital channels such as website, call centre, SMS, etc.

During this period there were no problems in connection with commu-

nication and information exchange between the Bank and the Regulatory Authority. Since the beginning of the pandemic, the Regulator has submitted several new daily and periodic reports necessary for monitoring the situation on the banking market. These reports mainly relate to deposits (movements and balances of deposits, early termination of term deposits, etc.), as well as to loans (loans under the moratorium, new payments, etc.). The entire set of reports and the majority of communications went through IT services, and knowing that the bank has fully adapted to the new circumstances and thus ensured continuity of business, there were no problems in this interaction.

Montenegro is a predominantly import-oriented economy characterized by a significant impact of tourism and related industries. As tourism is an industry that has suffered significant losses due to the pandemic, special attention is paid to clients in this sector. An active approach and communication with clients require common models to overcome the current situation. An analysis of expected cash flows with each customer is carried out and, based on this, new depreciation plans are proposed, which include debt restructuring within a grace period, reduction of annuities, etc. The Bank clearly informs customers that its role is not to finance losses, but to help liquidate liquidity and provide funding to start a new business cycle. At the time of writing, the available lines of financing, especially for the SME segment, were not favourable in the international market, so banks were relying more on their own sources.

The priority of each bank is to maintain a high level of liquidity and successfully serve the financial needs of its customers. General attention is paid to these categories, and all customer requirements are analysed with great care. The overall assessment of the banking sector is that from year to year we are improving our business, from regulatory to new customer services. In line with the previous ones, we see a tendency to reduce interest rates, as well as to strengthen the system capital and profit, as well as to implement FinTech solutions, digitization and high technologies, which are trends and conditions for market survival.

Experience of the work period in changed (social) circumstances imposes active thinking to improve certain processes. The most common problems are getting rid of the habits that are built into our way of thinking and working.

The current situation has provoked and made this approach necessary. I believe EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

that from our experience we can all draw qualitative conclusions, define new rules in the organization in order to satisfy our employees and improve the quality of work of companies.

But what’s next? It makes sense look at trends in the economy as Montenegro itself as well as Europe as a whole.

Reminders of the forecast for recession and recovery from the pandemic are expressed for Montenegro at the level of decline from 5.9% to 9% in 2020 and growth of 4.5% in 2021, depending on the international address that gave the forecast, which is in line with the forecast for the more developed economies of Europe. Montenegro’s current debt-toGDP ratio is about 77% and is expected to decrease to 85%. The eurozone economy is expected to shrink by 7.75% this year because of the corona virus, when estimating a contraction that put the worst financial crisis in 2009 in second place. Unemployment in the EU could rise to 9% this year. The situation could worsen depending on the development of the pandemic, said the Brussels representative. The financial crisis reduced the eurozone economy by 4.5% in 2009 and left about 10% of workers unemployed.

Greece, Italy and Spain face the greatest shocks when they are projected to lose 9.4% or more of their gross domestic product. All facts above, although they do not fully answer the question of what will happen next, indicate that at least it the forecast for the German economy is 6.5%, while the forecast for the French economy is 8.2%.

The eurozone economy should return to next year’s growth trend, where GDP growth is projected at 6.25%, as we can see from the European Commission documents. Of course, both decline and recovery will vary depending on the members of the single Eurozone. “Bloomberg recalls the position of the European Banking Agency, which warned that creditors may face a €315 billion blow to their capital levels due to credit losses and the growth of risky assets in their balance sheets, which further indicates the reality of economic forecasts.

The depth of the recession and the strength of the recovery will be uneven because of the speed with which obstacles are being overcome and services such as tourism are growing, which is particularly important for most economies, but the strength of the response depends on the financial resources of each nation. This divergence will exacerbate the north-south divide in the EU, which began after the financial system and public debt crisis.

“However, this may be mitigated by decisive joint European action,” said the head

of the Economic Committee Paolo Gentiloni in his statement, stressing that “we must face this challenge.

In a grim context, due to uncertain economic forecasts, the meeting of Italian and German bankers discussed many topics: from the implementation of reforms in the health sector and financial assistance to companies and families affected by the economic crisis, to the role that efficient financial markets can play in the recovery. The two delegations had the opportunity to discuss the recent banking package adopted by the European Commission on more flexible access to capital requirements rules for European banks affected by the corona virus, more flexible access to rules for dealing with non-performing loans (reservations) and contributions of various EU banks to the European ERF (European Resolution Fund) for 2020 and 2021. However, this is another crisis, although atypical, which has created both supply and demand side problems, but it can still be solved through joint actions.

Nevertheless, the IMF report states that banks were much better prepared for this economic shock thanks to the protective layers of capital created after the 2008 financial crisis, which is good for bank liquidity, but the information that bank deposits are increasing throughout Europe as a conditional reaction to the economic and social impact of the Corona virus pandemic, allowing more savings, which fuels economists’ fears that consumers will not be able to. Savings rates in four of Europe’s five largest economies have risen sharply from their long-term averages in March, according to the recently published data from the European Central Bank, published by the Financial Times.

On the other hand, European leaders may be united by the need to invest in the economy during the corona virus crisis, but they still have to face how to pay for all this, writes “Bloomberg”.

Such a review could force governments across the region to make difficult choices about how to share the burden with voters who are already dissatisfied with political institutions. Politicians are already asking questions about raising taxes on wealth or income, even if that threatens growth. Public debt in the euro area has increased to 103% of GDP, up from 86% last year, thanks to measures to support the economy and citizens and reduce tax revenues. CNBC says the EU is considering taxing US technical giants to further secure funds for recovery. It will definitely be a lively, interesting autumn of 2020.

27

Founder’s page. IBS

UKRAINE:

PRIORITY DIRECTIONS OF DIGITAL TRANSFORMATION OF BANKING SECTOR:

Elena Korobkova,

Executive director of Independent Association of Ukrainian Banks

‘STATE IN A SMARTPHONE’ AND TRENDS OF THE SYSTEM

28

In the era of global digitization not only of economies, but also the absolute majority of spheres of our life it is not surprising that the banking sectors of all countries follow this scenario. Everyone accurately understands the market requirements and implements the latest innovative developments designed to improve the quality of service, increase the level of trust and interest of customers, as well as significantly automate and accelerate all possible operations.

Ukraine also follows the world vector, introducing innovative and digital solutions in the maximum number of spheres of life: from state level operations to simple operations, with which the population is confronted daily. About global plans of the state and trends of the banking system focused on attracting and retaining clients in the era of rapid digitalization we will talk below.

‘State in a smartphone’ The concept “The state in a smartphone” was clearly defined by the President of Ukraine as one of the development priorities. And digitalization of public services, in turn, should become one of the main instruments in the fight against corruption and is already one of the main tasks for the government.

Of course, these are not the first steps of Ukraine towards the digitalization of all spheres (including the state level).

Among the developments over the past few years, we can mention the following: the release of some 900 publicly important public data sets; opening of all external audit reports performed by the State Audit Service; implementation of the E-data portal – a single web portal for the use of public funds, which allows to see what the public authorities’ funds are spent for; launch of electronic auctions of small privatization objects in the public domain; opening of an API (application software interface) in the sale of seized property through electronic auctions on the electronic resource OpenMarket.

However, despite the number of achievements, even more of them are embedded in the strategy. At present, the following projects are in the process of implementation: • introduction of electronic sick leaves for the population; • development of a system to digitize the import and recognition of humanitarian assistance; • the introduction of a unified social support management information and analysis system (E-SOCIAL); EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

• launch of a pilot project for electronic registration of cultural heritage sites; • the opening by the Ministry of Finance of a register of projects that are being implemented with funds from international financial organizations; • creation of electronic offices for all construction market participants; • launch of the IT-centralization of the public finance management system, within which the main information resources of the Treasury, Ministry of Finance, Tax and Migration Services will interact.

The above is only a part of the planned digitization. According to the government plans, the full digitalization of Ukraine should take place within 2020.

However, all of the above was related in most cases to the global state transformation. Now it is necessary to go deeper into the financial sphere: what trends, expectations and plans are observed in the banking sector of Ukraine?

Tendencies of banking sector Tendency № 1: Focus on customer retention Today the following dogma is relevant: earlier banks fought for profit, today – for a client (plus it is impossible to deny the calculation that retaining clients is much more profitable than attracting new ones). And here the safety of provided products and services, their simplicity, convenience, speed in use, availability of information and, of course, the possibility to perform as many operations remotely as possible come to the foreground.

Presence of non-bank financial services (the main competitors motivating to development – about it will be told below), change of generations of clients and technological progress force banks to reconsider the programs and to think out new ways of a gain of loyalty of clients.

Planned area for banking sector development Based on this trend, banks in Ukraine put into their digital strategies the study of consumers and their needs, creating an ecosystem of the bank that will help customers save and better manage money in everyday life. This approach involves involving partners and creating mutually beneficial co-branding products.

At the same time, the bank becomes a system-forming and connecting link of different business interests and as a result serves large cash flows of clients.

Tendency № 2: Audience rejuvenation According to demographic research, the largest age segment in Ukraine is from

15 to 44 years. Almost half of the total population (41.6%) is represented by two generations: Generation X at the age of 36–45 years and Generation Y at the age of 15–35 years. Advertising of banks is also noticeably “getting younger”.

Generation Y now reaches the most favorable age for earning money. They are the first to use and evaluate innovations, as well as to promote further dissemination of new technologies.

Planned area for banking sector development The goal of marketers becomes a kind of unity of a brand with a younger audience – it is rather a question of the language of communication. Digital becomes the main channel. Banks go out into the masses to talk to the audience in its language (participation in concerts, festivals).

Tendency № 3: Intensifying competition Despite the reduction in the number of banks in the market, competition in the banking sector has intensified. Mobile operators and payment services became new competitors for banks. Non-banking institutions have a rather aggressive and rapid policy of introducing technological products and digital innovations to the market.

Competition from non-banking institutions does indeed “attack” a significant part of bank income, leaving the corporate business entirely in their focus.

However, recent legislative changes will help to level the playing field between banking and non-banking financial institutions: a law (known in Ukraine as “SPLIT”), strategic for the system, has recently been adopted, in the development and lobbying of which the Independent Association of Banks of Ukraine (NABU) actively participated and which brings a certain order to the regulation of these areas. The idea of the law is simple: if both provide financial services to the public, the requirements (for example, in the field of financial monitoring) should be strict in the first and second cases. We are not talking about “squeezing” competitors – financial companies – out of the banking market, the essence is in the safety of funds and reliability of all parties, dealing with cash flows.

Planned area for banking sector development In order to meet the high standards already set in the financial market of Ukraine, banks need a close interaction with the Fintech (with a focus on remote banking, payment solutions, money transfers and digital wallets). It is ex-

29

Founder’s page. IBS

tremely important to choose the right and efficient business strategy – this issue is especially acute for small banking institutions. Focusing on the markers above, banks develop strategies and choose niches. One of the niches is the transactional business and the e-commerce market, which is developing very rapidly – on average, the market for purchases from mobile devices already generates about 30% of all sales, and this figure continues to grow.

Tendency № 4: Abandonment of cash Today Ukrainians are increasingly giving preference to non-cash payments, from year to year more and more confidently giving up cash. For example, in 2018 the share of non-cash payments compared to 2017 increased from 39.3% to 44.3%, while the level of cash decreased from 11.1% to 10.4%.

Simplicity, convenience, security, the ability to receive bonuses and cashbacks are the key motivators for non-cash payments.

The most popular options today are: payments using mobile phones (NFC, mobile banking, virtual wallets), as well as services with built-in payment: Uber, iTunes Store, etc.

Planned area for banking sector development First of all, it is improving financial literacy of clients and popularization of cash-

30

less payments at mass events: concerts, festivals, exhibitions. NABU, in turn, provides active support in such events: for example, every autumn it organizes World Savings Day, which traditionally ends with a big family holiday in the format of a festival. Banks, payment systems offering bonus products and programs, interactivity, novelties and much more take part in this festival.

The banks also focus on co-branding programs with non-banking financial institutions (similar to Apple Pay, Google Pay); even competing in general, both sides can unite to create a high-quality and convenient innovative service.

Innovative solutions of Ukrainian banks beyond trends There is a concept of “big tech” in the USA Fintech community. This is the name given to large technological giants like Amazon, Apple, etc., which are the main challengers for the rather conservative USA banking environment. Old-timers of the market (for example, JPMorgan and Bank of America) have incredible resources, but it becomes more and more difficult to chase innovations in technologies that change the very essence of bank-client relations. However, we should not exclude them from the equation: JPMorgan, for example, is actively introducing artificial intelligence in exchange operations. In Ukraine the top banks began to understand earlier that the

future will go beyond the transactional approach.

Banks become a “financial partner” for their clients, and with the implementation of this approach, the meaning of payment goes beyond the standard “movement of money from point A to point B”.

A personalized approach to the client comes to the foreground: customization of payment service and elimination of unnecessary steps. The choice of action, its confirmation, result – only now the algorithm of payment in the mobile application should be realized.

One example of this approach is the possibility of creating a personal plan for the client, using which, the user creates his own financial goals and achieves them. Banks are engaged in formation of the high-grade platforms offering templates, sets of recommendations, options of forecasting of expenses and demand for products and many other things. A kind of “bank in a smartphone” – by analogy with the state reform.

A good example of the development of digital support for the channel of communication with the banks’ clients in Ukraine is the evolution of virtual assistants. At the moment, there is a transition to the next link of this chain – chat bots, which are now the most popular way of interaction.

Evolution was triggered by the fact that virtual assistants can function solely on the basis of certain rules – they respond only to certain programmed commands and are no longer able to cope with a situ-

currency exchange operations online, came into force.

Many banks, especially those that participated in the development of regulatory documents, hurried to please their customers with the possibility of online currency exchange immediately after the law came into force. This option is already widespread in a number of countries, which once again emphasizes the world vector of digital development of Ukraine.

ation where the client takes a “step away”.

The next step is that chat bots that use artificial intelligence and machine learning are self-learned: they “smart” as they communicate with clients. Often, a conversation with a bank chat-bot completely imitates a conversation with a real person: it is impossible to recognize who is talking to you – a person or a machine. If we talk about further plans of Ukrainian banks – is the evolution of chat bots in full voice assistants, by analogy with Siri from Apple.

Such technologies have recently been used in banks for innovative identification methods as well: while the fingerprint is accepted by a number of banks as an identification factor (e.g. to enter a personal account), facial identification is one of the “novelties in the market”.

Again, banks have room for further imagination – the latest developments in identification based on a huge number of hidden factors (behavioural features) has already presented in the world . But clients (as well as the legislative base) are preparing for it gradually and smoothly, looking at all possible risk factors.

Here it is worth mentioning such an important non-standard factor as transparency and closeness of the bank to the client in the digital channel. For example, some bankers today conduct YouTube channels, some banks provide an online tour of the bank. All these points also help to place and keep the client, as they clearly demonstrate that all information is open and available.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

Selected digitally-cases of Ukrainian banks 1. Bank without branches.

Analyzing the high cost of maintaining the branches as such (plus, respectively, the staff) and the trend for maximum performance of all operations online, the first “non-bank” was launched in Ukraine: a digital bank without branches – Monobank.

The term “non-bank” itself means a new type of bank, which challenges the traditions of the market. It is the first Ukrainian virtual bank created within the framework of Universal Bank, which has a separate brand and its own terms of customer service.

This business model does not require investment in branches and at the same time allows customers to receive all desired banking services remotely.

To demonstrate the positive perception of such an idea by clients, we can give the following figures: during 5 months of Monobank’s existence 200 000 clients joined the bank. These are the best “digital” clients who value their time.

They are technologically advanced and enthusiastically accept any innovation.

This year it is planned to attract at least as many more customers.

2. Currency exchange operations online.

The long-term joint work of the NABU and member banks with the regulator in this area has finally borne fruit this year: in February, the Law on Currency, which allows individuals to conduct

Interaction with the regulator: joint projects and plans For many years of active cooperation between the NABU and the bank regulator – the National Bank of Ukraine – in the direction of creating the most comfortable conditions for banking business and increasing confidence in the banking system has been achieved a lot. Of course, the regulator also supports digital development of the banking sector, which is confirmed by examples of joint steps in this direction.

Thus, since 2018, banks have been providing their services using identification through the BankID system. Ukrainian citizens can remotely receive not only administrative services, but also order banking, financial and commercial services, which require identification.

For today, only the primary identification of an individual shall be carried out during his physical presence at a bank.

In the future, provided that the bank (which performed the primary identification) is a subscriber of BankID system, the client as an individual can use this system to transfer his personal data to another bank or non-bank institution, which are connected to BankID and offer services beneficial for the client. Of course, this system is becoming more and more popular.

Attention was also focused on the implementation in the country of the norms of EU Directive PSD2, the implementation of which will promote innovation through opening up the market of payment services to new players and new innovative methods of payment. This is a large project that requires a cohesive work of all participants of the payment market, which will allow Ukraine in the future to successfully integrate into the global community.

Thus, Ukraine is moving absolutely synchronously with the world innovation processes. It is innovation and digitalization of financial services at all stages that is an effective way to increase financial inclusion in Ukraine, which is one of the strategic goals of the entire sector and, consequently, of the Independent Association of Banks of Ukraine.

31

Founder’s page. IBS

ARMENIA:

TECHNOLOGIES AND FINANCE: FROM SERVICES TO ECOSYSTEMS Recently I read the ‘Digital Fortress’, less known novel by Dan Brown, the author of ‘The Da Vinci Code’, the content of which lays in attacking a deadly virus from the external environment on a $ 2 billion worth supercomputer of the US National Intelligence Agency.

The connection between this story and our current theme is obvious: currently emerging ecosystems, in view of the large number of participants, need reliable protection against, say, unfriendly penetration. And it doesn’t matter if we are talking about business ecosystems or other service organizations.

Today in Armenia even the presidential apparatus aims at complete transformation of its services into an ecosystem for the next year, in which all departments of the apparatus, from the checkpoint to the databases, will function as interconnected links within a single digital ecosystem. As a result, services (in particular, the respond to letters from citizens), will become faster, more affordable and more

32

efficient. However, with a fraction of the joke I need to note that the president’s apparatus requested from the government almost a million dollars above the planned budget for the current year.

The transition to the ecosystem is a natural response to the changing needs of all market participants, as well as to the development of technology, involving the offer of a wide range of different products and services in a “single digital window”. That is an ecosystem is a digital platform where a customer can purchase various goods and services (including third-party suppliers) and get a synergistic effect when used simultaneously (including with the product of the “ecosystem center”). Thus, the ecosystem of a business company involves a set of participants interacting with this organization and participating directly or indirectly in the “value chain”, as well as customers and even competitors. Ecosystem is a marketplace for goods and services, which offers a variety of seamlessly inte-

Samvel A. Chzmachian, Member of the Bureau of the Board – Deputy General Director – Head of Representative Office in the Republic of Armenia

grated products and services that cover the widest possible range of customer needs. And as the President and Chairman of Sberbank of Russia German Gref said, “everyone understands that the one who will be the first in the field of creating ecosystems will eat a pie from the rest.

All large companies dream of moving in this direction”.

It is clear that in the context of world development, that transforming into ecosystems with alternative services and capabilities banks are losing their classic look. Financial agglomerations in the form of financial courts, by analogy with food courts, will be formed. The

provision of related services will play an increasingly important role in the formation of bank profits, rather than the percentage of traditional banking that is formed from the difference in interest when attracting and borrowing funds.

If I started talking about novels at the beginning, let me remind you of another book, ‘The Death of Competition’ by James Moore, who in the early 1990s created the concept of strategic planning of the business ecosystem, which is now widely used in the high-tech community.

The basic definition of an ecosystem is taken from the same book. In his article “Predators and Prey: a New Ecology of Competition” James Moore proposed to view the economic activity as an ecosystem, where buyers and producers play complementary roles, evolving together in the direction given by companies that are at the center of the ecosystem. Moore defined the “business ecosystem” as “an economic community that consists of a combination of interconnected organizations and individuals,” and this community produces goods and services that are valuable to consumers, which are also part of the ecosystem. Besides, the ecosystem of any enterprise also includes suppliers, leading manufacturers, even competitors and generally all interested parties.

In Armenia, unlike, say, Russia, the formation of ecosystems is rather slow.

Perhaps the reason is that because of their mentality, which assumes a purely individualistic approach in business Armenian entrepreneurs are extremely reluctant to interact with other potential structures of a possible ecosystem, even if this promises them higher incomes and/or a sharp reduction in costs. By the way, this is the reason that in our country, entrepreneurs rarely go for the creation of open (public) joint-stock companies OJSC/PJSC, preferring more “reliable” (in quotation marks) CJSC, and finally all this affects the long-term sluggish stock exchange activities. But this, as they say, is a different story.

One way or another, but large, systemically important Armenian commercial banks are currently at the stage of transformation into ecosystems. This is an inevitable process, and banks, if they want to stay on the market, will have to go this route, investing in new technologies. In particular, the involvement of artificial intelligence (AI) in the banking system of Armenia remains the issue of time.

Business ecosystems are formed at the intersection of technologies, open standards, and architecture. Any company irrespectively of its agreement or disagreement participates in a particular ecosystem. The only question is how EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

much the company is able to extract the maximum from this ecosystem, whether the ecosystem helps the development of the company and whether it promotes the development of innovations and the emergence of new business ideas. This is the same dilemma as in the case of AI, when investments and desires often do not coincide with the results, since there is no ability to correctly implement artificial intelligence in your ecosystem with a clear vision of the targets (goals) of business processes. So, it is necessary to include the ecosystem as an indispensable element of business strategy and business architecture and become a business ecosystem-oriented company.

Since I have been engaged in banking for many years, I am more interested in transformations in this area. So, one can imagine as an example the structure of the bank’s ecosystem with the so-called seamless integration in the form of a single window selling various financial products and services, including those produced and offered by third parties, namely: real estate/ mortgage, insurance, cars (renting anywhere worldwide), telecom, leisure (hotel reservations, air and train tickets), household and travel goods. That is, the bank is able to cover the entire consumer line associated with the above areas. And the possibility of flexible integration with partners is provided through the API the application software interface that allows one software to interact with another. Let me note, that one of the brightest examples of the ecosystem is the approach to innovation in banks – from building their own innovation centers, which has already been implemented in several advanced commercial banks in Armenia, to deploying the Open API (open application interfaces) and attracting fintech industry startups.

Sometimes you observe the rapid transformation of banks and other organizations in other countries towards the formation of viable ecosystems with outright envy. So, recently an Internet holding company as part of the Rambler Group and the already mentioned Sberbank used the SberFood application. That is, now having applied to the bank for a purely banking product, you can get out of it not only, say, with a credit, but you can also reserve a place in the restaurant for the evening, select dishes from the menu, and even pay tips. Another vivid example is a full-fledged financial ecosystem created by Tinkoff Bank, which is created not only through its own services (credit cards, deposits), but also through partner products (mortgages, investment tools, car rental, etc.), when the latter are offered to the bank’s customers by others organizations and services.

Today there are already quite enough examples, and the trend towards consolidation will only intensify. Creating an ecosystem allows you to attract new customers and retain existing ones, that is to say the win-win situation develops: the user receives an additional service where he/ she feels comfortable; you hold him/her it in your ecosystem, and do not let in the next. The Bank becomes a sales channel for services of other companies, competently offering them to its customers. Thus, a market place is formed and additional profit is generated for the bank.

Today, business is treated not as a battlefield, but as a mutually beneficial ecosystem. Ordinary managers see business as a conflict between companies, departments, and groups. They gather impressive “troops” to defeat “enemies” in the face of competitors and conquer “territory”, that is, customers. Outstanding bosses see the business as a symbiosis where different companies work together to survive and prosper. They create teams that easily adapt to new markets and build partnerships with other companies, customers and even competitors ...

Finally, another thing. One of the important achievements of the meeting of the Supreme Eurasian Economic Council with the participation of the leaders of 8 countries held in October 1 this year in Yerevan, was the agreement of the heads of EAEU member states regarding the concept developed by the central banks of all countries of the integration union to form the EAEU common financial market by 2025. Thus, Vladimir Putin the President of Russian Federation ranked the adoption of uniform rules in the financial market among the priorities, saying that “this concept will become a roadmap for the formation of uniform rules for the provision of banking and financial services in the EAEU, making this market segment unified and transparent”. On October 31 this year the chairpersons of the central / national banks of the EAEU member states met in Minsk have approved a roadmap for the measures stipulated by the concept.

In this regard, banks operating in the EAEU should now think about the synchronous transformation of the banking culture and the formation of a trusting environment that will create a balance between adequate security control and the acceptable risk of using the latest digital technologies within ecosystems.

Simply returning to Dan Brown’s novel, the banks themselves must understand at one time or another how digital they are and to what extent they are “fortresses” in terms of security.

33

EURASIAN FINANCIAL SYSTEM

WESTERN BANKS’

SUCCESSFUL NICHE PLAYER APPROACH IN RUSSIA AND EASTERN EUROPE WILL SURVIVE IN CHALLENGING TIMES 34

Gunter Doyber,

Senior Director, Senior tool research economist with fixed income and foreign exchange risks Raiffeisen Bank International AG

Gunter Doyber studies Eastern Europe economies and banking markets since the early 2000s.He is responsible for the flagship CEE Banking publication Sector Report and supports the highest to the management of Raiffeisen Bank International when accepting strategic decisions, by regulators/IFIs, rating agencies and in dialogue with investors.

EURASIAN FINANCIAL & ECONOMIC HERALD | #1(9) 2020

In 2020 Russia and its neighbouring countries are facing one of the worst economic crises of the last decades. It goes without saying that this will also affect the local banking sectors, as banking is a macro-driven business. Nevertheless, the situation should be manageable for the dedicates foreign banks (mainly coming from Western Europe) operating and remaining in the region. This applies for several reasons.

First, there is some accumulated crisis management experience. This applies to the commercial banks, but also to the central banks. The Russian central bank in particular has extensive crisis management experience; also, with the help of measures such as partial temporary regulatory easing. Moreover, the substantive clean-up in the Russian banking sector shall pay off now.

Secondly, from a broad perspective, the upcoming macroeconomic distortions should be less existential than in many Western countries. In Russia and the Eurasian region, there have already been crises of the severity that should now be on the horizon in recent decades. This is particularly true of the slump in key economic and banking indicators (such as private consumption or investment). In many Western countries the imminent economic setback was to be the most severe in this century, possibly even since the 1930s. In Russia or Eurasia the 2020 slump could possibly “only” be as deep as in the global financial crisis. Back then the region was hit extremely hard. This was possibly driven by the overeager expansion of banks back then – something we are not seeing this time around.

Thirdly, Western banks operating in Russia and neighbouring countries have established themselves in recent years as genuine, specialised niche players committed to the region. Many other Western banks, which often operate, so to speak, only the “suitcase banking business” from the global financial centres, have withdrawn from Russia and the neighbouring countries in recent years.

The latter aspect in particular will be examined below.

At the time of the global financial crisis (GFC) and again in 2013, Western and internationally active banks reported claims on Russia of over USD 200 billion.

Together with their exposures in Kazakhstan, Ukraine, Belarus, Uzbekistan and Azerbaijan, the pre-GFC’s exposure of Western and internationally active banks

35

EURASIAN FINANCIAL SYSTEM

to Russia and Eurasia amounted to almost USD 300 billion. At present, Western banks have only about USD 120 billion of claims on Russia and USD 150 billion in total if one adds the above-mentioned countries plus Russia.

On the surface, this drop my nearly 50% in exposures looks like a withdrawal of Western banks from the region. This holds especially true as Western banks did not cut their overall exposure to Emerging Markets substantially over the last few years. According to our analysis, however, Western banks with little long-term presence in the region have withdrawn or, above all, cross-border business has been reduced - i.e. hardly any locally refinanced business at foreign banks with deep roots in the region.

Russia is a very good example of this.

Here, three dedicated Western European banking sectors now account for almost 50% of all balance sheet items at Western banks with a connection to Russia. These are the banking sectors of France, Italy and Austria. In return, other banking sectors have drastically reduced their positions in Russia in recent years (e.g. German banks or Anglo-Saxon banks). The involvement of the banking sectors from France, Italy and Austria in Russia naturally reflects their strong local on-shore roots via locally active subsidiaries of established major Eastern Europe focussed banks (Societe Generale, Unicredit, Raiffeisen Bank International). These players have not substantially reduced their exposure to Russia in recent years. De facto, the market share of these three banks in Russia has remained roughly constant for years at around 4 % - while the general market share of foreign banks has been on a downward trend.

Calculated in euro, the balance sheet total of these three foreign banks in Russia amounts to EUR 55 billion - which means that their balance sheet values have not declined despite the rouble devaluation in recent years. Back in 2009 the balance sheet of the three major Western European banks operating in Russia just amounted to EUR 33 bn. That said, it should not be forgotten that the major Western European banks operating in Russia and broader region Eurasia have taken restructuring measures outside this region in the past years, some of them very drastic.

For example, UniCredit withdrew from Poland and Turkey, SocGen withdrew from many smaller Eastern European markets and focused its activities on Russia, Romania and the Czech Republic. Raiffeisen Bank International also withdrew from Poland (and Slovenia),

36

while remaining committed to Russia, Belarus and Ukraine.

However, it shall be also mentioned that the Western banks remaining in the region have been very risk-conscious in recent years in Russia or countries such as Ukraine, Belarus, Uzbekistan and Azerbaijan. The focus was either on local business with a local refinancing base, business relations with transparently operating top companies, commercial banks, sovereigns or business relationships that had already been established for a very long time. The aim is now to go through the crisis with those clients together. The niche player model of the major Western banks remaining in the region, as outlined above, implies that they are quite satisfied with low single-digit market shares and, as outlined above, only target specific customers and customer segments.

Critical observers may call this “cherry picking”. However, Western banks are also dedicated to the development of local capital markets, which also lowers the risk taking by banks or bringing larger companies to international markets in a transparent and compliance-safe way.

Moreover, Western banks can still play an important stabilizing role for the region despite their niche player approaches. Firstly, Western companies and large corporations are naturally part of the selective market strategy of Western banks operating in the region. The aim here is to make the most efficient use of the support measures taken in many countries to support companies and international businesses. Secondly, remaining Western foreign banks are important contacts for smaller local banks and their international business. That said, Western foreign banks dedicated to the region are important actors in the fields of Trade Finance, Cash Management and Correspondent Banking in the region Eurasia. This is all the more of importance as a lot of other international banks scaled back their exposure here in recent years. Thirdly, the banks operating in the region are important contacts for global, regional and Western IFIs. Here, very close and well-established cooperative relationships exist. And at present, a very active involvement of relevant IFIs in the region is discernible, such as the European Bank for Reconstruction and Development (EBRD).

IFIs, such as the EBRD, have also taken stakes as shareholders in some subsidiaries of banks active in the region. At present, the Western banks operating in Eastern Europe are also in intensive talks to revive the so-called “Vienna Initiative”. In the context of this initia-

tive, the situation in some Central and Southeastern European economies and banking sectors could be stabilised very efficiently through cooperation between the public and private sectors – like it happened in the Global Financial Crisis.

Here, the leading banks in the region had committed themselves not to substantially reduce their balance sheet positions in exchange for IFI support. The Vienna Initiative is essentially about the functioning and stability of cross-border banking by providing seminal setting for all stakeholders, home and host authorities, banks, European institutions and IFIs. Support packages similar to those in the context of the “Vienna Initiative” during GFC would now also be conceivable, and the scope of the Vienna Initiative could certainly be extended.

New approaches are also being considered, such as partial guarantees to public finance exposures. The Vienna Initiative is also a matter of best practice sharing in the regulatory area (e.g. in relation to moratoria, non-performing loans, etc.).

The Western banks still active in the region also have some accumulated crisis experience. This applies to market shocks, but also to non-performing exposures etc. We believe that Western banks operating selectively in Russia and countries such as Kazakhstan, Ukraine, Belarus, Uzbekistan and Azerbaijan have not a too pursued to aggressive business strategies here in recent years. This was certainly different in the run-up to GFC, when many banks tried to participate in Russian business or in countries such as Kazakhstan or Ukraine.

Western banks operating in Russia and beyond are possibly not eager to expand their regional balance sheet positions massively in the coming 12–24 months, while being open to viable business on a selective basis. That said, these players have also shown that they can be quite successful in difficult situations with their niche player approaches. That said Western banks still active in Russia and Eurasia are definitely interested in bringing their existing clients through the crisis given their market discipline seen in recent years. Western banks are also dedicated to do everything possible to contribute to a successful private and public setor/ IFI cooperation in challenging times. It goes without saying that even with such a market development approach one is dependent on sound macroeconomic management. Russia has this anyway, and other countries in the region have also made substantial progress in this area. This applies to Belarus, Ukraine or even some of the oil-dependent states in the region.

www.rhodosorb.com

100% ЗЕОЛИТ/КЛИНОПТИЛОЛИТ

Oxygen is the foundation of our lives. Its deficiency in the outdoor environment and in our body has a devastating effect on health and life activities. Due to lack of oxygen, we are quickly tired and sleep poorly, may suffer from problems with the gastrointestinal tract, muscle pain and rheumatism, caries and periodontal disease, vision and hearing loss, memory impairment and many other problems.

It is known that most of the body’s internal energy is produced by oxygen, and the more oxygen we get, the more energy we have. Oxygen nourishes the body, supports the immune system, destroys toxic substances and promotes the growth of new cells. Therefore, a person should be allowed to absorb oxygen, and the body should be allowed to transport it to cells where oxygen is involved in metabolism.

Bulgarian food additive Rhodosorb®-H.* can provide such an opportunity.

It works: as an oxygen donor; a s a molecular trap for heavy metals, pesticides, bacteria, viruses, etc.

Rhodosorb®-H is a powerful antioxidant that enhances immunity, potency and endurance, normalizes mineral metabolism and blood chemistry, regulates digestion, and removes toxic and harmful substances from the body, including radioactive ones.

The source of all necessary micro and macro elements, Rhodosorb®-H helps to normalize the metabolic processes of lipids, proteins and carbohydrates, reduces total cholesterol, has anti-anemic properties, slows down the aging process.

Due to its chemical composition and structure Rhodosorb®-H is a good ion exchanger and has strong adsorption and absorption properties; it is an excellent tool for neutralizing free radicals, cleansing the body, restoring immunity, preventing and preventing serious diseases.

Rhodosorb®-H is a 100% natural product without side effects, certified in Bulgaria.

Manufacturer: LLC «EKO-TECH» (Bulgaria)

*Before an appointment you should consult with a doctor

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

37

world Trends

MONETARY WORLD ORDER: YESTERDAY, TODAY & TOMORROW Keynes or White?

Currency Duel at the End of World War II The decisions of the United Nations Monetary and Financial Conference in Bretton Woods, adopted more than 75 years ago, were a triumph for Harry Dexter White, senior U.S. Department of Treasury official, who promoted the American model of a post-war financial world order. And John Maynard Keynes, who led the British delegation and proposed replacing national currencies in cross-border turnover with a supranational currency called “Bancor” with a single issuing center, failed.

Inflated by military production and holding up to 70% of official gold reserves by the end of the war, the United States did not leave its partners much chance to escape American monetary and financial domination, especially since they pledged to freely exchange the dollar for gold at a fixed rate of $ 35 per troy ounce (31.1035 g of pure gold). For other currencies fixed exchange rates were introduced at parity in dollars or gold with a narrow range of acceptable fluctuations.

Institutionally, such an order was to be supported by the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which were effectively placed under American control.

38

«In the wake of… profound changes, international financial organisations need to adopt and reconsider the role of the dollar, which, as a global reserve currency, has now been an instrument of pressure exerted by the issuing country on the rest of the world” (from the speech by the President of the Russian Federation Vladimir Putin at the SPIEF-2019).

Keynes’ plan was not perfect, but it offered a prospect of collective action and responsibility that was completely absent from White’s American-centric plan. At Bretton Woods the ideas of the British founder of the new school of economic thought did not find support. But they have not sunk into the depths; from time to time, they resurface in one form or another.

Two worlds, two systems The Soviet Union was of cause represented at Bretton Woods and its delegation even initialled the agreements approved there, but their ratification took place only at a time when the USSR was collapsing. It turned out that the allies in the anti-Hitler coalition were not going to use their system to help restore territories destroyed during the war in the Soviet

Oleg Preksin,

Member of the Executive Board of the Financial and Business Association of EuroAsian Cooperation, VicePresident and Board Member of the Association of Russian Banks, Deputy Chairman of the Executive Board of the Russian Financial and Banking Union, Сo-founder and CEO of NFA BRICKS PAY LLC

zone of influence. Therefore, the USSR and the “countries of people’s democracy” began to build their own monetary and financial system, the key element of which was settlement in Transferable Ruble through the International Bank for Economic Cooperation (IBEC), both established in 1963. The Transferable Ruble, which the current Chairman of the IBEC has christened “Bitcoin’s grandfather”, was close in nature to the Keynesian Bancor, becoming in fact the first largescale supranational monetary unit to be launched. It was issued and used on the basis of interstate agreements, and its savings could be converted into national currencies of the COMECON countries through a series of special ratios . The Transferable Ruble was not convertible either into gold or into Western currencies, although it had an official content of 0.987412 g of pure gold, equal to the gold content of the Soviet Ruble. Having existed for a quarter of a century, the Transferable Ruble disappeared with the collapse of the COMECON. But IBEC continues to operate, uniting Russia, Vietnam and Mongolia with five EU member states, Bulgaria, Poland, Romania, Slovakia and the Czech Republic.

Bretton Woods 2.0 Even the record gold reserves at America’s Fort Knox were not enough to collatEURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

eralise the output of the U.S. Treasury’s printing press, which was gaining momentum. The true price of White’s guarantees to exchange dollars for gold was clear to many, but no one dared actually test the mechanism of such an exchange system until France decided to do so.

In 1965 Charles de Gaulle demanded that the United States exchange $1.5 billion from national stockpile for gold.

By dispatching paper dollars to the U.S. by ships and aircraft, for two years the French president “relieved” Fort Knox of more than 3,000 tons of gold. It cost him his presidency, but France’s example caught on, and the gold stock in the USA began to dwindle. From a historical peak of 21,800 tons, by 1970 it had fallen to 9,800 tons – more than halved.

After two devaluations of the American currency, Richard Nixon on August 15, 1971 announced the abolition of the gold content of the dollar.

Under pressure from partners, the U.S. returned to Keynesian plans to introduce a supranational currency, agreeing to finalise them under the auspices of the IMF. So, in 1969 the Special Drawing Rights (SDR) appeared – a reserve and payment cashless instrument issued by the Fund in the form of records on accounts. The gold content of the new unit was set at 0.888671 g of pure gold, which corresponded to the then declared gold

content of the U.S. dollar. The SDR rate, originally pegged to the dollar, has since 1974 has been calculated as a weighted average of sixteen currencies – thought only five since 1981 – classified by the IMF as freely convertible.

The emergence of the SDR – the second major international project with the features of Bankor – brought with it the prospect of at least supplementing the U.S. dollar in cross-border turnover, if not replacing it. But when the severity of the dollar crisis subsided, the U.S. tried to emasculate what was in essence a dangerous undertaking for them, in every possible way glorifying the “life-giving” effect on the world economy of dollar issuance and insisting on the absence of real alternatives. Nevertheless, besides the settlements in the IMF between its member states, at least a dosen national and international organisations began to use the SDR, in particular to express prices for goods or tariffs for services.

These include the Universal Postal Union, African Development Bank, Arab Monetary Fund, Asian Development Bank, Common Fund for Commodities, Bank for International Settlements and Islamic Development Bank. A number of countries, including the oil-producing Gulf States, pegged their national currencies to the SDR, although over time many of them have re-pegged to the dollar.

39

world Trends

The Jamaica monetary system, which replaced Bretton Woods in the 70s, confirmed the supremacy of the dollar, and did not eliminate the main problems of the U.S.-centrist monetary world order.

Moreover, by detaching monetary issuance from an objective basis and outlawing gold in the updated version of Bretton Woods, the U.S. opened the era of floating exchange rates, which Robert Mundell, the Nobel Laureate in Economic Sciences called “the era of financial nationalism” and “the worst idea, [with ] the greatest losses incurred by small countries”.

The America’s Western European partners, growing in economic strength, were not indifferent to the changing financial landscape; they were burdened with the position of “currency vassals”.

The European Challenge of Dollarisation Another, and quite successful, attempt to introduce a supranational monetary unit into international turnover was made in 1979, when eight countries of the European Economic Community (Belgium, Great Britain, Germany, Denmark, Italy, Ireland, the Netherlands and France) issued a composite European Currency Unit (ECU). Having appeared in cashless form, the ECU was calculated first using a basket of eight currencies, which grew to 12 when its founders were joined by Greece, Luxembourg, Portugal and Spain.

The national currencies of all these countries circulated for two decades alongside the ECU, in support of which they allocated not only their dollar holdings, but also 2,800 tons of gold.

The floating range for currencies included in the ECU, fixed by agreed limits, was held by central banks’ interventions.

The system of joint floating of Western European currencies was called the “currency snake” or “snake in the tunnel”.

Simplifying settlements, the ECU had many features of a fully-fledged currency, since its issuance was secured by real assets, the unit itself was used in accounting on a par with fiat money and recognised by the participating countries as a reserve means of payment.

40

The Euro, which replaced the ECU at a straight 1:1 in 1999, was initially launched in cashless form. Then in January 1, 2002 Euro banknotes and coins went into circulation. And since July 1, 2002 the Euro has become the only legal tender for 12 Eurozone countries, firmly taking second place among the reserve currencies. Later on, the circle of countries using the Euro as their currency more than doubled, and not only thanks to the EU countries .

Problems with the Financial Environment The 2007–2009 financial crises, triggered by the bursting of the U.S. mortgage market bubble, led to a revival of plans to use the SDR as a global currency. A radical change in the status of this unit was the clear message to colleagues in the Group of 20 (G20) from the Chinese side. The head of the Russian delegation to the 2009 G20 London Summit had close approach. He stated literally the following: “We support the establishment of strong regional currencies and the emergence of new reserve currencies. At the same time, one possible option in the future could also be the emergence of a supranational currency, based on Special Drawing Rights”.

The growth of speculative activity provoked by the Jamaica agreements has led to a disjoint between the financial sphere and real production, and to financial bubbles ready to burst when the investment preferences of “hot” money owners shift.

The total assets of financial institutions have grown in a short time to almost $400 trillion – about five times world GDP. Meanwhile non-bank financial institutions, with higher transaction risks than banks, outgrew other holders in terms of assets under management.

The global value of over the counter (OTC) derivatives – perhaps the most dangerous fruits of financial deregulation – reaches $500, and sometimes almost $700 trillion, which is an order of magnitude more than the world’s GDP.

The world’s aggregate debt (private and public) reached $255 trillion at the end of 2019, more than three times the global GDP. Since 2007 total public debt has more than doubled, while American debt has tripled, amounting to a full third of the total. Overall, U.S. debt (public, corporate and private households’) has almost reached the level of global GDP. According to the IMF, raising interest rates, which are now at a record low and nearing negative territory, would bring one in five large American corporations to the verge of collapse. Recent decisions by the American and Western European authorities to finance massively the fight against the pandemic have only aggravated the situation.

The overhang of the virtual economy over the real one is a fertile breeding ground for speculation. On commodity exchanges, there is an order of magnitude more speculative transactions than is determined by production needs. Powerful price swings undermine sustainable development, sometimes causing paradoxical situations, with negative price value.

The global forex market has become one of the main platforms for speculative activity. Exchange rate volatility under deregulation has reached a scale unimaginable by the founders of Bretton Woods; from October 2000 to March 2008, the Euro exchange rate against the U.S. dollar almost doubled, but then fell by almost a third. The range of annual fluctuations of the cross-rate of the key pair “USDEUR” since 2007 reached 20% at least eight times. The currencies of the socalled “second and third echelons” have shown ever greater volatility.

Against this background, the SDR position looks attractive to those who focus on the stability of exchange rates when conducting cross-border transactions. Over the past 10 years, the SDR/ EUR exchange rate has deviated from its average value (SDR 0.84 per EUR 1.00) by no more than 10-12%, while the SDR/USD exchange rate remained virtually within $1.40-1.60 range.

Growing financial instability has prompted the BRICS countries – Brazil, Russia, India, China and South Africa – to develop joint protection measures.

They established the New Development Bank (NDB) with a charter capital of $100 billion. It is sometimes referred to as the equivalent of the IBRD, but on democratic principles. Some features of the IMF are sought and found in the BRICS Contingent Reserves Arrangement, established at the same size. The latter is designed to protect the BRICS currencies from largescale speculative attacks, which can be hard to cope with alone.

Not limited to collective measures, China has focused on strengthening the international position of its own currency. By stabilising the exchange rate and making the yuan more convertible, the Chinese authorities have made it the main currency of the New Silk Road, designed for a wide range of countries.

The Beijing-based Asian Infrastructure Investment Bank, with 78 full members and over 20 potential participants, and the Asian Financial Cooperation Association, also based in Beijing with about 120 participants from more than 30 countries on all continents, are both working in this direction. In recognition of PRC’s success in internationalising the yuan, in 2015 the Chinese currency was included in the SDR basket along with the US dollar, Euro, British pound and Japanese yen, ahead of the latter two by share and mainly at the expense of the Euro.

Other BRICS currencies may be inferior to the yuan in terms of stability and internationalisation, but any one is equally affected by the Triffin dilemma (also called a “paradox”), discovered by Robert Triffin – a scientist and practitioner who has revealed a deep contradiction, a conflict of interests between the countries issuing reserve currencies and states that use them for their savings. The point is that the contradiction inevitably arises when trying to reconcile the goals of domestic monetary policy with the aspirations of foreign consumers of other currencies in the role of reserve ones – whether it is the U.S. dollar, the Chinese yuan or another internationally promoted national currency. The issuing state will never put the interests of even their closest partners above its own, especially when it comes to national security. And so there are all the benefits that the issuer of the national currency receives from its use as a reserve one, notably if it is possible to maintain the myth about the lack of any alternative to pumping the world economy with unsecured money supply.

The flaws of the monetary and financial world order, aggravated by successive weaponisation of the dollar by the U.S. administrations to achieve economic and political goals, have resulted in growing demands for alternative solutions for international payments and settlements.

And demand creates supply.

“Crypto” vs. Fiat Currencies The mysterious appearance of Bitcoin in 2009 opened a new page in the development of the financial market. It took just over a year for the first crypto currency, called virtual, digital or electronic cash, to launch transfers in this new instrument and start exchanging it for fiat money and EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

real goods. The success of the first miners and traders who managed to inflate the price of Bitcoin caused a real fever among those who saw here an affordable tool for easy and quick enrichment. The private sector has seen the emergence of a whole community of Bitcoin developers and united in mining pools they founded their own payment system.

Building on Bitcoin, crypto currencies started to grow like mushrooms after the rain. There are now more than a thousand of these, and the exchanges where “electronic cash” is traded briskly are counted in the dozens. Keynes’s Bancor was not forgotten; a new standard of crypto currency exchange via smart contracts with a protocol for the release of smart tokens were registered under this name in 2017.

Although most of the crypto business has little to do with the real economy, “stable coins” have emerged – that is crypto currencies linked to certain real assets, including precious metals. Forward-thinking new market participants understand the importance of such a linkage for large-scale cross-border projects. It is, for example, clearly indicated on the website of the Libra project announced by Mark Zuckerberg – built on Distributed Ledger Technology (on the Blockchain, as one of its manifestations) a “simple global payment system and financial infrastructure that empowers billions of people”.

The crypto currency market, marked by rapid growth, has never been stable, and did not look for it, because it grew on the speculative mood. Stability comes last for its adherents. Starting with a few dozen Bitcoins, when the value of each was less than a cent, the market grew to almost $200 billion in a decade. In December 2017, the price of a Bitcoin jumped to $20,000, then fell seven times, and then tripled again. The daily volatility of the crypto currency can hit 20% and beyond.

Central banks have long been interested in crypto currencies, not only as an element of an unregulated market that is gaining popularity, but also in terms of

their own issuing of such financial instruments. Many countries have started to study the possibilities of issuing national digital money, and the People’s Bank of China has become a pioneer in the transition from theory to practice.

The “Libra” project, the broad details of which were announced by the Facebook’s founder in June 2019, could accelerate China’s work on the “Central Bank Digital Currency” and “Digital Currency Electronic Payment” (DC/EP). The prospect of issuing its digital currency by a private enterprise with 2.3 billion users worldwide could not go unnoticed. In any case spring 2020 saw the launch of a “Crypto Yuan” – a national digital currency available in four pilot regions to selected customers of the Agricultural Bank of China. Its functionality includes payments, forex transactions, digital wallets, etc. by means of QR codes. Other major state banks of the country can join the “pilot”. The mass media started talking about “the plans of the Chinese leadership to completely convert the yuan into a digital currency and displace the U.S. currency from the electronic payments market” and about “China’s desire to change the global financial system, to shake the domination of the U.S. dollar and the Euro in international settlements as a whole”.

Undoubtedly, crypto currencies based on Blockchain technology are gaining more and more space in modern finance, and this combination is already being hailed as a prototype of the future monetary and financial system. This is possible, if the Transferable Ruble, SDR and ECU become prototypes of future crypto currencies, and development follows the path of balanced collective decisions.

But when it comes only to an additional issuing in digital format of a national currency with a claim to the global standard, we can hardly consider this as a prototype. After all, the Triffin dilemma applies equally to national fiat currencies in the role of reserve’s, as well as to the newly introduced “state crypto”.

41

world Trends

The current global monetary system does not contribute much to the sustainable growth for which we all strive. It is more a protagonist of unstable development, evolving through crisis shocks, growing contradictions and increasing social inequality. In his book “50 Years of Financial Crisis”, Jacques de Larosière – a participant in many landmark events of the past decades and a senior colleague with whom the author of this article was lucky enough to work at the EBRD Board of Directors – wrote with knowledge: “The fall of Bretton Woods… was not checked… If anything, it was on schedule... The 1971 collapse was not followed by genuine reform of the international monetary system. No true system resulted from either the creation of SDRs, or the thoughts of the G20 or the attempts at multilateral supervision... The questions raised by Keynes and Triffin still haunt us”.

From BRICS Pay to NIPS, NUE and the BRICS Plus Alliance.

The search for alternative ways to organise international settlements and the monetary world order in general has been joined by the BRICS Business Council, where a dedicated task force is developing proposals for the creation of a new international payment system (NIPS). This mega-project, initiated by the Russian side, has gained many supporters and is officially recognised as a priority by the Business Council. In this capacity it was presented to the leaders of five countries at their Johannesburg Summit and saw further development under the Brazilian and current Russian presidency of BRICS. The BRICS Pay innovative payment platform, the key element of which is the new unit of account (NUE), will become the starting point for NIPS. Built on a basket of the most popular currencies for the

42

countries covered by the project, this unit includes both key reserve and some local currencies of the emerging economies.

At the heart of the NUA – ERA, GCU or RICh (a list of possible names for the new unit remains open) – is the SDR basket with slightly adjusted composition and percentages for individual components.

(The SDR basket changes every five years, and the next revision is due this year.)

Starting in the retail market for cross-border payments for goods, services and private money transfers, BRICS Pay at the next stage of mega-project development may form the basis for an innovative system of settlements in the corporate sector (B2B), including exchange trading floors, and then serve as a trigger for a full-scale alternative monetary system covering interstate settlements (G2G).

While for retail payments via NUA, the conversion rate is important, since all the settlements are instantaneous and no balances occur, they may appear at the next stages of NIPS development, for example, in B2B settlements. Naturally, there will be a question of guaranteeing the safety of savings in the NUA, of the stability of exchange rates and possibility for the funds owners to use them without restrictions for the purchase of goods and services. Previous clearing systems for settlements in local currencies did not provide such guarantees, but they are possible with the NUA. Especially if the leadership in the implementation of the mega-project will eventually pass to international banks such as NDB, IBEC or the Eurasian Development Bank (EDB) as well as to other relevant multilateral structures. But this is a separate topic beyond the scope of this publication.

Even at the initial stage of NIPS development, it makes sense to explore the possibility of price setting and settlements in NUA in commodity trade, when

the BRICS countries play an important role in world market supplies or purchases (for example, in energy resources, precious metals or cereals). At the same time, it is worth considering in detail the possibilities for conjugation of monetary interaction plans in BRICS, SCO and the Eurasian Economic Union (EEU) in general and between such leading states in these unions as Belarus, Russia, India, China and Kazakhstan. (It’s notable that the first letters in the names of these five countries form the acronym BRICK). In the future, the NUA may become a fully-fledged reserve currency, as the ECU once turned into the Euro.

The applied use of an SDR basket in NUA with relatively stable and daily published exchange rates for the entire range of currencies makes it easy to calculate any cross-rate via NUA. It also eliminates the need to use U.S. dollar accounts in cross-border settlements. In addition to protecting against leakage of confidential information and eliminating sanctions risks, the NUA, through the stabilising effect of the key pair “USD-EUR” and other reserve currencies in its basket, will smooth out exchange rate fluctuations.

This will minimise the impact of swings in emerging market currencies that are not particularly stable.

The business model of the “BRICS Pay” project testifies to its high financial efficiency, even with an extremely conservative estimate of market share. This alone allows us to count on the growing range of territories covered by new initiative.

And the “BRICS Plus” concept officially adopted by the five leaders, aimed to “expand constantly the circle of BRICS friends and ensuring joint prosperity”, gives additional grounds for this.

Unlike the systems based on the use national currencies in international turnover and undermined by the Triffin dilemma, the introduction of a supranational monetary unit implies a common balance of interests for all users. The formula for such a unit can be amended according to clear, universally accepted rules when the objective situation changes, and this should ensure the strength of the monetary and economic union in a multipolar world.

The closing words by Jacques de Larosiere from the already mentioned book on crises are noteworthy: “This call for national reawakening may seem paradoxical or to be swimming against a tide… Under the prevailing lax financial conditions, the only countries liable to regain their strength and dignity will be those prepared to remedy their own structural imbalances, abandoning the illusion that these will be wiped out by the global monetary and financial mess.

Partners’ news

INTERNATIONAL ECONOMIC FORUM

“CIS +WORLD”

March 13, 2020 in Center of international trade, Moscow International Economic Forum of states-participants of CIS “CIS + world” was held. The event was organized by Business center of economic development of CIS with the support of Executive committee of Commonwealth of Independent States and Bank VTB (PAO).

Deputy of Commonwealth Chairmen, ministers, directors of Executive Committee of CIS, Eurasian economic commission, Union state and SCO, representatives of state and executive branches, real sector of economic, Chambers of Commerce and Industry, industry associations and bank communities, entrepreneurs. The work of Forum was covered by dozens of media.

The aim of the Forum: further development of strategic economic cooperation of states-participants of CIS, solidification of stability and steady expansion of multilateral interaction in the name of peace and progress.

Chairman of Executive Council, Executive Secretary of CIS Sergey Lebedev moderated the plenary section of the Forum.

At the meeting spoke: – Chairman of Economic Council CIS, Deputy of Prime-minister of Republic Uzbekistan – minister of economy

EURASIAN FINANCIAL & ECONOMIC HERALD | #1(9) 2020

and industry of Republic Uzbekistan Dzhamshid Kuchkarov; – member of Economic Council CIS, Deputy of Chairman of Government of Russian Federation Alexey Overchuk; – Chairman of Collegiate of Eurasian economic commission Mikhail Myasnikovich; – General Director AO “VTB capital” Alexey Yakovitskiy; – General secretary of Shanghai organization of cooperation Vladimir Norov; – State secretary of Union state Grigoriy Rapota; – Deputy of minister of foreign affairs of Russian Federation Alexander Pankin; – Chairman of Executive Board of Eurasian bank of development Andrey Belyaninov; – President of Chamber of commerce and industry of Russian Federation Sergey Katyrin; – President of Russian State Humanity University Efim Pivovar; – First deputy of general director OAO “Russian railways” Sergey Pavlov; – Chairman of Coordinate Council of Business center of economic development of CIS Anatoliy Kazakov.

In the end of the Forum solemn ‘Leader of CIS Business’ and anniversary medal ‘25 year of CIS’ award ceremony took place.

Thematic sessions active work: – ‘Innovations in integration’; – ‘Ensuring and solidification of financial stability’ – ‘Networks platforms of international cooperation in industry of CIS’; - ‘Modern tendencies o\in development TEC in world economy’; – ‘Digital technologies and financial instruments for effective realisation of high-technology products’; – ‘Development of international cooperation in health-secure’.

International touristic congress ‘CIS + World 2020’ took place in the framework of the Forum. In the Congress presenters of Azerbaijan, Kyrgyzstan, Russia, Tajikistan, Turkmenistan, Uzbekistan spoke. In the work of the Congress represents of Austria, Bulgar, Island, India, Cosra Rica, Cube, Nigeria, Norvay, Salvador, Tunis, Philippine Embassies in Moscow participated.

Organized on the sidelines of the Forum exhibitions-presentations of several companies of Union countries were popular.

Forum gave regular impulse for development of constructive and practical dialogue between authority and counties-participants of CIS business.

Business Centre Press Office CIS Economic Development

43

world trends

COVID-19 AND ITS IMPACT TO THE WORLD ECONOMY From the economic crisis towards economic pandemic The current situation with the coronavirus has a strong impact on all businesses.

With the temporary closure of some companies and the slowing down of others, the impact of the pandemic on the world economy will be even worse than that which followed the global financial crisis of 2007–2008.

The first country to be affected by COVID-19 was China, the second largest economy in the world. The containment of the infection, which required the closure or downsizing of a number of large manufacturing and retail companies, has significantly slowed the Chinese economy. According to a report by the Confederation of Chinese Enterprises (CEC) on March 6, more than 95% of the 299 major producers surveyed reported a drop in profits. In terms of consumption, retail sales in January and February this year decreased by 20.5% compared to the same period in 2019: there was a decline in January, and almost a complete stop in February (except for the sale of essential goods).

As a result of the fact that China has successfully stopped the spread of the virus, Chinese manufacturers have returned to work at full capacity. At this time, how-

44

ever, other economies were just beginning to experience the virus’s spread, and for this reason, China suffered a second blow - the consequences of closing foreign markets. According to the IMF’s expertise, China will be significantly affected by the decline in global demand, which is 20% of the Chinese economy.

According to Fang Gang, one of the main Chinese economists, we can expect a progressive recovery of the Chinese economy. Although according to a study conducted by China’s logistics and transport company Cefuture, 41% of the country’s citizens are going to cut their spending as a precautionary measure in case of future unforeseen events, while only 8% are planning their previous consumer activity after the pandemic. Nevertheless, the possible rapid recovery of China’s economy continues to give hope and inspire optimism to the rest of the world, where the situation is not yet very positive, especially in the US and Europe.

For example, in the United States, as a result of quarantine measures, which are constantly reducing economic activity, economists Morgan Stanley predicts a 30% reduction in consumption by the second trimester of 2020, while the International

Monetary Fund (IMF) predicts a decline of 5.9% this year and an unemployment rate of 17%. In the European Union, economic experts from the European Commission predict a decline in GDP by an average of 9% in the first semester with country differences of 7% to 12 %.

Indeed, the impact of the pandemic cannot be taken lightly, because it affects everyone. For example, the tourism industry is one of the sectors most at risk because of travel restrictions imposed by governments around the world.

Given the uncertainty created by COVID-19, we can assume that the world market will be quite volatile this year and that no global growth is to be expected. According to the Organization for Economic Cooperation and Development (OECD), the world economy could shrink by 6% in 2020 and grow by 2.8% next year. Tom Rafferty, senior economist at The Economist Intelligence Unit in China, suggests that global supply and demand should return to normal by next year. Indeed, to achieve this result, many governments have already revised their economic policies to mitigate the impact of the pandemic, but despite this, the virus still remains a critical factor in the ability of nations to return to normal life.

Jérôme Clausen, founder and CEO of CTI Advisory

Jérôme Clausen has 20 years of experience in trade and international investment; he founded CTI Advisory, advising the French sovereign wealth fund BPIFRANCE in Russia – coordinating investment activities between France and Russia in the framework of the partnership with the Russian Direct Investment Fund (RDIF).

Emergency economic measures The health crisis has in fact led many countries to declare emergency measures “at all costs” - that is, to significantly increase spending on health care and the impact of the pandemic at the expense of public funds, in particular with regard to unemployment and assistance to affected business sectors, especially small and medium-sized enterprises (SMEs).

Countries have already allocated substantial budgets to work on these aspects: 100 billion Euros in France, 60 billion in Germany, 200 in Italy and $2,200 billion in the United States. These amounts, which are expected to increase, will at the same time increase the imbalance in public finances and the borrowing needs of governments.

Thus, at least 11% of GDP is expected to fall in France, which is about 300 billion Euros. One should also not forget about the loss of tax revenues, which will amount to about €40 billion. In general, it will lead to a budget deficit of about 11% of GDP. The current crisis, although very different in nature from the 2008 crisis, has two things in common with it: the issue of refinancing certain public debts (and therefore the issue of trust in the Eurozone) and a possible crisis in the EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

lending system due to the large number of forthcoming bankruptcies and incomplete risk assessment.

Overall, it can be assumed that the need of European countries to borrow on financial markets will amount to about 1,500 billion euros.

Europe’s return to the economic and medical sovereignty?

The current crisis has shown that the public health policies implemented in recent decades in the West, and in Europe in particular, have not been far-sighted: the coronavirus situation has highlighted the loss of Western sovereignty in this area, given that 80% of the necessary funds to fight the pandemic (masks, respirators, medicines, virus tests) are imported to Europe and the United States from China. The lack of these supplies is a consequence of the loss of sovereignty in the health sector and the economy as a whole. This unexpected and bitter awareness makes us think about Brussels’ view of economic policy issues in the European Union.

What to do?

This crisis is reshuffling the maps of the entire globalization process, call-

ing into question the foundations of free trade, which were laid in the 19th century. After decades of delocalization of economic activity European governments realize that the time has come to “rearm” several sectors. In his speech of 13 April, French President Emmanuelle Macron was one of the first to raise this issue. “We will have to regain our independence in the areas of agricultural, medical, industrial and technological development. We need to find the moral strength, the will to produce more in France. That is what we are already beginning to do with courage and bravery in terms of the basic necessities needed to fight this crisis. And this is what we will continue doing tomorrow,” said the head of state.

In this context European countries should set an example today with Russia, which in recent years has greatly succeeded in strengthening its economic sovereignty in many areas - developing agriculture, creating “sovereign Internet”, working on artificial intelligence and restoring industrial production. The battle for “made in Russia” is a success that should serve as a model for Europe to take back the economic and political fate of the European Union.

45

Topic for discussion

THE CRISIS HAS ACCELERATED THE EVOLUTION OF THE RUSSIAN LEGAL INDUSTRY The Russian legal industry, as in the rest of the world, is a large and rapidly growing industry. For example, in 2018 the turnover of the legal services market alone reached its next high of 173.4 billion rubles. But after all, the legal industry also includes notaries, mediation, bankruptcy and collectors, and in a broad sense also human rights defenders, law enforcement agencies and courts. Now it faces very serious tasks related to overcoming the consequences of the global crisis caused, among other things, by the coronavirus pandemic. All spheres of ac-

rosanti.ru

46

tivity of the industry will be involved in solving these tasks. For example, about the bankruptcy institution, the Constitutional Court of the Russian Federation in the paragraph 3 of its resolution dd.

05.03.2019 № 14-P expressly explained that it is the market mechanism for recovery of the Russian economy.

Such large-scale tasks require not only the consolidation of efforts, but also the acceleration of reform processes, which had previously been gradual.

This includes the development of the market for qualified legal assistance and

Mikhail Sachev,

president of the All-Russian industry employers’ associations and self-regulatory organizations arbitration administrators (ROSANTI – Russian Anti-Crisis Union) the improvement of the efficiency of the bankruptcy institution, where all-Russian trade unions of lawyers and arbitration managers play an increasingly important role. The legal industry cannot stand

aside from the global processes that are developing in the course of the evolution of the regulation of personal labour relations. And the most significant for the law industry are the following global processes: expansion of social partnership for non-labour relations, formation of a unified system of labor qualification assessment and digitalization of information interaction.

The above circumstances naturally led to the establishment of the Russian Anti-Crisis Union (ROSANTI), an all-Russian industry association of employers in law and self-regulatory organizations of arbitration managers, a key element in the emerging post-crisis structure of the industry.

Social partnership is the basis of trade unions’ relations with government authorities and employers. The agreements entered into in such relations are legal acts, not normative, but collective bargaining agreements, which opens up possibilities for more effective regulation in the field of law, especially in situations where it is necessary to quickly find and make the best decision. In such regulation, public authorities are social partners, so decisions are taken by consensus, which distinguishes them from policy regulation – without necessarily taking into account the opinion of the trade community.

Despite the fact that it is possible to work and work not only on the basis of an employment contract, but also on the basis of a civil law contract (for example, Article 723, paragraph 1, and Article 1086, paragraph 2, of the Civil Code of the Russian Federation), in Russia for a long time regulation was based on the paradigm that an employee and an employer can only have an employment relationship, and thus social partnership is possible only where there is an employment relationship. This paradigm is now considered obsolete and is replaced by another one, which is based on the fact that the employee is the one who works and the employer is the one who gives him the job. Accordingly, social partnership and collective bargaining should be extended to all forms of employment, regardless of what the worker is working on. This is particularly relevant for appointment lawyers and arbitration managers who work on the basis of a decision by a public authority. All the more so since guarantees for social partnership in this broad sense are now enshrined in the new Article 75.1 of the Constitution of the Russian Federation.

The absence of legal relations of lawyers by appointment and arbitration managers (as employees) with the state (as employers) is the main reason for EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

the precariousness of their work, which has naturally led to a decrease in the efficiency of activities, an increase in the corruption component, while lawyers and arbitration managers do not have social guarantees. The quality of their work is constantly being criticized: lawyers by appointment do not provide protection, and arbitration managers have turned into liquidators. It is necessary to correct this situation and stop the trade community from sliding into the pre-cariate, which will not only fail to solve the task of restoring the Russian economy, but also exacerbate the economic crisis.

Social partnership legitimizes such relations, which eliminates the main reason for the precarnation of work and thus increases the efficiency of professional activity. Two sectoral agreements in the field of law at the federal level of social partnership came into force on January 1, 2020: the first in the field of advocacy, the second in insolvency (bankruptcy) and financial rehabilitation. The Social Partners of the Russian Anti-Crisis Union were, respectively, the Trade Union of Russian Lawyers (PSAR) and the All-Russian Trade Union of Arbitration Managers (ORPAU).

Assessing one of the concluded sectoral agreements, the Fifteenth Arbitration Court of Appeal in its ruling dd.

21.02.2020 in the case № A53-8303/2019 established the following: “In accordance with Article 45 of the Labour Code of the Russian Federation, a sectoral agreement is a legal act regulating social and labour relations of arbitration managers, so it is to be applied in regulating the activities of arbitration managers on an equal footing with the regulatory framework. In accordance with article 5, paragraph 3, of the Act on employers’ associations, the Union’s relations with the Union and the government authorities are based on the principles of social partnership, which gives the Union and the Union additional powers that self-regulatory organizations do not have. Such a position shall also be adopted by arbitration tribunals”. In verifying these findings, the District Court of Arbitration, in a order dated 11.06.2020 stated that they were based on a correct systematic assessment of the rules to be applied of theory law.

Thus, the Russian Anti-Crisis Union and sectoral all-Russian trade unions are bodies of social partnership in relations with the state, i.e. they have additional powers that are absent in community structures provided for by special federal laws and intended for directive regulation of relations in the legal sector.

In addition to efforts to include the legal sector in the unified system of social partnership, the Russian Anti-Crisis Union is also actively involved in the inclusion of the legal sector in the unified system of independent qualification assessment, which began to take shape in Russia with the adoption of a federal law in 2016. The need to introduce a unified system of independent qualification assessment, as well as a unified system of social partnership, is due to the establishment of an effective labour market in Russia to replace the outdated state regulation. This is particularly important now, when the government simply does not have time to respond to the changing needs of employers, including in the legal sector.

Four professional standards have already been developed in the legal industry at various levels of readiness: lawyer, arbitration manager, mediator and collector. The Russian Anti-Crisis Union initiated the creation of a separate commission for professional qualifications in the legal industry within the Council for Professional Qualifications of the Financial Market (SPKFR), chaired by Alexander Murychev, Chairman of the Executive Board of Financial and Business Association of Euro-Asian Cooperation (FBA EAC) and Executive Vice President of the Russian Union of Industrialists and Entrepreneurs (RSPP). The Russian Union of Industrialists and Entrepreneurs (RSPP) is the operator of the Commission’s activities, providing methodological support and organizational and technical support. The head of the Commission is Grigory Abukov, Chairman of the Russian Union of Lawyers and a member of the Russian Tripartite Commission on Regulation of Social and Labor Relations (RTK), the highest social partnership body in the Russian Federation.

Creation of a commission for professional qualifications in the legal industry is especially important now, when there is a great task of financial recovery in the conditions of economic decline and a prolonged post-crisis period, including the resolution of the problem of significant growth of overdue debts of citizens, which requires the development of professional requirements for the specialists working with them – collectors and arbitration managers.

Equally important for the Russian Anti-Crisis Union is the work to provide industry workers with the right of access to state infrastructure for electronic interaction on issues related to professional activities. In the field of law, only notaries now have such opportunities – through the Unified Notarial Information

47

System. However, arbitration managers and lawyers do not have such opportunities, although they have the authority to request information from the state authorities.

Thanks to the active position of all Russian trade unions in the field of law, the question of the need to provide such access was submitted to the Russian Tripartite Commission on the regulation of social and labour relations, in accordance with the decision of which, dated 24 April 2020, the Ministry of Digital Development, Communications and Mass Media of the Russian Federation was instructed to prepare changes to the rules for connecting information systems of organizations to the state infrastructure of interaction.

These changes will make it possible to connect the Russian Anti-Crisis Union and all-Russian trade unions in the field of law to a single system of interagency electronic interaction and a single identification and authentication system. Lawyers and arbitration managers will have the opportunity to request in electronic form the necessary information from government agencies, using information systems of specialized trade unions. The Russian Anti-Crisis Union will be able to provide such access for self-regulatory organizations of arbitration managers and bar associations, as well as to increase the availability of independent assessment of

48

qualifications of employees or persons applying for employment in the field of law, using a single system of identification and authentication in public services.

The symbiosis of the Russian Anti-Crisis Union with structures in the legal sector, which are provided for by special federal laws, is also manifested through participation in social partnership relations. Thus, arbitration managers have the opportunity to represent and defend their social and labor rights and interests at the federal level through the All-Russian Trade Union of Arbitration Managers, chaired by Mikhail Vasilega.

However, their self-regulatory organizations do not have such opportunities, as their national association is not a party to social partnership. Therefore, the Russian Anti-Crisis Union is guided by the position of the National Union of Anti-Crisis Management Professionals (NASMAU), which unites the majority of self-regulatory organizations of arbitration managers, and whose president is Sergey Belyaev, in developing its positions on regulation of arbitration managers.

And such interaction has already proved to be effective. On 10 April 2020 for the first time large-scale amendments to the Bankruptcy Act were considered in accordance with Article 35.1 of the Labour Code of the Russian Federation; the Ministry of Economic Development of the

Russian Federation was instructed to hold consultations with the parties to the social partnership, to consider alternative proposals from the All-Russian Trade Union of Arbitration Managers and, following the consultations, to resubmit the bill to the Russian Tripartite Commission on Regulation of Social and Labour Relations. Our task is to make this procedure mandatory.

At its meeting on May 29, 2020 the Russian Tripartite Commission for the Regulation of Social and Labor Regulations decided to include the legal sector in the list of those affected by the pandemic and to extend to lawyers and arbitration managers the support mechanisms provided for small and medium-sized businesses.

In this way, the Russian legal industry has formed into an independent economic sector. And on the one hand, it participates in the global processes of evolution of the regulation of relations related to personal labor, and on the other hand, it preserves the peculiarities of the organization of industry communities, which are provided by special federal laws for each area of its activities. It is this symbiosis of the general and the private that has emerged in the course of evolution that will allow the industry of law to effectively address the challenges associated with overcoming the consequences of the global crisis and the recovery of the Russian economy.

GEOGRAPHICAL History

UNKNOWN MOLDOVA r

o where to spend your vacation

*** Moldova... It is almost never what it seems, but almost always what it wants to be. And in this she is ahead of any other country – even in such a “mystical” region as the Balkans. Moldova is like a landscape along a road that nobody notices while rushing to an unknown place... But you should stop or at least slow down... And it starts!

In Moldova, one will not meet a set of clearly “typologized” attractions, which are familiar to all advertisements, magazines and booklets of tourist companies: azure seaside with palm trees, spires of mountains hiding in clouds, gorges,

EURASIAN FINANCIAL & ECONOMIC HERALD | #1(9) 2020

canyons, raging mountain rivers, virgin forests, volcanoes and geysers, cyclopean monumental architecture and other things that speak for itself and easily “consumed” – without any effort.

Here, in Moldova, there are at least four natural zones – the seaside, foothills, forest and hospitality, all of them sharply crossing into each other at the same time. But in spite of the widespread metaphor, where Moldova is compared with the “corridor” between the Carpathians and the Black Sea, along which people moved from east to west and often not at all peacefully from east to east, and even

Ruslan Taran,

Head of FBA EAC Moldova representaive Office

from north to south, it is not a “corridor” or even a “transition”, it is what is left and right of it... The history and culture of Moldova are inextricably linked to the whole Eurasia, and a few strokes, as well as a look into the past will allow you to feel it very quickly.

About the people who lived and live on this land In the 1st millennium B.C. the Scythians and Thracians (Geths) lived here, who were visited by such “celebrities” of antiquity as the Persian “king of kings” Darius I – in 512 B.C., Alexander the Great – in

49

GEOGRAPHICAL History

335 B.C. with no friendly “visits”, Zopirion, commander of Alexander the Great, viceroy of Thrace and Pontus (Scythia) – in 331 BC, Lissimah, companion (dyadoch) of Alexander the Great, ruler of Thrace, king of Macedonia and Asia Minor, including Phrygia – in 291 BC. Of the last two, the first died here with the whole army, while the second was taken prisoner and released by the Geths after promising not to come again in this way.

From III to I century BC bastards lived on the territory of present Moldova. Then, in the I–IV centuries already AD – Sarmatians, with whom in the III– IV centuries neighboring Goths (they are Visigoths) – the ancestors of the present Germanic peoples. They came here from far away, from Skanza itself (now Scandinavia), named their new homeland “Oium” (Goths “Aujom”) and left behind about 1500 archaeological sites of the Chernyakhov culture, as well as religious and literary heritage of the Bishop of Goths Ulphilas – the creator of the famous Gothic Bible (second half of IV century), one copy of which is kept in the library of Uppsala University in Sweden.

It is Wolfila’s legacy that allows the hospitable and friendly people of Moldova “not to be embarrassed” when mentioning Alaric, the first king of the Visigoths, who was born and grew up in the second half of the IV century AD in the extreme south of present Moldova, in the vicinity of the Danube international port of Giurgiulesti. It so happened that this Moldavian “countryman”, whose behavior fully corresponded to the turbulent time in which he lived, in 410 A.D. for the first time after the Gallic invasion (IV century BC) captured and plundered Rome, which even Hannibal failed after the legendary Battle of Cannes in 216 A.D. But a few months after the conquest of Rome, Alaric I suddenly died. Isn’t it fate?

In V–VI centuries Slavs from Polesie (present territory of Belarus, Ukraine and Russia) began to penetrate here. At the end of VII century in the south of present Moldova, on Danube, khan Asparuh laid the foundations of the first Bulgarian kingdom.

In the second half of the XIV century on the territory of the present Republic of Moldova located the capital of the Golden Horde Yangi-Shehr or Shehr Al-Jedid (nowadays Old Orhei, 60 km from Chisinau) – the bet of a descendant of Genghis Khan Abdullah, who had a dungeon Mamai – the ancestor of two future imperial dynasties: the Romanovs in Russia and Qing in China. The city was destroyed at the end of the XIV century by the troops of the Grand Duchy of Lithuania.

50

Shortly before the last events, at the turn of the XIII–XIV centuries, the Dniester River was reached by vlachs, who called themselves “Moldovans” – a mountain people who lived by distant pastoralism. Vlachas were descendants of the Wolves, Romanized Celts, who lived in the territory of present-day France, Italy and Switzerland and approximately in V century began their resettlement to the east – through the mountains across Europe. Curiously, the word Welschland in Old German was called Italy and France, and in modern German the French-speaking part of Switzerland is so called. In Polish, Italy is called Włochy even today, and Italians are called włosi. And the Hungarians still call Italy Olaszország, i.e. the Country of the Vlach.

Except actually Romania and Moldova, descendants of Vlach live in Croatia, Serbia, Macedonia, Albania, Greece, Bulgaria, Czech Republic, Slovakia, Hungary, Poland, in the west and south of Ukraine, in Russia.

In the second half of XIV century the considerable part of territory of present Moldova gets under the authority of the Moldavian princedom.

Then the suzerain was the Ottoman Empire. For a long time – until the beginning of the XIX century. It is interesting that for some time the Kingdom of Sweden was ruled from the Principality of Moldova. So, it was here – fifty kilometers from Chisinau, in Bender – under the protection of Sultan Ahmed III after his defeat at Poltava, Swedish King Charles XII spent four years (1709–1713).

Then there was the Bessarabian Province of the Russian Empire and the policy of “showcase” for the Balkans and all Europe. Thanks to the abolition of serfdom, tax breaks and exemption from recruitment kits, Bessarabia became one of the most dynamically developing regions, and at the end of the XIX century, then Chisinau, only in the XVIII century, several times burned to the ground, became the fourth city of royal Russia in terms of growth.

By the way, something similar happened during the Soviet period. Solar (as it was called then) Moldavia was a “blossoming garden” of the country and a “showcase of socialism”. Here developed not only one of the most advanced agricultural production on the planet, but also the most modern processing. Moreover, during the Soviet epoch the most powerful complex of the most advanced industrial enterprises and scientific and production associations serving the Soviet cosmonautics as well as one of the best educational systems in the USSR

and a very powerful academy of sciences were built.

Hospitality It is people who make Moldova special!

In any part of the country guests are welcomed with open people. Once in a Moldovan village, for example, you won’t even notice how you find yourself at the table, and the owner of the house is already serving spicy wine.

The national Moldovan cuisine amazes with its natural simplicity and unexpected variety. Aromatic soup-zama cooked with homemade noodles and mamaliga is a hard porridge made of corn flour, which is cut with a thread. Served with Moldavian cheese (Vlach cheese), sour cream and tokana. Placards are made of thin dough with various fillings: cabbage, cottage cheese, apple, pumpkin and cherry.

Yes, the warm and hospitable land of the Moldovan people will not leave anyone indifferent to the national cuisine!

And the wine? Here’s another pride of Moldova! Every year in October the whole country celebrates Wine Day. The best winemakers welcome guests to please and surprise them with their products. The festivity is amazing in scale, and dances, communication and national cuisine create a special atmosphere.

Authenticity Each corner of Moldova has incomparable flavor! In the south of the country live Gagauzians and Bulgarians – two brotherly Moldovans of the Balkan people, with their culture, history, traditions, and, of course, cuisine. It’s only an hour away – and now it’s a very different atmosphere, very different national features.

On the left bank of the Dniester River there is Transnistria, a region over which time is not overwhelming and which you can visit as if to return to the past – to the USSR. To visit the unique historical complex Old Orhei, to see cave monasteries and ancient sketes – it is necessary! No tourist has left Moldova without visiting this picturesque valley.

And if there is a willingness and desire to get acquainted with the Roma ethnic group, then the way should be to the north of Moldova – to the city of Soroca.

The surroundings of this city may cause ambiguous sensations, but this colorful trip and acquaintance with this special people will be remembered repeatedly.

Active recreation The nature of Moldova inspires to have an active rest. The guests of the country have an opportunity to raft down the river, go climbing or biking. Fans of hiking will be interested in the unique relict forest of Codra and one of the longest caves in the world – “Emil Rakovice”. For those who travel by car, the most picturesque places in Moldova are equipped with camping sites. To get acquainted closer with the traditions of Moldovans and folklore, special tours are organized, where you can engage in local handicrafts and immerse yourself in the peculiarities of village life. Travelling around the country does not require much time for travel, and everyone can fully enjoy the process of active recreation.

And many other things...

The Ethno Jazz festival in Chisinau and other Moldovan cities, the DescOpera EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

open-air festival in Old Orhei, the Color Festival in the international exhibition complex “Moldexpo” in Chisinau, Underland Fest, as well as marathons organized in the wine cellars in Cricova will leave bright memories during the visit to Moldova.

And to keep abreast of the events and plan a trip to any of them, you can subscribe to the mailing list of the most significant and interesting events in Moldova.

Tourists can combine excursions with visits to unique festivals. For example: – January – Cricova Wine Run, Cricova; – February – Underland Wine&Music Fest, Cricova; – March – Martisor, Chisinau; – April – Vernissage of wine, Chisinau; – May – First spring picnic, village Puhoi, Ialoveni district (50 km from Chisinau).

Safety Regardless of the time of day, everyone can safely go for a walk or an excursion to a favorite city or make a trip to the countryside – because Moldova is one of the safest countries in Europe. Moreover, on the whole territory of Moldova is available inexpensive mobile Internet, the speed of which makes the country one of the ten world leaders. In city parks, cafes and even trolleybuses you can connect to free Wi-Fi. And all this means that guests will always be in touch with their relatives and will be able to share their impressions about Moldova.

Moldova is a nontrivial place Moldova is a picturesque country in Southeast Europe. It is not difficult to find a small and hospitable country

on the map. The territory of Moldova on the map reminds a bunch of ripe grapes. And if there is a desire to bring unforgettable impressions and unique stories for friends, and not just magnets, Moldova can deeply surprise and overflow with emotions. After all, this is exactly what everyone is looking for in a new journey.

All roads to this hospitable country are open. You can get to the Republic by plane, having arrived at the international airport of the capital of Moldova – Chisinau. This is the same one described by the great Russian writer Lev N. Tolstoy during his two-month stay there in 1854 as a beautiful city, where life “runs smoothly, in pleasures...”. Since then, neither Chisinau nor the whole Moldova has changed itself in any way in the sense of “cultural peculiarity” fixed

by Count Tolstoy. One can also get to Moldova by car and even by ferry – arriving at the southern port of Giurgiulesti on the Danube.

Modern Moldova is sovereign and young again, as it has happened many times in the history of the region. And its people, as in the famous poem by Peter Vyazemsky (a close friend of the great Alexander Pushkin, who lived in Chisinau in 1820–1823) “have experienced a lot, and many” – and still a lot of work, looking for themselves, learning, constantly thinking about the future and always finds time and place for rest and dreams!

I think that after all this we can agree that Moldova is a very non-trivial place for holidays.

Moldova is waiting – welcome!

51

WineMD www.wine.md tel. +373 69294403 Е-mail: ivan.muntean@wine.md

WINE TOURISM: Wine growing and viticulture in Moldova Moldova belongs to the zone of distribution of one of the oldest European archaeological cultures, Starcevo-Koryosh Krish, which includes Croatia, Serbia, Bulgaria, Greece, Hungary and Romania.

But it was in Moldova that the Late Neolithic settlement was discovered, where numerous evidence was found of the wide and active use of wild grapes with the first signs of domestication (Vitis Vinifera Silvana) and its products. This makes Moldavia the oldest wine-growing area in the world. Think about it – 8000 years!

Scientists-paleontologists have long established that the vine grows on the territory of today’s Moldova since the Upper Miocene (6-25 million years ago), which is confirmed by the results of excavations near the village of Naslavcea, Donduşani district.

And in 1902, archaeologists established that Moldova belongs to the zone of another ancient European archaeological culture, Tripolie-Cucuten, which includes Romania and Ukraine in its area of distribution. This is the culture of protocities, which had up to 400005000 inhabitants and consisted mainly of houses of 2-3 and even 4 floors. It was on one of the monuments of this culture in the 1950s and 1980s in the village of Varvarovka, Floresti region, that traces

52

of the use of domesticated grapes (Vitis Vinifera Vinifera) were discovered and investigated in detail – about 6400 years ago! This fact makes the territory of the present Republic of Moldova the oldest area in the world not only for winemaking, but also for viticulture.

At the same time, despite the peripetias and catastrophes experienced by European viticulture, especially during the last 150 years, the inhabitants of Moldova have preserved more than 40 ancient local technical varieties, of which some small farms still make «grandfather» wine. Although some local winemakers are not very happy with the verbs «make» and «produce» in relation to wine. They joke: «Everything is made in America, even «love», and in Moldova wine, cheese, bread and children are born!

Some of the autochthonous grape varieties, such as «Fetyasca Neagre» («Maiden’s Black») and «Rara Neagre» («Rare Black», in Romania – «Babyasca», which means «female»), are first mentioned in medieval manuscripts as early as the 16th century. There is also an exclusively ancient variety, which was widely used in Soviet times on an industrial basis. It is called «Gordin», derived from the name of the city of Gordio (Gordion) – the capital of the legendary kingdom of Phrygia (where Alexander the Great cut the famous Gordian knot) – and is distributed here since the I millennium BC.

However, some researchers believe that this grape variety is much older, local and has been cultivated in the region since the times when the Phrygians lived in the Balkans (2nd millennium BC). By the way, according to ancient Greek myths, these are the same Phrygians who participated with the Greeks – the «Danaians bringing gifts» – in the Trojan War, sung by Homer in the «Iliad».

And there’s one more touch. Most scientists involved in the Moldovan region have long agreed that the ancient Greek god of viticulture and winemaking Dionysus is a character borrowed by curious Greeks. Borrowed (along with the mythical images of the Princess of Europe and the legendary singer Orpheus) from the Phracians, a large, warlike people who lived in the territories of modern Greece, Turkey, Bulgaria, Romania and Moldova.

Returning closer to modern times, it should be noted that Bessarabia (Bessarabia province) in the XIX century was the largest wine producer in the Russian Empire. An interesting fact is known: at the end of the same XIX century, when the phylloxera ruined a huge number of vineyards in France, the winemakers there had to massively buy wine material in other regions, including Bessarabia.

At the time of the USSR, Moldova was the largest producer of wine products,

WineMD is a tour operator and distributor of wine on the Moldovan market.

We create exquisite and authentic high-class wine and gastronomic tours and offer stable quality Moldovan wines.

If you miss natural aromas and real nature, natural food and quality wines - please contact us.

We are looking for partners and are waiting for guests in our beautiful and incomparable Moldova!

We are ready to welcome you – both as a partner and as a guest. And to convince you of this, we will tell you about Moldova, which many of you do not know yet.

Ivan Muntyan,

founder of the company Wine.MD

IN SEARCH OF PERFECT TASTE including sparkling wines (both classical «méthode champenoise» and others). It was in the middle of XX century that the world’s largest wine cellars «Cricova» and «Little Mileshta» were built on the basis of ancient quarries. («Milestii Mici»), recognized as a national property of the Republic of Moldova and representing stone streets and galleries stretching underground for hundreds of kilometers!

The largest wine collections in the world are kept there, and one of them – the «Golden Collection» – was entered in the Guinness Book of Records in 2005.

If wine, then why Moldova?

In the case of Wine.md, the short answer to this question consists of only four words, but each of them is with a capital letter: «Culture and Art of Wine making and Wine drinking». And the famous

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

Azerbaijani Piit Mirza Shafi Vazeh was right: «Not everybody is given the skill to drink, / The skill to drink is an art. / He is not smart, who drinks wine / Without thought and without feeling». In Moldova these lines are known to everyone. And how not to remember here the great Louis Pasteur, who said: «The bottle of wine contains more philosophy than all the books in the world.»

The variety of wine products in Moldova (grapes, must, juices, soft drinks and alcoholic beverages, wines of different types, distillates, etc.) has always aroused keen interest among the guests of the Moldavian region. Moldova, as a country with a long tradition in grape cultivation and wine production, has attracted and is attracting more and more attention from tourists, businessmen and winemakers. The richness and diversity of

the Moldovan landscape, the numerous museums, the beautiful churches and monasteries with their original architecture can be added to the culture of grape growing.

For tourists in Moldova, special wine routes are being developed, which include visits to the famous wine cellars and underground galleries with wine collections known far beyond the country: «Cricova», «Milestii Mici», «Cojusna», «Chateau Purcari», «OrheiVin», «Dionysos-Mereni» and others.

Yes, wine is the pride of the Moldovan people! Do not forget to visit the annual fantastic holiday – Wine Day, when the best winemakers will meet you and surprise you with their products. And when you go on a real wine tour through the vineyards and wineries, you can taste a variety of wines.

53

ADVERTISING

Cricova Cricova’s wine cellars are an underground town. In this city you will not find houses and buildings, you will not see shops and terraces, this city will never be penetrated by the sun. But this city will give a different warmth to its guests, it will warm you with the aroma of great wine and the great soul of the people who make this wine. Cricova invites you to discover a stunning underground city, the city of winemakers, the city of Moldova, the city of wine, a city with the best traditions of Moldovan winemaking.

Every owner who lives in Moldova and has his own cellar is proud of it. As well as the whole Moldova, owning the Cricova wine cellars, is rightly proud of them. This is why Cricova is declared a national treasure by a special law adopted by the Parliament of the Republic of Moldova.

But these wine cellars are unique not only in their area and length (hundreds of kilometers at a depth of 70-80), they are also underground streets with beautiful names: Cabernet, Chardonnay, Sauvignon, Dionis, Codru, Feteasca, «Méthode champenoise»!

Milestii Mici The Milestii Mici Wine Cellars is the largest underground wine storage facility with the largest wine collection in the world.

They are located underground at a depth of about 85 meters. It was officially documented by experts from the Guinness Book of World Records in 2005. The Milesti cellars are more than 200 kilometres of underground streets and more than 50 kilometres of wine galleries. They store more than two million bottles of wine, some of which date back to 1968. Visitors have a unique opportunity to stroll through cool, dark galleries and avenues, where giant wine barrels are located, as well as casas (niches carved in stone) with carefully laid wine bottles covered with noble mold. There they lie waiting for the day when they will be opened to enjoy them – attention! – It is the content, not the contents!

54

Chateau Purcari The Purcar Manor has one of the leading positions among such sights in Moldova. A walk through the vineyards of Purkar will give you a breath of fresh air, a wonderful view of the vine grown, by the way, according to the strict canons of branded French viticulture. The Purkar Manor will give you the secret of its wines. The unique microclimate of the terroir, the slopes facing southwest and south-east, the close proximity of the sea and the Dniester create truly ideal conditions for the production of high-quality wines.

And of course, the pearl of the manor are the Purkara cellars themselves. The oldest wine galleries date back to 1827, and some of the wonderful wine collections collected in the Purkars date back to 1948. In the exquisite tasting room you will have an exciting opportunity to taste Purkar wines, and the obvious atmosphere of the mystery will give the most vivid impressions even to extremely capricious gourmets.

Chateau Vartely «Château Vartely is a modern company by the standards of winemakers from the Old and New Worlds. It combines the most modern technologies of cultivation and processing of grapes with a passion for creating high-class limited edition wines. The own vineyards in the Codrii and Bujacska steppes of Moldova ensure the high quality of Château Vartely’s products, and the microclimate of these areas allows creating truly unique wines.

Thanks to the high quality wines from local and European varieties, «Château Vartely» is among the top Moldovan wine producers and is a leader in consumer preferences ratings both in Moldova and abroad. In 2008, promoting traditions and wine consumption culture, «Château Vartely» opened its own tourist complex. Located 45 kilometers from Chisineav, this complex has an unusual architecture and is an amazingly picturesque ensemble.

Et Cetera Winery «Et Cetera» is a family business and its goal is to grow grapes and produce wine, reflecting the unique character of the Moldovan land.

«Et Cetera» is a family winery, and the key to the well-being of any family is love and care. Every member of the family cares for the land, which always thanks for it – a beautiful harvest. The family carefully monitors every stage of wine production, from the cultivation of organic grapes, fermentation and maturation of wine in oak, to serving the finished product to guests at the winery. In this way, «Et Cetera» shares knowledge and contributes to the development of wine culture in Moldova.

Asconi Winery The winery «Asconi» was founded in 1994 and is still a family business. The purpose of this family business is to make good wine using all modern technologies, while reverently preserving the traditions of previous generations and generously sharing its achievements with all visitors, both compatriots and foreign visitors.

BASAVIN Winery «BASAVIN is a family-owned company, where limited-volume wines are produced. These are high-quality wines created from the exclusive vineyards grown on the terraces of Via Veliu, located in the Stefan Vode wine-growing region.

Kara Gani Kara-Gani is the first Gagauz yard* where the Cherven family produces limited shipments of high quality «wine with a Gagauz accent».

EURASIAN FINANCIAL & ECONOMIC HERALD | #1(9) 2020

Chateau Cojusna The complex is located in the heart of Moldova, just 15 km from Chisineav. The winery produces wine and cognac. It has beautiful cellars, which keep collections of the most famous wines produced in the winery.

Castel Mimi Nothing can tell you more about the quality of a winery than... the wines it produces! Castel Mimi impresses with its interesting and long history. Castel Mimi is currently one of the most remarkable architectural masterpieces in the wine world.

The history of the castle begins in 1893.

Pivnitele Branesti & Epoca de Piatra A place where winemakers live in harmony with nature and themselves, valuing peace and pristine peace!

KVINT KVINT – Tiraspol wine and cognac factory. The name is abbreviation of the name «Cognacs, wines and drinks of Tiraspol».

The mission of the Tiraspol wine and cognac factory «KVINT» is to preserve the centuries-old experience of domestic masters, multiplying knowledge and mastering new technologies.

Best experience – own experience Is it hard to believe that there are so many «wine wonders» in a small country? Then maybe it makes sense to see for yourself.

WineMD will gladly help you with that.

* G agauzians - a Turkic-speaking Orthodox people living in the Balkans.

They are descendants of Turkic nomads from the Great Steppe, who have lived in the region for over 1300 years. For the first time in Moldova they gained their own statehood, in 1994 they received constitutional autonomy.

55

special view

PROSPECTS FOR THE DEVELOPMENT OF TRANSPORT INFRASTRUCTURE IN MONGOLIA AS PART OF

Prof. Bazar BOLDBAATAR , Chief-editor, Journal “Money, finance, wealth”, Bank of Mongolia

Tuvd DORJ,

academian in University Ulaanbaatar Erdem, Ulaanbaatar, Mongolia

THE CHINA-MONGOLIA-RUSSIA ECONOMIC CORRIDOR

Moscow

High-speed railway on the route Moscow – Beijing Kuragino Kyzyl Tsagaan-Tolgoi Arts-Suur Khovd Takashiken Hami Tsongzhe Urumqi Western railway corridor

56

Globalization of the world economy and its reflection in the policies of the three countries Since the end of the 20th century, the process of “globalization”, accompanied by scientific and technological progress and new technological developments in the field of information and communication, integrates the life of the people of the planet under the “one roof” that has never existed before. A quick leap in the development of the transport network completely changed our planet as a single space for the lives of people of all countries.

The interdependence and interaction of national economies is the result of globalization processes. The National economies are increasingly interacting with global institutions; their development can already be called multilateral and diverse. Numerous examples of successful macro-regional structures and systems are known, for example, for the Benelux countries (economic union of Belgium, the Netherlands and Luxembourg), the EU, the USA and Canada, and Southeast Asia. The regional factor strengthens the trend of globalization due to such aspects as the similarity of political systems and the economic level of countries in the region; the proximity of the social way of life, traditions, historical roots; population migration; single sources of energy, raw materials; unified transport system and road infrastructure; unified telecommunications; lack of customs and trade barriers, etc.

Eastern railway corridor Borzya

Railway corridor “Oceanfront”

Mongolia is located on the Eurasian continent, and has a geopolitical advatantage, where it connects two giant markets – People’s Republic of China and Russian Federation. Since ancient times, Russia, Mongolia and China have been eternal neighbors, in such a historical space, these three countries were able to create a valuable legacy in the exchange and cooperation of great cultures and civilizations that gave us valuable historical information. The high coincidence of the strategic development of the three countries with one belt and one path and the strengthening of the construction of the economic corridor has wide space and potential for connecting the Silk Road economic belt, the Eurasian Economic Union and the Steppe Road, which will contribute to the economic potentials of the three countries.

Transport logistics is designed to ensure the rationalization of freight flows and increase the efficiency of use of vehicles. International trade relations in the global economy have left a special imprint on the development of logistics.

There is a definition of the international transport corridor as a high-tech transport system concentrating on general directions – public transport (rail, road, sea, pipeline) and telecommunications.

Based on this definition, it is necessary to relate to the transport corridor not only from the point of view of integration, but also to consider it as an important part of the world transport system. When a long-term, stable economic development policy based on megatransport corridors is implemented on the world stage, Mongolia should use the advantages created by globalization and carry out close economic cooperation with Russia and China. Since 2000, Mongolia has basically moved away from the process of improving relations with neighboring countries and accumulating experience in developing infrastructure in the framework of cooperation between the Eurasian Economic

Solovievsk Ereentsav Harbin Naushki Choibalsan Sukhbaatar Mudanjiang Rashaan Nakhodka Ulaanbaatar Yanzi Vladivostok Zarubino Zamiin-Uud Bichigt Ovoot Huntsun “Tumen-gol” Erlyan Erdenet Ulaankhad Ulaantsav transport corridor Chaoyang Zhangjiakou Northern Railway Beijing Jinzhou Corridor Tianjin Central railway corridor Ulan-Ude

Union. At present, when the framework for the participation of the Russian Federation and China in the development of the trilateral economic corridor is clearly defined and the measures to support the initiatives proposed by Mongolia are clarified, the Mongolian side needs to clearly determine its position and strive for the intended goal.

As you know, the Russian government developed the Transport Development Strategy until 2030, taking into account the entry of the Russian Federation into the World Economic Organization and the strategic documents that determine promising directions for the development of the economy and social sphere of the regions of the Russian Federation, economic sectors, the country’s transport system as a whole and certain types of transport , development of transport and logistics infrastructure, international transport integration. As part of this holistic program, the Russian Federation actively supports the “Belt and Road Initiative” program put forward by China and implements joint projects. Mongolia should take into account that many years of experience of the Russian Federation’s cooperation within the EU in the framework of the program “Dialogue on the transport and logistics system”.

It is assumed that the main routes of the Silk Road economic belt will be: – from China through Central Asia, Russia to Europe (to the Baltic Sea); – from China through Central and Western Asia to the Persian Gulf and the Mediterranean Sea; – from China to Southeast, South Asia, to the Indian Ocean.

The main directions of the 21st Century Sea Silk Road: – from the seaports of China through the South China Sea to the Indian Ocean and further to Europe; – from Chinese ports through the South China Sea to the South Pacific.

It is planned to form international corridors of economic cooperation in the following areas: China – Mongolia – Russia, China – Central Asia – West Asia, China – Indochina, China – Pakistan – Bangladesh – India – Myanmar – China.

In connection with the implementation of this economic program, Mongolia is faced with the task of determining the position and capabilities of the central transport corridor, which is the basis of the logistics of the trilateral economic corridor.

Tripartite political decision to create an economic corridor Since ancient times, Russia, Mongolia and China have common borders in the vast space of Eurasia. Today, the center

EURASIAN FINANCIAL & ECONOMIC HERALD | #1(9) 2020

57

special view

of world development has moved to the Asian mainland, to Northeast Asia. Therefore, the time has come for great opportunities for mutually beneficial cooperation. Aware of this moment, states are striving to implement programs such as the Silk Road Economic Belt, the Sea Silk Road, One Belt, One Road (PRC initiative), Steppe Road (Mongolia) and Eurasian Economic Union (RP). The heads of state discussed issues related to economic corridors at meetings in Dushanbe (2014), Ufa (2015), Tashkent (2016), Qingdao (2019) and Bishkek (2019).

As for Mongolia, the project “Steppe Road” was proposed and it involves the laying through the Mongolian territory of five transit lines: road and rail, gas, oil pipelines, power lines.

In total, there are 32 projects in the framework of creating an economic corridor, among which 13 projects in the transport and infrastructure field, seven of which are projects for the construction of a railway corridor: 1. Central railway corridor – the study of the economic basis for the full and comprehensive development of the Ulan-Ude – Naushki – Sukhbaatar – Ulaanbaatar – Zamiin-Uud – Erlyan – Ulaantsav – Zhangjiakou – Beijing – Tianjin route, including the construction of a parallel trunk road and electrification.

2. Northern Railway Corridor – study of the project along the route Kuragino – Kyzyl – Tsagaan-Tolgoi – ArtsSuur – Ovoot – Erdenet – Salkhit – Zamiin-Uud – Erlyan – Ulaantsav – Zhantszyakou – Beijing – Tianjin; 3. Western railway corridor – study of the project along the route Kuragino – Kyzyl – Tsagaan-Tolgoi – Arts-Suur – Khovd – Takashiken – Hami – Tsongzhe – Urumqi.

4. Eastern railway corridor – study of the project along the route Borzya – Solovievsk – Ereentsav – Choibalsan – Khoot – Bichigt – Shiliyin-gol (Zuonhatavch) –Ulaankhad – Chaoyang – Jinzhou (Panjin).

5. “Tumen-gol” transport corridor – study of the project along the Choibalsan – Sumber – Rashaan – Ulaankhot – Changchun – Yanzi – Huntsun – Zarubino route.

6. Railway corridor “Oceanfront”.

Study of the project along the route “Choibalsan – Sumber – Rashaan – Manchuria – Qiqihar – Harbin – Mudanjiang – Suifenhe – Vladivostok – Nakhodka.

7. Consideration of the prospects and opportunities for the construction of a high-speed railway on the route Moscow – Beijing through Mongolia.

Thus, Mongolian researchers need to begin a gradual and multilateral study of the central economic corridor crossing neighboring states. From this point of view, the launch of the Northern Corridor project, as determining the future of the main economic corridor, is significant.

Analysis of the development of transport infrastructure of the central region of Mongolia and neighboring regions of the Russian Federation and China In 2019 trade between Russia and China increased by 2.5% and amounted to $ 110.9 billion, and the leadership of the two countries agreed to increase trade turnover to $ 200 billion over the next 3–7 years.

Most of the exported goods from China to Russia are electrical goods, equipment, and consumer goods. In turn, oil, gas, coal, iron ore and ore-dressing raw materials are mostly imported from the Russian Federation to the PRC. Typically,

these goods are transported along the Zabaykalsk – Manchuria route. To ensure the further development of this growing trade turnover, the sound reform of the central railway corridor of the three countries is needed. The railway is cheaper in comparison with other types of land communications (the railway is two times cheaper than motor transport) and has a high throughput at border points (the usual throughput of vehicles at border points is 10 million tons of cargo, and for railways it reaches 20 to 100 million tons of cargo). It should be noted that in the areas of coal mining, where road transport dominates, the country’s ecosystem is negatively affected. The rapid development of the mining industry and the emergence of spontaneous rolling dirt roads negatively affect the soil and vegetation. The southern gobi part of the country, adjacent to the Chinese border, is streaked with similar roads.

In the implementation of transnational economic projects, not only relationships, trust and cooperation are important, but these projects should also be economically and socially beneficial and be a bridge to strengthen relations and friendship between the nation. In this sense, from an economic point of view, it is now very important to study and determine the main directions of close economic ties between the regions of the three countries. Based on this, we can tentatively distinguish three zones of economic favorable conditions (Table).

If we consider the current situation, the economic development of the Russia reaches a qualitatively new level in its eastern region, and a gradual transition to the central and western regions.

High rates of industrialization increase the need for raw materials and semi-finished products. In turn, Mongolia is not

Favored Areas of Three Countries Country Russia

Mongolia

China

58

East

Center

West

Trans-Baikal Territory, Zabaykalsk, Re- Republic of Buryatia, Irkutsk Region, Republic of Altai, Tuva, Khakassia public of Sakha (Yakutia) Krasnoyarsk Territory and Kemerovo Khentii, Dornod and Sukhbaatar prov- Selenge, Darkhan, Centre, Tuv, Um- Zavkhan, Govi-Altai, Khovd, Bayannugovi, Dundgovi, Dornogovi, Bulgan, Ulgii and Uvs provinces inces Arkhangai, Uburkhangai provinces

Northeast of China: Liaoning, Jilin, Heilongjiang, Hulun-Buirsky, Khyangansky, Shilingolsky, Ulaanhad, Chirim provinces AWPM, as well as the seaports of Jingzhou, Panjin, Dalian

Hebei, Shaanxi, Henan, Shanxi, Shandong, the cities of Beijing, Tianjin, the central part of the AWP, the seaports of Qinghuangdao, Huinhua, Shingan, Tangshan

Northwestern China: Xinjiang Uyghur Autonomous Region, Qinghai, Gansu, Ninxia Hui Autonomous Region, Western Workstation

economically developed, but has rich natural resources and has the ability to enter the markets of China and NorthEast Asia. There is a need to create a reliable foundation – the railway and its infrastructure, which will contribute to development of the three countries.

Nowadays, the “green” technology is widely developed, which is based on the production of liquid fuel from coking coal, which is widely mined in the Central and Eastern region of Mongolia.

According to our study, the Mongolian coking coal will enter the markets of the Liaoning and Hebei regions, which are the two largest importers of coking coal in China, through the central economic corridor. In addition, China pursues a policy of intensive development of metallurgical plants in the above regions, which will further increase the demand for coking coal for the same plants in Northeast China.

It is also worth noting that the cost of coking coal production in China is gradually increasing and this will lead to a decrease in competitiveness. At the same time, the Chinese government has closed some technologically unacceptable industries to meet environmental standards. These conditions make it possible to increase coal imports from Mongolia and Russia.

The Chinese non-ferrous metallurgy industry has been developing rapidly in recent years, and technological innovations are intensifying and the quality of its products is improving. These are the reason to result in increase of the demand for coking coal transported from Mongolia and Russia.

According to the 13th five-year plan, the implementation of which began in 2016, China will invest heavily in projects of railways, roads and water transport. In addition, China provides reimbursement and return of capital from non-profit long-term projects and attracts bilateral and multilateral projects to the development of the regional economic corridor.

The Economic Corridor program extends beyond the three countries, however, the level of preparedness for implementing railway projects in China and the Russian Federation is better compared to Mongolia. Although the program will be implemented within three countries, the degree of coverage and density of railway networks in China and the Russian Federation is higher than in Mongolia. The Chinese railway network is ready to connect with the railway network of Mongolia in the areas of economic corridor projects, as evidence showed by the construction of border points such as Rashaant, Zuun-Hatavch, EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

Erlyan, Gantsmod and Sehe. There are plans to connect the border crossing point Mandal (Mongolia), Teshishken and Laoai (China) to the railway line.

In recent years, ideas to construct the main railway line in the direction of Kuranchino – Kyzyl – Tsagaantolgoi have been intensively considered. On the other hand, the Trans-Siberian Railway, in particular, at some stations along the Zabaikalsk – Manchuria route and in the Irkutsk Region, is often under heavy pressure. Therefore, in terms of reforming this highway until 2020, specific measures are planned to solve this problem. Chinese experts are showing interest in the Baikal section of the Trans-Siberian Railway. They pay particular attention to the possibility of building a high-speed railway (WZD) China – Mongolia – Russia.

On the other hand, in Mongolia, 1,100 km of railways are used in the direction of Naushki-Sukhbaatar-Zamiin-Uud and 210 km of railways in the direction of Solovievsk-Erentsav-Choibalsan, but both have low power and small capacity that do not meet the needs of the future development. Therefore, it is time for Mongolia to carry out major repairs, to study and expand the basic structure of the Sukhbaatar-Zamiin-Uud and Erentsav-Choibalsan rails, as well as to develop railway lines connecting the country with neighboring states. Of particular note is the development of the railway from mineral deposits in Mongolia towards the Russian border point of Solovievsk. Thanks to the assistance of the Government of the Russian Federation, the route to Vostochny Port will be the same in terms of costs as to the Chinese port of Tianjin.

Characteristics of the central transport infrastructure of Mongolia, demand and trend of cargo turnover In 2019 in Bishkek at the end of the Summit of the Shanghai Organization of the Cooperation in Europe (SCO) at the 5th meeting of the President of the Russian Federation Vladimir Putin with the President of the People’s Republic of China Xi Jinping and Mongolian President Haltmagiin Battulga was held. At the meeting the President of Mongolia said: ‘We have achieved significant progress in the area of transit traffic. The number of trains from China to Russia and further to European countries via Mongolia increased by more then 50% between 2016 and 2018, which is clear example of improved triangular coordination’.

For Mongolia, with a vast and landlocked territory, rail transport plays an important role in the country’s economy.

The Mongolian-Russian company “Ulaan-

baatar Railway” has rights to the central railway transport corridor, which passes through Mongolia. Ulaanbaatar Railway is a joint venture company with full-time employees, numbering about 15,000 people. In fact, this transit railway along the route Ulan-Ude – Naushki – Ulaanbaatar – Beijing is the only strategically important route in Inner Asia. The total length of Ulaanbaatar Railway is 1,809.5 km, of which 1,110 km of roads (from the southern to the northern border of Mongolia) connect Europe and Asia by the shortest route. Today, the Ulaanbaatar Railway is a large transport agency serving 73.6% of the country’s cargo and 15,8% of passenger traffic.

In 1988, the Ulaanbaatar Railway transported 17.9 million tons of cargo, and in 1993, cargo transportation decreased to 7.5 million tons, but after the restoration of the Mongolian economy in the 2000s. the volume of rail transportation in 2003 increased by 40%. Compared to the previous decade, it grew to 12.3 million tons. In 2019, transportation reached 28.1 million tons, including 17.1 million tons of international cargo. Although Ulaanbaatar Railway traffic has increased in recent years and economic indicators tend to improve, conditions still exist that could have a negative effects. Recent studies show that further development of Mongolia and neighboring countries will contribute to the demand for rail transport.

Domestic rail transit traffic in Mongolia is also increasing and at a rather rapid race. However, the inland railway lines are mainly composed of coal transpored, whose share in the total volume reaches 78%.

From this point of view, we can draw conclusions about the current state of the Ulaanbaatar Railway: 1. The main problems are the lack of rolling stock, checkpoints, low speed of transportation. Road conditions in some places do not meet the requirements of transport safety. Speed limits reduce economic efficiency and do not meet the demand of shippers.

2. There is a tendency towards a decrease in the competitiveness of rail transport compared to other types of transport networks.

3. Over the years, the low efficiency of the non-productive part and the social sector of the Ulaanbaatar Railway has been noted, which requires special attention.

The current situation at Ulaabaatar Railway lags behind current needs. The Ulaanbaatar Railway needs specific reform measures.

59

special view

The problems of railway transport in Mongolia are studied in detail by Russian experts. In particular, there is an opinion on the three main problems of Mongolia’s railway transport: 1) the lack of electrification and the use of a single-track railway line; 2) the difference between the gauge railways of Mongolia and China, which significantly slows down and increases the cost of cargo flows to or from China; 3) high tariffs for rail transportation through Mongolia and slow procedures for processing customs and transit documents at Russian and Chinese-Mongolian checkpoints.

Particular attention in this regard can be given to security, which, according to experts, should include: expansion and modernization of existing and creation of new ways; technical re-equipment of the railway complex, the introduction of new technologies for the transport of passengers and goods and their timely delivery; the expansion of bandwidth and wired capabilities of transport routes and the introduction of modern information technologies.

The issues of modernization and strategic partnership for the development of the Ulaanbaatar Railway were considered during the visit of the President of the Russian Federation V.V. Putin to Mongolia in 2014. Following the discussion, an agreement was signed, the basic principles of cooperation on modernization of railways were agreed. An agreement was reached on work on the electrification of railways and, the construction of a parallel line.

In Bishkek, at the end of the Summit of the Shanghai Cooperation Organization, on June 14, 2019, Vladimir Putin noted that, “In our opinion, plans for the modernization of the corridor on the basis of the Ulaanbaatar Railway are of particular importance, in cooperation with Chinese and Mongolian partners, they are aimed at multiplying the capacity of this transport artery and, as a result, times increase the volume of goods delivered from China to European markets and in the opposite direction.

As another significant infrastructure project, we consider the laying of a new railway line Zuunbayan-Khangai. The construction of this section for Russia and Mongolia with a width of 1,520 millimeters will allow redistributing cargo flows, reducing the load on the existing border junction on the Mongolian-Chinese border. ” The Ulaanbaatar Railway development program until 2030 prepared in 2015. The program will be implemented in three stages: 2017 to 2020, 2021 to 2025 and 2026 to 2030. However, at present, if Ulaanbaatar Railway carries out car-

60

go transportation of approximately 20 million tons per year, then by 2030 it is planned to increase the volume to an average of 53.6 million tons.

In the development of the central railway corridor, a special role is given to the railway project called Bogd-Khan. Although, on the one hand, it is connected with the need to develop Ulaanbaatar, on the other hand, it has huge importance for the future of the Ulaanbaatar Railway.

It provides the transition to a standard of two-way, high-speed electric movement.

With the support of funding from the ADB, research was carried out and a preliminary feasibility study for the project was made. Currently, the Mongolian side intends to conduct a thorough feasibility study, develop appropriate legal and investment documents and select investors.

Planning the construction of a central railway corridor in Mongolia or coordinated development with the construction of other transport corridors is of great importance not only for developing opportunities in Mongolia, but also in neighboring countries. Recently, the project of the Erdenet – Ovoot – Artsuur – Tsagaantolgoi – Kyzyl railway network, which is known as the northern railway corridor, has been very important. Today, this project is being commissioned

by Aspire Mining Limited. In order to

coordinate cooperation between the parties involved in the construction of the railways, Northern Railways was created. Northern Railway developed the preliminary feasibility study of the project for the construction of a 330 km railway along the routes Ovot – Artsuur and Artsuur – Kyzyl.

The Mongolian side signed a memorandum of understanding and cooperation with China Railways on the construction of a railway along the Kyzyl – Kuragino route in Tuva. As a result of this work, the Ulaanbaatar Railway will be connected to the Trans-Siberian Railway, which gives Mongolia the opportunity to create the closest route connecting with Russia and China. An economic basis will also be created for the construction of double-track, fully electrified railways. In the case of the construction of the northern corridor, all conditions may appear for the construction of a new railway corridor in the western part of Mongolia.

One of the main transport projects will also be the creation of a transport and logistics company (TLC), which will be a logistics operator between the three countries. Its appearance will help to solve a number of urgent goals: the creation of a unified transport platform through the union of the leading railway container operators, logistics infrastruc-

ture, freight terminals, the development of railway container transportation.

Conclusions 1. According to our data, the creation of a trilateral economic corridor based on the central transport corridor will not only contribute to the development of Mongolia, but will also become an important infrastructure project for the future of the socio-economic development of both Russia, Mongolia, China, and the countries of Northeast Asia . In our opinion, this is due to the unique geographical location of Mongolia, as well as the general development trend of the three countries.

2. Ulaanbaatar Railway, the current owner of the main structure of the central transport corridor of Mongolia, has determined its development policy and prepared a development program until 2030. Despite this, the program does not meet the modern requirements, as it was designed to support the normal operation of the railway at current level and to ensure needs in the next few years.

3. In our opinion, the issue of building a railway transport corridor should not concern only one country. It is imperative that the policies, development trends and conditions of the three countries are coordinated.

EURASIAN FINANCIAL & ECONOMIC HERALD | #2(10) 2020

In 2010, Mongolia has developed a new policy for the development of railways, however, as part of the practice established in previous years, the Mongolian side needs to revise its policy once again, especially from the point of view of the cooperation between the three countries. Much work still remains to be done to develop the international transport corridor. On the other hand, we believe that Mongolia does not have enough experience in developing railways. Often this leads to the need to process the relevant documents, as previous documents were not developed enough. In this regard, Mongolian researchers and employees of the railway industry need to cooperate closely with the experts around the world, including Russian and Chinese researchers.

4. In Mongolia, for the implementation of railway projects, they must be clearly marked, firstly, as a public railway, and secondly, as a railway for economic purposes. Both roads have special socio-economic importance. For economic purposes, the Mongolian side should choose projects that have a real market that will allow the country to increase its market competitiveness. In addition, these projects should have financial prospects and a high degree of efficiency in socio-economic terms.

5. The creation of an economic corridor represents real state support and a strong development tool through regional economic integration in the sphere of world globalization. The political decisions made by the heads of the three countries will become a pillar for the further implementation of the economic corridor. If the parties can timely support these initiatives with innovations at the state level, a positive attitude, high technology, and management, then certain results will surely be achieved. To this end, it is important for researchers from all three countries to join forces and constantly communicate.

In order to improve work efficiency, the following joint actions can be recommended: support of interdependent factors in the development of transport and infrastructure sectors of the economy; ensuring improved control of state supervision and customs authorities and the expansion of border ports; promoting cooperation in the fields of industry and investment; deepening trade and economic cooperation; expansion of humanitarian exchange and cross-border cultural communications; ensuring cooperation in the field of environmental protection and ecology; the development of regional and cross-border cooperation.

61

History of money

MODERN MAN FOR A LONG TIME IS USED TO EACH COIN MATCHES CLEARLY DEFINED SIZE AND WEIGHT, ITS SHAPE IS CLEAR AND REGULAR. MANY SPECIALISTS TRACK THE QUALITY OF COINS AND THEIR COMPLIANCE OF THE STANDARDS IN MINTS IN EVERY PRODUCTION CIRCLE. BUT IT WAS NOT ALWAYS SO. FAMILIAR NOWADAYS RUSSIAN COINS HAVE VERY INTERESTING ANCESTORS. THEIR SHAPE MIGHT BE COMPARED ONLY WITH FISH FLAKES AND WE MIGHT NOT TELL ABOUT THEIR SAMENESS.

”

62

RUSSIAN ‘FLAKES’ – UNIQUE IN THE MONEY SUPPLY

Vasiliy Krasnikov, That’s why one of ancient Russian coins, reached us, today commonly called ‘flakes’. Certainly they became the result of long evolution of technologies of coin production. It was not cast coins, which different nations adjacent with the Russian principalities produced earlier. It was minted coins with their specialties.

Today to say where and when exactly appeared the first ‘flakes’ is difficult. In the period of Ivan IV Grozny they were common and understandable payment instrument for population. Long before Ivan IV most of principalities minted their own coints-flakes. The coins had different weight and unique form. Thus on the coin, which is not exceeding the size of human nail, ancient artists tried to place an indication of governor, city or principality and also different religious or cultural stories. There were attempts to place portraits of princes or kings on coins-flakes sometimes, but they were not recognizable very often.

Mostly it associated with specialties of production of such coins. The technology was simple: usual silver wire cut of small fragments, which then flattened by hand. This is what lead to received blanks had unique form and looked like flakes.

Later needed picture applied to blank.

But firstly method of appliance of image with stamp didn’t allow to do this always qualitatively. Second usually the size of blank was smaller then stamp and only part of picture stand on coin both from the observes side and from the reverse EURASIAN FINANCIAL & ECONOMIC HERALD | #1(9) 2020

side. Today it creates a lot of problems for the specialists, who try to identify these or other coins.

But flake is interested also in that in early periods the coin had not its own face value. Its weight was important and this allowed ‘novgorodka’ or ‘ryazanka’ calmly handle on the area of neighboring principalities, because not stigma but quantity of silver matters. So all manufacturing defects leveled by current payment system. Only in the second part of XV century gradual centralization of Russian country became to lead to standardization of outstanding coins.

Conditional monetary denominations such as polushka and den’ga with regulated weight appeared. In the time of Ivan Grozny kopeika entered in the active circulation.

Kopeika owns her name to imagine of spear horseman, which was actively applied to the coins of Ivan Grozny period and after him. It was the imagine of the king by some assumption. Afterwards this imagine became the imagine of Georgy Pobodonosets.

Flakes changed their weight and design repeatedly. They were seriously changed by monetary reform of Elena Glinskaya, mother of Ivan Grozny. But gradute development of the society and technologies required drastic changes also in currency. Peter I put an end to the fate of ‘flakes’. He introduced the fullweight coin in Russia. The coin confirmed to European standards.

analyst

63

ФОтоконкурс

«МИР “THE WORLD ГЛАЗАМИ THROUGH THE EYES ФОТОХУДОЖНИКА» OF A PHOTOGRAPHER”

2020

Редакционный сове т «Евразийского финансовоэкономического вестника» объявляет о продолжении конкурса «Мир глазами фотохудожника» — 2020. Мы ждем, что в этом конкурсе примут участие люди, влюбленные в свою родину, истинные ценители красоты, те, для кого фотография не профессия, а увлечение, способ самовыражения, желание делиться радостью от увиденного и пережитого.

The editorial board of the magazine “Eurasian Financial and Economic Herald” continues with the competition “The world through the eyes of a photographer” – 2020.

СРОКИ Прием работ — с февраля по октябрь 2020 года.

PHOTO STYLE «Countries and cities», «Native nature», «Self-artist», «World of emotions», «Snatch a moment», «Family album», «Package of impressions», «Incredible is close», «Proactive attitude»

КОЛИЧЕСТВО ФОТОРАБОТ От 6 до 10 ПОДВЕДЕНИЕ ИТОГОВ 15 ноября 2020 года Контактная информация

ТЕМЫ ДЛЯ ФОТОГРАФИЙ «Страны и города», «Родная природа», «Сам себе художник», «Мир эмоций», «Лови момент», «Семейный фотоальбом», «Багаж впечатлений», «Невероятное рядом», «Активная жизненная позиция»

sgk@fbacs.com, bev@fbacs.com, office@fbacs.com +7 495 663-02-08, 663-02-13, 663-02-19

Дмитрий Сигида Родился в г. Уссурийск, Приморский край (Россия) в 1983 году. Экономист

64

This is a competition for those who take photos not for profession but for hobby, self-expression, willingness to share joy from what they have seen and felt.

TIME LIMIT Works are received from February to October 2020 NUMBER OF PICTURES 6–10 WRAP-UP November 15, 2020 CONTACTS

Dmitry Sigida Born in Ussuriysk, Primorsky Krai (Russia) in 1983.

Economist

Сидоренко Александр Родился в г. Пятигорск (Россия) в 1971 году. Дизайнер

Alexander Sidorenko Born in Pyatigorsk (Russia) in 1971.

Designer

Ламжав Болдбаатар Родился в г.Улан-Батор (Монголия) в 1968 году. Директор финансово-консультативной фирмы

Lhamjav Baldbaatar Born in Ulaanbaatar (Mongolia) in 1968 year.

Director of financial advisory firm Prioriti Investment HCK

ЕВРАЗИЙСКИЙ ФИНАНСОВО-ЭКОНОМИЧЕСКИЙ ВЕСТНИК | #2(10) 2020

65