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  • Russian exporters and foreign buyers will enjoy reduced interest rate

    In 2019, the government will start supporting companies that are aimed to increase their own competitiveness and producing goods that can compete in world markets. Banks will reduce commercial rates for such companies by 4.5%. To enjoy with this benefit, a company will have to develop a corporate program to improve competitiveness and go through the selection process.

     

    The Russian Export Center (REC) is the government agent responsible for the implementation of the interest rate subsidy program under the new mechanism. In addition, REC will carry out the necessary consultations to help companies develop corporate programs. Moreover, it will assist in selection process and implementation of other measures in coordination with the Ministry of Industry and Trade.

     

    According to the documents on the program implementation, the total amount of funds invested will be about 327 billion rubles by 2024. It will cover different types of support for the implementation of corporate programs, including subsidizing interest rates on loans for export-oriented companies. The exact amount of funds will be announced within the next two weeks.

     

    Andrei Slepnev, the REC CEO, specified the details of such corporate programs for industrial companies on March 11 where he spoke at the Development Institutions Forum.

     

    He highlighted that presentation of corporate programs opens up access to profitable financing for export projects and allows using a "wide range of banking instruments” in a new way. In combination with export insurance, it becomes easier to implement investment projects and interact with foreign buyers and banks.

     

    The global goal is to ensure "the increase in the volume of production and sales of products competitively in world markets." Proposed program is a part of the national "International Cooperation and Export" project. Its main task is to increase the volume of Russian exports of non-commodity and non-energy goods and services up to $250 billion and $100 billion respectively. The corresponding goals are included in the Decree of the President of the Russian Federation which are outlined the priorities for the country’s development in May, 2018.

     

    The Ministry of Industry and Trade of the Russian Federation and the REC have already agreed on sectoral exports, which are needed to be increased in the next five years. They plan to increase exports of engineering products to $60 billion, metallurgy products - to $58 billion, chemical products - to $37 billion. In addition, the exports of the timber industry complex should reach $17 billion and for pharmaceuticals and cosmetics industry to reach $4 billion by 2024 respectively.

     

    Kirill Orlov, the Director for Cooperation with Development Institutions of REC, commented that support measures in the framework of corporate programs equalize the financial capabilities of domestic companies that produce products with export potential with western companies in other world markets.

     

    In the West, the interest rates are significantly lower and are not comparable with the basic rates of commercial banks in Russia. It is assumed that the end users of the subsidiary loan will be able to take advantage of a reduced commercial banking rate of 4.5% per annum. In fact, this is a governmental compensation to commercial banks, aimed at reducing investment loan rate for the manufacturers of competitive products with high export potential and trade finance.

     

    The selection rules and requirements for participants have already been published on the website of the Ministry of Industry and Trade. The selection itself lasts until May 15, 2019 while the procedures for concluding agreements on the implementation of corporate programs will continue until the end of August. A government decree dated February 23, 2019, which determines the rules for the formation and selection of corporate programs, as well as interest rate subsidies and sets sectoral limits while there are no restrictions on Russian regions.

     

    "We are well aware that different regions have different investment potential and different development programs. But each company will have a chance to get equivalent support regardless of the project’s localization,” Kirill Orlov emphasized. "The main objective is awareness. That’s why we did everything to making the selection process as open as possible, and all regions in the country were informed about the program."

     

    The corporate competitiveness program will not aim at increasing the flow of exports to certain countries or regions of the world. The project will only support the exporting companies and their interests.

     

    Key Performance indicators is the key selection criterion for the use of the program funding. That is, the ratio of the cumulative increase in export revenues and revenues in the domestic market to the funding received. In other words, how much "new" revenue a company can generate by exporting goods or services or selling them in Russia. The amount of subsidies of the Ministry of Industry and Trade aimed at compensating the loan interest rate also differs depending on the industry. Kirill Orlov presumes that a total of at least 320 corporate programs will be signed. We hope that the active work of the REC team and its partners throughout Russia to promote the program will allow to quickly form the necessary register of projects. Then it will be the time for the companies to act.


    The documentary basis for the development of corporate programs is already there. On March 9, the resolution of the RF government came into force. It approved the requirements and procedures for forming a single list of organizations that can apply for this support program.

     

    Those business projects that are going to participate in the program, should meet a number of requirements. They should not have debts in taxes, insurance premiums and fines. They cannot be registered abroad and have offshore capital of more than 50%. In addition, those companies that have been in the process of liquidation or bankruptcy in the past three years cannot apply as well.

     

     

    Please contact Russian Asian Business Union, if you are interested in doing business in Russia.

      

    Information source: "Российским экспортерам и иностранным покупателям снизят процентную ставку на 4,5%”

    https://www.exportcenter.ru

     
    Russian exporters and foreign buyers will enjoy reduced interest rate
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