Ivan Belozertsev talks on investments, style of government and the pension reform.
The figures for the first half of 2018 testify to the significant investment growth in the Penza region. The region is on the second place among others in the Volga Federal District. The total size of investments amounted to more than 30 billion roubles, that is 135% compared with the previous year. What are the causes of this positive dynamics and what is the political situation in the region are the main questions discussed by the governor of the Penza region Ivan Belozertsev and the ‘Kommersant’ journalist.
— These are very good figures for the rate of investment growth in the Penza region, especially if we consider that more than a half of other regions in the Volga Federal District have witnessed recession in investment activities. Are these the new investors or the ones already active in the region?
— Predominantly these are the companies that have already been working in the Penza region. They enjoy very favourable conditions, receive quite a good profit and are ready to invest further on.
For example, the ‘Damate’ group of companies, a large turkey meat producer and our long-term partner, are increasing their meat production up to 155,000 tonnes per year, so the sum of 15.5 billion roubles in the period from 2018 to 2020 is being invested.
The production increase demands new poultry breeding units, at present there are 13 such units in different districts of the Penza region. These are profitable investments and actual work places in the farming sector.
Meat processing plant ‘Cherkizovo’ is developing a large-scale project here building the pig farms with nursery and breeding units with the productivity of 5,000 tonnes of live animal weight per year. The complex of seven units for 20,000 heads of livestock eachwill soon be built. The cost of building one unit amounts to 550 million roubles.
There are investors who are to set up new production companies. Thus, ‘Rusmolko’ dairy producer is to build a dairy farm, ‘Aviagen Turkeys Rus’ is to build a turkey breeding farm with the capital investment of 1.9 billion roubles, ‘Vostok-Agro’ is building a dairy farm and a grain elevator, ‘Mushroom Company’ is to invest 1.5 billion roubles into growing white mushrooms. ‘Tekhnokord’ is building a plant for advanced grain processsing, which will need more than 15 billion roubles. The process is very slow, but we are trying to help and hoping they will start very soon.
‘SMC’is setting up a residential construction company for building modern LPS blocks. The investment is over 1.2 billion roubles. The company will be able to construct up to 120,000 m2 of residential housing per year. This is a very reliable investor with extensive tax base. Hopefully, this will increase the competition at the housing market and lower the prices per square metre.
— What are the current house prices in the Penza region?
— About 39,000 roubles per m2. Therate of mortgage activities is more than 50% this year. We are constantly working with the banks. We insist that they go to people’s workplaces and offer their services, instead of waiting for their customers to come to them.
— Isn’t there an oversupply of new housing? Some regions get fixed on the idea on figures of newly built housing, while in reality a lot of people just do not have the money for the new houses.
— Such problem does exist. And it became especially evident in the last years, during the economic recession when the housing demand also dropped down. However, last years figures show the mortgages activity are the same as in the beginning of 2014. There is a slow revival of the industry. The demand in the housing market is better now.
I suppose we haven’t lost our positions in this sphere because we never stopped working. We have regional funding programmes for young families, we participate in federal co-financing programmes. This is our support of the housing and construction sector. Last year around 900,000 m2 of housing has come to the market.
— What attracts businesses into the Penza region?
— I think it is our stable development, the fact that our government always keep their promises, that we create favourable conditions for serious and reliable companies. For example, the newly created businesses are relieved from the transport and asset taxes, they also enjoy lower profit tax - 13% instead of 17% for other businesses. Similar support is provided for companies that deal with strategically important investment projects starting from 8 billion roubles. In that case the tax concession period is increased to 5 years.
— Are these conditions in any way different from those provided in the neighbouring regions?
— One of my principles is always checking what the others are doing in similar circumstances. Who has achieved success and how. The investors know that their projects are not only supported but examined and watched closely and continuously. This observation is very strict. Everybody knows that we ‘hold on tight’ to our investors, figuratively speaking. And it is very important for a business to have trust towards the government. They know they will find help and support with us.
— The farming season is still going on. How was it this year?
— The weather conditions were not very good, first we had prolonged rains then the drought. The total crop yield for grains and pulses in the Penza region has been the largest in the Volga Federal District in the last two years and we are hoping to retain our leading positions this year as well. We have worked a lot with the farming businesses. We organized agricultural seminars. There is progress. Those who had the crop yield of 1800 - 2000 kg per ha in 2014-2015 last year already had 4000 - 4200 kg per ha. We tried to motivate some producers. We analyzed the problems, why the same arable land gives the crop yield of 2000 kg in some farms and 5000 kg in the others. Some farmers are not very ambitious, they are satisfied with what they have. It shouldn’t be like that. A farmer has to be passionate about what they are doing.
— You have been very active solving welfare problems in the countryside. You were repairing schools, culture and community centres. And a lot has been done in Penza as well in the past few years. Where do you get the money from?
— Some money comes from the regional budget, then we have federal programes of co-financing some welfare projects. Expenditures on welfare - healthcare, education, culture - cannot be ignored. This is our past, present and future. If you don’t spend now, tomorrow will be too late. Last year we started the programme of renovating village schools. About 400 million roubles was spent on that in 2017-2018. Currently 17 culture and community centres are also being renovated. Two new GP surgeries and first aid centres will be opened this year. We are also planning to build three more kindergartens. A new department of surgery is being built in Kuznetsk. The construction of this building was stopped 25 years ago, so it was slowly sinking into disrepair. Now we started the construction again. It will cost 1.2 billion roubles. We are investing into the road construction now and will continue to do it in the next year.
— How many roads have been repaired?
— You know, there was a receent teleconference between the Deputy Chair of the Federal Government, the Transport Minister and the regional governors concerning the naitonwide project ‘Safe Quality Rods’. The RF president set the task to make all the roads meet the established standard. Additional funds have been allocated for that. At the meeting we were told that the regions where the number of roads meeting the required standard is 50% and more will not be funded any more. We have more than 60% of such roads.
— Isn’t it good?
— I do not think that this is fair. I mean we did not withdraw the money allocated for the road repair and spent it otherwise. Now it turns out that those who did will get the additional financing. Is it fair? I understand that some regions can afford that but not ours. We applied to the Council of Federation and the federal ministries asking to support such regions as ours. And the answers were positive.
— The 2035 Strategy of Social and Economic Development of the Penza Region was adopted by the government recently. The document was under discussion for under a year. Why did it take so long? What are the key differences with the previous 2020 Strategy?
— I can’t say it took too long. The problem is that the external conditions change very fast. One day we deal with countrywide crises, next day other problems. We had a previous strategic plan that we kept to. We couldn’t afford to hurry, we had to analyze the situation and see what we have achieved according to the previous plan. The goals that we have set are not just beautiful words, they are practically achievable. We wanted the programme to be economically feasible as well as an ambitious one. We needed people to believe in it. At the same time we understood that drawing up the plan for one specific region without taking into consideration our neighbours, the processes happening in the country and globally was an impossible task. We have achieved what we wanted.
The developed strategy differs from the previous document in several aspects. First of all, we developed a complex approach in solving the current problems. We also defined clear stages for monitoring the progress.
— Have you been successful with the 2020 Strategy?
— In general, yes, we have. We have achieved what we were striving for. The performance was even better than planned in some areas, for example in agriculture.
We have some deviations from the plan, but they are mainly connected with the new calculations of the National Statistic Service performed in retrospect.
— A year ago (see ‘Kommersant’ June 16th 2017 issue) we talked about the situation with small businesses. What has changed over the last year?
— Well, we have increased the nominal capital of the government sponsored finance company ‘Poruchitel’. It was increased from 455 million to 527 million roubles. Minimum 90 micro-loans are to be granted to SMEs this year. The finance company serves as an intermediary between banks and businesses that do not have enough assets to be given a loan. Investments into small business amounted to 200 million roubles in the first half of 2018. The number of SMEs is growing. The density of businesses in the Penza region is higher than average in Volga Federal District.
We have set up the Centre for Business Support that provides services to small and medium enterprizes.
— How difficult is it for a budding entrepreneur without any business connections or prior experience to receive financial support?
— The main thing is that the money we can provide are given by the federal government and we can not just throw them away. There were cases when somebody received support and then the money just evaporated. We give a point-blank refusal to such people. Though, of course, some of those bear grudge and say we promise one thing and do nothing.
— How do you know whether the person is right for the job? Do they have to have some sort of reputation?
— We try to establish what they are, what they have already achieved, what project they have in mind. Things become obvious.
Once I had a couple of young men who came to see me and said they wanted to start a business manufacturing UPVC windows. I spent 45 minutes trying to talk them out of it, as the competition is incredibly tough in that sphere, a lot of construction companies wishing to minimize their costs set up their own companies for that. I suggested another project. They got enthusiastic about the idea. I advised them to go to the business incubator. Four months later they came to me with a completely different project and a detailed business plan. They are fine now.
— What do they do?
— It is a catering business. Pizza baking and delivery, and things like that. I’m convinced that one has to talk to business people. There are cases when heads of the government adopt a formal approach to business support. I do not approve of that. Each person is valuable. They come because they want to create job places, they will provide for themselves and their families and create conditions for others to do the same.
— At one of recent government meetings you talked about the inefficiecy of Public-Private Partnership (PPP) in the region. How and when should be, in your opinion, private companies involved in public projects?
— I am, in fact, dissatisfied with the PPP and how it works. We have analyzed the model of cooperation with businesses via Public-Private Partnership, found the drawbacks and we are trying to make it better now. We have developed a detailed strategic plan for developing the PPP in the region. Each year we draw a list of objects that can be transferred from federal to private property within the framwork of PPP.
We are searching for potential partners. Thus, a project is under way to create a waste recycling plant and a landfill deposit. We are discussing the project to build two hospital units - for laboratory and diagnostics and the cancer ward. We have an opportunity now to build a toll road, but it would be better if we did that as a PPP project. Some companies are ready to join in.
— Aren’t private companies weary of cooperation with the government? It is allegedly always trying to outsmart the business.
— There is a problem of mistrust, but in the recent years people started to have more confidence. And our investors know that they can rely on the governor’s word. Moreover, the private partner has a 51% control of the joint project. While an investor has controlling interest they cannot be ignored.
— ‘Politics St.Petersburg’ foundation cited the Penza region as one with high political stability. Did you see the report? How, in your opinion, was thatachieved?
— ‘Politics St.Petersburg’ foundation has an established reputation. I think this is a correct evaluation. The stability of the situation is based on hard work of the governor and heads of municipal governments. We have to create necessary conditions for the growth, so that people would earn more and the companies would not break up. I think it is necessary to build a dialogue between the authorities and the civil society.
— Have you managed to do that?
— I think we have. But there a lot of things to be done. We need to be more active in reaching the general public. Heads of government, ministers, civil servants - they have to come to people to the places where they live and work. We have a lot of issues to deal with: not enough quality water, not enough good quality roads. We have concerns about some management companies. Yet, even in the situation when you cannot solve the problem, you have to meet the people and explain why you can’t do that.
— What did you talk about last time you met with the people?
— Last time we talked about keeping the territories in residential areas tidy and beautiful. Before that I had a meeting with univerisity students. When on a visit in one of the districts,I was asked about problems with the hospital. Lots of topics. Different problems.
— What’s the situation like with the deceived depositors of ‘Penzastroy’?
— The bankruptcy administration will work till the 1st of October. Before that date I cannot tell the receiving companies to go and finish the construction. All preliminary works have to be finished.
— Are the investors ready to work in this situation? This does not sound very lucrative.
— The investors know us. They accept the authority and understand the need to have the problems settled. They will not work with losses, though they can’t count on superprofits under the circumstances. There are a lot of legal issues and not everything goes according to the plan. However the construction will be resumed this year.
— Sometimes the public is stirred by government-related scandals. As, for example, the recent criminal case against a Deputy Minister of Forestry of the region. What’s your reaction? Does it take you by surprise or do you say that you have expected this?
— How can one expect this? Why hire somebody who you expect to bring trouble? Naturally these situations are very unpleasant, they hurt me a lot. Luckily, these are one-off cases. There are much more incidents, including criminal cases, in some of the neighbouring regions. If at any point I receive information on a person’s predisposition to or dishonest behaviour, corruption, I take action.
— Can you give examples?
— I can but I will not. I do not want to name these people. Recently one of the heads of municipal government resigned. We had the information that he is ‘pressing’ some businesses. He was relieved from his duties immediately.
— You have often been criticized for interfering into the affairs of the municipalities. It has been said this is not for the head of the region to be busy with.
— I have worked for seven and a half years in a municipal government. That gave me the knowledge in a lot of spheres - how to construct roads, build curbs and manholes, repair networks. I have tested everything we made, physically. Who can criticize me for that?
— The people.
— There are people who will dislike anything. A governor is not a pop star. It is not the question of liking. People may only make a complaint if the roads are in a state of disrepair or the street lights do not work properly and so on. Whether they like or dislike the style of governing - these are their own problems. I am not the kind of person to sit idly and I will not allow district governments to do it as well.
— And the last question of our interview. I cannot avoid the question of forthcoming pension reform. What is your attitude?
— I think the pension reform is imminent. The pension benefits are very small, they ought to be higher. The amendments to the pension law will inevitable lead to changes in a lot of other laws and that will protect the interests of those people who will soon reach the retirement age. This is a good incentive for the governments to create more work places.
— Has the regional government suggested any amendments for the federal government to consider?— Of course, we have. We have suggested a list of amendments. All of them were taken into consideration.