Russia’s Civic Chamber Recommends Register for Regional Social Needs
The Civic Chamber of the Russian Federation issues recommendations to improve the SIB mechanism
Social impact projects involving VEB.RF as an operator and efficiently promoted in Russia provide an instrument for encouraging innovation in the social sphere. A social impact bond (SIB) is a multipartite contract among the public sector commissioner, the investor and the service provider, and repayment from the government to investors is contingent on the achievement of specified social outcomes.
As shown globally, this mechanism is effective in addressing social issues at regional and nationwide level. The current results of the SIB programme in Russia demonstrate its effectiveness and great potential.
However, according to the Civic Chamber, there are barriers: regional executive authorities feel concern about the feasibility of SIBs; social service providers, such as non-profit organisations and social enterprises, are not standardised and are not prepared to achieved the desired outcomes; it is necessary to introduce uniform metrics to calculate repayment and social outcomes. In addition, given the potential of Russian SIBs, the SIB testing deadline should be extended.
In this connection, the Civic Chamber prepared recommendations. Specifically, it was recommended that the programme should be completed within a longer period and aligned with the strategic plans of national projects and development priorities for 2030. It is also necessary to boost the launching and supporting of regional programmes at the level of executive authorities. Additionally, the Civic Chamber proposed that a uniform register should be formed to include social needs in the regions and effectively invite potential investors.
“We are certain about the great potential and effectiveness of the SIB mechanism, and we believe the Civic Chamber will be able to provide an infrastructural platform for identifying the demand for SIB projects and we are ready to provide support for cooperation with non-profit organisations and social enterprises, and render comprehensive assistance to organise dialogue with public authorities to augment the impacts of the programme,” said Yevgeniya Dmitrieva, a member of the Commission on Economic Development and Corporate Social Responsibility, Civic Chamber of the Russian Federation.
The mechanism is developing very quickly, and the principal task is to create a market for projects in order for investors to invest without hesitation and for the regions to be encouraged to introduce SIBs into various sectors of the social sphere, according to VEB.RF’s Managing Director Mikhail Alashkevich.
“Working with non-profits, big business will be able to use the mechanism to resolve critical issues by forming a new practice of collaboration. SIB testing in the regions has already shown good results, and we intend to use the mechanism to implement federal projects. VEB.RF is now involved in six ongoing projects, and there are plans to launch an additional ten SIBs this year,” he said.
The Civic Chamber made recommendations following a round-table discussion on how to use SIBs to encourage innovation in the regional social sphere. The event was organised by the Commission on Economic Development and Corporate Social Responsibility of the Civic Chamber, VEB.RF, and the Into the Changes Foundation with support from the Presidential Grant Foundation.
28-fold Increase in Revenue Reported by VEB.RF’s Chinese Subsidiary for 2021
Beijing Hua Nuo E Xiang (REX) Trading Company Limited (REX, a subsidiary of VEB.RF’s entities VEB Asia Limited and Russian Export Center) has reported a 28-fold increase in revenue and a 21-fold increase in gross profit for 2021. The company’s support for exports totalled 340 million US dollars, including 295 million US dollars for non-resource non-energy exports. “There’s more work ahead to achieve our financial targets, but amidst continuing severe pandemic restrictions in China and with almost discontinued passenger service, we believe our performance is satisfactory,” said Artem Sharov, General Director of VEB Asia and Chairman of the Board of Directors of REX.
REX was established in April 2020 to encourage the external demand for Russian-made products. Organised as a for-profit, the company provides agency and consulting services and conducts international trade operations. REX is an important mechanism for implementing the Russian-Chinese governmental agreement to achieve 200 billion US dollars in trade turnover. In this connection, the company is included in the road map for promoting trade in goods and services between Russia and China by 2024. REX completed 28 transactions in the Russian and Chinese local currencies in 2021.
The most significant exports supported by the company were dairy products, colza oil, petrochemicals, polyethylene, platinum-group metals, aluminium etc. The most important high-technology exports included taxifolin, a natural antioxidant present in the Siberian larch and the Dahurian larch, used in cosmetology, food processing and pharmacology. “This is not significant by volume yet, but the product wasn’t previously supplied to China at all—although this is really high-tech exports from Russia, and we all want to boost it,” Artem Sharov emphasised. “There are plans to increase taxifolin exports by a factor of several times.”
As a reminder, passenger traffic between the two countries has fallen almost to zero since the outbreak of the pandemic: China implemented one of the strictest lockdown policies (the so-called “zero-tolerance approach”) and banned almost all travellers from foreign countries. The fact that additional inspections were introduced and that ports were closed was also a substantial impediment to trade.
VEB.RF has plans to form Russian trading companies similar to REX in South-East Asia, where Russia has a limited presence. “A business organised as a trading company is particularly suitable for Russian exporters that want to enter the lucrative and attractive markets in this region. Trading companies can provide a broad range of commercial services while serving as competency centres to promote trade with a specific country and using their quasi-public status to establish ties with its government entities,” Artem Sharov added.