Taliya Minullina, TIDA: ‘The systemic problem is that private investments are an additional burden for colleagues’
Tatarstan needs to develop and adopt an investment general plan to continue the strategy of socio-economic development for 10-15 years ahead — a big interview with the main investor of Tatarstan
Regional and municipal functionaries in Tatarstan constantly disrupt the timing of document approval in investment projects because of a wrong idea that this work is not a priority but an additional burden. It is harder to work with the Finance Ministry in this respect, and as strange as it might sound, it is easier with the Ministry of Construction, head of the Tatarstan Investment Development Agency Taliya Minullina told Realnoe Vremya in an interview. Besides changing functionaries’ attitude, Tatarstan, she thinks, needs to make another three steps to develop public-private partnership: to introduce an investor’s guaranteed minimum income, improve the qualification of specialists on the public’s initiative and enhance investment legislation.
“They come back with remarks and then make up remarks about the new version, and all this can last forever”
Mrs Minullina, some problems of the investment cycle in the republic became public at your suggestion at an open meeting with the Tatarstan president. Issues of a long flow of documents within approval procedures were pronounced. Are those isolated cases or a systemic problem?
Systemic. If those were isolated cases, I wouldn’t have mentioned them. The systemic problem is that the work with investors is not a priority. There are a lot of tasks, different agencies, a lot of intergovernmental job is done to implement investment projects. Perhaps, investment activity is the most multifaceted and tensest one among all the sectors and spheres. Municipal and regional, federal power agencies specialised in legal, financial, sectoral, organisational, supervisory areas are involved in them. The number of people making decisions on one investment project is very big. Too many things need to align so that one private investment project is fulfilled.
Given such a number of participants, there are a lot of essential and necessary documents too. And it is extremely hard to make sure they all become a priority for each of these ministries and agencies. It goes without saying that our colleagues have their own tasks confirmed by top executives. And they are a priority for them. While private investments are an additional burden for them. It is one of the tasks but not the crucial one. And we see it in the flow of documents. Therefore we have to manually call every manager in operation mode. Moreover, more than 50 people approve of one document, this is for sure because managers write back to their deputies, deputies do to the heads of departments, heads of departments notify the heads of offices, and then some specialists deal with the documents, etc. In other words, a piece of paper passes through 5-6 people even in one agency. While one project has 10-15 agencies.
At the same time, several projects are considered at an investment council’s meeting. Consequently, we understand that the number of approving sides is really very big. The regulation timing that has been reconsidered now according to the president’s decision that, I hope, will lead us to success because the instruction read that if a document with remarks wasn’t returned within three days, it was considered approved automatically because they return documents with remarks and then make up remarks about the new version, and all this can last forever. Now we are going to try to finish this story with a regulation and see how this will influence the investment cycle.
We had an investment council meeting on 23 December. And its protocol was issued on 30 December.
“Frankly speaking, approval processes with the ministry of finance go with difficulties”
What agencies do you think do their job best and what do worst? If we evaluate them with such a formulation.
Each time the approval is very tough with the Tatarstan Finance Ministry. Especially if the project has some, even the smallest amount of budget money. Then that’s it, we start rounds of discussions, long approvals and so on. Seemingly, they have a scrupulous job, too many documents. It isn’t easy to work with them, so to speak. For sure.
Oddly enough, the Ministry of Construction is among those who coordinate quickly. They have such a heavy block of work, but they perform it quite quickly and efficiently. Colleagues can fulfill even those orders that were simply announced but nowhere recorded, were not included in the protocol. This means that the manager clearly records everything that has been said and performs it himself. Actually, it's very cool.
That is, good and bad — it depends only on deadlines? Or also on the quality of work of departments?
Of course, on quality. It will probably be incorrect here if I give ratings to all colleagues. I can just say that the Ministry of Finance takes a very long and difficult decision-making process. Probably because financial assistance to a particular project is associated with the redistribution of funds from certain programmes, which also requires a lot of approvals, or even the adoption of amendments to the budget. And this procedure generally involves the involvement of deputies of the State Council. In all cases, the approval period is very long. Frankly speaking, approval processes themselves go with difficulties.
“Delays are only a consequence of other reasons. They did not find time to work on a document for a reason”
Has the implementation of investment projects been disrupted in your memory precisely because of long-term coordination?
Yes, it has. This is life. This is taking place not only in Tatarstan, but in all regions. For example, we have a project of a rehabilitation centre with the Altai Krai for two billion. They even chose a plot of land in front of the Republican Clinical Hospital in Kazan. They agreed on the volume of compulsory medical insurance, which is also very difficult. After all, the whole model is based on the return on investment, this is very important, this is the payback period. They stumbled on inflation. A private investor says: this should be fixed in the documents. He wants to share with us the inflationary costs and the risks associated with them. Sounds fair. If we follow the model of public-private partnership, then it involves the separation of responsibilities: obligations and risks. But the republic does not take on these risks. For two or three years, the investor walked around the offices, we suffered, suffered, suffered. As a result, it was decided that it was impossible to implement the project.
You see, we don't even have measures of state support for entrepreneurs accumulated in one place. As a member of the board of the National Association of Investment Development Agencies, I asked the Russian Union of Industrialists and Entrepreneurs to submit proposals to the Ministry of Economic Development to create a single digital platform. It will collect all measures of state support for entrepreneurs and investors at all levels, from municipal to federal, that are in force in the country. It's just impossible to sort out: four thousand support measures. An entrepreneur cannot simply go to one place and understand what he can claim. This is not ok. The RSPP (Russian Union of Industrialists and Entrepreneurs — ed.), at my request, prepared a letter to Reshetnikov (Maksim Reshetnikov, Minister of Economic Development of Russia — ed.).
Is it possible to estimate the amount of lost profits of investors and the republic, in the form of taxes and fees, from failures in the implementation of investment projects?
It is difficult to give such an assessment. It's taking place everywhere, all over the world. Each investment project has its own life cycle. For one reason or another, ideas often do not reach realisation. This is understandable: the funnel is large, there are few projects coming out of it. The reasons are very different. Of course, it is possible to categorise them conditionally. The main reason will be the lack of economy. It seems that there is some kind of brilliant idea, there is some kind of state support, some kind of business plan, understanding of sales. We thought it was not profitable, the margin is too small. Probably, the main reason for refusing to implement investment projects is this. The investor offers, for example, to add the economy of the project with a state order. And we understand that we will not make such a state order.
Some projects are forced to enter a too overheated market, for example. Some projects are unable to take out a loan due to the lack of assets for collateral, and grant and subsidiary resources are too small. Some projects don't succeed because we can't agree on the terms. This is, for example, a garbage recycling project. We have been sitting with colleagues for two years, discussing at different levels, but in no way. The investor wants too much from the state, including shifting all responsibility to them. We want it all to be on them. Agreeing on the terms, especially if the state is involved in the project, is an extremely difficult task.
Because of bureaucratic delays?
To a lesser extent. Basically, delays are only a consequence of some other reasons. They did not just find time to work over a document and coordinate it in time, no. New projects may disrupt existing market ties. For this reason — yes. There is one monopolist in the market, and then suddenly another player appears. We are trying, we go with them, but it is extremely difficult. It is necessary to work particular with this. When we launch a project, we simply do not know such nuances. Accompanying the project, we look at what happens at each stage. This is a very big behind-the-scenes job.
The investment council with the president of Tatarstan includes projects that have not been worked out in this part?
Not exactly. Only projects with a sufficient level of elaboration with all relevant industry departments reach the investment council. Listening to the presentation of projects, the president raises every head, every relevant minister. And everyone says: yes, we know this project, yes, we support it and we will help.
After the presentation at the investment council, are all announced projects implemented?
Almost all of them.
Are there any that were disrupted after the investment council because of bureaucratic delays or because one of the officials slowed down their implementation?
Practically not. The projects that reach the investment council, as a rule, are in a large degree of elaboration. We provide their support. We sign an agreement with each investor, which assumes quarterly investment tranches. We draw reports on their implementation. We check the investment flows, whether they fulfill their obligations, whether there are deviations from the plan. If so, then we find out why. We meet, sort it out, come with visits. Conditionally, the investor drove piles — what are the claims against him? They've been standing there for two years, we can't do anything. During the implementation of projects, there are certain specified time lags that are given to investors to solve certain problems. Sometimes investors decide to reformat projects in the course of their implementation. We say: no, it doesn't work that way. Go again to the investment council and renegotiate with us officially. The projects in which we have seized land plots by court are isolated cases. They are there, but there are very few of them.
“We have the Ministry of Economy for such strategic things. But...”
Could you give an example of an ideal investment cycle? What is it, in your opinion? Will we come to such a model?
In my opinion, the ideal investment cycle is when we have an understanding in the territorial context on which land plots which projects in which industries in what time period and on what conditions should be implemented with the participation of private investors. In other words, this is actually an investment master plan that should be adopted as a continuation of the socio-economic development strategy that defines our priorities. This is an intersectoral economic development plan that falls on specific spatial and territorial schemes. And, of course, there should be indicative indicators on the time and conditions for the implementation of projects in these territories, according to the plan.
And if in simple language?
In simple terms, we need to understand: private investors should come to the Aktanyshsky district for which areas of activity, for which land plots, what the authorities at all levels should provide them with, and in what time frame we will do it all.
Such “territorial investment planning”, relatively speaking, should be developed by your Agency?
I think, we have the Ministry of Economy for such strategic stories. In my mind, it is them who should do it. And we must implement it, understanding in which areas we need private investment in education, in which in healthcare. We should have a map of the sites, a list of conditions, and we will find them. And we will collect them from the world, and from Russia, we will definitely do it.
But today, unfortunately, even our relevant regional ministries cannot formulate on what specific conditions they are ready to work with private investors. Therefore, we do not have a public initiative, which is laid down in federal laws on public-private partnerships and concessions. We have no public initiative at all! There was recently a public meeting in the housing and communal services in Almetyevsk, but housing and communal services are housing and communal services. And I'm talking about completely different stories.
Let someone come, do something somehow — it doesn't happen that way. Each investment project has specific financial models, a feasibility study. And colleagues are not very eager to delve into these indicators — IRR, EBITDA. Private investments always go somewhere “for later”. First, national projects, effective use of budget funds, some other priorities.
“If we had a minimum guaranteed income on investment projects in PPP, their number would have multiplied”
From the outside, it is perfectly clear that the PPP mechanism is being implemented in Russia under pressure. On the one hand, the “statesmen” perceive it as a tool for pumping out budget money by entrepreneurs.
Private investors are expected to act aggressively, in most cases minimise investments to maximise profits. Do you think this contradiction is insoluble or there are chances for a qualitative shift? If there is, what should be done for this?
In Tatarstan, public-private partnership is formalised by two regulatory legal acts: the law on PPP and on concession agreements. If we look at how they are implemented in practice and look at the internal economic models, we will see that in fact 70% of investments in Tatarstan are private investors, and only 30% are the state. The shares vary for different projects, but on average everything is exactly like that. And the classic PPP actually involves more state participation, somewhere 20 to 80. We should implement important public projects with the participation of private capital. That is, investors will earn something there a little, but at the same time, they will give us his expertise in response, give the speed of project implementation and so on. Actually, that's how it works. For now, everything is the opposite, at least in Tatarstan.
At the same time, if we take the entire economy, then we have five rubles of private investment for one budget ruble. Why? Because private owners implement most of the projects themselves, and the state practically does not take any part there. If we say that bringing engineering networks to a real estate object is the participation of the state in the project, then this is strange. This is actually a direct obligation of the state — to provide conditions for the development of the territory. And saying that this is the participation of a region or municipality in the implementation of an investment project is not very competent from an economic point of view. From this point of view, state support and state participation in an investment project are a capital grant, a subsidy, a state order, an offset contract, an energy service contract, a tax benefit. These are economically significant forms of state participation in the implementation of investment project.
We have questions here, that's a fact. And they are associated with the minimum guaranteed income of the investor. The MGD (minimum guaranteed income) is our weak point. Or rather, its absence. If we had a minimum guaranteed income on investment projects in public-private partnership, their number would have multiplied. The entire investment model there is based on the MGD.
Answering your question, what could change the situation with PPP, there are specific things. The first is the minimum guaranteed income. This is a budget change. This is long-term budget planning, because an investment project means 10-15 years of payback. And we have a budget for a year, for three. How then to guarantee a return on investment to a private trader? The changes here would immediately shoot in the number, quality and volume of PPP projects.
The second is the level of training of specialists who develop and implement PPP projects on the state side. To be honest, there are not many high-class, high-quality lawyers of this profile even in the country. Therefore, they earn very well, it is expensive to order their services. There should be training of specialists in PPP. By the way, in 2020, the Ministry of Labour of Russia developed an order on the approval of the professional standard “Specialist in the field of public-private partnership project management”. We really need good lawyers and economists who should work in municipalities and government agencies in the regions, and not go to Moscow to earn money. They must have sufficient competence to package a public initiative in a high-quality manner. Today we have to outsource this work for a lot of money. A PPP is built in only two ways. The state carries out a public initiative, that is, it says what we want to do, on what conditions and in what time frame. Either the investor comes out with a private initiative, and the state should say exactly how it can be implemented.
The third is, of course, the improvement of regulatory framework. It is necessary to expand the scope of application of PPP tools. There are very few of them today.
Federal agencies are working in this direction. Over the past 10 years, there have been a huge number of changes in investment legislation. Now we are much more open to a substantive conversation with investors. The attention from federal agencies to working with private capital has increased many times. Especially in the last five years. When we started making the National Rating of Investment Climate in the constituent entities of the federation, when we started making the investment standard — all this significantly facilitated and supported our work.
“We would like the federal budget to take over the additional expenses on the Shali-Bavly highway”
How did you manage to sign a concession for the construction of the Shali-Bavly highway?
With great difficulty. We have conducted and are conducting a large negotiation process with federal state authorities. We have reached a certain point. But even now there are still questions about this project. After we signed this concession, there was a state examination, and we saw an increase in expenses there. Then the story began — who will take these costs on themselves. And they are quite big there. It can be the state, federal or regional, it can be the investor who is already in the project, or it can be some additional investor. Now we are being at this stage.
Who do you think should take on the additional costs of this project?
Of course, I would like it to be federal budget funds. This is an ideal option.
Let's run through the numbers. How many public-private partnership projects have been implemented and are being implemented in Tatarstan, for what amount, how many projects will be implemented in total, and at what stage of development they are?
At different stages. We have the GASU, the state automated system “Management”, which is maintained by the Federal Ministry of Economic Development. Each region uploads information there about what has been done so far. So, to date, Tatarstan has signed 126 concession agreements in the fields of road infrastructure, healthcare, municipal infrastructure, education, education, sports. We now have an interesting new IT project that we want to do through PPP. The project is small, but interesting — an investment of 39 million rubles. It is an automated information system for accounting sports achievements. Now, together with the investor, we are preparing a package of documents to submit a private concession initiative.
And who will pay for the accounting of sports achievements?
We want to create a system that will allow us to track the dynamics of the development of children in sports schools. In our model, there are partially funds that are spent on infrastructure in sports schools, something we will work with the Ministry of Sports. Part of the costs will be borne by the parents of children. We think it will work or not. We have good stories about sports. If you were at the PPP forum, you saw that we invited the Ministry of Sports, they have budgets. As we understand it, the federal government is trying to test this approach through sports for all other industries: culture and so on. We managed to sign the first concession agreements in the field of education for the construction of three private schools. This is also a precedent.
In sports, we have ideas on concession agreements for the construction of football arenas in municipalities. It is relatively not expensive to build them, the maintenance is also affordable. We are doing two projects on the arena, in October they were selected in the federal project. There is a total investment of 181,5 million rubles.
We have 11 housing and communal services facilities under development for 525,7 million rubles. Three heat supply facilities, eight water supply and sanitation projects. They are at different stages: from holding tenders to approving concession agreements. Then we have a project on MSW for 4 billion rubles. We are negotiating on the terms of the project. I will announce some projects at the annual board meeting.
“As they say, lonely hearts are looking for each other”
Until 2022, Tatarstan actively attracted investments and projects from currently unfriendly countries…
We continued to do this in 2022. We are now seeing capital investments, agreements on which were reached earlier. You understand that this does not happen: today we agree, and tomorrow the money already come. An investment project is a long story that takes years. Therefore, in 2022, we have about 65% of investments from unfriendly countries. They continue, projects are being implemented. It's just that colleagues are experiencing certain difficulties right now. With the delivery of equipment, the arrival of specialists, commissioning. This is the way it is.
But does money come?
So far, yes, they are finding ways. As they say, lonely hearts are looking for each other.
Will everything work in 2023, too, despite the sanctions?
We will look for ways. Such work has been done, how much we have been suffering, negotiating, preparing land plots. We are going through so many approvals, and then at the final stage there are some problems. Of course, I want to solve them.
Is it easier for foreign investors to do a project here than for Russian ones?
It is. And not only in Tatarstan. Put yourself in their shoes. You want to build a restaurant with an investment of 300 million rubles. Try to do it in Almetyevsk, and then in Harbin and in Paris.
It will be most difficult in Almetyevsk.
Why? For you, on the contrary, it will be easiest in Almetyevsk. Here it is easier for you in terms of language, mentality, understanding of processes. And it will be difficult there. It is also difficult for foreigners here.
But investors come because it is more profitable to work here?
Not always. If we are talking about the implementation of projects with international expertise, then here it is primarily not just an opportunity to earn money, it is ambitions. If we apply this story to Russia as an example and look at which entrepreneurs are exporting, we will see that these are people with ambitions, large-scale thinking, and risk diversification. This is not always an opportunity to just earn more. There is a wider range of reasons and prerequisites.