x BRICS’ Role in Global Development up to 2020 Sergey Vasiliev Deputy Chairman 1 April, 2012 BRICS ROLE IN WORLD ECONOMIC OUTLOOK 2000-2010: BRIC – demonstrated high growth rates, became drivers of the world economy 2010-2020: BRIC keep their role in world economy, but with lower growth rates World GDP, % Emerging markets Developed countries 100% 80% 60% 40% 2020-2050: Emerging markets will produce 6070% of world GDP 20% 0% 1980 1990 2 Source: Goldman Sachs 2000 2010 2020 2030 2040 2050 EMERGING MARKETS: MULTIPLE CENTERS OF ECONOMIC GROWTH Annual GDP Growth Rate, % 9 Emerging markets will become new drivers of the world economy growth, demonstrate the highest growth rate 8 BRIC 7 6 Faster growth in emerging economies outside BRIC N-11 5 4 World 3 Developed 2 1 0 2000-2009 2010-2019 2020-2029 2030-2039 2040-2050 3 N-11: Bangladesh, Egypt, Indonesia, Iran, Korea, Mexico, Nigeria, Pakistan, Philippines, Turkey, Vietnam FACTORS OF ECONOMIC GROWTH 2000-2010 Population growth 4 2020-2050 Small contribution to growth after 2020 Constant driver of growth Capital accumulation Factor productivity 2011-2020 Increasing input to economic growth BRICS GROWING CONTRIBUTION TO INTERNATIONAL TRADE Share of BRICS in world trade (%) Over the last 20 years share of BRICS countries increased sharply This growth mainly determined by increasing exports to developed countries 18% 17,1% 16% 14% Exports Imports 12% 10% 9,0% 8% 7,5% 6% 4% 3,7% 4,0% 2% 0,8% 0% 5 1990 2000 2011 MUTUAL TRADE AMONG BRICS COUNTRIES World Trade Flows in 2011 (All Exports = 100%) To: From: BRICS In recent years mutual trade between BRICS countries enlarged fivefold, but still remains quite low BRICS G3 Other countries 6 Other countries G3 1,5% 4,4% 7,4% 7,4% 8,1% 27,5% 14,1% 15,5% 14,0% CASE FOR NATIONAL SETTLEMENT CURRENCIES IN FOREIGN TRADE Benefits - More transparent pricing in bilateral trade - Reduce dependence on other currencies fluctuations - Lower trade transaction costs (estimated up to 4% volume) What do BRICS development institutions do to extend international use of national currencies: Agreement on Financial Cooperation within the BRICS Interbank Cooperation Mechanism Master Agreement on Extending Facilities in Local Currency under BRICS Interbank Cooperation Mechanism. 7 Opening new credit lines and implementing joint investment projects on bilateral and multilateral basis CO-FINANCING INVESTMENT IN BRICS ECONOMIES: RDIF EXAMPLE Bilateral investment among BRICS countries remains very low: • 1.8 % of total foreign direct investment (FDI) inflows • 1.2 % of total FDI outflows Similar may be true for bilateral investment between other emerging countries Facility to promote investment: 8 Russian Direct Investment Fund • $10 billion fund established in 2011 by Russian government • Targets equity investments in the Russian economy • Mandated to co-invest with large investors globally Management Company of the Fund is a 100% subsidiary of Vnesheconombank and will operate according to international best practices of investment governance. LONG TERM INVESTMENT CHALLENGE Investment needs Constraints: «short-termism» Areas for action… … and cooperation 9 Solutions to various structural problems (such technology transfer, innovation catch-up and infrastructure demands) in emerging economies require long-term investment. Perceived economy growth risks and government budget deficits preserve «short-termism» in financing – a key challenge faced by long-term investors. Needed steps: Bring private financing to projects Implement frameworks to manage environmental and social risks Seek favorable financial regulation for long-term investment • • • Best practices exchange and joint pilot projects will help advance in these steps. Major development finance institutions joined to Long Term Investors Club to address these challenges. VNESHECONOMBANK GROUP Core Russian subsidiaries VEB CAPITAL Russian bank for Small and Medium Enterprise Support Roseximbank VEB Leasing VEB Capital (Russia) (Russia) (Russia) (Russia) 0.4% of Total Assets 5.6% of Total Assets 0.3% of Total Assets 3.6% of Total Assets Representation in CIS countries Banks bailed out by the Government during crisis Belvnesheconombank Prominvestbank Sviaz-Bank Globexbank (Belarus) (Ukraine) (Russia) (Russia) 1.6% of Total Assets 5.0% of Total Assets 6.8% of Total Assets 7.3% of Total Assets 10 1. Assets split provided based on 1H 2011 management accounts VNESHECONOMBANK STRATEGY 2015: KEY TARGETS 11 1.1.2011 1.1.2016 INVESTMENT PORTFOLIO, bn RUB 349 850 SHARE OF INNOVATIVE PROJECTS IN INVESTMENT PORTFOLIO, % 15 20 SME SUPPORT (THROUGH SUBSIDIARIES), bn RUB 121 150 EXPORT CREDIT FINANCE, INSURANCE GUARANTEES, bn RUB 25,6 90 Thank you ! 9 Ak. Sakharov ave. Moscow, Russia tel.: +7 (495) 721-18-63 fax: +7 (499) 975-21-43 www.veb.ru 12