Duma deputies introduce bill to reorganize RDIF as state stock company

Interfax, 29.03.2016

MOSCOW. March 28 (Interfax) - Russian State Duma deputies Nikolai Gonchar, Anatoly Aksakov and Sergei Gavrilov have introduced a bill to reorganize RDIF Management Company LLC as a non-public stock company wholly owned by the state. The text of the bill has been published in the Duma's electronic document database.

The Russian Direct Investment Fund (RDIF) is currently part of Vnesheconombank (VEB). There is no special law devoted it.

The authors of the bill note that the generally accepted practice worldwide is to create investment funds as independent instruments for implementing state investment policy. The bill would provide RDIF's supervisory board with broad powers, including the power to amend the organization's charter. The state would exercise control through its ability to make appointments to management bodies.

The Economic Development Ministry backed the proposals. "As concerns the RDIF, then yes, corresponding proposals [about RDIF's transfer from VEB Group to the Federal Property Agency] have been drafted. We are familiar with this. This was not our proposals, as much as I understand, this concerns the proposals of a group of State Duma deputies. We are familiar with them and think that this is a sensible proposal," Economic Development Minister Alexei Ulyukayev, who chairs the RDIF board of directors, told reporters.

The RDIF's presence in VEB Group is mostly formal: the fund is independently managed, and on its supervisory board is only one VEB representative. Last year officials began to discuss the new structure along with a discussion about the ability to resolve the financial problems of VEB itself. Due to its status as a subsidiary of VEB, RDIF was subject to sectoral sanctions.

Sovereign fund

The transfer of the RDIF to the state property agency Rosimushchestvo becomes law would enable the RDIF to become a sovereign fund in accordance with global practice for such organizations, RDIF chief Kirill Dmitriev told journalists.

"We consider that passage of this law will bring RDIF's status into accord with the best global practice and namely other sovereign funds exist within such structures. Accordingly, it would be reasonable for the RDIF, as a sovereign fund, to function under a separate law," Dmitriev said.

The fund's management company will be transferred initially, he said.

"Accordingly, this action will not trigger any additional budgetary consequences. Further along, we will see," Dmitriev said.

Ever since its formation, there have been plans to convert RDIF into an independent institution. "A separate law will make the investment process, the management process, more transparent. In fact, in the context of the restructuring the Vnesheconombank (VEB) Group, splitting off various structures has been discussed. We plan to remain in close partnership with VEB. We believe that VEB as a development institution will be a vital partner for RDIF," Dmitriev said.

The change in RDIF's status will not affect existing partnerships. "Everything that we have done and are doing will be continued under the new structure, and all are relationships and our partners will transfer there. There will be no special differences for our partners, except that they will sense that we have acquired the same status they have," he said, adding that RDIF's strategy will not be adjusted.

Recapitalization

The RDIF will be recapitalized in 2016 as soon as its account balances fall below 30 billion rubles, Dmitriev told journalists.

"We are in this year's budget as a provisional item. It is written there that the fund must be recapitalized when the account balances fall to or below 30 billion rubles. Here, there will be no changes," Dmitriev said.

Asked whether sanctions against RDIF might be lifted upon its transfer to Rosimushchestvo, Dmitriev said that the fund is not expecting "any special changes to the restrictions regime."

"The government has said repeatedly that our size would be increased to $10 billion, but binding agreements have been signed on an amount exceeding $25 billion," he said.

The state has already allocated a total of 127 billion rubles to the fund. Co-investors have allocated 680 billion rubles. RDIF materials indicate that the fund has conducted over 30 deals with investment of over 760 billion rubles approved. "Over 60 projects totaling more than $10 billion are in the detailed analysis stage," the materials say.