During the International Investment Forum Sochi-2015, Russian Prime Minister Dmitry Medvedev announced new economic priorities for Russia and set long-term development goals for the nation’s economy.

Russian Prime Minister Dmitry Medvedev speaking at the 14th International Investment Forum Sochi-2015. Press photo

On Oct. 2-3, the Olympic city of Sochi hosted the 14th International Investment Forum Sochi-2015, which is considered to be one of the leading annual economic events in Russia. Traditionally the forum is attended by senior government officials and ministers, including Russian Prime Minister Dmitry Medvedev.

This year’s forum was marked by an important milestone of sorts for the Russian economy – a year under economic sanctions that were imposed on Russia in 2014 by Western countries due to the Ukrainian crisis and Russia’s role in it.

As a result, the forum’s agenda was concentrated around several main topics that reflect issues of living in a new economic reality: fulfilling Russia’s export potential, implementing import substitution programs, developing Russia’s financial markets and transforming the structure of the Russian economy.

The unveiling of Strategy 2030

The main event of the Sochi-2015 Forum was a plenary session attended by Prime Minister Dmitry Medvedev. In his address to the participants of the forum, he highlighted the main trends and issues that the world and Russia currently face and set up new development goals.

Medvedev stated that the last year was very important not only to Russia, which faced a sharp national currency depreciation, unprecedented sanctions and a contracting GDP, but also to the whole world. As he pointed out, global economic growth rates are slowing down, Europe is struggling with a euro zone crisis and a refugee crisis, and China is experiencing slowing foreign trade and a declining value of its national currency, the renminbi.

All of these, argued Medvedev, contribute to “the emergence of the new reality,” which is making the country’s leadership review its strategic vision for the future.

As part of this strategic vision, Medvedev announced that Russia has begun working jointly with the expert community on an extended strategy of socioeconomic development, the so-called Strategy 2030. The strategy will concentrate on four priorities: investment activity, import substitution, the quality of state governance, and budgetary policy.

The four strategic priorities for the Russian economy

“Stimulating investment activity is of crucial importance,” stated Medvedev. Creating more favorable conditions for investments, both domestic and foreign, is given a high priority. “Our aim is to remove barriers that prevent private money from entering the market,” he said.

Within the last year, the government created a number of institutions and mechanisms to attract more private investment into the Russian economy. For example, the newly established Industry Development Fund provides assistance to companies in need of early stage investment. A corporation for the development of small and medium-size enterprises will provide financial and credit support for such enterprises. On the regional level, local authorities now are given a right to provide a two-year tax break.

Oleg Buklemishev, director of the Economic Policy Research Center, agrees that these are logical next steps, “The issue of investment in Russia is a key economic problem which has to be solved in the first place.”

However he argues that, “The main impediment for further investment progress is the state itself, the state is a bad investor: how it operates, how it creates an environment for the private sector and how it behaves in the investment sphere.” That is why he suggested that “investment incentives must be restored and state investment money should be given directly to private companies.”

The second priority – import substitution – has already become a mantra for the Russian state and the nation’s economists. It is also an essential element of structural reform, argued Medvedev. “It is competitive Russian businesses that make the economy more balanced and more resilient to crises,” he said.

By returning Russian goods to the market and increasing their quality (typically with the help of the state), it is possible to increase their competitiveness both in Russia and beyond. “The import substitution policy does not imply Russia’s isolation or building some artificial barriers; it is aimed at making Russian non-commodity products competitive on global markets,” concluded Medvedev.

The two remaining priorities, governance effectiveness and budgetary policy, serve as a pre-condition for achieving the first two goals. This is why Medvedev claimed that there are going to be reductions in the number of government officials and in government spending in order to increase governance and budget efficiency.

“This is the underlying principle of the next year budget, which we have almost finished drafting,” said Medvedev. The only protected items will be Russia’s international commitments, defense and security, agriculture and social obligations.

Asked by Russia Direct about positive changes in the Russian economy over the last year, Buklemishev noted the changing mindset within Russia: “I can consider one change as a positive – growing understanding of what’s going on in the Russian economy which, in my opinion, is very important. A lot of people started to understand where we are.”

It seems that the Russian authorities have also realized the complexity of the economic situation in the country and started to find ways out of it. A new extended strategy of socioeconomic development of the country until 2030 that involves the input of the expert community is a good start for creating a new strategic thinking.