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Government and Business in the Social Sector: Identifying New Sources of Growth
6 June 2019
09:00—10:15
KEY CONCLUSIONS
Social sphere is the foundation of state and business stability

If we want to live in a country that is truly successful, then we need to understand that we have to pay it a greater deal of attention, even more so than to the economic and financial institutions — Sergei Morozov, Governor of Ulyanovsk Region.

Apart from direct opportunities that business in the social sphere – finding yourself, raising expertise and competitiveness through working with tasks at hand – we have to understand that in the new economy both investment climate and company’s advantages are questions related to human potential and the ability to discover it. People are the matter that allows companies compete and win in the rapid race that is in part fueled by technologies, but by and large by human talent — Alexey Repik, Chairman, Russian-Japanese Business Council; President, Delovaya Rossiya (Business Russia); Chairman of the Board, Group R-Pharm .

On the global scale there are USD 30 trillion allocated for projects in the social sphere and joint work areas between government and business — Xavier Rolet, Chief Executive Officer, CQS; Chairman of the Board of Directors, PhosAgro; Former Chief Executive Officer, London Stock Exchange Group Plc (2009 – 2017) .

ISSUES
Business sees the social sphere as unprofitable

Social sphere is perceived as something perennially needy, costly, and entirely devoid of investment attractivity. We all need to fight that together and illustrate that social sphere, above all, is investment into human capital — Svetlana Chupsheva, Chief Executive Officer, Agency for Strategic Initiatives.

Often times business sees social sphere as a burden, something that can be written off as an expense, not an asset. This long-standing misconception leads to certain contradictions, to complicated attempts business takes to move away from resolving social issues — Alexey Repik, Chairman, Russian-Japanese Business Council; President, Delovaya Rossiya (Business Russia); Chairman of the Board, Group R-Pharm .

An idea that business in this sector should not focus on extracting profits is not that paradoxical. There are economic laws that cannot be broken. If we think of private public partnerships, we need to understand that business partners up to resolve the social task not just because someone said so or just because it happened so. Business partners up because it wants an adequate revenue and clear rules not for a year or two, but of for 10–12 years. It is a serious challenge for all of us. Unfortunately, we cannot see the forecast this deep yet — Mikhail Chachin, Vice President, Sberbank.

State companies push private companies away from the market. According to RBC, nearly 60% private companies do not show any profit. With this in mind, it is difficult to expect that business will invest in social or infrastructural projects with low profit rates and slim chances or recuperation — Sergey Fakhretdinov, Chairman of the Board of Directors, Management Company Ruscompozit .

Lack of competition in the social sphere

The state remained a monopolist in this area for decades. It is not a good thing because there is no competition in the social sphere, which leads to stagnation and degradation. We lack a few basic development elements. First, it is technology: the social sphere is far behind technologically. Second, it is big open date that raises the quality of social services and satisfaction of the recipients. Third, it is professionals, both in terms of their quality and their quantity — Svetlana Chupsheva, Chief Executive Officer, Agency for Strategic Initiatives.

Lack of transparent regulation

Today, there is incredible demand for investment in the social sphere. Thus, the road construction industry is RUB 1.3 trillion short, housing is short RUB 300 billion annually. It shows, that there are opportunities of private-public partnership in Russia today, yet there are issues with the environment. The rules of the game are unclear and not transparent, especially when the business cooperate with the state. The risks the business carries are impossible to predict — Sergey Fakhretdinov, Chairman of the Board of Directors, Management Company Ruscompozit .

Investors want an entry point to the fast-growing biomedical sector and want profits today. In medical projects the return rate is 12 years at least, whereas they want it to be 5–7 years. The market for medical services is not transparent, the regulatory function of the state is too high — Mikhail Yugay, General Director, International Medical Cluster Foundation .

SOLUTIONS
Involving business with social projects

We need business to contribute intellectually. From educating people we proceed to forming competences. Experts are raising alarms: old competences are fading; kids do not remember as well as they used to because what is the point when you can Google anything. Tomorrow kids will stop picking up pen and paper and the skill of writing will be lost. We need to teach kids the things their survivial will depend upon. Yet, it is hard to imagine a school teacher doing so without any help from business — Irina Potekhina, Deputy Minister of Education of the Russian Federation.

PhosAgro annually invests 2.5 billion roubles in the social sphere. This is a huge number. It goes to large programmes that support medicine, education, infrastructural modernization, recreation centres. We finance social construction. By allocating money to the social sphere we do not lose, we win. This helps the state, and help the company — Xavier Rolet, Chief Executive Officer, CQS; Chairman of the Board of Directors, PhosAgro; Former Chief Executive Officer, London Stock Exchange Group Plc (2009 – 2017) .

Development of priority national projects

The main task of the priority national projects is providing a technological breakthrough for our country and thus improving the quality of life for the people. Priority national projects are powerful locomotives for the entire country, for every person. They simultaneously converge the efforts of the government and the business in improving both technological and social spheres in our country. Priority national projects are the link that joins together business and the state in fulfilling social goals — Igor Kagramanyan, First Deputy Chair, Committee on Social Policy, Federation Council of the Federal Assembly of the Russian Federation.

Raising business’ social responsibility

One has to understand that the social sphere is not an industry to collect untainted profit. It would be great to talk to big business representatives to remind them that, for instance, in Europe big corporations invest in education, culture, or healthcare without a business component in mind. In other words, they do not extract profit, but rather do everything to develop human potential by creating a person who is culturally rich and well educated. It is uncommon for our big business. We are working on it and we want to make the year 2020 a year when big companies become responsible in this manner — Sergei Morozov, Governor of Ulyanovsk Region.

Creating task-specific platforms

Platforms could become point of growth; they can unite and consolidate the society around certain aspects or problems. As a business, we are ready to support the brightest of those initiatives — Anna Shabarova, Vice President for Human Resources and Social Responsibility, Russian Copper Company; Member of the Board of Trustees, Russian Copper Company Charity Fund .

It is important to move from general talk to particular cases and particular practices — Victor Sidnev, Director for Science and Innovation, Institute for Technology Assessment and Development.

Stable regulatory field

We have to agree on the rules of the game. Not short-term of 2,3,5 years – but 10–20 years, so that business that chooses a PPP understood that there would not be any changes for the next two decades. Second, everyone, but the regions especially need to move towards prioritizing projects that can unite both business and government. These projects need to be well prepared — Sergey Fakhretdinov, Chairman of the Board of Directors, Management Company Ruscompozit .

The material was prepared by the Russian news agency TASS