Speaking at the plenary session of the Moscow Financial Forum, Moscow Mayor Sergei Sobyanin said that the future belongs to post-industrial cities. According to him, metropolitan cities should focus on developing human capital and new technology.
Mr Sobyanin said the world is undergoing urbanisation: as in the past, people are flocking to mega cities. “Labour productivity is four times higher and investment is ten times more effective in cities. Today they do not ensure industrial advancement, but rather the development of human capital: the levels of education, science, healthcare and technology are much higher in cities.”
The Mayor said that today, 600 metropolises account for half of the world’s GDP, and that this figure will increase to two thirds in 15 or 20 years. Indicatively, the capitalisation of IT companies exceeds by far that of raw material producers.
“We must determine the growth points and focus all resources on them. This does not mean that we should turn the country into a desert. Absolutely not – we have strategic territories that we must keep by all means. Nevertheless, we cannot ignore global trends. Otherwise we would forget about labour productivity, investment, the new economy and new technology,” Mr Sobyanin said.
He added that the development of large cities is impossible without the systemic work of the federal and regional authorities. Further development of labour productivity, science, technology, education and budget efficiency are impossible without understanding, at the federal and regional level, the significance of large urban agglomerations, their development and the formation of a comfortable urban environment and infrastructure. I think this is a matter of principle, and we should always remember this when drafting federal and regional policies,” Mr Sobyanin said. According to him, Moscow has considerably reduced its regional debt in the past few years: “The growth of Moscow’s income was below the regional average and the increase of expenses was six times lower. But far from increasing our regional debt, we reduced it by more than three times, found resources for investment and preserved our investment programme,” the Mayor said. He emphasised that if a region’s debts are growing, it cannot develop its infrastructure and investment goes down as a result.
In forming the national budget, he suggested considering the economic situation in the regions: “All expenses are mostly generated by federal decisions and all rules are established at the federal level. It is very difficult to plan economic development without understanding what is happening in the country’s consolidated budget. I think these factors must be taken into account.”
The Mayor said that to balance regional budgets, it is necessary to sharply reduce expenses and mobilise revenues rather than redistributing funds from wealthy regions to poor ones. “I’m afraid that this is completely useless. If expenses continue to increase at the current rate, these 100 billion will be swallowed up without anyone noticing. Given a debt of two and a half trillion, this is more of a political than an economic step. Let me repeat that to balance the budgets of the regions it is necessary to considerably and sharply reduce expenses and mobilise revenues. I’m referring to two or three trillion roubles rather than 100 billion. This is quite a different figure. The idea of ‘dispossessing the wealthy and distributing their property’ is always welcomed, but we know that it has not produced anything good,” Mr Sobyanin said.
According to Moscow Government Minister and Head of the Department of Economic Policy and Development Maxim Reshetnikov, Moscow had to work hard on streamlining budget expenditures and searching for new tax and non-tax sources of funding. "We are actively sharing the experience amassed by Moscow now. In general I must admit that the powers granted to the regions and municipalities of the Russian Federation allow them to develop even in the current difficult conditions,” Mr Reshetnikov said.
He said the regions can be flexible in taxing small companies. A flexible policy stimulates small businesses on the one hand, and turns it into a budget foundation on the other. Mr Reshetnikov explained: “For instance, we are dealing with patents or simplified taxation. Moscow, for one, can be the first region to test such a mechanism as a sales tax. This will help increase budget revenues not by increasing the nominal tax burden but by receiving taxes from everyone. This is how business is being legalised.”
Work patents are another new form of taxation. “For instance, Moscow plans to receive over one percent of its tax revenues from guest workers. This is more than the tax on the profits of oil companies,” Mr Reshetnikov said. Taxes on corporate property and trade and office premises may also help the regions, he added.
The First Moscow Financial Forum has become a new public platform for professional discussions. Its main topic is “Russia’s financial strategy: a course towards growth.”
Its speakers and participants include representatives of the federal and regional authorities, relevant government organisations, top managers of major national financial institutions and companies, prominent economists and public and political leaders. Experts will discuss major areas of national economic development.
Meetings of financiers in September are expected to become recurrent. The Moscow Financial Forum will turn into Russia’s biggest annual event in finance and a landmark for the national economy.