3 February 2003
Pension Reform: Phase 2
“International Partnership and Investments in Russia’s Developing Social Sector Market” was the name of a conference held in Moscow on the threshold of the year 2003. Participating in the assembly were officials from the Russian Federation Pension Fund (PFR), the Inspection for NPF (Nongovernmental Pension Funds), as well as experts from foreign insurance groups and companies, and other agents in the pension market. The conference was organize on the initiative of the First National Pension Fund (NPF-1), one of Russia’s ten largest nongovernmental pension funds, for the purpose of attracting foreign “players” into the market concerned. As V. A. Plotnikov, president of the NPF-1, puts it, it is those players’ experience and technologies that can help the Russian nongovernmental pension funds to survive under the conditions now existing in the country’s social services market. As is well known, from this year on, nongovernmental pension funds will be able to attract and manage the accumulating part of a retirement pension, and the competition between such funds is expected to be fierce enough insofar as most of the country’s citizens are expected to remain loyal to the “good old” PFR. A. V. Kurtin, first deputy chairman of the PFR, however, believes that the pension market has already been monopolized by ten funds, of which the largest is the PFR itself. It should be added that seven out the ten funds are in Moscow, as was pointed out by V. I. Mudrakov, head of the Inspection for NPF, and nearly all of them are subsidiary companies of Russia’s largest corporations. Their investment programs are submitted mostly to the interests of the parent companies, which cannot help but cause anxiety: everyone now well remembers the bankruptcy of American Enron, whose pension fund held its assets in the parent company’s stocks.
Among the foreign participants was Jean-Louis de Mourgues, chairman of the board of directors of the French insurance group AG2R, co-founder of the NPF-1, and representatives of the international group Advent UK, which expressed its willingness to collaborate with the NPF-1. The main problem, for them, is that the Russian side is not much interested in investing abroad as well, which is, to a large extent, conditioned by the Russian legislation regulations. The Russian side intends to start placing abroad some insignificant part of its pension assets only in two years from now.
The current phase of the social sector reform is often referred to as a “capital accumulation period”: a system must be built to turn the pension money given to nongovernmental pension funds into profitable investments. However, only in case such a system is fully transparent, comprehensible and society-accountable, may the pension funds hope to attract any serious investments from abroad, and the pension reform be a success among Russia’s citizens. As for the government, there is no room left for its blunders anymore: within the next 10 to 15 years, after all, the country’s population of pensioners will exceed the number of those economically active.
The Diplomat magazine is a co-organizer and an information sponsor of the International Partnership and Investments in Russia’s Developing Social Sector Market conference.
Photos by Aleksandr Bibik