On the occasion of a meeting of the intergovernmental U.S. - Russia Business Development Committee (BDC) in Washington, D.C., March 23, 1999, both sides announce their intention to conduct the cooperative activities outlined below.
The BDC will continue to support and facilitate increased U.S.-Russian commercial relations in 1999 through its working groups and industry sector subgroups. The working groups and subgroups share many cross-cutting goals, including lowering of trade barriers, promotion of open investment climates, creation of sound and stable commercial tax, customs and regulatory regimes, and encouraging joint projects which promote rule of law in business. These long-term goals will continue to guide the BDC's main activities in 1999.
The BDC's Market Access Working Group will explore ways to increase bilateral economic relations by reducing barriers to trade and investment. Specifically, the Market Access Working Group will address and seek solutions to current and potential market access problems, both with respect to individual product areas and more general issues.
The U.S.-Russia Working Group on Taxation, consisting of American and Russian tax experts, has been providing recommendations to the Ministry of Finance and State Tax Service on improving the commercial tax climate through legislative and administrative reforms. At its January 1999 meeting, the Working Group reported progress in legislation affecting taxpayers' rights as well as improvements to the VAT Law. In 1999, the Working Groups' tax experts will begin meeting monthly and will report on their progress to the cochairs on a quarterly basis. The Working Group has pinpointed key actions necessary in 1999, including action by the Russian government on full business deductibility in profits tax calculation, fair and impartial conduct of tax audits and appeals by tax authorities, and harmonization of Russia's draft tax code with the PSA Law.
The Standards Working Group will continue its program of regular seminars, started in November 1998, aimed at informing Russian and American business communities of changes in certification procedures and customs clearances of goods in two-way trade subject to mandatory certification. The Working Group will coordinate on standards matters with the BDC industry subgroups and the U.S. West Coast - Russian Far East Ad hoc Working Group. In cooperation with the American Chamber of Commerce in Russia, the Standards Working Group will support periodic seminars during 1999 in Moscow for U.S. businesses on standards and certification in specific industries. The Working Group will continue to support the SABIT Standards Program and implement a proposal to widen the Standards Working Group by forming subgroups comprised of similar products and on metrology. The Working Group will continue its regular consultations on draft Russian technical regulations and on accreditation issues, with the goal of establishing the necessary technical infrastrucrure to support increased bilateral trade and investment. The U.S. side will consider possible options to help GOSSTANDART to translate U.S. and international standards in the fields of space engineering, information technology and medical technology.
The BDC's Oil and Gas Equipment and Services Subgroup welcomed the passage of PSA Amendments and Enabling Legislation by the Russian Duma in 1998, which is a significant step forward in establishing a PSA framework for investment in the energy sector. The Working Group will promote and facilitate trade and investment in the Russian oil and gas sector by working for adoption by the Russian Government of Normative Acts to implement PSA legislation. Harmonization by the Duma of the draft Tax Code with PSA legislation, placement by the Duma of oil and gas fields being developed by U.S. investors on the list of projects eligible for development under PSA terms, continued implementation of recommendations made in the Joint Report on Priority Energy Projects to the Tenth Meeting of the Joint Commission in March 1998, and further improvement of conditions for investment in the energy sector. The Oil and Gas Working Group also will hold a seminar on Russian oil and gas equipment certification in Moscow in June 1999.
The BDC Aerospace Subgroup continues to promote cooperation in the aerospace sector. The Subgroup urges continued implementation of the bilateral Memorandum of Understanding (MOU) on Aircraft Market Access, including financing of the IL-96M/T and their certification by the FAA and tariff waivers on the prospective order by Russian airlines of two U.S.-produced aircraft. The Subgroup encourages renewed interest to providing market access to aircraft parts and components, especially those parts which will be incorporated into Russian airframes producing hybrids such as the IL-96M/T and the AN-38 programs. The Subgroup plans to convene during the 1999 Paris Air Show and Moscow Air Show.
The Financial and Banking Services Subgroup is working towards improving bilateral trade and investment in the financial services sector. In June 1998, the Subgroup organized a delegation of U.S. insurance experts to Moscow, with round tables attended by members of the Duma, the Ministries of Economy and Finance, the Central Bank, and industry associations, followed by a visit of a high-level Russian leasing delegation to the U.S. in September. The Subgroup will build on these successes in 1999, with further planned exchanges, training, and development of educational material in insurance regulation and lease finance.
The Health Industries Subgroup has been highly effective in improving the business community's understanding of the Russian certification and registration process for medical equipment and pharmaceuticals. The Subgroup has effected improvements through a series of regulatory roundtables with both government and industry representatives, seminars, joint venture pharmaceutical projects, streamlined pharmaceutical certification and registration procedures, and the recent Medical Device Brochure. The Subgroup is also tracking a number of U.S.-Russia medical projects, as examples of how U.S. medical investment in Russia can be expanded. The Health Industries Subgroup looks forward co its Eighth meeting in Moscow on April 20, 1999, where it will continue the dialogue and action on regulatory improvements and sign an updated work plan.
The Microelectronics Subgroup will continue to focus on facilitating the exchange of information on market opportunities. The Subgroup plans to establish an Internet link between the U.S. and Russian sides to provide the business community with instant access to the plans of Russian microelectronics enterprises seeking foreign cooperation.
The Information Technology and Telecommunications (ITT) Subgroup is planning two seminars in Moscow during 1999. Working with the American Chamber of Commerce in Moscow and the Foreign Commercial Service, the Subgroup will hold its second Y2K Seminar in May. The seminar will focus on contingency planning and remediation, targeting decision makers in Russian government and business. In the Summer/Fall, the Subgroup, in conjunction with the Software Publisher's Association and the Foreign Commercial Service, will conduct a seminar on Intellectual Property Rights. In the telecommunications sector, we will continue to look for areas for possible future cooperation, such as training and information exchange.
The Environmental Equipment & Services Subgroup aims to increase commercial cooperation in the area of environmental technologies and equipment. In 1999, the Subgroup plans several environmental technologies programs in coordination with the Special American Business Internship Training program, including in the oil and gas industry (April-May, 1999) and in water systems management (August-October, 1999). In addition to the environmental technology programs, the SABIT program will endeavor several new initiatives in 1999, including in the areas of merchandising, building construction. food processing, timber, technology commercialization. and training for customs brokers as part of its regional focus on the Russian Far East.
The BDC will work to promote greater cooperation in the industrial sphere. The Vice-Chairs will explore ways to strengthen coordination of the BDC industry sector subgroups and make specific recommendations to the Co-Chairs.
The U.S. West Coast-Russian Far East Ad Hoc Working Group (AHWG) will continue Phase II of the CLEAR-PAC project, a grassroots initiative designed to promote trade between the two coasts by facilitating customs clearance of U.S. goods in Russian ports. In 1999, the AHWG plans to launch the East-by-West Corridor Project which proposes to create a new trade corridor between the U.S. and China through ports of the Russian Far East. The AHWG Fisheries Sector will propose changes to INS regulations regarding visas for Russian crewmen and will continue to educate industry on INS procedures. In the wake of the Russian financial crisis the AHWG has strengthened its Communications Network to disseminate news and information over an electronic listserv, an independent website, a monthly newsletter, and a finance and banking news service. Plans are underway for its Fourth Annual Meeting in Vladivostok in June, 1999.
Building on the success of the AHWG. the BDC proposes strengthening interregional and grassroots ties between the U.S. East coast and the Russian Northwest. The BDC strongly supports the Business Mission of Northwest governors to the United States in April 1999, which is being organized by the American Chamber of Commerce in Russia, the U.S. Russia Business Council, and the U.S. Consul General in St. Petersburg. The BDC also encourages efforts to create a working group or subgroup based on the AHWG model which could help stimulate commercial ties between these two regions.
The BDC welcomes the progress made on several Rule of Law for Business projects and particularly acknowledges the development in cooperation with the Russian Chamber of Commerce and Industry of the Basic Guidelines for Codes of Business Conduct. The BDC welcomes the agreement reached with Novgorod Region, City and businesses as the first region to adopt and implement the Basic Guidelines. The BDC will work with U.S. and Russian governrnent organizations as well as multilateral organizations to encourage initiatives and programs to employ the Basic Guidelines in Novgorod and other regions. Recognizing the importance of rule of law for business for Russia's commercial environment, the BDC will support in 1999 joint development of (1) a Handbook on Commercial Dispute Resolution in Russia; (2) a Manual for recognition and enforcement of arbitral awards and court judgments; and (3) welcomes joint work on a Handbook on Corporate Governance and Shareholder Rights.
The activities of the three U.S. Government financing agencies are vitally important to encourage bilateral trade and investment. Since 1999, the U.S. Export-Import Bank's (Ex-Im Bank) exposure in Russia totals $2.4 billion, including sovereign exposure of $922 billion, financing under the Oil and Gas Framework Agreement and other asset-based lending in the amount of $1.5 billion, as well as exposure to the Russian banking sector totaling $48 million. Ex-Im Bank remains open for creditworthy projects and continues to work on financing which would be secured by hard currency export earnings for major projects under the Oil and Gas Framework Agreement and a potential project in the forest products sector. Since beginning its Russia operations in 1992, the Overseas Private Investment Corporation (OPIC) has committed more than $3.5 billion in insurance and financing for investment projects in Russia, and has approved $485 million of insurance since the last Binational Commission meeting. Since beginning operations in 1992, the U.S. Trade and Development Agency (TDA) has provided over $52 million for feasibility studies on 141 major infrastructure and industrial projects in Russia. Despite the recent economic crisis in Russia, the Ex-Im Bank, OPIC and TDA are continuing to review new projects and to support mutually advantageous commercial and economic cooperation.
The BDC recognizes that the small business sector is a catalyst for economic growth in Russia. The Committee encourages small business development in the Russian Federation and supports the efforts of the Small Business Working Group.
The BDC supports creation of a U.S.-Russia Business Forum for the purposes of eliciting views and information from the Russian and American business communities, fostering consensus among the two business communities, providing an "early warning system" to allow development of mutually-acceptable business solutions to commercial problems, and fostering multiple voices from a wide spectrum of both business communities. The BDC intends to explore operational and organizational questions connected with creating a Forum, and to make recommendations to the Commission Secretariats for creation of a Forum which would report to the Commission through the BDC.
The BDC recognizes the importance of development of mortgage finance systems for private real estate markets and home ownership in Russia. The BDC recommends further examination of this issue, including a series of consultation with U.S. and Russian government agencies and businesses, and a report with specific recommendations presented at the twelfth meeting of the Commission. Based on results of these consultations further activities may be identified.
The BDC recognizes the need to make its organizational structure consistent with changes in the past few years in its conditions and priorities. Russian and American experts will conduct consultations on this issue and will propose joint recommendations to the cochairs of the Committee.
All of the above activities are subject to the laws and regulations of both countries and to the availability of appropriated funds.
Jan H. Kalicki
BDC Vice-Chairman for the American side
Counselor to the U.S. Department of Commerce
BDC Vice-Chairman for the Russian side
Deputy Minister of Trade of the Russian Federation
March 23, 1999