It’s time to act – Russia has every opportunity to attract investment

April 25, 2013

 

The 6th annual Russia Forum, which was hosted by Sberbank on April 18-19 at the World Trade Center in Moscow, once again confirmed its status as one of the largest discussion platforms in Russia. More than 2,200 delegates from over forty countries attended the event and around eighty invited guests from around the world spoke at the panel discussions. Speakers included well-known policymakers, economists, financiers, and investors. The Forum was covered by 232 journalists representing twenty-two Russian and foreign media outlets, including leading news agencies, television stations, and economic and political printed publications, radio stations and Internet resources. The discussions touched on a number of aspects of the economic situation both in Russia and worldwide, and formulated the tasks that lie ahead. The experts agreed that the formula for success for Russia includes economic openness, refinement of the legal framework and infrastructure, and realization of the human potential.

Setting the tone for the first plenary session “Turning point: Communism was Russia’s answer to the challenges of the 20th century. What can we expect in the 21st century?” was Herman Gref, CEO and Chairman of the Board of Sberbank, who talked about the main resource being time. “Those who learn how to use their time will be on top in the 21st century. Russia has now been ‘vaccinated’ against further revolution and now we need to stop looking for a ‘third way.’ We all know the answer to the question ‘What is to be done?’ We just need to figure out how to do it.” Sergei Ivanov, Chief of Staff of the Presidential Executive Office, who read a letter from President Vladimir Putin addressing the Forum’s participants, emphasized that “no serious political decisions will be made without taking into account the opinion of the experts and speakers at The Russia Forum.” He also spoke of the importance of working on improving the investment climate in Russia and raising the level of management both in business and government. In other words, both business and the government need to make every effort to make Russia even more attractive to foreign investors.

Former Prime Minister of Great Britain (1997-2007) Tony Blair said that economic nationalism was unacceptable and drew attention to Russia’s vital need to diversify its economy, as well as make it more open and transparent. “It’s essential that we create national institutions for investing,” said Sergey Kudrin a well-known economist and Head of the Committee of Civil Initiatives at Saint Petersburg State University. “Notwithstanding all of its peculiarities, Russia is moving in the same direction as developed countries.” Mr. Kudrin believes that Russia’s weak link is its political system. Former U.S. Secretary of State Colin Powell expressed his opinion that the government needs to get out of the way of entrepreneurs, give them a level playing field and ensure that the rules of the game are clear to all. “I would place my bets on education, which helps to reveal the intellect. After all, today’s young people need a higher level of competence than yesterday’s,” reasoned Mr. Powell.

How can Russia be turned into an attractive market for foreign investment? At the plenary session titled “Investing in Russia: What Drives Investors Today?” Lukoil Vice President for Strategic Development Leonid Fedun articulated the problem, “It’s hard to invest in a country whose own citizens invest abroad. Domestic investment creates certainty that the market will develop properly, and it also creates volatility.” The experts formulated several concrete steps that need to be taken in the near future: develop unified and unchanging rules of the game for business, create effective institutions, move away from situation-based management, control flows of funds, etc. Leading economists, businesspeople and financial experts analyzed from

various vantage points the investment potential of Russia and its various regions, foreign investment in the corporate sector, and latest tendencies in the stock market during the panel sessions “Tapping the Potential of Siberia and Russia’s Far East”, “How can the Valuation Gap of Russian Companies be Overcome?” and “Paths of Development for the Stock Market.”

The turbulence in the world economy and the general global trends will necessarily affect Russia’s commodities market, as well as the energy, retail, financial, and telecoms sectors. The heads of leading Russian companies and foreign funds, investors and economists shared their view of the situation in the market and offered forecasts for the future. The panelists of the session called “The Domestic Gas Market: on the Path to Increased Competition?” articulated the measures needed to develop the gas industry: new export strategy, improved regulatory framework, and creation of a gas exchange that would provide real price indicators.

The television station RUSSIA 24 broadcast its popular roundtable discussion “Opinion” live from the Forum. Among the topics discussed was a range of pertinent questions including the catalysts of economic growth, consequences for Russia of the Cyprus crisis, Russia’s relations with Europe, and the lessons and opportunities that stand before all of us.

Garnering particular attention was the Q&A session with First Deputy Prime Minister of the Russian Federation Igor Shuvalov which closed out the first day. Mr. Shuvalov named fighting inflation as the government’s number one task. He also said that the situation shouldn’t be overstated and there was no need to stimulate the economy by pumping money into the system. Elvira Nabiullina, Aide to the President of the Russian Federation and next chief of the Central Bank of Russia (starting June 24), agreed with Mr. Shuvalov during her remarks as part of the CNBC summit “Banking on an Unconventional Future.” She feels that the problem of Russia’s restrained economic growth has to do with the investment climate in the country and the structure of the economy. Ms. Nabiullina is convinced that “we have every opportunity to attract investment to Russia. As we carry out privatization, it’s important to create and develop a competitive environment. Fair competition in the banking sector is one of the most important elements of its development. In Cyprus, there were violations of the fundamental principles of trust on which the banking system is built. Citizens should not pay for the mistakes of regulators.” The incoming chief promised all Russians who have funds in offshore accounts that their assets will be protected in Russian banks.