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joukov More about Alexander Zhukov
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THE DAILY TELEGRAPH THURSDAY_NOVEMBER 15_2007
en.rian.ru/business Ria Novosti news wire
How Russia’s
Investment Deputy Prime Minister Alexander Zhukov
explains how Russia is becoming a major economic force…
financial climate
has changed
There is a dangerous myth sult, the Soviet Union helped
that investment is coming to many poor economies to
Russia because its economy is their feet without reaping
growing. Since Russia’s any reward. And when the
economic growth largely Soviet Union collapsed, Af-
depends on high fuel and rican and Asian countries
energy prices, many predict stopped building Commu-
that it may stop at any time, nism. A time
without warning, vapourising Almost all the newspapers
investments. in post-Soviet Russia in the
1990s wrote that the country
YEVGENY ARSYUKHIN
was hungry for investments.
ROSSIYSKAYA GAZETA Opportunists flocked into
MOSCOW
the country, expecting to
spend little and make a lot. Looking forward to
In spite of this myth, there is Respectable investors did
no direct connection be- not venture into Russia be-
tween the economic growth cause there were no clear
of any country and invest- rules of the investment
ment in it. Rather the reverse game. joining the top five
is true – investments spur Until 1996, they were fright-
growth. If there is no detect- ened off by the threat of a
able growth at the start of pseudo-Communist restora-
LILIA ZLAKAZOVA_RG
the investment period (as is tion and the re-nationalisa- goal of medium-term devel- destinations for investment
possible), it means that the tion of privatised property. opment programme until in the Russian regions. Last
business of those who have Russia in the 1990s had tax 2020, to be approved soon. summer’s investment forum
Russia’s image among
invested in Russia is in no legislation nobody could un- In the next 15 years, huge in St Petersburg demon-
way connected to future derstand tied to endemic funds will be invested in in- strated how the Russian re-
foreign investors
prices of fuel and energy. corruption. frastructure projects, par- gions presented their invest-
Some may justifiably say, in Investors, who did not know ticularly in roads, the energy ment projects, and how they Majority satisfied with investment in Russia. Companies’ level
fact, there is no direct con- with whom to discuss prob- sector, electric power gener- brought results. of satisfaction with decision to invest in Russia
nection between the eco- lems and projects in Russia, ation, and the construction Contracts to the tune of tens
nomic growth of any coun- were taken from one office of sea ports and airports. of billions of dollars were re-
try and investment in it. to another, each host accept- Estimates show that to en- cently concluded in St Pe-
Rather the reverse is true – ing a “gift” of money in ex- sure that Russia’s infra- tersburg and in Sochi, which
investments spur growth. If change for a promise of help. Alexander Zhukov second and third Duma structure does not slow the a short while ago played host
there is no detectable growth After scores of such meet- 1956: Born in Moscow. parliaments. current high rates of eco- to a similar investment
at the start of the investment ings, the investor realised 1976: Graduated from Mos- December 7, 2003: first nomic growth, it will be nec- forum. Sochi is now very
period (as is possible), it that nobody had explained cow State University as deputy speaker of Duma. essary to invest about $1 tril- much in fashion, not only in
means that the business of the essence of Russian in- mathematician-economist. Married with one son. lion by 2020. This is a stag- Russia but also in the world,
those who have invested in vestment legislation to him, 1991: Certificate from Har- Speaks fluent English and gering sum. And Russia nat- owing to the 2014 Winter
Russia is in no way connect- and that success tragically vard University. is an expert chess player urally looks forward to an Olympics.
ed to future prices of fuel depended on the personal 1981-1991: In the currency (elected president of the increased inflow of foreign The forum in that city alone
and energy. preferences of the governor, department of the Russian Russian Chess Federation). investment, while furnish- saw projects totalling more
Some may justifiably say mayor and other officials, Ministry of Finance, Winner of 2001 Themis prize ing all the required mecha- than $20bn. And these were
that they will have to pull who could be in power one rising from junior economist in the economics and law nisms for this purpose. absolutely real. They includ- Confidence in Russia’s ability to become one of the premier
their business out of Russia day and in prison the next. to section chief. section. It has been much discussed ed both state-sponsored and countries in the international market
if oil prices fall, bringing This is when German Gref 1991-1993: vice-president in Russia whether or not re- completely private projects,
poverty to Russians and di- entered the scene. You of Autotraktoroeksport. More about A.Zhukov on strictions on the free inflow including creating an artifi-
minishing their purchasing thought I would say it was 1993-2003: MP in the first, www.rbth.rg.ru and outflow of capital cial island in the Black Sea
power. But this is merely one Vladimir Putin who saved should be lifted. For a long on which to build hotels and
of many business risks. the day? They came togeth- time the country applied spas.
Unfortunately, this myth is er, but it was Gref who paved strict rules to currency regu- Not so long ago, I visited
unconsciously perpetuated the way for investments in It is sometimes claimed that external debts. Moreover lation. But after lengthy de- Penza [625km southeast of
by the many Russian offi- Russia. the Russian economy is currency reserves, at more bates the government decid- Moscow], which has no min-
cials who link the country’s German Gref, Russia’s eco- developing and growing than $430bn, are now the ed to abolish all bans and erals, but many old factories
economic achievements nomic development and thanks only to high world oil third largest in the world. curbs. that used to work for the So-
with investment. trade minister, had not and gas prices. This is These could allow the state Today, capital is free to come viet-era defence industry. In
According to another myth, worked business and his misleading. Of course Russia to finance all its necessary and go. The fears of those the 1990s, many of these
Russia is an investment university professor’s man- is currently reaping great expenses for a three-year went to the wall. Penza, too,
minefield, and those who ner seemed to doom him. dividends from high oil period even if crude prices held an investment forum.
come here are opportunists Two things saved him. First, prices. dropped to one-third of their ‘The government To my surprise, the region,
hoping to make high profits he did not do business in the But two-thirds of economic present value.
abolished all bans
which has a population of
overnight. murky 1990s, and was thus growth stems from an Investors coming to Russia just a million and a half, was
“What can attract investors blissfully ignorant of how upsurge in internal demand, should therefore feel abso-
and curbs. Today
able to conclude investment Russia’s economic strengths
to a country without free- business was done in Russia. fuelled by the increasing lutely confident, and not
capital is free to
contracts worth more than
dom of speech, with an im- Second, he knew very well incomes of the population. fear another default of the come and go’ $2bn, including a large ce-
poverished population, and how it should be done. kind that hit the country in ment works, an oil refinery,
instability on its southern He left his post last Septem- the late 1990s. and a great number of green-
borders?” ask those who ber, but not before he re-
ALEXANDER ZHUKOV
But we no longer regard for- who warned that capital houses to grow roses. In fact,
support that myth. But vised legislation, abolished FOR RBTH eign capital as purely a fi- would flee once the doors roses are already being
China is a highly attractive local regulations that dif- nancial resource. Russia has were flung open have not grown in that far from mild
investment destination for fered from region to region, These economic forces are a great deal of money as it is. been realised. In fact, the op- climate.
many countries, yet it has all and established common rising much faster than our Rather, we view foreign cap- posite proved to be the case: Another interesting fact is
of these problems and more. standards understandable economy in general. In the ital as a supplier of high capital began flowing in. that whenever foreign busi-
But nobody will tell you that to everyone. He introduced first nine months of this year technologies and, above all, Current efforts are focused nessmen are asked if they Assessment of Russia’s return on investment, as compared
investing in it is rash or un- a one-stop system for sub- wages in Russia rose almost up-to-date equipment. Im- on maximising protection of like the investment climate with emerging markets
wise. mitting documents. 14pc in real terms. ports rose by about 30pc in private property in Russia. in Russia, those who work in
So why has Russia become He encountered many diffi- Most pleasing of all, the cur- the past year, and almost Work is underway to refor- the country answer “yes”
attractive to investors? culties, notably the arrest, rent year is seeing an un- half of these were of ma- mulate corporate legisla- twice as often as those who
The Soviet Union also need- trial and imprisonment of precedented inflow of capi- chines and equipment. What tion, which is weak. But in do not. Improving Russia’s
ed investments, but could Mikhail Khodorkovsky, and tal into Russia. It began last this means is that industry is the next few years Russia investment image in the
not attract them on clear-cut the dismemberment of his year when $40bn was in- rapidly re-equipping itself. will protect investors’ rights world is a serious problem,
market terms for ideological once powerful oil company, vested in the Russian econ- Within the reasonably fore- and private ownership rights and one that we must solve.
reasons. It understood in- Yukos. It made the world omy. This year, in the first seeable future, or in 10 or 15 and have in place all the nec- To make judgments about
vestments only as loans, and question whether private six months alone, the figure years’ time, Russia will join essary corporate procedures business opportunities in
so borrowed astronomical property was really un- exceeded $60bn. the world’s top five most de- to contribute to that. Russia from newspaper re-
sums. touchable in Russia. But this To be sure, the reverbera- veloped nations. This is the There are many attractive ports and television stories
At the same time, it also and other obstacles proved tions of the financial crisis in is to be misled. It is necessary
acted as an investor, but not to be weaker than the sys- the United States and the to see everything with one’s
in the market meaning of the tem he created. Money rest of the world has caused
word. It made “gifts” of flowed into Russia, which some turbulence. But it is Facts and fi gures
own eyes, to network with
your Russian opposite num-
money to countries and re- also spent money abroad. not too great a cause of con- bers and try to start your Assessment of investment risks in Russia, as compared with
gimes that supported Soviet This time the money did not cern – in the past two months Foreign direct investment in rouble and dollar equivalent in own business. emerging markets
policy. But presents are for disappear into offshore ac- outflow of capital from Rus- the Russian economy is ex- 2007-2010. The Russian government,
keeps, and the one making counts, but was spent on sia amounted to no more pected to reach $40-$50bn in local authorities and public
them must not expect eter- high-tech equipment and than $10bn. 2007, although some experts The Russian Finance Ministry organisations will, in turn,
nal love in return. As a re- facilities.
-
Indeed, broadly speaking, think it could soar to a record expects GDP to go up by 7.3pc do everything in their power
we may say that Russia has high of $70bn. Last year FDI this year, with reported growth to ease the process of initia-
avoided the kind of financial totalled $31bn, or 3pc of GDP. 7.7pc January to August. tion.
crisis that affected many International exhibitions,
countries this summer. Investment in fixed assets went The ministry also forecast a conferences and business fo-
FIAC: an accurate
Perhaps it is not accidental up by 21.2pc in the first nine 14-15pc growth in consumer rums, where information is
that we have been able to months of the year (13.7pc demand and reported an an- exchanged directly and free-
achieve a high margin of last year). The Finance Minis- nual increase of 10pc in take- ly, are of immense impor-
guide to Russia
safety in the economy. To try forecast a 150pc increase home incomes over the past tance. There should be more
begin with, we have paid in investment in fixed assets in several years. of them, and they should be
back practically all of our held more often.
-
SOURCE: PETER D. HART RESEARCH ASSOCIATES
For the last two years major scores why there is high con-
international investors that fidence among these compa-
work in the Foreign Investors nies for Russia’s ability to be-
Advisory Council (FIAC) come one of the premier
have been seeking ways to countries in the Internation-
help open up the country to al market,” said Neville Is-
an adequate level of foreign dell, chairman and CEO of
investment, thus help diver- The Coca-Cola Company
sify the economy. and chairman of US-Russia
This attempt resulted in a Business Council at its 15th
survey, “Russia’s Image annual board of directors
among Foreign Investors”, meeting in Moscow last
by Peter D. Hart Research & month.
Associates and CESSI re- “However, as a successful
leased in 2007 at the St Pe- business operating in the
tersburg Economic Forum. Russian market we see our
“The experiences of current role in telling the true story
investors is very positive and about Russia to the rest of the
their outlook for expansion world, as FIAC research
is robust. The positive feel- shows a significant gap be-
ings are buttressed by the tween the image of Russia
sense of a strong return on in- abroad and its positive eco-
vestment, a growing afflu- nomic climate.”
-
ence of the Russian consum-
er market, and a desirable Key findings from the survey
and well-educated work- “Russia’s Image among for-
force. The combination of eign investors” are available at
these three elements under- www.rbth.rg.ru
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