Russia became one of the biggest newsmakers on the local and international business arenas in April where it was toasted at economic forums and trade fairs in such geographically and economically diverse cities as Krasnoyarsk in Siberia, London in England and Hanover in Germany.
Putin at the Hanover trade fair
The weeklong repackaging of Russia to the international business community started at the Second Krasnoyarsk Regional Forum on April 7 and climaxed at the opening of the Hanover Trade Fair-2005 on April 11 where Russia was the “Guest Country” — a special honor bequeathed to a particular country each year by the fair organizers. This status also requires the leader of the guest country to address the fair delegates at the opening ceremony along with German officials.
President Vladimir Putin used the golden opportunity to portray the new, democratic Russia and its achievements in the past decade to the fullest, calling the fair organizers’ gesture “another recognition of the weight of Russia’s intellectual and technological potential in Europe.” Expressing his profound gratitude to German officials for giving Russia such a highly esteemed honor, Putin noted that “the special status logically flows from the good spirit of German-Russian strategic partnership and cooperation.” He also noted that the large-scale nature of the economical transformations taking place in Russia has created a lot of opportunities for bold business activities and realization of strategic projects. Continuing the roaster of his economic plans, Putin said the private sector of the Russian economy will continue to grow as the government plans to offload its stakes in over 3,500 joint-stock companies and about 8,000 state companies, whilst the on-going reforms of the nation’s monetary system will climax in the full liberalization of the ruble by 2007.
Putin highlighted the fantastic rates of economic growth for the past five consecutive years, with key areas of his administration’s focus being sustaining macroeconomic stability, boosting the level of competitiveness of Russian goods and services and executing responsible social policies. “These programs have elevated Russia to the tier of global economic powerhouses. Our GDP grew by 7.1 percent in 2004, real disposable income surged by 8 percent, while the level of investment activity jumped by 10 percent,” Putin said. “We understand very well that the perspective of future growth and diversification of our economy directly depends on the degree of economic freedom in the country, the ability of the government to provide and guarantee favorable, transparent and predictable conditions for business.”
Other issues of interest at the Hanover trade affairs included Putin’s unfolding plan to repay nearly $20 billion of Soviet-era debts to Germany and about $23 billion more to the Parish Club earlier than scheduled timetables, to cut down the huge interest rates on them. Gazprom secured a multimillion-euro contract, giving it a 49 percent stake in a German gas-distributing company, while Siemens signed a 1.5 billion-euro contract to supply Railways Corp. with modern, high-speed trains to ply the Moscow-St. Petersburg route between now and 2015.
At the Krasnoyarsk forum
The Second Krasnoyarsk Regional Forum was attended by top federal government ministers, regional political heavyweights, business moguls and investors from all over the world, who already have businesses in Siberia, or are planning to move parts of their operations over there soon.
The term ‘investment’ was the catch phrase at the forum, and its continuous usage in combination with opportunities and potential was so frequent that the forum host, Krasnoyarsk Gov. Alexander Khloponin, gave a unique definition to the term, while addressing the delegates. “Investment is capital, and good, long-term capital needs to be courted like a beautiful and desirable lady.” Regional Development Minister Vladimir Yakovlev called for revoking ‘unneeded sovereignty’ enjoyed by some of Russia’s autonomous local administrations and a significant reduction of the number of regions so as to accelerate the rate of economic growth in the country. “In this context, and acting through state joint-stock companies, the federal government can support the most vital and perspective investment projects in the regions,” he added.
Andrei Illarionov, the presidential adviser on economic issues, noted that the investment attractiveness of any economy depends on the degree of freedom enjoyed by entrepreneurship in such economy. “This results from the economy’s freedom from official lawlessness and criminal assaults on business, restricting monopolists’ scopes of activities, granting equal rights and opportunities to all market participants, putting huge restrictions on the scale of government’s interference and regulation of business processes in the country,” he said. “Any sector where the government unnecessarily interferes usually develops problems and lags behind in macroeconomic performance — a fact evident from the Yukos case.” Highlighting the disturbing scale of corruption that has already eaten deep into every facet of the Russian public and private business sectors, Illarionov noted with pity that this issue is bound to hunt Russia for a very long time. “Unfortunately, corruption has yet to disappear totally even in freer countries, and probably, humanity might not be able to root out this evil at all. However, the level of corruption is much lower in freer nations than in Russia.”
At the Russia’s London forum
At another business conference, this time in the British capital, about 2,000 investors from all over the world congregated at the Queen Elizabeth II Conference Center, the venue for the Eighth Russia Economic Forum-2005, which kicked off on April 11. The forum has long become a platform for tabling key Russia’s political, economic and social issues, and a place where Russian government officials and business moguls mingle freely with their Western colleagues. This has given the forum the cliche, “Russian Davos,” comparing the mainly Russian affairs to the World Economic Forum, which takes place every January in the Swiss resort city of Davos.
Most of the people that attended the Krasnoyarsk forum were also in London to continue the discussions on investment potential and other business possibilities available on the Russian market and on how to reduce the disturbingly high risks therein. Among those selected by the Kremlin to present Russia and highlight its achievements under Vladimir Putin’s presidency were the ubiquitous Illarionov, U.S.-educated Arkady Dvorkovich, head of the Presidential Expert Department, IT and Telecommunications Minister Leonid Reiman, St. Petersburg Gov. Valentina Matviyenko and UES CEO Anatoly Chubais. Non-Russian VIPs included London Mayor Ken Livingston, EU Trade Commissioner Peter Mandelson and top OPEC officials amongst others.
Dropping the critically caustic tone he had used in Krasnoyarsk, Illarionov praised the nation’s economic performance, noting that the current rates of per-capita growth in the country’s gross domestic product are capable of doubling the GDP within 10 years — the Herculean task placed before the Cabinet by the president. “For the past seven years of economic growth, per-capita GDP has grown from annual average of 7.2 percent to 52 percent. These rates would make it possible for the government to double the GDP within a decade,” he noted. “These high rates were made possible through breakthrough in several sectors of the economy, which have overcome the negative aftereffects of the 1990s crises to hit new output levels.”
Speaking on ways to boost investment inflow, Dvorkovich called for the adoption of an individual approach to each potential investor. “At the moment, this has not become an automatic process in the country.” Another measure calling for urgent action, according to Dvorkovich, is the necessity to ensure stability and predictability in government’s investment and macroeconomic policies as well as in the government’s actions in every sector. “Business needs to understand what the government is planning to do in taxation and customs policies so as to engage in long-term planning.”
Severstal Holding owner Alexei Mordashov noted both the government and businesspeople are responsible for the cooling of the investment climate in the country. “Our country is developing dynamically, though the business climate still remains highly problematic,” he added. “This state of affairs partly stems from certain government actions, and partly from market players themselves. Therefore both government and the business community should join hands to improve the business climate in the country.” State Duma Property Committee Chairman Viktor Pleskachevsky advocated for the creation of equal competitive conditions for private and government companies. “In other words, the government has to abandon its dominating positions in all economic spheres of activities in the country and/or engage other market participants on equal and competitive terms,” he noted. “For instance, the government owns 90 percent of land and about 40-50 percent of all assets. The presence and hegemony of such a ‘monster’ deforms the economic space for business ventures in the country.”