New Views on Investments in Russia

THIS POST WAS ORIGINALLY PUBLISHED JUNE 13, 2007

New Views on Investments in Russia

News media vividly discusses the results of the St.Petersburg Economic Forum. Regarding the hottest issue in discussions – the Russian state capitalism – First Deputy Prime Minister Sergei Ivanov reiterated President’s Putin statement to the newsmen at the G8 summit (“...in cases where we are establishing large state corporations, such as in the shipbuilding and aircraft manufacturing sectors, we are not nationalizing previously privatized enterprises but are simply bringing scattered state-owned assets under one roof, uniting them as a single corporation…We have no intention of trying to increase the number of state assets from beyond their present size. As I already said, in the case of the aircraft manufacturing and shipbuilding sectors, we are streamlining state assets and making them more viable, efficient and competitive, and we do not rule out the sale of stakes in these corporations in the future, IPO operations, but these future plans will then involve viable and competitive companies of European level and significance. We do not want to lose these sectors; we want to develop them and we want to do so with the help of private capital too.”). Mr. Ivanov stated that while creating big holdings the government intends to buy out their stock at the market price with possible future IPOs. Regarding foreign investments Sergey Ivanov suggested a new idea: “your technologies in return for our market”.

There are some new announcements that show the desire of Western financial community to work in Russia:
- Goldman Sachs Group Inc. plans to expand its Moscow office to 100 employees by adding 25 more bankers
- Deutsche Bank AG, (already about 800 employees in Moscow) plans to add consumer lending to its operations in Russia to benefit from demand for loans and financial services

- Barclays Capital Plc is likely to open a Moscow office this year

VEDOMOSTI DAILY published today the results of the poll that was conducted by the Foreign Investment Advisory Council (FIAC) “Image of Russia in the View of Foreign Investors” . One of the key results is that those who are already working in Russia have a better attitude to the country as opposed to those who are only mulling to do so. That completely supports the idea of my yesterday’s post. The Russia-based investors: 47% of polled think that Russian is moving in the right direction, while 25% consider it wrong. Potential investors – 26% and 33% respectively. Over 50% of working in Russia consider investment in the country more profitable as compared to other emerging markets. Potential investors are different – only 18% think so. 39% of working in Russia think that country risks in Russia are higher; with 59% potential investors consider Russian risks bigger than in other emerging markets. As the result of the survey FIAC suggests that investors and government officials should inform their peers of advantages of doing business in Russia.

A commentary was published today by the Australian expert Chris Mayer “Russian Stock Market on Fire, No Longer as Dependent on United States” that analyzes the market in Russia. It end with “investors should not discount the importance of the Russian market and other overseas stock markets. Increasingly, investors will want to pay attention to what happens in Moscow or Dubai or other once-backwater investment arenas.”