The St. Petersburg International Economic Forum (SPIEF) took place on June 16-18, the highly touted “Russian Davos” showcasing prospects and investment deals. Participants at the forum included Russian companies Lukoil, VTB Bank, and Rostelecom, as well as international companies Bank of America, Hyundai, and BP. The three-day forum highlighted Russia’s international focus, ranging from proclamations of cooperation between Kazakhstan and Russia to support Belarus’ floundering economy, railway deals between Spain’s Talgo and Russian Railways, and the growing economic ties between Russia and China.
According to Minister of Economic Development Elvira Nabiullina, more than 50 agreements totaling more than 200 billion rubles ($7 billion) were signed at this year’s forum. Some of these deals included a $1.7 billion agreement between Russia and France for two Mistral-class helicopter carrier ships and Nordic telecoms firm Tele2’s announcement of an additional $300-500 million annual investment in the Russian market.
Despite it being the largest forum yet with a budget exceeding 2010’s event by 90 million rubles, Kommersant said the deals reached at SPIEF 2011 did not live up to expectations. Nabiullina hailed the $7 billion in deals as “successful,” but commentators pointed out that this amount is less than half the amount closed before 2008 at previous forums. Presidents Medvedev and Hu also failed to reach a landmark deal to supply East Siberian gas to China’s market.
President Medvedev did not put to rest speculations about his presidential ambitions for 2012, instead shifting focus away from his political intentions––(“When I believe the moment is right to say directly whether I will or will not run, I will do so, but this forum is not the best venue for that”)––toward attracting investors to the economy.
In his keynote address, Medvedev outlined a future of more modernization, liberalization, and privatization for the Russian economy. He lauded the progress Russia has made since the fall of the Soviet Union, weathering hyperinflation and accumulating $300 billion in foreign investment. He reminded the audience of investors that Russia has “one of the lowest corporate tax rates” and zero capital gains taxes. Despite all of these improvements, he said, the path has not been without its problems: “My choice is a policy to ensure maximum opportunities for economic activity of millions of citizens – citizens who are protected by law and all the power of the government.”
Medvedev imagined an economy growing faster aided by an end to what he called “manual control” of large corporations and one dominated by entrepreneurship in which the government’s role is to protect the private property and choices of its citizens. The speech emphasized privatization, consistent with Medvedev’s recent actions to start selling shares of state-owned companies and removing government officials from top posts.
Consistent with his emphasis on technological modernization through projects like Skolkovo, Medvedev also urged Russia to decrease its dependency on natural resources by playing a role to lead internet developments. Nonetheless, oil and gas companies were on full display at SPIEF, with Gazprom CEO Alexei Miller commenting on the future of gas prices.
Every year, SPIEF highlights Russia’s capacity to attract the attention of foreign investors and seal big deals. However, this is a tough pitch, given the fact that $55.6 billion has left Russia in the past eight months. Already a report has emerged that Goldman Sachs has advised its clients to invest in Russia before the 2012 presidential election, perhaps calling into question Medvedev’s coy refusal to announce whether or not he intends to seek a second term.
While Medvedev’s plan to liberalize the Russian economy seems to be a step in the right direction (the head of financial corporation Otkritie called him “convincing“) Goldman Sach’s cautious recommendation for investors demonstrates a wider reality. The government’s reputation and possible political instability in the near future could undermine Russia’s desire to be a bigger player in the global market.
Possibly related posts:
- Eastern Promises
- Kazakhstan IPOs: PBN Outlook for 2011
- Medvedev and Nazarbaev Boost Cooperation
- The U.S. Factor in Russia’s Economic Development
- Dmitry in Davos
Belarus · China · foreign investment · Medvedev · oil & gas · SPIEF
