February 5, 2010
The global crisis is more than a thorough readjustment of the economic system – it also presents unique opportunities for development and growth. Throughout this challenging period, the world community should remember that an effective model can only be built collectively. This is especially true in Russia, which has much to offer in terms of resources and innovations. Discussions regarding the post-crisis world economic paradigm, new challenges and innovative ideas – all this and more filled the agenda during the first day of events at The Russia Forum 2010, organized by Troika Dialog.
“Hopefully this conference will help all of us – investors, corporations, and government officials – to improve dialogue and mutual understanding, foster a common vision, so as to move forward, avoiding serious mistakes, with the construction of a new and modern Russia together with the international investment community,” emphasized Troika Dialog Chairman and CEO Ruben Vardanian during the Forum’s opening. In his opinion, even though the most dire forecasts overheard during The Russia Forum 2009 never came to pass, the world problems proved both deeply rooted and immense. The main task now, however, is to understand how Russia and other countries can act in the current situation so as to avoid further global turbulence. What will happen with the dollar and euro? Is the impetuous growth in China actually a ‘soap bubble?’ Who will restore trust in the global financial system and how? The answers to these important questions and others were provided by Mr. Vardanian.
Minister of Finances of the Russian Federation Aleksei Kudrin exercised caution in his valuations and forecasts. He expects the world economy to grow during 2010 (the IMF has forecasted growth of 3.5-3.9%) as well as in Russia’s economy (3.6%), although another lag in temps during 2011 can’t be ruled out. Last year was quite difficult for Russia. According to initial calculations at Rosstat, Russia’s economy fell by 7.9% during 2009, while investment volumes fell by 17%. Leading up to the crisis, foreign direct investment into Russia amounted to $70 bln, but barely reached $30 bln last year.
However, Aleksei Kudrin is certain that the pre-crisis levels can be reached within the next 2-3 years. Positive developments will occur in other areas as well: the Minister of Finances expects a stronger ruble exchange rate under a positive payments balance, an increase in the share of innovations products (currently 10-15%), and improved efficiency within innovation centers. All of this, together with a decreased burden on business, should bring about improvements in the investment climate. “We will only welcome foreign investments, especially those bringing in new technologies. We don’t have any other way,” Mr. Kudrin stated.
Participants in the panel discussion titled “Global Economy: Changing Growth Paradigm” all agreed that the world economy has already started gradual recovery, although changes in the economic model ought to include fundamental reforms. Furthermore, while the emerging market countries – China, India and Brazil – are recording economic growth, turning into a world locomotive, developed countries like the U.S. are analyzing possible risks. According to Edmund Phelps, recipient of the Nobel Prize in Economics, the key risks for the world economy remain the accumulation of domestic and outside debts, rising unemployment, falling investment activity, as well as lower business investment volumes.
In such conditions, the priority for government, business and the investment community should be innovations. The panel discussion titled “Global Companies: New Challenges and Possible Innovations” focused on just this topic. According to CEO of Russian Corporation of Nanotechnologies Anatoly Chubais, the main idea behind the innovations economy is to turn knowledge into money. Moreover, Russia holds a significant advantage – namely its resources and intellectual capital. President of Sberbank German Gref argued that the most promising sector in Russia’s economy is its small and medium business.
Business community representatives participated actively in the thematic panel discussions on Russia’s debt market, consumer sector and venture projects, confirming a common theme overheard throughout the day: markets are gradually recovering and investments in Russia are possible and needed, though it is important to focus on the long-term values rather than short-term profits. “The crisis is a time of change. The question is, once it’s over will we be able to cross the river and avoid being stuck on the wrong side,” remarked Rostislav Ordovsky-Tanaevsky Blanco, President of Rostik Group Corporation. Venture investors are convinced that Russia is one of the best markets for investments into promising projects. However, there are also problems in this regard: should the government be a venture investor and how soon will young and talented managers appear in Russia? These questions have yet to receive an answer.
Does Russia have enough cheap liquidity? This was the question posed to participants in the panel discussion on Russia’s debt market. “It would be nice to believe that the Central Bank will act as a thorough regulator of credit policy. After all, excessive and insufficient liquidity both pose problems,” said Elena Umnova, Deputy General Director at Svyazinvest. Deputy Minister of Finances Dimitry Pankin pledged to “sell Russian markets to investors in the best manner possible” and to address the main task of “entering the outside market.” “All of the Central Bank’s steps will be cautious,” assured Sergei Shvetsov, Board of Directors’ Member of the Central Bank of Russia.