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Gref lists Russia’s economic gains, challenges

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German Gref speaking at the Russia country presentation.

Jean Lemierre, EBRD President.

The Russia country presentation attracted many hundreds of business people.

The Russian government sent an upbeat and reassuring message to the world's investors at a showcase presentation on the country's prospects held as part of the Business Forum staged to coincide with the EBRD's Annual General Meeting in Kazan.

"We invite all our partners to come to Russia, together with the EBRD… we are waiting for you," Trade and Economic Development Minister German Gref told a packed audience during a marathon Russian country presentation straight after the Business Forum opened on Sunday.

Hailing EBRD President Jean Lemierre as "our old partner and old friend", Mr Gref praised the Bank's management for increasing its business volume in Russia, as well as scoring record profits last year. The EBRD last year invested a record 1.9 billion Euros in Russia -- with 75 percent of the deals signed with purely Russian-owned companies.

The Russian country presentation is traditionally the Business Forum’s biggest crowd-puller and many hundreds of business people and other guests packed every available seat in the complex's largest auditorium to listen to Gref and nine other speakers list Russia's achievements, attractions and shortcomings during the two-and-a-half hour session.

Mr Gref, one of the leading reformers in the Russian government, stressed the importance of "not repeating the protectionist mistakes of the past" and not ignoring the macro-economic discipline whose absence led the Soviet Union to disaster. Turning to Russia's achievements, he said that after years of huge capital outflows, the trend was now reversed. "Now we want to export civilised Russian capital to our traditional markets," the minister said.

He listed Russia's single biggest achievement since the collapse of communism as establishing an economy based on demand and supply, but bluntly admitted that the effectiveness of government bodies was "not something we can boast of at the moment". Answering a question, Mr Gref also said the authorities had failed to create an effective system of state management, repeating his oft-stated view that the state sector in the economy must shrink.

With equal candour, he spoke about a "fairly developed system of self-perpetuating bureaucracy" and said what Russia needed was fewer and more effective civil servants.

Oleg Deripaska, head of the Russian aluminium giant Rusal, highlighted the country's huge infrastructure needs, aggravated by the economic boom that has left no spare capacity in the supply of power and gas for new industrial projects. Mr. Gref singled out the modernisation of the airport in the southern city of Sochi by Mr. Deripaska as the best example of a public-private partnership in Russia.

Listing other shortcomings, Mr. Deriapska also complained that "there are also still long-term funding problems with the Russian banking sector". 

Earlier, the EBRD President hinted at a similar problem when he vowed to continue providing support to Russian banks in order to achieve the goal of a resurgent Russian businesses being financed "by a healthy banking sector". His message was taken up by Alain Pilloux, EBRD Business Group director for Russia, who said the EBRD was ready to inject capital into good regional Russian banks, as well as assist with mergers and initial public offerings (IPOs).

In fact much of the presentation was dedicated to the banking sector. Alexander Popov, head of Rosbank, said his bank as an EBRD client had benefited not just from financing, but like all other banks working with the EBRD, from help in raising standards of corporate governance and transparency. France's Societe Generale group last year acquired a minority stake in the privately-owned Rosbank.

In a presentation entitled A key instrument of state investment policy, Vneshekombank Chairman Vladimir Dmitriev outlined the ambitions of the new Development Bank which Russia is to launch later this year. Like Mr. Gref, he vowed it would not compete with the private sector, but said that projects with low financial returns required cheap government funding.

By Richard Wallis, Senior Communications Adviser
20 May 2007