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Forum in Sochi confirms investment attractiveness of Russian economy for foreign capital

23:46 | 07.03.2017 | Analytic

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7 March 2017. PenzaNews. The Russian Investment Forum (RIF), which ended last week in Sochi, once again confirmed the attractiveness of the country’s economy and its regions for foreign capital. This is the general opinion of representatives of business circles, politicians and observers who analyze the results of the two-day large-scale event and the agreements signed in its framework.

Forum in Sochi confirms investment attractiveness of Russian economy for foreign capital

Photo: Donat Sorokin, TASS

For the first time the forum gathered representatives of all subjects of the Russian Federation. The total number of participants increased by 8% compared to 2016. According to organizers, about 600 companies took part in it, including 80 from abroad.

“Many feared that the forum after changing the name and timing, will lose its importance and its functionality. However, in fact, we saw something quite different: for the first time all the subjects of the Russian Federation were represented in the forum, almost all the governors came together, many of them for the first time learned about each other’s potential. The event became a truly Russian investment forum,” said the governor of Krasnodar Krai Veniamin Kondratyev.

Commenting on the main results of the forum, President of the Russian Investment Agency Yuri Spiridonov noted the high productivity of the RIF.

“Despite the fact that only six months have passed since the previous Sochi forum, preliminary volume of agreements signed within its framework has reached 200 billion rubles [3.46 US Dollars at the current exchange rates], excluding trade secret information. The event became a milestone, but not only because its status was reformatted and the timing of the event was changed. This forum has become the main winter investment forum in the country. For the first time, the head of the government [Dmitry Medvedev] fully articulated there the main theses-conclusions on the development of Russia’s mobilization economy over the past three years, and medium-term plans for economic development under the current conditions,” he told PenzaNews.

In his opinion, the forum can become a starting point for a detailed discussion of specific activities aimed at increasing the growth rate of Russian economy.

“Undoubtedly, the country has learned to cope with recent challenges: instability of commodity markets, structural imbalances in the economy, sanctions of the West. But the key task, according to Dmitry Medvedev, is the development of an action system that will ensure high growth rates of the economy in the coming years. The Government’s Comprehensive Action Plan for the period from 2017 to 2025 will be aimed at this strategic goal. And it is the speech of the head of government at the forum that is meant to give rise to a broader discussion of the proposals that are contained in the draft,” President of the Russian Investment Agency said.

According to him, almost all forum participants agreed with the opinion that the Russian economy lacks private investment.

“Today the state often takes upon itself the functions of an investor, but it is not able to cover all needs. Therefore, the growth rate of private investment will become an indicator of the effectiveness of Russian subjects’ administrations,” Yuri Spiridonov said.

Meanwhile, in his opinion, enterprises and potential investors often lack incentives to invest their money in the economy development.

“The government hopes that such incentives will emerge with the implementation of a new economic growth plan until 2025, which is now being developed jointly with experts and business associations. That is, in fact, the head of government announced a new stage in the dialogue between business and government, which will result in such an important factor as the growth of mutual trust. And this is also one of the main messages of the Sochi forum, which inspires optimism,” he added.

In turn, Amitendu Palit, Economist, the Institute of South Asian Studies in the National University of Singapore, stressed that the RIF is important for spreading awareness among foreign investors about Russia and its potential as an investment destination.

“Russia is a very important country in the current global order. Most countries in the world today, including large economies like China and India, are interested in maintaining good relations with Russia. They also look forward to Russia as an important source of investments. The role of the Russian government is important in giving a signal to the rest of the world about Russia’s importance as an investment destination,” the analyst said.

According to him, events like the Russian Investment Forum should be held more regularly.

“The political impact of events like the Russian Investment Forum is to spread awareness about Russia's intentions to integrate closer with the global economy and being open for investment. China has done so successfully through many forums despite being painted a negative image by the Western media on many occasions. It is also important for Russia to do such events in other countries,” Amitendu Palit said.

At the same time, Hironori Fushita, Research Fellow at Japan Institute of International Relations, pointed to the growing economic cooperation between Japan and Russia.

“For Tokyo, economic cooperation with Moscow is literally vital. Today, Japan imports about 8% of oil from Russia and 10% of gas from total demand. And if earlier the Japanese invested mainly in the raw materials and extraction industry, now the contracts are concluded in other areas of the economy, including in manufacturing, agriculture and medicine,” the expert said.

He stressed that the Japanese are counting on further support of the Russian government and the implementation of all plans concerning Far East infrastructure development.

“New mechanisms such as the Free Port of Vladivostok (FPV) and Advanced Special Economic Zones (ASEZ) have been already introduced to the region and promote investments. With the status of special economic zone resident, many Japanese successfully do business and have a good result. [...] The active work of the Russian government to improve the business environment will become a reliable support for entrepreneurs wishing to find their niches in the Russian market,” Hironori Fushita said.

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According to him, participation in the forum helps potential investors learn about the ongoing reforms in the country and intensify economic cooperation.

“In the 1990s, due to economic instability, many Japanese companies left Russia. Instead of the Japanese, Koreans and Chinese found their niches in the market. Now it is important for Tokyo to demonstrate to Russian colleagues their unique technologies. This year, Japan will become a partner of the international industrial exhibition Innoprom [in Yekaterinburg], and this is also a very important event, during which we will have the opportunity to demonstrate our proposals,” the expert added.

In his view, the format of the Russian Investment Forum, as well as the Eastern Economic Forum (WEF) in Vladivostok, is the most effective for an open dialogue that allows the government to build further “rules of the game” taking into account the wishes of investors.

Meanwhile, Fernand Kartheiser, Luxembourg Parliament member for the Alternative Democratic Reform Party (ADR), stressed that Western countries also have a long-term and strategic interest in bilateral cooperation with Moscow.

“Both Russia and the West have a long term and strategic interest to cooperate rather than to rival each other. Any international forum that brings together leaders of foreign countries with Russia can contribute to an overall improvement of the situation,” the politician said.

He highly appreciated the importance of the RIF for establishing interstate cooperation, pointing out, at the same time, the need for more active political steps to deepen interaction.

“Economic fora can no doubt be useful but nothing would be as important as a lifting of the sanctions and a rebuilding of the economic ties between Russia and the West. The key would of course be an improvement in the relations between the US and Russia. As a Western European, I can only invite Presidents Trump and Putin to try to reach out to each other and overcome the divisions of the past,” Fernand Kartheiser said.

According to him, foreign economies can very much benefit from cooperation with Russia.

“Due to a number of factors, Russia is one of the leading technological and scientific powers in the world. In addition it has enormous natural resources and above all an excellent human potential. Russian universities gain in international reputation. It is however also important that the Russian legal system gives all necessary guarantees to foreign investors and that Russia continues its struggle against corruption,” the politician said.

“Economic interdependence through trade and investment would contribute to an easing of the current tensions and an improvement in the general the political situation,” Fernand Kartheiser concluded.

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