22 June 2004 05:39
Officials Offer Investors Rose-Colored Lenses
Incompetent public servants must be fired in the name of increasing investor confidence, the nation's top
economics official said Monday.
Speaking to a conference of foreign investors, the government's leading policymakers made a concerted effort to
soothe irritations over the Yukos affair with a balsam of positive macroeconomic projections and good intentions.
"There is just one way to stimulate [the state's] effectiveness -- transparency," Economic Development
and Trade Minister German Gref told the annual investor conference organized by Renaissance Capital. "Only after we
see a few loud public resignations stemming from ineptitude will we [be on the path of] such effectiveness."
Gref called the state the "weakest link" in the economy and urged it to invest only in infrastructure that
stimulates business.
Other officials promised fiscal responsibility, tax reduction and further liberalization of the economy.
Finance Minister Alexei Kudrin said the government's stabilization fund, designed to cushion Russia from a
future decline in oil prices, is growing faster than expected. The fund will reach 417 billion rubles ($14.4 billion) by
year's end, he said, and gain an additional 267 billion rubles in 2005.
Kudrin said consolidated budget spending -- including expenditures by regional governments -- would fall 1.5 percent
next year, signaling lower government participation in the economy.
"We must strictly control our spending," he said.
At the same time, Central Bank Deputy Chairman Alexei Ulyukayev insisted that the Central Bank would meet its dual
goals of limiting inflation to 10 percent and keeping a cap on ruble appreciation against the dollar. He predicted the
greenback would buy 29.50 to 30 rubles by year's end.
The authorities are also committed to reducing the value-added tax to 16 percent in 2006, said Deputy Finance
Minister Sergei Shatalov, Interfax reported.
Furthermore, he said, controversial VAT accounts will not freeze up companies' cash flow and will be implemented
in 2006 "at the earliest."
Oleg Vyugin, head of the financial market regulator, was the only government speaker to strike a sour note.
Although he hinted to reporters that Gazprom's "ring fence" limiting foreign investment may be removed
by the end of the year, Vyugin lamented the underdevelopment of Russian capital markets.
"Barring new IPOs, the golden age of the Russian stock market is at an end," he said, noting that 75
percent to 80 percent of Russian shares are now traded abroad, more than last year.
Despite economic growth, the markets raised "great expectations that Russia [has not been] able to
fulfill," Stephen Jennings, CEO of Renaissance, told the conference.
While stability under President Vladimir Putin has increased, Jennings said, "trust and respect for property
rights have obviously taken a step back under his term."
Paradoxically "the concentration of absolute power in the hands of Putin and his advisers is likely to slow down
the decision-making process," Jennings said.
Investor Ian Hague said he remained on his guard after hearing the officials speak.
"We've been investors in Russia long enough not to rely just on what people say," said Hague, whose
Firebird Management handles $600 million of investments in the former Soviet Union.
"The increased uncertainty about the rule of law and property rights issues has undermined the favorable
impression created by the solid macroeconomic performance."
Other investors were more forgiving.
"If property rights were not respected, we would not invest here," said Stanislav Fetolov, external
relations director at Baring Vostok Capital Partners, which manages $410 million of Russian assets.
"Yukos has frightened everyone, but I think in the short term, this affair will come to an end, and half a year
from now no one will remember it anymore."
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[The Moscow Times] |
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