Putin pitches to investors
Prime Minister Vladimir Putin’s pitch to investors at the VTB Capital “Russia Calling!” investment forum Thursday sounded more like the kind of rhetoric the country is used to hearing from President Dmitry Medvedev.
In a half-hour speech and rare question-and-answer session with foreign investors, Putin gave his best shot at persuading a fairly skeptical audience of some 500 business leaders what they probably wanted to hear – that Russia is following a path of modernization, privatization and diversification away from oil and gas.
“Our strategic line is that the state should gradually reduce its direct presence in the economy… privatize state-owned shares and introduced independent professionals to the boards of directors of state-owned companies,” Putin said.
Putin has traditionally taken a more cautious line on economic reform, while leaving investor-at-tracting rhetoric about modernization to Medvedev. This has caused analysts to predict an outflow of investment from the country when Putin returns to the presidency in March. However, this did not seem to be a worry facing many of the foreign investors at the event, who were cautiously optimistic about the country’s future.
I think Putin’s return is a good thing – stability is good for Russian politics and the Russian economy,” said Tarek Fawaz, managing partner at Swiss-based Rayan Capital Advisors. “If you look at how the market was behaving before the announcement, there was a flight of capital due to uncertainty of what was coming next. In the short-term at least, it is a positive development.”
Nevertheless, others cited the usual stumbling blocks still standing in the way of the country having an attractive investment climate, and Putin’s roundabout answers to the questions put to him about corruption and the fact that most Russians want to leave the country, will likely have done little to allays these fears.
Russia’s capital outflows reached an estimated $18.7 billion in the third quarter, bringing this year’s total to $49.3 billion, the Central Bank said in a statement Tuesday. Although part of this figure can be put down to investor uncertainty over who would run in the March elections, there are other factors at play.
“The current investment climate is better than it was but there is still a crying need for transparency in the courts, in the government and in the bureaucratic divisions. This process has been started, but it is only a start,” Clive Bode, a partner at the global private equity firm TPG Capital, told The Moscow News on the sidelines of Thursday’s event.
And the recent departure of Russia’s long-serving finance minister, Alexei Kudrin, may not help to calm investors’ nerves.
Kudrin, who still holds the role of chairman of the National Banking Council, was notable for his absence at the VTB event, after he was apparently struck off the program at the last minute.
Investors may have also picked up on the abundance of words such as “stability” and “continuity” in Putin’s speech, suggesting that the rhetoric about modernization may yield as little result as that spurted by Medvedev over the past 3 1/2 years.
Both Putin and Economic Development Minister Elvira Nabiullina stressed the importance of the country’s privatization drive, a process which began earlier this year with the successful sale of a 10 percent stake in VTB. However, subsequent sell-offs have been repeatedly delayed due to a weakening ruble. Skeptics fear the much-needed process may have grounded to a halt.
Current concerns focus on the looming financial crisis. Russia’s dependence on oil and gas exports make the country particularly vulnerable to global instability. The Micex stock index has tumbled more than 25 percent since the start of August on snowballing concerns surrounding the European debt crisis and a potential economic slowdown in the United States and Europe.
Although Putin and other panel speakers attempted to brush off fears of the effects of the turbulence on the Russian economy, investors have already shown that they are worried by selling Russian stocks at a faster pace than any other emerging markets in recent months.