Kommersant: "Vechny Zov"
Russian Prime Minister Vladimir Putin's new economic programme will remain oriented toward Western investment. He made this clear at the Russia Calling investment forum in early October, in his first major public speech since declaring his intention to run for a third presidential term.
The prime minister said the government was sticking to its 2005-2009 course, based on the idea of attracting heavy foreign investment, and that it continued to see the removal of administrative barriers as a macro-regulator of economic and political risk.
Unlike his other recent speeches, Putin's speech at the October 6 forum, sponsored by VTB Capital, was conceived as the event's centerpiece. Since making his big announcement of the year in September, Putin had not appeared at any important news conferences and had made no major economic statements, so the gathering expected something important.
Among other things, he was expected to shed some light on a possible modification of the government's economic progamme relative to the current EU debt crisis, which has had a much stronger adverse effect on the Russian economy than the country's authorities initially estimated. The same issues also required an answer regarding incumbent President Dmitry Medvedev's decision not to run for reelection and Putin's new presidential ambitions.
Some analysts see a link, even if indirect, between these two circumstances. One popular theory behind the announced job swap between Putin and Medvedev attributes it to the risk of high social tension over the possibility of GDP stagnation as well as to the authorities' failure to sustain the growth of the population's real income after 2010.
The investment community also wanted to know Putin's take on the resignation of Alexei Kudrin, the former deputy prime minister and minister of finance, who had been instrumental in boosting the country's economic growth rate in 2001-2008. Or rather, they wondered whether Putin, as the most likely new president, believed that Kudrin's resignation would entail modifications in the government's financial course. In other words, he was expected to reveal what he reads into that "stability" motto, unchanged since 2005-2006, and how this notion might be transformed in the years ahead.
Putin began his speech by voicing one of his concerns. TPG Capital CEO David Bonderman, who had spoken at the forum before the Russian prime minister, said the Chinese economy may soon overshadow the US economy.
"Should we then hold our gold and currency reserves in yuans while the Chinese still have theirs denominated in dollars? This would be a strange situation. And a complicated one," Putin said, apparently to himself rather than to the audience.
By and large, Putin managed to meet his audience's expectations with surprising precision, giving articulate replies to most of the questions put to him.
First, his speech confirmed that Russia's government sees the European debt crisis as a major threat to the national economy for the years to come. This is despite the fact that the government, just like most analysts, believes that Russia's private sector and the economy at large are dealing with the crisis aftermath more effectively than expected. Against the backdrop of such cautious optimism, the premier dismissed as unlikely the possibility of Russia facing a "full-scale second wave" of the crisis.
"At this point, the global economy is emerging from the crisis. It will certainly pick up. Not overnight, though," he said, apparently referring to Russia's own potential.
"We don't think a second wave is likely, and are calling on people to not overdramatise," he said. This statement must have been primarily intended for the Western investors in attendance, who, on the forum's sidelines, would have actively discussed the worsening situation in Europe.
The forum brought together some 300 representatives of large Russian companies and more than 500 investors from Russia, Europe, the United States, Asia, and countries of the Middle East and Africa. Over 2,000 people attended, overall.
Putin regards this country's domestic and foreign debt as a key macroeconomic challenge. And he believes that the unusually low debt of both the public and the private sectors should be viewed as an objective advantage of the Russian investment climate over other target countries.
A couple of weeks earlier, Economics Minister Elvira Nabiullina put forward the same argument, albeit with regard to household domestic debt, and she assessed the banking sector's growth potential as high. Since 2009 the private sector's borrowing, whose dynamics is seen by Putin's Cabinet as crucial, has been the principal source for maintaining domestic demand (state expenditures have a lesser impact). As for loans to the private sector, the Russian government still relies on foreign investment.
Putin pointed out that despite the suspension of investment as a result of the global economy's post-crisis fear of risk, the Russian government's macroeconomic strategy will continue, this year and beyond, that is, to draw from the inflow of foreign capital.
He probably meant that the removal of bureaucratic snags in the way of foreign investment in Russia should be a basic tool of macroeconomic regulation. Paradoxically, he did not say a word about the attitude toward Russian businesses.
The state has gone corporate, whether we like it or not. This is why referring to some high-tech sectors, the prime minister said: "We intend to implement ambitious projects in bio and nanotechnology, communications, energy saving technology, and the space industry, creating a network of powerful high-tech companies."
He reiterated the government's adherence to a policy of privatising state assets. "The motive behind our establishment of state corporations was to concentrate resources in some strategic sectors, sectors where this concentration would hardly have been possible without support and direct involvement on the part of the state, in sectors dominated by transnational giants on the world markets. If the state had not become involved in shipbuilding, aircraft and rocket building, there would have been no chance for those industries to stay afloat."
The government has its logic. On the one hand, Russian business and foreign business are formally separated. Russian authorities regard the presence of its own capital in certain sectors of the global economy as a matter of national interest, and in this sense the situation differs from that in most EU countries (except for northern Europe) and is much closer to the stance of Latin American nations.
On the other hand, the Russian authorities tend to believe that their own interests and the interests of this country's business community are inherently forged. This is why Putin had to say very little, if anything, about tax issues, something seen as divisive in most countries.
Putin deleted his traditional "high-tech breakthrough" rhetoric from his "investment declaration." He supported the "conservatism" of incumbent president Medvedev (this latter's modernisation bid defined his policies in 2008-2011 and earned him support among the business community and the general public), reaffirming the course against state capitalism.
"Let me stress once again: our strategy consists of incremental deregulation, so we will be gradually selling off our stakes in state-run corporations... introducing independent professionals in their boards of directors," he said. This remark, too, seems to have been intended primarily for the forum's Western attendees.
After repeating the official explanation of Kudrin's resignation, he said that the government would nonetheless stick to the former finance minister's course, which prioritises macroeconomic stability over economic growth.
In his speech, Putin cited some of Kudrin's quotes and he meaningfully developed what is seen as Kudrin's major principle, saying that the state is not going to increase the domestic debt beyond the limit set in the 2012-2014 draft budget, prepared by the Finance Ministry while it was still headed by Kudrin. Building up state debt to finance ambitious infrastructural and high-tech projects could be seen as a basic risk in the event of a job swap between the country's two most senior officials, so Putin made it clear that he would try his hardest to avoid that scenario.
Medvedev, who could have offered similar guarantees to the investors, was conspicuously absent from the rostrum that day.
Dmitry Butrin, Irina Parfentyeva
