The Russian government must take bolder steps towards fighting corruption and improving Russia’s image abroad if it wants to achieve its goal of establishing Moscow as an international financial center, analysts said on Wednesday.
The long-term goal to establish Moscow as an international financial center is one of the centerpieces of Russian President Dmitry Medvedev’s drive to modernize the Russian economy and wean it from its unhealthy dependence on oil and gas.
“Russia is still not very friendly to investors, neither domestic, nor foreign,” Rector of the New Economic School Sergei Guriev said during a panel session at the VTB Capital economic forum in London. “The President and Prime Minister have said that the investment climate will improve and corruption will decrease, but currently I do not think investors are convinced by such speeches, which is why capital is leaving Russia.”
Medvedev has made some promising steps toward establishing a financial center in the Russian capital, most recently assigning a 27-member advisory committee on the issue, which includes 19 foreigners.
In March, the government also created a $10 billion fund for joint investments with international private equity firms to attract investment from abroad.
Christopher Granville of research firm Trusted Sources said Russia had already taken positive steps toward fighting corruption, but their success has not necessarily been recognized by foreign investors.
“There is no single move which will boost Russia’s recognition for fighting corruption,” Granville said. “The WTO accession is a rare exception of something that will generate headlines in the fight against corruption. Everything else is slow, almost invisible.”
Russia hopes to join the World Trade Organization later this year after a nearly 17-year wait. It is the only major global economy outside of the organization. Analysts expect Russia’s entry to the organization to give the investment climate a significant boost, and forecast a GDP increase of around 3 percent in the short-term and 11 percent in the long-term.
Roland Nash, chief investment strategist at Moscow-based hedge fund Verno Capital, said the financial center was an important initiative since it justifies difficult political reforms such as tackling inflation and improving the pension system.
“There is a lot of work that needs to be done to create Moscow as an international financial center, there’s a lot of progress being made, there’s a long way to go,” Nash said. “But even if it never actually happens, I still think it’s a really important policy initiative for the government.”
LONDON, June 1 (RIA Novosti, Natasha Doff)