Medvedev appoints envoys to promote regional investments

President Dmitry Medvedev appointed his own envoys to promote investments in Russian regions and help domestic and foreign businessmen overcome administrative hurdles. The Kremlin hopes the “investment ombudsmen” will help change the deteriorating situation with capital exodus from the country and encourage investors to promote regional development.
Market experts doubt whether the new institution would be efficient.

The investment ombudsmen are deputies of the presidential envoys to eight Russian federal districts. The president wants them to reconcile private enterprise and executive authorities who are often at odds and speak different languages.

A similar investment protection institution has been operating within the Russian government for a year. The Economic Development Ministry has the investment policy department which gathers all complaints from entrepreneurs related to excessive administrative barriers. First Deputy Prime Minister Igor Shuvalov supervises the work.

Medvedev believes investors encounter most administrative barriers at the regional level and there are few provinces that encourage investments. “There are regions where it takes an investor three months to get all the necessary permissions. Happy investors live there. The task of the investment envoys is to make such deadlines a norm,” the president said adding even in Moscow the obtaining of all permissions can take up to two years.

 The investment ombudsmen are vested with wide powers and can contact regional governments and mayors to resolve systemic problems on site. If a problem demands federal government interference, the president will personally point at exposed flaws.

Medvedev warned his envoys they should in no way impose their services on investors. “If an investor does not want your assistance you should not insist and tell him you would help anyway,” he said.

Suvalov said investment ombudsmen agencies had been already created in regions. He said most complicated problems would be referred to him personally while easy issues will be decided with the Economic Development ministry and on-site. The ombudsmen will not interfere in cases demanding judicial proceedings or already considered by courts.

“A system has been created that will resolve all problems faced by Russian and foreign investors,” Shuvalov said. He recalled the government has been considering foreign investors’ complains since 2010. Fifty-two out of 76 complaints have been satisfied.

A Kremlin official quoted by Vedomosti daily explained Shuvalov is in charge only of foreign investors, while the new ombudsmen will assist also domestic ones.

Experts did not express much enthusiasm over the new institution. “Provided systemic work investment climate improvements can be visible in a region only in three-five years,” Dmitry Trofimov from MEF-Audit told RBC daily.

Alexey Pukhayev from Investcafe said “it is difficult to assess the efficiency of investment ombudsmen in the regions as they are practically the only mechanism of state participation in attracting investments. In all the rest state agencies act as a scarecrow for investments.” If the new institution begins to gradually build up an independent mechanism acting as an intermediary between investors and authorities, it may become efficient,” he added.

Professor Natalya Volchkova from the Russian Economic School listed the minuses of the new institution. She told RBC daily the ombudsmen will mostly focus on major projects which will not help small and medium businesses. Besides, the new institution means “hand steering” instead of resolving systemic problems.

Management Development Group partner Dmitry Potapenko doubts whether the ombudsmen will radically change the situation. He told Vedomosti it is necessary to improve the work of regional authorities and the judiciary rather than appoint new officials in charge of the investment climate.

MOSCOW, August 3

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