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Russia’s first foreign investment promotion agency coming up

December 10, 2013, 18:09 UTC+3 Alexandrova Lyudmila
© ITAR-TASS/Sergei Bobylev

MOSCOW, December 10./ITAR-TASS/. An agency promoting foreign investments will be set up in Russia this year to become a single ‘help desk’ for foreign investors and an intermediary between the regions and potential investors. The new administration on the basis of the Ministry of Regional Development is intended to assist Western enterprises promoting projects in the Russian regions, and not only in those that are already being actively explored. Experts' opinions over the initiative differ. Some support the decision, while others believe yet another bureaucratic organization, which has no state support at that, will hardly change the situation for the better.

The decision was made late October by Prime Minister Dmitry Medvedev. He faced a tough task of persuading foreign investors they would benefit from investing in the Russian economy. Meanwhile, Russian capital flees the country - the amount of $57 billion that left Russia last year is expected to even increase this year.

The Minister of Regional Development Igor Slyunyaev said the new agency would promptly provide potential investors with verified information about business terms, opportunities and procedures in the Russian regions. “At the ministry we are establishing the Russian investment agency, a non-budget organization that will promote the mechanism of ‘a common help desk’ for foreign investors,” he said.

The detailed concept of the Agency - a brain child of the best international and Russian investment experts - is based on the experience of the most efficient foreign agencies.

The Russian authorities are dissatisfied with the scale of foreign investments - Russia ranks fifth by the GDP, but only 13th by the volume of direct foreign investments ($18.7 billion of direct foreign investments came to Russia last year). Moreover, the distribution of foreign investments among the regions is quite uneven, with 10 regions enjoying 80 percent of the total amount (Moscow, the Sakhalin Region, Moscow Region, St. Petersburg, Kaluga Region, Leningrad Region, Chelyabinsk Region, Arkhangelsk Region, Nizhny Novgorod Region and Komi Republic).

“We are not at all happy with the fact that 73 regions attract only 20 percent of the total foreign investments. Most foreign investors do not see the real potential of our regions and economic sectors. Not all regions have sufficient experience and qualification to work with foreign partners,” Slyunyaev said.

“We are not establishing another red tape agency, but are rather trying to create a favourable environment in the Russian regions for foreign investors amid the existing institutions aimed to attract investments,” Slyunyaev said.

The three chief investment factors are the country’s market capacity, natural resources and efficiency of foreign investments, Chief Executive of the World Association of Investment Promotion Agencies (WAIPA) Carlos Bronzatto is quoted as saying by the RBC Daily. Russia is a perfect match by the first two parameters, as it has a huge market that became even larger after accession to the Customs Union and is quite rich in energy resources, he said. As for efficiency, much has been done to adjust the business climate to investors' interests, but this work is subject to further coordination.

“Russia is the sole BRICS country without an investment agency,” the chairman of the National Council for Investment Climate Development, Yury Voitsekhovsky, one of the authors of the idea explained. “For the first time an agency is being established in Russia with the participation of international organizations and regional investment promotion agencies. It will act as a coordinator. This is also the pattern that was used to create a similar agency in Switzerland.”

“For me the need for such an authority is absolutely obvious. Almost all Eastern European countries, as well as Britain, have their own investment promotion agencies. Japan established such an agency 50 years ago,” he is quoted as saying by the web site Slon.ru.

Some are skeptical about the project, though. One of the reasons is there is already the Russian Direct Investment Fund (RDIF) established 2011, a 100-percent subsidiary of Vnesheconombank (VEB). The Fund specializes in working with foreign investors keen to invest in the leading companies of the most briskly developing Russian regions. A $10 billion RDIF acts as a co-investor in transactions.

The chief economist for Russia and the CIS at HSBC, Alexander Morozov, is quoted by the Nezavisimaya Gazeta daily as saying the agency will do no harm. Nor will it bring much benefit. “The result will most likely be close to zero,” he says.

The expert is not sure the new agency will rise to the expectations, as it will have no authority to put pressure on local governments in protecting rights and interests of foreign investors. Besides, the projects will not be co-financed. “If it has no resources of its own, the agency will be of no interest to foreigners,” Morozov believes.

 

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