Image is nothing

The government hopes that the second wave of privatization will increase direct investment in the Russian economy

The peak of the crisis has passed, Russian Minister of Economic Development Elvira Nabiullina said at the end of last week. Economic growth at the end of this year, according to the Ministry of Economic Development, will be 4%. However, it has not yet been possible to restore the influx of private capital, and without increased investment, economic growth cannot be significant. At the end of this year, an outflow of private capital will again be recorded in Russia. “I trust the forecasts of the Central Bank. Currently, he predicts a small capital outflow for the year, this is normal,” presidential aide Arkady Dvorkovich told reporters. It should be recalled that earlier the First Deputy Chairman of the Central Bank, Alexey Ulyukaev, predicted that the net capital outflow at the end of 2010 would be about $10 billion.

The authorities place their main investment hopes on the second wave of privatization. “In connection with the announced privatization plan for the next three years, there will be an influx of capital in the very near future,” Mr. Dvorkovich hopes. In previous years, according to Ms. Nabiullina, income from privatization amounted to about $600 million a year. “In the future, we plan to increase this figure to $10 billion per year,” she said. Under the three-year privatization plan approved by the government last week, it is planned to partially privatize such large state assets as Rosneft, RosHydro, Sovcomflot, Sberbank and VTB.

Meanwhile, based on the results of nine months of this year, the outflow of capital by the private sector amounted to $16 billion. Moreover, in January alone, this figure amounted to 11.8 billion. Starting from March 2010, the outflow of capital in the banking sector stopped, and by the third quarter, the import of capital by the banking sector reached 8.3 billion. Against this background, in other sectors, since December 2009, there has been a tendency to increase foreign assets. However, foreign direct investment in the Russian economy is still declining. In the first half of the year, they decreased by 11% compared to the same period last year, to $5.4 billion. For comparison, the influx of investment into China in July alone amounted to $6.92 billion.

This is not to say that the Russian authorities are not worried about this. However, according to Boris Kheifets, chief researcher at the Institute of Economics of the Russian Academy of Sciences, the measures taken by the government only cause a smile. This is how he assessed the appointment of First Deputy Prime Minister Igor Shuvalov as ombudsman for the rights of foreign investors. According to the expert, the investment ombudsman, like the Russian authorities in general, pays attention only to large companies, ignoring the protection of smaller investors.

Experts, for their part, suggest that the state not only sell off assets, but also work to improve the country’s image. “The lack of foreign direct investment is not tragic, but it improves the structure of GDP and shows the good state of the economy, which leads to an increase in international ratings,” said Ivan Rodionov, executive director of the Russian Association of Private Equity and Venture Capital, at a round table in RIA Novosti. “They either don’t work on the image of Russia abroad at all, or they understand it as stupid Soviet propaganda,” laments the head of the Center for European Studies at the Institute of World Economy and International Relations, Alexei Kuznetsov.

“We specifically support the bandit image of the country in order to close the markets from the influx of small and medium-sized Western companies,” Mr. Rodionov is convinced. The Russian authorities are accustomed to manual management of the economy, so they are only interested in the arrival of large businesses, with which they can communicate directly through various councils or through the ombudsman.

Vera SITNINA