SOCHI — The government needs to boost investment to ensure it emerges strong from the financial crisis, so it will not reintroduce capital controls, Prime Minister Vladimir Putin said Friday.
Russia resisted calls for capital controls, choosing instead to spend $200 billion of reserves in late 2008 and early 2009 on keeping the ruble from weakening too quickly as it adjusted to lower oil prices and the country’s first recession in a decade. “We will keep this liberal regime, which is one of the fundamental reasons for investment in Russia’s economy,” Putin told an economic forum in the Black Sea resort town of Sochi.
Businessmen attending the forum were upbeat about prospects in Russia’s resource-rich economy, now that the worst of the global slowdown seems to have passed and investors are looking for fresh avenues for their cash.
David Bonderman, founding partner of one of the world’s largest private equity funds TPG, said he is looking for opportunities for about $30 billion in uninvested capital and is “cautiously optimistic” about Russia.
“We have about $60 billion of capital, half of it is uninvested and we are looking for opportunities,” he said.
General Electric listed Russia among its priorities, adding that it is in talks about possible projects with Russian Railways and Gazprom.
Putin said he hoped the purchase of Germany’s Opel by a consortium including Sberbank and carmaker GAZ would set a precedent for fruitful partnerships with foreign companies. “We are open to foreign investments, of course. … We need not so much the money, and not just the money, but first of all the knowledge and the experience that key international players have,” he said.
The government should start thinking about how it will unwind anti-crisis stimulus measures and diversify the economy from natural resources to cushion it from future turmoil, he added. Investment will be key here.
Although Russia has been much harder hit by the global crisis than other major emerging markets such as China or India, Putin said his country had some advantages over the others.
“One of the main advantages of China is stability. … A possibility for financial authorities to make decisions without looking back at political situations. Some people like it, some don’t, but for investors it is an advantage. But there are some currency restrictions,” he said. “In Russia there are some problems but some pluses, including the liberal financial regime.”
But some remained skeptical about how far Russia — which in the past had a checkered relationship with foreign investors, especially in strategic sectors — would really open up.
“The suspicion will obviously linger that any attempt now to woo foreign investment is a transitory move, while Russia is in need of capital/funding,” RBS analyst Tim Ash said in a note.
“But once global markets and commodity markets pick up this desire to really open up, foreign investment will again fall by the wayside in favor of Russia, and in particular, Russian state interests.”
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