Buy investors. Expensive!

Experts – on how to lure investors to Russia
Ivan Trefilov, Radio Liberty

Dmitry Medvedev instructed the government to submit proposals on the creation of a special fund to attract foreign investment by the end of February. The head of Rusnano, Anatoly Chubais, believes that Western companies have already heard the signals of the Russian president and are ready to invest in the country's economy. But is this really the case?

For the first time, Dmitry Medvedev spoke about the creation of a special state fund in Russia, which should become a co-investor of financial investments of foreign companies in the country's economy, in the summer of 2010 at the economic forum in St. Petersburg. Then the idea did not get its development, but the Russian president, fascinated by the prospects of attracting foreign capital to the country, recalled it again at the end of this January in Davos, Switzerland, and now instructed the government to document everything by March 1.

It is not yet known what foreign investors think about this initiative. Anatoly Chubais, the head of the state corporation Rusnano, believes that they are already ready to respond to the signals given by Dmitry Medvedev in Davos and invest in the Russian economy. He said this in an interview with the Kommersant newspaper. However, the head of the Economic Expert Group Evsey Gurvich considers such a statement overly optimistic:

– I can agree with Mr. Chubais that there are good prospects for foreign investment in the industry that he personally deals with – that is, in nanotechnology. This industry is now promising all over the world, and Russia has certain groundwork and good potential here. Therefore, it is likely that it will develop dynamically, including with the participation of foreign investors. But I would not extend such a forecast to investments in Russia as a whole, and even to investments in high–tech industries," says Yevsey Gurvich.

There are no official Russian data on foreign investments for 2010 yet. But, according to preliminary UN statistics, the volume of direct investments alone amounted to almost $ 40 billion.

It would seem that this is a very good indicator for an economy recovering from the crisis. But Alexander Osin, the chief economist of the Finam Management management company, does not think so:

– Investments are coming, but they are going only in industries that have already been mastered by foreign players. These are industries related either to consumption or to the extraction and processing of natural resources. Or in those industries where there is public money. The question is that foreign investment should go not only in industries that are already developing well, but in industries in which there are long–term needs of the economy - that is, in the real sector: processing or technology. Foreigners are not in a hurry to come here yet, because, in my opinion, there is no base here that the state could create with its investments," Alexander Osin notes.

The head of the Economic Expert Group Yevsey Gurvich agrees that foreign investors are in no hurry to invest in long-term Russian projects, primarily in the innovation sphere:

– For investments in Russia as a whole, we still have a poor investment climate, poor conditions for doing business. Cross–country studies have shown that there is a very close connection between the investment climate in general and the development of innovative industries - they, just like more cultivated plants, require better soil. On bad soil, under unfavorable business conditions, in an unfavorable business climate, only the simplest "plants" grow, the simplest mining business.

Investments in high-tech projects require, first of all, demand for scientific products within the country. Right now, this demand is very low – that's the main reason that our innovation activity is low. The government is trying to boost the supply of innovations without doing anything to create demand for them," explains Yevsey Gurvich.

In general, experts agree, the creation of a state investment fund in the country, which will co-finance foreign investments in the national economy, will increase its attractiveness for foreign companies. But the question is how much money from the budget will be allocated for these purposes.

– We need state investments, which will make up tens of percent of the total volume of joint investments. If we say that there is a need to upgrade fixed assets, to increase the share of investments in Russia's GDP from 20 to 30 percent, then we should talk about public investments at the level of tens of trillions of rubles. But where can the state get them with the current budget? The Fund solves this problem, but pointwise, and not cardinally and long–term, - emphasizes the chief economist of the management company "Finam Management" Alexander Osin.

It will not be known in what proportion the Russian authorities will be ready to supplement foreign investments and how much money they will generally agree to spend on this until the beginning of spring, when the government will submit its proposals. In the meantime, it is assumed that the fund's capital will amount to tens of billions of rubles.

Portal "Eternal youth" http://vechnayamolodost.ru09.02.2011