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tv   [untitled]    October 15, 2011 4:31am-5:01am EDT

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coming up next peter lavelle and his guests discuss how russia aims to attract foreign investment on the money is here next. great. to. come to. some of the. moscow.
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hello and welcome to on the money with the business of russia is business i'm peter lavelle foreign investment has been identified as the key factor in helping drive russia's economy forward with the foreign investment advisory council tracking a raft of global business luminaries to moscow on the money looks at the progress russia has made and the issues russia still needs to tackle to boost its profile with international investors. to discuss the investment climate in russia i'm joined by glenn waller here in the studio he is president of exxon mobile russia stuart irvin he is chief executive officer nestle russia eurasia we also have a key is chief economist at deutsche bank and vladimir off he is deputy head of research department at a critter ok but first let's take a look at what's going on in russia's invest investment environment. challenge to attract foreign capital must be adjusted if russia is to wean itself
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off revenues was a new pollens and government on the horizon investors are looking for great progress. i think it's quite clear that she can no longer rely. on the economic model actually needs to change the model that you might have to focus on creased investment restricted space by far in russia and also a great. business environment or should he be players in russia. and harlow there first of the president. and the prime minister's foreign investment advisory council as a result of cease to commissions rules for business became more transparent many administrative procedures for simplified in russia and russia sleekest mission became more aligned with european union surely. there are students.
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for improvement and russia is constantly working brueggemann so i believe that russia investors challenge by less than positive sentiment based on reliance and red tape. and there is a. perception as much as local. that needs to change that it just mining r.t. . ok student if you go to you first here nestle is obviously an international brand name what is the company's experience here i mean from the very beginning and to what's going on right now actually it's been a very positive experience the company has been here a hundred forty years but in the last fifteen years we've invested strongly in russia and it's been a very positive experience for us we've now got twelve plants ten thousand people and we're looking for to invest in the future as well but it is very positive when
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you say positive what does that mean i mean is it been well for an investor now is that you have had a good relationship with local. regional authorities federal authorities in certain part of the lords the first things we're looking at is is it a good business opportunity and we've seen we've seen good growth in russia and in the aeration countries last year our business was up was up ten percent and it's clearly a very significant population within the strategic future for russia is good too with the size of russia one hundred forty million and then the rest of your a shoe on top of it so that's what we're looking at first of all and we've seen the relationship with the federal authorities and the regulation improve over time so to less red tape you're say less red tape less administration so in the last couple of years with the move towards the customs union we've seen less regulation or more streamlined regulation we're looking to one permission per product we've seen. easier to get our specialists into the country in terms of in migration of
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specialists so we're making progress all the time. and i think that's what's the still a lot to do ok i got my point there you know it's love i want to go to you what has to be done still because we just had a really rosy picture from stuart here but i mean what needs to be done because that i mean let's be let's be honest here you know not every company in the world is flocking to russia why. well i think because there are still problems and the problems are still significant in terms of red tape i think there has been progress in addressing issues such as corruption such as the. level of bureaucracy at the regional level of the federal level but this is coming from a very high base so there is a lot that still needs to be done in that regard i think another issue is russia's overall openness to foreign investment and in this regard again we've seen progress in the past four to five years russia currently is the only bric country without
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capital controls but on the other hand you do have things such as strategic reserve strategic enterprises strategic sectors there are scope has been reduced but again this is something that still needs to be addressed in order for capital foreign capital to come more forcefully and to russia and then the other issue finally i think w t o accession if that is his clenched i think that would be a tremendous trigger for capital inflows into russia all right everyone seems to be going in the direction they want to go and they want to go to you because your company is in a strategic sector here what has been your experience because it there were very tight controls a few years ago now there loosening up as you know smoke pointed out i mean how is the exxon mobile because you just clinched a really big deal with a russian partner struck well we've been in brush twenty years and we have one of our largest projects in russia the suckling one project. and we're very proud of what we've been able to achieve and it's been
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a very successful project you know exxon mobil in the industry in the worldwide has the highest has the best record on safety safety is our number one priority and the suck on one project even compared to other exxon mobil projects is our best project in terms of safety record technology as well we've drilled the longest wells in the world in soccer. several of the of the number the top number of worlds including the longest we have on that one project we have the largest drilling rig that we have the largest. single point moring system that's that's the system that actually puts the oil onto the tankers and currently we're constructing the largest platform . offshore platform in the world where we're building it in which is the partnership you have with russia is would you call it a poster child relationship i mean how would you pitch this relationship to other large companies aren't here yet it's been extremely successful and in fact we've
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had a fifteen year relationship with russia's largest oil company. there are partners with the with an indian state company and a japanese type company on the side on one and that partnership with ross nafta has actually led to the deal that you mentioned that we just saw and in august which is one of the biggest deals with we've actually entered into recently and that includes it's a global strategic. relationship with ross nafta it includes exploration up in the arctic sea which we think is one of the most prospective areas in the world down in the black sea in russia also deep water another opportunity for us to leverage superior technology but we're also bringing ross nafta into projects globally in the united states and canada or another but it's very interesting is that you know russia is still very known very well known as being a quote unquote dependent on export of resources like oil and other things vladimir
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if i could go to you i mean we just one gave us a really pick surely in then from what i know about it is true that the relationship that wrote russia has with oil majors and other energy companies are very good but let's step out of the energy sector right now what are some of the barriers still when i say large companies or mid-size companies want to come here or they can have the same experience as a an energy company. well i think we heard the really the two sides of the story because the early pioneers if we may say saw of foreign direct investment in russia you know we heard in there they're hit with the experience of the business is growing they see you know the environment changing for the better the regulations the rate tape being reduced on the other hand clearly as you said not everybody's here are sold the problem is how to bring those those that are not yet in russia to make them realize the opportunities that this market has and this i think is one reason is indeed the bureaucracy in the red tape that are being
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decreased about but not quite yet. russia always comes low in rankings of ease of doing business and this has not improved a lot on the image that it is being posted usually in western media is more focused on the negative occurrences which which happen everywhere but we don't hear a lot about the positive experiences that for example exxon model his head in rushing in building you know the longest wells in sally and we don't see it cover that well so you know maybe. i think on the second tier companies that can potentially come into russia and know a little bit less about it you know they quite honestly. are still still afraid to make their initial step ok and this is something that is going to work it's very
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interesting coming back to i mean what is the we just heard perception here in the perceptions wrong and it's off base here i mean what you just heard would you agree with that i mean because there are so many success stories here people have come here stayed here i don't hear a lot of people actually leaving it's still people coming i mean considering the global environment to me a lot of people are sitting on their money right now but would you agree or disagree to what degree with what vladimir just said i think there is a difference in perception that there is a difference perception if you look at the companies that are part of the foreign investment advisory committee which which works for the federal authorities is forty major multinationals all of them are continuing to invest here so we're continuing to invest here we're just opening three factories this year one of them in to michigan crescent outside of moscow you've heard about exxon investing pepsi in the food industry of ball then bill dandenault and so they industries by the people who are part of that committee that got here early on by other people i
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think there is a perception outside of that outside of russia that it's a bit of a black box they don't know what to do now and say you know investment the very word investment implies risk and reward us for and i would say we've balance the risk and reward these major companies i think other companies are coming with us if i look at one of the factories the coffee factory were ripping into a machine it's got six hundred suppliers ok six hundred supplier the big logistical issue exactly three hundred of those over three of those suppliers a local suppliers with another three hundred that are international and they are building facilities at the same time so as we move forward i think it will open up the work that weird. on the foreign investment advisory committee also helps because it's not just about foreign investment i think that this and these big multinationals they're making it easier as we move the regulations and you know the lay of the ground here all right gentlemen we have to go to one short break and after that short break we'll continue our discussion on russia's investment climate
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stay with r.t. . just beginning to history. she was trying to stall. but sprung the traps they laid for. the search blocks around the. well we've always missed. one shot. at the global drug industry it's called father became the most want to trophy the world's. great. nation and free credit taishan free transport charges free. range month
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free. free. to free. download free broadcast quality video for your media projects a free media. friendly . dynamic. welcome back to on the money i'm peter lavelle remind you we're discussing foreign investment in russia. hi glad i'm here i'd like to go back to you here how well
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does russia sell itself i mean because we have individual companies gentleman sitting with me here in the studio they sell russia really quite well does russia itself do that. i think the short answer is no to well. and again this relates to what i've been talking previously you know this perceptions about russia are either neutral or usually you know on the negative side especially when it concerns the west and. a clearly you know we can blame many people but of course it's the russian authorities and policy makers that you know have to have to think about it and what can be done to the change the situation to tell that it's a country you know with vast. with vast population it's a vast consumer market you know the biggest in europe with potential to take over in consumption. you know the other rich countries that we have in western europe
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that their taxes are low that that foreign investment is actually welcome that red tape is being produced it takes time it's a vast country takes time but it's happening that investment in infrastructure is speaking now and so on and so forth because these are the tick boxes that foreign investors direct investors look at when they consider where to invest their money ok here is what i am i to go back to you and me kind of continue the theme the vladimir was mentioning there is that you know we all know that it's a competitive world i mean there are a lot of places companies can go and invest in and there are choices out there in russia is one of many again the kind of poor on the thread is what i mean was measuring what more should the state be doing to say come to russia as opposed to china or to venezuela or eccentric such or what does it need to do more. well i think it has to be more active and. showing its strength
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i think it has to be more active on the economic the plough mostly from i think in all of the four that it participates it has to deliver a message that is coherent that is. that shows concrete examples of how things are changing and i think it is the quality of russia's governance that needs to be addressed here as well the quality of russia's economic diplomacy the concerted effort to show the strengths that are out there because you know quite frankly russia and some of the counts is very strong and you know whether it's the fundamental strength that have to do with the scale of the market with a huge potential of human capital the education levels the quality of human capital but also in terms of some of the policy advances that has to be delivered and clued
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in what is being done with regard to the dividends policy with regard to corporate governance i mean finally it seems in the past year that issues related to corporate governance to the level of the micro level of individual corporates this is starting to be addressed and this is very important for for investors not just portfolio but direct investors as well. do you give me some examples that my viewers can understand because they are all not experts in your sector it what can you give me examples of improvement that something loose change for the better for a company like yours doing business in russia because as you said earlier in the program even extremely good working relationship with partners here what are some of those improvements and maybe kind of give a little bit more substance to what your response was saying in corporate governance and things like that yes i mean. when we were obviously aware of the perceptions of russia but we take a very disciplined
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a player's approach to our investments and we look at we look at the facts and we look at our own experience and our experience i mention the stock on one project we've been able to achieve what we've achieved with at the moment an eighty two percent russian workforce and working with russian companies two thirds of the contracts that we've awarded and that's that that's seven point seven billion dollars in contracts have been awarded to russian com companies and companies in joint ventures with russia so you know we see russian business as well now and i mention you know where we're building that huge platform in russia we see that russian business ease is is is improving and being able to meet the needs that we have in getting these very large projects going forward would you say the same thing on in your sector we see better regulation all a small streamlined regulation so for example to have a product approved by the authorities is taking less pieces of pipe work than
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before so this is this is helping us to do things faster and lower our cost of doing business the customs union will also make sure that the the legislation is homogeneous between those markets and that really helps us in making sure that we can move our products freely across those those countries so those are some concrete examples where things have got better for us and go to easier for us there's still some areas that need improvement if we try to build a saw it's build a factory the still a lot of the minister of regulation in the permits in that needs to correct what do you do what do you do do you do you go to the advisory council do you go to work governor what do you do i mean you have to lobby these things you do and there is an ombudsman argue civil of those the only one of the. for the government and he has solved a lot of these little issues now and it's solves the issue and i would say he solves it yes it's for nestlé or for another company but i. actually it helps solve it for all the companies that are operating in small and medium enterprises so we
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do go it unblocks some things between federal legislation local legislation so little glitches can get unblocked but the some other things are the permeating is just actually have to look at the legal framework of the number of permits or you can make the number of sanitary inspections of plants a lot easier by just moving them together so it's not so difficult for us to to operate and in these lower the cost of doing business here and once you lower the cost of doing business for the investment becomes easy to manage it's clearer to see what the legislation is the legislation is moving a lot closer to say european norms it's much easier for investors to see what to do and that helps them and that helps them invest obviously in the in the country and it's a journey the wrong is it as easy is the european no it isn't but it is getting better will she know what to do you never go back to you know if you can put you know we keep talking about perceptions then and how russia is viewed in the world particularly in our context here in business but how much different really is it from other emerging markets is it significantly different. i think still the
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perception of russia is i think worse than. some of the other countries including some of the other bric countries. again the few who come back to the issue of the quality of the investment climate and things such as capital controls all of the other bric countries have capital controls russia does not this is not really brought out under sward. by russia itself. and when you look at levels of foreign direct investment into the largest emerging markets you clearly see that russia still underperforms interims of the overall level of inflows foreign direct investment inflows into russia it's still nearly fifty percent lower than pre-crisis levels. in terms of the
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scale of the cline that the stock market had during the crisis period in two thousand and eight russia suffered significant blow partly due to the dependency on oil that is quite significant but russia is clearly doing a lot to address some of these ills in terms of the macro economy russia looks very strong certainly significantly stronger than a lot of the developed countries than a lot of the years this year it's going to post its lowest inflation level since one thousand nine hundred ninety two in terms of growth in terms of. other macroeconomic macro economic indicators such as consumption investment it's doing relatively well i'm glad i mean if i go to you know it's very interesting i mean even the word tsunami is used a lot these days and you can use use it in a social sense political sense economic financial never sense you want to be
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a lot of the. is that happening in the world now. is there more of a perception now that russia is a place of predictability i mean that's a lot more stable here because if we look at what's going on. with the dollar with the euro and we have a lot of political issues around the world i'm thinking of the arab spring russia seems to be a little a lot more tranquil than most of the world right now. yeah thankfully yes indeed is was talking to mark rican amik environment is is relatively good i mean everything is relative these days and they'd be a lot better in growth could be higher but it's it's it's fine i think are the key question that for all of us is russia is always important is the level of oil prices and they have been holding up pretty well despite the global volatility which this time around tells me that rather them a lot of speculation with commodity prices that we had before the crisis this time it's probably the case of you know really supply demand for oil which means that
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prices would be would be decent and again this is this is good for russia on top of that we have a political issue relatively transparent for the for the next few months we know what decisions have been taken and this gives it least our service to investors and predictability and i think you know at the end of the day investment needs stability and predictability above all and then and then everything else ok so now we're almost out of time here i want to go in the last word here if there was one thing the government could do to attract foreign investment what would it be and i got twenty second i think streamlined more streamline the regulatory system i mean you know on our projects we have to get thousands of different licenses and permits and we're successful in doing that because we understand the system we have we've got some very good russian nationals working the system but still it's time consuming and we are encouraged by the
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russian government's attempts to improve that system i think that is a very practical thing that can can before also the fiscal regime for these offshore projects the government recognizes that the projects are not economic under the current regime and the prime minister has now created a task force to look at that and to make some improvements are extremely hard to talk i want to thank my guests and thank our viewers for watching us here on. on the money see you next time and stayed with. the be.
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