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tv   [untitled]    October 15, 2011 8:30am-9:00am EDT

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with the business of russia is. from moscow now the headlines of protests against corporate greed have gone global hundreds of cities across america europe asia and africa all say no to a culture of big business control it was born out of the occupy wall street movement which started a month ago in the heart of. the seven month long divided syria as the regime supporting capital says it's ready to wait for cities outside damascus want the president gone the u.n. has warned that the country is on the brink of civil war with three thousand from
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the killed and. twenty twelve football championships comes under fire from animal rights groups they're accusing the government of burning stray dogs. while europe is drowning in debt and russia seems to have the worst of the world's financial troubles. whether it's the best time to invest in the country all the money that's right now here out.
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great. things. come to. some to be a little. moscow. hello and welcome to on the money when the business of russia is business i'm peter lavelle foreign investment has been a divide is the key factor in helping drive russia's economy forward with the foreign investment advisory council tracking a raft of global business women in recent moscow on the money looks at the progress russia has made and the issues russia still needs to cockle 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
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russia eurasia we also have you know he is chief economist at deutsche bank and white america 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 inverts investment environment. alonso challenge to foreign capital must be just as if russia is to wean itself off revenues. parliaments and government on the horizon and that's the result great progress so it's quite clear that russia can rely on orange with you can actually lead to change the market that you might have to. restrict us from restricted space in our culture and also a great. business environment or should he level players in russia. and hollow there first of the presidential modernization and the prime ministers
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foreign investment advisory council as a result of ceased to commissions rules of business became more transparent many ministers are. you frightened russian. and russians because mission became more aligned with european union. there are snoots of areas for improvement and rational solutions are constantly working on them and so i believe that less rational invest their profile remains challenge belleza a positive sentiment based on reliance and rather see for us at least to become more and less friendly and there is evidence of this it is still percepts and as much as local stuff that's going better is that needs to change that interest on the mining r.t. . ok student if you go to you first here nestle is obviously an
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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 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 if you have got twelve plants ten thousand people and we're looking for to invest in the future as world citizen very positive or you say positive what does that mean i mean is it been well for investors how is that if you have a good relationship with local authorities regional authorities federal authorities in a certain type of thing was 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 russian countries last year were 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 racial
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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 or so 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 look in to one permission per product we've seen. easier to get all specialists in the country in terms of in migration of specialists so we making progress all the time. and i think that's one of the still a lot to do ok got my point here is what 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 i mean 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
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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 and. and in this regard again we've seen progress in the past four to five years russia currently is the only country without 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 for russia and then another issue finally i think w t o accession that his clenched i think that would be a tremendous trigger for capital inflows and for russia all right everyone seems to be going in the direction i want to go and i want to go to you because your company
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is in a strategic sector here what has been your experience because it we were very tight controls a few years ago now the loosening up is going to slow down i mean how is exxon mobil because you did you just clinched a really big deal with a russian partner truck where we've been in russia for twenty years. and we have one of our largest projects in russia the suck on one project. and we're very proud of what we've been able to achieve and it's been 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 in. 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 there we have the largest. single point moring system that's that's the system that actually
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puts the oil onto the tankers and currently where where we're constructing the largest platform. offshore platform in the world where we're building it again 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 had a fifteen year relationship with russia's largest oil company ross north. there are partners with the with an indian state company and a japanese company on the on site on one and that partnership is with rosneft has actually led to the deal that you mention that we just signed in august which is one of the biggest deals which we've actually entered into recently and that includes it's a global strategic. relationship with ross and if that includes exploration up in the arctic sea which we think is one of the most prospective areas in the world
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down in the black sea in russia also deep water another opportunity for us to leverage our superior technology but we're also bringing rosneft into projects globally in the united states in canada or in other big news that you know. russia is still very known very well known as being a critical dependent on export of resources like oil and other things where if i could go to you i mean we just one gave us a really easy picture in going from what i know about it is true to the relationship the rogue 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 with a large companies or mid-size companies want to come here and look at have the same experience as a an energy company well i think we heard the really little sides of the story because the early pioneers if we may see saw foreign direct investment in russia you know we heard it there and they're here with the experience of the
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business is growing see in an environment changing for the better the regulations the rate tape being reduced on the other hand clearly as you said not everybody's here so 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 increased 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 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 mobil are you scared in russia in building you know the longest wells in sun valley and we don't see the
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cover that well so you know maybe. fed them. second tier companies that can potentially come into russia and know a little bit less about it all day but honestly. are still a still afraid to make their initial step ok this is the up in there please good work it's very interesting coming of back story i mean would it be we just heard perception here in perceptions right it's our base here i mean what you just heard but i mean would you agree with that i mean because there are so many success stories here people have come here stay here i don't hear a lot of people actually believing 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 to say i think there is a difference in perception there is a difference perception if you look at the companies that are part of the fall investment advisory committee which which work for the federal authorities those forty major multinationals all of them are continuing to invest here so we're
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continuing to invest here we're just opening three factories this year one of them in to michigan crescent bar outside of moscow you've heard about exxon investing pepsi in the food industry of ball when will down then and so they industries by the people who are part of that committee that got here early and why other people i 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 you know i would say you know investment the very word investment implies risk and reward us for and i would say that 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 opening to machinist it's got six hundred suppliers ok six hundred supply really big logistical hoshi exactly three hundred of those over three of those spots are local suppliers or there's another three hundred that are international and they're building facilities at the same time so as we move forward i think it will open up
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the work that we do. on the phone averse or not 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 we know the lay of the ground here for a general and we have to go to one short break and after that short break we'll continue our discussion on russia's investment climate state authority. just big game hunting history. he was trying to stall. but sprung the traps they lay for him. on the radio we have the search walks around the. dog was missing. one shot trying to take.
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the drug industry's godfather became the most want to trophy of the world. and. this time. the dynamic. to. go. to. welcome back to on the money i'm here a little reminder we're discussing foreign investment in russia. i'm glad i'm here i'd like to hear how well there's russia's sell itself i mean because we have
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individual companies and gentleman sitting with me here in the studio based really quite well does russia itself do that. i think the short answer is not to well. and again this relates to what i've been talking previously you know this perceptions about russia are either neutral or are 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 work can be done to change the situation to tell that it's a country with vast. with vast population it's a vast consumer market the biggest in europe with potential to take over in consumption. you know the other rich countries that we have in western europe their
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taxes are low the need for investing 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 picking up 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 and here is what i'd like to go back to you any kind of go continue the theme that 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 to kind of pull 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 diplomacy front 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 they have the clearly of russia's economic diplomacy and a 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 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 the rest investors as well when it if you give me some examples with my view we're going to stand because we're all not experts in your sector it what can you give me examples of improvement that something changed for the better for a company like yours doing business in russia because as you said earlier in the program you've extrude good working relationship with partners here which are some of those improvements in the maybe kind of give a little bit more substance to what your response was saying in sort of like corporate governance something for us i mean. when we are obviously aware of the perceptions of russia but we take a very disciplined a players approach to our investments and we look at we look at the facts and we
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look at our own experience and our experience and i mention a 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 have water and that's that that's seven point seven billion dollars in contracts have been awarded to russian companies and companies in joint ventures with russia so you know we see russian business as well now and i mention it 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 you see the same thing on in your sector we see better regulation all a small streamlined regulation so for example to have a product approved god of the authorities is taking less pieces of paper work than before so this is this is helping us to do things faster and lower our cost of
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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 who call create examples where things have got better for us and go easier for us there's still some areas that need improvement if we try to build a so it's build a factory the still a lot of the minister of regulation in the permits thing that needs to create 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 that on was one of the. for the government and he has solved a lot of these little issues there is solves the issue and i would say he solves it yes if it's for nestlé or for another company but i. actually it helps all that for all the companies that are operating this whole medium enterprises so we do that under locks and things between federal legislation local legislation so little
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glitches can get unblocked but there's some other things that the permit ing 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 talk right i mean these lower the costs of doing business here and want to lower the cost of doing business because the investment becomes easier to manage it's clear to see what the legislation is the legislations with a lot closer to say european norms as much easier for investors to see what to do and that helps them and that helps them invest obviously in there in the country and it's a journey the wrong is it is easy is other you're going to know it isn't but it is getting better will she know what to do get over back here if you can put you know we keep talking about perceptions then and how russia is reviewed in the world particularly in our context you're 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 if you 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 cultural controls russia does not this is not really brought out under some word. 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 the inflows foreign direct investment in flows into russia it's still nearly fifty percent lower than pre-crisis levels. in terms of the scale of the line
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that the stock market had during the crisis period in two thousand and eight russia suffered a significant blow partly due to the dependency. on world 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 viewers 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 and finally 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 to use it in a social sense political sense economic funny or whatever sense you want to be
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allotted for. is that happening in the world now. is there more of a perception now that russia is a place of predictability i mean it'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 rushy seems to be a lot more tranquil than most of the world right now. yeah thankfully yes indeed is yes the who's talking to mark rick nomic environment is is relatively good when everything is relative these days and he a lot better at growth could be higher but. it's fine i think 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 third a global fortuity 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 the oil which means
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that 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 when our decision here being taken. in 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 the wrong also to me i want to be although no last word here it was one thing the government could do to attract foreign investment what would it be and i got twenty second i think streamlined more streamlined the regulatory system i mean you know in our projects we have to get thousands of different licenses and permits and we're successful in doing that because we understand a system where we've got some very good russian nationals working the system but still it's time consuming and we are encouraged by the russian government's attempts to improve that system i think that is
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a very practical thing that can happen 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 that streamline to ok i want to thank my guests it take our viewers for watching us here on on the money see you next time and state authorities.
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wealthy british soil science sometimes. markets why not. come to. find out what's really happening to the global economy which might cause or for a no holds barred look at the.

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