Russia is certainly at a crossroads. As one of the participants,Tatjana Fink, Chief Exe-cutive Officer,Trimo, put it:‘The financial crisis only underscores the divergent paths the country can choose to walk.
‘Will the government’s vision of a confident Russian Federation boasting a diversifying economy win out? Or will Russia weaken from overreliance on commodities and a shrinking population?’ asked James Fierro, Chairman, Recipco Holdings, Canada. Dennis Gillings, Chairman, Quintiles, USA, felt that ‘Russia’s declining population is crucial to understanding the country.
The country’s low birth rates are alarming,’ he asserted, ‘and the country faces difficult demographic realities unless birth rates rise significantly.’
Proponents of contrasting visions of Russia’s future debated over what kind of economy will emerge. Igor Agamirzyan, Chief Executive Officer, Russian Venture Company, Russia started the discussion by remarking that ‘Russia’s economy is poised for a big bounce this year as companies rebuild stocks and domestic demand boosts output.’
Session participants split on predicting whether Russia will successfully diversify its economy. Participants also broadly disagreed on whether ‘Russia would suffer if oil prices drop, or would use low oil prices as a catalyst for economic reform’, as Maria Ordzhonikidze, Secretary-General, EU-Russia Center, Belgium, predicted.‘Most of Russia’s economic growth has been drawn from its resources sector.
Roughly 20% of Russia’s
GDP comes from the oil and gas industries,
making the country the world’s largest
producer of gas and second largest
producer of oil’, said John Roberts,
Global Energy Security Analyst, Platts,
Panels at the Global Russia Business Meeting explored a wide range of topics, covering the future role of public markets, private investors and other aspects of financing growth.
They dealt with key drivers of recovery in the real economy, including aspects of innovation generally, and sectors with the potential to nurture innovation into great economic value, for example IT, cleantech, and professional services.
Peter Loukianoff, Managing Partner, Almaz Capital Partners, USA observed that ‘the Russian government wants the corporate sector to create its own intellectual property.’ Victor Zubarev, Deputy Leader, State Duma, Russia, said: ‘We have to boost innovation capabilities.
And we have to develop a world-class service sector to reduce our dependency on the country’s natural resources.’ Russia needs to build a new high-tech economy to survive,’ added Dmitry Lisenkov, Managing Director, RusNano, Russia.‘China could be a model on how to steer up technology driven economic growth’, opined Charles Tang, Chairman, Brazil-China Chamber of Commerce, Brazil.
‘Increasing knowledge-based innovation hubs is one of the major challenges Russia will face in the next decade to spur economic growth,’ said Mikhail Treyvish, President, OmniGrade, Russia.‘The role of the private sector is critical in raising education standards as a means of reducing poverty.
Doing so puts more people in an economic position to buy products and services,’ said Andreas Schweitzer, Managing Director, Mistral, Switzerland.’ Unemployment must be addressed. Education is the key - it is the solution to unemployment and all other challenges in Russia’, said Mikael Hagström, President International, SAS, USA.
‘Entrepreneurs are critical to jobs and growth in Russia, and the government can play a productive role in supporting new businesses,’ argued Dmitry Loschinin, Chief Executive Officer, Luxoft, Russia.‘A possible obstacle for Russian entrepreneurs is access to capital. Public-private partnerships could be the solution,’ concluded Janez ˇSkrabec, General Director, Riko, Slovenia.
The panel on Russia’s Natural Resources emphasized the need to evaluate the historical role of resource-driven growth and understand transformations to new economic models for Russia.
John Fetter, President, FSI Energy, USA explained that ‘volatility in commodity pricing and balance points between regulation and markets is an important driver for the long-term success of Russia’s energy sector.’‘Surely, Russia took a very hart hit - the Russian economy in 2009 has contracted by about 8 percent of GDP,’ stated Valentin Romanov, Executive Director, SUN Group, Russia.
He further explained the reason why Russia was hurt so badly:‘Russia borrowed heavily on the international capital markets and, of course, it is dependent on the price of oil.’
Peter Kraljiˇc,Member of the Supervisory Board, Severstal, Russia, added that ‘Russia’s fundamentals remain strong and stand out from the rest of emerging Europe. I am confident that the Russian economy will bounce back - depending on what happens to oil prices.’
Garegin Tosunyan, President, Association of Russian Banks, Russia launched the session on financial services with an upbeat assessment.
‘Banking is developing into a Russian success story’, he stressed,‘and is one of the most advanced users of information technology.‘During the impressive growth years of the 2000s, Russian banks increasingly began to resemble the banks everywhere in emerging economies,’ added Oltmann Siemens, Co-Chairman of the Advisory Board, First Trust Portfolios, USA.
‘Still, the Russian banking sector remains small relative to the size of economy’, held Roberts Idelsons, President, Parex Asset Management, Latvia. Marc-Emmanuel Vives, First Deputy Chairman, Rosbank, Russia, emphasized the necessity of competition in the Russian financial sector between government, private and foreign banking operations.
Andrey A. Serebryakov, First Deputy Chairman, MFK Bank, Russia, said that the financial sector ‘is on the right track but there is lots of work to be done. Meanwhile, there is room for everyone but state banks will still dominate.’