Now, the threat of a deeper crisis in Europe is forcing Russia to get serious.
President Vladimir Putin, whose rhetoric often positions him as sternly anti-Western, is courting foreign investors with enticing promises as he seeks investment that can bring about economic development and insulate Russia from global tremors.
Investors have made a great deal of money in Russia, but doing business here has a bad reputation, reinforced by a World Bank-International Finance Corp. survey that puts Russia in 120th place out of 183 countries on ease of doing business.
“Russia is considered a risky place to invest,” said Roland Nash, chief investment strategist at Verno Capital here, “and people don’t want to take much risk now.”
At a recent economic forum in St. Petersburg, Putin assured potential investors that Russia was changing. He vowed to fight corruption, a pledge heard so many times before with so little result that it was met with a cynical believe-it-when-we-see-it shrug. Putin attracted more attention when he guaranteed an improvement in the business climate, vowing to overtake Switzerland, France, China and others and move Russia to 20th place on the World Bank index by 2018.
Some investment advisers and economists are skeptical that can be achieved, but would consider any move in the right direction a success. Others contend that Russia doesn’t deserve its tarnished reputation and called the index meaningless. They agree, however, that Russia needs more foreign direct investment — money put directly into business and industry rather than stocks or bonds.
“You don’t have development and technological innovation without investment,” said Evsey Gurvich, head of the Economic Expert Group. “Improving the business climate means more freedom to operate your business, and this means more competition. More competition means more efficiency and better management.”
Putin says that only investment can create the new jobs Russia needs, and he wants to make investment 27 percent of GDP by 2018, from 20 percent today. Gurvich called that ambitious but possible if the business climate is improved.
“He didn’t suggest any new measures to fight corruption, so we can’t expect any progress there in the near future,” he said, adding that the business climate goal was different. “There’s a concrete program with concrete objectives. I’m not saying it will work, but it’s different than corruption.”
Improving Russia’s rating is a worthy goal, said Liam Halligan, chief economist at Prosperity Capital Management, because many investors give it credence. He doesn’t.