Medvedev tells investors Russia will reform

June 17, 2011

President Dmitry Medvedev, seeking on Friday to assure investors that Russia is becoming a good place to take a risk, described a country committed to unfettered business and ironclad rights — no matter who takes office in the next few years.

His speech to hundreds of business people and government officials — China’s President Hu Jintao was among those attending the annual St. Petersburg International Economic Forum — inevitably raised political antennae. Perhaps Medvedev was declaring himself a candidate in next year’s presidential election by discreetly criticizing Prime Minister Vladimir Putin. Or maybe he was already making his concession speech.

“We are not building government capitalism,” Medvedev said, offering evidence for the first theory. “My choice is different. The Russian economy ought to be dominated by private businesses and private investors. The government must protect the choice and property of those who willingly risk their money and reputation.”

Repeating “my choice” several times, Medvedev said he was in pursuit of what he calls modernization. “We need to change everything in the way of breakthrough development.”

Evidence was also plentiful for the theory that he would not run. “This project must be implemented no matter who occupies what office in the next couple of years,” he said, suggesting that the presidency was an open question.

Medvedev, who said Russia was making progress in fighting corruption, improving the judicial system and developing better governance, is often perceived in the West as the best hope for a more democratic Russia. Putin, regarded as more authoritarian, assumed the presidency in 2000 and immediately began to strengthen the power of the state in reaction to what he called the chaos of the early post-Soviet years.

Medvedev’s speech, however, comes against a landscape that indicates Russia has been making anemic progress in its attempts at reform. Earlier this week, the World Justice Project, supported in part by the Bill and Melinda Gates Foundation, described “deficiencies in checks and balances leading to an institutional environment characterized by corruption, impunity and political interference.”

Also this week, a deputy economic development minister, Oleg Fomichev, released a poll that found that the number of corrupt deals was falling but that the size of the average bribe was growing. A World Bank assessment put Russia far down on a list of good business environments, listing Russia at 123 out of 183 countries this year, down from 116 last year.

Other polls suggest that Russians, especially the young, see few prospects for good careers and satisfying lives. More and more are talking about immigration, with 21 percent saying they would leave if they could, according to VTsIOM, a national polling agency.

Although Putin remains highly popular, the level of malaise has prompted him in recent weeks to announce the formation of a new political movement called the Popular Front, to appeal to those disenchanted with the ruling United Russia Party.

Putin was prohibited by term limits — since removed — from running for the presidency in 2008 and picked Medvedev, his former chief of staff and a longtime associate in their home territory of St. Petersburg, to run instead. Putin then became prime minister, though retained his power to chart the country’s course. Who runs in next spring’s presidential election is expected to be his decision.

Ngozi Okonjo-Iweala, World Bank managing director and moderator of a panel discussion on emerging markets, said it was very clear that economic growth requires good governance.

It’s a good sign, she said, that Russia and other emerging economies have begun to acknowledge that. But changes here — such as fighting corruption — won’t happen overnight.

Russia can take small steps, she said, that would hearten investors and begin a move in the right direction. “There are so many approvals needed to start a business,” Okonjo-Iweala said. “If you reduced that to one or two, that alone reduces the potential for corruption. But you can’t just talk; you have to get specific.”

First thing Friday, she had attended a breakfast where a number of investors discussed Russia’s prospects, then voted on their predictions for the years ahead.

“Seventy-seven percent said they felt Russia would be able to overcome these obstacles,” she said, “and would become one of the world’s 50 most competitive countries in the world in the next few years.”

Russia intends to do that, Medvedev said, creating a new system that no longer relies on one person in the Kremlin calling the shots — and he did not say whom that may be.

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