in. a back here with arjun here's a look at the top stories as a government and rest of the middle east creatures a critical point in libya with protesters in control of most parts of the country plunged into chaos. as a libyan crisis triggers a wild frys ice and threatens to derail global canonical coverage there is concern in drastically over how the world sat the situation. and a supply all straight for the first rays summer twenty fourteen winter games with massive for the salt it's due to be announced later. roxane for our new

show on the market today carol valleys gas discuss ways to improve investment climate in russia. hungry for the full story we've got it. the biggest issues get the cuban voice face to face with the news makers on . a little game welcome to on the money with the business of russia it is business today we're talking about russia's financial modernizations its prospects and challenges and to do that i'm joined by elected with a of he is deputy head of research and head of the macroeconomics research team at v t v capital and hark sunshine he is managing director portfolio investments and i have seen metropole also we have you here supply of she is chief economist on

russia and c.i.s. e.m.p. parry park and we also turn to daniel salter he is chief eat em e.a.a. equity strategist at unicredit securities first alexei i'd like to go to you. not long ago a think tank in london came out with the following the london based zed yen thinking which produces my annual rankings of global financial centers based on their competitiveness rush must go sixty eight out of seventy five i was in some temper of last year they said nothing has changed to today sixty eight out of seventy five it's not very good but it's not very good conquest president seventy five national the national center for the world of kind of sixty countries right so seriously i think as a unique. option here if russia doesn't screw things up under things right in terms of this and i'll be environment and infrastructure it is a natural advantage of russia being a natural center for the tears financial markets have been so you're saying first.

country wide then regional threat status regional all russian for four of the stage is regional center for others here countries firstly for the central asian countries and possibly poor. or equally important it will reflect this one evidence of that which is below is trying to replace the real balance which is the first ever the so fresh becoming somewhat a financial center ok if i go to you when you talk to your clients would it be looking for what is the major problem they see one of the major problems he rushes infrastructure i'm totally not surprised that rush is right sixty to seventy five although i agree with alex say that they are they are they really seventy five financial centers the problem here is infrastructure when you arrive at the airport the lines for passport control the house of getting to the center of town it takes hours to get to the center of town sometimes if you want to take a car unlike other financial centers. i think the infrastructure has to be drastically improved here improved here in russia before russia can lay claim to more than just a regional financial center you know julie you know you're an economist i mean it

from a macro scale what do you think the major barrier is because we've heard we heard even back in two thousand and eight the president didn't want to make is one of his priorities now we had to go to the financial crisis which is done reasonably well but if they really learned anything from the financial crisis are we just right in the same place we were back in two thousand and eight. i would fully agree that infrastructure is their main problem their main obstacle but at the same time i would also highlight importance of western climate in my view. a lot of made by the rational mind to improve. sentiment about foreign and westerners and to boost importance of foreign investment in jail how. is not that simple and

a lot of logistical problems for foreign investors. at the same time. are russia has a reputation that it is not fully in the western friendly country in jail so i would. venture of problems that they believe about daniel franco to you and me which match the rhetoric which actions i mean i produced for two years russia wants to become a major financial center i even heard it could be financial center what is being done is the actions and rhetoric matching him anyway. i think you're seeing gradual progress being made we've seen recently the merger of the two main markets and russia the my six of the r.t.s. index that's one thing you've seen the ability now of foreign companies to list in russia using audio programs russian depository receipts you've seen big developments in terms of derivatives trading so things are progressing gradually

there's still a lot of theory and i can see if i could see it with you then why are russian companies still listing bond issues on foreign exchanges here i mean it isn't attractive enough and what needs to change back out. of for me the two reasons firstly it's very easy to list overseas you've got a lot of expertise you've got all the noise you put all the accountants all the all the legal experts there overseas already in places like london and new york so it's a one stop shop you get all the all the services you need in one place the other one is in russia so we've still got very underdeveloped domestic asset management industries and if you look at most of the success story but at some markets around the world you've got very strong domestic investors other pension funds or insurance companies and that kind of gets more stable money within russia is yet to really develop and evolve scale oleksandr like a one stop shop now that's what it's really all about isn't it you know absolutely absolutely the point is that a profit is the place where russia can get in and she's the russia's far less

middle east environment. for god and for european lands whatever theory just turned all sorts of things you don't have to list all the swaps you produce in we in russia you don't have to report all she's reporting for integration somewhat liable for their ratings and russia and so on of course so i think for some countries where it's court is stable to produce financial accounting standards and conflict small companies for. more than lauriston accountants and i think there because of. the concerns of transparency for some people well question is where the spirit of dignity in some spots and so basically. sexual cordle's really does not interfere glisten if you listen to was present it's not in front of franklin to see it actually don't go to spiritually difficult to go actually literally within the bible is your definition there especially for talking listen to paul walker here's what financial markets are with their rate that you wrote sort of i'm sure you won't who want to jump in there i totally disagree with alex to see that the lack

of regulation in the market is is a is a great thing then we'd say well we could take that to the absurd and say well then the congolese or the cameron stock exchange it would be would be even better. because when you have absolutely no regulation if you take a look at where where money is in the world a lot of this money is institutional money a lot of this money is sophisticated investors and in a market that's not regulated that under staking out sees words and saying that with a they don't perform due diligence at a certain level on companies then investors investors not even want to get involved in the market because they know the risks are very high and it's the same kind of market that appeal the private placement sort of investors if you look at if you look at the world you see how many financial global financial centers do we need three to maybe once a coverage time zone so there's always one working i mean there's a lot of competition to become a global financial center and i think that the way of saying that we have new regulation would not be the approach that russia is going to take in order to

increase its significance in moscow in particular to crease its significance as a global financial center if you will require that i agree with you that no regulation i mean look at the congolese or economic whatever other. local issues get she's the matter it's taken to go to the thing that the america and britain thing to notice and how many patients you know and i know that move from london singapore into three separate singapore has become a christian capital of the world is this right you should it's not because of personal tax regulation because the hedge fund managers who are making huge amounts of money don't want to pay fifty percent plus taxes in new york or london. of course a major issue of course but one of those conflicts meant ok let's talk about going to julie i want to talk about another issue that a lot of people talk about and that is the rule of law and this is an issue that is brought up often in going with russia i used to one time be a financial analyst at a major bank here in russia and that was back in the late ninety's and i still hear the same complaints to this day so julian what about the rule of law. yes there are

a lot of complaints out cities and is improving but improving clerical radially as a result. at least. to. remove this problem so this is easy timing is crucial as he was a. global target is the. most core new financial center in the global south of this or it is possible to go by the way i'm likely to get a result in two three years. their main east. africa this i think of liquidation and where they like you will continue all these efforts will improve this is an interview with. a lot it is important not only of from the board of your financial sector it is

a more global problem for us ok if i can go to you i mean we hear a lot and what the russian government wants to do we hear the ministry of finance and other institutions. in other banks what they want to do but what are your investors saying they want to see happen in russia before they me move more money in there into this country because we all know there's a certain amount of dollars out there and then go to a certain number of places what can be the attraction to come to russia as opposed to another market. well i think it's the it's the opportunity investors will come to wherever they can buy stocks where they can trade them where markets are liquid and where they feel protected and i think you know over the what you'll see in russia is that russians are growth are living longer life expectancy is increasing and so you'll see naturally over time russians looking to save money and that money in terms of pension funds and insurance money will be invested and put into the russian market and i think when you see that happening these russian

domestic investors will want to feel protected they'll want their domestic legal system. environment of the stock market to improve to protect their own life savings so i think that is what will change the markets and cause from investors to become more confidence in the environment or even for going to recollect appearing interesting point to be talk about foreign investors all the time but russians are becoming themselves much more sophisticated in dealing with their finances because before you just put the money in the bank and you lose you hope the bank can collapse in the one nine hundred ninety s. totally different environment today well i'm not sure i actually agree with it but i have the financial services industry outside of banks have collapsed during the last crisis and the government has done a good job will not make a system god didn't do anything to save the. mutual funds and the insurance companies and so on what insurance mutual funds not just in russia that's a problem i completely agree with daniel here but also to some of the earlier comments from laurie after a short break we'll continue our discussion on modernizing russia's financial

sector with our team. download the official anti application to your high phone or i pod touch from the i.q. sampson. the john c. life on the. video on demand r.t.s. my broadcasts and r.s.s. feeds now another part of your. question on

the dot com.

welcome back to on the money and people of our country mind you we're talking about what russia is doing to modernize its financial system but first let's have an overview of where russia is on this issue where it's calling. the global financial crisis which exposed the international banking system so russia overt catastrophe but the experience on the line been need to expand the domestic financial sector and provide a local authority has the listings and the emplacements corporate russia takes overseas it is increasingly seen as a man show but also campus in profound changes for the russian finance and corporate world it is a question or so by feel for countries to build such

a financial center for practice and necessary from. in russia will depend on foreign investments for many many many years to come and to attract responds they have to attract investors you have to attract foreign institutions you have to makes a country. foreign investment not just was embarrassing. but to along these foreign institutions to make money to be part of the environment to be properly treat their burping greater confidence in the legal system and protections for minority shareholders remains their priority this by holding out better than one expected during the economic downturn. experience. for a credit local credit. for an investor who's minority investors during this recent

crisis and get in a situation where a lot of difficult negotiations had to be held major restructuring said. all of them got together and negotiated difficult solutions yes some people lost money but for the most part the core essence of the contractual claims that they were entered entered into had entered into were respected also needed to be an overhaul of national savings and branches development office that you should know investors and exhilarate services human capital and the range of financial instruments if you will not happen in the short term but only through further development can the financial system help reduce volatility and some of the birth so you can on the growth that you are on the money are. ok i'd like to talk about two issues that we haven't really mentioned in the local alexy here first in the studio let's talk about the ruble where the ruble needs to go for us who wants

to become a financial center major financial center and inflation here let's talk about both the ruble attractive enough to complement the financial sector every financial center has a currency well that's a big point and i think that it's not necessary to turn this of course is investment. because there are a lot of countries where terrorists are attractive in your conversion but not necessarily just going to become financial center seven or seventy five i'm sure that the must be some. of the reserves. but nevertheless and so the point is is that. predicted the author of the sheet for predictability of. marketing instability and clearly a potent inflation is no creeping up a little around ten percent is a big problem. in a problem for russia for a long time actually was a financial crisis that actually slowed it down for the first time but i didn't hear the nerves absolutely and in fact i think a lot of things for example the laws and for bank was devised in one thousand nine hundred eighty and country changed in changed since then but the major problem are those things you've addressed a myriad of things which need to be addressed and clearly in order for russia to

become we would have financial center is a place where people commonly some people come and invest in for that clear market and if they do it is one of the major. problems ok if i can do to you is the government doing enough to deal with inflation and we have to look at oil prices are on the way back up in a big way you know i think that the government's monetary policy has been unpredictable in the in the past if we look at a couple months ago we saw world prices rising from a crisis level of let's say forty dollars to ninety dollars and we see the ruble barely reacting to that and in very high levels of inflation i think that the cannot of terry policy in the government has been inconsistent and the. ruble exchange rate the ruble stability is unpredictable there is no stability and there are a large the in the foreign investment community i don't think there's much and much faith or interest in the ruble as a as a global currency let's look at the dollar for examples compare to the ruble the

dollar to take to extremes we see most we see almost we see a large majority of global financial instruments listed in dollars i think that is i think the rubles a long way off from from becoming a global currency but as aleksey said this is not necessarily necessary to become to become one of the to move up in the rankings from sixty to seventy five global financial so. certainly would be a nice plus if we had people who are attracted to the ruble as an exchange unit. well i also believe that russia has some advantage. of this current city so. i have no capital controls on the russian capital controls are very unlikely to be . used in future. in my view i would agree with you see that. macroeconomic stability is essential for me it is

very important to have more or less predictable the ruble to be. properly developed into a global financial center currently available is very dependent on oil prices surprise us out over the tile. and that is this is unlikely to disappear in the coming years in my view as a result of all efforts of the garment it will just approach. where the position in. the famous the least aware is only sixty. eight from seventy five. and likely to result in some. practical outcome nevertheless. any movement in the right direction there is very positive for my view and unifying to you i mean thinking anything in a conversation about finance in russia it always seems to get back to all which you

know you. prices are going up there are certain people who are very very happy and then there are a lot of other people the world that are on it is it always going to be tied to the ruble and we always be tied to the price of oil and then we have the inflation factor is how is this a vicious circle we can be broken out of somehow. it's clearly going to be an actually seal for russia if it is a commodity producing country the government can try and stabilize the ruble by using things like saving the all surplus over seas as they've tried to do in the past that can help a bit like what's norway does putting money into a stabilization fund into an overseas savings account i think what will also happen is that over time we'll see creation of long term investment products in russia you have long term pension funds looking for long term assets long term bonds markets developing in russia and that will make things more stable as it will mean the flows of money into and out of the ruble could become less important so you have

a bust because the mistake of saving space looking to buy russian. russian assets russian financial assets. go back to you here in the studio one of the things that really bothers me living in russia now been here for almost thirteen years is the lack of competition is there enough competition in the banking sector another key pillar of being a financial center is there enough competition in the banking sector well i think the central bank has worked very hard to establish that albany. liquidity and we will see orders very different right and it's their bank and everybody else for it and i knew it well it will prosper because different right so i think the process stuff but. you know. even if i wouldn't know how many how many banks or how wide variety of insecure about of instruments that you can have when we look at retirement and we look at these kind of things here i mean we could be there is a still me a small number of people actually think that's exactly the point it's not the

number of things you have you have countries with one or two drinks working right but that's that's fine the point is there's really under developed system or for saving completely completely agree with the deal here is there is life insurance mutual funds things like that as they develop as the government actually works hard to ensure that people have trust in those things and fully funded pension system and start with the. as they started to do and become truly progress in our government talks about development control system and so those things develop in the local savings they slip a little base crystal to the banks that's when the actually the biggest corporation financial center is i think really lies how can i go back to you i mean with competition more in the marketplace here i'm up for russians within their market he would be more attractive for foreigners coming in here to see if there is competition here because there isn't a lot in a lot of sectors well i agree with you i think that i think that increasing competition does not make the market more attractive it makes it less attractive but allowing the potential for competent competition certainly would. you know i

think that there are a lot of barriers to maybe not formalized but some of the administrative barriers to to opening up shop here in russia and there's a lot of rules that keep competition especially foreign competition out of russia and i think that the definitely makes russia less attractive place for foreign investment and therefore number sixty eight out of seventy five on the list again you have are you worried about more competition in the marketplace will be more attractive for other people to come in here in make it the global center that mr madrid really wants it to be. i think competition is good because it breeds excellence usually the more competition there is the better the service standards are and so therefore the more attractive as a financial center russia will become people want to come to the best banks the best legal firms and so on in the world now there's clearly a risk that a couple of big stated this could stop saddam and eight. i think it's a good move in the short term you're creating at the best expertise base in investment banking but the challenge for the government will be to prevent those

those big institutions becoming too dominant in the markets. going to finish up with julie here i'm told it can be a diversity in gap that makes i.c.t. marketplace from the actual center what would need some of those three what needs russia needs to do most on a hierarchy what's the most important thing you can do the last word in the program . my will. it is more transparent. legislation. is the simpler just a simple electrostatic a few seconds what would you say your your priority because i think that the thing that really got a lot of place where you kind of going to exist but there's no actual deaths and and that's i think what's really important and which is far as can be is concerned . well connected it is the economy going to a place like south of the road it's not much better there but it can actually much . made no question about that but all of that with much more on from much more

ahead in the front and whatever so i think that is for the death and domestic initial place to treat your trip ok we've run out of time i want to thank my guests here today and i want to thank our viewers for watching us here on on the money see you next time and stay with parties. i'll. remind you the latest in science and technology from around russia. we've got the future covered.

in indonesia alone she's available in hotels coming down the resort and spa. resort and spa only come on come down upon a mode of being turned on.