reminder of the top stories here on our team as a government unrest in the arab world reaches a critical going to leave us with protesters in control of most parts of the country and golf by chaos drives loads of police and loyal to longtime leader from dauphine are believed to be switching allegiance and growing numbers. believe you a crisis spoiled price hikes affecting the global cost of everything from transports of food and there are fears of real economic recovery in the u.s.

and around the world. that you pay is under fire for the court decision to extradite salinas saw instance sweden over rape allegations passports say it exposes the caucus and the justice system that provides asylum to the number of suspects of war criminals and terrorists. and it's the final straight for the first raise over twenty fourteen winter games as the winning mascot for the sorts of the olympics is do have been announced later ten candidates are currently running neck and neck in the final something nationwide contests. the drive for more than is a shoe in and russia is adding momentum to efforts to improve the country's investment climate. become a global financial center or as a dooms to remain a regional economy the whole valley his guests are discussing this next hour a new show on the money. hungry for the full story we've got.

the biggest issues get a human voice face to face with the news makers on the party. logan welcome to on the money with the business of russia 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 the metropole also we have you here supply of she is chief economist on russia and c.i.s. the n.p. perry par and we also turn to daniel salter he is chief eat em e.a.a. equity strategist and unicredit securities first alexei like to go to you. not long ago a think tank in london came out with

a following the london based zed yen think tank which produces my annual rankings of global financial centers based on their competitiveness ranked russia moscow 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 question pres there are seven national financial centers on the world that are kind of sixty countries right so but seriously i think that there's a unique. option here if russia doesn't screw things up and got things right in terms of setting up the environment and infrastructure a natural advantage of russia being a natural center for the serious financial markets have been losing first. countrywide then regional threat not just regional all russian for four of the station is regional center for others here countries firstly for the central asian countries an impulse to before. crane and possibly familiar with and put this one

evidence of that which is below is trying to replace the real bones which is the first it was so fresh becoming somewhat of a financial center ok if i can go to you and you talk to your clients will be looking for what is the major problem they see one of the major problems here meshes 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 and 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. julie you know you're an economist i mean. scale what do you think of the major barrier is because we've heard we heard even back in two thousand and eight and it pretty president didn't want to make is one of his priorities now we had to go through the financial crisis rush is done reasonably

well but if they learned anything from the financial crisis are we just right in the same place we were back in two thousand and eight. i would agree that infrastructure is their main problem and their main obstacle but at the same time i would also highlight important for the western climate in my view. a lot of efforts made by the russian government to improve. sentiment about foreign and westerners and to importance of foreign and the west in jail how . is not that simple. a lot of logistical problems for foreign investors in at the same time. russia has a reputation that it is not fully in the western friend of the country in jail so i

would. venture off. the table as well. i mean which match the rhetoric which factions i mean i produce for two years russia wants to become a major financial center and i even heard it to 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 in russia the my six and the r.t.s. index that's one thing you've seen the ability now of foreign companies to list in russia are using audio programs russian depository receipts you seen big developments in terms of derivatives trading so things are progressing gradually there's still a lot of anyone making a cd if i could stay with you then why are russian companies still listing bond issues on foreign exchanges here i mean they're it isn't attractive enough and what needs to change for that to happen. so for me the reasons firstly it's very easy to

list overseas you've got a lot of expertise you've got all the noise you've got all the accountants all the all the legal experts 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 a very underdeveloped domestic asset management industries and if you look at most of the successful but for markets around the world you've got very strong domestic investors either by the pension funds or insurance companies and that kind of. more stable money within russia has yet to really develop and of large scale alexia like doubt one stop shop now that's what it's really all about isn't it here not to look at a little bit of the point is that it is the place where russia can give and then she's the russia's far less reduced environment because one stop shop for god's plan for european lands whatever the region and all the sorts of things you don't have to list all the swaps you produce in me in washington i have to report all those huge reports infringing agencies are not liable for their ratings in russia and so on of

course so i think that for some countries where it's not just people to produce financial accounting standards and can take small companies for whom it's going to pay for dawson or the lords and lord nick and i think there's a couple of the concerns of transparency for some people what question is where the transparency begins and stops and burn and so basically it's action. cordle's we interfere if you listen to war listeners a lot of things and frankly actually don't talk about prosperity only difficult actually literally limiting the brits your definition work specially for talk you listen to paul volcker he does what initial work the way terry that he wrestled as i'm sure you want 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 that would say well we can take that to the absurd and say well then the congolese are the cameroon stock exchange 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 the they don't perform due diligence at a certain level on companies then investors investors will even want to get involved in that market because they all 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 one to cover each time zone so that 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 the regulation we would not be the proofs that russia is going to take in order to increase its significance. particular to crease in significance as a global financial center to be required that i agree with you that no regulation i mean look at the congolese or i don't know whatever other networks obviously it's no relations bit which is too much it's taken

a bit of sort of also got i think that the american british knows how many patients you know and i know that move from a lot of singapore industries right singapore has become a christian capital of the world is this rate 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 taxes i was. of course a major issue of course but for those conflicts of interest what's going to go to julia 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 and viewing with russia are used to it one time the 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 julia what about the rule of law. yes there are a lot of complaints and cities and is improving but improving very good radially as a result. at least. eight to.

remove this problem so this is east timing is crucial as he was a. global climate is still. russia most core financial center in the global south of this or it is possible to go whether we're likely to get a result in two three years. east. of the patient and where they are likely to continue all these efforts will improve this is going. into the deals. or it is a bowl a lot of the of from the board of your financial sector it is more our global problem for us ok daniel if i can go to you i mean we hear a large what the russian government wants to do we hear the ministry of finance and other institutions and in other banks what they want to do but what are your

investors saying they want to see how thin russia before the me move more money in there into this country because we all know is 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 is the opportunity investors will come to wherever they can buy stocks where they can trade them where their 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 living longer like expenses 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 i think that is what will change the markets and and cause from investors

to become more confident in the environment here before going to recollect very interesting point to be talking 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 know it was a big didn't collapse in the one nine hundred ninety s. totally different environment today well i'm not sure i actually agree with that i had feared the financial services industry outside of banks have collapsed during the last crisis and the government has done a good job in not the baker system but they didn't do anything to save the. mutual funds and the insurance companies and so on like insurance mutual funds don't exist in russia that's a problem a degree within your here but also to some fairly common law right after a short break we'll continue our discussion on modernizing russia's financial sector stayed with our team.

wealthy british. tight. markets why not. find out what's really happening to the global economy is a report on our team. to. welcome back to on the money time 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 going to. the global financial crisis which exposed the international banking system so russia overt catastrophe but the experience on the line beneath to expand the domestic financial sector and provide a local authority through the links things and phone placements corporate russia takes overseas it is increasingly seen as a fan show but. for some profound changes for the russian finance and corporate world it is a question of still diving for comfort little such from mention something from a truck so necessary from. and russia will depend on foreign investments for many many many years to come and to attract these funds they have to attract investors you have to track to foreign institutions you have to make the country.

vote common foreign investments not just for their missile. but to a long and foreign institutions to me to be part of the environment to be properly tweaked there are being greater confidence in the legal system and protections for minority shareholders remains their priority this by holding better than one links back to do you run the economic downturn. experience. for your credit local credit. for an investor who's minority investors during this recent crisis 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 clunes that they were in

through entered into had entered into were respect also needed to in the end or the whole national savings and pensions development office that you should all investors and exhilarate service this 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 so you can are me growth that is going to show up on the money are. ok but to talk about two issues that we haven't really mentioned in the local election here for us in the studio let's talk about the ruble where the ruble needs to go for russia wants to become a financial center major financial center and inflation here let's talk about both the ruble attractive enough to complement a financial center every financial center has a currency well that's a good point and i think that it's not necessary to list of clarence's investment. because there are a lot of countries where currencies are attractive from your to invest in but not

necessarily it is going to become financial center seven or seventy five i'm sure there must be some. but nevertheless and so the point is there's. with his predictability of the change for predictability of triple a c. market an instability and clearly a potent inflation is no creeping up a little around ten percent is a big problem. problem for russia for a long time actually was a financial crisis that actually slowed it down for the first time but i did appear at the absolutely and in fact i think a lot of things for example the law central bank was devised in one thousand nine hundred eighty and country changed been 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 come and listen people come and invest in for that clear market in which to do it is one of them which are a perfectly. ok hard if i can go 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 oil 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 the monetary policy in the government has been inconsistent and the. ruble exchange rate the ruble stability is unpredictable there is no stability and there largely in the foreign investment community i don't think that there's much much faith or interest in the ruble as a as a global currency let's look at the dollar for example to compare the ruble the dollar to take to extremes we see most we see 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 alex he 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

finance or so but ok julia but if i go to you it certainly would be a nice plus if we had people were attracted to the ruble as an exchange and it. well i also believe that russia has some advantage. of this currency. have no capital controls and 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 sure. russia properly developed in the global financial sense currently available is very dependent on oil prices rise as . it is this is unlikely to disappear in the coming years in my view

as a result both efforts of the garment who just approach. where position in. the famous the least where it is only sixty. eight from seventy five. and likely to result in some. practical outcome nevertheless. any movement in i do action there is very positive for my view and unifying to you i mean thinking to make it in a conversation about finance in russia it always seems to get back to which you know you. when prices are going up there are certain people here that are very very happy and then there are a lot of other people the world that are on review is it always going to be tied to the ruble and we could 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 that 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 bond markets developing in russia that will make things more stable as it will mean the flows of money into and out of the people could become a bit less importance when you have a bust because the mistake of saving space looking to buy russian. russian assets russian financial assets. are saying about you here in the studio one of the things that really bothers me in living in russian i've 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

that we're going to work very hard to separate all the. liquidity and we nor this very different right and it's a very big and everybody offer and you well it will prosper because different rates i think of process stuff but the way. you name it. even if i were them i mean but how many how many banks or how wide variety of about of instruments if you can when you 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 when i think that's exactly the point it's not a number of things you have you have countries with one or two banks working right but that's just fine the point is there's really underdeveloped system or for saving completely completely agree with you know here is there is life insurance mutual funds things like that as they develop as the government actually works clarity sure that people have trust in those things and fully funded pension system and start with the. they've started to do and become truly progressed in our government talks about you know developing pension system and so those things

develop in the local settings they slip a little base as christiane said the banks that's when the actually the biggest corporation financial center is i think actually lies if 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 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 i have the administrative barriers 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 make it

more attractive for other people to come in here and we could be 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 the water activism has a natural sense of russell because 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 states could start to dominate. i think it's a good move in the short term you're creating a best expertise base in investment banking but the challenge for the government will be to prevent the biggest situations becoming too dominant in the markets. going to finish of a julia here i'm told it can be a diversity in gap that makes a city a marketplace our financial center what needs out 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. i just. got a few seconds what would you say your your priority because i think that the thing that it's weird that's right because a lot of place where you kind of have thing going for this but there's no actual death and that's i think what's really important and which is far as can be is concerned. well look here it is the economy go to the right it's not much better there but you can actually much. the. polls are with much more i'm sure much more ahead in the seventy five or whatever and so i think that it's very adept in the midst of a national base the regular trick all right 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.

the freshest in your trisha's and this is product on the price of healthy eating. we need to test these foods from time to city allergenicity immune response lower nutrition and for environmental contamination don't you feel like a lab rats some consider the experiment each human treatment very highly significant different it sees it be the g.m. fair that they both at that don't cheer up plus they were treated so well themselves one question means one career if you ask one question you could be uncertain and you might or might not be able to publish it but that's the end of your career.

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