in terms of the river and the grimly it used to be the montague to the world the rubens return. at twelve thirty pm moscow time these are the top stories on our coalition forces leave colonel gadhafi air defense in tatters but on the ground tensions remain high in libya amid claims of civilian deaths and with reports that over one hundred people have been killed since the weeklong operation began then you're starting to wonder whether foreign forces are doing more harm than good. london bracing itself for what's promised to be the biggest political protest in a decade with thousands expected to hit the streets against deep also sturdy cuts the government is that's a slots spending by eighty billion pounds to eliminate the country's huge budget

deficit. and critical work has reportedly been stranded in one of the reactors in japan's fukushima nuclear power plant as a radioactive threat skyrockets the fallout house apparently reached the nearby coast with breaking some levels in the sea now a thousand times higher than. i'll have more on all those stories in about thirty minutes now it's time for a look at why some food prices across the world and how they're affecting russia that's coming up in our new program on the money with peter the bell after this. welcome to on the money where the business of russia is business time peter lavelle

today we're talking about russia in the context of the global food crisis. to discuss this i'm joined by david steer here in the studio with me he is president and general director of kraft foods russia we also have chris we've heard he's chief strategist a year of the big. a managing director of investment banking at troika dialogue and andre sees our piece managing director at sauvie con all right david i've told you go to you here first time you're the the company man on the program as it were kraft foods well it's an international brand you've been here for how long have you been here what's your greatest success to date what is your biggest challenge all up or this is my second time in russia been here for three years this time five years in a previous life been with kraft for three years i actually joined them to come back to russia biggest success the company's doubled itself basically in the last three years here in russia so we're pretty proud of that it's been a great place for us to do business is that because of market conditions or it's because of your hard work or both it's a variety of things you know we're going to bunch of really good people working for us i think that's the that's the foundation very good brands good strategy pretty

clear focus and plenty of investment from the parent company and it all goes to a great success story in terms of biggest challenge i think just the dynamism that is russia that's the reason we're all here if we wanted a boring life we work somewhere else it's definitely not here and i think just grappling with the biggest challenge which was a piece of advice was given when i first came to russia the hardest thing in russia is what not to do so for us it's all about focus and you're always getting dragged off to the next opportunity so trying to keep yourself on the strategy and and tight on that is probably the biggest challenge we're going to have you definitely back on this program chris if i can go to you let's blow it's broaden it out here i mean how is russia playing the in the global strategy of food pricing in food shortages because we have an export ban right now will probably continue to be in the course of this year how much of a difference is it making globally if prices and supply. no question about

it the russians droughts last year which as you say led to an export ban in previously russia exporters about twenty five million tons of grain and last year it was the cut that to zero big question mark this year but it's quite likely to russia will either have a very modest amount of contribution to global markets again so it is contributing but if you broaden it back a bit. during the crisis focus obviously on financial markets and infrastructure electricity supply. period it also became very clear that part of russia's problem is that over the last twenty years it simply has not invested enough in agriculture in domestic food production and russia has become overly reliant on food imports and that is one of the reasons why the government is grappling with an inflation problem right now a lot of that is coming in with imported food and the second problem of course is because russia imports a lot of food it's got you know food security issues so agriculture along which you

know medicines and other basic industries these are now high priority areas for the government to invest to to develop and to modernize so we'll see this over the next few years but but but right now russia both contributes to the global food problem because of last year's grout drought which is driving up grain prices and it in turn has a problem because it's importing food inflation and that if i go to you explain to me and my viewers russia is the biggest country in the world and has a lot of land and actually has a lot of water resources as well is the government doing the right thing because as chris pointed out going forward russia is going to be more and more of a key player is the russian government doing the right things now to make that happen. actually i just first of all i'd like to add a couple of words to what crease was same years right now we still have big imports or all of. our food products. need but if

a little. more broader perspective we would see the. declining. ones a-q. reasons for the. livestock sector is developing pretty fast thanks to. government. assistance and help to the governmental programs that we have. around five years ago a new program was implemented was started so-called national. a national program in the agricultural a lot of investments when we need during or after the time. production for example grows that. ok victoria if i can go to you i mean you you work with investment banking you're an investment banker yourself what is attractive about the russian market for foreign investors when it comes to agriculture well of

course the land and the prospects are extremely attractive for russia but as you understand the sector is hugely fragmented in fact top twenty companies that have one hundred thousand hectares or more of land they make up less than five percent of the total arable land now these companies naturally can grow in the future and present at the majority of the companies that will be developing going forward however there's a plethora of other agricultural companies that don't get enough investment and that's a big problem and what we really do need is a clear strategy for agriculture a strategy that you know that can predict future cash flows and can see. certain returns that investors do. demand what kind of strategy is necessary then to get the investment to the companies that need it put it simply was shouldn't be just harvesting wheat we have to differentiate into other crops this is hugely important

and that's a strategy that's technological know how so what we really need is to bring people that left the country agriculture story but it wasn't sexy at all and it wasn't profitable bring these people back have international know how and develop a strategy in maximizing profits ability and maximizing the returns on the land that we have here david your company is here what kind of expertise do you bring what is craft bring here we've got six manufacturing facilities here we're going to couple chocolate factories we've got a couple of biscuits factories a gun factory a coffee factory so we come to the market with decades and decades of experience in all things to do with manufacturing fast moving consumer goods food products we can with pretty high standards our standards are second to none in the world in terms of the quality of goods in the way we manufacture so in dealing here we can bring the expertise of how to do it right and we translate that back to any of the

suppliers that work for us we don't change our standards simply because we're working in a place that's outside the developed world those standards stay high so we can bring that learning through our r. and d. people through our quality people to any of the suppliers that we work with they have to meet those standards before the goods can come into our factories to be part of the food cycle in the production of all of your products here is it all sourced locally all of your ingredients everything that when it's kraft on it with russian it's all made here isn't it it's made here as many ingredients as we can source with the right price and quality here we do but there are certain things we could probably never source here things like coffee cocoa powder obviously have to come from those countries that are good at producing that but we should go various other ingredients are coming increasingly from this part of the world and. if i go to you what in victoria brought it up what does it take for russia to start producing things that we normally don't think of russia producing you know exporting vegetables or exporting exit of meat and things like that because so much

of it is still for the domestic market what is it needs them to differentiate that is can the government help and do that. if we talk about the government the government. five here program. next year. likely to develop a new five here program five year plan where it was able to track their priorities . and i can't agree to that that we just have to produce the crops because we actually is likely to remain our. crop and we can do. about this what can be done we always need to attract more investments. to produce more products more crops and actually for my feeling is that for our livestock sector. development of exports is probably

a very important key issue because for example in poultry sector we're going to be self-sufficient in next years in swine sector we're also growing. be more self-sufficient in five six years so the industry wants to develop after that they will have to start. exporting. to other countries chris if i can turn to you and going back still to the export ban if you really wants to be a global player in looking beyond its domestic market what does it need to do because russia has been criticised for the band i mean what is really doing in the meantime to clean up its act at home for food security and then to be a major global player. this is not going to be fixed quickly i mean that the most and getting the most encouraging point for me is that in agriculture and food production has now been put under the table as

a priority area that really wasn't the case much before last year i think you know there's a barrister in photographs from rural russia where people were complaining about not having a bucket to butter the fires and in a dramatic collapse in grain production i think you know these are helped provide a catalyst or a spur to the to the program and you know already over the last few months we've seen the government enact legislation which will empower it to take back control or to force ownership control over almost one hundred million acres of arable land that has not been used for at least three years so there is some momentum and i'm also encouraged that as russia looks likely to join the w t o by the end of this year that also will keep a momentum will keep external pressure on the government to continue this this program and not to let it drop but i think you know that said to answer your question i think what russia really needs to do is of course create the right

investment conditions to bring in a considerable amount of investment into the into the sector into the industry removing the sort of administrative barriers and legal barriers that are still many case still in place but key above all else and i think this applies to other industries such as pharmaceuticals and we saw it in the car industry as well russia really needs to bring in experts like kraft foods and other you know well established food companies and the agriculture companies because russia really has lost a considerable amount of its ability to grow food to process food over the last twenty years the focus has been on extractive industries already gassed metals etc not in industries like like farming or like food that the skill sets of being. yes ok i'm going to jump in right here i want to continue these thoughts when we return after a short break we'll continue our discussion on russia's agricultural sector stay with r.t. . for

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santagati dot com. welcome back to on the money i'm peter lavelle today we're talking about russia's position on the global food market but first let's have an overview of what's happening in this sector today. the two thousand and ten drought in russia spiralling domestic food prices trade grain expert told sending a chill for global markets but with the flaws in russia's sigrid culture exposed it has underlined the need to get every culture right because first of all it shows that russia is part of the global agricultural and food system and it is very important to have stable predictable agrarian markets and have opportunities for stable export and access to products and technologies on the global market the

agricultural market is very volatile and we were able to see clearly all the problems of russian agriculture problems with infrastructure first of all due to lack of export mechanisms transport problems and crop technologies very little attention is paid to land to be ration which i think is very important because it helps minimize the risks we face in agriculture it's the fifty to encourage in the world to investment the government has looked at the land management issues at the same time it is pushing investment into infrastructure but just to place it needs to promote competition. we. saw the government must in my view of the government must be more competitive. environment you know infrastructure at the same time it needs to work on promotion with the russian language culture not having the global profile it could. then my chick on there information and the global of information above to put you in just

in russia some people do successfully in the west country. those who care for patients and understanding in the long view or. culture of the business however the global demand outlook for foot production in particular is driving increased interest in russia she would you. today we see two weapons of mass destruction lack of water and lack of food that's one of the reasons why many investors are looking to invest in agriculture there are thirty to forty global firms that invest all over the world and they are interested in russia and the c.i.s. . with a vested interest in providing better outcomes for domestic consumers and a better experts performance russia has a clear commitment to getting its agriculture right russia certainly has the land and the water getting a better return from them is the road to hoe in less of the trauma on the money are

today. ok victoria i'd like to go to you and i'd like to bring a distro to the to the dinner table here i mean russian consumers really want good quality food at a reasonable price so you can get good quality but not always a good price or what it companies have to do to bring those prices down because you go to a grocery store if you know there's a lot of people in things that we would think here are our products are very middle range products in other markets in developed markets in the world foods expensive in russia yes a do you agree and it's a structural problem in fact this year put inflation alone was up fourteen percent and we think food inflation for two thousand and eleven will still be double digit but this is not only because of high oil prices are high wheat prices which are now at seven thousand seven hundred roubles and this is almost triple from last autumn

yes there's a seasonal factor to it but just to give you a flavor now inflation in the zone is a big problem but it has that want to it's a function of one monetary supply as well it's a function of other economic factors hence i cannot give you a solution for how to curb this inflation because it looks as if it's here to stay well that's not a very optimistic note chris if i can go to you you touched upon it in the earlier in the program w t o how was i going to make food better and more affordable for the russian consumer or won't. frankly i don't think it will actually have any immediate impact i think really the the solution for this problem for russia is simply to grow more food domestically to grow it more efficiently you know to have a bigger volume of it and therefore create more competition and that's what will bring prices down but i think it will be very useful for is two parts one is it's you know it's a very considerable bucks for investors to take a russian would make russia think that little bit more investable for investors in

all industries and number two of course it will maintain pressure russia to keep improving its industry if you like to compete with the potential increase in imports that will come with your entry so i think it's a positive factor not immediate but it definitely pushing in the right direction you know one of the things that you know you can go through russian history and it's not that it's not a problem for russians to grow food per se it's getting it to market now is the government if we go for local regional and the federal or are they doing enough to help producers get to market at a decent price for consumers and i'm talking also about eventual mass exports which i think russia can eventually do. infrastructure yes it's one of the key issues it's not just a luxury sticks it's also for example for livestock sector it's slaughtering is.

often very prohibitive but actually i can just agree it was mentioned earlier that talk about. for example we just the government should try to develop. to establish several companies here so was the terrorists will below and i was i really prosecuted for example. rail tariffs are roughly three times higher than in the u.s. for transporting goods. tariffs imports for so called for being services around two times higher than in you or us actually the garment ease doing some things that have established their united grain company several years ago and one was the key. targets of this company is to improve their whole infrastructure here in russia but unfortunately it's not just an easy issue of

infrastructure if we talk about major constraints for our domestic market there are also several are the ships like education and one of the key issues that wasn't mentioned today is development all of the land market it's very important if it will be developed we will help us. bring so all badly needed investments into the sector david with craftier which which direction should it go should the government leave companies alone two companies can grow themselves or should the government be putting a tool box out there to help you where do you find the right mix because there will be people say get the government off my back and we've heard a little bit of that here but then we need the government to build ports or better roads they help companies i mean what's the right mix from a craft point of view from our perspective we look at this is a perfect opportunity for increased partnership between the companies the suppliers

the government their opportunities for them to get involved in the process they can free up administrative burdens they can look at the speed with which we can get new projects up and running without compromising the safety standards but certainly speeding up the red tape the opportunity to look at which infrastructure can deliver much better product to market faster and at a reasonable price in terms of the investment for the government we've got some good programs in place starting with a number of the regional governments of the must say no you have to go in a little bit more detail on that because in your area. very good relationship with for example vladimir asian and north korea region and we're starting to work with them looking identifying local businesses more local suppliers we have perhaps with a three way approach we can bring our quality standards get some breaks for those businesses to allow them to establish move to the new standards and bill told me before the program they are coming to you now yeah it's a two way thing you know we always thought we'd have to make the running but obviously there is within both of those regions and i'm sure it's other regions around russia a real move by the regional governments to want to get involved in development

investment there's a lot of competition between the regions naturally for that but it's built of wanting to move things forward and i think it's a great development on the way in the in the way you look at the development of the sector in the last twenty years and let's say going twenty years ahead is the government doing enough to be friendly to foreign foreign businesses coming here of foreign producers like kraft or is it just you have to you know it's highly competitive around among a small number of players is there a high cost of entry for outsiders to come in. my views of the obviously can do. much more. to stimulate the development of the sector first of all actually i mean not livestock sectors of. the livestock sector but if we look at our crop produce an industry just so friendly and predictable definitely should do more to improve the development of the sector i mean this acts

but. the grain of the market which. depresses a price is farmers are now. in the beginning of spring planting campaign and actually it will be great if the guy would say that yes it wants to support the crop produce an industry first thing and also they want foreign companies to come to russia because actually food from inverse the point of view they all love south america i mean if we talk about farming companies by a very skeptical about russia while we have a lot of opportunities here a lot of. it was mansion access to water and also it's very important you can do large. large scale farming in russia as there are not so many regions all over the walls where you can do that ok but i did like to go to victoria cross about the investment opportunity here but i'd like to point out to our viewers that yes there

is a green export ban but russia made an exception for humanitarian causes and it's very important but tory if i can go to you first i mean you have foreign investors coming out of companies saying what are you going to tell them what's your best advice to look. towards and what to look to avoid well first of all i'd like to go back to what angela saying i think what's really important is the legal infrastructure and i think if we can see more visibility in terms of what the government can do with the legal inquest. that will be a step forward also financing a lot of these smaller farmers especially if they don't have enough financing just so the costs naturally if we can have some sort of a pre financing harvest financing mechanism whereby if for example you can get some money for the harvest that is being sold that would already be a start so these are the things i think that are necessary from the government's point of view to stimulate investment into this industry right now and what i think investors will be looking for they'll be looking quite nice quality companies that

not only have good land bank and quality land bank but they have the technologies that have the access to human capital return i'm going to have to jump in here and chris will get you in the next edition of on the money ok ok i want to thank all my guests today and i want to thank our viewers for watching us here on the money see you next time and stayed with our team.

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