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and world bank. obvious peter will rally his gas discuss the role of russia and other emerging economies in tackling the unstable global financial situation on the money is next on our. welcome to on the money where the business of russia is business with the privatization of state controlled sectors a vital part of the government's long term economic strategy on the money looks at the company's schedule to be part of the program it's time frames expectations as well as potential budgetary implications along with the risks involved in pushing privatization in russia with the global economy looking weak. discuss russia's upcoming privatization i'm joined by so you all in the studio with me he's the c.e.o.

of the joint stock company gaiman world also i have been here is he's the editor in chief of business new europe and we also have tom when he's the chief strategist at a critter but first let's have an overview of russia's privatization goals. the multi-billion dollar privatization plan will see the russian government sell down its current fifty five percent ownership stake in the economy it has strategic objectives well beyond the budget bottom line they mean. in my view. the government is not the. manager. or corporate management is not high. diversified structure. it is a very good point. the

other natural target is definitely modernization. growth corporate governance procedures transparency this actually wants from state on companies right now to be beyond. international investors international political process it's impossible to meet. everyone. just wants them to do but the deteriorating google has some questioning where the shirt should be delayed there's not really nice. in the market it's the same time however the global search for investment value means the russian coming to the blog could attract a greater interest regardless of the timing the privatization plan would stay in first. but the share of the companies involved that's where she begins to take emotion and that means this team you gave me

a long time for this. volatility that brought the money. ok gentlemen when we were planning this program there was volatility in the market but if we sit down right now there is enormous volatility in the market right now and if we're talking about what's going on in the emerging markets right now the stock market's been how much sense does it make to talk about privatization and russia's privatization program which is a vast right now i mean we're going to we're going to have to delay it even longer isn't it wait and see i mean there's so many things being played out there is carnage in the markets right now one of the russians had to do well i took to. running the agency that's coordinating the whole program and he said to me that's our priority is to get the states out of the economy is a question of long term competitiveness of the states a bad manager encouragingly and concedes that they want to remove themselves however you know there's also a question of money involved so it is

a big valuable companies and it's so that once. they want to sell they need to sell to get them out of it get them into private hands or at least private oversight but they're not going to set any price and clearly the market is extremely unstable and the russian stock markets lost at least a quarter of its value since august and so it doesn't really make sense to sell them such as you don't need to so you can wait see here and then the prices will go back up and we're talking billions and billions of barrels that is very interesting as we look at so many of these countries in the euro zone and i'm going to say it again this is where they have to sell assets because they needed for their budget because of the deficit to run and russia doesn't have to sell assets right now straight on our fed's it would like to because as ben pointed out in principle once they get the economy out i'm sure get the government out of the economy so russia has a little bit of a luxury situation right now compared to a lot of its peers in the world. thank you peter we are in such situations when we

can afford ourselves wisely handle these resources very very important resources for the national economy and very serious but it is a pittance of the. process on the world scale i would agree wise words which were about the goals of privatization will on the lot from big crisis of the year to that and six. to southern and nine but we didn't do everything we learned as the lessons of this. pierrette it's time to challenge and of the difficult times and other crisis and. i don't mean to overestimate the role of the business but it's very evident that business can play a significant role when we do if we look at a good time here i mean come on if we're looking at you know should they or

shouldn't they i mean it's just a matter of time right now what what what are you investors looking at now they're looking at specific sectors we have something we have like spare bank up there we have melrose i mean what do you think during this time of volatility and considering the privatization program if you could be sector driven. well i think you know i agree with what the panelists i mean clearly the current market people are very little privatization program nobody actually expects anything with cereal to happen in the near future certainly not and so what is three thousand and twelve i mean the only negativity comes the market in any in any meaningful size. their futures that i believe in that's going to get pushed back and i think i'd you know i'd also fly that you know there is a place with like the moments and days which which political cycle rushes are or the u.s. is. this is a russia's political cycle but i think there's a history of privatization in russia not been taking proper in most places i don't think given specially given the current market volatility that prices depressed as

they are if there's any need of saw any real willingness to push these reservations out before the next for the next election and i think the market really does accept that what's more interesting i think is the way that the government has attacked has understood the need for an investment and instead of pushing privatization aggressively in the current market volatility they've looked at j.v. and getting j.d.s. going for a sense of russia like the axe on rusty f.t.l. that's my mind much more realistic much more substantial and something that foreign investment community can really latch on to the privatization zone is a very it's not going to be front and center for a while yet it's very very difficult back to being here i mean three m. standing we should point out to our viewers what privatization means for this country because as i pointed out to sergei we have countries in the years on that have to sell assets because they need to generate income for the budget russia doesn't have to that would be other things like expertise more liquidity in the in the marketplace to attract even more investment in russia has

a different objective or a series of objects if the western europe or the states even i mean people are selling because they need money and russia has the luxury of having lots of money and some of the richest country in the world in terms of cash in the bank they can cover their external their public external debt to. for the other it's that of this kind of cash so the goal of this protestation is about dealing with russia's more basic problems which is competitiveness and fish and see new technologies and setting of companies in the strategic sectors of said having ringfence price the prices they're looking for know how for management skills for the technology for efficiency to boost productivity competitiveness and this is the irony of russia has lots of money but it's not particularly competitive and going forward you need to have a viable economy you need to compete and you need to produce goods that you can service where you know it's a good thing for you i mean i think we all agree with what we just heard from tom i mean this because of the volatility going on right now and the election cycle in

russia and in the united states. there's going to be a wait and see but we you know there will there are thirty maybe big names brand names of the nine hundred companies there's eight hundred seventy small ones there i mean is it just in principle just get it off the government's ashiq you know to say we got to get rid of it we don't need it why should we did devote resources to it without will be cherry picks right there where people say this will be a nice because you know ben is right the price is going to matter when we're talking about these three big companies but these prices need to be so important for the smaller ones. the price is important otherwise we're not in business but let me say that the kid goal is a long term goals and the reasons for profit is asian if to say it in short it's modernisation of our business and the integration of our business and the world's business this to a direction. of the development of the business the right time in bad times

like crisis and when we're talking about declining for privatization let me emphasize one important stage negotiations not only about the price what we're going to do together that's an extremely. or it's a really good point to what i envy and you're going to see a lot of the media if i go to your time here i mean again you know there are different objectives here and countries where they have privatizations could have it for a number of reasons but is this for russia and i agree that timeframe is probably going to be pushed out here but it just shows it has to demonstrate that russia is a investment friendly destination because this is something that we've always talked about in the the i don't know how many years you've been here what sixteen and eighteen i've been here for almost thirteen and it's always russia as an investment destination can privatization kind of push that along be be a driver to show that russia is a better interesting place in a place where you can make a lot of money under the right circumstances. privatization is part of a big it's you know it's not enough on its own it's part of another story as well

where there's a liberalization of tires for example but privatization is something that the intention is very clear from the government so i think they're very very serious about this and i fully agree with everything that don't just that they have russia's had twenty years of depreciation of assets if you look across say most of the russians of steel mills they're operating in front close to full capacity right now and this goes across the whole economy and it's got the station on russian gas simply it's been creaking for a long time and now it's starting to break down and we've seen that as evidence of that or some of the tragic accidents that we've seen in the end in the acar aquifers and so on over the past couple of months is evidence that there's a real root problem in russia and russia has to do something governor has to some of the shows of foreign investors that they don't guarantee stable returns on investment and one way of doing that is opening up the markets going transparency its ability racial room floor creating as a thirty and privatization is very much part of that but i would go by it's what i heard said at the beginning event has compounded with other with our the reform

process privatization is not just enough on its own this pushing forward with its and with with liberalisation of tyrus result is also obsolete and ok i guess we all can agree it's not a panacea we need to go to a quick break gentlemen but after that break we'll continue our discussion on russia's privatization state party. this is a city. of about one hundred ninety thousand people and we had eighty thousand

people working for general motors. or a job that depended on general motors. general motors is if it's not relations you it might be your neighbor somebody you knew so it's kind of family run business you know myself i'm third generation my father was working there and you have a lot of two three and four generation families there and their first let's understand it is this is it doesn't work. and he said. it is rewarding. and to work with. i think for a long time this notion in america that bigger is better was simply an undisputed fact in the twenty first century smarter you can do better general motors simply became too large for their own good and so many brands that they couldn't

even keep up with they just basically became a dinosaur. was. just. welcome back to on the money i'm going to continue our discussion of privatization in russia and other business news happening around the world and to do that i'm joined by ben errors here in the studio with me he's the editor in chief of business new europe also i have it on he's the chief economist for russia and c.i.s. at renaissance capital he's the chief strategist so pretty and alexei they are called he is the chief economist at euro capital all right ben let's pick up where we left off in the first part of the program about privatization when we look at russia's privatization which we all agreed with me in the first part of the program that's not going to go anywhere fast because of external events here but let's look

at external events here how are other countries emerging markets going to be looking at this volatility because in some ways some ways there are some real cherry picks out there i mean flight to quality i'm thinking of these kind of things and if you've got the cash we're going to give emerging markets like russia second third look now one of the moment at the moment that's being driven as far as i can see. you know the prospects of. europe and major european banks going to the world people are doing well there was that i mean the fact of the things that they think the safest steeples in the states called the irony of this is that measuring markets have sold off heavily if you look at the fundamentals they're in a lot more sort of position really this is a crisis of the west's not a global crisis. ok ok my business is maybe your fundamentals are right there is a container ship here i mean we've seen markets all over the world and united are going to have on what you think about the same i think that we all agree the commercial markets have made very big strides in terms of improving their

underlying economic fundamentals but at the end of the day when things from google go south i think everybody runs for hours for the exit and this exactly what is happening so i would agree with ben at this point of time we just have to play safe ok. actually what do you think about that everyone's going to play it safe here i don't i'm not going to give up on the emerging market i see a lot more opportunity even during crisis well i would think that. many people are . there risks when things go bad in the world the crown and russia is seen as a very safe place to invest so i think that. many people just want to get out there for sure these days and put their money in something more safe like american treasures or other safe i don't know what do you think about that tom i mean the very name keys words coming out of the fed here we have a report coming out of the i.m.f. i mean there is doom and gloom out there i mean just sit on your money.

yeah we are beholden tellers of the moment but i think the good news is if you are holding dollars russia is eventually and we can you know like we saw at the end of two thousand a crisis will be very good value you know russia's other sovereign position is very very strong especially in europe and peripheral european countries and that's reflected in a part of mark's contraction in russian southern spread since the beginning of the year the problem for russia is that this is an economy that's highly highly reliance on the oil price and russia is the biggest highest peter plan emerging markets on the oil price so you know even if the fundamentals are very good because because you know russia needs high oil prices its budget you can buy out sees an environment where you think your price is going to fall i've mentioned russia is going to look really really good and the market apart and so we have certainty in what's happening in europe in europe and more stability and all price forecasting are going to stay out of russia ok well then i want to go to you let's look at the euro crisis here right now i mean it's not if it's when when greece completely defaults and maybe is kicked out of the euro zone we've talked to the euro zone

many times in my cross talk program what do you think about that house i could affect russia's fundamentals if he we continue to see indecision with the eurozone well it's a contagion effect i mean it's hammering the russian market i mean some are saying that there's going to be good value in the in the russian equities there's already quit value in russian equities i think the trading and price to earnings ratio is down around five and russia was the cheapest market maybe under five yeah under five you see i mean it was already the cheapest market in the world before the crisis and now it's i mean these are insanely cheap prices and at some point they're going to kick back in again but in europe it's they need to make a decision i mean you either bail. them out and it's that the the ring that's really causing all the problems the currency the fact that we've got another meeting and we've got a billion dollars or two in in three weeks and we don't i don't think anything it's you know i don't want to have the whole of the russians taking it i mean we all know how the chinese are taking with the emerging markets i mean this gives. ring

we see in the eurozone because people it's the biggest economic zone in the world market in the world and you have no political will right now in the eurozone i mean it really must really drive people kind of batty waiting for them to see what they're going to do because of just the simple trade relations because to put it very mildly i don't think that this is something that's appreciated here. for me actually there's one key difference right now if the world is going to thousand and eight i still remember very vividly it was september two thousand and eight and couldn't we're saying that russia is an island of stability russia is a safe haven nothing will happen to us and would remember what happened in two thousand and nine in terms of g.d.p. collapsing where i think a little bit of a comfort here is that right now you hear a quote in an other person saying that will be affected so i think that the previous crisis actually gave the russians a little bit of a learning lesson and it's i think it's a positive election and it's

a really good point too that we have a huge learning curve here and i can go back to the late one nine hundred ninety eight to two thousand and four and we have two thousand and eight i mean russia has learned a lot i mean businesses have learned and governments in how to deal with all of chile outside of its borders i mean is as we go through this turbulence right now how well positioned is russia to ride this storm out. well i think that basically the russian fundamentalists are in la was thrown out the situation may had changed pretty soon i mean there are two factors that are critical to this the good of the russian economy one of these these well prices another thought to ease the credit expansion so so far that will remain spread stable and it doesn't drop significantly significantly but also the credit expansion is pretty good in the russia but the problem with the current market situation is that basically. on going confidence prices even banking system in the euro

zone it will also spread into russia and when that happens there will be a sharp decline in credits and this will affect the economy well ok ok john let me go to you for if we see that happen is it a real problem economy will contract or will just go flat. you know the sort of problem for russia is that it's difficult to see i mean one side you know it's created that for me the profile of just that profile is much much better now that it wasn't two thousand a not in times of over before and that it's about the same and signs of that repayment schedules russia's pressure maturity fits that profile which is great news now is reflected in a very minor contract expires to say yes france for example for russia but again the problem is the balance the budget balance is a high oil price now and russia hasn't learned from that and again maybe something political in this well you can't it's very interesting the timing of standing a lot of money on public sector it's very interesting this time around we've had the saudis making it very clear that they have to have

a very stable oil regime because of the arab spring because of expectations within the kingdom they're going to make sure certain amount of money go in that actually is that russia will be able to take full advantage of how critical is the oil regime right now if we have the main player one of the major players in our pick like opec say they will support in oil price at a certain price prices first we should say it's a mug's game trying to predict or price of cornelius were brought out in ninety eight when oil went to ten dollars how he said there's no like a correction it's i mean bear in mind i think it was only in two thousand and six the russian budget broke even at twenty five dollars per barrel and today it's one hundred twenty dollars that's a massive change. thing with the saudis i mean the talking about something eighty to one hundred dollars they need to break even but you know the russians they're taking a bet they're saying we've got this a revenue and we're going to invest heavily in the country because we need infrastructure we need factories we need and we have the money at the moment

because there were prices are high and that all of this stuff will bring growth and . bring some sort of momentum to the country's economy so that when oil prices do they actually go down and the time before the program once it ratchets up it usually stays pretty high. i mean i can i expect it to but it's a pure guess but you know if the oil prices come down to seventy dollars. sort of sixty dollars a minute for some of your thirty and what would be going to result russia would turn into a normal country where it wasn't reliant on oil and what would that push them even harder than a society of diversifying economy and do all those things we want them to do so would it be such a bad thing i mean certainly would hurt but would it be sensible and think obviously before you might think twice about people who want to go to you is the us experiencing a double dip we knew that we know that in two thousand and eight they found out it had been in recession for almost a year before it was declared a recession it is a double dip right now how is it could affect you and the emerging markets because

they prepared for russia prepared for it well first of all i pay nearly as quantitative easing going to have any effect anymore as it is into that now well first of all i think that if you look at the markets i think the markets are just so pricing two different outcomes right now a lot of vacillating between tomorrow to do outcomes number one is maybe we're going to have a mild recession along the lines of one thousand nine hundred or two thousand and one or we're going to have a repeat of two thousand and eight in any case the market i think is pricing we're starting to price as a baseline recession so this is number one the second and the answer to your second question is how russia will be affected certainly we should not be living in a we should not be complacent and should not be deluding ourselves and russia will be affected but still i think that we're not going to definitely into a negative credit to get it early next year ok let's see what are you see more quantitative easing going to make any difference now for the u.s. and for the rest of the world i mean i think theme our emerging market worlds are tired of you know getting these and inflated assets but also offloading all over the place that we've had enough of it isn't going to do any good for the u.s.

in the ending greenback i think the. want to be easy in which is basically a monitor response and there's not really our opening more because of the problem is not to give our mind to the balance of the problem is to give money to people so that people spend more and when you sort of. though this you increase the amount of money by the banking system but the banking system does not really have a part of this money to people because of the risks associated risks we could be this. confidence crisis is also a serious problem they are already looking at we're almost running out of time i want to go to. the. quantitative easing keep you up at night. now what keeps me up at night is that is the unknown in europe you know i don't personally think that there is a big driver overseas because the market economy last time has

a decrease get any extra pretty. model modest as i would say that a modest. recession in the u.s. where we can start surprised that the markets prices were pretty well already it's the blowouts in europe that i think's really worry like it's right now and we need to stop muddling through and find a resolution so finally finally consensus among us all here ok i want to thank my guests and thanks to our viewers for watching on the money see you next time and stayed with our team.

the. man the ship would be soo much brighter if you knew about sun from funds to freshen some. of these.