the top stories here on our team and on the money was paid all about it next. great. concert. so did the. moscow. hello and welcome to on the money with the business of russia is business i'm peter

lavelle foreign investment has been identified as the key factor in helping drive russia's economy forward with the foreign investment advisory council tracking a raft of global business luminaries to moscow on the money looks at the progress russia has made and the issues russia still needs to tackle to boost its profile with international investors. to discuss the investment climate in russia i'm joined by glenn waller here in the studio he is president of exxon mobile russia stuart irvin he is chief executive officer nestle russia eurasia we also have. is chief economist at deutsche bank and vladimir off he is deputy head of research department at a critter ok but first let's take a look at what's going on in russia's invest investment environment. challenge to attract foreign capital just as if russia is to wean itself off revenues was

a new pollens and government on the horizon investors are looking for great progress. i think it's quite clear russia can not rely on anything or interest economic model russia needs to change the model that you might have to focus on priest investment restricted space by far in russia and also a great. business environment or should he be players in russia. and hollow there first of the president. and the prime minister's foreign investment advisory council as a result of ceased to commissions rules for business became more transparent many administrative procedures more simplified and russia and russia must be here more aligned with european union. for improvement and russian arsenals are constantly working brueggemann so i believe

that russia investor challenge by less than positive sentiment based on reliance and rather. more investor and there is a. perception as much as local. that needs to change that it just mining r.t. . ok student if you go to you first or nestle is obviously an international brand name what is the company's experience here i mean from the very beginning and to what's going on right now actually it's been a very positive experience the company was been here hundred forty years but in the last fifteen years we've invested strongly in russia and it's been a very positive experience for us we've now got twelve plants ten thousand people and we're looking for to invest in the future as well the citizen very positive when you say positive what does that mean i mean is it been well for an investor

how is that if you have had a good relationship with local. already regional authorities federal authorities think in certain part of the law it's the first things we're looking at is is it a good business opportunity and we've seen we've seen good growth in russia and in the erosion countries last year were business was up was up ten percent and it's clearly a very significant population within the strategic future for russia is good too with the size of russia one hundred forty million and then the rest of your racial on top of it so that's what we're looking at first of all and we've seen the relationship with the federal authorities and the regulation improve over time so to less red tape or so less red tape less administration so in the last couple of years with the move towards the customs union we've seen less regulation or more streamlined regulation we're looking to one permission per product we've seen. easier to get our specialists into the country in terms of in migration of specialists so we're making progress all the time. and i think that's what's to

still a lot to do ok i got my point there eunice love i want to go to you what has to be done still because we just had a really rosy picture from stuart here but i mean what needs to be done because i mean let's be honest here you know not every company in the world is flocking to russia why. well i think because there are still problems then the problems are still significant in terms of red tape i think there has been progress addressing issues such as corruption such as the. level of bureaucracy at the regional level the federal level but this is coming from a very high base so there is a lot that still needs to be done in that regard i think another issue is russia's overall openness to foreign and. and this regard again we've seen progress in the past four to five years russia currently is the only bread country without capital

controls but on the other hand you do have things such as reserves trip. enterprises strategic sectors their scope has been reduced but again this is something that still needs to be addressed in order for capital foreign capital to come more forcefully and to russia and then the other issue finally i think w t o accession if that in his clenched i think that would be a tremendous trigger for capital inflows into russia all right everyone seems to be going in the direction i want to go and i want to go to you because your company is in a strategic sector here what has been your experience because it there were very tight controls a few years ago now there loosening up is going to slow pointed out i mean how is the exxon mobile because you do you just clinched a really big deal with the russian partners that's right well we've been involved twenty years and we have one of our largest projects in russia the suckling one project. and we're very proud of what we've been able to achieve and it's been a very successful project you know exxon mobil in the industry in the worldwide has

the highest has the best record on safety safety is our number one priority and the suck on one project even compared to other exxon mobil projects is our best project in terms of safety record technology as well we've drilled the longest wells in the world in auckland. several of the of the number the top number of worlds including the longest we have on that one project we have the largest drilling rig that we have the largest. single point moring system that's that's the system that actually puts the oil onto the tankers and currently where where constructing the largest platform. offshore platform in the world where we're building it in which is the partnership you have with russia is would you call it a poster child relationship i mean how would you pitch this relationship to other large companies aren't here yet it's been extremely successful and in fact we've had a fifteen year relationship with russia's largest oil company. there are partners

with the with. an indian state company in a japanese type company on the cycling won and that partnership with ross nafta has actually led to the deal that you mentioned that we just saw and you know oldest which is one of the biggest deals with we've actually entered into recently and that includes it's a global strategic. relationship with ross nafta it includes exploration up in the arctic sea which we think is one of the most prospective areas in the world down in the black sea and russia also deep water another opportunity for us to leverage superior technology but we're also bringing ross nafta into projects globally in the united states and canada or another but it's very interesting is that you know russia is still very known very well known as being a quote unquote dependent on export of resources like oil and other things vladimir if i could go to you i mean we just one gave us a really pick surely in then from what i know about it is true whether the

relationship that russia has with oil majors and other energy companies are very good but let's step out of the energy sector right now what are some of the barriers still when i say large companies or mid-size companies want to come here or they can have the same experience as a an energy company. well i think we heard the really the two sides of the story because the early pioneers if we may say so of foreign direct investment in russia you know we heard it there there are people with the experience the business is growing they see you know the environment changing for the better the regulations the rate tape being reduced on the other hand clearly as you said not everybody is here so the problem is how to bring those those that are not yet in russia to make them realize the opportunities that this market has and this i think is one reason is indeed the bureaucracy of the red tape that are being decreased about but not quite yet. russia always comes low

in rankings of ease of doing business and this has not improved a lot. the image that is being posted usually in western media is more focused on the negative occurrences which which happen everywhere but we don't hear a lot about the positive experiences that for example exon model his head in russia in building. the longest twelve's in sally and we don't see it cover that well so you know maybe. second the second tier companies that can potentially come into russia and know a little bit less about it you know day quite honestly. are still still afraid to make their initial step ok and this is something that is going to work it's very interesting coming back to i mean what is the we just heard perception here in the

perceptions right it's off base here i mean where you just heard latimer say would you agree with that i mean because there are so many success stories here people have come here stayed here i don't hear a lot of people actually leaving it's still people coming i mean considering the global environment to me a lot of people are sitting on their money right now but would you agree or disagree to what degree with what vladimir just said i think there is a difference in perception that there is a difference of perception if you look at the companies that are part of the foreign investment advisory committee which which works for the federal authorities is forty major multinationals all of them are continuing to invest here so we're continuing to invest here we're just opening three factories this year one of them in to michigan crescent dar outside of moscow you've heard about exxon investing pepsi in the food industry of ball then build and then and so they industries by the people who are part of that committee the goal here really are by other people i think there is a perception outside of that outside of russia that it's a bit of

a black box they don't know what to do now and say you know investment the very word investment implies risk and reward us for and i would say we've balance the risk and reward these major companies i think other companies are coming with us if i look at one of the factories the coffee factory where i ping into machine it's got six hundred suppliers ok six hundred supplier the big logistical issue exactly three hundred of those over three of those suppliers a local suppliers with another three hundred that are international and they are building facilities at the same time so as we move forward i think it will open up the work that we're. on the foreign investment advisory committee also helps because it's not just about foreign investment i think that this and these big melting are sort of them making it easier as we move the regulations and you know the lay of the ground here all right gentlemen we have to go to one short break and after that short break we'll continue our discussion on russia's investment climate stayed with r.t. . to. discover

its buzy. communicate with the want to. test yourself and become free. see what nature can give you.

he's telling. dynamic. welcome back to on the money i'm literally about to remind you we're discussing foreign investment in russia. right glad i'm here i'd like to go back to you here how well does russia so itself i mean because we have individual companies gentlemen sitting with me here in the studio they sell russia really quite well does russia itself do that. i think the short answer is not to well. and again this relates to what i've been talking previously you know this perceptions about russia are either neutral or usually you know on the negative

side especially when it concerns you know the west and. clearly you know we can blame many people but of course it's the russian authorities and policymakers that you know have to have to think about it and what can be done to the change the situation to tell that it's a country you know with vast. with vast population it's a vast consumer market the biggest in europe with potential to take over in consumption. you know the other rich countries that we have in western europe that their taxes are low that that foreign investment is actually welcome that red tape is being produced it takes time it's a vast country takes time but it's happening that investment in infrastructure is speaking now and so on and so forth because these are the tick boxes that foreign investors direct investors look at when they consider where to invest their money

ok here is what i am i to go back to you and me kind of continue the theme the vladimir was mentioning there is that you know we all know that it's a competitive world i mean there are a lot of places companies can go and invest in and there are choices out there in russia is one of many again to kind of pull on the thread is what i mean was mentioning what more should the state be doing to say come to russia as opposed to china or to venezuela or eccentric such or what does it need to do more. well i think it has to be more active and. showing its strength i think it has to be more active on the economic diplomacy front i think in all of the four that it participates it has to deliver a message that is coherent that is. that shows concrete examples of how things are changing and i think it is the quality of

russia's governance that needs to be addressed here as well the quality of russia's economic diplomacy the concerted effort to show the strengths that are out there because you know quite frankly russia and some of the counts is very strong and you know whether it's the fundamental strength that have to do with the scale of the market with a huge potential of human capital the education levels the quality of human capital but also in terms of some of the policy advances that has to be delivered and clued in what is being done with regard to the dividends policy with regard to corporate governance i mean finally it seems in the past year that issues related to corporate governance to the level of the micro level of individual corporates this is starting to be addressed and this is very important for foreign investors not just portfolio but direct investors as well when if i go to you give me some

examples that my viewers can understand because they're all not experts in your sector it what can you give me examples of improvement that something loose change for the better for a company like yours doing business in russia because as you said earlier in the program even extremely good working relationship with partners here what are some of those improvements in that maybe kind of give a little bit more substance to what your response was saying in corporate governance and things like that yes i mean. when we were of obviously aware of the perceptions of russia but we take a very disciplined a players approach to our investments and we look at we look at the facts and we look at our own experience and our experience i mention a sock on one project we've been able to achieve what we've achieved with at the moment an eighty two percent russian workforce and working with russian companies two thirds of the contracts that we've awarded and that's that that's seven point seven billion dollars in contracts have been awarded to russian com companies and companies in joint ventures with russia so you know we see russian business as well

now and i mention you know where we're building that huge platform in russia we see that russian business ease is is is improving and being able to meet the needs that we have in getting these very large projects going forward would you say the same thing on in your sector we see better regulation all a small streamlined regulation so for example to have a product approved by the authorities is taking less pieces of pipe work than before so this is this is helping us to do things faster and lower our cost of doing business the customs union will also make sure that the the legislation is homogeneous between those markets and that really helps us in making sure that we can move our products freely across those those countries so those are some concrete examples where things have got better for us and go to easier for us there's still some areas that need improvement if we try to build a saw it's build

a factory the still a lot of the minister of regulation in the permits in that needs to clear out what do you do what do you do do you do you go to the advisory council do you go to a governor what do you do i mean you have to lobby these things you do and there is an ombudsman argue civil over there is the only one of the. for the government and he has solved a lot of these little issues yeah and it's solved the issue and i would say he solves it yes if it's for nestlé or for another company but i. actually it helps solve it for all the companies that are operating in small and medium enterprises so we do go to unblock some things between federal legislation local legislation so little glitches can get unblocked but the some other things are the permeating it is actually have to look at the legal framework of the number of permits or you can make the number of sanitary inspections of plants a lot easier by just moving them together so it's not so difficult for us to to operate and if these lower the costs of doing business here and what you lower the cost of doing business for the investment becomes easier to manage it's clearer to

see what the legislation is the legislation is moving a lot closer to say european norms are it's much easier for investors to see what to do and that helps them and that helps them invest obviously in the in the country and it's a journey the wrong is it is easy is the european no it isn't but it is getting better will she know what to do you never go back to you know if you can put you know we keep talking about perceptions then and how russia is viewed in the world particularly in our context here in business but how much different really is it from other emerging markets is it significantly different. i think still the perception of russia is i think worse than. some of the other countries including some of the other bric countries. again the few come back to the issue of the quality of the investment climate and things such as capital controls all of the other bric countries have capital controls russia does not this is not really

brought out underscored. by russia itself. and when you look at levels of foreign direct investment into the largest emerging markets you clearly see that russia still underperforms interims of the overall level of inflows foreign direct investment inflows into russia it's still nearly fifty percent lower than pre-crisis levels. in terms of the scale of the cline that the stock market had during the crisis period in two thousand and eight russia suffered a significant blow partly due to the dependency on oil that is quite significant but russia is clearly doing a lot to address some of these ills in terms of the macro economy russia looks very

strong certainly significantly stronger than a lot of the developed countries than a lot of the years this year it's going to post its lowest inflation level since the one nine hundred ninety two in terms of growth in terms of. other macroeconomic macro economic indicators such as consumption investment it's doing relatively well i'm glad to me if i go to you know it's very interesting i mean even the word tsunami is used a lot these days and you can use use it in a social sense political sense economic financial never sense you want to be a lot of the. is that happening in the world now. is there more of a perception now that russia is a place of predictability i mean that's a lot more stable here because if we look at what's going on. with the dollar with the euro and we have a lot of political issues around the world i'm thinking of the arab spring russia seems to be a little a lot more tranquil than most of the world right now. yeah thankfully yes indeed is jaroslav was talking to mark rican amik environment is is relatively

good i mean everything is relative these days and they'd be a lot better in growth could be higher but it's it's it's fine i think are the key question that for all of us is russia is always important is the level of oil prices and they have been holding up pretty well despite the global fortuity which this time around tells me that rather than a lot of speculation with commodity prices that we had before the crisis this time it's probably the case of you know really supply demand for oil which means that prices would be would be decent and again this is this is good for russia on top of that we have a political issue relatively transparent for the for the next few months we know what decisions have been taken and this gives at least our service to investors and predictability and i think you know at the end of the

day investment needs stability and predictability above all and then and then everything else ok so the ramos horta i mean i want to go in the last word here if there is one thing the government could do to attract foreign investment what would it be in a you've got twenty second i think streamline more streamline the regulatory system i mean you know on our projects we have to get thousands of different licenses and permits and we're successful in doing that because we understand the system we have we've got some very good russian nationals working the system but still it's time consuming and we are encouraged by the russian government's attempts to improve that system i think that is a very practical thing that can can before also the fiscal regime for these offshore projects the government recognizes that the projects are not economic under the current regime and the prime minister is now created a task force to look at that and to make some improvements are extremely to look i want to thank my guests and thank our viewers for watching us here on out. on the money see you next time and stayed with. the

birds.

more news today violence is once again flared up. and these are the images the world has been seeing from the streets of canada. giant corporations rule the day.

dozens of the new iran's across america failed to stop the anti-corporate occupy together movement from swelling with activists saying it's now simply too big to fail. syrians are split over the seven month long uprising while the capital once the president to be given more time to reform cities outside the massacres are tired of the regime. and ukraine's preparations for the euro two thousand and twelve will both championships are under pressure from animal rights activists accusing the authorities of a burning stray dogs alive. you want unity coming to life from.