watching. a million voices for independence scotland. the campaign that could see a referendum on breaking free from the u.k. time. to protest against. the. police brutality demonstrations in the georgian capital critics accuse the country state media of. its content.

the money is next. election. the money with a business of business. economic form. story. expensive oil and. to discuss the agenda. peter weston he's chief equity strategist at a time. of the new book.

david snapshot of the burgh. despite predictions that little would change two thousand and twelve has turned out benfield period in both. speeches the new crept. in just a few in petersburg the government intends to gaze the strength of

the days and then you cabinet. on may twenty first. it's. likely the. country which reached eighty four in the end eleven and has shown signs of abating this year on the. dollar in

states of just zero point three. it will cut well in current markets and market and. one particular market but it's a. after taking office on me. tonight and the corner me side to. define a set. of times

if dition in the world bank's doing. in. so. they. go bust but it's slowing down what is now the grip. and. growth.

that's been amiss. ship. this is. from our petition for.

the french you think it's good. you know for your money but that it's still. burning to.

the fact that. your money until the.

it's quite good for the economy in so much as its hold on inflation inflation is at a twenty year low is holding down the value of the euro the ruble which is also making it easy for russians to export and so it's quite beneficial and given that russia has more than five hundred billion and they can afford to bleed a little bit of money which is actually helping the economy along at the moment ok always the optimiser what about you simon i mean ben just gave a real mixed bag here at the st petersburg forum this year what do investors want to hear to bring money back into the country again we all agree that there are external shocks here but what proactive element can the russian government do to start bringing the money back in also predispose a great place to be in the summer. obviously many multinationals there. waiting

with bated breath to see what president putin says. the new cabinet stays as it is is a move forward we're seeing we're seeing you know there's a whole raft of new people within within the within the government now that said many of them were deputy ministers that are basically stepping up but you know for foreign companies want to see a little more action less and less words would like to see a substantial movement on things like you know corruption which is always said on the on the program we would like to see significant increases in infrastructure there are many many projects that need doing across russia over the olympics coming up in the world cup coming up there are great opportunities that president bush himself has you know seek to said significant improvement in fifths or infrastructure needed we'd like to see that actually taking taking shape faster rather than sooner rather than later ok peter talking about infrastructure i mean how attractive is that for foreign investors mean huge projects huge amounts of

money what kind of guarantees are there to get their return on their investment i mean it's not you know i'm jumping into the the r.t.s. of the mind six i'm jumping out right well actually if i just didn't point to one of the opportunities here and that is actually on the f.b.i. side of the phone direct investment side russia's received. about one one percent of g.d.p. in inflows. on average over the last sort of ten fifteen years which is abysmal in terms of numbers and what russia needs especially as to domestic investment and also look. the chinese which are actually great in doing infrastructure projects the sort of caveat is that it normally want to bring their own workers right but if you look at the overall investments that s.d.i. that's come into russia it's five hundred billion since one thousand nine hundred four when the data started to be collected all of that hundred eighty billion is cyprus you know what i mean we all know explain to our viewers what cyprus is what it is to be russian money coming back. into the left only ninety's mainly and then

coming back yes the chinese money is only two billion of that is amazing and if you look at the size of the country and the opportunities that the chinese are going to go into africa because what they're after you are apart from infrastructure they're looking for raw materials and oil and africa is the place to go because that's where they can basically manage to actually get hold of assets and even think that you're welcome you know and you know i really like what simon had to say because you know the infrastructure is very important here but at the same time it's a lot of money and it has to be a lot of trust your i mean is this the kind of next step that the russian of the russian government has to push to bring huge amounts of money in our experience we're seeing activity course whole broad range of spectrum changes in business climate in terms of administrative areas bureaucracy you're a critic simplifications massive program this climate action plan has been put together two thousand and twelve two thousand and fourteen some really meaty stuff in there on corporate governance on building codes a whole range of things if we can pull that off together by working with the

government that plus good infrastructure projects really moves forward i think it starts to get out of the mindset of what's wrong with russia or into the mindset of what we can change for the positive and i think that's extremely powerful regiment on that know where we're going to go to a short break and when we return we'll continue our discussion on the state of the russian economy. but our good. wealthy british. markets. can. find out what's really happening to the global economy with max cause or a no holds barred look at the global financial headlines. is

a report on our. secret laboratory. was able to build the world's most sophisticated robot which doesn't do anything. to teach the creation why it should care about humans and. this is why you should watch only dot com. welcome back to on the money i'm peter lavelle all right gentlemen let's continue our discussion on the russian economy before the forum in st petersburg ban if i can go to you mentioned in the first part of the program looking at political risk here when people are sample in st petersburg there's going to be a number of academics there and businesspeople there and politicians want to know what kind of impact the recent protests have had on the current government thinking about reforming the economy what's your what's your take on it that's the point

they're thinking about i mean the protesters have stood up and said we want to bit more say in how this country is run and the kremlin has to listen and it has been listening i think it's going forward it's finding a balance between the protest movement and the man. and how the government is going to react to that and i think the government's side it's going to be a mixed bag on the one hand they are listening and they reintroduce a popular election of governors and which is a step forward which putin got rid of when he took over in two thousand but on the other hand they've introduced this new demonstration or which imposes big fines on people who do and sanction protests and it's going to be a balancing act between the protesters you know their frustration in terms of how much they get to get involved and against you know what the government actually does and delivers but i think all said and done and everybody agrees that the protests are a brilliant development it takes us forward and we need this kind of debate and the

government doesn't need to engage in the people more and the people are standing up and they've become radicalized to the point where this can't be put back in the bank and so therefore it is going to have to deal with it and it's the beginning of civil society in russia which we haven't had for most of the twenty years we've been here peter you're an old hand like myself here how do you what kind of impact those do the protests recent protests have on government policy because government policy even in the best of times moves slowly ok you can't implement demands immediately you needed a dialogue well so far we i don't think we've seen any impact because we've obviously been in a shift of government it's going to take time before they start to act i think that the major point here is that the government needs to manage expectations because during two thousand two thousand and eight. two terms in office he managed to increase wages in nominal terms thirty percent per year over the last three four years it's been ten percent per year people have been focusing and seeing you know

bureaucrats and officials getting richer and richer. they need to manage these expectations in other words the people now expect perhaps put in to be able to do the same as indeed over the last eight. years and it is president up three hundred eighty eight percent of the. it's years since made it better to look at method of oil prices down so it's going to be a challenge so what do you think about that i mean managed expectations oh my goodness you know a lot of politicians in the world would love to have this kind of situation both peter and them bring up great points i will say that you know we need to move to a more pure or a stick society here in russia you know the protesters of vans that now in many ways i disagree with and i don't think the government's really been listening i mean it's heard but i don't know whether it's actually sunk in and these are substantially in that we're still really to see any substantial changes and you know the next few years ago to be very very significant i mean if greece does blow

up as we saw in your report you know or oil price goes down to eighty there's a huge budget hole all of a sudden we could see some civil unrest ok you know given you know you know all of us on this program have been in russia for quite a long time and. the calls for reform are always out there but is it being said too loudly too often what reforms is for someone that runs a large company and what reforms have you seen seen quite a significant program over recent years the office of federal on bud's been looking after regional affairs hugely successful fantastic opportunity to be able to get through bureaucratic red tape and get things change for the better and a very open dialogue there much more direct access on business issues to various parts of the government to be able to get solutions in place and if you look at organizations like fee uk really starting to play a role in terms of offering positive suggestions that the government is accepting so i think there is definitely an understanding from my perspective anyway in the

government of the need for reform and some movements to start to go down that path but the agenda is pretty broad there's a huge amount that needs to be worked and i think from my perspective we've got to be realistic on the expectations what can be changed in what order to get us the right place then if i go back to you if you were to have a pecking order of the things that needs to. most in russia's economy and i'd like to point out when there's an economic forum you know russia is in a very turbulent world why why what does the russian government and russian business have to say to that to the visitors in st petersburg come invest in this country as opposed to china or india or brazil what would be your spiel i think what needs to be done. is very simple it just needs a level playing field rule of law to get rid of the corruption to get rid of the bureaucracy so that people can come set up and give some sort of stability the stability and predictability and that's all you need to make business work but the process you know it's going slowly the state has a lot of big projects sectors that it wants to push and tends to throw its own

money at that which is not necessarily helpful but i think to come back to the bottom line and david has mentioned this and this is why companies like kraft here is that russia is on the verge of becoming the biggest consumer market in europe and if you look across europe it's the only dynamically growing profitable markets in the whole of the continent and also compared to the other countries in the world it's you know it's doing stream well and that alone will bring investment people want to do business and this is the place to do business and the government just needs to bang on that message and make it easier to do it ok it's a very nice message with peter with me here in the studio how vulnerable is russia to the world in europe well i think you give me a good scenario in a bad scenario ok. if we get a muddle through scenario. with greece because in the end we've never had an event like greece ever nobody really knows that's going to play out but it could open pandora's box. if that happens all of us going to be sixty five fifty. you know

without any any hesitation or in my view. that's if if we force. scenario ninety eighty ninety dollars. but. the dependence on oil for russia has increased dramatically to in my view alarming level if you look at the non oil deficit to exclude the oil related revenues from the budget two thousand and four to two thousand and eight they were one point five percent of g.d.p. over the last three years more than ten percent of g.d.p. the dependence on oil is as has recently been level so that's really the key that matters when we don't have the domestic drivers in place by the massive driver we have right now is politics the tense of a negative if you get the reform agenda going in frankly you know they don't need to do much to exaggerate a huge difference if we get that we're in a different scenario but right now russia is all about domestic factors. so i mean

if i go to you know it seems to me sometimes it's russia interrupted because just when they get things going then you have the euro crisis in the backyard you don't know what's going to happen with with the dollar. there's so many things going on here we can interrupt russia's progress even with one of the best scenario absolutely i mean and russia still growing i mean you know the whole of europe is dying for growth rates of over four percent and mustn't forget that you know russia is still a dynamic economy that's pushing for despite all the problems that it's facing i mean god knows what will work what we can possibly hope for should you know should we muddle through in europe you know we get stability and we get political reforms in this country we'll see significant bones forward you know russia russia is definitely moving in the right direction we just it would it would be nice if it was just a little faster and little easier but then everybody would like that benefit go back to you i mean let's go to the other side of the globe here growth in china is slowing down when people go to st petersburg are going to be looking at china as

well how much is that impact russia. well the tourney's story is you know dominating everyone's attention in so much as it's seen as a global driver i think to pick up and simon's point that's what russia needs it just needs some peace and quiet you know everything else settle down and everyone just got back to work than russia would flourish as it is having to manage all of these things but i think all said and done i mean peter i think made the crucial point here is the lack of s. emmy's because then it means the russian economy is very dependent on a few big state owned companies and most of those a commodity commodity driven and at the end of the day makes russia very vulnerable it becomes a boom bust economy and if this crimean and it says it doesn't have to do very much you can boost this domestic small business then that gives the economy some sort of robustness and given it's got so much catch up to do then it will become irrelevant what happens in the rest of the world just simply because of domestic business getting on the business or getting on with growing you run

a company here and i think we all agree here having small or medium sized businesses is what really is missing in russia i mean running a business what we like to see the government do because these could be suppliers for you and what not all kinds of help to you what would you be your wish list two or three areas i think there is an opportunity for the government to partner more with big business to set up schemes that encourage the growth of local suppliers so that these small and medium sized businesses can have the cover of protection of a big business to help them through the times of bureaucracy in the way things work or you got the opportunity to work on a local level with regions much more regular we have good relationships with all the regions we work in those are very positive the other areas to look at those barriers that exist are necessary barriers that prevent you from exporting from here you know we've got world class factories and we're not alone in having fantastic factories or coffee factories in most efficiently group anywhere in the world for example chocolate factory same deal how do we free them up so that you can get them exporting not just satisfy a local demand and therefore expand that capacity starts to diversify the economy i

mean there's a whole series of. in partnership with a government possible and there are also reforms to tax law and things that make it more competitive to invest here alterations to property tax for example getting rid of the eighty on exports is all series of things that really could make a difference peter i'm going to put you in the position of being flooded near puton addressing the st petersburg forum next month what's his scripts going to say what if you were to write it for him what would you say well i think you know we've touched already on this it's a bear and mention what needs to be done i think the corruption issue is crucial because that comes back to the small business environment and there's nothing more important in my view to create a foundation for big business creating if you want financial industry networks is all done if you look at you know evidence is done by small or medium sized companies that will also attract the f.t. eyes and also if you look at the export orientation in fact export orientated export expert oriented countries tend to attract more f.b.i.

than domestically in the country so i think the corruption is actually key and it but it has to be focused on you know in my view to also coincide with creating a better environment for enterprise to be allowed to be entrepreneurs that i think is the fact you got twenty seconds you want to add to that you're giving the speech absolutely i mean the rule of law is fundamental i would i would push forward that you know here we are there is a level playing field that speaks to the protesters on the streets i also will seriously try to long term capital the infrastructure that we talked about the beginning of the show all right gentlemen thank you once very much i want to thank my guests today and we wish for watching on the money see you next time and stay hearty.

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