it does exist in a real world but there is still much to be done at home to expand the economy i. discuss this and more i'm joined by my guest chris weaver he is the senior partner with macro advisory and we also have been heiress to use the editor in chief of business new europe all right ben if i go to you i think you were on the first program of this year if not the second one in a nutshell in a few words how is the russian economy ending this year or this year i think it's been rushes. in so much is it's been the worst year was in a crisis year for the last decade and a half and so we're puttering out of the year slowly with very disappointing results across the board and everyone is looking forward to next year because can't be worse than this one always can be worse interest in a few and a few words a few sentences how would you describe russia's economy as we're ending the year i would actually agree with ben there compared to where we were the start of the year

looking for three three and a half percent growth or think of the optimistic end now we're no ending the year according to the world bank's forecast maybe about one point three percent very disappointing compared to what had been expected and that has come as a result of a big drop in investment and much lower level of consumption than we've seen in previous years ok gentlemen i don't know if you agree with what i mean or vitamin putin agrees with you but let's listen what he had to say about the state of russia's economy. of course we are feeling the affects of the global economic crisis but let's be frank the main reasons for the slowdown in our economy are internal rather than external in nature in terms of the size of its g.d.p. russia is doing well and counts among the world's five biggest economies but in key indicators such as labor productivity there's a two to three fold gap between us and the developed economies we must work hard to

close this gap. and that's a very different tone usually heard from the president when it comes to the economy is it does it match the situation i mean it's encouraging him to. put in put his finger on one of the big problems i mean a that they admit that you know it's our fault it's not just the global economy strategy or tone it where you date and the second thing that he identifies productivity increased mention the investments down and there's been a huge problem and really that going forward next year what happens to investments going to determine what happens in the year but underlying all of that is this fundamental problem of lack of reform badly run companies and the fact that russian productivity is so low and that's an investment those if they fix those two things it will make an enormous difference. to the president's comments last week i think

represented in a major shift in you know he's attitudes towards the economy if we look back you know almost like the last twelve years for you know for a first part of it it didn't matter to gold prices going up would lead to consumption boom which of course would sustain a strong growth economy and then two thousand and nine ten eleven the government was much more inclined to emphasize domestic stability while warning about you know external contagion the rest of the world basically. it posed a risk so this is the very worst time good but at the same time. they were ignoring what was going on it holistically because they were very focused on that and emphasizing strong balance sheet domestic stability so the president's comments last week you know this is the first time we've heard the president actually saying this is our problem to fix rather than you know suffering from contagion from from the west so that at least gives us the basis of optimism to as we come into two thousand and fourteen to recognize this is a serious problem something must be done and you know i don't think we are going to see anything major in terms of initiatives up laughter the sochi olympics are out

of the way but i think once that's done i really would hope that to see much greater focus on the economy and what and hopefully it will even bother to solutions to pull it out of the slump. i think what we've seen before in the boom years we had lots of money and reforms were about privatizing the power sector or studying the financial sector reforms the so-called international financial sense a project and what putin was just talking about there is focusing on structural problems i mean things that have always been in the background but they weren't necessarily an issue before because everybody's wages was going up so fast and you know there was lots of money to do business and the slowdown has refocused russia on questions of efficiency productivity waste accountability and this is great for the course you know talking about it we have to see some changes and that's not you know but you don't you don't get growth without pain too and i'm not saying we have to be on the same magnitude of austerity in europe i think this is really what they

want to avoid here because we've seen tightening of budgets here are at least in the state sector and with an eye on that you know finding some synergies finding more efficiencies we saw that in the week we saw that in the state media sector that we need something to him in that the crackdown on corruption is gaining in momentum and it's getting more and more serious and that's part of the parcel it's the fact that you know the corruption was it was a huge drag on the economy and the kremlin is trying to do something about it. probably going to be a generation before you know actually really get to the root of that problem but you know it's very encouraging to see than actually talking about the right things and already we've seen some results in russia is going up in the in the ease of doing business and is now the most it's the easiest place of all the brics the four big emerging markets to do business and the same with transparency international the corruption perspective index of russia she improved in that and overtaken kazakhstan and ukraine in terms of who is still

a big problem so we're going in the right direction it's interesting because you know it takes a feeling nervous let's put it that way to really get your act together and start working on these reforms because we've all pointed out over the last twelve thirteen years you know money kept coming in so and we can you can put off things and this is what we've been talking about on this program for every since we started doing on the money is that you know because if there isn't enough push initiative you can delay you can think about you can we plan now those that window is closing or even close. to get a lot of people watching this program or probably say look we've heard this all before and i would strongly emphasize the fact that we are talking about it as economists and said the liberal faction within government economy ministry formis finance minister khujand cetera have all been pushing this agenda for many years this is the very first time that the guy in charge has you know sort of signed on to that and is recognize a problem that's a major difference and ben says of course we need to see how that. works out next

year what changes it will it make and i think you know it's it's obviously it's a huge it's a huge problem within government it's all very well for the economy ministry ins of the so-called liberals and those who have been pushing this agenda for home for a long time. it's all very well for that group you know to to you know start talking about the need for more urgency in the form process you still have a huge you know vested interests bureaucracy. the state sector which is very powerful and they don't necessarily you know subscribe to this you know need for change so that's still the big problem you have this enormous part of the economy that really doesn't sign up to this at all the question is whether the guy in charge will now be able to beat heads together and make progress it's interesting because the state sector is. a good part of putin's political base as well and he's telling them you know now is the time you've been we've built up your organizations

you've created your empires but they're not efficient and now but he has the power not to fund them ok so this is a carrot and stick approach if you think it's going to be very effective in which our time frame here because you know politicians are in power you know to give results you need to give results things that russia was seem to take four times longer than they should do because there's a huge inertia i think people sort of lose sight of the fact that the size of this country you know from half the globe and the million or nearly two million people in the bureaucracy and a large portion of those are left over from the old days and this is an inertia here i mean how do you supervise people. when you sit in moscow because they're asleep the whole time that you're awake so it's administration by e-mail it's not particularly efficient whereas if you live in a stone you just walk out the door and everybody's you know two minutes down the road and so everything takes a long time timeframes in a way a kind of nonsensical because you have to start it and it takes as long as it takes

and it's going to take longer than most of the places because it's so big and the trick is to get on with it i mean you mentioned pain but then that's one of russia's advantages is although we're feeling pain we're not feeling the same pain as everyone else it's hardly pain i think it's more frustration right now it's really i don't see it as a patient of possible pain because we're in a relative sense this economy it's still growing let's remind our viewers it's still growing it is flat. now compared to what we've seen over the last decade he still has money in reserves and he still has very low debts and you know all the macro stuff is compared to everybody else is actually pretty good sort of using it more efficiently but of course to you the other factors that we need to take into account and i'm sure president putin the kremlin is taken into account is of course you can you polls are showing that while you know majority people still you know approve of the president's approval rating remains above sixty percent according to deliver other polls there's also you know

a growing discontent with the results that are being achieved in government and people are definitely looking at the slowdown in the economy in the opinion polls showed that there's a declining level of confidence which of course is also self feeding into slowdown because if you don't have confidence in the future you're going to delay purchasing you're going to delay investment so there's that sort of combination coming into play right now as well and that adds to the sense of urgency and gives us more confidence or some confidence that next spring for starters it's going back to putin's words you think the private sector is taking this well because i mean of course we been talking about the state sector here but the private sector would really like to see a lot more efficiency in government as well yeah i think that the more predictability is well i mean part of the problem is that we've had several new things launched corruption drive one the closure of mid-sized banks is unsettled bank is and i think chris she touched on a key point there's confidence and it seems to me i was a conference just the other day and one of the chief economist from spare bank was

saying there's no economic reason why people are not investing in everything they need to do it is there what's holding them back is you know these changes the slowdown and possibility of a crisis outside the possibility of a crisis banking crisis inside and there's a lack psychological there's a lack of confidence and then so everybody's holding back until there's a bit more certainty so hopefully the predictions for next year are right and there's an upswing and we do get three percent growth as predicted then it'll only short of that you know. money and plans been held back and the thing could then start to snowball a bit on that point we're going to go to a short break and after that break we'll continue our discussion on russia's economy state with our take. a little place to. play. so.

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welcome back to on the money where the business of russia is business i'm peter lavelle to remind you we're talking about russia's economy as the year two thousand and thirteen ends ok chris you know before we talk to talk about what we need to be done for foreign investors coming up on the tail end of what ben with saying first half of the program let's go back to this kind of ideology of the balance sheet because i think this is one of the things that is the biggest plus that russia has because we had in the beginning in the middle of the year of two thousand and thirteen the government got spooked and we see we saw a major change we went from stimulus to a russian form of austerity and nothing like in the european union but the one thing that they have on their side the balance sheet they have money in the bank and it can be spent and there are plenty of forces within this within the gun.

would love to spend that money for a rainy day how do you think putin is going to play this. reserves that russia has in looking at the beginning of next year well this is part of what we're talking about the needs to be more efficiency in the real needs to be more efficiency in the use of these resources and within the budget and it was encouraging to hear the president referred to that last week acknowledging that there might now have to be changes within the budget so we you know there's an enormous amount of money being spent in the budget on. the military for example that could certainly be stretched out over a longer time period and there's a big chunk of the budget that still classified as you know secret whatever we don't even know what it was in there so it's encouraging to hear him talk about more efficient use of the budgets but you know i don't wouldn't expect sort of any unleashing of massive amounts of spending we know also from the president that he's very cautious. you know emphasizing now the need for stimulus for growth but at the same time remaining very cautious about increasing spending about you know running

the budget deficit too high so i think the whole approach will be done very carefully and over many years as ben said things do take a lot longer here even when you know we get this projects or do you think that's the putins greatest advantage and when he's telling the government to get its act together and look for new ideas more efficiency because he's got money in his pocket ok we don't have to worry about printing money we don't have to worry about borrowing money we've got the money is this the signal that he's sending to the government right now absolutely i think it's a bit like we're not talking about sort of a major change in direction is more like cooking you know where you have to get all the ingredients rights and it's a question of getting all the small pieces that you're adding to the soup. in the right proportions and so that it tastes good in the same way that you know they're trying to make can't ability a bit more. to make it stick a bit more by introducing international can't extend its banking for example at the same time that the tender process is going online and is being checked and the

spending. it is going through the regional governments and they're being more and made more accountable in reporting and to taken all together this can produce enormous gains in russia simply because the putin says you know the productivity is a third or a quarter of what it is. and so you don't actually have to do anything major you just have to do what you're doing but do it and do it right. what are foreign investors how are they looking at this one for the entire year of two thousand and thirteen how did they look at russia and what do they want to hear and see for the next year i think again as we we said at the start of the year there was a lot more optimism about growth in investments which is old you know been dissipated to much lower level and foreign investors you know generally i think have have been sidelined you know that there are first of all you're you know we've seen good growth in some of the developed economies particularly in the u.s. recovery in europe so foreign investors have been much more focused on those markets and to a large extent russia has been you know put to one side emerging markets have been

disappointing areas for investors this year russia has been been part of that but investors are looking for is simply a much more confident signal from government they want to see the government actually doing something in the spring you know this year has all been about you know emphasizing stability for sizing the strong balance sheet you say we almost had a move towards stimulus in the spring or soon as bernanke the u.s. fed chairman mentioned tapering that one of the it completely so you know we basically want to see you know more pro a proactive approach from the government you know some fiscal some monetary changes some budget changes and i think it really does come down to that confidence if there is more confidence that the government is now getting its act together and is taking a more proactive stance if we get that message and we see that happening i think you'll see the follow through from investors and hopefully from domestic investors as well as foreign investors as well use the analogy of cooking earlier what's the right recipe to get people interested in this market again. then russia's case is

going to kind of hard i think it should go out marketed a bit more i mean terms of investment the pretty investments been standing on the sidelines but the wrecked investors those particularly in return have been piling in and the because you still have growth you still have rising incomes and at the same time they're being pushed out of their home markets because their everything's going backwards and the state is growth the states are growing but average incomes in america have been falling by thousand dollars a year for the last five years and so the middle class and the lower classes are getting squeezed more of any investor who's already here is reinvesting every cent they make into expanding as fast as they can but there's still this invisible wall down the russian border and those who've crossed in a working here are quite happy and those who are outside still see it as some sort of like you know wild east unregulated. and don't come but i think the message is coming out slowly but the government as chris said seems to have given up on the

idea of attracting significant foreign investment as a solution i don't think there's a generator and talk about his repatriation of russian money coming back into this country here and he's quite firm about that even to the point will be penalties for example no state subsidies for companies to do keep their money broad i mean is that a carrot in a stick but is it too much of a stick money goes where it feels comfortable you know it always he's not saying anything that we haven't heard from developed economies we were all aware of course of the big for within the g twenty would be in europe companies like amazon and google who are doing good business in in europe and they're paying very little tax so you know so this is a global trends it's not specific russia and it does make good economic sense when companies that are making money here should pay tax year i think that's just basic economics so no i don't think that you know should frighten any investors i don't think it is it's part of global trend but it is. you know ben mention the fact that

the message more often than not doesn't you know is not translated correctly there is a there is a disproportionate emphasis on the bad news from russia rather than the good news and people do hear it you know therefore they you know the headline bad news and they don't pay attention then to the reams of positive news behind it so that these to change and frankly that's just p.r. it's it's managing the message and russia does not do that well. selling a bad story about russia sells that's a growth industry that has been ever since the end of the cold war. what are the main things you think that will drive the russian economy next year what it would take a look at like oil prices. could be playing around with the budget now i mean the oil prices in the boom years rising oil fuel to love the growth but i think everyone agrees that that model is exhausted and because the oil prices remain around one hundred dollars which is four times what they were ten years ago and yet

that doesn't seem to have any visible impacts are quite the opposite you know the close to deficit in the federal budget. this year the main driver is being consumption i mean that's what's been holding up but again as we come into the end of the year that's beginning to slow and i think the consensus is going forward next year the driver is going to switch to investment consumption to investment i think it absolutely has to go that way we need to see sustainable rise in investment but remember you know one such is done we start to focus on the world cup now the world cup is a much bigger deal in terms of a bigger footprint across the country eleven or twelve cities would have to prepare for the world cup saw you know major event like that can be a good catalyst for investment in those regions because it covers you know the main part of russia's economy so inward investment you know the government is making talking at least. correctly about say using the national wealth fund for example as part of that catalyst other words they're looking more domestically and again what

we heard from president putin last week is you know this is a domestic problem we have to solve it so i think the first thing we need to see is the government making better use of its resources as you were saying earlier starting that process and then i think once we see that and the results are visible then i think that produces the confidence that brings in one money because no i was very interested in a speech from him to pick up on that point about the regions i mean we we have such a and now we're going to have to work but you know it's a vehicle these sports events for regional development and putin specifically cited to stood up in. in his speech he was a nineteenth century prime minister and his thing was decentralization and i think what they're planning is going to be a lot more focused investment on the regions and bringing those up and there's been some very successful ones like who simply just stand. there in some way like look at the industrial production has doubled and trebled incomes are going up five fold and so they're looking at that model and then through through the

template of the world cup sport they can use that in trying to repeat the success in all of the regions thinking of successes how much do you think that the sochi games will because we talked about p.r. here this is a perfect opportunity to do to showcase the country here that changing perceptions about russia and seeing that it's a normal country holds normal you know global sporting events mark it's very modern russia certainly spent an enormous amount of money on the games you think they can change perceptions marginal i think it's a much more important that russia seem to be dealing with you know sort of the bigger issues that concern investors such as corruption sustaining that campaign against corruption bringing more corrupt officials to book you know making more progress on the world bank sees doing business rankings improving russia's ranking transparency international frankly these are the issues and you know right now you know we have to potentially negatives that people are talking a lot about again we talk about the disproportionate bad news where but you know

a proposal to merge the supreme court with the arbitration court that has a lot of investors and business is worried is that what that might mean and there's also the proposal to give power to the you know to to the to the police or or to the. investigative. bodies in government to you know initiate tax investigations in their own right and again that brings back memories of the bad old days you know to have anymore exactly so you know that there's seems to be a case of one step forward and three or four sideways all the time so we need three . such a description of russia last word bent go ahead. reform i thought was indicative of the frustration that i think the kremlin a feeling at the slow pace that all these reforms particularly in corruption. making and you know that there is there seems to be a commitment certainly trying to make a change but then they're sort of battling against themselves and it's not working very well and so it was putting into the game will give them more power never more

saying well that doesn't help that she doesn't so no gentleman thank you for being with us here in two thousand and thirteen and hopefully we'll see you in two thousand and fourteen many thanks to our guests and thanks to our viewers for watching us here on on the money see you next time and stay with r.t. . i don't understand you correctly bad you don't believe that ad words no than perform the public service may be in the best interest of the united states but at least in the best interest of humanity here countries don't want to turn over their play book to the other side and that's essentially what's happened here it is true that it is heard a big debate about the role of our intelligence services in the united states i think that debate was coming anyway after nine eleven but i don't think we've had

sort of anything in the interest of humanity served by the ship's. largest consumer p.c.'s and i see it with me in the country is the federal government simply saves property will be made into these companies. is the united states privilege and it was done in public has to realize it can't just by. just throw it away this is a problem for instance the launch of the you know steve's environmental protection agency and i found this on a dump site here this is their computer it's not wasted luminal the producers of these little i have to should be able to collect these though i believe the vision responsible for the brutal too great. for mexico

comment of mental health from purdue will sell to murder and corporate greed also belongs to the washington metro area transit authority to the properties of a dentist aids treatment and trademark office. dramas the truth be ignored. stories others refused to notice. faces changed the walls of lights never. told pictures of today's news long distance from around the globe. up to. fifty. approximately sixty percent of imports came from illegal fishing. the european union is ironically taking fish from some of the poorest nations on earth

so this is a very serious and very urgent problem that needs immediate international action. to ensure territorial waters for the fish they load the fish on to the ships and leave for. illegal fishing just taking the bread out of our mouths.

reunited a day after being released from a russian prison reform up oil tycoon mikhail khodorkovsky meets his son in the german capital and hopes to see the rest of his family. washington is told still rein in an accountable defense spending at the pentagon amounting to eight point five trillion dollars since nineteen ninety six. new charges are thrown at egypt's in boss hold for. over a prison break and twenty eleven has been made a show of dissent on the streets that is stifled by. the first time in my life that the child is locked up in the military prison for having a ruler while the ongoing political watch which hunt in egypt knows no bounds.