By Lyubov Pronina and Lucian Kim - Jun 18, 2010
Russia will help lead efforts to recast the global economic hierarchy as the world emerges from the financial crisis, President Dmitry Medvedev said.
"We really live at a unique time, and we should use it to build a modern, prosperous and strong Russia, a Russia that will be a co-founder of the new world economic order," Medvedev said at the annual St. Petersburg International Economic Forum today.
Russia will use tax incentives and other free-market economic policies to turn the country into a destination for innovators from around the world, Medvedev told an audience including Citigroup Inc. Chief Executive Officer Vikram Pandit and French Finance Minister Christine Lagarde.
Medvedev, in the third year of his presidency, is promoting modernization to transform Russia from an oil-and-gas economy into a magnet for high technology. Its reliance on natural resources exacerbated the steepest contraction among major emerging markets last year, when the economy shrank a record 7.9 percent.
The government will abolish taxes on capital gains from long-term direct investments starting next year, seeking to lure funds to reduce the economy's energy dependence and subdue speculative capital, Medvedev said.
"Such investments are critically important for modernizing the national economy and we are ready to create institutions to facilitate such investments," he said. The government will create an investment fund within a year to help draw "strategic investors" by raising 3 rubles of private capital for each 1 ruble of state money.
"We understand that international competition is the decisive stimulus for our modernization," the president said. "Russia should become an attractive country to which people from the whole world will come in search of their dreams."
Foreign direct investment slipped an annual 17.6 percent to $2.6 billion in the first quarter.
Russia will cut the number of so-called "strategic enterprises," which are restricted for foreign investors, to 41 from 208, Medvedev said.
Medvedev in March asked billionaire Viktor Vekselberg, owner of holding company Renova Group, to oversee efforts to create a Russian version of Silicon Valley in the Moscow suburb of Skolkovo, where tax breaks and other incentives will be offered to lure investment to spur innovation and production of high-technology products. Cisco Systems Inc. and Nokia Oyj plan to join the project.
Citigroup's Pandit backed Medvedev's plans announced last year to create a financial center in the capital.
"It's a real opportunity to turn Moscow into a hub," Pandit said in St. Petersburg today.
The nation is on the road to recovery after the decline, Medvedev said. Sovereign debt is "minimal," foreign reserves are growing again and inflation is at its lowest level in 20 years, according to the president. The country boasts government debt of about 10 percent of gross domestic product.
"Flexibility and adaptability are words that have become much more popular than stability and predictability," Medvedev said.
Medvedev said he will continue to seek economic integration on a regional level with former Soviet republics such as Kazakhstan and Belarus, a development he said doesn't conflict with Russia's aspirations to join the World Trade Organization.
In areas where it lags behind, Russia will adopt foreign practices, such as the European Union's technical standards, according to the president.
To contact the reporters on this story: Lyubov Pronina in St. Petersburg at firstname.lastname@example.org; Lucian Kim in St. Petersburg at email@example.com