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Official website of the President of Russia

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Address to the Advisory Council on Foreign Investment under the Russian Government

March 13, 2000, President Hotel, Moscow

Vladimir Putin: Ladies and gentlemen,

It is a pleasure to me to address this regular meeting of the Advisory Council. Our previous meeting took place not very long ago, in October of last year, when some agreements were reached.

I think this is a good format and it enables us to review and plan our joint work together in a detailed and frank manner.

Each of these meetings (and there have been eleven meetings in the last five years, this being the twelfth) was a kind of test of compatibility of the Russian economy with the economy of the rest of the world, compatibility of the Russian economy with the rules of the game accepted in the whole world, compatibility of the Russian legal framework with the expectations and intentions of investors, and psychological compatibility, for that matter.

We in Russia call this process “dovetailing”. And today much has been done for our cooperation to go into a higher gear.

I am convinced that the foreign investment situation in Russia is poised for a dramatic improvement. I am sure we will manage to attract a larger share of the world investments, which are being fiercely contested.

We understand that Russia occupies a certain place on that list. I appreciate the members of the Advisory Council for their honest effort to help our country win that contest. Our Council is called Advisory Council because we very much count on your experience and knowledge and on your interest in Russia.

We are aware that it is impossible to buy economic growth, it is impossible to acquire it with foreign capital. Economic growth is above all our own internal national task and we are not going to shift the burden on anyone’s shoulders. The policy of the Russian Government should be geared to that goal.

The amount of foreign investments is undoubtedly a factor that propels our movement, but it is not the only factor. The main field of activity is our internal reserves.

The past year and a half have shown the tremendous potential of Russia for economic development. This is not just about the positive economic growth in Russia, which, by the way, is a success on which to build.

In my opinion, even more important is the growth of economic freedom. The fiscal load on the economy, the Government’s claims to private financial resources and the budget deficit have diminished. We have come to realise that our economy is competitive.

All these factors are a big plus for investors. The Russian market is indeed a promising one. It is set to develop dynamically. You have mutual partnership interests. In the past year alone foreign investments in the Russian economy rose by 27%.

We are aware that for years investors have been putting their capital in the Russian economy because of high profit margins. They outweighed even the combined risks: unstable taxation, poor legislation and occasional neglect of investors’ rights.

Today, profits remain high and risks are going down. Our task is to reduce the risk factor to zero, to make our economic policy transparent and clear several years ahead.

I would like to tell you in a nutshell what we are planning to do towards that end.

First, of course, the improvement of the legal framework in the Russian Federation. Your recommendations in this area are very important.

We should take a hard look at the methods used to achieve that goal. We wouldn’t like to proceed by the method of trial and error, but there are some things which have already been tried in our own experience and tested by time.

At our previous meeting we discussed the introduction of the law “On Foreign Investments” in the Russian Federation. I know that many of you are unhappy about some of its provisions. I am sure we will hear more grievances about it before this meeting ends.

We are aware that the most significant provisions of the law are not self-implementing. So the challenge facing us is to pass corresponding documents not only to minimise possible losses of this kind, but to make the law more effective. We will do it as soon as possible. The law for foreign investors will work effectively and in full measure.

Work has yet to be completed on the Tax Code, which means that investors are still unable to precisely assess their risks.

We have yet to pass the Land Code, to put land tenure in order and make this an attractive investment destination.

Present at our meeting today is State Duma Speaker Gennady Seleznyov, and we hope that he will convey your wishes and ideas to the State Duma deputies.

I think that the presence of the Speaker of the supreme legislative body of our country is very important.

The second area is bringing back Russian capital from abroad.

I think until Russian capital starts flowing back into the country on a large scale, foreign investments in Russia will not reach a scale that we would like to see.

The return of Russian capital from abroad and a dramatic slowdown in the outflow of capital will send a good signal to many companies, because we are determined to solve this problem and we are looking at the prospect of capital investment above all inside Russia. The recommendations of the members of the Advisory Council and your practical help can be very useful to Russia.

The third area is something that we discussed many times at our previous meetings and that is much discussed inside the country, I mean the fight against corruption.

First of all, the Government must overcome the weakness and inefficiency of its apparatus as regards protecting property rights, the rights of investors and the rights of creditors. We are determined to move in that direction.

These are the problems high on our agenda, I mean not only the present meeting, but the short-term and long-term policy of the Russian Federation.

At the same time, I have to be frank with you, we cannot tolerate the practice of “presumption of Russia’s guilt” in everything. I think this is nothing if not a sign of bad-faith competition against Russia in the world markets. This false premise is used to build a structure of unproven and sweeping accusations of Russian business.

Russian banks and commercial structures, as well as the foreign businessmen who believe in the promise of doing business in Russia, are given the cold shoulder. Many of you head up companies that can be called Russian companies. They have foreign capital, but they are Russian companies. So, when I speak about protecting the interests of Russian business, I also mean protecting your business in Russia.

We are working hard to lay the legal foundation, we are negotiating with more than 70 countries to sign inter-governmental agreements. And we will work vigorously and persistently to fight corruption.

The fourth area that merits attention is respect of investors’ rights, although of course what I have said so far is also relevant to the issue. But there is a separate topic that can be identified as an important element of our activities.

Our talks with foreign companies and their submissions to the Government of the Russian Federation and the Presidential Executive Office show that infringement upon the rights of foreign investors is becoming a serious problem of economic policy. In effect we have today double standards for Russian and foreign entrepreneurs. In any case, this is a frequent situation encountered in practice.

Another problem has to do with frequent violations of intellectual property rights, illegal use of Western trademarks, faking of products and practically unobstructed access of these products to the Russian market. It has to be said that practical steps have recently been made to address the situation, as I think many of you have noticed. Perhaps we are not doing enough, but we will persist.

All this is a challenge for our lawmakers and the law enforcement bodies. In this area we will work closely with the regional authorities. I would like to note that we have with us today many regional leaders – governors and presidents of republics.

The fifth area is improving the work of the Advisory Council. The Advisory Council, established back in 1994, probably needs a new impetus. Until recently the meetings of the Advisory Council were to some extent token meetings. Judging from the informal discussions today, I have the impression that many company heads would like to do business in Russia more actively.

We invite you to cooperate with us in harmonising the conditions of this work. I assure you that your recommendation will be noted and incorporated in the process of creating the necessary environment for your work in the Russian Federation.

I would like to end my introductory speech there. Thank you for your attention.

March 13, 2000, President Hotel, Moscow