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Turmoil shows Russia needs to modernise
Recent financial turmoil shows Russia needs to modernise its free-market economy rather than roll it back, Prime Minister Vladimir Putin told investors yesterday.
- Reuters
- Published: 00:24 September 20, 2008
Sochi, Russia: Recent financial turmoil shows Russia needs to modernise its free-market economy rather than roll it back, Prime Minister Vladimir Putin told investors yesterday.
Putin, addressing an international investment forum in the Black Sea resort of Sochi, warned the West that any attempts to pressure Russia politically could jeopardise its ambitious economic modernisation plans.
"Our policy, our basic approaches, remain unchanged," Putin told the Sochi Forum. "We are betting on private initiative, freedom of enterprise and rational integration into the world economy."
Capital flight and liquidity problems on the back of the global financial crisis have robbed Russian stock markets of more than half of their value, sparking fears the turmoil might push the Kremlin towards a state-regulated economy.
Finance Minister Alexei Kudrin announced yesterday in Moscow that the state would increase further its stakes in gas giant Gazprom, top oil producer Rosneft and number two bank VTB, although he did not say by how much.
Western condemnation of Russia's military intervention in ex-Soviet Georgia last month has helped push Moscow's stock markets down by more than 50 per cent since their highs in May.
Putin, who led Russia's economic boom as president from 2000-08, said Western pressure could disrupt Russia's plans.
"I take any attempts to throw us back to the time of the Cold War as ... a direct threat to our modernisation project," he said. "Confrontation is not our choice."
"There will be no politically-motivated market closures or a break-up of economic ties by Russia," he added. "We are thinking about other things, first and foremost about how to kick-start new factors of economic growth."
US Secretary of State Condoleezza Rice attacked Russia in a speech in Washington on Thursday, saying the country had taken a "dark turn" and that a "paranoid, aggressive impulse" from the Russian past to view free neighbours as a threat had reappeared.
Risk of irrelevance
"Our strategic goal now is to make clear to Russia's leaders that their choices could put Russia on a one-way path to self-imposed isolation and international irrelevance," Rice said.
Many analysts and fund managers, however, say they are attracted by Russia's sustained growth and strong economic fundamentals, which compare well with other emerging markets globally.
But they also say that the Russian economy remains volatile because of its strong dependence on energy export revenues and speculative investment.
"We have no systemic problems in the Russian economy," Putin told a group of leading Western businessmen at a separate meeting on Thursday night.
"All basic economic indicators are alright. For most of our colleagues today the question is not about whether to invest in Russia. The question is about where to invest, in what form, how to do this and what instruments should be used," Putin added.
Government officials said the financial turmoil showed Russia needed reforms to make its economy more sustainable and less exposed to upheavals on Western markets.
"This (financial turmoil) gives us an opportunity to ... realise there is no alternative to investment in modernisation and development to create a solid basis for future," Economy Minister Elvira Nabiullina told the forum.
On Thursday, Putin told leading foreign businessmen that a priority task set in 2003 during his presidency - doubling the Gross National Product - would be achieved soon.
"I want to inform you with great satisfaction that by the end of 2009 or in the worst case in early 2010 the task of doubling the GDP will be accomplished," he told heads of leading Western companies.
Making top seven
Putin and President Dmitry Medvedev, his close ally who took over the Kremlin in May, have set a new ambitious goal of making Russia one of the top seven global econ-omies by 2020.
Putin told the forum Russia would achieve the goal by encouraging investment and creating sustainable market institutions.
He named reducing red tape, improving legislation to make economic rules of the game more stable and keeping monopolies, most of which are state-run, as the main tasks.
Medvedev has said fighting corruption and improving the work of courts are other key elements of the Kremlin's efforts.
"We are interested in attracting further the foreign capital, although we count on reciprocity - the readiness of our partners to welcome Russian investors," Putin said.
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