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Russia: Conference To Offer Opportunities To Investors

  • Ben Partridge

London, 5 June 1998 (RFE/RL) -- Potential investors in Russia have been advised that it offers tremendous long-term investment opportunities in sectors such as food processing, beverages, transport, pharmaceuticals and cosmetics.

Financiers, bankers, and investors are meeting in London for a two-day conference, "Financing Corporates in Russia", organized by the free market think tank, the Adam Smith Institute.

Scott Lamb, head of investment banking for Epic Russia, a firm based in Moscow, said investors have been preoccupied by Russia's oil and gas and telecommunications sectors. But new opportunities are opening up, among them in financial services and insurance.

Lamb's message was: right now, Russia offers "tremendous opportunities to investors for long-term value."

The conference is being held under the shadow of the financial crisis that has hit Russia in recent days (the major speakers failed to show up apparently because of the crisis back home).

The conference heard that Russia has suffered more than most because of the "knock-on' effect of the collapse in currencies and stocks in the Asia-Pacific region, and the fall in world oil prices.

Lamb said uncertainty about the future and the "bloodbath" in the Asia-Pacific region has made it difficult to "sell" Russia to investors. He said there is a perception among investment managers that Russia shares some of the same problems as Indonesia, the country worst affected by the Asian financial crisis.

Lamb said, "Russia and Indonesia do share a couple of basic characteristics. Unfortunately, they had the two worst performing stock markets in the world in 1998. They are both, in some ways, afflicted by some of the same things. When you look at the political situation in Indonesia, the complaints coming from Indonesia have to do with the political corruption, the cronyism, the crony-capitalism at very high levels that have put off investors, and put off analysts looking at the market there. And, of course, you hear a lot of the same sentiments towards Russia."

Lamb said that both Indonesia and Russia have fragile political systems, weak legal systems, and untested succession mechanisms. But he said Russia's political transformation has been more committed, its reform path has weathered many obstacles, and it is likely that reformers will continue to dominate government and industry. He said Russia has a huge advantage over other emerging economies seeking international investment capital because of its highly educated workforce and its "intellectual infrastructure".

Geoff Mazullo, chairman of the conference, said Russia may actually benefit from the chaos in Asia-Pacific, because of a switch in investment, but not to the extent that some imagined.

"I think that there was some optimism at the time that Russia might be able to attract some of the investment that would be leaving southeast Asia. That has materialized to a certain extent, but not to the extent that was hoped for."

Leonid Baron, head of the credit policy department of the Russian Economy Ministry, said one of the most serious problems facing the reform drive is the increase in all types of indebtedness. He said almost two-thirds (60.4 percent) of manufacturing, transport, agriculture and construction companies are unprofitable.

This prompted predictions that Russia faces a big shake-out of unprofitable industries -- forcing many to close. But, in general, conference speakers were optimistic about Russia's long-term economic prospects, although saying past euphoria has long disappeared.