The government’s role in economic diversification

With the Russian government looking to promote economic development and diversification Business RT spoke with Yuri Voitsehovsky, Head of the National Council for Investment Climate.

RT:Your council represents directors who actually manage companies. What do they think is the key to updating and diversifying Russia’s economy?

YV:“Of course, it’s a big task, and both the government and private investors can do quite a lot. I think first of all what is important is the government can follow a consistent policy of growth and development, and that policy should be based on a consistent focus on business and investment, on promoting foreign direct investments in the country, and setting up clear rules and regulations.Of course, on top of it, it is important to build infrastructure in the country, both legal and physical.And if you look at the growing competition from countries like the BRIC countries they invest a considerable part of GDP in growth, to achieve above 6-8% levels.So currently in Russia it is less than about 20% of GDP.Should invest more of its GDP to sustain high growth rates.And also what is important on top of it, is to increase efficiency of government bodies, and promote better corporate governance in the country.And a lot depends on elite, on business owners showing the example how to develop socially responsible businesses in the country.”

RT:What is being done in Russia to improve corporate governance – to protect the rights of shareholders and investors – and what still needs to be done?

YV:Yes, of course, Russia has promoted and done quite a lot in areas of improving corporate governance in companies, and promoting such institutes as the institute of independent directors, for example.However although such institutes became more and more common in state companies, for example, still quite a lot have to be done in terms of improving how such directors are appointed, improving rules, as such, and also changing the legislation so that such corporate governance rules are enforced and companies have to follow them.

RT:So surely independent directors would be key, would make that work.The government seems to be aiming at top-down modernization, with state projects to buy new technology, but your members have experience building and growing companies. Is enough being done to promote the organic growth of companies?

YV:“I think, again, investment is a big theme and I think it’s good to look at successful countries like, for example, Singapore, and look at best practices.So I think that one thing that Russia should adopt is a best practice and learn from other jurisdictions how to implement certain initiatives – that’s number 1.I think it’s also very important to develop infrastructure, and , I think, also develop trust between businesses. Russia should promote development of joint ventures, for example foreign investors.I am a little bit more sceptical about government directly investing into particular technology.I think that should be left to, led by the private sector.But what I think government should do, and what state should do, is promote equal rights, clear rules, and right climate for such investments to prosper.”