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Boosting Russia’s investment climate

After President Dmitry Medvedev’s call to boost the Russian investment climate Business RT spoke with the Chief economist of Deutsche Bank Russia, Yaroslav Lissovolik, about what is needed.

The Russian leader highlighted the speed of Russia’s GDP growth, as well as falling unemployment and the risks of inflation in emphasizing the need for Russia to turn around the abysmal international perception of its investment climate.

“The investment climate in Russia is bad. That’s what the government should work on next year. Yes, we’ve managed to overcome the consequences of the crisis. But the investment climate is still very difficult in our country. There are several reasons for that. We’ve done and are doing a lot, but apparently we need extraordinary measures.”

Chief Economist from Deutsche Bank Russia, Yaroslav Lissovolik agreed that key reforms were needed, and that the international perception of the Russian investment climate was not what it should be.

RT: What has changed in the Russian investment climate this year and has anything improved?

“I think, there were some improvements, certainly there were more efforts to deal with the most difficult issue in Russia’s investment climate. And these were first and foremost Russia’s red tape. I think that the level and the intensity of debate on this issue, and some of the measures that have been undertaken, are unprecedented. But, of course, as President Medvedev has already outlined, there’s far more that needs to be done on this front. There was some progress on WTO accession, there was progress on moving ahead with privatization. So, these are some of the signs of improvement in the term.”

RT: The President also called for extraordinary measures to improve the investment climate of the country. What sort of measures is he talking about?

“I think, again, the main problem is red tape, excessive bureaucracy on various levels including the regional level. That will take even more measures, even more than we’ve seen so far during the course of the year 2010. And then, I think, with some of the issues that Russia’s tried to address during a very long period of time, like WTO accession, we haven’t had such progress for several years now in terms of the pace of the talks now, in terms of Russia being very close to clinching this WTO accession, which in turn will be a very important step in improving Russia’s investment climate.”

RT: The Government says the inflation will be 6.5% next year, but analysts say it could be even higher. Who, do you think, is right?

“My sense is that inflation is certainly a risk and really 6.5% strikes me as a very low figure. Given the upward inflationary moment that we are seeing now, I think, it’s very likely that we’ll have inflation of around 8% in the course of 2011. Possibly even with some upside risks to that outlook, but a lot depends on the Central Bank and so farsome of the policies pursued by the Central Bank give reasons to expect that the inflation will not be perhaps as high as in 2010. ”

RT: President Madvedev says this was a difficult but successful year. What’s your view on Russia’s economic development?

“Overall, some advancements were made. And again I would cite administrative reform, WTO accession, privatization. I think, more needs to be done in terms of structural adjustments, in terms of structural reforms, in terms of reformingnatural monopolies – that is something that probably will take a bit more time, that is more a medium term issue for the Government. But in