We are not building state capitalism – Medvedev

In his speech before the St. Petersburg Economic Forum, Russian President Dmitry Medvedev pledged support to private property and entrepreneurship as the state regulation model has already depleted its potential.

Speaking before the audience of world business and political leaders, President Medvedev said that integration into the global economy was the top priority of Russian authorities. Medvedev reminded of a saying popular among finance workers that markets are like parachutes, working only when they are open, and said that he expected the talks on Russia’s entry into the World Trade Organization to be completed this year if there are no political obstacles. At the same time, there is a limit to Russian readiness for compromise and if the partners continue to pressure Russia the deal may not take place, the Russian leader said.

Medvedev praised the transition to the multi-currency financial system and said that strengthening of new currencies makes the financial system more flexible and gives investors more tools and opportunities in their work.

The Russian president drew special attention to the general course that the Russian authorities were planning for country’s future – free competition and free market economy.

“We are not building state capitalism,” Medvedev said. He added that at some point of its history Russia had to return to stronger regulation in the economy and admitted that this period was unavoidable. However, the Russian leader said that the potential of state involvement had depleted and the model with strong state regulation was becoming dangerous, as stabilization could easily turn into stagnation.

“This is not my preference," Medvedev said.

The Russian president said that the state must support private property and private entrepreneurship. For this, the state must offer legal protection of property rights, create working infrastructure that will help to develop the economy and also build a strong social system that will promote population growth, a higher level of education and longer and more productive working periods.

Read the full transcript of Dmitry Medvedev's speech

­“Modernization is my responsibility”

­Modernization is Russia’s choice, although a difficult one, but it will continue regardless of all obstacles.

“I will be talking about the project of our country’s development which must become reality thanks to the joint efforts of the entire Russian society. And it must be fulfilled irrespective of whoever takes whatever posts in the next few years,” Medvedev said opening the forum. “It is my responsibility as president and the responsibility of my colleagues,” he added.

The president noted that “modernization of national economy is not going easily”. “We expected this,” he said. “But we had no right to wait. Anyway the modernization project is already bearing its fruit.”

­Attracting investors

­Dmitry Medvedev also discussed the importance of good investment climate in Russia, especially following the world economic crisis.

“Russia must offer investors new development opportunities,” he noted. “The global financial crisis resulted in significant financial imbalances in a number of countries, including Europe and the US. And new bubbles are possible in almost any market. And we could see that in the current financial system bubbles burst so that the entire planet feels it.”

In this context, “whether investors will choose our country depends on ourselves,” Medvedev stressed, adding that Russia will decrease existing barriers for foreign investment.

­Five-step plan

­President Dmitry Medvedev outlined that modernization is only possible as a continued process and proposed a series of new steps to support it.

First and foremost, Russia needs to go on with the privatization of state property, the president believes. Second, the decentralization of power so that “we can use Russian federalism to our advantage.”

“In the modern world, we cannot rule the country from one point, especially if we are talking about Russia. More than that: if everything works only by signals from the Kremlin, then the system is not viable,” Medvedev stressed.

The third step should deal with improving the quality of the court system in the country. In the fourth place, the president mentioned the fight against corruption. “And this is a point on which all Russian society is unanimous.”

Finally, and perhaps, most importantly, the Russian government must step up efforts in creating a world financial center in Moscow. For this purpose, Medvedev reiterated, Russia is in talks with the EU about the visa-free regime. In this regard, he added that the establishment of a “capital federal district” may be considered.

Russian authorities will also soon cancel restrictions for the placement and circulation of Russian capital assets abroad.

“Many important amendments to the legislation will be made this year,” the president promised.

­More than 10,000 people, including heads of state, ministers, businessmen and scientists, are expected to participate in the event. A series of panel discussions at the forum will be dedicated the role of emerging economies in the post-crisis world.

Together with his Chinese counterpart Hu Jintao, President Dmitry Medvedev will take part in a plenary session devoted to the investment climate in Russia and across the world.

According to presidential aide Arkady Dvorkovich, Medvedev will also take in a discussion about energy security, which will bring together heads of the world’s largest energy companies such as the president of Russia’s Lukoil, Vagit Alekperov, and BP CEO Robert Dudley.