BUSINESS

Sometimes the process itself is just as important as reaching the goal.

That was the view of one investor at a business forum in London last week, addressing the question of how Moscow could become a global financial centre.

“There is a lot of work that needs to be done to create Moscow as an international financial centre, there’s a lot of progress being made, there’s a long way to go,” said Roland Nash, chief investment strategist at Verno Capital, a Moscow-based hedge fund. “But even if it never actually happens, I still think it’s a really important policy initiative for the [Russian] government.”

Key reforms urged by investors at the “Russia Calling” forum, organized by VTB Capital, Russia’s biggest investment bank, included battling inflation and corruption and creating a domestic investor base.

The conference comes as President Dmitry Medvedev is pushing strongly for a raft of economic and financial reforms, including a large-scale privatization program, ahead of next year’s presidential elections. The idea to make Moscow a global financial centre was launched by Medvedev in 2008 – just before the world economic crisis hit. With Russia now slowly getting over the crisis, buoyed by high oil prices, government officials and investors are again daring to dream of Moscow achieving this goal.

Just as important as market reforms, according to some investors, is general macroeconomic stability, even it comes at the cost of lower growth in GDP and average incomes.

‘Low growth, low inflation’

In contrast to Russia’s rapid GDP growth over the last decade, Christopher Granville, managing director of Trusted Sources, an emerging markets research firm, said that “low growth and low inflation” was the best way forward for the country now – if it is to become a financial powerhouse.

Regulatory reform was important, but not as important as improving the general investment climate, Granville said.

“You can fit out the hotel, but will it have any customers?” he said.

Speakers stressed there was no silver bullet to bring about the goal of making Moscow one of the world’s top stock markets, but pointed to several pros and cons in what they said would be a lengthy process requiring strong “political will” from the country’s leaders.

Dmitry Pankin, the new head of Russia’s enlarged financial regulator, the Federal Service for Financial Markets, hailed recent legislative reforms aimed at making Moscow’s stock market more investor-friendly, from the insider trading law to the ongoing merger of Moscow’s two stock markets, MICEX and RTS.

Some of the problems with bringing investors to the Russian stock market are more image-based, however, and range from the difficulty in getting visas for businesspeople to the city’s traffic jams, Granville and other speakers at the forum said.

Ruben Aganbegyan, president of MICEX, Moscow’s largest stock market index, said that a key part of making the city more attractive as a financial centre was educating people about financial issues.

“People need to know more than how to disassemble a Kalashnikov – they also need to know how to invest in the stock market,” he said. “The shift [in investors’ attitudes] will come quickly, but we have to do something to make it happen.”

Chichvarkin protest

One poignant reminder of problems with Russia’s investment climate was provided by Yevgeny Chichvarkin, the exiled former chief of mobile phone retailer Yevroset, who made an impact on the forum from outside the hall.

Chichvarkin turned up for a oneman protest outside the hotel where the forum was taking place in the City of London financial district, wearing a T-shirt emblazoned with his picture above the slogan “Russia Calling?”

Chichvarkin has complained that the legal problems he faced when his business was allegedly targeted by a group of law enforcement officers and he was forced to flee the country show that Moscow is still a long way away from becoming a comfortable place for investors.

Charges have recently been dropped against Chichvarkin, but he has said he doesn’t feel safe returning to Russia yet. Inside the forum, Granville expressed hopes that the tide was finally turning in the battle against corruption and for the rule of law, noting that under Medvedev’s anti-graft campaign “more officials are being jailed on corruption charges, and fewer businessmen.”