tv [untitled] January 29, 2011 4:30am-5:00am EST
past the hour here in moscow you with all the top stories egypt battling renewed violence with protesters filling the streets following the dissolution of the cabinet some political experts claim this week's uprising was. the west put into a new exposé by online wiki leaks and washington were secretly supporting key figures behind the uprising to achieve a regime change. it's money versus in journalism in the united states as big corporations fund the media leading many americans to look for the truth from unbiased sources but while some are turning to alternative news sources like the
internet experts say they're also in danger of being taken over by big business. and russia is on a mission to step up security for the new system being debated and president did it better protection from terrorist attacks this comes after a suicide bombing of the country's busiest airport killed. all right up next we talk about money and what needs to be done to further attract foreign investment into russia to help russia modernize its economy that's a new program on the money that's coming up next right here. hello and welcome to on the money with the business of russia is business i'm teetotal of today we talk about foreign investment in the modernization of russian president dmitri medvedev says he wants to modernize russia to foreign investment.
second very soon as a share willing to set up a situation. that will surely risk with authority because through joint investments in projects to modernize our economy last week on the. way to talk about the president's words in davos i'm joined by enrico he is else chief operating officer for russian operations and look what attack he's pepsico as president for eastern europe also we have yet to solve lisa volek the chief economist at deutsche bank and roland nash senior partner in chief investment strategist at verne zero capital ok but i want to go to you first you have your company that must be extremely happy particularly today the merger has been a approved pepsico is really explore the scene after a lot of hard work what is foreign investment going to do what can you bring to the table to modernize russia yes is the next you know so that any day for us and we've
been working on this for many many months so yes thank you for the for the announcement that we believe in russia a lot we believe in russia for country of a lot of opportunities and we've been investing for the last fifty years in russia probably when one person made a better thought about modernization he didn't think about food and beverage probably as the top of the line for his mother i say sure but i think we can bring a lot to the to the table and the first thing is about products i think i think food and beverage is basically a product that we can but you bring technology we also bring know how also we are in technology and you bring in example as well don't you we i mean when pepsi coke comes here doesn't a lot of people notice hey if they're doing it. what should we be doing with your example and i was i was i meant to say you know we when we apply technology to our for example things like energy conservation energy reduction that's modernizing the country improving the productivity of of our farmers potato growers milk growers that's brought modernizing russia you know different way toward what probably the governments think it but also i meant to say. bringing new products to the market
bringing products in a way that have for example improving gradients or compete in package in solutions or you know ways that that uses less energy that's a very good way of modernizing and ration the standards of living of russia in a very unique way and if i go to you what does it mean when you hear the words modernization in foreign investment what does it mean to you and what can you bring to the table and what can other foreign companies do in coming to russia because there is that risk factor out there we hear about that a lot if it's true or not it's still out there. again for the christiane we are in a rather different industry than than pepsi cola for us the world where there is a show on means a lot in the windows to reopen one generation and that we enter a few years ago what does it mean actually move their lives ation for us bringing all the standards that we have been alarcon party to meet safety forcible efficiency and we need
a lot of efficiency year and environmental compliance we took over several plants are in when we enter discounter if you a few years ago all of these plants are quite quite old we had the pleasure to celebrate last week and seventy five years all our first unit being commissioning a plant. in they were outs. plant is a beautiful plant but needs a lot of investment well there is a show on new units but. most you where you will perforating and improving every day ok well and if i can go to you what do you tell investors how do you sell russia because the president of russia dmitry medvedev has been talking about modernization for his entire presidency you know i used to think of lot of here putin is the president by numbers growth growth growth increase increasing greece expand expand expand but now mr medvedev is talking about intensive growth isn't he
and that really means modernization but there's a lot of resistance out there how do you sell foreign investment to modernize this country. we talk about opportunity i mean that's that's what's clearly in russia right now you know the modernization drive by some of the investments that you're talking about now that some of the most concrete results of that so are examples of that modernization but there's a very very long way to go so if you can get foreign investment into russia or it brings in technology it brings in capital and it brings in competition and that helps the whole economy become more efficient and you don't need that much efficiency gains in economy like russia to generate a whole lot of value and that's what we're about ok you get us off a fine go to you which let's say let's give the hard sell story here what are the major barriers to this kind of modernization where foreign investment is still hesitant do you think are they valid hesitations and what needs to be done to overcome that. well i think clearly the main barrier and the main problem that
aside by most of the investors are certainly red tape on the excessive intervention of iraq we'll see into business operations in russia and you know if you were to go by the official numbers the growth in the bureaucratic cap counts continued almost in exhort oblique in the course of the past ten years and i think one of the key issues in terms of modernization and trends of dealing away with this key barrier would be to pursue actively this administrative reform that is currently under way and we see that for example for the next three years there are plans to cut the bureaucratic headcount at the federal level by up to twenty percent so delivering on these issues will be crucial i think i'm going to go back to you me in expanding into the market here and pepsico has been very
successful how much of it is pointed out is really just the bureaucracy the inertia there it isn't the attitude that we don't want foreign investors. it's the right way to bring them here and have them operate in the way that both sides other the state feels comfortable you feel comfortable in other companies feel comfortable i must say that our experience has been very good in russia in terms of our welcome our investment has been by the government not only at the federal level but at the regional level i travel why why is that because there's this perspective perception out there that it's too risky to come here and you just said you had a really good example and that's are you just lucky or is they are did you play in a different way do different things i think we've been here for many years and maybe that that's given as a level of confidence that other companies when they start thinking about russia they're afraid but the truth is that at the regional level local level and federal level we've been very supported by the a by the government and i go to any region where you want to start a new plant and you have you know a lot of help from the government from the original government because you create
jobs you modernize you help the development of the region which i think is one of the big elements that needs to happen in russia because clearly the balance is between moscow and the rest of russia is big so companies like ours that need to go copier and need to go really penetrate the country in different regions we can help a lot more than a station to development of their regions and that's why i think the local governments are welcoming us so much we're going to high quality jobs and they're going what does russia need is it need to know how in technologies or does it need this new physical plant or a combination of both because i think when foreign investors come here you know they have to consider do they have a workforce usually they do depending on where you are ok how efficient the administration is if it's on a regional level local level even the federal level i mean what do you how do you prioritize these things when you when you think about expanding into the russian market well i want a specific experience we came for opportunity at the some of. the people
who said before the opportunity was given by the change a whole but u.s. and deliberately. zation of the market. monopoly was on bandos with a deal creating a market keeping competition and welcoming foreign investors for an investor i guess for two reasons one is to bring capital in order to investing athlete which was by age that but that is only one element and probably not the most important it was to bring technology as you mentioned mother time commodity now you can do it in two ways you can start from scratch and build something new which of course it's happening actually there is the first way of the long term contracts for creating new capacity which is coming to fruition and you have new plants coming but still the core of the production to russia at least in our in our sector comes from age
the power station like the one i mentioned before ninety percent is still like that you can bring the technology because you can modernize upgrade them but keeping them just bringing continuous improvement continues that upgrades are and running it better in the whole technology in oil roland if i go back to you how do you how do you sell modernizing russia through foreign investment when there are so many other countries you can go to i mean let's look at the other bric countries for example i mean there is a finite number of investment dollars out there how do they attract them to get here. what the foreign investors want foreign investors want to be had right more on their money investing into a country than they would make elsewhere and that's a that's a combination of two factors part of it is how attractive is the investment environment and politic is also the size of the opportunity how much it cost to actually invest into a country and you know russia actually has quite a lot of work i think there's plenty of examples of foreign investors investing to
russia the problem russia has has quite a long way to go in terms of creating the investment environment that is truly competitive with some of the other emerging markets like like brazil for instance however because there's so little foreign investment in here right now because the perception of russia is still actually quite poor if you put money into russia you can actually make it work harder here than just about anywhere else in the world and i think that's the opportunity for us well fine go to you do kind of just go off on what roland was saying high cost of entry when it comes to modernization in foreign investment. yes in some respects completely agree with with all and that this is probably one of the barriers at the same time i would note that in the past several years the russian authorities have made important steps to facilitate treif or direct on portfolio investment and one
of the key steps in this direction was the liberalization of the capital account in two thousand and six and currently russia is the only bric country that does not have capital controls so at the peak of the crisis. russia did not introduce these capital controls and i think this is a very important sign of the commitment of the russian authorities to follow this road of greater openness and dealing with some of these barriers to entry that roland mentioned after a short break. continue our discussion on russia's modernization and foreign investment. close.
the cuban missile crisis. welcome back to on the money. tree mind you were speaking about foreign investment and russia's modernization but first let's have an overview of what has happened in russia over the last twenty years. to the end of the soviet union russian production is still dominated by soviet era technology and. the government has identified this as a clear focus and it's try. to modernize the russian economy was russia suffered a very severe crisis in two thousand and nine in two thousand and ten in my opinion that actually she is starting to understand that they made a lot of mistakes during this crisis and therefore the benefit of prices fell so much they're facing a very significant amount we can only challenge is in pulte call it is called sign
therefore it is very important for these for this economy to modernize in the future and i think that we are starting always to see some visible signs that the government understands the challenges they are starting to do some important things to modernize its economy international investors are in magic some notably consumer intransigence pepsico have already invested heavily russian accession to the w t o is expected to see the floodgates open in a way for similar investment and the leader has been the automotive sector with measure in just replacing investing in russia sic a strategic move forward russia is a fast growing market in our sector so obviously not only a good day but a lot of producers foreign producers are interested in this market as we can see i mean vast some of our competitors at the ready have plants and some are building plants right now so all over in truth because it is. wise let's say ten years ago most of our competitors would consider this as an
opportunistic market maybe this is surgical or for most of not only for bad for a lot of our competitors. this went on the station was just shape investment in production facilities but also distribution systems logistics operations retail networks and servicing with the russian companies traditionally a weaker in these areas than in straightforward processing it will be international expertise as well as investment funds that have been the success of them and in his asian drive and its embrace by russian consumers in the us of the travel on the money r t. ok roland if i can go to you first every emerging country has different issues or different priorities if when you talk to investors and investors talk to you more importantly what kind of what how do you prioritize it for them when you say compared to brazil compared to india you know what to do what are the things that you tell them you need to look out for in
russia and one of the opportunities in comparison to other countries. well you know one of the things that often comes up is the bureaucracy and the red tape you know that's always there. a lot of people still worried about corruption across russia. but but you know what i tell them is the you know there is a there's a lot of money to be made in russia almost because of some of the inefficient inefficiencies that exist that creates the opportunity and you know some of the changes that are being made now by the government are opening up possibilities i think the you know and now is a classic example of that we've had we've had a wave of reform in the utility sector and what has happened the third largest power generator in europe has invested three billion dollars into into this country so when i'm talking to investors i'm emphasizing the scale of the opportunity and you know how this process of modernization can unlock
a lot of the value that still exists in russia. and when you when you're looking at in talking to investors and looking the development of the economy how important is partnerships how important is it for a company to come in and say we have to partner with somebody they'll help guide you through it you know and of course roland brought up the issue of corruption and that is an issue in the authorities have talked quite a bit about it but just learning the bureaucratic ropes spoke a you know if you want to get this done you have to do this and i'm not talking about money under the table but just procedures russia is a very there's a heavy procedure approach in this country and anything you do. absolutely i think this is one of the key issues for foreign investment in russia. given the complexity of a lot of the economic issues in russia a lot of the foreign majors they look for opportunities to create partnerships. in order to navigate this very complicated and environment. and that
to some degree probably does serve to facilitate some of. the foreign investment inflow and to us and the same by the way i can say with respect to russia's state as such because russia's state does need foreign investment to guided towards more efficient projects left to its own devices by itself the russian state i would even say probably at times is afraid to spend too much say on infrastructure because of the inefficiency of that spending and the cordingley it has to rely on the private sector it has to rely on foreign investment going forward in order to really make this major push of modernization to we as infrastructure when i'm on the phone go to you i mean you know each pepsico obviously everybody it's an international brand it's an icon but what other elements of the economy need to be modernized the
foreigners can help do that that would help your business more would be the financial sector retail what other sectors i think the as we as i said for any consumer goods company we're trying to reach any single point across the country where not only about most caution because we're aware every single little city in the country so they're not just stick in the street the just the infrastructure in the country needs to be modernized for us to be more efficient in there where we move goods goods around the country the raw materials are finished goods that for us probably is the biggest bottleneck that we have in terms of people capability we don't see any problem it's basically the not just stick part of the business that really there's a lot of efficiencies in the supply chain where we need the government's help here then road to build a more infrastructure warehouses etc across the country how about you what we're in a being in the power sector here what is the one i know a another sector that would help your business flourish ok you your your company's
made. a massive in vestment here and in investment must mean you have a lot of hope and a good run rate of return but what else has to happen and how could foreigners who because you're a slob brought up a very good point i mean because of the inefficiencies of a lot of domestic investment here in that in restructure you know when you give to the private sector a company like yours you're going to make sure every pound penny rouble in this can't really counts so what would that sector be yeah it's it's a chain it's a chain of valley or we entered mainly now we're going at power generation not power generation is influenced by transportation or power and distribution these are the other two sectors for us very important to be more efficient in their leaving our product which is power to the final consumers whether they are industrial or a resignation. speaking about opportunity is that there is a great opportunity in improving the efficiency of the all but wrong greed and this
is not only exciting technologically and as a business opportunity but it's going to be also very good for environment because we are going to use a less simple less thing which only in the atmosphere the other point i would like also to attach what i'm known before ears sticks for us it's very important that the construction here do you see word of this program which is actually the construction business the mentor news business is developing and becoming more efficient and used to be more cutting edge technology which are the wonder we are trying to introduce piece by piece so that infrastructure you know roland if i can go to you this is quite interesting because logistics keeps being brought up here and then presumably that also falls in the purview of certain categories of the economy that you would think the state would be most responsible for highways. more
freeways which certainly moscow good use a lot better roads because that does. actually hinder business in the capital here i mean can the can the russian government feel at ease and maybe sub contracting these kind of logistic issues that normally we think the state would do because i think a lot of private companies would do better. look it's got big problems with that but it really doesn't have any choice any longer you know as well as i do the driving from one side to moscow from one side of us because of the other can take several hours now you know there needs to be this investment that goes across russia and you know the states doesn't it has the farms probably but it doesn't really have the mechanism at the moment to invest it appropriately so that's what the private sector can bring it brings efficiencies with it. and you know that's that's actually a key question the we should probably think about a sense of what exactly does modernization really mean for russia what kind of economy is russia really trying to trying to build is it going to be just a state that invests in modern russia or is it really going to be employing the
private sector i think you know your guess in the in the studio today really show that russia is trying to get the private investments in there to bring in the technology in the competition to help create a better infrastructure and make sure that things work better in russia. you know we when i talk to people i used to be investment banking and and people say you know what you have all those strategic sectors in russia they seems like you can't go there you can't call can't go there or you can all go twenty percent there and you know what it is complicated not opaque but you really have to focus your attention and is this something the government really has to reassess here because obviously they're going to be sectors of the economy for national security any country in the world would say is off limits but i think the way financial media which is often very unfair to russia kind of makes it sound like it's more of a minefield. well yes absolutely this is an issue that has to be reconsidered and it is being reconsider that i think because yes if you look at russia today still there are several instruments that are used to. contain
foreign investment to. prevent foreign investment from going into certain sectors so the instruments are strategic sectors strategic reserves strategic enterprises but what has been the change in the past several years the change has been the scope of the strategic and surprise the strategic sectors has been reduced and in fact there was a statement coming from the president made very different that that was for him that there was almost an eighty percent reduction and the scope of strategic sectors and russia's economy as russia would covers from the crisis we're clearly seeing signs that measures are being taken to render russia's economy more open to foreign investment ok roland if i go to you we have about ten seconds i'm just going to ask you a question can you give me as soon
a yes or no does modernizing the russian economy mean getting away from oil. yes it doesn't mean giving away some oil but that doesn't mean to say that the oil cannot benefit crossroad to get russia in the car i want to thank my guests here today and thanks to our viewers for watching us here on on the money see you next time and stay with are today.
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