A plan was made to discuss the prospects for doing business in Russia and Ukraine at the 11th international conference, organized by RosBusinessConsulting (RBC), in Switzerland, which finished at the end of last week. The discussion swiftly shifted from economics to politics, and this has become the conference’s main result, as its participants have shown that in their opinion, the prospects for businesses in both countries depended primarily on changes in the political situation in Russia and Ukraine.

RBC's 11th international conference “Russian and Ukrainian Business under New Conditions: Risks and Prospects” (please read about the conference’s cultural program on page 8), where Kommersant was the general information sponsor, was held in Gstaad (Switzerland). Mikhail Delyagin, chief of the Globalization Problems Institute, determined the general sentiment at the conference, and the picture he drew looked depressing: “Troubling signs were increasingly noticeable in 2004. The GDP growth rate has stopped increasing, and in 2005, it has fallen to 5.8 percent. The decrease in inflation has stopped for the first time since the beginning of the (economic) reforms, except for 1998. Capital flight has stepped up. The stock market’s reaction to positive news has been weak. Furthermore, a decline in gas output, arms exports and the working-age population is likely after 2007.” Commenting on the origin of this situation, Mr. Delyagin has noted that the idea of the reforms implemented in Russia over the past 15 years had been “to free the bureaucracy from public control and answerability.” This result of this was “direct robbing of businesses” and the development of “bureaucratic business,” he noted. This situation would end in a system crisis in 2007-2009, Delyagin reckons.

Viktor Gerashchenko, chairman of the YUKOS Board of Directors, has drawn the attention of the conference’s participants to the dangers of the administrative reform. “A decrease in the number of ministers can turn into a real mess. I remember that previously, ministers were so busy that their deputies had to wait for two weeks to meet with them. What will happen now? It is unclear. In general, I disapprove of this reform. Many things are done inconsiderately. We are not moving forward,” he said.

Other speakers were no more optimistic either, forecasting any positive changes in the Russian economy for the period after 2008 only. At the same time nobody said directly that the situation could be corrected only after a new President of Russia was elected. Mr. Delyagin was the only one to remark, although somewhat equivocally, on this issue: “In the event of political modernization, the economic modernization and regaining of (Russia’s) positions in the world would begin after 2009.” As for Ukrainian business, its representation at the conference was quite limited: in fact, only well-known “Ukrainian” politician Boris Nemtsov spoke about it. Actually, even his speech was focused on politics rather than business, in the long rather than short term. Describing the present situation in Ukraine, Mr. Nemtsov said, “In comparison with Kiev, Moscow looks like a model of order – there is an awful mess there, and it is impossible to understand who is responsible for anything. Corruption is terrible. If a Russian official accepted a bribe, he would do something, while Ukrainian officials also accept (bribes) and do nothing. There are no legally paid wages there, as the wage fund tax is high. There are no laws on joint-stock companies. There are bylaws only, and this situation leads to non-stop corporate wars. In short, a legal mess, and spirit of embezzlement and corruption.”

Despite this, Boris Nemtsov is convinced that “the main result of the “orange revolution” is the creation of a national idea and strategy; everything else is just a matter of time.” He thinks that Ukrainians know what they want, when saying: “We want to live in Europe, we are Europeans.” Judging from this, Nemtsov believes that Russian businesspeople should not be afraid of any deprivatization in Ukraine. In his view, Ukrainians are aware that if they behaved barbarically, they would never be admitted to Europe.

Therefore, the conference devoted to business risks and prospects in Russia and Ukraine has largely shifted from economics to politics. Strangely enough, it has thus achieved its goals, as it has clearly shown that both in Russia and Ukraine, economic risks look insignificant in comparison with political risks, while the prospects for doing business in both countries are primarily related to the development of their political situations. Maxim Builov