Following the opening of RBC's investment conference in Hong Kong yesterday, the first discussion, as expected, concerned ways of doubling the GDP. Russian Presidential Advisor Andrey Illarionov urged following the example of Hong Kong and achieve sustainable economic growth through its liberalization. Deputy Industry and Energy Minister Ivan Materov was concerned about structural changes in industrial production, and YUKOS Chairman Viktor Gerashchenko expanded on Russian economic freedom in real life.

Illarionov opened the plenary session of the conference 'Expansion of Capital. From National Economies to a Transnational Economy.' The topic of his speech was natural. Hong Kong is the absolute world leader in terms of economic growth. The Presidential Advisor talked about how Russia could learn from Hong Kong, a former British colony that has been doubling its GDP every 11-12 years from 1950 to 2003.

In the opinion of Illarionov, among the main lessons to be taken by Russia are extra-liberal customs and tax procedures, predictable government in the investment sphere, transparent monetary policies conducted without the Central Bank (because Hong Kong doesn't have one), and low social expenditures. The official compared statistical information on Russia, Sweden, the USA and Hong Kong and tried to explain that economic growth dynamics were in inverse relationship with the percentage of state expenditures in the GDP, and that includes social expenditures too. The most interesting part of the speech was devoted to Hong Kong's migration policies. Their analysis shows the efficiency of attracting a foreign workforce without providing it with social security. This problem is quite urgent for Russia, especially in view of the fact that 95% of the population of Hong Kong is Chinese, it attracts immigrants from China, and in the future it might become a major exporter of workforce to Russia.

The audience didn't support Illarionov as he called for lifting restrictions on immigration. Ivan Materov, the Deputy Energy Minister, mentioned that immigration control was necessary for Russia. In any case, it is not really impossible to ensure economic growth in Russia, he added. "Russia does see growth. The question is how long it is going to last. We are able to maintain GDP growth within 7-8% a year amid high energy prices, but this changes the entire economy." According to Materov, it is still unclear how to cope with an investment deficit in manufacturing industries. However, the free atmosphere in Hong Kong played its role. Materov admitted that Russia's dependency on raw materials is in many ways due to its place in the world division of labor. As an example, he mentioned a decade when the government of Russia was making attempts to set up a fish processing industry in the Far East of Russia, but unfortunately Japan and Korea continued doing it themselves.

In general, it became clear from Illarionov's opponents that Hong Kong's successful economic principles are similar to those followed by the Russian government. But the truth is that each time the participants of the conference talked about implementing them in real life, their optimism vanished. For example, Chairman of the Supervisory Council of the Renaissance Capital investment bank Alexander Shokhin said that despite rather low taxes in Russia, foreign companies have been asking the Russian government to revive product sharing agreements and other "tax stability options."

Meanwhile, Mike Rowse, the General Director of Invest Hong Kong, looked at the economic growth in Hong Kong from a different perspective, compared to his Russian colleagues. "Even a fool can run a business like in China. The question is, whether he can make a profit," he stressed. Talking about growth factors, Rowse pointed to the same investment procedures applied to Hong Kong, Chinese and foreign investments, and the "national nature" of economic growth in Hong Kong, which mainly unwrapped in the form of opening China's gates to foreign markets. He also stressed the importance of the development of banking and financial systems for stable economic growth.

YUKOS' Chairman Viktor Gerashchenko was the last to speak on the first day of the conference. He preferred not to waste time expanding on the theoretical side of the topic 'The Government and Businesses. Protecting Investors' Rights and the Problem of Business Security' and used YUKOS as an example. Gerashchenko confirmed YUKOS' ability to pay its debts to the Russian Tax Ministry within a two-year period (however, he stressed that he was talking about the aggregate tax debt as of September 2004 equal to around USD8.5bn) and added that the MENATEP Group, which is the main shareholder of the oil company, might give up its stake. "It can be sold," Gerashchenko emphasized. Earlier, he made a statement that US investors, who control around 20% in YUKOS, were taking the possible sale of Yuganskneftegaz as an expropriation of property, which they expressed in relative letters to the Russian government.

Hong Kong businessmen, who were among the participants of the conference, watched a surprising difference between the sound theoretical approach of the Russian government and the way it is being implemented in real life. It wasn't easy for Russian businessmen either. One of them asked Illarionov: "Is that true that private businesses can change what the government of Russia does?" "I think, yes," the Russian Presidential Advisor replied but didn't specify how.