The tenth investment conference 'Expansion of Capital. From National Economies to a Transnational Economy' took place in Hong Kong on November 6 to 11. RBC was the organizer of this conference. About 200 businessmen and politicians from European and Asian countries visited the forum. The largest business powerhouse in South Eastern Asia witnessed the four-day discussions on the issue of doubling the GDP and ways of spending the Stabilization Fund. Russian leaders showed their jealousy about the economic freedom in Hong Kong and called on Russians to adopt Chinese experience of creating an efficient economy in a separate city. Announcement on the future of YUKOS were also made during the conference.

Hong Kong's freedom lures

"It is interesting that the conference took part in a week after an official visit to China paid by the Russian President," said Russian Deputy Prime Minister Alexander Zhukov in an address of welcome. "Nowadays business and authorities have similar interests. On one hand, countries of the Asia Pacific region are of a high priority for Russia's foreign policies. China is ready to invest about $12bn in the Russian economy. On the other hand, Hong Kong is an ideal platform for Russian companies planning to enter foreign markets."

The hosts of the conference intentionally chose Hong Kong. This major financial center is a great example to other countries in terms their ability to create a favorable business environment. Profit and wage taxes are low here, namely 16% and 15% respectively, British common law and the independence of the courts are strictly observed here. In addition, the Hong Kong stock exchange creates extremely favorable conditions for companies willing to carry out IPOs. This is of immense importance for Russian businessmen, especially if taking into consideration a high inflation rate in the country and on-going ruble strengthening. It is natural that Russian business has begun looking closer at Hong Kong: Bank of Moscow and Rosbank held road shows for their bond issues here. Gazprom, NOMOS-Bank, Aeroflot, MDM-Finance have already entered this market. According to experts, following the initial issue of Eurobonds by Gazprom in September 2003, as well as by NOMOS-Bank, MDM-Finance, and NIKoil in 2004, the stake of Asian investors reached 8-40%.

Russians everywhere

Earlier conferences on the theory and practical experience of investing in Russia were held in Hong Kong. This time Hong Kong witnessed the readiness of Russian companies to enter foreign markets.

"We used to pay a lot of attention to investments in Russia. Now it is time to talk about Russia's investments in foreign assets, - General Director of RBC Yury Rovensky said. - Russia's economic growth is adding pace. Russian business is not only getting acquainted with international management standards and informational transparency standards, but also is getting more more and more involved in global processes. Russia's direct investments in Western assets have become among the main trends in our economy."

General Director of the Moscow International Business Association Alexander Borisov was quoted as saying that the association possessed information on around 300 projects of 111 Russian companies with assets in 62 countries worldwide. "But in reality, this number is three-four times bigger, - Mr. Borisov said. - Owing to the positive economic situation over the last several years and free financial assets at hand, second and even third-tier companies were getting more and more involved in the process of buying assets abroad."

Our companies are looking not only for attractive investments abroad but also stability, convenient business infrastructure and economic freedom that they lack in their homeland. In the opinion of Russian Presidential Advisor Andrey Illarionov, economic freedom has been sagging in Russia lately. As a result, the GDP has been contracting, too. The only way this situation can be fixed is through minimizing state expenses, pursuing open demographic policies, and doing away with the legal restriction of economic growth in Russia. The YUKOS case is a sad example of Illarionov's thesis about lower economic freedom in the country, Chairman of the Board of Directors of YUKOS Viktor Gerashchenko emphasized. According to him, the worsening of the business climate in Russia can be extremely negative for the company. YUKOS may declare bankruptcy at an extraordinary shareholders' meeting scheduled for December 20.

Recovery receipts

Chairman of the Coordination Council of Russian Entrepreneurship Unions Alexander Shokhin has offered another receipt for enhancing the economic recovery. According to him, we should avoid agitation from favorable oil prices. "We hope that the market environment will help us. Even the economic reforms may stall - why should we do anything, if the situation is good enough?" he voiced a rhetorical question. As Shokhin announced, we should understand, what macroeconomic environment is positive for us. Even oil prices of $80 per barrel could not guarantee stubborn economic growth and even may be accompanied by industrial contraction. May be we should start spending the Stabilization Fund to boost the economic recovery. But nobody knew, which is the right way to spend these funds. According to estimates of head of the financial policies department of the Russian Financial Ministry Alexey Savatyugin, the Russian Stabilization Fund may grow to $88bn by 2010 and $237bn by 2020 from the current level of $19bn. Russian Presidential Advisor Andrey Illarionov has proposed to use these funds for early payments of Russia's foreign debt. His address was tough. "We should in no case spend these funds inside Russia." According to the Presidential Advisor, these funds may also be allocated for Russia's foreign policies, like the establishment of military bases, or investments in risk-free assets abroad. Despite some disturbing trends in the Russian economy, (according to the estimates of the European Bank for Reconstruction and Development, the Russian economy is expected to expand 6.9 percent this year, which is a slower growth rate compared to that of 2003 - 7.3 percent), participants of the conference showed their optimism. Chairman of the Executive Board of the Russian Pension Fund Gennady Batalov said, that Russia had its own resources, which will make it possible to boost economic expansion. According to him, by 2005 the Russian Pension Fund will grow to $3bn. If the Russian Pension Fund shows the same growth rate in the future, after the first 10 years of the implementation of the pension reforms the fund will advance to $25bn-$30bn. These funds may be allocated for the implementation of large-scale projects. This amount of funds, which may be invested, could have a significant impact on Russia's relations with the foreign investments market. "In 3-5 years foreign investors will have to make a decision whether to enter the Russian market or let the Russian economy grow on its own resources. But they will face certain difficulties trying to enter the development market later," Gennay Batanov warned.