Profil (Moscow) - March 19, 2007

The Russian information agency RosBusinessConsulting organized its 15th business conference, Russia - Europe: Business, Investment, Partnership, in Amsterdam in early March.

It is not by chance that Peter the Great chose this country in the 18th century as a prototype for Russia, when the Czar began reforms to improve the quality of life. The Dutch themselves still honor the Russian Czar, who spent a great deal of time in their country mastering various sciences. Russian government officials and businessmen could learn from their Dutch colleagues, as well as establish new contacts. This is probably why the Russian delegation was so extensive and included representatives of various sectors. Among participants of the conference were members of the Russian Finance Ministry, Russian Economic Development Ministry, the Bank of Russia, as well as business people, representatives of the banking sector and various financial companies. What is more, a large delegation from Kazakhstan attended RBC's business forum for the first time ever.

On the European scale, the Netherlands is a rather small country, but it is an important member of the European Union. The country is ranked in the top ten of the world's major exporters and importers, being the largest exporter of gardening, meat and dairy products. The country's leading position in exporting these products can be attributed to Holland's historical orientation on agriculture. Meanwhile, its rank among the world's top ten leading exporters and importers is undoubtedly due to its high development of transportation and logistics services, as well as its financial sector.

Dutch banks ABN Amro, ING Bank, and Rabobank are well known all over the world, while the Rotterdam port is the largest in the world. As a result, the majority of products from Asian and other markets are transferred to Europe via this port, thus generating high revenue thanks to transit services.

First after Cyprus

Curiously enough, the Netherlands is Europe's largest investor in the Russian economy. According to Kirill Gevorgian, Ambassador Extraordinary and Plenipotentiary of Russia to the Netherlands, as of the end of 2006, the amount of Holland's accrued investments in the Russian economy stood at $24bn-$25bn, or over 17 percent of the total amount of foreign investment. With this in mind, the Netherlands ranks second after Cyprus. Meanwhile, in terms of direct investment, the Netherlands is Russia's largest investor. As of October 1, 2006, for instance, direct investments amounted to $17.3bn. They are primarily allocated to the fuel, transportation, communication, and agricultural sectors, as well as the food industry. At the same time, Bas Pulles, Deputy Director of the Netherlands Foreign Investment Agency (NFIA), indicated that accrued foreign investments in Holland's economy stood at nearly EUR 410bn, while the total amount of funds invested in other countries had reached roughly EUR 565bn.

Last year, the Netherlands was second only to Germany (among non-CIS countries) in terms of trade volume, which reached $38bn. The figure is expected to reach $48bn this year. It is only logical that energy products and non-ferrous metals account for the majority of Russia's exports (over 80 percent), as raw materials have already been dominating the country's exports for a long time now. Yet this causes some concerns, and even fears. Therefore, Russia imports products with high value added tax: food products, cars and equipment, and technologies, as well as chemical industry products.

General Director of Bashkirskaya Khimiya Sergei Chernikov pointed out the lack of national technologies to the participants of the business forum. He indicated that his company had organized a tender among Russian companies to supply equipment for a new production line of polyvinylchloride. None of the participants could offer anything suitable, however, so the company had to look for a foreign producer. This is precisely why Russia must close the technological gap as soon as possible, he said, and the Russian president had already stressed this numerous times.

In general, the representatives of the Russian business circles were interested not only in matters related to financial services, but primarily in the possibility of purchasing equipment and technologies.

Russia's investment climate

Meanwhile, the Dutch representatives of the financial sector were mostly interested in political perspectives, including those related to the presidential elections scheduled for 2008, as well as new legislative initiatives - everything concerning the investment climate of the country. It is no coincidence that Bas Pulles observed that the BRIC members (Brazil, Russia, India and China) were rapidly developing, adding that the amount of Holland's investments in Russia would not decrease. General Director of the Center for Political Technologies Igor Bunin described the current political situation and the future prospects. The main idea of his address was that the center expects at least four years of political stability in Russia following the presidential elections.

Meanwhile, Deputy Finance Minister Sergei Shatalov gave a presentation to conference participants on the current standing of Russia's macroeconomics. He indicated that in 2007, the country's GDP would amount to 102.7 percent of the GDP level of 1990, and it would reach 122.5 percent by 2010. At the same time, Shatalov ensured those who feared an increase in foreign loans taken out by banks and Russian enterprises that even though in absolute numbers this indicator was indeed rising, the total amount of foreign loans in respect of the country's GDP was sliding. According to Sergei Shatalov, the only unresolved problem was high inflation. He stressed that the problem would be solved soon, however, and inflation would not exceed 5.5 percent in 2009.

Advisor to Russian Economic Development Minister Yury Lyubimov informed the Dutch investors about a bill providing for restricted access of foreign investment in Russia's strategic economy sectors. He also named those companies and added that the list was not at all extensive. Meanwhile, First Deputy Chairperson of the Bank of Russia Tatyana Paramonova related to conference participants the situation in the banking sector and the existing risks in the banking business.

Make money on transit

Several major projects were presented at the forum, each of them demonstrating Russia's great potential and existing opportunities. Grigory Tomchin, member of the Public Chamber and President of the Foundation for the Support of Legislative Initiatives, when speaking about Holland's highly developed transportation and logistics infrastructure, indicated that Russia could become a major transit country for various products thanks to its convenient geographical position and grand scale. South-East Asian countries are currently the largest producers of products in the world, and the situation is likely to remain this way for at least several dozen years. The bulk of the products from this region are consumed in Europe. Meanwhile, it takes over 30 days to deliver goods by sea and/or oceans. Therefore, the use of Russia as a transportation corridor - on the platform of the Transsiberian railway that leads to the Baltic Sea and further transportation of products by sea to Europe - would make the transit much cheaper and faster. This project required not only political approval, however, but huge investments in the transportation infrastructure, the construction of logistics centers, etc. Furthermore, the implementation of the project would promote closer cooperation between regions and strengthen Russia in general. Tomchin admitted that, so far, unfortunately, the Silk Road bypassed Russia.

Participants of such business conferences do not usually expect such venues to have an immediate effect or to instantly see its results, as the main goal of the forum is to promote closer ties, define business positions and interests, and improve the business climate. In the future, however, the conference will prove to have been successful if businesses expand, and trade between the Netherlands and Russian increases. This success can no doubt be attributed to the conference's organizer - RosBusinessConsulting - for managing to make this forum truly high-profile.