The 10th investment conference “Expansion of Capital. From National Economies to a Transnational Economy” is over now. The conference took place in Hong Kong on November 6-11 and was hosted by RBC. The business forum brought together over 200 businessmen and politicians, including Russian Presidential Advisor Andrey Illarionov, Deputy Energy Minister Ivan Materov, Senior Deputy Chairman of the Central Bank of Russia Tatyana Paramonova, Head of Wimm-Bill-Dann David Yakobashvili, Vice President of Aton Capital Vladislav Vershinin, and Chairman of the Board of YUKOS Viktor Gerashchenko.

The top Russian officials were jealous of the economic freedom of Hong Kong and urged their countrymen to learn from China’s experience in building an efficient economy in a single city.

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 do 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 businesses have begun looking closer at Hong Kong. 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%. Compared to previous conferences devoted to theoretical and practical aspects of investing in Russia, this time Hong Kong witnessed the eagerness of Russian companies to enter the world market. “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 businesses are getting 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 decreasing 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.

As General Director of RBC Yury Rovensky stressed at the opening of the conference, the business forum followed one practical idea: to outline the main investment objects, namely which Russian industries are the most promising now, and which foreign assets are worth being invested in by Russian companies.

IT and construction companies appear to find themselves in the best condition in Russia. According to President of Verysell group Mikhail Krasnov, the Russian ICT market added 20.3% in 2003. With successful policies of the Russian government and stable economic environment the ICT market can see a stable growth, three-five times higher than the GDP growth. Apartment construction remains one of the most profitable industries of the national economy. In Moscow, newly built apartments add 1.5-2% in price every month, and around 3% in Saint Petersburg, President of the Group Forward association of manufacturers Vladimir Gamza noted. Such high growth rates may lead to mass migration. According to Advisor to the Chairman of the Board of Directors of the Su-155 holding Nikolay Kokovin, “each well-off person considers it necessary to buy an apartment in Moscow for him/herself, his/her family, relatives or children.” As a result, very soon prices for good apartments in Moscow will be similar to any other European capital (in Paris one square meter costs around EUR10,000-15,000). Moscow will become a city for rich people. Consequently, monthly apartment fees will go up, almost all parking lots will be paid (including front yards), it will cost money to drive in the city, cheap stores will disappear. In other words, only rich people with high incomes will be able to afford living in Moscow. And several million Muscovites will have to move in the outskirts in search for a cheaper life in the next 10-15 years.