Novye Izvestia
Foreign investors like Russia's R&D sector
A.T. Kearney's Foreign Direct Investment Confidence Index assigned Russia sixth place for the first time. The survey's authors believe that Russia owes this success to its growing R&D sector. But Russian experts say that foreign companies are often misled about the national situation.
Investors have merely reassessed their risks, said Eki-Invest analyst Ivan Yermilov. Russian assets are becoming more expensive because of the favorable oil price situation. This is why foreign investors are quite eager to operate in the local market. "One does not need an economic degree to see that Russia's processing industry is notorious for its low labor productivity. The industrial world has outpaced Russia by 30%-40% in this respect," Yermilov added.
Other experts note that foreign agency ratings of Gazprom's Eurobonds sometimes exceed Russian sovereign ratings. Still this is absolutely impossible because the gas monopoly is controlled by the state.
Nevertheless, the latest A.T. Kearney survey implies that investors like Russia for its successful performance in the R&D sphere. Experts claim that the economy should continue to develop in this direction. "Russia is not India, which is a target for outsourcing. Consequently, we must channel all our resources into the high-tech sector and try and catch up with Southeast Asia, to say the least," Yermilov said.
Gazeta.ru
S&P may upgrade Russian state companies despite ineffectiveness
International rating agency Standard & Poor's says state-owned companies are generally less attractive to foreign investors than private firms, but not in Russia. S&P plans to upgrade local ratings of state-owned Russian companies.
In a statement, the agency said that foreign creditors thought state-owned companies had more drawbacks than advantages. However, such state-owned companies as Gazprom, Vneshtorgbank and Russian Railways (RZD) received the highest credit ratings from foreign agencies, including S&P.
"The reason for this is the growing budget possibilities and the subsequent growth of state companies' solvency," Olga Belenkaya of the Finam investment company said.
She said S&P had, for the most part, made an objective assessment of the risks and advantages of state-owned companies. "S&P has compiled the most important risk factors in state-owned companies: covert political rivalry, non-transparent governance mechanisms, and decision-making practices, as well as the absence of guarantees that the next government will be able and willing to offer support in case of project failure," Belenkaya said.
But Dmitry Belousov of the Center of Macroeconomic Analysis said it was not correct to compare the credit standards of private and state-owned companies. "They have different goals. Private companies are after profits, whereas state-owned firms face a number of additional national tasks, such as the development of new territories, the fulfillment of social obligations, and so on," Belousov said.
S&P sees one more major drawback of state-owned companies in Russia: many of them are monopolies according to national legislation. Their operation is state-regulated to a considerable degree, which includes "loose tariff rules that give the regulating agency a lot of room to maneuver."
However, the above factors have not stopped S&P from announcing its readiness to upgrade the credit ratings of state-owned Russian companies.
Vedomosti
Chubais convinces Cabinet to sell power plants
Anatoly Chubais, the head of RAO UES of Russia, has convinced the government of the need to sell power plants.
The plan envisions splitting the energy giant into seven big wholesale generating companies (OGK), territorial generating companies (TGK), the Federal Grid Company (FSK) that will own trunk energy lines, the Systems Operator, and the Interregional Grid Distribution Company. The energy market is to be fully liberalized by 2008.
The government was planning to acquire 75% plus one share in the FSK and the Systems Operator and a controlling stake in the Hydro OGK and to sell its share in thermal generating companies. RAO UES was discussing possible privatization methods when Mikhail Fradkov was appointed prime minister in 2004 and decided to put off the sale of generating assets.
Shortly before yesterday's Cabinet session, Chubais started actively promoting a new scenario for the privatization of generating assets. He said OGK and TGK should hold initial public offerings (IPO) or issue new shares, and use the revenues for modernization and construction. Chubais warned that the May blackout, which left much of Moscow and several neighboring districts without electricity, would not be the last such catastrophe unless investments were attracted into the energy sector.
As a result, he convinced the ministers to accept his view. They agreed that generating companies should issue new shares. The additional emission of shares of five or six OGKs and TGKs could attract up to $5 billion in 2006 and 2007, Minister of Industry and Energy Viktor Khristenko said.
Investors welcomed the optimism of Chubais and the ministers. Shares of RAO UES have been dropping since Wednesday evening but started to rise upon news from the Cabinet session, gaining 0.55% on the RTS. Shares of less liquid Mosenergo soared at the news, forcing the RTS and MICEX to stop trading them after they had risen by 13.7% and 25%, respectively.
Biznes
European market ousts Russian chemical producers
Unflagging pressure from the European Union may force Russian chemical producers to re-orient themselves toward the domestic market.
Temporary anti-dumping tariffs on polytetrafluoroethylene (plastic fluor 2) that Europe introduced against Russia and China have now become permanent. The product is a basic ingredient for Teflon production, is used to protect surfaces from aggressive environments, and is used to manufacture products with a low friction coefficient. Now exports from Russia will carry a duty of 36.6%. For China the duty is set at 55.5%.
In Russia, two companies, the Kirovochepetsk chemical works and Galogen, produce plastic fluor 2. Experts assess their aggregate annual exports at some 8,000 metric tons.
Nadezhda Voronova, press secretary for Kirovochepetsk, said, "They want to oust us because Europe intends to expand its own production." She said that after the duties came into force, it would not be profitable for the Russian producers to export plastic fluor 2 and the company would have to re-orient itself toward the domestic market. "Before, our Russian clients were mainly the defense and space industries, but now we hope to extend the list by expanding first of all to the chemical and petrochemical sectors." The company also intends to begin manufacturing its own products based on plastic fluor 2 so that it does not only export the raw material, Voronova added.
Analysts say that similar problems will arise until Russia joins the World Trade Organization. "Although Russia is recognized as a market economy, Europe has additional leverages to exercise pressure on the country, which is not a WTO member," Maxim Ivanov, an expert with the Center Invest Group, said.
Izvestia
Putin writes Russian Constitution?
The main source of power and agent of sovereignty in Russia is not the population, as is stipulated by the Constitution, but the president, according to a survey conducted by the All-Russian Public Opinion Research Center, VTsIOM.
Close to 55% of the population believe that the head of state and sovereignty are identical. Only 19% of the respondents believe in Russian democracy and say that power in the country does belong to people.
This should not be a big surprise, as many citizens have not read the Constitution and, moreover, a majority of them do not recall participating in its adoption by voting in the 1993 referendum. At least one third of respondents answered correctly about how it had been adopted, whereas most of them either could not answer the question or believed that it was the president's job.
These figures have been confirmed in another poll conducted by Romir Monitoring. Nearly 51% of the respondents admitted that they had never read the Constitution. In rural areas, this figure was even higher, 62%. Only one tenth of Russians know the full text of the Constitution.
Nezavisimaya Gazeta
Wives and children of Russian VIPs strive for power
One of the leading trends in Russian political life is the desire of famous politicians' wives and children to tread in their footsteps. However, the exploitation of well-known names does not always result in electoral dividends.
This trend was especially evident in the recent Moscow City Duma elections and the by-election to the Russian parliament in two Moscow constituencies. In the former, Communist Yelena Lukyanova, 47, the daughter of Anatoly Lukyanov, the former speaker of the Soviet Supreme Council, lost to General Yuri Rodionov's daughter and member of the United Russia party, Inna Svyatenko, 37, (26% to 40%). Prominent Russian liberal Boris Nemtsov's daughter, Zhanna Nemtsova, 21, ran as an SPS candidate but only came in third with 9% of the vote, losing to her United Russia rival, Viktor Ivanov, who garnered 37%.
Vladimir Kiriyenko, 22, whose father was formerly the presidential special envoy to the Volga Federal District but recently appointed head of the Russian Atomic Energy Agency, has also tried his hand in politics. No doubt he will obtain the desired State Duma deputy card in 2007. The same is true for Ramzan Kadyrov, the son of Chechnya's late President Akhmad Kadyrov. United Russia's regional division has already appointed him chairman of the party's local executive committee. This post opens the way to the country's parliament, but only if he does not want to become Chechen president before that.
