Premier Touts Jump In Foreign Investing

Foreign investment in Russia tripled last year, providing a boost for the government's plan to reverse the country's industrial decline and increase economic output this year, Prime Minister Viktor Chernomyrdin said Monday.


Chernomyrdin, speaking at the opening of the seventh session of the Foreign Investment Advisory Council in Moscow, said total foreign investment in Russia amounted to about $12 billion and more than 3 trillion rubles ($534 million) in the first nine months of 1996, nearly three times the amount of investment for the same period in 1995.


He said he expected this year's input of foreign capital to reach at least $6 billion.


"This is a solid achievement, but I believe that all of us would like to see more," he said, adding that Russia hoped to boost the volume of foreign investment by three to four times by the end of the century.


Chernomyrdin attempted to downplay the effect of President Boris Yeltsin's illness on the Russian investment climate, telling a press conference after the council meeting that Yeltsin had "control over major issues of state policy."


However, he admitted that strong leadership was what Russia now probably lacked in selling itself as a credible economy to foreign investors.


"It is impossible for us not to regard the personality of the president as important during such a period in Russian history," he said, according to Interfax.


Chernomyrdin cited last year's low annual inflation of 21.8 percent and cuts to the Central Bank refinancing rate as key factors to help Russia boost investments and produce stable economic growth of up to 2 percent of GDP this year.


He also promised a wide range of industrial and structural reforms that will include adoption of international accounting standards at Russian companies, valuation of fixed assets in accordance with their market value and substantial improvements in corporate management.


Chernomyrdin confirmed that the government would give its backing to a State Duma law for the "budget of development," a special fund to invest in commercial projects.


"We expect that each ruble of the budget will make it possible to attract at least nine rubles of private investments," he said.


Chernomyrdin said the government would this year complete work on the long-delayed new tax code, widely regarded as crucial to paving the way for massive influx of foreign capital.


"My position on this is unambiguous: The next annual budget will not be considered or adopted without changes in the tax system and without a reduction of the tax burden on the real sector," he said.


Finance Minister Alexander Livshits said the biggest change in the new tax code will be the replacement of profit and property taxes with a real estate tax.


"It will be a modern tax code, it is practically ready and I expect us to live according to it in 1998," he was quoted by Interfax as saying.


But some experts said the government was doing little to bolster the amount of foreign money directly involved in the running of the Russian economy.


Pavel Teplukhin, chief economist at the brokerage house Troika Dialog said the amount of foreign money was "ridiculously small" compared with other emerging markets.


"The government keeps talking about improving investment climate. But the problem is that nothing has changed and the tax regime is still as chaotic as it was last year," he said.


?Chernomyrdin said he expected the frozen November and December tranches of the International Monetary Fund's loan, worth $680 million, to be released in the next few days, according to Interfax.


The news service reported that Chernomyrdin acknowledged that Russia had been responsible to a great extent for the delay in payment of the two loan tranches.