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. Last Updated: 07/27/2016

New Body To Boost Foreign Investment

Prime Minister Viktor Chernomyrdin is to head a new Foreign Investment Council of top government officials and senior Western business executives aimed at improving Russia's investment climate, officials said Thursday. Deputy Economics Minister Yakov Urinson told a press conference that the new council was part of a government program aimed at boosting the still low level of foreign investment in Russia. He said the government was dissatisfied with the current level of direct foreign investment, which was just $2.3 billion in 1993 and is expected to drop to $1 billion this year. Western businessmen have expressed dismay over inconsistent legislation that has undermined confidence in Russia as an investment risk in the past. The most recent example was a 23 percent value-added tax that was extended to cover foreign investment, but was later withdrawn. Urinson did not give details on the rest of the investment-boosting package, but said it applied to leases of land by foreign companies, legislation on the operation of joint ventures and changes in the regulations for free-trade zones throughout Russia. "It would provide certain privileges to foreign investors," he said, adding that the program is expected to be finalized by Chernomyrdin over the weekend and will be presented at the first meeting of the Foreign Investment Council in Moscow to be held Sunday through Tuesday. Urinson said the new council would meet every six months in Moscow or one of the European capitals. "It is designed to solve concrete problems, not only to carry out political functions," he said. "Having this meeting is a very positive sign itself," said George Reese, managing partner at Ernst & Young in Moscow. He said that similar councils have worked effectively around the world, passing the investors' points of view to governments. Reese, whose company is organizing the first meeting, cited unfavorable legislation and taxation as the key problems for foreign investors in Russia. The council will include ABB Asea Brown Boveri, BASF, Citicorp, Coca-Cola, Ernst & Young, Fleisch KG, Mobil, The Pioneer Group, Procter & Gamble, Raytheon International, United Technologies, Gulf Canada, Mitsui and Mars, said Urinson. "These are serious multinational companies, which have been very active on the Russian market over the past two years," Urinson said. The council's first meeting will be attended by First Deputy Prime Minister Oleg Soskovets, Economics Minister Alexander Shokhin, acting Finance Minister Sergei Dubinin and Foreign Trade Minister Oleg Davydov in addition to Chernomyrdin. Urinson said that the Russian economy has become more profitable for investment over the past months, with relatively low and predictable inflation and the Central Bank reducing its interest rate."Investment projects are becoming more real and today I can give you a long list of enterprises which are ready to invest, not only to ask for help from the government," he said. Urinson added that Chernomyrdin's signature of a multibillion-dollar deal for an oil-drilling project with a consortium of Western companies during his visit to Washington on Wednesday showed that the investment climate was already improving (Page 11). Urinson said the government was now discussing whether to provide incentives only for foreign investors or to extend them also to Russian investors in an effort to reduce capital flight. "Personally, I think that there should be a better investment climate in general, both for Russian and foreign firms," he said. "This is the only way for Russia to compete on the international capital market," he added. one of the European capitals. "It is designed to solve concrete problems, not only to carry out political functions," he said. "Having this meeting is a very positive sign itself," said George Reese, managing partner at Ernst & Young in Moscow. He said that similar councils have worked effectively around the world, passing the investors' points of view to governments. Reese, whose company is organizing the first meeting, cited unfavorable legislation and taxation as the key problems for foreign investors in Russia. The council will include ABB Asea Brown Boveri, BASF, Citicorp, Coca-Cola, Ernst & Young, Fleisch KG, Mobil, The Pioneer Group, Procter & Gamble, Raytheon International, United Technologies, Gulf Canada, Mitsui and Mars, said Urinson. "These are serious multinational companies, which have been very active on the Russian market over the past two years," Urinson said. The council's first meeting will be attended by First Deputy Prime Minister Oleg Soskovets, Economics Minister Alexander Shokhin, acting Finance Minister Sergei Dubinin and Foreign Trade Minister Oleg Davydov in addition to Chernomyrdin. Urinson said that the Russian economy has become more profitable for investment over the past months, with relatively low and predictable inflation and the Central Bank reducing its interest rate."Investment projects are becoming more real and today I can give you a long list of enterprises which are ready to invest, not only to ask for help from the government," he said. Urinson added that Chernomyrdin's signature of a multibillion-dollar deal for an oil-drilling project with a consortium of Western companies during his visit to Washington on Wednesday showed that the investment climate was already improving (Page 11). Urinson said the government was now discussing whether to provide incentives only for foreign investors or to extend them also to Russian investors in an effort to reduce capital flight. "Personally, I think that there should be a better investment climate in general, both for Russian and foreign firms," he said. "This is the only way for Russia to compete on the international capital market," he added.