Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Fradkov Promises Clear Rules

bloombergErnst & Young CEO James Turley
Government ministers reassured investors on Monday that the state was close to drawing up clear rules on foreign participation in strategic sectors of the economy.

"No one is planning to prohibit anything. We are talking about establishing clear rules for investing in projects," Prime Minister Mikhail Fradkov said after a meeting of the Foreign Investment Advisory Committee, Interfax reported.

Fradkov, who is a co-chair of FIAC, told reporters that the government was in the final stages of reviewing the existing barriers to foreign investment into strategic sectors.

The draft law on foreign participation in strategic sectors will include provisions that clarify investing in subsoil projects, Natural Resources Minister Yury Trutnev said during closed-door meetings earlier in the day, Interfax reported, citing his press service.

"We cannot be sure that we won't have differences of opinion," said Industry and Energy Minister Viktor Khristenko. The draft is set to be approved by the Cabinet this month, he said, Interfax reported.

The regular FIAC meeting in the President Hotel brought together top government officials and senior executives from major foreign investors such as BP, ExxonMobil, Coca-Cola, Deutsche Bank and Siemens.

"The most key thing to foreign investors is predictability," James Turley, chairman and C EO of Ernst & Young and another FIAC co-chair, said on the sidelines of the summit.

Many investors have complained that a lack of rules about Russia's best hydrocarbon and metals deposits is is holding back the flow of foreign capital into subsoil projects.

More transparency in the government's decision-making process would hep increase predictability, Turley said.

Another common complaint is the "efficiency, effectiveness, predictability and fairness" of tax administration in Russia, he said. The problem is not Yukos' $28 billion tax bill -- which foreign investors view as a "domestic issue," Turley said."There continue to be cautionary concerns around administrative hurdles and barriers," he said.

"Sometimes inconsistent application of laws, concerns about corruption."

Turley stressed that most large foreign investors were enjoying a good deal of success, with many planning to expand in Russia.

Nevertheless, the government should pay more attention to foreign high-growth technology companies and other up-and-coming firms set to become household names, he said.

"The future foreign direct investors into Russia today don't have the scale, the resources and the patience ... to overcome administrative barriers that are present," Turley said.

FIAC has yet to assign a working group to the issue.

Established in 1994 as a venue for foreign investors and government officials to share investment concerns, FIAC has had a significant impact in pushing a number of reforms. The group meets regularly to discuss pending legislation and its effect on foreign investment.