Interactive Business Meeting in Honour of H E Mr Ilya I Klebanov, Deputy Chairman of The Government of Russian Federation & Chairman of The Irigc
October 16, 2001, New Delhi

A Statement by H.E. Mr Ilya I. Klebanov,Deputy Chairman of the Government of Russia before the Indian businessmen

Dear partners, colleagues and friends,

I am sincerely happy that my visits to friendly India and meetings with business circles of your country are becoming traditional.

It is not for the first time that I visit this wonderful country and I come here not only because duty calls. Sincere feelings of brotherhood, kindness and sympathy that I feel here bring me to your country. We feel the same towards you.

I welcome the interest evinced by the Indian big business to Russia. This interest, no doubt, is based upon sober analysis and planning. It was rightly noted by people in India that Russia Today becomes an increasingly attractive trade and investment partner. During the first half of this year the inflow of foreign investment into Russia rose by 40 per cent as compared to the same period of last year, foreign trade rose by $7.1 bn totaling $102.1. Business people in other countries have realized that Russia can be a partner and has to be paid attention, that Russia means profit.

On the part of the Russian Government we are doing our best to preserve and stimulate these positive trends at the macroeconomic level. In 2000-2001 the Government introduced, the both Houses of the Federal Assembly of Russia passed and President Putin approved Federal Bills introducing flat income tax at the rate of 13 per cent and cutting corporation tax from 35 per cent to 40 per cent. Another Bill on reducing VAT from 20 per cent to 15 per cent is due to be introduced in the Parliament. Even if we don't take the VAT Reduction Bill into account, currently the aggregate tax burden in Russia is the least in Europe. Simultaneously, we have consistently implemented tough measures aimed at combatting tax evasion and other economic crimes, the practice of granting selective tax breaks to some businesses has been abolished completely. Due to these efforts taxable base has expanded considerably, people in manufacturing have realised new advantages of paying taxes duly rather than trying to hide their profits. A convincing example of this is that, bearing in mind this trend of growing tax collection rate, the amount of revenues in the Federal Budget for the year 2002 has doubled to $85 bn.

Besides, in October 2001, the Federal Assembly of Russia passed a truly liberal Land Code that for the first time since starting economic reforms in our country has reaffirmed the right of private property for land in industrial, commercial and financial purposes, except for agricultural lands. We are keen on continuing with the progressive and well-planned land reform called to re-establish private property for agricultural land.

I dare say that the well-balanced policy of the Russian Government has played an important role in changing the situation for better: in 2000, GDP grew by 8.5 per cent and in the first half of 2001 by 5 per cent (against 4.5 per cent planed by the Federal Budget), whilst the growth rate of the industrial output in the first half of 2001 exceeded 5.3 per cent. As far as I know, the Indian economy is growing nowadays at a similar pace. This brings us even closer, enabling to jointly identify and address common problems, share experience.

Allow me to give you more statistics. In 2000, the inflow of FDI into the Russian economy exceeded $5 bn (during the whole past decade the overall amount of FDI totaled $15bn), for 2001 the forecast is at least $7.5-8 bn bearing in mind already submitted foreign investors' applications. In five years we are committed to achieve annual FDI inflow of $15-20 bn. Noteworthy that over the past two years the Russian business elite has ben thoroughly revising its investment strategy. Foreign direct investments, both Russian and foreign, increasingly go into the high-tech rather than primary resources sector. The concentration of the national private capital is going very fast. Several Russian financial and industrial corporations including those actively investing in mechanical engineering and electronics can now be compared with the leading European corporations in such parameters as turnover, competitiveness and profitability.

As the Co-Chairman of the IGC allow me to assure you that the Russian side is doing its best for expanding cooperation with India, including business contacts.

The realties of today mean that without taking into account Russia's and India's opinion it is impossible to address global issues. Russia and India having entered the path of market liberalization, have become countries with the market economy and this underlying principle has to be made a corner stone of our trade and economic relations.

The current situation requires that in order to survive tough challenges of globalization and stiff competition as politically and economically independent states, Russia and India have to develop multifaceted and mutually beneficial political, economic and scientific cooperation.

Bearing this in mind, creation of favourable conditions for developing trade and economic cooperation is one of our priorities.

We have real opportunities for further developing trade in traditional goods: tea, tobacco, pharmaceuticals, apparel and shoes from India and print paper and fertilizers from Russia. In this field, business people have to focus on enhancing quality and competitiveness.

Allow me to be frank with you. If we limit ourselves to this trade only we will remain insignificant partners to each other (with 1- per cent share in foreign trade), and be highly dependent on trade in goods prone to market fluctuations and weather conditions.

We see tangible prospects for a breakthrough in mutually beneficial trade and economic cooperation in mechanical engineering and high technologies.

India has started important programmes of building new and modernizing existing power plants, setting up new and upgrading operational power lines. In this context, efficient and competitive energy plants and equipment from Russia and Russian experience of running nationwide energy systems are invaluable to India.

Committed to strengthening its independence, India has embarked upon establishing national aircraft industry. Russia is ready to share its rich experience and know-how and jointly manufacture modern aircraft.

We have noted with satisfaction active advancement of our scientific cooperation. However, the time has come to commercialize achievements in electronics, software, satellite communications, joint rocket programme and satellite launches.

There are promising opportunities in exchanging technologies of oil processing and petrochemicals in general. Until recently they have not been much utilized.

Speaking about these high-scale programmes one shouldn't forget about small and mid-sized business - the basis of any developed economy and welfare state. In this context we are interested in India's experience of promoting this sector organizationally and financially.

I am convinced that regular exchange of delegations, exhibitions and seminars will help us further interact in this sphere.

Necessary infrastructure has to be developed and modernized for creating favorable conditions in our trade and economic partnership.

In this regard we are concerned by the inadequate level of dialogue between banking systems of our countries. Proper banking is instrumental for business and without it functioning there will be success neither in trade nor economic cooperation.

There remains the problem of information gap which can be helped by massive advertising of goods and services in mass media and Internet.

We have noted with satisfaction the launch of the international transport North-South corridor. Its organizational structure is being established. Investment is coming into port infrastructure and we invite Indian investors to take part in developing Olya port on the Caspian sea.

Summing up, we have real prospects for advancing trade and econmic cooperation. I suggest that business people in Russia and India take keener interest, reasonable risks, show commitment and business assertiveness in their trade. I am convinced that on this path the governments of our countries will support you. The only thing we are against is wait-and see position.

Upon implementation of the aforementioned measures will be able to improve the structure of the bilateral trade, increase turnover commercialize research and development and thus strengthen our economy, independence and international position.

Allow me to wish you all success and thank you very much.