Russian Davos begins to woo foreign investment

FE Team | Published: May 24, 2018 21:55:01

SAINT PETERSBURG, May 24 (AFP): Amid sanctions, counter-sanctions, and trade wars, Western firms gathered at the Saint Petersburg economic forum will need to tread nimbly with Russia, as it seeks above all to attract foreign investment.
The annual event, often called the Russian Davos, used to serve as a window on a booming economy, but over the past five years has been a soap box allowing the Kremlin to let the world know it is open to investors despite tense relations with the West.
This year, French President Emmanuel Macron and Japanese Prime Minister
Shinzo Abe will make an appearance at the three-day event was scheduled to begin on Thursday.
This year's forum comes at a critical moment for Russia, which is just overcoming a recession triggered by US sanctions and a drop in oil prices in 2014.
Putin, who was re-elected in March, has put the development of the economy at the heart his fourth term in office, and aims to catapult the nation into the fifth-largest economy spot, from its current position in 12th place.
Tens of billions of dollars in investment will be needed, and despite rising oil prices Russia will not be able to muster that without foreign firms and investors.
However, the United States is stepping up its sanctions against Russia.
And Putin, who has set the objective of making Russia a top-five economic power before, has not changed his economic team to spur reforms that could unlock growth.
The International Monetary Fund noted this week that "Russia's convergence to advanced economy income levels has stalled and its weight in the global economy is shrinking".
Nevertheless Russia will strive to put its best foot forward at the forum.
"The key message is expected to be that Russia remains open for foreign investment and business, despite the political noise, and that it is a country where money will be made in the coming years," said Chris Weafer, founder of the Macro Advisory consulting firm.
Among the major problems that Russia suffers is "a very poor international image and this often raises concerns about reputational risk for major investors" in addition to the direct impact of sanctions, he noted.
"Even though the economy has largely adjusted to 2014 sanctions, the escalation with the (latest measures) is now causing major challenges and makes it more difficult to attract investment," added Weafer.
Despite the strained international situation, the Saint Petersburg forum is still attracting more than 1,400 foreign companies from 70 countries.