Russian President Dmitry Medvedev says that starting next year Russia will scrap the capital gains tax on long-term foreign investment in order to attract more investment.
He acknowledges that Russia will need an “investment boom” in order to get its oil and gas-based economy on track.
Medvedev also told a major business forum yesterday that Russia would cut the number of strategic enterprises fivefold to allow for partial foreign ownership of these companies.
Russia’s economy has been badly hit by the downturn, with economic output plummeting 7.9 percent and foreign investment plummeted 41 percent last year.
Both Medvedev and his predecessor, Russian Prime Minister Vladimir Putin, understand that without a significant increase in foreign investment they are unlikely to wean Russia’s economy — ranked a dismal 120th by the World Bank in terms of business climate — off its oil and gas dependency and phase in value-added, high-tech industries.
Medvedev, for instance, wants to create a Silicon Valley-like project in Skolkovo — in suburban Moscow — that would bring together some of Russia’s greatest entrepreneurs, scientists and mathematicians to design innovative, high-tech products that could be sold worldwide.
However, with endemic graft, endless red tape and a corrupt court system, Russia’s leaders have more than an uphill battle.
US and European officials used the opening of Russia’s premier business forum Thursday to impugn Russia’s leadership for failing to defend investors’ rights and improve the country’s dismal investment climate.
Swedish foreign affairs minister Carl Bildt, reminding participants that Russia ranks 146th on Transparency International’s corruption index said foreign businesses still do not feel protected, despite Russian leaders’ pledges to improve the situation.
“There are quite substantial problems that need to be addressed in Russia,” he said, singling out the dysfunctional judicial system.
Andrew Somers, president of the American Chamber of Commerce in Russia, said that an investor could discover that his newly purchased property is contaminated with “old Soviet” hazardous waste, yet have no protections under local laws.
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