Moscow News
www.MoscowNews.ru
November 17, 2009
Where’s the beef?
Investors welcome President Medvedev’s speech but see few specific reforms
By Ed Bentley
Dmitry Medvedev's state-of-the-nation address reiterated his plans to modernise the economy. But while his rhetoric on infrastructure was widely seen as positive, concern remains about the lack of concrete action.
The focus remained on the five strategic sectors he had outlined in a September article, "Forward, Russia!" stressing that the economy must focus on people's "real needs" and move away from the "humiliating" dependence on oil.
"These priorities include introducing the latest medical, energy and information technology, developing space and telecommunications systems, and radically increasing energy efficiency," Medvedev said in his speech.
The speech did not cover fiscal policy and it appears unlikely that any changes will be made until 2012 but economists agreed that the key sectors Medvedev highlighted needed heavy investment.
"The declared policy of modernisation is supportive, particularly for pharmaceuticals, utilities, and telecoms," UBS analysts said in a note to investors.
However, in his 100-minute speech to the Federal Assembly (both chambers of parliament), Medvedev went over much of the same ground he covered in the article, without expanding on it or going into policy details.
"From an investor's point of view, there was relatively little new in his speech," Chris Weafer, chief strategist at Uralsib, wrote in a note to investors.
Russia has fallen far behind Europe and the US in these sectors as it developed its oil-powered economy, but the collapse in crude prices last year left the government frantically scrambling to catch up.
While the points raised in Medvedev's speech were almost universally praised, experts have stated that few policy changes have actually been seen.
"Everything now boils down to the implementation," said Vladimir Osakovsky, chief economist at Unicredit. "What he said was really good and Russia really needs reform."
Some scepticism was expressed about how fast the measures would be enacted after Kremlin aide ArkadyDvorkovich said that the economy would only fully recover by 2012.
"It does not look like the fiscal policy will be changed at least until 2012, according to ArkadyDvorkovich," Citibank analyst Mikhail Seleznez wrote in a note to investors. "Medvedev believes that infrastructure investment should only be raised when efficiency of the new construction projects improves."
Meanwhile, the president championed creating a research and development centre in Russia to support the priority areas, particularly the hi-tech sector.
"This is a project to create a modern technological centre, something on the lines of Silicon Valley and similar foreign centres," Medvedev said.
The speech also tackled corruption and "legal nihilism", two of Medvedev's pet topics and main concerns of foreign investors, but as yet there is little substance behind the reforms.
"Again, there were no specific new proposals to deal with these issues other than highlighting them as priorities," wrote Weafer.
Curing Russia's ailing medicine and pharmaceuticals sector was also given "top importance" for the modernisation drive, with a target of 25 per cent of all medicines to be produced locally within five years and no less than 50 per cent by 2020.
