RBCC Investment Forum
Every year the Russo-British Chamber of Commerce (RBCC) hosts an important conference in Moscow, bringing together major figures from the worlds of government, diplomacy and commerce for a day’s discussion about the Russian economy and British involvement in it. This year’s event was held on 15th November at, as usual, the old stock exchange, an elegant building on Ilinka, near Red Square. By the end of the day, which culminated in a lavish drinks party at the British Ambassador’s Residence opposite the Kremlin, a consensus seemed to have emerged, namely that Russo-British links are on the mend, but they have a long way to go to reach the level of activity of one of Britain’s main trading partners, like Germany or the US. But that is hardly news. What was news was the changed atmosphere when compared with previous RussiaTALK conferences.
In the past, these events could plausibly be divided into two categories: pre-crisis and post-crisis. The ones up to 2008 had a whiff of Russian triumphalism: “Russia is off its knees” and is looking to buy its way back into the major league of world economies. 2008 was a cuspal year, but still Russia could rather smugly claim it was an island of stability in a sea of global chaos. By 2009 that mood had evaporated. The tone was more contrite, almost realistic. But still there was a sense of underlying optimism which the possibility of the mould of Russian politics begin broken by President Medvedev allowed. Not in 2011. I detected a changed mood at this year’s conference—which is why such events are so valuable: they enable the interested observer to listen and talk to some major players at first hand and gauge the tone of their remarks much more sensitively than is possible when simply reading their words in newspaper reports.
“Why is no-one mentioning corruption?” I asked a senior Russian delegate at the coffee interval after the session devoted to Innovation. “It surely is the biggest factor inhibiting new business growth in Russia?”
“I think everyone knows it is a huge factor,” the delegate replied, “but no-one wants to talk about Putin. There are spies in the room.”
“No. I am sure of it.”
That was perhaps the most interesting comment I heard all day. For the first time in four years of attendance at these events, I detected a note of self-censorship in the debates. The chilling effect of another 6 or 12 years of Putinism was obvious. What that means for the Russian economy, one can only guess, but I find it hard to be optimistic.
The theme of this year’s event was “From Theory to Practice”. The first session considered the general UK-Russia investment climate. Denis Keefe, the Head of Mission at the British Embassy, described the background by saying that British manufactured exports to Russia are running at about £4 billion at year, and that Britain has £600 billion invested in Russia (while Russia’s investments in Britain total a meagre £1 billion). Other speakers praised the emergence of a middle class in Russia, and reiterated what a bad press the country gets, without attempting to explain why. The President of the RBCC, Tim Eggar, a former British Minister of Trade and Industry, mentioned the problems of “bureaucracy” in Russia, which was as close to the subject of corruption that any speaker came. But whatever you call it, public interference in private business and property is surely at the root of the reason why Russia is treated unsympathetically by the world’s media.
The crux of the matter of Russian economic prospects was considered to be the likelihood, or lack of it, of a serious level of innovation which would enable the country to alleviate its current dependence on oil and gas. An Australian who is one of the key executives with the Skolkovo project described at length the virtues of that initiative, speaking of “back-end and front-end functionality” and “bespoke high-tech manufacturing technology on both sides of the fence”—whatever that means.
Then the most impressive speaker of the day, not least because he was the most succinct, Neil Hardwick of the advertising agency GroupM, made the point that Steve Jobs needed only his parents’ garage to get started, and that Mark Zuckerberg, did not even need a garage. Skolkovo, he implied, is an irrelevance.
An American businessman in the audience summarised the situation by saying: Russia has lots of money, moderate scientific and technical capabilities and an almost complete lack of innovation. Other speakers praised Russians for their entrepreneurial spirit, but pointed out that if they want to exercise it, they have to go abroad, like one of the co-founders of Google. Tim Eggar said there are 300,000 Russians in London, many operating at the leading edge of the knowledge economy. Why do these people not live and work in their native land?
Though this problem of the lack of innovation was enthusiastically debated, no-one in the hall dared to suggest that a big part of the reason was, as one delegate put it to me over lunch, that as soon as you create something successful in Russia, someone else tries to take it off you, by fair means or foul, and few entrepreneurs have the money or legal expertise to fight for what in a more successful economy would be regarded as their rights.
A fascinating day left me with this thought: the most corrupting effect of corruption is that it prevents uncorrupt people discussing corruption in public, and therefore making plans to fight it. One wonders what will the situation be by the time next year’s event takes place?