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The Russia Forum 2012 magazine

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    • www.therussiaforum.com the russia forum 2012 ww w. th er us si af or um .c o m the russia forum 2012
    • Information about positions of delegates and speakers of The Russia Forum 2012 are valid as of the date of the event.Sberbank of Russia. General license of August 30, 2010 for banking operations in the territory of the Russian Federation. Registration number 1481.Closed Joint-Stock Company “Investment company “Troika Dialog“ (hereinafter referred to as Troika Dialog Investment Company) may provide brokerage and depository services on thebasis of the following licenses granted by FSFM of Russia and provide other related services on the securities market:№177-06514-100000 for brokerage activities as of April 08, 2003;№177-06518-010000 for dealer activities as of April 08, 2003;№177-06522-001000 for securities management activities as of April 08, 2003;№177-06527-000100 for depository activities as of April 08, 2003;Troika Dialog Investment Company is a financial consultant on the securities market.Troika Dialog Investment Company is also entitled to render professional services in the capacity of stock market intermediary completing deals with futures and options on the basis ofLicense to act as stock market intermediary completing futures and options deals in stock market trading on the territory of the Russian Federation dated October 14, 2010, №1523, issuedby the FSFM of Russia. Informative and analytical services and data are provided by Troika Dialog Investment Company only within the framework of the abovementioned services and do not constitute a separate kind of activity.Troika Dialog Investment Company may refuse to provide services to persons who do not meet the requirements, imposed by Troika Dialog Investment Company for its clients, or whenlegislation applicable to such persons prohibits/restricts the provision of these services to them, as well as in other cases stipulated by applicable legislation and/or internal regulations ofCJSC Troika Dialog Investment Company.Closed joint stock company “Asset Management Company “Troika Dialog“ was registered by the Moscow Registration Chamber on April 1, 1996. FSFM of Russia license №21-000-1-00010 dated September 12, 1996 to perform management of investment funds, mutual investment funds and non-government pension funds. FSFM of Russia license №177-06044-001000 dated June 7, 2002, to perform management of securities. http://www.troika-am.ruThe value of investment units can increase and decrease, investment results in the past are not a guide to future returns, the government does not guarantee the profitability of unitinvestment fund investments. Prior to purchasing investment units, investors should attentively read the management rules of unit investment fund. To receive detailed information aboutmutual funds and to read through the management rules of unit investment fund and other documents, please inquire to: 125009 Moscow, Romanov pereulok, 4.Closed Joint-Stock Company “3D” – distributor of CJSC Troika Dialog AM and CJSC Troika Dialog Investment Company investment products FSFM of Russia professional security market participant’s license:– for rendering brokerage services №077-07641-100000 dated 28.04.2004– for rendering dealer services №077-07648-010000 dated 28.04.2004.
    • T H E R U S S I A F O R U M 2 0 1 2 Every year The Russia Forum presents us with new chances to meet and openly discuss what is going on in Russia and the wider world. The modern world is very dynamic and in this ever-changing situation it is important to rely on those whom you trust. Trust is a key element that is built up by years of communication, and I am proud that we have earned such trust. Obviously we cannot reduce the risks of investing in Russia to zero, but we can make the unpredictable predictable by giving investors as much information as possible during The Russia Forum so that they go on to make the right decisions. This year we were able to take our Forum to the next level in terms of scale and quality thanks to the joint efforts of Sberbank of Russia and Troika Dialog. We are pleased to announce that on the eve of the Forum the deal for Sberbank of Russia’s 100% acquisition of Troika’s share capital was closed. This was a significant event for both our company and the Russian financial market on the whole, and will allow us to merge the knowledge and expertise of teams that every day make the impossible possible. The Russia Forum is comparatively young, yet it has already become an important international conference that investors rightly consider to be one of the highest calibreDEAR FRIENDS, business events in Russia. This year the format of the Forum was greatly widened and the programme featured new events: for the first time ever we held specialised thematic workshops, which undoubtedly enabled us to make the Forum more informative. The Russia Forum 2012 also included a special day entitled “Cinema and Money” andYOU HAVE IN YOUR HANDS THE RUSSIA featured over 40 panel discussions and sessions dedicated to a wide range of the mostFORUM 2012 MAGAZINE, WHICH SUMS UP varied topics – from global economic challenges to making investments in art and theTHE FIFTH ANNIVERSARY EDITION OF future of modern Russian cinema.THE RUSSIA FORUM. I WOULD LIKE TO ONCEAGAIN THANK EVERYONE WHO SPENT THOSE Over 3,000 delegates attended the Forum, and the event was covered by 345FEW BUSY WINTER DAYS WITH US DESPITE journalists representing 133 media outlets from Russia and 12 foreign countries. InTHE RUSSIAN FROST AND THE MOSCOW connection with this, for the first time we held our event at a larger venue: the MoscowTRAFFIC JAMS . THOSE WHO WEREN ’T ABLE International House of Music. We sincerely thank Vladimir Spivakov for the modernTO VISIT OUR LANDMARK EVENT THIS YEAR infrastructure and high-quality service provided to the organisers and participants ofCAN FIND WHAT I HOPE WILL BE EXHAUSTIVE the Forum.INFORMATION ABOUT THE RUSSIA FORUM2012 ON THE PAGES OF OUR MAGAZINE. In conclusion I would like to thank the outstanding speakers whose addresses bring The Russia Forum unquestionable success. I would like to express especial gratitude to Vladimir Putin for his participation in the plenary session entitled “Russian Economic Policy in a Time of Global Change”. I hope that you found each and every part of The Russia Forum 2012 interesting, dear friends. I also hope that your faith that Russia can and should be invested in has grown, and that Russian investors were once again able to see that they have made the right choice. YOURS SINCERELY, RUBEN VARDANIAN PRESIDENT OF TROIKA DIALOG, CO-HEAD OF THE CORPORATE INVESTMENT UNIT, HEAD OF THE WEALTH MANAGEMENT UNIT OF SBERBANK OF RUSSIA I N T R O D U C T I O N 1
    • T H E R U S S I A F O R U M 2 0 1 2СОNTENTS 04 DOSSIER 72 HERMAN GREF Sberbank and Troika Dialog Today PANEL DISCUSSIONS, FEBRUARY 3 74 GORDON BROWN 08 STATISTICS 36 OPENING SPEECH: SERGEY SOBYANIN Forum in Numbers 76 KENNETH ROGOFF 38 The Future of the Global Economy and Financial System 10 WORKDAYS 78 QUOTATION 103 Is There a Future for Cinemas and Distribution? Program of The Russia Forum 2012 40 Risk Management: Myth or Reality? Straight from the Top 104 What do the Figures Mean? Cinema, Television and Advertising 12 SPEECH OF VLADIMIR PUTIN, PRIME MINISTER 42 A New Era in Mobile – Opportunity Knocks 80 SURVEY OF THE RUSSIAN FEDERATION Forum Survey Results 105 Breakthrough Hit Creation: A Gift of Foresight or Calculation? 44 Where Does the Big Money Go? PANEL DISCUSSIONS, FEBRUARY 2 82 RESEARCH CENTER 106 How to Finance Projects Through Special Funds 46 Interest Rates, Exchange Rate and Liquidity: are there Research Materials: An Investor’s Guide from Troika Dialog 14 Russia 2018: at Vital Crossroads and Challenges Resources for Investment? 107 How Will New Technology Change the Content Distribution Market? that Will Determine the Country’s Future 84 CHARITY 48 Which Emerging Technologies will Kill the Traditional Bank? Cinema Auction 108 Ukraine: This Applies to Everyone. State Policy for Supporting 16 The Present and Future of Russian Oil: CEO Challenges Cinema and Co-Production 50 Developed and Emerging Banks: A Case of Irreversible 86 TELETYPE 18 Global Economic Ills and their Impact on the Social Framework Decline vs. Irrepressible Rise? The Press on the Forum 109 Transmedia: A New Language for a New Audience 20 Agriculture & Food: What Will the Future Bring? 52 Retail: Stabilization Period SPECIAL DAY “INVESTMENTS IN CINEMA, TELEVISION 110 Will Russia be able to Transform from the World’s Largest TV Format AND NEW MEDIA” Importer into the Largest Exporter, and What Will it Take? 22 Privatization: Interim Results 54 Creating a Domestic Capital Base 92 Program of the Special Day 111 The Israeli Phenomenon: From Creative Desert 24 Russia’s Economic Policy in a Time of Global Change 56 Russia’s Gas Exports to Europe: New Challenges and Opportunities to Creative World Centre 94 List of Special Day Speakers 26 Metals and Mining in the CIS: Development Prospects 58 Transport and Infrastructure: Reform at a Crossroads? 112 Independent Cinema: How Not to Pass by a New Wave amid Great Volatility 98 Cinema, Television and New Media in 2012: Key Topics 60 Troika Dialog: Investments in Art. Art Banking and Art Finance SPECIAL DAY ROUND TABLES 28 Russia in Transition 99 Media Pirates: Is It Worth Dealing With Them? 62 The Role of Innovation Policy in Modernisation 113 Institute of Stars: Why isn’t the Hollywood Strategy Used in Russia? 30 What’s Moving the Real Estate Market? 100 State Support of the Production and Distribution 64 WORKSHOPS (JANUARY 31 – FEBRUARY 1) of National Cinema – What is Going to Change? 114 Film Studios: Who Will Win the Competition? 32 New Industrialization in Russia ON THE AGENDA: THE MAIN ECONOMIC ISSUES 101 How to Finance Cinema and TV Projects 115 Where and How to Look for Talent? 34 CLOSING SPEECH: GORDON BROWN 66 FORUM IN FORMAT 1:1 at the Expense of Advertisers List of company participants in meetings 116 BEST OF 102 Co-Production: How to Find a Common Language Forum Entertainment Program 68 PODIUM Complete List of Forum Speakers 126 ART Forum Guests Receive Inspiration from the Works of Wassily Kandinsky INTERVIEWS THAT MATTER 128 FORUM PARTNERS 132 CONCLUSIONS Alexander Bazarov Sums up the Forum C O N T E N T S C O N T E N T S 3
    • T H E R U S S I A F O R U M 2 0 1 2SBERBANK The bank has the most extensive branch network in Russia, consisting of 17 territorial banks, around 19,000 branchesTODAY and internal structural subdivisions as well as subsidiary banks in Kazakhstan, Ukraine and Belarus, a branch in India and representative offices in Germany and China. Sberbank continuously develops its Recently the bank has accomplished trade and export financing, and by a large amount of work aimed at 2014 it plans to increase the share of net increasing its focus on clients: the numberFounded in 1841, Sberbank of Russia is the largest bank in Russia and profit generated abroad to 5%. The key of ATMs and payment terminals has been terms and conditions of a deal to acquire increased and internet bank functionalitythe CIS. Its assets and shares account for over a quarter of the capital Volksbank International – with branches has been enhanced. Clients can now use the in nine Central and Eastern European internet bank to independently manage theirof the country’s banking system. Sberbank is the biggest taker of countries – have been signed. At the end of accounts at home or via a smartphone. Since 2011, Sberbank signed an agreement on the October 2008 the share of remotely-executeddeposits on the market and the key lender to the national economy. creation of a joint loan market bank at points transactions has increased from 37% to 70%. of sale with Cetelem (BNP Paribas Group) New contact centres have been created and New products and servicesApproximately half of the population’s savings held in Russian banks and concluded a deal to acquire shares of SLB on average it takes 30 seconds for a caller to have been implemented, Commercial Bank AG. In January 2012 the be put in touch with a contact centre specialist. for example the “Youthare entrusted to Sberbank. Sberbank’s lending portfolio includes deal to merge leading investment company Offer”. For the purposes of Troika Dialog into Sberbank was finalised. Client service models are being reducing loan application reviewapproximately a third of all the loans issued in Russia. The founder successively changed, taking into account time, Sberbank has implemented the needs of similar client groups (VIP clients, the “Loan Factory” technologyand principle shareholder of Sberbank of Russia is the Central Bank large high-income segment). In 2011, 800 and now issues people all loans, offices were refurbished. Up to 2015 the except mortgages, practicallyof the Russian Federation, which holds over 60% of voting shares. reformatting programme envisages that the within one day. Sberbank also 7,700 points of sale will be reformatted.. launched a brand new product No less extensive work is being carried outOver 245,000 individuals and legal entities are the bank’s other for those opening businesses, inside the bank; above all this concerns New CRM-systems are being actively the “Business Start” loan and centralisation of operations and ITshareholders. implemented at Sberbank’s corporate has started up the “Serviceman modernisation. In 2011 Sberbank opened the largest and retail units (the corporate unit’s CRM- Mortgage”, a product aimed at data processing centre in Europe and the first automated system already covers over 250,000 clients). providing Russian servicemen archiving and logistics centre in Russia. Currently there These are information systems designed to with affordable and comfortable are 9 CTAs (Client Transaction Accompany Centre) in record the history of interaction between accommodation. operation and a programme for creating interregional client and bank, establish and improve service centres has been approved. This programme of business procedures and carry out subsequent transformations is closely related to the new corporate analysis of work results. ideology and technology, the SPS (Sberbank Production System). Using SPS methods, 27 billion roubles have already been saved. Of course, all this is grounded on changes to the work with bank personnel. In terms of personnel, a wide-reaching personnel evaluation and training system has been implemented. In addition a corporate training system is being developed with the assistance of the world’s leading business schools and unique social programmes have been launched. D O S S I E R 5
    • T H E R U S S I A F O R U M 2 0 1 2TROIKADIALOGTroika Dialog is part of the Sberbank Group and is one of the leading investmentcompanies operating in the CIS. The key business areas of Troika Dialog, founded in1991, are securities sales and trading, investment banking, private wealth and assetmanagement, private equity and venture investments, as well as personal investment andfinance. Troika Dialog’s operations are located in 21 cities across Russia plus offices inNew York, London, Nicosia, Kyiv and Almaty.SECURITIES TRADING COMPLETE MARKET INVESTMENT ANALYSIS BANKINGTroika Dialog is a participant on the mainexchanges trading in Russian assets. We The broad scope of Troika Dialog’s Troika Dialog provides its clients with aprovide a wide range of investors the research product offering reflects wide range of advisory services on dealsopportunity to carry out operations using a comprehensive and independent with shareholder and debt capital. Our aimfinancial instruments and we support view of the CIS markets. Our analysts is to find the most effective solutions forfirm quotes for the most liquid equities of closely keep track of operations at our clients in the framework of applicable ASSET MANAGEMENTRussian issuers beginning well before the 278 companies and conduct detailed legislation and to guarantee flawlessopening of trading in Moscow and ending analysis of the 129 most important execution no matter the market conditions. Since its founding in 1996, Troikaat midnight Moscow time when trading listed companies in Russia, Ukraine and In 2011, with the support of the Sberbank of Dialog AM has occupied thecloses in New York. Our company was Kazakhstan. In 2011 members of our Russia team, Troika Dialog took first place in leading positions in the mutualrecognised as the best brokerage house in research team took 12 key positions terms of M&A deals in Russia (Mergermarket investment fund industry and on OPERATIONS WITH2008-2010 and our traders were deemed in the Institutional Investor All Russia data) and first place in the ranking of the asset management services PRIVATE CLIENTSthe best in Russia from 2008-2011, Analyst rankings. Our analysts took first organisers of bond issues on the domestic market. We offer our clients 20according to Thomson Extel ratings. place in seven of the ten categories in market (Cbonds data). We also are among open-ended mutual investment Retail investors may obtain and make use of the prestigious Thomson Reuters Extel the top 10 global coordinators/bookrunners funds and 1 closed-ended products and services such as mutual funds, Pan-Europe 2011 Survey. operating in Russia (Dealogic data). commercial real estate investment internet trading, asset management, individual fund. Troika Dialog’s mutual funds brokerage service, and pension savings are some of the largest in Russia advisory via Troika Dialog’s own sales offices and our company is the leader or 1,200 agent sales points throughout Russia. ALTERNATIVE on the collective investments In addition, as part of its private banking INVESTMENTS market, holding a 19.8% share service, Troika Dialog provides a wide range of (according to Investfunds data as investment products to affluent individuals – Troika Dialog invests funds in the leading of December 30, 2012; among from conservative investment strategies to companies of fast growing sectors: retail, companies managing open-ended investments in structured products, real estate, financial sector, the media, healthcare, mutual investment funds). innovation, commodities markets, individual foodstuffs production and packaging. brokerage services, as well as advisory services. Besides this we manage four venture funds with investment totalling $100 mln. This money is invested in 9 companies of the IT, new media and life science spheres. D O S S I E R 7
    • T H E R U S S I A F O R U M 2 0 1 2WORKDAYS PROGRAM PANEL THURSDAY, FEBRUARY 2ND DISCUSSIONSTUESDAY, JANUARY 31ST WEDNESDAY, FEBRUARY 1ST VENUE: MOSCOW INTERNATIONAL HOUSE OF MUSIC | KOSMODAMIANSKAYA EMB., 52-8VENUE: VENUE:THE RITZ-CARLTON HOTEL THE RITZ-CARLTON HOTEL 07:30–09:00 REGISTRATION. WELCOME COFFEE FRIDAY, FEBRUARY 3RDTVERSKAYA STR., 3 TVERSKAYA STR., 3 09:00–09:15 WHITE HALL. Opening speech: VENUE:FULL DAY OF 1:1 MEETINGS FULL DAY OF 1:1 MEETINGS Herman Gref and Ruben Vardanian MOSCOW INTERNATIONALPRIVATE THEMED CLIENT EVENTS PRIVATE THEMED CLIENT EVENTS 09:15–10:30 WHITE HALL. HOUSE OF MUSIC | Plenary Session: Russia 2018: KOSMODAMIANSKAYA EMB., 52-8 at Vital Crossroads and Challenges that Will Determine 08:00–09:50 WELCOME COFFEE the Country’s Future 09:50–10:00 WHITE HALL. Opening speech:08:00–14:00 WASHINGTON 1-2. 08:30–13:30 BALLROOM 1. 10:30–10:45 COFFEE BREAK Sergey Sobyanin The Agenda for CEOs in a Time of Global A Look at Forex and Interest Rates: 10:45–12:00 WHITE HALL. 10:00–11:30 WHITE HALL. The Future of the Global Risks and the Elections in Russia How to Reduce Financial Risks The Present and Future of Russian Oil: Economy and Financial System CEO Challenges GREEN HALL. Risk Management: GREEN HALL. Myth or Reality?08:45–12:30 MOSCOW 1-3. 09:00–15:00 MOSCOW 1-3. Global Economic Ills and their Impact Group meeting with management of Venture Capital: On the Crossroads BLUE HALL.A New Era in Mobile – on the Social Framework Sberbank: “Insights into Sberbanks Opportunity Knocks BLUE HALL. Business” 09:30–12:20 WASHINGTON 1-2. RED HALL. Where Does the Big Money Go? Agriculture & Food: What Will the Future Bring? The government’s objectives, regulatory 11:50–12:10 COFFEE BREAK RED HALL.10:00–13:30 BALLROOM 1. changes and tariff growth. Guarantees Privatization: Interim Results 12:10–13:30 WHITE HALL. Interest Rates, Exchange Rate and Operational Excellence to investors ahead of privatisation in Liquidity: are there Resources for Investment? 12:00–13:00 LUNCH the electricity sector GREEN HALL Which Emerging Technologies will 13:00–14:30 WHITE HALL. Kill the Traditional Bank? Crowdsourcing, Big14:30–17:00 ISTANBUL 1. Plenary Session: Russia’s Data, Social Commerce, Artificial Intelligence? Sberbank’s International Business: 09:30–12:30 ISTANBUL 1. Economic Policy in a Time of Global Change BLUE HALL. Developed and Emerging Banks: Opportunities on Markets of the Fundraising Possibilities on the Russian Market for A Case of Irreversible Decline vs. Irrepressible Rise? CIS and EAEC Foreign Issuers 14:30–15:00 COFFEE BREAK RED HALL. 15:00–16:30 WHITE HALL. Retail: Stabilization Period Metals and Mining in the CIS:15:00–17:45 WASHINGTON 1-2. 14:00–16:30 BALLROOM 1. 13:30–14:30 LUNCH Development Prospects Amid Modernization of the Cement Industry: The Russian Stock Market in 2012: Great Volatility 14:30–16:00 WHITE HALL. How to Maintain a Balance of Interests Reset. New Opportunities for Investors Creating a Domestic Capital Base GREEN HALL. Russia in Transition BLUE HALL. What’s Moving the Real GREEN HALL Russia’s Gas Exports to Europe: 18:30–20:30 MOSCOW 1-3. Estate Market? New Challenges and Opportunities Private Finance. Asset Allocation RED HALL. New Industrialization in Russia BLUE HALL. Transport and Infrastructure: Reform at a Crossroads? 16:30–17:00 COFFEE BREAK RED HALL. Troika Dialog: Investments in Art. 17:00–17:30 WHITE HALL. Art Banking and Art Finance Closing Speech: Gordon Brown 16:00–16:30 COFFEE BREAK 18:30–19:30 GREEN HALL. Round table: “The Global Economy. Political Risks 16:30–18:00 WHITE HALL. The Role of Innovation Policy and Choice of Capital” in Modernization W O R K D A Y S W O R K D A Y S 1 1
    • T H E R U S S I A F O R U M 2 0 1 2 THE MOST SIGNIFICANT CHALLENGE THAT RUSSIA WILL HAVE TO CONFRONT IS THE CHALLENGE OF LOW EFFECTIVENESS . civilisation, Russia will have to business environment. The deadlines for encounter the same problems hooking up to power supply grids must as other countries, noted be decreased by a factor of four. An Vladimir Putin. accountant must complete tax returns three times faster. The time required None of the reasons for the for trucks to go through customs will continued financial upheavals be reduced by six-sevenths. Obtaining have been addressed. Moreover, a construction permit will be five times the 2008 crisis has obviously faster than it is now, and there will be entered a new stage, revealing three times less paperwork involved in such large-scale in-depth problems the process. as the debt crisis of corporations and entire governments, and the The Prime Minister also touched on imbalances of the financial sector, issues concerning the improvement which has swelled out of proportion of the country’s investment climate. and has become largely speculative There will be a businessmen’s rights and far removed from economic commissioner in Russia and he/ realities. The upcoming decades will she will protect the rights of all be a time of great challenges, risks and businesspeople, not just foreign transformations. Russia, which is finally investors. The procedure for joining the WTO in 2012, has all it takes reviewing cases in arbitration courts to become a top five global economy in involving entrepreneurs must be the near future. as fast as possible and the time it takes to appeal court decisions by Last year the Russian economy grew businessmen should be extended. by over 4% (the best rate among G8 All rudimentary Soviet legal thinking members and the best result among large should be removed from criminal law. European economies). Russia’s inflation All the loopholes creating criminal rate (6%) is the lowest in the last 20 years liability in economic disputes should and is comparable to countries like Great be closed. Britain. According to government forecasts, in the next few years, inflation will lower The philosophy of oversight over to 4%. businesses must be changed, and a transition from various government Russia, unlike the world’s major developed permits to liability insurance must economies, has a budget surplus (approxi- take place. Public associations of mately 1% of GDP). Sovereign debt is extremely businessmen should be entitled low (only 10.4% of GDP) and external debt is to file legal claims to protect as low as 2.5%. the interests of entrepreneurs. Corporate legislation needs to Vladimir Putin’s speech was devoted to the In addition to the current balanced economy and be harmonised with that of ourSPEECH OF issues of Russia’s development as part of the global economy. The Prime Minister talked solid macroeconomic indicators, the country also enjoys basic, long-term and powerful advantages. key partners, primarily in Europe, across all positions.VLADIMIR PUTIN, about plans for shaping and implementing the country’s economic policy. At the same time as trying to resolve its own problems In the Prime Minister’s opinion, Russia’s core resource consists of a talented, creative, well trained and educated people. That is what the first set of measures proposed by VladimirPRIME MINISTER OF THE amid global transformation and against Putin, intended to increase the the backdrop of new trends in the Russia needs to move up 100 spots in order to Russian economys transparency,RUSSIAN FEDERATION global economy, technology and go from 120th place to 20th place in terms of the looks like. P A N E L D I S C U S S I O N S 1 3
    • T H E R U S S I A F O R U M 2 0 1 2 RUSSIA 2018 – AT VITAL businesses and prevents them from properly developing. There is not enough transparency in the work LARS THUNELL COMMENTED that WTO entry will help the evolutionary process continue, but added that the state needs to involve the The panel also reviewed the changes now taking place in the global economy and the serious CROSSROADS AND CHALLENGES THAT of the state and state officials. This needs to change so that the division between state and private enterprises private sector much more. He said the state is now trying to drive too much, which keeps the system overly bureaucratic and focused challenges it faces. Against that backdrop, the panelists reviewed the particular challenges facing WILL DETERMINE THE can be made and the work of the bureaucrats can be forced to be more efficient. too much on the older, mainly commodity- based, industries. the Russian economy, especially given the uncertainty over the trend in oil revenues. The panelists COUNTRY’S FUTURE FEBRUARY 2ND, THURSDAY EAST OR WEST? Panelists generally agreed that the clearest economic ALEKSEI KUDRIN REFERRED to the fact that the current political system is obsolete and needs to change as part of the process were asked if they consider it possible, under such conditions, to support economic growth in growth opportunities lie to the east of building a new economy. He referred the country and, specifically, to but that Russia should look much to current political changes as a very review what policy instruments OPPORTUNITIES AND CHALLENGES ARE EQUALLY CLEAR . THE more to Europe for examples when positive development that will force faster the government has, and needs, to PANEL CONCLUDED THAT RUSSIA HAS THE POTENTIAL TO building institutions and regulatory changes. He highlighted what he called achieve this goal. GROW THE ECONOMY MORE STRONGLY AND WITH GREATER frameworks. the positive response from the prime DIVERSIFICATION , AND THAT IT CONTINUES TO MOVE TOWARD minister. THAT GOAL , ALBEIT FOLLOWING A SLOW EVOLUTIONARY PATH . SERGEI GURIEV SAID that the state ONE OF THE MAIN CONCLUSIONS IS THAT THE STATE STILL ALEKSEI KUDRIN needs to speed up the privatization HAS A ROLE IN CREATING A BETTER BUSINESS AND ECONOMIC process to reduce its dominant role in ENVIRONMENT , BUT THEN SHOULD GET OUT OF THE WAY AND HELP RATHER THAN HINDER OR COMPETE AGAINST PRIVATE SERGEI GURIEV ENTERPRISES . THE PANELISTS IDENTIFIED A NUMBER OF KEY CHALLENGES THAT THEМОDERATOR: COUNTRY NEEDS TO ADDRESS IF THAT RUBEN VARDANIANRUBEN VARDANIAN UNFULFILLED POTENTIAL IS TO BE KENNETH ROGOFFPresident, Troika Dialog REALIZED. Regarding business startups, Russia needs to make it much easier for THE LOSS OF HUMAN CAPITAL the economy. He said that Russia also needsSERGEI GURIEV new businesses to start and grow. Right ALSO NEEDS TO BE REVERSED. to demonstrate very clearly that it is dealing LARS H. THUNELLRector, New Economic School now this is too difficult and has resulted Russia continues to lose too many with issues such as corruption by speeding in the economy remaining skewed of its most talented people every up the adoption of Article 20 of the UNALEKSEI KUDRIN toward large enterprises in extractive year, people who are starting up convention against corruption. He said thereRussian statesman industries. The SME segment is far too new businesses in other countries are some very public corruption scandals in small and yet this is exactly the area that but should be doing so in Russia. Russia today where the state could act moreKENNETH ROGOFF needs to receive state help to grow. The panelists did, however, highlight decisively. He called for the release of ex-Thomas D. Cabot Professor the fact that this is a normal trend in YUKOS chief Mikhail Khodorkovsky and theof Public Policy and Professor CORRUPTION AND OVERLY BUREAU- developing economies where people firing of everybody involved in the case ofof Economics, Harvard University CRATIC PROCEDURES REMAIN MAJOR leave for better lives elsewhere but Hermitage lawyer Sergei Magnitsky. OBSTACLES TO BUSINESS DEVELOPMENT. then, after 20–30 years, start to comeLARS H. THUNELL Panelists also identified the unpredictability back. The faster the state helps make it KENNETH ROGOFF HIGHLIGHTED the factExecutive Vice President & CEO, factor in Russia, stating that the lack of clear easier to do business in Russia, especially that while Russia’s annualized growth (4.0%International Finance Corporation rules and fair arbitration too often puts off to start a business, the sooner the trend expected in 2012) is very good compared foreign investors. Panelists identified the will reverse here also. with developed markets and most other lack of clearer guidance from the state and developing economies, Russia is capable of sometimes poor behavior, arguing that this THERE IS TOO OFTEN A LACK OF A CLEAR much more. He said that Russia should have, fosters equally bad behavior across the DIVISION BETWEEN STATE AND PRIVATE and needs to develop, new export-led growth economy. ENTERPRISE. This usually hurts private in such areas as hi-tech. P A N E L D I S C U S S I O N S 1 5
    • T H E R U S S I A F O R U M 2 0 1 2 THE PRESENT AND FEBRUARY 2ND, THURSDAY FUTURE OF ALEXANDER KORSIK RUSSIAN OIL: CEO CHALLENGES ARSEN IDRISOV SERGEY GORKOV LEONID FEDUN THE PANEL HIGHLIGHTED SEVERAL DISAGREEMENTS AMONG A VERY DISPARATE GROUP OF PEOPLE – FROM A CHIEF ECONOMIST AT A GLOBAL OIL MAJOR TO A GOVERNMENT OFFICIAL TO CEOS OF BOTH STATE - OWNED AND PRIVATE RUSSIAN MAJORS . DMITRY KONOV MIKHAIL GUTSERIEVMODERATOR: Gazprom Neft, added that the system shouldSERGEY GORKOV evolve toward profit-based (not revenue-Deputy Chairman of the Board, based) taxes.Sberbank SERGEY KUDRYASHOV FINALLY, THERE WAS NO SINGLE VIEW ONALEXANDER DYUKOV THE FUTURE FOR RUSSIAN OIL. KudryashovCEO, Gazprom Neft insisted that the era of easy oil is still withLEONID FEDUN us – the country has got the reserves, theVice President, LUKOIL technology, the people and the experience,MIKHAIL GUTSERIEV CHRISTOF RUEHL, CHIEF ECONOMIST demand in the emerging world would he said. Not so, countered RussNeftPresident, RussNeft AT BP, KICKED OFF THE SESSION by be balanced by slowing consumption in President Mikhail Gutseriev: the educationARSEN IDRISOV projecting that global oil consumption developed countries. of industry managers in the country is ALEXANDER DYUKOVManaging Director, Alliance Oil Company will grow at a compound rate of 0.6% at a “fetal stage,” he said. And Ruehl CHRISTOF RUEHLDMITRY KONOV per year to 2030, and that 90% of NOR DID THE PANELISTS SEE EYE TO EYE pointed out that all of the breakthroughGeneral Director, SIBUR LLC additional demand will come from ON RUSSIAN-SPECIFIC TAX POLICIES. technological solutions of recent years –ALEXANDER KORSIK India and China. However, Dmitry Sergey Kudryashov, the deputy energy from multistage fracking and horizontalPresident, Bashneft Konov, the CEO of SIBUR, pointed minister, claimed that the targeted tax drilling that allowed the unlocking of theSERGEY KUDRYASHOV out that consumption is likely to reductions on the Vankor, Verkhnechonsk shale deposits, to deepwater production –Deputy Energy Minister moderate as it runs into capacity and Talakan fields have worked their magic, were originally developed in the mostCHRISTOF RUEHL constraints. Some of the estimates boosting overall output after a decline in competitive upstream markets, such asGroup Chief Economist and for growth in Indian car demand 2008. But Bashneft CEO Alexander Korsik the US or Canada. The Russian tax systemVice President, BP that he has seen would imply said the targeted solutions do not ultimately should be tilted toward stimulating such that there are not enough roads work because the state cannot do a better competition, he said. in India today to even park – job of picking the winning fields than could much less convey – half the the oil companies themselves. He would expected number of vehicles. prefer a universal system of lower brownfield He also expects that higher taxation. His colleague, Alexander Dyukov of P A N E L D I S C U S S I O N S 1 7
    • T H E R U S S I A F O R U M 2 0 1 2 МODERATOR: GLOBAL FEBRUARY 2ND, THURSDAY RAGHURAM RAJAN Professor, University of Chicago, Booth School of Business creates an improved business and investment environment from now. Always: 37.5% For the most part: 48% NOURIEL ROUBINI reflected on the fact that the problem exists at both an international and domestic level and the latter cannot ECONOMIC SHAUKAT AZIZ Former Prime Minister of Pakistan AUDIENCE VOTES People were asked to vote about which country they thought more likely to experience instability Seldom: 12.7% alone fix it. We need a global response that is then executed at a domestic level. ILLS AND THEIR PAUL COLLIER Director, Centre of the Study of African Economies, Oxford University over the next two years. They voted as follows: Europe: 53.7% Never: 1.8% VLADIMIR MAU reflected on the fact SHAUKAT AZIZ identified the two main advantages that Russia has today as 1) very strong human capital in terms of highly IMPACT ON THE SOCIAL MIKHAIL DMITRIEV President, Center for Strategic Research VLADIMIR MAU Russia: 18.6% China: 14.1% that, in Russia, as people take a greater role in the economy, as the economy expands and people make a greater educated people, and 2) a big resource base that delivers steady budget revenues. But Russia now needs to increase governance, FRAMEWORK Rector, Russian Academy of National Economy and Public Service at the President of the Russian Federation US: 9.0% contribution via taxes, etc, they will demand a greater say and will be much more demanding. That, he argued, is a strengthen institutions and improve the rule of law in order to bring in more capital to achieve economic diversity. GIDEON RACHMAN India: 5.0% very positive trend. The emergence of Chief Foreign Affairs Commentator, the middle class is one of the reasons MIKHAIL DMITRIEV reflected on the fact Financial Times GIDEON RACHMAN and PAUL COLLIER for the current demands for political that so many counties, such as the BRICs, NOURIEL ROUBINI disagreed because Europe has more of change, he argued. He also said it was are now middle-income countries but WHILE THE EASE OF COMMUNICATION VIA Professor of Economics, NYUs Stern a solid bedrock of both democracy and inevitable that closer Russian integration are pushing to join the institutions now SOCIAL NETWORKS HAS FACILITATED THE School of Business wealth, and this will sustain the social with Europe will take place. He said this dominated by the developed rich nations, RAPID SPREAD OF PROTEST MOVEMENTS , fabric. China is more likely to experience would be good for both as Russia would such as the World Bank and IMF. He said THE UNDERLYING CAUSE IS A FAILURE instability because autocracies even- benefit from adopting EU institution that the rich nations will have to make OF EXPECTATIONS AND A LOSS OF HOPE , tually become unsustainable as the formats and the EU would benefit from more room for middle-income countries if ESPECIALLY AMONG YOUNG PEOPLE . FIXING middle class grows and becomes more long-term growth opportunities. He saw there is to be an effective global response THAT PROBLEM WILL TAKE MANY YEARS AND demanding. Russia, Germany and France at the core of to the crisis. WILL FOR A LONG TIME TO COME SUSTAIN the eventual cooperation. THE UNCERTAINTY THAT HAS AFFECTED GLOBAL The audience was also asked to vote RAGHURAM RAJAN, in his concluding MARKETS . whether it thought capitalism and MR COLLIER also highlighted the need for a remarks, said that the core of the current democracy are compatible. much more engaged and informed citizenry problem is a crisis in the financial sector, as a prerequisite for change. His opinion and this, primarily, will have to be fixed if GIDEON was that social networks have helped that the global social crisis is to be solved. ThePANELISTS COMMENTATED ON THE ROLE countries appear to be floundering equally in RACHMAN develop globally and in Russia, and it is a world cannot function and jobs cannot beTHAT SOCIAL NETWORKS are playing in terms of policy response. The G-20 is more positive global trend. created without a properly functioninghelping protest movements to emerge and like a G-0 today. This will also have to change global financial sector.grow. They make it cheaper to protest, as if solutions are to be found and implemented. MR RACHMAN said that counties in thewell as easier. But clamping down on such developing world need to build strong networks would not solve or even contain ONE OF THE MAJOR PROBLEMS THAT institutions and improve the rule of law. the problem – to a large extent the genie is POLITICAL LEADERS NEED TO ADDRESS IS That is a requirement for investment, for job now out of the bottle. THE PERCEPTION OF INEQUALITY AND LACK creation and will go a very long way toward OF FAIRNESS IN THE WORLD. All agreed maintaining social stability in Russia, as THAT “GENIE” IS THE FACT THAT YOUNG that this is a major issue that will not easily elsewhere. PEOPLE HAVE GROWN UP IN A WORLD be addressed – and not without major job that created expectations of lifestyle and creation. wealth that are simply not realistic. Now we have very significant levels of young THE PANELISTS ALSO DISCUSSED THE ROLE RAGHURAM RAJAN unemployed that do not have the skill OF STATE CAPITALISM and concluded that sets required to work in a more realistic this is a defunct strategy that has now been NOURIEL ROUBINI global economy. Governments now have totally discredited. Countries such as Russia SHAUKAT AZIZ to refocus on education and skill creation need major structural reforms to attract more to help boost long-term economic growth. foreign investment. But the panelists agreed this may take VLADIMIR MAU one to two decades to achieve and, in the THE PANEL ALSO DISCUSSED THE USUAL meantime, the social pressures will remain PATTERN IN RESOURCE-RICH COUNTRIES and hamper economic growth. where the few “steal” from the many or the country borrows from its future. But, while PANELISTS ALSO HIGHLIGHTED THE LACK this is the usual “default option”, it may not OF GLOBAL POLITICAL LEADERSHIP. All be the case in Russia provided the county PAUL COLLIER MIKHAIL DMITRIEV P A N E L D I S C U S S I O N S 1 9
    • T H E R U S S I A F O R U M 2 0 1 2 AGRICULTURE & FOOD: investment in machinery, and improvements in VLADIMIR ZOTOV labor efficiency. WHAT WILL VLADIMIR ZOTOV (AGRO-BELOGORIE). Since its inception five years ago, the company has evolved into the No. 2 player in pork production, THE FUTURE BRING? with 2011 production volumes at above 100,000 tonnes. State support has been very beneficial for the industry – a focused program was introduced in Belgorod region in 2005, which resulted in total pork production of EUGENIY IGOR ARTAMONOV (SBERBANK). RUSSIA HOLDS THIRD PLACE IN THE WORLD 400,000 tonnes in 2010. The same program LYASHENKO BY ARABLE LAND, WHILE A THIRD OF THE COUNTRY’S POPULATION LIVES IN was introduced on a national level in 2010, AGRICULTURAL REGIONS – THIS CREATES GREAT POTENTIAL FOR DEVELOPMENT IN and could be considered a good example of THE AGRICULTURE INDUSTRY. IN 2011, WE HAD A DECENT GRAIN HARVEST AND how the state can create an efficient industry. PRODUCTION OF VEGETABLE OIL, POULTRY AND PORK IS GROWING, BUT CATTLE REMAINS UNDER PRESSURE. SERGEY MIKHAILOV (CHERKIZOVO GROUP). Cherkizovo Group is a leading producer of terms for Russia are not excessively it expects to export 1 mln tonnes in pork, poultry and meat products. Having unfavorable (especially compared 2012. Poor state support is one of the invested R25 bln in business development, with those of other recent members key challenges – Europe provides $80 FEBRUARY 2ND,THURSDAY it now has 25,000 employees. Production of the WTO), and still allow for bln in support, while Russia offers just costs for efficient producers in Russia are the a so-called anti-dumping duty $4 bln. That said, the availability of land MAXIM BASOV (RUSAGRO GROUP). Rusagro is core drivers for several subsectors of lowest in the world, hence the company is (like the one introduced in China), resources, cheaper labor and fertilizers the most diversified company among the panel the Russian agriculture industry. Once able to deliver a 35-45% EBITDA margin which may be introduced to protect has positioned the country favorably discussion participants, with exposure to sugar, self-sufficiency is achieved, the pricing in pork (versus 6% in Europe). Poultry local industry from unfair import to feed the global population, which pork, agriculture and the oil and fats segments, environment will become less supportive for production volumes in Russia are expanding pressure. The Agriculture Ministry is expected to reach 9 bln people in 15 and is thus well positioned to deliver more local players. The increasing penetration of by 250,000-300,000 tonnes each year, and is actively communicating with years. stable profitability. Conventional demand modern retail should contribute to a rising self-sufficiency will be achieved in 2012. professional associations, consisting factors (growing population, higher share of higher-margin processed products in Thus, either local demand should grow of representatives of major producers. EUGENIY LYASHENKO (EFKO). EFKO protein consumption) should drive companies’ revenues, while the key challenges or new markets need to be discovered. was founded 15 years ago, and now expansion in the global agriculture are cost inflation in labor and utilities. In order Considering per capita consumption of STEPHANE FRAPPAT (SODRUGESTVO). holds first place in industrial fats, second industry, but the pricing environment to address these issues, industry players aim 25-26 kg, there is room for expansion, Sodrugestvo is focused on logistics, place in mayonnaise and good positions IGOR remains very volatile. Import to continue vertical and horizontal integration, but it will be a gradual process. The WTO processing and international trade in bottled oil. Import substitution was theARTAMONOV substitution has been one of the in several countries, thus Russia’s main factor for its business expansion, entry to the WTO should not have a while increasing health concerns should direct negative impact on the business. drive it further. Poor infrastructure is a That said, it could affect the financial key challenge – in 2011, a shortage of MAXIM performance of its key customers. Poor railcars and a tariff hike led to a 30% BASOV infrastructure is the key impediment in spike in transportation costs, reducing SERGEY MIKHAILOV Russia (as well as in Brazil, where they Russia’s competitive advantages on a also operate) – transport represents 50% global scale. of COGS of agriculture goods imported to Russia. Other challenges are massive STEPHANE FRAPPAT working capital requirements and volatility in agricultural prices. Only 20-25% of deals on CBOT are conducted by producers МОDERATOR: and customers of soft commodities, IGOR ARTAMONOV STEPHANE FRAPPAT while the remainder of trading uses soft Deputy Chairman of the Chief Executive Officer, commodities as a financial instrument. Management Board, Sberbank of Russia Sodrugestvo SERGEY KISLOV SERGEY KISLOV (YUG RUSI). Yug Rusi is MAXIM BASOV Chairman, Yug Rusi SERGEY KISLOV the most consumer-oriented company on CEO, Rusagro Group SERGEY MIKHAILOV the panel, 65% of their revenues being EUGENIY LYASHENKO CEO, Cherkizovo Group generated by packaged products. Russia’s General director, CJSC VLADIMIR ZOTOV recent success in agriculture is obvious – in Managing company “EFKO” CEO, Agro-Belogorie 1999, it imported grain, while in 2011, it exported 25 mln tonnes; Russia imported 1 mln tonnes of sunflower oil in 2000, while P A N E L D I S C U S S I O N S 2 1
    • T H E R U S S I A F O R U M 2 0 1 2 that. ALEXEI KALININ mentioned THE DISCUSSION MOVED ON TO THE legislative process. There was alsoPRIVATIZATION: the importance of privatization for growth of the market in breadth and in depth. NIKOLAI SHVETS said QUESTION OF WHETHER PRIVATIZATION DEALS SHOULD INVOLVE NEW SHARES AND NEW EQUITY DEALS TO FINANCE COMPANY mention of two OECD models for the treatment of minority investors: the “conventional majority model” INTERIM RESULTS that as the head of a state company, he needs to see the rules for the development of a particular sector DEVELOPMENT, or simple divestiture from the state. The moderator mentioned that there is a dichotomy between the goal of structural and the “majority model based on a 3% threshold”. made before privatization is carried reform via privatization and the government’s THE CONVERSATION TOUCHED FEBRUARY 2ND, THURSDAY out, while he praised the state as paternalistic approach and hope that it can be ON WHAT REQUIREMENTS BUYERS the most effective owner of assets. successful in tackling corporate finance issues MUST MEET. RUBEN AGANBEGIAN pointed out at the privatized companies. THE PANEL INCLUDED ALL THE PARTIES ENGAGED IN THE that fiscal goals and structural reform THERE WAS ALSO A BRIEF MENTION PROCESS : CEOS OF STATE COMPANIES , GOVERNMENT OFFICIALS , are actually at loggerheads. IT WAS MENTIONED THAT THERE ARE OTHER OF THE OPPORTUNITIES FOR RUSSIAN INVESTMENT BANKERS , PRIVATE EQUITY INVESTORS AND FUND WAYS TO PRIVATIZE, such as through share PRIVATE AND STATE PENSION FUNDS MANAGERS . THE KEY OUTCOME OF THE DISCUSSION WAS THAT THE MODERATOR SUMMARIZED THE swaps or issuing convertible bonds, as IN PRIVATIZATIONS. PRIVATIZATION IS GOOD AND NECESSARY FOR RUSSIA. BUT SOME REMARKS by saying that everyone Blackstone proposed to do in autumn 2011. INTERNAL CONTRADICTIONS AND INTERNAL CONFLICTS IN THE apparently agreed that privatization is THERE WAS A DISCUSSION OF PROCESS NEED TO BE CLEARED UP . good, but the prevailing thought was THE ROLE OF PRIVATE EQUITY FUNDS WAS DIVIDENDS FROM COMPANIES UP that nothing would happen until the DISCUSSED. Dmitriev said that he would be FOR PRIVATIZATION. Gleb Nikitin and budget comes under pressure. interested in buying some assets, particularly Uvarov take dividend policies of state VYACHESLAV PIVOVAROV ALEXEI KALININ KIRILL DMITRIEVSAID BATKIBEKOV RUBEN AGANBEGYAN ALEKSEI UVAROV GLEB NIKITIN NIKOLAY SHVETS FIRST, IS PRIVATIZATION AIMED AT THE PANELISTS THEN DISCUSSED A agricultural, banking and logistics and companies very seriously as a way to improve FINANCING THE BUDGET DEFICIT, or is NUMBER OF TECHNICAL ISSUES. It turns transportation assets. Kalinin sees corporate governance and said there was a it merely a political decision designed to out that the legislation has been changed the main role for private equity firms great deal of discussions on the issue. bring in structural reforms? The majority so that the state can now privatize assets as “sherpas”, taking stakes pre-IPO or of panelists said that the latter was more without the need to create a special fund. intermediating further sales of these PIVOVAROV INDICATED THAT TWO TYPES important. Privatization is necessary to assets to investors. OF DIVIDENDS ARE POSSIBLE: specialМОDERATOR: SAID BATKIBEKOV reduce the state’s role in the economy, PRIVATIZATION DEALS FROM LAST YEAR dividends distributing cash before a sale, andManaging Director Parastatal Projects Group, shrink the public sector and increase the WERE MENTIONED: VTB and Freight One, as THE ROLE OF EXCHANGES IN regular dividends, which are a part of a normalSberbank of Russia role of the private sector. well as the failed Sovcomflot deal. There was PRIVATIZATION WAS ALSO corporate governance and dividend policy and also a mention of upcoming deals, such as HIGHLIGHTED, including the need should be generous for state companies withRUBEN AGANBEGYAN, President, CEO, MICEX-RTS ALEKSEI UVAROV said it is not only United Grain Company, a block in Apatit and to conduct privatization deals on strong cash flows.KIRILL DMITRIEV, Chief Executive Officer, important to privatize large state holdings, the sale of SG Trans. MICEX. There was a reference toRussian Direct Investment Fund but also to spin off related entities from the Brazilian experience, whereALEXEI KALININ, Senior Partner, Baring Vostok Capital Partners state holdings to reduce the size of the public THERE WAS A SUGGESTION THAT Novo Mercado, the exchange thatGLEB NIKITIN, Acting Head, The Federal Agency for State sector. SLAVA PIVOVAROV recalled research PRIVATIZATION SHOULD OCCUR IN SMALL set the listing rules, revolutionizedProperty Management by McKinsey that labelled privatization as BLOCKS, with a gradual increase in the free corporate governance forVYACHESLAV PIVOVAROV, Managing Partner, Altera Capital “low hanging fruit” to achieve growth. KIRILL float. Private equity deals can also be conducted companies trading on theNIKOLAY SHVETS, Director General, JSC IDGC Holding DMITRIEV said that promoting competition was in the same manner as pre-IPO deals. exchange and ran well ahead of theALEKSEI UVAROV, Head of The Property Relations Department, important, and privatization could help achieveMinistry of Economic Development of The Russian Federation P A N E L D I S C U S S I O N S 2 3
    • T H E R U S S I A F O R U M 2 0 1 2 is the poor investment climate. THE SCALE OF REFORMS IS COMPARABLE WITH current crisis. In his view, inequality According to international THE SO-CALLED “GREF PROGRAM”, which was increased in industrialized countries polls, Russia ranks 120th successfully implemented during Putin’s first for several reasons. Technological RUSSIAS ECONOMIC POLICY globally. Mr Putin tasked the next government with moving Russia to 20th place. presidential term and which created a basis for economic development (though not ideal, it was a breakthrough after the chaos of the 1990s). changes increased the importance of education, especially in technological spheres. As a result, people with poor IN A TIME OF GLOBAL CHANGE THE PRIME FORMULATED SIX NECESSARY MINISTER Very symbolically, Sberbank CEO Herman Gref moderated the panel at which Putin presented his program. However, the implementation of this education did not have a chance to earn good salaries and became poor from a financial standpoint. Second, CHANGES IN RUSSIAN program implies a de-concentration of power (i.e. deregulation of the labor market led to LEGISLATION. First, an institution a completely different strategy from what the increased competition, which resultedFEBRUARY 2ND, THURSDAY VLADIMIR PUTIN OPENED THE PANEL WITH A SPEECH THAT (GIVEN of commissioners to defend the Kremlin has been doing over the past decade). in greater inequality. HE WAS RUNNING FOR PRESIDENT ) CAN BE VIEWED AS THE LONG- rights of businessmen will be Only time will tell whether the political elite is TERM ECONOMIC PROGRAM OF THE FUTURE HEAD OF THE RUSSIAN established in the near future. The able to take such a radical turn. Raghuram Rajan also highlighted STATE . commissioners will have the power some arguments against this position. to halt implementation of current PAUL KRUGMAN CONTINUED THE Competition can be seen as the reason legislation if it hurts the investment DISCUSSION ABOUT ECONOMIC POLICY. In for inequality, but it is also a driver of economic growth. Economic growth HERMAN GREF PAUL KRUGMAN that is based on competition does VLADIMIR PUTIN not guarantee equity in revenues, but average incomes will most likely increase in this case. Russia is a good example of this process. In 1990, personal incomes were much more “equal” than in 2011, but they consumed much less. MICHAEL MILKEN DISCUSSED THE IMPORTANCE OF HUMAN CAPITAL FOR ECONOMIC GROWTH, providing very impressive statistics. In 1960, Singapore and Jamaica had the same GDP per capita ($2,200). However, Singapore invested a lot more in human RAGHURAM RAJAN capital (e.g. education and health), while Jamaica concentrated on developing climate and provides grounds for his view, budget expenditures should not tourism infrastructure. In 2011, GDP per MICHAEL MILKEN corruption. They will guarantee the be cut. Over recent years, debt growth capita in Singapore reached $50,700, protection of business interests at was accelerating due mainly to corporate while that in Jamaica was only $5,400.The prime minister started with an HOWEVER, THE KREMLIN REALIZES the institutional level. Second, legal borrowing. Now corporates are paying Russia could be an incredibly rich countryanalysis of the situation in the global THE CHALLENGES that the country МОDERATOR: procedures for examining deals between off debt and reducing costs. This has if it properly uses the human capital thateconomy. He stated that the major may face in the future; it is not only the HERMAN GREF businesses and the state will be simplified. already negatively affected economic it already has. The proper policies can reason for the current world crisis debt problem in the developed world. Chairman of the Management The state will bear the responsibility in activity. Cuts to budget expenditures reduce the emigration of talented people was huge imbalances at the state Nobody can rule out a technological Board, CEO, case of incorrect claims and can be forced would have multiplied this problem. Mr to Europe, the US and Israel. If Russia and corporate level, which caused revolution, which would reduce the Sberbank of Russia to compensate for a business’ financial Krugman also stressed that 10 years succeeds, it could become a new world incredible debt accumulation. Russia is demand for traditional fuels. The losses that are incurred as a result of such ago, he was strictly against increasing leader. in better shape, as its debt/GDP ratio economy’s dependence on the oil VLADIMIR PUTIN an examination. Third, the possibility to the budget deficit. He does not believe remains extremely low. The country last market should be reduced, and the Prime Minister, Russia classify a business’ activity as criminal will that the current situation can be year demonstrated the most dynamic economy itself should shift from natural PAUL KRUGMAN be substantially limited. Fourth, control classified as a crisis of overproduction. development among G-8 countries, with rent reallocation to modernized growth Professor, Princeton University of business activity will be eased. This Anytime people want to buy more, growth of 4.3%, record low inflation of based on technological improvements. MICHAEL MILKEN implies a reduction in various checks the crisis is a result of collapsing debt 6.1% (still rather high compared with Chairman, and approvals that make the life of small and demand. developed countries) and a budget RUSSIA HAS A UNIQUE NATURAL Milken Institute businessmen unbearable and force them to surplus of 0.8% of GDP. Russia is the RESOURCE BASE AND HUMAN RAGHURAM RAJAN pay bribes. Fifth, businesses will be able to RAGHURAM RAJAN FOCUSED fifth-largest economy in the world and CAPITAL, but these are not being used Professor, University initiate mutual claims against the state. And ON INEQUALITY AS A MAJOR has the third-highest gross international properly. As result, although Russia’s of Chicago, Booth School finally, legislation will be harmonized with REASON for populist decisions in reserves. The demographic situation is GDP is comparable to Germany’s, the of Business best practices in developed countries. economic policy that led to the also improving, and life expectancy is former’s labor productivity is a third of on the rise. the latter’s. One of the key problems P A N E L D I S C U S S I O N S 2 5
    • T H E R U S S I A F O R U M 2 0 1 2 DAVID G. TARR CHRISTOPHER WEAFER RUSSIA FEBRUARY 2ND, THURSDAY IN TRANSITION ANDERS ASLUND KICKED OFF THE PANEL. HE WAS EXTREMELY OPTIMISTIC ON RUSSIA IN 2012 (NOT HIS USUAL VIEW), SAYING THAT THINGS HAVE NEVER BEEN SO GOOD HERE: THE ECONOMY IS STRONG, INFLATION IS LOW, AND GROWTH IS HIGH.ANDERS ASLUND SERGEI GURIEV PAUL COLLIER ERIK BERGLOF in the near term (three to four but it is not the conducting of elections that – ASLUND: implementation of checks years) and 11% overall in the is important. Elections are easy to hold, and balances; improvement of corporateRussia has human capital, and saying that only 6% of the population next 10 years. Tariff reduction but the quality of elections depends on governance; privatization; and lowerfighting corruption is on the agenda. tries to start their own business, versus МОDERATOR: CHRISTOPHER WEAFER will lower import costs and the institutions. Fairness of the elections influence of state companies.The country will join the WTO in the average of 16% in Europe. Russians Chief Strategist, Troika Dialog create better margins. Domestic process has a positive effect on democracy.2012 and start the process of joining also fail more often when trying to start sectors could suffer, but these Problems and exceptions to these rules – GURIEV: reform in Gazprom; lessthe OECD. Mr Aslund welcomed a business. The key problem is the ANDERS ASLUND negatives will be offset by the occur with states that are natural resource corruption in the procurement system;political instability, which meant business climate, with a high level of Senior Fellow, Peterson Institute for positives of a weaker ruble, as producers, as the taxation of citizens joining the OECD and taking on its anti-more democracy. corruption. One of the biggest problems International Economics greater imports will pressure the in these countries is low. People not bribery standards; and formation of a is connecting to the electricity grid. ERIK BERGLOF exchange rate. The main economic burdened with taxes do not take politics new government.SERGEI GURIEV mentioned that There is also a lack of practical skills, Chief Economist, Special Advisor to the effect is through cost benefits and seriously. So taxes are an importantprior to political events, Russia was and an evident lack of training. President, European Bank for increased consumption thanks to democratic instrument. Democracy – BERGLOF: checks and balances; WTO;falling into a political-economic trap, Reconstruction and Development higher disposable income on the could be popular because it promotes stimulation of the regions to improve theas there was no political demand for DAVID TARR said that Russia PAUL COLLIER back of lower costs. The insurance growth and the rule of law. For natural business environment; the middle class’reform. He said that political demand received really good terms for its Director, Centre of the Study of African sector could open up to international resource states, transparency in how it loss of confidence in the system.was important for structural reform to WTO transition period. Its average Economies, Oxford University competition, but this could handles resource revenues is important.be launched. The political demands of tariff will be 7.5%, versus 5.9% SERGEI GURIEV be positive, as demand for skilled It is also valuable to join an energy – TARR: diversification and development ofthe middle class occurred unexpectedly for other countries when they Rector, New Economic School domestic actuaries could improve charter, which will further boost SMEs; success with fighting corruption.and could stimulate demand for reform. entered. Russia got a good deal DAVID G. TARR salaries in the sector and drive up democracy.However, the changes are likely to take for the banking and automotive Consultant and Former Lead Economist, consumption. – COLLIER: diversification (he pointedplace as an evolution, not a revolution. sectors, which will be protected World Bank In answer to the moderator’s question to Australia and Botswana as examples until 2018. He estimates that PAUL COLLIER noted that rising incomes about what events will take place, the of natural resource countries that haveERIK BERGLOF highlighted Russia’s WTO accession for Russia will impact stability of the autocracy. panelists noted the following: managed to diversify).lagging position in entrepreneurship, result in 3.3% GDP growth Democratization starts with elections, P A N E L D I S C U S S I O N S 2 9
    • T H E R U S S I A F O R U M 2 0 1 2 LEONID KAZINETS WHAT’S MOVING IGOR LEVIT THE REAL ESTATE MARKET? TOP MANAGERS OF RUSSIAN DEVELOPERS AND HOMEBUILDERS DISCUSSED A NUMBER OF QUESTIONS INCLUDING FEBRUARY 2ND, THURSDAY REGULATION , MANAGEMENT COMPETITIVENESS, THE MARKET BEYOND MOSCOW, THE COST OF LAND, INVESTMENT AND THE FUTURE OUTLOOK. GORDON BLACK ARTEM EYRAMDZANTS МОDERATOR: ARAM GRIGORIAN Managing Director, Troika Dialog DMITRY MINTS GORDON BLACK Senior Managing Director, European Team, Heitman Private Equity ARAM GRIGORIAN ARTEM EYRAMDZANTS qualities are quite questionable, having a land, theyre not making it developers were very focused on selling at First Vice President, PIK Group negative effect on quality and implementation anymore”. But in general, all as low a cap rate as possible, while investors VENIAMIN GOLUBITSKIY time of projects. If faced with management the speakers agreed that only were concerned with the sustainability of President, Renova StroyGroup of Chinese companies, most would lose out infrastructure-ready land in high rental rates. The two do not go hand-in- LEONID KAZINETS to the competition. Igor Levit of LSR Group locations with a strong job hand, which may suggest that the currently Chairman of the Board, Barkli and Artem Eyramdzants of PIK Group, on market was of any value, and high spread of commercial property over IGOR LEVIT the contrary, argued that the management the rest may be worth little if Sovereign yields may persist. Mr Mints, Chairman of Board, LSR Group of large homebuilders is quite professional nothing. Veniamin Golubitskiy however, was much more optimistic on the DMITRY MINTS and can build projects nearly as fast their of Renova-StroyGroup said that potential for further narrowing of the spread, Chairman of the Management Board, Chinese counterparts, with the main reason the land market was the only which is one of the highest among the O1 Properties for smaller volumes vis-a-vis Chinese peers one that has not recovered post- world’s capitals (over 350 bps in Moscow being smaller market capacity (demand). crisis, while Dmitry Mints of O1 versus London’s 150 bps). Properties said that land in the VENIAMIN GOLUBITSKIY IS THERE A MARKET BEYOND MOSCOW? center of Moscow for commercial WHAT DOES THE FUTURE BRING? All Absolutely yes. While the regions indeed projects is scarce in light of the new homebuilders were very upbeat on the have seen an uneven recovery, there is city administration’s intent to limit sales outlook for 2012, noting strong definitely demand and a market outside commercial development in the city demand and support from growth inWHAT WOULD YOU CHANGE IN conditions for all land plots and moving from from the state as possible and urge of Moscow. Renova StroyGroup’s center. the mortgage market. For commercialTHE INDUSTRY? It is no secret that an authorization-based approval process the authorities to try to avoid bad Akademicheskiy project (totaling some properties, the outlook for Russia was alsodevelopers have long been unhappy to a notification-based one; second, PR for developers. 9.0 mln m2 of residential and 4.5 mln m2 FOREIGN INVESTMENT ON THE RISE. upbeat, especially relative to the rather with regulation of the industry. Some introduce a law on complex development of commercial space in Ekaterinburg), As the market transitions and matures, gloomy backdrop in developed markets, cities (St. Petersburg, Ekaterinburg) and improve the law on ownership and COMPETITIVE MANAGEMENT WAS LSR Group’s home in the St. Petersburg the number of quality properties has where a lack of financing from liquidity- are better in this regard, while others tax legislation; third, cancel open land ALSO DISCUSSED, ALTHOUGH VIEWS market and PIK Group’s presence in been on the rise, which has made the strapped banks will restrict buyers and (Moscow) do not even have an approved auctions; fourth, come up with a single DIVERGED. Leonid Kazinets of Barkli Kaluga, Yaroslavl and other regions choice for foreign institutional and constrain price appreciation. city development plan. If granted a wish plan for development of territories that argued that the management of most are good examples. specialty investors wider. Gordon Black to make a single change in the industry, will be supported by construction of Russian real estate companies is just as of Heitman Private Equity noted there the panelists would do five things. First, building material capacity; and fifth good at having connections that help get WHY IS LAND SO EXPENSIVE? Igor were probably 20 high-quality properties introduce a clear city development (something that all the speakers access to lucrative land plots and ease the Levit opened this discussion with in Russia worth consideration. At the plan specifying development terms and agreed on) have as little involvement approval process, but their professional a quote from Mark Twain: “Buy same time, he also voiced a concern that P A N E L D I S C U S S I O N S 3 1
    • T H E R U S S I A F O R U M 2 0 1 2 ANDREI SHALABAEV NEW INDUSTRIALIZATION IN RUSSIA SESSION PARTICIPANTS DISCUSSED THE IMPORTANCE OF FURTHER DEVELOPMENT OF RUSSIAN INDUSTRY . THEY DISAGREE WITH THE FEBRUARY 2ND, THURSDAY ARGUMENTS OF VARIOUS SPECIALISTS ABOUT THE IMPORTANCE FOR SOME COUNTRIES TO MAKE THE TRANSITION FROM INDUSTRIAL TO POST -INDUSTRIAL ECONOMIES , AND THINK THAT THIS COULD LEAD TO ECONOMIC CRISIS . ANATOLY LEYRIKH ALEXANDER OLEG KHUSAENOV IDRISOV global ranking of attractiveness for investment reduce transport expenses for from 120 to 20 is an important step. industrial companies. He pointed to Kaluga Region as an example, OLEG SIYENKO said that the country’s the governor of which was able to infrastructure must be developed for attract large industrial enterprises industry to improve. Without this, industrial to the region, including a VW plant. МОDERATOR: enterprises will expand very slowly. The Thanks to the latter, the region took ALEXANDER IDRISOV slow delivery of goods obviously impacts on infrastructure issues on its own. Mr Managing Partner, Founder, companies’ economics, increasing the cost Khusaenov does not see any point in Strategy Partners of their products. developing enterprises in regions with poorly developed infrastructure, as it ALEKSANDR GALUSHKA OLEG KHUSAENOV spoke about his boosts production costs. President, All-Russian public experience investing in industrial organization “Business Russia” enterprises. In his view, this is a very The session ended with a discussion about OLEG KHUSAENOV attractive sector that offers IRR of Russia’s entry into the WTO, the speakers CEO, Atlant-M 25–30%. Mr Khusaenov believes that agreeing that it is negative overall for ANATOLY LEYRIKH it makes sense to industrialize and industry. However, there is a grace period for President, Intrall ARTEM VOLYNETS define priority sectors at the regional the next few years, which will give companies ANDREI SHALABAEV level. This policy could significantly the chance to become more competitive. Deputy Director Department for machine building clients, Sberbank of RussiaThe crisis in Greece, for example, is partly while creating jobs and education programs. OLEG SIYENKOdue to the country’s refusal to develop its The economic crisis in Europe could be OLEG SIYENKO CEO, Uralvagonzavod own industry, unlike Germany, which has helped by Russia’s new industrialization – ARTEM VOLYNETS been actively developing its industry and domestic enterprises can acquire European CEO En+ Group remains economically prosperous. Russia technology or hire specialists for in-house also needs to continue its industrialization, development. and it has all the necessary ingredients for success: resources, capital, and a The panelists talked about the problems favorable geographic location between faced in priority sectors. For example, Asia and Europe. The panelists came to in Soviet times, there were more than the conclusion that Russian industrial 30 “priority sectors”. Today, many key enterprises can fill a niche between low- industries are suffering from a lack of quality but cheap Chinese products and workers and investment. high-quality but expensive European products. The speakers agreed that A strong investment climate is necessary industry is still a source of new technology to develop industry in Russia, and and production and business processes, the government’s goal to increase its ALEKSANDR GALUSHKA P A N E L D I S C U S S I O N S 3 3
    • T H E R U S S I A F O R U M 2 0 1 2 GORDON BROWN’S CLOSING SPEECH: 2020, will be between India and about the dangers of a rise in protectionism – There needs to be greater GLOBAL ECONOMIC China – a trend he suggested suits or trade wars and a restriction in capital investment in infrastructure Russia’s economic development investment, as countries may look to protect across the world, but especially in very well. One of the trends he their economies. HIS OPINION IS THAT, FAR developing nations, including Russia. GROWTH – MIND considers most important is the FROM PROTECTIONISM, THERE NEEDS TO BE He cited a gap between the needs shift in consumption. Whereas today MUCH GREATER COOPERATION BETWEEN for infrastructure and the availability 60% of global consumption occurs EAST AND WEST TO TRY TO REBUILD today as being $3 trln. in the West and only 40% in the East, GLOBAL GROWTH AND AVOID A GLOBAL THE GAP by 2020 the ratio will have reversed. RECESSION. SPECIFICALLY, HE ADVISED – Trade must continue and any moves By that time, the Asian economies will THE FOLLOWING: toward greater protectionism must be account for the majority of production avoided. FEBRUARY 2ND, THURSDAY and consumption, making them the – A new cooperation deal between the engine of global economic growth as the developed Western economies and – The middle class in both the West and US and Europe used to be. the emerging Asian countries as to East needs greater protection – the FORMER PRIME MINISTER OF GREAT BRITAIN, GORDON BROWN, what should be the way forward former is being squeezed and is insecure, STATED THAT HE BELIEVES THE WORLD IS NOT MERELY SUFFERING THE But it is the gap of 10 years, while this and how to resolve current and while the latter is still small and lacks EFFECTS OF FALLOUT FROM A GLOBAL RECESSION AND CONTRACTION trend evolves, that he highlights as being emerging issues. confidence. OF LIQUIDITY , BUT IS ALSO UNDERGOING A MAJOR RESTRUCTURING . of greatest concern. MR BROWN warnedHe believes that the developed Western the leading global economies, overtaking thoseeconomies are showing relative decline in Europe, also in that time scale. He highlightedwhile the developing economies, Russia’s advantages as being in human capital, aparticularly those in Asia and the so- strong resource base and the now shifting politicalcalled BRIC category, are on a steady backdrop in the country. He also highlightedgrowth track. But he believes that the the challenges that Russia needs to resolve and,latter countries still need 10 years to generally, the improvements needed in therealize their full potential and become investment and business climate to attract morethe dominant global drivers. Meanwhile, investment into new-economy industries.unless both categories of economic blocksfind a way to work together, that decade- The former prime minister referred to a studylong gap may be characterized by low conducted by the Centre for Global Economicsgrowth, uncertainties and social instability that showed how the center of globalacross the globe. economic gravity has been moving east for many decades. Having been mid-AtlanticMR BROWN believes Russia is on a steady in the 1980s, it is now geographicallygrowth projection and will rank among somewhere in Eastern Europe and, by P A N E L D I S C U S S I O N S 3 5
    • T H E R U S S I A F O R U M 2 0 1 2FEBRUARY 3RD, FRIDAY OPENING SPEECH: SERGEY SOBYANIN construction contracts and launched an ambitious PRIVATIZATION IS ONGOING. In FOR MOSCOW, STABILITY IS commercial real estate program involving retail and 2011, the city privatized several billion IMPORTANT. The mayor therefore AFTER A BRIEF INTRODUCTION BY RUBEN VARDANIAN, office space. dollars’ worth of assets, in line with the thinks that Muscovites should seek MOSCOW MAYOR SERGEY SOBYANIN BEGAN HIS SPEECH BY federal privatization program. to elect politicians who will support COMPARING THE MOOD AT THE RECENT DAVOS CONFERENCE ZONING AND LAND REGULATION WERE stability. WITH THAT IN MOSCOW. HE SURMISED THAT THE MOOD IN HIGHLIGHTED AS IMPORTANT. The city is CHANGES TO THE PROCUREMENT THE RUSSIAN CAPITAL WAS MUCH MORE OPTIMISTIC AND developing policy to solve local traffic and SYSTEM and switching to an electronic ON THIS NOTE HE ENDED HIS POSITIVE. parking issues. Mr Sobyanin said it will take system have helped the city budget to SPEECH. During the subsequent $12-15 bln to solve these problems. More save $2 bln. Q&A session, Moscow was attention will be paid to old development compared with Singapore. zones. Up to $50 bln will be spent on THE INFLUX OF PEOPLE INTO Foreigners are very comfortable Moscow has fought and financial sector. The development strategy recreation areas, social development, MOSCOW IS GOOD. People coming to in Moscow and sectors in greater overcome the 2008 crisis. for Moscow is aimed at transforming the medical and transportation infrastructure, Moscow take jobs in finance, education need of investment – such as Unemployment is just 1%, city into a global megapolis and a regional and hotels. and the cultural sphere, which supports retail, hotels, healthcare, sports investment is growing at a healthy development center. development in these areas. and transport – have received pace, average life expectancy has NEW AREAS PROVIDE MORE significant investment. Moscow is risen to 75, and the birth rate now MOSCOW IS OPEN TO INCREASED OPPORTUNITIES FOR THE CITY, where ONE IN THREE RUSSIAN SCIENTISTS home to 12 mln people, while a exceeds the mortality rate. However, INVESTMENT but is selective in terms local government plans to build new LIVES IN MOSCOW, so the city is very further 8 mln live in the suburbs the ill effects of the European crisis are of growth sectors. The city has campuses, site a financial center and important as a center of innovation. just across the city limits. being felt in many sectors, especially the canceled 8 mln m2 of residential government buildings, etc. P A N E L D I S C U S S I O N S 3 7
    • T H E R U S S I A F O R U M 2 0 1 2 WILLIAM WHITETHE FUTURE OF THE GLOBAL ECONOMY AND FINANCIAL SYSTEM THE PANELISTS FOCUSED MOSTLY ON DISCUSSING THE SITUATION IN THE EU AND THE US, AS THIS IS THE BIGGEST FACTOR OF UNCERTAINTY MAKING THE FINANCIAL MARKETS NERVOUS .FEBRUARY 3RD, FRIDAY EVGENY GAVRILENKOV KENNETH ROGOFF KENNETH ROGOFF thinks that although currencies will depreciate economic policy in the US is unsustainable and against emerging currencies. the fiscal deficit must be reduced, the US finds The emerging world will also itself in a better situation than the eurozone, increase emission in order to as it has common regulatory institutions. protect their domestic producers. Decisions can be made quickly and they will As a result, the imbalances will be followed by actions. continue to grow. Unfortunately, international cooperation is not WILLIAM WHITE started his speech rather progressing. Debt restructuring is not pessimistically. He does not see how the yet successful, while structural reforms crisis can be stopped. A decade of easy need time, which the politicians do not monetary and budgetary policy resulted have. He expects economic growth to МОDERATOR: in great imbalances and these imbalances slow due to debt problems, banks to EVGENY GAVRILENKOV are still with us. He expects the crisis to become smaller, and the clash between Chief Economist, MD, GORDON BROWN continue but does not know what will state capitalism and the free market to Troika Dialog trigger its next phase. In order to resolve continue. Mr White concluded that Europe GORDON BROWN believes that one of the demonstrated progress in resolving the their own problems, the advanced needs one more crisis to start cooperatingGORDON BROWN problems that caused the current crisis was region’s problems. Mr Wyplosz believes countries will print money and their more actively.MP Prime Minister of , low globalization at the supervisory level. that the debt of some countries will be JEAN-MICHEL SIX said that severalGreat Britain and Northern The banking system became global, but restructured, the banking system will be years from now the spreads betweenIreland (2007–2010), was supervised by national agencies. recapitalized and the European Central bonds of European countries willChancellor of the Exchequer (1997– This mistake should be corrected in Bank will increase its activity in all of have narrowed. Everyone will have2007) the future. He concluded that global these processes. He also expects the realized that European countriesKENNETH ROGOFF problems need global solutions. He eurozone to demonstrate more fiscal CHARLES WYPLOSZ comprise a single family with theThomas D. Cabot Professor expects the eurozone to initiate fiscal discipline. He admits that the eurozone same risk, hence no default will beof Public Policy and consolidation and restructuring of is not a sustainable construction, but allowed and no country will leaveProfessor of Economics, the banking system. added that this is a feature of all new the eurozone. All of these beliefsHarvard University constructions. The eurozone will evolve are being questioned now. TheJEAN-MICHEL SIX CHARLES WYPLOSZ is an optimist. institutionally, in at least two ways. The eurozone will have to resolve theManaging Director, Chief EMEA He does not expect the eurozone first path, which Germany advocates, is root of all its problems to survive.Economist, Standard & Poors to collapse and stressed that to give more power to strong countries This root is a lack of convergenceWILLIAM R. WHITE there is no legal mechanism for with healthy finances. They should between European countries.Chairman of the Economic a country to exit. All contracts have the right to affect the economic Economic policy should focusDevelopment and Review are based on the euro as a policy of less successful neighbors. The on smoothing the gaps inCommittee, OECD common currency and it is second way is to create a system (as in competitiveness between theCHARLES WYPLOSZ simply impossible to revise the US) with two levels of governance, countries. Mr Six also believesProfessor of International them without a total collapse on the federal and state levels. In this that the responsibility forEconomics of economic activity. The case, the federal level would not bear the debt restructuring should be last few months have responsibility for the debt of states. mutualized. JEAN-MICHEL SIX P A N E L D I S C U S S I O N S 3 9
    • T H E R U S S I A F O R U M 2 0 1 2 IGOR LOJEVSKY RISK MANAGEMENT: EVGENIY KORNILOV MYTH OR REALITY?FEBRUARY 3RD, FRIDAY THE PANEL CONSISTED OF SENIOR FINANCIAL OFFICERS OF LARGE RUSSIAN COMMODITY -EXPORTING COMPANIES , FINANCIAL CONSULTANTS AND REPRESENTATIVES OF COMMERCIAL BANKS . ALEXANDER BAZAROV SATYAJIT DAS TIGRAN KHACHATUROV OLGA ZINOVIEVA МОDERATOR: ALEXANDER BAZAROV Vice President — Director of the Corporate Clients Department, Sberbank of Russia AXEL VAN NEDERVEEN TIGRAN KHACHATUROV Acting Director General, JSC Atomredmetzoloto PETER BAKAEV Head of the Capital Markets Division, Gazprom SATYAJIT DAS Risk Consultant, THE MAJOR REASONS FOR MOST PANELISTS FROM THE INDUSTRIAL Author of “Extreme Money” THE RATHER SELECTIVE and SIDE MENTIONED THAT THEY MAINLY USE EVGENIY KORNILOV cautious use of derivative FOREIGN BANKS AS COUNTERPARTIES FOR PETER BAKAEV CFO, RUSAL financial instruments by STRUCTURED TRANSACTIONS, as large IGOR LOJEVSKY Russian industrials seem to be Russian institutions entered the field only Chief Country Officer, their complexity (all panelists recently. Interestingly, none of the industrial Russia and CIS, were strongly in favour of panelists mentioned counterparty risk as PANELISTS REPRESENTING THE “REAL since the issue versus a straight issue) Deutsche Bank simple structured products), a component they pay attention to in a ECONOMY“ described their companies’ and the synthetic conversion of local AXEL VAN NEDERVEEN very strong loss aversion of structured deal. approach toward managing various types rouble bonds into foreign currency Treasurer, European the companies’ risk officers and of risk. Most speakers conceded that liability (a practice widely employed Bank of Reconstruction treasurers (“you are not rewarded ALL PANELISTS CONCLUDED THAT they employ a selective range of rather by many Russian local bond issuers in and Development if your hedge works, but if it RUSSIAN COMMODITY-EXPORTING simple derivative instruments (such as 2009-11). On the revenue side, most OLGA ZINOVIEVA loses, it is your fault“), belief that COMPANIES’ USE OF STRUCTURED plain vanilla currency swaps), mainly in companies rely on “natural hedges“ Appointed First Deputy Russian commodity producers have FINANCIAL INSTRUMENTS for risk order to synthetically adjust standalone and commercial methods to reduce CEO, Interros certain natural hedges (weaker oil management represents a very largeticket deals on the liability side. cash flow volatility, such as long-term means a weaker rouble and lower interesting market for large banks, Examples mentioned included such contracting. An exception, noted by cost base) and the simple absence of and thus the market is likely to grow deals as Gazprom’s 2008 placement of UC RUSAL, was that being one of the tradable derivative contracts for many materially in the coming years. a Eurobond with a coupon linked to the world’s largest exporters of aluminium, commodities (e.g. for uranium). oil price (the company believes that it very actively employs exchange- it has saved circa 70 bps per annum traded commodity derivatives to in interest costs over the four years manage its sales mix. P A N E L D I S C U S S I O N S 4 1
    • T H E R U S S I A F O R U M 2 0 1 2 A NEW ERA IN MOBILE: scratch, they could apply a business case that is more suitable for data services, as the company from the first day of its operation Big Four operators, Tele2 does not consider itself an outsider. In the 37 Russian regions where the company OPPORTUNITY KNOCKS has been focusing on data. He thinks that the industry should prepare itself for a decline in revenues per base station from the current operates, it holds first place in nine and is among the top three operators in 20. Tele2 has the lowest R500,000-600,000/month to at best churn rate in Russia, implying that R150,000/month for data. At the same customers are currently satisfied with THE PANELISTS DISCUSSED THE FUTURE OF THE time, operating expenses will not decrease, the speed that the network offers. TELECOMMUNICATION INDUSTRY , FOCUSING ON THE EMERGENCE which implies that most operators have the However, the company wants to FEBRUARY 3RD, FRIDAY OF NEW TECHNOLOGY THAT MIGHT SHAPE A NEW ERA , AS WELL wrong operational model for data. Skartel develop further and offer customers AS PREVAILING TRENDS AND INDUSTRY OBSTACLES . focuses on revenues per employee, and has services using new technologies, such the highest in the industry. as mobile TV. Hence, the issue of aspect of the business; operators that can reshape technology neutrality is important, as distribution will rule the market. A final important Commenting on the issue of fixed it would enable the operator to launch principle is pricing of services. lines competing with mobile networks, a next-generation network. It is also DENIS BUGROV ALEXANDER PROVOTOROV stressed that possible to launch LTE networks in the THE SPEAKERS COULD NOT REACH A UNANIMOUS these two technologies do not substitute, 900 MHz spectrum. Tele2 is ready to OPINION ON THE COST OF THE LTE NETWORK but enhance each other. In Italy, only participate in financing the conversion ROLL-OUT. While Mr Hecker thinks that upgrading 10% of people use mobile connections of frequencies. She agreed with Mr MTS’ existing network will incur much less expense ALEXANDER PROVOTOROV at home, and this is the country that has Hecker that the growth drivers are data than constructing a network from scratch and will the highest ratio. Mr Provotorov believes and voice traffic. not require substantial investments. Mr Sverdlov, that fixed-line broadband will remain on the contrary, insisted that for Skartel, building a popular in Russia, as for some services OLE BJORN SJULSTAD thinks that we are new network would require the same investments mobility is not necessary, for example witnessing a continuation of the current or even less than for MTS to upgrade its network. SVETLANA SKVORTSOVA television. The main growth area for the mobile era, rather than the end of a Mr Provotorov said that LTE would require huge company is pay-TV and there is a trend past era. The dream of mobile business investments, as it is necessary to invest in the where people initially subscribe to pay- is adapting to the needs of people but cable that goes to the base station, which is TV and only then opt for broadband. also driving these needs. While new costly, but without which it is impossible to reach Therefore, the challenge for equipment technologies are important, five factors the full data transfer speeds implied by LTE. vendors and appliance producers is to are crucial if the company wants to deliver make equipment that would enable the profitable growth, he said. The first is THE SPEAKERS ALSO DEFINED OPPORTUNITIES convergence of fixed-line and mobile services that are offered by the operator. AND CHALLENGES FACING THE TELECOM МODERATOR: services that would enable people to Then frequencies and licenses. Companies INDUSTRY IN RUSSIA. On one hand, they DENIS BUGROV automatically switch from one to the paid a lot during the allocation of 3G licenses, agreed that they should focus on reducing Senior Vice President, other, depending on where they require whereas now they are trying to reduce operating costs and capex. On the other, DENIS SVERDLOV Sberbank of Russia an internet connection. expenses by teaming up with other operators though, they said they need to seek alternative in rolling out networks. Mr Sjulstad also said revenue sources, among which might be MICHAEL HECKER ANDREY SEMERIKOV noted that people that effective procurement processes would considered offering additional value-added Vice President, Strategy and Corporate have been discussing competition 15- push down prices. Distribution (staying services to keep their business from becoming Development, MTS 20 years already, but revenues from in touch with customers) is an important a pipeline.MICHAEL HECKER has a positive operators. As an example, he cited machine- ALEXANDER PROVOTOROV fixed-line services continue to grow.outlook for the sector and anticipates to-machine (M2M) services, which in Europe President, OJSC “Rostelecom” His main thesis was that the capacityhealthy growth at telecom companies generate ARPU of $5-10. In Russia, there are ANDREY SEMERIKOV of existing networks is insufficient todriven by data and voice usage, which already around 2.5 mln M2M sim-cards, and General Director, Er-Telecom digest exploding traffic that, among OLE BJORN SJULSTADstill has potential in Russia to increase this number is growing dramatically. OLE BJORN SJULSTAD other things, is driven by contentfrom the current level of around 270 Telenor Group Senior Vice President created by users (which is starting MICHAELminutes to 600 minutes. He thinks Asked why we need LTE, DENIS SVERDLOV for Central and Eastern Europe, Head to exceed professionally produced HECKERthat, compared with where we will be said that in practice, once the network of Telenor Russia; member of the content) and cloud services. In hisin five to 10 years, the industry is still in exists, i.e. has been constructed and VimpelCom Ltd. Board of directors view, not a single company will bethe Stone Age. At the moment, our only becomes available to customers, massive SVETLANA SKVORTSOVA able to digest this coming traffic onconnection devices are mobile phones, demand appears. The reason for this at Strategy and Development Director, its own and, hence, infrastructuresmartphones, tablets and computers, least in Russia is in undeveloped cable Tele2 Russia should be integrated.whereas there are billions of home infrastructure and people requiring DENIS SVERDLOVappliances, cars and other appliances mobility. Talking about why operators can General Director, Skartel SVETLANA SKVORTSOVA believesthat in the future will be connected, still make money, he said that because ANDREY SEMERIKOV that despite being not among thedelivering traffic and revenues for Skartel was building infrastructure from P A N E L D I S C U S S I O N S 4 3
    • T H E R U S S I A F O R U M 2 0 1 2 to commodities, but the cost of carry is IRINA RAPOPORT, CEO, RUSNANO so high in this asset class that investors Capital: Russian private equity is wondered how they lost money despite different – it’s smaller, and the rising commodity prices. Big money is terms and investment horizon are lost. Cash is a good asset. Cash is waiting much longer in Russia. for opportunities and special situations. RAKHMANOV: So what do you do? RAKHMANOV: How has private equity You have to do something. changed? LACAILLE: You have to be very МODERATOR: CHUCK FLYNN, Managing Director, diversified. And if you outperform ANTON RAKHMANOV Bregal Private Capital: There has been basic rates, then you have to take Managing Director, little change in the private equity the risk. Stop limits are important. Troika Dialog business. It’s the best sector – you can’t You have to ask yourself, how much lose. It is usually structured in a 10-year are you prepared to lose? STEVE DROBNY ANTON RAKHMANOV cycle: five to six years of investment, Founder, Drobny Global then two years of harvest and then RAKHMANOV: What needs to Asset Management two years of litigation. But the job is change for Russia to become a CHUCK FLYNN very interesting. The best in finance. normal, investable market? Managing Director, Nothing has really changed here in Bregal Private Capital a sector that has flourished over the FLYNN: Use this acronym: RICHARD LACAILLE past 10 years of real negative interest FUC – friction (the difficulty of Global Chief Investment rates. There is some shift toward doing business), uncertainty and Officer, State Street services, as money is chasing slightly corruption. Russia needs to improve Global Advisors higher growth. F and U and get just as good as IRINA RAPOPORT WHERE DOES THE CEO, RUSNANO Capital BIG MONEY GO?FEBRUARY 3RD, FRIDAY STEVE DROBNY RICHARD LACAILLE ANTON RAKHMANOV, moderator: LACAILLE: It’s a question of how long it can Where does the big money go in maintain low social spending and deflate difficult times? until there is stress and they have to print money to finance the deficit. RICHARD LACAILLE, Global Chief Investment Officer, State Street STEVE DROBNY, Founder, Drobny Global Advisors: Last year saw limited Global Asset Management: Where risk-on, but this was strongly hedged should the money go? Global money with small overweight in equities. Mr is lost and doesn’t know what to do. other BRICS in C. Mr Flynn was Lacaille thinks the US will continue to In 1960, it was all in bonds. Then very impressed with Putin’s be strong. The US elections will add in the 1970s, when inflation was speech. Russia climbing from CHUCK FLYNN to volatility, but US equities will make high, it switched to a mixed bond/ 120th to 20th place by improving net gains. Europe is hostage to slow stock portfolio (60%/40%). A bias the business climate is exactly what growth and a strong currency. However, toward equities emerged in the is needed. However, in simple terms, European equities have outperformed 1980s, when valuations were low Mr Flynn thinks it is difficult to invest the economy in Europe big time. Theres and growth was strong. In 2000- into Russia while money is flowing a slight overwiegthed of GEMs here. 03, they thought that stocks out. Having seen $84 bln flowing out Greece and Portugal are insolvent rather couldn’t go lower. Then in 2002- of Russia in 2011, it is difficult to go than illiquid, and there will be a resolution 08 they piled into private equity against the flow. at some point this year. and illiquid assets. Since 2008, they do not know where to go. LACAILLE: We are investors in Russia, RAKHMANOV: How long will it take for As of yet there is no new model. and it is cheap because corporate Europe to restructure social spending? Some attention has been paid IRINA RAPOPORT governance is very poor. P A N E L D I S C U S S I O N S 4 5
    • T H E R U S S I A F O R U M 2 0 1 2 INTEREST RATES, JONATHAN MUIR GIACOMO BAIZINI EXCHANGE RATE AND LIQUIDITY:FEBRUARY 3RD, FRIDAY ARE THERE RESOURCES FOR INVESTMENT? ANDREI KLEPACH ALEXEI ULYUKAEV AT THE BEGINNING OF THE DISCUSSION, PANEL MODERATOR KSENIA YUDAEVA (DIRECTOR, CENTER FOR ECONOMIC RESEARCH, SBERBANK) GAVE AN OVERVIEW OF THE MACROECONOMIC SITUATION. THE MAIN FEATURE OF TODAY’S MARKET GIACOMO BAIZINI, CFO OF THOMAS RUTZ, FUND MANAGER FROM IS HIGH VOLATILITY AND AMPLE FLUCTUATIONS IN LIQUIDITY. INVESTORS HAVE EVRAZ GROUP, mentioned that CLARIDEN LEU, mentioned that emerging DIFFERING VIEWS, AND THIS DOES NOTHING TO HEIGHTEN STABILITY. THE his company still uses the dollar markets offer unique opportunities in an POLICY OF THE CENTRAL BANK PLAYS A BIG ROLE NOW. as its main operating currency (as environment of low interest rates globally. steel prices, even domestic, are He said that diversification is critically linked to the dollar). At the same important now. The firm prefers investment time, it widely uses opportunities in the corporate sector in EMs, rather than FIRST DEPUTY CENTRAL BANK KSENIA YUDAEVA to borrow in different markets. in Sovereigns or quasi-Sovereigns. Mr Rutz CHAIRMAN ALEXEI ULYUKAEV said THOMAS RUTZ Over the past two and a half years, expects rates to remain low, appreciatesМОDERATOR: that the regulator sees a balance Evraz Group has placed R60 bln in the heightened transparency of the CentralKSENIA YUDAEVA between inflation risks and economic ruble bonds, but all these funds were Bank’s interest rate policy and likesDirector, Center for Economic growth in the current situation, which WERNER GEY swapped into hard currency, as the investment in the ruble.Research, Sberbank of Russia means that the regulator is unlikely to VAN PITTIUS company wants to hedge exchange move rates within the next couple of rate risk. Mr Baizini thinks that in the DEPUTY FINANCE MINISTER SERGEIGIACOMO BAIZINI months. At the moment, the Central current environment borrowers should STORCHAK said that the Finance MinistryVice President of Corporate Affairs, Bank is maintaining a “dirty” floating find the proper balance between cost received about R20 bln in interest in 2011CFO, Evraz Group S.A. exchange rate, but plans to switch to a of funding and risk. Evraz Group is from the placement of money on depositANDREI KLEPACH full-fledged floating regime soon. The very opportunistic in terms of choice at commercial banks, and expects suchDeputy Head of the Ministry amount of Central Bank operations on of instrument for borrowing. At the placements to continue. The Financeof Economic Development the open forex market is minimal. He moment, the company is considering Ministry is moving toward greaterof the Russian Federation sees commercial banks continuing to project financing. transparency and is talking with investorsJONATHAN MUIR use refinancing at the Central Bank, SERGEI STORCHAK on a regular basis.CFO, ТNК-ВР as capital flight is continuing. He JONATHAN MUIR, CFO OF ТNК-ВР,THOMAS RUTZ expects inflation to come in at 5.5- agreed with the previous speaker that the KSENIA YUDAEVA summarized the viewsFund Manager, Clariden Leu 6.0% in 2012, but believes achieving Russian monetary policy and the Central comfortable environment for development bulk of exporters in Russia use the dollar of the panel members, who believe thatSERGEI STORCHAK this level will be complicated. The Bank’s greater transparency (such of the real sector. He expects interest rates as their operational currency. At the same inflation may decline further. In addition,Deputy Finance Minister Central Bank is ready to heighten the as publication of the minutes of BoD to decline in 2H12, but remain high until time, borrowers need to be more flexible the Central Bank and Finance Ministryof the Russian Federation, transparency of its policy and plans meetings). He expects more foreign mid-year. The existing volatility is forcing in the current environment. According to are likely to be more focused on theirGovernment of the Russian to start publishing quarterly reports investors to come to the OFZ market companies to think more about hedging him, about 60% of foreign lending came core activity, while the real sector willFederation on monetary policy. In addition, Mr after its opening for international their risks. Mr Klepach thinks that capital to Russian borrowers from the EU. Due to be more concentrated on using existingALEXEI ULYUKAEV Ulyukaev mentioned that the Central investors, and considers these bonds outflow may turn into an inflow in 2H12. the European debt crisis, many European opportunities in capital markets.First Deputy Chairman Bank may use lending in hard currency as undervalued relative to current In addition, he expects the primary banks may be out of the syndicated loanof the Central Bank of Russia only as an extraordinary measure and fundamentals (e.g. slowing inflation and markets for both bonds and equities market, which could have a negative impactWERNER GEY VAN PITTIUS prefers to see balanced positions current account surplus). Lastly, he said to start operating normally. Lastly, he on borrowers. At the moment, TNK-BP isPortfolio manager, among commercial banks. he is ready to continue lending money mentioned that about 10% of Russian considering borrowing in different currenciesInvestec Asset Management to the Russian authorities. GDP is concentrated in the Reserve and and does not rule out funding in rubles. At WERNER GEY VAN PITTIUS, National Wealth funds, which are not the same time, the cost of borrowing will PORTFOLIO MANAGER FROM DEPUTY ECONOMICS MINISTER working in the economy. Attraction of be critical. Mr Muir considers volatility on INVESTEC ASSET MANAGEMENT, ANDREI KLEPACH thinks that the this money to the market is one of the financial markets to be manageable if policy is appreciates the recent changes in Central Bank’s policy creates a challenges facing the authorities. transparent. P A N E L D I S C U S S I O N S 4 7
    • T H E R U S S I A F O R U M 2 0 1 2 WHICH EMERGING ALEXANDER OSLON TECHNOLOGIES WILL KILL THE TRADITIONAL BANK? CROWDSOURCING, BIG FEBRUARY 3RD, FRIDAY DATA, SOCIAL COMMERCE, PEDRO MARTINEZ ARTIFICIAL INTELLIGENCE?THE PANEL PARTICIPANTS DISCUSSED THE POSSIBLE THREAT FROM NEW TECHNOLOGIES TOTHE FURTHER DEVELOPMENT OF THE BANKING SYSTEM . IN THEIR VIEW , NO REAL THREATTO THE BANKING SYSTEM EXISTS YET , BUT COMPETITION WITH NEW TECH COMPANIESLIKE FACEBOOK MAY INTENSIFY IN THE FUTURE . NOUBAR AFEYAN МODERATOR: VICTOR ORLOVSKIY PHILIP FARAH Senior Vice President, Sberbank of Russia developing rapidly and will have a major impact on many industries going NOUBAR AFEYAN forward. Managing Partner, CEO, Flagship Ventures There are many opportunities for banks Banks’ strength is in regular ADDITIONALLY, THE PANELISTS ANASTACIA ANISHCHENKO to analyze their own databases, which contact with clients, in contrast EXPLORED THE CAPABILITIES ANASTACIA ANISHCHENKO Senior Intelligence contain an enormous amount of to large internet projects, where OF CROWDSOURCING. ExistingVICTOR ORLOVSKIY Associate, Quid information about their depositors and there is no such interaction. As technologies can bring tens of PHILIP FARAH payments. On this basis, banks are a result, despite technological thousands of people into projects Principal Financial Services, able to develop new business models, advances, people will still keep to form a kind of collective mind. Cisco Systems mobile payment technologies, money in the bank. In addition, crowdsourcing can PEDRO MARTINEZ alternative lending systems and assist in finding the most talented Business Development other services. The trend is that THE PANELISTS ALSO TALKED ABOUT people. Manager, more people are communicating THE PROSPECTS FOR THE NFC (near- NXP Semiconductors with banks via mobile devices, field communication) standard, a ALEXANDER OSLON and for this reason, bank offices’ technology enabling contactless Co-founder, Witology importance for consumers transactions and data exchange that is will decline. That said, banks’ being integrated into the latest generation advisory function will survive. of mobile devices. This technology is P A N E L D I S C U S S I O N S 4 9
    • T H E R U S S I A F O R U M 2 0 1 2 DEVELOPED AND EMERGING ANTON KARAMZIN BANKS: A CASE securities) actually turn out to be the highest risk. In terms of debt, corporate credit has OF IRREVERSIBLE DECLINE long proven a better risk than retail, with Sovereign risk the worst performing. Milken cited half a dozen mistakes that are made VS. IRREPRESSIBLE RISE? NOURIEL ROUBINI over and over, including excessive leverage, real estate loans, banks mismatching maturities, Sovereign risks, misjudged ratings and misunderstanding of currencies.FEBRUARY 3RD, FRIDAY MICHAEL MILKEN He concluded by saying that one problem OLEG VYUGIN markets carries good and bad features. It is has been that financial institutions have been positive that DM banks work and invest in EMs, measured by their size and have become too but the downside is the problems that can be KAIRAT big for the economies in which they operate. caused when they quickly repatriate funds and KELIMBETOV Financial institutions are so important and capital to their home markets. more leveraged than other companies that ANTON KARAMZIN, we need to have a good understanding SBERBANKS CFO, ALEXEY SIMANOVSKY, Deputy Central Bank of the people making decisions in these MODERATED THIS PANEL AND Chairman, sees it as incorrect to oppose/ companies. STARTED PROCEEDINGS BY compare EM and DM banks. Every country/ banking model. That would be a small SUGGESTING THAT THE CRISIS region has good and bad banks. He gave the regional bank taking deposits from THE PANELISTS CONCLUDED WITH A OF THE PAST FEW YEARS HAS analogy of good and bad school students. Those town people and giving loans to them, SENTENCE ON THE OVERALL TAKEAWAYS HIGHLIGHTED THAT EMERGING who followed regulatory recommendations knowing well its narrow customer base. FROM THE DISCUSSION. Roubini suggested MARKET BANKS ARE NOW are doing relatively well, but those that have But this bank would make low profit. there had been too much investment into the BETTER ABLE TO UNDERSTAND failed to do so are not. He admitted that the To make profit, one needs scale and wrong forms of capital, too many excesses RISK MANAGEMENT AND Central Bank may make mistakes and is still arbitrage. This is what most banks did – and that we need to invest more in things PRICING THAN THEIR not ideal, but at least it understands them and increased arbitrage quickly, but their such as human capital and infrastructure. ALEXEY DEVELOPED MARKET PEERS. is working to improve regulation. risk management did not keep up with Vasiliev suggested that the banking sector PETR AVEN SIMANOVSKY growth/scale. Hence, risk management needs a serious rethink on the nature of risk, KAIRAT KELIMBETOV, Kazakhstan’s Deputy needs a lot of attention. while Kelimbetov suggested that economies PETR AVEN, Chairman, Alfa Banking the crisis of 2007-09 originated in developed Prime Minister, agreed with the moderator need the right combination of public and Group, refrained from criticizing Western markets, first the US then the eurozone, due to, that Kazakh banks entered the crisis earlier SERGEY VASILIEV, VEB Deputy CEO, private support. Milken concluded thatМОDERATOR: banks, but domestically sees local banks among other things, excessive debt and leverage, and hence have reformed their regulation sees a general problem in internal risk we need a better knowledge of history toANTON KARAMZIN as better positioned to do business in distorted financial sector compensation and earlier too. The role of the latter has visibly management through an effective better understand risks, while SimanovskyDeputy Chairman of the Management Russia (better understanding of risks, inadequately regulated shadow banking. A increased recently, unlike the boom years. reward/punishment system. We are alluded to the ultimately similar challengesBoard, Sberbank of Russia etc). He sees a few risks in Russia, such consequence is that banks need less leverage, Banks’ focus is still skewed toward capital- living in times of privatization of profits for both EM and Western banks. as high growth. While other countries’ and more capital and liquidity. The advantage rich state institutions. While he admits and nationalization of losses. DuringPETR AVEN banks were shrinking recently, Russian EM banks have had is that in many countries that banks should be private, during hard crises, state banks have to take onChairman of the Board of Directors banks were growing quickly (80% they went through a series of financial crises times, state financial arms (like Samruk- private banks’ risks.at Alfa Banking Group, Member corporate, 40% retail), which resulted in the 1990s and subsequently reformed, Kazyna, Development Bank of Kazakhstan,of the Board of Directors, Alfa Bank in overleveraging of the corporate with lower levels of debt and better macro and VEB) have to share risks unbearable MICHAEL MILKEN, Chairman, MilkenKAIRAT KELIMBETOV sector and will limit future growth of fundamentals. There are still fault lines for commercial banks, as the Kazakh Institute, began by suggesting thatDeputy Prime Minister, Kazakhstan Russian banks (while peers that shrank in EM, such as some Central and East government did. The discussion on banks one risk is assuming certain marketsMICHAEL MILKEN will post higher rates). He sees retail European countries, while China is yet should be placed in a broader context of and economies are homogenous –Chairman, Milken Institute and corporate loans rising 20-25% to see the full impact of its recent credit macroeconomic environment and structure. South Korea, with the worldsNOURIEL ROUBINI and 10-15%, respectively, near binge. EM economies will, however, post Given the domination of commodity sectors most educated population, differsProfessor of Economics, NYUs Stern term; deposit growth will also slow much stronger growth than DM countries, in the Kazakh and Russian economies, markedly from Thailand just asSchool of Business as income is falling. A longer-term account for a rising share of global banks have to focus on the real sector, SMEs, Norway differs from Spain andALEXEY SIMANOVSKY issue is the limited access of banks to GDP and require greater deepening of and find their niche, while the government Greece in Europe. Another mistakeDeputy Chairman of the Bank capital/liquidity. Overall, he sees the financial systems. We are already seeing with the help of national companies should being made is not understanding theof Russia, Central Bank near-term future as rather stable. new financial centers emerge, such work on economic diversification. lessons of history in terms of whatof the Russian Federation as Shanghai, Dubai and Sao Paolo, as markets constitute higher risk. ManySERGEY VASILIEV NOURIEL ROUBINI, CEO, Roubini well as Moscow, and this process will OLEG VYUGIN, MDM Bank Chairman, apparently low-risk segments (suchDeputy Chairman, Vnesheconombank Global Economics, said that indeed continue. The interconnectedness of talked about the safest/lowest-risk as all those triple-A rated mortgage SERGEY VASILIEVOLEG VYUGINChairman, MDM Bank P A N E L D I S C U S S I O N S 5 1
    • T H E R U S S I A F O R U M 2 0 1 2 RETAIL: STABILIZATION ARTEM BEKTEMIROV PERIOD X5 RETAIL GROUP CEO ANDREY GUSEV OPENED THE FEBRUARY 3RD, FRIDAY DISCUSSION, SAYING THAT THE RUSSIAN FOOD RETAIL INDUSTRY IS A TECHNOLOGICAL PIONEER AND A MAJOR INVESTMENT GROWTH CATALYST . SERGEY PETROV SERGEY GALITSKIYThe sector accounts for over 20% ofnational GDP. The biggest players invest last year. Another trend is some changes in car DETSKY MIR CHAIRMAN GEORGYhundreds of millions and even billions of segmentation tilting toward more expensive KRAVCHENKO estimates the market sizedollars every year. Industry growth hinges cars, such as SUVs. at $30 bln, on a rough calculation, and said on the macroeconomic environment. In this that comparison with European countries light, the company is moderately upbeat on SVYAZNOY CEO MAXIM NOGOTKOV indicates that spending per capita may 2012, particularly the second half of the explained that despite the high penetration of double in the next five years. Unlike the year, as global policymakers exert efforts mobile devices, Russia is still characterized by food retail industry, there is massive upside to remove existing imbalances and oil low frequency of replacement (it is 60% lower to margins, while competition intensifies prices soar at near-record levels, which, all than in Europe), so handset sales should see as franchisees of global retailers penetrate together, should support household income expansion (and smartphones account for the Russian market with established growth. Therefore, one may argue that the 50% of revenues). That said, new types assortment and business processes. The MAXIM NOGOTKOV Russian retail sector is now approaching of mobile devices (including tablets and company is the largest player, but its its trough point, which should be followed e-readers) act as a key driver for sales market share is just 5%, which indicates ALEKSANDER TORBAKHOV by sustainable recovery. This refers to LFL ANDREY GUSEV expansion. The company saw 25% revenue consolidation opportunities. Overall, 2011 rates, which X5 Retail Group expects to be growth in 2011 and projects a further was positive for the company. The retailer in positive territory this year. supplier relationships, Mr Galitskiy underpenetrated by modern 30% expansion in 2012. Furthermore, opened 20 stores and delivered LFL growth underscored that healthy competition retail. But ongoing aggressive jewellery chain Pandora (another business of 15%. Importantly, brand awareness is Magnit CEO SERGEY GALITSKIY emphasized underlies an efficient market – every МОDERATOR: ALEKSANDER TORBAKHOV expansion makes it hardly possible to of Mr Nogotkov) delivered a decent very supportive for top-line performance; the uniqueness of the situation, when retailer is striving to get better purchasing Deputy Chairman of the Management Board, consistently show positive LFL traffic performance in 2011. While he noticed revenues per store are much higher in multi-billion dollar Russian companies are terms, which is not easy given the still Sberbank of Russia inflow. Arguably, 2011 was the first some cautious consumer behaviour in those cities where the company operates a growing by 35-40% and still managing highly fragmented retail market (with the year when competition kicked in as October-November 2011, the situation number of stores. to retain 7% EBITDA margins. This may biggest players holding 3-5%) and high ARTEM BEKTEMIROV a critical factor affecting the industry. reversed in December, driving revenues only be compared with the British retailers, consolidation on the side of consumer CEO, Pharmacy Chain 36.6 But this also had a positive impact – up by more than 40%. though they boast far less impressive producers (which can account for as SERGEY GALITSKIY local retailers already employ more growth rates. Therefore, Mr Galitskiy much as 15-20%). Finally, LFL growth CEO, Magnit advanced and efficient technologies ILYA YAKUBSON deems the current cautious and even is naturally distorted by roaring rollout ANDREY GUSEV than some international competitors. negative attitude to the Russian retail and, hence, cannibalization. This is why, СEO, X5 Retail Group sector to be unfair and undeserved. at this stage of development, it should GEORGY KRAVCHENKO ROLF FOUNDER SERGEY PETROV The major challenge for the industry not be viewed as the single most Chairman of the BoD, commented that auto retail is emerging is ongoing population decline, which important performance indicator. Detsky Mir – Center from the crisis, as shown by 40% may have a sequential impact on retail. MAXIM NOGOTKOV growth last year. But the history of Therefore, he believes the government DIXY GROUP PRESIDENT ILYA CEO, controlling shareholder, Svyaznoy auto retail development indicates that needs to come up with new efficient YAKUBSON noted that Russian SERGEY PETROV growth decelerates after car penetration migration and human preservation retail is an exceptional industry, Delegate of the Fifth State Duma reaches 300 cars per 1,000 people, while policies, as population trends will shape distinguished by rapid growth and of the Federal Assembly of Russian Russia currently has 240. Therefore, the landscape and future of Russian private investments. The company Federation, Founder of ROLF new drivers should play in to stimulate retail. That said, Magnit is quite upbeat sees plenty of untapped potential ILYA YAKUBSON further growth. A good example is auto on its 2012 growth outlook. Addressing stemming from the vast territory President, Dixy Group loans, which accounted for 44% of sales GEORGY KRAVCHENKO P A N E L D I S C U S S I O N S 5 3
    • T H E R U S S I A F O R U M 2 0 1 2 CREATING out the infrastructure further, but also to promote the capital markets with Russian investors. broader range of investors and investment capital. He also highlighted one of the key advantages that Moscow has as it tries to He also highlighted that Brazil managed to avoid the credit explosion that hit the US and EU, and built a strong resource A DOMESTIC FFMS. Dmitry Pankin reflected on the measures already in place and, in particular, the Central Depositary that has now come into force. He build an international financial center – it sits in the ideal time zone between Asia and Europe and, in that, can become an base with bio-fuels. This also helped sustain strong economic growth. CAPITAL BASE explained that there are still a number of measures that now need to be added, or improved, to make the new depositary fully important intermediary hub as the world moves to 24-hour trading. RUSSIA’S PERCEPTION. Gideon Rachman talked about the current poor perception of Russia among foreign investors and effective, including the license issuance BRAZIL’S EXPERIENCE. Marcos Troyjo how this may be addressed. He commented FEBRUARY 3RD, FRIDAY THE PANELISTS GENERALLY AGREED THAT RUSSIAN AUTHORITIES procedures and document flow rules, as well as highlighted the difference between how that while it takes a long time to build a ARE FOLLOWING THE CORRECT COURSE TO ESTABLISH A LARGER other work within the exchange. investors today view Brazil (very positive) positive reputation, losing it is very quick if AND MORE VIBRANT STOCK MARKET . THEY ALL COMMENTED compared with Russia (less positive) and the wrong decisions are made. He said that THAT BUILDING A MARKET CULTURE TAKES TIME , ESPECIALLY INDIA’S EXPERIENCE. Madhu Kannan reflected how, about 15 years ago, Brazil was in a investors remember bad events easier than IN A COUNTRY WITH SUCH A LONG HISTORY OF A COMMAND on the fact that India had strong domestic much less favorable position. He set out positive events and highlighted the cases of BELLA ECONOMY . institutions that helped in the creation of an the measures that Brazil introduced to YUKOS and Hermitage Capital as two that ZLATKIS infrastructure and legal framework for the achieve that positive turnabout. are regularly cited. He said Russia now needs development of capital markets in the country. to keep doing the right thing and avoid any He also noted one other key difference – Introduced fiscal responsibility laws. further “accidents” and, eventually, it too can between Russia and India in that Indian have a much more favourable perception with people also had a long history of trading. – Made it easier to access capital. investors. Mr Rachman also highlighted one But all also agreed that the government The panelists came up with several specific major advantage that Moscow has over, for needs to accelerate efforts to build a more comments. LSE EXPERIENCE. Xavier Rolet said that the – Introduced transparency laws. example, Shanghai, as they both try to build an active and larger domestic capital base in LSE is not a competitor to MICEX-RTS. The international financial center – Russian authorities Russia. Without the establishment of a – The market needs to strike a balance between LSE wants to work more closely with the – Worked hard to build a positive business allow a much greater climate of openness than strong base of domestic capital, it will be investors and issuers, with clear and predictable Moscow bourse to help build a stronger climate and investor perception of the China does. Discussions are much more open than very difficult to create a stock market that regulations and enforcement. market. The LSE compliments other bourses country. that allowed in China. This is strongly to Moscow’s is relevant to both investors and issuers. rather than competes, as it offers access to a advantage. The moderator, Bella Zlatkis, commented – The stock exchange needs to leverage that pension reform is the number one technology to make market access easily and RUBENAGANBEGYAN priority for government and that, while cheaply available across the entire country. GIDEON RACHMAN a lot has been achieved, a lot still needs to be done. In general, Russia is doing – The authorities need to pursue programs all the right things, but improvement to introduce insurance, mutual and pension МОDERATOR: BELLA ZLATKIS takes time. funds in addition to boosting retail-based Deputy Chairman of the Management Board, investment funds. Sberbank of Russia – The authorities should avoid following the RUBEN AGANBEGYAN DMITRY Western bourses and not introduce any President, CEO, MICEX-RTS PANKIN restrictions on market development, such MADHU KANNAN as transaction taxes. The fact that Europe Managing Director & CEO, Bombay Stock is following this more restrictive path could Exchange actually help Moscow develop a more DMITRY PANKIN international base faster. Head of Federal Service for Financial Markets, The Federal Service for Financial Markets MADHU KANNAN MICEX. Ruben Aganbegyan set out the GIDEON RACHMAN developments already achieved and Chief Foreign Affairs Commentator, MARCOS TROYJO planned for the Moscow bourse. He said Financial Times that MICEX-RTS is already working in XAVIER ROLET cooperation with other international CEO, London Stock Exchange Group bourses and sees itself developing as MARCOS TROYJO part of the global market rather than in Co-Director, BRIC-Lab, a center established to competition with it. He stressed the need study the rise of Brazil, Russia, India and China, for greater harmonization in the further Adjunct Associate Professor of International development of laws, regulations and and Public Affairs, Columbia University infrastructure in order to better cater to the needs of both issuers and investors. XAVIER ROLET He talked about plans not only to build P A N E L D I S C U S S I O N S 5 5
    • T H E R U S S I A F O R U M 2 0 1 2RUSSIA’S GAS EXPORTS TIM LAMBERT TO EUROPE: NEW CHALLENGES AND OPPORTUNITIES FEBRUARY 3RD, FRIDAY SHANKARI SRINIVASAN TATIANA MITROVA SERGEI KOMLEVTHE MAIN TAKEAWAY FROMTHE PANEL WAS THAT THESEEMINGLY OBVIOUS “TRUTHS”ABOUT THE GLOBAL GASMARKET ARE OFTEN MOREAMBIGUOUS THAN THEY SEEM .МОDERATOR:SHANKARI SRINIVASANManaging Director, ISMO KOSKINENEurope, IHS CERAFATIH BIROLChief Economist,International Energy AgencyMARK GYETVAY MARK GYETVAY FATIH BIROL ANDREI KONOPLYANIKCFO, NOVATEKSERGEI KOMLEVHead, Departmentfor gas contracts andpricing, Gazprom export Take complaints about the high price of Russian (and the same country that spends MARK GYETVAY pointed out, Australian LNG is Gazpromexports Komlev believesANDREI KONOPLYANIK gas to Europe. As Gazpromexports SERGEI €23 bln per year on subsidies for very expensive compared with conventional gas this oversupply of shale fromDirector, Institute for Energy KOMLEV pointed out, Germany is spending renewables) is building 10 “dirty” sources. Meanwhile, the Energy Information the US is driven by the fact thatand Finance €23 bln per year on subsidies for renewable coal plants against just one that runs Administration in the US last week downgraded producers have hedged the price,ISMO KOSKINEN forms of energy, such as solar and wind on gas, as the so-called dark-spark the country’s gas reserve estimates, while in while the financial institutionsEnergy Counselor, Delegation power – more than double the sum it spends spread – the difference between Poland – which boasts the third-largest share sitting on the wrong side ofof the EU in Russian Federation on Russian gas. Clearly, energy security and coal-fired and gas-fired profitability – potential in Europe (curiously, after Russia the hedges can continue to doTIM LAMBERT the desire to diversify into cleaner forms has approached recent highs. and Ukraine) – the quest for shale has so so because they know they willVice President Energy Consulting of fuels – what ANDREI KONOPLYANIK far resulted in dry holes. Nevertheless, as ultimately be bailed out by the long-Group, Wood Mackenzie labeled “methanophobia” – are coming Or consider the excitement over new TIM LAMBERT demonstrated, the shift in suffering US taxpayer. In the US, as inTATIANA MITROVA at a price. Komlev claimed that it and unconventional sources of gas. supply and demand across geographies Germany, it is government interferenceHead of Global Energy, would be cheaper for Europe to meet FATIH BIROL expects that in 10 years, will nevertheless cause the world to that is directly or indirectly skewing theSKOLOKOVO Energy Centre its emission goals by relying more the newcomer Australia will overtake move from conventional gas deliveries market, Komlev said. Whether this is on gas. But as TATIANA MITROVA Qatar as the world’s biggest LNG toward LNG. Sluggish demand in Europe, true or not, it is curious that the current pointed out, the environment producer. The US and Canada have seen oversupply in the US and precisely debate on gas involves the Russian may not be the foremost concern shale production skyrocket, and China the opposite dynamics in Asia will state-owned behemoth pitted against its anyway. Germany, the most might be the next to take advantage of assure a pull for LNG deliveries to the Western customers in advocating for the vocal clean energy champion the new technology. But as NOVATEKs Pacific region. free market in their countries. P A N E L D I S C U S S I O N S 5 7
    • T H E R U S S I A F O R U M 2 0 1 2 KIRILL ANDROSOV at borders and low implementation THE LIBERALIZATION OF LOCOMOTIVES of electronic documentation. In his VYACHESLAV view, infrastructural development in According to MR MALTSEV, about $60– AMINOV the Far East is important, but beyond 70 bn should be invested in locomotive that it is necessary to maintain modernization in the coming years and attractive railroad tariffs for cargo thus the government has to decide transportation to this region. Mr whether it will provide investment itself Magomedov drew attention to the fact or in partnership with private investors. that the transport infrastructure needs He also noted that managing locomotives to be in surplus and equally accessible is technologically a more complicated for everyone, so shippers can choose process than operating rolling stock. the transportation direction they Therefore, it makes sense to run pilot need and not have to choose direction projects at short distances of 200–300 depending on capacity utilization at km, for example. At the end of the panel VICTOR OLERSKIY talked about the major ports. discussion, the speakers answered theZIYAVUDIN MAGOMEDOV infrastructure projects to be implemented at question of what should be done to avoid SERGEY MALTSEV ports in the coming years. ROLLING STOCK OPERATIONS traffic congestion on railroads in the future. They believe there are a numberTRANSPORT AND INFRASTRUCTURE: NORTH-WESTERN BASIN. This involves the construction of railway approaches to the port of Ust-Luga, which will basically be completed VYACHESLAV AMINOV noted the problem of an excessive number of rolling stock operators, leading to of important factors, such as actual transport cargo volumes that should be matched with declared volumes;REFORM AT A CROSSROADS? in 2015. By that time, the port’s throughput will exceed 100 mn tonnes, including 30–35 mn tonnes of liquids delivered via pipeline inefficient use of the existing system. He believes that the requirement to operate at least 1,000 railcars will not improve tolerance between operators and Russian Railways, which should be improved; and implementation of strict planning and the rest via railroad. It is also planned the situation on railroads dramatically. He and hard execution on a weekly basis. DURING THE PANEL SESSION, to construct railway approaches to Primorsk thinks that operators should have at least The speakers agreed that, in general, MODERATOR KIRILL ANDROSOV Trade Port, which will add 20–25 mn tonnes 5,000 railcars under management. Given the industry’s problems can be solved, OUTLINED THREE MAIN THEMES – of cargo. Finally, a project to construct that there are over 30 companies with such though the lack of communication was THE DEVELOPMENT OF RAIL railroads to the port of Murmansk is being a fleet size in Russia, it will not lead to a lack a factor that must be overcome. FEBRUARY 3RD, FRIDAY INFRASTRUCTURE , ROLLING STOCK designed now, which should boost cargo of competition in the sector. OPERATIONS AND LOCOMOTIVE MARKET turnover by 30 mn tonnes (mainly coal) in LIBERALIZATION . the future. KIRILL RUBINSKY supported Mr Aminov’s view that an operator must have a minimum SOUTHERN BASIN. The development of 5,000 railcars. He also added that the VADIM MODERATOR: of railway approaches to Novorossiisk level of containerization in Russia remains MIKHAILOV KIRILL ANDROSOV KIRILL RUBINSKY Commercial Seaport will provide an low, while many goods that are transported Member of the Board of Directors, additional 15–20 mn tonnes of dry cargo. in bulk would be transported more efficiently Altera Investment Fund Moreover, there are plans to build a new in containers. Separately, Mr Rubinsky RAIL INFRASTRUCTURE suggests that the companies cargo port in Taman by 2020. emphasized the problem of the locomotive VYACHESLAV AMINOV guarantee to provide declared fleet, which is now depreciated by 80%, while Member of the Board of Directors, VADIM MIKHAILOV noted the issue of cargo volumes, while Russian FAR EAST BASIN. The total capacity the average speed of freight trains is equal to NefteTransService rapid growth in rail freight traffic, which Railways promises timely delivery of Far East basin ports is expected to the level of the 1920–30s. ZIYAVUDIN MAGOMEDOV will increase to 1.7 bn tonnes by 2015, to customers. He also stressed expand by an additional 75 mn tonnes Chairman of the Board of Directors, compared with 1.4 bn tonnes in 2011. The that the amount of non-delivered by 2020. In particular, Daltransugol According to SERGEY MALTSEV, reform has Summa Group main growth will occur in the direction goods would reach 230 mn tonnes (SUEK) plans to boost coal handling allowed Russian Railways to modernize rolling SERGEY MALTSEV of the Far East, with traffic planned to by 2015, if no actions to solve at Vanino port from 12 mn to 20 mn stock, and presently it is generally in good CEO, Globaltrans increase 47% by 2015 compared with the cargo problem were taken. In tonnes, Summa Group plans to build condition. He thinks that the problem of traffic VIKTOR VADIM MIKHAILOV 2010. Given such significant growth, 2012, Russian Railways’ investment a coal terminal at Vostochny port (18 congestion lies not in the excessive number of OLERSKIY Vice President, JSC Russian Railways the total length of railway network program will increase to R428 bn, mn tonnes by 2015) and Mechel railway operators, but in low efficiency – railway VIKTOR OLERSKIY bottlenecks may increase by 7,200 km of which R173.8 bn will be spent to is looking to build up coal exports management nowadays does not split operations Deputy Minister of Transport, to 13,300 km by 2015, he believes. remove infrastructure bottlenecks. through Vanino port (25–30 mln for loaded and empty rolling stock, unlike in Government of the Russian Federation Mr Mikhailov argues that the Russian Despite a number of non-profitable tonnes) from its Elga coal field. the Soviet era. Mr Maltsev drew attention to KIRILL RUBINSKY government understands the scale infrastructure projects, the state the problem that Russian Railways is operating Chairman of the Board of Directors, of the problem and is actively must invest in them, as they will lead ZIYAVUDIN MAGOMEDOV noted on a regional basis, whereas private companies FESCO Transportation Group seeking a solution. For instance, to increased cargo turnover, higher that Russia misses up to 150 operate nationwide. Therefore, for example, the the recently signed agreement corporate profits and, accordingly, mn tonnes of cargo in potential number of required locomotives sometimes does between Russian Railways and better tax collection. business annually, in particular not match the number of trains in the regions. the largest cargo shippers due to slow custom procedures P A N E L D I S C U S S I O N S 5 9
    • T H E R U S S I A F O R U M 2 0 1 2 MATTHEW STEPHENSON WILLIAM FLATMO TROIKA DIALOG: INVESTMENTS IN ART. ART BANKING AND ART FINANCE THE MAIN CONCLUSION OF THE DISCUSSION WAS AS FOLLOWS : PARTICIPANTS SEE INVESTMENTS IN ART NOT ONLY AS AN INSTRUMENT TO OBTAIN DIRECT OLGA SVIBLOVA AND ALSO INDIRECT (BY WAY OF CHANGING THE SOCIAL STATUS OF ARTFEBRUARY 3RD, FRIDAY OWNERS ) PROFIT , BUT ALSO AS A KEY RESOURCE FOR DEVELOPING SOCIETY SERGEY SKATERSCHIKOV IN GENERAL AND THE ECONOMY IN PARTICULAR . IT WAS PRECISELY FROM THIS POINT OF VIEW THAT INVESTMENTS IN ART AND CULTURE AS SEEN closed nature of this market, the data available CHRISTINA THROUGHOUT THE WORLD is extremely sparse and vague. According to STEINBRECHER VASILI TSERETELI an Art Economics report published for TEFAF (the world’s leading art and antiques fair) and Russian galleries have acted as investors announced at the International Confederation SERGEY SKATERSCHIKOV remarked that since in 1992, when the Western marketMODERATOR: JOSEPH BACKSTEIN of Antiquarians and Art Dealers (ICAAD), the currently there are 4-5 main business models lost interest in Perestroika-era art, andVASILIY BYCHKOV global art market is valued at $41 bln and the on the art market and that art fairs are the even now all works of modern art inDirector, Central Russian market is valued at $600-800 mln. In most well-known model. The fact that the Russia are financed by gallery money.House of Artists Europe the annual sales volumes of works of art largest Russian art fair, Art Moscow, does not at auctions come in at around $5 bln. The core earn money is proof that the Russian market Aidan Salakhova noted that it is essentialJOSEPH BACKSTEIN of the Russian art market is made up of galleries, is still undeveloped. to also work with Russian collectors and VASILIY BYCHKOVArt Director of the Moscow shops and salons. International auction houses help increase their level of education. InBiennale of Contemporary Art are rather actively working with Russian clients, In the opinion of the discussion participants, the words of VASILI TSERETELI, ExecutiveVALERIE BLAIR however, they only hold pre-auction exhibits in the problem of the Russian art market is Director of the Moscow Museum ofDirector, Gagosian Gallery Russia. Major Russian auction houses have not the small number of informational and Modern Art, today a dialogue is beingALEXEI GOLUBYKH yet been created, however all the preconditions educational resources despite the high formed between collectors and museums,Private Banking Director, to do this exist. demand for personnel. Foreign art houses partnership relations are being created, andTroika Dialog are interested in young artists in order to collectors are getting access to museumAIDAN SALAKHOVA THE PRIMARY SPECIFIC FEATURES OF THE ensure a “commodity reserve” for their curators, art historians and experts, andOwner, Aidan Gallery VALERIE BLAIR RUSSIAN ART MARKET ARE AS FOLLOWS: grandchildren. Nevertheless, according to this all gives art collectors the opportunityOLGA SVIBLOVA it is relatively young (arising at the end of JOSEPH BACKSTEIN, Art Director of the to research their works. The discussionDirector, Moscow AIDAN SALAKHOVA the 1980s); closed (there’s an information Moscow Biennale of Contemporary Art and participants agreed that today more andHouse of Photography; vacuum as the main players don’t wish to Director of The Institute of Contemporary Art, more people want to collect modern art andDirector, Multimedia As noted by SERGEY SKATERSCHIKOV, Managing SESSION MODERATOR VASILIY BYCHKOV, take part in market research); the modern art in Russia the weakest part of the system is increase their level of knowledge of art. AtArt Museum, Moscow Director at Skate’s Art Market Research, the Director of the Central House of Artists and CEO market is weakly integrated into the global art education, which is yet to be modernised. the same time, there are still a rather smallSERGEY SKATERSCHIKOV idea to invest in art has become very popular of Expo-Park Exhibition Projects, pointed out art community and as a result of this, Russian The leading specialised universities continue amount of high-quality works that have theManaging Director, Skate’s among affluent individuals in the past few the obvious problems connected with collecting modern art is undervalued in comparison to to amount to Soviet institutions and are not potential of becoming objects for investment.Art Market Research years in connection with the unique protective works of art: high operational expenses for its Western European, Eastern European and flexible enough and incapable of adapting to Therefore modern art is a very good sector toMATTHEW STEPHENSON quality that works of art offer when investment obtaining and owning works of art and difficulties American counterparts (at the moment Russia the international art system. It is essential to invest in and is completely undervalued.Managing Director, portfolios are created: they allow capital to be connected with expert valuations. A great is a market of internal consumption, although invest in education, closely cooperate withChristie’s Russia maintained during conditions of high volatility amount of experience has been accumulated to changes are happening); low self-production institutes, especially post-graduate ones, Summing up the discussion, OLGA SVIBLOVA,WILLIAM FLATMO on the financial markets. In the past three resolve these problems, however, in Russia the (there are few high-quality artists and works); and to modernise them in order to develop Director of the Moscow House of PhotographyDirector, Christen Sveaas years, yield for re-sales of the most expensive mechanisms for addressing them are still being a lack of strict government regulation, which the market on the whole. and Director of the Multimedia Art Museum,Art Collection, Oslo works of art have grown from –1.5% (prior developed. And if the mechanisms of how art leads to the need to create self-regulating said that today’s art market has felt the impactVASILI TSERETELI to ownership costs) to around 5% (prior to banking works are more or less understood, then bodies; and a small amount of professional During discussion, interaction between art of the crisis less than other areas of the RussianExecutive Director, ownership costs). This indicates that these works investments in culture and art as an innovative sources of information about the market. market participants – collectors, gallery economy and that above all, this is proof ofMoscow Museum of art are growing in value when other asset prices sector of the real economy are strategically more representatives and artists – was also the very bad state of the market. When talkingof Modern Art are declining. difficult but at the same time more interesting THE MAIN TRENDS OF THE RUSSIAN ART covered. AIDAN SALAKHOVA, owner about investing in art, it is worth mentioningCHRISTINA STEINBRECHER and more prospective. Today we are at a stage of MARKET are its internetisation and also the of Aidan Gallery, thinks that developing that the role of the collector is no less significantArt Director, Many strategies for investing in art are focused understanding the necessity of such mechanisms growth in significance of art fairs and various relationships with artists is one of the than that of a gallery or and artists because theArt Moscow International Art Fair; on “branding” people by way of art collection: and services in Russia. exhibition projects. As market operators, most difficult issues in the gallery business art investment field is being built by joint efforts.Art Director, how your name is positioned and what you leave more and more galleries are going online. It because, in Russia, unlike in the West, it is Any collection starts with passion and only thoseCentral House of Artists behind. Mr Bychkov presented a BRIEF OVERVIEW OF is predicted that by 2020, internet sales will practically impossible to legally construct collections that are made with passion turn out to THE RUSSIAN ART MARKET. Due to the historical exceed traditional sales methods. these relationships. Russian galleries be serious investments. P A N E L D I S C U S S I O N S 6 1
    • T H E R U S S I A F O R U M 2 0 1 2 VLADIMIR SOLOVYOVTHE ROLE a result, some schools will not survive. He thinks we need to wait five or six years before launchingOF INNOVATION FEBRUARY 3RD, FRIDAY a program to support education, as some schools do not deserve support. POLICY IN There were several other emotional comments from the audience:MODERNIZATION – State support is important. – Stop killing innovators. Let them survive. SERGEY PETROVTHERE WAS A VERY EMOTIONAL DISCUSSION ABOUTINNOVATION , AS THE GLOBAL ECONOMIC CRISIS HAS CLEARLY – Elites must support innovators.SHOWN THAT RUSSIA’S PLACE IN THE WORLD DEPENDS DIRECTLYON WHETHER IT WILL BE ABLE TO CARRY OUT INTENSIVE – Innovators are optimists.MODERNIZATION TO REDUCE ITS CURRENT TECHNOLOGICALBACKWARDNESS . HOWEVER, THERE IS NO UNITED POSITION ON – Immigration is important.HOW TO LAUNCH FULL–SCALE INNOVATION IN RUSSIA OR THEPATH TO ANSWERING THIS PROBLEM. RUBEN VARDANIAN, in his closing remarks, summed it all up by saying: “Do not be afraid to change the world ANATOLY CHUBAIS around you”. NOUBAR AFEYAN Every aspect of modernization is being discussed in total R300 bn. He added that there is really society – from the state of science and education nothing to kill. The sector is nonexistent. and the level of technological and engineeringМОDERATOR: culture to the private sector’s ability to perceive NOUBAR AFEYAN said that innovation is KIRILL DMITRIEVVLADIMIR SOLOVYOV innovation. just competition; it is a competitive strategy.TV Presenter, Journalist Innovators are like immigrants – they are The government is a vehicle of change, but it is very open to opportunities. However, theyNOUBAR AFEYAN not the only party that can change the situation. immigrate not in space but in time. The KIRILL DMITRIEV noted that innovations do notManaging Partner, Russia needs a continuous dialogue, exchange greatest innovation comes in the form of need to be large. Mr Dmitriev did not inventCEO, Flagship Ventures of opinions, and organization of idea centers startup companies. anything, he just executed on the plan to create aANATOLY CHUBAIS to ensure that the process of unavoidable mobile phone company in Moscow. Gillette hasCEO and Chairman change is as transparent and comprehensible DMITRY ZIMIN, who spoke from the followed a similar model of small innovationsof the Board, RUSNANO as possible, and a joint effort. audience, said that in his 40-year career (30 that require little research. Mr Dmitriev isKIRILL DMITRIEV years in the military and 10 with VimpelCom looking for “conservative innovation” andCEO, Russian Direct SERGEY PETROV said the need to innovate as as founder of the company) he saw a big “smart money”. Russia is inefficient, andInvestment Fund a competitive strategy is not strong in Russia. change in 1970. Previously, all innovation innovative companies can change this.SERGEY PETROV It is easier here to bribe a bureaucrat than had to be sponsored by the government.Delegate of the Fifth State to innovate. But the government should But in 1970, it started to come from the An audience member noted that equipmentDuma of the Federal not get involved. He thinks it would kill market, Japan being the impetus of this at Russian universities is very basic andAssembly of Russian innovation. trend. Mr Zimin thinks the state is a criminal that investment should be made inFederation, and complained that some bureaucrats are education. This sentiment was echoedFounder of ROLF ANATOLY CHUBAIS, by contrast, said corrupt. They own interests in the companies by another audience member, who the government needs to get involved, in the sector they regulate, and this gives said the state did not have to invest as nothing is possible without state them a huge competitive advantage. in a nanotechnology corporation, but involvement in Russia. He said they should invest in education. spent R230 bn and that the portfolio is Mr Chubais responded that not all bureaucrats comprised of more than 100 projects. are criminals; he mentioned that Vladimir Mr Chubais responded to this by In 2011, their combined revenues will Bulgak supported business development in explaining that education reform total R27 bn and by 2017, combined the telecom industry, to which Mr Zimin was is underway that will reduce the revenues of RUSNANO projects will referring. number of students by half. As P A N E L D I S C U S S I O N S 6 3
    • T H E R U S S I A F O R U M 2 0 1 2 WORKSHOPS FEBRUARY 1ST, WEDNESDAY AGENDA : A LOOK AT FOREX AND INTEREST RATES: FROM YEAR TO YEAR THE PROGRAMME OF THE RUSSIA FORUM IS EXPANDED AND HOW TO REDUCE FINANCIAL RISKS ENHANCED . THIS YEAR , IN ADDITION TO THE USUAL MEETINGS BETWEEN ISSUER Evgeny Gavrilenkov, Chief Economist at Troika Dialog, COMPANIES FROM THE CIS AND INVESTORS , CLOSED THEMATIC EVENTS FOR professor at Russia’s Higher School of Economics, and CLIENTS IN THE FORM OF WORKSHOPS FOR CLIENTS WERE HELD . TROIKA DIALOG’S Director at the Institute for Macroeconomic Research ANALYSTS AND SALES MANAGERS PLAYED AN ACTIVE ROLE IN THE PREPARATION OF and Forecasting, analysed Russia’s major macroeconomic THE WORKSHOPS . THE TOPICS COVERED AT THE WORKSHOPS HELD ON JANUARY 31 indicators. The main focus was on the forex market’s AND FEBRUARY 1 AT THE RITZ-CARLTON WERE CHOSEN ON THE BASIS OF THE MOST current trends and development outlook. Deloitte & Touche PRESSING ISSUES FACING REPRESENTATIVES OF KEY INDUSTRIES OF THE RUSSIAN consultants gave a presentation on legal and tax issues ECONOMY . CLIENTS HAVE IN PARTICULAR NOTED THE PRACTICAL AND HIGHLY affecting hedging operations. Risk consultant and derivate INFORMATIVE NATURE OF THE WORKSHOPS . instruments expert Satyajit Das shared his “Secret Hedging Techniques: Unknown to Economists and Not Found in Textbooks” with the audience. As part of the workshop, a roundtable discussion “How to Reduce Financial Risks” wasJANUARY 31ST, TUESDAY AGENDA : held. THE AGENDA FOR CEOS IN A TIME OF GLOBAL SBERBANK’S INTERNATIONAL BUSINESS: VENTURE CAPITAL: AT A CROSSROADS RISKS AND THE ELECTIONS IN RUSSIA OPPORTUNITIES ON MARKETS OF THE CIS We live in interesting times – times of constant changes. UNDRAISING POSSIBILITIES ON THE RUSSIAN Economic and political uncertainties in Russia coupled AND EAEC Yesterday’s hot trends are disappearing, while new MARKET FOR FOREIGN ISSUERS with the country’s expected WTO entry and a torrent The session provided an overview of Sberbank’s revolutionary ones are transforming the way we behave and This workshop featured presentations by FFMS and primary market products; listing of gloomy global economic forecasts press CEOs, international business and the opportunities in interact. Social media, crowdsourcing, cloud computing, MICEX representatives: “Opportunities for foreign foreign securities: direct access TUESDAY, JANUARY 31 presenting them with a new set of daunting challenges countries where the bank has subsidiaries. In 2011, big data, semiconductors, green energy, augmented issuers on the Russian debt capital market: the legal and RDR; Brazil’s experience. as they strive to maintain business stability. The Sberbank’s subsidiaries saw dynamic growth that reality, artificial intelligence are trendy words which are aspects” and “The perspective of Russian markets for participants of this panel discussed the most important was well above average rates for those countries on everybody’s lips. In a three-session workshop the foreign issuers. Opportunities for listing securities of PRIVATE FINANCE. ASSET questions facing CEOs and strived to develop ways to where it is present (Belarus, Kazakhstan and participants tried to figure out what is happening across these foreign issuers. Placement alternatives”, respectively. ALLOCATION resolve them. Ukraine). Expansion of the corporate business was segments in Russia and worldwide. Where do entrepreneurs, Participants discussed practical examples of bond Evgeny Gavrilenkov, Chief especially rapid thanks to close cooperation between companies and venture investors have a place in all this? placements on the Russian market made by various Economist at Troika Dialog, GROUP MEETING WITH MANAGEMENT OF Sberbank and its subsidiary banks. categories of foreign investors. analysed the key macroeconomic SBERBANK: “INSIGHTS INTO SBERBANK’S THE GOVERNMENT’S OBJECTIVES, REGULATORY indicators of various countries BUSINESS” MODERNISATION OF THE CEMENT INDUSTRY: CHANGES AND TARIFF GROWTH. GUARANTEES TO THE RUSSIAN STOCK MARKET IN 2012: RESET. and also offered his predictions This workshop focused on the implementation of HOW TO MAINTAIN A BALANCE OF INTERESTS INVESTORS AHEAD OF PRIVATISATION IN NEW OPPORTUNITIES FOR INVESTORS on further development of the Sberbank of Russia’s strategy. Global market trends and key growth drivers for THE ELECTRICITY SECTOR Discussion at this workshop covered the following situation in Russia and the world. the cement industry in Russia; the current state The Russian utilities sector has exendured a difficult year. three topics: 1. “From Russia with Love”: creation of a Oleg Larichev, CIO of Troika Dialog OPERATIONAL EXCELLENCE of cement production capacity and its utilisation, The regulatory framework has been amended and the rules comfortable “path” to the Russian market; what Russian AM, gave a talk about the main The term “operational excellence” has long been used upcoming commissions and regional surplus/deficit have been changed throughout the entire value chain instruments are the most competitive; how does one asset management strategies and as a key direction of organisational development. In of cement consumption/production in Russia. Price (generation-transmission-distribution-supply/retail). Some stock exchange in Russia differ from two (what’s new put forward his outlook on the his report, Gennady Tsepkov, Head of the Banking trends going forward: will price inflation be driven measures have already been implemented, while others will for investors); legislation, or which rules of the game subsequent development of the Standards Department at Sberbank of Russia, an by demand or cost inflation? Can price volatility be take effect from 2012 and beyond. do investors need? 2. “Domestic investors: creation situation on the stock market in experienced project manager in the sphere of reduced in Russia and how? Environmentally-friendly What are the government’s key goals and priorities for 2H12 of a magnetic field for liquidity”: pension money and Russia and globally. Alexander operational excellence, shared his practical experience cement production and transportation. Can cash and beyond? What other key regulatory changes are needed, insurance reserves; placement of sovereign fund money Krapivko, Asset Allocation Advisor, gained in the course of executing operational excellence outlays be reduced? Position of key players in the and what tariff growth would be acceptable for Russia over on the Russian market; development of the investment familiarised the audience with projects and discussed the evolutionary process of market and potential for consolidation in the industry. the next five years? fund industry and incentives for private investors. 3. general approaches for managing operational excellence. UniCredit Bank Board Member The consolidation process in the sector facilitated by state- “Why is there no place like home? Creation of a centre of personal finances, evaluated Paolo Cederle presented his report “Outsourcing as the controlled utilities has already peaked. A privatisation plan liquidity and price formation for the securities of Russian investment potential for 2012 and highest form of operational excellence”. As part of the devised by the government in 2011 includes offering issuers in Moscow”: privatisation of Russian companies talked about optimal investment workshop, a roundtable discussion “Is it possible to of stakes in the utility companies in 2012. What and how in Russia – a powerful incentive for development of the methods for private clients in outsource operations functions in Russia and the CIS?” much can the government guarantee investors this time? Has national stock market; what measures must be taken in 2012. was held. the search for strategic/portfolio investors begun? order to return IPOs to Russia; increasing the quality of W O R K S H O P S W O R K S H O P S 6 5
    • T H E R U S S I A F O R U M 2 0 1 2 LIST OF COMPANY-PARTICIPANTS IN 1:1 MEETINGSONE ON ONEFORUM IN BANKING Bank DeltaCredit REAL ESTATE AFI Development1:1 FORMAT Bank Saint Petersburg AHML Home Credit Bank Etalon Group MICEX LSR Group Nomos Bank MIRLand Development Corporation OTP Bank OPIN Promsvyazbank PIK GroupLike in the previous years a key part of the Forum is the Rusfinance Bank R.G.I. International Russian Agricultural Bank Raven Russiaprivate meetings that take place between companies Sberbank Regions-Development VTBfrom CIS countries and investors. These meetings build Vozrozhdenie Bank TMT OIL AND GAS Armadadialogue between major listed companies and leading Alliance Oil Company IBS Group Holding INFRASTRUCTURE Bashneft MTSinvestors from developing markets. Getting a first hand Aeroflot Eurasia Drilling Company MegaFon FESCO Gazprom RBCunderstanding of a company’s business by building a Global Ports Investments Gazprom Neft Rostelecom Globaltrans Investment Integra Sistemarelationship with its management team is rewarding HMS Group Lukoil VimpelCom Ltd. Mostotrest Novatekfor both parties involved. On January 31 and February 1, NCSP Rosneft Russian Railways Surgutneftegaz CHEMICALS2469 meetings were organized for representatives of 104 Sollers TNK-BP Acron TransContainer Tatneft Eurochemcompanies and 221 investment funds. The 1:1 meetings Sibur Uralkali were held at the Ritz-Carlton Hotel. METALS AND MINING CONSUMER AND RETAIL PhosAgro EVRAZ Group S.A. AVK Highland Gold Mining CentrObuv IRC Limited Dixy Group UTILITIES KTK M.video Bashkirenergo Koks Group Magnit DTEK MMK Group Okey Group EOS Russia Mechel Rosinter Restaurants Holding Enel OGK-5 Metalloinvest Svyaznoy EuroSibEnergo Metinvest Holding Synergy FGC EUS NLMK X5 Retail Group N.V. Gazprom Energoholding Nord Gold N.V. Inter RAO UES Petropavlovsk Lenenergo Polymetal AGRICULTURE MOESK RUSAL Cherkizovo Group MRSK Center Raspadskaya EFKO MRSK Center and Volga Severstal UkrLandFarming (inc. Avangard) MRSK Holding TMK Yug Rusi MRSK North-West Uranium One MRSK Siberia MRSK Urala Quadra Rosatom RusHydro F O R U M I N O N E O N O N E F O R M A T 6 7
    • T H E R U S S I A F O R U M 2 0 1 2SPEAKERS Paul Collier, Willam Flatmo, Michael Hecker, Alexander Korsik, Director, Centre of the Director, Christen Sveaas Art Collection, Oslo Vice President, Strategy and President, Bashneft Study of African Economies, Chuck Flynn, Corporate Development, MTS Natalia Kosheleva, Oxford University Managing Director, Bregal Tax & Legal Services Director, Deloitte & Touche James Corrigan, Private Capital Regional IB Managing Director, Troika Dialog Stephane Frappat, I Ismo Koskinen, Artem Bektemirov, Chief Executive Officer, Alexander Idrisov, Energy Counselor, Delegation of the EU inA CEO, Pharmacy Chain 36,6 Sodrugestvo Managing Partner, Founder, Strategy Partners Russian FederationNoubar Afeyan, Serguei Beloussov, D Arsen Idrisov, Alexander Krapivko,Managing Partner, CEO, Senior Partner, Runa Capital Satyajit Das, Managing Director, Alliance Oil Company Asset Allocation Advisor, Troika DialogFlagship Ventures Anna Berezovskaya, Risk Consultant, G Andrey Ilyin, Georgy Kravchenko,Ruben Aganbegyan, CEO, Groupon Russia Author of “Extreme Money” Sergey Galitskiy, CFO, Eurochem Chairman of the Board of Directors,President, CEO, MICEX-RTS Erik Berglof, Alex De Valukhoff, CEO, Magnit Oleg Ivaschenko, Detskiy mir – Center Vyacheslav Aminov, Chief Economist, Special Advisor CEO, Lafarge Russia Aleksandr Galushka, CEO, Novoroscement Paul Krugman,Member of the Board of Directors, to the President, European Natalya Dirks, President, All-Russian public Professor, Princeton UniversityNefteTransService Bank for Reconstruction Head of Shared Services Center, organization “Business Russia” Aleksei Kudrin,Kirill Androsov, and Development Sberbank of Russia Evgeny Gavrilenkov, K Russian statesmanMember of the Board of Directors, Fatih Birol, Kirill Dmitriev, Chief Economist, MD, Troika Dialog Alexei Kalinin, Sergey Kudryashov,Altera Investment Fund Chief Economist, Chief Executive Officer, Werner Gey van Pittius, Senior Partner, Baring Vostok Capital Partners Deputy Minister of EnergyAnastacia Anishchenko, International Energy Russian Direct Portfolio manager, Investec Madhu Kannan, Elena Kuritsina,Senior Intelligence Associate, Quid Agency Investment Fund Asset Management Managing Director & CEO, Deputy Head of Federal Service for FinancialSergey Anokhin, Gordon Black, Mikhail Dmitriev, Ivan Glasenberg, Bombay Stock Exchange MarketsBanking Standards Department Senior Managing Director, President, Center for Strategic Chief Executive Officer, Olga Kanovich, Shamil Kurmashov,Project Director, European Team, Research Glencore Senior Vice President, Sberbank of Russia Deputy General Director for Finance andSberbank of Russia Heitman Private Equity Andrey Donskikh, Veniamin Golubitskiy, Anton Karamzin, Investment, AeroflotIgor Artamonov, Valerie Blair, Deputy Chairman of the Board, President, Renova StroyGroup Deputy Chairman of the Management Board,Deputy Chairman of the Management Board, Director, Gagosian Gallery Sberbank of Russia Alexei Golubykh, Sberbank of RussiaSberbank of Russia Pavel Bogdanov, Steve Drobny, Private Banking Director, Aleksandr Kashirin, LAnders Aslund, Managing Partner, Almaz Founder, Drobny Global Asset Troika Dialog Head of Innovations and Strategic Development Richard Lacaille,Senior Fellow, Peterson Institute Capital Partners Management Sergey Gorkov, Department, Russian Technologies State Global Chief Investment Officer,for International Economics Hendrik Brandis, Alexander Dyukov, Deputy Chairman of the Board, Corporation State Street Global AdvisorsPetr Aven, Managing Partner, Earlybird VC CEO, Gazprom Neft Sberbank of Russia Leonid Kazinets, Tim Lambert,Chairman of the Board Carlos A. Bronzatto, Timofei Dzyadko, Pavel Grebtsov, Chairman of the Board, Barkli Vice President Energyof Directors at Alfa Banking Group, CEO, The World Association Editor, Forbes Russia Management board member, Kairat Kelimbetov, Deputy Prime Minister Consulting Group,Member of the Board of Directors, of Investment Promotion Deputy Chairman of the Moscow of the Republic of Kazakhstan Wood MackenzieAlfa Bank Agencies (WAIPA) Regional Energy Commission Tigran Khachaturov, Oleg Larichev,Shaukat Aziz, The Rt. Hon. Gordon Brown, E Herman Gref, Chairman of the Acting Director General, JSC Atomredmetzoloto CIO, Managing Director,Former Prime Minister of Pakistan MP Prime Minister of Great , Andrey Elinson, Management Board, CEO, Eduard Khudainatov, Troika Dialog Britain and Northern Ireland (2007-2010), Deputy CEO, Basel Sberbank of Russia President, Chairman of Rosneft’s Management Igor Levit,B Chancellor of the Exchequer (1997-2007) Artem Eyramdzants, Aram Grigorian, Board, Member of the Board of Directors, Chairman of Board,Joseph Backstein, Denis Bugrov, First Vice President, PIK Group Managing Director, Rosneft LSR GroupArt Director of the Moscow Biennale Senior Vice President, Troika Dialog Oleg Khusaenov, Anatoliy Leyrikh,of Contemporary Art Sberbank of Russia Sergei Guriev, CEO, Atlant-M President, IntrallGiacomo Baizini, Vasiliy Bychkov, F Rector, New Economic School Sergey Kislov, Andrey Likhachyov,Vice President of Corporate Affairs, Director, Central House of Artists Philip Farah, Andrey Gusev, Chairman, Yug Rusi CEO, Moscow UnitedCFO, Evraz Group S.A. Principal Financial Services, СEO, X5 Retail Group Andrey Klepach, Energy CompanyPeter Bakaev, Cisco Systems Mikhail Gutseriev, Deputy Head of the Ministry of Economic Igor Lojevsky,Head of the Capital Markets Division, C Evgeny Fedorov, President, Oil and Gas Company Development of the Russian Federation Chief Country Officer,Gazprom Paolo Cederle, CEO, JSC EuroSibEnergo “RussNeft” Sergey Kogogin, Russia and CIS,Maxim Basov, Head of Group ICT & Operations Leonid Fedun, Vladimir Guz, CEO, KAMAZ Deutsche BankCEO, Rusagro Group Division and Executive Vice President Vice President, LUKOIL Managing Partner, CMPRO Sergei Komlev, Eugeniy Lyashenko,Said Batkibekov, of Organization & Services Functions, UniCredit Brian Feinstein, Mark Gyetvay, Head, Department for Gas Contracts and Pricing, General Director, CJSC “ManagingManaging Director Parastatal Anatoly Chubais, Partner, Bessemer Venture Partners CFO, NOVATEK Gazprom Export company “EFKO”Projects Group, Sberbank of Russia CEO and Chairman of the Board, Aleksandr Filatov, Andrey Konoplyanik,Alexander Bazarov, RUSNANO СЕО, Russian Machines H Director, InstituteVice President, Director Ilya Chuprinko, Peter Hambro, for Energy and Finance Mof the Corporate Clients Department, Head of Treasury, Gazpromneft Chairman of the Board of Directors, Dmitry Konov, Ziyavudin Magomedov,Sberbank of Russia Petropavlovsk General Director, SIBUR LLC Chairman of the Board Evgeniy Kornilov, of Directors, Summa Group CFO, United Company of RUSAL P O D I U M P O D I U M 6 9
    • T H E R U S S I A F O R U M 2 0 1 2 Nouriel Roubini, Mikhail Skorokhod, Alexey Timofeev, William R. White, O Professor of Economics, President, Eurocement Group Chairman of Executive Chairman of the EconomicSergey Maltsev, Viktor Olerskiy, NYUs Stern School of Business Svetlana Skvortsova, Board, NAUFOR Development andCEO, Globaltrans Deputy Minister of Transport, Kirill Yu. Rubinsky, Strategy and Development Director, Aleksander Torbakhov, Review Committee, OECDPedro Martinez, Government of the Chairman of the Board Tele2 Russia Deputy Chairman of the Charles Wyplosz,Business Development Russian Federation of Directors of FESCO Mikhail Slobodin, Management Board, Professor of InternationalManager, NXP Semiconductors Victor Orlovskiy, Transportation Group Ltd., Supervisory Board Chairman, “Community Sberbank of Russia EconomicsAndrey Martirosov, Senior Vice President, Fesco Transportation Group of Buyers on the Wholesale and Retail Markets Marcos Troyjo,CEO, UTair Sberbank of Russia Christof Ruehl, of Electricity (Capacity)”, Executive Co-Director, BRIC-Lab, Adjunct Associate YVladimir Mau, Alexander Oslon, Group Chief Economist and Vice President of Gas and Electricity, Professor of International and Public Affairs, David Yakobashvili,Rector, Russian Academy of National Economy Co-founder, Witology Vice President, BP TNK-BP Management Columbia University Chairman of the Board of Directors,and Public Service at the President Thomas Rutz, Sergey Sobyanin, Gennady Tsepkov, ”Bioenergy” сorporationof the Russian Federation Fund Manager, Clariden Leu Mayor of Moscow Head of Banking Standards Ilya Yakubson,Mircea Mihaescu, P Pavel Sokolov, Department, Sberbank of Russia President, Dixy GroupDirector, Sberbank Technology Stepan Pachikov, Deputy Head of IB, Head of DCM, Vasili Tsereteli, Ksenia Yudaeva, Director,Research Center Founder, Evernote S MD, Troika Dialog Executive Director, Center for Economic Research,Sergey Mikhailov, Dmitry Pankin, Aidan Salakhova, Vladislav Soloviev, Moscow Museum Sberbank of RussiaCEO, Cherkizovo Group Head of Federal Service Owner, Aidan Gallery First Deputy CEO, RUSAL of Modern ArtVadim V. Mikhailov, for Financial Markets, The Federal Mikhail Semenov, Vladimir Solovyov,Vice President, Service for Financial Markets CEO, Renova-StroyGroup TV presenter, journalist ZJSC Russian Railways Sergey Petrov, Andrey Semerikov, Shankari Srinivasan, U Evelina Zakamskaya,Michael Milken, Delegate of the Fifth State Duma General Director, Er-Telecom Managing Director, Europe, Andrey Ugro, TV presenter, RUSSIA 24Chairman, Milken Institute of the Federal Assembly of Russian Andrei Shalabaev, IHS CERA IB Managing Director, Troika Dialog Vladimir Zaluzhskiy,Dmitry Milshtein, Federation, Founder of ROLF Deputy Director Department Christina Steinbrecher, Alexey V. Ulyukaev, Head of Investor Relations,CFO, Euroset Vyacheslav Pivovarov, for machine building clients, Art Director, Art Moscow, First Deputy Chairman of the Bank of Russia OJSC SeverstalDmitry Mints, Managing Partner, Altera Capital Sberbank of Russia International Art Fair Aleksei Uvarov, Jane Zavalishina,Chairman of the Management Board, Alexey Ponomarenko, Pavel Shpilevoy, Matthew Stephenson, Head of The Property Relations Department, СEO, Yandex.DengiO1 Properties Head of Cash Handling, Acting Director of the Government Department Managing Director, Christies Russia Ministry of Economic Development of The Nikolai Zelenski,Igor Mironov, Sberbank of Russia of tariff regulation, infrastructure reform and Sergey Storchak, Russian Federation CEO, NordgoldCEO, NCP “Council of Power Producers” Eduard Potapov, energy efficiency of the Economics Ministry Deputy Finance Minister of the Russian Anna Zhurkina,Tatiana Mitrova, CEO, Management Company of the Russian Federation Federation, Government of the Russian Tax & Legal Services Manager,Head of Global Energy, SKOLKOVO METALLOINVEST Nikolay Shvets, Federation V Deloitte & Touche RegionalEnergy Centre Alexander Provotorov, General Director, JSC IDGC Holding Denis Sverdlov, Axel Van Nederveen, Olga Zinovieva,Jonathan Muir, President, OJSC ”Rostelecom” Sergei Shvetsov, General Director, Scartel Treasurer, European Bank Appointed First Deputy CEO,CFO, ТNК-ВР Vladimir Putin, Deputy Chairman, The Central Olga Sviblova, of Reconstruction and Development InterrosOleg Mukhamedshin, Prime Minister of Russia Bank of the Russian Federation Director, Multimedia Ruben Vardanian, Bella Zlatkis,Director, Equity and Corporate Alexander Silvestrov, Art Museum, Moscow Chairman of the Board of Directors, Deputy Chairman of theDevelopment, UC Rusal Managing Director, Deputy Director CEO, Troika Dialog Management Board,Sergey Muratov, R of International Operation, Sergey Vasilyev, Sberbank of RussiaBanking standards department Gideon Rachman, Sberbank of Russia T Deputy Chairman, Vnesheconombank Vladimir Zotov,manager, Sberbank of Russia Chief Foreign Affairs Commentator, Alexey Simanovsky, David G. Tarr, Pekka A. Viljakainen, CEO, Agro-Belogorie Financial Times Deputy Chairman of the Bank Consultant and Former Chairman, No Fear Community Raghuram Rajan, of Russia, Central Bank Lead Economist, Maxim Volkov,N Professor, University of Chicago, of the Russian Federation World Bank CEO, OJSC PhosAgroRoland Nash, Booth School of Business Jean-Michel Six, Lars H. Thunell, Artem Volynets,Senior Partner and Chief Investment Anton Rakhmanov, Managing Director, Chief EMEA Executive Vice President & CEO, CEO, En+ GroupStrategist, Verno Capital Managing Director, Economist, Standard & Poors International Finance Corporation Oleg Vyugin,Gleb Nikitin, Acting Head, Troika Dialog Oleg Siyenko, CEO, MDM BankThe Federal Agency for State Irina Rapoport, CEO, UralvagonzavodProperty Management CEO, RUSNANO Capital Ole Bjorn Sjulstad,Maxim Nogotkov, Matteo Rizzi, Innovation Telenor Group Senior Vice President for Central WCEO, Controlling Shareholder, Manager, SWIFT and Eastern Europe, Head of Telenor Russia; David Waroquier,Svyaznoy Kenneth Rogoff, Thomas D. Member of the VimpelCom Ltd. Partner, MangroveYekaterina Novokreschenyh, Cabot Professor of Public Policy Board of Directors Capital PartnersManaging Director of Primary and Professor of Economics, Sergey Skaterschikov, Christopher Weafer,Market Development, MICEX Harvard University Managing Director, Skates Art Chief Strategist, Troika Dialog Xavier Rolet, Market Research CEO, London Stock Exchange Group P O D I U M P O D I U M 7 1
    • T H E R U S S I A F O R U M 2 0 1 2HERMAN GREF:“PRICES FOR OIL AND METALS ARE BECOMING THE MAINELEMENT FOR ‘BROADCASTING THE CRISIS’ THROUGHOUTTHE COUNTRY” the bottom or can we fall even the crisis would seriously hit the budgets of major further? the root causes, but instead the corporations that are not receiving enough revenue consequences. Although at the and would also lead to a balance of payments – The operating revenue of companies moment this isn’t so important deficit, depreciation of the rouble and budget is leaving the country, and not some optimism? It’s hard to talk about because we’ve already gone through deficit. Secondly, it would have a negative effect sort of reserves that have been saved significant strengthening of the that stage. In terms of what is going on investment activity and potential investment up, and so we can always fall further. rouble or significant growth of the on today, let’s start with the fact that inflows to Russia. This is the same sort of For example, not so long ago, every markets. Europe is already in crisis. “broadcast element”: the lack of investment year we ran into the same problem: growth. quarterly capital outflows totalling $20 At the end of December many – For us it’s important to bln were a normal phenomenon. We suggested that the rouble understand how quickly it will – Do you mean the complete lack of only managed to overcome this trend would most likely fall during influence oil and metal prices… capital for loans? in the 2000s when capital outflow was the Russian winter holiday replaced by inflow. And so if you ask period. However, the national – At the moment we aren’t dependent – Yes, since it is the ability for financial me whether capital outflow is possible currency behaved contrary to on oil prices from Europe. If we were, organisations to gain foreign currency this year, I’ll answer you: yes. How predictions. then given the situation in Europe, funding. possible is this? Unfortunately it’s very the oil price would not exceed $90 possible. Can we somehow influence – We didn’t make those sorts of according to our forecasts. Today the oil – Last year on the eve of the this situation? In my opinion we can, predictions. We said that the chances price is static ‘thanks to’ the instability European crisis a massive amount but to do this the maximum possible that the rouble will depreciate and in the Middle East. Much will depend on of capital outflows from Russia effort must be applied after the elections the chances that it will appreciate how the situation develops in Iran and the were recorded. One of the period. were roughly 50-50. Furthermore, Middle East as a whole. I believe that in reasons for this was that foreign we suggested that if oil prices remain Europe nothing highly critical will happen: players needed cash. In your – After the elections investors at their current level then it is most the chances are that the situation will opinion have we already hit will likely be keeping track probable that the rouble will strengthen. continue to be volatile, which means that of appointments to the new That’s exactly what we’re seeing zero growth rates will drag on. European government. Can you name now. As of yet we’ve heard neither leaders have still not reached a consensus some possible candidates whose optimistic nor critical forecasts. The on how to solve the two key problems: the appearance as the country’s market is dominated by a normal level of insolvency of Europe’s peripheral countries economic and financial supervisors volatility and a large amount of liquidity and the region’s uncompetitiveness. Such would be clearly perceived by (American, Asian, European), which will uncertainty cannot fail to cause concern. investors as a positive sign? help the market grow as soon as a reason Until we get answers to these problems we to be optimistic arises. If negative events will be unable to predict the future of the – I don’t want to drop any specific names.THE HEAD OF SBERBANK – Many conversations and predictions take place we will see capital outflows and euro or growth of the European economy. One thing is clear: they must be highlyANSWERED QUESTIONS ON are currently focusing on the crisis in decline. respected people, real professionals. TheWHETHER THE TREND OF THE Europe, although in January European – On to the vulnerable points of the principle according to which we (myselfSTRENGTHENING ROUBLE AND markets grew and the Russian – The primary trigger of the 2008- Russian economy. How could an included) work by in Sberbank is as follows:GROWTH OF MARKETS IS STABLE, market showed a very significant 2009 crisis in Russia was above all intensification of the situation in Europe first who and then what. Therefore for meWHAT THE MOST VULNERABLE strengthening of the rouble. What the debts on Western loans owed (default of countries and banks) impact it is very important to see those who willPOINTS OF THE RUSSIAN ECONOMY prompted the development of this by Russian businesses, banks and on the Russian economy? be responsible for specific spheres. OnlyAND BUSINESS ARE, AND WHETHER trend and can it be considered a industrial corporations. These loans after that will it be possible to talk about theOR NOT EUROPE WILL ACTUALLY BE stable one? were recalled and their service costs – The most vulnerable points of the Russian effectiveness of reforms.HIT WITH ANOTHER CRISIS were sharply increased. If a crisis economy are its non-diversified nature and – Honestly speaking I can’t see any real really does start in Europe, how will dependence on commodities prices. In such reasons to be optimistic. The start of this impact on Russia? conditions oil prices and metals prices are a new year, tired markets, negative becoming the main channel, if you like, the expectations and… an attempt to show – I can’t say that I share your opinion on the “element for broadcasting” the crisis throughout primary triggers. What you described aren’t the country. In terms of possible impact, firstly, Based on an interview with radio station Business FM on 02.02.2012 H I G H L I G H T I N T E R V I E W 7 3
    • T H E R U S S I A F O R U M 2 0 1 2 GORDON BROWN: “EUROPE MUST UNDERSTAND THAT IT CURRENTLY FACES A THREE-DIMENSIONAL PROBLEM: ECONOMIC SLOWDOWN, DIFFICULTIES OF BANKS THAT NEED TO BE REFORMED AND THE REDUCTION OF PUBLIC DEBT” of all with Russia, China, India and Brazil), I – Who is the main player when it fear that Europe will be doomed to minimal comes to stabilising the eurozone: economic growth. This will lead to an increase in government or bankers? – I remember the events of May independent or not. It must be independent. We unemployment and a rise in public discontent. 1997 well, when you granted the set the inflation target, and the Bank of England – Governments should bear primary Bank of England independence. adheres to it. Politicians are accountable to voters – Are you happy that Britain still has the responsibility. The situation that we areEX-BRITISH PRIME MINISTER This became a mantra for the and they must follow their wishes in order to pound, Russia still has the rouble, and currently in cannot be resolved by a fewON THE UK’S POSITION AND European Union. However, don’t better cope with inflation. I am certain that at that the euro is, let’s say, fading away? bankers at round table discussions. ItTHE NECESSITY TO REFORM THE you think that small countries may the moment the problem in EU countries is down must be sorted out by political leaders whoWHOLE OF THE EUROZONE if not repeat, then make the same to the lack of a growth strategy. Budget deficits – The main lesson learned from creating the are ready to enact reform in the eurozone. mistake by following the same are the consequences and they will remain a eurozone (and we know that African countries Banks need to be recapitalised in order to path? Take a look at Hungary, for problem until European economies begin to and other nations are more and more make them stronger and put economies example… grow again. It goes without saying that the often considering the possibility of creating back on the path to growth. And of course, deficit needs to be cut, but the question is: how monetary unions) is that things must be done the European Central Bank must be the lender – I consider that the question isn’t of can this be done? Economies will never become properly. Today there is a very large difference of last resort for European banks. However, whether the Bank of England should be more stable if austerity measures shatter the between various parts of Europe. The lack of the main issue here is the responsibility of possibilities for growth. This means a high common ground between the economies of political leaders. If the economies of eurozone level of unemployment, the necessity to pay EU countries is still a major problematic factor. countries do not begin to grow again, above – And the last question: will the United benefits, and a loss of tax revenue. Europe No kind of crisis prevention mechanism was all this will be a failure of politicians. Kingdom remain united? What advice must understand that it currently faces a three- created when the eurozone was formed. would you give to Scots that plan to dimensional problem: economic slowdown, Britain’s reasons for not joining the eurozone –In other words, we need “more vote at the referendum? difficulties of banks that need to be reformed are fully understandable. I am certain that the government”? and the reduction of public debt. decision not to join is still the correct one. – I am a Scot and I have always taken pride – State intervention implies that someone should in this. But above all I support the United – “Save, save, save” or “spend, – Will the pound and the rouble benefit control the economy at a government level. But Kingdom and will continue to stand up for spend, spend”? Which one do you from the possible death of the euro? I’m talking about leadership, about the best way its unity. choose? of coordinating efforts and actions at a global – No, because the British pound is very level. – What will happen if the vote goes – Neither one nor the other. National tightly linked to the euro. I’m sure that such the other way? economies shouldn’t be allowed to fall into a development wouldn’t be favourable for – Not about nationalism? recession, remain in recession or even the rouble either. This is mainly due to the – Of course, people must make a choice display zero growth for a number of years. fact that we enjoy large trade turnover – No, I don’t have nationalism in mind, but instead, one way or another, but I’m sure the Today the biggest danger facing the with the eurozone, approximately 50% of greater economic coherence: a reform strategy that majority will vote for Scotland to remain European community and the eurozone is trade in both Britain and Russia currently will make us more competitive and also stimulate part of the United Kingdom. the threat of a period of very low growth comes from EU countries. It goes without economic growth. When there is a lack of growth it rates, possibly during the next ten years. saying that we are suffering from the low is impossible to lower budget deficit, and this affects Obviously this will happen if we fail to growth of eurozone economies – our the lives of our citizens. Currently Europe has a high take action now. Unless we develop a export volumes are falling, it is difficult level of unemployment (approximately 16-17 million Based on an interview with growth strategy that will increase the to retain jobs, and businesses are on the people are out of work) and in the USA this figure is TV channel Rossiya 24 European Union’s competitiveness and verge of bankruptcy. Low growth rates still higher than 8%. Youth unemployment in many on 14.02.2012 increase trade turnover with countries in the eurozone are bad for both Russia countries equals 20%. It is the job of political leaders that have growing economies (first and Britain. to address these problems. H I G H L I G H T I N T E R V I E W 7 5
    • T H E R U S S I A F O R U M 2 0 1 2KENNETH ROGOFF:“THE EARLIER WE ADMIT THAT PART OF THE DEBTWILL NEVER BE PAID BACK, THE BETTER” world powers. In the past these inflating on the stock market. Now they fivefold difference in terms of quality of sorts of global changes were are deflating a real estate bubble. life. accompanied by conflicts and even wars. How will things – The Chinese leadership manages theirIN KENNETH ROGOFF’S OPINION , THE EURO develop now? economy wonderfully, but don’t doubt that – How are different sectors changingWILL NOT SURVIVE WITHOUT THE FORMATION in future they will experience financial crises after the crisis: the financial systemOF A UNITED STATES OF EUROPE, AND – It is inevitable that the USA’s share in and recessions. No economy is capable and industrial sector in the USA?CHINA IS FACING UNAVOIDABLE CRISIS the global economy will decrease and of avoiding them. The Chinese economy those of developing countries, above all has massive imbalances, and although it’s – The USA’s financial system must be China, will grow. We should hope that possible that it will grow for another thirty reduced because it has expanded too this will be a peaceful transition, and I years without running into a crisis, this is much. Ultimately, governments will can’t see any reasons as to why this won’t extremely unlikely. It will increasingly look refinance some European banks. I don’t happen. But as world leaders change, like a normal economy, but in the same think that the USA will substantially there will of course be conflicts. way as a normal economy it will experience increase its industrial base, but if this does boom and bust periods. happen, this will involve industries with– Are Western economies facing the fate of smaller numbers of jobs; factories where Japan, which after the crisis of 1989-1990 – What role does Russia play in the you need a telescope to actually see the went through a lost decade, if not two? new world order? – When will this Chinese crisis people working there. The USA may be happen? very successful in precisely these industries.– It’s possible that the USA will experience a soft – Russia plays and will continue to play But Asia is the future for labour-intensive version of Japan’s fate and for several years growth a major role. Russia has two unique – I would say there’s a 10% chance of it sectors. The United States needs to compete will hover around 0.5-1% lower than the trend. characteristics: its enormous “physical” happening this year and 10% for next in the services sector and in industries with The excessively heavy debt burden is slowing capital (it occupies a massive part of the year. Yet in the next decade the chance high productivity. economic growth. However, there are a number globe and so far only a small part of its of this happening is more probable, of positive factors in the USA. For example, the natural resources have been discovered) there’s over a 50% chance. Based on an interview with population is growing. Japan’s bubble was and also its substantial human capital, its newspaper Vedomosti in fact a lot larger and the collapse was a lot extremely talented population. Russia is on 11.03.2012 more serious. On the other hand, the Japanese capable of becoming a world leader in – To a large extent the eurozone crisis happened when economies throughout many areas – science, culture, technology. was created as a political the rest of the world were growing rapidly. Its achievements and potential are due project. Will it be able to survive Today it’s not like that and in addition, Japan to a wider tradition, not just the Russian economically in a changing is a lender country and the USA is a debtor. education system. I suggest that Russia world? So things for the USA aren’t that great. In needs to develop its human capital to a much Europe the situation is worse. Over there the talk about high-risk mortgage loans of the debt will never be paid back, the better. larger extent since growth in the last decade – Without significant political lost decade scenario is probably an optimistic in the USA, then in the long-term Otherwise the economies will be undermined, was too heavily based on natural resources. integration – no. The eurozone forecast. Besides economic trouble, Europe there is no alternative to writing off and not just those of individual countries, is a rickety house. The idea that is embroiled in a political and constitutional a part of these debts as many of them but the global monetary system as a whole. – Is it possible to prevent bubbles from fully sovereign states could have crisis. If it fails to transform itself into the will never be repaid. This is a political Inflation could also be used to reduce debt, being inflated? independent budget and tax United State of Europe, then I don’t think problem, but acting in such a way will and I think that in the long run we will see policies and their own regulations, that the eurozone will remain a sustainable possibly encourage economic revival. this happening. – Unless human nature changes it will be and at the same time use a single entity. In Europe it is imperative to carry out a impossible to fully prevent them. For the currency, was wrong from the massive write-off and restructuring of the meantime we can combat them a little more start. I consider that European– It seems like in the world today debt of Greece, Portugal and maybe two to – Some experts consider that the successfully than before. political integration will intensify, there is more debt than can be three other countries. I don’t believe that it might of the USA as a world but as this process takes place, paid back. How can debt be will be necessary to write-off the debt of major leader is declining and that the poorest countries will, at cut? countries like the USA or Germany, but I’m not new countries are increasingly – It looks like the Chinese have already least temporarily, remain on– There is no simple answer. If we sure about Japan. The earlier we admit that part beginning to play the role of managed this. In 2008 they rather the sidelines. It’s too difficult painlessly deflated a bubble that was to unite countries that have a H I G H L I G H T I N T E R V I E W 7 7
    • T H E R U S S I A F O R U M 2 0 1 2 STRAIGHT FROM MICHAEL MILKEN, Chairman of the Milken Institute: “The future of any country is based on education. Education is an VLADIMIR MAU, Rector, Russian Academy of National Economy and Public Service under the President of the THE TOP investment in the future, and it is hard to compete with countries that Russian Federation: have already realised this.” “At the moment, politics are more important than economics in Russia. In general, emerging markets can be defined as markets where politics ANDREY SHARONOV, are no less important than economics.” Deputy Mayor of Moscow for Economic Policy: “You can build 100 special economic zones and 20 SKOLKOVO projects, but if you have no way of defending your rights in a climate OLEG IVANOV, of unfair competition (and unfair competition is often created with General Director, Movie Research:ALEXEY ULYUKAEV, VLADIMIR PUTIN, support from specific public officials, who solve the problems of those “Improving the quality of Russian films is a key First Deputy Chairman of the Central Bank of Russia: Prime Minister of Russia: who don’t wish to play by the rules), the risks increase.” factor because the change to the state support“Our interest rates are a direct consequence of global Russia is the world’s sixth largest economy and has all system that took place in 2010 is starting to rates and the situation on foreign markets, where risk it takes to become a top five economy. I’m confident now bear fruit. We expect that out of total box appetite will be higher this year than it was last year.” that this will happen. We ended last year with good ANDREY KELPACH, office, the share for Russian films shown across results if you look at the aggregate economic outcome. Deputy Head of the Ministry of Economic Development the country will reach 20 percent, despite the Without exaggeration, this is one of the world’s best of the Russian Federation: fact that last year among the top ten films we HERMAN GREF, results. Economic growth over 4% is one of the best “The current high interest rates will remain until at least midway recorded a surprisingly large fall: the share ofPresident and Head of the Management Board rates among G8 members. No, not just one of the best, through the year. I doubt that they will be reduced any time soon.” Russian films was at less than 10 percent.”of Sberbank of Russia: it actually is the best result among other large European“The key mission of the forum is to increase trust in economies.” Russian business, the authorities and the country on the PETR AVEN, ALEXANDER AKOPOV, whole, so that we gain more trust as a major financial Chairman of the Board of Directors at Alfa Banking Group, Chairman of the Board of Directors, Amedia; institute.” SERGEY STORCHAK, Member of the Board of Directors, Alfa Bank: Member of the Board of Directors Deputy Finance Minister of the Russian Federation, “The debt load (of companies) is still heavy. As before, the population’s of the Producers Guild of Russia: Government of the Russian Federation: retail deposits won’t grow. In the past nominal wages grew by 30- “The total volume of movie production in RussiaSERGEY SOBYANIN, “We have felt the benefits of holding dialogue with 40% per year. Now that figure is around 10-12%.” equals around 2 billion dollars; 90-95% of this Mayor of Moscow: investors. Every quarter we meet with investors who money is spent in Moscow. From this money“In 2011 the capital’s economic growth equalled 4% and actively operate on the OFZ market. We take into approximately 70% makes up the wages of in Moscow we have practically no unemployment. By account where we behaved like a bull in a china shop.” RUBEN VARDANIAN, actors and film crews, while 25-30% is spent International Labour Organization standards it is around President, Troika Dialog: on services, with 100-120 million dollars going 1%. For the first time in recent years, investment in the “Investors consider that in Russia, in comparison with China for towards studio services.” city’s infrastructure has begun to grow again.” GORDON BROWN, example, project profit is high, yet the risk of unpredictable situations British MP, Prime Minister of the United Kingdom is even higher.” (2007–2010), British Chancellor of the Exchequer SERGEY TOLSTIKOV, KAIRAT KELIMBETOV, (1997–2007): Executive Director of the Federal Fund Deputy Prime Minister of the Republic of Kazakhstan: “I often wonder why, three years since the start of the KENNETH ROGOFF, for Social and Economic Support of Russian“Crises are opportunities to make the right conclusions. financial crisis and after three years of efforts made Professor of Economics and Public Policy, Harvard University: Cinematography: Instead of treating them like the apocalypse you should by governments throughout the world to stabilise the “It’s good news for Russia that the macroeconomic situation in the “There was a time when television saved the use crises to learn lessons. I consider that a classic global global economy, we continue to fearfully look towards country is positive. The thing that worries me when looking at Russia movies, now it simply provides weak support.” crisis is currently developing, which we will overcome. the future. In my opinion this is because the global from the outside is that recently it only managed 4% economic But if there will be a global recession, there will only be economy is currently undergoing a transformation that growth while enjoying such good conditions.” one exit scenario, and if we move to slow growth, there is comparable to the Industrial Revolution.” RENAT DAVLETYAROV, will be a different one.” President of the Producers Guild of Russia: NOURIEL ROUBINI, “If government support ceases, very few movies XAVIER ROLET, Professor of Economics, NYU’s Stern School of Business: financed by private investment will be created.” CEO, London Stock Exchange: “Korea, Japan and Israel are the most successful countries. Neither “As an intermediate link between Europe and Asia, Canada, nor Russia nor any other country with natural resources All quotes taken from public sources Moscow has the ideal location to become a major can match their success. The secret of growth of the first countries financial centre.” mentioned is their investment in human capital. The problem is that in developed countries in the last 20 years, investments have been made in much less productive industries – finance and real estate.” Q U O T A T I O N Q U O T A T I O N 7 9
    • T H E R U S S I A F O R U M 2 0 1 2 RUSSIA 2012 12 PARTICIPANT 43 34SURVEY RESULTS 2 10 75% of those surveyed predict that the RTS Index will grow from 0 to 30%. Approximately half of those surveyed consider that the impact of the recent protests will be only marginal, while 33% optimistically believe that the implementation of the reforms programme will be significantly speeded up thanks to the protests. Approximately 80% of participants consider that the RUB/USD exchange rate will be around 28-33 roubles to the dollar. All those surveyed admitted that equities would be the most profitable sector (~50%); gold took second place. Approximately 52% of respondents consider that the USD/EUR exchange rate will be around 1.2-1.3, and 27% think that it will be within 1.3-1.4 dollars to the euro.. This part of the survey with regard to oil prices showed that the most likely price (in the respondents’ opinion) in 12 months’ time will be around 100-120 USD per barrel. Among the risks for the global market in 2012, respondents most often stated the following: the eurozone crisis, uncertainty surrounding the development of the US economy, potential Chinese economic slowdown, and possible economic consequences caused by new conflicts (Iran, Arabic states). And Russian risks: political risks, high level of corruption, a drop in energy prices, and capital outflows. S U R V E Y А R E S U L T S 8 1
    • T H E R U S S I A F O R U M 2 0 1 2RESEARCH MATERIALS: AN INVESTOR’S CIS METALS AND MINING – BOOK OF MAPS: 2012 EDITIONGUIDE FROM TROIKA DIALOG The 2012 edition of Troika Dialog Research Department’s CIS Metals and Mining Book of Maps covers all CIS operations and is divided into base metals, ferrousTROIKA DIALOG’S metals, precious metals and fertilisers. ItCOMMITMENT TO BOTH DEPTH comprises all assets of major listed andAND BREADTH OF RESEARCH RUSSIA OIL AND GAS ATLAS private companies in the region, fromIS A BIG COMPETITIVE UC RUSAL and Severstal to NLMK andADVANTAGE FOR THE “Knowledge is power”, according to the PhosAgro. The CIS region covers oneCOMPANY . TROIKA DIALOG’S ancient proverb. But energy is power too, sixth of the Earth’s land surface andSTRONG TEAM OF MORE THAN especially in Russia. Troika’s research team its size is comparable to that of North40 ANALYSTS COVERS ALL tried to combine these two ideas and America. It boasts some of the largestTHE , SECTOR AND MACRO express them in the Russia Oil and Gas metals and mining companiesCOMPANY -SPECIFIC TRENDS Atlas. It is not only about the 100 or so globally, some located in the coalIN RUSSIA, UKRAINE AND maps of fields, refineries and pipelines. basins of Ukraine, some beyondKAZAKHSTAN. DURING Each page contains analytical and the Polar Circle, some in theTHE RUSSIA FORUM 2012, descriptive data that will help investors steppes of Kazakhstan and someOUR EXPERTS PROVIDED draw their own conclusions about in the mountainous regions of theINFORMATION SUPPORT TO how the country’s most important Urals. Our Book of Maps will helpTROIKA DIALOG’S CLIENTS IN industry is operating, where it came clients familiarise themselvesTHE FORM OF FORUM BUZZES from and where its potential lies. with all of these assets.SUMMARISING THE FORUM The Atlas has been divided intoSESSIONS. AT THE RUSSIA seven parts plus a bonus sectionFORUM 2012, THE RESEARCH containing a short guide toDEPARTMENT PRESENTED MANY Russian oil and gas taxation.IMPORTANT PUBLICATIONS:RUSSIA OIL AND GAS ATLAS,RUSSIA UTILITIES ATLAS,RUSSIAN TRANSPORT ANDINFRASTRUCTURE ATLAS – TROIKA DIALOG OFFERS THEMAPPING THE INVESTMENT WIDEST RANGE OF RESEARCHCASE, AND CIS METALS AND MATERIALS : FROM THE DAILYMINING – BOOK OF MAPS: MARKET OVERVIEW (MARKET2012 EDITION. DAILY AND FIXED INCOME RUSSIAN TRANSPORT DAILY) TO DETAILED ANALYSIS AND INFRASTRUCTURE ATLAS – RUSSIA UTILITIES ATLAS OF ENTIRE SECTORS IN MAPPING THE INVESTMENT CASE RUSSIA’S ECONOMY . Last year was not an easy one term immutable rules and practices, Russia is the largest country in for the Russian electricity sector. and privatisation. Troika’s research THE MONTHLY STRATEGY the world and prone to significant Ranked fourth in the world by team aims to present the scale of OVERVIEWS OUTLINE THE MAIN distances between suppliers and installed capacity and production, the sector and its configuration/ MARKET TRENDS AND GIVE consumers of raw materials. Its and boasting the world’s largest composition in the Russia Utilities RECOMMENDATIONS ON THE transport sector is therefore crucial public transmission company by grid Atlas. It contains not only maps MOST APPEALING INVESTMENT to the national economy. In the length (Federal Grid Company), this of power plants, MRSKs and SECURITIES . Russian Transport and Infrastructure enormous infrastructure machinery has transmission lines, but also data Atlas Troika Dialog’s analysts show passed through turbulent times, from on electricity and capacity prices, THE MONTHLY ECONOMIC the largest players, cargo flows regulatory amendments to tariff growth fuel mixes by price zone and OVERVIEWS FOCUS ON THE between regions, infrastructure limitations. However, if you tear into an companies’ construction plans. MACROECONOMIC AND bottlenecks and potential investment economy’s cardiovascular system for too It includes a handbook on the POLITICAL FACTORS IMPACTING projects, in order to help investors long, at some point it will eventually fail. basics of the Russian utilities FINANCIAL MARKETS . TROIKA gain an understanding of the To prevent this, the give-and-take principle sector, containing key data DIALOG REGULARLY PUBLISHES sector’s prospects and the growing must be in place, and we think it is. The and sector parameters that ANALYTIC OVERVIEWS ON opportunities for publicly listed transport best medicine includes market mechanisms will help investors gain a INDIVIDUAL LISTED COMPANIES and infrastructure companies. in competitive segments, a set of long- broader sector overview. AND ECONOMIC SECTORS . R E S E A R Н M A T E R I A L S A N I N V E S T O E R S G U I D E 8 3
    • T H E R U S S I A F O R U M 2 0 1 2 CHARITY FRIDAY EVENING , FEBRUARY 3. THE OFFICIAL PART OF THE RUSSIA FORUM HAS FINISHED . ALL THE GUESTS ARE HURRYING TO GET TO WHITE RABBIT RESTAURANT , A NEW AND STUNNINGLY BEAUTIFUL ESTABLISHMENT LOCATED IN SMOLENSKY PASSAZH IN THE HEART OF MOSCOW. THE RESTAURANT TAKES UP THE SIXTEENTH, FINAL FLOOR OF THE RETAIL AND ENTERTAINMENT CENTRE. THIS TALL BUILDING’S SEMI-CIRCULAR ROOF UNDER WHICH THE GUESTS ARE PLANNING TO PARTY TILL THE MORNING IS MADE UP OF A GLASS CEILING AND WALLS. FROM DIZZYING HEIGHTS A BREATHTAKING PANORAMA UNFOLDS BEFORE THE EYE: SNOW-COVERED STREETS, MOSCOW’S SHINING LIGHTS, THE CATHEDRAL OF CHRIST THE SAVIOUR, HOTEL UKRAINA AND THE WHITE HOUSE. THIS IS THE PERFECT PLACE TO WRAP UP THE FIFTH FORUM, EXCHANGE OPINIONS AND MAKE NEW CONTACTS. hose who arrived early gazed in fascination at the A POSTER for Andrey Zvyagintsev’s film The modern cityscape, enjoyed cocktails and soaked up the Return, which won the Golden Lion at the Venice relaxed, pleasant atmosphere. When the guests had all Film Festival in 2003 arrived, RUBEN VARDANIAN stepped up to the stage and thanked everyone for taking part in the Forum. Then A COSTUME FROM THE SERIAL Nine Lives of Nestor INGEBORGA DAPKŪNAITĖ announced the start of the Makhno charity auction… A YEAR’S SUBSCRIPTION to Variety magazine and Holding charity events as part of the Forum has become a accreditation for the Cannes Film Festival valued tradition. The fifth anniversary of the Forum was no exception. This time, like in previous years, Troika organised a A BIT PART in the film Dubrovsky, and other no less charity event together with Hospice Cahrity Fund Vera. interesting things As cinema has been the main theme of all our marketing A PAIR OF SHOES formerly belonging to People’s Artist of communications since last year, we decided to hold an auction Russia Liya Akhedzhakova with the same theme. The following day many guests intended to participate in the “Cinema and Money” forum and therefore all the The lot “The Hall is All Yours” donated by Pioneer movie theatre lots at the auction were very relevant: had to be doubled! When the first lot had already been sold, a buyer arrived who had come to the auction especially to win Pioneer’s lot. Well, it’s not every day that you get to hire an entire hall in a movie theatre for only 1,300 euros! A real bidding battle ensued for the pendant worn by Chulpan Khamatova’s character in the film Luna Papa. Guests also bid enthusiastically for a painting by deceased actor Yury Bogatyryov. When the auction came to an end, the band CrossroadZ took to the stage. Loud bass and lively melodies livened up warm and friendly atmosphere and everyone got up to dance. The guests departed well after midnight. In total that evening we raised 990,000 roubles for the programmes of Hospice Charity Fund Vera. Thank you to everyone who participated in the auction and also to those who helped to prepare and run the evening. C H A R I T Y 8 5
    • T H E R U S S I A F O R U M 2 0 1 2THE PRESS ON THE FORUM Putin’s 100 Steps “Our goal is to join the ranks of countries with Gordon Brown: Investments in Infrastructure and Focus on Middle Class Essential for Sustainable Global the best business environments within the Economic GrowthPutin Proposes Involving Society in Fight against Corruption next few years. We must move one hundredAt The Russia Forum 2012 Russian Prime Minister Vladimir Putin announced steps forward in order to move from 120th to Former British Prime Minister Gordon Brown considers that Russia could occupy a worthy place in the global economy after the recentthat in future, public associations of businesspeople will be entitled to file lawsuits to protect the 20th place in the rating (Doing Business Rating transformations as a result of the crisis. In his speech at The Russia Forum 2012 organised by Sberbank of Russia and Troika Dialog, Mr Browninterests of entrepreneurs. compiled by the World Bank – Gazeta.Ru),” stated that Russia has all the resources necessary to do this. Mr Brown emphasised the fact that three years after the financial and announced Prime Minister and presidential“A small business owner will be able to defend his rights, to engage in disputes with economic crisis started, economists and politicians throughout the candidate Vladimir Putin at The Russia Forum world are still talking about it. He asked the question why, despite all thetop-ranking officials, such as governors, and to do so not just on his own, measures that have been taken, no one has managed to deal with the 2012. <…> crisis throughout the years. He considers that the world has run into abut on behalf of a fairly powerful public organisation. This should be enshrined period of economic contraction and that the consequences of this could Putin emphasised that work to improve the be more serious than the recession. This is why the global economyin law,” Putin elaborated. cannot avoid transformation. Furthermore, in Brown’s opinion, the BRIC investment climate will be based on three countries will be the main global drivers of economic growth and the principles: the presumption of honesty on the centres of production will shift to these countries from Europe and theIzvestia_02.02.2012 USA. part of business, wide-scale implementation Finam.ru_02.02.2012Exporter Yug Rusi: Russia will be Able to Export 26 mln of international practices and cooperationTonnes of Grain The Russia Forum: Cinema, between business and the state. “It’s not up to aThis year Russian farmers will be able to export no less than 26 million metric Wine and Bondarchuk government official to decide on investors’ needs. Kudrin: Russia will becometonnes of gain, said Sergey Kislov, President of Yug Rusi Group, one of the largest the World’s Fifth Largest Economyexporters of Russian grain. In the current agricultural year that On Saturday the fifth and final day of The For example, entrepreneurs should formulate by 2022began on July 1, the company exported 1.5 mln tonnes of grain, added Kislov in an interview held Russia Forum took place at Digital October.today at a conference in Moscow. The topic of the day was investment in their requirements for tax procedures. The cinema, television and new media. Former Minister of Finance Aleksei Kudrin stated that Russia will become creation of a favourable business environment the world’s fifth largest economy in terms of purchasing power parity (PPP)Bloomberg_02.02.2012 <…> The programme of the special day of the is a partnership project with the participation of forum was as different to the previous days within the next 10 years. “Today Russia is the sixth largest economy in the as the weekend differs to work days. The 20 the state, business and society,” underlined the world and we have already joined the number of economies that are closeAgriholdings Aren’t Afraid of Piggy Imports sessions and round table discussion covered Hollywood, state support for Russian movie head of the Russian government. to becoming developed. In the next 10 years even without our compulsoryRussia’s WTO entry won’t impact on their investments. production and distribution, media piracy participation we will reduce the oil and gas sector’s share in our economy and many other topics. from 22-24% to around 17%,” said Kudrin at a press conference held duringAfter Russia joins the WTO, import duties for live swine will decrease from the current Gazeta.Ru_02.02.201240% to 5% and because of this Russian companies have threatened to freeze the “The media world is changing and developing. The Russia Forum 2012.construction of hog farms. However, yesterday at The Russia Forum 2012, both Rusagro The Russian movie distribution market has Roubini: Growth Comes from Humanand Cherkizovo, as well as other major pork producers promised that this won’t happen. exceeded $1 bln and we want to establish Resources and Not Natural Ones Earlier at the forum the financier called on the Russian government toThe CEO of Rusagro, Maxim Basov, stated that in the next three years the company intends contacts between investors and contentto increase pork production by more than threefold to 200,000 tonnes per year (in 2011 makers in order to understand where this Roubini noted that the examples of the world’s most successful heavily curtail the amount of state subsidies pumped into the economy. Heit produced 63,500 tonnes). industry is moving and to show investors economies of the past 30 years are those of countries where substantiated this position by saying that the subsidies “sap private initiativeVladimir Zotov, CEO of Agro-Belogorie, announced that within the next two years his that there are new opportunities. We hope there are no natural resources. “These countries are Japan, Korea,company will increase pork production by one and a half times and that production will that Russia will not only import content, but Hong Kong, Singapore, and Israel with 100% human resources, present in the economy.”hit approximately 150,000 tonnes. also begin to export it,” explained Troika not natural ones. The source of growth is investment in humanSergey Mikhailov, CEO of Cherkizovo Group also had something to say: he voiced (for the Managing Director Gor Nakhapetyan. capital.” The economist noted that in recent years in developed According to the World Bank, in 2010 Russia took eleventh place in terms offirst time) that in 2013 the company’s pork production plan envisages a rise to 180,000 economies, investments have been made in the financial sectortonnes from the current 91,400 tonnes. All of these companies are part of the top five Finparty_06.02.2012 or real estate, and that not enough attention or financing has GDP and sixth in terms of PPP.largest producers. been focused on human capital. The professor sees this as the root of economic problems.. Kommersant_03.02.2012 Rossiya 24_02.02.2012 BBC Russian_02.02.2012 T E L E T Y P E 8 7
    • T H E R U S S I A F O R U M 2 0 1 2Sberbank to Pump $500mln into Tech Investing Inflation in Russia Drops by 2 Percent since Start of YearRussian lender Sberbank is to invest $500 million in a series of technology funds managed by Troika Venturesover the next five years, the fund said on Friday, and the money will target tech companies which can expand As of February 3 inflation in Russia had fallen to 4.1% year-on-year from 6.1% at the end of 2011, announced First Deputy Head of the Central Bank of Russia Alexey Ulyukaev at The Russia Forum 2012, a conference organised by Sberbank of Russia and Troika Dialog.internationally. In his words, the overall level of inflation for 2012 will be within the 5.5-6% range. The Russian Ministry of Economic Development has forecasted inflation of 5-6% after the 6.1% growth of prices in 2011. According to data provided by state statistics service Rosstat, for the period from January 1 to January 30 consumer prices grew by 0.5%. Rossiyskaya Gazeta_03.02.2012The funds will be managed by Troika Ventures, the venture arm of Troika Dialog, Sberbank’s recently-acquiredinvestment banking business. Troika Ventures, founded in 2007, is aiming that another $200 million will be Rajan: First Develop Troika Dialog Moscow Forum: Disputesraised from outside investors over the five year period. Real Economy and over Russian Oil then Finances In the second session at an investment forum in Moscow held by“It will be a classic venture fund,” said Troika Venture Capital Department Director Andrei Vakulenko, speaking to Sberbank and Troika Dialog in Moscow, panellists disagreed about At The Russia Forum 2012, Chicago University professorReuters on the sidelines of The Russia Forum 2012. “We are not interested in companies which can work only Raghuram Rajan answered Herman Gref’s questions about almost everything to do with the present and future of Russian the impact of tough fiscal policy on growing inequality inin Russian markets - but Russian companies which can work in global markets or global companies which can industrialised countries, and about Moscow’s chances to become oil. The baseline projection by Christof Ruehl, chief economist at an international financial centre.expand in Russia.” BP that global oil consumption will grow at a compound rate of , The current crisis, in Rajan’s opinion, is nothing more than a crisis 0.6% per year to 2030, and that 90% of additional demand will Reuters_03.02.2012 of aggregate demand. In his words, one of the most important aspects of the crisis is the growing inequality present in industrial come from India and China, was immediately disputed. Dmitry societies. This inequality is reflected in the fact that from birthCapital Outflows people have differing opportunities to improve their welfare and Konov, the CEO of Russian petrochemical firm SIBUR, pointed Forum Added to for some it is simply impossible to achieve what others achieve.to Continue Evening Agenda out that consumption is likely to moderate as it runs into capacity The economist also pointed out the problem that today’s form ofthis Year <…>… The (Forum’s) evening programme was no higher education does not correspond with the needs of the real constraints. <…> less interesting than Prime Minister Vladimir Putin’s sector. “If you have a higher education it doesn’t mean that youclaims Gref three-hour visit. To begin with, a select group of forum will automatically find a good job,” warned Rajan. He noted that Clashes arose again over specific Russian tax policies. Sergey participants and guests were shown Kirill Serebrennikov’s people with high school educations can achieve more than those Kudryashov, Russias deputy energy minister, claimed the The head of Sberbank of Russia Herman Gref believes that the trend new performance entitled “Metamorphoses” on stage with higher education due to the time that they save. Jobs require of capital outflows from Russia will extend into this year. He stated this at the Chekhov Moscow Art Theatre. This was a deluxe more specialised skills that are not offered by universities. targeted tax reductions on the Vankor, Verkhnechonsk and opinion during a discussion with journalists on the sidelines of The Russia version of the show, which is planned to premiere this Rossiya 24_02.02.2012 Forum 2012 on Thursday. spring: exclusively for the forum, the performance based Talakan fields have “worked their magic”, boosting overall Back in mid-2011 the government assumed that outflows would not on Ovid’s poem included an appearance by prima Diana exceed $30-35 bln. However, in previous months capital outflows rapidly Vishnyova, opera diva Jessye Norman and musician Kelimbetov Assigns Second-tier Banks the output after a decline in 2008. accelerated and as a result totalled $85 bln by the end of the year. Djivan Gasparyan. Konstantin Khabensky as narrator and Role of Domestic Banks But Bashneft CEO Alexander Korsik said the targeted solutions Answering a question about whether capital outflows had hit the “bottom”, Alla Demidova and Renata Litvinova as goddesses, roles Gref said that because the outflows are made up of operating revenue, that are natural to them, remained from the standard would not ultimately work because the state cannot do a better Vice Prime Minister of Kazakhstan Kairat Kelimbetov assigned second-tier capital always has an exit. version. Among the guests were presidential press“[Outflows in 2012] are possible, and unfortunately, very possible,” said the secretary Natalya Timakova and her spouse; Alexander banks the role of domestic banks, reported a correspondent from agency job of picking the winning fields than oil companies themselves. head of the largest bank in Russia. Budberg, advisor to the president of VTB; presidential KazTAG. Earlier the Bank of Russia announced that in January of this year capital advisor Mikhail Abyzov; Federation Council member He would prefer a universal system of lower brownfield taxation. outflows have continued. Vadim Moshkovich; Deputy Mayor of Moscow Andrey “Everyone should do his own work. Development institutes and His colleague, Alexander Dyukov of Gazprom Neft, added that In Gref’s opinion, it is possible to contain this trend and the government Sharonov, President of IBS Group Holding Anatoly must take action after the elections. Karachinksy; Managing Partner of Flagship Ventures development banks have took on an anti-crisis function. Yet this isn’t a the system should evolve toward profit-based (not revenue- In mid-January First Deputy Head of the Central Bank of Russia Alexey Noubar Afeyan; TV presenter Sati Spivakova; and Art function that is inherent to them. Their role is to diversify and develop the Ulyukaev announced that as a result of the previous year, the Bank of Director of Chekhov Moscow Art Theatre, Oleg Tabakov based) taxes. Russia expects a zero capital outflow-inflow balance. and his wife Marina Zudina. economy and create new sectors of the economy,” he said. Kommersant_06.02.2012 Forbes Russia_06.02.2012 Investment Europe_03.02.2012 RIA Novosti_02.02.2012 T E L E T Y P E 8 9
    • T H E R U S S I A F O R U M 2 0 1 2Kudrin on the Historical Moment Experts: Russian Federation not Using Favourable Growth Sobyanin: On the Whole Moscow has Overcome Opportunities to the FullThe ex-Finance Minister stated that for Russia the current political Consequences of Economic Crisis In the opinion of international experts,situation is decisive in selecting the country’s path of development. He Russia is not using its own potential and favourable macroeconomic conditions foralso made calls to reform the economy: “We aren’t just addicted to oil stimulating growth to the fullest extent. On the whole Moscow has overcome the consequences of economic downturn that occurred in 2008-2009, “It’s troubling when you look at Russiaand gas, oil and gas have also restructured our economy”. from the outside and you see that that they only city mayor Sergey Sobyanin announced Friday at investment conference The Russia Forum 2012. “In 2011 the achieved 4% growth during such a favourable situation,” commented Kenneth Rogoff, professor capital’s economic growth equalled 4%. In Moscow we have practically no unemployment; by International of public policy and economics at HarvardReforms of Russia’s electoral legislation and political legislation University, in a speech at The Russia Labour Organization standards it is around 1%,” said Sobyanin. Forum 2012.announced after the mass protests against falsification at the elections He also emphasised that despite the fact that the In his words, for the first time in recent years, investment in Moscow’s economy has begun to grow again. “I global economy is currently in a rather difficultto the State Duma will give Russia a chance to follow a new path of situation, Russia’s macroeconomic situation consider that the Moscow market is the sort of market that takes on any possible investments. It is considered remains stable enough. “Let’s hope that the growthdevelopment, considers ex-Finance Minister Aleksei Kudrin. “It seems (of the Russian economy – editor) will continue,” that Moscow is saturated with investments and overdeveloped. This is partly true, especially with regard to the he remarked.to me that this is one of the most important historical moments in our Rogoff also added that he is concerned that centre of the city. But despite that, analysis we have conducted shows that Moscow seriously lacks retail areas,” Russia’s economy is not becoming morecountry, this (initiatives of the President and Prime Minister concerning diversified, especially in sectors focusing on the city head emphasised. exports. “You need to export high-tech capital andreform of the political system – Interfax) is vital to us,” he said in a high-tech software… But instead of exporting RIA Novosti_03.02.2012 goods, you’re exporting people,” he said,speech at The Russia Forum 2012, organised by Sberbank and clarifying that Russia needs to lay down the conditions to take advantage ofTroika Dialog. its human capital. Chubais vs. Zimin: Results of The Russia Forum 2012 Prime_02.02.2012 the State vs. Markets to Become Clear by End of YearInterfax_02.02.2012 Does Anatoly Chubais, the architect of Russia’s The banking sector is in a tense situation, but this isn’t a crisis. privatisation programme in the early 1990s, have the answer Russia needs investments in the high-tech sector, but the traditions to the dilemma facing Russia now: how best to diversify of making such investments don’t exist. Moscow is an attractive Troika Surprises with its raw materials economy into one driven by innovations? market for capital, but the safety of investments cannot beRussia “Stuck “Metamorphoses” As head of Rusnano, the state corporation attempting guaranteed. The Russia Forum 2012 is like a mirror of modern to spearhead that leap, Chubais, perhaps not surprisingly, economic contradictions. Statements made by participants can bein First Gear” “Metamorphoses” was performed at the Chekhov seems to have undergone an evolution of his own. He now found in the material of Vesti FM correspondent Sergey Artyomov. Moscow Art Theatre for guests and participants sounds much more positive about the role of the state than The Central Bank is maintaining its current interest rates. In theAt The Russia Forum 2012, Moscow’s version of the World Economic of The Russia Forum 2012, organised by he would have done nearly 20 years ago when as a free opinion of First Deputy Head of the regulator, Alexey Ulyukaev,Forum, Lars Thunell, CEO of International Finance Corporation, Troika Dialog and Sberbank. Director Kirill marketeer he helped dismantle the command economy. this fully reflects the country’s relative macroeconomic stability:compared Russia to a powerful vehicle persistently moving in Serebrennikov staged his performance based on <…> But the Anatoly Chubais’ address during a “We’re seeing a balance of economic growth risks as wellfirst gear. <…> Ovid’s poem and brought to the stage Konstantin debate that centred on Russia’s attempts to lead innovation as inflation risks: the situation is not changing in either direction.”For Thunell, Russia’s ineffective and opaque system of governance Khabensky, Renata Litvinova, a number of aerial from the state down at an investment forum organised The liquidity problems in the banking sector, a popular topicand the special status of businesses with government participation are slowing gymnasts, and Diana Vishnyova. The main part of by Sberbank and Troika Dialog faced a barrage of criticism. of discussion at the end of last year, have not gone away.that vehicle down. work was done in the last few days prior to the His worthy opponent was Dmitry Zimin, a 78-year-old However, the Central Bank’s other Deputy Head, AlexeyThe Russian economy remains relatively stable, however, growing by performance and the ancient text was reworked, former Soviet military engineer who pioneered the Simanovsky, calls this tension: “To a large extent its offset by fiscalmore than 4.5% in 2011 and even beating market consensus estimates said Serebrennikov <…> development of Russia’s first mobile telephone company, Beeline, injections, however, budgetary money is taking its own route andof 4.1%. That’s better than Brazil, long a darling of emerging in the early 90s. the situation from the point of view of liquidity won’t be as greatmarket investors. But everyone thinks Russia could do better. At every forum Troika surprises its guests. This Zimin pilloried the idea that the state could lead innovation, as it was a year and a half or a year ago. But this is definitelyIt’s by far the richest of the big four emerging year their surprise was a unique performance: the saying the whole world had changed since the not a crisis!” <…>markets — Brazil, Russia, India and China — as measured merger of Troika and Sberbank is indeed also a days – in the 1970s – when the high-tech industryby per capita income. <…> type of metamorphosis, commented Troika Dialog was led by the state and driven by orders from Vesti FM_05.02.2012 Managing Director Gor Nakhapetyan. <…> the military.Forbes_03.02.2012 BusinessFM_03.02.2012 Financial Times_03.02.2012 T E L E T Y P E 9 1
    • T H E R U S S I A F O R U M 2 0 1 2“INVESTMENTS IN CINEMA,TELEVISION AND NEW MEDIA” I DMITRY KONNOV, General Director, Universal Music Russia DMITRY LITVINOV, Founder and General Director, Planeta Inform Communication Group EKATERINA KOPYLOVA, SPECIAL DAY PETER IACONO, Head of Ukrainian State Film Agency MARK LOLO, VYACHESLAV MURUGOV, Managing Director, Lionsgate Television President, Central Partnership General Producer, STS Media Holding; SPEAKERS VASILY KORETSKY, General Director, STS Television Channel OLEG IVANOV, Film Critic, Editor in Chief, Movie Section, MICHAEL LONDON, General Director, Movie Research OpenSpace.ru Producer ALEXANDER AKOPOV, LEONID DEMCHENKO, ALEXANDER KOSTYUK, OLGA LOYANICH, Chairman of the Board of Directors, Russia’s National Representative Consultant of Leading Media Holdings General Director, Volga Amedia; Member of the Board of Directors of the Producers Guild of Russia in the Eurimages Fund ARMEN DISHDISHYAN, J PAVEL KRAPIVIN, Vice President, Warner Brothers ANDY LUCAS, Vice President, New Technologies, ALEXANDER ALEKSEEV, Executive Vice President for International NBCUniversal Executive Creative Director, EMCG; Projects, Central Partnership BILL JOHNSON, ILYA KRIVITSKY, President of the Russian Art Directors Club Co-founder and Partner, Inferno Entertainment Creative Director, Krasny Kvadrat MIKHAIL LYALIN, Chairman of the Board of Directors, ANNA KRUTOVA, Zeptolab B F K Producer, Vice President, CTB; Advisor to the Managment Board of the Association of Cinema and TV Producers ILYA BACHURIN, DZHAKHANGIR FAIZIYEV, Director, Producer SERGEY KAPKOV, IVAN KUDRYAVTSEV, Editor-in-Chief, The Hollywood Reporter M General Director, Glavkino Group Head of the Moscow City Department REGINA VON FLEMMING, of Culture ILYA KULIKOV, Screenwriter GADJI MAHTIEV, PAVEL BARDIN, Director CEO, Axel Springer Russia Founder and Owner, KanobuNetwork ANATOLY KARACHINSKY, ALEXANDRA KUYAROVA, TIMUR BEKMAMBETOV, Producer, Director RAISA FOMINA, President, IBS Group Creative Media Director, ZenithOptiMedia GEORGY MALKOV, General Director, Intercinema (New Cast) Producer, Founder, KIM BELOV, Screenwriter MAXIM KASHULINSKY, Enjoy Movies VALERY FYODOROVICH, General Director, SLON.RU OLEG BEREZIN, General Director, Nevafilm Chief Producer of Series Production, VITALY MANSKY, FYODOR BONDARCHUK, TNT Television Channel ALEXANDER KAURYKH, CEO, DViZ RealTime Systems Inc (Vancouver), Director, Producer L Producer, Director of Documentary Films Director, Producer, Co-owner of Glavkino and Art Pictures Studio ALEXANDRA KHANTER, New Projects Director, YULIA MATYASH, General Director, SovTeleExport N SERGEY BONDAREV, Film Critic G Sony Pictures Television Int. NIKOLAY KHOMERIKI, KSENIA LEGOIDA, Managing Partner, Proplacement (All-Russian State Television and Radio Broadcasting Company) ALLA NAGLIS, CAITLIN BURNS, Director, Screenwriter HAGAI LEVI, MAXIM MIKHAILOV, Partner, King & Spalding Editorial Lead, Transmedia Producer, ELENA GROZNAYA, Director, Screenwriter, Producer, Creator Managing Director, NBCUniversal Russia Starlight Runner Entertainment Managing Director and Partner, ANNE KIRSIPUU, Director Fremantle of the television series In Treatment, GOR NAKHAPETYAN, iMARS|Kultproekt Media for Russia and the CIS Golden Globe and Emmy winner, Israel VIKTOR MIRSKY, Managing Director, Troika Dialog General Director, Film.ua DOBRYNYA GUTIEV, YULIA KIRYUKHINA, DANIEL LIBERMAN, MARY NAZARI, D Business Development Director, MediaCom General Director of a Group of Film Projects, iMARS|Kultproekt Head of Concept Space studio DAVID LIBERMAN, IGOR MISHIN, Producer, Vice President of the National Broadcasters’ Association Producer, General Director, Pioneer Cinema Chain Head of Concept Space studio DMITRY NESTEROV,General Director, INGEBORGA DAPKŪNAITĖ, Actress RENAT DAVLETYAROV, H DMITRY KOLESNIKOV, Vice President, Association of Producers of Ukraine ALEXANDER LIGER, Deputy General Director, EKATERINA MTSITURIDZE, Editor-in-Chief, Variety magazine; General Director, Sovexportfilm CINEMOTION GROUP EVGENY NIKISHOV, President of the Producers Guild of Russia Video International Editor-in-Chief, TNT TV Channel ALEXANDRA HUNTER, KLIM KOLOSOV, JEAN-LUC DE FANTI, Head of Development, Director of Media Services, Managing Director of Hemisphere Capital Sony Pictures Television Int Associated Press; Producer Management S P E C I A L D A Y 9 5
    • T H E R U S S I A F O R U M 2 0 1 2 SERGEY TOLSTIKOV, Executive Director of the Federal Fund for Social and Economic Support of Russian Cinematography W NIKITA TRYNKIN, LANCE WEILER,O R YEVGENY SAVOSTYANOV, Senior VP Federal Programs and Corporate , Managing Director, Bazelevs Film Company Head of the Section “Content of the Future” at the World Economic Forum Management, Sistema Mass Media ASKAR TUGANBAEV,TATIANA OGNEVA, GIDEON RAFF, Development Director, Internet Projects, TIMUR WEINSTEIN,Managing Director, Proplacement Producer, Screenwriter OLEG SILVANOVICH, STS Media General Producer, Founder, General Director, Belarusfilm WeiT Media GroupSERGEY ORLOVSKY, MIKHAIL RAIBMAN, OLEG TUMANOV,Founder and President, Nival Advertising Relations Manager, TNS NATALIA SINDEEVA, President, ivi.ru Director, Dozhd. Optimistic Channel ANTON RAKHMANOV, Managing Director, Troika Dialog ALEXEY SITNIKOV, Y ALEXANDER RODNYANSKIY, Producer, Chairman of the Board Advisor to the President and the Chairman of the Management Board, Sberbank of Russia V YEGOR YAKOVLEV, of Directors, AR Fillms General Director, Tvigle.ru ANDREY SMIRNOV, RICHARD VACZY, ELENA ROMANOVA, General Director, Sistema Mass Media Senior Consultant, ELENA YATSURA, Director of the International Department Sony Picture International Producer of the Cinema Fund MARIA SMIRNOVA, General Director, Sony Pictures Television NATALIA VASHKO,NADAV PALTI, DMITRY RUDOVSKY, Russia Partner, Managing Director,Chief Executive Officer & Presidentof Dori Media Group, Israel General Director, Art Pictures Studio VLAD RYASHIN, SANDRA STERN, COO, Lionsgate Television Media AAA BUREAU, London ARTYOM VASILYEV, ZFYODOR PETROV, Chairman of the Board of Directors General Producer, METRAFILMSCEO, AR Films and Founder, Star Media Group MARINA ZHIGALOVA-OZKAN, MARINA ZHUNICH, EKATERINA VESELKOVA, General Director, Walt Disney GR Director, Google RussiaEDUARD PICHUGIN, DENIS RZHAVSKY, Commercial Director, Company CISChairman of the Board of Directors, Lenfilm President of the Ukrainian Association TNT Television Channel YURY ZINCHENKO,Film Studio, Founder of federal cinema of Cinematographers EKATERINA ZHMOTOVA, Dean, Psychology Departmentnetwork Kronverk Cinema and Kino City ROMAN VOLOBUEV, Strategy Director, at Moscow State University; President, Journalist, Columnist, Afisha magazine Central Partnership Russian Psychology Society;ALEXEY POPOGREBSKY, Director,Screenwriter S Member of the European Federation of Psychologists AssociationsILYA POPOV, RUSLAN TAGIEV,General Producer, Smeshariki Project YURY SAPRONOV, General Director, TNS Russia Group General Director, Russian World StudiosIRINA PROKHOROVA, ANDREY TERESHOK,Development Director, SKOLKOVO ROMAN SARKISOV, General Director, Kronverk Cinema General Director, MTV S P E C I A L D A Y 9 7
    • T H E R U S S I A F O R U M 2 0 1 2 CINEMA, TELEVISION AND NEW MEDIA IN 2012: KEY TOPICS MEDIA PIRATES: IS IT WORTH DEALING WITH THEM? The Hollywood Reporter are breaking into MODERATOR: the Russian market. At the same time the MARINA ZHIGALOVA-OZKAN МОDERATOR: NATALIA VASHKO labour has to be paid for, and just because General Director, Walt Disney Partner, Managing Director, cinema, TV and internet spaces are merging. the result of labour can be stolen it doesn’t Company CIS Media AAA BUREAU, London In 2011 Russia came first in Europe in terms mean it has to be stolen. It is dangerous of the number of internet users and became to let people get used to free access to one of the world leaders in the amount of time SPEAKERS: SPEAKERS: ALEXANDER AKOPOV programmes and other content on internet Chairman of the Board of Directors, Amedia; spent on social networks. Despite this, TV and PAVEL KRAPIVIN resources. Another illusion that they try Member of the Board of Directors of the Producers magazines are holding their positions but the Vice-President, Warner Brothers Guild of Russia to sell us is that piracy means advertising. share of radio and newspapers is decreasing. A ANDY LUCAS MARINA ZHUNICH But it’s not true. The ratio between home transmedia space is being formed in this country Vice President, New Technologies, GR Director, Google Russia entertainment to cinemas is 7:1. The main very actively: all the premieres are supported NBCUniversal market is at home and by undermining it we YEVGENY SAVOSTYANOV on the web, online booking of tickets has been SANDRA STERN Senior VP Federal Programmes and Corporate , undermine the economics of our industry. COO, Lionsgate Television Management, Sistema Mass Media developed, content is being distributed via the However, if cinema ceases to exist, like the internet and viewers now have the possibility to music market for example, it might be for individually aggregate content. Content creators of the internet in terms of the consumption mankind’s benefit. He noted that we stand have to be on top of technologies and follow of TV content. Specifically, lately users watch NATALIA VASHKO made a little excursion into for the development of the Internet, for the changes in the patterns of content consumption. content simultaneously on two screens, for the history of the topic. In the 20s, she said, the development of digital distribution and are question as to whether the fight against piratesThis special day of the Forum was inaugurated by GOR After having come to Russia six years ago, The example on TV and on iPad. According to his development of radio had caused a scare among prepared to provide our facilities so that the will go on sounds more or less like ‘Is there lifeNAKHAPETYAN, Managing Director at Troika Dialog. Walt Disney Company opened their own portal in data, over the last two years the consumption musicians, but nonetheless people didn’t stop going pirates can legally earn money from the sale of on Mars?’ In a constructive way we can discuss An unprecedented number of topics suggested for 2008, became leaders in a number of segments of TV content has grown significantly among to concerts. In the 40s the American motion picture content: they have their own solutions and they something else: what should be done to optimise discussion aroused the interest of 90 speakers and and has recently launched a Disney broadcasting smartphone owners. Tablets are acquiring studios had lost their movie theatres and everyone are close to our consumers, he said. The only the monetisation of content in the internet? 700 delegates, he said. He also expressed a hope channel. The first Russian Disney film The Book of new significance: they are handy for watching started talking about the end of film distribution, thing that cannot happen on a legal platform Alexander Akopov said he was convinced that that in the course of discussions the representatives Masters was sold in 65 countries and received nine longer programmes and their users are getting but the number of cinemas in the USA quadrupled. is the simultaneous launching of a film on the the internet industry should get prepared for of business and creative circles – the three key awards at international film festivals. For Disney, used to buying content packages in Ultra- The appearance of video didn’t cut the gains of film internet and in movie theatres. retrospective lawsuits for all the damage of past segments: cinema, TV and new media – will be Russia is a global player in the market of production Violet format. distributors but instead became a new channel of years. Marina Zhunich came to the conclusion able to find some common ground. of digital content. distribution. Today’s television is worried that it MARINA ZHUNICH stressed that Youtube has that it’s necessary to create an automated PAVEL KRAPIVIN went further in this discussion might be swallowed up by the internet but those been created for the purpose of distribution and system that would easily detect and delete any According to MARINA ZHIGALOVA-OZKAN, SANDRA STERN highlighted a strong recent trend: by saying that the consumption of content who have digital recording devices watch 15% so that the film industry can make a profit from the illegal content. Alexander Akopov remarked today’s world has transformed into a transmedia TV viewers are eager to watch what they want, when is changing quickly – Blue Ray technology is more TV than the average TV viewers. Besides internet, but the industry simply ‘doesn’t know that it is not enough to delete the illegal space. Various sources confirm that Russia is they want and on the most convenient platform, already taking the place of DVD and viewers that, due to the onrush of modern technologies, how to cook it up’. If a year ago there was just one content – the system should automatically capable of becoming a media market world whether it’s on plasma screens or iPads. But quality want to watch their favourite movies where teenagers are becoming more active as they partner, today there are 70 and 90% of them are divert the user to legal resources. leader. Today Russia is among the top 10 television doesn’t stop being television and if a and when they want, and straight away. He choose what’s more convenient for them. And monetising their own channels. The approach to advertising markets; Hollywood studios directly programme is being prepared for mobile viewing it suggested that participants of the discussion business must also take into account the users’ piracy is changing: Russia Today makes money on operate on the Russian film distribution market has to be shorter. Ms Stern spoke about the business- should picture the ‘Ultra-Violet cloud’ that convenience. copied content by using it as marketing promotion and run advertising campaigns designed model of her studio which still needs a colossal update. would embrace the whole of media production material. especially for Russia. The most respectable When a new project is being launched, instead of a and then predicted the future, promising that ALEXANDER AKOPOV expressed certainty publications of the film industry, Variety and costly pilot release, the studio produces 10 high very soon we’ll all be users of this technology. In that the problem of piracy exists worldwide YEVGENY SAVOSTYANOV said that during similar quality episodes. If they are successful, another 90 his opinion, Hollywood is not just supporting this and that in the most developed countries meetings people try to transform talk regarding episodes are produced within two years and launched format but is even making huge investments in it. channel saturation has hit its peak and a fighting theft into talk about content distribution. on all distribution channels. In the cloud everything has been designed for the price race has started. Piracy will soon be Many TV and film companies have put their content user’s maximum convenience: you buy content dealt with by providers and access to the on the internet in order to make it legally accessible; In his speech ANDY LUCAS covered three aspects and watch it on any media device. Currently internet will be free. The ideology behind but it’s impossible to convince the copyright holder relevant to the USA: changes in the forms and research is being conducted that aims to find a it is simple: give people everything and that he can profit from free viewing – downloading requirements of consumption, development of new commercial solution to adapt the cloud so that it give it free because it can be done. But free movies is like going to the pictures without a distribution channels and appearance of new distribution becomes possible to subscribe to the consumption according to the basic law of economics, ticket. The attitude to intellectual property has always forms on the market. He also stressed the significance of a specific localised window. been nihilistic in Russia but the free internet community will be eventually brought to civilised standards. The S P E C I A L D A Y 9 9
    • T H E R U S S I A F O R U M 2 0 1 2 STATE SUPPORT OF THE PRODUCTION AND DISTRIBUTION OF NATIONAL CINEMA – WHAT IS GOING TO CHANGE? HOW TO FINANCE MODERATOR: OLEG IVANOV, CINEMA AND TV PROJECTS AT THE General Director, Movie Research EXPENSE OF ADVERTISERS SPEAKERS: RENAT DAVLETYAROV EKATERINA VESELKOVA shared with advertiser and the viewer. It’s better to avoid attracting MODERATOR: President of the Producers Guild of Russia her colleagues the experience of TNT excessive attention as happened with the sequel to ALEXANDER ALEKSEEV concerning the attraction of sponsors- The Irony of Fate. However, there there have been Executive Creative Director, EMCG; DZHAKHANGIR FAIZIYEV President of the Russian Art Directors Club Director, Producer partners. There is a ‘product-based examples of successful collaboration, for example: ANNA KRUTOVA approach’, when there is a direct link Pepsico with Bazelevs Film Studio, during the Producer, Vice-President, CTB; Advisor between the theme of a new project and production of Wanted; the product as such wasn’t SPEAKERS: to the Managment Board of the Association the choice of candidates for sponsorship. big but there were plenty of reminders about it, DOBRYNYA GUTIEV of Cinema and TV Producers Business Development Director, Then there is also the ‘philosophic approach’, and the trailers were doing a favour both to the GEORGY MALKOV which means that the advertiser secures for film and the customer. MediaCom Producer and Founder of Enjoy Movies TATIANA OGNEVA itself not just a niche but a specific platform, DMITRY RUDOVSKY Managing Director, Proplacement as it was with MegaFone on TNT during the The support provided by Raiffeisenbank to EKATERINA VESELKOVA General Director, Art Pictures Studio work on the Dom-2 (House-2) project. The the Chekhov International Theatre Festival is Commercial Director, SERGEY TOLSTIKOV third approach is the ‘360 degree approach’, an interesting example. Outdoor resources TNT Television Channel Executive Director of the Federal Fund for Social and Economic Support of Russian Cinematography when the advertiser appears not only on TV were used to advertisе the festival, whilst screens but also on outdoor advertising, the the bank was given the elite status of a to be among the best in the world and NIKITA TRYNKIN Managing Director, internet, etc. The fourth option is when ‘the patron of the arts. The TV reality show its budget was largely covered by the Bazelevs Film Company impossible is possible’, as illustrated by the co- Igra (The Game) that had been created involvement of sponsors. Tatiana Ogneva operation of Univer project and Sberbank of in a customized format happened finished her speech with a story about a Russia – a teenage series was supported by one film project in which a brand, totally new of the most conservative Russian brands. Ekaterina in Russia, had become a strategic partner –SERGEY TOLSTIKOV set the direction of the According to information from NIKITA Veselkova summarised the secret of successful co- “an ideal version of synergy between thediscussion by stating that the structure of TRYNKIN, the takings of Russian film operation with advertisers as “You have to determine client, cinema and TV”.government support has been changed in order distributors in 2011 totalled RUR 5.6 your own value, take it to your customer, and offer to protect medium and large companies that are billion, which represented 16% of the them precisely what you have”. DOBRYNYA GUTIEV mentioned that key elements in the structure of the film industry. total amount of takings. At the same time, cinema occupies not more than 1-2% in the This measure reassured all the participants in this Russian films sponsored by the Federal Fund TATIANA OGNEVA remarked that often successful film breakdown of the customers’ finances for industry. However, it was clear that with regard for Social and Economic Support of Russian and TV products are distributed and broadcast without various projects, and named the reasons why. to the distribution of finance, state support has Cinematography had gathered 60% of all the any commercial partner at all. The problem is the lack of Unlike television, which easily guarantees a to become more competitive. On the other proceeds. Mr Trynkin highlighted the project consensus between the three parties – the producer, the result, film producers must make risky decisions. hand, if we want the companies to spend Smeshariki. Nachalo for the financing of which Apart from that, they are not always clear about public funds more responsibly, they have to be a mutual investment fund had been created the specific tasks that a certain brand must carry subject to refund this money, from 10 to 50% and which was the first experience of this kind GEORGY MALKOV remarked that it’s possible to out. Another problem is related to the belated depending on the nature of projects. in Russia. bring back the viewers’ interest to Russian cinema release of projects: it is hard to find a last minute by promoting family movies for schoolchildren budget – also, they are usually smaller than RENAT DAVLETYAROV expressed the DZHAKHANGIR FAIZIYEV stressed the need and their parents. At the same time, these have necessary. What are the solutions? First of all, to opinion that the past scenario when the to increase professionalism in the film industry; to be high quality films as children represent understand where the cost of investments comes distribution of funds was done on the professionals should get the required ‘training’ by the potential target audience for the planned from. Organisational issues are important and basis of ‘back room games’ had resulted shooting blockbusters, since the industry needs return of Russian viewers to movie theatres. in this respect, mutual understanding is a must. in a huge growth of the production cost exactly this type of industrial approach to movie Delays in the release of films to distributors also of films. Government support must be making. DMITRY RUDOVSKY concluded the discussion create problems, for example, the delayed film actually based on competition which has on a high note by expressing his certainty that Generation P was promoting models of telephones to be created, as the film industry can’t ANNA KRUTOVA asked her colleagues to pay everything is changing for the better. The which were not available for sale at the moment exist within a ‘paradise for eight’. In the attention to the fact that public funds should be used government has abolished the tax on import of of the premiere. In conclusion, Dobrynya Gutiev situation that exists today, independent to build movie theatres in the regions, thus creating digital equipment, which will make it possible to stressed that advertisers want to see a structured, producers cannot count on the a possibility, often the only one, for people to engage renew the existing digital projectors and to show comprehensible market and not unrelated splashes implementation of their projects. in cultural activities in their leisure time. low-budget films on a larger number of screens. of activity. S P E C I A L D A Y 1 0 1
    • T H E R U S S I A F O R U M 2 0 1 2 IS THERE A FUTURE FOR CINEMAS AND DISTRIBUTION? the role of Rasputin. In France, the MODERATOR: in cinemas and that no other way IVAN KUDRYAVTSEV success of the TV drama Rasputin, shot of viewing films can compete TV journalist, in St. Petersburg and Tsarskoye Selo with the big screen. Editor-in-Chief, The Hollywood Reporter with a budget of €6 mln, exceeded all (Russia) expectations. A movie version is being EDUARD PICHUGIN stressed the prepared in Russia and in autumn the SPEAKERS: continued growth of the number film will be released with a new cut OLEG BEREZIN of cinemas. However, the cinema and soundtrack. MARIA SMIRNOVA General Director, Nevafilm business involves large risks and spoke about the possibilities of adapting FYODOR BONDARCHUK it is hard to break even. This is Director, Producer, Co-owner cinema products in accordance with why movie theatre chains take so of Glavkino and Art Pictures Studio the specific features of the national long to develop in this country. The CO-PRODUCTION: PAVEL KRAPIVIN perception and stressed that Sony Vice-President, Warner Brothers peculiarities of the development of Pictures always takes into account which EDUARD PICHUGIN the film distribution network in Russia format works better in which country. Chairman of the Board of Directors, are such that new movie theatres are OLEG BEREZIN raised the problem of the HOW TO FIND A COMMON LANGUAGE NADAV PALTI also spoke about the peculiarities of adaptation. Israeli soap Lenfilm Film Studio, Founder of federal cinema network opening in shopping malls only, whilst in smaller cities the construction of new generation of viewers who prefer virtual communication and who know Kronverk Cinema and Kino City operas are sold to 120 countries around the latter is not to be expected. Mr how to master modern gadgets from a ANDREY TERESHOK ELENA ROMANOVA emphasised distributors created by the Council of Europe the world. ALEXANDER RODNYANSKIY General Director, Pichugin’s company goes to these small very young age. It’s they who will come that co-production encourages the in 1988 that unites 33 countries who are remarked that Russia is the fifth largest Kronverk Cinema cities (where he has already launched to movie theatres after those who still integration of Russian cinematography trying to resist the ‘predominance’ of American market for Hollywood films and that the 11 cinemas with 40 screens), despite remember the Russian films of the early in an international context, gives access movies – facilitates Russia’s involvement in co- export of Russian films is the weakest link the fact that according to experts, film 2000s; these generations have very to the international film distribution production. ALLA NAGLIS identified the legal in the domestic film industry. distribution is not profitable in such different tastes and attitudes to cinema. market and increases familiarity with issues concerning co-production and said ANDREY TERESHOK spoke about market localities. Mr Berezin then spoke about the issues expertise from abroad. It’s hard to that they help to clearly define commercial trends, especially about the VPF system which of alternative content, which is what overestimate its advantages, for example and creative interests. It is the legal side of will soon reach Russia. Distributors are trying FYODOR BONDARCHUK claimed that his company is involved in. Opera is in MODERATOR: ELENA ROMANOVA the broadening of inter-cultural borders, co-production that allows the combination to stimulate movie theatres’ conversion to the state doesn’t need to support large the greatest demand in movie theatres; Director of the International the strengthening of Russia’s image, the of state interests in promoting national Department, Cinema Fund digital equipment by refunding costs of digital companies engaged in film distribution football matches can also be shown growth of the film industry and the national identity with the interest of the producers installation, part or in full. Another positive as it does now. They should support small there live in 3D. In small cities cinemas economy on the whole. The Cinema Fund in state funding. In reply to the moderator’s SPEAKERS: LEONID DEMCHENKO trend is the revival of a developer market distributors which are capable of a more that were showing such content were pays special attention to the production and question about the possibility of co- Russia’s National Representative and the appearance of new proposals to the subtle approach to the distribution of sold out. distribution of Russian films: in 2011 the operation with Russian producers, SANDRA in the Eurimages Fund owners of chain movie theatres in shopping more complex non-mainstream films. Mr Fund’s support totalled €3 mln. Among the STERN remarked that so far, there is only a BILL JOHNSON malls from contractors. The last trend he Bondarchuk is certain that Russian movies Co-founder and Partner, Inferno Entertainment factors that hinder the development of co- work agreement with Canada. When the mentioned is piracy – fighting piracy still can bring not more than 30% to the overall YULIA MATYASH production, Ms Romanova named the lack of plot of a film concerns another country, a doesn’t bring any results. yearly box office. General Director, SovTeleExport (All-Russian transparency of the Russian film industry in the place is found where the project is easier State Television and Radio Broadcasting eyes of the world community, unattractiveness to carry out, taking into account financial Company) PAVEL KRAPIVIN was also certain that of Russia for foreign producers as a place for benefits. But usually the road to success ALLA NAGLIS the problems that movie theatres are shooting movies, the lack of tax benefits and is in the universal character of the plot. Partner, King & Spalding experiencing depend on the success of the insurance system, differences in legislation BILL JOHNSON agreed with her and NADAV PALTI the fight against piracy. If it continues Chief Executive Officer & President of and the language barrier. stressed the significance of the quality and brings positive results, then in the Dori Media Group, Israel of the script and the choice of genre. ALEXANDER RODNYANSKIY future movie theatres won’t have any LEONID DEMCHENKO highlighted the issues of Today the genres in most demand are Producer, Chairman of the Board problems. In answer to the question the legislative regulations relating to the status action, science fiction, romance and of Directors, AR Fillms about alternative ways of viewing of national film. As of today film co-production thriller. YULIA MATYASH spoke about MARIA SMIRNOVA films, Mr Krapivin said that peopleagreements have been signed with France, a joint project with France where out General Director, Sony will never stop liking watching films Pictures Television RussiaBulgaria, Italy, Germany and Canada. The fact that of the French actors there were Fanny SANDRA STERNRussia has become a member of the Eurimages Ardant and Gerard Depardieu, who COO, Lionsgate TelevisionFund – an association of business people and film had always dreamed of playing S P E C I A L D A Y 1 0 3
    • T H E R U S S I A F O R U M 2 0 1 2WHAT DO THE FIGURES MEAN? of both the USA and of small but globally positionedCINEMA, TELEVISION AND ADVERTISING IN 2012 Israel, these characters have depth and the viewer identifies himself or herself with them, even though they live in different countries and happen to findIn his report OLEG IVANOV specified the the state adopts. As for the audience, themselves in different circumstances. Today’s viewermain characteristics of Russia’s film industry out of the 140 mln population of doesn’t like Russian cinema because he/she can’tin 2011. Today there are six film studios of Russia, only 40 mln people have identify with its heroes and a hit must give answers MODERATOR:significance, of which two are private and access to the movies. No more than 4 to current issues. ALEXANDER KOSTYUKfour are state owned (Mosfilm, Lenfilm, mln people go to cinema frequently. Consultant of Leading Media HoldingsSverdlovsk Film Studio and the Gorky Film In 2011, 300 new films were released; ILYA KULIKOV, the author of the script of the TVStudio). At the moment five more are being 19% of them were Russian films. 270 mln series Glukhar (Cold Case), confessed that thebuilt and the most active among them is tickets were sold in 2011 with an average SPEAKERS: largest surprise to him was that the series wasFyodor Bondarchuk’s studio. There are price of US$7.1 – this amount is getting OLEG IVANOV launched at all: the series contains too much truth General Director, Movie Research80 pavilions where feature films can be close to the limit of viewers’ purchasing for Russian television, but that’s exactly what made ALEXANDER LIGERshot to a certain extent; Movie Research power. The aggregate budget of all the films it so successful. It’s practically impossible to make Deputy General Director,is carrying out research as to the current released in Russia in the year was US$200 Video International a TV hit because there is no universal channel,situation in the industry. The total picture mln with state support equal to US$120 mln. MIKHAIL RAIBMAN that’s why one has to know the specific featuresin the film industry will be completed by The forecast for the growth of attendance at Director of Advertising Agency of the audience of each channel.two large cinematographic educationalcentres, 80 film producers activelyinvolved in the production of feature movie theatres in 2012 is 6%. Mr Ivanov also remarked that presently there are two factors that have a negative impact on the development Operations, TNS BREAKTHROUGH RICHARD VACZY believes that a hit is defined by a simple and comprehensible concept: afilms and over 10,000 representativesof other cinematographic professions. Inthe distribution segment there are three of the Russian film industry – piracy and the lack of transparency. MIKHAIL RAIBMAN introduced television figures and analysed the key tendencies After taking the floor ALEXANDER LIGER suggested that we should look HIT CREATION: hit of the latest 10 years in the USA is a life story of two brothers; 20 years ago it was the series Friends. For Richard Vaczy as a producermajor players and eleven distributors in TV consumption. The total number of TV viewers 5-10 years ahead: fears are arising that A GIFT OF FORESIGHT OR CALCULATION? it is essential to find talented partners whowith a share of over 1%, 10 major movie in Russia stays at the same level but the frequency new technologies will radically change would trust him; his support consists in lettingtheatre chains (covering 30% of all movie of TV viewing is reducing and TV no longer has a our lives very soon. However, despite SERGEY BONDAREV suggested that the discussion GEORGY MALKOV, creator of Russian films talented people get on with their jobs. Theretheatres and movie screens), about mass audience. The fragmentation of the audience all warnings, theatre didn’t die when should start by defining what a ‘hit’ is. DZHAKHONGIR Lyubov v Bolshom Gorode (Love in the City), are talents everywhere but it’s hard to find850 cinemas and 2,500 movie screens. is a global trend; in Russia the audience of niche cinema was invented, and cinema didn’t FAIZIYEV specified that a ‘blockbuster’ originally meant Beremenny (The Pregnant Man) and Mama them. ALEXANDER RODNYANSKIY madeNo one has exact numbers – they will channels has doubled and the share of the ‘big three’ die with the appearance of television – ‘a huge block used for breaking down fortified walls’. (Mother), was of the opinion that if everything it clear that the producer’s task is to allowappear only after a uniform e-ticket is among the TV channels has reduced to 46%. At the the same way television won’t come to And this title has to be deserved. If at the beginning could be calculated in advance, anybody could talented participants to create somethingintroduced. The state is still the number same time, genre preferences have not changed in 10 an end because of new media and the of the road you don’t believe that your film will be create hits, but in reality, only 5-6 projects a that they both believe in. He said that unlikeone player: the very existence of the years: 80% of viewing belong to four genres: soaps, internet. With all the pressure from new loved and that it will bring you fame, you should year bring real profit. Mr Malkov doesn’t take Oscar-winning screenwriters, Russian writersfilm industry depends on which policy films, entertainment programmes and the news. technologies, the essence of television cancel it. Before spending a part of his life and loads up genres in which hits have never been created; have forgotten how to write for the sake of doesn’t change: on the contrary, it is of money on a new film, Mr Faiziyev carries out a he believes that an idea must have perfect clarity writing. using new technologies as a means sociological survey in order to understand whether and he prefers to work only with a star cast. MODERATOR: of bringing the signal to the viewers the viewers will be interested in it or not. But talent The main condition for creating a potential hit SERGEY BONDAREV,Film Critic and is demonstrating harmonious co- and intuition can be more important than any is full immersion of the whole crew in all of the development along with the internet survey results. minor details of the project as well as complete SPEAKERS: DZHAKHONGIR FAIZIYEV instead of competition. This market coincidence of supply and demand. Director, Producer will grow, as it is at the moment, by HAGAI LEVI confessed that he doesn’t know ILYA KULIKOV, Screenwriter an average of 10% per year until how to create hits. His drama series In Treatment ALEXANDER RODNYANSKIY is convinced that HAGAI LEVI 2020. The internet will never take was sold to 120 countries, and he is certain that a hit, contrary to a commercially successful movie, Director, Screenwriter, Producer, Creator of the over the ‘relaxed consumption’, the writing a script is the same as writing a novel always means an unexpected breakthrough in television series In Treatment, function of the general producer who or creating a painting. When you are creating terms of quality, new types of heroes and a new Golden Globe and Emmy winner, Israel decides what’s best to watch and a narrative the only way to make a hit is to understanding of yourself. Also, there are no GEORGY MALKOV especially over the social character talk about what you really want to talk about. guarantees that this breakthrough can be repeated. Producer and Founder of Enjoy Movies of television. As the latest expert And the only way to protect your project in The fate of 9th Company was in doubt up to its release; NADAV PALTI conclusions demonstrate, it is not another country is to adapt it in a way that it it was only the faith of the film’s creators, that every Chief Executive Officer & President the television that has begun to die becomes ‘their own’ story. That’s why Russia viewer would once more want to feel proud of his of Dori Media Group, Israel but actually the home computer. shouldn’t borrow the idea of the American country and that this film about the Soviet war in ALEXANDER RODNYANSKIY dream. Afghanistan was dedicated to the personal victory of Producer, Chairman of the Board of Directors, each soldier. The TV series In Treatment interested the AR Films whole world because it’s a universal story, with strong RICHARD VACZY attitudes and genuine characters. In the cinematography Senior Consultant, Sony Pictures International S P E C I A L D A Y 1 0 5
    • T H E R U S S I A F O R U M 2 0 1 2HOW TO FINANCE HOW WILL NEW TECHNOLOGYPROJECTS THROUGH CHANGE THE CONTENT DISTRIBUTION MARKET?SPECIAL FUNDSFYODOR PETROV explained that the use of ANTON RAKHMANOV mentioned that MODERATOR: NIKITA TRYNKIN ANDREY SMIRNOV said that the time when the creation of content on a media MODERATOR: ANDREY SMIRNOVspecial funds for financing movie production is classical investment instruments don’t Managing Director, the content buyer has to go somewhere to get player. Another instrument is paid, General Director, Sistema Mass Mediathe usual practice in the US film industry and meet investors’ expectations, and therefore Bazelevs Film Company content is coming to an end. Today everything is pre-premiere viewing of content on that the majority of Hollywood blockbusters they are interested in new alternative ruled by the viewer’s wish to watch a product on a the internet. SPEAKERS: PETER IACONO are financed with private investors’ money instruments that won’t unconditionally SPEAKERS: TV screen or using some internet resource. In this Managing Director, Lionsgate Television accumulated in investment funds. That’s why depend on the global economic situation – ARMEN DISHDISHYAN respect Russia occupies a prestigious place in the OLEG TUMANOV stressed that ivi.ru KLIM KOLOSOV AR Films has founded an investment fund for example, investment in film production. Executive Vice-President for world – the internet is penetrating various areas with its 16 million audience entered Director of Media Services, Associated Press; with US$120 mln destined for the realisation Even more so, 60% of the profits from International Projects, of our lives and smart-TV can be found in Russian the top 20 websites, and in its content Producer Central Partnership of six projects. This fund was started up international film distribution are taken even homes more and more frequently. Besides that catalogue contains over 60,000 titles. MAXIM MIKHAILOV BILL JOHNSON with the money of private and institutional before the film is released, and this thereby iPads and smartphones connected to the internet A number of unique deals have been Managing Director, NBCUniversal Russia Co-founder and Partner, investors. Mr Petrov stressed the necessity reduces the risks to the investors. Inferno Entertainment entertain people during travel. concluded with practically all Russian ASKAR TUGANBAEV of insuring filming, as is common practice FYODOR PETROV copyright holders and contracts with Development Director, ARMEN DISHDISHYAN considers that it’s CEO, AR Films Internet Projects, STS Media in the West. Then, even if force majeure YEGOR YAKOVLEV mentioned some of the major USA studios are in the pipeline. circumstances occur, the movie will be possible to minimise investor risks – probably, ANTON RAKHMANOV data recently disclosed to the public: when a At the same time, 95% of the catalogue OLEG TUMANOV Executive Director, President, ivi.ru completed and will not cost more than its by investing in a package of 5-6 projects TV viewer flips channels when deciding what is powered by advertising revenue and Troika Dialog AM YEGOR YAKOVLEV scheduled budget. simultaneously instead of just one. The future to watch, it takes him from 4 to 8 minutes; only 5% is paid content. Even though the General Director, Tvigle.ru of Russian cinema, in his opinion, depends on the internet it takes 8-16 seconds. This is TV advertising market is growing by 15% upon the creation of several funds that would EKATERINA ZHMOTOVA the time producers have to catch the viewer’s annually, video viewing is moving online. Strategy Director, systematically finance movie production. This financing to his taste. The classic option is attention. In Mr Yakovlev’s opinion, the future ivi has spent more on licencing than it has Central Partnership is profitable for investors, especially because when the investor is an institution (the state belongs to non-linear TV viewing; its volume made profit. whatever is happening in world economics, or a fund) which possesses a methodology doubles and triples every year. Market potential the film industry makes more money than the for an integral evaluation of the project is enormous. Last year IBS Group filmed and EKATERINA ZHMOTOVA mentioned that PETER IACONO supported the topic of the average market. and for making a decision concerning produced 40 products for the internet, some Central Partnership has always supported changing structure of consumption. New the investment. The option with the best of which have reached several million viewings; new channels and was the first to start media not only change the consumers’ Anton Rakhmanov agreed with Mr Dishdishyan prospects is when investors are a vast circle their profitability is incomparable with any of transmitting their content to aggregators. habits – they have made a real demand by saying that such a scheme is realistic if the of people who choose the best projects the licences acquired from major distributors. Nevertheless, today the situation is such that revolution and now the task of the investment fund is at the level of US$150mln, from what is available in the market. In the viewer is prepared to pay for content, but producers of content is to deliver it to which would be sufficient to make 7-8 films in Mr Trynkin’s opinion, this system can be In reply to the moderator’s question, ‘what lies the demand for distribution doesn’t coincide consumers in a convenient and accessible 2-3 years. efficient when a few hundred or even a ahead for television?’ ASKAR TUGANBAEV with supply: the consumer is moving on to new form. It’s a shame that the best consumers few thousand investors actively react to said that linear TV viewing is remarkable for viewing platforms whilst the producer is using in the world are media pirates. NIKITA TRYNKIN looked into several investment new projects thus allowing producers to its social nature: you are watching the same traditional channels. models. The riskiest option is an independent see how attractive their ideas are. This thing as everyone else and tomorrow you’ll investor who follows the work of certain would be like natural selection among be able to discuss it. STS Media is trying to producers and chooses a project and a level of them. transplant this process on to the internet and allow the viewer to deal with content as if it were a text and actively discuss it. When you connect to a real time play list, you can watch the same content as everybody else and discuss it in chat rooms. Soon users will be able to create channels and become TV producers of semi-linear viewing themselves. Bearing in mind teenagers’ video-clip and multi-screen mentality, games are created that give the possibility of participating in S P E C I A L D A Y 1 0 7
    • T H E R U S S I A F O R U M 2 0 1 2 UKRAINE: MODERATOR: THIS APPLIES TO EVERYONE. TRANSMEDIA: VASILY KORETSKY Film Critic, Editor-in-Chief, STATE POLICY FOR SUPPORTING CINEMA Movie Section, OpenSpace.ru A NEW LANGUAGE FOR A NEW AUDIENCE AND CO-PRODUCTION SPEAKERS: CAITLIN BURNS Editorial Lead, Transmedia LANCE WEILER started by finding out how many behavioural and moral issues. But a Producer, Starlight Runner Entertainment film directors, producers and journalists there were mobile phone is also a powerful mobile EKATERINA KOPYLOVA named In Ekaterina Kopylova’s opinion, the fact MODERATOR: in the audience and remarked that today is the industry of transactions, and he too LANCE WEILER VLAD RYASHIN Head of the “Content three basic tasks that are expected that the Ukrainian public has been yearning perfect time for telling stories – in our globalised tried to use it. Weiler is certain that in Chairman of the Board of Directors of the Future” Section to be addressed simultaneously: for Ukrainian films is well illustrated with world everyone is linked with each other as a few years all material objects – from at the World Economic and Founder, Star Media Group revival of Ukrainian national cinema, the results of the distribution of the film never before. Then he said that his feature films refrigerators and cars to toys – will be Forum production of joint projects with Firecrosser, which was in production for have been watched in 20 countries on the linked with each other, and this will give other countries and development of five years. This film had become the first channels HBO and Showtime. Since hundreds new possibilities and ways to tell a story. Ukraine as a potential film set. Apart completely Ukrainian production for a long SPEAKERS: DMITRY KOLESNIKOV of thousands of DVD copies of films have been The use of transmedia today needs a lot from that, each national film must time and had a circulation of only 10 copies Vice-President, Association sold he considers himself a film director, but as of preliminary work. It was Weiler’s son completely new possibilities in re-creating the of Producers of Ukraine reach the viewers: ordinary movies (having 350 screens in the country), but it he experiments more and more with different and mother who had inspired his previous world around a story. To combine different EKATERINA KOPYLOVA must be launched into distribution managed to gather US$4,000 per copy, technologies, he is becoming an ‘architect of project, when he saw that his mother was possibilities means to hear a symphonic orchestra Head of the Ukrainian chains and art-house projects must be which is considered a good result. stories’. Whilst Hollywood is spending increasing teaching the 4-year-old to read and the and not just one instrument. James Cameron State Film Agency shown at festivals. The state is planning amounts of money on the creation of movies boy in turn was teaching her how to use had just 90 minutes to tell the story in Avatar, DENIS RZHAVSKY to finance (in some cases in full) DENIS RZHAVSKY remarked that over President of the Ukrainian and even more on advertising, last year Lance an iPad. As a result a robot was invented. but a story as such also has a past and a future independent films, documentary films the last 20 years there practically was no Association of Cinematographers Weiler carried out his global project Pandemic Two classes of 11-year-old schoolchildren and they can be re-created in videogames and and films for children, as it considers Ukrainian cinematography. Only in the at the Sundance Film Festival. This combined from French- and English-speaking schools online products. In this way Avatar’s world this to be of national importance. The last year did film-making circles receive the possibilities of cinema, the internet and helped the robot to travel around the world. will be broadened. At the same time, the plot budget for Ukrainian cinematography a clear signal from the government mobile technologies with reality. Today his Eventually the robot was ‘let go’ into the night can be fascinating on any platform and be in 2012 grew by 7.5 times compared about their intentions to develop crew is promoting this project by using media sky – it was very touching and it developed successful in any country. For example, in with 2010. Ukraine is going to change its this industry (for example, some in Europe – in Berlin, London, Barcelona, the imagination, which in its turn is also a Brazil, apart from entertainment and digital financing system from project-based to serious tax benefits were introduced Paris and Rome; soon it will be passed over possibility for telling stories. In Weiler’s view, projects, a project is being developed with compilation-based which will be created in to the republic’s tax code). The to Sydney, Australia. The aim of the project nowadays the better you know your audience – the support of the government, related on the basis of the most successful Russian creation of the Ukrainian Association is not only to combine sci-fi with horror; the richer and more versatile the ideas, the to the rain forest and its inhabitants; and European experience, in particular of Cinematographers has become the it’s much deeper and involves studying the possibilities and the whole business will be. it involves internet programmes and the French protectionist model. Serious answer to this signal – this way the reaction to this invention and how it spreads documentary films. In Canada a project attention will also be given to checking cinematographic community showed in society. With mobile technologies it can CAITLIN BURNS presented her company’s projects will soon be released which consists the projects presented by producers – that it is ready to work closely with the be traced how a ‘sleeping virus’ is spread on transmedia production and commented that of a series of documentary films and films that receive financing must reach the government on building a fully-fledged in the community and how people that they are related to film production, production videogames about castles. And it’s country’s screens. As a positive example of film industry in Ukraine. don’t know each other and that possess of online games and book publication in the USA not so important which language thedevelopment of national cinematography Ms important information, find each other and worldwide. In her eyes, transmedia is opening characters speak – it’s easy to find aKopylova named Poland where 30% of films in Vice-President of the Association in order to exchange this information. common language if the narratedthe distribution chain are of domestic origin. of Producers of Ukraine DMITRY Besides a telephone story of control over story is really humane. KOLESNIKOV spoke about how currently the pandemic, a ‘secret room’ with a his association is mainly involved in issues projection on the walls has been invented, concerning rights and the collection of where you can see the whole world, and royalties for producers. The organisation it depends on your own reactions as to ARMA-Ukraine was founded and amongst how the world changes. At the beginning its founders is the European AGICOA which everything looks beautiful, then you start collects royalties in 140 countries. As a result, feeling ill and then you lose control. The a widely-spread system will be introduced in ‘secret room’ is changing constantly and Ukraine: a user of cable TV, for example, will the phone allows your whereabouts pay a fee for audio-visual content, which in to be traced and show what you are the end will reach the copyright holders. busy with, and all of it is related to S P E C I A L D A Y 1 0 9
    • T H E R U S S I A F O R U M 2 0 1 2WILL RUSSIABE ABLE TO TRANSFORM FROM THE WORLD’SLARGEST TV FORMAT IMPORTER INTO THE LARGEST THE ISRAELI PHENOMENON:EXPORTER, AND WHAT WILL IT TAKE? FROM CREATIVE DESERT TO CREATIVE WORLD CENTREPETER IACONO started his presentation by VLAD RYASHIN told the story of MODERATOR:saying that Russia is often mentioned as a source Maidan’s, a successful Russian- TIMUR WEINSTEINof new original formats but there hasn’t been Ukrainian project. Russian channels General Producer, Founder, EVGENY NIKISHOV informed the audience that 20 Mr Palti disclosed the secret of a ‘Russian breakthrough’ yet. In his view, a didn’t risk getting involved in this WeiT Media Group years ago in Israel there was just one news channel this success: at the very start number of important factors guarantee success, unusual reality show about mass and there was no domestic film production; today of the production and then, and among them – an aggressive and carefully dancing but the Ukrainian channel the Israeli drama series, In Treatment has got the during the whole process, you SPEAKERS: considered style of work on the international Inter launched it in spring 2011: whole world talking. Each episode lasts half an hour, have to keep in mind the whole PETER IACONO TV markets and high quality presentation the first season was so successful with only two actors in just one room. The viewer world! Also, the high quality Managing Director, materials. However, most importantly you that in autumn the second season Lionsgate Television becomes witness to a big human drama. Then of production and experience have to create an original project that would started. This new, unique format ILYA KRIVITSKY Evgeny Nikishov introduced the Israeli guests – the in distribution are of great life. In September 2005 the series was launched blow the market away – to create a precedent raised interest on the international Creative Director, director, script writer and creator of In Treatment importance; i.e. in order to make on TV and for the first 2 or 3 weeks the reviews like the Israeli serial In Treatment, which has market and a contract with an Krasny Kvadrat Hagai Levi and the President of Dori Media Group money first you have to invest it. To were excellent. But after that something strange become an international hit. A huge role in American company was signed. The VYACHESLAV MURUGOV Studios Nadav Palti. export TV formats as other countries started: reviews and requests were arriving from the process of promoting original formats terms of licensing are unusual and General Producer, export, say, natural resources, is a Canada, France, Australia and even the USA. A to the international market belongs to at the same time positive, so the TV STS Media Holding; NADAV PALTI clarified the situation around difficult task. Having an extremely Hollywood actress got a call from her friends who the work of agents, who would be West- channel Rossiya showed interest in it General Director, film production in Israel. In 1991-1992 low budget at your disposal, you told her about the drama and she asked to have STS Television Channel oriented and at the same time would know as well. This precedent gives hope. At there was an event that gave a stimulus to have to invent different mechanisms a disc sent. She sent the few first episodes to her specific Russian issues well. the moment contracts with France and VLAD RYASHIN the development of the whole film industry: of relations between people. And from agent and when they watched them together Chairman of the Board China are at the stage of signing. cable and commercial TV channels started the very beginning you have to have an she gave a very approximate translation. After of Directors and Founder, ILYA KRIVITSKY noted that Russia is Star Media Group broadcasting. As they were interested in idea of how to adapt this content to the that they went together to a very famous agent. expected to produce new TV game shows: Ilya Krivitsky and Vlad Ryashin also content, they started investing in original realities of other countries in the future, Immediately three channels wanted to buy the MARIA SMIRNOVA Russian producers need a game show spoke about the marketing component. General Director, productions – and then the competition mainly English-speaking ones. Today series and Hagai Levi was stuck in Hollywood breakthrough. Some original formats If in other countries creators of a format Sony Pictures Television Russia started. As a result, over the last five years original Israeli content has been adapted for half a year. The main difference in the have been sold to the USA but their are thinking straight away about both the Israeli companies sold 150 formats for 82 countries. In comparison, Latin principles of work is that in Israel a very low execution can hardly be called successful. domestic and international markets, in for drama series and shows in over 120 American soap operas are sold to only 70 budget gives you precious creative freedom. For example, the VID TV Studio sold the Russia they are oriented only by the usually need serious adaptation and countries. How was it possible, bearing in countries. Wait for Me format to ABC channel, but domestic audience. In Mr Ryashin’s perhaps this can show the way to a mind how small the language audience is? In answer to VALERY FYODOROVICH’S after one release the programme was opinion, either Russian producers have to future breakthrough. Answering the question how the famous question about the range of figures, after shut down. The same happened to the combine efforts in their work on potentially drama In Treatment had been created, HAGAI he’d mentioned that in Russia the budget of project What? Where? When?: after competitive formats or a separate business To summarise the discussion, Peter LEVI said that he ‘didn’t keep the entire world a half an hour episode on TNT totals about a few episodes on ABC it was closed. trend has to be developed. Mr Krivitsky Iacono stressed that the cultural wealth in mind’ but, on the contrary, the world didn’t US$120,000, Nadav Palti said that in Israel Our formats are “too Russian”. remarked that in Russia imported formats of Russia is much respected throughout exist for him at all when he was writing the US$45,000 is a lot. the world. So, if today’s Russian script. Generally, he was thinking only about television doesn’t always coincide himself, because the main topic of the drama MODERATOR: with the global process, it just has is utterly personal. Psychology had been an EVGENY NIKISHOV to borrow some production details. important part of his life for a long time, so he Editor-in-Chief, TNT TV Channel The technological achievements of decided to write about it. Two years of work along the Americans have to meet the with soap opera teams had taught him a lot: it undoubted talent of Russian authors. helped him understand that it wasn’t his forte, that SPEAKERS: HAGAI LEVI Peter Iacono gave the example of he was getting bored when he had to be involved in Director, Screenwriter, Producer, Creator China: this country remains a tough serious work, but he liked to invent dialogues and that of the television series In Treatment, Golden Globe and Emmy winner market for the West but Chinese drama series did not always have to be silly. He wanted partners are now making millions. to create a format that would be interesting to an NADAV PALTI Chief Executive Officer & President Likewise Russia will be able to score educated and intellectual audience. After having written of Dori Media Group, Israel a success. pilot episodes for In Treatment, he tried to sell them to VALERY FYODOROVICH domestic channels for two years without success. The Chief Producer of Series Production, fact that they were bought was the greatest surprise of his TNT TV Channel S P E C I A L D A Y 1 1 1
    • T H E R U S S I A F O R U M 2 0 1 2 ROUND TABLE INDEPENDENT CINEMA: INSTITUTE OF STARS: WHY HOW NOT TO PASS BY A NEW WAVE ISN’T THE HOLLYWOODIGOR MISHIN opened the discussion by giving adefinition of the concept of ‘independent cinema’.The term as such appeared 50 years ago when ‘Off POPOGREBSKY specified that our situation is not very different from the one existing in Europe: MODERATOR: IGOR MISHIN Producer, Vice-President of the National STRATEGY USED IN RUSSIA?Hollywood’ and even ‘Off Off Hollywood’ studios if you discard ‘mainstream that Broadcasters’ Associationwere founded that rejected everything related to you aren’t ashamed of’, you’re Hollywood. Today they are creating large and left with the comics and art-house. SPEAKERS: commercially successful movies independently In Europe and in Russia, in his PAVEL BARDIN from big film studios. Independent cinema mainly opinion, there can’t be independent Director produces complex psychological dramas with cinema; how to pay-off a part of the OLGA LOYANICH small casts. Judging by these parameters, there is cost over the internet remains a big General Director, Volga ‘independent cinema’ in this country too. ELENA question. OLGA LOYANICH stressed MARY NAZARI YATSURA remarked that cinema independent of that the new wave is most definitely Producer, General Director, Pioneer Cinema chain state finances is always commercial – you have gaining momentum. The internet is to repay the borrowed money. Nowadays high actually bringing money comparable ALEXEY POPOGREBSKY Director, Screenwriter quality Russian cinema is composed precisely with a TV channel package, but nothing of this type of film. Having to constantly watch can replace film distribution, which is ROMAN VOLOBUEV Journalist, Columnist, the films proposed for the Golden Eagle Award the origin of rights of all types. It also Opening the discussion, EKATERINA MTSITURIDZE noted Afisha magazine made her come to the conclusion that national determines whether a film will become that there are stars in Russia, and the lack of a system for ELENA YATSURA cinema shouldn’t exclusively consist of this a good TV library item and whether it will making stars is directly related to the problems that exist Producer type of film. There is a certain culture of film go international. Alexey Popogrebsky is in the film industry. DMITRY LITVINOV added that the production and our domestic cinematography convinced that it will be possible to make level of ‘TV stars’ is much lower than the professional mustn’t fall behind world standards. Besides money without the middle man thanks to takings. Elena Yatsura stressed the importance level of theatre actors. INGEBORGA DAPKŪNAITĖ this, a director who’s made his debut in distribution in clubs. At the moment the of professional education for producers and said she was sure that the film industry in each country the so-called festival cinema must come to viewers’ distrust is such that people are said that without knowledge of drama it’s goes its own way, and in Russia a new model of film complex-staged films with a higher level of prepared to watch what is predictable, but impossible to become a producer. Producer is industry is still being created. ROMAN SARKISOV direction – but this doesn’t happen. there is no doubt that there is a demand for a profession of taste, and there won’t be any made a link between the concept of ‘media persona’ the unusual in this country. MARY NAZARI new wave unless the producer decides that and the public demand for the personal life of ROMAN VOLOBUEV is of the opinion that went back to the issue of independent cinema the scriptwriter is not a Shakespeare and this celebrities, and mentioned that the financial people the most successful model of an independent by saying that it is a start-up for directors before particular face will not become fashionable. should be interested in actors’ craftsmanship and director in the world is George Lucas: in making large, studio-based films At the same not in the final product. EKATERINA MTSITURIDZE ‘media people’, can then star in the beginning his Star Wars was regarded time the film Shapito Show, for example, is quite stressed the need for a system of agencies. budget TV series. But reality shows as a completely crazy idea but now is independent in terms of distribution and convincing ARTYOM VASILYEV supported her by clarifying are, in a way, produced for this one of the most commercially successful that out of all of the actors who come to casting, purpose – to make profit and then transmedia stories in the world. PAVEL you can work with just 10%, and only 1% can be shoot a quality drama series with BARDIN was also certain that one has to used simultaneously in several projects. The main professional actors. shoot what one wants; Woody Allen, for problem, in his opinion, is the lack of a strategy. example, isn’t dying to make blockbusters. Dmitry Litvinov pointed out that in the USA The participants of the discussion all But a dialogue with the authorities is actors come to soap operas from cinema, but agreed that the situation is changing, an inevitable form of existence of the in our case it’s the opposite, hence the poorer that in the USA there is no more industrial art, and it’s not only money that quality of TV formats. YULIA KIRYUKHINA division into ‘high’ and ‘low’ genres or one needs from state institutions: one has mentioned the difficulties in promoting between cinema and TV viewers: the MODERATOR: DMITRY NESTEROV to discuss legal issues concerning the film film projects: the media are not particularly gradation is based on how much talent industry, exchange databases, develop a interested in the professional side of an there is in a film. In conclusion, in Russia programme of support of professional actor’s work. Ekaterina Mtsituridze stressed there is no institute of stars. The strategy INGEBORGA DAPKŪNAITĖ education and hold open tenders. Now the fact that in France €500 mln are spent for the creation and motivation of stars ELENA GROZNAYA YULIA KIRYUKHINA there are online platforms where one annually on the promotion of domestic films. must be state-driven. But unfortunately DMITRY LITVINOV can watch the most recent premieres. The competition and the film industry should today there are no grounds that could EKATERINA MTSITURIDZE Some films are gathering hundreds of develop actors. Roman Sarkisov thinks that help creating personalities, growing ROMAN SARKISOV thousands of views per month. ALEXEY the heroes of reality shows, having become talents and yet be in public demand. ARTYOM VASILYEV S P E C I A L D A Y 1 1 3
    • T H E R U S S I A F O R U M 2 0 1 2 ROUND TABLE WHERE AND HOW TO LOOK FOR TALENT? Where and how to look for talent? At first glance actor is on the team or not. And however talented it looks like a simple question. The foundation of he is, if he is not a team player he won’t get the evolution is not a system, not regularity, but an job. REGINA VON FLEMMING is certain that in error. Is talent then an error, an eventuality? Is talent the media business the task of the boss is to give a genius boy playing the violin, or is it the feeling freedom and space to be creative to a team of of the market, of modernity, the sense of being in professionals, and then you can solve the most MODERATOR: MAXIM KASHULINSKY demand? Are we looking for talents so that they challenging problems. You can’t create the take us with them, or simply to make money? spirit of creativity just by giving an order fromROUND TABLE ALEXANDER AKOPOV The participants of this round table tried to find the top – it can only appear inside a team. answers to these questions. IRINA PROKHOROVA VITALY MANSKY highlighted that there is no ILYA BACHURIN remarked that the constantly changing social talent unless there is a market demand forFILM STUDIOS: WHO WILL FYODOR BONDARCHUK SERGEY KAPKOV space is forming a new information reality. it. It is the market that creates a platform VIKTOR MIRSKY Today a talented employee chooses an employer for the appearance and development of ELENA ROMANOVA and employers are competing for talent. ILYA talent. Independent documentary cinemaWIN THE COMPETITION? YURY SAPRONOV BACHURIN is convinced that in the search for is proof of this: there is no such market YEVGENY SAVOSTYANOV OLEG SILVANOVICH talent the keyword is responsibility: those who in Russia and all talented documentary appear like comets must be supported. And makers have either gone to feature the optimal methods of search and selection movies, or now work in Europe where depend on the goals of each individual project. documentary films are in demand. ALEXANDER AKOPOV said that today in Moscow there are (a joint project of VGTRK and RWS) is going ALEXANDER AKOPOV confessed that he is GOR NAKHAPETYAN remarked that 119 filmmaking pavilions, but out of them only half are to make money with, among other activities, interested in talented people that have become it was always interesting to work on adequate studio complexes. The total volume of filmmaking excursions to the pavilions – a model borrowed professionals. He quoted Walt Disney’s new projects with people who dream and TV-making in Moscow is valued at about US$2 billion, from Universal Studios. formula “Talent is not allowed in my studio”. about changing the world. As the whilst the volume of the market of cinematic services is Because there is only one Disney and he statistics of job interviews in Troika MODERATOR: only one fifth of this amount. Amedia Studios has a work VIKTOR MIRSKY, the head of Ukrainian Film.ua needs 300 good artists. As it’s been proved Dialog show, only 3% of people ALEXEY SITNIKOV load of 80% but is used mainly for the production of TV (the second private studio in the country), said by the model of the American film industry, have this attribute. Therefore series’ and TV programmes. that at the moment Ukraine is going through a two issues are important: talented agents selection is very important. In ALEXANDER AKOPOV TV market boom and for the first time is ahead and trade unions. This model embraces well SKOLKOVO it was quite rigorous ILYA BACHURIN Glavkino was represented at this meeting by of Russia. However, films are practically not being developed mechanisms for professionals as it is selection that brings 50% VITALY MANSKY FYODOR BONDARCHUK and ILYA BACHURIN. In Mr produced. The volume of TV and film production who understand the rules of the game. In of the success in any school. GOR NAKHAPETYAN IRINA PROKHOROVA Bondarchuk’s opinion, in Russia there are very few totals US$300 mln. It’s interesting that Russian order to explain how unfair life is it’s enough REGINA VON FLEMMING hi-tech studios: Amedia, Mosfilm and RWS (Russian film companies often come to Ukraine to shoot, to see a discussion of a casting just once: World Studios) in St. Petersburg. The construction especially to the Crimea. According to OLEG you need five seconds to decide whether an of the Glavkino Studio has almost been finished in SILVANOVICH, the head of Belarusfilm Studios, the Krasnogorsk District of the Moscow Region; private capital has finally come to cinematography in it will possess the largest film shooting pavilion Belarus and his company ceased being a monopoly in the country. Fyodor Bondarchuk’s studio has in 2012. For now the Belorussian market is rather the goal of reaching a work load that would be modest at the level of US$80 mln. YEVGENY comparable with East European studios. But in SAVOSTYANOV, Senior Vice-President of the the director’s opinion, a state programme of tax Sistema Mass Media holding and owner of RWS returns to foreign cinematographers who film Studios, was of the opinion that Russian film studios in Russia will be required. The Glavkino Studio are competitive mainly due to excellent locations and a will comprise 12 pavilions with a total area of good technological infrastructure. He also mentioned 33,000 sq. m.; four of them are scheduled major drawbacks, such as administrative obstacles, lack to open in the near future. The precise of tax benefits, the low qualification of service staff as budget has not been disclosed but one of well as the climate and pricey services. For example, the the studio’s main problems is the long time crew of Mission Impossible 4: Ghost Protocol obtained it will take to pay off costs. Lenfilm 21st permission to shoot inside the Kremlin but preferred to Century Studio which is being built now go to Prague instead because of tax preferences. S P E C I A L D A Y 1 1 5
    • T H E R U S S I A F O R U M 2 0 1 2 The art created by the Russian avant-garde is at one with the idea of The to power Kandinsky immigrated to France and in 1939 he obtained Russia Forum, and the works of early 20th century Russian avant-garde French citizenship. “A truly beautiful tale” is how he described his work artists dominate the Forum’s visual style. The works of Kazimir Malevich of the time. He painted with the most subtle nuances of colour and new and Aristarkh Lentulov, Aleksandr Rodchenko and Aleksandr Deyneka elements began to appear in his works that literally seem to float in the have harmonised with the spirit and mood of discussions at the Forum depths of his paintings. throughout the years. The artistic context of dialogue at The Russia Forum 2012 was the creations of Wassily Kandinsky. Today Kandinsky’s works are enjoying a new wave of interest throughout the world. In 2008-2011 a world tour retrospective of Kandinsky’s Wassily Kandinsky, the founder of abstractionism who radically altered works was held. In Munich, Paris and New York 95 pictures were shown perceptions of painting, is a symbol of everything that is new. A key figure that were painted from 1907 to 1942, thus enabling people to trace the of Russian culture and one of the greatest artists of the 20th century, artist’s complete creative odyssey. The Times listed the New York leg of Kandinsky was an art theorist, brilliant organiser, teacher of painting the tour as one of the most outstanding events of the year. and a poet. For him the creative process was “self-expression and self- development of the soul”. When working on his dissertation, Kandinsky, Recently, after exhibits in European and Japanese cities, an exhibit a 30 year old graduate of the Legal Department of Moscow University, entitled “Kandinsky and the Blue Rider” was held in Moscow at the received an invitation to teach at the University of Dorpat. Kandinsky Pushkin State Museum of Fine Arts. It demonstrated 30 early works of accepted the invitation and departed to study painting in Germany. Kandinsky. In 2007, the independent Kandinsky Award was founded in Russia to support and develop modern arts.“THE IMPACT OF THE ACUTE In his early period (1901–1907) Kandinsky’s paintings are dominated by decorative effect and his subjects are the characters of Russian fairy tales.ANGLE OF A TRIANGLE ON In 1910 Wassily Kandinsky painted his first abstract work and in 1911 he released his treatise “Concerning the Spiritual in Art” which detailed the theory of this new artistic movement: any colour, line, geometrical shape and combination thereof are intended to evoke the most differingA CIRCLE PRODUCES AN visual, aural and even taste associations. Rhythm, the emotional sound of colour, energy of lines, contrasting clash of colourful spots in the objectless compositions by Kandinsky are similar to a powerful orchestraEFFECT NO LESS POWERFUL expressed through painting. The Blue Rider Almanac published in 1912 in Munich became the manifesto of Western European avant-garde artists.THAN THE FINGER OF GOD With the start of the First World War Kandinsky returned to Moscow. The 1910s and 1920s for him were a period of active social and educational work. However, socialist realism began to take hold in Soviet Russia,TOUCHING THE FINGER and in 1921 Kandinsky left the country, never to return. In the USSR his paintings disappeared from galleries and museums for a long time.OF ADAM AS PAINTED Kandinsky then began teaching in Germany and producing conceptual works. It was around this time that he received world-wide recognition: from 1927 to 1932 in various countries there were up to 15 exhibitions of his paintings. In 1923 his work was displayed for the first time in NewBY MICHELANGELO” York and in 1930 an exhibit was held in Paris. When the Nazis came A R T A R T 1 2 7
    • T H E R U S S I A F O R U M 2 0 1 2PARTNERS OF THE FORUM: MEDIA PARTNERS: the Official Car of The Russia Forum 2012 is one of the world’s leading business news organisations and is recognised OFFICIAL CAR Mercedes-Benz Russia SAO appeared as the official partner of the Russia internationally for its authority, integrity and accuracy. Providing essential news, comment, data and Forum 2012 and Mercedes-Benz brand acquired the status Official analysis for the global business community, the FT has a combined paid print and digital circulation Forum Car. of 592,390 (Deloitte assured, 4 July to 2 October 2011) and a combined print and online average Mercedes-Benz Russia SAO was an official partner of The Russia Forum daily readership of 2.1 million people worldwide (PwC assured, May 2011). has 4 million 2012 and the Official Car of the Forum. registered users and 250,000 paying digital subscribers. The newspaper, printed at 23 print sites During the event, Mercedes-Benz provided 35 premium class cars to across the globe, has a global print circulation of 337,239 (ABC, November 2011). transport VIP guests and speakers. 35 drivers of the project worked for no less than 1,500 hours in total. Mercedes-Benz Russia SAO is a Russian enterprise with 100% foreign is a global business and financial information and news leader, and gives capital. It was founded as a subsidiary company of Daimler AG concern in influential decision makers a critical edge by connecting them to a dynamic network of Russia. It was the first foreign automotive company to appear in Russia. information, people and ideas. The company’s strength – delivering data, news and analytics Mercedes-Benz Russia SAO has been successfully operating in Russia for through innovative technology, quickly and accurately – is at the core of the Bloomberg over 17 years by expanding its dealer network and investing money in Professional service, which provides real-time financial information to more than 310,000 directs sales development. The company has been the general importer of subscribers globally. Mercedes-Benz and Maybach vehicles since 2002. is the leading global broadcaster of live business and financial news and information, reporting directly from the major financial markets around the globe, with three regional networks CONCIERGE COMPANY was the official concierge company of the Russia Forum 2012 in Asia, EMEA and the US. The channel is available in more than 130 million homes, 1,400 banks and provided all the Forum’s participants with a full range of concierge and financial institutions and leading hotels across Europe, the Middle East and Africa. Additionally services and a special guide, developed by PRIME, that contains information gives you access to live streams of all three CNBC regional networks and to the on Moscow’s sights and includes PRIME 101 restaurant guide. During world’s most comprehensive archive of business news videos ever assembled. CNBC is a division the Forum, the PRIME contact centre received about 600 calls. The most of NBC Universal. demanded requests were information services (69%) and the rest included taxi and transfer assistance, as well as restaurant reservations. PRIME has offered lifestyle management and travel services for more than is one of the world’s foremost financial publications with ground- 6 years and is the leader among all companies that provide concierge breaking journalism and incisive writing that provides essential reading for the world’s leading services on the Russian market. More than 4,000 international service financiers, corporate executives and government officials. Institutional Investor regularly breaks companies are PRIME’s strategic partners and more than 600 companies stories and tells the inside story behind companies. Throughout the year, Institutional Investor that provide premium class goods and services are participants of PRIME offers a host of proprietary research and rankings that serve as respected industry benchmarks, loyalty programme. informing and influencing its carefully targeted circulation base throughout the year. Global circulation including its heavily subscribed website is 115,000. TECHNICAL PARTNERS and became technical partners of The Russia Forum 2012 and is the world’s leading source of intelligent information for businesses provided 28 LCD screens to assist in broadcasting sessions in the foyer of and professionals. We combine industry expertise with innovative technology to deliver critical the Moscow International House of Music. The VAIO-Intel Business Cafe information to leading decision makers in the financial, legal, tax and accounting, scientific, provided Forum guests with internet access via innovational VAIO laptops. healthcare and media markets, powered by the world’s most trusted news organisation. We During the two days of the Forum more than 700 delegates visited the cafe. operate in 300 cities in over 100 countries across the world. The VAIO-Intel Business Cafe also served as an area for interviewing Forum speakers. Media Business Solutions agency was the organiser of the project. is one of the world’s most influential business media sources. Forbes magazine and Forbes.ru report on stories of entrepreneurial success and failure, new business and investment ideas, and publishes widely respected ratings. is the biggest retail chain of Apple branded stores in Europe with Apple Premium Reseller (APR) status. It is the part of re:Store Retail Group is a Chinese state and international news agency which gathers and publishes global which belongs to Lanit Holding. news, including the publication of printed editions, internet, television and other kinds of mass media. Xinhua has over 160 branches in China and abroad, their quantity (excluding local structures) exceeds the quantity of branches of every Western information agency. P A R T N E R S 1 2 9
    • T H E R U S S I A F O R U M 2 0 1 2MEDIA PARTNERS: MEDIA PARTNERS: is a leading finance publication dedicated to the growing asset is the only Russian business weekly magazine with a focus on deep and professionalmanagement industry. By focusing on areas such as alternative investments, securities research in economy, business, social and political issues. In the course of the years Expertservices, pension reform, risk management, mutual funds, trends and regulations across the has grown from being just a magazine into a business partner for hundreds of businessmen,region, AI provides a platform for leading institutions to engage with their target audience. top managers, managers and executives of different levels all over the country. Expert is a handbook for decision makers. is the first and only Russian news TV channel broadcasting 24 hours a day,7 days a week. It keeps its viewers informed of world, national and regional news, and is Russia’s first business radio station. It broadcasts in Moscow, Saintprovides economic analysis and in-depth interviews with leading politicians, public figures Petersburg, Ufa, Kaliningrad, Ekaterinburg, Krasnoyarsk and Chelyabinsk. Business FMand experts. The channel’s most significant feature is live coverage of such major events as provides an exclusive product for a small but active and influential segment of the generaleconomic forums, international summits, spacecraft launches etc. RUSSIA 24 TV channel public, which in minutes must have the full spectrum of informationbroadcasts via satellite platforms NTV+, terrestrial TV frequencies and cable networks ofRussia’s 85 regions, Hot Bird which covers Europe and Middle East and the USA’s largestsatellite platform – DirectTV. According to TNS estimates, RUSSIA 24 broadcasts can be was founded by the Government of the Russian Federation. Itreceived by 55% of households. has been published since November 11, 1990 on a daily basis. The newspaper covers the most significant events taking place in the country and all over the world, and presents the opinions of established politicians, lawyers, economists, political analysts, artists, celebrities Information Services Group is the largest diversified information provider in the CIS, and sportspeople. Presidential decrees, government regulations and other federal legal actsand a recognised leader on the Russian information market in the B2B segment. Our products come into force after their publication in Rossiyskaya Gazeta.and services are political and economic news, real-time news from Russian regions and the CIS,information exchange, analysis, business references about companies, SPARK and SCAN databases,ratings and rankings, credit reports, IR services and services in the information disclosure sector, is a social, political and business daily newspaper. It is one of the oldest Russianorganization of press conferences and e-advertising. newspapers, established in March 1917. At present, subjects of the newspaper include coverage of events in Russia and abroad, analytical comments, review of business and economics, cultural events and sports. Each edition contains exclusive reports, analysis andRussian business daily reports on the most important economic, financial, commentary of qualified journalists.corporate and political events, providing analysis and forecasting future trends. Vedomostistrives to provide readers with the most detailed and objective information as soon as thestory breaks. is a men’s magazine that combines high standards of a glossy magazine with the intellectual excellence of a reporting or analytical periodical. The majority of readers are aged 25 – 45 years old with average or above average income. is a leading Russian news media organisation, with a history spanning 70years. Today the group incorporates the eponymous multimedia international news agency,a Russian Legal Information Agency (RAPSI), a business news agency (PRIME), a sports is an internet portal about the life of the Russian financial market and thenews agency (R-Sport), a rating agency, a publishing house (Moskovskiye Novosti, or people who work on it. Finparty.ru publishes news about personnel changes, exclusiveMoscow News) and a wide network of media centres in Russia and abroad, as well as over interviews with investment bank executives and reports from business conferences and40 websites in 14 languages, with an overall audience of over 17 million unique visitors per social events.month. is the first internet portal covering the most important cultural and societal is the leading online news, comment and analysis site in Russia, covering events in Moscow, St. Petersburg and Kyiv, as well as events held abroad and in other Russiandomestic and international current affairs. Launched in 1999, Gazeta.ru combines the speed cities. The project is intended for an audience with an outspoken disposition leading socialof a digital media publisher with the quality of a printed newspaper. It has six million unique lifestyles, visiting the trendiest events and establishments, expensive restaurants, clubs,users and over fifty million page views a month. Gazeta.ru’s professional editorial team offers shops and fitness centres. The project also includes Mainpeople internet-radio and quarterlyinternational news, analysis, forecasts, and expert commentaries, 24 hours 7 days a week. magazine Mainpeople Report, publishing photo reports from headlining events as well asGazeta.ru covers today what traditional newspapers will cover tomorrow. exclusive interviews with key representatives of the elite. P A R T N E R S 1 3 1
    • T H E R U S S I A F O R U M 2 0 1 2CONCLUSIONSFINAL REMARKS ON THE RUSSIA FORUM 2012FROM ALEXANDER BAZAROV, MEMBER OF THE MANAGEMENTBOARD, VICE PRESIDENT OF SBERBANK OF RUSSIA,DIRECTOR OF THE CORPORATE CLIENTS DEPARTMENT ANDCO-HEAD OF THE CORPORATE INVESTMENT UNIT. Some things are seen better at a distance. Now that the bustle surrounding the preparation for The Russia Forum 2012 has subsided and the event itself has drawn to a close, it’s possible to draw conclusions and make assessments. These conclusions fall into two categories: intellectual and emotional. With regard to the first, the most important conclusion that can be made about the results of the discussions held at the Forum is that the positive impetus that the Russian market began the year with could last for a long time. However, this will only be possible if the Russian government takes advantage of the opportunities that are arising and immerses itself in solving the most obvious problems. This is a significant signal for investors and it’s important that they heard it first at The Russia Forum, which in the words of one of our foreign participants “gives you the opportunity to get a complete picture of the state of the Russian economy.” In terms of the emotional interpretation of the Forum, it was a lively event. Alongside the diversity of opinions it was nice to see that the participants all shared one opinion: The Russia Forum is one of the few (if not the only) Russian conference where it’s possible to engage in intellectual discussion about the key global discussions. From year to year the intellectual content of the Forum intensifies, topics become more diversified, and discussion widens. The majority of participants have noticed this. In 2012 it goes without saying that the debate between Vladimir Putin, Nobel laureate in Economics Paul Krugman, leading economist Raghuram Rajan and Michael Milken drew the most attention from the audience. In summing up The Russia Forum 2012 I would like to express that I am certain that this event, which is always distinguished by its high quality line-up of speakers and participants as well as intellectual level of discussions, will not lower its standards and will become even more effective in fulfilling its main goal: to attract investors to Russia, including foreign ones. I hope that discussion with those that are responsible for shaping macroeconomic conditions in Russia will increase investor optimism and allow them to get a better view of the opportunities that our country has to offer. Finally, I can point out two key factors that speak in favour of investing in Russia. Last year the Sberbank Group made $10.5b net profit and ROE was approximately 28%. It’s hard to find similar growth points in the world, where it’s possible to earn so much on invested capital. Having joined forces, Sberbank of Russia and Troika Dialog will assist you to a highly profitable and well-securitised business with reliable partners. Welcome to Russia! See you at The Russia Forum 2013!