Plenary Session: Russia 2018 – At Vital Crossroads and Challenges that Will Determine the Country’s Future

1. RUSSIA
FEBRUARY 2 3, 2012
Russia Forum Buzz
Plenary Session: Russia 2018 – At
Vital Crossroads and Challenges
that Will Determine the Country’s
Future
█ Opportunities and challenges are equally clear. The panel concluded that
Russia has the potential to grow the economy more strongly and with greater
diversification, and that it continues to move toward that goal, albeit following a
slow evolutionary path. One of the main conclusions is that the state still has a role
in creating a better business and economic environment, but then should get out
of the way and help rather than hinder or compete against private enterprises.
█ The panelists identified a number of key challenges that the country needs
to address if that unfulfilled potential is to be realized. Regarding business
startups, Russia needs to make it much easier for new businesses to start and
grow. Right now this is too difficult and has resulted in the economy remaining
skewed toward large enterprises in extractive industries. The SME segment is far
too small and yet this is exactly the area that needs to receive state help to grow.
█ Corruption and overly bureaucratic procedures remain major obstacles
to business development. Panelists also identified the unpredictability factor
in Russia, stating that the lack of clear rules and fair arbitration too often puts
off foreign investors. Panelists identified the lack of clearer guidance from the
state and sometimes poor behavior, arguing that this fosters equally bad
behavior across the economy.
█ The loss of human capital also needs to be reversed. Russia continues to lose
too many of its most talented people every year, people who are starting up new
businesses in other countries but should be doing so in Russia. The panelists did,
however, highlight the fact that this is a normal trend in developing economies
where people leave for better lives elsewhere but then, after 20 30 years, start to
come back. The faster the state helps make it easier to do business in Russia,
especially to start a business, the sooner the trend will reverse here also.
█ There is too often a lack of a clear division between state and private
enterprise. This usually hurts private businesses and prevents them from
properly developing. There is not enough transparency in the work of the
state and state officials. This needs to change so that the division between
state and private enterprises can be made and the work of the bureaucrats
can be forced to be more efficient.
█ East or West? Panelists generally agreed that the clearest economic growth
opportunities lie to the east but that Russia should look much more to Europe
for examples when building institutions and regulatory frameworks.
www.TheRussiaForum.com

2. FEBRUARY 2 3, 2012 RUSSIA FORUM BUZZ – PLENARY SESSION: RUSSIA 2018
█ Sergei Guriev said that the state needs to speed up the privatization process to reduce its dominant
role in the economy. He said that Russia also needs to demonstrate very clearly that it is dealing with
issues such as corruption by speeding up the adoption of Article 20 of the UN convention against
corruption. He said there are some very public corruption scandals in Russia today where the state
could act more decisively. He called for the release of ex YUKOS chief Mikhail Khodorkovsky and the
firing of everybody involved in the case of Hermitage lawyer Sergei Magnitsky.
█ Kenneth Rogoff highlighted the fact that while Russia’s annualized growth (4.0% expected in
2012) is very good compared with developed markets and most other developing economies,
Russia is capable of much more. He said that Russia should have, and needs to develop, new
export led growth in such areas as hi tech.
█ Lars Thunell commented that WTO entry will help the evolutionary process continue, but added
that the state needs to involve the private sector much more. He said the state is now trying to
drive too much, which keeps the system overly bureaucratic and focused too much on the older,
mainly commodity based, industries.
█ Alexei Kudrin referred to the fact that the current political system is obsolete and needs to change
as part of the process of building a new economy. He referred to current political changes as a
very positive development that will force faster changes. He highlighted what he called the
positive response from the prime minister.
█ The panel also reviewed the changes now taking place in the global economy and the serious
challenges it faces. Against that backdrop, the panelists reviewed the particular challenges facing
the Russian economy, especially given the uncertainty over the trend in oil revenues. The panelists
were asked if they consider it possible, under such conditions, to support economic growth in the
country and, specifically, to review what policy instruments the government has, and needs, to
achieve this goal.
Panel
Ruben Vardanian Chairman of the Board of Directors, CEO, Troika Dialog
Sergei Guriev Rector, New Economic School
Aleksei Kudrin Russian statesman
Kenneth Rogoff Thomas D. Cabot Professor of Public Policy and Professor of Economics, Harvard University
Lars H. Thunell Executive Vice President & CEO, International Finance Corporation
2 TROIKA DIALOG

3. We are delighted to inform you that
Troika Dialog Research
is now available on iPad and IPhone
Access to all reports is now even easier!
To start using our app:
Access the App Store on your iPad / iPhone.
Search for “troika”, and look for our logo. The app is
published by “worldflow Research”.
Click the “FREE” button.
Once the app has downloaded, launch it and log in using
the same login and password you use on the website.
If you still do not have a login and password for our website,
please contact your Troika Sponsor or Relationship Manager.
This research report is prepared by TROIKA DIALOG or its affiliate named herein and provides general information only. Neither the information nor any opinion expressed constitutes a
recommendation, an offer or an invitation to make an offer, to buy or sell any securities or other investment or any options, futures or derivatives related to such securities or investments. It is not
intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the particular needs of any specific person who may receive
this report. Investors should seek financial advice regarding the appropriateness of investing in any securities, other investment or investment strategies discussed or recommended in this report and
should understand that statements regarding future prospects may not be realized.
Investors should note that income from such securities or other investments, if any, may fluctuate and that price or value of such securities and investments may rise or fall. Accordingly, investors may
receive back less than originally invested. Past performance is not necessarily a guide to future performance.
Any information relating to the tax status of financial instruments discussed herein is not intended to provide tax advice or to be used by anyone to provide tax advice. Investors are urged to seek tax
advice based on their particular circumstances from an independent tax professional.
Foreign currency rates of exchange may adversely affect the value, price or income of any security or related investment mentioned in this report. In addition, investors in securities such as ADRs or
GDRs, whose values are influenced by the currency of the underlying security, effectively assume currency risk.
The information contained herein has been obtained from, and any opinions herein are based upon, sources believed to be reliable, but no representation is made that it is accurate or complete and it
should not be relied upon as such. All such information and opinions are subject to change without notice.
From time to time, TROIKA DIALOG or its affiliates or the principals or employees of its affiliates may have or have had positions or derivative positions in the securities or other instruments referred to
herein or make or have made a market or otherwise act or have acted as principal in transactions in any of these securities or instruments or may provide or have provided investment banking or
consulting services to or serve or have served as a director or a supervisory board member of a company being reported on herein.
TROIKA DIALOG maintains strict internal policies, which are designed to manage any actual or potential conflicts of interest from harming the interests of investors.
Further information on the securities referred to herein may be obtained from TROIKA DIALOG upon request.
This report may not be reproduced, copied nor extracts taken from it, without the express written consent of TROIKA DIALOG.
For residents of the United States: This research report is being distributed in the United States by TROIKA DIALOG USA, INC., which accepts responsibility for the contents hereof. Any U.S. person
receiving this report who wishes to effect transactions in any securities referred to herein should contact TROIKA DIALOG USA, INC., not its affiliate. Further information on the securities referred to
herein may be obtained from TROIKA DIALOG USA, INC. upon request.
For residents of the United Kingdom and rest of Europe: Except as may be otherwise specified herein, this research report is communicated to persons who are qualified as eligible counterparties or
professional clients (as defined in the FSA Rules) and is made available to such persons only. The information contained herein is not intended for, and should not be relied upon by, retail clients (as
defined in the FSA Rules).
© TROIKA DIALOG 2012