This article is a guest post from Peter Elam Håkansson, East Capital.
2010-04-12
There is currently a lot of talk across Russia about the need to modernise the country. The debate has been led by President Medvedev and highlights a number of areas that need attention in order for Russia not to be left behind. Western media has been giving the issue some notice, and the comments have often focused on whether or not this is a criticism of Putin's governing
style in recent years.
We feel, however, that the full scope of what such a modernisation could involve has been overlooked, and we challenge our newsletter readers to read the following from the Institute of Contemporary Development: http://www.riocenter.ru/en/news/analytics/8034. The institute is run by Igor Yurgens, and the chairman is no less than President Medvedev. In the report, entitled "Russia in the 21st Century: a vision for the future", there is a lot of exciting material.
Perhaps the most exciting of all (and most overlooked by the press) is the discussion surrounding membership of both NATO and the EU! Fascinating thoughts, and naturally nothing that will happen overnight. But Yurgens is convinced this would lay the best foundation for future developments in Russia. We agree completely, and feel that this would not only be good for Russia, but also for the West.
This is not a view shared by everyone in Russia however, and the report was criticised somewhat in the Russian media upon its release. Click this link to see the NY Times' comments on the issue: http://www.nytimes.com/2010/02/04/world/europe/04russia.html. East Capital has for a long time been convinced of the fantastic potential in Russia, and we think these comments are mind boggling. This is not something we expected to hear so early in the debate, and not something that we considered in our positive scenario for the country.
The Russian economy at the moment
In the last newsletter, we wrote about what we experience during our company visits in Russia, and this month, we can report that this is also starting to have an impact on the various forecasts being released. The consensus on growth is closer to 5%, which is what we predicted. The World Bank just released a forecast of 5.5%, whilst the IMF figure remains at 3.5% (up however from the 1.5% predicted as late as November). The growth is most evident in industrial production and private consumption is showing small improvements. However, we think this is set to change in the year to come.
Peter Elam Håkansson
Written onboard flight QR 089 (Qatar Airways) from Doha to Stockholm
