Putin Seeks To Reassure International Investors That Russia Is Open For Business

by Tatiana Smolenskaya, Tax-News.com, Moscow

28 June 2005

Russian President, Vladimir Putin has attempted to reassure foreign investors that their input into the country's economy is welcome and outlined new plans to make the country's investment environment more open and competitive.

Mr Putin's assurances came after meetings with investors from the United States and Germany over the weekend, who were representing companies such as IBM, ConocoPhillips, Siemens and E.ON.

"We are preparing additional, highly essential steps for institutional reform and lessening bureaucracy, strengthening the rights of proprietors, breaking up monopolies and also a clearer regulation of the work of tax bodies," Mr. Putin announced.

Confidence in the Russian business environment has taken a severe battering after the highly-publicised trial of former Yukos boss Mikhail Khodorkovsky, who has been jailed for nine years after being found guilty of tax evasion, fraud and embezzlement, although it is widely believed that trial had more to do with Khodorkovsky's political ambitions than with tax crime. The breaking up of Yukos after multiple multi-billion dollar claims for back taxes, not to mention back tax claims against firms across many sectors have exacerbated the uncertainty and insecurity felt by many investors in Russia over the past twelve months.

In a report published earlier this month, the OECD also noted that the tackling of basic issues, such as the strengthening of the rule of law and securing property rights, increasing the transparency and accountability of state institutions, and combating corruption are all major reform challenges for the Russian government.

While the OECD observed that some progress has been made on resolving these issues, it argued that there is recent evidence of a "drift towards more interventionist, less rule-governed state behaviour".

"Russia’s long-term growth depends on checking such tendencies and reinvigorating market reforms," the report noted.

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