Economic stability lures investors
THE POLITICAL STABILITY THAT HAS FOLLOWED THE ELECTION OF VLADIMIR PUTIN IN MARCH 2000, COUPLED WITH INCREASED COMPETITIVENESS AS A RESULT OF THE 1998 DEVALUATION OF THE RUBLE, HAS ALLOWED THE RUSSIAN FEDERATION AS A WHOLE TO ENJOY ITS STRONGEST ECONOMIC GROWTH IN A DECADE. THE CHALLENGE NOW IS TO CONSOLIDATE THIS GROWTH BY ATTRACTING INCREASING FOREIGN INVESTMENT TO AREAS SUCH AS PETROLEUM, MANUFACTURING AND TELECOMS

From day one of his presidency, Vladimir Putin made it clear that he was determined to transform the loosely divided Russian Federation into a more unified structure led by a strong central government. The task is a formidable one, as the Federation consists of 89 regional administrative units, some of which enjoy republic status while others are national autonomous areas, termed oblast, krai or okrug.
So far, his task, which is expected to last decades rather than years, has been met with optimism at the international level while at home feelings are mixed. It is hoped that, as economic indicators in the federation continue to improve, the regional governments will be more likely to ease their demands on the central power structure and accept the fact that breaking up Russia into 89 separate countries would be much worse than the president’s proposed reforms to the federal framework.

Although the government’s reform program concerning fiscal and monetary policy, as well as the restructuring of the banking and utilities sectors, is popular among both the public and lawmakers, the pace of centralization will likely be slow, so as not to alienate the political and business leaders whose cooperation is vital for a smooth transformation of the Russian economy.
This report centers on Russia, the largest entity of the Russian Federation, and on two of the 89 regional administrative regions in particular: the city of St. Petersburg, which, like Moscow, ranks as federal unit in its own right (see p. 15), and the Republic of Tatarstan, in the Volga region (see p. 18). Both regions are interesting examples of the dynamism of the country and also of the vitality of regional culture.

St. Petersburg, considered the window to Europe and the cultural capital of Russia, has the largest commercial seaport in the country and its economy accounts for 5% of the entire federation’s GDP. The city founded by Peter the Great in 1703 is also one of the major recipients of foreign investment in the whole federation. One of its key claims to economic fame is that, during the country’s crippling financial crisis of 1998, not one foreign investor pulled out of St. Petersburg.
Tatarstan has already earned a reputation abroad as one of the most economically developed republics to have emerged from the former Soviet Union. The region has huge oil and bitumen reserves, and boasts a modern upstream and downstream petroleum industry. Foreign investment has been flowing into the republic and is expected to double or even triple over the next few years. Tatarstan’s agriculture and manufacturing industries are also the envy of much of the Russian Federation.

FOR FURTHER INFORMATION PLEASE CONTACT SUMMIT COMMUNICATIONS AT: 1040 FIRST AVENUE, SUITE 395, NEW YORK, NY 10022-2902. TEL: (212) 286-0034 FAX: (212) 286-8376 E-MAIL: info@summitreports.com