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Contributors on investment in Russia

Setting the scene

The opportunities for investment in Russia are potentially enormous. The country has a large market and a huge, exceptionally well-educated workforce. It is rich in natural resources, including oil, gas, coal, gold, timber, nickel and diamonds. But political instability, legal and tax shortcomings, bureaucratic hurdles, corruption and rising crime are deterring mass foreign investment: according to the International Monetary Fund (IMF), about US$2 billion in 1995. By comparison, the Czech Republic attracted $2.5 billion.

Political instability is the most pressing issue. The years since the failed coup against the then Soviet leader Mikhail Gorbachev have been dominated by a power struggle between reformers and hardliners, including an aborted armed uprising against President Boris Yeltsin in October 1993. President Yeltsin's re-election in 1996 will do little to resolve the issue: his ill-health has meant that jockeying for power between communist, nationalist and liberal factions has not ended. The President's ill-health makes it unlikely that he will be able to serve out his full four-year term.

The economy, still at only 55 per cent of its 1989 size, also faces serious difficulties. Economic reforms have alienated many Russians who have seen their jobs disappear or their wages slashed, and who look back at the Communist past as a haven of stability and prosperity. The economic crisis has led to escalating levels of violent crime, the emergence of powerful mafia groups, rising extortion and corruption, and the spread of the unofficial economy.

President Yeltsin's key challenges are to cut Government borrowing and raise tax collection - though closing non-paying enterprises has proved dangerously counter-productive. And he must do this while softening the social impact of reform.

Key economic indicators
Capital MOSCOW
Area (Sq km) 17, 075, 400
Population (m) 148
GDP/Capita (1995) US$2, 421
President Boris Yeltsin
Currency rouble /: 1US$ 6.2 (FT 29/05/98)

Viktor Chernomyrdin, Former Prime Minister
Economic changes in Russia

Sergei Dubinin, Chair, the Central Bank of the Russian Federation
Developments in the Russian financial and banking system: 1996 overview

Sergey Karpov, Moscow Central Stock Exchange (MCSE)
The results of the Moscow Central Stock Exchange Performance (MCSE) performance in 1997

Dmitry Vasiliev, Chair, Russian Federal Commission for the Securities Market
The way ahead

Yuri Kasanenko, Head of Foreign Exchange and Money Market Department, Bank St Petersburg
Russian banks create national currency market

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