Putin Offers to Forget 1990s Privatizations ............................
By Maria Levitov and Valeria Korchagina
Moscow Times
Staff Writers
President Vladimir Putin on Thursday offered to forgive and forget the shady privatizations of the 1990s and to clean up the tax regime -- two major concessions to big business clearly aimed at boosting investor confidence.
Market players welcomed Putin's remarks as a sign that a crisis of confidence prompted by the Yukos legal assault was over, and shares on the MICEX bourse shot up 4 percent.
"I think it is possible to support shortening the statute of limitations on privatization deals from 10 years to three years," Putin told a meeting of business leaders in the Kremlin. "This will help the business community look into the future with greater certainty, draw up promising development plans and make new investments. And I hope reassure entrepreneurs about the security of property rights."
Also at the top of the government's agenda are efforts to help Russian companies grow into global players, to stimulate small business development and to reform the tax regime, Putin said.
The need to modify the tax system "is to me an obvious fact," Putin said, adding that businesses should help draft the changes.
After the meeting, Deputy Prime Minister Alexander Zhukov said Putin's "important statement" on privatizations means that "in Russia, property rights will be protected." He said the Cabinet had already been instructed to draft legislation to support the moratorium on reviews of state sell-offs that took place more than three years ago.
It was unclear whether the proposal would have any effect on the criminal proceedings against Yukos founder Mikhail Khodorkovsky and his business partner Platon Lebedev. Khodorkovsky and Lebedev are being tried on fraud charges related to privatization of the Apatit fertilizer producer in 1994, and they have been in jail since 2003.
Moscow's Meshchansky district court on Thursday prolonged Khodorkovsky's detention until July 14, even though the current custody order does not expire until May. Inexplicably, the prolongation was also conducted without the required request from prosecutors.
Despite the uncertainty, Putin's comments came at a time when the country is in desperate need of a confidence boost. Economic growth has been slowing as the investment climate worsened because of uncertainty connected to the Yukos affair and a subsequent slew of back tax claims against other large companies. Economic growth slowed to 5.2 percent in the first quarter of this year, compared with 7.3 percent in the same period of 2004, according to the Economic Development and Trade Ministry.
"The crisis of confidence has become obvious, and it is bigger than just a relationship between big business and power," said Yevgeny Gavrilenkov, chief economist at Troika Dialog. "Consumption, incomes and savings are all slowing down."
Thursday's meeting suggests "Putin has now drawn a line in the sand on the lack of progress and other unsettling actions by state officials and seems determined to push ahead with improvements to business, investment climate and confidence," Chris Weafer, chief strategist at Alfa Bank, said in a research note.
Andrew Somers, president of American Chamber of Commerce in Russia, said Putin was finally moving to contain the damage inflicted by the Yukos affair.
"The Yukos affair ... is over," Somers said. "I do think that the government has recognized the damage incurred through how the Yukos affair was handled. The effect on the outside world's perception of Russia was very, very negative, and the Kremlin is seeking to address it on a very positive basis."
But Interros head Vladimir Potanin, who attended the meeting, said afterward that the government must do more if it hopes to undo the damage caused by Yukos. "In order to make the investment climate a good one, a large number of consecutive steps need to be made in the area of cooperation between business and power," Potanin said.
The markets soared after Putin's offer to shorten the statute of limitations on reviewing privatizations. MICEX saw its biggest increase since Dec. 21, closing at 596.94, while the RTS index rose 2.5 percent to 678.70.
"We always expected that once the Yukos affair was over there would be a flow of good news to help everyone recover from the uncertainty and jitters caused by it," said Alexei Moiseyev, economist at Renaissance Capital. "Today's statements can be considered such good news."
Alexander Shokhin, chairman of Renaissance Capital's supervisory board, told the Kremlin meeting that there was some disagreement in the business community about which taxes needed to be modified first but everyone agreed that tax collection procedures and related processes should be addressed first. He stressed that while cutting taxes is important for business, lower taxes cannot become a sort of "compensation" for illegal actions by tax authorities.
Putin acknowledged the need for reform and the need for the tax authorities to "be effective mechanisms in solving state problems."
Putin also said that the government needs to help stimulate small business growth, Sergei Borisov, president of the small-business lobbying group Opora, said after the meeting. "The pressure from regional authorities is continuing to grow. ... There's been a rebirth of various types of inspections," he said.
Alexander Abramov, president of the country's largest steelmaker, Yevrazholding Group, urged the government to simplify the process of tapping international capital markets.
The business leaders appeared to leave the meeting in high spirits, but Gavrilenkov cautioned that it was now up to Putin to deliver the goods. "Many good words have been said before. It is time to take action," he said. |
