By: Modern Russia and Emmanuel Quidet on June 22, 2012
Just hours before the official opening of the 2012 St. Petersburg International Economic Forum (SPIEF), Modern Russia sat down with Emmanuel Quidet, Partner at Ernst & Young Russia and President of the French-Russian Chamber of Commerce. Quidet shared his views on Russia’s economic outlook and the country’s attractiveness for investment funds, why SPIEF remains the place to be for foreign businessman interested in Russia and President Vladimir Putin’s proposals made at the recent G20 in Mexico.
Could you tell us about the activity of the Ernst & Young in Russia? How long have you been present in the country, what type of clients are you advising and what are your reflections amidst Russia’s economic evolution over your history there?
Ernst & Young has been present in Russia for 23 years and currently has over 4,000 employees. In fact, our quick development reflects Russia’s economic activity. Today, 80 percent of our clients are Russians, whereas 70 percent of our customers were international when we initially began working there. Ernst & Young’s activities are spread across a number of sectors, notably in banking, telecommunications, as well as consumer and industrial products.
Contrary to the image that is often conveyed abroad, Russia has considerably modernized and developed its economy. Russia has also industrialized and does not only rely on oil revenues. Since 1997, Russia’s industrial production has been significantly revived, but especially so since 2000.
In the current morose economic context, how do you perceive the business climate in Russia?
In 2007-08, Russia did not immediately feel the effects of the global economic crisis, experiencing a sort of “crisis denial.” Yet, in 2009, it was seriously hit, and suffered a significant income diminution because of the historic fall of oil prices. But the crisis only lasted one year and Russia recovered when oil prices returned to normal levels. Russia’s accounts are currently balanced and solutions implemented in Europe to tackle the crisis allowed Russia to grow. Regarding the current eurozone crisis, the effects are not yet tangible today in Russia, and growth is still strong – favoring a two-digit growth for many of our clients, as well as for our own company. Nobody knows when Russia will be hit by the crisis. But if the West manages to get out of trouble, Russia should not suffer either.
To many international businessmen, numerous obstacles to business development remain in Russia. Some business leaders aren’t as enthusiastic about investing there, whether they are based in Moscow or in their home country. What do you think of this discrepancy of views? What are the difficulties to overcome? Are there some reforms that Russia should undertake?
Even though there are always some difficulties, investing in Russia can be very profitable. There is always a strong dichotomy between the people who are in Russia and those abroad; this dichotomy actually explains a lot about Russia’s image in France.
The first reform that needs to be made by the government is a restructuring of its administration and bureaucracy that really weighs on investors today – both Russian and foreigners alike. A banking reform could also be implemented.
At the recent G20 summit in Mexico, President Putin authored an article in El Universal calling for, amongst other things, an agreement with other G20 members on the appropriate level of protectionism in times of crisis. How can we interpret this statement, if we put it in the context of Russia’s WTO accession?
What Putin describes in his piece is that everyone says they want to liberalize their economy, while governments do exactly the opposite. Putin does not call for the revival of protectionism, but tries to find a reasonable agreement amongst G20 countries allowing joint actions while understanding that every country needs to protect their industries. It is about finding a way for “protectionism in liberalism,” because Russia is not a completely liberal country, nor are France or Europe for that matter. In this regard, Putin’s view is closer to the European model than the U.S. one – although the U.S.’ economy is, in practice, one of the most protected in the world.
You are going to the St. Petersburg International Economic Forum. What are your expectations for this 2012 edition?
This forum is interesting. A few years ago, a yearly economic forum was organized in London, until Putin decided that when it came to discussing Russia, it had to be done in Russia. The objective was to draw investors to Russia, and it worked extremely well. I have attended six editions of SPIEF, so I could witness how it evolved over the years. Many global business and political leaders go for the networking aspect as well. Two years ago then-President Nicolas Sarkozy’s attended with nine ministers!
The forum, which allows for exchanges of views on Russia that are very optimistic in general. As the crisis loomed in 2008, people were still very optimistic about Russia – rightly so, if you ask me. CEOs of major global firms still consider it a growing market. So this forum is a way to take the temperature of Russia’s business climate.
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