APPENDIX 29
Memorandum submitted by the Confederation
of British Industry
1. BACKGROUND
The Confederation of British Industry (CBI)
has a significant number of members with interests in the Russian
Federation. These interests range from multi-million pound investments
to longstanding and substantial trading relationships. In the
current economic and political turmoil we believe it essential
to support existing investors through high-profile lobbying of
the Russian government and business community on key issues affecting
UK business interests in the Russian Federation. To this end the
CBI has, together with the British Embassy in Moscow, organised
a series of UK/Russian Round Table Conferences and briefings with
the participation of Russian and British business leaders and
politicians, including the President of the Russian Federation.
The personal influence of the Ambassador, Sir Andrew Wood has
been the driving force of the initiatives at the Moscow end and
his continued support has been invaluable.
The views outlined in this submission represent
the opinions of the major investors and traders in the region.
It does not seek to provide trade or investment data that is available
from other sources.
2. THE CONTEXT
OF FCO WORK
It is important to note that the rapidly changing
political scene in Russia and continued economic chaos have a
key impact on the way that business is conducted. In particular
due consideration should be given to the following points:
— the significant commercial impact
of the political and economic insights given by FCO officials.
This is recognised and appreciated by business. In addition, diplomatic
assistance provided by the FCO has been central to investment
decisions in the region. The personal support of the Ambassador
has greatly contributed to maintaining business confidence during
uncertain times in Russia. The Ambassador's visits to the Russian
regions have been warmly supported by British companies. The Embassy
in Moscow and Consulate in St Petersburg have achieved the satisfactory
resolution of tax disputes which could have proved a major hurdle
for investors. The attendance of the Ambassador and representatives
of government at project inaugurations is seen as a hugh support
for British investment;
— in addition to the Commercial Section,
the Science and Technology and Political Departments of the British
Embassy in Moscow have provided significant help to British investors;
— government contact is very important
in Russia. It is vital to maintain and strengthen the network
of British representation in Russia to assist in maintaining existing
commercial commitments, and to facilitate the search for solutions
to business-related problems and best take advantage of emerging
opportunities.
3. THE RATIONALE
FOR STRENGTHENING
REPRESENTATION IN
THE REGION
Business feels that there are strong arguments
for maintaining and enhancing FCO representation in the Russian
Federation. It believes that:
— high levels of experience and expertise
in FCO staff are particularly important in Russia. The Russian
market often operates in a complex and unpredictable manner and
exhibits less than transparent characteristics. Business recognises
the key role that the Ambassador plays in trade matters, this
is particularly true of the current Ambassador who continues with
the CBI to create a dialogue between the highest echelons of British
business and decision makers in the Russian government and economic
circles;
— given the size and diversity of Russia,
regional and sector specialisation is greatly valued by business.
In time, as the economy develops more resources will be needed
throughout the regions of the Russian Federation;
— the potential offered by the FCO
short-term secondment scheme could be utilised. The CBI played
a major role in getting this private sector attachment scheme
launched and it believes its demonstrable success could be extended.
Six-month project-based secondments to Posts in the region would
provide real mutal benefits in key commercial sectors;
— the current arrangements for consular
and visa services are in need of review. This is quoted as a major
source of irritation to UK companies who find their Russian partners
complaining of their treatment. Any visa system must not only
look to protect British interests, but must also be flexible enough
not to impact negatively on legitimate commercial and political
interchange.
4. THE MECHANICES
OF DOING
BUSINESS
There are a number of general recommendations
that the CBI would make that relate to the way in which British
business interests could be assisted still further. These include:
— The need for Cabinet-level support
and an increased programme of ministerial visits in both directions.
This would not only serve broad foreign policy aims, but would
also raise and support British business interests in the region.
This is particularly the case where strategic industries are concerned.
— British investors who remain concerned
at the general investment environment in Russia. Topics on which
continued lobbying is needed include:
— The fear confiscatory measures in
times of economic crisis.
— The lack of a conventional banking system,
help is needed with banking supervision.
— The streamlining of the tax regime where
irrational taxes such as Turnover tax and taxes on foreign exchange
profits are levied and regional variations occur.
— Improved corporated governance and transparency
are essential, the laws are largely in place but support for an
independent and strong judiciary is needed to enforce them. Foreign
and local investors need to be treated equally under the law and
shareholders rights protected.
— The introduction of land and property
law.
— Examining whether greater efforts
can be made in institution-building in Russia including the above
mentioned problem areas. British expertise is recognised as world-class
and there are both generic and specific advantages of assisting
the proper growth of a sound institutional framework.
— The Know How Fund has been very effective
and is having results in terms of Russian awareness of Western
planning and management methods and willingness to apply them.
KHF activities have been integrated with complementary programmes
from IFIs such as the EBRD and other bi-lateral donors.
— Providing advice on finance. It is
imperative that there is timely, relevant and accurate information
that enables business opportunities to be pursued. Export credit
agencies including ECGD should continue to support good projects.
In additions, there is a clear need to provide details of funding
that is available from other sources such as the EU and the multilateral
institutions. The UK Government can assist in the reform of international
funding programmes such as TACIS. Increased external funding is
urgently needed particularly to tackle nuclear, military and environmental
threat reduction, industries where the UK has significant expertise.
— Increasing the use of Information
Technology which would benefit more firms seeking access to information,
especially where FCO research facilities on the ground are limited.
Equally, organisations such as the CBI chould share data-bases
of commercial interest with the Posts in a more meaningful manner.
A British Embassy website would provide answers to many routine
enquiries.
— Full and faithful implementation
of all the recommendations contained in Sir Richard Wilson's Review
of Export Promotion will create a truly effective public-private
sector partnership in export and investment promotion. The CBI
strongly supports Sir Richard's Review and urges the Committee
to take its recommendations into account as the inquiry proceeds.
October 1999
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