The 13Th Annual Renaissance Capital Investor Conference in Conjunction with the St
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The 13th Annual Renaissance Capital Investor Conference in conjunction with The St. Petersburg International Economic Forum 2009 KEYNOTE SPEECH AND PLENARY SESSION • President Dmitry Medvedev's keynote speech • Global economic crisis - first lessons and leading the way forward 5 JUNE - ECONOMICS DAY • The price of oil • Anti-crisis programmes scale and limits of government intervention in the context of market economy • A new economic model, and the long-term impact of crisis • The power of innovation: When will tomorrow start? • The economic crisis and new challenges to global security • Modern logistical systems • CIS - Space for cooperation - agenda for tomorrow • Leveraging the productivity level • From trusting capital to capitalising on trust • Strengthening the role of international cooperation and opposing protectionism • Prospects for the evolution of political systems • Energy efficiency and alternative energy sources • Training future world leaders • Retrospective of world crises • Social policy during the crisis • SCO: Room for economic cooperations and countermeasures to the global crisis • The cinema industry during the crisis 6 JUNE - FINANCE DAY • Plenary session • Plenary session: Post-crisis financial architecture • Afternoon session • Restructuring financial institutions • Financial markets: Risks & regulation • International financial centres: Experience and perspectives • The future of reserve currencies • Project financing in crisis conditions • Future payment systems • Global economic revival: Where and when? The viewpoint of international business and analysts • The future of cities: Preparing for economic growth OTHER EVENTS • Stephen Jennings: Speech at The 13th Annual Renaissance Capital Investor Conference - Creative destruction • Russia-EU business dialogue • Russia-US business dialogue INTRODUCTION Beginning in Moscow on Monday last week, and ending today in Yekaterinburg, our 13th Annual Russia conference has been rolling through Russia. It has been a rather different experience than the one I anticipated when we started planning it in January this year. I had expected a few dozen grizzled Russia specialists and the more value-seeking hedge funds. Instead the conference, in terms of international participation, was really little different from that of previous years, except that it was centred in St. Petersburg. Two hundred international investors met with 35 Russian corporates at 950 one-on- one meetings, with site visits undertaken to LUKOIL, Gazprom, Evraz and TMK. What was different this year was Renaissance Capital’s participation in the St. Petersburg International Economic Forum. The Forum is impressive. The seniority of the speakers was remarkable. The oil-price session, for instance, saw CEOs of LUKOIL, TNK-BP, Chevron, and Shell all answering questions to a panel which included Deputy Prime Minister Igor Sechin. Even the rather more modest panel I moderated on reserve currencies – one of several that took place simultaneously late in the afternoon of the final day – included the IMF’s number two, a member of the board of the ECB, an MD from Ashmore, the head of research at the OECD development centre, the Senior Vice Chairman of the Bank of New York Mellon and Arkady Dvorkovich, the most senior economic aide to Russia’s president. Most impressive, however, were the informal meetings that took place around the fringes of the forum. We met with Alekperov, Bogdanov, Chubais, Zyuzin, Nabuillina, Dvorkovich and Ulukayev, to name just the ones in which I was involved. Informal meetings were actively encouraged, with everybody from Vladimir Mau to Pavel Borodin moving between the various panels. The only disappointment was the weather, which was awful…particularly so for the poor Mercedes girls sat wrapped in blankets in their open-air bar, waiting for the rain to stop. Below, and enclosed, we include a summary of each of the panels that took place over the course of the conference. For me, a small (and very partisan) selection of the highlights included… • The outlook for economic growth. An audience at one panel was asked whether they expected a W, L, U or V- shaped recovery for the Russian economy. The most popular by a distance was W (50%), while only 2% expected a V-shaped outcome. In 1998, the consensus expectation for growth in 1999 was -6%. Actual was +6%. I am not saying history will repeat itself, but it is interesting to note how unexpected it would be if the outcome was better than the worst case. • Exchange-rate policy. Who would have thought in January that the talk in June would have been about how to prevent appreciation of the currency? Officials were keen to emphasise both that they would prevent nominal appreciation above RUB30/$1, and that they wanted to move towards a floating currency managed through inflation targeting – which illustrates the dilemma of exchange-rate policy when commodity prices are so volatile. • The body language of the oil executives. Russia’s top hydrocarbon CEOs all showed the greatest respect to both Dmitri Medvedev and Igor Sechin. Indeed, when they were answering questions, they did so at least as much to Sechin (also on the stage) as to the audience. • Plans for fiscal policy. It seems possible that the budget deficit this year will exceed 7.8% of GDP (the number in the 2009 budget) even if the oil price remains above $60/bbl for the remainder of this year (the price used in the budget is $41/bbl). This suggests more of a fiscal boost than anticipated. • The consensus on the oil price. Both the audience and the CEOs were asked about their forecasts for a sustainable level for the oil price. The oil execs chose $80-90/bbl, while the audience went for $70-80. Both ranges suggest plenty of upside for Russian equity. • The direction of interest rates. On several occasions, it was made clear that rouble interest rates would tend downwards, with expectations of a further 100-150 bpts decline in official rates before the end of the year. • The efficiency of the security. Given the seniority of the people attending, the security felt surprisingly light. There was almost no queuing, and once through the security check, there was little obvious sign of what must have been a heavily policed event. • The performance of President Medvedev. He looked the part. His opening speech was delivered with presidential confidence. He turned up in the audience of a couple of other panels, and held a whole series of breakout sessions. His message was consistent – that Russia is open for business. Implementation is clearly very different from communication. But communication has often been a big part of Russia’s problem. With much justification, Russia is often criticised for failing to communicate its message to the outside world. The St. Petersburg Forum seemed to me to be an excellent attempt to answer that criticism. Roland Nash Telephone: +7 495 258 7916 © 2009 Renaissance Securities (Cyprus) Limited. All rights reserved. Regulated by the Cyprus Securities and Exchange Commission (Licence No: KEPEY 053/04). Hyperlinks to important information accessible at www.rencap.com: Disclosures and Privacy Policy, Terms & Conditions, Disclaimer KEYNOTE SPEECH AND PLENARY SESSION President Dmitry Medvedev's keynote speech Global economic crisis - first lessons and leading the way forward Keynote speaker Dmitry Medvedev, President of the Russian Federation Moderator Maria Bartiromo, Anchor of CNBC’s Closing Bell Conference participants Gloria Macapagal Arroyo, President of the Republic of the Philippines Junichiro Koizumi, Prime Minister of Japan Gerhard Schroeder, former Chancellor of Germany Dr Robert Mundell, Professor of Economics, Columbia University, Nobel Prize laureate in economic science 1999 President Dmitry Medvedev opened the plenary session with a keynote address on the global financial crisis. The discussion that followed sought to highlight the lessons learned thus far, and how global governance would lead the way forward. The president believes that the crisis is nearing the bottom. However, he stressed that the depth of the crisis has been exacerbated in large part by the inability of international financial organisations (IFOs) to either predict or combat against it. He noted that no country in the world has been left unscathed by the current economic downturn and that the IFOs have failed in their duty to protect the global financial system. Reliance on a single-polar economic model that is crisis-prone by design should be eschewed in favour of setting up new international financial regulation standards. These should not conserve elements of the previous system, which would likely generate a new crisis, nor be overly tight, which would slow economic growth. The president believes the new system should be aimed at rebuilding trust, and set a level playing field for everyone, commenting that work in this regard has already begun. He urged the G20 to follow up on its decision to reform the IFOs and that the reforms should go beyond the cosmetic, aiming to serve as an early warning system, and should not be dominated by any one country or political ideology. President Medvedev continued with his address by highlighting that the crisis has posed simple, but very important questions on the oil trade, protectionism and the future or global currency systems. With regard to the oil trade, he commented that new and transparent energy-trading rules are vital; however, he cautioned that these will only work if all parties involved are satisfied their interests are