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WRAPUP 2-Russia PM seeks investment, pledges no capital control

Published 09/18/2009, 10:58 AM
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* Russia must attract investments

* Seeks knowledge, technology boost from investors

* Morgan Stanley, GE, TPG say interested in Russia

* Putin pledges no capital controls

(Adds details, background, quotes)

By Gleb Bryanski and Toni Vorobyova

SOCHI, Russia, Sept 18 (Reuters) - Russia needs to boost investment to ensure it emerges strong from the financial crisis, so it will not re-introduce capital controls, Prime Minister Vladimir Putin said on Friday.

Russia resisted calls for capital controls, choosing instead to spend $200 billion of reserves in late 2008-early 2009 on keeping the rouble from weakening too quickly as it adjusted to lower oil prices and the country's first recession in a decade. "We will keep this liberal regime, which is one of the fundamental reasons for investment in Russia's economy," Putin told an economic forum in the Black Sea resort town of Sochi.

Businessmen attending the forum were upbeat about prospects in Russia's resource-rich economy, now that the worst of the global slowdown seems to have passed and investors are looking for fresh avenues for their cash.

David Bonderman, founding partner of one of the world's largest private equity funds TPG [TPG.UL], said he is looking for opportunities for about $30 billion in uninvested capital and is "cautiously optimistic" about Russia. [ID:nLI351370]

"We have about $60 billion of capital, half of it is uninvested and we are looking for opportunities," he said.

General Electric Co , the largest U.S. conglomerate, listed Russia among its priorities [ID:nLI179221], adding that it is in talks about possible projects with Russian Railways and gas export monopoly Gazprom . [ID:MOS005538]

John Mack, outgoing CEO of Morgan Stanley told Reuters he was confident about Russia [ID:nLH695446] and later especially highlighted pharmaceuticals. [ID:nMOS005538]

Putin said he hoped the purchase of Germany's Opel by a consortium including Russia's largest lender Sberbank and carmaker Avtovaz would set a precedent for fruitful partnerships with foreign companies. "We are open to foreign investments, of course...We need not so much the money, and not just the money, but first of all the knowledge and the experience that key international players have," he said.

The Russian economy has passed the worst of the crisis, with growth averaging 0.5 percent a month since June, Putin said.

The government should start thinking about how it will unwind anti-crisis stimulus measures and diversify the economy from natural resources to cushion it from future turmoil, he added. Investment will be key here.

TRAFFIC JAMS

Avtovaz chief Igor Komarov told the forum that his company plans to create a joint venture with Renault and its Japanese alliance partner Nissan Motor Co <7201.T> to produce car parts. [ID:nLI158779]

"Russia needs to fight for direct investment," German Gref, Sberbank's chief executive said.

Although Russia has been much harder hit by the global crisis than other major emerging markets such as China or India, Putin said his country had some advantages over the others.

"One of the main advantages of China is stability...A possibility for financial authorities to make decisions without looking back at political situations. Some people like it, some don't, but for investors it is an advantage. But there are some currency restrictions," he said.

"In Russia there are some problems but some pluses, including the liberal financial regime."

But some remained sceptical about how far Russia -- which in the past had a chequered relationship with foreign investors, especially in strategic sectors -- would really open up.

"The suspicion will obviously linger that any attempt now to woo foreign investment is a transitory move, while Russia is in need of capital/funding," RBS analyst Tim Ash said in a note.

"But once global markets, and commodity markets pick up this desire to really open up to foreign investment will again fall by the wayside in favour of Russian, and in particularly Russian state interests."

Russian businessmen, including metals tycoon Vladimir Potanin, said they are also prepared to invest [ID:nLI255283] but some said they have no intention to share their profits with foreign investors.

"There is not enough room here even for us," Vladimir Yevtushenkov, CEO of Systema, which holds stakes in a number of technology companies, told Vesti television.

Foreign companies at the forum also noted ongoing problems in Russia, from a lack of transparency to more basic issues.

"Reduce traffic jams, seriously," Michael Calvey, co-managing partner of private equity fund Baring Vostok Capital Partners, said when asked what would make investment easier. (Additional reporting by Dmitry Sergeyev and Katya Golubkova; Writing by Toni Vorobyova; Editing by Toby Chopra)

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