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Expanding Business Opportunities in Russia's Regions

William J. Burns, U.S. Ambassador to Russia

Sochi, Russia, September 29, 2006

"A Speech delivered by U.S. Ambassador William J. Burns on Friday, September 29, 2006 at the KUBAN forum on regional economic development in Sochi, Russia

I am honored to participate in this important conference on economic opportunities in Russia's regions. One of the first things I learned when I worked in Russia ten years ago is that you cannot understand this society simply by sitting in Moscow. I travel often across this great country. While I still have a lot to learn, what I have seen and heard so far convinces me that we have only scratched the surface of business opportunities in Russia's regions.

The facts speak for themselves. Foreign direct investment outside Moscow nearly tripled in the past two years. In 2005, the regions accounted for nearly three quarters of all foreign investment in Russia.

On my travels across the country, I have seen firsthand how American firms are reinforcing this trend. In St. Petersburg last June, I participated in the ground-breaking for a new General Motors plant. I've seen ALCOA's excellent facilities in Samara, and Coca Cola's expanding operations in Krasnoyarsk. International Paper is doing exceptional business in Svetogorsk, employing nearly 3000 Russians. I've also seen INTEL's growing software development center in Nizhny Novgorod. And I've seen other new business opportunities emerging in travels from the western borders of Russia to Kazan and the Urals, and across Siberia to Vladivostok.

I am a bureaucrat, not a businessman. But I have seen enough to understand that business is attracted to places that have several key characteristics: an accessible market; a skilled workforce; effective infrastructure; clear, consistent business rules; and, not least, regional leaderships that are actively committed to those goals, with strong backing from Moscow.

This kind of environment already exists in many of the regions I have visited. It can be developed in many more. Russia's large domestic market and extremely well-educated workforce are significant strategic advantages. Minister Gref's Investment Fund, and efforts to improve transportation and infrastructure in the regions, are encouraging signs.

I hardly need to tell any of you that there are also major challenges to overcome. Corruption and bureaucratic red tape were a big problem when I lived in Russia ten years ago. They are an even bigger problem today. In a recent survey, 90% of foreign investors in Russia said that reducing corruption at all levels would be one of the most important steps that Russia could take to strengthen the business climate. This is not a favor to American or foreign investors. As President Putin has said repeatedly, it is profoundly in Russia's own self-interest.

Similarly, it is in Russia's own self-interest to protect its greatest economic resource, its skilled and well-educated people. That's why investment in Russia's educational system, strong steps to protect intellectual property, a vigorous campaign against health threats such as HIV-AIDS, and measures to promote tolerance throughout Russian society are all so important.

It is deeply in Russia's interest to develop a diversified economy, beyond oil and gas exports, with benefits spread across Russia's regions and shared by all of Russia's citizens. That is in America's interests too. We can help in several ways. As we meet here in Sochi, our negotiators are working very hard in Washington to conclude a bilateral agreement on Russia's entry into the World Trade Organization. That will open up new opportunities for a more diverse and competitive Russian economy. We remain open to increased Russian investments in the U.S. market, making our economic relationship a genuine two-way street. And President Bush announced in St. Petersburg last July a new foundation, built on the very successful U.S.-Russian Investment Fund, which will help support small and medium-sized businesses here, strengthen business education, and deepen connections between young entrepreneurs in both our countries.

I look forward to moving ahead together in all these areas. I have no higher priority as Ambassador than to encourage American businesses to take advantage of opportunities across Russia – and to encourage Russian leaders to take steps to attract and retain the kinds of investments that serve the interests of both our countries.

Americans and Russians have their share of differences and mutual frustrations these days. We are navigating a complicated period, in which it remains very important to keep a sense of perspective, to remember how much we have to gain by working together. There is no better place to apply that understanding, and expand our economic ties, than in Russia's regions, where more and more opportunities are emerging every day.