|26 April 2012|
In February president-elect Vladimir Putin told investors at the Sberbank/Troika investment summit that Russia would move up the World Banks Ease of Doing Business ranking from its current 120 place (out of 183) to 20.
Yeah, right, and pigs will fly, would probably sum up the reaction of most veteran investors. Ivan doesnt do radical reform. Moving this far up the list would mean nothing short of a revolution; a total transformation of the economy and machinery of government.
Or would it: Marcus Svedberg, chief economist of leading retail fund East Capital told delegates at its annual conference in St Petersburg at the start of April that bringing about the change maybe easier than it looks.
In this week chart Svedberg breaks down components that go into the ranking and if the Kremlin concentrates on making reforms only in the two of the 10 factors that go into the ranking where it performs worst (construction permits and getting power to businesses) Russia would move up to position 80 on the ranking, according to the World Banks own simulation. And if the Kremlin reforms the five worst factors (add cross board trade, investor protection, starting a business) it would move up to 38.
As it happens Putin promised the RSPP, Russias big business lobbying group, in February that whole system of issuing construction permits will be overhauled this year. And deep reforms to the power sector are ongoing (although are currently bogged down in row over tariffs).
Suddenly Putins challenge doesnt look quite so crazy -- even if it remains unlikely Russia will get into the 40s of the World Banks index any time soon.