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Medvedev seeks Russian economy modernization

18.06.2009

Russia imports too much high technology and cutting-edge innovations and must do more to free the economy from its reliance on heavy industries like oil and gas, President Dmitry Medvedev said Thursday.

Medvedev called for the government to work with big business groups to help modernize the economy — an initiative that could involve billions of public and private dollars.

"It's easier to buy everything abroad and to deliver (abroad) our natural wealth, but we must strive for business to have the motivation to produce the best commodities and to create the most competitive conditions in our country," he said.

Speaking to a new presidential commission, Medvedev said Russia had for too long relied on importing what he called "intellectual products"_ an area he sees as a Russian speciality.

Medvedev said Russia should be a global leader in five areas — energy use and storage; nuclear technology; space and communications technology; medical know-how and equipment; and information technology including supercomputers.

The high-power, 18-member commission includes top Kremlin ministers as well as businessmen including Russia's richest man, Mikhail Prokhorov.

In the brief part of the meeting open to reporters, Medvedev made no mention of how the modernization would be funded nor how long the effort would last.

Medvedev's top economic adviser Arkady Dvorkovich told reporters later that "it would be naive to think" that the government would bear the cost alone, saying most of the funding would come from the private sector.

He said the crucial part is encouraging investment in the projects by convincing business leaders that modernizing the economy is in their interests.

Russia's economy remains heavily dependent on oil and gas exports, and recent years of high world oil prices have stuffed the government's coffers and led to a noticeable expansion in Russia's middle class.

But the country's infrastructure — from transportation links, to the electricity grid, to the telecommunication network — is aging and in danger of falling into further disrepair without major new investment.

But new private funding will be difficult to find — either domestically or abroad — as credit dries up and foreign investors flee Russia's worst economic crisis in a decade.

Russia's stock markets had been among the world's worst performing during the credit crunch last fall until this year, when markets did a U-turn and investors flooded back into Russian equities, making it one of the world's fastest growing.

Still, on Thursday, stocks dropped 4 percent, extending the week's losses to 14 percent as investors are anxious to take profits and remain wary of the country's economic outlook.

Russian shares have lost 20 percent since the market correction started in early June.

Observers said investors are still wary of the economic outlook in Russia and prefer to take their profits now when the market is high.

"Many investors still doubt that the economy can work as well as the market pictures it now," said Ovanes Oganisyan, vice-president at Renaissance Capital investment bank.


Source: Associated Press

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Commentary and opinions: a selection of excerpts from speeches and presentations by Mikhail Prokhorov