#11 - JRL 8148 - JRL Home
Moscow Times
April 1, 2004
After Vote, Investors Hope for a Spring of Reform
By Alex Nicholson
Staff Writer

Business confidence was on the way back up in March as market players looked forward to a spring of reform after President Vladimir Putin's resounding re-election.

The Moscow Times Business Confidence Index, compiled from a pool of managers and market watchers, rebounded slightly by two points to 28. And after hitting a two-month plateau, personal business confidence took a jump of three points to 33. On the MT scale, 10 represents a very negative attitude and 50 a very positive attitude.

Jamison Firestone, founder of Firestone Duncan Ltd., said his confidence hasn't flickered over the past two months. "Let me say this: I am as confident this month as I was last, but I think Russia's a no-brainer. The overall short-term to mid-term business outlook is justifiably high," he said.

But Dmitry Gavrilov, general director of Connection by Boeing Eastern Europe, said the recent top-to-bottom overhaul of the government raises concern of delays. "In general, it's clear what the political line will be, but I hope that the transition will be painless. This is important for us. We need permits approved, and this will be delayed for a month while new people are appointed. But this is temporary."

Despite an overall increase in optimism, inflation fears crept up two notches on the index in March.

Troika Dialog's chief economist, Yevgeny Gavrilenkov, expressed confidence, however, that it could be contained.

"I don't think there is a problem. The economy is growing rapidly, and the bulk of the monetary mass is being swallowed by the economy," he said. "I don't exclude the fact that there could be a one-off rise in prices one month due to tariff increases, but this is an unavoidable payment because there has been no increase for several months."

Gavrilenko predicted inflation would stay steady at 1 percent for March.

Another troubled month for Yukos and its shareholders helped hit concerns about political instability, said Dmitry Alenouchkine, a marketing analyst at The Moscow Times who devised the confidence Index.

March began with the mysterious death of Menatep's managing director in a helicopter crash. And the Yukos-Sibneft divorce became increasingly acrimonious in an increasingly complex legal battle.

The MT index is based on 10 indices measuring respondents' attitudes toward issues such as corporate governance, unemployment and inflation. Political instability is measured slightly differently: At the lowest possible score of 10, no one is worried about it, while at 50 it is on everybody's mind.

The index relies largely on management opinion and is weighted according to the size of the company and the experience and position of the respondent.

A pool of 440 managers and market watchers participate in the survey, and 80 respondents took part in the latest poll.

Peter O'Brien
Vice president, Morgan Stanley

"There was a fair bit of election-related uncertainty in February, and in particular concerns around the leanings of the potential new government. But I think it's been confirmed we're going to continue on a reform path. It certainly feels different than a year ago. Maybe then we were being unrealistic, and the environment we have today is more sustainable."

Denis Schekin
Partner, Pepeliaev, Goltsblat and Partners

"Although tax legislation has taken a step forward, it is nonetheless still undetermined in a number of respects. And it's still a case of 'he who is strongest is in the right.' But businessmen looking at recent tax claims on oil companies are left with the sense that if these giants can be attacked, then so can their companies."