Moscow aims to become a global financial centre

By Konstantin Rozhnov
Business reporter, BBC News

image captionEntrepreneurs list a number of problems they encounter in Moscow

Moscow has long seen itself as an international cultural and historical hub. Now the Russian government wants to turn it into a global financial centre.

The initiative aims to make foreign investors feel welcome and to improve Russia's image among international companies.

"Our interest is obvious," Russian President Dmitry Medvedev told St Petersburg International Economic Forum last week.

"In order to modernise [our economy], we need a developed and globally competitive national financial system."

Structural reforms

In Soviet times, the slogan "Catch up and overtake America!" was widely used in short- and long-term planning.

The current Russian government seems to be more realistic when setting goals to modernise its energy-dependent economy.

Mr Medvedev did not speak about overtaking New York or London, admitting instead that Russia had "a long way to go" to create "a truly competitive financial centre" in Moscow.

Indeed, according to Michael Ganske, head of Emerging Markets Research at Commerzbank Corporates & Markets, the city's chances of becoming a global financial hub any time soon are slim.

However, simply having it as a goal could help spur on necessary structural reforms, he told the BBC.

Expats' concerns

Most international studies that rank cities by how comfortable it is for foreign professionals to live in and do business in them, have given Moscow damning verdicts.

image captionMr Medvedev wants more investors to come to Russia

In the latest Mercer's Quality of Living survey, the Russian capital is 166th out of some 220 cities.

And while Moscow officials have claimed that these ratings are unfair to the city because of the criteria used, there is no hiding from the fact that much needs to be improved.

Many expats cite a number of obstacles that prevent them from enjoying living and working in Moscow. They range from huge traffic jams and air pollution to issues such as strict immigration rules, bureaucracy, corruption and a lack of transparency.

The Russian government has shown that it is aware of at least some of these problems and is ready to act.

Earlier this month, Mr Medvedev asked the Russian and Moscow governments to look into ways to ease visa and registration rules for foreign financial services professionals and to develop Moscow's transport infrastructure.

He also told the forum in St Petersburg that laws were set to be changed to stimulate financial services expansion.

Regional integration

There is a consensus that Moscow has everything it takes to become a regional financial centre in the next several years - at least, for former Soviet republics, now members of the Commonwealth of Independent States (CIS).

As Mr Ganske put it: "If you want to be active in the CIS, you need to be in Moscow."

Yaroslav Lissovolik, chief Economist of Deutsche Bank, says, in turn, that while CIS companies see Moscow as a potential launch pad for their global presence, a lot will depend on Russia's policy in the region, as well as on the integration processes in the CIS.

Recent signals have been mixed: while ties between Russia and Ukraine have been improving, and Russia, Kazakhstan and Belarus are trying to create a custom union, Russia and Belarus recently got embroiled in a new gas conflict.

If Russia succeeds in sorting out the political differences with its neighbours, one of the important steps for Moscow towards becoming a financial centre would be strengthening the rouble's international position, ideally turning it into a global reserve currency.

Mr Medvedev said that Russia had already started working with its regional partners on details of how the rouble could become their shared currency.

Mr Lissovolik thinks it could help turn the rouble into a global reserve currency at a later point.

"The rouble should gain weight in the region first," he says.

Additional hub

While Moscow's regional perspectives are bright, experts are less optimistic about it becoming a global financial centre in the near term.

Sceptics point out that it took London, New York and Tokyo dozens or even hundreds of years to get their status recognised by the financial world, and Moscow is unlikely to enjoy much swifter progress.

In Mr Lissovolik's opinion, it will take Moscow at least 10 years to gain importance as a financial centre anywhere outside what it calls its "near abroad".

Mr Ganske believes that in reality Moscow could become not a global centre, but an additional financial hub on the world scene - similar to Singapore or Abu Dhabi.

"Moscow will not be irrelevant," he says.

The financial centre idea fits perfectly into Mr Medvedev's scheme of modernising Russia.

But as with everything in the country, it will require a lot of political will from the government to make it come true.

Changing legislation to stimulate financial services expansion could be a move in the right direction.

For more about business in St Petersburg and the Russian economy watch Russia Business Report on BBC World News this weekend: on Saturday, 26 June at 0430 GMT and 1730 GMT and on Sunday, 27 June at 1030 GMT and 2330 GMT.