News / Economy

High Risk for Venture Capital in Russia

Russian President Dmitri Medvedev met Tuesday with a group of American venture fund managers in a bid to increase foreign investment in his country's fledgling high-tech industry. The Kremlin leader spoke frankly about the risks facing investors in Russia, including a less than ideal tax system, ineffective legal safeguards, and a meddling bureaucracy.

Speaking with 22 managers of American venture funds at his residence outside of Moscow, Russian President Dmitri Medvedev said the venture capital market in Russia is very poorly developed.

The Kremlin leader says there is a clear tendency in Russia of spending government funds on research and scientific development, and a shortage of venture capital. Mr. Medvedev notes there are about 20 venture funds in the country with combined assets of roughly $2 billion. He says that is virtually nothing compared to the United States and other countries.

Mr. Medvedev criticized Russia's top-down management approach, noting that many of the country's development projects traditionally have prospects only if they are undertaken by the country's top leader. He proposed a flat tax for investors, but cautioned the country's tax system is less than ideal.

The president said Russia has good business legislation, but noted it is not often observed, particularly in the courts. Mr. Medvedev also criticized the Russia bureaucracy for meddling in business affairs.

But business is demanding more. The director of the Rus Rating firm in Moscow, Richard Hainsworth, told VOA Mr. Medvedev needs to back his words with action.

"I think there needs to be some significant movement in actually punishing some of the bureaucrats who are working against the well-being of the Russian businessman," he said.

Corrupt Russian bureaucrats have a reputation for demanding bribes and conspiring with courts to steal business firms.

Richard Hainsworth says the inherent risk in the venture capital world is compounded by a heavy bureaucratic reporting burden in Russia.

"The next risk that a business runs in this country is that if you demonstrate that you are successful and that you have an extremely good business, you begin to attract the attention of the business sharks, who then want to have a piece of the action," added Hainsworth.

Corrupt bureaucrats are suspected in last November's death of attorney Sergei Magnitsky, who died in pre-trial detention after allegedly being denied urgent medical attention for pancreatitis. He was held for tax evasion, charges seen by human-rights activists as trumped up.

Magnitsky represented the London-based Hermitage Capital Management Fund, formerly the largest foreign investor on the Russian stock market. Its chief executive, William Browder, alleged Russian Interior Ministry officials colluded with tax authorities to steal $230 million from the national treasury. President Medvedev sacked 20 prison officials after Magnitsky's death, but no one has been prosecuted.

Russia is seeking venture capital to build its own version of Silicon Valley, the high-tech innovation center in California. The Kremlin is encouraging construction in the town of Skolkovo outside the Russian capital.

Professor Natalya Volchkova, of the New Economic School in Moscow, notes that innovation involves intellectual property, which she says does not enjoy adequate legal protection in Russia.

Volchkova says there are innovative Russian companies, but they sell most of their products abroad. These companies, she says, have foreign investments and foreign management, but few sales in Russia, so in this regard, intellectual property rights are not much of an issue; the owners are concerned how their rights are protected elsewhere.

But Volchkova concedes the problem of pirated intellectual property is a problem for American companies that sell their goods in Russia.

Mr. Medvedev told the U.S. venture fund managers that businesspeople create jobs, provide products for the economy and generally serve as the foundation of a flourishing society. But he said many Russians maintain a negative image businesspeople that has carried over from Soviet times.

You May Like

Conflicts Engulf Christians in Mideast

Research finds an increase in faith-based hostilities, and Christians are facing persecution in a growing number of countries in the region More

Chinese Americans: Don’t Call Us 'Model Minority'

Label points to collective achievement, but some say it triggers resentment, unrealistic expectations More

Iran Bolsters Phone, Internet Surveillance

Does increased monitoring suggest the government is nervous? More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
West Africa Ebola Vaccine Trials Possible by Early 2015i
X
Carol Pearson
August 30, 2014 7:14 PM
A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video West Africa Ebola Vaccine Trials Possible by Early 2015

A U.S. health agency is speeding up clinical trials of a possible vaccine against the deadly Ebola virus that so far has killed more than 1,500 people in West Africa. If successful, the next step would be a larger trial in countries where the outbreak is occurring. VOA's Carol Pearson has more.
Video

Video Survivors Commemorate 70th Anniversary of Nazi Liquidation of Polish Ghetto

When the Nazi army moved into the Polish city of Lodz in 1939, it marked the beginning of a long nightmare for the Jewish community that once made up one third of the population. Roughly 200,000 people were forced into the Lodz Ghetto. Less than 7,000 survived. As VOA’s Kane Farabaugh reports, some survivors gathered in Chicago on the 70th anniversary of the liquidation of the Lodz Ghetto to remember those who suffered at the hands of the Nazi regime.
Video

Video Cost to Raise Child in US Continues to Rise

The cost of raising a child in the United States continues to rise. In its latest annual report, the U.S. Department of Agriculture says middle income families with a child born in 2013 can expect to spend more than $240,000 before that child turns 18. And sending that child to college more than doubles that amount. VOA’s Deborah Block visited with a couple with one child in Alexandria, Virginia, to learn if the report reflects their lifestyle.
Video

Video Chaotic Afghan Vote Recount Threatens Nation’s Future

Afghanistan’s troubled presidential election continues to be rocked by turmoil as an audit of the ballots drags on. The U.N. says the recount will not be completed before September 10. Observers say repeated disputes and delays are threatening the orderly transfer of power and could have dangerous consequences. VOA correspondent Meredith Buel reports.
Video

Video Ukraine Battles Pro-Russia Rebel Assault

After NATO concluded an emergency meeting to discuss the crisis in eastern Ukraine, the country is struggling to contain heavy fighting near the strategic port of Mariupol, on the Azov Sea. Separatist rebels are trying to capture the city, allegedly with Russian military help, and Ukraine's defense forces are digging in. VOA's Daniel Schearf spoke with analysts about what lies ahead for Ukraine.
Video

Video Growing Business Offers Paint with a Twist of Wine

Two New Orleans area women started a small business seven years ago with one thing in mind: to help their neighbors relieve the stress of coping with a hurricane's aftermath. Today their business, which pairs painting and a little bit of wine, has become one of the fastest growing franchises across the U.S. VOA’s June Soh met the entrepreneurs at their newest franchise location in the Washington suburbs.
Video

Video Ebola Vaccine Trials To Begin Next Week

The National Institutes of Health says it is launching early stage trials of a vaccine to prevent the Ebola virus, which has infected or killed thousands of people across West Africa. The World Health Organization says Ebola could infect more than 20,000 people across the region by the time the outbreak is over. The epidemic has health experts and governments scrambling to prevent more people from becoming infected. Zlatica Hoke has more.
Video

Video Asian Bacteria Threatens Florida Orange Trees

Florida's citrus fruit industry is facing a serious threat from a bacteria carried by the Asian insect called psyllid. The widespread infestation again highlights the danger of transferring non-native species to American soil. VOA’s George Putic reports.
Video

Video Aging Will Reduce Economic Growth Worldwide in Coming Decades

The world is getting older, fast. And as more people retire each year, fewer working-age people will be there to replace them. Bond rating agency Moody’s says that will lead to a decline in household savings; reducing global investments - which in turn, will lead to slower economic growth around the world. But experts say it’s not too late to mitigate the economic impact of the world’s aging populations. Mil Arcega has more.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.

AppleAndroid

World Currencies

EUR
USD
0.7537
JPY
USD
103.79
GBP
USD
0.6032
CAD
USD
1.0957
INR
USD
60.522

Rates may not be current.