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

Uganda Court Annuls Anti-Gay Law

Court says law was passed in parliament without enough members present for a full quorum More

Multimedia Thailand Makes Efforts to Improve Conditions for Migrant Laborers

In Thailand, its not uncommon for parents to bring their children to work; one company, in-collaboration with other organizations, address safety concerns More

In Indonesia, Jihad Video Raises Concern

Video calls on Indonesians to join Islamic State of Iraq and the Levant, ISIL 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.
In Thailand, Some Efforts to Improve Conditions For Migrant Laborersi
X
Steve Herman
August 01, 2014 6:22 PM
Thailand has been facing increasing international scrutiny as a hub of human trafficking and slave labor. Some of the kingdom’s companies are striving to improve working conditions, especially for the millions of migrant laborers from surrounding countries. VOA Correspondent Steve Herman in Bangkok takes a look at one initiative for children at construction sites
Video

Video In Thailand, Some Efforts to Improve Conditions For Migrant Laborers

Thailand has been facing increasing international scrutiny as a hub of human trafficking and slave labor. Some of the kingdom’s companies are striving to improve working conditions, especially for the millions of migrant laborers from surrounding countries. VOA Correspondent Steve Herman in Bangkok takes a look at one initiative for children at construction sites
Video

Video Public Raises its Voice on Power Plant Pollution

In the United States, proposed rules to cut pollution from the nation’s 600 coal-fired power plants are generating a heated debate. The U.S. Environmental Protection Agency, charged with writing and implementing the plan, has already received 300,000 written comments. As VOA’s Rosanne Skirble reports, another 1,600 people are lining up this week at EPA headquarters and at satellite offices around the country to give their testimony in person.
Video

Video Information War Rages Alongside Real One in Ukraine

The downing of the Malaysian airliner two weeks ago, and allegations that Russians are shelling Ukrainian troops across the border, have moved the information war swirling around the Ukrainian conflict to a new level. VOA's Al Pessin reports from Kyiv.
Video

Video When Fighting Eases, Gazans Line Up at Bakeries

When there is a lull in the conflict in Gaza, residents who have been hunkered down in their apartments rush out to stock up on food and other necessities. Probably the most important destination is the local bakery. VOA’s Scott Bobb reports from Gaza City.
Video

Video China Investigates Powerful Former Security Chief

The public in China is welcoming the Communist Party's decision to investigate one of the country's once most powerful politicians, former domestic security chief Zhou Yongkang. Analysts say the move by President Xi Jinping is not only an effort to win more support for the party, but an essential step to furthering much needed economic reforms and removing those who would stand in the way of change. VOA's Bill Ide has more from Beijing.
Video

Video US-Funded Program Offers Honduran Children Alternative to Illegal Immigration

President Obama and Central American leaders recently agreed to come up with a plan to address poverty and crime in the region that is fueling the surge of young migrants trying to illegally enter the United States. VOA’s Brian Padden looks at one such program in Honduras - funded in part by the United States - which gives street kids not only food and safety but a chance for a better life without, crossing the border.
Video

Video 'Fab Lab' Igniting Revolution in Kenya

The University of Nairobi’s Science and Technology Park is banking on 3-D prototyping to spark a manufacturing revolution in the country. Lenny Ruvaga has more for from Nairobi's so-called “FabLab” for VOA.
Video

Video Immigrant Influx on Texas Border Heats Up Political Debate

Immigrants from Central America continue to cross the U.S.-Mexico border in south Texas, seeking asylum in the United States, as officials grapple with ways to deal with the problem and provide shelter for thousands of minors among the illegal border crossers. As VOA's Greg Flakus reports from Houston, the issue is complicated by internal U.S. politics and U.S. relations with the troubled nations that immigrants are fleeing.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.