As reported in the most recent report from the World Economic Forum issued in October 2012, Moscow still ranks 39th in a list of international financial centres, the same position as last year. Moscow ranked worst as institutional environment (59th), banking financial services (58th) and financial access (50th).
According to the report, Moscow is held back by some continuing negative perceptions, with Russia allegedly still “plagued by a weak institutional environmenta, with weaknesses identified in a number of areas, including “corporate governance, legal and regulatory issues, and financial sector liberalisation.”
So while the politicians may talk the talk, nobody is being taken in. If the Kremlin wants the situation to change, it will have to do something about rampant corruption and the poor state of the judicial system, which is so derided by even Russian citizens that they prefer to stipulate arbitration in other jurisdictions for disputes and to litigate more and more frequently in the UK.
Meanwhile financial liberalisation will require even more change: it is clear to all but the short-sighted that the Russian stock market is not representative of real interest in blue chip shares, given that most companies are still either state-controlled or controlled by various oligarchs to such an extent that the percentage of shares on sale on the market rarely exceeds 10 per cent of the total number of shares – in the rare exceptions this is due to the fact that 25 per cent of such a company is already traded on a European stock exchange.
So the Potemkin “democracy” is accompanied by a similar artificial financial centre. Unfortunately, if the authorities want that to change, they will need to introduce real reforms to persuade Russian companies to list in Russia – expecting the world to pay lip service may work when it comes to politics, but global investors will expect at the very list some level of financial transparency.