Global Policy Forum

By Maria Levitov

Russia and its partners in the Eurasian Economic Community need to stamp out corruption and promote greater transparency if they want to attract more foreign investment, U.S. Ambassador Alexander Vershbow said Tuesday. Speaking at the opening of Eurasec's first investment forum in Moscow, Vershbow lauded Kazakhstan for its transparency, but chided Belarus and Russia on a number of issues.

Eurasec was formed in 2000 to promote economic integration among Russia, Belarus, Kazakhstan, Kyrgyzstan and Tajikistan, and coordinate their entry into the World Trade Organization. The two-day gathering drew top officials from member countries and attracted big international companies like Siemens and Alcatel. Eurasec states have "immense potential," Vershbow said, but still need to "show the political will to open access to markets ... and create a stable, predictable investment environment."

Russia's representative to the forum, Prime Minister Mikhail Fradkov, said that the former Soviet republics realize what is at stake. "Without a transition toward innovative development, our countries do not have a chance to participate in the world economy on equal terms," he said. One of the biggest stumbling blocks to foreign investment is corruption, Vershbow said. "Often license payment amounts and conditions for tenders held in [Eurasec] countries are not published, which makes potential investors defenseless in the face of corrupt bureaucrats," Vershbow said.

Vershbow commended Kazakhstan for its transparency -- despite international criticism of Sunday's parliamentary elections and past disputes between Kazakh authorities and Western oil investors. "Foreign direct investment levels are an important indicator of transparency," Vershbow said. "In this respect, Kazakhstan has reached an important degree of success." Kazakhstan attracted $13 billion in investment over the past three years, said Kazakh Prime Minister Danial Akhmetov, speaking at the forum. Vershbow singled out Belarus for its lack of guarantees for private property. Minsk's so-called golden share system allows the government to renationalize any company if the state owns at least 1 percent of it.

Belarussian Prime Minister Sergei Sidorsky insisted that his country is "safe and attractive for investors" and said that 157 countries -- including the United States, Russia, Germany and Britain -- have trade relations with Belarus. As for Russia, Vershbow said the country must do away with many of its agricultural subsidies and, if it wants to join the WTO, provide better protection for intellectual property rights. Those issues are the subject of negotiations between Moscow and Washington regarding Russia's WTO bid.

Russia, the largest economy outside the WTO, is seeking membership in the organization as early as next year. The government is betting on accession to give foreign investment a boost. Eurasec representatives stressed the need for foreign investment in developing telecommunications and transportation infrastructure -- and it is likely their words did not fall on deaf ears. Both Siemens and Alcatel were among the most visible investors at the forum. Only on Monday, Russian Railways Co. announced that the two industrial powerhouses were part of a consortium backing a $29 billion loan to overhaul Russia's rail infrastructure. "The electronic digitalization revolution has arrived here, too," said Jochen Trinckauf, a German railway expert. "Alcatel and Siemens are the obvious first choice."