Russia » Economics

Foreign workers stole $12 billion from Russia

Russia was unable to complete 2003 with positive payment balance.
Net capitals flow out of the country was 3 billion dollars. However, Minister of Finance Alexei Kudrin said February 11 that the news is good because capitals were mostly brought to the countries of the former USSR. In this way, Russia provided “brotherly assistance” to the former Soviet republics. 

There is a belief that capitals flow demonstrates that the country’s economy is weak. In the beginning of 2003 Russian government set the purpose to stop the capitals flow out of Russia, but failed: in 2003 Russia was deprived of 3 billion dollars.
 
Countries do not like to boast about such data in G8 summits. However, Russian Deputy Prime Minister, Minister of Finance Alexei Kudrin broke this unwritten rule: he had explained to his counterparts from the developed countries that $3 billion capital flow is not bad. First, the tempo of money flow-out decreased in Russia in 2003 twice in comparison with 2002 (in 2002 $8 billion was flown out of Russia, in 2001 - $24 billion). 
 
According to Kudrin, capitals flow out of Russia not because businessmen become disappointed in the government liberal reforms. Not for the reason of businessmen being confused with the scandal related to Yukos company, the statement on oil companies taxation increase and rumors of canceling privatization results. The Minister of Finance said foreign citizens (from the former Soviet republics) working in Russia contributed much to the balance deficit. The Ministry of Labor estimates the number of foreign workers in Russia as 2 million. On average, such a foreigner makes about $500 a month. For the entire year they make $12 billion. Therefore the figure of $3 billion flow-out is OK, Kudrin says. 
 
Investment companies analysts believe that Russian Minister of Finance is too optimistic. “The fact that 2 million foreign workers out of 140 million Russians cause the balance deficit makes me think”, said Chief Economist of NIKoil investment company Vladimir Tikhomirov. Experts do not agree with the opinion that the money flow-out was caused solely by foreign workers. They state that the flow-out is caused mainly by Russian companies investing their funds abroad. There are reasons for such an activity: high degree of political risk for Russian businesses, lack of domestic sources for investment – Russian financial markets are still non-liquid, while investments into economy are not profitable and risky. In addition, bank system is still not developed in Russia: despite the government’s requests, Russian banks prefer speculative trading to investing in industrial sector.
“All this makes Russian companies and individuals to transfer part of their capitals abroad. I think this is much bigger amount of money than taken out of Russia by foreign workers”, Vladimir Tikhomirov says.
 
In any case, the government has to analyze the situation. “Brotherly assistance” is a good thing, but it should hardly be conducted by money flow-out of Russia. “Nothing good in money flow-out: people prefer investing in the economies of other countries, not in Russian”, says Vice President of Renaissance-Capital investment company Alexei Moiseev.
 
Source: Novye Izvestia