|Kirill Dmitriev. Photo by Ben Aris|
Ahead of high level talks on economic cooperation between leaders of Russia and India, the Russian Direct Investment Fund (RDIF) and the Confederation of Indian Industry (CII) hosted a conference for the Indian business community aiming to highlight investment opportunities for in Russia as well as Russian investment projects in India.
The Russian Direct Investment Fund, a $10 billion fund established in 2011 in order to boost equity investments in the Russian economy, looks at India as a country with numerous opportunities both for Russian investments and for investments in Russian economy.
During today’s summit-level meetings with Russian and Indian political and business leaders, RDIF is signing two agreements with IDFC (Infrastructure Development Finance Company), one of the leading infrastructure funds in India, and Tata Power, the subsidiary of India’s $100 billion conglomerate.
“The agreement with IDFC assumes that each party will invest $500 million and the investments will be directed in infrastructure projects both in Russia and in India. While in case of Russia it is first of all roads, airports, sea ports and logistics infrastructure, in case of India it is hydro energy project which one Russian company is being working on,” RDIF Chief Executive Kirill Dmitriev told RIR.
“The agreement with Tata Power will address company’s interest in investing in Russia’s coal mining sector in Far East. We will be also studying the opportunities to invest in Tata’s project in other countries,” he added.
According to Dmitriev, RDIF along with its co-investors invested and committed over $7 billion of which RDIF alone invested $1.3 billion and over $6 billion came from blue chip international co-investment partners from such countries as Italy, France, China, Japan, Korea, the United Arab Emirates and Kuwait.. RDIF also attracted over $15 billion of foreign capital into the Russian economy through long-term strategic partnerships.
Dmitriev noted that Indian officials are discussing the possibility of establishing an Indian Investment fund taking the RDIF as a model. “For India our model is very relevant considering that Prime Minister Modi announced attracting investments as the key of India’s economic growth”.
Boosting trade and investment
According to official statistics, till today India has invested about $7 billion in Russia while Russia has invested about $3 billion in India, the question for both counties now is how to do more.
“The political relations between Russia and India have been very strong, but economic relations have practically languished. If you look at $10 billion between our countries comparing to $109 billion with United Sates or $80 billion trade with China, it’s time to figure out how to move our relations to 3 or 5 times of what it is,” Shiv Khemka said.
Khemka, who has more than two decades of experience investing and doing business in Russia, says that in case of Russia and India the bulk of the business happening will still be “government to government” and the challenge is how to include business in it so that eventually trade transform from “G to G” to “G to B” and finally to “B to B”.
“Investing in Russia has been challenging but with RDIF the risk profile for investors are changing. Having such bodies like RDIF and Indian version of RDIF in India which be a fund to leverage and catalyze investments in India. I am very excited about Indian opportunity,” Khemka added.
When thinking investments in Russia, Indian businessmen at first blame issues such as customs, bureaucracy and long and costly logistics to Russia as for making such investments difficult or slow on returns. Be it semiconductor industry, manufacturing or leather goods’ exports, Indian companies find it difficult to deal with Russian custom laws and levies, preferring to export good to Russia via Turkey, Egypt or European Union countries.
“There are opportunities in many sectors in Russia, and there are hardships and issues as well. It is not specific to Russia but to any other country, India as well, to have issues with customs, taxation, bureaucracy which newcomers face. There are only two ways about it, you either go and live in Russian for couple of decades and figure it out or you choose the right partner tin Russia,” Khemka said.
Dmitriev emphasized that RDIF's advantage as such a potential partner for foreign investors in Russia is that the fund is a non-political body and is focused solely on returns as well as promoting transparent investment procedures. The fund has an experienced international team of investment professionals, risk analysts.
According to RDIF data, among BRICS countries Russia stands number one in ease of doing business ranking. Moreover, investing in Russia is expected to become even easier since in his recent address to the Federal Assembly, Vladimir Putin announced plans to improve the business and investment environment in Russia, which includes two-year tax relief for newly registered enterprises and ‘holidays from inspections’ for companies with a solid reputation.
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