By Kim Iskyan
In early October Norway’s Telenor and Russian investment vehicle Alfa Group announced an agreement to merge VimpelCom and Kyivstar, their jointly controlled Russian and Ukrainian telecommunications companies. The deal ends a five-year battle between Alfa and Telenor that had come to epitomize many of the challenges and dangers of investing in Russia. While clearly positive for the companies involved, the resolution of the dispute does not necessarily suggest an improvement in the underlying investment environment in Russia, which remains plagued by weak institutions, personalized politics, corruption, red tape and a lack of transparency.
Some of that opacity appears to be prevalent in official statistics. As part of its evolving anti-crisis strategy, the government extended loan guarantees to a number of heavily indebted companies, in part as an effort to stem layoffs. Somewhat surprisingly, given the context of a sharp economic contraction, unemployment in Russia has been subsiding. But comments in mid-October from the departing head of the Russian state statistical agency about the influence of the economics ministry on official state data cast a shadow of doubt over relatively upbeat recent unemployment data—and about the integrity of Russia’s economic figures generally.
The Kremlin floated a plan to accelerate the privatization in 2010 of a range of state-controlled companies and infrastructure assets, although controlling stakes in key strategic holdings will not be sold. The anticipated privatizations, if they are carried out, reflect the continued strong influence of the liberal wing of government over economic policymaking.
President Dmitry Medvedev has tasked the cabinet with developing a broad national strategy to fight alcoholism, which has been repeatedly cited for years as a root cause of the severe long-term demographic and economic challenges that the country faces. But past anti-alcohol crusades, most notably during the Gorbachev era, have had few results beyond undermining the government’s popularity ratings.