SPIEF 2010 Programme

Select assertions and opinions • Development and implementation of an intelligent grid system (Smart Grid) is a priority task set by Modernization Commission, chaired by President of the Russian Federation • An intelligent grid system is a good example of how an economy with innovative capabilities can successfully development beneficial systems that have a positive knock-on effect for downstream subsectors as well. • Successful implementation of Smart Grid is possible only with the substantial investment in infrastructure and “intelligent component software”. • Today Smart Grids in Russia are being rolled out as “pilot projects”, for further successful development companies should study and incorporate the experience of other international economies undertaking the same efforts.

• As with Russia, the EU must undertake modernization if it is to remain competitive in the global marketplace, and the EU suffers from a “reform deficit” • Russia has never been better positioned to become a member of the WTO. Further delays in Russia joining the WTO could have a negative impact on both Russia and EU economies as they seek recovery from the crisis. • Customs Union is neither a barrier nor an alternative to Russia joining the EU. • Modernization policies will enhance EU-Russian relations. • Skolkovo can serve as a major platform for Russian-EU high tech cooperation. Select quotes "…it is when business gets moving what really drives modernization." - Carl Bildt "Russia is interested in a stable and prosperous Europe". - A. Chubais

Select assertions and opinions • Practical measures such as the unification of standards and eliminating visa barriers will enhance bilateral trade. • Telecom and oil & gas have been key sectors in bilateral economic relations, but this can be expanded into communications, precious stones, and high tech petrochemical production as some of the new areas of cooperation. • Nano tech, pharmaceuticals and compact car production projects are also under discussion. Select quotes “We want to appeal to Russian businessmen to invest in Indian minds” Deepak Loomba, Director general De Core Science & Technologies “The Key issue… is to find profitable projects. In case the parties see the profit, they will overcome every difficulty”. Alexander Goncharuk, President of JSFC Sistema

Select assertions and opinions • CIS economies are individually less competitive versus regional associations and global financial centers than when acting in union. • Three key development priorities for CIS economies include formation of customs union, single economic space, and accession to the WTO. • Customs Union can develop in parallel to the accession to the WTO. • Space, nuclear, mobility and nano technology are key areas for CIS cooperation spurring modernization and innovation. • Moscow should serve as a key CIS regional financial centre. • The price for integration will be outweighed by the long term benefits. Select quotes “There are a lot of bumps on the road of integration but as seasoned drivers tell you, if you drive fast enough, you won’t feel them.” - Andrei Slepnyev “Customs union is proving to be the most successful project in CIS.” - Umbra Shukeyev

Select assertions and opinions • Along with the significant progress mentioned in the area of military and political cooperation, a considerable potential of economic collaboration was recognized by the participants of Forum. • It was reinstated that fastest possible integration of Russia to the WTO is the priority in the dialogue of two countries. It was mentioned that Russia is also highly interested in participation in OECD. • Officials confirmed that Customs Union of Russia, Belorussia and Kazakhstan is not by any means an alternative to accession to the WTO. • Innovation and modernization were mentioned as the most prospective areas of cooperation. Participants confirmed readiness to сollaborate, particularly within the "Skolkovo" project. • Among other high-priority mutually beneficial ways of cooperation between Russia and USA, participants outlined educational sphere, manpower training, research activities and creation of financial center to improve stability of the financial system. • Efforts of Russia in the area of regulatory affairs and increasing transparency were recognized, although several shortfalls were noted, e.g. insufficient protection of the rights of investors. • Participants commented forthcoming visit of President Dmitry Medvedev to USA as a momentous event and a significant impulse to the development of cooperation between Russia and USA. Select quotes “Skolkovo is not an oasis, but the beginning of a huge deal.” - Viktor Vekselberg “A year ago it was said that Russia will enter WTO by the end of the year, the same is expected to be heard this year.” - Alexander Shokhin “Integration of Russia into the Customs Union may not be treated as an alternative to integration into WTO, but should be rather considered as an access to more capacious market with more liberal conditions.” - Elvira Nabiullina, Minister of Economic Development, Russian Federation “Economy nowadays is rather multi-partner than multi-polar.” - Robert D. Hormats “Our economies [Russian and US] have many complementary features and less cultural barriers.” - Alexey Mordashov

Select assertions and opinions • The policy being implemented by Russia is the policy of modernisation aimed to develop an innovative economy, while the direction of this policy has been already set. Russia has succeeded at stabilizing its economy and returning on the path of gradual recovery, however further efforts are required to accelerate the economic growth. • Russian fiscal policy has to encourage a structural shift in the economy. The country is already taking specific measures in this area, for example, those aimed to establish the national innovation centre Skolkovo - which could become the model for further development and support for innovative projects. • A well-developed financial system is an important tool for modernisation of economy, and Moscow should become an leading regional and international financial centre. • Panellists came to a common conclusion that the global financial system needs new types of institutions and architectures, which would support the “real economy” and promote sustainable growth. • The multi-currency reserve system including leading global currencies is a likely alternative to the use of US dollar as the only reserve currency. • The participants came to the conclusion that the global economy is on its way to recovery, however, a lot of things must still be done and it was expressed as a cautious optimism. A key to sustaining recovery will be for the leading developed and emerging economies to continue coordinating their efforts in the process. Select quotes “For us, the crisis is a powerful signal to revise traditional approaches.” - E. Nabiullina) “We have changed, primarily because the whole world has changed, what seemed to be unshakable has collapsed, the bubbles which gave an illusion of prosperity have burst.” - President Medvedev “Making changes requires time, but we will succeed. Russia understands the objectives of its development and is changing.” - President Medvedev “We have extinguished the fire, now we need to consolidate and build the foundation.” - C. Lagarde

Session highlights • Use of 3D technologies in film production and other features are attracting audiences back to the cinema. • The development of technologies and the rise in the number of digital cinemas is bound to stimulate a niche system of film production and distribution. • Russia is interested in joint production with foreign film studios to not only raise the funds but also exchange experience, ideas and technologies. • There is a general agreement that in the short-term the lack of original, interesting content constitutes a major problem. • International experience shows that while tax relief can have a positive effect on attracting investments to the film industry, the availability of local specialists in the industry of international qualifications are equally important. Selected quotes: “3D-cinema is a reality in the film world but not in that of cinema art.…Technology is currently outstripping the language in which the filmmakers tell the stories.” - Timur Bekmambetov, Film Director, Producer, Bazelevs Production Studio “Piracy is certainly a problem but the viewer still goes to the cinema for the overall experience”. - Marina Zhigalova-Ozkan, General Director, The Walt Disney Company, CIS “The 3D world is a quite attractive investment sphere because the demand for content is still greater than the supply”. - Zlata Polishchuk, CEO, Central Partnership Film Company “As for co-production in Russia, there are plenty of wonderful, talented people and opportunities here. Provided there are financial incentives, we will get on board, fly here and make a film”. - Lisa Ellzey, Executive Vice President, Lionsgate Entertainment

Select assertions and opinions • Reading the genome can became the book of human behavior and treating diseases, leading to personalized medicine and changing the healthcare systems in future. • Progress over the last 10 years has not been as significant as expected, but near future developments could lead to the advancement of the application. • Already in the nearest future the cost of sequencing of DNA could reach the level of thousands of dollars, not billions. • A secure storage of genetic information and legal and ethical issues related to usage of personal information are key policy issues. • In the future genome-based cancer treatments, diagnostics and determination of treatment can all lead to substantial cost-savings in the healthcare systems. Select quotes “Currently we are not in business of wellness, we are in business of sickness – we cure diseases when we discover them. Early detection of deceases, individualised medicine, personalised care is a world of wellness.” - Steven Burrill “Researchers say that most of prescriptions currently do not work for patients. This is a ‘waste in the system’, which will be avoided with genetic engineering.” - Steven Burrill “Innovation brings risks and often there is a ‘stigma of failure’, however best cultures accept risks and rewards and tolerate failures. Failure is a basis for building a success in the future.” - Steven Burrill “Revolution in the biomedical industry creates opportunities. Innovation in this industry is a very good place to be.” - Evgeny Zaitsev “We are on a verge of very interesting time in healthcare because of nanotech.” - Omid Farkhozad

Select assertions and opinions • The objective of improving labor productivity must be treated as a national priority. • Instilling productivity must reach beyond the boardroom and become part of the culture of individual employees. • Maintaining an economic environment with healthy competition is an important way to drive productivity not only at the level of the enterprise but also for the entire sectors of the economy. • Business and government should collaborate to identify and recognize best practices in enhancing productivity and innovate means to promote these on a broad basis. Select quotes “Labor market liquidity is a key factor in resolving productivity issues” – V. Yakovlev “There is no such age when it is too late to re-train”. - Helmut Wieser

Select assertions and opinions • The first priority must be given to formulating “efficient contracts for the higher education teaching staff”, which would incentivize them to undertake academic research and thus would allow to continuously improve their expertise. • The main components constituting national competitiveness in the area of higher education are (1) the quality and motivation of students, (2) teaching staff and their potential, (3) the level of the infrastructure development of the universities (availability of campuses, recreation zones, sports grounds, attractiveness of universities’ exterior decor), as well as (4) efficiency of scientific researches. • We are witnessing a gradual transition from the industrial specialization in Russian higher education to a new education model tailored to the requirements by the post-industrial society needs. • There is a strong need for both in-depth marketing research of the foreign educational services market, and an active and positive advertising of the Russian education abroad. • An alternative way to improve competitiveness of the Russian education is to support the learning of Russian language abroad, especially in the CIS countries, which would allow attracting incoming educational tourism. • There are several widespread myths about the Russian education, which should be overcome, such as a free-of-charge education, high quality of teaching inherited from the Soviet system and over-production of lawyers and economists. Select quotes “It is master programs that may become a platform for international student mobility/” - Valery Katkalo “Brands [of Russian universities] should lean towards the great [brands of Western universities] to be competitive.” - Valery Katkalo “If you can’t beat the competitor, join him!” - Claude Canizares “Case-study” is for knowledge-consumers rather than for researchers.” - Oleg Kharkhordin “We need to develop education for people of the third generation, for senior citizens.” - Irina Sokolova

Select assertions and opinions • Without increasing its investments, Russia cannot increase gas exports. • Has gas lost its voice in the global energy arena? • Panelists debated whether the spot market or long-term contracts will ensure stability of supplies. • The “revolution” in gas shale may lead to a global “revolution” in new or expanded uses for gas – including gas sourced from non-traditional sources. • Over $100bn is to be invested in the development of gas deposits in just the next five years alone. • So far, there is no realistic alternative to replace oil and gas energy, but a wide energy mix –including oil, gas and others - is important to meet future demand. • The key conditions for development of the gas market are to de-politicize questions of gas production and transportation, diversification of gas sources and sales markets, and the provision for long-term energy security. Selected quotes: “The demand for new gas will double by 2030”. Russia is essential to meeting this demand for gas.” - Ambassador Richard Jones “The markets are changing, evolving; the mechanisms and factors needed for financing major new projects are of the utmost importance.” - Ed Moros “Gazprom and international oil and gas companies have turned gas into the main source for satisfying the growing demand for energy. The share of gas in the global energy balance has been rising steadily and has now topped 20%. The reason is that gas is cheap for consumers and its production is relatively environment-friendly.” - Igor Sechin “Gazprom has now adopted a new development strategy and is keen to become a global player on the international energy market.” - Alexey Miller

Select assertions and opinions • Russia and EU are strategic partners. • Bi-lateral corporate investment has over the last few years increased. • It is very important to increase quality of investment environment and to provide consistent conditions for business. A meeting of the minds of Russia and EU in establishing good conditions for investments is a key priority. • Reliable protection of investors’ rights, including developing of new mechanisms to regulate investment risks is a priority. Select quotes “Russia and the EU are reliable and promising partners both in political, strategic and economic context.” - Sergei Naryshkin “Russia is not only interested in inflow of direct and portfolio financial investments but rather in entering international stock exchanges, and the ability of Russian companies to invest in attractive assets abroad.” - Helen Teplitskaia “We should not scatter investments, but mobilize them in key industries.” - Igor Maksimtsev “To increase mutual investments we need to follow the rule of 4P: Predictability, Priority, Preferences and Partnership.” - Michael Harms

Select assertions and opinions • We need to strengthen global coordination in the development of management strategies and risk management and mitigation. To restore trust in the economic system, we have to improve the regulatory framework. • The low level of trust globally leads to volatility in financial markets. • The economic environment is global in nature, and all countries are connected in the finance system - which should be reflected in the development of global and local strategies and policies. • Development and attraction of skilled human resources plays an important role in the development of financial markets. Select quotes “In helping each other we help ourselves.” - Christine Lagarde “The habit of Europe to live well and on credit has been interrupted.” - Herman Gref “Financial sector was the first to become global. We are absolutely dependent on each other. We all live in one home. We should search for the common rules for the game.” - Herman Gref “The countries creating better conditions for immigrants may become more successful.” - James Dimon

• Russia is moving away from resource-oriented economy towards innovative technologies. • Skolkovo will demonstrate technological integration of global firms and leading universities. • The plans for the near future include building physical and virtual infrastructure for bringing together scientific and academic communities and entrepreneurial talent. A range of multinational partners - such as CISCO, Nokia, Siemens, Google, Microsoft and others – are already engaged in the project. • Ability to foster entrepreneurial culture is a key factor for success. • It is necessary to attract venture capital to create successful Russian companies – Russia’ s “Nokias” and “CISCOs”. • In today’s globally competitive environment, most countries do not want to be left behind in the development and supporting of innovation. The governments have a key role in this process. Selected quotes “We should believe in ourselves and create an area with new attitudes…” - Viktor Vekselberg “One of the key points of our project is to engage financial institutions, especially attract venture capital funds.” - Arkady Dvorkovich

• One of the key objectives for the government for the near future is to clearly define budget expenses and identify sources of revenue independent of the resource base and fluctuating commodity prices. • In an attempt to increase budgetary revenues Russia is looking to optimize the utility of the state property and will implement next stages of privatization as well as may raise taxes and cut state expenditure. • It is a common understanding that the tax system should be neutral, therefore the government is planning to abandon a number of inefficient tax incentives and adapt certain tax levels. • The non-oil related deficit in the Russian budget has gradually increased, reaching 13,5% in 2009. This phenomena makes the transition to a balanced budget even more difficult. The goal of the current fiscal policy is to achieve a balanced budget by 2015. • With a view of the large and growing numbers of the pensioners, Russia is looking to enlarge the funding of the state social budget. Select quotes “A major part of the oil and gas in Russia soon will be recovered, with territories enjoying tax incentives. That is an important factor to be considered”. - Aleksey Kudrin "We must move to a different organization of the state in general, not limited to fiscal policy - the principle of target-oriented organization." - Aleksey Lavrov

Select assertions and opinions • In the last decade the world has become not only multi-polar but also multi-partner. Russia’s objective is to be one of the world’s leading partners. • Russia’s strategy should not be about make a choice between East and West in the economic and political cooperation. The interest in further economic development is a global ambition. • Russia plays a unique role in the world as a connector between East and West in both economics, politics and culture. • The Russia’s reform agenda is important for maintaining its global competitive positioning, and should include a move from an economy oriented on raw materials to on and providing value-added services – all the while increasing labor productivity. • Technological advances and advances in modernization can be successful only if they will go hand-in-hand with social and economical changes, coupled with an active struggle with corruption and unnecessary bureaucracy. • Russian business has a great interest in the development of economic relations with China. Its market is extremely attractive for the Russian exports and also as a potential source of capital. Select quotes “Our children will face a multi-polar world.” - Andrew C. Kuchins “Russia is a bridge between East and West.” - Lanxin Xiang “If cancer remedy is invented in co-operation with Chinese and Russian scientists it will be good for the whole world. We need to understand and accept it.” - Robert D. Hormats

Select assertions and opinions • The role of private sector in the military industry is increasing. But there are the limits to the involvement of the private sector into military industry and the States will maintain a leading role. • Military manufacturers, within limits, are increasingly relying on consumer electronics as part of the component mix, impacting approaches to innovation and cost competitiveness. • Weapons platform development is a globalized process often involving cooperation of different countries during the creation of complex weapon systems. Select quotes “We do not have a global enemy.” - Premvir Das “There is a continuous trend to incorporate dual-use technologies.” - Alexei Isaykin “You do not need such devices for which you have to be PhD just push one button.” - Eeben Barlow

Assertions and opinions: • Urbanization is on the rise with 6.5 billion people projected to live in cities by 2050. • To meet the challenges of the future, cities must maintain their advantages — investing in culture, education, infrastructure — while lowering energy (electricity usage) and accelerating trends to “green” cities. • Changing the attitudes, mindset and habits of the urbanizing public is the largest and most complex challenge — but this is vital if we are to set the correct path of development. Creating a socially and environmentally responsible urban public will not happen overnight, especially in the case of emerging markets. • Approaches to sustainable urbanization are not to be universal. Even if the tools might be the same, their implication can differ on a case-by-case basis. • Culture — its global mobility and its variety — is an important opportunity for cities and towns of any size, and this stimulates change in the modern cities. • Western cities are increasingly in the vanguard as places demonstrating renewal to create comfortable living, and this success has been supported by a collaboration between the government, business and broader community (for example the Ruhr area, and Tallinn). • Russian cities are very different, but they are now joining in the effort to develop and revitalize urban living, sometime borrowing concepts from their western counterparts and adopting it to their own experiences and specific conditions (for example St Petersburg and Perm). Select Quotes: "The future of the cities — is the future of their youth!" - Edgar Savisaar "Scale of the art is not the scope of financial investments, but the value of personality." - Marat Guelman "Culture gives stolichnost (adds flavor of metropolis)." - Artur Ghukasyan "Values appear only on the territory of culture!" - Eduard Boyakov

Select assertions and opinions • The transformation of the Russian economy into an innovative economy is both necessary and inevitable. • An open economy, clear and favourable legislation, an ability to commercialize scientific research, ample talent with an high level of education, an availability of financing are all crucial elements for the development of innovative solutions. • Innovations are best nurtured by small businesses in a highly competitive environment. • Economic crisis can become a catalyst for introducing needed reform and innovations, while government support measures have the potential of creating long term impairing effects. • The Russian government sees the development of the innovative economy as an imperative, and supports its realization through fostering the general environment, implementing structural changes and by supporting particular innovative projects. • There is no ready-made foreign model of innovation, which could be taken over for introducing innovation in Russia. However, it is possible to borrow and adopt select elements of existing models. Select quotes “There is no innovation without competition.” - E. Nabiullina “The next ten years will be a decade of building the economy of innovation.” - A. Chubais “Russia has tremendous scientific knowledge which needs to commercialized.” - R. Kivel “Russia’s transformation will not happen overnight.” - R. Kivel “Environment that celebrates entrepreneurship and does not punish failure, encourages higher risk-taking.” - R.Kivel “Pessimists watch while optimists do.” - A. Chubais

Select assertions and opinions • Urbanization is one today’s major transformational trends. • The concept of the Smart House includes ecological properties, energy efficiency and its intelligence (including communications). • The increase of living standards translates in the increase of requirements towards housing. • People want to pay only for the resources that they use. • The House of the Future should be more user-friendly: approachable and energy-efficient. Quotes: “The house should become the source of prolongation and enrichment of human’s life.” - Sergey Zhuravlev “It is necessary to radically inspire for modernization of construction industry.” - Valery Fadeev “The topic of the future house was always talked about ... although during the last two years real actions in sphere of power-saving technologies have bee undertaken.” - Reza Raji

Select assertions and opinions • Relief of red tape in the construction sector will unleash new investment and strengthen competitiveness of the country. • It will take time to adjust legislation on municipal and regional level to bring it in line with changes in the federal legislation. • It is important to have full ability and range of options to insure the work of the general contractor, management company and operating professionals. Select quotes “Market mechanisms should facilitate the sale of inefficiently used lands.” – Leonid Kazinets “Building beautiful, high-quality and cheap constructions will be a guaranty of sale.” - Martin Shakkum

Select assertions and opinions • Today Russia accounts for only about 1 percent of world tourist flows. • The highest priority is to leverage tourism development in the North Caucasus to create new jobs. • Tourist development in the North Caucasus can have a multiplier effect on the entire North Caucasus regional economy. • 450 billion rubles in new investments is currently slated for the region - Ahmed Bilalov, first deputy chairman of the Legislative Assembly of Krasnodar Region chairs the working group coordinating projects. Select quotes “There is a need for the implementation of project focused on tourist complex of North Caucasus, and this project should be a unifying factor for the development of the North Caucasus republics.” - Dmitry Medvedev “Development of ski resort is a priority project.” - Alexander Khloponin “Cultural characteristics of the North Caucasus region in combination with other factors will contribute to the successful implementation of the project.” - Ahmed Bilalov

• One of the measures taken in response to the economic crisis is the development of new approaches to labor market regulation • Retraining and reeducation of workers is a key policy objective – supporting demands for emerging innovative enterprises, introducing traineeships and increasing mobility of work force. • Post-crisis unemployment has gone from 7 million in February 2010 down to today’s figure of 5.6 million. • New laws provide for a number of preferences in employment of highly skilled foreign specialists, giving a “green light” for hiring experienced expatriates. Select quotes “Today’s vision of labor market regulation is pragmatic and stems from purely economic basis.” - К. Romodanovsky “The movement of people and money are interconnected.” - К. Romodanovsky “Russian labor market in turning into one of the most attractive for highly skilled work force.” - А. Zhukov

Select assertions and opinions • The increase in the average life span coupled with a decrease in the birth rates and early aging of populations will inevitably lead to a rise in the retirement age. • There are two potential problem areas, which require governmental attention: Russia’s population refuses to accept the idea of increasing the retirement age and there is lack of trust in the sustainability of the pension systems. • The accumulated pension fund system could be more attractive, provided the pension accumulated funds have the same status as the ordinary financial assets. • Pension systems will be more effective if they combine elements of distribution and sufficient surplus budgets. • It is important to explain to the general public the role of the financial markets, and both the inherent risks but also the positive impact they can have on assuring a sufficient level of pension funding. Select quotes “The nightmare for the employees of a pension fund is A Bag of Bones with a pension certificate.” – M. Dmitriev “Diversification is the hedge against volatility.” – A. Rakhmanov “As a result the government pays all the bills when the population freaks and they (the public) is reluctant to accept changes.” – J.-P. Thomas

Select quotes “Education is the core for everything. This topic is vital for everyone. We all are parents either in the current or the next generation.” - Tina Kandelaki “Russia’s resources are not limited to its oil, gas and wood, but also includes its Human Capital.” - Dr. Boris Berenfeld “True teacher is a person who is still prepared to teach for free.” - Anatoly Kasprzhak “In a modern world the schools are no longer the only source of knowledge.” - Yefim Rachevsky “It’s not sufficient to provide equipment, new approaches in teaching of the children are essential.” - Katerina Polivanova “School of the future is a school with “open architecture”. It is able to establish positive relationships with different educational institutions: museums, libraries, family, work environment of the parents.” - Igor Valdman

Select assertions and opinions • To meet projected long-term demand, energy firms and policymakers will need to put in place a wide range of energy options, and it is not a question of selecting one, but deploying all options. • Governments and private sector collaboration is needed to deliver the necessary range of options, but the market must, in the end, be the lead factor. • Growing economies will choose energy sources mainly based on cost. Therefore the goal of governments of developed states as well as business is to increase the market attractiveness for the energy that is safe and comes from renewable sources. • Nuclear energy and the increased export of nuclear power stations is promising, particularly with the introduction of a full package of services beginning with construction of power stations to repossessing of fuel rods services. • Coal and gas are a particularly pivotal investment area, particularly as demand for electricity rises. • The energy market is going to drastically change in response to new consumer demands (China, Southeast Asia in particular). Select quotes “One of the key strategic areas in Russia today is the effectiveness of energy utilization.” – Viktor Vekselberg “I believe that we are living in exciting times because we are going to witness a lot of innovation in the energy field.” - Anne Lauvergeon

Select assertions and opinions • The key issue telecom companies face is the need to monetize the additional services that their clients demand. • Telecom companies should adapt to new business environment in which the main source of income becomes data traffic rather than voice services • Marketplaces of telecommunication and data transferring are becoming more integrated and telecom operators have to compete with such companies as Apple and Google • To maintain market share and growth of revenues mobile operators have to continue investing heavily in infrastructure. Select quotes “Russia has a strategy, people, and technologies to have a good potential to compete in the global telecommunication market.” - Jim Balsilie “The industry is going through a tectonic shift…” - Alexander Izosimov “The main question that faces this industry is opportunity of monetization of growing demand of consumers.” - Mikhail Shamolin

Select assertions and opinions • Despite of the crisis Russian agricultural sector has performed well - Russia has moved up to become the third largest exporter of grain in the world. • The Government is taking actions to stimulate agro-industry. • Transportation and warehousing logistics are the key opportunities for foreign investors in this sector. • In order to achieve further industrial development investment in the grain market infrastructure and a significant reduction of national transportation costs are required. • One of the most important factors of the market development is price volatility. Combined with absence of long-term contracts this impedes effective planning. • Russia has an opportunity to learn and adopt select practices from other countries in the form of legislation, technologies and commercial models. Selected quotes “Russian grain is export commodity of strategic importance; and it positions Russia as one of the guarantors of global food supply security.” - Yelena Skrynnik ”Leading companies have doubled net profits in meat sector in comparison with pre-crisis 2008. This serves as a very important signal for the investors.” - Sergei Yushin “…Let Russian grain producers apply the standards they are interested in – I think its time to do it… We should enter the markets providing the standards, which local consumers are expecting from us.” - Pavel Skurikhin “The Russian Far East is possibly a gateway to Asia…We sincerely wish to make our contribution in expanding the export of the Russian grain to the East Asian countries jointly with our Russian partners.” - Noriaki Sakamoto

Select assertions and opinions • During the last 2 years both legislative and business environments brought significant changes to the pharmaceutical market. • In principle three main business development strategies can be identified: construction of new production facilities, acquisition of existing production facilities, or partnership with Russian production companies. • Legislative environment saw significant changes such as the adoption of development strategy “Pharma-2020”, the Federal law “On Circulation of medicines” to be effective starting 1 September 2010, and implementation of GMP standards beginning 1 January 2014. • Currently, the state plays the leading role in the pharmaceutical market largely due to the fact that over half of the purchases of pharmaceutical products currently are done by the public sector. Overall, the government is interested and prepared to invest in developing all key competences of the Russian pharmaceutical industry, including the development of biotechnology and scientific research. • In order to continue to attract foreign investment Russia must maintain and continue to improve equal opportunities for all market players, create a clear regulatory system, and establish a positive climate for partnership, a well as maintain a stable economic and political environment. • Russia’s comparative advantages in the industry include an accumulated knowledge in the field of medicine, talented scientists, as well as its potential for development of production sites. Select quotes “We understand that the pharmaceutical market development is closely connected with the partnership with global companies. - V. Khristenko “We are interested in research and development investments not only because we have ambitions for this, but because we can provide conditions for that…” - V. Matvienko “We think, that at certain moment the local developments will become global, and they will come from Russia.” - O. Charmeil

Select assertions and opinions • For a successful system the Universal Smart Card (of USC) should synchronize all existing data concerning pension fund, government revenue service and other social services. • The issues surrounding security, transparency and confidence are the main challenges facing the project. • One of the ways how the USC will make a difference is the decreases in the amount of “dead souls” who receive social privileges. • USC will decrease time and expense of issuing or replacing identity and public financial documents – it is a question of issuing a single card instead of multiple identity and financial documents. • USC will lead to a considerable decrease in the number of government officials providing services to the population. • In the near future citizens will be able to choose the design, and also different options of what functions/services are associated with the USC card. Select quotes “The only chance to reduce bribery is to limit direct contact between citizens and officials.” - Herman Gref. “Costs will be 3 times higher if we do nothing…This is a breakthrough project that is unique and first of its kind in the world.” - Herman Gref

Select assertions and opinions • The financial crisis can be turned into a great opportunity for developing a new financial reporting model. • The latest financial crisis is very different in nature to the crisis of 10 years ago. The latest crisis was caused by inadequate risk assessment, which led to uncontrolled lending, and by unrealistic business models created by investment banks - and not by fraudulent financial reporting. • One of the key issues facing the auditors today is to ensure the disclosure to the shareholders as well as future investors the sufficient and required information to meet their needs. • New regulations will be developed as a result of the crisis, and it is the goal of all interested parties – business, auditors, investors – to help legislators come up with an effective framework for such regulation. • To help Russia achieve its goal of becoming a major financial centre, Russia must adopt global standards on financial reporting. This will help attracting new investors who may currently want more transparency from the Russian companies. • Of key importance is the independence of the auditor. • Implementation of global financial reporting standards in all sectors of the economy and modern regulation are necessary conditions required for implementation of Russia’s ambitious plans to become a global financial centre. • Once adopted, it is highly important to keep the unified global financial reporting standards, as it would not be possible to return to standards specific for individual sectors. Select quotes “Only if we can have a debate and discussion with key parties, can we come up with standards that will be totally relevant.” – Dennis Nally “I believe that the Sorbanes-Oxley act reduced the risk of fraud in financial reporting.” – James Quigley “Nothing would be as harmful at this stage of recovery as protectionism.” – James Turley “I believe that one of the most important things that will come out of this crisis is a common set of global, high-quality accounting standards. Let’s not put a deadline on it, but let’s make sure that it will happen.” – Timothy Flynn

Select assertions and opinions • Basic principles of the Customs Union of Russia, Belarus and Kazakhstan have been implemented as of January 1, 2010. • Further unification of the custom's regulations is envisaged for the next stage of the reforms: entry into force of the Customs Code, followed by the implementation of the procedure of import duties assignment and distribution, then followed by the cancellation of the customs clearance of goods. • Despite the complexities related to the restructuring of the customs legislation there is an overwhelming will to promptly solve any problems, which may arise. • Based on the prior experience of the implementation of agreements within the Custom Union, member states have agreed to undertake a series of measures aimed at minimizing potential losses or inefficiencies during the next stage of implementation of the Customs Union. • Representatives of the member-states of the Customs Union are interested to continue negotiations of accession to the WTO and will undertake further efforts to unify their trade regimes. Select quotes “The best reforms are not visible to the public.” - Andrei Slepnev “Implementation of the Custom Union is the evolution rather than revolution.” - Andrei Slepnev “Due to the Custom Union creation, we implement the best practices used by other countries.” - Vladimir Goshin “Custom Union is a step towards single economic environment.” - Andrei Slepnev “Positive incentives need to be practically realized.” - Andrei Slepnev “[…] how the process of Custom Union creation do correlate with the processes of WTO accession held by member-states? The negotiations […]to unify and harmonise the questions under the Custom Union competence are currently taking place. The key document will contain the unique issues on regime […]and obligations that make provisions to sustainability and continuous work of the Union in the frames of WTO accession by member-states.” - Zhanar Aitzhanova

Select assertions and opinions • Russia is well positioned to overcome the economic crisis, as it has already had experience in overcoming the crisis of 1998, which Europe did not have. The Russian economy at present looks healthier than that of the most developed countries. • Establishing a single European support fund is an adequate response to the current economic situation in Europe and the issues faced by Greece. The European Commission has formed a set of measures and there is confidence that this should resolve the current situation in Greece. • Tightening fiscal regulations is a necessity for reducing deficits and controlling fiscal costs. In turn, strengthening control over fiscal costs is one of the most efficient tools to manage the national debt. • Reducing deficit is a higher priority for Russia than maintaining demand. The debt risk prevails over the risk of inflation. • What is needed is the consolidation of economic policy and economic institutions to support the European economy and the common European currency in the long term. • Deleveraging in Europe will be positive for Asian countries and for the global economy. • A considerable part of deficit growth and increase of the national debt were unavoidable measures aimed at avoiding collapse of economic markets. Select quotes “The crisis of 1998 was a good lesson for Russia. We learned this lesson. We approached the current crisis well prepared.”- Alexei Kudrin “We need stricter fiscal regulations based on experience of this crisis.” - Alexei Kudrin “We will not forget the conclusions and the risk positions which resulted in huge crash of the international banking system.” - Yuri Solovyov “People start realizing that they can not keep living beyond their income.” - Peter Hooper III “The total architecture of euro zone should be revised.” - John Lipsky “I believe in Europe and in euro.” - Alexei Kudrin

Select assertions and opinions • Many developed countries have significant budget deficits, high risks and low yield on investments. BRIC countries will play a prominent role in bringing growth and stability to the global economy over the coming years. • Politicizing recovery efforts has receded since 2008. • Investment strategies for sovereign wealth funds are an important issue in the current market conditions. • Sovereign Wealth Funds may focus on more domestic opportunities to increase competitiveness, as well as look to developing countries in order to increase yields. • Portfolio diversification is an important issue and there will be a strong mix in equities and government bonds. • Sovereign Wealth Funds are one of key instruments of post crisis recovery. Select quotes “Sovereign funds are investors who are awaited with arms wide open.“ - Andrei Kostin “We understand that current crisis has raised many questions for sovereign funds managers.“ - Oleg Viyugin “Protectionism in Europe has turned out to be a disaster.” - Laurent Vigier

Select assertions and opinions • The return of top talent is not necessarily the final goal. The turnover of talent will provide new opportunities to Russia. • International cooperation among diasporas as well as cooperation of Russian scientists and academics can be vital to the modernization effort. • For efficient engagement with “global” Russians and fostering dialog with the Russian government, red tape interference should be minimised, while implementing simple and clear rules. • Today a small number of “global” Russians are ready to share their experience with Russia. They are among those who are treating Russia not only as labor market but also as market of capital and sales. Select quotes “If we look at the number of successful Russian scientists, businessmen we will actually find that a rather big percent of among them are so called global.” - Serguei Beloussov “Global” Russians in my opinion are people who follow their star.” - Alexandra Johnson “Education levels rise only when it is a business of a society, not just a government.” - Andrei Fursenko “We are ready to help Russia… we need no money… just give us the possibility to work.” - Valentin Gapontsev

Select assertions and opinions • Hosting the Football World Cup can accelerate socio-economic development of the country and region, and can give a tremendous impulse to the development of the football itself, as the component of a healthy life-style inside Russia and the CIS. • FIFA is interested in the straightforward development and the expansion of football as well as creating an efficient legacy of World Cups. • Russia’s proposal to host the World Cup in either 2018 or 2022 has significant chances to win, because it is in compliance with the FIFA expectations, the diversity of the Russian society (population, business, politics, sportsmen, etc) and the country’s exceptional record in hosting major global sporting events. • Serious governmental support, such as signing not only mandatory but additional guarantees of perfect World Cup 2018/2022, underlines the importance of Russia’s commitment. • The position of the President of the Russian Federation is that the effective realization of such projects should be based on the principles of transparency, in partnership with the international community. • Football World Cup 2018/2022 will become an opportunity for the whole world to appraise Russia, which will differ over the coming decade as a result of the modernization program. Select quotes: “…by the year 2018 it will be another country, it will be a modernized - modern Russia. And the Football World Cup will give an opportunity to introduce this new Russia to the whole world.” - Igor Shuvalov “The President of the Russia Federation considers that business without partners and business only by means of our own resources and without a serious integration with the international community is meaningless… we will collaborate.” - Arkady Dvorkovich “Russia is an extraordinary opportunity for the world.” - Clyde Tuggle

Select assertions and opinions • Africa is one of the most attractive investment regions in the world. • There are two main strategies of investing in Africa that BRIC countries are currently following: Russia and Brazil are interested in expanding sales in energy and other services, while China and India are mostly focused on accessing the natural resources. Both approaches complement each other: while one stimulates investments in infrastructure, the other creates market relations and fosters competition. • In terms of commercial legal environment, Africa is very diversified, and continued improvement of the legal environment will lead to enhanced investment. • Political stability is one of the most important factors, which are of utmost importance to the international business and investment community. • There are many Russian businesses successfully operating in the African market, such as, Gazprom, Alrosa and Renova. Select quotes “Russian government considers Africa as attractive destination for doing business.” – Boris Ivanov “Russia has a high professional reputation which opens any doors in any country.” - Sergei Oulin “We, as a country (Nigeria) want to become one of the largest economies by to 2020.” – Dr Ide.

Select assertions and opinions • In the situation of diminishing trust in the major currencies more attention is being focused on the future of global currency system. • The economic strength of the BRIC countries has increased rapidly, as is the importance of their currencies. • There are two main ideas as to how minimize dependency on US dollar as a primary reserve: to either modify SDR as a “super-currency” or to diversify holdings into a basket of currency reserves. • Wide development of SDR is restricted by its embedded limitations such as absence of common centre of emission and liquidity problems. • The possibility and practicability of inclusion into SDR currencies, which are not freely convertible, still remains an unresolved issue. • Plans are being discussed to increase the use of national currencies in payments between BRIC countries, which will also allow for a diversification of the currency basket. Select quotes “We need to develop an international system that would allow the coordination of financial systems around the world to further enhance cooperation between countries.” - Le Jepin “BRIC countries will slowly but surely move towards the approval of a multi-currency basket.” - Carlos Feras “The SDR was designed for specific purpose. It is actually not a currency, it is not a liability of the IMF - it is a sort of reserve asset. SDR really has to change substantially to become a widely used tool.” - Ousmène Jacques Mandeng “First of all BRIC countries should allow other countries to use on equal terms their own currencies. It is unacceptable to force other countries to use BRIC’s currency.” - Jim O'Neil

Select assertions and opinions • One of the key “break-through technologies” yet to be developed is application of power facilities using nuclear fuel. They will increase speed 20-fold. Development of relevant launching infrastructure will be required. • The government should develop and finance strategic space programs (e.g. flight to Mars program), commercial companies may carry out operating tasks (such as delivery of cargo to the orbit). • Space is a risky business, but risk is not an obstacle for certain people, therefore there will always be private businesses keen to capitalize on these opportunities. • The commercial component in space programs is currently prevailing in telecommunication systems, in the systems of earth remote sensing, meteorology systems, while it less significant in the manned missions. • By 2011, Shuttle will suspend their operations. Therefore RosKosmos has taken the responsibility to deliver astronauts and cargo to the orbit. It is also desired that some other country would have similar systems reserved to perform space-links. • ISS can operate without investments up to 2020 - and with additional investments, even up to 2028. Within the next ten years it may be handed over to commercial organizations, like Space Adventure, which will perform manned missions to the station. • We will need 20-30 years before people start living in Mars or somewhere else on a permanent basis - creating a second living environment would be established other than the Earth. • Space tourism segment has good chances to become sufficiently notable. Selected quotes: “We have learned to live in space, we have learned to work in space. So far it is more an environment for professionals, but non-professionals gradually start to use it too.” - Sergei Krikalev “Privatization may be implemented in space, the same way it happened in the Internet.” - Esther Dyson “ At present we are at the edge of the next quality step from our original habitat, reaching further into space.” - Sergei Krikalev “Commercial area in development of manned missions is interesting for RosKosmos, and we support it.” - Anatoly Perminov

Select assertions and opinions • Mass media plays important role in the modern world - and there is an enormous demand for information, education and entertainment - but sources of information and ways how to monetize its delivery will change. • Printed media will exist in the future and newspapers will exist to answer more questions «why?» and not «what?» • Russian information agencies will continue to face increased competition from international media firms and will need to continue to adopt new models and possibly consolidate in order to compete. • Users are interested not only in the information itself, they want to receive analysis, therefore it is necessary to attract (and pay for) highly professional staff. • Brand trust and integrity will remain a key to attracting and maintaining customer loyalty. Select quotes “Mass media is not a less important aspect to our life, as medicine or education.” - Alexander Lebedev “The know-how is in taking money for high-quality information.” - Elizaveta Osetinskaya “I believe in printed media, I think it will keep its role in the future but it will be changed.” - Hannu Syrjänen “Investigative journalism is a socially responsible mission.” - Alexander Lebedev

Select assertions and opinions • Although nobody can predict exactly what will happen, there is a general optimism that the EU will manage to recover from the recent concerns over Greece and its management of sovereign debt. • It is crucial to coordinate actions of all countries to overcome the crisis. • The economic crisis represents an opportunity for the European Union to confront some of the key systemic problems and build the basis for a more sustainable path. • The G20 is an increasingly efficient organisation of global governance of the 21st century. • We should take into account the importance of emerging markets in the modern world and recovery from the economic crisis. • There is a need for a new approach to development and utilisation of human resources. • Economies and societies need a management system adopted for the 21st century. The global shifts underway are enormous, yet regulation remains largely at a national or regional level. Select quotes “In the past the big fish ate the small fish. In the future the speedy fish will eat the slower one.” - Klaus Schwab “It is not possible to change the economy while keeping politics the same.” - Dmitry Medvedev “Markets are happy to hear the words but they want to see the actions.” - John Lipsky “The stone age came to the end not due to the lack of stones, but because of the new knowledge that people acquired.” - Herman Gref “Freedom is the power of order, not law of the jungle. The governments should stay closer to each other.” - Nicolas Sarkozy “Lets not forget that Europe is a phenomenon. 27 countries making decisions together.” - Nicolas Sarkozy “One of the lessons we learned from the crisis: no national economy can be independent from the global economy. If we collaborate, politics can make difference.” - John Lipsky “What’s next?...Further communications.” - Dmitry Medvedev