Stepping into the XXI century

THE ROAD WE HAVE CHOSEN

Gennady Tkachev,
St. Petersburg Vice-Governor,
Chair of the Committee for Foreign Relations

        When we made new approaches with a view of forming the city budget we managed to create the image of the city as a reliable business partner. Before that the budget of our city had been misinterpreted by foreign investors and they thought it risky enough to make investments in our economics.
        From 1997 our city has started to make up the budget in accordance with common European standards. The budget that had been published then for the first time and English copies of which had been distributed among the consulates within the city became clear and accessible for one to see through. Due to the measures taken in 1997 St. Petersburg received a credit rating which was not high, as it was then estimated, for in accordance with fair play the city credit rating had to be limited by the country's rating, that is, Russia's. Such was the conclusion by economic experts. With the international credit rating the city has been able to enter the Eurobonds market. What has attracted us there? Of course, we have been seriously thinking of our city's business image. At that particular time such "financial pyramids" as MMM and their sudden collapse were at the center of a major scandal over the banking activities in the country. Our duty was to prevent the appearance of such organizations in the future and we took preventive measures for securing the short-term issuance of Petersburg bonds and thus safeguarding our city's reputation.
        The suggested scheme was very simple. Having the international credit rating we decided to float Petersburg Eurobonds on the world market. The currency income from such activities we immediately use for the purchasing of "unsafe" municipal bonds which had been issued for 3, 6, 7 and 12 months and our Eurobonds were to be placed with the public for a term of five years. Thus the city, which borrowed the money at lower interest, may pay off its debt and shares within five years. During this period our situation may change for the best. We had been preoccupied with one thought: would our Eurobonds be accepted at the financial market and would there be much demand for them?
         The emission was 300 million US dollars. This figure was put forward for consideration in accordance with European standards and our experts could estimate the amount that our city was able to borrow for five years with the Eurobonds issued as a pledge. We hoped our plan would be a success but the demand for our Eurobonds has exceeded our expectations: it was four times more than the amount estimated. Such is the real "confidence rating" the city has won! Petersburg has a reputation as a trustworthy borrower that pays off debts in time, has low expenses for dealing with internal and external debts (less than 10 percent of the budget), and has the budget formed for 1999 without the primary deficit.
        - Would not it be natural now to relax and let the investment situation evolve by itself?
        - By no means! The business image of our city is worth all efforts! Many important measures are taken for the city's prosperity and much work is still to be done. We are preoccupied with the strengthening of confidence in our investors as well as the creation of mutual business interests between the investors and the city.
        Our another important task is the establishment of infrastructures necessary for an active process of investing. In order to protect their business against possible dangers our investors must have the opportunity to obtain the necessary information concerning the market and Petersburg dealers with whom the investors should or should not have contacts: what suppliers are not honest? Which banks are reliable? How to technically safeguard a company's computer network? Today these questions can be answered in any of ten expert commissions, the reliability and competence of which are guaranteed by the city's administration and by the Investment Promotion Council under the auspices of the Governor. The commissions mentioned were allowed to work in the information service market for they had won at the serious qualifying trial.
        One of the present urgent problems is the creation of a quality checking system for all goods delivered, that is, the system being at the level of modern world standards. Penetration of the international markets is impossible without the introduction of certification of goods and services. This process has already begun. Another Petersburg problem is that we need to introduce modern customs technologies for safeguarding the investors' time and money and enhancing the investment attractiveness of our region. In order to attain this we direct our efforts towards the establishment of a "duty-free warehouse" where there would not be any export taxing and a suitable site for which might be our seaport. We are waiting for the central government's decision on this issue.