Zee Beam News

MOSCOW, February 7 (RIA Novosti) - Russia saw a fourfold increase in capital outflow last year, Deputy Economics Minister Andrei Sharonov reported. Speaking Monday at parliamentary hearings in the State Duma, or the Russian legislature's lower house, Mr. Sharonov said capital flight reached $8 billion in 2004, quadrupling 2003 outflows. There was an inflow of investment in the private sector from September onward, but the year's figures turned out worse than expected, Mr. Sharonov said. He attributed the tendency to problems with the investor climate and investor confidence, relating these problems to the tax authorities' raids against Yukos and other corporate giants. The government's continuing attacks on high-profile companies have scared off many domestic and some foreign investors already, he said. This year will see a production decrease in export-oriented sectors, including in the oil industry, Mr. Sharonov predicted. According to him, the rate of economic growth is expected at 5 percent this year, in comparison to last year's 6.1 percent. He said this was attributed to a slowdown in petroleum export growth and that the tendency could be reversed by investing heavily in the development of new oilfields and the construction of pipelines. Russian producers' competitiveness dropped by 20 percent in 2004, Mr. Sharonov said. He pointed to a recent growth in domestic demand and in retail sales, adding that two-thirds of the demand was satisfied by imports. "This indicates a low level of domestic producers' competitiveness," he noted. "Problems of competitive pricing will become even harder for Russian producers to cope with in the year ahead, and they have lessons to learn."