RD Interview: The chairman of the board of Italy’s Banca Intesa shares his views on the Eurasian Economic Union and Russia’s current business environment.
Former Italian Prime Minister Romano Prodi and the President of the Sofia-Antipolis Foundation Dominique Fache (front row left to right) during the discussion “EU-Russia rapprochement” during St. Petersburg International Economic Forum 2015. Photo: TASS
Contrary to the expectations of many, the St. Petersburg International Economic Forum 2015 experienced a record number of participants, more than half of which represented foreign businesses.
While the international political environment is still far from improving, Western businesses have decided to take the lead. They are asserting their disagreement with the current political situation, which spoils economic cooperation, decreases trade, reduces profits, and, ultimately, leads to the overall slowdown of economic activity and development.
Russia Direct recently sat down with Prof. Antonio Fallico, president of Conoscere Eurasia Association and chairman of the board of Italy’s Banca Intesa, who discussed pressing questions of economic cooperation between European businesses and Russia.
Russia Direct: How does European business view the Eurasian Economic Union (EEU)?
Antonio Fallico: We view the EEU utterly positively, especially with regard to its future potential development. We believe that this will contribute to not only the development of bilateral economic relations of countries involved but also to global economic development.
RD: Lately, the economy has become highly politicized. More often than not, politics interferes into business affairs and imposes its will on it. In such circumstances, what steps can Italian and European business do to influence European officials and affect their political decisions and policies?
A.F.: Unfortunately our job is very hard. We strongly believe that the economy must prevail over politics. And politicians must understand the interests of their own country. Of course, like it or not, politics will have its influence on the economy. owever, we are trying to ignore pretexts lodged by politicians and are trying to act in accordance with the interest of our own countries and companies.
RD: Does the European business community, in principle, have leverage over political decision-makers in Brussels?
A.F.: Several days ago, breaking news shocked everyone: Germany signed a memorandum with Russia to construct a second pipeline to double capacity of the Nord Stream. No one expected that. When I learned about this agreement I thought that it was not for real. And there is a plenty of reasons to think so: sanctions against Russia, its isolation, political tensions, etc. But on the other hand I was even happy. Why? Because we have a chance to co-fund the second pipeline of the Nord Stream as we did with the first one. So, for us it is a very good deal.
RD: How does Italian business view Russia?
A.F.: I can say that we view Russia as not just a market but also a strategic country in particular with regard to business. Russia being in the center of the continent is a core element of the economic development of Eurasia. Russia maintains close ties with the BRICS and Shanghai Cooperation Orgnization (SCO) and has access to these markets, which is hard to find anywhere else. Also we know that here in Russia you can get a quite good return on investment.
Undoubtedly Russia (and the EEU) is a difficult market with its peculiarities where competition is quite intense. Moreover all major business giants are present there contributing to the creation of the competitive environment. This is a challenge for us but a good challenge where you want to take a risk and see who is stronger.
RD: What has to be done to improve the business environment in Russia? What steps will make doing business easier here?
A.F.: In developing our particular business, which is banking, we do not experience big obstacles or problems. Small and medium-size companies doing business in Russia experience the real problems. They are the ones that suffer the most from the current crisis, which naturally has a negative impact. We need to increase the amount of medium-size businesses in Russia as a share of its GDP. It is crucial for diversification of the Russian economy and for internal demand increase. It will also contribute to the production growth of sophisticated high-tech manufacturing.
Among other things, this will give Russia a stronger stance on the international arena as a country that produces high-tech products.
I always had a dream that, one day, Russia would become strong and a constant exporter of high technology products, not only its talented people, oil and gas. This would give a strong impulse to its further development.
That is why it is important to pay close attention to the development of small and medium-size businesses. President Putin said during his address that Russian state corporations will stimulate the small and medium size enterprises. If this is going to be the true, it is a very important step, especially for Italy as our countries complement each other: 90 percent of the Italian economy consists of small and medium-size companies. The growth of the same companies in Russia will give Italy an opportunity to find equal and proportionate partners with whom we could grow together and together compete even with big monopolies.
RD: But currently there are not a lot of Italian companies in Russia in comparison with other European countries. What can be done to increase the number of Italian businesses in Russia?
A.F.: Well, there are about 400 Italian companies constantly working in Russia, they are very stable. Almost all of them, except five or six big ones, are small and medium-size companies. Italian small and medium companies participate in big projects when one big company wins a tender. For example, when Italian ENI built the Blue Stream gas pipeline it outsourced to 350 firms to accomplish all required work. So, all these firms were working for ENI, they never worked directly with big Russian clients for quite obvious reasons – almost all big contracts are given to big state corporations in Russia.
However, if the structure of the Russian economy will be changed it will bring huge advantages not only to Russia itself but also the entire international economy will benefit from it as well.