Interview with UK Trade and Industry Secretary Patricia Hewitt

United Kingdom Trade and Industry Secretary Patricia Hewitt is on a two-day visit to Moscow. During her visit she intends to discuss the prospects of Great Britain-Russia investment and energy cooperation. Patricia Hewitt gave a RIA Novosti correspondent more details about the agenda of the talks and London's assessment of Russia's investment climate.

- Dear Ms. Hewitt, what topics are you to discuss with Finance Minister Alexei Kudrin, Deputy Prime Minister Alexander Zhukov and Energy and Industry Minister Viktor Khristenko?

- I'm here to continue deepening and strengthening the economic partnership between the United Kingdom and Russia and of course contribute to the growing partnership between Russia and the European Union. So what I'll be discussing with all three ministers is progress Russia has been making in economic reform which we of course very much hope will continue and accelerate. I want to hear more about what Russia's government plans are for continuing to improve the investment climate because of course the United Kingdom is very large and important investor in Russia's economy. And in particular with Finance Minister Kudrin I'll be discussing the work we've been doing through the Steering Group on economic Cooperation and the working group.

- It's not only investment but also the climate change, of course particularly with Minister Khristenko and energy matters. I think it's very important that we don't see Russia as simply a producer and exporter of energy, nonetheless you know we've been importing energy from Russia for 30 years, I think. And as Britain becomes a net importer rather than net exporter of energy, we see that part of our relationship with Russia has been very important. It's only a part of the relationship but it is important and obviously I want to discuss that.

- Last year the UK became the largest foreign investor in Russia. Do you have forecasts for this year? Do you foresee any new investment projects?

- I have no doubt at all the British investment in Russia will continue to increase. I don't have specific forecasts for that. But we are seeing -I mean obviously BP and Shell are both major investors here - but a number of other companies as well, number of our banks of course including HSBC, Pilkington which is building very large float glass facility in Moscow oblast. And I would expect in a whole variety of fields including science-based industries, where of course Russia is strong, software, business services where again we've seen investment, and retail where Britain is very strong. So I would expect all the other sectors of economy to attract more and more investors to Russia. Which is why it is so important that we have a dialogue with Russian government about it's own plans for economic reform because it needs desire to continue attracting inward investment and the government also needs to ensure that there's a good climate for the investors coming here.

- Speaking at the Russian Economic Forum in London you mentioned that British companies were ready to invest not only in the oil and gas sector but other industries as well. What is the top priority, the most interesting sector of Russian economy but for oil and gas of course?

- We do not seek to direct investment into specific sectors, it is a matter of our companies to make their own judgment, but when I look at the strength of the Russian economy I must say in particular of your extraordinary condition of high technology, scientific, mathematical and engineering excellences, which are all outstanding. Where I think will be a great interest from a number of our companies in seeking to form partnerships with Russian companies. And to work here with your immensely skilled and talented people. And of course Russian middle class is clearly growing, which is why there are very obvious opportunities in the field of retail, export of luxury goods, etc. It is very interesting and diverse prospects, I would say.

- How would you describe a general perception of Russian investment climate among British business? How big is the interest in Russia?

- There is a considerable interest and it is reflected in growth of two-way trade and investment. But there's also anxiety about whether Russia is going to continue on the path of reform and whether it's going to deal with issues around corporate governance and contracts and intellectual property law and so on. Obviously these are the issues we will be discussing again with Minister Kudrin and with the deputy prime minister which are of concern to investors. These issues are on the agenda of Russian government and business I believe. It's the questions I will be asking some of the Russian business this evening we are meeting.

- How do you see the changes in the Russian investment climate?

- It certainly has been changing for better. We hope it will continue traveling in that direction and traveling faster. But there's a question mark, because obviously the new government has just been appointed and it's not yet exactly clear who will hold which position and there are larger questions which I think should be asked. That's one of the reasons why I'm here - to explore these questions.

- What should be done to improve the investment climate?

- Well, clearly what investors in any country seek is stability and security and as few risks as possible. And therefore when they enter the contracts, those ought to be binding, they want to have good legal framework for corporate governance and for protection of intellectual property. Clearly without getting into details, the situation with Yukos does raise concerns. They really want to be certain with taxation, that tax rates are fair and competitive and that tax laws and law generally are enforced in an even-handed way. All of these issues and eventually the economy will become open and welcoming of inward investment and partnership and enable investors to form successful partnerships with Russian companies and Russian people.

- Do think the UK will join the euro area and when?

- That we looked into detail last year. As a government we've always taken the view that in principle joining euro area would be the right thing to do. But it also has to be the right thing in practice which means the economic conditions have to be right. We've set five tests for making that judgment - we carried last year exhaustive and very detailed assessment of the economic condition and whether it would be right for us to join the single currency in the near future. What was very striking with this assessment is that potential benefits of joining the single currency are even larger that we initially thought they were. But also clear that economic conditions are not right in this moment with Britain continuing to grow very strongly - we've had the longest uninterrupted economic growth period in 200 years - and the euro zone, in particular France and Germany, growing very slowly. Certainly there are no prospect of immediate entry to euro. But it remains our ambition. I can't give you any timescale.