* Medvedev announces business-friendly moves
* "We have changed", Kremlin leader says
* Vows no turning back on drive to modernise Russia
(Adds market reaction, bankers on privatisation)
By Michael Stott
ST PETERSBURG, Russia, June 18 Appealing to
global business leaders to help him modernise Russia, President
Dmitry Medvedev vowed on Friday to cut taxes on investment and
announced plans for a new fund to channel money to big projects.
Making the keynote address to the annual St Petersburg
Economic Forum, Russia's top business event, Medvedev said he
was taking real action to steer the country away from its
dependency on oil and towards a future based on innovation.
"Since our last meeting, a year has passed, but not just
that. There was something more. We have changed," a confident,
relaxed Medvedev said. "We are really modernising Russia."
Now halfway through his presidency, Medvedev has made
modernisation his priority, launching a project to build a
Silicon Valley-style technology hub near Moscow [ID:nLDE64R1N6]
and promoting diversification of the economy into new areas.
Critics say Medvedev, a protege of longtime leader Vladimir
Putin, will not succeed in modernising the economy unless he
also opens up Russia's closed political system, curbs
corruption, allows free media and promotes open debate.
As in previous years of Medvedev's rule, Putin did not
attend the forum.
Underlining his determination to project a fresh image in
front of an audience of 2,000 senior global executives, the
Kremlin leader appeared on stage without the traditional anthem
written to Soviet music and kept formality to a minimum.
Medvedev said the global crisis offered Russia a unique
opportunity to build a modern, prosperous country based on a
knowledge economy encompassing space, medical science, nuclear
and information technology.
"Creating a comfortable environment for investors, in
essence, is our greatest challenge," Medvedev said. "But today
we put this task at the centre of our actions."
Medvedev said capital gains tax on long-term direct
investment would be abolished from next year and held out the
prospect of more tax cuts for business as the economy recovered.
CAUTIOUS ABOUT RECOVERY
"Reform is vital if Russia's historic valuation discount is
to narrow, and investor-friendly remarks such as we heard today
are, in our view, a step in the right direction," said Moscow
investment bank Renaissance Capital in a research note.
The tone of the speech was more upbeat than last year, when
Russia was in the depths of the crisis. Medvedev remained
cautious about the recovery, saying the pace of growth was "not
as inspirational as we would like".
Russia's economy is expected to grow by about 4 percent this
year, clawing back about half of last year's contraction.
Addressing a commonly heard criticism of the Kremlin's
modernisation plans, Medvedev said his government understood
that a modern economy could not be built on orders from above.
"The state should not tear the apples from the tree of
economics. What the government should do is help to grow our
apple orchard, develop our economic environment."
Medvedev ordered the government to create a new investment
fund financed jointly by the state and the private sector which
would work along market principles.
"No matter how many state-owned corporations we have,
modernisation will happen above all through private businesses,"
he said. "And only if there is competition."
On Thursday, the president implemented a previously
announced move, cutting the number of companies that must be
state-owned because they are "strategic" from 208 to 41.
This opens the way for more privatisations. Economy Minister
Elvira Nabiullina reiterated that Russia aims to earn 72 billion
roubles from privatisations this year, but is not yet planning
to sell stakes in behemoths like Gazprom or Russian Railways.
Morgan Stanley (MS.N) chairman John Mack told Medvedev at a
forum meeting with bankers that Russia needed to expand the
number of listed companies on the stock exchange.
"Privatisations are critical to creating the volume and the
flow of activity," he said.
A fan of technology, Medvedev said Russia had set a target
of giving Internet access to 90 percent of the population and
broadband access to 60 percent by 2015. He said technology could
help develop democracy in Russia.
"Information technology is one of the key directions for the
development of democracy," the Kremlin leader said.
"Technological expansion guarantees freedom of speech".
Medvedev vowed to press on with government plans to promote
Moscow as a regional financial hub and said this would help
strengthen the position of the rouble as a reserve currency.
(Additional reporting by Denis Dyomkin and Toni Vorobyova,
writing by Michael Stott and Toni Vorobyova; editing by Jon