* Says Russia needs "smart" investment
* Says law on foreign investment will be changed
* Says PepsiCo to invest $1 bln in 5 years
* Govt blocks TeliaSonera asset merger bid
(Adds Putin quotes, commission decision, details)
By Gleb Bryanski
NOVO-OGARYOVO, Russia, Dec 28 Russia plans to
change a key law regulating foreign investment in so-called
"strategic" sectors in 2011 in a bid to bring "smart" money
into the country, Prime Minister Vladimir Putin said on
Russia passed the law, which limits foreign investment in
strategic sectors in 2008, before the country was hit by the
economic crisis. The law requires that major deals get approval
from a government commission.
The Russian budget is now in the red, and with no
improvement in the country's investment climate, major foreign
acquisitions are rare, casting doubts over the country's bid to
privatise $32 billion worth of assets.
"We understand that we need foreign direct investment but
we need not just capital, we need "smart" investment,
accompanied by technology transfer and job creation," Putin
told the commission meeting.
"As far as the strategic sectors are concerned, the access
will be significantly simplified. Already in 2011 we are
planning to pass a number of amendments to the law on foreign
investment," Putin said.
Putin did not disclose details but said the proposed
changes will ease investor access to the food, pharmaceutical,
banking and natural resources sectors. He said that a second
round of amendments was already being worked on.
"I hope that measures we are taking will help us
significantly increase the flow of foreign investment into
Russia," Putin said.
Earlier on Tuesday, the Natural Resources Ministry signaled
possible changes, saying the limit on foreign ownership of
Russia's strategic mineral deposits should be raised to 25
percent from 10 percent. [ID:nLDE6BR0Y2]
Putin said foreign direct investment was estimated to reach
$40 billion in 2010, compared with only $16 billion last year,
but FDI statistics in Russia are distorted by offshore
ownership of major Russian firms.
The commission, chaired by Putin, gave a green light for
acquisition of Russian juice and dairy firm Wimm-Bill-Dann
WBD.N by PepsiCo (PEP.N) for $3.8 billion, one of the biggest
acquisitions by a foreign company in Russia to date.
Putin said PepsiCo had pledged to invest about $1 billion
in research and development, marketing and modernisation of the
Russian firm's production facilities in the next five years.
The commission also declined a request by a shareholder in
mobile operator Megafon TeliaSonera TLSN.ST to transfer its
interest in MegaFon to an offshore firm where it can be merged
with the stake in Turkish mobile firm Turkcell (TCELL.IS).
"We have reviewed a request by TeliaSonera regarding
changes in the (Megafon) ownership structure. As a result of
these changes shares in Megafon would be transferred to new
offshore companies," said commission member Igor Artemyev.
The transaction -- backed by another Megafon shareholder,
Altimo, but opposed by a third shareholder, tycoon Alisher
Usmanov -- would have helped TeliaSonera increase control over
one of its key holdings. [ID:nLDE6611CM]
The situation can spark a shareholder conflict in Megafon
similar to the one over the rival operator Vimpelcom VIP.N.
That conflict was solved through a similar scheme of asset
merger in an offshore firm.
"This request was declined since TeliaSonera is controlled
by governments of Sweden and Finland ... The situation with a
handover of property rights to offshore firms given
TeliaSonera's ownership structure was deemed inexpedient,"
(Writing by Gleb Bryanski; Editing by Gary Hill)