Germany is Interested in Russia’s Stable Economic Development

Interview

Germany has traditionally been considered one of Russia’s key economic partners. We have met Michael Harms, Chairman of the German-Russian Chamber of Commerce, to discuss the future of bilateral trade and economic relations, as well as the modernization of Russian industry.

Interview

Germany has traditionally been considered one of Russia’s key economic partners. We have met Michael Harms, Chairman of the German-Russian Chamber of Commerce, to discuss the future of bilateral trade and economic relations, as well as the modernization of Russian industry.

Mr. Harms, Germany is one of Russia's key trade partners. Could you name some measures that might boost the growth of trade relations between the two countries?

Regrettably, Russia’s main trading partner is China and not Germany. I would be happy to see my country back in the leading role, but I don't think this is realistic. Nevertheless, there is a sound foundation for increasing Russian-German trade, since our economies complement each other. The FDIs are also impressive. For the time being, this is mostly a matter of German investments in Russia, but we hope the reciprocal flow will also increase. As far as net trade is concerned, the current figures are quite good. The thing to be done now is to bolster cooperation at the local level and build up direct investments. We are definitely interested in Russia’s stable economic development, since German firms would improve their prospects in the Russian market as a result.

Photo: Michael Harms

Moscow pays a lot of attention to drawing foreign capital. Which sectors of the Russian economy could German investors become involved in modernizing, and what measures could make Russia more attractive for foreign funds?

The strength of German industry lies in advanced manufacturing, which means that our capital has an edge in high-tech production – automobiles, chemicals, electrical engineering and so on – rather than in the financial sector or Internet business. These seem to be the areas most wanted by Russia, and Germany is able to provide the appropriate know-how. In Russia, German companies are ready to open enterprises that would make links within global supply chains geared toward Russia’s vast market. As I see it, in recent years the overall investment environment has improved despite certain political complications. However, it is not politics but stable and transparent institutions that provide the backbone for investment attractiveness.

Russian investments in Germany have also been growing. Which sectors appear most appealing to Russian investors, and what is the importance of Russian capital for the German economy?

Investment from Russia is also on the rise, although from a very modest starting point. For that matter, the efficiency of the incoming assets also remains insignificant. The problem is that Russian industry is not yet competitive enough to consolidate its place in the German market. But computer software and information technologies are an exception. There are some very successful Russian firms in these fields, whereas I don’t see many achievements in material production.

What do you think of the Partnership for Modernization initiative? Is the plan efficient enough or should it be replaced by a more appropriate program?

The idea is good but its implementation raises many questions. The plan’s economic section has more failures than achievements, especially in regard to its institutional arrangement. Modernization is proceeding smoothly, at least while there is no political interference. As soon as politicians come in, performance unfortunately decreases.

How will the results of the recent Bundestag elections affect Russian-German economic relations? Are there any changes in the offing?

I believe the grand coalition likely to emerge based on the CDU/CSU is a good sign for economic policy, because the government is going to be strong, skilled and able to make prompt decisions. Furthermore, both the CDU and the SDP realize how important economic relations with Russia are for Germany. All parties are interested in their advancement, with no one willing to torpedo the relationship. I’m quite optimistic as far as this matter is concerned.

Interviewer: Nikolay Markotkin, RIAC Program Coordinator