Moscow as international financial center

Throughout the years of economic reforms, Moscow has clearly become the country`s major financial centre, having significantly surpassed other Russian cities in terms of both the development of financial infrastructure and the concentration of financial resources. As of today, the majority of all the leading financial institutions in the country — large banks, insurance companies, pension funds, stock exchanges, etc. — are located in Moscow. Moscow is home to more than 600 banks out of a total of 1,250 credit institutions operating in Russia. Similarly, nearly 80% of the country`s financial resources are transferred through the city`s financial system.

The leading Russian stock exchange is also located in Moscow. The Moscow Interbank Currency Exchange (Micex) ranks among the world`s top ten largest stock exchanges: it accounts for over 80% of Russia`s organized securities market, with roughly 30% of all deals being struck by non-residents. All the top companies from the leading nations have representative offices and operate in Moscow. The majority of large foreign companies that work on different regional markets also have their headquarters in Moscow. Even today, the Russian capital is the world`s third largest city in terms of its city budget, which exceeded $40bn in 2007 and increased by 20% in 2008. All of this makes Moscow`s further integration into the global financial system an absolute necessity, which will most likely result in the strengthening of its international position later on.

Meanwhile, in practical terms, Moscow`s position as an international financial center means the attraction of new investments to the city, an increase in the taxable base, and a greater number of jobs for professionals, which is especially important for Moscow, as the city boasts a huge number of universities and other academic institutions. This will also result in an increase in wages of the city`s employees, as well as an improvement in the quality of life of the population and a rise in consumer demand. This progress in the city directly correlates with the capital`s long-term strategic development plans until 2025, which are currently being drafted as part of the implementation of the Moscow City Government`s decree No. 1761-RP dated August 17, 2007, “On the organization of work for the creation of Moscow`s development strategy for the period until 2025.“

The Moscow City Government has determined long-term priorities for the evolution of Moscow into one of the world`s leading global financial centres, which actively participates in the global economic processes, and also plays a key role in the formation and outline of future advancement of the world economy thanks to a high concentration of big finance-oriented businesses in Moscow, a well-developed system of education and training for professionals, highly-developed city infrastructure and a favorable social environment. The city is also comfortable and convenient for its citizens, including a wide range of businessmen and tourists.

The previous global experience of Singapore and China (Hong Kong and Shanghai) — both modern international financial hubs — has proven that the successful implementation of such grand projects requires certain macroeconomic ‘growth points` that prompt the emergence and development of such centres.

The following conditions have traditionally been cited as such growth points:

• economy with high development potential;
• stable national currency;
• trade in securities of joint-stock companies on stock exchanges;
• liberal regulation of the country`s economy.

Notably, Moscow already complies with some of the abovementioned ‘growth points` and is actively striving to attain the remaining ones.

The first growth point — an economy with high development potential — speaks for itself: since the year 2000, Russia in general and Moscow in particular have been among the leaders in economic growth in real terms. Furthermore, in recent years, GDP and reserves have been rapidly rising, the consumer market has demonstrated significant growth, and the positions of Russian companies on the global market have improved considerably, as many of them have become major investors abroad.

The second growth point — a stable national currency — does not require any additional commentaries: in the last few years, the ruble has demonstrated impressive stability against the leading global currencies, whereas strong fluctuations were registered in both the euro and the dollar exchange rates. What`s more, even against the background of the global financial crisis, the Russian credit and financial system has been able to weather the crisis without significant disruptions — thanks primarily to the government`s support.

The third growth point is trade in securities of joint-stock companies on stock exchanges. Despite the fact that a small social group still owns the majority of production facilities and the rights for the use of Russia`s natural resources, the situation has been rapidly improving: big Russian businesses have been actively developing actively developing corporate culture and the climb towards becoming joint-stock companies, and many companies have made initial public offerings of their securities on both domestic and foreign stock exchanges, and the number of private investors who prefer to invest in these companies has also been increasing.

And the fourth condition — liberal regulation of the country`s economy, which provides for the capital markets functioning in accordance with the government`s regulations, whereas enterprises operate without unnecessary control by supervisory authorities — is still a goal for Russia, and the federal authorities are doing their best to attain it. Moreover, the adoption of a special stimulating tax and financial legislation will also bolster the development of Russia`s capital as an international financial centre, thus making it especially attractive for investors, as the city will become a centre for investment resources.

At the same time, it is importation to point out that the implementation of major global economic plans in Moscow will by no means result in the stagnation of other financial platforms in other Russian cities (such as St. Petersburg, Nizhny Novgorod, etc. ), but will instead become a driving force for the rapid development of new financial centres, which are expected to grow on the back of the synergistic effect from Moscow`s progression into an international financial centre.

Successful activities aimed at attaining these goals provide for the close cooperation of federal authorities, the Moscow City Government and private businesses. For instance, the Russian Economic Development Ministry`s concept for the long-term social and economic development of Russia is based on the need for creating one of the leading international financial centres in Moscow. Meanwhile, the Moscow City Government also considers the creation of favorable conditions for the development of the financial system and big businesses oriented on finances its top priorities.

Based on all of this, as well as on the federal government`s measures aimed at providing additional support for the Russian credit and financial system against the background of the global financial crisis, there are sufficient reasons to believe that by 2025 Moscow will have everything it needs to become one of the top five financial centres in the world, and in the next 10 years it will be capable of becoming a leader on the regional financial market of the CIS countries, the Baltic states and Eastern Europe.