U.S. firms lag in Russia, economists say

June 12, 1993|By Jeff Leeds | Jeff Leeds,Contributing Writer

COLLEGE PARK -- American businesses are lagging behind those in all other industrialized nations in expanding their enterprises into Russia, economists agreed at a U.S.-Russia trade conference here yesterday.

The U.S. is exercising perhaps too much caution in initiating business ventures in Russia, while Japan, South Korea and several European nations are off to a quick start, according to Russian government officials and U.S. economists. The conference, held the University of Maryland, examined environmental issues and banking reform in the former Soviet Union.

Warren Phillips, a University of Maryland government professor who helped organize the conference, said U.S. business have been "the least enthusiastic" in establishing strong trade relations with Russia.

"American businesses are very shy about early investment without strong protections," Mr. Phillips said at a news conference held with Russian officials.

Even big-money industries with much to gain from overseas investment, such as oil and gas companies that could tap Russia's vast mineral and oil reserves, have been "cautious" in stepping across the borders of the former Soviet Union, said Karl Viehe, an international trade attorney.

U.S. business leaders said their hesitancy was caused by a Russian economy that was still based on the virtually worthless ruble and lacking an established banking infrastructure. Further, the country's large labor force, while eager to begin the transition from communism to capitalism, has unfamiliar with the principles of personal enterprise.

American restraint in entering the Russian marketplace might not be unwarranted. According to a cloudy economic forecast distributed at the conference, the downward trend in foreign trade in and out of Russia will persist through the end of the year.

Enterprises dependent on raw materials will be threatened by production stoppages, and the Russian economy is expected to continue in a deep slump.

Abel Aganbegyan, president of the Russian Academy of National Economy, said government officials and business representatives compiled a list of serious holes in Russia's banking system, including a lack of an adequate foreign exchange system throughout the former Soviet Union and the difficulty in lending money to new enterprises.

A representative from Russia's central bank attended the conference, marking the first time the government-run financial institution has had a presence at an international trade conference, Mr. Aganbegyan said.

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