Kirill Dmitriev interviewed

Bloomberg TV, 06.06.2012

Bloomberg: Russia and China created a joint investment fund last night. And we will hear more about it live from Beijing this morning, because we talking to Kirill Dmitiriev, CEO of the Russian Direct Investment Fund. Mr. Dmitriev, it is pleasure to us to have you with us. First off, you are looking at close to $4 bln for this fund, with the Russian and Chinese sides each putting in $1 bln. Where you going to put this money?

Kirill Dmitriev: We believe there is a tremendous opportunity to invest in projects that benefit from the growth of the Russian and Chinese economies. Right now the trade between Russia and China is $83.5 bln a year, and it is expected to grow to $200 bln by 2020. So there are huge opportunities to invest in things like agriculture, in logistics, in forestry and other sectors that will benefit from the growth in Russia and China and from the increased trade between those countries.

Bloomberg: That`s right. The fund is considering investments in agriculture, logistics in energy efficiency and in machine building as well. But there is talk that your first investments for the fund is likely to be in a forestry company. Can you tell which company it will be?

Kirill Dmitriev: Well I cannot name the company but I think it is a good example to consider. It is one of largest forestry producers in Russia, exporting quite a bit of wood into China. But we believe that more value-added production can happen in Russia. So by investing in value-added production, it will create quite a bit of value and China will also secure the supply of more processed wood.

Bloomberg: 70% of the fund is going to be invested in Russia and also in the CIS countries, with the remainder of the fund going to China. What is the reasoning behind this investment structure. Are the returns in Russia more attractive than, say, investing in China.

Kirill Dmitriev: I think there is plenty of capital already going into China. And we believe there is the lack of international capital going into Russia. And if you look at the macroeconomy it is strong in Russia. Debt to GDP is 11%, at the same time it is 100% in Europe and growing quite quickly. The middle-class tripled in the last 5 years. So we believe there is a major opportunity in terms of underinvestment into Russia to participate in the growth in the Russian market. There is also a major opportunity to invest in the Russian Far East and Siberia, which are much less developed and need investment in infrastructure and are close to China. So those areas will really benefit and definitely will help Russia to attract the foreign investment and showcase good investments in Russia.

Bloomberg: This partnership with CIC, Mr. Dmitriev, will see a billion dollars in capital each from Russia and China. And you are looking for $2 bln additionally from Chinese institutional investors. So who are going to be these funds, these names, who are putting money in this JV?

Kirill Dmitriev: So yesterday was the first closing, where we and CIC contributed $1 bln each to the venture. The remaining $2 bln we expect to raise over the next 15-18 months from institutional investors, from wealthy families. Obviously investors understand that CIC is a good investor. We also have a good record of investing so far. So we believe, that the joint venture of the two state funds will induce quite a number of investors to come in and to invest together with us.

Bloomberg: Mr. Dmitriev, one more quick question for you.  As you mentioned, the JV is considering investments in the agriculture, logistics, forestry and energy efficiency. Why not invest in the energy sector, which seems to be the major money-maker out of Russia?

Kirill Dmitriev: Well, I think, we may invest in some energy deals. But there is already quite a bit of money chasing those investments. We are open to investing in high value-added energy sector. But we also believe there are tremendous opportunities in other sectors like logistics. I mentioned the middle class increasing dramatically. So truly there is a very balanced approach. And President Putin was very clear, he mentioned yesterday that we are going from trade cooperation with China to trade, investment, and technology cooperation with China. So lots of good investments to be made in sectors other than energy.

Bloomberg: Ok, Mr. Dmitriev, thank you so much for your time. Enjoy the Shanghai Cooperation Organization meeting, which is taking place in the Chinese capital. Kirill Dmitriev, the Russian Direct Investment Fund CEO, live from Beijing this morning.