Netanyahu Blasts Russia's IT Laws

By Melissa Akin and Florence Gallez / Staff Writers

Former Israeli Prime Minister Benjamin Netanyahu became the unexpected star of an Internet investment conference Thursday, issuing a rousing call to deregulate the technology sector that he said could catapult Russia into the global economy.

"The greatest challenge we face in the world is to move this global economy," said Netanyahu, who was greeted enthusiastically after arriving at the Grand Marriott Hotel unannounced and surrounded by a crowd of bodyguards.

The one-day conference — sponsored by Renaissance Capital IG and organized by Sachs Associates and Bloomberg LP — brought together more than 400 industry experts from the country’s leading IT companies.

The purpose of Netanyahu’s visit to Moscow was unclear, but the former prime minister demonstrated his familiar tough-talking manner in his surprise speech.

"The biggest obstacle to the flow of technology in the world right now is government," Netanyahu said, slashing the air with his fist as he called for lower corporate taxes and deregulation.

Netanyahu cut a sharp contrast to Communications Minister Leonid Reiman, whose dogged determination to regulate the sector got a lukewarm response from assembled members of the Internet investment community, many of whom fear the government could stifle the Internet’s potential for increased efficiency and profits.

The ministry, he said, wasn’t opposed in principle to self-regulation of the sector but said a state hand was required in the sector because "Internet activity concerns more and more people."

"Together with the Internet community, we are strengthening the role of the government in [the sector]," he said, listing a series of bills — including an electronic signature law to legalize e-commerce transactions — that the ministry intends to draft and push through the Duma in 2000-2001. He said a measure to control domain name registration was also on the way.

There was a frenzy of investor interest in Russia’s high-tech sector early this year, but enthusiasm cooled after the U.S. tech-heavy exchange Nasdaq crashed in April.



The keynote speaker at the conference, Renaissance investment banking chief Richard Olphert, said the likely winners of the technology game were those who developed Internet business on the side of cash-flow positive core businesses. Olphert mentioned as examples IBS, which is mainly a systems integrator that also develops business-to-business e-commerce projects, and -eStart.ru, a web portal built around content from Russian language magazines published by the Independent Media holding, the publisher of The Moscow Times. Renaissance is also involved in the eStart project.

Olphert said the Russian IT sector should be assessed in the context of the country’s overall investment environment.

Aside from investors’ occasional bouts of nerves — like over the Communications Ministry’s recent threat to seize frequencies from a local mobile operator — the Internet is "isolated at the moment, because it’s such a new secto," Olphert said. "In the next 10 years we will see the tech sector playing a big role in Russia, in the long term," he said. "As the tech sector becomes more important we will obviously adjust our strategy and become more focused on that. But at the moment it doesn’t really make sense for us, given the size of the transactions."