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Moscow Finance Hub Hopes Hit by Pension Plan, Deputy Mayor Says

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Oct. 4 (Bloomberg) -- Moscow’s chances of becoming an international financial center will suffer from the Russian government’s proposal to reduce the amount paid into the funded part of pension system, Deputy Mayor Andrey Sharonov said.

“This decision concerns not only Moscow, but the whole country, and it looks like a sacrifice of strategy for the benefit of tactics,” Sharonov, a former deputy economy minister and head of investment banking at Troika Dialog, now known as Sberbank CIB, said in an interview yesterday in Moscow.

Turning the capital into a global hub for finance was a goal announced by Prime Minister Dmitry Medvedev when he was president in 2008. His government submitted proposals to President Vladimir Putin on Oct. 1 for overhauling the nation’s pension system, including a reduced contribution to the funded component, triggering criticism from pension funds that the move would suck up long-term money needed for investment in the country’s financial markets.

Medvedev’s Cabinet proposed cutting the amount paid into the savings component to 2 percent, from 6 percent now. The move had also been opposed by the Finance Ministry, which argued that it would do little to reduce longer-term imbalances in the pension system.

Putin, who criticized ministers including Labor Minister Maxim Topilin for delays on drafting the pension proposals last month, ordered Medvedev to hold public discussions on the plan and then submit it to the State Duma, the lower house of parliament, by Dec. 15.

Keeping Mum

Federal policy makers appear to have gone quiet on plans to turn Moscow into a financial center able to compete with London, Sharonov said.

“It’s hard for me to say what the reason is, because the main sponsor of the whole process still remains Dmitry Medvedev,” he said. “That said, it’s important to remember that Moscow also has the obligation and the authority to contribute to this.”

The city is focused on improving transportation infrastructure, health care and education, which are also important in making Moscow an attractive place for international business, Sharonov said.

To contact the reporter on this story: Olga Tanas in Moscow at otanas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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