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Russia: Government Vows To Start Implementing Economic Plan

  • Sophie Lambroschini

The Russian government has given itself two months to put into effect the first measures of its ambitious ten-year strategy to pull the Russian economy out of its crisis and the Russian people out of poverty. NCA's Moscow correspondent Sophie Lambroschini reports.

Moscow, 5 July 2000 (RFE/RL) -- Russia's ten-year economic strategy, officially adopted by the government last week, is still being analyzed by specialists in the State Duma. But its general terms are already set.

Finance Minister Aleksei Kudrin told reporters in Moscow today (Wednesday) that some priority measures will be put into effect in the next two months. Most of these initial measures concern tax reforms.

The program was developed under the auspices of Economic Minister German Gref and his Center for Strategic Planning. Gref's center was given the task at President Vladimir Putin's express request last December.

Kudrin says the goal is to spur high economic growth and to double the population's real income within ten years.

"With [this program] we create the possibility to lay basic, fundamental foundations for economic growth in Russia. And it is this economic growth that, according to us, should attain 4 to 5 percent of GDP a year and will make it possible to ensure growth in the standard of living," he says.

To reach these ambitious goals, the government proposes to slash state spending, in part by strictly refocusing state subsidies to those living below the poverty line. State financial support for business will also be cut. Defense of property rights is a key principle of the government's plan -- almost a radical principle in a country where, so far, private property has never been completely safe from state confiscation.

Large companies will be restructured. The plan calls for a long-awaited reform of Russia's major monopolies, including the splitting up of giants such as the gas company Gazprom into production, transport, and sales units. The plan also calls for privatization of many of those companies that are still owned by the state.

Cutting bureaucracy is another element of the economic plan. That includes curtailing some tax and customs privileges, simplifying licensing and business registration and getting rid of some regulatory bodies altogether.

But the plan is not only about cuts. It also includes social measures such as boosting education spending, developing private pension funds, and creating a mortgage lending system so people can borrow money to buy houses.

The general ideas in the plan have been known for months, but analysts were withholding judgment until they saw the details. Most now say they like what they see. Denis Rodionov, an analyst with Brunswick-Warburg investment bank, calls the plan "liberal, market reform-oriented, solid -- just what investors were hoping for."

Months of debate and in-house battling had many observers wondering whether the program wouldn't be watered down or forgotten altogether. Such influential politicians as Prime Minister Mikhail Kasyanov and presidential administration head Aleksander Voloshin were said to be critical of Economics Minister Gref's ideas.

To many analysts, the adoption of the Gref program essentially unchanged is a sign that the liberal economists have the president's ear.

As journalist Vera Kuznetsova noted in the English-language weekly "Russia Journal": "Even in their wildest dreams, convinced liberals like former premier Yegor Gaidar couldn't have hoped for a single social tax and flat income tax of 13 percent." Both are ideas which Putin now backs.

Of course, despite the general atmosphere of support, the plan is not without its critics. For example, Boris Fyodorov, a liberal and a former economics minister, lashed out against the government's plan, saying it doesn't go far enough. He says the cabinet is like a coalition government and will be bogged down in compromises and half measures. "I think it is very sad that the first hundred days of President Putin [in office] is ending with several good ideas, for example taxes, that have not been taken to their conclusion. But apart from taxes and the policy towards the regions, what else is there? As an economist, as a PhD in economics, I don't see what the economic policy of the government is, what the policy of the Central Bank is and where we are heading in the end," Fedorov says.

Leftists also oppose the program -- but for opposite reasons. When Gref presented his plan to the Duma's economic committee yesterday (Tuesday), Communist deputies said the government is being too eager to apply Western models. The Communists want greater state subsidies to the industrial and military-industrial sector.

But the most weighty argument against the plan is also the most obvious -- that it is just a declaration of intention and that the real challenge lies in its implementation. Complex laws will have to be passed to implement the reforms, in particular a new tax code, laws guarding private ownership of land, and a bankruptcy code.

The quip that Russia is good at making programs but bad at implementing them has become a favorite among critics.

The Russian weekly "Kommersant" compared Russia's planners to scientists stuck on a desert island with nothing but a closed tin of corned beef and no can-opener. While the engineer desperately tries to build a tool, the economist works out his own solution. "Let's just imagine that we have a can opener," he suggests.

So far, no economic program has ever been implemented in its essence, noted the paper, and therefore the tin can of corned beef still hasn't been opened.