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Russia: Chernomyrdin Says Economy At 'Turning Point'

Moscow, 25 July 1997 (RFE/RL) - Russian Prime Minister Viktor Chernomyrdin says said the government can revive the economy if it presses ahead with ambitious reforms. He told a cabinet meeting Thursday that Russia is at "a turning point."

"We can pull ourselves up and make the Russian economy competitive and respected in the world, but we can also go back downhill," Chernomyrdin said.

Chernomyrdin says the Russian economy is at last showing signs of growth and pointed to a 2 percent upswing in industrial production since last year.

Economists have noted that the economy appears to be bottoming out this year, but warn that official figures should be treated with caution because of recent changes to state statistics methodology.

Chernomyrdin says the economy could be turned around if the government tackles the pressing problem of non-payments, which he says have grown worse since the beginning of the year. The Russian economy is grappling with a massive non-payments crisis. The federal government is currently scrambling to fulfill its promise to pay off 7.7 trillion rubles in public sector wage arrears by the end of the year.

But wage arrears are only a small part of the overall problem. First Deputy Finance Minister Alexei Kudrin told the cabinet meeting that the federal government owes a total of 76 trillion rubles ($13 billion) to enterprises.

Chernomyrdin says the government was making progress in bringing its finances under control. He says tax collection in the second quarter of 1997 rose to 87 percent of targeted levels from a 58 percent level in the first three months of the year. But he warned the State Duma that the budget crisis would continue next year unless it passes the new tax code this fall.

In a move that surprised some, Chernomyrdin criticized the government's track record on privatization, singling out top officials who are closely associated with his deputy, Anatoly Chubais. He said nearly every time the government auctioned off state property there was what he called a "scandal." As he put it: "We need reliable rules of the game."

His comments come as the government is in the midst of an ambitious privatization drive to raise budget revenues, with auctions underway for huge government stakes in telecommunications holding company Svyazinvest and metals giant Norilsk Nickel.

Chernomyrdin pointed criticized Privatization Minister Alfred Kokh, saying it was too early for him to "rest on his laurels." Kokh, seen as a close ally of Chubais, worked in the State Property Committee during the government's controversial loans-for-shares program, which allowed a handful of politically-connected banks to win stakes in some of Russia's top companies at bargain prices.

He also chided the head of the Federal Bankruptcy Agency, Pyotr Mostovoi for being sluggish in pursuing reforms and called for bankruptcy actions to be stepped up.

The government has vowed to go after enterprises that fail to pay their debts to the state in a bid to patch up budget holes caused by low tax collection. But so far, very few bankruptcies have been declared. In his words: "There is a sort of gray zone of half-alive or half-dead enterprises which could recover, but cannot because of the dire financial situation."

But Chernomyrdin said there was evidence that business activity is picking up in the regions, which could spur growth if capital can be freed up in the economy through reduced interest rates. But he said at the moment the economy is suffering from what he termed "a financial anemia."

Chernomyrdin sounded a tough note on trade, announcing that the government will alter its tariff policy to protect domestic producers and will aggressively seek out foreign markets for Russian goods.

In particular, he warned that Russia would impose quotas on textile imports from the European Union if Brussels fails to lift similar restrictions on Russian textiles. He said Russia could act against other European goods if the EU continues to block Russian imports.