Russia’s officials vow to stick to reform plans

Russia’s state officials have vowed to press on with the promised reforms, including privatisation of state owned assets, pension reform and modernization of institutions.

Arkady Dvorkovich, deputy Prime Minister to Dmitry Medvedev, said: “We are not going to deviate from our plan,” speaking at the Russia Investment Conference held by Troika Dialog and Sberbank in London yesterday.

He identified three key areas of focus for the Kremlin – the shift to calculating the budget based on lower oil prices; the demographic policy, including the pension reform; and modernisation of various industries.

In order to retain the current budget surplus based on a lower oil price, Dvorkovich said Moscow will have to optimise its expenses. However, he stressed there are no plans to increase taxes. Instead, a push will be made to increase investment in industries.

Focusing on demographic policy, Dvorkovich pointed out Russia has managed to “stop the trend,” despite negative predictions from leading world organisations. Its population is stable this year, with the birth rate increasing and the death rate going down.

To continue this upward trend, Moscow will focus on the pension reform. This week saw an official discussion on the development of the pension system and the debate will be opened to the public in the next few months. Dvorkovich said the country is “coming close to a solution.”

Modernisation initiatives include improving the regulatory framework in such sectors as technology, finance and utilities, providing better education and scientific research facilities, and enabling broadband access across the whole country within the next three to four years.

The priority sectors are car manufacturing and infrastructure. Russia is expected to produce have a functioning car industry within the next seven years. The infrastructure investment programme also has a strict deadline, with the Sochi Olympic Games and the Football Cup coming up in 2014 and 2018, respectively.

These initiatives are expensive, and Dvorkovich admitted the government cannot fund them without external help. The need for private long term capital is giving a push to the privatisation initiative over the next six years.
Dvorkovich said some sectors, such as utilities and road works, require new regulation to make privatisation possible. This is putting a brake on progress, but he assured the Kremlin will go ahead with its plans.

Additionally, the government itself is striving to increase efficiency and create an environment for open dialogue. Now that a new government has been formed, Dvorkovich said “there is a generation of people who hate corruption,” and those that engage in it will be severely punished.

This concerns, for example, the infrastructure industry, previously known for fraudulent procurement procedures. Dvorkovich said from now on all tenders are open, following recent rule changes.

Dvorkovich is positive on what Moscow has already been able to achieve. This year saw the country joining the World Trade Organisation, after some 18 years of negotiations.

“Could we do more? Could we do better? Certainly, in terms of investment flows,” Dvorkovich conceded, but added that with continued GDP growth of around 4% and strong macroeconomic indicators, Russia is well positioned for the coming years.

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