Troika Dialog Moscow Forum: Putin’s six-point plan
In the third of a series of blogs from Troika Dialog’s Moscow Forum, Russian president Vladimir Putin, already on the presidential campaign trail, offers his economic outlook.
Putin identified the major reason for the global financial crisis as the huge imbalances at the state and corporate level, which caused debt accumulation.
Russia is in better shape, as its debt/GDP ratio remains extremely low, he said.
The country last year demonstrated the most dynamic development among G8 countries, with growth of 4.3%, record low inflation of 6.1% (still rather high compared with developed countries) and a budget surplus of 0.8% of GDP. Russia is the fifth largest economy in the world and has the third highest gross international reserves. The demographic situation is also improving, with life expectancy on the rise.
However, Putin said the Kremlin realizes the challenges the country may face in the future. It is not only the debt problem in the developed world but possible technological revolution, which would reduce demand for traditional fuels. Russia’s dependence on oil should be reduced, and the economy shifted from natural rent reallocation to modernized growth based on technological improvements.
He feels Russia’snatural resource base and human capital are not being used properly. So although Russia’s GDP is comparable to Germany, labour productivity is just one third as high. The country also urgently needs to create a better investment climate and rise from its 120th ranking in global polls to the top 20.
He sees six necessary changes in Russian legislation. First, an institution of commissioners to defend the rights of businessmen will be established in the near future. The commissioners will have the power to halt implementation of current legislation if it hurts the investment climate and provides grounds for corruption.
They will guarantee the protection of business interests at the institutional level.
Second, legal procedures for examining deals between businesses and the state will be simplified. The state will bear the responsibility in case of incorrect claims and can be forced to compensate for a business’ financial losses that are incurred as a result of such an examination.
Third, the possibility to classify a business’ activity as criminal will be substantially limited, and fourth, control of business activity will be eased. This implies a reduction in various checks and approvals that make the life of small businessmen unbearable and force them to pay bribes.
Fifth, businesses will be able to initiate mutual claims against the state. And finally, legislation will be harmonized with the best practice in developed countries.