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Main | Archive | Issue 2/2007

The Gains Made Should Be Preserved
Column: Reading About Russia



On the tasks and risks facing us in the new year.

Of the most interesting articles from the Russian-language press in this country, this month Diplomat magazine has chosen to reprint an article written by Igor Yurgens, Vice President of the Russian Union of Industrialists and Entrepreneurs. It was published in the Rossiiskaya gazeta on January 10, 2007.

As a strategically-minded optimist I shall begin with the good news. Our country has ushered in the new year with high economic potential. Domestic demand is bolstering up the steady growth of the economy and that makes it more stable and capable of withstanding the ups and downs of the world market.

At present the Russian economy is the strongest it has been in recent times. No wonder that almost all public opinion polls show that our fellow-countrymen are more optimistic about the future. This goes not only for the rich citizens, but also the so-called middle class, that is, people earning their bread by everyday labour. However, this does not mean that we have made up for what for we lost during the 1990s. We are still far from achieving what Russia did when it was part of the Soviet Union.

Nevertheless, the state possesses great means and reserves. The socio-economic situation in general and the prevailing inequality between the rich and the poor have prompted the government to start implementing national projects in education, health care, housing construction and agriculture. The first results of these projects have shown both the positive and negative aspects of the states efforts. There are some problems that cannot be tackled without the direct participation of the state. It alone can positively influence the life of the people working in the public sector by redistributing the budget.

At present the Russian economy is the strongest it has been in recent times. But this does not mean that we have made up for what we lost during the 1990s. We are still far from achieving what Russia did when it was part of the Soviet Union.

But there are certain risks, too. We have not reached the proper level of control over those responsible for allocating state funds. This is alarming, however, the situation is not hopeless. The experts in the Ministry of Information Technologies and Communications have worked out a way to monitor on-line the implementation of national projects. It makes it possible to have a clear and precise picture of how much money has been allocated and received by thousands upon thousands of objects: schools, hospitals, farms, construction sites, etc. Information about the situation on each object is now completely available. Now that the reigns of management of the national projects are in the hands of Dmitry Medvedev, the first vice premier, the results have been good.

For the eighth year in a row the incomes of the population have increased by over ten percent.

Having become stronger, the state could better set its priorities. And they are not limited to the social projects mentioned in this article. There are certain challenges this year that are crucial for the countrys economy. For one, the creation of a new, modern infrastructure in the country. A commodity produced, say, in Samara, which is in demand on the world market, is delivered by railway or motor vehicle to our Baltic port in St.Petersburg, or to other exporting points via Moscow. Traffic jams on roads and the problems on railways are well-known. As to the latter, it has been developing rather well recently, which is gratifying. As to the state of the infrastructure on roadways, it is simply catastrophic. This vividly shows that the countrys economic growth and the greater well-being of the population manifested, among other things, in an increased number of private cars, greatly exceed the capacity of Russias transport infrastructure. There are very few roads in our country- by this indicator it cannot be considered an advanced country. So we will have to invest billions of dollars in the repair and development of the infrastructure this year and for years to come, for it is having a negative impact on the countrys economic progress.

Not enough electric and gas networks, roads, ports and air terminals are becoming the main threat to us. To solve this problem it will be necessary to spend billions of dollars. The state has part of the money for it and Russian businesses have money for some of it. There are big companies in the West who are also ready to invest their money in the development of our infrastructure. The Russian government is close to tackling this problem properly. For the first time it is planned to lay roads on the basis of state-private partnership and concession agreements. It should be recalled that all railways were built in Russia on the basis of concessions signed prior to 1917, and after the revolution the Soviet Union developed thanks to them during the 1920s-1930s. The state wouldnt have been able to cope with such construction. If we draw up concession laws correctly today and take advantage of them, we shall be able to make a great leap into the future.

If we draw up concession laws correctly today and take advantage of them, we shall be able to make a great leap into the future.

These and other projects will be financed by the state from the Investment fund and from other sources. The money should be used rationally. I agree with the government ministers who oppose unlimited spending of money from the Investment fund and the Stabilization fund (which are our important reserves) on unfeasible projects. Indeed, it is easy to squander money very quickly. What we need is for the money to be spent effectively, which it sometimes isnt, especially when greed and selfishness supercede conscience and honesty. This is why I unconditionally support the position of our ministers Herman Gref and Alexey Kudrin, who, before agreeing to allocate any money, demand a thorough evaluation of the projects, business-plans and guarantees of the effectiveness of their realization. We are moving on a wide front as we march forward. It presupposes huge expenditures, and this is why we should keep in mind that there may not be enough good managers.

There is another concern, for it either removes or increases the risks we face in 2007. I have in mind our attitude to foreign investors. So far it has been rather inconsistent and illogical, especially in connection with large-scale energy projects. For example, we announce our intention to develop gas-condensate deposits with foreign partners, and then say that we shall do this alone. At first, we say the Sakhalin projects should be advantageous for foreign partners, and then take rather harsh measures to oust them. Well, the intentions and reasons for doing this may be quite reasonable, for we should protect our national interests and preserve our limited, though vast, natural resources. However, all this should be done in a gentlemanly way.

We should protect our national interests and preserve our limited, though vast, natural resources. However, all this should be done in a gentlemanly way.

Foreign partners might come in very handy. More difficult times may begin for us. I emphasize once again that we should first of all take our national interests into account. However, it is a no less important how our situation and intentions are presented to the outside world. So far everything has been done without being discussed in the press and by the public. No wonder my foreign colleagues maintain that Russia is pursuing its political and economic course in an aggressive way. Such assessments, as well as malevolent western propaganda, which we dont counter properly, create additional risks for Russias image and its economy. To change the situation for the better we need clever foreign-policy propaganda. If we fail to do this in 2007, we shall have economic foes everywhere, which will have an adverse effect on our investment climate in 2008. This is doubly dangerous because the year 2008 will be a turning point for the country.





-, 2006