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Excerpts from the JRL E-Mail Community :: Founded and Edited by David Johnson

#16 - JRL 7014
SOURCE: FEDERAL NEWS SERVICE (http://www.fednews.ru/)

Q: What results did the Ministry of Economic Development and Trade achieve in the year 2002?

A: The GDP growth rate in 2002 exceeded 4 percent. This became possible due to a favorable foreign economic situation as well as a considerable decrease in the outflow of capital from the country. By the way, this is a rather strong tendency.

Despite the continued economic growth, there unfortunately were no fundamental changes in its quality. The economic situation remains dependent on the price of raw materials in the world markets. The improvement of the foreign economic situation, especially in terms of oil prices, allows export-oriented industries to invest in production.

Actually we didn't expect big qualitative changes. It is not possible to change the structure of growth in one or two years. This requires more time. Reforms we are carrying out now aim at changing the structure of the economy, say, by the year 2007. And yet we have taken a number of steps that will create a framework for the transformation of internal economic mechanisms and foreign economic activities. I mean the adoption of laws on the taxation of small business, the law on bankruptcy, the law on the purchase and sale of farmland, and a number of other normative and legal acts.

Russia's economic growth potential is 6-10 percent a year. We have everything we need to fulfill the main task -- making our economy competitive in the world markets. But of course this can be possible only if the government's plans are implemented.

Q: German Oskarovich, what initiatives does your Ministry plan to put forth in 2003?

A: Immediate initiatives will be connected first of all with the need to continue and finish what we have already begun: from the reform of natural monopolies to the protection of the interests of Russian manufacturers in the world market.

We have submitted to the State Duma a number of laws pertaining to the reorganization of railways and the power industry. We also plan to consider a concept of the gas market development, after which we will present appropriate bills on gas industry reform to the lower house of parliament.

We have big plans to continue the tax reform in two areas. First, we will have to finish the work on the Tax Code and adopt the missing chapters. These concern first of all property tax and a special tax regime for PSA. The latter is due to be adopted this year. There are also bills concerning customs duties.

The second area deals with amendments that are called upon to further ease the tax burden. It is necessary to adopt a decision that will change the procedure for VAT refund and compensation, reduce the average rate of the unified social tax, and change the Tax Code to stimulate investment. Most of these decisions have to be formalized in the form of law this spring.

The law on special economic zones is of paramount importance today. We need to approve its concept and finish drafting the law as soon as possible.

The currency regulation and control bill approved by the government and the bank deposit insurance bill will also be submitted by the State Duma. We plan to pay special attention to the discussion of these laws in both houses of parliament in order to facilitate their speedy passage.

Besides, there is a number of laws designed to liberalize banking legislation and provided for in the banking sector development strategy. The government has issued additional instructions to submit these laws to the State Duma in the near future. We must make sure that work to make the Russian banking system more competitive does not lag behind the liberalization of currency legislation. If we do not change the situation, resources will go to banks in other countries. Such a risk exists and the government is aware of it. This is why it is necessary to change legislation and Central Bank instructions as soon as possible in order to reduce banking operation costs.

In addition to continuing and finishing ongoing reforms, it will be necessary to introduce a number of legislative initiatives. We have identified six key priorities that have provided the basis for drafting the government's Plan of Action in 2003. The government will pay most attention to administrative reform, tax and budget reform, institutional and infrastructure reform, diversification of the economy to make it more open, the creation of an effective system of social insurance and social services.

As part of the administrative reform, a program has been adopted to reorganize public service, and the first bill identifying the fundamental principles of public service in the Russian Federation has already been submitted.

A medium-term program designed to reduce the tax burden will be developed within the framework of the second priority -- tax and budget reform. The program will be tied in with our analysis of state expenditures in order to optimize them.

As for institutional and infrastructure reforms, in addition to the reorganization of natural monopolies we will have to ensure the implementation of the law on the basic principles of technical regulation in the Russian Federation and start taking measures to develop the stock market.

Last year the government considered a number of concepts concerning the reorganization of certain industries, such as the automobile industry, the aircraft industry and the forestry industry. This year we will have to implement these concepts.

The use of subsoil resources represents a separate sphere that also requires radical changes and considerable improvements in existing legislation. We plan to work out new versions of the law "On Subsoil Resources", and the Foreign and Water codes in 2003.

Stimulating further diversification of the economy is an important task to be faced in 2003. One of the main instruments for fulfilling this task is the creation of a system to support the export of non-raw materials, including an export contract guarantee and insure system.

In order to make the economy more open, it will be necessary to finish the active stage of accession talks with the WTO.

In the social sphere, special attention will be paid to the creation of an effective system of mandatory medical insurance, and the introduction of a number of novelties in education and health care.

Q: What will be done in the field of foreign trade legislation?

A: One of the priorities here is the adoption of a new Customs Code that is very important for our foreign trade operators. There is a number of other laws regulating foreign economic activities without which it will not be possible to effectively protect both domestic producers and foreign trade operators. I mean for example such laws as the law on special protective, anti-dumping and compensatory measures that will allow us to effectively use internationally adopted instruments for the protection of the domestic market, as well as the law on the state regulation of foreign trade. In addition, we expect a package of laws on the protection of intellectual property that is in the State Duma now to be fully adopted in 2003.

As I have already said, we will continue accession talks with the WTO this year. Today we can already say that there is some progress and hope that jointly with our principal trade partners we will be able to work out mutually acceptable solutions to all key issues.

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