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St. Petersburg Times
January 14, 2003
Government Makes New Year's Resolutions
By Torrey Clark

MOSCOW - Leading bureaucrats from key ministries and a smattering of lesser committees and agencies offered up their New Year's resolutions for 2003 on the government Web site Thursday. Whether talking about security or economics, the main message appeared to be that Russia must put its interests first and strengthen its position, or risking losing ground.

In terms of economic reforms, 2003 is shaping up to be another year of intense discussion and preparation, rather than concrete actions - much as expected, given the upcoming State Duma and presidential elections. Most of the resolutions focused on developing new legislation in the budget, economic and social spheres and seem to leave the more painful implementation to a later date.

On the foreign stage, Foreign Minister Igor Ivanov emphasized the importance of international cooperation to improve security and foster domestic development, making the defense of Russian interests abroad - political and economic as well as linguistic and cultural - a priority.

He listed international cooperation on terrorism, arms of mass destruction, and "other threats and challenges in the global era" as hot issues, and emphasized the importance of multilateral diplomacy in resolving conflicts involving Iraq, the Middle East, the Korean peninsula, South Asia and the Balkans.

Ivanov named the United States, the European Union, China, India, and the G-8 as important partners.

Interior Minister Boris Gryzlov also put security high on his list, in particular the fight against narcotics, terrorism, organized crime and illegal immigration.

In addition, he said the ministry would work to normalize the situation in Chechnya, in part by carefully selecting and training recruits for a Chechen Interior Ministry. President Vladimir Putin announced that Gryzlov had ordered the creation of the regional ministry in mid-November, in the aftermath of the Moscow theater siege.

The upcoming elections are themselves a focus for the Interior Ministry, which will work with election commissions to keep criminals out of public office, said Gryzlov, who re-entered politics in November when he was selected for the pro-Kremlin party United Russia's top post.

Gryzlov promised to be more open with the mass media and renewed an almost two-year-old pledge to pay more attention to criticism and build the population's trust in the police.

State Statistics Committee head Vladimir Sokolin said analysis of the results of last year's national census would be his primary focus in 2003, and he promised a preliminary population count by March 31.

Finance Minister Alexei Kudrin named as his main task budget policies to stimulate the economy and improve living standards. The most important goals, though, were to stick to the budget and the debt-repayment schedule, regardless of external economic factors, he said.

"We'll meet budget targets to the last kopek under any conditions," he said, cheering some economists who feared spending could burgeon ahead of elections.

However, Kudrin also promised that financial assistance to the regions may increase, as long as the funds go for social needs.

At the same time, Kudrin said the government would work to lower the overall tax burden by 0.7 percent of gross domestic product (about $2.5 billion), while taxation of small businesses should decrease by 50 percent to 75 percent.

Kudrin praised 2002's economic successes - economic growth of an estimated 4 percent; an increase in real incomes of 8.5 percent and a drop in capital flight of about 66 percent - for laying the foundations for economic stability in 2003.

Economic Development and Trade Minister German Gref said GDP growth had exceeded 4 percent, though a far cry from what he sees as the country's potential - 6 percent to 10 percent annual growth.

His ministry's focus in 2003 will be on continuing initiatives begun earlier, "from reforming the natural monopolies to protecting producers' rights on the world market," he said.

Gref listed six priorities for 2003: streamlining state regulation, tax and budget reforms, institutional and infrastructural reforms, economic diversification, increased economic transparency and social welfare and services. The priorities form the basis of the government's 2003 action plan for carrying out its social-economic program for 2002 to 2004, to be submitted to the government by Jan. 15.

"To increase economic transparency, it is necessary to finish the active phase of Russia's WTO negotiations," Gref said. "We can already talk about noticeable progress; there is hope that we will be able to find acceptable solutions to all key issues with our trade partners."

In particular, Gref said priorities in the realm of external trade were passing the Customs Code, laws on anti-dumping, countervailing duties and other trade protection measures and a package of legislation on intellectual-property rights.

Gref stressed that banking reform must match currency and banking liberalization, while the cost of banking activities needs to be brought down. "If the situation doesn't change, resources will go to banks in other countries," he said.

Gref also foresaw the completion of the Tax Code, in particular production-sharing agreements - long-awaited by foreign investors - and amendments aimed at encouraging investment.

VAT reimbursement - a nightmare identified by both foreign and domestic manufactures as a major hindrance to developing exports of processed goods - will also come up for an overhaul, Gref said. He reiterated the government's commitment to supporting exports of processed goods by developing export guarantees and export contracts insurance.

Gref said carrying out development plans drawn up for the automobile, aviation and forestry sectors in 2002 would be a focus.

Despite the worrying delays in power reforms, Kudrin, Gref and Anti-Monopoly Minister Ilya Yuzhanov were bullish about planned revamps at Unified Energy Systems and other so-called natural monopolies, including the railroads and gas. Yuzhanov also spoke of the need to break up the communal-housing monopoly before meaningful reforms could take place.

Economists and analysts sniffed at the lack of details in many of the 2003 resolutions, but noted only a few omissions.

"If they wanted to be more open, they should have said something more concrete and new," said Alexei Moiseyev, an economist at Renaissance Capital.

"It's hard to believe in any concrete steps. My expectations are that this will be a year of much discussion, without much being done," said Yevgeny Gavrilenkov, chief economist at Troika Dialog. "In general, they're talking about refinishing, polishing and testing in 2003."

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