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Moscow Times
February 21, 2003
Cabinet Approves Plan For 8% GDP Growth
By Valeria Korchagina
Staff Writer

The Cabinet on Thursday gave preliminary approval to an economic development plan that envisions removing the country's overdependence on oil exports and boosting economic growth by 7 percent to 8 percent yearly from 2008.

According to the plan, drawn up by the Economic Development and Trade Ministry, the government would lower taxes on the manufacturing, agricultural and service sectors.

"We must apply such measures ... so that, without lowering the growth rate in sectors where it is already high, we can secure the development of the industry and service sectors, achieving a consolidated rate of 7 percent to 8 percent" GDP growth, Prime Minister Mikhail Kasyanov was quoted as saying on the government web site at www.government.ru. The plan envisions GDP growth of 5 percent per year until 2008.

The government must also lower taxes and remove excessive red tape on small and medium-sized businesses to help them develop, Kasyanov said.

The plan, which the Cabinet is to review again in April, included raising taxes on natural resources exports.

Economic Development and Trade Minister German Gref named six priorities for boosting GDP growth in the coming years, the top one being economic diversification.

The government also must cut back interference in the economy by, among other things, reducing the tax burden and further reforming state-controlled enterprises, he said.

Russia should bring legislation in line with international laws, Gref said, which is important considering Russia's efforts to enter the World Trade Organization.

The government must also improve the economy's use of energy, develop transport and communication infrastructure and revamp social services.

Alexei Moiseyev, senior economist at Renaissance Capital, said trying to relieve the tax burden from other sectors by putting pressure on the natural resources sector would only make the government more dependent on the latter.

Alexei Zabotkine, economist at United Financial Group, praised the Cabinet for recognizing that red tape should be lowered.

"It's good that the government has learned over the past three years ... what should be done," he said.

Zabotkine, however, questioned the idea of forcing a shift in roles that various sectors play in the economy.

"Whether Russia should produce its own cars is a debatable issue," he said. "Maybe one day, yes, but not until the existing potential of the fast-growing sectors in which Russia has clear advantages is fully realized."

From the fast and aggressive development of the natural resources and energy sectors, banking and services companies will sprout, Zabotkine said.

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