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PRESIDENT PUTIN'S AIDE CRITICIZES RUSSIA'S ECONOMIC POLICY

HONG KONG, November 8 (RIA Novosti, Mark Zavadski) -- Russian President's aide on economic issues Andrei Illarionov believes that in the past two years Russia's economic policy has been going in the wrong direction.

"The radical turn in Russia's economic policy occurred in August of 2002, and since then it has been negatively affecting the economic development of the country," said Mr. Illarionov in an interview with RIA Novosti.

In his opinion, Russia shows high rates of economic growth at present only because of the favorable economic situation on global markets, and not because of the sound economic policy.

"In recent months, the growth of industrial production has slowed down, and we see some indicators of recession," the President's aide stated. "For instance, in terms of the economic growth index, we are currently at the levels reached in May of 2004."

In Hong Kong, Andrei Illarionov made a presentation "Hong Kong - lessons for Russia" in the framework of the international conference "The expansion of capital: from national economy to transnational."

The President's aide believes that Russia has to learn several lessons from Hong Kong's experience in the sphere of economic freedoms.

"Hong Kong is the absolute world leader in terms of economic growth rates. In the last 50 years, its GDP has increased by the factor of 33.3, "Mr. Illarionov stated. "During the same period, Russia's GDP has only tripled, the USA managed a 5-times increase, and the average global increase was about 7.5 times."

In the last 50 years, state expenditures have never exceeded 10% of the GDP in Hong Kong. The same index for Russia constantly stays at 30-40% mark.

The level of economic freedom is the index that considers the proportion of state expenditures and taxes in the GDP, the level of protection of ownership rights, the quality of the monetary policy, the freedom of foreign trade, and the degree of state control over economic activity.

"In terms of economic freedom, Russia is way down the current list," Mr. Illarionov said.

He also reiterated his disagreement with Russia's decision to sign the Kyoto protocol.

"The rates of economic growth in Hong Kong almost fully correlate with the growth rates of carbon emissions, despite the fact that its economy is based on financial and service sectors, rather than on industrial sector," he pointed out.

"By 2010, Russia will have to chose its quota in accordance with the Kyoto protocol. Besides, the participation in this agreement, apparently, will not allow Russia to double its GDP in ten years," stated Mr. Illarionov.

In his opinion, for the first time Russia will face the imposition of legal restrictions on the rates of its economic growth.

"For the first time in history, our country will be legally obliged to limit the rates of economic growth. In addition, the participation in the Kyoto protocol will have a negative impact on Russia's manufacturing industry and will tilt the balance toward raw materials industry even further," Mr. Illarionov underlined.

He said that he did not change his attitude toward Russia's participation in the Kyoto protocol even after Russian President Vladimir Putin had signed the document.

"My opinion remains the same - it is a bad step for Russia," announced Mr. Illarionov.