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Moscow Times
January 24, 2005
Chubais Blasts State for Climate of Fear
By Guy Faulconbridge
Staff Writer

Unified Energy Systems CEO Anatoly Chubais lashed out at Prime Minister Mikhail Fradkov's government last week for not addressing what he called the worst crisis of confidence for businesses "in 15 years."

Aggressive tax probes and a lack of predictability by officials has created "tensions" that must be alleviated for businesses to continue to develop, Interfax quoted Chubais as saying at the Council on Competitiveness and Entrepreneurship's first meeting of the year.

The council, whose members include Cabinet members and top executives from major state-owned and private companies, is charged with advising the government on ways to improve Russia's economic competitiveness.

"There has not been such a difficult situation for 15 years," Chubais told Fradkov, who chaired the meeting late Thursday. "When entrepreneurs don't know what will happen they will base their views on a pessimistic scenario."

Chubais' comments ended months of silence by one of the country's most experienced politicians on the growing concerns of investors and businesspeople, which have been fueled by the chaotic dismemberment of Yukos and tax probes into companies such as VimpelCom and Japan Tobacco International.

Under some of the best external economic conditions for decades, Russia's economy is slowing after a six-year boom as confidence lags and key reforms remain on hold, according to estimates from the Economic Development and Trade Ministry and top economists.

Chubais, the architect of the country's privatization program, managed former President Boris Yeltsin's re-election campaign in 1996 before becoming his chief of staff, one of the most powerful positions in Russian politics. Since April 1998, he has been CEO of UES, the state-controlled electricity and heat monopoly.

The government's medium-term economic plan -- a document of more than 170 pages -- is "great and good," Chubais said. "But neither I nor anyone knows what happens in real life. And when no one knows, everyone assumes the worst scenario and bases investment decisions on the worst scenario."

The document, drafted by the Economic Development and Trade Ministry, should include a section on the relationship between the state and business, Chubais said.

If all the businessmen at Thursday's meeting were asked if they had been targeted by tax authorities, "a third of this room would raise their hands," he was quoted as saying.

"The question of confidence between business and the state is a performance index of all work, which -- even with the best possible program -- can lower results significantly," Chubais said.

When asked by Fradkov to be more precise as to who the business community would like to see more decisive action from, Chubais answered: "the government."

The biggest hurdles for future economic growth, according to the government's development plan, include poor state management, demographics, a lack of overall competitiveness and too many monopolies.

"We have so many institutional traps that businesses have to make their way through a minefield without a mine detector," said council member Alexander Shokhin, a former minister and top debt negotiator who is now a leading member of RSPP, the nation's big business lobby.

The traps are "the distrust of authorities, elements of uncertainty over property rights and tax policy," Shokhin said, Reuters reported.