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RIA Novosti
April 11, 2005
RUSSIAN GOVERNMENT DOCTRINE: ECONOMIC FREEDOM

MOSCOW. (RIA Novosti political commentator Yana Yurova.) --
The Russian government has approved a strategy for the country's socio-economic development from 2005 through 2008. Although Vladimir Putin set the objective of doubling GDP within a decade in 2003, this idea does not dominate the document. Its main goal is to establish economic freedom in the country. So why has the government deviated from its former objective? And will businessmen welcome this change of tactics?

The Economic Development and Trade Ministry drafted the first version of a strategy for Russia's socio-economic development this January. When he presented this paper to deputies and the business community, the minister, German Gref, surprised everybody by saying that he had produced a "program of economic freedom." It dictated that the most important part of economic policy was to reduce the state's interference in business and step up institutional reforms in the country.

Gref tried to prove that his proposal did not signify a change in policy but, on the contrary, accelerated movement to the same goal: progress. "Here, we argue with one another about where we are going - to authoritarianism or to democracy?" he asked somewhat rhetorically. "Our main guideline is as follows: dynamic growth is only possible in conditions of economic freedom." In Gref's opinion, GDP growth is "hindered by a slowdown in reforms and also a lack of trust between business and the authorities."

The government did not immediately approve this unexpected program but returned it for revision with a proposal that it included sectoral strategies with all sorts of indicators. Gref did not object. Now, he has submitted a new final version. The federal budget is expected to have a surplus of about 1.6% of GDP until 2008. With record-high oil prices, inflation is projected to run at 10%, which will gradually fall to 4%-5.5% in 2008. The share of highly processed goods will increase in the export structure, with an increase in the share of machinery and equipment by 1 percentage point: from 7.8% in 2004 to about 9%.

In essence, it is the same document, but with a few more details. Nevertheless, the government did not object to the scenario conditions of Russia's socio-economic development on this occasion. Prime Minister Mikhail Fradkov called them conservative, because they did not take success in doubling GDP into account. However, he approved it as a basic document and reminded to all the Cabinet members present that doubling GDP remained on the agenda. Now the executive authorities have to find the reserves to accelerate economic growth.

It is easy to explain why the Cabinet looked at the ideological aspect of Gref's program from a new angle. During a recent meeting, the president told businessmen he was ready to help business develop in every possible way and to create conditions for improving the country's business and investment climate. Ministers were thereby told which course they should take. Now Gref has provided the ideologically correct guideline.